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0000874016-05-000010.txt : 20050311
0000874016-05-000010.hdr.sgml : 20050311
20050311104726
ACCESSION NUMBER: 0000874016-05-000010
CONFORMED SUBMISSION TYPE: 10-K/A
PUBLIC DOCUMENT COUNT: 18
CONFORMED PERIOD OF REPORT: 20041231
FILED AS OF DATE: 20050311
DATE AS OF CHANGE: 20050311
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: JONES APPAREL GROUP INC
CENTRAL INDEX KEY: 0000874016
STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330]
IRS NUMBER: 060935166
STATE OF INCORPORATION: PA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10746
FILM NUMBER: 05674193
BUSINESS ADDRESS:
STREET 1: 250 RITTENHOUSE CIRCLE
STREET 2: KEYSTONE PK
CITY: BRISTOL
STATE: PA
ZIP: 19007
BUSINESS PHONE: 2157854000
MAIL ADDRESS:
STREET 1: 250 RITTENHOUSE CIRCLE
CITY: BRISTOL
STATE: PA
ZIP: 19007
10-K/A
1
form10ka2004.htm
FORM 10-K/A (AMENDMENT NO. 1)
Form 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-K/A
(Amendment No. 1)
(Mark One) |
[X] |
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004 |
|
|
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______ |
Commission file number 1-10746
JONES APPAREL GROUP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of
incorporation or organization) |
06-0935166
(I.R.S. Employer
Identification No.) |
|
|
250 Rittenhouse Circle,
Bristol, Pennsylvania
(Address of principal executive offices) |
19007
(Zip Code) |
Registrant's telephone number, including area code: (215)
785-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value |
Name of each exchange
on which registered
New York Stock Exchange, Inc. |
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. [X] Yes [ ] 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/A
or any amendment to this Form 10-K/A. [X]
Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Act). [X] Yes [ ] No
The aggregate market value of the voting and non-voting
common equity held by non-affiliates as of the last business day of the
registrant's most recently completed second fiscal quarter, based on the closing
price of the registrant's common stock as reported on the New York Stock
Exchange composite tape on July 2, 2004, was approximately $4,858,157,435.
As of February 23, 2005, 122,413,858 shares of the
registrant's common stock were outstanding.
Explanatory Note
This Amendment No. 1 on Form 10-K/A to our Annual Report
on Form 10-K for the fiscal year ended December 31, 2004 (the "Original
Filing"), which was filed with the Securities and Exchange Commission (the
"SEC") on February 25, 2005, is being filed to:
- include a revised Consent of Independent Registered Public Accounting Firm
to cover both the audit report relating to our consolidated financial
statements and the audit report relating to our internal control over
financial reporting, consistent with views recently expressed by the Staff
of the SEC,
- include a revised Report of Independent Registered Public Accounting Firm
relating to our consolidated financial statements, to which a reference to
the audit report relating to our internal control over financial reporting
has been added,
- include a revised Report of Independent Registered Public Accounting Firm
relating to our internal control over financial reporting, to include
disclosure that such firm's audit of our internal control over financial
reporting did not include an evaluation of the internal control over
financial reporting of Barneys New York, Inc., which we acquired on December
20, 2004 and
- include information under Item 9B, and as Exhibit 10.34, concerning executive
officer compensation action taken by the Compensation Committee of our Board
of Directors at a meeting on December 14, 2004.
As a result of these amendments, the certifications
pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed
as exhibits to the Original Filing, have been re-executed and re-filed as of the
date of this Form 10-K/A.
Except for the amendments described above, this Form
10-K/A does not modify or update other disclosures in, or exhibits to, the
Original Filing. For the convenience of the reader, this Form 10-K/A also
includes the remainder of the Original Filing in its entirety.
TABLE OF CONTENTS
2
DOCUMENTS INCORPORATED BY REFERENCE
The documents incorporated by reference into this Form
10-K/A and the Parts hereof into which such documents are incorporated are listed
below:
Document |
Part
|
Those portions of the registrant's proxy
statement for the registrant's 2005 Annual Meeting of Stockholders (the
"Proxy Statement") that are specifically identified herein as
incorporated by reference into this Form 10-K/A. |
III |
DEFINITIONS
As used in this Report, unless the context requires
otherwise, "our," "us" and "we" means Jones
Apparel Group, Inc. and consolidated subsidiaries, "Sun" means Sun
Apparel, Inc., "Nine West Group" means Nine West Group Inc.,
"Nine West" means Nine West Footwear Corporation, "Victoria"
means Victoria + Co Ltd., "Judith Jack" means Judith Jack, LLC,
"McNaughton" means McNaughton Apparel Group Inc., "Gloria
Vanderbilt" means Gloria Vanderbilt Apparel Corp. (acquired April 8, 2002),
"l.e.i." means R.S.V. Sport, Inc. and its related companies (acquired
August 15, 2002), "Kasper" means Kasper, Ltd. (acquired December 1,
2003), "Maxwell" means Maxwell Shoe Company Inc. (acquired July 8,
2004), "Barneys" means Barneys New York, Inc. (acquired December 20,
2004), "FASB" means the Financial Accounting Standards Board,
"SFAS" means Statement of Financial Accounting Standards and
"SEC" means the United States Securities and Exchange Commission.
STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE
This Report includes, and incorporates by reference,
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements regarding our expected
financial position, business and financing plans are forward-looking statements.
The words "believes," "expects," "plans,"
"intends," "anticipates" and similar expressions identify
forward-looking statements. Forward-looking statements also include
representations of our expectations or beliefs concerning future events that
involve risks and uncertainties, including those associated with the effect of
national and regional economic conditions, lowered levels of consumer spending
resulting from a general economic downturn or generally reduced shopping
activity caused by public safety concerns, the performance of our products
within the prevailing retail environment, customer acceptance of both new
designs and newly-introduced product lines, financial difficulties encountered
by customers, the effects of vigorous competition in the markets in which we
operate, the integration of the organizations and operations of any acquired
businesses into our existing organization and operations, our foreign operations
and manufacturing, our reliance on independent manufacturers, changes in the
costs of raw materials, labor and advertising, and our ability to secure and
protect trademarks and other intellectual property rights. All statements other
than statements of historical facts included in this Report, including, without
limitation, the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations," are forward-looking
statements. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, such expectations may prove to be
incorrect. Important factors that could cause actual results to differ
materially from our expectations ("Cautionary Statements") are
disclosed in this Report in conjunction with the forward-looking statements. All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
Cautionary Statements.
WEBSITE ACCESS TO COMPANY REPORTS
Copies of our filings under the Securities Exchange Act of
1934 (including annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and all amendments to these reports) are available
free of charge on our investor relations website at www.jny.com on the same day
they are electronically filed with the SEC.
3
PART I
ITEM 1. BUSINESS
General
Jones Apparel Group, Inc. is a leading designer, marketer
and wholesaler of branded apparel, footwear and accessories. We also market
directly to consumers through our chain of specialty retail and value-based
stores, and operate the Barneys chain of luxury stores. Our nationally
recognized brands include Jones New York, Evan-Picone, Norton McNaughton,
Gloria Vanderbilt, Erika, l.e.i., Energie, Nine West, Easy Spirit, Enzo
Angiolini, Bandolino, Joan & David, Mootsies Tootsies, Sam & Libby,
Napier, Judith Jack, Kasper, Anne Klein, Albert Nipon, Le Suit and Barneys
New York. The Company also markets apparel under the Polo Jeans Company
brand licensed from Polo Ralph Lauren Corporation ("Polo"), costume
jewelry under the Tommy Hilfiger brand licensed from Tommy Hilfiger
Licensing, Inc. ("Hilfiger") and the Givenchy brand licensed
from Givenchy Corporation and footwear under the Dockers Women brand
licensed from Levi Strauss & Co. Each brand is differentiated by its
own distinctive styling, pricing strategy, distribution channel and target
consumer. We primarily contract for the manufacture of our products through a
worldwide network of quality manufacturers. We have capitalized on our
nationally known brand names by entering into various licenses for several of
our trademarks, including Jones New York, Evan-Picone, Anne
Klein New York, Nine West, Gloria Vanderbilt and l.e.i., with select
manufacturers of women's and men's products which we do not manufacture. For
more than 30 years, we have built a reputation for excellence in product quality
and value, and in operational execution.
On July 8, 2004, we acquired all the outstanding shares of
Maxwell. Maxwell designs and markets casual and dress footwear for women and
children under multiple brand names, each of which is targeted to a distinct
segment of the footwear market. Maxwell markets its products nationwide to
national chains, department stores and specialty retailers. Maxwell offers
footwear for women in the moderately priced market segment under the Mootsies
Tootsies, Sam & Libby and Dockers Women brands, in the
better market segment under the AK Anne Klein and Circa Joan &
David brands and in the bridge segment under the Joan and David and
Albert Nipon brands. Maxwell also sells moderately priced children's
footwear under both the Mootsies Tootsies and Sam & Libby
brands and licenses the J. G. Hook trademark from J. G. Hook, Inc. to
source and develop private label products for retailers who require brand
identification.
On December 20, 2004, we acquired 100% of the common stock
of Barneys. Barneys is a luxury retailer that provides its customers with a wide
variety of merchandise across a broad range of prices, including a diverse
selection of Barneys label merchandise. Barneys' preferred arrangements
with established and emerging designers, combined with creative merchandising,
store designs and displays, advertising campaigns, publicity events and emphasis
on customer service, has positioned it as a leading retailer of men's and
women's fashion, cosmetics, jewelry and home furnishings. Barneys complements
its merchandise offerings from designers such as Giorgio Armani, Manolo Blahnik,
Marc Jacobs, Prada, Jil Sander and Ermenegildo Zegna with a diverse selection of
Barneys label merchandise, including ready-to-wear apparel, handbags,
shoes, dress shirts, ties and sportswear. Barneys label merchandise is
manufactured by independent third parties according to Barneys' specifications
and is of comparable quality to the designer merchandise.
Operating Segments
Our operations are comprised of four reportable segments:
wholesale better apparel, wholesale moderate apparel, wholesale footwear and
accessories, and retail. We identify operating segments based on, among other
things, the way our management organizes the components of our business for
purposes of allocating resources and assessing performance. Segment revenues are
generated from the sale of apparel, footwear and accessories through wholesale
channels and our own retail locations. See "Business Segment and Geographic
Area Information" in the Notes to Consolidated Financial Statements.
4
Wholesale Better Apparel
Our brands cover a broad array of categories for the women's
markets; we also provide Polo Jeans Company apparel to the men's
markets. Within those brands, various product classifications include career and
casual sportswear, jeanswear, dresses, suits, and a combination of all
components termed lifestyle collection. We also produce a collection of
sportswear under the Anne Klein New York brand and suits under the Albert
Nipon brand that are priced for the bridge market. Career and casual
sportswear are marketed as individual items or groups of skirts, pants, shorts,
jackets, blouses, sweaters and related accessories which, while sold as
separates, are coordinated as to styles, color schemes and fabrics, and are
designed to be worn together. New collections are introduced in the four
principal selling seasons - Spring, Summer, Fall and Holiday. Each season is
comprised of a series of individual items or groups which have systematically
spaced shipment dates to ensure a fresh flow of goods to the retail floor. In
addition, certain labels offer key item styles, which are less seasonal in
nature, on a replenishment basis (which ship generally within three to five days
from receipt of order).
The following table summarizes selected aspects of the
products sold under both our brands and licensed brands:
|
Label
|
|
Product
Classification
|
|
Retail
Price
Points
|
Jones New York Labels
Skirts, blouses, pants,
jackets, sweaters,
jeanswear, suits,
dresses, casual tops,
outerwear, shorts
|
Jones New York
Jones New York Signature
Jones New York Sport
Jones Jeans
Jones New York Country
Jones New York Dress
Jones New York Suit
|
|
Collection Sportswear
Lifestyle
Casual Sportswear
Casual Sportswear
Lifestyle
Dresses
Suits |
|
$20 -
$420 |
Nine West Labels
Skirts, blouses,
pants,
jackets, sweaters,
dresses,
outerwear, shorts,
casual tops
|
Nine West
Easy Spirit |
|
Lifestyle
Lifestyle |
|
$20 - $259 |
Anne Klein Labels
Skirts, blouses, pants,
jackets, sweaters,
vests,
dresses, casual tops |
Anne Klein New York
AK Anne Klein
AK Sport
Anne Klein Dress |
|
Collection Sportswear
Collection Sportswear
Casual Sportswear
Dresses |
|
$55
- - $2,495
$29
- - $1,081
$10 - $80
$160 - $360 |
Other Labels
Skirts, blouses, pants,
jackets, sweaters,
suits, dresses |
Kasper
Albert Nipon
Evan-Picone Dress
Le Suit |
|
Suits, Dresses, Sportswear
Suits
Dresses
Suits |
|
$39
- - $521
$262
- - $1,174
$69
- - $159
$100
- - $342 |
Labels Under License
Skirts, t-shirts,
pants, jackets,
dresses,
sweaters, jeanswear |
Polo Jeans Company |
|
Casual Sportswear |
|
$20 -
$849 |
5
Wholesale Moderate Apparel
Our brands cover a broad array of categories for the women's,
juniors and girls markets. Within those brands, various product classifications
include career and casual sportswear, jeanswear, dresses, suits, and a
combination of all components termed lifestyle collection. Career and casual
sportswear are marketed as individual items or groups of skirts, pants, shorts,
jackets, blouses, sweaters and related accessories which, while sold as
separates, are coordinated as to styles, color schemes and fabrics, and are
designed to be worn together. New collections are introduced in the four
principal selling seasons - Spring, Summer, Fall and Holiday. Each season is
comprised of a series of individual items or groups which have scheduled
shipment dates to ensure a fresh flow of goods to the retail floor. In addition,
certain labels offer key item styles, which are less seasonal in nature, on a
replenishment basis (which ship generally within three to five days from receipt
of order).
The following table summarizes selected aspects of the
products sold under our brands:
|
Label
|
|
Product
Classification
|
|
Retail
Price
Points
|
Jones New York Labels
Skirts, blouses,
jackets, sweaters,
casual tops |
Jones Wear
Jones Wear Sport |
|
Collection Sportswear
Casual Sportswear |
|
$20 - $150 |
Nine West Labels
Skirts, blouses,
jackets, sweaters,
casual tops
|
Nine & Company
Bandolino |
|
Lifestyle
Casual Sportswear |
|
$16 - $260 |
McNaughton Labels
Skirts, blouses,
jackets, sweaters,
casual tops |
Norton McNaughton
Maggie McNaughton |
|
Collection Sportswear
Collection Sportswear |
|
$29 -
$103 |
Gloria Vanderbilt Labels
Skirts, blouses, shorts,
jackets, sweaters,
jeanswear, capris,
casual tops |
Gloria Vanderbilt |
|
Lifestyle |
|
$36 - $65 |
Other Labels
Skirts, blouses, pants,
jackets, sweaters,
jeanswear, dresses,
casual tops and bottoms |
Evan-Picone
Energie
Erika
l.e.i.
Jeanstar
A|Line
Pappagallo
Rena Rowan
Glo/Glo Girls |
|
Lifestyle
Casual Sportswear
Casual Sportswear
Casual Sportswear
Casual Sportswear
Casual Sportswear
Casual Sportswear
Career Sportswear
Casual Sportswear |
|
$6
- - $104 |
In addition to the products sold under these brands, we
provide design and manufacturing resources to certain retailers to develop
moderately-priced product lines to be sold under private labels.
6
Wholesale Footwear and Accessories
Our wholesale footwear and accessories operations include
the sale of both brand name and private label footwear, handbags, small leather
goods and costume, semi-precious, sterling silver, and marcasite jewelry. The
following table summarizes selected aspects of the products sold under both our
brands and licensed brands:
Label
|
|
Product Classification
|
|
Retail Price Points
|
|
Shoes
|
|
Boots
|
Footwear |
|
|
|
|
|
|
Bridge labels |
|
|
|
|
|
|
Joan & David |
|
Sophisticated
Classics |
|
$175 -
$225 |
|
$325 -
$379 |
Albert Nipon |
|
Sophisticated Classics |
|
$129 - $169 |
|
$229 - $329 |
Garolini |
|
Sophisticated/Contemporary |
|
$110 -
$140 |
|
$180 -
$250 |
Better labels |
|
|
|
|
|
|
Nine West |
|
Contemporary |
|
$49 -
$85 |
|
$89 -
$199 |
Enzo Angiolini |
|
Sophisticated Classics |
|
$60 - $115 |
|
$99 - $289 |
AK Anne Klein |
|
Modern Classics |
|
$59 -
$75 |
|
$139 -
$159 |
Circa Joan & David |
|
Sophisticated Classics |
|
$59 - $98 |
|
$119 - $189 |
Upper
Moderate labels |
|
|
|
|
|
|
Bandolino |
|
Modern Classics |
|
$49 - $69 |
|
$79 - $149 |
Easy Spirit |
|
Comfort/Fit,
Active,
Sport/Casuals |
|
$49 -
$89 |
|
$69 -
$129 |
Moderate labels |
|
|
|
|
|
|
Nine & Company |
|
Contemporary |
|
$40 -
$50 |
|
$59 - $99 |
Westies |
|
Contemporary |
|
$39 - $49 |
|
$59 - $99 |
Pappagallo |
|
Lifestyle |
|
$29 -
$49 |
|
- |
Gloria Vanderbilt |
|
Lifestyle |
|
$30 - $45 |
|
$43 - $50 |
Mootsies Tootsies |
|
Lifestyle |
|
$25 -
$35 |
|
$30 -
$46 |
Mootsies Tootsies Kids |
|
Children's |
|
$15 - $30 |
|
$35 - $40 |
Sam & Libby |
|
Contemporary |
|
$39 -
$49 |
|
$49 -
$69 |
Sam
& Libby Kids |
|
Children's |
|
$20 - $41 |
|
$40 - $60 |
Dockers Women |
|
Lifestyle |
|
$40 -
$55 |
|
$40 -
$76 |
7
Label
|
|
Product Classification
|
|
Retail Price
Points
|
Accessories |
|
|
|
|
Bridge Labels |
|
|
|
|
Jones New York |
|
Handbags |
|
$28 - $188 |
Anne
Klein New York |
|
Handbags |
|
$50
- $320 |
Judith Jack |
|
Marcasite and Sterling Silver Jewelry |
|
$30 - $688 |
Better Labels |
|
|
|
|
Nine West |
|
Handbags, Luggage,
Small Leather Goods
and Costume Jewelry |
|
$10 - $100 |
Givenchy |
|
Costume and Fashion
Jewelry |
|
$20 -
$295 |
Tommy Hilfiger |
|
Juniors Costume Jewelry |
|
$14 - $160 |
Upper Moderate Labels |
|
|
|
|
Easy
Spirit |
|
Costume Jewelry |
|
$18 - $60 |
Bandolino |
|
Handbags |
|
$48 -
$138 |
Moderate Labels |
|
|
|
|
Nine & Company |
|
Handbags, Small
Leather Goods and
Costume Jewelry |
|
$10 -
$42 |
Gloria Vanderbilt |
|
Handbags, Small
Leather Goods and
Costume Jewelry |
|
$10 - $36 |
A|Line |
|
Handbags and Small
Leather Goods |
|
$16 -
$42 |
Napier |
|
Costume Jewelry |
|
$8 - $135 |
l.e.i. |
|
Juniors Costume Jewelry |
|
$6 -
$15 |
Retail
We market apparel, footwear and accessories directly to
consumers through our specialty retail stores operating in malls and urban
retail centers, our various value-based ("outlet") stores and, with
the acquisition of Barneys, luxury stores located in major urban locations. We
constantly evaluate both the opportunities for new locations and the results of
underperforming locations for possible modification or closure.
Specialty Retail Stores. At December 31, 2004, we
operated a total of 402 specialty retail stores. These stores sell either
footwear and accessories or apparel (or a combination of these products)
primarily under their respective brand names. Our Nine West, Easy Spirit,
Enzo Angiolini and Bandolino retail stores offer selections of
exclusive products not marketed to our wholesale customers. Certain of our
specialty retail stores also sell products licensed by us, including belts,
legwear, outerwear, watches and sunglasses.
The following table summarizes selected aspects of our
specialty retail stores at December 31, 2004. Of these stores, 393 are located
within the United States, five are located in the United Kingdom and four are
located in Canada. In addition to the stores listed in the table, we participate
in a joint venture that operates 29 specialty stores in Australia under the
Nine West and Enzo Angiolini names.
8
|
|
|
Retail Price Range
|
|
Average
store size
(square feet)
|
|
Number of
locations
|
Brands
offered
|
Shoes and
Boots
|
Accessories
|
Apparel
|
Type of
locations
|
Nine West |
215 |
Primarily
Nine West |
$15 -$250 |
$3 - $400 |
$44 - $1,000 |
Upscale and regional malls and urban retail centers |
1,661 |
Easy Spirit |
137 |
Primarily
Easy Spirit |
$29 - $149 |
$4 - $140 |
$39 - $159 |
Upscale and regional malls and
urban retail centers |
1,389 |
Enzo Angiolini |
18 |
Primarily Enzo Angiolini |
$24 -
$229 |
$6 -
$215 |
$129 -
$259 |
Upscale malls and urban retail centers |
1,497 |
Bandolino |
22 |
Primarily
Bandolino |
$34 - $189 |
$10 - $79 |
$36 - $199 |
Urban retail
locations and regional malls |
1,241 |
Apparel |
10 |
Various |
- |
- |
$10 -
$399 |
Urban retail locations and
regional malls |
2,848 |
Luxury stores. At December 31, 2004, we operated
three Barneys New York flagship stores in prime retail locations in New
York City, Beverly Hills and Chicago. The flagship stores, which average 136,667
square feet, establish and promote Barneys New York as a leading retailer
of men's and women's fashion. These stores offer customers a wide variety of
merchandise, including apparel, accessories, cosmetics and items for the home,
catering to affluent, fashion-conscious customers. We also seek to ensure that
the ambience of our flagship stores reflects the luxury and distinct style of
the merchandise that we sell. The flagship stores in New York and Beverly Hills
also include restaurants managed by third-party contractors.
At December 31, 2004, we operated three Barneys New
York regional stores in Manhasset, NY, Seattle, WA and Chestnut Hill, MA.
The regional stores, which average 12,133 square feet, provide a limited
selection of the merchandise offered in the flagship stores and cater to similar
customers as our flagship stores in more localized markets.
At December 31, 2004, we operated three Barneys New
York CO-OP stores in New York City and one in Miami. These free-standing
stores, which average 7,569 square feet, are an extension of the CO-OP
departments in our flagship stores and focus on providing customers with a
selection of high-end, contemporary, urban casual apparel and accessories, often
at price points that are slightly lower than our non-CO-OP merchandise. CO-OP
stores provide us with the opportunity to develop one of Barneys' fastest
growing merchandise categories in a less capital intensive manner, relative to
Barneys' other luxury stores. These stores give us the opportunity to enter
new markets and expand in our existing markets, while broadening our client base
by targeting the younger designer customer. In addition, since we will be
attracting our Barneys customer earlier in their life cycle, we also believe
this format can serve as the initial entree for the shopper who will ultimately
develop into our regional and flagship store customer. Similar to our CO-OP
departments, our CO-OP stores offer merchandise from established and emerging
designers, as well as our Barneys label.
Outlet Stores. At December 31, 2004, we operated a
total of 625 outlet stores. Our shoe stores focus on breadth of product line, as
well as value pricing, and offer a distribution channel for our residual
inventories. The majority of the shoe stores' merchandise consists of new
production of current and proven prior season's styles, with the remainder of
the merchandise consisting of discontinued styles from our specialty retail
footwear stores and wholesale divisions. The apparel stores focus on breadth of
product line, customer service and value pricing. In addition to our brand name
merchandise, these stores also sell merchandise produced by our licensees. The Barneys
New York outlet stores leverage the Barneys New York brand to reach a
wider audience by providing a lower priced version of the sophistication, style
and quality of the retail experience provided in the luxury stores and also
provide a clearance vehicle for residual merchandise from the luxury stores.
9
The following table summarizes selected
aspects of our outlet stores at December 31, 2004. Of these stores, 606 are
located within the United States and its territories and 19 are located in
Canada. In addition to the stores listed in the table, we participate in a joint
venture that operates five outlet stores in Australia under the Nine West
name.
|
Number of
locations
|
|
Brands
offered
|
|
Type of
locations
|
|
Average
store size
(square feet)
|
Nine West |
143 |
|
Primarily Nine West |
|
Manufacturer
outlet centers |
|
2,821 |
Jones New York |
157 |
|
Primarily Jones New York,
Jones New York Sport and Jones New York Country |
|
Manufacturer
outlet centers
|
|
3,724 |
Easy Spirit |
109 |
|
Primarily Easy Spirit |
|
Manufacturer
outlet centers |
|
3,998 |
Stein Mart (leased footwear departments) |
104 |
|
All Company footwear brands |
|
Strip centers |
|
2,646 |
Kasper |
81 |
|
Primarily Kasper |
|
Manufacturer
outlet centers |
|
2,618 |
Anne Klein |
19 |
|
Primarily Anne Klein |
|
Manufacturer
outlet centers |
|
2,689 |
Barneys New York |
11 |
|
Various |
|
Manufacturer
outlet centers |
|
7,084 |
Joan & David |
1 |
|
Primarily Joan & David |
|
Manufacturer
outlet center |
|
2,202 |
We also operate four Barneys New York warehouse
sale events annually, one each spring and fall season in both New York and Santa
Monica, California. The warehouse sale events provide another vehicle for
liquidation of end of season residual merchandise, as well as a low cost
extension of the Barneys New York brand to a wider audience. The events
attract a wide range of shoppers, mostly bargain hunters who value quality and
fashion.
Licensed Brands
As a result of the acquisition of Sun, we obtained the
right to sell Polo Jeans Company products under long-term license and
design agreements which Sun entered into with Polo in 1995 (collectively, the
"Polo Jeans License"). Under the Polo Jeans License,
Polo has granted us an exclusive license for the design, manufacture and sale of
men's and women's jeanswear, sportswear, and related apparel under the Polo
Jeans Company by Ralph Lauren trademarks in the United States, its
territories and Mexico. The agreements expire on December 31, 2010 and may be
renewed by us in five-year increments for up to 20 additional years, provided
that we achieve certain minimum sales levels. Renewal of the Polo Jeans
License after 2010 requires a one-time payment by us of $25.0 million or, at our
option, a transfer of a 20% interest in our Polo Jeans Company business
to Polo (with no fees required for subsequent renewals). Polo also has an
option, exercisable on or before June 1, 2010, to purchase our Polo Jeans
Company business at the end of 2010 for a purchase price, payable in cash,
equal to 80% of the then fair value of the business as a going concern, assuming
continuation of the Polo Jeans License through 2030. The agreements
provide for the payment by us of a percentage of net sales against guaranteed
minimum royalty and design service payments as set forth in the agreements.
As a result of the acquisition of Victoria, we obtained
the exclusive license to produce and sell costume jewelry in the United States
and Canada under the Tommy Hilfiger trademark pursuant to an agreement
with Hilfiger. This agreement expires on March 31, 2008. The agreement provides
for payment by us of a percentage of net sales against guaranteed minimum
royalty and advertising payments as set forth in the agreement. We also obtained
the exclusive license to produce, market and distribute costume jewelry in the
10
United States, Canada, Mexico and Japan under the Givenchy trademark
pursuant to an agreement with Givenchy, which expires on December 31, 2005. The
agreement provides for the payment by us of a percentage of net sales against
guaranteed minimum royalty and advertising payments as set forth in the
agreement.
As a result of the acquisition of Maxwell, we obtained the
exclusive license to produce and sell women's footwear under the Dockers
Women trademark in the United States (including its territories and
possessions) pursuant to an agreement with Levi Strauss & Co. and a license
to design, develop and market women's and children's shoes under the J.
G. Hook and Hook Sport brand names pursuant to an agreement with J.
G. Hook, Inc. These agreements expire in December 2005 and December 2006,
respectively. The agreements provide for the payment by us of a percentage of
net sales against guaranteed minimum royalty payments as set forth in the
agreements.
Design
Our apparel product lines have design teams that are
responsible for the creation, development and coordination of the product group
offerings within each line. We believe our design staff is recognized for its
distinctive styling of garments and its ability to update fashion classics with
contemporary trends. Our apparel designers travel throughout the world for
fabrics and colors, and stay continuously abreast of the latest fashion trends.
In addition, we actively monitor the retail sales of our products to determine
and react to changes in consumer trends.
For most sportswear lines, we will develop several groups
in a season. A group typically consists of an assortment of skirts, pants,
jeans, shorts, jackets, blouses, sweaters, t-shirts and various accessories. We
believe that we are able to minimize design risks because we often will not have
started cutting fabrics until the first few weeks of a major selling season.
Since different styles within a group often use the same fabric, we can
redistribute styles and, in some cases, colors, to fit current market demand. We
also have a key item replenishment program for certain lines which consists of
core products that reflect little variation from season to season.
Our footwear and accessories product lines are developed
by a combination of our own design teams and third-party designers, which
independently interpret global lifestyle, clothing, footwear and accessories
trends. To research and confirm such trends, the teams travel extensively in
Asia, Europe and major American markets, conduct extensive market research on
retailer and consumer preferences, and subscribe to fashion and color
information services. Each team presents styles that maintain each brand's
distinct personality. Samples are refined and then produced. After the samples
are evaluated, lines are modified further for presentation at each season's
shoe shows and accessory markets.
Our jewelry brands are developed by separate design teams.
Each team presents styles that maintain each brand's distinct personality. A
prototype is developed for each new product where appropriate. Most prototypes
are produced by our contractors based on technical drawings that we supply.
These prototypes are reviewed by our product development team, who negotiate
costs with the contractors. After samples are evaluated and cost estimates are
received, the lines are modified as needed for presentation for each selling
season.
We complement the designer merchandise in our luxury
stores with a diverse selection of comparable quality Barneys label
merchandise, including ready-to-wear apparel, handbags, shoes, dress shirts,
ties and sportswear. Barneys label merchandise is manufactured by
independent third parties according to our specifications. We are intensively
involved in all aspects of the design and manufacture of this collection.
In accordance with standard industry practices for
licensed products, we have the right to approve the concepts and designs of all
products produced and distributed by our licensees. Similarly, Polo Ralph Lauren
provides design services to us for our licensed products and has the right to
approve our designs for the Polo Jeans Company product line. Hilfiger,
Givenchy and Levi Strauss & Co. also provide design services to us for our
licensed products and have the right to approve our designs for the Tommy
Hilfiger, Givenchy and Dockers Women product lines,
respectively.
11
Manufacturing and Quality Control
Apparel
Apparel sold by us is produced in accordance with our
design, specification and production schedules through an extensive network of
independent factories located in the United States and its territories, Mexico,
China and other locations throughout the world. We also operate manufacturing
facilities of our own in Mexico. Approximately 18% of our apparel products were
manufactured in the United States and Mexico and 82% in other parts of the world
(primarily Asia) during 2004. We source a portion of our products in Central
America, enabling us to take advantage of shorter lead times than other offshore
locations due to proximity. Sourcing in this region enables us to utilize
exemptions under "807" customs regulations, which provide that certain
articles assembled abroad from United States components are exempt from United
States duties on the value of these components.
We believe that outsourcing a majority of our products
allows us to maximize production flexibility, while avoiding significant capital
expenditures, work-in-process inventory build-ups and costs of managing a larger
production work force. Our fashion designers, production staff and quality
control personnel closely examine garments manufactured by contractors to ensure
that they meet our high standards.
Our comprehensive quality control program is designed to
ensure that raw materials and finished goods meet our exacting standards.
Substantially all of the fabric purchases for garments manufactured
domestically, in Mexico and in Central America are inspected upon receipt in
either our warehouse facilities (where they are stored prior to shipment for
cutting) or at the contractor's warehouse. Fabrics for garments manufactured
offshore are inspected by either independent inspection services or by our
contractors upon receipt in their warehouses. Our quality control program
includes inspection of both prototypes of each garment prior to cutting by the
contractors and a sampling of production garments upon receipt at our warehouse
facilities to ensure compliance with our specifications.
Domestic contractors are supervised by our quality control
staff based primarily in Pennsylvania. Our Mexican contractors are monitored by
an in-house contractor operations group located in Mexico and other foreign
manufacturers' operations are monitored by our Hong Kong-based personnel,
buying agents located in other countries and independent contractors and
inspection services. Finished goods are generally shipped to our warehouses for
final inspection and distribution.
For our sportswear business, we generally supply the raw
material to our domestic manufacturers and occasionally to foreign
manufacturers. Otherwise, the raw materials are purchased directly by the
manufacturer in accordance with our specifications. Raw materials, which are in
most instances made and/or colored especially for us, consist principally of
piece goods and yarn and are purchased by us from a number of domestic and
foreign textile mills and converters. Our foreign finished goods purchases are
generally purchased on a letter of credit basis, while our domestic purchases
are generally purchased on open account.
Our primary raw material in our jeanswear business is
denim, which is primarily purchased from leading mills located in the United
States, Mexico, the Pacific Rim and Pakistan. Denim purchase commitments and
prices are negotiated on a quarterly or semi-annual basis. We perform our own
extensive testing of denim, cotton twill and other fabrics to ensure consistency
and durability.
We do not have long-term arrangements with any of our
suppliers. We have experienced little difficulty in satisfying our raw material
requirements and consider our sources of supply adequate. Products have
historically been purchased from foreign manufacturers in pre-set United States
dollar prices, and therefore, we generally have not been adversely affected by
fluctuations in exchange rates.
Our apparel products are manufactured according to plans
prepared each year which reflect prior years' experience, current fashion
trends, economic conditions and management estimates of a line's performance.
We generally order piece goods concurrently with concept development. The
purchase of piece goods is controlled and coordinated on a divisional basis.
When possible, we limit our exposure to specific colors and fabrics by
committing to purchase only a portion of total projected demand with options to
purchase additional volume if demand meets the plan.
12
We believe our extensive experience in logistics and
production management underlies our success in coordinating with contractors who
manufacture different garments included within the same product group. We also
contract for the production of a portion of our products through a network of
foreign agents. We have had long-term mutually satisfactory business
relationships with many of our contractors and agents but do not have long-term
written agreements with any of them.
Footwear and Accessories
To provide a steady source of inventory, we rely on
long-standing relationships developed by Nine West and Maxwell with footwear
manufacturers in Asia and Brazil, by Nine West with accessories manufacturers in
Asia and by Victoria with jewelry manufacturers in Asia. We work through
independent buying agents for footwear and our own offices for accessories and
jewelry. Allocation of production among our manufacturing resources is
determined based upon a number of factors, including manufacturing capabilities,
delivery requirements and pricing.
During 2004, approximately 88% of our footwear products
were manufactured by independent footwear manufacturers located in Asia
(primarily China) and approximately 12% were manufactured by independently owned
footwear manufacturers in Brazil. Our handbags and small leather goods are
sourced through our own buying offices in Korea, China and Hong Kong, which
utilize independent third party manufacturers located primarily in China.
Products have historically been purchased from the Brazilian and Asian
manufacturers in pre-set United States dollar prices, and therefore, we
generally have not been adversely affected by fluctuations in exchange rates. We
do not have contracts with any of our footwear, handbag or small leather goods
manufacturers but, with respect to footwear imported from Brazil and China, we
rely on established relationships with our Brazilian and Chinese manufacturers
directly and through our independent buying agents. For footwear, quality
control reviews are done on-site in the factories by our third-party buying
agents primarily to ensure that material and component qualities and fit of the
product are in accordance with our specifications. For accessories, quality
control reviews are done on-site in the factories by our own locally-based
inspection technicians. Our quality control program includes approval of
prototypes, as well as approval of final production samples to ensure they meet
our high standards.
We believe that our relationships with our Brazilian and
Chinese manufacturers provide us with a responsive and adequate source of supply
of our products and, accordingly, give us a significant competitive advantage.
We also believe that purchasing a significant percentage of our products in
Brazil and China allows us to maximize production flexibility while limiting our
capital expenditures, work-in-process inventory and costs of managing a larger
production work force. Because of the sophisticated manufacturing techniques of
footwear manufacturers, individual production lines can be quickly changed from
one style to another, and production of certain styles can be completed in as
few as four hours, from uncut leather to boxed footwear.
We place our projected orders for each season's styles
with our manufacturers prior to the time we have received all of our customers'
orders. Because of our close working relationships with our third party
manufacturers (which allow for flexible production schedules and production of
large quantities of footwear within a short period of time), most of our orders
are finalized only after we have received orders from a majority of our
customers. As a result, we believe that, in comparison to our competitors, we
are better able to meet sudden demands for particular designs, more quickly
exploit market trends as they occur, reduce inventory risk and more efficiently
fill reorders booked during a particular season.
We do not have contracts with any of our jewelry
manufacturers but rely on long-standing relationships, principally with
third-party Asian manufacturers. We also have our own manufacturing facility to
satisfy demand for products manufactured domestically (such as cosmetic
containers) and to provide product samples, prototypes, small quantities of test
merchandise and a small amount of production capacity in the event of a
disruption of certain outsourced manufacturing. Victoria has historically
experienced little difficulty in satisfying finished goods requirements, and we
consider their source of supplies adequate. Products have historically been
purchased from Asian manufacturers in pre-set United States dollar prices, and
therefore, we generally have not been adversely affected by fluctuations in
exchange rates.
13
During 2004, our jewelry products were manufactured
primarily by independently-owned jewelry manufacturers in Asia. We believe that
the quality and cost of products manufactured by our suppliers provide us with
the ability to remain competitive. Sourcing the majority of our products enables
us to better control costs and avoid significant capital expenditures, work in
process inventory, and costs of managing a larger production workforce. Victoria's
history as manufacturers gives them the requisite experience and knowledge to
manage their vendors effectively.
Forecasts for basic jewelry products are produced on a
rolling 12-week basis and are adjusted based on point of sale information from
retailers. Manufacturing of fashion jewelry products is based on marketing
forecasts and sales plans; actual orders are received several weeks after such
forecasts are produced. Quality control testing is performed either by private
firms in the country of manufacture or on-site by domestic employees or our own
locally-based inspection technicians. Quality assurance checks are also
performed upon receipt of finished goods at our distribution facilities.
Workplace Compliance Program
We have an active program in place to monitor compliance
by our contract manufacturers (in all product categories) with the Jones Apparel
Group Standards for Contractors and Suppliers ("Factory Standards").
In 1996, we became a participant in the United States Department of Labor's
Apparel Manufacturer's Compliance Program Agreement. Under that agreement, and
through independent agreements with domestic and foreign manufacturers that
produce products for us, we regularly audit for compliance with our Factory
Standards and require corrective action when appropriate. In 2003, we also
initiated a more active training program for contractors.
Our Factory Standards, which we have posted on our
website, apply to conditions of employment, such as child labor, wages and
benefits, working hours and days off, health and safety conditions in the
workplace and housing, forced labor, discrimination, disciplinary practices and
freedom of association.
We have a vigorous factory-auditing program. During 2004,
1,364 audits were conducted (including 915 by independent auditors), including
domestic and foreign factories for apparel, footwear, handbag and jewelry
products. Our Compliance Auditing staff consists of 15 auditors based in three
countries. Thirteen auditors claim English as a second language, and virtually
all are multi-lingual and have at least a bachelor's degree from a four-year
institution in the United States or abroad. In addition to our own staff, we
retain several recognized, unaffiliated workplace compliance audit firms to
conduct factory audits on our behalf and to report on such findings, including
recommendations for remediation.
During 2003, we initiated a more training-based approach
with our contract manufacturers. In China, we funded a mobile training van
program run by an independent monitoring firm, in which approximately 20
factories were visited several times during the year, providing worker training
in the following topics: nutrition, reproductive health for female workers,
psychology and interpersonal relationships, social skills, our Factory
Standards, prevention and cure of SARS, calculation of wage and working hours
entitlements, and occupational health and safety. These topics were addressed
through lectures, group discussions and group exhibits performed by the
independent monitor's staff or local experts with relationships to the
monitor.
Expanding on our introduction in 2003 of a more
training-based approach, in 2004 we funded training for an initial period of six
months with ten footwear factories. This training is being conducted by a
China-based labor compliance consulting organization. It addresses setting up
policies and procedures with the factories and communicating their policies and
procedures throughout the factory workforce. Examples of their policies and
procedures are grievance procedures and hiring, promotion, termination and
harassment prevention policies. The ten factories have committed to another six
months of additional training, focusing on production planning to reduce the
number of working hours. Jones is funding one-half of the second six months of
training in these ten factories. In addition to the ten footwear factories, we
have funded training for 14 accessories factories for an initial six months that
is similar to the footwear factory initial training program. These training
programs began in October and November 2004.
14
Jones is also providing ongoing support (but not funding)
for six apparel factories that have engaged the same China-based labor
compliance consulting organization. For 2005, eight additional factories are in
the process of engaging the same compliance consulting organization for an
initial six months of consulting services.
Jones utilizes five factories in Lesotho which have been
part of an Employee Relations Improvement Program conducted by a local
Industrial Relations expert from South Africa. The program was presented at a
conference for textile and apparel industries in Lesotho in May 2004, co-hosted
by the Commark Trust and the Lesotho National Development Corporation. These
five factories and any other factories we may use in Lesotho in the future are
eligible for public funding through the Commark Trust to continue the Employee
Relations Improvement Program. The Commark Foundation Trust received its initial
funding from the UK's Department for International Development.
In 2003, we funded remediation training for approximately
ten factories in Guatemala to address previously unfavorable audit results,
specifically verbal harassment of workers. Also at our expense in 2003, a
monitor provided an interpersonal relationship training program to workers at
two facilities in Vietnam on our behalf, and a general code of conduct
informational session for representatives of all footwear factories in China
(some of the same factories being visited by the mobile van), bringing in local
government representatives to provide detailed information on the local labor
code requirements for working hours and wages.
Obtaining compliance with our Factory Standards is, in
many instances, a very challenging process. We deal with many factories in many
countries, each with legal systems and cultures far different from those of the
United States. Our auditing program invariably reports problems of varying
degrees in almost all factories. Our approach, in virtually all cases, has been
to attempt to improve conditions through directions to remediate the cited
conditions and to conduct follow-up audits, rather than to cease using a given
factory, which would assuredly result in severe hardship for the employees
working at those factories. We believe that progress and improvement, although
incremental, is quite real.
Marketing
During 2004, no single customer accounted for more than
10% of sales; however, certain of our customers are under common ownership. When
considered together as a group under common ownership, sales to seven department
store customers currently owned by The May Department Stores Company
("May") accounted for approximately 14% of 2004 sales, and sales to
eight department store customers currently owned by Federated Department Stores,
Inc. ("Federated") accounted for approximately 12% of 2004 sales. Our
ten largest customer groups accounted for approximately 59% of sales in 2004. We
believe that purchasing decisions are generally made independently by individual
department stores within a commonly controlled group. There has been a trend,
however, toward more centralized purchasing decisions. As such decisions become
more centralized, the risk to us of such concentration increases. Furthermore,
we believe a trend exists among our major customers to concentrate purchasing
among a narrowing group of vendors. In addition, in recent years the retail
industry has experienced consolidation and other ownership changes. In the
future, retailers may have financial problems or consolidate, undergo
restructurings or reorganizations, or realign their affiliations, any of which
could increase the concentration of our customers. We attempt to minimize our
credit risk from our concentration of customers by closely monitoring accounts
receivable balances and shipping levels and the ongoing financial performance
and credit status of our customers.
Sportswear products are marketed to department stores and
specialty retailing customers during "market weeks," which are
generally four to six months in advance of the corresponding industry selling
seasons. While we typically will allocate a six-week period to market a
sportswear line, most major orders are written within the first three weeks of
any market period.
We believe retail demand for our apparel products is
enhanced by our ability to provide our retail accounts and consumers with
knowledgeable sales support. In this regard, we have an established program to
place retail sales specialists in many major department stores for many of our
brands, including Jones New York, Jones New York Sport, Jones
New York Signature, Polo Jeans Company, Kasper and Anne Klein. These
individuals have been trained by us to support the sale of our products by
educating other store personnel
15
and consumers about our products and by coordinating our marketing activities
with those of the stores. In addition, the retail sales specialists provide us
with firsthand information concerning consumer reactions to our products. In
addition, we have a program of designated sales personnel in which a store
agrees to designate certain sales personnel who will devote a substantial
portion of their time to selling our products in return for certain benefits.
We introduce new collections of footwear at industry-wide
shoe shows, held semi-annually in both New York City and Las Vegas. We also
present an interim line to customers during the fall and spring of each year. We
introduce new handbag and small leather goods collections at market shows that
occur five times each year in New York City. Jewelry products are marketed in
New York City showrooms through individual customer appointments and at five
industry-wide market shows each year. Retailers visit our showrooms at these
times to view various product lines and merchandise.
We market our footwear, handbag and small leather goods
businesses with certain department stores and specialty retail stores by
bringing our retail and sales planning expertise to those retailers. Under this
program, members of branded division management who have extensive retail
backgrounds work with the retailer to create a "focus area" or
"concept shop" within the store that displays the full collection of a
single brand in one area. These individuals assist the department and specialty
retail stores by: providing advice about appropriate product assortment and
product flow; making recommendations about when a product should be re-ordered;
providing sales guidance, including the training of store personnel; and
developing advertising programs with the retailer to promote sales of our
products. In addition, our sales force and field merchandising associates for
footwear, handbags and small leather goods recommend how to display our
products, assist with merchandising displays and educate store personnel about
us and our products. The goal of this approach is to promote high retail sell-throughs
of our products. With this approach, customers are encouraged to devote greater
selling space to our products, and we are better able to assess consumer
preferences, the future ordering needs of our customers, and inventory
requirements.
We work closely with our wholesale jewelry customers to
create long-term sales programs, which include choosing among our diverse
product lines and implementing sales programs at the store level. A team of
sales representatives and sales managers monitor product performance against
plan and are responsible for inventory management, using point-of-sale
information to respond to shifts in consumer preferences. Management uses this
information to adjust product mix and inventory requirements. In addition, field
merchandising associates recommend how to display our products, assist with
merchandising displays and educate store personnel about us and our products.
Retailers are also provided with customized displays and store-level
merchandising designed to maximize sales and inventory turnover. By providing
retailers with in-store product management, we establish close relationships
with retailers, allowing us to maximize product sales and increase floor space
allocated to our product lines. We have also placed retail sales specialists in
major department stores to support the sale of our Napier, Nine West,
Givenchy, Tommy Hilfiger and Judith Jack jewelry products.
Advertising and Promotion
We employ a cooperative advertising program for our
branded products, whereby we share the cost of certain wholesale customers'
advertising and promotional expenses in newspapers, magazines and other media up
to either a preset maximum percentage of the customer's purchases or an
agreed-upon rate of contribution. An important part of the marketing program
includes prominent displays of our products in wholesale customers' sales
catalogs as well as in-store shop displays.
We have national advertising campaigns for the following
brands:
- Jones New York Collection, Jones New York Sport and Jones
New York Signature (in fashion and lifestyle magazines),
- Nine West (footwear, apparel, handbags, jewelry and licensed
products, primarily in fashion magazines),
- Easy Spirit (primarily in fashion, lifestyle, health and fitness
magazines),
- Nine & Company (in fashion magazines through co-op advertising
efforts),
- Bandolino (in fashion magazines),
16
- Gloria Vanderbilt (in fashion and trade magazines),
- Glo (in fashion magazines),
- l.e.i. (in lifestyle and fashion magazines and radio),
- Anne Klein New York and AK Anne Klein (in fashion magazines),
- Kasper (in fashion magazines),
- Jeanstar (in fashion magazines) and
- the licensed Polo Jeans Company line (in fashion and lifestyle
magazines).
Given the strong recognition and brand loyalty already
afforded our brands, we believe these campaigns will serve to further enhance
and broaden our customer base. Except for Polo Jeans Company, our
in-house creative services departments oversee the conception, production and
execution of virtually all aspects of these activities. We also believe that our
retail network promotes brand name recognition and supports the merchandising of
complete lines by, and the marketing efforts of, our wholesale customers.
Licensing of Company Brands
We have entered into various license agreements under
which independent licensees either manufacture, market and sell certain products
under our trademarks in accordance with designs furnished or approved by us or
distribute our products in certain countries where we do not do business. These
licenses, the terms of which (not including renewals) expire at various dates
through 2015, typically provide for the payment to us of a percentage of the
licensee's net sales of the licensed products against guaranteed minimum
royalty payments, which typically increase over the term of the agreement. We
are also a party to licensing arrangements pursuant to which two retail stores
are operated in Japan and a single in-store department is operated in Singapore
under the name Barneys New York.
The following table sets forth information with respect to select aspects of
our licensing business:
Brand
|
Category
|
Jones New York |
Men's
Accessories and Jewelry (U.S., Canada)
Men's Dress Shirts (U.S.)
Men's Neckwear (Canada)
Men's Neckwear (U.S.)
Men's Tailored Clothing, Dress Shirts, Outerwear, Dress Slacks (Canada)
Men's Tailored Clothing, Formal Wear (U.S.)
Men's Topcoats, Outerwear (U.S.)
Men's Umbrellas, Rain Accessories (U.S.)
Women's Costume Jewelry (Canada)
Women's Leather Outerwear (U.S.)
Women's Optical Eyewear (Aruba, Australia, Canada, Colombia, Costa Rica,
Curacao, Cyprus,
Dominican Republic, Ecuador, El Salvador, Guatemala,
Honduras, Kuwait, Lebanon,
Mexico, Nicaragua, Panama, Philippines, Trinidad,
Turkey, South Africa, Sweden)
Women's Outerwear, Rainwear (U.S.)
Women's Outerwear, Wool Coats, Rainwear (Canada)
Women's Scarves, Wraps and Cold Weather Accessories (U.S., Canada)
Women's Sleepwear, Loungewear (U.S., Canada)
Women's Sunglasses (U.S., Canada)
Women's Umbrellas, Rain Accessories (U.S.)
Women's Wool Coats (U.S.) |
Kasper |
Men's Leather Outerwear (U.S.)
Men's Tailored Clothing (U.S., Canada, Mexico) |
Evan-Picone |
Men's Tailored Clothing,
Formal Wear, Topcoats (U.S.)
Women's Sheer Hosiery, Casual Legwear (U.S.)
Women's Sportswear (Japan) |
Albert Nipon |
Men's Tailored Clothing (U.S.)
Women's Outerwear (U.S.) |
A|Line |
Costume
Jewelry (U.S.)
Outerwear, Rainwear (U.S.)
Scarves (U.S.)
Swimwear (U.S.) |
17
Brand
|
Category
|
Anne Klein New York
and AK Anne Klein |
Anne
Klein New York Footwear (worldwide excluding Japan)
AK Anne Klein costume jewelry (U.S.)
Belts (U.S., Canada)
Home Sewing Patterns (worldwide)
Hosiery, Casual Legwear (U.S., Canada)
Outerwear, Wool Coats, Rainwear (U.S.)
Scarves, Cold Weather Accessories, Gloves (U.S., Canada)
Sunglasses, Optical Eyewear (worldwide)
Swimwear (U.S.)
Umbrellas, Rain Accessories (U.S., Canada)
Watches (worldwide)
Men's Outerwear (U.S., Canada, Mexico)
Bed, Bath, Table Linens (U.S., Mexico)
Apparel, Handbags, Belts, Accessories, Costume Jewelry, Footwear, Towels
(Japan)
Apparel, Handbags, Accessories (Korea)
Apparel, Handbags, Accessories (Central America, South America,
Caribbean, Dominican
Republic)
Apparel, Handbags, Accessories (Mexico)
Apparel, Handbags, Accessories, Belts (Hong Kong, China, Taiwan,
Singapore, Malaysia,
Thailand, Indonesia, Macau)
Apparel, Handbags, Accessories, Belts, Sleepwear, Casual Legwear
(Philippines)
Retail distribution rights for Apparel, Handbags and Small Leather Goods
(Turkey)
Retail distribution rights for Apparel, Handbags and Small Leather Goods
(Saudi Arabia) |
Nine West |
Belts (U.S.)
Casual Legwear (U.S., Canada)
Gloves, Cold Weather Accessories (U.S., Canada)
Hats (U.S., Canada)
Leather, Wool, Casual Outerwear, Rainwear (U.S., Canada, Spain)
Luggage (U.S., Canada)
Optical Eyewear (U.S., Bolivia, Brazil, Canada, Chile, China, Colombia,
Costa Rica,
El Salvador, Honduras, Mexico, Netherlands Antilles,
Panama, Peru, Venezuela)
Sunglasses (U.S., Canada, Spain)
Watches (U.S., Argentina, Canada, Chile, El Salvador, Guatemala, Israel,
Mexico, Panama,
Saudi Arabia, Spain, Turkey, UAE, Venezuela, Hong Kong) |
Nine & Company |
Belts (U.S.)
Casual Legwear (U.S.)
Gloves, Cold Weather Accessories (U.S.)
Hats (U.S.)
Luggage (U.S.)
Leather, Wool, Casual Outerwear, Rainwear (U.S.)
Sleepwear, Loungewear (U.S.)
Slippers (U.S.)
Sunglasses (U.S.)
Swimwear (U.S.)
Watches (U.S.) |
Easy Spirit |
Slippers (U.S., Canada) |
Enzo Angiolini |
Sunglasses (U.S.) |
Calico |
Footwear (U.S.) |
Gloria Vanderbilt |
Costume
Jewelry (Canada)
Knit Tops, Bottoms, ActiveWear, Performance ActiveWear (U.S.)
Scarves, Gloves, Cold Weather Accessories (U.S., Canada)
Sleepwear, Daywear, Loungewear (U.S., Canada)
Sweaters (U.S.)
Swimwear (U.S.)
Watches (U.S.)
Wool, Leather, Casual Outerwear, Rainwear (U.S.)
Woven Shirts (U.S.)
Infants', Toddlers' and Children's (4-6x) Apparel (U.S., Canada)
Bath Towels, Decorative Bedding, Decorative Bath, Bath/Accent Rugs,
Pillows, Mattress
Pads and Pillow Protectors (U.S.)
Women's, Girls' (4-18), Infants' and Toddlers' Apparel and Accessories
(Canada) |
18
Brand
|
Category
|
Vanderbilt
for Boys
and Vanderbilt for
Men |
Men's, Boys'
(4-18), Infants' and Toddlers' Apparel and Accessories (Canada) |
Glo |
Infants', Toddlers' and
Children's (4-6x) Apparel (U.S.)
Swimwear (U.S.) |
Energie |
Men's Denim & Sportswear
(U.S.) |
Joan & David |
Retail distribution rights for
Apparel, Footwear and Handbags (Hong Kong, Taiwan, Japan,
United Kingdom, Singapore, France, Thailand, Spain,
Italy, China) |
Mootsies
Tootsies |
Women's and
Girls' Hosiery and Casual Legwear (U.S., Canada, Mexico) |
Sam & Libby |
Men's, Women's and Children's
Slippers and Sandals (U.S.) |
l.e.i. |
Casual Legwear
(U.S.)
Children's Apparel (U.S.)
Footwear (U.S., Canada)
Handbags, Belts, Accessories, Cold Weather Accessories (U.S., Canada)
Hats (U.S., Canada)
Intimate Apparel (U.S.)
Outerwear (U.S.)
Sunglasses (U.S., Canada)
Swimwear (U.S., Canada)
Watches (U.S., Canada) |
International
footwear and accessories retail/wholesale distribution |
Nine West retail
locations (Bahrain, Kuwait, Oman, Qatar, The United Arab Emirates,
Jordan, India, Poland)
Nine West retail locations (Saudi Arabia, Lebanon)
Nine West retail locations and wholesale distribution rights for Nine
West, Enzo Angiolini,
Bandolino and Easy Spirit footwear and
accessories (Belize, Colombia, Costa Rica,
Ecuador, El Salvador, Guatemala, Honduras, Nicaragua,
Panama, Venezuela,
the Dominican Republic, French Guiana, Guyana,
Suriname, the Caribbean Islands)
Nine West retail locations and wholesale distribution rights for Nine
West footwear and
accessories (Greece, Cyprus)
Nine West retail locations and wholesale distribution rights for Nine
West footwear and
accessories (Chile, Peru) and wholesale distribution
rights for Enzo Angiolini
footwear and accessories (Chile)
Nine West, Enzo Angiolini, NW Nine West and Easy Spirit
retail locations and wholesale
distribution rights for Nine West, Enzo Angiolini,
NW Nine West and Easy Spirit footwear
and accessories (Hong Kong, Indonesia, Japan, Korea,
Macau, Malaysia, the
People's Republic of China, the Philippines, Singapore,
Taiwan, Thailand)
Nine West retail locations and wholesale distribution rights for Nine
West footwear and
accessories (South Africa)
Nine West, Enzo Angiolini and Westies retail locations,
wholesale distribution rights for
Nine West footwear and accessories and Enzo
Angiolini and Westies footwear and
manufacturing rights for Westies footwear
(Mexico)
Nine West retail locations (Turkey)
Nine West and Easy Spirit retail locations and wholesale
distribution rights for Nine West
and Easy Spirit footwear and accessories
(Israel)
Nine West and Easy Spirit retail locations, wholesale
distribution rights for Nine West, Enzo
Angiolini, Easy Spirit, Bandolino, Nine & Company
and Westies footwear and accessories
and AK Anne Klein, Circa Joan & David, Sam &
Libby and Mootsies Tootsies footwear
(Canada)
Nine West retail locations (the United Kingdom, Ireland, the
Channel Islands) and
wholesale distribution rights for Nine West and NW
Nine West footwear and accessories
and Easy Spirit footwear (the United Kingdom,
Ireland, the Channel Islands, Norway,
Denmark, Sweden, Finland, Iceland, Belgium, the
Netherlands, Luxembourg)
Nine West retail locations and wholesale distribution rights for Nine
West and Enzo Angiolini
footwear and accessories (Spain)
Wholesale distribution rights for Nine West and Napier
costume jewelry (Canada) |
19
Trademarks
We utilize a variety of trademarks which we own, including
Jones New York, Jones New York Signature, Jones New York Sport, Jones Wear,
Jones New York Country, Jones Jeans, Jones Studio, Evan-Picone, Norton
McNaughton, Maggie McNaughton, Norton Studio, Erika, Energie, Nine West, Easy
Spirit, Enzo Angiolini, Bandolino, Banister, Nine & Company, Westies, Joan
& David, Mootsies Tootsies, Sam & Libby, Napier, Richelieu, Judith Jack,
Gloria Vanderbilt, Glo, l.e.i., Albert Nipon, Anne Klein, Anne Klein New York,
AK Anne Klein, A|Line, Kasper, Le Suit and Barneys New York. We have
registered or applied for registration for these and other trademarks for use on
a variety of items of apparel, footwear, accessories and/or related products
and, in some cases, for retail store services, in the United States and certain
other countries. The expiration dates of the United States trademark
registrations for our material registered trademarks are as follows, with our
other registered foreign and domestic trademarks expiring at various dates
through 2019. Certain brands such as Jones New York are sold under
several related trademarks; in these instances, the range of expiration dates is
provided. All marks are subject to renewal in the ordinary course of business if
no third party successfully challenges such registrations and, in the case of
domestic and certain foreign registrations, applicable use and related filing
requirements for the goods and services covered by such registrations have been
met.
Trademark
|
Expiration
Dates |
|
Trademark
|
Expiration
Dates |
|
Trademark
|
Expiration
Dates |
Jones New York |
2006-2012 |
|
Napier |
2009 |
|
Anne Klein |
2005-2012 |
Jones New York Sport |
2013 |
|
Judith Jack |
2012 |
|
Kasper |
2011 |
Evan-Picone |
2013 |
|
Norton McNaughton |
2014 |
|
Le Suit |
2008 |
Nine West |
2011-2013 |
|
Erika |
2014 |
|
Joan & David |
2008-2014 |
Easy Spirit |
2007-2013 |
|
Energie |
2008 |
|
Mootsies Tootsies |
2010 |
Enzo Angiolini |
2005-2014 |
|
Gloria Vanderbilt |
2005-2012 |
|
Sam & Libby |
2011 |
Bandolino |
2011
|
|
l.e.i. |
2011 |
|
Barneys New York |
2005-2010 |
Nine & Company |
2012
|
|
Albert Nipon |
2006-2012 |
|
|
|
We carefully monitor trademark expiration dates to provide
uninterrupted registration of our material trademarks. We also license the Polo
Jeans Company by Ralph Lauren, Givenchy, Tommy Hilfiger, Dockers Women, J. G.
Hook and Hook Sport trademarks (see "Licensed Brands"
above).
We also hold numerous patents expiring at various dates
through 2019 (subject to payment of annuities and/or periodic maintenance fees)
and have additional patent applications pending in the United States Patent and
Trademark Office. We regard our trademarks and other proprietary rights as
valuable assets which are critical in the marketing of our products. We
vigorously monitor and protect our trademarks and patents against infringement
and dilution where legally feasible and appropriate.
Imports and Import Restrictions
Our transactions with our foreign manufacturers and
suppliers are subject to the risks of doing business abroad. Imports into the
United States are affected by, among other things, the cost of transportation
and the imposition of import duties and restrictions. The United States, China,
Brazil and other countries in which our products are manufactured may, from time
to time, impose new quotas, duties, tariffs or other restrictions, or adjust
presently prevailing quotas, duty or tariff levels, which could affect our
operations and our ability to import products at current or increased levels. We
cannot predict the likelihood or frequency of any such events occurring.
Our import operations are subject to constraints imposed
by bilateral textile agreements between the United States and a number of
foreign countries, including Hong Kong, Taiwan, the Philippines, Thailand,
Indonesia and South Korea. In certain cases, these agreements impose quotas on
the amount and type of goods which can be imported into the United States from
these countries. Such agreements also allow the United States to impose, at any
time, restraints on the importation of categories of merchandise that, under the
terms of the agreements, are not subject to specified limits. Our imported
products are also subject to United States customs duties and, in the ordinary
course of business, we are from time to time subject to claims by the United
States Customs Service for duties and other charges.
20
We monitor duty, tariff and quota-related developments and
continually seek to minimize our potential exposure to quota-related risks
through, among other measures, geographical diversification of our manufacturing
sources, the maintenance of overseas offices, allocation of overseas production
to merchandise categories where more quota is available and shifts of production
among countries and manufacturers.
Because our foreign manufacturers are located at greater
geographic distances from us than our domestic manufacturers, we are generally
required to allow greater lead time for foreign orders, which reduces our
manufacturing flexibility. Foreign imports are also affected by the high cost of
transportation into the United States and the effects of fluctuations in the
value of the dollar against foreign currencies in certain countries.
In addition to the factors outlined above, our future
import operations may be adversely affected by political instability resulting
in the disruption of trade from exporting countries and restrictions on the
transfer of funds.
Backlog
We had unfilled customer orders of approximately $1.5
billion and $1.4 billion at December 31, 2004 and December 31, 2003,
respectively. These amounts include both confirmed and unconfirmed orders which
we believe, based on industry practice and past experience, will be confirmed.
The amount of unfilled orders at a particular time is affected by a number of
factors, including the mix of product, the timing of the receipt and processing
of customer orders and scheduling of the manufacture and shipping of the
product, which in some instances is dependent on the desires of the customer.
Backlog is also affected by a continuing trend among customers to reduce the
lead time on their orders. Due to these factors, as well as the acquisition of
Maxwell during 2004, a comparison of unfilled orders from period to period is
not necessarily meaningful and may not be indicative of eventual actual
shipments.
Competition
Apparel, footwear and accessories companies face
competition on many fronts, including the following:
- establishing and maintaining favorable brand recognition;
- developing products that appeal to consumers;
- pricing products appropriately; and
- obtaining access to retail outlets and sufficient floor space.
Competition is intense in the sectors of the apparel,
footwear and accessory and retail industries in which we participate. We compete
with many other manufacturers and retailers, some of which are larger and have
greater resources than we do.
We compete primarily on the basis of fashion, price and
quality. We believe our competitive advantages include our ability to anticipate
and respond quickly to changing consumer demands, our brand names and range of
products and our ability to operate within the industries' production and
delivery constraints. Furthermore, our established brand names and relationships
with retailers have resulted in a loyal following of customers.
While new entrants come into markets we serve on a regular
basis, we consider the risk of formidable new competitors to be low due to
barriers to entry, such as significant startup costs, the long-term nature of
supplier and customer relations and the need to develop both adequate financial
resources and an efficient operational infrastructure.
We believe that, during the past few years, major
department stores and specialty retailers have been increasingly sourcing
products from suppliers who are well capitalized or have established reputations
for delivering quality merchandise in a timely manner. However, there can be no
assurance that significant new competitors will not develop in the future.
21
Employees
At December 31, 2004, we had approximately 17,260
full-time employees. This total includes approximately 10,095 in quality
control, production, design and distribution positions, approximately 3,090 in
administrative, sales, clerical and office positions and approximately 4,075 in
our retail stores. We also employ approximately 5,240 part-time employees, of
which approximately 5,115 work in our retail stores.
Approximately 210 of our employees located in Bristol,
Pennsylvania are members of the Teamsters Union, which has a collective
bargaining agreement with us expiring in March 2006. Approximately 80 of our
employees located in Vaughan, Ontario are members of the Laundry and Linen
Drivers and Industrial Workers Union, which has a collective bargaining
agreement with us expiring in March 2006. Approximately 1,060 of our employees
located in Mexico are members of an affiliate of the Cofederacion de
Trabajadores Mexicanos, which has a collective bargaining agreement expiring on
January 1, 2006. Approximately 215 of our employees are members of the Union of
Needletrades, Industrial and Textile Employees, which has a labor agreement with
Kasper that expires on May 31, 2007. Approximately 765 of our employees are
members of UNITE HERE, which has various labor agreements with Barneys that
expire between March 1, 2005 and March 31, 2007. We consider our relations with
our employees to be satisfactory.
ITEM 2. PROPERTIES
The general location, use and approximate size of our
principal properties are set forth below:
Location
|
Owned/Leased
|
Use
|
Approximate Area
in Square Feet
|
Bristol, Pennsylvania |
leased |
Headquarters and distribution warehouse |
419,200 |
Bristol, Pennsylvania |
leased |
Administrative and computer services |
170,600 |
New York, New York |
leased |
Administrative, executive and sales offices |
727,100 |
Vaughan, Canada |
leased |
Administrative offices and distribution warehouse |
125,000 |
Lawrenceburg, Tennessee |
leased |
Distribution warehouses |
1,199,100 |
South Hill, Virginia |
leased |
Distribution warehouses |
534,000 |
El Paso, Texas |
owned |
Administrative, warehouse and preproduction facility |
165,000 |
El Paso, Texas |
leased |
Distribution warehouses |
860,500 |
Durango, Mexico |
owned |
Finishing, assembly and warehouse facilities |
452,600 |
White Plains, New York |
leased |
Administrative offices |
366,500 |
West Deptford, New Jersey |
leased |
Distribution warehouses |
868,150 |
East Providence, Rhode Island |
leased |
Distribution warehouses, product development,
administrative and computer services |
241,400 |
Goose Creek, South Carolina |
leased |
Distribution warehouses |
600,000 |
Edison, New Jersey |
leased |
Distribution warehouse |
155,000 |
Commerce, California |
leased |
Administrative offices and distribution warehouse |
86,100 |
Yuma, Arizona |
leased |
Distribution warehouse |
75,000 |
San Luis, Mexico |
leased |
Production and distribution warehouses |
946,800 |
Secaucus, New Jersey |
leased |
Administrative offices, retail store and distribution warehouse |
384,550 |
Hyde Park,
Massachusetts |
leased |
Administrative
offices |
52,000 |
Brockton, Massachusetts |
leased |
Distribution warehouse |
215,000 |
Lyndhurst, New
Jersey |
leased |
Distribution
warehouse |
180,000 |
New York, New York |
leased |
Barneys New York flagship
retail store |
240,000 |
Beverly Hills,
California |
leased |
Barneys New
York flagship retail store |
120,000 |
We sublease approximately 200,000 square feet of our White
Plains facilities and a 220,000 square foot warehouse facility in Teterboro, New
Jersey to independent companies. Our Australian joint venture company leases
office and distribution facilities in Australia.
We also own two production facilities totaling 101,000
square feet in Durango, Mexico which are currently not in service.
Our retail stores are leased pursuant to long-term leases,
typically five to seven years for apparel and footwear outlet stores, ten years
for footwear and accessories and apparel specialty stores and ten to 20 years
with multiple ten-year renewal options for our luxury stores. Certain leases
allow us to terminate our
22
obligations after a predetermined period (generally one to three years) in
the event that a particular location does not achieve specified sales volume,
and some leases have options to renew. Many leases include clauses that provide
for contingent payments based on sales volumes, and many leases contain
escalation clauses for increases in operating costs and real estate taxes.
We believe that our existing facilities are well
maintained, in good operating condition and that our existing and planned
facilities will be adequate for our operations for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
In October 1995, we acquired an exclusive license to
manufacture and market women's shirts, blouses, skirts, jackets, suits,
sweaters, pants, vests, coats, outerwear and hats under the Lauren by Ralph
Lauren ("Lauren") trademark in the United States, Canada
and Mexico pursuant to license and design service agreements with Polo
(collectively, the "Lauren License"), which were to expire on
December 31, 2006. In May 1998, we acquired an exclusive license to manufacture
and market women's dresses, shirts, blouses, skirts, jackets, suits, sweaters,
pants, vests, coats, outerwear and hats under the Ralph by Ralph Lauren
("Ralph") trademark in the United States, Canada and Mexico
pursuant to license and design service agreements with Polo (the "Ralph
License"). The Ralph License was scheduled to end on December 31,
2003.
During the course of the discussions concerning the Ralph
License, Polo asserted that the expiration of the Ralph License would
cause the Lauren License agreements to end on December 31, 2003, instead
of December 31, 2006. We believe that this is an improper interpretation and
that the expiration of the Ralph License did not cause the Lauren
License to end.
On June 3, 2003, we announced that our discussions with
Polo regarding the interpretation of the Lauren License had reached an
impasse and that, as a result, we had filed a complaint in the New York State
Supreme Court against Polo and its affiliates and our former President, Jackwyn
Nemerov. The complaint alleges that Polo breached the Lauren License
agreements by claiming that the license ends at the end of 2003. The complaint
also alleges that Ms. Nemerov breached the confidentiality and non-compete
provisions of her employment agreement with us. Additionally, Polo is alleged to
have induced Ms. Nemerov to breach her employment agreement and Ms. Nemerov is
alleged to have induced Polo to breach the Lauren License agreements. We
asked the court to enter a judgment for compensatory damages of $550 million, as
well as punitive damages, and to enforce the confidentiality and non-compete
provisions of Ms. Nemerov's employment agreement. On June 3, 2003, Polo also
filed a complaint in the New York State Supreme Court against us, seeking among
other things a declaratory judgment that the Lauren License terminated as
of December 31, 2003. On June 25, 2003, we filed an amended complaint adding a
claim against Ms. Nemerov for conversion, which alleges that Ms. Nemerov
wrongfully took and possesses documents containing confidential information
regarding us.
On October 2, 2003, Ms. Nemerov filed a motion to stay our
claims against her and to compel arbitration of those claims. We opposed that
motion. Additionally, on July 3, 2003, Polo served a motion on us to dismiss our
breach of contract claim, and to stay our claim regarding inducement of Ms.
Nemerov's breach of her employment agreement pending the outcome of
arbitration. On July 8, 2003, we served papers opposing Nemerov's motion. On
July 23, 2003, we served papers opposing Polo's motion and also served upon
Polo a motion seeking summary judgment in Polo's action for a declaratory
judgment. On August 12, 2003, Polo filed a cross-motion for summary judgment in
that action.
On March 15, 2004, the Court issued a decision resolving
the motions. The Court denied Polo's motion to dismiss our breach of contract
claim, granted our motion for summary judgment in Polo's action for a
declaratory judgment, and denied Polo's cross-motion for summary judgment in
the same action. As a result, the Court dismissed Polo's action for a
declaratory judgment and entered judgment in our favor in that action, while
permitting our action against Polo to proceed.
The Court also denied Nemerov's motion to compel
arbitration of our claim against her for inducing Polo to breach the Lauren
Agreements, but granted her motion to compel arbitration of our remaining claims
against her. The Court granted Polo's motion for a stay of proceedings
relating to our claim against Polo for
23
inducing Nemerov to breach her employment agreement while those claims are
arbitrated by us and Nemerov. We dismissed our claims against Nemerov in the
litigation and are pursuing our claims against her in the arbitration.
Polo and Nemerov have appealed from these rulings. In
addition, Polo filed a motion for leave to reargue and to renew its previous
motions to dismiss and for summary judgment, which we opposed. On April 16,
2004, the Court heard oral argument on Polo's motion. On August 16, 2004, the
court denied Polo's motions to reargue and renew its previous motions. Polo
has appealed from this ruling.
On May 12, 2004, we initiated a Demand for Arbitration
with the American Arbitration Association against Ms. Nemerov. The demand
alleges Ms. Nemerov breached her employment agreement with us, violated her
fiduciary duties and converted our property. Ms. Nemerov has denied these
allegations and asserted counterclaims for defamation and breach of the
non-disparagement and indemnification clauses of her employment agreement. On
August 24, 2004, we amended our demand to add a claim for misappropriation of
trade secrets. Ms. Nemerov continues to deny our claims and to pursue her
counterclaims.
We have been named as a defendant in various actions and
proceedings arising from our ordinary business activities. Although the amount
of any liability that could arise with respect to these actions cannot be
accurately predicted, in our opinion, any such liability will not have a
material adverse financial effect on us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Our executive officers are as follows:
Name |
Age |
Office
|
Peter Boneparth |
45 |
President and Chief Executive Officer |
Sidney Kimmel |
77 |
Chairman |
Wesley R. Card |
57 |
Chief Operating and Financial Officer |
Patrick M. Farrell |
55 |
Senior Vice President and Corporate Controller |
Rhonda J. Brown |
49 |
President and Chief Executive Officer of Footwear, Accessories and Retail Group and President and Chief Executive Officer of Nine West and Jones Retail |
Anita Britt |
41 |
Executive Vice President of Finance |
Ira M. Dansky |
59 |
Executive Vice President, General Counsel
and Secretary |
Mr. Boneparth was named President in March 2002 and Chief
Executive Officer in May 2002. He also serves as Chief Executive Officer of
McNaughton. He has been Chief Executive Officer of McNaughton since June 1999,
President of McNaughton from April 1997 until January 2002, and Chief Operating
Officer of McNaughton from 1997 until its acquisition by us. Prior to that time,
Mr. Boneparth was Executive Vice President and Senior Managing Director of
Investment Banking for Rodman & Renshaw, Inc., an investment banking firm,
from March 1995 to April 1997.
24
Mr. Kimmel founded the Jones Apparel Division of W.R.
Grace & Co. in 1970. Mr. Kimmel has served as our Chairman since 1975 and as
Chief Executive Officer from 1975 to May 2002.
Mr. Card has been our Chief Financial Officer since 1990.
He was also named Chief Operating Officer in March 2002.
Mr. Farrell was appointed Vice President and Corporate
Controller in November 1997 and Senior Vice President in September 1999.
Ms. Brown joined us as President and Chief Executive
Officer of Nine West Group and President and Chief Executive Officer of
Footwear, Accessories and Retail Group in October 2001. Prior to joining us, Ms.
Brown served as President of Steve Madden, Ltd. from February 2000 to September
2001. Ms. Brown also served as Chief Operating Officer of Steve Madden, Ltd.
from July 1996 to January 2001 and as a director of that company from October
1996 to September 2001.
Ms. Britt was named Executive Vice President of Finance in
May 2002. She served as Director of Investor Relations and Financial Planning
from 1996 to August 2000, Vice President, Finance and Investor Relations from
September 2000 to February 2001 and Senior Vice President, Finance and Investor
Relations from March 2001 to April 2002.
Mr. Dansky has been our General Counsel since 1996 and our
Secretary since January 2001. He was elected an Executive Vice President in
March 2002.
PART II
ITEM 5. MARKET FOR REGISTRANT'S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
|
First Quarter
|
Second Quarter
|
Third Quarter
|
Fourth Quarter
|
Price range of common stock: |
|
|
|
|
2004 |
|
|
|
|
High |
$38.18 |
$40.00 |
$39.66 |
$37.49 |
Low |
$33.25 |
$35.20 |
$34.41 |
$33.00 |
2003 |
|
|
|
|
High |
$37.44 |
$31.15 |
$33.18 |
$35.91 |
Low |
$25.61 |
$26.60 |
$27.98 |
$30.78 |
Dividends per share of common stock: |
|
|
|
|
2004 |
$0.08 |
$0.08 |
$0.10 |
$0.10 |
2003 |
- |
- |
$0.08 |
$0.08 |
Our common stock is traded on the New York Stock Exchange
under the symbol "JNY." The above figures set forth, for the periods
indicated, the high and low sale prices per share of our common stock as
reported on the New York Stock Exchange Composite Tape. The last reported sale
price per share of our common stock on February 23, 2005 was $32.83, and on that
date there were 508 holders of record of our common stock. However, many shares
are held in "street name;" therefore, the number of holders of record
may not represent the actual number of shareholders.
25
Annual CEO Certification
The Annual CEO Certification required by Section 303A.12(a) of the New York
Stock Exchange Listed Company Manual was submitted to the New York Stock
Exchange on May 26, 2004.
Issuer Purchases of Equity Securities
The following table sets forth the repurchases of our common stock for the
fiscal quarter ended December 31, 2004.
Issuer Purchases of Equity Securities
Period |
(a) Total
Number of Shares (or Units) Purchased |
(b) Average
Price Paid per Share (or Unit) |
(c) Total
Number of Shares (or Units) Purchased as Part of Publicly Announced
Plans or Programs |
(d) Maximum
Number (or Approximate Dollar Value) of Shares (or Units) that May Yet
Be Purchased Under the Plans or Programs |
October
2, 2004 to October 29, 2004 |
850,000 |
$34.02 |
850,000 |
$144,236,442 |
October 30,
2004 to November 26, 2004 |
81,000 |
$35.29 |
81,000 |
$141,377,954 |
November
27, 2004 to December 31, 2004 |
- |
- |
- |
$141,377,954 |
Total |
931,000 |
$34.13 |
931,000 |
$141,377,954 |
These repurchases were made under programs
announced on July 27, 2004 for $150.0 million and October 27, 2004 for $100.0
million. Neither plan has an expiration date.
26
ITEM 6. SELECTED FINANCIAL DATA
The following financial information is
qualified by reference to, and should be read in conjunction with, our
Consolidated Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained elsewhere in this Report. The selected consolidated financial
information presented below is derived from our audited Consolidated Financial
Statements for each of the five years in the period ended December 31, 2004. We
completed our acquisitions of Victoria, Judith Jack, McNaughton, Gloria
Vanderbilt, l.e.i., Kasper, Maxwell and Barneys at various dates within the
five-year period and, accordingly, the results of their operations are included
in our operating results from the respective dates of acquisition.
(All amounts in millions except net income per share data)
Year Ended December 31,
|
2004
|
2003
|
2002
|
2001
|
2000
|
Income Statement Data
|
|
|
|
|
|
|
Net sales |
$ 4,592.6
|
$ 4,339.1
|
$ 4,312.2
|
$ 4,073.8
|
$ 4,147.4
|
|
Licensing income (net) |
57.1
|
36.2
|
28.7
|
24.8
|
22.2
|
|
|
|
|
|
|
|
|
Total revenues |
4,649.7 |
4,375.3 |
4,340.9 |
4,098.6 |
4,169.6 |
|
Cost of goods sold |
2,944.4
|
2,738.6
|
2,657.0
|
2,570.4
|
2,436.5
|
|
|
|
|
|
|
|
|
Gross profit |
1,705.3 |
1,636.7 |
1,683.9 |
1,528.2 |
1,733.1 |
|
Selling, general and administrative
expenses |
1,176.9
|
1,056.9
|
1,093.3
|
1,004.1
|
1,091.6
|
|
Amortization of goodwill |
-
|
-
|
-
|
44.2
|
36.9
|
|
|
|
|
|
|
|
|
Operating income |
528.4
|
579.8
|
590.6
|
479.9
|
604.6
|
|
Interest income |
1.9
|
3.5
|
4.6
|
4.5
|
2.3
|
|
Interest expense and financing costs |
51.2
|
58.8
|
62.7
|
84.6
|
103.8
|
|
Equity in earnings of unconsolidated affiliates |
3.8
|
2.5
|
1.0
|
-
|
-
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
482.9
|
527.0
|
533.5
|
399.8
|
503.1
|
|
Provision for income taxes |
181.1
|
198.4
|
201.2
|
163.6
|
201.2
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change in accounting principle |
301.8
|
328.6
|
332.3
|
236.2
|
301.9
|
|
Cumulative effect of change in accounting for intangible assets, net of tax |
-
|
-
|
13.8
|
-
|
-
|
|
|
|
|
|
|
|
|
Net income |
$ 301.8
|
$ 328.6
|
$ 318.5
|
$ 236.2
|
$ 301.9
|
|
|
|
|
|
|
|
Per Share Data
|
|
|
|
|
|
|
Income per share before cumulative effect of change in accounting principle |
|
|
|
|
|
|
Basic |
$2.44 |
$2.58 |
$2.59 |
$1.92 |
$2.54 |
|
Diluted |
$2.39 |
$2.48 |
$2.46 |
$1.82 |
$2.48 |
|
Net income per share |
|
|
|
|
|
|
Basic |
$2.44 |
$2.58 |
$2.48 |
$1.92 |
$2.54 |
|
Diluted |
$2.39 |
$2.48 |
$2.36 |
$1.82 |
$2.48 |
|
Dividends paid per share |
$0.36 |
$0.16 |
- |
- |
- |
|
Weighted average common shares outstanding |
|
|
|
|
|
|
Basic |
123.6 |
127.3 |
128.2 |
123.2 |
119.0 |
|
Diluted |
126.5 |
136.5 |
139.0 |
133.7 |
121.9 |
December 31,
|
2004
|
2003
|
2002
|
2001
|
2000
|
Balance Sheet Data
|
|
|
|
|
|
|
Working capital |
$ 612.3 |
$ 826.9 |
$ 890.9 |
$ 762.8 |
$ 294.9 |
|
Total assets |
4,550.8 |
4,187.7 |
3,852.6 |
3,373.5 |
2,979.2 |
|
Short-term debt and current portion of long-term debt and capital lease obligations |
203.2 |
180.8 |
6.3 |
7.7 |
499.8 |
|
Long-term debt, including capital lease obligations |
1,016.6 |
835.1 |
978.1 |
976.6 |
576.2 |
|
Stockholders' equity |
2,653.9 |
2,537.8 |
2,303.5 |
1,905.4 |
1,477.2 |
27
ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides information and analysis
of our results of operations from 2002 through 2004, and our liquidity and
capital resources. The following discussion and analysis should be read in
conjunction with our Consolidated Financial Statements included elsewhere
herein.
Overview
We design, contract for the manufacture of, manufacture
and market a broad range of women's collection sportswear, suits and dresses,
casual sportswear and jeanswear for men, women and children, and women's
footwear and accessories. We sell our products through a broad array of
distribution channels, including better specialty and department stores and mass
merchandisers, primarily in the United States and Canada. We also operate our
own network of retail and factory outlet stores. In addition, we license the use
of several of our brand names to select manufacturers and distributors of women's
and men's apparel and accessories worldwide.
Trends
We believe that two significant trends are occurring in
the women's apparel, footwear and accessories industry. We believe that a
trend exists among our major retail accounts to concentrate their women's
apparel, footwear and accessories buying among a narrowing group of vendors and
to differentiate their product offerings through exclusivity of brands. We also
believe that consumers in the United States and Canada are shopping less in
department stores (our traditional distribution channel) and more in other
channels, such as specialty shops and mid-tier locations where value is
perceived to be higher. We have responded to these trends by enhancing the brand
equity of our labels through our focus on design, quality and value, and through
strategic acquisitions which provide significant diversification to the business
by successfully adding new distribution channels, labels and product lines (such
as the Gloria Vanderbilt, l.e.i., Kasper, Albert Nipon, AK Anne Klein,
Anne Klein New York, Joan & David, Mootsies Tootsies and Sam &
Libby brands and the Barneys New York retail stores). Through this
diversification, we have evolved into a multidimensional resource in apparel,
footwear and accessories. We have leveraged the strength of our brands to
increase both the number of locations and amount of selling space in which our
products are offered, to introduce product extensions such as the Jones New
York Signature, Nine West, Nine & Company, Easy Spirit
and Bandolino apparel labels and the Jones New York accessory
label, and to reposition the Bandolino and Evan-Picone labels to
the moderate market segment.
On January 1, 2005, the World Trade Organization's 148
member nations lifted all quotas on apparel and textiles. As a result, all
textiles and textile apparel manufactured in a member nation and exported on or
after January 1, 2005 will no longer be subject to quota restrictions. This will
allow retailers, apparel firms and others to import unlimited quantities of
apparel and textile items from China, India and other low-cost countries. The
effects of this action could lead to lower production costs or allow us to
improve the quality of our products for a given cost and could also allow us to
concentrate production in the most efficient markets. China, however, has
implemented an export tax on many of the items previously subject to quota
restriction. In addition, litigation and political activity has been initiated
by interested parties seeking to re-impose quotas. As a result, we are unable to
predict the long-term effects of the lifting of quota restrictions and related
events on our results of operations.
Risk Factors
There are certain risks and uncertainties that could cause
actual results and events to differ materially from those anticipated. Risks and
uncertainties that could adversely affect us include, without limitation, the
following factors:
- the apparel, footwear and accessories industries are highly competitive,
and any increased competition could result in reduced sales or prices (or
both);
- we may not be able to respond to changing fashion and retail trends in a
timely manner;
28
- a prolonged period of depressed consumer spending;
- the loss of any of our largest customers;
- the loss or infringement of our trademarks or other proprietary rights;
- the extent of our foreign operations and manufacturing;
- fluctuations in the price, availability and quality of raw materials; and
- damage to our customer relationships resulting from delays or quality
issues, or damage to our reputation resulting from any failure to comply
with our factory workplace standards, caused by our reliance on independent
manufacturers.
Acquisitions
We completed our acquisitions of Gloria Vanderbilt on
April 8, 2002, l.e.i. on August 15, 2002, Kasper on December 1, 2003, Maxwell on
July 8, 2004 and Barneys on December 20, 2004. The results of operations of the
acquired companies are included in our operating results from the respective
dates of acquisition. Accordingly, the financial position and results of
operations presented and discussed herein are not directly comparable between
years. Kasper operates primarily in the wholesale better apparel and retail
segments, Gloria Vanderbilt and l.e.i. operate in the wholesale moderate apparel
segment, Maxwell operates in the wholesale footwear and accessories segment and
Barneys operates in the retail segment.
Restructuring and Other Charges
During 2002, we recorded a $31.9 million charge relating
to contractual obligations under employment contracts, primarily for former
President Jackwyn Nemerov and former Vice Chairman Irwin Samelman. The charges
under these contracts are comprised of pre-tax amounts totaling $11.8 million
for contractual salary and bonus obligations and $18.1 million for non-cash
compensation expense resulting from contractual vesting of outstanding stock
options and restricted stock. Also included is a pre-tax amount of $2.0 million
related to certain obligations under the employment agreement that we entered
into with Peter Boneparth when we acquired McNaughton in 2001. These obligations
were satisfied in March 2002 when Mr. Boneparth was elected President and
designated to become our Chief Executive Officer on May 22, 2002.
Also during 2002 we restructured several of our existing
operations to reduce both excess capacity and overhead costs, including the
closing of Canadian and Mexican production facilities and the closing of an
administrative, warehouse and preproduction facility in El Paso, Texas. As a
result, we recorded restructuring charges of $8.8 million, including $5.0
million of employee severance and related costs, $3.3 million of asset
impairments (based on estimated market values of the affected properties) and
$0.5 million of other costs. Of these charges, $0.9 million is reported as a
selling, general and administrative ("SG&A") expense in the
wholesale better apparel segment, $6.9 million is reported as an SG&A
expense in the wholesale moderate apparel segment and $1.0 million is reported
as an SG&A expense in the wholesale footwear and accessories segment.
During 2003, we further restructured our operations by
announcing the closing of a warehouse facility in Rural Hall, North Carolina,
which resulted in a charge of $0.7 million for employee severance and related
costs which is reported as an SG&A expense in the wholesale better segment.
This charge was offset by a reversal of $0.2 million of employee severance cost
accruals in the wholesale footwear and accessories segment.
In 2004, we recorded an additional net restructuring
charge of $1.5 million as an SG&A expense in the wholesale better apparel
segment, which reflects a $1.7 million lease termination payment related to the
North Carolina facility offset by a $0.2 million reduction in accruals for the
closing of the Canadian facility.
29
Goodwill and Other Intangible Assets
In June 2001, the FASB issued SFAS No. 142, "Goodwill
and Other Intangible Assets," which changed the accounting for goodwill and
other intangible assets from an amortization method to an impairment-only
approach. Upon our adoption of SFAS No. 142 on January 1, 2002, we ceased
amortizing our trademarks without determinable lives and our goodwill. As
prescribed under SFAS No. 142, we had our goodwill and trademarks tested for
impairment during the first fiscal quarter of 2002.
Due to market conditions resulting from a sluggish economy
compounded by the aftereffects of the events of September 11, 2001, we revised
our earnings forecasts for future years for several of our trademarks and
licenses. As a result, the fair market value of these assets (as appraised by an
independent third party) was lower than their carrying value as of December 31,
2001. We accordingly recorded an after-tax impairment charge of $13.8 million,
which is reported as a cumulative effect of change in accounting principle
resulting from the adoption of SFAS No. 142.
In the second fiscal quarter of 2002, we recorded an
additional impairment charge of $5.8 million related to two trademarks due to a
decrease in projected accessory revenues resulting from a further evaluation of
our costume jewelry business. We have our annual impairment test for goodwill
and trademarks performed in the fourth fiscal quarter of the year. As a result
of continuing decreases in projected revenues in our costume jewelry lines, the
conversion of a portion of our Enzo Angiolini retail stores to the more
moderately-priced Bandolino brand and the discontinuance of our Rena
Rowan better apparel line, we recorded additional trademark impairment
charges of $18.6 million in 2002, $4.5 million in 2003 and $0.2 million in 2004.
These charges are reported as an SG&A expense in the licensing, other and
eliminations segment.
Termination as of December 31, 2003 of Licenses with Polo for Lauren
and Ralph Brands
The Ralph License with Polo was scheduled to end on
December 31, 2003. During the course of the discussions concerning the Ralph
License, Polo asserted that the expiration of the Ralph License would
cause the Lauren License to end on December 31, 2003, instead of December
31, 2006. We believe that this is an improper interpretation and that the
expiration of the Ralph License did not cause the Lauren License
to end.
On June 3, 2003, we announced that our discussions with
Polo regarding the interpretation of the Lauren License had reached an
impasse and that, as a result, we had filed a complaint in the New York State
Supreme Court against Polo and its affiliates (see "Legal
Proceedings"). The complaint alleges that Polo breached the Lauren
License agreements by claiming that the license ends at the end of 2003. We
asked the Court to enter a judgment for compensatory damages of $550 million as
well as punitive damages. On June 3, 2003, Polo also filed a complaint in the
New York State Supreme Court against us, seeking among other things a
declaratory judgment that the Lauren License terminated as of December
31, 2003. On July 3, 2003, Polo served a motion to dismiss our breach of
contract claim. On July 23, 2003, we served papers opposing Polo's motion and
also served upon Polo a motion seeking summary judgment in Polo's action for a
declaratory judgment. On August 12, 2003, Polo filed a cross-motion for summary
judgment in that action.
On March 15, 2004, the Court issued a decision resolving
the motions. The Court denied Polo's motion to dismiss our breach of contract
claim, granted our motion for summary judgment in Polo's action for a
declaratory judgment, and denied Polo's cross-motion for summary judgment in
the same action. As a result, the Court dismissed Polo's action for a
declaratory judgment and entered judgment in our favor in that action, while
permitting our action against Polo to proceed. Polo has appealed from these
rulings. In addition, Polo filed a motion for leave to reargue and to renew its
previous motions to dismiss and for summary judgment, which we opposed. On
August 16, 2004, the court denied Polo's motions to reargue and renew its
previous motions. Polo has appealed from this ruling.
We assert within the complaint that Polo's actions fully
discharged our obligations under the Lauren License agreements for lines
to be sold after December 31, 2003. Therefore, we ceased development of Lauren
products effective with the Spring 2004 season. Our Lauren business
represented a significant portion of our sales and profits. Net sales of Lauren
products were $476.4 million for 2003. The termination of our exclusive right to
manufacture and market clothing under this trademark in the United States,
Canada and elsewhere will have a material adverse effect on our results of
operations after 2003. To replace the sales of the Lauren
30
brand, we have pursued other opportunities, including internal brands
(including the new lifestyle brand under the Jones New York Signature
label), acquisitions (including the Kasper acquisition) and licensing options,
some of which we previously were precluded from exploring under agreements with
Polo. The loss of the Lauren License has not materially adversely
impacted our liquidity, and we continue to have a strong financial position.
The expiration of the Ralph License has not been
material to us in any respect. Net sales of Ralph products were $30.7
million for 2003.
We and Polo have agreed that, in connection with the
expiration of the Ralph License, related licenses to produce certain Polo
Jeans Company and Polo Ralph Lauren products in Canada terminated as
of December 31, 2003. The termination of these Canadian licenses has not been
material to us in any respect. Net sales of all products under these Canadian
licenses were $41.3 million for 2003. The dispute between us and Polo does not
relate to the Polo Jeans License in the United States, and an end to the
Canada Licenses does not end our longer term Polo Jeans License in the
United States or otherwise adversely affect the Polo Jeans License in the
United States.
Stock-Based Compensation
Effective January 1, 2003, we adopted the fair value
method of accounting for employee stock options for all options granted after
December 31, 2002 pursuant to the guidelines contained in SFAS No. 123,
"Accounting for Stock-Based Compensation" using the "prospective
method" set forth in SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." Under this approach, the fair
value of the option on the date of grant (as determined by the Black-Scholes
option pricing model) is amortized to compensation expense over the option's
vesting period. Since the expense to be recorded is dependent on both the timing
and the number of options to be granted, we cannot estimate the effect on future
results of operations at this time. Prior to January 1, 2003, pursuant to a
provision in SFAS No. 123 we had elected to continue using the intrinsic-value
method of accounting for stock options granted to employees in accordance with
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees." Accordingly, compensation cost for stock options had been
measured as the excess, if any, of the quoted market price of our stock at the
date of the grant over the amount the employee must pay to acquire the stock.
Under this approach, we had only recognized compensation expense for stock-based
awards to employees for options granted at below-market prices. For more
information, see "Summary of Accounting Policies - Stock Options" in
Notes to Consolidated Financial Statements.
Critical Accounting Policies
Several of our accounting policies involve significant
judgements and uncertainties. The policies with the greatest potential effect on
our results of operations and financial position include the estimated
collectibility of accounts receivable, the recovery value of obsolete or
overstocked inventory and the estimated fair values of both our goodwill and
intangible assets with indefinite lives.
For accounts receivable, we estimate the net
collectibility, considering both historical and anticipated trends of trade
discounts and co-op advertising deductions taken by our customers, allowances we
provide to our retail customers to flow goods through the retail channels, and
the possibility of non-collection due to the financial position of our
customers. For inventory, we estimate the amount of goods that we will not be
able to sell in the normal course of business and write down the value of these
goods to the recovery value expected to be realized through off-price channels.
Historically, actual results in these areas have not been materially different
than our estimates, and we do not anticipate that our estimates and assumptions
are likely to materially change in the future. However, if we incorrectly
anticipate trends or unexpected events occur, our results of operations could be
materially affected.
We utilize independent third-party appraisals to estimate
the fair values of both our goodwill and our intangible assets with indefinite
lives. These appraisals are based on projected cash flows and interest rates;
should interest rates or our future cash flows differ significantly from the
assumptions used in these projections, material impairment losses could result
where the estimated fair values of these assets become less than their carrying
amounts.
31
Results of Operations
Statements of Income Stated in Dollars and as a Percentage of
Total Revenues
(In millions)
|
2004
|
|
2003
|
|
2002
|
Net sales |
$
4,592.6
|
98.8%
|
|
$ 4,339.1
|
99.2%
|
|
$ 4,312.2
|
99.3%
|
Licensing income (net) |
57.1
|
1.2%
|
|
36.2
|
0.8%
|
|
28.7
|
0.7%
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
4,649.7
|
100.0%
|
|
4,375.3
|
100.0%
|
|
4,340.9
|
100.0%
|
Cost of goods sold |
2,944.4
|
63.3%
|
|
2,738.6
|
62.6%
|
|
2,657.0
|
61.2%
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
1,705.3
|
36.7%
|
|
1,636.7
|
37.4%
|
|
1,683.9
|
38.8%
|
Selling, general and administrative expenses |
1,176.9
|
25.3%
|
|
1,056.9
|
24.2%
|
|
1,061.4
|
24.5%
|
Executive compensation obligations |
-
|
-
|
|
-
|
-
|
|
31.9
|
0.7%
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
528.4
|
11.4%
|
|
579.8
|
13.3%
|
|
590.6
|
13.6%
|
Interest income |
1.9
|
0.0%
|
|
3.5
|
0.1%
|
|
4.6
|
0.1%
|
Interest expense and financing costs |
51.2
|
1.1%
|
|
58.8
|
1.3%
|
|
62.7
|
1.4%
|
Equity of earnings of unconsolidated affiliates |
3.8
|
0.1%
|
|
2.5
|
0.1%
|
|
1.0
|
0.0%
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
482.9
|
10.4%
|
|
527.0
|
12.0%
|
|
533.5
|
12.3%
|
Provision for income taxes |
181.1
|
3.9%
|
|
198.4
|
4.5%
|
|
201.2
|
4.6%
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before change in accounting principle
|
301.8
|
6.5%
|
|
328.6
|
7.5%
|
|
332.3
|
7.7%
|
Cumulative effect of change in accounting for intangible assets
|
-
|
-
|
|
-
|
-
|
|
13.8
|
0.3%
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$ 301.8
|
6.5%
|
|
$ 328.6
|
7.5%
|
|
$ 318.5
|
7.3%
|
|
|
|
|
|
|
|
|
|
|
Percentage totals may not agree due to rounding.
2004 Compared to 2003
Revenues. Total revenues for 2004 were $4.65
billion compared to $4.38 billion for 2003, an increase of 6.3%.
Revenues by segment were as follows:
(In millions)
|
2004
|
2003
|
Increase
|
Percent
Change
|
Wholesale better apparel |
$ 1,493.2
|
$ 1,475.0
|
$ 18.2
|
1.2%
|
Wholesale moderate apparel |
1,315.3
|
1,310.2
|
5.1
|
0.4%
|
Wholesale footwear and accessories |
1,002.4
|
868.3
|
134.1
|
15.4%
|
Retail |
780.3 |
685.6 |
94.7 |
13.8% |
Licensing and other |
58.5
|
36.2
|
22.3
|
61.6%
|
|
|
|
|
|
Total revenues |
$ 4,649.7
|
$ 4,375.3
|
$ 274.4
|
6.3%
|
|
|
|
|
|
Wholesale better apparel revenues were impacted by the
discontinuance of the Lauren and Ralph businesses (a decrease of
$535.9 million including the Canadian Polo business) which was offset by
shipments of the new Jones New York Signature line ($176.3 million) and
the product lines added as a result of the Kasper acquisition ($349.2 million).
Planned decreases in shipments of the Polo Jeans Company product line and
the discontinuance of the Rena Rowan better product line were partially
offset by increased shipments of Jones New York Collection and Nine
West products, as well as the initial shipments of the AK Sport
product line.
Wholesale moderate apparel revenues increased as a result
of higher shipments of our Energie, Gloria Vanderbilt and Bandolino
product lines and the initial shipments of our A|Line product, mostly
offset by reduced shipments of our Norton McNaughton, Evan-Picone
and l.e.i. product lines as well as planned decreases in our private
label denim businesses.
Wholesale footwear and accessories revenues increased
primarily due to the product lines added as a result of the Maxwell acquisition
($92.5 million) as well as higher shipments of our Nine West and Bandolino
footwear and our Nine West accessories product line, the introduction of Bandolino
accessories, and the inclusion of the Anne Klein accessories product line
obtained in the Kasper acquisition, as well as an increase in our international
footwear business. These increases were partially offset by reductions in
shipments of our Easy Spirit footwear product line.
32
Retail revenues increased primarily due to same store
sales increasing 1.6% for footwear and accessories stores and 3.8% for
ready-to-wear outlet stores as compared to 2003, $14.2 million from the addition
of the Jones New York Signature product line to our apparel outlet stores
and $62.5 million and $19.3 million, respectively, in sales from locations added
as a result of the Kasper and Barneys acquisitions. We began 2004 with 990
retail locations, added 21 locations as a result of the Barneys acquisition and
had a net addition of 26 apparel and footwear locations during 2004 to end the
period with 1,037 locations.
Gross Profit. The gross profit margin
decreased to 36.7% in 2004 compared to 37.4% in 2003.
Wholesale better apparel gross profit margins were 34.2%
and 38.0% for 2004 and 2003, respectively. The decrease was a result of the
discontinuance of the Lauren product line (which carried higher margins
than the historical segment average) and the addition of the acquired Kasper
business (which generated lower margins than the historical segment average),
partially offset by shipments of the new Jones New York Signature line
(which carries higher margins than the historical segment average). Margins were
also negatively impacted by a higher level of markdowns and lower off-price
recoveries than the prior year. Cost of sales for 2004 included $4.1 million
related to adjustments required under purchase accounting to write up acquired
Kasper inventories to market value.
Wholesale moderate apparel gross profit margins were 26.1%
and 26.0% for 2004 and 2003, respectively. The increase is primarily the result
of increased shipping in the higher-margin Gloria Vanderbilt product
line.
Wholesale footwear and accessories gross profit margins
were 33.5% and 33.8% for 2004 and 2003, respectively. The decrease was driven
primarily by the increase in our lower-margin international business and $6.0
million of adjustments required under purchase accounting to write up acquired
Maxwell inventories to market value. The negative impact of these items was
partially offset by improved margins in our wholesale accessories and costume
jewelry businesses.
Retail gross profit margins were 53.3% and 54.5% for 2004
and 2003, respectively. The decrease was primarily the result of the effects of
the addition of the acquired Kasper apparel retail outlets and Barneys retail
locations, which generate lower margins than the historical segment average, as
well as a higher level of promotional activity in our domestic retail stores and
lower margins in our Canadian retail outlets.
SG&A Expenses. SG&A expenses of
$1.18 billion in 2004 represented an increase of $120.0 million from the $1.06
billion reported for 2003. In 2004, Kasper added $96.8 million to the wholesale
better apparel segment, which includes $8.0 million of amortization of the
purchase price assigned to acquired customer orders, and $22.4 million to the
retail segment; Maxwell added $26.8 million to the wholesale footwear and
accessories segment, which includes $13.9 million of amortization of the
purchase price assigned to acquired customer orders; and Barneys added $5.7
million to the retail segment. We also recorded an $8.4 million writeoff of
unamortized bond discounts and debt issuance costs in the wholesale better
apparel segment resulting from the redemption of all of our outstanding Zero
Coupon Notes. Increases in expenses in our Gloria Vanderbilt and retail
businesses were related to the volume growth of these business over the prior
year. These increases were offset by a $66.2 million reduction in royalty and
advertising expenses resulting from the discontinuance of the Lauren and Ralph
businesses.
Operating Income. The resulting operating
income for 2004 of $528.4 million decreased 8.9%, or $51.4 million, from the
$579.8 million for 2003, due to the factors described above.
Net Interest Expense. Net interest expense
was $49.3 million in 2004 compared to $55.3 million in 2003. This was primarily
a result of lower overall borrowings during 2004 and a favorable interest rate
differential resulting from replacing our Zero Coupon Notes and 7.50% Senior
Notes due 2004 with short-term borrowings under our Senior Credit Facilities.
Provision for Income Taxes. The
effective income tax rate was 37.5% for 2004 and 37.65% for 2003. The difference
is primarily driven by a favorable change in the state and local effective tax
rate resulting from various legal entity reorganizations and business
initiatives.
33
Net Income and Earnings Per Share. Net
income was $301.8 million in 2004, a decrease of $26.8 million from the net
income of $328.6 million earned in 2003. Diluted earnings per share for 2004 was
$2.39 compared to $2.48 for 2003, on 7.3% fewer shares outstanding.
2003 Compared to 2002
Revenues.
Total revenues for 2003 were $4.38 billion compared to $4.34 billion for 2002,
an increase of 0.8%.
Revenues by segment were as follows:
(In millions)
|
2003
|
2002
|
Increase/ (Decrease)
|
Percent
Change
|
Wholesale better apparel |
$ 1,475.0
|
$ 1,636.4
|
$ (161.4)
|
(9.9%)
|
Wholesale moderate apparel |
1,310.2
|
1,093.5
|
216.7
|
19.8%
|
Wholesale footwear and accessories |
868.3
|
882.3
|
(14.0)
|
(1.6%)
|
Retail |
685.6 |
700.0 |
(14.4) |
(2.1%) |
Licensing and other |
36.2
|
28.7
|
7.5
|
26.1%
|
|
|
|
|
|
Total revenues |
$ 4,375.3
|
$ 4,340.9
|
$ 34.4
|
0.8%
|
|
|
|
|
|
Wholesale better apparel revenues declined primarily as
the result of a decrease in shipments and increased customer allowances of our Polo
Jeans, Lauren and Ralph businesses. Planned decreases in Jones
New York career and decreased shipments in our Jones New York Sport
and Rena Rowan products were partially offset by increases in our Nine
West, Jones New York Suit and Easy Spirit apparel product lines as
well as the product lines added as a result of the Kasper acquisition.
Wholesale moderate apparel revenues increased primarily as
a result of the product lines obtained as a result of the Gloria Vanderbilt and
l.e.i. acquisitions. Increases were also realized in the Nine & Company
business during 2003, which were offset by reduced shipments of our Jones
Wear, Energie, Evan-Picone and Erika products.
The wholesale footwear and accessories business was
planned conservatively in light of the uncertain retail climate. These planned
reductions significantly impacted shipments of our Nine West accessories
and Enzo Angiolini footwear product lines, which were somewhat offset by
new product lines, including ESPRIT and Gloria Vanderbilt in both
the footwear and accessories product categories, as well as the growth of our Bandolino
footwear line and our Nine West international business.
Retail revenues decreased primarily due to comparable
store sales decreasing approximately 2.3% for footwear and accessories stores
and 4.3% for ready-to-wear outlet stores as compared to 2002. The overall
decreases were a result of a lack of consumer traffic and the challenging retail
environment for most of 2003, although consumer traffic in our footwear stores
improved considerably during the fourth fiscal quarter of 2003, and a net
reduction of five footwear stores and a consolidation of 12 apparel stores from
2002.
Gross Profit. The gross profit margin
decreased to 37.4% in 2003 compared to 38.8% in 2002.
Wholesale better apparel gross profit margins were 38.0%
and 41.3% for 2003 and 2002, respectively. The decrease was a result of higher
levels of sales through the off-price channel and increased discounts and
customer allowances provided to our retail customers in relation to the
discontinuance of our Lauren business. This decrease was partially offset
by improved performance of the Jones New York career products at retail,
resulting in lower levels of customer allowances, as well as a higher percentage
of sales of our product lines to regular customers at full-price and a lower
percentage of sales through the off-price channel. Cost of sales for 2003
included $3.4 million related to adjustments required under purchase accounting
to write up acquired inventories to market value.
34
Wholesale moderate apparel gross profit margins were 26.0%
and 27.0% for 2003 and 2002, respectively. The margin for the current period was
impacted by a higher level of customer allowances as a result of higher
promotions at our retail customers, as well as a higher ratio of off-price to
full-price sales during the period. Cost of sales for 2002 included $23.1
million related to adjustments required under purchase accounting to write up
acquired inventories to market value.
Wholesale footwear and accessories gross profit margins
were 33.8% and 32.0% for 2003 and 2002, respectively. The margin increase, which
occurred principally in our costume jewelry business, was driven by our
inventory liquidation plan in 2002 and an emphasis on maintaining lower
inventory levels, which resulted in lower sales through the off-price channel.
This increase was partially offset by challenges in our Nine West
accessories business that resulted in a higher level of customer allowances to
maintain the flow of inventory through the retail channel. Margins also
decreased in the Nine West, Easy Spirit and Bandolino
footwear product lines due to a higher level of customer allowances and a higher
percentage of sales through the off-price channel.
Retail gross profit margins were 54.5% and 53.2% for 2003
and 2002, respectively. The increase was primarily the result of improved
inventory planning which resulted in a higher percentage of full-price sales and
lower promotional activity in our retail stores.
SG&A Expenses. SG&A expenses of
$1.06 billion in 2003 represented a decrease of $36.4 million from the $1.09
billion reported for 2002. In 2003, Kasper added $6.7 million to the wholesale
better apparel segment, which includes $1.1 million in amortization of acquired
customer orders, and $2.7 million to the retail segment. Gloria Vanderbilt and
l.e.i. added a total of $28.2 million to the wholesale moderate apparel segment
to 2003, which was somewhat offset by a $26.1 million reduction in our private
label denim business (a result of restructuring and integrating its operations
into l.e.i.). The reorganization of our costume jewelry business also reduced
overhead costs by $17.6 million from the prior year. The remaining decline
represents tighter cost controls across the wholesale businesses and leveraging
the corporate infrastructure across the organization, eliminating duplicative
expenses in our new acquisitions. In 2003 we recorded trademark impairments of
$4.5 million in the licensing, other and eliminations segment related primarily
to the discontinuance of our Rena Rowan better product line. The prior
period reflected $31.9 million of executive compensation costs and a $24.4
million writedown of Enzo Angiolini footwear and costume jewelry
trademarks in the licensing, other and eliminations segment.
Operating Income. The resulting operating
income for 2003 of $579.8 million decreased 1.8%, or $10.8 million, from the
$590.6 million for 2002, due to the factors described above.
Net Interest Expense. Net interest expense
was $55.3 million in 2003 compared to $58.1 million in 2002. This was primarily
a result of both lower interest rates and lower average borrowings in 2003 as
compared to 2002.
Provision for Income Taxes. The
effective income tax rate was 37.65% for 2003 and 37.7% for 2002. The difference
is primarily the result of an $8.5 million deferred valuation allowance
established in 2003 for capital loss carryforwards that will likely expire
unused, offset by an $8.7 million reversal of prior year tax accruals as the
result of the completion of Internal Revenue Service audits of our federal tax
returns through 2000.
Net Income and Earnings Per Share. Net
income was $328.6 million in 2003, an increase of $10.1 million from the net
income of $318.5 million earned in 2002. Diluted earnings per share for 2003 was
$2.48 compared to $2.36 for 2002, on 1.8% fewer shares outstanding.
Liquidity and Capital Resources
Our principal capital requirements have been to fund
acquisitions, pay dividends, working capital needs, capital expenditures and
repurchases of our common stock on the open market. We have historically relied
on internally generated funds, trade credit, bank borrowings and the issuance of
notes to finance our operations and expansion. As of December 31, 2004, total
cash and cash equivalents were $45.0 million, a decrease of $305.0 million from
the $350.0 million reported as of December 31, 2003.
35
Operating activities provided $461.9 million, $455.0
million and $716.5 million in 2004, 2003 and 2002, respectively.
The change from 2003 to 2004 was primarily due to higher
levels of non-cash expenses in 2004 (such as depreciation, amortization and
deferred taxes) as compared to the prior year. The level of accounts receivable
(net of acquisitions) did not significantly change in 2004 compared to the
decrease reported for 2003, due to lower wholesale shipments in some of our
moderate businesses, the loss of the Polo Licenses in our Canadian business, and
seasonal differences related to our Maxwell acquisition, offset by an increase
in our Kasper business. Inventories decreased in 2004 compared to an increase in
2003 due to improved inventory management in several of our moderate businesses
along with seasonal differences related to our Maxwell and Barneys acquisitions.
The change from 2002 to 2003 was primarily due to a
smaller decrease in accounts receivable in 2003 than in 2002 and a small
increase in inventory in 2003 compared to a decrease in 2002. While accounts
receivable turns improved in 2003 compared to 2002, the reduction in 2003 was
less than in 2002 due primarily to the collection of acquired l.e.i. receivables
in 2002. The change in inventory was due to increases required for new product
launches (including Jones New York Signature, Gloria Vanderbilt Career
and Bandolino apparel) and planned increases in certain wholesale
moderate and accessories businesses, which were offset by improved inventory
turns in our wholesale better apparel segment and by reductions resulting from
the discontinuance of Lauren and Ralph.
Investing activities used $629.4 million, $274.5 million
and $368.7 million in 2004, 2003 and 2002, respectively. The increase for 2004
from 2003 was primarily due to higher payments for acquisitions related to
Maxwell and Barneys. The decrease for 2003 from 2002 was primarily due to lower
acquisition-related payments in 2003 than in 2002.
During 2003, we entered into a sale-leaseback agreement
for our Virginia warehouse facility. The gross sale price was $25.9 million,
which resulted in a net gain of $7.5 million that has been deferred and is being
amortized over the 20-year term of the lease agreement (which has been recorded
as a capital lease). In connection with this transaction, we repaid $7.4 million
of long-term debt related to the Virginia warehouse facility.
Financing activities used $138.1 million in 2004. On
February 2, 2004, we redeemed all of our outstanding Zero Coupon Notes at a
redemption price (inclusive of issue price plus accrued original issue discount)
of $554.41 per $1,000 of principal amount at maturity for a total payment of
$446.6 million, which was financed primarily through our Senior Credit
Facilities. As a result of this transaction, we recorded an SG&A expense of
$8.4 million in 2004, representing the writeoff of unamortized bond discounts
and debt issuance costs. The securities carried a 3.5% yield to maturity with a
face value of $805.6 million ($1,000 per note) and were convertible into common
stock at a conversion rate of 9.8105 shares per note. On June 15, 2004, we
redeemed at maturity all our 7.50% Senior Notes due 2004 at par for a total
payment of $175.0 million.
In November 2004, we issued $250.0 million of 4.250%
Senior Notes due 2009, $250.0 million of 5.125% Senior Notes due 2014 and $250.0
million of 6.125% Senior Notes due 2034. Net proceeds of the offerings were
$743.5 million, which were used to fund the acquisition of Barneys, to redeem
$102.3 million of Barneys' outstanding 9% Senior Secured Notes due 2008 and to
repay amounts then outstanding under our Senior Credit Facilities. In connection
with the 4.250% Senior Notes due 2009 and the 5.125% Senior Notes due 2014, we
had entered into two interest rate lock agreements which were terminated upon
the issuance of the notes. These terminations resulted in a gain of $0.2
million, which is being amortized as a reduction of interest expense over the
term of the related notes.
Financing activities used $114.7 million in 2003. The
primary uses of cash were to repurchase our common stock and pay dividends to
our common shareholders.
Financing activities used $141.1 million in 2002,
primarily to refinance $43.7 million and $83.2 million of debt assumed as part
of the acquisitions of Gloria Vanderbilt and l.e.i., respectively, and to
repurchase our common stock. In addition, we redeemed the remaining $0.1 million
of Nine West Group's 9% Senior
36
Subordinated Notes Due 2007 in September 2002 at 104.5% of par. These uses of
funds were partially offset by $118.4 million in proceeds from the issuance of
common stock to our employees exercising stock options.
We repurchased $194.9 million, $108.7 million and $129.2
million of our common stock on the open market during 2004, 2003 and 2002,
respectively. As of December 31, 2004, a total of $858.6 million had been
expended under announced programs to acquire up to $1.0 billion of such shares.
We may make additional share repurchases in the future depending on, among other
things, market conditions and our financial condition. Proceeds from the
issuance of common stock to our employees exercising stock options amounted to
$35.5 million, $20.5 million and $118.4 million in 2004, 2003 and 2002,
respectively.
At December 31, 2004, we had credit agreements with
several lending institutions to borrow an aggregate principal amount of up to
$1.5 billion under Senior Credit Facilities. These facilities, of which the
entire amount is available for letters of credit or cash borrowings, provide for
a $500.0 million three-year revolving credit facility (which was reduced from
$700.0 million in June 2004 and expires in June 2006) and a $1.0 billion
five-year revolving credit facility (which replaced a similar $700.0 million
five-year revolving credit facility in June 2004). At December 31, 2004, $69.2
million in cash borrowings was outstanding under the three-year revolving credit
facility and $367.8 million in outstanding letters of credit was outstanding
under our five-year revolving credit facility. Borrowings under the Senior
Credit Facilities may also be used for working capital and other general
corporate purposes, including permitted acquisitions and stock repurchases. The
Senior Credit Facilities are unsecured and require us to satisfy both a coverage
ratio of earnings before interest, taxes, depreciation, amortization and rent to
interest expense plus rents and a net worth maintenance covenant, as well as
other restrictions, including (subject to exceptions) limitations on our ability
to incur additional indebtedness, prepay subordinated indebtedness, make
acquisitions, enter into mergers and pay dividends.
In addition to these committed facilities, we have
unsecured uncommitted lines of credit for the purpose of issuing letters of
credit and bankers' acceptances for Kasper and Maxwell. As of December 31,
2004, $27.9 million in letters of credit were outstanding under these lines of
credit.
At December 31, 2004, we also had a C$15.0 million
unsecured line of credit in Canada, under which no amounts were outstanding.
Our credit ratings of BBB from Standard & Poor's and
Baa2 from Moody's contribute to our ability to successfully access global
capital markets. Each rating is considered investment grade. While we have
maintained these ratings since our first public debt offering in 1998, Moody's
has recently revised our rating outlook to negative as a result of the Barneys
acquisition. Any downgrade of our debt rating by Moody's could increase the
interest rates charged under our Senior Credit Facilities and could impact our
ability to access capital markets in the future.
In July 2001, December 2001 and August 2002, we entered
into transactions relating to the short sale of $139.0 million, $157.9 million
and $190.5 million, respectively, of U. S. Treasury securities. These
transactions were intended to address interest rate exposure and generate
capital gains that could be used to offset previously incurred capital losses.
These transactions closed in November 2001, August 2002 and May 2003,
respectively. There are no present intentions to enter into any further
transactions. See "Short Term Bond Transactions" in Notes to
Consolidated Financial Statements.
We recorded minimum pension liability adjustments of $2.6
million, $3.1 million and $10.8 million in 2004, 2003 and 2002, respectively, to
other comprehensive income resulting from the lowering of the discount rate from
6.1% to 5.8% in 2004 and from 6.5% to 6.1% in 2003 and both the negative returns
on our investments and the lowering of the anticipated rate of future returns
from 9.0% to 8.0% in 2002. Our plans are currently underfunded by a total of
$14.8 million. As the benefits under our defined benefit plans are frozen with
respect to service credits, the effects on future pension expense are not
anticipated to be material to our results of operations or to our liquidity.
On December 20, 2004, we completed the acquisition of
Barneys. The aggregate cash purchase price was $294.5 million (of which $3.1
million was paid in January 2005), which included $19.00 for each outstanding
share of Barneys (for a total of $264.5 million) and $26.7 million related to
Barneys' employee stock options,
37
preferred stock and stock warrants. We also assumed approximately $106.0
million of Barneys funded debt, $102.2 million of which we subsequently
refinanced.
On July 8, 2004, we completed the acquisition of Maxwell.
The aggregate cash purchase price was $377.1 million, which included $23.25 for
each outstanding share of Maxwell common stock (for a total of $345.8 million)
and $24.1 million related to Maxwell's employee stock options.
On December 1, 2003, we completed the acquisition of
Kasper. The aggregate cash purchase price was $259.5 million, of which $37.8
million was paid in the first fiscal quarter of 2004.
On August 16, 2002, we completed the acquisition of l.e.i.
The aggregate purchase price was approximately $309.7 million, which included
payments to the selling shareholders of $272.5 million in cash and the issuance
of approximately 1.0 million shares of our common stock. We also assumed
approximately $84.0 million of l.e.i.'s funded debt and accrued interest,
$83.2 million of which we subsequently refinanced. Pursuant to the Amended
Acquisition Agreement, the selling shareholders were entitled to a $2.2 million
payment as additional consideration, which was made in 2003.
On April 8, 2002, we completed the acquisition of Gloria
Vanderbilt. The aggregate purchase price was approximately $100.9 million, which
included payments to the selling shareholders of $80.9 million in cash and the
issuance of approximately 0.6 million shares of our common stock. We also
assumed approximately $43.7 million of Gloria Vanderbilt's funded debt and
accrued interest, which we subsequently refinanced. The terms of the acquisition
agreement for Gloria Vanderbilt required us to pay the former Gloria Vanderbilt
shareholders additional consideration of $4.50 for each $1.00 of Gloria
Vanderbilt's earnings before interest and taxes (as defined in the stock
purchase agreement) that exceeded certain targeted levels for the 12 months
following the completion of the acquisition, up to a maximum of $54.0 million.
The maximum additional consideration was paid in cash on July 7, 2003 and was
recorded first as a reduction of the liability resulting from the fair value of
assets acquired exceeding the purchase price, with the remaining balance being
recorded as goodwill.
On February 16, 2005, we announced that the Board of
Directors had declared a quarterly cash dividend of $0.10 per share to all
common stockholders of record as of March 2, 2005 for payment on March 11, 2005.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements within
the meaning of SEC Regulation S-K Item 303(a)(4).
Contractual Obligations and Contingent Liabilities and Commitments
The following is a summary of our significant contractual
obligations for the periods indicated that existed as of December 31, 2004, and,
except for purchase obligations and other long-term liabilities, is based on
information appearing in the Notes to Consolidated Financial Statements (amounts
in millions).
|
Total
|
Less than
1 year
|
1 - 3
years
|
3 - 5
years
|
More than
5 years
|
Long-term debt |
$ 1,108.4 |
$ 129.6 |
$ 225.0 |
$ 253.8 |
$ 500.0 |
Interest on long-term debt |
669.5 |
63.6 |
86.3 |
76.3 |
443.3 |
Capital lease
obligations |
69.1 |
7.2 |
10.5 |
10.3 |
41.1 |
Operating lease obligations (1) |
910.6 |
139.3 |
233.4 |
168.1 |
369.8 |
Purchase obligations (2) |
1,298.3 |
1,279.5 |
18.8 |
- |
- |
Minimum royalty payments
(3) |
48.3 |
8.6 |
17.7 |
14.8 |
7.2 |
Other long-term liabilities |
61.4
|
11.6
|
4.9
|
4.2
|
40.7
|
|
|
|
|
|
|
Total contractual cash obligations |
$ 4,165.6
|
$ 1,639.4
|
$ 596.6
|
$ 527.5
|
$ 1,402.1
|
|
|
|
|
|
|
38
(1) Future rental commitments for leases have not been reduced by
minimum non-cancelable sublease rentals aggregating $40.8 million.
|
(2) Includes outstanding letters of credit of $395.7 million, which
primarily represent inventory purchase commitments which typically
mature in two to six months.
|
(3) Under exclusive licenses to manufacture certain items under
trademarks not owned by us pursuant to various license and design
service agreements, we are obligated to pay the licensors a percentage
of our net sales of these licensed products, subject to minimum
scheduled royalty and advertising payments. |
We have two joint ventures with HCL Technologies Limited
to provide us with computer consulting, programming and associated support
services. As of December 31, 2004, we have committed to purchase $10.5 million
in services from these joint venture companies through June 30, 2007.
We also have a joint venture with Sutton Developments Pty.
Ltd. ("Sutton") to operate retail locations in Australia. We have
unconditionally guaranteed up to $7.0 million of borrowings under the joint
venture's uncommitted credit facility and up to $0.4 million of presettlement
risk associated with foreign exchange transactions. Sutton is required to
reimburse us for 50% of any payments made under these guarantees. At December
31, 2004, the outstanding balance subject to these guarantees was approximately
$0.8 million.
We occupy warehouse and office facilities leased from the
City of Lawrenceburg, Tennessee. Two ten-year net leases run until July 2005 and
May 2006, respectively, and require minimum annual rent payments of $0.5 million
each plus accrued interest. In connection with these leases, we guaranteed $10.0
million of Industrial Development Bonds issued in order to construct the
facilities, $1.0 million of which remained unpaid as of December 31, 2004. We
obtain title to these facilities upon expiration of the leases.
We believe that funds generated by operations, proceeds
from the issuance of notes, the Senior Credit Facilities and the Kasper, Maxwell
and Canadian lines of credit will provide the financial resources sufficient to
meet our foreseeable working capital, dividend, capital expenditure and stock
repurchase requirements and fund our contractual obligations and our contingent
liabilities and commitments.
New Accounting Standards
In November 2004, the FASB issued SFAS No. 151,
"Inventory Costs," which clarifies the accounting for abnormal amounts
of idle facility expense, freight, handling costs, and wasted material
(spoilage) by requiring these items to be recognized as current-period charges.
SFAS No. 151 is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005, with earlier application permitted. The adoption
of SFAS No. 151 will have no impact on our results of operations or our
financial position.
In December 2004, the FASB issued SFAS No. 153,
"Exchanges of Monetary Assets," which addresses the measurement of
exchanges of nonmonetary assets and eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets and replaces
it with an exception for exchanges that do not have commercial substance. SFAS
No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005, with earlier application permitted. The adoption
of SFAS No. 153 will have no impact on our results of operations or our
financial position.
In December 2004, the FASB issued a revision of SFAS No.
123, "Statement of Financial Accounting Standards No. 123 (revised
2004)," which requires that the cost resulting from all share-based payment
transactions be recognized in the financial statements. This Statement
establishes fair value as the measurement objective in accounting for
share-based payment arrangements and requires all entities to apply a
fair-value-based measurement method in accounting for share-based payment
transactions with employees except for equity instruments held by employee share
ownership plans. This Statement is effective as of the beginning of the first
interim or annual reporting period that begins after June 15, 2005. The adoption
of SFAS No. 123 (revised 2004) will not have a material effect on our results of
operations or our financial position.
39
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Market Risk Sensitive Instruments
The market risk inherent in our financial instruments
represents the potential loss in fair value, earnings or cash flows arising from
adverse changes in interest rates or foreign currency exchange rates. We manage
this exposure through regular operating and financing activities and, when
deemed appropriate, through the use of derivative financial instruments. Our
policy allows the use of derivative financial instruments for identifiable
market risk exposures, including interest rate and foreign currency
fluctuations. We do not enter into derivative financial contracts for trading or
other speculative purposes. The following quantitative disclosures were derived
using quoted market prices, yields and theoretical pricing models obtained
through independent pricing sources for the same or similar types of financial
instruments, taking into consideration the underlying terms, such as the coupon
rate, term to maturity and imbedded call options. Certain items such as lease
contracts, insurance contracts, and obligations for pension and other
post-retirement benefits were not included in the analysis.
Interest Rates
Our primary interest rate exposures relate to our fixed
and variable rate debt. The potential decrease in fair value of our fixed rate
long-term debt instruments resulting from a hypothetical 10% adverse change in
interest rates was approximately $101.8 million at December 31, 2004.
The primary interest rate exposures on floating rate
financing arrangements are with respect to United States and Canadian short-term
rates. We had approximately $1.5 billion in variable rate financing arrangements
at December 31, 2004. As of December 31, 2004, a hypothetical immediate 10%
adverse change in interest rates, as they relate to the cash borrowings then
outstanding under our variable rate financial instruments, would have a $0.4
million unfavorable impact over a one-year period on our earnings and cash
flows.
Foreign Currency Exchange Rates
We are exposed to market risk related to changes in
foreign currency exchange rates. We have assets and liabilities denominated in
certain foreign currencies and purchase products from foreign suppliers who
require payment in funds other than the U.S. Dollar. At December 31, 2004, we
had outstanding foreign exchange contracts to exchange Canadian Dollars for a
total of US$12.0 million at a weighted-average exchange rate of 1.2291 through
June 2005, US $24.7 million for Euros at a weighted-average exchange rate of
1.3683 through December 2005 and US $1.6 million for British Pounds at a
weighted-average exchange rate of 1.9138 through October 2005. We believe that
these financial instruments should not subject us to undue risk due to foreign
exchange movements because gains and losses on these contracts should offset
losses and gains on the assets, liabilities, and transactions being hedged. We
are exposed to credit-related losses if the counterparty to a financial
instrument fails to perform its obligation. However, we do not expect the
counterparties, which presently have high credit ratings, to fail to meet their
obligations.
For further information see "Derivatives" and
"Financial Instruments" in the Notes to Consolidated Financial
Statements.
40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
![BDO logo](bdo_04.jpg)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Jones Apparel Group, Inc.
Bristol, Pennsylvania
We have audited the accompanying consolidated balance
sheets of Jones Apparel Group, Inc. and Subsidiaries as of December 31, 2004 and
2003 and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
2004. 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 the standards
of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Jones Apparel Group, Inc. and Subsidiaries at December 31, 2004 and
2003, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2004, in conformity with accounting
principles generally accepted in the United States.
We also have audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United States), the effectiveness
of Jones Apparel Group, Inc. and Subsidiaries' internal control over financial
reporting as of December 31, 2004, based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) and our report dated February
11, 2005 expressed an unqualified opinion thereon.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, New York
February 11, 2005
41
Jones Apparel Group, Inc.
Consolidated Balance Sheets
(All amounts in millions except per share data)
December 31,
|
2004
|
2003
|
ASSETS
|
|
|
CURRENT ASSETS:
|
|
|
|
Cash and cash equivalents
|
$ 45.0
|
$ 350.0
|
|
Accounts receivable
|
448.3
|
385.8
|
|
Inventories
|
664.2
|
590.6
|
|
Deferred taxes
|
68.2
|
80.6
|
|
Prepaid expenses and other current assets
|
70.5
|
48.9
|
|
|
|
|
|
TOTAL CURRENT
ASSETS |
1,296.2
|
1,455.9
|
PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and amortization |
303.6
|
268.4
|
GOODWILL |
2,125.0
|
1,646.9
|
OTHER
INTANGIBLES, at cost, less
accumulated amortization |
768.2
|
767.5
|
OTHER ASSETS |
57.8
|
49.0
|
|
|
|
|
|
|
$ 4,550.8
|
$ 4,187.7
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
CURRENT LIABILITIES:
|
|
|
|
Short-term borrowings
|
$ 69.2
|
$
-
|
|
Current portion of long-term debt and capital lease obligations
|
134.0
|
180.8
|
|
Accounts payable
|
259.3
|
244.6
|
|
Income taxes payable
|
23.7
|
14.7
|
|
Payments due relating to Kasper acquisition
|
-
|
37.6
|
|
Accrued employee compensation
and benefits
|
51.3
|
36.6
|
|
Accrued expenses and other current liabilities
|
146.4
|
114.7
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES |
683.9
|
629.0
|
|
|
|
NONCURRENT LIABILITIES:
|
|
|
|
Long-term debt
|
977.0
|
791.4
|
|
Obligations under capital leases
|
39.6
|
43.7
|
|
Deferred taxes
|
135.0
|
130.1
|
|
Other
|
61.4
|
55.7
|
|
|
|
|
|
TOTAL NONCURRENT LIABILITIES |
1,213.0
|
1,020.9
|
|
|
|
|
|
TOTAL LIABILITIES |
1,896.9
|
1,649.9
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
- |
- |
STOCKHOLDERS' EQUITY: |
|
|
|
Preferred stock, $.01 par value - shares authorized 1.0; none issued |
-
|
-
|
|
Common stock, $.01 par value - shares authorized 200.0; issued
150.1 and 148.6 |
1.5
|
1.5
|
|
Additional paid-in capital |
1,236.4
|
1,179.4
|
|
Retained earnings |
2,204.2
|
1,947.2
|
|
Accumulated other comprehensive income |
0.8
|
3.8
|
|
|
|
|
|
|
3,442.9
|
3,131.9
|
|
Less treasury stock, 27.9 and
22.4 shares, at cost |
(789.0)
|
(594.1)
|
|
|
|
|
|
TOTAL STOCKHOLDERS'
EQUITY |
2,653.9
|
2,537.8
|
|
|
|
|
|
|
$ 4,550.8
|
$ 4,187.7
|
|
|
|
|
See accompanying notes to consolidated financial statements |
|
|
42
Jones Apparel Group, Inc.
Consolidated Statements of Income
(All amounts in millions except per share data)
Year Ended December 31,
|
2004
|
2003
|
2002
|
Net sales |
$ 4,592.6
|
$ 4,339.1
|
$ 4,312.2
|
Licensing income (net) |
57.1
|
36.2
|
28.7
|
|
|
|
|
Total revenues |
4,649.7
|
4,375.3
|
4,340.9
|
Cost of goods sold |
2,944.4
|
2,738.6
|
2,657.0
|
|
|
|
|
Gross profit
|
1,705.3
|
1,636.7
|
1,683.9
|
Selling, general and administrative expenses
|
1,176.9
|
1,056.9
|
1,093.3
|
|
|
|
|
Operating income |
528.4
|
579.8
|
590.6
|
Interest income |
1.9
|
3.5
|
4.6
|
Interest expense and financing costs |
51.2
|
58.8
|
62.7
|
Equity in earnings of unconsolidated affiliates |
3.8
|
2.5
|
1.0
|
|
|
|
|
Income before provision for income taxes |
482.9
|
527.0
|
533.5
|
Provision for income taxes |
181.1
|
198.4
|
201.2
|
|
|
|
|
Income before cumulative effect of change in accounting principle |
301.8
|
328.6
|
332.3
|
Cumulative effect of change in accounting for intangible assets, net of tax |
-
|
-
|
13.8
|
|
|
|
|
Net income |
$ 301.8
|
$ 328.6
|
$ 318.5
|
|
|
|
|
Earnings per share
|
|
|
|
|
Basic
|
|
|
|
|
|
Income before cumulative effect of change in accounting principle
|
$2.44
|
$2.58
|
$2.59
|
|
|
Cumulative effect of change in accounting for intangible
assets
|
-
|
-
|
0.11
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
$2.44
|
$2.58
|
$2.48
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
Income before cumulative effect of change in accounting principle
|
$2.39
|
$2.48
|
$2.46
|
|
|
Cumulative effect of change in accounting for intangible
assets
|
-
|
-
|
0.10
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
$2.39
|
$2.48
|
$2.36
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
Basic |
123.6 |
127.3 |
128.2 |
|
|
Diluted |
126.5 |
136.5 |
139.0 |
|
|
|
|
|
|
Dividends declared per share |
$0.36 |
$0.16 |
- |
See accompanying notes to consolidated financial statements
43
Jones Apparel Group, Inc.
Consolidated Statements of Stockholders'
Equity
(All amounts in millions except per share data)
|
Number of
common
shares
outstanding
|
|
Total
stock-
holders'
equity
|
|
Common
stock
|
|
Additional
paid-in
capital
|
|
Retained
earnings
|
|
Accumu-
lated
other
compre-
hensive
income
(loss)
|
|
Treasury
stock
|
Balance,
January 1, 2002 |
125.7 |
|
$
1,905.4 |
|
$
1.4 |
|
$
974.3 |
|
$
1,320.3 |
|
$
0.5 |
|
$(391.1) |
Year ended December 31, 2002: |
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
- |
|
318.5
|
|
- |
|
- |
|
318.5
|
|
- |
|
- |
|
Minimum
pension liability adjustment,
net of $4.1 tax |
- |
|
(6.7)
|
|
- |
|
- |
|
-
|
|
(6.7) |
|
- |
|
Gain on termination of
interest rate hedges, net of $8.2 tax |
- |
|
13.4
|
|
- |
|
- |
|
-
|
|
13.4 |
|
- |
|
Change in fair value of cash flow hedges,
net of $0.4 tax |
- |
|
(0.5)
|
|
- |
|
- |
|
-
|
|
(0.5) |
|
- |
|
Reclassification adjustment for hedge gains and losses included in net income,
net of $1.4 tax |
- |
|
(2.1)
|
|
- |
|
- |
|
-
|
|
(2.1) |
|
- |
|
Foreign
currency translation adjustments |
- |
|
0.2
|
|
- |
|
- |
|
-
|
|
0.2 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
322.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of restricted stock to employees |
0.3 |
|
-
|
|
- |
|
- |
|
-
|
|
- |
|
- |
Treasury
stock reissued for acquisition of Gloria Vanderbilt |
0.6 |
|
20.0
|
|
- |
|
10.1 |
|
-
|
|
- |
|
9.9 |
Treasury
stock reissued for acquisition of l.e.i. |
1.0 |
|
36.3
|
|
- |
|
11.3 |
|
-
|
|
- |
|
25.0 |
Amortization
expense in connection with employee stock options and restricted stock |
- |
|
12.9
|
|
- |
|
12.9 |
|
-
|
|
- |
|
- |
Exercise
of employee stock options |
4.8 |
|
118.4
|
|
0.1 |
|
118.3 |
|
-
|
|
- |
|
- |
Tax benefit
derived from exercise of employee stock options |
-
|
|
16.9
|
|
-
|
|
16.9
|
|
-
|
|
-
|
|
-
|
Treasury stock
acquired |
(4.0)
|
|
(129.2)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(129.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2002 |
128.4
|
|
2,303.5
|
|
1.5
|
|
1,143.8
|
|
1,638.8
|
|
4.8
|
|
(485.4)
|
Year ended December 31, 2003: |
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
- |
|
328.6
|
|
- |
|
- |
|
328.6
|
|
- |
|
- |
|
Minimum
pension liability adjustment,
net of $1.1 tax |
- |
|
(2.0)
|
|
- |
|
- |
|
-
|
|
(2.0) |
|
- |
|
Change in fair value of
cash flow hedges, net of $1.0 tax |
- |
|
(1.4)
|
|
- |
|
- |
|
-
|
|
(1.4) |
|
- |
|
Reclassification adjustment for hedge gains and losses included in net income,
net of $2.0 tax |
- |
|
(3.6)
|
|
- |
|
- |
|
-
|
|
(3.6) |
|
- |
|
Foreign currency
translation adjustments |
- |
|
6.0
|
|
- |
|
- |
|
-
|
|
6.0 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income |
|
|
327.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
restricted stock to employees, net of forfeitures |
0.6 |
|
-
|
|
- |
|
- |
|
-
|
|
- |
|
- |
Amortization
expense in connection with employee stock options and restricted stock |
- |
|
12.2
|
|
- |
|
12.2 |
|
-
|
|
- |
|
- |
Exercise of
employee stock options |
0.9 |
|
20.5
|
|
- |
|
20.5 |
|
-
|
|
- |
|
- |
Tax
benefit derived from exercise of employee stock options |
- |
|
2.9
|
|
- |
|
2.9 |
|
-
|
|
- |
|
- |
Dividends on
common stock ($0.16 per share) |
-
|
|
(20.2)
|
|
-
|
|
-
|
|
(20.2)
|
|
-
|
|
-
|
Treasury stock
acquired |
(3.7)
|
|
(108.7)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(108.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2003 |
126.2
|
|
2,537.8
|
|
1.5
|
|
1,179.4
|
|
1,947.2
|
|
3.8
|
|
(594.1)
|
Year ended December 31,
2004: |
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
- |
|
301.8
|
|
- |
|
- |
|
301.8
|
|
- |
|
- |
|
Minimum
pension liability adjustment,
net of $1.0 tax |
- |
|
(1.6)
|
|
- |
|
- |
|
-
|
|
(1.6) |
|
- |
|
Change in fair value of
cash flow hedges |
- |
|
(0.1)
|
|
- |
|
- |
|
-
|
|
(0.1) |
|
- |
|
Reclassification adjustment for hedge gains and losses included in net income,
net of $6.9 tax |
- |
|
(4.3)
|
|
- |
|
- |
|
-
|
|
(4.3) |
|
- |
|
Foreign currency
translation adjustments |
- |
|
3.0
|
|
- |
|
- |
|
-
|
|
3.0 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income |
|
|
298.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
restricted stock to employees, net of forfeitures |
0.1 |
|
-
|
|
- |
|
- |
|
-
|
|
- |
|
- |
Amortization
expense in connection with employee stock options and restricted stock |
- |
|
16.5
|
|
- |
|
16.5 |
|
-
|
|
- |
|
- |
Exercise of
employee stock options |
1.4 |
|
35.5
|
|
- |
|
35.5 |
|
-
|
|
- |
|
- |
Tax
benefit derived from exercise of employee stock options |
- |
|
5.0
|
|
- |
|
5.0 |
|
-
|
|
- |
|
- |
Dividends on
common stock ($0.36 per share) |
-
|
|
(44.8)
|
|
-
|
|
-
|
|
(44.8)
|
|
-
|
|
-
|
Treasury stock
acquired |
(5.5)
|
|
(194.9)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(194.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2004 |
122.2
|
|
$
2,653.9
|
|
$
1.5
|
|
$
1,236.4
|
|
$
2,204.2
|
|
$
0.8
|
|
$
(789.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
44
Jones Apparel Group, Inc.
Consolidated Statements of Cash Flows
(All amounts in millions)
Year Ended December 31,
|
2004
|
2003
|
2002
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
Net income |
$ 301.8
|
$ 328.6
|
$ 318.5
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities, net of acquisitions:
|
|
|
|
|
|
Cumulative effect of change in accounting principle
|
- |
- |
13.8 |
|
|
Amortization of original issue discount
|
1.3 |
15.2 |
14.7 |
|
|
Trademark impairment losses
|
0.2 |
4.5 |
24.4 |
|
|
Depreciation and other amortization
|
107.7 |
84.3 |
74.1 |
|
|
Provision for losses on accounts receivable
|
(0.8) |
(0.6) |
3.6 |
|
|
Deferred taxes
|
52.8 |
47.1 |
2.6 |
|
|
Gain on short sale of U. S. Treasury securities
|
- |
(6.6) |
(14.8) |
|
|
Loss on repurchase
of Zero Coupon Convertible Senior Notes
|
8.4 |
- |
- |
|
|
Other
|
2.0 |
(2.2) |
3.1 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
7.0
|
61.2
|
117.2
|
|
|
|
Inventories |
34.8
|
(7.0)
|
122.9
|
|
|
|
Prepaid expenses and other current assets |
(10.5)
|
(10.8)
|
20.7
|
|
|
|
Other assets |
(2.6)
|
21.4
|
21.4
|
|
|
|
Accounts payable |
(14.7)
|
(17.5)
|
(1.6)
|
|
|
|
Taxes payable |
22.9
|
(13.4)
|
37.4
|
|
|
|
Accrued expenses and other liabilities |
(48.4)
|
(49.2)
|
(41.5)
|
|
|
|
|
|
|
|
|
Total adjustments |
160.1
|
126.4
|
398.0
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
461.9
|
455.0
|
716.5
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
Acquisition of
Maxwell, net of cash acquired |
(273.5)
|
-
|
-
|
|
Acquisition
of Barneys, net of cash acquired |
(261.9)
|
-
|
-
|
|
Acquisition of
Kasper, net of cash acquired |
(37.9)
|
(198.2)
|
-
|
|
Acquisition
of Gloria Vanderbilt, net of cash acquired |
-
|
(54.0)
|
(80.9)
|
|
Acquisition of
l.e.i., net of cash acquired |
-
|
(2.4)
|
(251.8)
|
|
Additional
consideration relating to Victoria acquisition |
-
|
-
|
(2.0)
|
|
Capital expenditures |
(56.6)
|
(53.3)
|
(52.6)
|
|
Net proceeds from sale of U.S. Treasury securities |
-
|
12.3
|
9.2
|
|
Acquisition of intangibles |
(1.2)
|
(6.0)
|
(2.9)
|
|
Repayments of loans to officers |
-
|
-
|
2.0
|
|
Proceeds from sales of property, plant and equipment |
1.7
|
26.9
|
10.4
|
|
Other |
-
|
0.2
|
(0.1)
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
(629.4)
|
(274.5)
|
(368.7)
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
Issuance of 4.25% Senior Notes, net of discount and debt issuance costs |
248.1
|
-
|
-
|
|
Issuance of
5.125% Senior Notes, net of discount and debt issuance costs |
248.1
|
-
|
-
|
|
Issuance of 6.125% Senior Notes, net of discount and debt issuance costs |
247.3
|
-
|
-
|
|
Redemption
of Zero Coupon Convertible Senior Notes |
(446.6)
|
-
|
-
|
|
Redemption at
maturity of 7.50% Senior Notes |
(175.0)
|
-
|
-
|
|
Redemption
of Barneys 9% Senior Secured Notes, including premiums and fees |
(112.7)
|
-
|
-
|
|
Net borrowings
(payments) under credit facilities |
69.2
|
-
|
(0.8)
|
|
Repurchase of Nine West
Group Senior Notes |
-
|
-
|
(0.1)
|
|
Refinancing of acquired debt |
-
|
-
|
(126.9)
|
|
Purchases of treasury stock |
(201.5)
|
(102.1)
|
(129.2)
|
|
Proceeds from exercise of employee stock options |
35.5
|
20.5
|
118.4
|
|
Dividends paid |
(44.8)
|
(20.2)
|
-
|
|
Proceeds from termination of interest rate
hedges |
0.2
|
-
|
21.6
|
|
Repayment of
long-term debt |
-
|
(7.4)
|
(11.2)
|
|
Principal payments on capital leases |
(5.9)
|
(5.5)
|
(12.9)
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
(138.1)
|
(114.7)
|
(141.1)
|
|
|
|
|
|
EFFECT OF EXCHANGE RATES ON CASH |
0.6
|
0.9
|
0.1
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(305.0) |
66.7 |
206.8 |
CASH AND CASH EQUIVALENTS, BEGINNING |
350.0
|
283.3
|
76.5
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, ENDING |
$
45.0
|
$ 350.0
|
$ 283.3
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
45
Jones Apparel Group, Inc.
Notes to Consolidated Financial Statements
SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the
accounts of Jones Apparel Group, Inc. and our wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated. The
results of operations of acquired companies are included in our operating
results from the respective dates of acquisition.
We design, contract for the manufacture of, manufacture
and market a broad range of women's collection sportswear, suits and dresses,
casual sportswear and jeanswear for men, women and children, and women's
footwear and accessories. We sell our products through a broad array of
distribution channels, including better specialty and department stores and mass
merchandisers, primarily in the United States and Canada. We also operate our
own network of luxury, retail and factory outlet stores. In addition, we license
the use of several of our brand names to select manufacturers and distributors
of women's and men's apparel and accessories worldwide.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
Credit Risk
Financial instruments which potentially subject us to
concentration of credit risk consist principally of temporary cash investments
and accounts receivable. We place our cash and cash equivalents in
investment-grade, short-term debt instruments with high quality financial
institutions and the U.S. Government and, by policy, limit the amount of credit
exposure in any one financial instrument. We perform ongoing credit evaluations
of our customers' financial condition and, generally, require no collateral
from our customers. The allowance for non-collection of accounts receivable is
based upon the expected collectibility of all accounts receivable.
We also provide credit to certain retail customers through
an in-house Barneys New York credit card program. We perform ongoing
credit reviews of our credit card accounts. Accounts are generally written off
automatically after 180 days have passed without receipt of a full scheduled
monthly payment and are written off sooner in the event of bankruptcy or other
factors that make collection seem unlikely. We estimate an allowance for
uncollectibility using a model that considers the current aging of the accounts,
historical write-off and recovery rates and other portfolio data. Concentration
of credit risk is limited because of the large number of credit card accounts.
Derivative Financial Instruments
Our primary objectives for holding derivative financial
instruments are to manage foreign currency and interest rate risks. We do not
use financial instruments for trading or other speculative purposes. We have
historically used derivative financial instruments to hedge both the fair value
of recognized assets or liabilities (a "fair value" hedge) and the
variability of anticipated cash flows of a forecasted transaction (a "cash
flow" hedge). Our strategies related to derivative financial instruments
have been:
- the use of foreign currency forward contracts to hedge a portion of
anticipated future short-term inventory purchases to offset the effects of
changes in foreign currency exchange rates (primarily between the U.S.
Dollar and the Canadian Dollar, the Euro and the British Pound);
- the use of interest rate swaps to effectively convert a portion of our
outstanding fixed-rate debt to variable-rate debt to take advantage of lower
interest rates; and
- the use of treasury rate locks to fix forward the treasury rate component
of a portion of our November 2004 debt offering that was priced based on the
prevailing applicable treasury rate and credit spread at the time the debt
offering was finalized.
46
The derivatives we use in our risk management strategies
are highly effective hedges because all the critical terms of the derivative
instruments match those of the hedged item. On the date the derivative contract
is entered into, we designate the derivative as either a fair value hedge or a
cash flow hedge. Changes in derivative fair values that are designated as fair
value hedges are recognized in earnings as offsets to the changes in fair value
of the related hedged assets and liabilities. Changes in derivative fair values
that are designated as cash flow hedges are deferred and recorded as a component
of accumulated other comprehensive income until the associated hedged
transactions impact the income statement, at which time the deferred gains and
losses are reclassified to either cost of sales for inventory purchases or to SG&A
expenses for all other items. Any ineffective portion of a hedging derivative's
change in fair value will be immediately recognized in SG&A expenses.
Differentials to be paid or received under interest rate contracts are
recognized in income over the life of the contracts as adjustments to interest
expense. Gains or losses generated from the early termination of interest rate
contracts and treasury locks are amortized to earnings over the remaining terms
of the contracts as adjustments to interest expense. The fair values of the
derivatives are reported as other current assets or accrued expenses and other
current liabilities, as appropriate.
Accounts Receivable
Accounts receivable are reported at amounts we expect to
be collected, net of trade discounts and deductions for co-op advertising
normally taken by our customers, allowances we provide to our retail customers
to effectively flow goods through the retail channels, an allowance for
non-collection due to the financial position of our customers and credit card
accounts, and an allowance for estimated sales returns.
Inventories
Inventories are valued at the lower of cost or market.
Approximately 50%, 37% and 13% of inventories were determined by using the FIFO
(first in, first out), weighted average cost and retail methods of valuation,
respectively, as of December 31, 2004 and approximately 58%, 40% and 2% of
inventories were determined by using the FIFO, weighted average cost and retail
methods of valuation, respectively, as of December 31, 2003. We make provisions
for obsolete or slow moving inventories as necessary to properly reflect
inventory value.
Property, Plant, Equipment and Depreciation and Amortization
Depreciation and amortization are computed by the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized using the straight-line method over the life of the
lease or the useful life of the improvement, whichever is shorter. Property
under capital leases is amortized over the lives of the respective leases or the
estimated useful lives of the assets.
Operating Leases
Total rent payments under operating leases that include
scheduled payment increases and rent holidays are amortized on a straight-line
basis over the term of the lease. Rent expense on our buildings and retail
stores is classified as an SG&A expense and, for certain stores, includes
contingent rents that are based on a percentage of retail sales over stated
levels. Landlord allowances are amortized by the straight-line method over the
original term of the lease as a reduction of rent expense.
Goodwill and Other Intangibles
Goodwill represents the excess of purchase price over the
fair value of net assets acquired in business combinations accounted for under
the purchase method of accounting. Goodwill recorded in connection with
acquisitions had been amortized using the straight-line method over 30 years
prior to December 31, 2001. Other intangibles with determinable lives, including
license agreements, are amortized on a straight-line basis over the estimated
useful lives of the assets. Other intangible assets without determinable lives,
such as trademarks, had been amortized using the straight-line method over
periods primarily ranging from 15 to 30 years prior to December 31, 2001. SFAS
No. 142, "Goodwill and Other Intangible Assets," changed the
accounting for goodwill and other intangible assets without determinable lives
from an amortization method to an impairment-only approach and, accordingly, we
annually test goodwill and other intangibles without determinable lives for
impairment through the use of independent third-party appraisals.
47
Foreign Currency Translation
The financial statements of foreign subsidiaries are
translated into U.S. dollars in accordance with SFAS No. 52, "Foreign
Currency Translation." Where the functional currency of a foreign
subsidiary is its local currency, balance sheet accounts are translated at the
current exchange rate and income statement items are translated at the average
exchange rate for the period. Gains and losses resulting from translation are
accumulated in a separate component of stockholders' equity. Where the local
currency of a foreign subsidiary is not its functional currency, financial
statements are translated at either current or historical exchange rates, as
appropriate. These adjustments, along with gains and losses on currency
transactions, are reflected in the consolidated statements of income. Net
foreign currency gains (losses) reflected in the consolidated statements of
income were $(1.9) million, $1.3 million and $(0.6) million in 2004, 2003 and
2002, respectively.
Defined Benefit Plans
Our funding policy is to make the minimum annual
contributions required by applicable regulations.
Treasury Stock
Treasury stock is recorded at net acquisition cost. Gains
and losses on disposition are recorded as increases or decreases to additional
paid-in capital with losses in excess of previously recorded gains charged
directly to retained earnings.
Revenue Recognition
Wholesale apparel and footwear and accessories sales are
recognized either when products are shipped or, in certain situations, upon
acceptance by the customer. Retail sales are recorded at the time of register
receipt. Allowances for estimated returns are provided when sales are recorded.
Shipping and Handling Costs
Shipping and handling costs billed to customers are
recorded as revenue. Freight costs associated with shipping goods to customers
are recorded as a cost of sales.
Advertising Expense
We record national advertising campaign costs as an
expense when the advertising takes place and we expense advertising production
costs as incurred, net of reimbursements for cooperative advertising.
Advertising costs associated with our cooperative advertising programs are
accrued as the related revenues are recognized. Net advertising expense was
$77.6 million, $74.2 million and $75.4 million in 2004, 2003 and 2002,
respectively.
Income Taxes
We use the asset and liability method of accounting for
income taxes. Current tax assets and liabilities are recognized for the
estimated Federal, foreign, state and local income taxes payable or refundable
on the tax returns for the current year. Deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Deferred income tax provisions are based on the changes to the
respective assets and liabilities from period to period. Valuation allowances
are recorded to reduce deferred tax assets when uncertainty regarding their
realizability exists.
Earnings per Share
Basic earnings per share includes no dilution and is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflect, in periods in which they have a dilutive effect, the effect of
common shares issuable upon exercise of stock options and the conversion of any
convertible bonds. The difference between reported basic and diluted
weighted-average common shares results from the assumption that all dilutive
stock options outstanding were exercised and all convertible bonds have been
converted into common stock.
The following options to purchase shares of common stock were outstanding
during a portion of each year but were not included in the computation of
diluted earnings per share because the exercise prices of the options were
greater than the average market price of the common shares and, therefore, would
be antidilutive.
48
|
2004
|
2003
|
2002
|
Number of options (in millions) |
3.9 |
10.4 |
3.2 |
Weighted average exercise price |
$37.44 |
$32.88 |
$38.97 |
Stock Options
Effective January 1, 2003, we adopted the fair value
method of accounting for employee stock options for all options granted after
December 31, 2002 pursuant to the guidelines contained in SFAS No. 123,
"Accounting for Stock-Based Compensation" using the "prospective
method" set forth in SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." Under this approach, the fair
value of the option on the date of grant (as determined by the Black-Scholes
option pricing model) is amortized to compensation expense over the option's
vesting period. Since the expense to be recorded is dependent on both the timing
and the number of options to be granted, we cannot estimate the effect on future
results of operations at this time. Prior to January 1, 2003, pursuant to a
provision in SFAS No. 123 we had elected to continue using the intrinsic-value
method of accounting for stock options granted to employees in accordance with
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees." Accordingly, compensation cost for stock options had been
measured as the excess, if any, of the quoted market price of our stock at the
date of the grant over the amount the employee must pay to acquire the stock.
Under this approach, we had only recognized compensation expense for stock-based
awards to employees for options granted at below-market prices. The adoption of
the fair value method did not have a material effect on our results of
operations.
Had we elected to adopt the fair value approach of SFAS
No. 123 upon its effective date, our net income would have decreased
accordingly. Both the stock-based employee compensation cost included in the
determination of net income as reported and the stock-based employee
compensation cost that would have been included in the determination of net
income if the fair value based method had been applied to all awards, as well as
the resulting pro forma net income and earnings per share using the fair value
approach, are presented in the following table. These pro forma amounts may not
be representative of future disclosures since the estimated fair value of stock
options is amortized to expense over the vesting period, and additional options
may be granted in future years. For further information, see "Stock Options
and Restricted Stock."
Year Ended December 31,
|
2004
|
2003
|
2002
|
(In millions except per share data) |
|
|
|
|
|
|
|
Net income - as reported |
$
301.8 |
$
328.6 |
$
318.5 |
Add: stock-based employee compensation cost,
net of related tax effects, included in the determination of net income as reported |
10.3 |
7.5 |
8.0 |
Deduct: stock-based employee compensation cost,
net of related tax effects, that would have been included in the determination of net income
if the fair value-based method had been applied to all awards |
(16.9)
|
(19.5)
|
(37.7)
|
|
|
|
|
Net income - pro forma |
$ 295.2
|
$ 316.6
|
$ 288.8
|
|
|
|
|
Basic earnings per share |
|
|
|
As reported |
$2.44 |
$2.58 |
$2.48 |
Pro forma |
$2.39 |
$2.49 |
$2.25 |
Diluted earnings per share |
|
|
|
As reported |
$2.39 |
$2.48 |
$2.36 |
Pro forma |
$2.34 |
$2.39 |
$2.14 |
49
Restricted Stock
Compensation cost for restricted stock is measured as the
excess, if any, of the quoted market price of our stock at the date the common
stock is issued over the amount the employee must pay to acquire the stock. The
compensation cost is recognized over the period between the issue date and the
date any restrictions lapse.
Long-Lived Assets
We review certain long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. In that regard, we assess the recoverability of such
assets based upon estimated non-discounted cash flow forecasts. If an asset
impairment is identified, the asset is written down to fair value based on
discounted cash flow or other fair value measures.
Cash Equivalents
We consider all highly liquid short-term investments to
be cash equivalents.
Presentation of Prior Year Data
Certain reclassifications have been made to conform prior
year data with the current presentation.
New Accounting Standards
In November 2004, the FASB issued SFAS No. 151,
"Inventory Costs," which clarifies the accounting for abnormal amounts
of idle facility expense, freight, handling costs, and wasted material
(spoilage) by requiring these items to be recognized as current-period charges.
SFAS No. 151 is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005, with earlier application permitted. The adoption
of SFAS No. 151 will have no impact on our results of operations or our
financial position.
In December 2004, the FASB issued SFAS No. 153,
"Exchanges of Monetary Assets," which addresses the measurement of
exchanges of nonmonetary assets and eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets and replaces
it with an exception for exchanges that do not have commercial substance. SFAS
No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005, with earlier application permitted. The adoption
of SFAS No. 153 will have no impact on our results of operations or our
financial position.
In December 2004, the FASB issued a revision of SFAS No.
123, "Statement of Financial Accounting Standards No. 123 (revised
2004)," which requires that the cost resulting from all share-based payment
transactions be recognized in the financial statements. This Statement
establishes fair value as the measurement objective in accounting for
share-based payment arrangements and requires all entities to apply a
fair-value-based measurement method in accounting for share-based payment
transactions with employees except for equity instruments held by employee share
ownership plans. This Statement is effective as of the beginning of the first
interim or annual reporting period that begins after June 15, 2005. The adoption
of SFAS No. 123 (revised 2004) will not have a material effect on our results of
operations or our financial position.
ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS
Accounts receivable consist of the following:
December 31,
|
2004
|
2003
|
(In millions) |
|
|
|
|
|
Trade accounts
receivable |
$ 458.3
|
$ 424.1
|
Credit card receivable |
36.2
|
-
|
Allowances for doubtful
accounts, returns, discounts and co-op advertising |
(46.2)
|
(38.3)
|
|
|
|
|
$
448.3
|
$ 385.8
|
|
|
|
A significant portion of our sales are to retailers
throughout the United States and Canada. We have two significant customers in
our wholesale apparel and wholesale footwear and accessories operating segments.
50
Sales to department stores owned by The May Department Stores Company
accounted for 14%, 12% and 14% of consolidated total revenues for the years
ended December 31, 2004, 2003 and 2002, respectively. Sales to department stores
owned by Federated Department Stores, Inc. accounted for 12%, 13% and 14% of
consolidated total revenues for the years ended December 31, 2004, 2003 and
2002, respectively. May and Federated accounted for approximately 18% of
accounts receivable at December 31, 2004.
ACQUISITIONS
On July 8, 2004, we acquired all the outstanding shares of
Maxwell. Maxwell designs and markets casual and dress footwear for women and
children under multiple brand names, each of which is targeted to a distinct
segment of the footwear market. Maxwell markets its products nationwide to
national chains, department stores and specialty retailers. Maxwell offers
footwear for women in the moderately priced market segment under the Mootsies
Tootsies, Sam & Libby and Dockers Women brands, in the
better market segment under the AK Anne Klein and Circa Joan &
David brands and in the bridge segment under the Joan and David and
Albert Nipon brands. Maxwell also sells moderately priced children's
footwear under both the Mootsies Tootsies and Sam & Libby
brands and licenses the J. G. Hook trademark from J. G. Hook, Inc. to
source and develop private label products for retailers who require brand
identification. Maxwell operates in the wholesale footwear and accessories
segment.
The acquisition of Maxwell is intended to provide further
diversification in our footwear business and strengthen our positions in both
the moderate and children's distribution channels. We also expect to benefit
from the cross-branding opportunities that exist with our other lines of
business.
The aggregate purchase price was $377.1 million, which
included $23.25 per share in cash for each outstanding share of Maxwell (for a
total of $345.8 million) and $24.1 million related to Maxwell's employee stock
options. The purchase price was allocated to Maxwell's assets and liabilities,
tangible and intangible (as determined by an independent appraiser), with the
excess of the purchase price over the fair value of the net assets acquired of
approximately $206.1 million being recorded as goodwill in the wholesale
footwear and accessories segment. The acquired goodwill relating to Maxwell will
not be deductible for tax purposes.
On December 20, 2004, we acquired 100% of the common stock
of Barneys. Barneys is a luxury retailer that provides its customers with a wide
variety of merchandise across a broad range of prices, including a diverse
selection of Barneys label merchandise. Barneys' preferred arrangements
with established and emerging designers, combined with creative merchandising,
store designs and displays, advertising campaigns, publicity events and emphasis
on customer service, has positioned it as a leading retailer of men's and
women's fashion, cosmetics, jewelry and home furnishings. Barneys complements
its merchandise offerings from designers such as Giorgio Armani, Manolo Blahnik,
Marc Jacobs, Prada, Jil Sander and Ermenegildo Zegna with a diverse selection of
Barneys label merchandise, including ready-to-wear apparel, handbags,
shoes, dress shirts, ties and sportswear. Barneys label merchandise is
manufactured by independent third parties according to Barneys' specifications
and is of comparable quality to the designer merchandise. Barneys operates in
the retail segment.
As our growth strategy has focused on diversification to
provide a well-balanced portfolio of businesses, the acquisition of Barneys
provides additional diversification by introducing a new competency in luxury
specialty retailing. With an inherent diversified portfolio comprised of its own
brand, as well as numerous other brands from new designers and classic design
houses, Barneys provides entry into the high-growth, resilient luxury goods
market.
The aggregate cash purchase price was $294.5 million (of
which $3.1 million was paid in January 2005), which included $19.00 for each
outstanding share of Barneys (for a total of $264.5 million) and $26.7 million
related to Barneys' employee stock options, preferred stock and stock
warrants. We also assumed approximately $106.0 million of Barneys funded debt,
$102.2 million of which we subsequently refinanced. The purchase price was
allocated to Barneys' assets and liabilities, with the excess of the purchase
price over the fair value of the net assets acquired of approximately $276.3
million being recorded as goodwill in the retail segment. Of the acquired
goodwill relating to Barneys, approximately $83.1 million will be deductible for
tax purposes. Barneys' intangible assets (including trademarks, customer lists
and vendor relationships)
51
are currently being valued by independent appraisers; the appraised values
will be reclassified from goodwill to other intangible assets during the first
quarter of 2005.
The following table summarizes the estimated fair values
of the assets acquired and liabilities assumed at the date of acquisition for
both Maxwell and Barneys. The allocations of the respective purchase prices have
not been finalized and are subject to refinement. Any additional adjustments
resulting from the finalization of the purchase price allocations of Maxwell and
Barneys will affect the amounts assigned to goodwill. Other than the
reclassification of intangible assets related to Barneys, these adjustments are
not expected to be material.
(In millions)
|
Maxwell
|
Barneys
|
Current assets |
$ 191.3
|
$ 172.5
|
Property, plant and equipment |
0.9
|
48.5
|
Intangible assets |
40.3
|
-
|
Goodwill |
206.1
|
276.3
|
Other assets |
-
|
11.9
|
|
|
|
Total assets acquired |
438.6
|
509.2
|
|
|
|
Current liabilities |
45.4
|
105.5
|
Long-term debt |
16.1
|
109.2
|
|
|
|
Total liabilities assumed |
61.5
|
214.7
|
|
|
|
Net assets acquired |
$ 377.1
|
$ 294.5
|
|
|
|
Of the $40.3 million of acquired Maxwell intangible
assets, $24.7 million was assigned to registered trademarks that are not subject
to amortization, $1.1 million was assigned to third-party license agreements,
which had a useful life of approximately 18 months on the acquisition date, and
$14.5 million was assigned to existing customer orders, which had a useful life
of approximately eight months on the acquisition date. The amortization of the
license agreements and customer orders is included in SG&A expenses. The
amortization of Barneys intangible assets will also be included in SG&A
expenses.
On December 1, 2003, we acquired 100% of the common stock
of Kasper. Kasper designs, markets, sources, manufactures and distributes women's
suits, sportswear and dresses. Kasper's brands include such well-recognized
names as Albert Nipon, Anne Klein New York, AK Anne Klein, Kasper and Le
Suit. In addition, Kasper has granted licenses for the manufacture and
distribution of certain other products including, but not limited to, women's
watches, jewelry, handbags, small leather goods, footwear, coats, eyewear and
swimwear and men's apparel. Kasper also operates retail outlet stores under
the Kasper and Anne Klein names, which not only sell company
produced apparel, but also showcase and sell licensed products. The acquisition
of Kasper is intended to partially replace the business in the better market
lost by the termination of the Lauren and Ralph agreements and
increases our penetration into the better market distribution channel. We also
expect to benefit from the cross-branding opportunities of Kasper's brands
that exist with our other lines of business. Kasper operates in both the
wholesale better apparel and retail segments and the licensing of acquired
Kasper trademarks to independent third parties is reported in the licensing,
other and eliminations segment.
The aggregate purchase price was $259.5 million. The
purchase price was allocated to Kasper's assets and liabilities, tangible and
intangible (as determined by an independent appraiser), with the excess of the
purchase price over the fair value of the net assets acquired of approximately
$57.0 million being recorded as goodwill, of which $9.4 million was assigned to
the retail segment and the balance assigned to the wholesale better apparel
segment. Of the acquired goodwill, approximately $22.1 million will be
deductible for tax purposes.
Of the $107.6 million of acquired Kasper intangible
assets, $79.5 million was assigned to registered trademarks that are not subject
to amortization, $18.5 million was assigned to third-party license agreements,
which had a weighted-average useful life of approximately 86 months on the
acquisition date, $9.1 million was assigned to existing customer orders, which
had a useful life of approximately eight months on the acquisition date, and
$0.5 million was assigned to a below-market lease, which had a useful life of
approximately 109 months on the acquisition date. The amortization of the
customer orders and the below-market lease is included in SG&A expenses and
the amortization of the license agreements is included in net licensing income.
52
On August 15, 2002, we acquired 100% of the common stock
of l.e.i., a leading designer, manufacturer and distributor of girls' and
young women's moderately-priced jeanswear. l.e.i.'s products are marketed
nationwide to national chains, department stores and specialty retailers. The
acquisition of l.e.i. is intended to enhance our competitive position in the
moderate market. We also expect to benefit from the cross-branding opportunities
that exist with our other lines of business, by leveraging l.e.i.'s strengths
in design, production, merchandising and logistics, and by achieving cost
synergies and economies of scale in the manufacturing process. l.e.i. is
reported under our wholesale moderate apparel segment.
The aggregate purchase price was $312.1 million, which
included payments to the selling shareholders of $274.8 million in cash and the
issuance of 1,035,854 shares of our common stock valued for financial reporting
purposes at $35.04 per share (the average closing price for the week containing
July 10, 2002, the date the acquisition was announced). The number of our common
shares delivered was based upon the average of the high and low sales price for
the ten consecutive trading days immediately preceding the signing date.
The purchase price was allocated to l.e.i.'s assets and
liabilities, tangible and intangible (as determined by an independent
appraiser), with the excess of the purchase price over the fair value of the net
assets acquired of approximately $172.7 million being recorded as goodwill. The
goodwill was assigned to the wholesale moderate apparel segment and will be
deductible for tax purposes. We also assumed approximately $84.0 million of
l.e.i.'s funded debt and accrued interest, $83.2 million of which we
subsequently refinanced.
Of the $113.6 million of acquired l.e.i. intangible
assets, $106.0 million was assigned to registered trademarks that are not
subject to amortization and $7.6 million was assigned to third-party license
agreements, which had a weighted-average useful life of approximately 20 months
on the acquisition date. The amortization of these agreements is included in net
licensing income.
Pursuant to the Amended Acquisition Agreement, the selling
shareholders of l.e.i. were entitled to a $2.25 million payment as additional
consideration, which was made in 2003 and recorded as goodwill.
On April 8, 2002, we acquired 100% of the common stock of
Gloria Vanderbilt and also the Gloria Vanderbilt, Glo and other
trademarks and third-party licenses from Gloria Vanderbilt Trademark B.V. Gloria
Vanderbilt is a leading designer, marketer and distributor of women's
moderately priced stretch and twill jeanswear. Gloria Vanderbilt markets its
products nationwide to national chains, department stores, mass merchants, and
specialty retailers. Brands include Gloria Vanderbilt, and junior product
marketed under the Glo brand name. The acquisition of Gloria Vanderbilt
increased our penetration into the moderate market distribution channel. Gloria
Vanderbilt is reported under our wholesale moderate apparel segment.
The original aggregate purchase price was $100.9 million,
which included $80.9 million in cash payments and 562,947 shares of our common
stock valued at $35.564 (the average closing price for the week containing March
19, 2002, the date the acquisition was announced). The purchase price was
allocated to Gloria Vanderbilt's assets and liabilities, tangible and
intangible (as determined by an independent appraiser).
The terms of the acquisition agreement for Gloria
Vanderbilt required us to pay the former Gloria Vanderbilt shareholders
additional consideration of $4.50 for each $1.00 of Gloria Vanderbilt's
earnings before interest and taxes (as defined in the stock purchase agreement)
that exceeded certain targeted levels for the 12 months following the completion
of the acquisition, up to a maximum of $54.0 million. The maximum additional
consideration was paid in cash on July 7, 2003 and was recorded first as a
reduction of the liability resulting from the fair value of assets acquired
exceeding the purchase price, with the remaining balance of $45.1 million being
recorded as goodwill in the wholesale moderate segment in the third fiscal
quarter of 2003. The acquired goodwill relating to Gloria Vanderbilt will not be
deductible for tax purposes.
Of the $83.9 million of acquired Gloria Vanderbilt
intangible assets, $75.3 million was assigned to registered trademarks that are
not subject to amortization and $8.6 million was assigned to third-party license
agreements, which had a weighted-average useful life of approximately 30 months
on the acquisition date. The amortization of these agreements is included in net
licensing income.
53
We also assumed approximately $43.7 million of Gloria
Vanderbilt's funded debt and accrued interest, which we subsequently
refinanced.
Our consolidated financial statements include the results
of operations of the acquired companies from their respective acquisition dates.
The following unaudited pro forma information presents a summary of our
consolidated results of operations as if the Maxwell, Barneys and Kasper
acquisitions and their related financing had taken place on January 1, 2003.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which actually would
have resulted had the acquisitions occurred on January 1, 2003, or which may
result in the future.
Year Ended December 31,
|
2004
|
2003
|
Total revenues
(in millions) |
$ 5,237.1 |
$ 5,368.9 |
Net income (in
millions) |
347.9 |
381.8 |
Basic earnings
per common share |
$2.81 |
$3.00 |
Diluted
earnings per common share |
$2.76 |
$2.87 |
ACCRUED RESTRUCTURING COSTS
In connection with the acquisitions of Nine West Group,
Judith Jack, McNaughton, Gloria Vanderbilt, Kasper and Maxwell, we assessed and
formulated plans to restructure certain operations of each company. These plans
involved the closure of manufacturing facilities, certain offices, foreign
subsidiaries, and selected domestic and international retail locations.
The objectives of the plans were to eliminate unprofitable
or marginally profitable lines of business and reduce overhead expenses. During
2002 and 2003, we also restructured several of our operations, including the
closing of Canadian and Mexican production facilities, the closing of an
administrative, warehouse and preproduction facility in El Paso, Texas and the
closing of a warehouse facility in Rural Hall, North Carolina. The accrual of
these costs and liabilities, which are included in accrued expenses and other
current liabilities, is as follows:
(In millions)
|
Severance
and other
employee
costs
|
Closing of
retail
stores and consolidation
of facilities
|
Total
|
Balance, January 1, 2002 |
$ 11.2
|
$ 4.2
|
$ 15.4
|
Net additions (reversals) |
3.3
|
4.2
|
7.5
|
Payments and reductions |
(7.1)
|
(6.3)
|
(13.4)
|
|
|
|
|
Balance, December 31,
2002 |
7.4
|
2.1
|
9.5
|
Net additions |
6.4
|
2.1
|
8.5
|
Payments and reductions |
(6.9)
|
(0.5)
|
(7.4)
|
|
|
|
|
Balance, December 31,
2003 |
6.9
|
3.7
|
10.6
|
Net additions |
16.9
|
17.4
|
34.3
|
Payments and reductions |
(17.3)
|
(3.0)
|
(20.3)
|
|
|
|
|
Balance, December 31,
2004 |
$ 6.5
|
$ 18.1
|
$ 24.6
|
|
|
|
|
Estimated severance payments and other employee costs of
$6.5 million accrued at December 31, 2004 relate to the remaining estimated
severance for an estimated 177 employees at locations to be closed. Employee
groups affected (totaling an estimated 1,129 employees) include accounting,
administrative, customer service, manufacturing, production, warehouse and
management personnel at locations closed or to be closed and duplicate corporate
headquarters management and administrative personnel.
The $16.9 million net addition during 2004 represents
severance accruals related to acquisitions, which was recorded as an increase to
goodwill.
54
The $6.4 million net addition during 2003 represents a
$5.9 million increase in severance accruals related to acquisitions, which was
recorded as an increase to goodwill, a $0.7 million severance accrual related to
the closing of the North Carolina facility recorded as an SG&A expense in
the wholesale better apparel segment and a $0.2 million reduction of severance
accruals recorded as a reduction of SG&A expenses in the wholesale footwear
and accessories segment.
The $3.3 million net addition in 2002 represents a net
reversal of $1.7 million of the accrual related to acquisitions, which was
recorded as a reduction of goodwill, a $3.6 million severance accrual related to
the closing of the Mexico and Texas facilities recorded as an SG&A expense
in the wholesale moderate apparel segment, a $0.4 million severance accrual
related to the closing of the Canadian facility recorded as an SG&A expense
in the wholesale better apparel segment and a $1.0 million severance accrual
recorded as an SG&A expense in the wholesale footwear and accessories
segment.
During 2004, 2003 and 2002, $17.3 million, $6.9 million
and $7.1 million, respectively, of the reserve was utilized (relating to partial
or full severance and related costs for 231, 575 and 270 employees,
respectively).
The $18.1 million accrued at December 31, 2004 for the
consolidation of facilities relates to expected costs to be incurred, including
lease obligations, for closing certain acquired facilities in connection with
consolidating their operations into our other existing facilities.
The $17.4 million addition for 2004 represents a $15.9
million accrual for the closing of certain Kasper and Maxwell facilities, which
was recorded as an increase to goodwill, and a $1.7 million lease termination
payment for the North Carolina facility offset by a $0.2 million reduction in
accruals related to the closing of the Canadian facility, both of which were
recorded as SG&A expenses in the wholesale better apparel segment.
The $2.1 million additional accrual for 2003 represents a
$2.2 million accrual related to the closing of acquired facilities and retail
stores, which was recorded as an increase to goodwill, offset by a $0.1 million
reduction in accruals related to the closing of the Canadian facility recorded
as a reduction of SG&A expenses in the wholesale better apparel segment.
The $4.2 million additional accrual for 2002 consists of a
$0.4 million accrual related to the closing of acquired facilities, which was
recorded as an increase to goodwill, a $0.5 million accrual related to the
closing of the Canadian facility recorded as an SG&A expense in the
wholesale better apparel segment and a $3.3 million accrual related to the
closing of the Texas facility recorded as an SG&A expense in the wholesale
moderate apparel segment.
Our plans have not been finalized in all areas, and
additional restructuring costs may result as we continue to evaluate and assess
the impact of duplicate responsibilities, warehouses and office locations. We do
not expect any final adjustments to be material. Any additional costs relating
to Maxwell before July 8, 2005 will be recorded as goodwill; after that date,
additional costs will be charged to operations in the period in which they
occur. Any costs not related to Maxwell will be charged to operations in the
period in which they occur.
INVENTORIES
Inventories are summarized as follows:
December 31,
|
2004
|
2003
|
(In millions) |
|
|
|
|
|
Raw materials |
$ 21.5
|
$ 31.1
|
Work in process |
33.6
|
30.6
|
Finished goods |
609.1
|
528.9
|
|
|
|
|
$ 664.2
|
$ 590.6
|
|
|
|
55
PROPERTY, PLANT AND EQUIPMENT
Major classes of property, plant and equipment are as
follows:
December 31,
|
2004
|
2003
|
Useful
lives
(years)
|
(In millions) |
|
|
|
|
|
|
|
Land and
buildings |
$ 125.9
|
$
96.4
|
5 - 40 |
Leasehold
improvements |
237.8
|
169.7
|
1 - 39 |
Machinery and
equipment |
360.8
|
291.5
|
3 - 20 |
Furniture and
fixtures |
67.2
|
64.6
|
3 - 8 |
Construction in progress |
11.6
|
18.8
|
- |
|
|
|
|
|
803.3
|
641.0
|
|
Less: accumulated depreciation and amortization |
499.7
|
372.6
|
|
|
|
|
|
|
$ 303.6
|
$ 268.4
|
|
|
|
|
|
Depreciation and amortization expense relating to
property, plant and equipment was $64.0 million, $56.9 million and $52.2 million
in 2004, 2003 and 2002, respectively.
Included in property, plant and equipment are the
following capitalized leases:
December 31,
|
2004
|
2003
|
Useful
lives
(years)
|
(In millions) |
|
|
|
|
|
|
|
Buildings |
$ 74.2
|
$ 74.2
|
15 - 20 |
Machinery and equipment |
11.8
|
11.5
|
3 - 7 |
|
|
|
|
|
86.0
|
85.7
|
|
Less: accumulated amortization |
32.0
|
24.9
|
|
|
|
|
|
|
$ 54.0
|
$ 60.8
|
|
|
|
|
|
GOODWILL AND OTHER INTANGIBLE ASSETS
In June 2001, the FASB issued SFAS No. 142, "Goodwill
and Other Intangible Assets," which changed the accounting for goodwill and
other intangible assets from an amortization method to an impairment-only
approach. Upon our adoption of SFAS No. 142 on January 1, 2002, we ceased
amortizing our trademarks without determinable lives and our goodwill. As
prescribed under SFAS No. 142, we had our goodwill and trademarks tested for
impairment during the first fiscal quarter of 2002.
Due to market conditions resulting from a sluggish economy
compounded by the aftereffects of the events of September 11, 2001, we revised
our earnings forecasts for future years for several of our trademarks and
licenses. As a result, the fair market value of these assets (as appraised by an
independent third party) was lower than their carrying value as of December 31,
2001. We accordingly recorded an after-tax impairment charge of $13.8 million,
which is reported as a cumulative effect of change in accounting principle
resulting from the adoption of SFAS No. 142.
In the second fiscal quarter of 2002, we recorded an
additional impairment charge of $5.8 million related to two trademarks due to a
decrease in projected accessory revenues resulting from a further evaluation of
our costume jewelry business.
We perform our annual impairment test for goodwill and
trademarks during the fourth fiscal quarter of the year. As a result of
continuing decreases in projected accessory revenues in our costume jewelry
lines, the conversion of a portion of our Enzo Angiolini retail stores to
the more moderately-priced Bandolino brand, and the discontinuance of our
Rena Rowan better product line, we recorded additional trademark
impairment
56
charges of $18.6 million in 2002, $4.5 million in 2003 and $0.2 million in
2004. All trademark impairment charges are reported as SG&A expenses in
the licensing, other and eliminations segment.
The components of other intangible assets are as
follows:
December 31,
|
|
2004
|
|
2003
|
(In millions)
|
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Amortized intangible assets |
|
|
|
|
|
|
License
agreements |
|
$ 62.7
|
$ 34.4
|
|
$ 68.9
|
$ 25.1
|
Acquired order backlog |
|
14.5
|
14.0
|
|
9.1
|
1.1
|
Covenant not to compete |
|
2.9
|
2.8
|
|
2.9
|
2.2
|
Other |
|
0.5
|
0.1
|
|
0.6
|
-
|
|
|
|
|
|
|
|
|
|
80.6
|
51.3
|
|
81.5
|
28.4
|
Unamortized trademarks |
|
738.9
|
-
|
|
714.4
|
-
|
|
|
|
|
|
|
|
|
|
$ 819.5
|
$ 51.3
|
|
$ 795.9
|
$ 28.4
|
|
|
|
|
|
|
|
During 2004, we acquired $14.5 million of existing
customer orders that have an amortization period of eight months and $2.3
million of license agreements that have a weighted-average amortization period
of 21.1 months. Amortization expense for intangible assets subject to
amortization was $32.6 million, $18.5 million and $9.8 million for the years
ended December 31, 2004, 2003 and 2002, respectively. Amortization expense for
intangible assets subject to amortization for each of the years in the five-year
period ending December 31, 2009 is estimated to be $6.0 million in 2005, $3.7
million in 2006, $2.4 million in 2007, $2.3 million in 2008 and $2.3 million in
2009.
The changes in the carrying amount of goodwill for the
years ended December 31, 2003 and 2004, by segment and in total, are as follows:
(In millions)
|
Wholesale
Better
Apparel
|
Wholesale
Moderate
Apparel
|
Wholesale
Footwear &
Accessories
|
Retail
|
Total
|
Balance, January 1,
2003 |
$ 356.7
|
$ 470.6
|
$ 602.7
|
$ 111.2
|
$
1,541.2
|
Net adjustments to purchase price of prior acquisitions |
-
|
1.4
|
-
|
-
|
1.4
|
Additional
consideration paid for Gloria Vanderbilt |
-
|
45.1
|
-
|
-
|
45.1
|
Additional consideration paid for l.e.i. |
-
|
2.2
|
-
|
-
|
2.2
|
Acquisition of Kasper |
47.6
|
-
|
-
|
9.4
|
57.0
|
|
|
|
|
|
|
Balance, December 31,
2003 |
404.3
|
519.3
|
602.7
|
120.6
|
1,646.9
|
Net adjustments to purchase price of prior acquisitions |
(4.2)
|
(0.1)
|
-
|
-
|
(4.3)
|
Acquisition of Maxwell |
-
|
-
|
206.1
|
-
|
206.1
|
Acquisition of Barneys |
-
|
-
|
-
|
276.3
|
276.3
|
|
|
|
|
|
|
Balance, December 31, 2004 |
$ 400.1
|
$ 519.2
|
$ 808.8
|
$ 396.9
|
$ 2,125.0
|
|
|
|
|
|
|
Goodwill was initially tested for impairment upon adoption
of SFAS No. 142 and is further tested for impairment during the fourth fiscal
quarter of each year. There have been no impairments to the carrying amount of
goodwill.
FINANCIAL INSTRUMENTS
As a result of our global operating and financing
activities, we are exposed to changes in interest rates and foreign currency
exchange rates which may adversely affect results of operations and financial
condition. In seeking to minimize the risks and/or costs associated with such
activities, we manage exposure to changes in interest rates and foreign currency
exchange rates through our regular operating and financing activities
57
and, when deemed appropriate, through the use of derivative financial
instruments. The instruments eligible for utilization include forward, option
and swap agreements. We do not use financial instruments for trading or other
speculative purposes.
At December 31, 2004 and 2003, the fair values of cash and
cash equivalents, receivables and accounts payable approximated carrying values
due to the short-term nature of these instruments. The estimated fair values of
other financial instruments subject to fair value disclosures, determined based
on broker quotes or quoted market prices or rates for the same or similar
instruments, and the related carrying amounts are as follows:
December 31,
|
2004
|
2003
|
(In millions) |
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
|
|
|
|
|
Long-term debt, including current portion |
$
1,106.6
|
$
1,119.8
|
$
966.3
|
$
1,018.9
|
Foreign currency exchange contracts, net
asset (liability) |
2.0
|
2.0
|
(0.5)
|
(0.5)
|
Financial instruments expose us to counterparty credit
risk for nonperformance and to market risk for changes in interest and currency
rates. We manage exposure to counterparty credit risk through specific minimum
credit standards, diversification of counterparties and procedures to monitor
the amount of credit exposure. Our financial instrument counterparties are
substantial investment or commercial banks with significant experience with such
instruments. We also have procedures to monitor the impact of market risk on the
fair value and costs of our financial instruments considering reasonably
possible changes in interest and currency rates.
We are exposed to market risk related to changes in
foreign currency exchange rates. We have assets and liabilities denominated in
certain foreign currencies and purchase products from foreign suppliers who
require payment in funds other than the U.S. Dollar. At December 31, 2004, we
had outstanding foreign exchange contracts to exchange Canadian Dollars for a
total of US$12.0 million at a weighted-average exchange rate of 1.2291 through
June 2005, US $24.7 million for Euros at a weighted-average exchange rate of
1.3683 through December 2005 and US $1.6 million for British Pounds at a
weighted-average exchange rate of 1.9138 through October 2005.
We recorded amortization of net gains resulting from the
termination of interest rate swaps and locks of $7.8 million, $7.6 million and
$3.5 million during 2004, 2003 and 2002, respectively, as a reduction of
interest expense. We reclassified $0.9 million and $1.9 million of net losses
from foreign currency exchange contracts to cost of sales in 2004 and 2003,
respectively. There has been no material ineffectiveness related to our foreign
currency exchange contracts as the instruments are designed to be highly
effective in offsetting losses and gains transactions being hedged. As of
December 31, 2004, the estimated net amount of existing gains and losses
reported in accumulated other comprehensive income that will be reclassified
into earnings in the next 12 months include amortization of $6.4 million of net
gains resulting from the termination of interest rate swaps as a reduction of
interest expense and no material reclassification of net gains from currency
exchange contracts to cost of sales.
CREDIT FACILITIES
At December 31, 2004, we had credit agreements with
several lending institutions to borrow an aggregate principal amount of up to
$1.5 billion under Senior Credit Facilities. These facilities, of which the
entire amount is available for letters of credit or cash borrowings, provide for
a $500.0 million three-year revolving credit facility (which was reduced from
$700.0 million in June 2004 and expires in June 2006) and a $1.0 billion
five-year revolving credit facility (which replaced a similar $700.0 million
five-year revolving credit facility in June 2004). At December 31, 2004, $69.2
million in cash borrowings was outstanding under the three-year revolving credit
facility and $367.8 million in outstanding letters of credit was outstanding
under our five-year revolving credit facility. Borrowings under the Senior
Credit Facilities may also be used for working
58
capital and other general corporate purposes, including permitted
acquisitions and stock repurchases. The Senior Credit Facilities are unsecured
and require us to satisfy both a coverage ratio of earnings before interest,
taxes, depreciation, amortization and rent to interest expense plus rents and a
net worth maintenance covenant, as well as other restrictions, including
(subject to exceptions) limitations on our ability to incur additional
indebtedness, prepay subordinated indebtedness, make acquisitions, enter into
mergers and pay dividends.
In addition to these committed facilities, we have
unsecured uncommitted lines of credit for the purpose of issuing letters of
credit and bankers' acceptances for Kasper and Maxwell. At December 31, 2004,
$27.9 million in letters of credit were outstanding under these lines of credit.
At December 31, 2004, we also had a C$15.0 million
unsecured line of credit in Canada, under which no amounts were outstanding.
The weighted-average interest rate for outstanding cash
borrowings under our credit facilities was 5.25% at December 31, 2004.
LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
|
2004
|
2003
|
(In millions) |
|
|
|
|
|
7.50% Senior Notes due 2004, net of unamortized discount of $0.1 |
$
- |
$ 174.9 |
8.375% Series B Senior Notes due 2005, net of unamortized discount of
$0.0 and $0.1 |
129.6 |
129.5 |
7.875% Senior Notes due 2006, net of unamortized discount of
$0.5 and $0.8 |
224.5 |
224.2 |
9% Senior Secured Notes due 2008, net of
unamortized discount of $0.5 |
3.3 |
- |
4.250% Senior Notes due
2009, net of unamortized discount of $0.2 |
249.8 |
- |
5.125% Senior Notes due 2014, net of
unamortized discount of $0.2 |
249.8 |
- |
3.50% Zero Coupon Convertible Senior
Notes due 2021, net of unamortized discount of $7.7 |
- |
437.7 |
6.125% Senior Notes due 2014, net of
unamortized discount of $0.4 |
249.6 |
- |
|
|
|
|
1,106.6
|
966.3
|
Less: current portion |
129.6
|
174.9
|
|
|
|
|
$ 977.0
|
$ 791.4
|
|
|
|
Long-term debt maturities for each of the next five years
are $129.6 million in 2005, $225.0 million in 2006, $3.8 million in 2008 and
$250.0 million in 2009. All of our notes contain certain covenants, including,
among others, restrictions on liens, sale-leaseback transactions and additional
secured debt, and pay interest semiannually. The weighted-average interest rate
of our long-term debt was 6.1% at December 31, 2004.
In November 2004, we issued $250.0 million of 4.250%
Senior Notes due 2009, $250.0 million of 5.125% Senior Notes due 2014 and $250.0
million of 6.125% Senior Notes due 2034. Net proceeds of the offering were
$743.5 million, which were used to fund the acquisition of Barneys, to redeem
Barneys' outstanding 9% Senior Secured Notes and to repay amounts then
outstanding under our Senior Credit Facilities.
On February 2, 2004, we redeemed all our outstanding Zero
Coupon Convertible Senior Notes due 2021 at a redemption price (inclusive of
issue price plus accrued original issue discount) of $554.41 per $1,000 of
principal amount at maturity for a total payment of $446.6 million. As a result
of this transaction, we recorded an SG&A expense of $8.4 million in 2004,
representing the writeoff of unamortized bond discounts and debt issuance costs.
On June 15, 2004, we redeemed at maturity all our 7.50% Senior Notes due 2004
for a total payment of $175.0 million.
59
ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income is comprised of the
following:
December 31,
|
2004
|
2003
|
(In millions) |
|
|
|
|
|
Foreign currency
translation adjustments |
$
5.6 |
$ 2.6 |
Minimum pension liability adjustments |
(10.3) |
(8.7) |
Unrealized gains on
hedge contracts |
5.5 |
9.9 |
|
|
|
|
$ 0.8
|
$ 3.8
|
|
|
|
DERIVATIVES
SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," subsequently amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities" (as amended, hereinafter referred to as "SFAS 133"),
establishes accounting and reporting standards for derivative instruments.
Specifically, SFAS 133 requires us to recognize all derivatives as either assets
or liabilities on the balance sheet and to measure those instruments at fair
value. Additionally, the fair value adjustments will affect either stockholders'
equity or net income, depending on whether the derivative instrument qualifies
as a hedge for accounting purposes and, if so, the nature of the hedging
activity.
We use foreign currency forward contracts for the specific
purpose of hedging the exposure to variability in forecasted cash flows
associated primarily with inventory purchases. These instruments are designated
as cash flow hedges as the principal terms of the forward exchange contracts are
the same as the underlying forecasted foreign currency cash flows. Therefore,
changes in the fair value of the forward contracts should be highly effective in
offsetting changes in the expected foreign currency cash flows, and accordingly,
changes in the fair value of forward exchange contracts are recorded in
accumulated other comprehensive income, net of related tax effects, with the
corresponding asset or liability recorded in the balance sheet. Amounts recorded
in accumulated other comprehensive income are reflected in current-period
earnings when the hedged transaction affects earnings.
The following summarizes, by major currency, the U.S.
Dollar equivalent amount of our foreign currency forward exchange contracts.
December 31,
|
|
2004
|
|
2003
|
(In millions)
|
|
Notional
Amount
|
Fair Value -
Asset/
(Liability)
|
|
Notional
Amount
|
Fair Value -
Asset/
(Liability)
|
|
|
|
|
|
|
|
Canadian Dollar - U.S. Dollar |
|
$ 12.0
|
$ (0.3)
|
|
$ 11.0
|
$ (0.5)
|
U.S. Dollar - Euro |
|
24.7
|
2.2
|
|
-
|
-
|
U.S. Dollar - British
Pound |
|
1.6
|
0.1
|
|
-
|
-
|
|
|
|
|
|
|
|
|
|
$ 38.3
|
$ 2.0
|
|
$ 11.0
|
$ (0.5)
|
|
|
|
|
|
|
|
During 2004, no material amounts were reclassified from
other comprehensive income to earnings and there was no material ineffectiveness
related to our cash flow hedges. If foreign currency exchange rates or interest
rates do not change from their December 31, 2004 amounts, we estimate that any
reclassifications from other comprehensive income to earnings within the next 12
months also will not be material. The actual amounts that will be reclassified
to earnings over the next 12 months could vary, however, as a result of changes
in market conditions.
In connection with the $250.0 million of 4.250% Senior
Notes due 2009 and $250.0 million of 5.125% Senior Notes due 2014 issued in
November 2004, we had entered into two interest rate lock agreements which were
60
terminated upon the issuance of the notes. These terminations generated
pre-tax gains of $0.2 million, which is being amortized as a reduction of
interest expense over the term of the related notes.
For the periods April 2002 through October 2002 and June
1999 through January 2001, we had employed an interest rate hedging strategy
utilizing swaps to effectively float a portion of our interest rate exposure on
our fixed rate financing arrangements. The termination of these interest rate
swaps generated pre-tax gains of $21.6 million and $8.3 million, respectively,
which is being amortized as a reduction of interest expense over the remaining
terms of the interest rate swap agreements.
Approximately $6.4 million of pre-tax income will be
reclassified into earnings within the next 12 months related to these terminated
agreements.
COMMON STOCK
The Board of Directors has authorized several programs to
repurchase our common stock from time to time in open market transactions
totaling $1.0 billion. As of December 31, 2004, 32.4 million shares had been
acquired at a cost of $858.6 million. There is no time limit for the utilization
of the amounts remaining under any uncompleted programs.
OBLIGATIONS UNDER CAPITAL LEASES
Obligations under capital leases consist of the following:
December 31,
|
2004
|
2003
|
(In millions) |
|
|
|
|
|
Warehouses, office facilities and equipment |
$ 44.0
|
$ 49.6
|
Less: current portion |
4.4
|
5.9
|
|
|
|
Obligations under capital leases - noncurrent |
$ 39.6
|
$ 43.7
|
|
|
|
We occupy warehouse and office facilities leased from the
City of Lawrenceburg, Tennessee. Two ten-year net leases run until July 2005 and
May 2006, respectively, and require minimum annual rent payments of $0.5 million
each plus accrued interest. In connection with these leases, we guaranteed $10.0
million of Industrial Development Bonds issued in order to construct the
facilities, $1.0 million of which remained unpaid as of December 31, 2004. We
obtain title to these facilities upon expiration of the leases. The financing
agreement with the issuing authority requires us to comply with the same
financial covenants required by our Senior Credit Facilities (see "Credit
Facilities").
We also lease warehouse and office facilities in Bristol,
Pennsylvania. Two 15-year net leases run until March and October 2013,
respectively, and require minimum annual rent payments of $1.3 million and $0.9
million, respectively.
In 2003, we entered into a sale-leaseback agreement for
our Virginia warehouse facility. This transaction resulted in a net gain of $7.5
million that has been deferred and is being amortized over the lease term, which
runs until April 2023 and requires minimum annual rent payments of $2.4 million.
The building has been capitalized at $25.6 million, which approximates the
present value of the minimum lease payments.
We also lease various equipment under two to six-year
leases at an aggregate annualized rental of $3.4 million. The equipment has been
capitalized at its fair market value of $10.5 million, which approximates the
present value of the minimum lease payments.
The following is a schedule by year of future minimum
lease payments under capital leases, together with the present value of the net
minimum lease payments as of December 31, 2004:
61
Year Ending December 31, |
|
(In millions) |
|
|
|
2005 |
$ 7.2
|
2006 |
5.4
|
2007 |
5.1
|
2008 |
5.2
|
2009 |
5.1
|
Later years |
41.1
|
|
|
Total minimum lease payments |
69.1
|
Less: amount representing interest |
25.1
|
|
|
Present value of net minimum lease payments |
$ 44.0
|
|
|
COMMITMENTS AND CONTINGENCIES
(a) CONTINGENT LIABILITIES. We have been named as a
defendant in various actions and proceedings, including actions brought by
certain employees whose employment has been terminated arising from our ordinary
business activities. Although the amount of any liability that could arise with
respect to these actions cannot be accurately predicted, in our opinion, any
such liability will not have a material adverse effect on our financial position
or results of operations.
(b) ROYALTIES. Under an exclusive license to manufacture
certain items under the Polo Jeans Company trademark pursuant to license
and design service agreements with Polo, we are obligated to pay Polo a
percentage of net sales of Polo Jeans Company products. Minimum payments
under these agreements amount to $5.6 million for 2005 and $7.2 million per year
during the period 2006 through 2010. We are also obligated to spend on
advertising a percentage of net sales of these licensed products. The agreements
expire on December 31, 2010 and may be renewed by us in five-year increments for
up to 20 additional years provided that we achieve certain minimum sales levels.
Renewal of the Polo Jeans Company license after 2010 requires a one-time
payment by us of $25.0 million or, at our option, a transfer of a 20% interest
in our Polo Jeans Company business to Polo (with no fees required for
subsequent renewals). Polo also has an option, exercisable on or before June 1,
2010, to purchase our Polo Jeans Company business at the end of 2010 for
a purchase price, payable in cash, equal to 80% of the then fair market value of
the business as a going concern, assuming continuation of the Polo Jeans
License through 2030.
We also have an exclusive license to produce and sell
costume jewelry in the United States and Canada under the Tommy Hilfiger
trademark, which expires on March 31, 2008. The agreement provides for payment
by us of a percentage of net sales against guaranteed minimum royalty and
advertising payments as set forth in the agreement. Minimum payments under this
agreement amount to $1.4 million in 2005, $1.5 million in 2006, $1.7 million in
2007 and $0.4 million in 2008. We also have an exclusive license to produce,
market and distribute costume jewelry in the United States, Canada, Mexico and
Japan under the Givenchy trademark, which expires on December 31, 2005.
The agreement provides for the payment by us of a percentage of net sales
against guaranteed minimum royalty and advertising payments as set forth in the
agreement. Minimum payments under this agreement amount to $0.5 million in 2005.
We also have an exclusive license to produce and sell
women's footwear under the Dockers Women trademark in the United States
(including its territories and possessions) pursuant to an agreement with Levi
Strauss & Co. which expires in December 2005. The agreement provides for
payment by us of a percentage of net sales against guaranteed minimum royalty
and advertising payments as set forth in the agreement. Minimum payments under
this agreement amount to $0.9 million in 2005.
We also have an exclusive license to design, develop and
market women's and children's shoes under the J. G. Hook and Hook
Sport brand names pursuant to an agreement with J. G. Hook, Inc. which
expires in December 2006. This agreement provides for the payment by us of a
percentage of net sales against guaranteed minimum royalty payments as set forth in the agreement. Minimum
payments under this agreement amount to $0.1 million in 2005 and $0.2 million in
2006.
62
(c) LEASES. Total rent expense charged to operations for
the years ended December 31, 2004, 2003 and 2002 was as follows.
Year Ended December 31,
|
2004
|
2003
|
2002
|
(In millions) |
|
|
|
|
|
|
|
Minimum rent |
$ 122.7
|
$ 107.6
|
$ 100.8
|
Contingent rent |
1.9
|
1.1
|
1.1
|
Less: sublease rent |
(6.8)
|
(6.4)
|
(5.6)
|
|
|
|
|
|
$ 117.8
|
$ 102.3
|
$ 96.3
|
|
|
|
|
The following is a schedule of future minimum rental payments required
under operating leases:
Year Ending December 31, |
|
(In millions) |
|
|
|
2005 |
$ 139.3
|
2006 |
125.1
|
2007 |
108.3
|
2008 |
90.1
|
2009 |
78.0
|
Later years |
369.8
|
|
|
|
$ 910.6
|
|
|
Certain of the leases provide for renewal options and the
payment of real estate taxes and other occupancy costs. Future rental
commitments for leases have not been reduced by minimum non-cancelable sublease
rentals aggregating $40.8 million.
INCOME TAXES
The following summarizes the provision for income taxes:
Year Ended December 31,
|
2004
|
2003
|
2002
|
(In millions) |
|
|
|
|
|
|
|
Current: |
|
|
|
Federal |
$ 103.0
|
$ 131.1
|
$ 173.8
|
State and local |
16.5
|
15.0
|
19.9
|
Foreign |
8.8
|
5.2
|
5.4
|
|
|
|
|
|
128.3
|
151.3
|
199.1
|
|
|
|
|
Deferred:
|
|
|
|
Federal
|
48.6
|
43.7
|
3.7
|
State and local
|
4.3
|
3.8
|
(2.1)
|
Foreign
|
(0.1)
|
(0.4)
|
0.5
|
|
|
|
|
|
52.8
|
47.1
|
2.1
|
|
|
|
|
Provision for income taxes |
$ 181.1
|
$ 198.4
|
$ 201.2
|
|
|
|
|
63
The total income tax provision was recorded
as follows:
Year Ended December 31,
|
2004
|
2003
|
2002
|
(In millions) |
|
|
|
|
|
|
|
Included in income before cumulative effect of change in accounting principle |
$ 181.1
|
$ 198.4
|
$ 201.2
|
Included in cumulative effect of change in accounting for intangible assets |
-
|
-
|
(8.4)
|
|
|
|
|
|
$ 181.1
|
$ 198.4
|
$ 192.8
|
|
|
|
|
The domestic and foreign components of income before
provision for income taxes are as follows:
Year Ended December 31,
|
2004
|
2003
|
2002
|
(In millions) |
|
|
|
|
|
|
|
United States |
$ 457.1
|
$ 517.3
|
$ 526.4
|
Foreign |
25.8
|
9.7
|
7.1
|
|
|
|
|
Income before
provision for income taxes |
$ 482.9
|
$ 527.0
|
$ 533.5
|
|
|
|
|
The provision for income taxes on adjusted historical
income differs from the amounts computed by applying the applicable Federal
statutory rates due to the following:
Year Ended December 31,
|
2004
|
2003
|
2002
|
(In millions) |
|
|
|
|
|
|
|
Provision for Federal income taxes at the statutory rate |
$ 169.0
|
$ 184.5
|
$ 186.7
|
State and local income taxes, net of federal benefit |
13.6
|
11.6
|
11.7
|
Reversal of prior years federal income tax
audit accruals |
-
|
(8.7)
|
-
|
Valuation allowance |
-
|
8.5
|
-
|
Other items, net |
(1.5)
|
2.5
|
2.8
|
|
|
|
|
Provision for income taxes |
$ 181.1
|
$ 198.4
|
$ 201.2
|
|
|
|
|
We have not provided for U.S. Federal and foreign
withholding taxes on $38.4 million of foreign subsidiaries' undistributed
earnings as of December 31, 2004. Such earnings are intended to be reinvested
indefinitely.
The following is a summary of the significant components of our deferred tax
assets and liabilities:
December 31,
|
2004
|
2003
|
(In millions) |
|
|
|
|
|
Deferred tax assets (liabilities): |
|
|
Nondeductible accruals and allowances |
$ 89.4
|
$ 82.4
|
Depreciation |
5.8
|
9.5
|
Intangible asset valuation and amortization |
(208.5)
|
(176.6)
|
Loss and credit carryforwards |
36.0
|
29.9
|
Amortization of stock-based compensation |
9.5
|
6.1
|
Other (net) |
9.5
|
7.7
|
Valuation allowance |
(8.5)
|
(8.5)
|
|
|
|
Net deferred tax
liability |
$ (66.8)
|
$ (49.5)
|
|
|
|
Included in:
|
|
|
Current assets
|
$ 68.2
|
$ 80.6
|
Noncurrent liabilities
|
(135.0)
|
(130.1)
|
|
|
|
Net deferred tax liability |
$ (66.8)
|
$ (49.5)
|
|
|
|
64
As of December 31, 2004, we had federal and state net
operating loss carryforwards of $35.7 million and $214.7 million, respectively,
which expire through 2023. We also had capital loss carryforwards of $22.6
million, which expire in 2006, and state tax credit carryforwards of $4.2
million, which expire through 2020.
During the fourth fiscal quarter of 2003, the Internal
Revenue Service completed its audits of our returns through 2000. As a result,
we reversed $8.7 million of tax accruals established in years prior to 2001.
We have determined that the $22.6 million of capital loss
carryforwards expiring in 2006 may not be utilized; therefore, we established a
valuation allowance of $8.5 million in 2003.
EARNINGS PER SHARE
Year Ended December 31,
|
2004
|
2003
|
2002
|
(In millions except per share amounts) |
|
|
|
|
|
|
|
Basic |
|
|
|
Net income |
$ 301.8
|
$ 328.6
|
$ 318.5
|
Weighted average common shares outstanding |
123.6
|
127.3
|
128.2
|
|
|
|
|
Basic earnings
per share |
$ 2.44
|
$ 2.58
|
$ 2.48
|
|
|
|
|
Diluted |
|
|
|
Net income |
$ 301.8
|
$ 328.6
|
$ 318.5
|
Add: interest expense associated with convertible
notes, net of tax benefit
|
0.8
|
9.5
|
9.1
|
|
|
|
|
Income available to common shareholders |
$ 302.6
|
$ 338.1
|
$ 327.6
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
123.6 |
127.3 |
128.2 |
Effect of dilutive securities:
|
|
|
|
Employee stock options |
2.2
|
1.3
|
2.9
|
Assumed conversion of
convertible notes
|
0.7
|
7.9
|
7.9
|
|
|
|
|
Weighted average common shares and
share equivalents outstanding
|
126.5
|
136.5
|
139.0
|
|
|
|
|
Diluted
earnings per share |
$ 2.39
|
$ 2.48
|
$ 2.36
|
|
|
|
|
SHORT-TERM BOND TRANSACTIONS
During 2001 and 2002, we entered into two transactions
relating to the short sale of $487.4 million of U.S. Treasury securities. The
transactions were intended to address interest rate exposure and generate
capital gains that could be used to offset previously incurred capital losses.
As a result of these transactions, we recorded short-term capital gains of $14.8
million, interest income of $1.8 million and interest expense and fees of $19.3
million during 2002 and short-term capital gains of $6.6 million, interest
income of $0.6 million and interest expense and fees of $7.9 million during
2003. The net effects of $2.7 million and $0.7 million, respectively, are
included in the statement of operations as interest expense. The first
transaction, which represented $157.9 million of the securities, closed in
August 2002. The second transaction, which represented $190.5 million of the
securities, closed in May 2003. There are no present intentions to enter into
any further transactions.
65
STATEMENT OF CASH FLOWS
Year Ended December 31,
|
2004
|
2003
|
2002
|
(In millions) |
|
|
|
|
|
|
|
|
Detail of acquisitions: |
|
|
|
|
Fair value of assets acquired |
$ 985.7
|
$ 382.0
|
$ 621.3
|
|
Liabilities assumed |
(279.3)
|
(103.9)
|
(208.7)
|
|
Common stock and options issued |
-
|
-
|
(56.3)
|
|
|
|
|
|
|
Cash paid for acquisitions |
706.4
|
278.1
|
356.3
|
|
Cash acquired in acquisitions |
(133.1)
|
(23.5)
|
(21.6)
|
|
|
|
|
|
|
Net cash paid for acquisitions |
$ 573.3
|
$ 254.6
|
$ 334.7
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
Interest
|
$ 50.3 |
$ 47.0 |
$ 48.7 |
|
Income taxes |
98.5 |
163.2 |
158.6 |
Supplemental disclosures of non-cash investing and financing activities:
|
|
|
|
Equipment acquired through capital lease financing
|
0.3 |
29.3 |
5.4 |
|
Tax benefits related to stock options
|
5.0 |
2.9 |
12.9 |
|
Restricted stock issued to employees |
4.5 |
18.8 |
10.8 |
STOCK OPTIONS AND RESTRICTED STOCK
Under two stock option plans, we may grant stock options
and other awards from time to time to key employees, officers, directors,
advisors and independent consultants to us or to any of our subsidiaries. In
general, options become exercisable over either a three-year or five-year period
from the grant date and expire 10 years after the date of grant for options
granted on or before May 28, 2003 and seven years after the date of grant
thereafter. In certain cases for non-employee directors, options become
exercisable six months after the grant date. Shares available for future option
grants at December 31, 2004 totaled 3.6 million. Total compensation cost
recorded for stock-based employee compensation awards (including awards to
non-employee directors) was $16.5 million, $12.2 million and $12.9 million (of
which $11.3 million was related to executive compensation obligations) for 2004,
2003 and 2002, respectively.
The following table summarizes information about stock
option transactions (options in millions):
|
2004
|
|
2003
|
|
2002
|
|
Options
|
Weighted
Average
Exercise
Price
|
|
Options
|
Weighted
Average
Exercise
Price
|
|
Options
|
Weighted
Average
Exercise
Price
|
Outstanding, January 1 |
12.6 |
$29.64 |
|
14.2 |
$29.28 |
|
17.9 |
$27.26 |
Granted |
0.8
|
$34.15
|
|
0.3
|
$30.28
|
|
2.0
|
$36.28
|
Exercised |
(1.4)
|
$25.54
|
|
(0.9)
|
$22.29
|
|
(4.8) |
$24.54 |
Cancelled/forfeited |
(0.5) |
$35.26 |
|
(1.0) |
$31.35 |
|
(0.9) |
$30.56 |
|
|
|
|
|
|
|
|
|
Outstanding, December 31 |
11.5
|
$30.19
|
|
12.6
|
$29.64
|
|
14.2
|
$29.28
|
|
|
|
|
|
|
|
|
|
66
The following table summarizes information about stock
options outstanding at December 31, 2004 (options in millions):
|
|
Outstanding
|
|
Exercisable
|
Range of
Exercise Prices
|
|
Number
of
Options
|
Weighted
Average
Remaining
Years of
Contractual
Life
|
Weighted
Average
Exercise
Price
|
|
Number
of
Options
|
Weighted
Average
Exercise
Price
|
$0 to $10 |
|
0.1
|
4.3
|
$3.68
|
|
0.1
|
$3.68
|
$10 to $20 |
|
0.8
|
3.0
|
$14.86
|
|
0.8
|
$14.86
|
$20 to $25 |
|
1.5
|
4.7
|
$22.99
|
|
1.3
|
$22.98
|
$25 to $30 |
|
2.4
|
5.9
|
$28.67
|
|
2.1
|
$28.61
|
$30 to $35 |
|
3.9
|
6.4
|
$32.14
|
|
2.3
|
$31.52
|
$35 to $40 |
|
2.2
|
6.6
|
$36.98
|
|
1.6
|
$37.10
|
$40 to $70 |
|
0.6
|
5.9
|
$42.55
|
|
0.5
|
$42.86
|
|
|
|
|
|
|
|
|
In total |
|
11.5
|
5.8
|
$30.19
|
|
8.7
|
$29.31
|
|
|
|
|
|
|
|
|
The following table summarizes the
weighted average fair value of options granted and the related assumptions used
in the Black-Scholes option pricing model.
Year Ended December 31,
|
2004
|
2003
|
2002
|
Weighted-average fair value of options at grant date:
|
|
|
|
Exercise price less than market price
|
$32.93 |
$34.38 |
$32.71 |
Exercise price equal to market price
|
$10.77 |
$12.11 |
$14.72 |
|
|
|
|
Assumptions:
|
|
|
|
Dividends yield
|
1.00% |
0.77% |
- |
Expected volatility
|
40.9% |
47.9% |
50.0% |
Risk-free interest rate
|
2.87% |
2.55% |
3.98% |
Expected life (years)
|
4.0 |
3.8 |
3.5 |
During 2004, 126,250 shares of restricted common stock
were issued to 91 employees under the 1999 Stock Incentive Plan. The
restrictions generally lapse on one-third of the number of restricted shares on
each of the first three anniversary dates of issue. The value of this stock
based on quoted market values was $4.5 million, which we are amortizing over the
period in which the restrictions lapse. The restrictions do not affect voting
and dividend rights.
During 2003, 626,500 shares of restricted common stock
were issued to 31 employees and six executive officers under the 1999 Stock
Incentive Plan. The restrictions generally lapse on one-third of the number of
restricted shares on each of the first three anniversary dates of issue or, in
the case of our Chief Executive Officer and our Chief Operating and Financial
Officer, one-third of the number of restricted shares on the first day
immediately following the end of the trading restrictions imposed by us on the
grantee with respect to the public announcement of fourth quarter financial
results for each of 2003, 2004 and 2005, provided we meet certain target levels
of free cash flow (cash flow from operations less capital expenditures) for the
year immediately preceding the lapse date. The value of this stock based on
quoted market values was $18.8 million, which we are amortizing over the period
in which the restrictions lapse. The restrictions do not affect voting and
dividend rights.
During 2002, 293,000 shares of restricted common stock
were issued to 75 employees and two executive officers under the 1999 Stock
Incentive Plan. The restrictions lapse on one-third of the number of restricted
shares on each of the third, fourth and fifth anniversary dates of issue or, in
the case of the executive officers,
67
one-third of the number of restricted shares on the first day immediately
following the end of the trading restrictions imposed by us on the grantee with
respect to the public announcement of fourth quarter financial results for each
of 2003, 2004 and 2005, provided we meet certain target levels of free cash flow
for the year immediately preceding the lapse date. The value of this stock based
on quoted market values was $10.8 million, which we are amortizing over the
period in which the restrictions lapse. The restrictions do not affect voting
and dividend rights.
EMPLOYEE BENEFIT PLANS
Defined Contribution Plans
We maintain the Jones Apparel Group, Inc. Retirement Plan
(the "Jones Plan") under Section 401(k) of the Internal Revenue Code
(the "Code"). Employees not covered by a collective bargaining
agreement and meeting certain other requirements are eligible to participate in
the Jones Plan. Under the Jones Plan, participants may elect to have up to 15%
of their salary (subject to limitations imposed by the Code) deferred and
deposited with a qualified trustee, who in turn invests the money in a variety
of investment vehicles as selected by each participant. All employee
contributions into the Jones Plan are 100% vested.
We have elected to make the Jones Plan a "Safe Harbor
Plan" under Section 401(k)(12) of the Code. As a result of this election,
we make a fully-vested safe harbor matching contribution for all eligible
participants amounting to 100% of the first 3% of the participant's salary
deferred and 50% of the next 2% of salary deferred, subject to maximums set by
the Department of the Treasury. We may, at our sole discretion, contribute
additional amounts to all employees on a pro rata basis.
In connection with the acquisitions of Nine West Group,
Victoria, McNaughton, Gloria Vanderbilt, Kasper, Maxwell and Barneys, we assumed
additional plans in which certain employees participate.
Nine West Group, Victoria, Gloria Vanderbilt and Kasper
maintained defined contribution plans and McNaughton maintained two such plans
under Section 401(k) of the Code. Certain employees not covered by a collective
bargaining agreement and meeting certain other requirements were eligible to
participate in these plans. Participants could elect to have a portion
(typically up to 15%) of their salary deferred and deposited with a qualified
trustee, who in turn invested the money in a variety of investment vehicles as
selected by each participant. All employee contributions into these plans were
100% vested. We matched a portion of the participant's contributions subject
to maximums set by the Department of the Treasury. The Nine West Group,
Victoria, Gloria Vanderbilt, Kasper and two McNaughton plans were merged into
the Jones Plan on December 16, 2002, April 2, 2002, January 26, 2004, September
1, 2004, November 22, 2002, and December 20, 2002, respectively.
Maxwell maintains a defined contribution plan under
Section 401(k) of the Code. Maxwell employees meeting certain requirements are
eligible to participate in the plan. Under the plan, participants can elect to
have up to 100% of their salary (subject to limitations imposed by the Code)
deferred and deposited with a qualified trustee, who in turn invests the money
in a variety of investment vehicles as selected by each participant. The plan
requires Maxwell to match 100% of employee contributions up to 2% of eligible
employee compensation. The plan also allows for additional discretionary company
contributions.
Barneys maintains the Barney's Inc. Retirement Savings
Plan under Section 401(a) of the Code. Barneys employees meeting certain
requirements are eligible to participate in the plan. Under the plan,
participants can elect to have up to 13% of their salary (subject to limitations
imposed by the Code) deferred and deposited with a qualified trustee, who in
turn invests the money in a variety of investment vehicles as selected by each
participant. The plan requires Barneys to match 50% of employee contributions up
to 6% of a participant's eligible compensation and to make a non-discretionary
contribution of 1.5% of a participant's eligible compensation. In addition,
Barneys may make a discretionary contribution of up to 4% of a participant's
eligible compensation.
68
Pursuant to certain collective bargaining agreements,
Barneys is also required to make periodic pension contributions to
union-sponsored multi-employer plans which provide for defined benefits for
certain union members employed by Barneys.
We contributed approximately $8.1 million, $6.4 million
and $6.9 million to our defined contribution plans during 2004, 2003 and 2002,
respectively.
Defined Benefit Plans
We maintain several defined benefit plans, including the
Pension Plan for Associates of Nine West Group Inc. (the "Cash Balance
Plan") and The Napier Company Retirement Plan for certain associates of
Victoria (the "Napier Plan"). The Cash Balance Plan expresses
retirement benefits as an account balance which increases each year through
interest credits. All benefits under the Napier Plan are frozen at the amounts
earned by the participants as of December 31, 1995. Our funding policy is to
make the minimum annual contributions required by applicable regulations. We
plan to contribute $2.4 million to our defined benefit plans in 2005. The
measurement date for all plans is December 31.
Obligations and Funded Status
Year Ended December 31,
|
2004
|
2003
|
(In millions) |
|
|
|
|
|
Change in
benefit obligation |
|
|
Benefit
obligation, beginning of year |
$ 39.1
|
$ 36.6
|
Service cost |
0.1
|
0.1
|
Interest
cost |
2.3
|
2.4
|
Actuarial loss |
2.9
|
3.7
|
Effects of
changes in foreign currency exchange rates |
0.1
|
0.1
|
Benefits paid |
(4.1)
|
(3.8)
|
|
|
|
Benefit obligation, end of year |
40.4
|
39.1
|
|
|
|
Change in
plan assets |
|
|
Fair value
of plan assets, beginning of year |
23.2
|
23.6
|
Actual return on plan assets |
1.2
|
2.5
|
Employer
contribution |
5.2
|
0.8
|
Effects of changes in foreign currency exchange rates |
0.1
|
0.1
|
Benefits
paid |
(4.1)
|
(3.8)
|
|
|
|
Fair value
of plan assets, end of year |
25.6
|
23.2
|
|
|
|
Funded status |
(14.8)
|
(15.9)
|
Unrecognized
net actuarial loss |
16.4
|
13.9
|
|
|
|
Net amount
recognized |
$
1.6
|
$
(2.0)
|
|
|
|
Amounts Recognized on the Balance Sheet
December 31,
|
2004
|
2003
|
(In millions) |
|
|
|
|
|
Accrued benefit cost |
$ (14.8)
|
$ (15.9)
|
Accumulated other comprehensive income |
16.4
|
13.9
|
|
|
|
Net amount recognized |
$ 1.6
|
$ (2.0)
|
|
|
|
69
Information for Pension Plans with an Accumulated Benefit Obligation in
Excess of Plan Assets
December 31,
|
2004
|
2003
|
(In millions) |
|
|
|
|
|
Projected benefit
obligation |
$ 40.4
|
$
39.1
|
Accumulated benefit obligation |
40.4
|
39.1
|
Fair value of plan
assets |
25.6
|
23.2
|
Increase in minimum liability included in
other comprehensive income |
2.6
|
3.1
|
Components of Net Periodic Benefit Cost
Year Ended December 31,
|
2004
|
2003
|
(In millions) |
|
|
|
|
|
Service cost |
$
0.1
|
$
0.1
|
Interest cost |
2.3
|
2.4
|
Expected
return on plan assets |
(1.8)
|
(1.8)
|
Amortization
of net loss |
0.9
|
0.8
|
|
|
|
Net periodic
benefit cost |
$
1.5
|
$
1.5
|
|
|
|
Assumptions
|
2004
|
2003
|
Weighted-average
assumptions used to determine: |
|
|
Benefit
obligations at December 31 |
|
|
Discount rate |
5.8%
|
6.1%
|
Expected long-term return on plan assets |
7.9%
|
7.9%
|
Net periodic benefit cost for year ended December 31 |
|
|
Discount rate |
6.1%
|
6.5%
|
Expected long-term return on plan assets |
7.9%
|
7.9%
|
Estimated Future Benefit Payments
Year Ending December 31, |
|
(In millions) |
|
|
|
2005 |
$ 1.3
|
2006 |
1.4
|
2007 |
1.4
|
2008 |
1.9
|
2009 |
1.6
|
2010 through 2014 |
12.7
|
|
|
|
$ 20.3
|
|
|
Plan Assets
The weighted-average asset allocations at December 31,
2004 and 2003 by asset category are as follows:
December 31,
|
2004
|
2003
|
Equity
securities |
47%
|
53%
|
Debt securities |
34%
|
37%
|
Other |
19%
|
10%
|
|
|
|
Total |
100%
|
100%
|
|
|
|
Our plans are designed to diversify investments across
types of investments and investment managers. Permitted investment vehicles
include investment-grade fixed income securities, domestic and foreign equity
70
securities, mutual funds, guaranteed insurance contracts and real estate,
while speculative and derivative investment vehicles are generally prohibited.
The investment managers have full discretion to manage their portion of the
investments subject to the objectives and policies of the respective plans. The
performance of the investment managers is reviewed on a regular basis. The
primary objectives are to achieve a rate of return sufficient to meet current
and future plan cash requirements and to emphasize long-term growth of principal
while avoiding excessive risk and maintaining fund liquidity. At December 31,
2004, the weighted-average target allocation percentages for fund investments
were 34% fixed income securities, 51% U. S. Equity securities, and 15%
international securities.
To determine the overall expected long-term
rate-of-return-on-assets assumption, we add an expected inflation rate to the
expected long-term real returns of our various asset classes, taking into
account expected volatility and correlation between the returns of the asset
classes as follows: for equities and real estate, a historical average
arithmetic real return; for government fixed-income securities, current yields
on inflation-indexed bonds; and for corporate fixed-income securities, the yield
on government fixed-income securities plus a blend of current and historical
credit spreads.
JOINT VENTURES
On July 1, 2002, we entered into two joint ventures with
HCL Technologies Limited ("HCL") to provide us with computer
consulting, programming and associated support services. HCL is a global
technology and software services company offering a suite of services targeted
at technology vendors, software product companies and organizations. We received
a 49% ownership interest in each joint venture, which operate under the names
HCL Jones Technologies, LLC and HCL Jones Technologies (Bermuda), Ltd., for a
cash contribution of $0.3 million and the transfer of certain software and
employees. HCL received a 51% ownership interest in each company for an initial
cash contribution of $1.0 million. HCL has the option to acquire our remaining
ownership interest at the end of five years through the issuance of HCL equity
shares. As of December 31, 2004, we have committed to purchase $10.5 million in
services from these joint venture companies through June 30, 2007.
We also have a 50% ownership interest in a joint venture
with Sutton to operate retail locations in Australia. We have unconditionally
guaranteed up to $7.0 million of borrowings under the joint venture's
uncommitted credit facility and up to $0.4 million of presettlement risk
associated with foreign exchange transactions. Performance under the guarantees
is required if the joint venture fails to make a required payment under these
facilities when due. Sutton is required to reimburse us for 50% of any payments
made under these guarantees. At December 31, 2004, the outstanding balance
subject to these guarantees was approximately $0.8 million.
The results of our joint ventures are reported under the
equity method of accounting. The amount of consolidated retained earnings
represented by the undistributed earnings of our joint ventures as of December
31, 2004 was $7.9 million.
BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
We identify operating segments based on, among other
things, the way our management organizes the components of our business for
purposes of allocating resources and assessing performance. Our operations are
comprised of four reportable segments: wholesale better apparel, wholesale
moderate apparel, wholesale footwear and accessories, and retail. Segment
revenues are generated from the sale of apparel, footwear and accessories
through wholesale channels and our own retail locations. The wholesale segments
include wholesale operations with third party department and other retail
stores, the retail segment includes operations by our own stores, and income and
expenses related to trademarks, licenses and general corporate functions are
reported under "licensing, other and eliminations." We define segment
profit as operating income before net interest expense, equity in earnings of
unconsolidated affiliates and income taxes. Summarized below are our revenues,
income and total assets by reportable segments.
71
(In millions)
|
Wholesale
Better
Apparel
|
Wholesale
Moderate
Apparel
|
Wholesale
Footwear &
Accessories
|
Retail
|
Licensing,
Other &
Eliminations
|
Consolidated
|
For the year ended December 31, 2004 |
|
|
|
|
|
|
Revenues from external customers |
$ 1,493.2
|
$ 1,315.3
|
$ 1,002.4
|
$ 780.3
|
$ 58.5
|
$ 4,649.7
|
|
Intersegment revenues |
146.9
|
13.0
|
58.3
|
-
|
(218.2)
|
-
|
|
|
|
|
|
|
|
|
|
Total revenues |
1,640.1
|
1,328.3
|
1,060.7
|
780.3
|
(159.7)
|
4,649.7
|
|
|
|
|
|
|
|
|
|
Segment income |
$
160.1
|
$
142.6
|
$
164.2
|
$
78.4
|
$ (16.9)
|
528.4 |
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
|
|
|
(49.3)
|
|
Equity in earnings of unconsolidated affiliates |
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
|
$ 482.9
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
$ 24.1 |
$ 18.0 |
$ 22.7 |
$ 11.8 |
$ 31.1 |
$ 107.7 |
For the year ended December 31, 2003 |
|
|
|
|
|
|
Revenues from external customers |
$ 1,475.0
|
$ 1,310.2
|
$ 868.3
|
$ 685.6
|
$ 36.2
|
$ 4,375.3
|
|
Intersegment revenues |
88.7
|
12.3
|
62.6
|
-
|
(163.6)
|
-
|
|
|
|
|
|
|
|
|
|
Total revenues |
1,563.7
|
1,322.5
|
930.9
|
685.6
|
(127.4)
|
4,375.3
|
|
|
|
|
|
|
|
|
|
Segment income |
$ 212.8
|
$ 157.1
|
$ 157.9
|
$ 77.0
|
$ (25.0)
|
579.8 |
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
|
|
|
(55.3)
|
|
Equity in earnings of unconsolidated affiliates |
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
|
$ 527.0
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
$ 19.6 |
$ 18.6 |
$ 8.7 |
$ 11.0 |
$ 26.4 |
$ 84.3 |
For the year ended December 31, 2002 |
|
|
|
|
|
|
Revenues from external customers |
$ 1,636.4
|
$ 1,093.5
|
$ 882.3
|
$ 700.0
|
$ 28.7
|
$ 4,340.9
|
|
Intersegment revenues |
93.8
|
11.3
|
74.1
|
-
|
(179.2)
|
-
|
|
|
|
|
|
|
|
|
|
Total revenues |
1,730.2
|
1,104.8
|
956.4
|
700.0
|
(150.5)
|
4,340.9
|
|
|
|
|
|
|
|
|
|
Segment income |
$ 343.5
|
$ 133.5
|
$ 124.3
|
$ 69.9
|
$ (80.6)
|
590.6 |
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
|
|
|
(58.1)
|
|
Equity in earnings of unconsolidated affiliates |
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
|
$ 533.5
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
$ 21.7 |
$ 10.9 |
$ 8.6 |
$ 11.2 |
$ 21.7 |
$ 74.1 |
Total assets |
|
|
|
|
|
|
|
December 31, 2004 |
$ 1,891.0 |
$ 1,071.4 |
$ 1,391.1 |
$ 744.7 |
$ (547.4) |
$ 4,550.8 |
|
December 31,
2003 |
1,889.7 |
1,207.4 |
1,081.2 |
383.9 |
(374.5) |
4,187.7 |
|
December 31, 2002 |
1,597.3 |
895.0 |
1,043.5 |
277.0 |
39.8 |
3,852.6 |
Revenues from external customers and long-lived assets
excluding deferred taxes related to operations in the United States and foreign
countries are as follows:
On
or for the Year Ended December 31,
|
2004
|
2003
|
2002
|
(In millions) |
|
|
|
|
|
|
|
Revenues from external customers: |
|
|
|
United States |
$ 4,448.8
|
$ 4,249.1
|
$ 4,158.6
|
Foreign countries |
200.9
|
126.2
|
182.3
|
|
|
|
|
|
$ 4,649.7
|
$ 4,375.3
|
$ 4,340.9
|
|
|
|
|
Long-lived assets: |
|
|
|
United States |
$ 3,217.6
|
$ 2,697.3
|
$ 2,493.6
|
Foreign countries |
37.0
|
34.5
|
40.8
|
|
|
|
|
|
$ 3,254.6
|
$ 2,731.8
|
$ 2,534.4
|
|
|
|
|
SUPPLEMENTAL PRO FORMA CONDENSED FINANCIAL INFORMATION
Certain of our subsidiaries function as co-issuers,
obligors and co-obligors (fully and unconditionally guaranteed on a joint and
several basis) of the outstanding debt of Jones Apparel Group, Inc.
("Jones"), including Jones Apparel Group USA, Inc. ("Jones
USA"), Jones Apparel Group Holdings, Inc. ("Jones Holdings"),
Nine West and Jones Retail Corporation ("Jones Retail")(collectively,
including Jones, the "Issuers").
72
Jones and Jones Holdings function as either co-issuers or
co-obligors with respect to the outstanding debt securities of Jones USA and the
outstanding debt securities of Nine West. In addition, Nine West and Jones
Retail function as either a co-issuer or co-obligor with respect to all of Jones
USA's outstanding debt securities, and Jones USA functions as a co-obligor
with respect to the outstanding debt securities of Nine West as to which Jones
and Jones Holdings function as co-obligors.
The following condensed consolidating balance sheets,
statements of income and statements of cash flows for the Issuers and our other
subsidiaries have been prepared using the equity method of accounting in
accordance with the requirements for presentation of such information. Separate
financial statements and other disclosures concerning Jones are not presented as
Jones has no independent operations or assets. There are no contractual
restrictions on distributions from Jones USA, Jones Holdings, Nine West or Jones
Retail to Jones. On January 1, 2003, the retail operations of Nine West Group
were transferred to Jones Retail and the remaining Nine West Group wholesale
assets and liabilities were transferred to Nine West. As a result, the
statements of income and statements of cash flows for 2002 have been restated
for comparison purposes.
Condensed Consolidating Balance Sheets
(In millions)
December 31, 2004 December 31, 2003
---------------------------------------- ----------------------------------------
Elim- Cons- Elim- Cons-
Issuers Others inations olidated Issuers Others inations olidated
---------------------------------------- ----------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12.3 $ 32.7 $ - $ 45.0 $302.0 $ 48.0 $ - $350.0
Accounts receivable - net 174.6 273.7 - 448.3 173.2 212.6 - 385.8
Inventories 294.3 373.2 (3.3) 664.2 262.1 327.3 1.2 590.6
Prepaid and refundable income taxes 1.5 24.9 (26.4) - 5.5 8.5 (14.0) -
Deferred taxes 23.5 46.0 (1.3) 68.2 27.7 53.8 (0.9) 80.6
Prepaid expenses and other
current assets 37.9 32.6 - 70.5 28.3 20.6 - 48.9
---------------------------------------- ----------------------------------------
TOTAL CURRENT ASSETS 544.1 783.1 (31.0) 1,296.2 798.8 670.8 (13.7) 1,455.9
Property, plant and equipment - net 125.3 178.2 0.1 303.6 128.5 139.9 - 268.4
Due from affiliates - 511.3 (511.3) - 275.1 399.6 (674.7) -
Goodwill 1,776.0 349.0 - 2,125.0 1,461.9 185.0 - 1,646.9
Other intangibles - net 167.7 600.5 - 768.2 167.3 600.2 - 767.5
Investments in subsidiaries 2,110.4 - (2,110.4) - 1,549.9 - (1,549.9) -
Other assets 35.5 24.7 (2.4) 57.8 28.0 22.5 (1.5) 49.0
---------------------------------------- ----------------------------------------
$4,759.0 $2,446.8 $(2,655.0) $4,550.8 $4,409.5 $2,018.0 $(2,239.8) $4,187.7
======================================== ========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 69.2 $ - $ - $ 69.2 $ - $ - $ - $ -
Current portion of long-term debt
and capital lease obligations 132.5 1.5 - 134.0 178.8 2.0 - 180.8
Accounts payable 105.9 153.4 - 259.3 119.5 125.1 - 244.6
Income taxes payable 47.5 9.6 (33.4) 23.7 32.3 - (17.6) 14.7
Deferred taxes - - - - - 0.4 (0.4) -
Accrued expenses and other
current liabilities 93.3 104.4 - 197.7 119.6 69.3 - 188.9
---------------------------------------- ----------------------------------------
TOTAL CURRENT LIABILITIES 448.4 268.9 (33.4) 683.9 450.2 196.8 (18.0) 629.0
---------------------------------------- ----------------------------------------
NONCURRENT LIABILITIES:
Long-term debt 973.7 3.3 - 977.0 791.4 - - 791.4
Obligations under capital leases 14.1 25.5 - 39.6 16.9 26.8 - 43.7
Deferred taxes 23.6 109.0 2.4 135.0 27.2 103.6 (0.7) 130.1
Due to affiliates 394.8 116.5 (511.3) - 317.1 357.6 (674.7) -
Other 24.7 28.1 8.6 61.4 35.9 20.0 (0.2) 55.7
---------------------------------------- ----------------------------------------
TOTAL NONCURRENT LIABILITIES 1,430.9 282.4 (500.3) 1,213.0 1,188.5 508.0 (675.6) 1,020.9
---------------------------------------- ----------------------------------------
TOTAL LIABILITIES 1,879.3 551.3 (533.7) 1,896.9 1,638.7 704.8 (693.6) 1,649.9
---------------------------------------- ----------------------------------------
STOCKHOLDERS' EQUITY:
Common stock and additional
paid-in capital 1,237.9 1,779.9 (1,779.9) 1,237.9 1,180.9 1,462.2 (1,462.2) 1,180.9
Retained earnings (deficit) 2,430.0 110.6 (336.4) 2,204.2 2,180.2 (150.9) (82.1) 1,947.2
Accumulated other comprehensive income 0.8 5.0 (5.0) 0.8 3.8 1.9 (1.9) 3.8
Treasury stock (789.0) - - (789.0) (594.1) - - (594.1)
---------------------------------------- ----------------------------------------
TOTAL STOCKHOLDERS' EQUITY 2,879.7 1,895.5 (2,121.3) 2,653.9 2,770.8 1,313.2 (1,546.2) 2,537.8
---------------------------------------- ----------------------------------------
$4,759.0 $2,446.8 $(2,655.0) $4,550.8 $4,409.5 $2,018.0 $(2,239.8) $4,187.7
======================================== ========================================
73
Condensed Consolidating Statements of Income
(In millions) Year Ended December 31, 2004 Year Ended December 31, 2003 Year Ended December 31, 2002
-------------------------------------- -------------------------------------- --------------------------------------
Elim- Cons- Elim- Cons- Elim- Cons-
Issuers Others inations olidated Issuers Others inations olidated Issuers Others inations olidated
-------------------------------------- -------------------------------------- --------------------------------------
Net sales $2,302.2 $2,379.8 $ (89.4) $4,592.6 $2,466.8 $1,895.8 $(23.5) $4,339.1 $2,771.2 $1,558.0 $(17.0) $4,312.2
Licensing income (net) 0.1 57.0 - 57.1 0.1 36.1 - 36.2 - 28.7 - 28.7
-------------------------------------- -------------------------------------- --------------------------------------
Total revenues 2,302.3 2,436.8 (89.4) 4,649.7 2,466.9 1,931.9 (23.5) 4,375.3 2,771.2 1,586.7 (17.0) 4,340.9
Cost of goods sold 1,363.6 1,648.5 (67.7) 2,944.4 1,426.2 1,328.9 (16.5) 2,738.6 1,579.5 1,087.7 (10.2) 2,657.0
-------------------------------------- -------------------------------------- --------------------------------------
Gross profit 938.7 788.3 (21.7) 1,705.3 1,040.7 603.0 (7.0) 1,636.7 1,191.7 499.0 (6.8) 1,683.9
Selling, general and
administrative expenses 793.7 397.1 (13.9) 1,176.9 781.2 281.9 (6.2) 1,056.9 890.6 209.4 (6.7) 1,093.3
-------------------------------------- -------------------------------------- --------------------------------------
Operating income 145.0 391.2 (7.8) 528.4 259.5 321.1 (0.8) 579.8 301.1 289.6 (0.1) 590.6
Net interest (income)
expense and financing
costs 54.6 (5.3) - 49.3 53.2 2.1 - 55.3 53.6 4.5 - 58.1
Equity in earnings of
unconsolidated affiliates 1.8 3.0 (1.0) 3.8 2.7 0.9 (1.1) 2.5 1.1 0.1 (0.2) 1.0
-------------------------------------- -------------------------------------- --------------------------------------
Income before provision
for income taxes,
equity in earnings of
subsidiaries and
cumulative effect of
change in accounting
principle 92.2 399.5 (8.8) 482.9 209.0 319.9 (1.9) 527.0 248.6 285.2 (0.3) 533.5
Provision for income taxes 44.3 137.7 (0.9) 181.1 87.0 116.4 (5.0) 198.4 97.4 103.7 0.1 201.2
Equity in earnings of
subsidiaries 246.3 - (246.3) - 453.2 - (453.2) - 198.7 - (198.7) -
-------------------------------------- -------------------------------------- --------------------------------------
Income before cumulative
effect of change in
accounting principle 294.2 261.8 (254.2) 301.8 575.2 203.5 (450.1) 328.6 349.9 181.5 (199.1) 332.3
Cumulative effect of change
in accounting for
intangible assets,
net of tax - - - - - - - - - 13.8 - 13.8
-------------------------------------- -------------------------------------- --------------------------------------
Net income $294.2 $261.8 $(254.2) $301.8 $575.2 $203.5 $(450.1) $ 328.6 $349.9 $167.7 $(199.1) $318.5
====================================== ====================================== ======================================
Condensed Consolidating Statements of Cash Flows
(In millions) Year Ended December 31, 2004 Year Ended December 31, 2003 Year Ended December 31, 2002
-------------------------------------- -------------------------------------- --------------------------------------
Elim- Cons- Elim- Cons- Elim- Cons-
Issuers Others inations olidated Issuers Others inations olidated Issuers Others inations olidated
-------------------------------------- -------------------------------------- --------------------------------------
Net cash provided by
operating activities $336.8 $125.1 $ - $461.9 $419.1 $162.9 $(127.0) $455.0 $694.9 $183.3 $(161.7) $ 716.5
-------------------------------------- -------------------------------------- --------------------------------------
Cash flows from investing activities:
Acquisitions, net of
cash acquired (573.3) - - (573.3) (254.6) - - (254.6) (334.7) - - (334.7)
Capital expenditures (28.8) (27.8) - (56.6) (27.3) (26.0) - (53.3) (24.7) (27.9) - (52.6)
Net cash related to sale
of U. S. Treasury bonds - - - - 12.3 - - 12.3 9.2 - - 9.2
Acquisition of intangibles (1.2) - - (1.2) - (6.0) - (6.0) (0.2) (2.7) - (2.9)
Proceeds from sales of
property, plant and
equipment 0.1 1.6 - 1.7 2.1 24.8 - 26.9 9.4 1.0 - 10.4
Repayments of loans to
officers - - - - - - - - 2.0 - - 2.0
Other - - - - 0.2 - - 0.2 0.2 (0.3) - (0.1)
-------------------------------------- -------------------------------------- --------------------------------------
Net cash used in
investing activities (603.2) (26.2) - (629.4) (267.3) (7.2) - (274.5) (338.8) (29.9) - (368.7)
-------------------------------------- -------------------------------------- --------------------------------------
Cash flows from financing activities:
Issuance of Senior
Notes, net 743.5 - - 743.5 - - - - - - - -
Repurchase of Senior Notes (621.6) (112.7) - (734.3) - - - - (0.1) - - (0.1)
Refinancing of
acquired debt - - - - - - - - (126.9) - - (126.9)
Net borrowings (payments)
under credit facilities 69.2 - - 69.2 - - - - - (0.8) - (0.8)
Purchases of treasury
stock (201.5) - - (201.5) (102.1) - - (102.1) (129.2) - - (129.2)
Proceeds from exercise of
employee stock options 35.5 - - 35.5 20.5 - - 20.5 118.4 - - 118.4
Dividends (44.8) - - (44.8) (20.2) (127.0) 127.0 (20.2) - (161.7) 161.7 -
Proceeds from termination
of interest rate hedges 0.2 - - 0.2 - - - - 21.6 - - 21.6
Net proceeds from (repay-
ment of) long-term debt - - - - - (7.4) - (7.4) (1.5) (9.7) - (11.2)
Other items (3.8) (2.1) - (5.9) (4.2) (1.3) - (5.5) (10.0) (2.9) - (12.9)
-------------------------------------- -------------------------------------- --------------------------------------
Net cash used in
financing activities (23.3) (114.8) - (138.1) (106.0) (135.7) 127.0 (114.7) (127.7) (175.1) 161.7 (141.1)
-------------------------------------- -------------------------------------- --------------------------------------
Effect of exchange rates
on cash - 0.6 - 0.6 - 0.9 - 0.9 - 0.1 - 0.1
-------------------------------------- -------------------------------------- --------------------------------------
Net increase (decrease) in
cash and cash equivalents (289.7) (15.3) - (305.0) 45.8 20.9 - 66.7 228.4 (21.6) - 206.8
Cash and cash equivalents,
beginning 302.0 48.0 - 350.0 256.2 27.1 - 283.3 27.8 48.7 - 76.5
-------------------------------------- -------------------------------------- --------------------------------------
Cash and cash equivalents,
ending $ 12.3 $ 32.7 $ - $ 45.0 $302.0 $48.0 $ - $350.0 $256.2 $27.1 $ - $283.3
====================================== ====================================== ======================================
74
UNAUDITED CONSOLIDATED FINANCIAL INFORMATION
Unaudited interim consolidated financial information for the
two years ended December 31, 2004 is summarized as follows:
|
(In millions except per share data)
|
First Quarter
|
Second Quarter
|
Third Quarter
|
Fourth Quarter
|
2004 |
|
|
|
|
|
Net sales |
$ 1,205.0
|
$ 1,042.6
|
$ 1,283.0
|
$ 1,062.0
|
|
Total revenues |
1,218.1
|
1,052.6
|
1,296.1
|
1,082.9
|
|
Gross profit |
461.6
|
413.4
|
461.6
|
368.7
|
|
Operating income |
161.9
|
134.6
|
164.4
|
67.5
|
|
Net income |
94.4
|
77.6
|
95.8
|
34.1
|
|
Basic earnings per share |
$0.75
|
$0.62
|
$0.78
|
$0.28
|
|
Diluted earnings per share |
$0.73
|
$0.61
|
$0.77
|
$0.28
|
|
Dividends per share |
$0.08
|
$0.08
|
$0.10
|
$0.10
|
|
|
|
|
|
|
2003 |
|
|
|
|
|
Net sales |
$ 1,226.7
|
$ 974.7
|
$ 1,171.1
|
$ 966.5
|
|
Total revenues |
1,234.2
|
980.4
|
1,180.5
|
980.1
|
|
Gross profit |
481.4
|
377.2
|
428.4
|
349.7
|
|
Operating income |
209.0
|
127.8
|
164.0
|
79.1
|
|
Net income |
121.8
|
71.1
|
93.9
|
41.8
|
|
Basic earnings per share |
$0.95
|
$0.56
|
$0.74
|
$0.33
|
|
Diluted earnings per share |
$0.90
|
$0.54
|
$0.71
|
$0.33
|
|
Dividends per share |
-
|
-
|
$0.08
|
$0.08
|
Quarterly figures may not add to full year
due to rounding.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
ITEM 9A. CONTROLS AND PROCEDURES
As required by Exchange Act Rule 13a-15(b), we carried out
an evaluation, under the supervision and with the participation of our President
and Chief Executive Officer and our Chief Operating and Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report.
The purpose of disclosure controls is to ensure that
information required to be disclosed in our reports filed with the SEC is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms. Disclosure controls are also designed with the
objective of ensuring that such information is accumulated and communicated to
our management, including our Chief Executive Officer and our Chief Operating
and Financial Officer, to allow timely decisions regarding required disclosure.
The purpose of internal controls is to provide reasonable assurance that our
transactions are properly authorized, our assets are safeguarded against
unauthorized or improper use and our transactions are properly recorded and
reported to permit the preparation of our financial statements in conformity
with generally accepted accounting principles.
Our management does not expect that our disclosure
controls or our internal controls will prevent all error and all fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable rather than absolute assurance that the objectives of the control
system are met. The design of a control system must also reflect the fact that
there are resource constraints, with the benefits of controls considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of
75
controls can provide absolute assurance that all control issues and instances
of fraud (if any) within the company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty and that simple errors or mistakes can occur. Controls can also be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected.
Our internal controls are evaluated on an ongoing basis by
Deloitte & Touche, LLP, to whom we outsource our internal audit function, by
other personnel in our organization and by our independent auditors in
connection with their audit and review activities. The overall goals of these
various evaluation activities are to monitor our disclosure and internal
controls and to make modifications as necessary, as disclosure and internal
controls are intended to be dynamic systems that change (including improvements
and corrections) as conditions warrant. Part of this evaluation is to determine
whether there were any significant deficiencies or material weaknesses in our
internal controls, or whether we had identified any acts of fraud involving
personnel who have a significant role in the our internal controls. Significant
deficiencies are control issues that could have a significant adverse effect on
the ability to record, process, summarize and report financial data in the
financial statements; material weaknesses are particularly serious conditions
where the internal control does not reduce to a relatively low level the risk
that misstatements caused by error or fraud may occur in amounts that would be
material in relation to the financial statements and not be detected within a
timely period by employees in the normal course of performing their assigned
functions.
Based upon this evaluation, our President and Chief
Executive Officer and our Chief Operating and Financial Officer concluded that,
subject to the limitations noted above, both our disclosure controls and
procedures and our internal controls and procedures are effective in timely
alerting them to material information required to be included in our periodic
SEC filings and that information required to be disclosed by us in these
periodic filings is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and that our internal controls
are effective to provide reasonable assurance that our financial statements are
fairly presented in conformity with generally accepted accounting principles.
There have been no changes in our internal controls over
financial reporting that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
76
MANAGEMENT'S REPORT ON INTERNAL CONTROL
February 11, 2005
To the Stockholders of Jones Apparel Group, Inc.
The management of Jones Apparel Group, Inc. is responsible
for the preparation, integrity, objectivity and fair presentation of the
financial statements and other financial information presented in this report.
The financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America and reflect the
effects of certain judgments and estimates made by management.
In order to ensure that our internal control over
financial reporting is effective, management regularly assesses such controls
and did so most recently for our financial reporting as of December 31, 2004,
except for Barneys, acquired on December 20, 2004, which represents 10.2% of
assets at December 31, 2004 and 0.4% of revenue and 0.6% of income from
operations for the year ended December 31, 2004. This assessment was based on
criteria for effective internal control over financial reporting described in
Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission, referred to as COSO. Our assessment
included the documentation and understanding of our internal control over
financial reporting. We have evaluated the design effectiveness and tested the
operating effectiveness of internal controls to form our conclusion.
Our internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our internal control
over financial reporting includes those policies and procedures that pertain to
maintaining records that, in reasonable detail, accurately and fairly reflect
transactions and dispositions of assets, providing reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, assuring
that receipts and expenditures are being made in accordance with authorizations
of our management and directors and providing reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Based on this assessment, the undersigned officers
concluded that our internal controls and procedures are effective in timely
alerting them to material information required to be included in our periodic
SEC filings and that information required to be disclosed by us in these
periodic filings is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and that our internal controls
are effective to provide reasonable assurance that our financial statements are
fairly presented in conformity with generally accepted accounting principles.
The Audit Committee of our Board of Directors, which
consists of independent, non-executive directors, meets regularly with
management, the internal auditors and the independent accountants to review
accounting, reporting, auditing and internal control matters. The committee has
direct and private access to both internal and external auditors.
BDO Seidman, LLP, independent auditors of our financial
statements, has reported on management's assertion with respect to the
effectiveness of our internal control over financial reporting as of December
31, 2004.
/s/ Peter Boneparth
Peter Boneparth
President and Chief Executive Officer |
/s/ Wesley R. Card
Wesley R. Card
Chief Operating and Financial Officer |
77
![](bdo_04.jpg)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Jones Apparel Group, Inc.
Bristol, Pennsylvania
We have audited management's assessment, included in the
accompanying Management's Report on Internal Control, that Jones Apparel Group,
Inc. and Subsidiaries maintained effective internal control over financial
reporting as of December 31, 2004, based on the criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A
company's internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management's Report on
Internal Control, management's assessment of and conclusion on the effectiveness
of internal control over financial reporting did not include the internal
controls of Barneys New York, Inc., acquired on December 20, 2004, which
represents 10.2% of assets at December 31, 2004 and 0.4% of revenue and 0.6% of
income from operations for the year ended December 31, 2004. Management did not
assess the effectiveness of internal control over financial reporting at this
entity because the Company acquired this entity during 2004. Refer to the
Acquisitions footnote to the consolidated financial statements for further
discussion of this acquisition and its impact on the Company's consolidated
financial statements. Our audit of internal control over financial reporting of
Jones Apparel Group, Inc. and Subsidiaries also did not include an evaluation of
the internal control over financial reporting of the entity referred to above.
In our opinion, management's assessment that Jones Apparel
Group, Inc. and Subsidiaries maintained effective internal control over
financial reporting as of December 31, 2004, is fairly stated, in all material
respects, based on the criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2004, based on the criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
We have also audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United States), the consolidated
balance sheets of Jones Apparel Group, Inc. and Subsidiaries as of December 31,
2004 and 2003 and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 2004 and our report dated February 11, 2005 expressed an unqualified
opinion.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, New York
February 11, 2005
78
ITEM 9B. OTHER INFORMATION
In connection with its annual review of executive
compensation, on December 14, 2004, the Compensation Committee of our Board of
Directors set the compensation of our named executive officers (as defined in
Regulation S-K Item 402(a)(3)) as follows:
Executive Officer
|
2005 Salary
|
2004 Bonus
|
2005 Restricted Stock
Grant (1)
|
Peter
Boneparth
President and Chief Executive Officer |
$2,500,000 |
(2) |
$2,000,000 |
100,000 shares |
Sidney Kimmel
Chairman |
$1,200,000 |
(2) |
$1,800,000 |
- |
Wesley R. Card
Chief Operating and Financial Officer |
$1,100,000 |
|
$1,000,000 |
50,000 shares |
Rhonda J.
Brown
President and Chief Executive Officer, Footwear, Accessories and Retail
Group |
$1,300,000 |
(2) |
$1,500,000 |
25,000
shares |
Ira M.
Dansky
Executive Vice President, Secretary and General Counsel |
$650,000 |
|
$600,000 |
10,000 shares |
__________
(1) |
Grants are effective January
3, 2005. Vesting restrictions lapse as to all of the shares on the
second business day immediately following our public announcement of our
fourth quarter financial results for the year 2007, provided that we
achieve certain performance targets. |
(2) |
No salary increase for 2005. |
79
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information about our directors appearing in the Proxy
Statement under the caption "ELECTION OF DIRECTORS" is incorporated
herein by reference.
We have adopted a Code of Business Conduct and Ethics and
a Code of Ethics for Senior Executive and Financial Officers, which applies to
our Chief Executive Officer, Chief Operating and Financial Officer, Controller
and other personnel performing similar functions. Both codes are posted on our
website, www.jny.com, (under the "OUR COMPANY - Corporate Governance"
caption) and are also available in print to any stockholder who requests it by
written request addressed to Wesley R. Card, Chief Operating and Financial
Officer, Jones Apparel Group, Inc., 250 Rittenhouse Circle, Keystone Park,
Bristol, Pennsylvania 19007. We intend to satisfy the disclosure requirement
regarding any amendment to, or a waiver of, a provision of the Code of Ethics
for Senior Executive and Financial Officers by posting such information on our
website.
We have also posted on our website, www.jny.com, our
Corporate Governance Guidelines and the charters of the Compensation, Audit and
Nominating/Corporate Governance Committees of our Board of Directors (under the
"OUR COMPANY - Corporate Governance" caption). That information is
available in print to any stockholder who requests it by written request
addressed to Wesley R. Card, Chief Operating and Financial Officer, Jones
Apparel Group, Inc., 250 Rittenhouse Circle, Keystone Park, Bristol,
Pennsylvania 19007.
The information appearing in the Proxy Statement relating
to the members of the Audit Committee and the Audit Committee financial expert
under the captions "CORPORATE GOVERNANCE AND BOARD MATTERS - Board
Structure and Committee Composition" and "CORPORATE GOVERNANCE AND
BOARD MATTERS - Audit Committee" and the information appearing in the Proxy
Statement under the caption "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE" is incorporated herein by this reference.
The balance of the information required by this item is
contained in the discussion entitled "EXECUTIVE OFFICERS OF THE
REGISTRANT" in Part I of this Form 10-K/A.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing in the Proxy Statement under the
captions "EXECUTIVE COMPENSATION," "COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION," "EMPLOYMENT AND COMPENSATION
ARRANGEMENTS" and the information appearing in the Proxy Statement relating
to the compensation of directors under the caption "CORPORATE GOVERNANCE
AND BOARD MATTERS - Director Compensation and Stock Ownership Guidelines"
is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information appearing in the Proxy Statement under the
caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" is
incorporated herein by this reference.
80
Equity Compensation Plan Information
The following table gives information about
our common stock that may be issued upon the exercise of options, warrants and
rights under all of our existing equity compensation plans as of December 31,
2004.
Plan Category |
Number of securities to be issued upon exercise of
outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options,
warrants and rights |
Number of securities remaining available for future
issuance under equity compensation plans |
Equity compensation plans approved by security holders |
10,982,860 |
$30.34 |
3,607,284 |
Equity compensation plans not approved by security holders |
473,865 |
$26.82 |
-- |
Total |
11,456,725 |
$30.19 |
3,607,284 |
In connection with the acquisition of McNaughton, stock
options held by McNaughton employees on the acquisition date were converted to
fully-vested options to purchase our common stock under the same terms and
conditions as the original grants. A portion of these options were originally
granted pursuant to equity compensation plans not approved by McNaughton
shareholders. No additional options, warrants or other equity rights will be
granted under any McNaughton equity compensation plans.
During 2002, 325,000 options were granted pursuant to
equity compensation plans not approved by our shareholders. These options were
issued to persons not previously employed by us as material inducements to these
persons entering into employment contracts with us. Of these options, 225,000
became fully vested on December 30, 2003 and expire on December 30, 2006 (based
on terms of individual employment contracts) and 75,000 vest on the third
anniversary of the grant date and expire ten years after the grant date.
For further information, see "Stock Options and
Restricted Stock" in Notes to Consolidated Financial Statements.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing in the Proxy Statement under the
caption "CERTAIN TRANSACTIONS" is incorporated herein by this
reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information appearing in the Proxy Statement under the
caption "FEES PAID TO INDEPENDENT AUDITORS" is hereby incorporated by
reference.
81
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) The following documents are filed as part of this report: |
|
1. |
Financial Statements. |
|
|
The following financial statements are included in Item
8 of this report: |
|
|
Report of Independent
Registered Public Accounting Firm |
|
|
Consolidated Balance Sheets - December 31,
2004 and 2003 |
|
|
Consolidated Statements of Income - Years ended December 31,
2004, 2003 and 2002 |
|
|
Consolidated Statements of Stockholders'
Equity - Years ended December 31, 2004, 2003 and 2002 |
|
|
Consolidated Statements of Cash Flows - Years ended
December 31, 2004, 2003 and 2002 |
|
|
Notes to Consolidated Financial Statements (includes
certain supplemental financial information required by Item 8 of Form
10-K) |
|
2. |
The schedule and report of independent
registered public accounting firm thereon, listed in the Index to Financial Statement
Schedules attached hereto. |
|
3. |
The exhibits listed in the Exhibit Index attached hereto. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
March 11, 2005 |
|
JONES APPAREL GROUP, INC.
(Registrant)
|
|
By:
|
/s/ Wesley R. Card
Wesley R. Card
Chief Operating and Financial Officer |
82
INDEX TO FINANCIAL STATEMENT SCHEDULES
Report of Independent Registered Public Accounting Firm on
Schedule II.
Schedule II. Valuation and qualifying accounts
Schedules other than those listed above have been omitted
since the information is not applicable, not required or is included in the
respective financial statements or notes thereto.
EXHIBIT INDEX
Exhibit No.
|
Description of Exhibit
|
2.1 |
Agreement and Plan of Merger
dated September 10, 1998, among Jones Apparel Group, Inc., SAI Acquisition
Corp., Sun Apparel, Inc. and the selling shareholders (incorporated by
reference to Exhibit 2.1 of our Current Report on Form 8-K dated September
24, 1998). |
2.2 |
Agreement and
Plan of Merger dated as of March 1, 1999, among Jones Apparel Group, Inc.,
Jill Acquisition Sub Inc. and Nine West Group Inc. (incorporated by
reference to Exhibit 2.1 of our Current Report on Form 8-K dated March 2,
1999). |
2.3 |
Securities Purchase and Sale
Agreement dated as of July 31, 2000, among Jones Apparel Group, Inc.,
Jones Apparel Group Holdings, Inc., Victoria + Co Ltd. and the
Shareholders and Warrantholders of Victoria + Co Ltd (incorporated by
reference to Exhibit 2.1 of our Quarterly Report on Form 10-Q for the
three months ended April 2, 2000). |
2.4 |
Agreement and
Plan of Merger dated as of April 13, 2001, among Jones Apparel Group,
Inc., MCN Acquisition Corp. and McNaughton Apparel Group Inc.
(incorporated by reference to Exhibit 2.1 of our Current Report on Form
8-K dated April 13, 2001). |
2.5 |
Purchase Agreement dated as of
August 7, 2003 between Kasper A.S.L., Ltd. and Jones Apparel Group, Inc.
(incorporated by reference to Exhibit 2.1 of our Quarterly Report on Form
10-Q for the nine months ended October 4, 2003). |
2.6 |
Agreement and
Plan of Merger dated as of June 18, 2004, among Jones Apparel Group, Inc.,
MSC Acquisition Corp. and Maxwell Shoe Company Inc. (incorporated by
reference to Exhibit 99.D.3 of Amendment No. 16 to our Schedule TO dated
June 21, 2004). |
2.7 |
Agreement and Plan of Merger
dated as of November 10, 2004 among Jones Apparel Group, Inc., Flintstone
Acquisition Corp. and Barneys New York, Inc. (incorporated by reference to
Exhibit 2 of our Schedule 13D dated November 10, 2004). |
3.1 |
Articles of
Incorporation, as amended (incorporated by reference to Exhibit 3.1 of our
Annual Report on Form 10-K for the fiscal year ended December 31, 1998). |
3.2 |
Amended and Restated By-Laws
(incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form
10-Q for the six months ended July 6, 2002). |
4.1 |
Form of
Certificate evidencing shares of common stock of Jones Apparel Group, Inc.
(incorporated by reference to Exhibit 4.1 of our Shelf Registration
Statement on Form S-3, filed on October 28, 1998 (Registration No.
333-66223)). |
4.2 |
Exchange and Registration Rights
Agreement dated October 2, 1998, among Jones Apparel Group, Inc. and Chase
Securities Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated and
Bear, Stearns & Co. Inc. (incorporated by reference to Exhibit 4.1 of
our Form S-4, filed on December 9, 1998 (Registration No. 333-68587)). |
4.3 |
Second
Supplemental Indenture for 8-3/8% Series B Senior Notes due 2005 dated as of
June 15, 1999, among Jack Asset Sub Inc., Jones Apparel Group, Inc., Jones
Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc. and The Bank
of New York, as trustee (incorporated by reference to Exhibit 4.1 of our
Quarterly Report on Form 10-Q for the six months ended July 4, 1999). |
83
Exhibit No.
|
Description of Exhibit
|
4.4 |
Exchange and Note Registration
Rights Agreement dated June 15, 1999, among Jones Apparel Group, Inc.,
Bear, Stearns & Co. Inc., Chase Securities Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc.,
BancBoston Robertson Stephens Inc., Banc of America Securities LLC, ING
Baring Furman Selz LLC, Lazard Freres & Co. LLC, Tucker Anthony Cleary
Gull, Brean Murray & Co., Inc. and The Buckingham Research Group
Incorporated (incorporated by reference to Exhibit 4.5 of our Quarterly
Report on Form 10-Q for the six months ended July 4, 1999). |
4.5 |
Senior Note
Indenture dated as of June 15, 1999, among Jones Apparel Group, Inc.,
Jones Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc., Nine
West Group Inc. and The Bank of New York, as trustee, including Form of
7.50% Senior Notes due 2004 and Form of 7.875% Senior Notes due 2006
(incorporated by reference to Exhibit 4.6 of our Quarterly Report on Form
10-Q for the six months ended July 4, 1999). |
4.6 |
Senior Note Indenture dated as
of July 9, 1997, among Nine West Group Inc. and Nine West Development
Corporation, Nine West Distribution Corporation, Nine West Footwear
Corporation and Nine West Manufacturing Corporation, as Guarantors, and
The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1
of the Nine West Group Inc. Registration Statement on Form S-4, filed on
August 21, 1997 (Registration No. 333-34085)). |
4.7 |
Supplemental
Indenture, dated as of September 15, 1998, among Nine West Group Inc. and
Nine West Manufacturing II Corporation, Nine West Development Corporation,
Nine West Distribution Corporation, Nine West Footwear Corporation and
Nine West Manufacturing Corporation, as Guarantors, and The Bank of New
York, as Trustee under the Senior Note Indenture dated as of July 9, 1997
(incorporated by reference to Exhibit 4.7.1 of the Nine West Group Inc.
Quarterly Report on Form 10-Q for the nine months ended October 31, 1998). |
4.8 |
Form of Nine West Group Inc. 8-3/8%
Series B Senior Notes due 2005 (incorporated by reference to Exhibit 4.6
of the Nine West Group Inc. Registration Statement on Form S-4, filed on
August 21, 1997 (Registration No. 333-34085)). |
4.9 |
Indenture
dated as of February 1, 2001, among Jones Apparel Group, Inc., Jones
Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc. and Nine West
Group Inc., as Issuers and The Bank of New York, as Trustee, including
Form of Zero Coupon Convertible Senior Notes due 2021 (incorporated by
reference to Exhibit 4.22 of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2000). |
4.10 |
Registration Rights Agreement
dated February 1, 2001 among Jones Apparel Group, Inc., Jones Apparel
Group Holdings, Inc., Jones Apparel Group USA, Inc., Nine West Group Inc.,
Salomon Smith Barney Inc. and Bear, Stearns & Co. Inc. (incorporated
by reference to Exhibit 4.23 of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2000). |
4.11 |
Supplemental
Indenture, dated as of December 23, 2002, by and among Jones Apparel
Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel Group USA,
Inc., Nine West Group Inc., Nine West Footwear Corporation, Jones Retail
Corporation, as issuers, and the Bank of New York, as Trustee, relating to
the Zero Coupon Senior Notes Due 2021 (incorporated by reference to
Exhibit 4.11 of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2002). |
4.12 |
Supplemental Indenture, dated as
of December 23, 2002, by and among Jones Apparel Group, Inc., Jones
Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc., Nine West
Group Inc., Nine West Footwear Corporation, Jones Retail Corporation, as
issuers, and the Bank of New York, as Trustee, relating to the 7.50%
Senior Notes Due 2004 and 7.875% Senior Notes Due 2006 (incorporated by
reference to Exhibit 4.12 of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2002). |
4.13 |
Supplemental
Indenture, dated as of December 23, 2002, by and among Jones Apparel
Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel Group USA,
Inc., Nine West Group Inc., Nine West Footwear Corporation, Jones Retail
Corporation, as issuers, and the Bank of New York, as Trustee, relating to
the 8-3/8% Series B Senior Notes due 2005 (incorporated by reference to
Exhibit 4.13 of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2002). |
4.14* |
Indenture dated as of November
22, 2004, among Jones Apparel Group, Inc., Jones Apparel Group Holdings,
Inc., Jones Apparel Group USA, Inc., Nine West Footwear Corporation and
Jones Retail Corporation, as Issuers and SunTrust Bank, as Trustee,
including Form of 4.250% Senior Notes due 2009, Form of 5.125% Senior
Notes due 2014 and Form of 6.125% Senior Notes due 2034. |
84
Exhibit No.
|
Description of Exhibit
|
4.15* |
Form of Exchange and Note
Registration Rights Agreement dated November 22, 2004 among Jones Apparel
Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel Group USA,
Inc., Nine West Footwear Corporation and Jones Retail Corporation, and
Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., as
Representatives of the Several Initial Purchasers listed in Schedule I
thereto, with respect to 4.250% Senior Notes due 2009, 5.125% Senior Notes
due 2014 and 6.125% Senior Notes due 2034. |
10.1 |
1991 Stock
Option Plan (incorporated by reference to Exhibit 10.5 of our Registration
Statement on Form S-1 filed on April 3, 1991 (Registration No. 33-39742)).+ |
10.2 |
1996 Stock Option Plan
(incorporated by reference to Exhibit 10.33 of our Annual Report on Form
10-K for the fiscal year ended December 31, 1996).+ |
10.3* |
1999 Stock
Incentive Plan.+ |
10.4* |
Form of Agreement Evidencing Stock Option Awards Under the
1999 Stock Incentive Plan.+
|
10.5* |
Form of
Agreement Evidencing Restricted Stock Awards Under the 1999 Stock
Incentive Plan.+ |
10.6 |
License Agreement dated October 18, 1995, between Jones
Apparel Group, Inc. and Polo Ralph Lauren, L.P. (incorporated by reference
to Exhibit 10.40 of our Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).#
|
10.7 |
Design
Services Agreement dated October 18, 1995, between Jones Apparel Group,
Inc. and Polo Ralph Lauren, L.P. (incorporated by reference to Exhibit
10.41 of our Annual Report on Form 10-K for the fiscal year ended December
31, 1996).# |
10.8 |
License Agreement dated as of August 1, 1995, between PRL
USA, Inc., as assignee of Polo Ralph Lauren Corporation, successor to Polo
Ralph Lauren, L.P., and Sun Apparel, Inc., as amended (incorporated by
reference to Exhibit 10.53 of our Quarterly Report on Form 10-Q for the nine
months ended September 27, 1998).#
|
10.9 |
Design
Services Agreement dated as of August 1, 1995, between Polo Ralph Lauren
Corporation, successor to Polo Ralph Lauren, L.P., and Sun Apparel, Inc.,
as amended (incorporated by reference to Exhibit 10.54 of our Quarterly
Report on Form 10-Q for the nine months ended September 27, 1998).# |
10.10 |
Cross-Default and Term Extension
Agreement dated May 11, 1998 among PRL USA, Inc., The Polo/Lauren Company,
L.P., Polo Ralph Lauren Corporation, Jones Apparel Group, Inc. and Jones
Investment Co. Inc. (incorporated by reference to Exhibit 10.1 of our
Current Report on Form 8-K dated February 4, 2003). |
10.11 |
License
Agreement dated May 11, 1998, between Jones Apparel Group, Inc. and Polo
Ralph Lauren, L.P. (incorporated by reference to Exhibit 10.53 of our
Quarterly Report on Form 10-Q for the fiscal nine months ended September
27, 1998).#
|
10.12 |
Design Services Agreement dated May 11, 1998, between Jones
Apparel Group, Inc. and Polo Ralph Lauren, L.P. (incorporated by reference
to Exhibit 10.54 of our Quarterly Report on Form 10-Q for the fiscal nine
months ended September 27, 1998).#
|
10.13 |
Five-Year
Credit Agreement dated as of June 15, 1999, among Jones Apparel Group USA,
Inc. and the Additional Obligors referred to therein, the Lenders referred
to therein, and First Union National Bank, as Administrative Agent
(incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form
10-Q for the six months ended July 4, 1999).
|
10.14 |
Jones Apparel Group, Inc. Executive Annual Incentive Plan
(incorporated by reference to Annex B of our Proxy Statement for our 1999
Annual Meeting of Stockholders).+
|
10.15 |
Amended and
Restated Employment Agreement dated March 11, 2002, between Jones Apparel
Group, Inc. and Peter Boneparth (incorporated by reference to Exhibit
10.20 of our Annual Report on Form 10-K for the fiscal year ended December
31, 2001).+ |
10.16 |
Employment Agreement dated as of
July 1, 2000, between Jones Apparel Group, Inc. and Sidney Kimmel
(incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form
10-Q for the nine months ended October 1, 2000).+ |
10.17 |
Amended and
Restated Employment Agreement dated March 11, 2002, between Jones Apparel
Group, Inc. and Wesley R. Card (incorporated by reference to Exhibit 10.1
of our Quarterly Report on Form 10-Q for the three months ended April 6,
2002).+
|
85
Exhibit No.
|
Description of Exhibit
|
10.18 |
Amended and Restated Employment
Agreement dated April 4, 2002, between Jones Apparel Group, Inc. and Ira
M. Dansky (incorporated by reference to Exhibit 10.2 of our Quarterly
Report on Form 10-Q for the three months ended April 6, 2002).+
|
10.19 |
Buying Agency Agreement dated August 31, 2001, between Nine
West Group Inc. and Bentley HSTE Far East Services Limited (incorporated by
reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q for the nine
months ended October 6, 2001).
|
10.20 |
Buying Agency
Agreement dated November 30, 2001, between Nine West Group Inc. and
Bentley HSTE Far East Services, Limited (incorporated by reference to
Exhibit 10.22 of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2001).
|
10.21 |
Employment Agreement dated as of October 1, 2001, between
Jones Apparel Group, Inc. and Rhonda Brown (incorporated by reference to
Exhibit 10.23 of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2001).+
|
10.22 |
Amendment dated February 28,
2003 to the Amended and Restated Employment Agreement between Jones
Apparel Group, Inc. and Wesley R. Card (incorporated by reference to
Exhibit 10.22 of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2002).+
|
10.23 |
Amendment dated February 28, 2003 to the Amended and Restated
Employment Agreement between Jones Apparel Group, Inc. and Peter Boneparth
(incorporated by reference to Exhibit 10.23 of our Annual Report on Form
10-K for the fiscal year ended December 31, 2002).+
|
10.24 |
Amendment dated February 28,
2003 to the Amended and Restated Employment Agreement between Jones
Apparel Group, Inc. and Ira M. Dansky (incorporated by reference to
Exhibit 10.24 of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2002).+
|
10.25 |
Amendment dated February 28, 2003 to the Employment Agreement
between Jones Apparel Group, Inc. and Rhonda Brown (incorporated by
reference to Exhibit 10.25 of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2002).+
|
10.26 |
Form of Deferred Compensation
Plan for Outside Directors (incorporated by reference to Exhibit 10.26 of
our Annual Report on Form 10-K for the fiscal year ended December 31,
2002).+
|
10.27 |
Waiver and Amendment No. 2 to the Five-Year Credit Agreement
dated as of June 10, 2003, among Jones Apparel Group USA, Inc., the
Additional Obligors referred to therein, the banks, financial institutions
and other institutional lenders parties to the Five-Year Credit Agreement
referred to therein and Wachovia Bank, National Association, as agent
(incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form
10-Q for the six months ended July 5, 2003).
|
10.28 |
Three Year
Credit Agreement dated as of June 10, 2003, by and among Jones Apparel
Group USA, Inc., the Additional Obligors referred to therein, the Lenders
referred to therein, J.P. Morgan Securities Inc. and Citigroup Global
Markets Inc., as Joint Lead Arrangers and Joint Bookrunners, Wachovia
Bank, National Association, as Administrative Agent, JPMorgan Chase Bank
and Citibank, N.A., as Syndication Agents and Fleet National Bank and Bank
of America, N.A., as Documentation Agents (incorporated by reference to
Exhibit 10.2 of our Quarterly Report on Form 10-Q for the six months ended
July 5, 2003).
|
10.29 |
Amended and Restated Five-Year Credit Agreement dated as of
June 15, 2004, by and among Jones Apparel Group USA, Inc., the Additional
Obligors referred to therein, the Lenders referred to therein, Citigroup
Global Markets Inc. and J.P. Morgan Securities Inc., as Joint Lead Arrangers
and Joint Bookrunners, Wachovia Bank, National Association, as
Administrative Agent, Citibank, N.A. and JPMorgan Chase Bank, as Syndication
Agents, and Bank of America, N.A., Barclays Bank PLC and Suntrust Bank as
Documentation Agents (incorporated by reference to Exhibit 10.1 of our
Quarterly Report on Form 10-Q for the six months ended July 3, 2004).
|
10.30* |
Amendment No.
2 to the Three Year Credit Agreement dated as of November 17, 2004 among
Jones Apparel Group USA, Inc., the Additional Obligors referred to
therein, the Lenders referred to therein and Wachovia Bank, National
Association as agent for the Lenders.
|
86
Exhibit No.
|
Description of Exhibit
|
10.31* |
Amendment to the Amended and Restated Five-Year Credit
Agreement dated as of November 17, 2004 among Jones Apparel Group USA, Inc.,
the Additional Obligors referred to therein, the Lenders referred to therein
and Wachovia Bank, National Association as agent for the Lenders.
|
10.32* |
Jones Apparel
Group, Inc. Deferred Compensation Plan.+
|
10.33* |
Summary Sheet of Compensation of Outside Directors of Jones
Apparel Group, Inc.+
|
10.34* |
Summary Sheet
of Compensation of Named Executive Officers of Jones Apparel Group, Inc.+
|
11* |
Computation of
Earnings per Share.
|
12* |
Computation of Ratio of Earnings to Fixed Charges.
|
21* |
List of
Subsidiaries.
|
23* |
Consent of BDO Seidman, LLP.
|
31* |
Certifications
of Chief Executive Officer and Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32o |
Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
|
99.1 |
Decision and
Order of the Federal Trade Commission In the Matter of Nine West Group
Inc., Docket No. C-3937, dated April 11, 2000 (incorporated by reference
to Exhibit 99.1 of our Quarterly Report on Form 10-Q for the three months
ended April 2, 2000).
|
____________________
* Filed herewith.
o Furnished herewith.
# Portions deleted pursuant to application for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934.
+ Management
contract or compensatory plan or arrangement.
87
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Jones Apparel Group, Inc.
Bristol, Pennsylvania
The audits referred to in our report dated February 11, 2005 relating to the
consolidated financial statements of Jones Apparel Group, Inc. and Subsidiaries,
which is contained in Item 8 of this Form 10-K/A (Amendment No. 1), included the
audit of the financial statement schedule listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based upon our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, New York
February 11, 2005
88
SCHEDULE II
JONES APPAREL GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
(In Millions)
Column A Column B Column C Column D Column E
- ------------------------------- ---------- ------------------------- ---------- ---------
Additions
-------------------------
Balance at Charged to Charged to Balance
beginning costs and other at end of
Description of period expenses accounts Deductions period
- ------------ ---------- ---------- ----------- ---------- ---------
Accounts receivable allowances
- ------------------------------
Allowance for doubtful accounts
For the year ended December 31:
2002 $13.1 $ 3.8 - $ 5.3(1) $11.6
2003 $11.6 $ (0.6) $1.2(2) $ 1.3(1) $10.9
2004 $10.9 $ (0.7) $2.1(3) $ 3.3(1) $ 9.0
Allowance for sales discounts
For the year ended December 31:
2002 $11.6 $135.4 - $132.3(4) $14.7
2003 $14.7 $127.6 $5.1(2) $132.6(4) $14.8
2004 $14.8 $125.2 $ - $123.9(4) $16.1
Allowance for sales returns
For the year ended December 31:
2002 $ 3.2 $ 28.1 $0.8(5) $ 25.0(4) $ 7.1
2003 $ 7.1 $ 29.6 $0.2(2) $ 31.7(4) $ 5.2
2004 $ 5.2 $ 27.2 $3.3(6) $ 26.8(4) $ 8.9
Allowance for co-op advertising
For the year ended December 31:
2002 $ 4.0 $ 28.3 $1.0(5) $ 28.1(4) $ 5.2
2003 $ 5.2 $ 28.7 - $ 26.5(4) $ 7.4
2004 $ 7.4 $ 48.1 $1.1(7) $ 44.4(4) $12.2
Deferred tax valuation allowance
For the year ended December 31:
2003 - $ 8.5 - - $ 8.5
2004 $ 8.5 - - - $ 8.5
(1) Doubtful accounts written off against accounts receivable.
(2) Addition due to the acquisition of Kasper on December 1, 2003.
(3) Addition due to the acquisition of Maxwell on July 8, 2004 and Barneys on December 20, 2004.
(4) Deductions taken by customers written off against accounts receivable.
(5) Addition due to the acquisition of Gloria Vanderbilt on April 8, 2002
and l.e.i. on August 15, 2002.
(6) Addition due to the acquisition of Maxwell on July 8, 2004 and Barneys on December 20, 2004
and effects of foreign currency translation.
(7) Addition due to the acquisition of Maxwell on July 8, 2004.
89
EX-4
3
exhibit4_14.htm
EXHIBIT 4.14
Exhibit 4.14
EXHIBIT 4.14
JONES APPAREL GROUP, INC.,
JONES APPAREL GROUP HOLDINGS, INC.,
JONES APPAREL GROUP USA, INC.,
NINE WEST FOOTWEAR CORPORATION,
and
JONES RETAIL CORPORATION,
as Issuers
and
SUNTRUST BANK
as Trustee
INDENTURE
Dated as of November 22, 2004
$250,000,000 4.250% Senior Notes Due 2009
$250,000,000 5.125% Senior Notes Due 2014
$250,000,000 6.125% Senior Notes Due 2034
TABLE OF CONTENTS
|
|
Page
|
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
|
Section 1.01. |
Definitions. |
1 |
Section 1.02. |
Other Definitions. |
7 |
Section 1.03. |
Incorporation by Reference of
Trust Indenture Act |
8 |
Section 1.04. |
Rules of Construction |
8 |
ARTICLE 2
THE SECURITIES |
Section 2.01. |
Form of Securities |
9 |
Section 2.02. |
Denominations |
9 |
Section 2.03. |
Forms Generally |
9 |
Section 2.04. |
Execution, Authentication and Delivery |
9 |
Section 2.05. |
Registrar and Paying Agent |
10 |
Section 2.06. |
Paying Agent to Hold Money in Trust |
11 |
Section 2.07. |
Securityholder Lists |
11 |
Section 2.08. |
Transfer and Exchange |
11 |
Section 2.09. |
Replacement Securities |
12 |
Section 2.10. |
Outstanding Securities |
13 |
Section 2.11. |
Temporary Securities |
13 |
Section 2.12. |
Cancellation |
13 |
Section 2.13. |
Defaulted Interest |
13 |
Section 2.14. |
CUSIP Numbers |
14 |
Section 2.15. |
Issuance of Additional Securities |
14 |
ARTICLE 3
REDEMPTION |
Section 3.01. |
Notices to Trustee |
15 |
Section 3.02. |
Selection of Securities to Be Redeemed |
15 |
Section 3.03. |
Notice of Redemption |
15 |
Section 3.04. |
Effect of Notice of Redemption |
16 |
Section 3.05. |
Deposit of Redemption Price |
16 |
Section 3.06. |
Securities Redeemed in Part |
17 |
ARTICLE 4
COVENANTS |
Section 4.01. |
Payment of Securities |
17 |
Section 4.02. |
Annual and Quarterly Reports |
17 |
i
Section 4.03. |
Corporate Existence |
17 |
Section 4.04. |
Restrictions on Liens |
18 |
Section 4.05. |
Restrictions on Sale and
Leaseback Transactions |
20 |
Section 4.06. |
Exempted Debt |
21 |
Section 4.07. |
Waiver of Certain Covenants |
21 |
Section 4.08. |
Compliance Certificate |
22 |
Section 4.09. |
Further Instruments and Acts |
22 |
ARTICLE 5
SUCCESSOR COMPANIES |
Section 5.01. |
Merger and Consolidation |
22 |
ARTICLE 6
DEFAULTS AND REMEDIES |
Section 6.01. |
Events of Default |
23 |
Section 6.02. |
Acceleration |
25 |
Section 6.03. |
Other Remedies |
26 |
Section 6.04. |
Waiver of Past Defaults |
26 |
Section 6.05. |
Control by Majority |
26 |
Section 6.06. |
Limitation on Suits |
26 |
Section 6.07. |
Rights of Holders to Receive
Payment |
27 |
Section 6.08. |
Collection Suit by Trustee
|
27 |
Section 6.09. |
Trustee May File Proofs of
Claim |
27 |
Section 6.10. |
Priorities |
28 |
Section 6.11. |
Undertaking for Costs |
28 |
Section 6.12. |
Waiver of Stay or Extension
Laws |
28 |
ARTICLE 7
TRUSTEE |
Section 7.01. |
Duties of Trustee |
29 |
Section 7.02. |
Rights of Trustee |
30 |
Section 7.03. |
Individual Rights of Trustee |
31 |
Section 7.04. |
Trustee's Disclaimer |
31 |
Section 7.05. |
Notice of Defaults |
31 |
Section 7.06. |
Reports by Trustee to Holder |
31 |
Section 7.07. |
Compensation and Indemnity |
31 |
Section 7.08. |
Replacement of Trustee |
32 |
Section 7.09. |
Successor Trustee by Merger |
33 |
Section 7.10. |
Eligibility, Disqualification |
34 |
Section 7.11. |
Preferential Collection of Claims
Against Issuers |
34 |
ii
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE |
Section 8.01. |
Disclaimer of Liability on
Securities: Defeasance |
34 |
Section 8.02. |
Conditions to Defeasance |
35 |
Section 8.03.
|
Application of Trust Money
|
37 |
Section 8.04. |
Repayment to Issuers |
37 |
Section 8.05. |
Indemnity for Government Obligations
|
37 |
Section 8.06. |
Reinstatement |
37 |
ARTICLE 9
AMENDMENTS |
Section 9.01. |
Without Consent of Holders
|
38 |
Section 9.02. |
With Consent of Holders |
39 |
Section 9.03. |
Compliance with Trust Indenture
Act |
40 |
Section 9.04. |
Revocation and Effect of
Consents and Waivers |
40 |
Section 9.05. |
Notation on or Exchange of
Securities |
40 |
Section 9.06.
|
Trustee to Sign Amendments
|
40 |
Section 9.07. |
Payment for Consent |
41 |
ARTICLE 10
MISCELLANEOUS |
Section 10.01.
|
Trust Indenture Act Controls
|
41 |
Section 10.02. |
Notices |
41 |
Section 10.03. |
Communication by Holders with
Other Holders |
42 |
Section 10.04. |
Certificate and Opinion as
to Conditions Precedent |
42 |
Section 10.05.
|
Statements Required in Certificate
or Opinion |
42 |
Section 10.06. |
When Securities Disregarded |
43 |
Section 10.07. |
Rules by Trustee, Paying
Agent and Registrar |
43 |
Section 10.08. |
Legal Holiday |
43 |
Section 10.09. |
Governing Law |
43 |
Section 10.10. |
No Recourse Against Others
|
43 |
Section 10.11. |
Successors |
43 |
Section 10.12. |
Multiple Originals |
43 |
Section 10.13.
|
Table of Contents: Headings
|
44 |
Section 10.14. |
Severability |
44 |
APPENDIX A |
PROVISIONS RELATING TO INITIAL SECURITIES, ADDITIONAL
SECURITIES AND EXCHANGE SECURITIES |
|
EXHIBIT A |
FORM OF FACE OF 2009 INITIAL SECURITY |
|
iii
EXHIBIT B |
FORM OF FACE OF 2009 EXCHANGE SECURITY |
|
EXHIBIT C |
FORM OF TRANSFEREE LETTER OF REPRESENTATION FOR 2009
NOTES |
|
EXHIBIT D |
FORM OF FACE OF 2014 INITIAL SECURITY |
|
EXHIBIT E |
FORM OF FACE OF 2014 EXCHANGE SECURITY |
|
EXHIBIT F |
FORM OF TRANSFEREE LETTER OF REPRESENTATION FOR 2014
NOTES |
|
EXHIBIT G |
FORM OF FACE OF 2034 INITIAL SECURITY |
|
EXHIBIT H |
FORM OF FACE OF 2034 EXCHANGE SECURITY |
|
EXHIBIT I |
FORM OF TRANSFEREE LETTER OF REPRESENTATION FOR 2034
NOTES |
|
iv
INDENTURE dated as of November 22, 2004, by and among JONES APPAREL GROUP,
INC., a Pennsylvania corporation, JONES APPAREL GROUP HOLDINGS, INC., a Delaware
corporation, JONES APPAREL GROUP USA, INC., a Pennsylvania corporation, NINE
WEST FOOTWEAR CORPORATION, a Delaware corporation, JONES RETAIL CORPORATION, a
New Jersey corporation (collectively, the "Issuers"), and
SUNTRUST BANK, a national banking corporation associated under the laws of the
State of Georgia, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for the
equal and ratable benefit of the Holders of (i) the Issuers' 4.250% Senior
Notes due 2009 issued on the date hereof (the "2009 Original Securities"),
5.125% Senior Notes due 2014 issued on the date hereof (the "2014
Original Securities") and 6.125% Senior Notes due 2034 issued on the
date hereof (the "2034 Original Securities" and, together with
the 2009 Original Securities and the 2014 Original Securities, collectively, the
"Original Securities"), (ii) any Additional Securities (as
defined herein) that may be issued after the date hereof (all such Securities in
clauses (i) and (ii) being referred to collectively as the "Initial
Securities") and (iii) if and when issued as provided in a Registration
Agreement (as defined in Appendix A hereto (the "Appendix")),
the Issuers' 4.250% Senior Notes due 2009 issued in a Registered Exchange
Offer (as defined in the Appendix) in exchange for 2009 Initial Securities (the
"2009 Exchange Securities"), 5.125% Senior Notes due 2014
issued in a Registered Exchange Offer in exchange for 2014 Initial Securities
(the "2014 Exchange Securities") and 6.125% Senior Notes due
2034 issued in a Registered Exchange Offer in exchange for 2034 Initial
Securities (the "2034 Exchange Securities" and together with
the 2009 Exchange Securities and the 2014 Exchange Securities, the "Exchange
Securities" and together with the Initial Securities, the "Securities").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFRENCE
Section 1.01. Definitions.
"Additional Securities" means Securities of any series
issued under this Indenture after the Closing Date and in compliance with
Section 2.15 hereof, it being understood that any Securities issued in exchange
for or replacement of any Original Securities shall not be Additional
Securities, including any such Securities issued in exchange for Original
Securities pursuant to a Registration Agreement.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to
direct the management and
policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Attributable Debt" in respect of a Sale and Leaseback
Transaction means, at the time of determination, the present value (discounted
at the actual rate of interest of such transaction) of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction (including any period for which such
lease has been extended or may, at the option of the lessor, be extended). The
term "net rental payments" under any lease for any period shall mean
the sum of the rental and other payments required to be paid in such period by
the lessee thereunder, not including, however, any amounts required to be paid
by such lessee (whether or not designated as rental or additional rental) on
account of maintenance and repairs, insurance, taxes, assessments, water rates
or similar charges required to be paid by such lessee thereunder or any amounts
required to be paid by such lessee thereunder contingent upon the amount of
sales, maintenance and repairs, insurance, taxes, assessments, water rates or
similar charges. In the case of any lease which is terminable by the lessee upon
the payment of a penalty, such net amount shall also include the amount of such
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated without payment
of such penalty.
"Board of Directors" means the Board of Directors of the
applicable Issuer or any committee thereof duly authorized to act on behalf of
the Board of Directors of such Issuer.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participating or other
equivalents of or interests in (however designated) equity of such Person,
including any preferred stock, but excluding any debt securities convertible
into such equity.
"Closing Date" means the date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term ("remaining life") of the
Securities of such series to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
2
"Comparable Treasury Price" means, with respect to any
redemption date, (1) the average of five Reference Treasury Dealer Quotations
for such redemption date after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (2) if the Independent Investment
Banker obtains fewer than five such Reference Treasury Dealer Quotations, the
average of all such quotations.
"Consolidated Net Tangible Assets" means as of any date of
determination, the total amount of assets of the Issuers and their respective
Subsidiaries (less applicable reserves and other properly deductible items)
after deducting (1) all current liabilities (excluding the amount of those which
are by their terms extendable or renewable at the option of the obligor to a
date more than 12 months after the date as of which the amount is being
determined and excluding all intercompany items between an Issuer and any of its
wholly-owned Subsidiaries or between Issuers or wholly-owned Subsidiaries of
Issuers) and (2) all goodwill, trade names, trademarks, patents, unamortized
debt discount and expense and other like intangible assets, all as determined on
a consolidated basis in accordance with GAAP.
"Consolidated Stockholders' Equity" means consolidated
stockholders' equity of the Issuers and their respective Subsidiaries as
determined in accordance with GAAP and reflected on the Issuers' most recent
balance sheet.
"Default" means any event which is, or after notice or
passage of time or both would be, an Event of Default.
"Depositary" means, with respect to the Securities of any
series issuable in whole or in part in global form, the Person specified
pursuant to Section 2.01 hereof as the initial Depositary with respect to the
Securities of such series, until a successor shall have been appointed and
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Depositary" shall mean or include such successor.
"Dollar" means a dollar or other equivalent unit in such
coin or currency of the United States as at the time shall be legal tender for
the payment of public and private debt.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Funded Debt" means Indebtedness, whether incurred, assumed
or guaranteed, maturing by its terms more than one year from the date of
creation thereof or which is extendable or renewable at the sole option of the
obligor in such manner that it may become payable more than one year from the
date of creation thereof, provided, however, that Funded Debt
shall not include obligations created pursuant to leases, or any Indebtedness or
portion thereof maturing by its terms within one year from the time of any
computation of the
3
amount of outstanding Funded Debt unless such Indebtedness
shall be extendable or renewable at the sole option of the obligor in such
manner that it may become payable more than one year from such time, or any
Indebtedness for the payment or redemption of which money in the necessary
amount shall have been deposited in trust either at or before the maturity or
redemption date thereof.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time, including those
principles set forth in (i) the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants, (ii)
statements and pronouncements of the Financial Accounting Standards Board, (iii)
such other statements by such other entity as approved by a significant segment
of the accounting profession and (iv) the rules and regulations of the SEC
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 1-3 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
All ratios and computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP.
"Global Security" means a Security that is issued in global
form in the name of the Depositary with respect thereto or its nominee.
"Holder" or "Securityholder" means the
Person in whose name a Security is registered on the Registrar's books.
"Indebtedness" of a Person means indebtedness for borrowed
money and all indebtedness under purchase money mortgages or other purchase
money liens or conditional sales or similar title retention agreements (but
excluding trade accounts payable in the ordinary course of business) in each
case where such indebtedness has been created, incurred, assumed or guaranteed
by such Person or where such Person is otherwise liable therefore and
indebtedness for borrowed money secured by any Lien upon property owned by such
Person even though such Person has not assumed or become liable for the payment
of such indebtedness; provided that if the obligation so secured has not
been assumed in full by such Person or is otherwise not such Person's legal
liability in full, the amount of such obligation for the purposes of this
definition shall be limited to the lesser of the amount of such obligation
secured by such Lien or the fair market value of the property securing such
Lien.
"Indenture" means this Indenture as amended or supplemented
from time to time and includes the terms of a particular series of Securities
established as contemplated by Section 2.01.
"Independent Investment Banker" means either Citigroup
Global Markets Inc. or J.P. Morgan Securities Inc., as specified by the Issuers,
or if
4
neither of the foregoing is willing or able to select the Comparable
Treasury Issue, an independent investment banking institution of national
standing appointed by the Issuers.
"Issuer" means each party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the indenture securities.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).
"Officer" means the Chairman of the Board, the Chief
Executive Officer, the Chief Financial Officer, the President, any Vice
President, the Treasurer or the Secretary of the applicable Issuer.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion from legal
counsel. The counsel may be an employee of or counsel to the applicable Issuer
or the Trustee.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"principal" of a Security means the principal of the
Security plus the premium, if any, payable on the Security which is due or
overdue or is to become due at the relevant time.
"Principal Property" means any property owned or leased by
any Issuer or Restricted Subsidiary, the net book value of which exceeds one
percent of the Consolidated Net Tangible Assets of the Issuers and their
respective Subsidiaries.
"Reference Treasury Dealer" means Citigroup Global Markets
Inc. and J.P. Morgan Securities Inc. and their respective successors and, at the
Issuers' option, three other nationally recognized investment banking firms
that are primary dealers of U.S. Government securities in New York City (each, a
"Primary Treasury Dealer"). If any of the foregoing shall cease
to be a Primary Treasury Dealer, the Issuers shall substitute therefor another
Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
5
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third Business Day preceding such redemption
date.
"Remaining Scheduled Payments" means, with respect to any
Security to be redeemed, the remaining scheduled payments of principal of and
interest on such Security that would be due after the related redemption date
but for such redemption. If such redemption date is not an interest payment date
with respect to such Security, the amount of the next succeeding scheduled
interest payment on such Security will be reduced by the amount of interest
accrued on such note to such redemption date.
"Restricted Subsidiary" means, at any time, any Subsidiary
of an Issuer which would be a "Significant Subsidiary" at such
time, as such term is defined in Regulation S-X promulgated by the SEC, as in
effect on the Closing Date.
"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning set forth in the second
paragraph of this Indenture.
"Securities Act" means the Securities Act of 1933, as
amended.
"Subsidiary" of any Person means any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa- 77bb in effect on the Closing Date.
"Treasury Rate" means, with respect to any redemption date,
(a) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded U.S. Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the remaining life (as defined in the
definition of Comparable Treasury Issue) of the Securities, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
will be determined and the Treasury Rate will be interpolated or extrapolated
from such yields on a straight
6
line basis, rounding to the nearest month) or (b)
if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means any Vice President, Assistant Vice
President, Assistant Treasurer or any other officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Wholly Owned Restricted Subsidiary" means a Restricted
Subsidiary, 100% of the outstanding Capital Stock of which (other than Capital
Stock constituting directors' qualifying shares or interests held by directors
or shares or interests required to be held by foreign nationals, in each case to
the extent mandated by applicable law) is directly or indirectly owned by an
Issuer or by one or more Wholly Owned Restricted Subsidiaries.
Section 1.02. Other Definitions.
Term |
Defined in Section |
Bankruptcy Law |
6.01 |
covenant defeasance option |
8.01(b) |
Custodian |
6.01 |
Event of Default |
6.01 |
legal defeasance option |
8.01(b) |
Legal Holiday |
10.08 |
Notice of Default |
6.01 |
Paying Agent |
2.03 |
Primary Treasury Dealer |
1.01 |
protected purchaser |
2.07 |
Registrar |
2.03 |
Sale and Leaseback Transaction |
4.05 |
Successor Company |
5.01(a) |
7
Section 1.03. Incorporation by Reference
of Trust Indenture Act. This Indenture is subject to
the mandatory provisions of the TIA, which are incorporated by reference in and
made a part of this Indenture. The following TIA terms have the following
meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture Securityholder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee"
means the Trustee.
"obligor" on the indenture securities means the Issuers and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular; and
(6) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP.
8
ARTICLE 2
THE SECURITIES
Section 2.01. Form of Securities.
Provisions relating to the Initial Securities and the Exchange Securities are
set forth in the Appendix, which is hereby incorporated in and expressly made a
part of this Indenture. The Initial Securities and the Trustee' s certificate
of authentication shall each be substantially in the form of Exhibit A hereto
(in the case of the 4.250% Senior Notes due 2009), Exhibit D hereto (in the case
of the 5.125% Senior Notes due 2014) and Exhibit G hereto (in the case of the
6.125% Senior Notes due 2034), which are hereby incorporated in and expressly
made a part of this Indenture. The Exchange Securities and the Trustee's
certification of authentication shall each be substantially in the form of
Exhibit B hereto (in the case of the 2009 Exchange Securities), Exhibit E hereto
(in the case of the 2014 Exchange Securities) and Exhibit H hereto (in the case
of the 2004 Exchange Securities), which are hereby incorporated in and expressly
made a part of this Indenture.
Section 2.02. Denominations. The
Securities of each series shall be issuable in such denominations as shall be
specified as contemplated by Section 2.01. In the absence of any such provisions
with respect to the Securities of any series, the Securities of such series
denominated in Dollars shall be issuable in denominations of $1,000 and any
integral multiples thereof.
Section 2.03. Forms Generally.
The Securities of each series may have notations, legends or endorsements
required by law, securities exchange rule, agreements to which any Issuer is
subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Issuers). Each Security shall be
dated the date of its authentication.
The definitive Securities of each series shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the Officers executing such Securities of each series, as
evidenced by their execution thereof.
Section 2.04. Execution, Authentication
and Delivery. One or more Officers of the Issuers shall sign the
Securities of each series on behalf of the Issuers by manual or facsimile
signature. The Issuers' seal, if any, shall be impressed, affixed, imprinted
or reproduced on the Securities and may be in facsimile form.
If an Officer of the Issuers whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The signature
9
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate and make available for delivery Securities as
set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably acceptable to the
Issuers to authenticate the Securities of each series. Any such appointment
shall be evidenced by an instrument signed by a Trust Officer, a copy of which
shall be furnished to the Issuers. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities of such series
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
Section 2.05. Registrar and Paying
Agent. The Issuers shall maintain an office or agency for each series
where Securities of such series may be presented for registration of transfer or
for exchange (the "Registrar") and an office or agency where
Securities of such series may be presented for payment (the "Paying
Agent"). The Registrar shall keep a register of the Securities of such
series and of their transfer and exchange. The Issuers may have one or more
co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent, and the term "Registrar"
includes any co-registrars. The Issuers initially appoint the Trustee as (i)
Registrar and Paying Agent in connection with the Securities and (ii) the
Securities Custodian (as defined in the Appendix) with respect to the Global
Securities (as defined in the Appendix).
The Issuers shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the terms of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. The Issuers shall notify the Trustee of the
name and address of any such agent. If the Issuers fail to maintain a Registrar
or Paying Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.07. The Issuers or any
of their domestically organized Wholly Owned Restricted Subsidiaries may act as
Paying Agent or Registrar.
The Issuers may remove any Registrar or Paying Agent upon written notice to
such Registrar or Paying Agent and to the Trustee; provided, however,
that no such removal shall become effective until (1) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Issuers and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or (2) notification to the Trustee that the Trustee
shall serve as Registrar or Paying Agent until the appointment of a successor in
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accordance with clause (1) above. The Registrar or Paying Agent may resign at
any time upon written notice; provided, however, that the Trustee
may resign as Paying Agent or Registrar only if the Trustee also resigns as
Trustee in accordance with Section 7.08.
Section 2.06. Paying Agent to
Hold Money in Trust. On or before each due date of
the principal and interest on any Security, the Issuers shall deposit with the
Paying Agent (or if an Issuer or a Subsidiary of any Issuer is acting as Paying
Agent, segregate and hold in trust for the benefit of the Persons entitled
thereto) a sum sufficient to pay such principal and interest when so becoming
due. The Issuers shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities of each series and shall
notify the Trustee of any default by the Issuers in making any such payment. If
an Issuer or a Subsidiary of an Issuer acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund. The
Issuers at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
Section 2.07. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of Securityholders.
If the Trustee is not the Registrar, the Issuers shall furnish, or cause the
Registrar to furnish, to the Trustee, in writing at least five Business Days
before each interest payment date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders.
Section 2.08. Transfer and Exchange.
The Securities shall be issued in registered form and shall be transferable only
upon the surrender of a Security for registration of transfer and in compliance
with the Appendix. When a Security is presented to the Registrar with a request
to register a transfer, the Registrar shall register the transfer as requested
if the requirements of Section 8-401(a)(1) of the Uniform Commercial Code are
met. When Securities are presented to the Registrar with a request to exchange
them for an equal principal amount of Securities of other denominations, the
Registrar shall make the exchange as requested if the same requirements are met.
To permit registration of transfers and exchanges, the Issuers shall execute and
the Trustee shall authenticate Securities at the Registrar's request. The
Issuers may require payment of a sum sufficient to pay all taxes, assessments or
other governmental charges in connection with any such transfer or exchange
pursuant to this Section. The Issuers shall not be required to make and the
Registrar need not register transfers or exchanges of Securities selected for
redemption (except, in the case of
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Securities to be redeemed in part, the
portion thereof not to be redeemed) or any Securities for a period of 15 days
before a selection of Securities to be redeemed.
Prior to the due presentation for registration of transfer of any Security,
the Issuers, the Trustee, the Paying Agent, and the Registrar may deem and treat
the Person in whose name a Security is registered as the absolute owner of such
Security for the purpose of receiving the payment of principal and interest, if
any, on such Security and for all other purposes whatsoever, whether or not such
Security is overdue, and none of the Issuers, the Trustee, the Paying Agent or
the Registrar shall be affected by notice to the contrary.
Any Holder of a Global Security shall, by acceptance of such Global Security,
agree that transfers of beneficial interest in such Global Security may be
effected only through a book-entry system maintained by (i) the Holder of such
Global Security (or its agent) or (ii) any Holder of a beneficial interest in
such Global Security, and that ownership of a beneficial interest in such Global
Security shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant to the terms of
this Indenture will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Securities surrendered upon such transfer
or exchange.
Section 2.09. Replacement Securities.
If a mutilated Security is surrendered to the Registrar or if the Holder of a
Security claims that a Security has been lost, destroyed or wrongfully taken,
the Issuers shall issue and the Trustee shall authenticate a replacement
Security if the requirements of Section 8-405 of the Uniform Commercial Code are
met, such that the Holder satisfies the Issuers or the Trustee within a
reasonable time after such Holder has notice of such loss, destruction or
wrongful taking, and the Registrar does not register a transfer prior to
receiving such notification, requests the Issuers or the Trustee to issue a new
replacement Security, prior to the Security being acquired by a protected
purchaser as defined in Section 8-303 of the Uniform Commercial Code (a "protected
purchaser") and satisfies any other reasonable requirements of the
Trustee. If required by the Trustee or the Issuers, such Holder shall furnish an
indemnity bond sufficient in the judgment of the Trustee to protect the Issuers,
the Trustee, the Paying Agent and the Registrar from any loss that any of them
may suffer if a Security is replaced. The Issuers and the Trustee may charge the
Holder for the expenses they incur in replacing a Security. In the event any
such mutilated, lost, destroyed or wrongfully taken Security has become or is
about to become due and payable, the Issuers in their discretion may pay such
Security instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the Issuers.
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The provisions of this Section 2.09 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, lost, destroyed or wrongfully taken Securities.
Section 2.10. Outstanding Securities.
Securities outstanding at any time consist of all Securities authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section as not outstanding. Subject to
Section 10.06, a Security does not cease to be outstanding because an Issuer or
an Affiliate of an Issuer holds the Security.
If a Security is replaced pursuant to Section 2.09, the Security so replaced
ceases to be outstanding unless and until the Trustee and the Issuers receive
proof satisfactory to them that the replaced Security is held by a protected
purchaser.
If the Paying Agent (other than the Issuers or Affiliates of the Issuers)
segregates and holds in trust, in accordance with this Indenture, on a
redemption date or maturity date, money sufficient to pay all principal and
interest payable on that date with respect to the Securities (or portions
thereof) to be redeemed or maturing, as the case may be, then on and after that
date, such Securities (or portions thereof) shall cease to be outstanding and
interest on them shall cease to accrue.
Section 2.11. Temporary Securities.
In the event that Definitive Securities (as defined in the Appendix) are to be
issued under the terms of this Indenture, until such Definitive Securities are
ready for delivery, the Issuers may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
Definitive Securities but may have variations that the Issuers consider
appropriate for temporary Securities. Without unreasonable delay, the Issuers
shall prepare and the Trustee shall authenticate Definitive Securities and
deliver them in exchange for temporary Securities upon surrender of such
temporary Securities at the office or agency of the Issuers, without charge to
the Holder.
Section 2.12. Cancellation. The Issuers
at any time may deliver Securities to the Trustee for cancellation. The
Registrar and the Paying Agent shall forward to the Trustee any Securities
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Securities surrendered for registration
of transfer, exchange, payment or cancellation and deliver canceled Securities
to an Issuer pursuant to written direction by an Officer of such Issuer. The
Issuers may not issue new Securities to replace Securities they have redeemed,
paid or delivered to the Trustee for cancellation. The Trustee shall not
authenticate Securities in place of canceled Securities other than pursuant to
the terms of this Indenture.
Section 2.13. Defaulted Interest.
If the Issuers default in a payment of interest on the Securities, the Issuers
shall pay the defaulted interest (plus interest
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on such defaulted interest to
the extent lawful) in any lawful manner. The Issuers may pay the defaulted
interest to the Persons who are Securityholders on a subsequent special record
date. The Issuers shall fix or cause to be fixed any such special record date
and payment date to the reasonable satisfaction of the Trustee and shall
promptly mail or cause to be mailed to each Securityholder a notice that states
the special record date, the payment date and the amount of defaulted interest
to be paid.
Section 2.14. CUSIP Numbers. The
Issuers in issuing the Securities may use "CUSIP" numbers (if then
generally in use) and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided, however,
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
Section 2.15. Issuance of Additional
Securities. After the Closing Date, the Issuers shall be entitled to issue
Additional Securities of any series under this Indenture in an unlimited
aggregate principal amount, which Securities shall have identical terms as the
Initial Securities of the same series issued on the Closing Date, other than
with respect to the date of issuance, the issue price and the date from which
interest thereon will begin to accrue. With respect to each series of
Securities, the Original Securities of such series, any Additional Securities of
such series and all Exchange Securities of such series issued in exchange
therefor shall be treated as a single class for all purposes under this
Indenture including waivers, amendments, redemptions and offers to purchase.
With respect to any Additional Securities, each Issuer shall set forth in a
resolution of the Board of Directors and an Officers' Certificate, a copy of
each which shall be delivered to the Trustee, the following information:
(1) the series and the aggregate principal amount of such Additional
Securities to be authenticated and delivered pursuant to this Indenture;
(2) the issue price, the issue date and the CUSIP number of such Additional
Securities; provided, however, that no Additional Securities may be issued at a
price that would cause such Additional Securities to have "original issue
discount" within the meaning of Section 1273 of the Code; and
(3) whether such Additional Securities shall be Initial Securities or shall
be issued in the form of Exchange Securities.
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ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Issuers elect to redeem Securities of any series pursuant to paragraph 5
of the Securities, they shall notify the Trustee in writing of the redemption
date and the principal amount of Securities of such series to be redeemed.
The Issuers shall give each notice to the Trustee provided for in this
Section at least 45 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Issuers to the effect that such
redemption will comply with the conditions and covenants herein. If fewer than
all the Securities of any series are to be redeemed, the record date relating to
such redemption shall be selected by the Issuers and given to the Trustee, which
record date shall be not fewer than 15 days after the date of notice to the
Trustee. Any such notice may be canceled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void and of no
effect.
Section 3.02. Selection of Securities
to Be Redeemed. If fewer than all the Securities of any
series are to be redeemed, the Trustee shall select the Securities, not more
than 60 days prior to the redemption date, of such series to be redeemed pro
rata or by lot or by a method that complies with applicable legal and securities
exchange requirements, if any, and that the Trustee in its sole discretion shall
deem to be fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. The Trustee shall
make the selection from outstanding Securities of such series not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities of such series that have denominations larger than
$1,000. Securities of such series and portions thereof that the Trustee selects
shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this
Indenture that apply to Securities of such series called for redemption also
apply to portions of Securities of a series called for redemption. The Trustee
shall promptly notify the Issuers of the Securities or portions thereof to be
redeemed.
Section 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a date for redemption of
Securities, the Issuers shall mail a notice of redemption by first-class mail to
each Holder of Securities to be redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price and the amount of accrued interest to the
redemption date;
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(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities of any series are to be
redeemed, the certificate numbers and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Issuers default in making such redemption payment or
the Paying Agent is prohibited from making such payment pursuant to the
terms of this Indenture, interest on Securities (or portion thereof) called
for redemption ceases to accrue on and after the redemption date;
(7) the CUSIP number, if any, printed on the Securities being redeemed;
and
(8) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Issuers' request, the Trustee shall give the notice of redemption in
the Issuers' name and at the Issuers' expense. In such event, the Issuers
shall provide the Trustee with the information required by this Section.
Section 3.04. Effect of Notice
of Redemption. Once notice of redemption is mailed, Securities
called for redemption become due and payable on the redemption date and at the
redemption price stated in the notice. Upon surrender to the Paying Agent, such
Securities shall be paid at the redemption price stated in the notice, plus
accrued interest, if any, to the redemption date; provided, however,
that if the redemption date is after a regular record date and on or prior to
the interest payment date, the accrued interest shall be payable to the
Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
Section 3.05. Deposit of Redemption
Price. Prior to 11:00 a.m. on the redemption date, the Issuers shall
deposit with the Paying Agent (or, if an Issuer or a Subsidiary of any of the
Issuers is the Paying Agent, shall segregate and hold in trust) money sufficient
to pay the redemption price of and accrued interest on all Securities to be
redeemed on that date other than Securities or portions of Securities called for
redemption that have been delivered by the Issuers to the Trustee for
cancellation.
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Section 3.06. Securities Redeemed
in Part. Upon surrender of a Security that is redeemed in part,
the Issuers shall execute and the Trustee shall authenticate for the Holder (at
the Issuers' expense) a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities.
The Issuers shall promptly pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities and in this Indenture.
Principal and interest shall be considered paid on the date due if on such date
the Trustee or the Paying Agent holds, in accordance with this Indenture, money
sufficient to pay all principal and interest then due and the Trustee or the
Paying Agent, as the case may be, is not prohibited from paying such money to
the Securityholders on that date pursuant to the terms of this Indenture.
The Issuers shall pay interest on overdue principal at the rate specified-in
the Securities, and shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
Section 4.02. Annual and Quarterly Reports.
Notwithstanding that the Issuers may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, each of the Issuers
shall provide the Trustee and Securityholders within 15 days after it would have
been required to file them with the SEC, annual and quarterly reports containing
the Issuers' most recent financial statements and schedules and related notes
thereto, together with management's discussion and analysis, all of which meet
the requirements of the applicable items in Form 10-K, in the case of annual
reports, and Form 10-Q, in the case of quarterly reports. Delivery of such
reports, information and documents to the Trustee is for informational purposes
only and the Trustee's receipt of such shall not constitute constructive
notice of any information contained therein or determinable from information
contained therein, including the Company's compliance with any of its
covenants hereunder (as to which the Trustee is entitled to rely exclusively on
Officers' Certificates). The Issuers also shall comply with the other
provisions of TIA Section 314(a).
Section 4.03. Corporate Existence.
Each Issuer shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, material rights (charter
and statutory) and material franchises (other than as contemplated by Section
5.01); provided, however, that such Issuer shall not be required
to preserve any such right or franchise if the Board of Directors shall
determine that the preservation of such rights or franchises is no longer
desirable in the conduct of the business of the Issuers and the Restricted
Subsidiaries considered as a whole.
17
Section 4.04. Restrictions on Liens.
Except as provided in Section 4.06, the Issuers shall not, and shall not permit
any Restricted Subsidiary to, create or suffer to exist any Lien to secure any
Indebtedness of any Issuer or Restricted Subsidiary on any Principal Property of
any Issuer or Restricted Subsidiary, without making, or causing such Restricted
Subsidiary to make, effective provision to secure all of the Securities offered
hereunder and then outstanding by such Lien, equally and ratably with any and
all other such Indebtedness thereby secured, so long as such other Indebtedness
is so secured, except that the foregoing restrictions shall not apply to:
(a) Liens on property of a Person existing at the time such Person is
merged into or consolidated with any Issuer or Restricted Subsidiary or at
the time of sale, lease or other disposition of the properties of such
Person (or a division thereof) as an entirety or substantially as an
entirety to any Issuer or Restricted Subsidiary;
(b) Liens on property of a Person existing at the time such Person
becomes a Restricted Subsidiary or existing on property prior to the
acquisition thereof by any Issuer or Restricted Subsidiary;
(c) Liens securing Indebtedness between a Restricted Subsidiary and an
Issuer or between Restricted Subsidiaries or between Issuers;
(d) Liens on any property created, assumed or otherwise brought into
existence in contemplation of the sale or other disposition of the
underlying property, whether directly or indirectly, by way of share
disposition or otherwise, provided that the applicable Issuer or
Restricted Subsidiary must dispose of such property within 180 days after
the creation of such Liens and that any Indebtedness secured by such Liens
shall be without recourse to any Issuer or Restricted Subsidiary;
(e) Liens in favor of the United States of America or any state thereof
or any department, agency or instrumentality or political subdivision of the
United States of America or any state thereof, or in favor of any country,
or any political subdivision thereof, to secure partial, progress, advance
or other payments, or performance of any other similar obligations,
including, without limitation, Liens to secure pollution control bonds or
industrial revenue or other similar types of bonds;
(f) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course of
business which secure obligations not more than 60 days past due or which
are being contested in good faith and by appropriate proceedings;
18
(g) Liens incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or regulatory
requirements, performance or return-of-money bonds, surety bonds or other
obligations of a like nature, in each case which are not incurred in
connection with the borrowing of money, the obtaining of advances or credit
or the payment of the deferred purchase price of property and which do not
in the aggregate impair in any material respect the use of property in the
operation of the business of the Issuers and their respective Subsidiaries
taken as a whole;
(h) Liens incurred to secure appeal bonds and judgment and attachment
Liens, in each case in connection with litigation or legal proceedings which
are being contested in good faith by appropriate proceedings so long as
reserves have been established to the extent required by GAAP;
(i) pledges or deposits under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection
with bids, tenders, contracts (other than for the payment of Indebtedness)
or leases to which any Issuer or Restricted Subsidiary is a party, or
deposits to secure public or statutory obligations of an Issuer or
Restricted Subsidiary or deposits for the payment of rent, in each case
incurred in the ordinary course of business;
(j) utility easements, building restrictions and such other encumbrances
or charges against real property as are of a nature generally existing with
respect to properties of a similar character;
(k) Liens granted to any bank or other institution on the payments to be
made to such institution by an Issuer or Subsidiary thereof, pursuant to any
interest rate swap or similar agreement or foreign currency hedge, exchange
or similar agreement designed to provide protection against fluctuations in
interest rates and currency exchange rates, respectively, provided
that such agreements are entered into in, or are incidental to, the ordinary
course of business;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights
and remedies, in each case as to any deposit account or any other fund
maintained with a creditor depository institution, provided that (1)
such deposit account is not a dedicated cash collateral account and is not
subject to restrictions against access by the applicable Issuer or
Restricted Subsidiary in excess of those set forth by regulations
promulgated by the Federal Reserve Board, and (2) such deposit account is
not intended by such Issuer or Restricted Subsidiary to provide collateral
to the depository institution;
19
(m) Liens arising from Uniform Commercial Code financing statements
regarding leases;
(n) the giving, simultaneously with or within 180 days after the latest
of the Closing Date, or the acquisition, construction, improvement,
development or expansion of such property, of a purchase money Lien on
property acquired, constructed, improved, developed or expanded after the
Closing Date, or the acquisition, construction, improvement, development or
expansion after the Closing Date, of property subject to any Lien which is
limited to such property;
(o) the giving of a Lien on real property which is the sole security for
Indebtedness incurred within two years after the latest of the Closing Date,
or the acquisition, construction, improvement, development or expansion of
such property, provided that the holder of such Indebtedness is
entitled to enforce its payment only by resorting to such security;
(p) Liens arising by the terms of letters of credit entered into in the
ordinary course of business to secure reimbursement obligations thereunder;
(q) Liens existing on the Closing Date;
(r) Liens for taxes, assessments and other governmental charges or levies
not yet due or as to which the period of grace, if any, related thereto has
not expired or which are being contested in good faith and by appropriate
proceedings if adequate reserves are maintained to the extent required by
GAAP; and
(s) extension, renewal, replacement or refunding of any Lien existing on
the Closing Date or referred to in clauses (a) to (k) and (n) to (o) and
(q), provided that the principal amount of Indebtedness secured
thereby and not otherwise authorized by clauses (a) to (k) and (n) to (o)
and (q) shall not exceed the principal amount of Indebtedness, plus any
premium or fee payable in connection with any such extension, renewal,
replacement or refunding, so secured at the time of such extension, renewal,
replacement or refunding.
Section 4.05. Restrictions on Sale
and Leaseback Transactions. Except as provided in Section
4.06, none of the Issuers shall, and none of the Issuers shall permit any
Restricted Subsidiary to, after the date hereof, enter into any arrangement with
any Person providing for the leasing by any such Issuer or Restricted Subsidiary
of any Principal Property now owned or hereafter acquired which has been or is
to be sold or transferred by such Issuer or Restricted Subsidiary to such Person
with the intention of taking back a lease of such
20
Principal Property (a "Sale
and Leaseback Transaction"), unless the net proceeds of such sale or
transfer have been determined by the Board of Directors to be at least equal to
the fair market value of such Principal Property or asset at the time of such
sale and transfer and either such Issuer or Restricted Subsidiary applies or
causes to be applied an amount equal to the net proceeds of such sale or
transfer, within 180 days of receipt thereof, to the retirement or prepayment
(other than any mandatory retirement or prepayment, except mandatory retirements
or prepayments required as a result of such Sale and Leaseback Transaction) of
Funded Debt of any Issuer or any Restricted Subsidiary ranking senior to or pari
passu with the Securities or to the purchase, construction or development of
property or assets to be used in the ordinary course of business, or such Issuer
or Restricted Subsidiary would, on the effective date of such sale or transfer,
be entitled, pursuant to this Indenture, to issue, assume or guarantee
Indebtedness secured by a Lien upon such Principal Property, at least equal in
amount to the Attributable Debt in respect of such Sale and Leaseback
Transaction without equally and ratably securing the Securities. The foregoing
restriction shall not apply to any Sale and Leaseback Transaction (i) between
any Issuer and Restricted Subsidiary or between Restricted Subsidiaries or
between Issuers, provided that the lessor shall be an Issuer or a Wholly
Owned Restricted Subsidiary, (ii) which has a lease of less than three years in
length, (iii) entered into within 180 days after the later of the purchase,
construction of development of such Principal Property or assets, or the
commencement of operation of such Principal Property or (iv) involving the
distribution warehouse of Jones Apparel Group, Inc. at South Hill, Virginia.
Section 4.06. Exempted Debt.
Notwithstanding Sections 4.04 and 4.05, any Issuer or Restricted Subsidiary may,
in addition to amounts permitted under such covenants, create Indebtedness
secured by Liens, or enter into Sale and Leaseback Transactions, provided
that, at the time of such transactions and after giving effect thereto, the
aggregate outstanding amount of all such Indebtedness secured by Liens plus
Attributable Debt resulting from such Sale and Leaseback Transactions does not
exceed 20% of Consolidated Stockholders' Equity.
Section 4.07. Waiver of Certain
Covenants. Each of the Issuers may in any particular instance, be excused
from failing to comply with any term, provision or condition set forth in
Section 4.02 or Sections 4.04 to 4.06, with respect to the Securities of any
series if before the time for such compliance the Holders of at least a majority
in principal amount of the outstanding Securities of such series shall, by act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such term, provision or condition but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Issuers, and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect.
21
The Issuers may, but shall not be obligated to, fix a record date for the
purpose of determining the Persons entitled to waive compliance with any
covenant or condition hereunder. If a record date is fixed, the Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to waive any such compliance, whether or not such Holders remain
Holders after such record date; provided that unless the Holders of at
least a majority in principal amount of the outstanding Securities affected
shall have waived such compliance prior to the date which is 90 days after such
record date, any such waiver previously given shall automatically and without
further action by any Holder be canceled and of no further effect.
Section 4.08. Compliance Certificate.
The Issuers shall deliver to the Trustee within 120 days after the end of each
fiscal year of the Issuers an Officers' Certificate stating that in the course
of the performance by the signers of their duties as Officers of the Issuers
they would normally have knowledge of any Default and whether or not the signers
know of any Default that occurred during such period. If they do, the
certificate shall describe the Default, its status and what action the Issuers
are taking or propose to take with respect thereto. The Issuers also shall
comply with TIA Section 314(a)(4).
Section 4.09. Further Instruments
and Acts. Each of the Issuers shall execute and deliver to the
Trustee such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.
ARTICLE 5
SUCCESSOR COMPANIES
Section 5.01. Merger and Consolidation.
None of the Issuers shall consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person (other than
a merger of a Restricted Subsidiary into an Issuer or another Restricted
Subsidiary or a merger of one Issuer into another), unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation, limited liability company,
partnership, trust or other entity organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia,
and the Successor Company (if not such Issuer) shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of such Issuer under the
Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor
22
Company, any
other Issuer or any Restricted Subsidiary as a result of such transaction,
as having been incurred by the Successor Company or such Issuer or
Restricted Subsidiary at the time of such transaction), no Event of Default
shall have occurred and be continuing;
(iii) such Issuer shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and such supplemental indenture
(if any) comply with this Indenture; and
(iv) if, as a result of any such consolidation,
merger or transfer, the Principal Property of such Issuer would become
subject to a Lien which shall not be permitted by this Indenture, such
Issuer or the Successor Company, as the case may be, shall take such steps
as shall be necessary to secure the Securities equally and ratably with (or
prior to) all Indebtedness secured thereby.
The Successor Company shall succeed to, and be substituted for, and may
exercise every right and power of, the applicable Issuer under this Indenture,
but the predecessor Issuer in the case of a lease of all or substantially all of
its assets shall not be released from the obligation to pay the principal of and
interest on the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" with respect to any series of Notes
occurs if:
(1) the Issuers default in any payment of interest
or additional interest on any Security of such series when the same becomes
due and payable, and such default continues for a period of 30 days;
(2) the Issuers default in the payment of the principal of, or premium,
if any, on any Security of such series when the same becomes due and payable
at its maturity, upon redemption, upon declaration or otherwise;
(3) any Issuer fails to comply with Section 5.01;
(4) any Issuer fails to comply with Section 4.02,
4.03, 4.04, 4.05 or 4.06, and such failure continues for 30 days after the
notice specified below;
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(5) any Issuer fails to comply with any of its covenants or agreements
contained in the Securities or this Indenture (other than those referred to
in (1), (2), (3) or (4) above) and such failure continues for 60 days after
the notice specified below;
(6) any Issuer or Restricted Subsidiary defaults
under any Indebtedness (other than the Securities of such series), whether
such Indebtedness now exists or shall hereafter be created, and such default
results in Indebtedness in excess of $25,000,000 or its foreign currency
equivalent becoming due and payable prior to the date on which it would
otherwise have become due and payable, without such Indebtedness having been
discharged or such acceleration having been rescinded or annulled within 30
days after the notice specified below;
(7) any Issuer or Restricted Subsidiary pursuant
to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors or
takes any comparable action under any foreign laws relating to insolvency;
(8) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(A) is for relief against any Issuer or Restricted Subsidiary in an
involuntary case;
(B) appoints a Custodian of any Issuer or Restricted Subsidiary or for
any substantial part of its property; or
(C) orders the winding up or liquidation of any Issuer or Restricted
Subsidiary or any similar relief is granted under any foreign laws and the
order or decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of
money in excess of $25,000,000 or its foreign currency equivalent at the
time, is entered against any Issuer or Restricted Subsidiary and either (A)
an enforcement proceeding has been commenced by any creditor upon such
judgment or
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decree or (B) there is a period of 60 days following the entry
of such judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed; or
(10) the co-obligation of any of the Issuers under this Indenture or
under any Security issued pursuant to this Indenture ceases to be in full
force and effect (except as contemplated by the terms of this Indenture).
The foregoing shall constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States
Code, or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
A Default under clause (4), (5) or (6) above is not an Event of Default with
respect to any series until the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities of such series notify the
applicable Issuer of the Default and such Issuer does not cure such Default
within the time specified in clause (4), (5) or (6), as applicable, after
receipt of such notice. Such notice must specify the Default, demand that it be
remedied and state that such notice is a "Notice of Default."
The Issuers shall deliver to the Trustee, within 30 days after the occurrence
thereof, written notice in the form of an Officers' Certificate of any Event
of Default under clause (6) and any event which with the giving of notice or the
lapse of time would become an Event of Default under clause (4), (5) or (9), its
status and what action the Issuers are taking or proposes to take with respect
thereto.
Section 6.02. Acceleration. If an Event
of Default with respect to any Securities of any series at the time outstanding
(other than an Event of Default specified in Section 6.01(7) or (8) with respect
to any Issuer) occurs and is continuing, the Trustee or the Holders of at least
25% in principal amount of the outstanding Securities of such series by written
notice to the Issuers (and to the Trustee, if notice is given by such Holders),
may declare the principal of and accrued but unpaid interest on all the
Securities of such series to be due and payable. Upon such a declaration, such
principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(7) or (8) with respect to any Issuer occurs,
the principal of and interest on all the Securities shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder. The Holders of a majority in principal amount of
the Securities of such series by notice to the
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Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default in respect of such
series have been cured or waived except nonpayment of principal or interest that
has become due solely because of acceleration. No such rescission shall affect
any subsequent Default or impair any right consequent thereto.
Section 6.03. Other Remedies. If
an Event of Default in respect of any series occurs and is continuing, the
Trustee may pursue any available remedy to collect the payment of principal of
or interest on the Securities of such series or to enforce the performance of
any provision of the Securities of such series or this Indenture.
The Trustee may institute and maintain a suit or legal proceeding even if it
does not possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
Section 6.04. Waiver of Past
Defaults. The Holders of a majority in principal amount of the Securities
of any series by notice to the Trustee may waive an existing Default with
respect to such series and its consequences except a Default in the payment of
the principal of or interest on a Security of such series, a Default arising
from the failure to redeem or purchase any Security of such series when required
pursuant to the terms of this Indenture or a Default in respect of a provision
that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
Section 6.05. Control by Majority.
With respect to Securities of any series, the Holders of a majority in principal
amount of the outstanding Securities of such series may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture or, subject to Section 7.01, that the Trustee determines is unduly
prejudicial to the rights of any other Holder or that would subject the Trustee
to personal liability; provided, however, that the Trustee may
take any other action deemed proper by the Trustee that is not inconsistent with
such direction. Prior to taking any action hereunder, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
Section 6.06. Limitation on Suits.
Except to enforce the right to receive payment of principal, premium (if any) or
interest when due, no Holder of a
26
Security of any series may pursue any remedy
with respect to this Indenture or the Securities of any such series unless:
(1) the Holder previously gave the Trustee written notice stating that an
Event of Default with respect to such series is continuing;
(2) the Holders of at least 25% in principal amount of the outstanding
Securities of such series make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the outstanding
Securities of such series do not give the Trustee a direction inconsistent
with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
Section 6.07. Rights of Holders
to Receive Payment. Notwithstanding any other provision of
this Indenture, the right of any Holder to receive payment of principal of and
additional interest and interest on the Securities held by such Holder, on or
after the respective due dates expressed in the Securities, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by
Trustee. If an Event of Default specified in Section 6.01(1) or (2)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Issuers for the whole amount then due
and owing (together with interest on any unpaid interest to the extent lawful)
and the amounts provided for in Section 7.07.
Section 6.09. Trustee May File
Proofs of Claim. The Trustee may file such proofs of claim
and other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee and the Securityholders allowed in any judicial
proceedings relative to any Issuer or any of its Subsidiaries, their creditors
or their property and, unless prohibited by law or applicable regulations, may
vote on behalf of the Holders in any election of a trustee in bankruptcy or
other Person performing similar functions, and any Custodian in any such
judicial proceeding is hereby authorized by each Holder to
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make payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and its counsel, and any other amounts due the Trustee under
Section 7.07.
Section 6.10. Priorities. If the Trustee
collects any money or property pursuant to this Article 6, it shall pay out the
money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders of each series for amounts due and unpaid on
the Securities of each series for principal and interest, ratably, and any
additional interest without preference or priority of any kind, according to
the amounts due and payable on the Securities of each series for principal,
any additional interest and interest, respectively; and
THIRD: to the Issuers.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Trustee shall mail to each Securityholder and each Issuer a notice
that states the record date, the payment date and amount to be paid.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture or
in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing, by any party litigant
in the suit, of an undertaking to pay the costs of the suit, and the court in
its discretion may assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in the suit, having due regard to the merits
and good faith of the claims or defenses made by the party litigant. This
Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.07 or a suit by Holders of more than 10% in principal amount of the
Securities.
Section 6.12. Waiver of Stay
or Extension Laws. None of the Issuers (to the extent it
may lawfully do so) shall at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of~, any stay or extension
law, wherever enacted, now or at any time hereafter in force, which may affect
the covenants or the performance of this Indenture; and each Issuer (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
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ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee shall
exercise the rights and powers vested in it by this Indenture and use the same
degree of care and skill in its exercise thereof as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein).
(c) The Trustee may not be relieved from liability for its own grossly
negligent action, its own grossly negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
grossly negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the Trustee
is subject to paragraphs (a), (b), (c) and (g) of this Section.
(e) The Trustee shall not be liable for interest on any money received by it
except as the Trustee may agree in writing with the Issuers.
29
(f) Money held in trust by the Trustee need not be segregated from funds
except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section and to the provisions of the TIA.
Section 7.02. (a) Rights of Trustee.
The Trustee may conclusively rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents or attorneys and shall not be
responsible for the misconduct or negligence of any agent or attorney appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take
in good faith which it believes to be authorized or within its rights or powers;
provided, however, that the Trustee's conduct does not
constitute wilful misconduct or gross negligence.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities, shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
note or other paper or document.
(g) The Trustee shall not be deemed to have notice of any Default or Event of
Default unless a Responsible Officer of the Trustee has actual knowledge thereof
or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Securities and this Indenture.
30
(h) The rights, privileges, protections, immunities and benefits given to the
Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other Person employed to act
hereunder.
Section 7.03. Individual Rights of
Trustee. The Trustee, or any of its Affiliates, in its individual or any
other capacity may become the owner or pledgee of Securities and may otherwise
deal with the Issuers or their Affiliates with the same rights it would have if
it were not Trustee. Any Paying Agent, Registrar or co-paying agent may do the
same with like rights. However, the Trustee must comply with Sections 7.10 and
7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Issuers use of the proceeds from the Securities, and it
shall not be responsible for any statement in this Indenture, in the Securities,
or in any document executed in connection with the sale of the Securities, other
than those set forth in the Trustee's certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default with respect to the Securities of any series occurs and is
continuing and if it is actually known to a Trust Officer of the Trustee, the
Trustee shall mail to each Securityholder of such series notice of the Default
within 90 days after it occurs. Except in the case of a Default in payment of
principal of, premium (if any) or interest on any Security of such series
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders of such series.
Section 7.06. Reports by Trustee
to Holder. As promptly as practicable after each July 31 beginning
with the July 31 following the Closing Date, and in any event prior to September
30 in each year, the Trustee shall mail to each Securityholder of a series a
brief report dated as of such July 31 that complies with Section 13(a) of the
TIA. The Trustee shall also comply with Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Securityholders of a
series shall be filed with the SEC and each stock exchange (if any) on which the
Securities of a series are listed. The Issuers agree to notify promptly and in
writing the Trustee whenever the Securities become listed on any stock exchange
and of any delisting thereof.
Section 7.07. Compensation and Indemnity.
Each of the Issuers, jointly and severally, shall pay to the Trustee from time
to time such compensation for its services as the Issuers and the Trustee shall
from time to time agree in writing. The Trustee's compensation shall not be
limited by any law on compensation of a
31
trustee of an express trust. The
Issuers, jointly and severally, shall reimburse the Trustee upon request for all
reasonable out-of- pocket expenses incurred or made by such Trustee, including
costs of collection, in addition to the compensation for its services. Such
expenses shall include the reasonable compensation and expenses, disbursements
and advances of the Trustee's agents, counsel, accountants and experts. Each
Issuer, jointly and severally, shall indemnify the Trustee against any and all
loss, liability or expense (including reasonable attorneys' fees) incurred by
or in connection with the administration of this trust and the performance of
its duties hereunder, including, without limitation, costs or expenses of
defending itself against or investigating any claim (whether asserted by any
Issuer or any Holder or any other Person) in connection with the exercise or
performance of any of its powers or duties hereunder. The Trustee shall notify
the Issuers of any claim for which it may seek indemnity promptly upon obtaining
actual knowledge thereof, provided, however, that any failure so
to notify the Issuers shall not relieve any Issuer of its indemnity obligations
hereunder. The Issuers need not reimburse any expense or indemnify against any
loss, liability or expense incurred by an indemnified party through such party's
own wilful misconduct, gross negligence or bad faith.
To secure the Issuers' payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee other than money or property held in trust to pay the
principal of and interest and any additional interest on particular Securities.
The Issuers' payment obligations pursuant to this Section shall survive the
satisfaction or discharge of this Indenture, any rejection or termination of
this Indenture under any bankruptcy law or the resignation or removal of the
Trustee. When the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.01(7) or (8) with respect to any Issuer, the expenses are
intended to constitute expenses of administration under the Bankruptcy Law.
Section 7.08. Replacement of Trustee.
The Trustee may resign at any time with respect to the Securities of one or more
series by so notifying the Issuers. The Holders of a majority in principal
amount of the Securities of a series may remove the Trustee with respect to the
Securities of such series and may appoint a successor Trustee. The Issuers shall
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
property; or
(4) the Trustee otherwise becomes incapable of acting.
32
If the Trustee resigns, is removed by the Issuers or by the Holders of a
majority in principal amount of the Securities of one or more series and such
Holders do not reasonably promptly appoint a successor Trustee with respect to
the Securities of that or those series, or if a vacancy exists in the office of
Trustee for any reason with respect to one or more series (the Trustee in such
event being referred to herein as the retiring Trustee), the Issuers shall
promptly appoint a successor Trustee with respect to the Securities of that or
those series.
A successor Trustee with respect to the Securities of any series shall
deliver a written acceptance of its appointment to the retiring Trustee and to
the Issuers. Thereupon the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the rights, powers
and duties of the Trustee under this Indenture. The successor Trustee shall mail
a notice of its succession to Securityholders at their last known addresses as
they appear on the Registrar's books. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, subject to
the lien provided for in Section 7.07.
If a successor Trustee does not take office within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in
principal amount of the Securities of such series may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
If the Trustee fails to comply with Section 7.10, any Securityholder of a
series may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee with respect to the
Securities of such series.
Notwithstanding the replacement of the Trustee pursuant to this Section, the
Issuers' obligations under Section 7.07 shall continue for the benefit of the
retiring Trustee.
Section 7.09. Successor Trustee by
Merger. If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all its corporate-trust business or assets to,
another corporation or banking association, the resulting, surviving or
transferee corporation without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and if at
that time any of the Securities shall not have been authenticated, any such
successor to the Trustee may authenticate such Securities either in the name of
any predecessor
33
hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of
the Trustee shall have.
Section 7.10. Eligibility, Disqualification.
The Trustee shall at all times satisfy the requirements of TIA Section 310(a).
The Trustee shall have a combined capital and surplus of at least $100,000,000
as set forth in its most recent published annual report of condition. The
Trustee shall comply with TIA Section 310(b); provided, however,
that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities or certificates of interest
or participation in other securities of any Issuer are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
Section 7.11. Preferential Collection
of Claims Against Issuers. The Trustee shall comply
with TIA Section 311(a), excluding any creditor relationship listed in TIA
Section 311(b). A Trustee who has resigned or been removed shall be subject to
TIA Section 311(a) to the extent indicated.
ARTICLE 8
DISCHARGE FO INDENTURE; DEFEASANCE
Section 8.01. Disclaimer of Liability
on Securities: Defeasance. (a) When the Issuers deliver to the
Trustee all outstanding Securities of a series (other than Securities of a
series replaced pursuant to Section 2.09) for cancellation or all outstanding
Securities of a series have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof and
the Issuers irrevocably deposit with the Trustee funds or U.S. Government
Obligations on which payment of principal and interest when due shall be
sufficient to pay at maturity or upon redemption all outstanding Securities of a
series, including interest thereon to maturity or such redemption date (other
than Securities replaced pursuant to Section 2.09), and if in either case the
Issuers pay all other sums payable hereunder by the Issuers, then this Indenture
shall, subject to Section 8.01(c), cease to be of further effect with respect to
the Securities of such series. The Trustee shall acknowledge satisfaction and
discharge of this Indenture on demand of the Issuers accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Issuers.
(b) Subject to Sections 8.01(c) and 8.02, the Issuers
at any time may terminate all of their obligations under the Securities of a
series and this Indenture ("legal defeasance option") or the
obligations of the Issuers under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.08 and
4.09 and the operation of Section 5.01(iii), 5.01(iv), 6.01(4), 6.01(6), 6.01(7)
(with respect to Restricted Subsidiaries only), 6.01(8) (with respect to
Restricted Subsidiaries only) and
34
6.01(9) ("covenant defeasance
option"). The Issuers may exercise their legal defeasance option
notwithstanding their prior exercise of their covenant defeasance option.
If the Issuers exercise their legal defeasance option, payment of the
Securities of a series may not be accelerated because of an Event of Default. If
the Issuers exercise their covenant defeasance option, payment of the Securities
may not be accelerated because of an Event of Default specified in Section
6.01(4), 6.01(6), 6.01(7) or 6.01(8) (with respect to Restricted Subsidiaries
only) or 6.01(9) or because of the failure of the Issuers to comply with clauses
(iii) and (iv) of Section 5.01.
Upon satisfaction of the conditions set forth herein and upon request of the
Issuers, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuers terminate.
(c) Notwithstanding clauses (a) and (b) above, the
Issuers' obligations in Sections 2.03, 2.04, 2.05, 2.07, 2.09, 2.10, 7.07,
7.08 and in this Article 8 shall survive until the Securities of a series have
been paid in full. Thereafter, the Issuers' obligations in Sections 7.07, 8.04
and 8.05 shall survive.
Section 8.02. Conditions to Defeasance.
(a) The Issuers may exercise their legal defeasance option only if:
(1) the Issuers irrevocably deposit in trust with the Trustee money or
U.S. Government Obligations for the payment of principal, premium (if any)
and interest on the Securities of a series to maturity or redemption, as the
case maybe;
(2) the Issuers deliver to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that the
payments of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations plus any deposited money without
investment shall provide cash at such times and in such amounts as shall be
sufficient to pay principal and interest when due on all the Securities of
such series to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123 day period
no Default specified in Section 6.01(7) or (8) with respect to the Issuers
occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other agreement
binding on any of the Issuers;
35
(5) the Issuers deliver to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
qualify as, a regulated investment company under the Investment Company Act
of 1940;
(6) the Issuers shall have delivered to the Trustee an Opinion of Counsel
stating that (i) the Issuers have received from, or there has been published
by, the Internal Revenue Service, a ruling, or (ii) since the Closing Date
there has been a change in the applicable Federal income tax law, in either
case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Securityholders shall not recognize income, gain or loss
for Federal income tax purposes as a result of such defeasance and shall be
subject to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance had not
occurred;
(7) the Issuers deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities of such series as contemplated by
this Article 8 have been complied with.
Before or after a deposit, the Issuers may make arrangements satisfactory to
the Trustee for the redemption of Securities of such series at a future date in
accordance with Article 3 of this Indenture.
(b) The Issuers may exercise their covenant defeasance option only if:
(1) the Issuers irrevocably deposit in trust with the Trustee money or
U.S. Government Obligations for the payment of principal, premium (if any)
and interest on the Securities to maturity or redemption, as the case may
be,
(2) the Issuers deliver to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that the
payments of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations plus any deposited money without
investment shall provide cash at such times and in such amounts as shall be
sufficient to pay principal and interest when due on all the Securities to
maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123 day period
no Default specified in Section 6.01(7) or (8) with respect to the Issuers
occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other agreement
binding on any of the Issuers;
36
(5) the Issuers deliver to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
qualify as, a regulated investment company under the Investment Company Act
of 1940;
(6) the Issuers shall have delivered to the Trustee an Opinion of Counsel
to the effect that the Securityholders shall not recognize income, gain or
loss for Federal income tax purposes as a result of such covenant defeasance
and shall be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred; and
(7) the Issuers deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article 8
have been complied with.
Before or after a deposit, the Issuers may make arrangements satisfactory to
the Trustee for the redemption of Securities at a future date in accordance with
Article 3 of this Indenture.
Section 8.03. Application of Trust
Money. The Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to this Article 8. It shall apply the
deposited money and the money from U.S. Government Obligations through the
Paying Agent and in accordance with this Indenture to the payment of principal
of and interest on the Securities of the series with respect to which the
deposit was made.
Section 8.04. Repayment to Issuers.
The Trustee and the Paying Agent shall promptly turn over to the Issuers upon
request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the Paying
Agent shall pay to the Issuers upon written request any money held by them for
the payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Issuers for
payment as general creditors.
Section 8.05. Indemnity for Government
Obligations. The Issuers shall pay and shall indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against deposited
U.S. Government Obligations or the principal and interest received on such U.S.
Government Obligations.
Section 8.06. Reinstatement. If the
Trustee or Paying Agent is unable to apply any money or U.S. Government
Obligations in accordance with this Article 8 by reason of any legal proceeding
or by reason of any order or judgment of any
37
court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Issuers'
obligations under this Indenture and the Securities of each applicable series
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying, Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article 8; provided, however, that, if the Issuers have made any
payment of interest on or principal of any Securities of such series because of
the reinstatement of their obligations hereunder, the Issuers shall be
subrogated to the rights of the Holders of such Securities of such series to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
Section 9.01. Without Consent of
Holders. The Issuers and the Trustee may amend this Indenture or the
Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in place
of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add guarantees or co-obligors with respect to the Securities or to
secure the Securities;
(5) to add to the covenants of the Issuers for the benefit of the Holder
to surrender any right or power herein conferred upon the Issuers;
(6) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA;
(7) to make any change that does not adversely affect the rights of any
Securityholder; or
(8) to provide for the issuance of the Exchange Securities, which shall
have terms substantially identical in all material respects to the Initial
Securities (except that the transfer restrictions contained in the Initial
38
Securities shall be modified or eliminated, as appropriate), and which shall
be treated, together with any outstanding Initial Securities, as a single
issue of securities. After an amendment under this Section becomes
effective, the Issuers shall mail to Securityholders a notice briefly
describing such amendment. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the
validity of an amendment under this Section.
Section 9.02. With Consent of
Holders. The Issuers and the Trustee may amend this Indenture or the
Securities without notice to any Securityholder but with the written consent of
the Holders of at least a majority in principal amount of the Securities then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Securities). However, without the consent of each
Securityholder of a series affected, an amendment may not:
(1) reduce the amount of Securities of such series whose Holder consent
to an amendment;
(2) reduce the rate of or extend the time for payment of interest or any
additional interest on any Security of such series;
(3) reduce the principal of or extend the stated maturity of any Security
of such series;
(4) reduce the premium payable upon the redemption of any Security of a
series or change the time at which any Security of such series may be
redeemed in accordance with Article 3;
(5) make any Security of such series payable in money other than that
stated in the Security;
(6) impair the right of any Holder to receive payment of principal of,
and interest or any additional interest on, such Holder's Securities on or
after the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Securities; or
(7) make any change in Section 6.04 or 6.07 or the second sentence of
this Section 9.02.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof After an amendment
under this Section becomes effective, the Issuers shall mail to all affected
Securityholders a notice briefly describing such amendment. The failure to give
such notice to all such Securityholders, or any defect therein, shall not impair
or affect the validity of an amendment under this Section.
39
Section 9.03. Compliance with Trust
Indenture Act. Every amendment to this Indenture or the Securities
shall comply with the TIA as then in effect.
Section 9.04. Revocation and Effect
of Consents and Waivers. A consent to an amendment
or a waiver by a Holder of a Security shall bind the Holder and every subsequent
Holder of that Security or portion of the Security that evidences the same debt
as the consenting Holder's Security, even if notation of the consent or waiver
is not made on the Security. However, any such Holder or subsequent Holder may
revoke the consent or waiver as to such Holder's Security or portion of the
Security if the Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. After an amendment or waiver becomes
effective, it shall bind every Securityholder. An amendment or waiver becomes
effective once both the requisite number of consents have been received by the
Issuers or the Trustee and such amendment or waiver has been executed by the
Issuers and the Trustee.
The Issuers may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
Section 9.05. Notation on or
Exchange of Securities. If an amendment changes the terms
of a Security, the Trustee may require the Holder of the Security to deliver it
to the Trustee. The Trustee may place an appropriate notation on the Security
regarding the changed terms and return it to the Holder. Alternatively, if the
Issuers or the Trustee so determines, the Issuers in exchange for the Security
shall issue and the Trustee shall authenticate a new Security that reflects the
changed terms. Failure to make the appropriate notation or to issue a new
Security shall not affect the validity of such amendment.
Section 9.06. Trustee to Sign
Amendments. The Trustee shall sign any amendment authorized pursuant to
this Article 9 if the amendment does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may but need
not sign it. In signing such amendment the Trustee shall be entitled to receive
indemnity satisfactory to it and to receive, and (subject to Section 7.01) shall
be fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel stating that such amendment is authorized or permitted by this Indenture
and that such amendment is the legal, valid and binding obligation of the
Issuers enforceable against them in accordance with its
40
terms, subject to
customary exceptions, and complies with the provisions hereof (including Section
9.03).
Section 9.07. Payment for Consent.
Neither the Issuers nor any Affiliate of the Issuers shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid to all
Holders, ratably, that so consent, waive or agree to amend in the time frame set
forth in solicitation documents relating to such consent, waiver or agreement.
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act
Controls. If any provision of this Indenture limits, qualifies or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
Section 10.02. Notices.
Any notice or
communication shall be in writing and delivered in person or mailed by
first-class mail addressed as follows, or transmitted by facsimile transmission
(confirmed by guaranteed overnight courier) to the following facsimile numbers:
if to the Issuers:
Jones Apparel Group, Inc.
1411 Broadway
New York, NY 10018
Attention of: Ira M. Dansky, Esq.
Facsimile No.: (212) 790-9988
if to the Trustee:
SunTrust Bank
25 Park Place, N.E.
24th Floor
Atlanta, Georgia 30303-2900
Attention: Corporate Trust Administration
Facsimile No.: (404) 588-7335
The Issuers or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
41
Any notice or communication mailed to a Securityholder shall be mailed to the
Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 10.03. Communication by Holders
with Other Holders. Securityholders may communicate
pursuant to TIA Section 312(b) with other Securityholders with respect to their
rights under this Indenture or the Securities. The Issuers, the Trustee, the
Registrar and anyone else shall have the protection of TIA Section 312(c).
Section 10.04. Certificate and Opinion
as to Conditions Precedent. Upon any request or
application by any Issuer to the Trustee to take or refrain from taking any
action under this Indenture, such Issuer shall furnish to the Trustee:
(1) an Officers' Certificate of such Issuer in form and substance
reasonably satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Section 10.05. Statements Required
in Certificate or Opinion. Each certificate or
opinion with respect to compliance with a covenant or condition provided for in
this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such individual,
such covenant or condition has been complied with.
42
Section 10.06. When Securities Disregarded.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by any Issuer, or by any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with any Issuer shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are so
owned shall be so disregarded. Subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.
Section 10.07. Rules by Trustee,
Paying Agent and Registrar. The Trustee may make
reasonable rules for action by or a meeting of Securityholders. The Registrar
and the Paying Agent may make reasonable rules for their functions.
Section 10.08. Legal Holiday. A
"Legal Holiday" is a Saturday, Sunday or other day on which
banking institutions in New York State are authorized or required by law to
close. If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record date
shall not be affected.
Section 10.09. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 10.10. No Recourse Against
Others. A director, officer, employee or stockholder, as such, of any
Issuer shall not have any liability for any obligations of such Issuer under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issuance of the Securities.
Section 10.11. Successors. All
agreements of each Issuer in this Indenture and the Securities shall bind its
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section 10.12. Multiple Originals.
The parties may sign any number of copies of this Indenture. Each signed copy
shall be an original, but all of them
43
together represent the same agreement. One
signed copy of the Indenture is enough to prove this Indenture.
Section 10.13. Table of Contents:
Headings. The table of contents, cross-reference sheet and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.
Section 10.14. Severability. If any
provision in this Indenture is deemed unenforceable, it shall not affect the
validity or enforceability of any other provision set forth herein, or of the
Indenture as a whole.
[Rest of page intentionally left blank]
44
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
|
JONES APPAREL GROUP, INC.
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: Executive Vice
President
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: President
|
|
JONES APPAREL GROUP USA, INC.
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: Secretary
|
|
NINE WEST FOOTWEAR CORPORATION
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: Executive Vice
President
and Secretary
|
|
JONES RETAIL CORPORATION
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: Secretary
|
|
SUNTRUST BANK, as Trustee
By: /s/ George Hogan
Name: George Hogan
Title: Vice President
|
APPENDIX A
PROVISIONS RELATING TO INITIAL SECURITIES,
ADDITIONAL SECURITIES AND EXCHANGE SECURITIES
1. Definitions.
1.1. Definitions. For the purposes of this Appendix A the following
terms shall have the meanings indicated below:
"Applicable Procedures" means, with respect to any transfer
or transaction involving a Regulation S Global Security or beneficial interest
therein, the rules and procedures of the Depositary for such Global Security,
Euroclear and Clearstream, in each case to the extent applicable to such
transaction and as in effect from time to time.
"Clearstream" means Clearstream Luxembourg or any successor
securities clearing agency.
"Definitive Security" means a certificated Initial Security
or Exchange Security (bearing the Restricted Securities Legend if the transfer
of such Security is restricted by applicable law) that does not include the
Global Securities Legend.
"Depositary" means The Depository Trust Company, its
nominees and respective successors.
"Euroclear" means the Euroclear Clearance System or any
successor securities clearing agency.
"Global Securities Legend" means the legend set forth under
that caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor"
as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Citigroup Global Markets Inc.,
J.P. Morgan Securities Inc., Banc of America Securities LLC, Barclays Capital
Inc., Bear, Stearns & Co. Inc., Greenwich Capital Markets, Inc., Scotia
Capital (USA) Inc., SunTrust Capital Markets, Inc. and Wachovia Capital Markets,
LLC.
"Purchase Agreement" means (a) the Purchase Agreement dated
November 17, 2004, among the Issuers and the Initial Purchasers and (b) any
other similar Purchase Agreement relating to Additional Securities.
"QIB" means a "qualified institutional buyer" as
defined in Rule 144A.
AP-1
"Registered Exchange Offer" means an offer by the Issuers,
pursuant to a Registration Agreement, to certain Holders of a series of Initial
Securities, to issue and deliver to such Holders, in exchange for their Initial
Securities of such series, a like aggregate principal amount of Exchange
Securities of such series registered under the Securities Act.
"Registration Agreement" means any of (a) the Exchange and
Note Registration Rights Agreements dated November 22, 2004, among the Issuers
and the Initial Purchasers and (b) any other similar Exchange and Note
Registration Rights Agreements relating to Additional Securities.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Securities" means all Initial Securities
offered and sold the United States in reliance on Regulation S.
"Restricted Period," with respect to any Securities of any
series, means the period of 40 consecutive days beginning on and including the
later of (i) the day on which such Securities are first offered to Persons other
than distributors (as defined in Regulation S under the Securities Act) in
reliance on Regulation S and (ii) the Closing Date with respect to such
Securities.
"Restricted Securities Legend" means the legend set forth in
Section 2.3(e).
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Securities" means all Initial Securities offered
and sold to QIBs in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depositary) or any successor thereto, who
shall initially be the Trustee.
"Shelf Registration Statement" means a registration
statement filed by the Issuers in connection with the offer and sale of Initial
Securities pursuant to the Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities
and any other Securities that bear or are required to bear the Restricted
Securities Legend.
1.1. Other Definitions.
AP-2
Term: |
Defined in Section: |
"Agent Members" |
2.1(b) |
"IAI Global Securities" |
2.1(a) |
"Global Securities" |
2.1(a) |
"Regulation S Global Securities" |
2.1(a) |
"Rule 144A Global Securities" |
2.1(a) |
2. The Securities.
2.1. Form and Dating. The Initial Securities issued on
the date hereof shall be (i) offered and sold by the Issuers pursuant to the
Purchase Agreement and (ii) resold, initially only to (A) QIBs in reliance on
Rule 144A and (B) Persons other than U.S. Persons (as defined in Regulation S)
in reliance on Regulation S. Such Initial Securities may thereafter be
transferred to, among others, QIBs, purchasers in reliance on Regulation S and,
except as set forth below, IAIs in accordance with Rule 501. Additional
Securities offered after the date hereof may be offered and sold by the Issuers
from time to time pursuant to one or more Purchase Agreements in accordance with
applicable law.
(a) Global Securities. Rule 144A Securities shall be issued
initially in the form of one or more permanent global Securities in definitive,
fully registered form (collectively, the "Rule 144A Global Securities")
and Regulation S Securities shall be issued initially in the form of one or more
global Securities (collectively, the "Regulation S Global Securities"),
in each case without interest coupons and bearing the Global Securities Legend
and Restricted Securities Legend, which shall be deposited on behalf of the
purchasers of the Securities represented thereby with the Securities Custodian,
and registered in the name of the Depositary or a nominee of the Depositary,
duly executed by the Issuers and authenticated by the Trustee as provided in
this Indenture. One or more global securities in definitive, fully registered
form without interest coupons and bearing the Global Securities Legend and the
Restricted Securities Legend (collectively, the "IAI Global Security")
shall also be issued on the Closing Date, deposited with the Securities
Custodian, and registered in the name of the Depositary or a nominee of the
Depositary, duly executed by the Issuers and authenticated by the Trustee as
provided in this Indenture to accommodate transfers of beneficial interests in
the Securities to IAIs subsequent to the initial distribution. Beneficial
ownership interests in a Regulation S Global Security shall not be exchangeable
for interests in a Rule 144A Global Security, IAI Global Security or any other
Security without a Restricted Securities Legend until the expiration of the
Restricted Period. Each Rule 144A Global Security, IAI Global Security and
Regulation S Global Security is referred to herein as a "Global Security"
and are collectively referred to herein as "Global Securities."
The aggregate principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee as hereinafter provided.
AP-3
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only
to a Global Security deposited with or on behalf of the Depositary.
The Issuers shall execute and the Trustee shall, in accordance with this
Section 2.1(b) and pursuant to an order of the Issuers, authenticate and deliver
initially one or more Global Securities that (a) shall be registered in the name
of the Depositary for such Global Security or Global Securities or the nominee
of such Depositary and (b) shall be delivered by the Trustee to such Depositary
or pursuant to such Depositary's instructions or held by the Trustee as
Securities Custodian.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary or by the Trustee as Securities Custodian
or under such Global Security, and the Depositary may be treated by the Issuers,
the Trustee and any agent of the Issuers or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall (x) prevent the Issuers, the Trustee or any agent of the
Issuers or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or (y) impair, as between the
Depositary and its Agent Members, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(c) Definitive Securities. Except as provided in Section 2.3 or
2.4, owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities.
2.2. Authentication. The Trustee shall authenticate and make available
for delivery upon a written order of the Issuers signed by one Officer (1) 2009
Original Securities for original issue on the date hereof, in an aggregate
principal amount of $250,000,000, 2014 Original Securities for original issue on
the date hereof, in an aggregate principal amount of $250,000,000 and 2034
Original Securities for original issue on the date hereof, in an aggregate
principal amount of $250,000,000, (2) subject to the terms of this Indenture,
Additional Securities in an unlimited principal amount and (3) the Exchange
Securities for issue only in a Registered Exchange Offer pursuant to a
Registration Agreement and for a like principal amount of Initial Securities
exchanged pursuant thereto. Such order shall specify the amount of the
Securities to be authenticated, the date on which the original issue of
Securities is to be authenticated and whether the Securities are to be Initial
Securities or Exchange Securities. The aggregate principal amount of Securities
outstanding at any time is unlimited.
2.3. Transfer and Exchange. (a) Transfer and Exchange
of Definitive Securities. When Definitive Securities are presented to the
Registrar with a request:
AP-4
(x) to register the transfer of such Definitive Securities or
(y) to exchange such Definitive Securities for an equal principal amount
of Definitive Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested
if its reasonable requirements for such transaction are met; provided, however,
that the Definitive Securities surrendered for transfer or exchange shall be:
(i) duly endorsed or accompanied by a written instrument of transfer in
form reasonably satisfactory to the Issuers and the Registrar, duly executed
by the Holder thereof or his attorney duly authorized in writing; and
(ii) accompanied by the following additional information and documents,
as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse side of the Initial Security); or
(B) if such Definitive Securities are being transferred to an Issuer,
a certification to that effect (in the form set forth on the reverse
side of the Initial Security); or
(C) if such Definitive Securities are being transferred pursuant to
an exemption from registration in accordance with Rule 144 under the
Securities Act or in reliance upon another exemption from the
registration requirements of the Securities Act, (i) a certification to
that effect (in the form set forth on the reverse side of the Initial
Security) and (ii) if the Issuers so request, an opinion of counsel or
other evidence reasonably satisfactory to it as to the compliance with
the restrictions set forth in the legend set forth in Section 2.3(e)(i).
(b) Restrictions on Transfer of a Definitive
Security for a Beneficial Interest in a
Global Security. A Definitive Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by a written instrument of transfer in
form reasonably satisfactory to the Issuers and the Registrar, together with:
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(i) certification (in the form set forth on the reverse side of the
Initial Security) that such Definitive Security is being transferred (A) to
a QIB in accordance with Rule 144A, (B) to an IAI that has furnished to the
Trustee a signed letter substantially in the form of Exhibit C or Exhibit F,
as applicable, or (C) outside the United States in an offshore transaction
within the meaning of Regulation S and in compliance with Rule 904 under the
Securities Act; and
(ii) written instructions directing the Trustee to make, or to direct the
Securities Custodian to make, an adjustment on its books and records with
respect to such Global Security to reflect an increase in the aggregate
principal amount of the Securities represented by the Global Security, such
instructions to contain information regarding the Depositary account to be
credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct
the Securities Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged for certificated securities pursuant to Section 2.4, the
Issuers shall issue and the Trustee shall authenticate, upon written order of
the Issuers in the form of an Officers' Certificate, a new Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securities.
(i) The transfer and exchange of Global Securities or beneficial interests
therein shall be effected through the Depositary, in accordance with this
Indenture (including applicable restrictions on transfer set forth herein, if
any) and the procedures of the Depositary therefor. A transferor of a beneficial
interest in a Global Security shall deliver to the Depository a written order
given in accordance with the Depositary's procedures containing information
regarding the participant account of the Depositary to be credited with a
beneficial interest in such Global Security or another Global Security and such
account shall be credited in accordance with such order with a beneficial
interest in the applicable Global Security and the account of the Person making
the transfer shall be debited by an amount equal to the beneficial interest in
the Global Security being transferred. Transfers by an owner of a beneficial
interest in the Rule 144A Global Security or the IAI Global Security to a
transferee who takes delivery of such interest through the Regulation S Global
Security, whether before or after the expiration of the Restricted Period, shall
be made only upon receipt by the Trustee of a certification in the form provided
on the reverse of the Initial Securities from the transferor to the effect
AP-6
that
such transfer is being made in accordance with Regulation S or (if available)
Rule 144 under the Securities Act. In the case of a transfer of a beneficial
interest in the Regulation S Global Security or the Rule 144A Global
Security for an interest in the IAI Global Security, the transferee must furnish
a signed letter substantially in the form of Exhibit 2 to the Trustee.
(ii) If the proposed transfer is a transfer of a beneficial interest in
one Global Security to a beneficial interest in another Global Security, the
Securities Custodian shall reflect on its books and records the date and an
increase in the principal amount of the Global Security to which such
interest is being transferred in an amount equal to the principal amount of
the interest to be so transferred, and the Securities Custodian shall
reflect on its books and records the date and a corresponding decrease in
the principal amount of the Global Security from which such interest is
being transferred.
(iii) Notwithstanding any other provisions of this Appendix (other than
the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(iv) In the event that a Global Security is exchanged for Definitive
Securities pursuant to Section 2.4 prior to the consummation of a
Registered Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Securities, such Securities may be exchanged
only in accordance with such procedures as are substantially consistent with
the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Securities intended to
ensure that such transfers comply with Rule 144A, Regulation S or such other
applicable exemption from registration under the Securities Act, as the case
may be) and such other procedures as may from time to time be adopted by the
Issuers.
(d) Restrictions on Transfer of Regulation S Global Security. (i)
Prior to the expiration of the Restricted Period, interests in the
Regulation S Global Security may only be sold, pledged or transferred in
accordance with the Applicable Procedures and only (A) to an Issuer, (B) so long
as such security is eligible for resale pursuant to Rule 144A, to a Person whom
the selling holder reasonably believes is a QIB that purchases for its own
account or for the account of a QIB to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A, (C) in an offshore
transaction in accordance with Regulation S, (D) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 (if applicable) under
the Securities Act, (E) to an IAI purchasing for its own account, or for the
account of such an IAI, in a minimum
AP-7
principal amount of Securities of $250,000
or (F) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States. Prior to the expiration of the Restricted Period, transfers
by an owner of a beneficial interest in a Regulation S Global Security to a
transferee who takes delivery of such interest through a Rule 144A Global
Security or IAI Global Security shall be made only in accordance with Applicable
Procedures and upon receipt by the Trustee of a written certification from the
transferor of the beneficial interest in the form provided on the reverse of the
Initial Security to the effect that such transfer is being made to (i) a Person
whom the transferor reasonably believes is a QIB within the meaning of Rule 144A
in a transaction meeting the requirements of Rule 144A or (ii) an IAI purchasing
for its own account, or for the account of such an IAI, in a minimum principal
amount of the Securities of $250,000. Such written certification shall no longer
be required after the expiration of the Restricted Period. In the case of a
transfer of a beneficial interest in a Regulation S Global Security for an
interest in an IAI Global Security, the transferee must furnish to the Trustee a
signed letter substantially in the form of Exhibit C or Exhibit F, as
applicable.
(ii) Upon the expiration of the Restricted Period, beneficial ownership
interests in a Regulation S Global Security shall be transferable in
accordance with applicable law and the other terms of this Indenture.
(e) Legend. (i) Except as permitted by the following paragraphs (ii),
(iii), (iv) or (vi), each Security certificate evidencing the Global Securities
and the Definitive Securities (and all Securities issued in exchange therefor or
in substitution thereof) shall bear a legend in substantially the following form
(each defined term in the legend being defined as such for purposes of the
legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A ("RULE 144A") UNDER THE SECURITIES ACT),
(2) AGREES NOT TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR
TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS
AP-8
PERMITTED BY RULE 144(k) OF THE SECURITIES ACT) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH ANY ISSUER OR ANY
"AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT)
OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) OR (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY
APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE") EXCEPT
(A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
(D) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES
TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE
PROPERTY OF SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR
THEIR CONTROL, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND; PROVIDED THAT THE ISSUERS AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE
FOREGOING CASES, BUT ONLY IF THIS SECURITY IS NOT A GLOBAL SECURITY (AS
DEFINED IN THE INDENTURE REFERRED TO HEREIN), TO REQUIRE THAT A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE ISSUERS AND THE TRUSTEE.
THIS LEGEND WILL BE REMOVED
AP-9
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE."
Each Security offered and sold in reliance on Regulation S under the
Securities Act shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT IT IS NOT A "U.S. PERSON" (AS DEFINED IN REGULATION S
("REGULATION S") UNDER THE SECURITIES ACT), (2) AGREES
NOT TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE DATE
WHICH IS 40 DAYS AFTER THE ORIGINAL ISSUE DATE HEREOF (THE "REGULATION
S RESTRICTED PERIOD") EXCEPT (A) TO THE ISSUERS, (B) PURSUANT
TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A ("RULE 144A") UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN
EACH CASE TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND; PROVIDED THAT THE ISSUERS AND THE TRUSTEE SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
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COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE TERMINATION
OF THE REGULATION S RESTRICTED PERIOD."
Each Definitive Security shall bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Security that is
a Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security that
does not bear the legends set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security if the Holder certifies in
writing to the Registrar that its request for such exchange was made in
reliance on Rule 144 (such certification to be in the form set forth on the
reverse of the Initial Security).
(iii) After a transfer of any Initial Securities during the period of the
effectiveness of the Shelf Registration Statement with respect to such
Initial Securities, all requirements pertaining to the Restricted Securities
Legend on such Initial Securities shall cease to apply and the requirements
that any such Initial Securities be issued in global form shall continue to
apply.
(iv) Upon the consummation of a Registered Exchange Offer with respect to
the Initial Securities pursuant to which Holders of such Initial Securities
are offered Exchange Securities in exchange for their Initial Securities,
all requirements pertaining to Initial Securities that Initial Securities be
issued in global form shall continue to apply, and Exchange Securities in
global form without the Restricted Securities Legend shall be available to
Holders that exchange such Initial Securities in such Registered Exchange
Offer.
(v) Upon a sale or transfer after the expiration of the Restricted Period
of any Initial Security acquired pursuant to Regulation S, all requirements
that such Initial Security bear the Restricted Securities
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Legend shall cease
to apply and the requirement that any such Initial Security be issued in
global form shall continue to apply.
(vi) Any Additional Securities sold in a registered offering shall not be
required to bear the Restricted Securities Legend.
(f) Cancellation or Adjustment of Global Security.
At such time as all beneficial interests in a Global Security have either been
exchanged for Definitive Securities, transferred, redeemed, repurchased or
canceled, such Global Security shall be returned by the Depositary to the
Trustee for cancellation or retained and canceled by the Trustee. At any time
prior to such cancellation, if any beneficial interest in a Global Security is
exchanged for Definitive Securities, transferred in exchange for an interest in
another Global Security, redeemed, repurchased or canceled, the principal amount
of Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
(g) Obligations with Respect to Transfers and
Exchanges of Securities.
(i) To permit registrations of transfers and exchanges, the Issuers shall
execute and the Trustee shall authenticate, Definitive Securities and Global
Securities at the Registrar's request.
(ii) No service charge shall be made for any registration of transfer or
exchange, but the Issuers may require payment of a sum sufficient to cover
any transfer tax, assessments, or similar governmental charge payable in
connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 3.06 and 9.05 of this Indenture).
(iii) Prior to the due presentation for registration of transfer of any
Security, the Issuers, the Trustee, the Paying Agent or the Registrar may
deem and treat the Person in whose name a Security is registered as the
absolute owner of such Security for the purpose of receiving payment of
principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the
Issuers, the Trustee, the Paying Agent or the Registrar shall be affected by
notice to the contrary.
(iv) All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture shall evidence the same debt and shall be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
AP-12
(h) No Obligation of the Trustee. (i) The
Trustee shall have no responsibility or obligation to any beneficial owner of a
Global Security, any Agent Member, or any other Person with respect to the
accuracy of the records of the Depositary or its nominee or of any Agent Member,
with respect to any ownership interest in the Securities or with respect to the
delivery to any participant, member, beneficial owner or other Person (other
than the Depositary) of any notice (including any notice of redemption or
repurchase) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and all
payments to be made to Holders under the Securities shall be given or made only
to the registered Holders (which shall be the Depositary or its nominee in the
case of a Global Security). The rights of beneficial owners in any Global
Security shall be exercised only through the Depositary subject to the
applicable rules and procedures of the Depositary. The Trustee may rely and
shall be fully protected in relying upon information furnished by the Depositary
with respect to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor, determine
or inquire as to compliance with any restrictions on transfer imposed under
this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Agent
Members or beneficial owners in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by, the
terms of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
2.4. Definitive Securities. (a) A Global Security deposited
with the Depositary or with the Trustee as Securities Custodian pursuant to
Section 2.1 shall be transferred to the beneficial owners thereof in the form of
Definitive Securities in an aggregate principal amount equal to the principal
amount of such Global Security, in exchange for such Global Security, only if
such transfer complies with Section 2.3 and (i) the Depositary notifies the
Issuers that it is unwilling or unable to continue as a Depositary for such
Global Security or if at any time the Depositary ceases to be a "clearing
agency" registered under the Exchange Act, and a successor depositary is
not appointed by the Issuers within 90 days of such notice, or (ii) the Issuers,
in their sole discretion, notify the Trustee in writing that they elect to cause
the issuance of certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners thereof
pursuant to this Section 2.4 shall be surrendered by the Depositary to the
Trustee, to be so transferred, in whole or from time to time in part, without
charge, and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Security, an equal aggregate principal amount of
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Definitive Securities of authorized denominations. Any portion of a Global
Security transferred pursuant to this Section shall be executed, authenticated
and delivered only in denominations of $1,000 and any integral multiple thereof
and registered in such names as the Depositary shall direct. Any certificated
Initial Security in the form of a Definitive Security delivered in exchange for
an interest in the Global Security shall, except as otherwise provided by
Section 2.3(e), bear the Restricted Securities Legend.
(c) Subject to the provisions of Section 2.4(b), the registered Holder of a
Global Security may grant proxies and otherwise authorize any Person, including
Agent Members and Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this Indenture or the
Securities.
(d) In the event of the occurrence of any of the events specified in Section
2.4(a)(i), (ii) or (iii), the Issuers will promptly make available to the
Trustee a reasonable supply of Definitive Securities in fully registered form
without interest coupons.
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EXHIBIT A
[FORM OF FACE OF 2009 INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
A-1
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
("RULE 144A") UNDER THE SECURITIES ACT), (2) AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO (X) THE DATE WHICH
IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) OF
THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH ANY ISSUER OR ANY "AFFILIATE" (AS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT) OF ANY ISSUER WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) OR (Y) SUCH LATER DATE, IF
ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION
TERMINATION DATE") EXCEPT (A) TO THE ISSUERS (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO
ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF
SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL,
AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
THE ISSUERS AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE
A-2
OR TRANSFER (I) PURSUANT TO CLAUSE (E) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, BUT ONLY IF THIS SECURITY
IS NOT A GLOBAL SECURITY (AS DEFINED IN THE INDENTURE REFERRED TO HEREIN), TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE
OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE ISSUERS AND
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
[Definitive Securities Legend]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.
A-3
4.250% Senior Note due 2009
No. ___ CUSIP No.
JONES APPAREL GROUP, INC., a Pennsylvania corporation, JONES APPAREL GROUP
HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP USA, INC., a
Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a Delaware
corporation, and JONES RETAIL CORPORATION, a New Jersey corporation, promise to
pay to Cede & Co., or registered assigns, the principal sum of
$
( Dollars)
on November 15, 2009.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other side of
this Security.
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IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
|
JONES APPAREL GROUP, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP USA, INC.
By: __________________
Name:
Title:
|
|
NINE WEST FOOTWEAR CORPORATION
By: __________________
Name:
Title:
|
|
JONES RETAIL CORPORATION
By: __________________
Name:
Title:
|
A-5
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
SUNTRUST BANK, as Trustee, certifies that this is one of the Securities
referred to in the Indenture.
Dated:
By: _____________________
Authorized Signatory
A-6
[FORM OF REVERSE SIDE OF 2009 INITIAL SECURITY]
4.250% Senior Note due 2009
1. Interest.
(a) JONES APPAREL GROUP, INC., a Pennsylvania corporation, JONES APPAREL
GROUP HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP USA, INC.,
a Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a Delaware
corporation and JONES RETAIL CORPORATION, a New Jersey corporation (such
corporations and, their successors and assigns under the Indenture are
collectively referred to herein as the "Issuers"), promise
to pay interest on the principal amount of this Security (a "2009
Note") at the rate per annum shown above. The Issuers shall pay
interest semiannually on May 15 and November 15 of each year. Interest on
the Securities shall accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from November 22, 2004. Interest
shall be computed on the basis of a 360-day year of twelve 30-day months.
The Issuers shall pay interest on overdue principal at the rate borne by the
Securities, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
(b) Additional Interest. The holder of this Security is entitled
to the benefits of an Exchange and Note Registration Rights Agreement, dated
November 22, 2004, among the Issuers and the Initial Purchasers named
therein (the "Registration Agreement"). Capitalized terms
used in this paragraph (b) but not defined herein have the meanings assigned
to them in the Registration Agreement. If (i) the Registered Exchange Offer
is not consummated on or prior to 210 days after the Issue Date, (ii) the
Shelf Registration Statement is not declared effective on or prior to the
later of (A) the date that is 210 days after the Issue Date and (B) 90 days
after the obligation to file such Shelf Registration Statement arises under
Section 2 of the Registration Agreement or (iii) the Shelf Registration
Statement is filed and declared effective within the period prescribed by
clause (ii) but shall thereafter cease to be effective at any time that the
Issuers are obligated to maintain the effectiveness thereof (other than (A)
as contemplated by Section 4(o) of the Registration Agreement, provided
that the period of time during which the Shelf Registration Statement is not
effective pursuant to Section 4(o) of the Registration Agreement does not
exceed either two periods of up to 45 days or 90 days in the aggregate
during any 365-day period, or (B) as required by applicable law) (each such
event referred to in clauses (i) through (iii), a "Registration
Default"), the Issuers shall be obligated to pay additional interest to
each Holder of Transfer Restricted Securities, during the period of one or
more such Registration Defaults, at a rate of 0.25% per annum for the first
90 days and 0.50% per annum thereafter, determined daily, on the principal
A-7
amount of the Securities constituting Transfer Restricted Securities held by
such holder until (i) the Registered Exchange Offer is consummated, (ii) the
Shelf Registration Statement is declared effective or (iii) the Shelf
Registration Statement again becomes effective, as the case may be.
Following the cure of all Registration Defaults, the accrual of additional
interest shall cease. All accrued additional interest shall be paid to
holders in the same manner as interest payments on the Securities on
semi-annual payment dates which correspond to interest payment dates for the
Securities. The Trustee shall have no responsibility with respect to the
determination of the amount of any such additional interest. As used herein,
the term "Transfer Restricted Securities" means (i) each
Initial Security until the date on which such Initial Security has been
exchanged for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) each Initial Security until the date on which such
Initial Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iii)
each Initial Security until the date on which such Initial Security is
distributed to the public pursuant to Rule 144 under the Securities Act or
is saleable pursuant to Rule 144(k) under the Securities Act.
2. Method of Payment. The Issuers shall pay interest on
the Securities (except defaulted interest) to the Persons who are registered
holders of Securities at the close of business on the May 1 or November 1
immediately preceding the interest payment date even if Securities are canceled
after the record date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Issuers shall pay principal, premium, additional interest and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium, additional
interest and interest) shall be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Company. The Issuers
will make all payments in respect of a certificated Security (including
principal, premium and interest), by mailing a check to the registered address
of each Holder thereof; provided, however, that payments on the
Securities may also be made, in the case of a Holder of at least $1,000,000
aggregate principal amount of Securities, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).
3. Paying Agent and Registrar. Initially,
SunTrust Bank, a national banking corporation associated under the laws of the
State of Georgia (the "Trustee"), will act as Paying Agent and
Registrar. The Issuers may appoint and change any Paying Agent, Registrar or
coregistrar without notice. An Issuer or
A-8
any domestically incorporated Wholly
Owned Restricted Subsidiary of an Issuer may act as Paying Agent, Registrar or
coregistrar.
4. Indenture. The Issuers issued the Securities under an Indenture
dated as of November 22, 2004 (the "Indenture") among the
Issuers and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date
of the Indenture (the "TIA"). Terms defined in the Indenture
and not defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all terms and provisions of the Indenture, and
Securityholders are referred to the Indenture, and the TIA for a statement of
such terms and provisions. In the event of any conflict between the terms of
this Security and the terms of the Indenture, the Indenture shall govern.
The Securities are senior unsecured obligations of the Issuers. The Issuers
may issue Additional Securities of any series pursuant to the Indenture. This
Security is one of the Original Securities referred to in the Indenture. The
Securities include the Original Securities, any Additional Securities and any
Exchange Securities issued in exchange for Initial Securities. With respect to
each series of Securities, the Original Securities of such series, any
Additional Securities of such series and all Exchange Securities of such series
are treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of the Issuers and the Restricted
Subsidiaries to, among other things, create or incur Liens or enter into sale
and leaseback transactions. The Indenture also imposes limitations on the
ability of the Issuers to convey, transfer or lease all or substantially all of
the assets of any Issuer.
5. Optional Redemption. The 2009 Notes will be redeemable as a
whole or in part, at the option of the Issuers at any time or from time to time,
at a redemption price equal to the greater of (i) 100% of their principal amount
or (ii) the sum of the present values of the Remaining Scheduled Payments (as
defined below) discounted to the date of redemption, on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months), at a rate equal to
the sum of the Treasury Rate (as defined below) and 10 basis points.
In the case of each of clause (i) and (ii), accrued interest will be payable
to the redemption date.
"Treasury Rate" means, with respect to any redemption date,
(a) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded U.S. Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding
A-9
to the Comparable Treasury Issue (if no maturity
is within three months before or after the remaining life (as defined in the
definition of Comparable Treasury Issue) of the Securities, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
will be determined and the Treasury Rate will be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest month) or (b)
if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term ("remaining life") of the
Securities of such series to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
"Comparable Treasury Price" means, with respect to any
redemption date, (1) the average of five Reference Treasury Dealer Quotations
for such redemption date after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (2) if the Independent Investment
Banker obtains fewer than five such Reference Treasury Dealer Quotations, the
average of all such quotations.
"Reference Treasury Dealer" means Citigroup Global Markets
Inc. and J.P. Morgan Securities Inc. and their respective successors and, at the
Issuers' option, three other nationally recognized investment banking firms
that are primary dealers of U.S. Government securities in New York City (each, a
"Primary Treasury Dealer"). If any of the foregoing shall cease
to be a Primary Treasury Dealer, the Issuers shall substitute therefor another
Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third business day preceding such redemption
date.
"Remaining Scheduled Payments" means, with respect to any
Security to be redeemed, the remaining scheduled payments of principal of and
interest on such Security that would be due after the related redemption date
but for such redemption. If such redemption date is not an interest payment date
with respect
A-10
to such Security, the amount of the next succeeding scheduled
interest payment on such Security will be reduced by the amount of interest
accrued on such note to such redemption date.
"Independent Investment Banker" means either Citigroup
Global Markets Inc. or J.P. Morgan Securities Inc., as specified by the Issuers,
or, if neither of the foregoing is willing or able to select the Comparable
Treasury Issue, an independent investment banking institution of national
standing appointed by the Issuers.
6. Sinking Fund. The Securities are not subject to any sinking
fund.
7. Notice of Redemption. Notice of redemption will be
mailed by first- class mail at least 30 days but not more than 60 days before
the redemption date to each Holder of Securities to be redeemed at his or her
registered address. Securities in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued and unpaid interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date, interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
8. Denominations, Transfer, Exchange. The Securities are
in registered form without coupons in denominations of $1,000 and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or transfer or
exchange any Securities for a period of 15 days prior to a selection of
Securities to be redeemed.
9. Persons Deemed Owners. The registered Holder of this
Security may be treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent shall pay
the money back to the Issuers upon their written request unless an abandoned
property law designates another Person. After any such payment, Holders entitled
to the money must look only to the Issuers and not to the Trustee for payment.
11. Discharge and Defeasance. Subject to certain
conditions, the Issuers at any time may terminate some of or all their
obligations under the
A-11
Securities and the Indenture if the Issuers deposit with
the Trustee money or U.S. Government Obligations for the payment of principal
and interest on the Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver. Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Securities may be amended without prior
notice to any Securityholder but with the written consent of the Holders of a
majority in aggregate principal amount of the outstanding Securities and (ii)
any default or noncompliance with any provisions may be waived with the consent
of the Holders of a majority in principal amount of the outstanding Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of Securities, the Issuers and the Trustee may amend the Indenture or
the Securities (i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article 5 of the Indenture; (iii) to provide for
uncertificated Securities in addition to or in place of certificated Securities;
(iv) to add guarantees or co-obligors with respect to the Securities or to
secure the Securities; (v) to add to the covenants for the benefit of the
Securityholders or to surrender any right or power conferred upon the Issuers;
(vi) to comply with the requirements of the SEC in order to effect or maintain
the qualification of the Indenture under the TIA; (vii) to make any change that
does not adversely affect the rights of any Securityholder; or (viii) to provide
for the issuance of the Exchange Securities.
13. Defaults and Remedies. If an Event of Default occurs
(other than an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of any Issuer) and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the outstanding Securities
may declare the principal of and accrued but unpaid interest on all the
Securities to be due and payable. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of any Issuer occurs, the
principal of and interest on all the Securities shall become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in principal
amount of the outstanding Securities may rescind any such acceleration with
respect to the Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be under
no obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders have offered to
the Trustee indemnity or security satisfactory to it against any loss, liability
or expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Securities unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
25% in principal amount of the outstanding Securities have requested in writing
that the Trustee pursue the remedy, (iii) such Holders have offered the Trustee
reasonable
A-12
security or indemnity against any loss, liability or expense, (iv)
the Trustee has not complied with such request within 60 days after the receipt
of the request and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Securities have not given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would subject the Trustee to personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
14. Trustee Dealings with the Issuers.
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuers or their Affiliates and may otherwise deal with the Issuers
or their Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of any Issuer shall not have any
liability for any obligations of such Issuer under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
16. Authentication. This Security shall not be valid until an
authorized signatory of the Trustee (or an authenticating agent) manually signs
the certificate of Authentication on the other side of this Security.
17. Abbreviations. Customary abbreviations may be used in the name of
a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and UIG/M/A (=Uniform Gift to
Minors Act).
18. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
A-13
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Issuers have
caused CUSIP numbers to be printed on the Securities and have directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
The Issuers will furnish to any Holder of Securities upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Security.
A-14
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
_________________________________________________________________
(Print or type assignee's name, address and zip code)
__________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _________________ agent to transfer this Security on
the books of the Issuers. The agent may substitute another to act for him.
Date: __________________
Your Signature: ___________________
Sign exactly as your name appears on the other side of this Security.
A-15
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $______________ principal amount of Securities
held in (check applicable space) ______ book-entry or _______ definitive form by
the undersigned.
The undersigned (check one box below):
[ ] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depositary a Security or
Securities in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Security (or the portion thereof indicated above);
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to an Issuer; or
(2) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933)
that purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is being made
in reliance on Rule 144A, in each case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(4) [ ] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with Rule 904
under the Securities Act of 1933; or
(5) [ ] to an institutional "accredited investor"(as
defined in Rule 501(a)(1),(2), (3) or (7) under the Securities Act of 1933)
that has furnished to the Trustee a signed letter containing certain
representations and agreements; or
A-16
(6) [ ] pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any Person other
than the registered holder thereof, provided, however, that if box
(4), (5) or (6) is checked, the Trustee may require, prior to registering any
such transfer of the Securities, such legal opinions, certifications and other
information as the Issuers have reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933.
____________________________
Your Signature
Signature Guarantee:
Date: ____________
____________________________
Signature of Signature Guaranteed
Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Issuers as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
Signature
NOTICE: To be executed by an executive officer
A-17
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $ .
The following increases or decreases in this Global Security have been made:
Date of Exchange
Amount of decrease in Principal Amount of this Global Security
Amount of increase in Principal Amount of this Global Security
Principal Amount of this Global Security following such decrease or
increase
Signature of authorized signatory of Trustee or Securities Custodian
A-18
EXHIBIT B
[FORM OF FACE OF 2009 EXCHANGE SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE OF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
B-1
4.250% Senior Note due 2009
No. ___ CUSIP No.
JONES APPAREL GROUP, INC., a Pennsylvania corporation, JONES APPAREL GROUP
HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP USA, INC., a
Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a Delaware
corporation, and JONES RETAIL CORPORATION, a New Jersey corporation, promise to
pay to Cede & Co., or registered assigns, the principal sum of
$
( Dollars)
on November 15, 2009.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other side of
this Security.
B-2
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
|
JONES APPAREL GROUP, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP USA, INC.
By: __________________
Name:
Title:
|
|
NINE WEST FOOTWEAR CORPORATION
By: __________________
Name:
Title:
|
|
JONES RETAIL CORPORATION
By: __________________
Name:
Title:
|
B-3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
SUNTRUST BANK, as Trustee, certifies that this is one of the Securities
referred to in the Indenture.
Dated:
By: _______________________
Authorized Signatory
B-4
FORM OF REVERSE SIDE OF 2009 EXCHANGE SECURITY
4.250% Senior Note due 2009
1. Interest. JONES APPAREL GROUP, INC. a Pennsylvania corporation,
JONES APPAREL GROUP HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP
USA, INC., a Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a
Delaware corporation, and JONES RETAIL CORPORATION, a New Jersey corporation
(such corporations, and their successors and assigns under the Indenture are
collectively referred to herein as the "Issuers"), promise to
pay interest on the principal amount of this Security (a "2009 Note")
at the rate per annum shown above. The Issuers shall pay interest semiannually
on May 15 and November 15 of each year. Interest on the Securities shall accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from November 22, 2004. Interest shall be computed on the basis of a
360-day year of twelve 30-day months. The Issuers shall pay interest on overdue
principal at the rate borne by the Securities, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment. The Issuers shall pay interest on
the Securities (except defaulted interest) to the Persons who are registered
holders of Securities at the close of business on the May 1 or November 1
immediately preceding the interest payment date even if Securities are canceled
after the record date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Issuers shall pay principal, premium and interest in money of the United States
of America that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium and interest) shall be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Issuers will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however,
that payments on the Securities may also be made, in the case of a Holder of at
least $1,000,000 aggregate principal amount of Securities, by wire transfer to a
U.S. dollar account maintained by the payee with a bank in the United States if
such Holder elects payment by wire transfer by giving written notice to the
Trustee or the Paying Agent to such effect designating such account no later
than 30 days immediately preceding the relevant due date for payment (or such
other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar. Initially,
SunTrust Bank, a national banking corporation associated under the laws of the
State of Georgia (the "Trustee"), will act as Paying Agent and
Registrar. The Issuers may appoint and change any Paying Agent, Registrar or
coregistrar without notice. An Issuer or
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any domestically incorporated Wholly
Owned Restricted Subsidiary of an Issuer may act as Paying Agent, Registrar or
coregistrar.
4. Indenture. The Issuers issued the Securities under an Indenture
dated as of November 22, 2004 (the "Indenture") among the
Issuers and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) as in effect on the date of the
Indenture (the "TIA"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all terms and provisions of the Indenture, and
Securityholders are referred to the Indenture and the TIA for a statement of
such terms and provisions. In the event of any conflict between the terms of
this Security and the terms of the Indenture, the Indenture shall govern.
The Securities are senior unsecured obligations of the Issuers. The Issuers
may issue Additional Securities of any series pursuant to the Indenture. The
Securities include the Original Securities, any Additional Securities and any
Exchange Securities issued in exchange for Initial Securities. With respect to
each series of Securities, the Original Securities of such series, any
Additional Securities of such series and all Exchange Securities of such series
are treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of the Issuers and the Restricted
Subsidiaries to, among other things, create or incur Liens or enter into sale
and leaseback transactions. The Indenture also imposes limitations on the
ability of the Issuers to convey, transfer or lease all or substantially all of
the assets of any Issuer.
5. Optional Redemption. The 2009 Notes will be redeemable as a
whole or in part, at the option of the Issuers at any time or from time to time,
at a redemption price equal to the greater of (i) 100% of their principal amount
or (ii) the sum of the present values of the Remaining Scheduled Payments (as
defined below) discounted to the date of redemption, on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months), at a rate equal to
the sum of the Treasury Rate (as defined below) and 10 basis points.
In the case of each of clause (i) and (ii), accrued interest will be payable
redemption date.
"Treasury Rate" means, with respect to any redemption date,
(a) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded U.S. Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the remaining life (as defined in the
definition of Comparable Treasury
B-6
Issue) of the Securities, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
will be determined and the Treasury Rate will be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest month) or (b)
if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term ("remaining life") of the
Securities of such series to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
"Comparable Treasury Price" means, with respect to any
redemption date, (1) the average of five Reference Treasury Dealer Quotations
for such redemption date after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (2) if the Independent Investment
Banker obtains fewer than five such Reference Treasury Dealer Quotations, the
average of all such quotations.
"Reference Treasury Dealer" means Citigroup Global Markets
Inc. and J.P. Morgan Securities Inc. and their respective successors and, at the
Issuers' option, three other nationally recognized investment banking firms
that are primary dealers of U.S. Government securities in New York City (each, a
"Primary Treasury Dealer"). If any of the foregoing shall cease
to be a Primary Treasury Dealer, the Issuers shall substitute therefor another
Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third business day preceding such redemption
date.
"Remaining Scheduled Payments" means, with respect to any
Security to be redeemed, the remaining scheduled payments of principal of and
interest on such Security that would be due after the related redemption date
but for such redemption. If such redemption date is not an interest payment date
with respect to such Security, the amount of the next succeeding scheduled
interest payment
B-7
on such Security will be reduced by the amount of interest
accrued on such note to such redemption date.
"Independent Investment Banker" means either Citigroup
Global Markets Inc. or J.P. Morgan Securities Inc., as specified by the Issuers,
or, if neither of the foregoing is willing or able to select the Comparable
Treasury Issue, an independent investment banking institution of national
standing appointed by the Issuers.
6. Sinking Fund. The Securities are not subject to any sinking
fund.
7. Notice of Redemption. Notice of redemption will be
mailed by first- class mail at least 30 days but not more than 60 days before
the redemption date to each Holder of Securities to be redeemed at his or her
registered address. Securities in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued and unpaid interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
8. Denominations, Transfer, Exchange. The Securities are
in registered form without coupons in denominations of $1,000 and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or transfer or
exchange any Securities for a period of 15 days prior to a selection of
Securities to be redeemed or 15 days before an interest payment date.
9. Persons Deemed Owners. The registered Holder of this
Security may be treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent shall pay
the money back to the Issuers upon their written request unless an abandoned
property law designates another Person. After any such payment, Holders entitled
to the money must look only to the Issuers and not to the Trustee for payment.
11. Discharge and Defeasance. Subject to certain
conditions, the Issuers at any time may terminate some of or all their
obligations under the Securities and the Indenture if the Issuers deposit with
the Trustee money or U.S.
B-8
Government Obligations for the payment of principal
and interest on the Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver. Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Securities may be amended without prior
notice to any Securityholder but with the written consent of the Holders of a
majority in aggregate principal amount of the outstanding Securities and (ii)
any default or noncompliance with any provisions may be waived with the consent
of the Holders of a majority in principal amount of the outstanding Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of Securities, the Issuers and the Trustee may amend the Indenture or
the Securities (i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article 5 of the Indenture; (iii) to provide for
uncertificated Securities in addition to or in place of certificated Securities;
(iv) to add guarantees or co-obligors with respect to the Securities or to
secure the Securities; (v) to add to the covenants for the benefit of the
Securityholders or to surrender any right or power conferred upon the Issuers;
(vi) to comply with the requirements of the SEC in order to effect or maintain
the qualification of the Indenture under the TIA; (vii) to make any change that
does not adversely affect the rights of any Securityholder; or (viii) to provide
for the issuance of the Exchange Securities.
13. Defaults and Remedies. If an Event of Default occurs
(other than an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of any Issuer) and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the outstanding Securities
may declare the principal of and accrued but unpaid interest on all the
Securities to be due and payable. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of any Issuer occurs, the
principal of and interest on all the Securities shall become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in principal
amount of the outstanding Securities may rescind any such acceleration with
respect to the Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be under
no obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Securities unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
25% in principal amount of the outstanding Securities have requested in writing
that the Trustee pursue the remedy, (iii) such Holders have offered the Trustee
reasonable security or indemnity against any loss, liability or expense, (iv)
the Trustee has
B-9
not complied with such request within 60 days after the receipt
of the request and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Securities have not given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would subject the Trustee to personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
14. Trustee Dealings with the Issuer.
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuers or their Affiliates and may otherwise deal with the Issuers
or their Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of any Issuer shall not have any
liability for any obligations of such Issuer under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
16. Authentication. This Security shall not be valid until an
authorized signatory of the Trustee (or an authenticating agent) manually signs
the certificate of Authentication on the other side of this Security.
17. Abbreviations. Customary abbreviations may be used in the name of
a Securityholder or an assignee, such as TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with rights of
survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=
Uniform Gift to Minors Act).
18. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
B-10
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Issuers have
caused CUSIP numbers to be printed on the Securities and have directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
The Issuers will furnish to any Holder of Securities upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Security.
B-11
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
________________________________________________________________
(Print or type assignee's name, address and zip code)
________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _________________ agent to transfer this Security on
the books of the Issuers. The agent may substitute another to act for him.
Date: _________________
Your Signature: ________________
Sign exactly as your name appears on the other side of this Security.
Signature must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guaranteed acceptable to the Trustee.
B-12
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $ .
The following increases or decreases in this Global Security have been made:
Amount of decrease in Principal Amount of this Global Security
Amount of increase in Principal Amount of this Global Security
Principal Amount of this Global Security following such decrease or
increase
Signature of authorized signatory of Trustee or Securities Custodian
B-13
EXHIBIT C
FORM OF TRANSFEREE LETTER OF REPRESENTATION
FOR 2009 NOTES
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $_________ principal
amount of the 4.250% Senior Notes due 2009 (the "Notes") of
Jones Apparel Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel
Group USA, Inc., Nine West Footwear Corporation and Jones Retail Corporation
(the "Issuers").
Upon transfer, the Securities would be registered in the name of the new
beneficial owner as follows:
Name:________________________________
Address:_______________________________
Taxpayer ID Number:_____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act")), purchasing for our own account or for
the account of such an institutional "accredited investor" at
least $250,000 principal amount of the Securities, and we are acquiring the
Securities not with a view to, or offer or sale in connection with, any
distribution in violation of the Securities Act. We have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Securities, and we invest in or
purchase securities similar to the Securities in the normal course of our
business. We, and any accounts for which we are acting, are each able to bear
the economic risk of our or its investment.
2. We understand that the Securities have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Securities to offer, sell or otherwise
transfer such Securities prior to the date that is two years after the later of
the date of original issue and the last date on which an Issuer or any affiliate
of an Issuer was the owner of such Securities (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to an Issuer,
(b) pursuant to a registration statement that has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act ("Rule 144A"), to a Person we
reasonably believe is a qualified
C-1
institutional buyer under Rule 144A (a "QIB")
that is purchasing for its own account or for the account of a QIB and to whom
notice is given that the transfer is being made in reliance on Rule 144A, (d) in
an offshore transaction within the meaning of, and in compliance with,
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act that is purchasing for its own account or for the account of
such an institutional "accredited investor," in each case in
minimum principal amount of Securities of $250,000, or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter to
the Issuers and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it
is acquiring such Securities for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges that the Issuers
and the Trustee reserve the right prior to the offer, sale or other transfer
prior to the Resale Termination Date of the Securities pursuant to clause (d),
(e) or (f) above to require the delivery of an opinion of counsel,
certifications or other information satisfactory to the Issuers and the Trustee.
TRANSFEREE:
By: _______________________________
C-2
EXHIBIT D
[FORM OF FACE OF 2014 INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
D-1
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
("RULE 144A") UNDER THE SECURITIES ACT), (2) AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO (X) THE DATE WHICH
IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) OF
THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH ANY ISSUER OR ANY "AFFILIATE" (AS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT) OF ANY ISSUER WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) OR (Y) SUCH LATER DATE, IF
ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION
TERMINATION DATE") EXCEPT (A) TO THE ISSUERS, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO
ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF
SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL,
AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
THE ISSUERS AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (I) PURSUANT TO CLAUSE (E) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR
D-2
OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, BUT ONLY IF THIS SECURITY
IS NOT A GLOBAL SECURITY (AS DEFINED IN THE INDENTURE REFERRED TO HEREIN), TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE
OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE ISSUERS AND
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
[Definitive Securities Legend]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.
D-3
5.125% Senior Note due 2014
No. ___ CUSIP No.
JONES APPAREL GROUP, INC., a Pennsylvania corporation, JONES APPAREL GROUP
HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP USA, INC., a
Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a Delaware
corporation, and JONES RETAIL CORPORATION, a New Jersey corporation, promise to
pay to Cede & Co., or registered assigns, the principal sum of
$
( Dollars)
on November 15, 2014.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other side of
this Security.
D-4
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
|
JONES APPAREL GROUP, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP USA, INC.
By: __________________
Name:
Title:
|
|
NINE WEST FOOTWEAR CORPORATION
By: __________________
Name:
Title:
|
|
JONES RETAIL CORPORATION
By: __________________
Name:
Title:
|
D-5
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
SUNTRUST BANK, as Trustee, certifies that this is one of the Securities
referred to in the Indenture.
Dated:
By: _________________________
Authorized Signatory
D-6
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
5.125% Senior Note due 2014
1. Interest.
(a) JONES APPAREL GROUP, INC., a Pennsylvania corporation, JONES APPAREL
GROUP HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP USA, INC., a
Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a Delaware
corporation and JONES RETAIL CORPORATION, a New Jersey corporation (such
corporations and their successors and assigns under the Indenture are
collectively referred to herein as the "Issuers"), promise to
pay interest on the principal amount of this Security (a "2014 Note")
at the rate per annum shown above. The Issuers shall pay interest semiannually
on May 15 and November 15 of each year. Interest on the Securities shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from November 22, 2004. Interest shall be computed on
the basis of a 360-day year of twelve 30-day months. The Issuers shall pay
interest on overdue principal at the rate borne by the Securities, and it
shall pay interest on overdue installments of interest at the same rate to the
extent lawful.
(b) Additional Interest. The holder of this Security is entitled to
the benefits of an Exchange and Note Registration Rights Agreement, dated
November 22, 2004, among the Issuers and the Initial Purchasers named therein
(the "Registration Agreement"). Capitalized terms used in
this paragraph (b) but not defined herein have the meanings assigned to them
in the Registration Agreement. If (i) the Registered Exchange Offer is not
consummated on or prior to 210 days after the Issue Date, (ii) the Shelf
Registration Statement is not declared effective on or prior to the later of
(A) the date that is 210 days after the Issue Date and (B) 90 days after the
obligation to file such Shelf Registration Statement arises under Section 2 of
the Registration Agreement or (iii) the Shelf Registration Statement is filed
and declared effective within the period prescribed by clause (ii) but shall
thereafter cease to be effective at any time that the Issuers are obligated to
maintain the effectiveness thereof (other than (A) as contemplated by Section
4(o) of the Registration Agreement, provided that the period of time
during which the Shelf Registration Statement is not effective pursuant to
Section 4(o) of the Registration Agreement does not exceed either two periods
of up to 45 days or 90 days in the aggregate during any 365-day period, or (B)
as required by applicable law) (each such event referred to in clauses (i)
through (iii), a "Registration Default"), the Issuers shall be
obligated to pay additional interest to each Holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, at a
rate of 0.25% per annum for the first 90 days and 0.50% per annum thereafter,
determined daily, on the principal
D-7
amount of the Securities constituting
Transfer Restricted Securities held by such holder until (i) the Registered
Exchange Offer is consummated, (ii) the Shelf Registration Statement is
declared effective or (iii) the Shelf Registration Statement again becomes
effective, as the case may be. Following the cure of all Registration
Defaults, the accrual of additional interest shall cease. All accrued
additional interest shall be paid to holders in the same manner as interest
payments on the Securities on semi-annual payment dates which correspond to
interest payment dates for the Securities. The Trustee shall have no
responsibility with respect to the determination of the amount of any such
additional interest. As used herein, the term "Transfer Restricted
Securities" means (i) each Initial Security until the date on which
such Initial Security has been exchanged for a freely transferable Exchange
Security in the Registered Exchange Offer, (ii) each Initial Security until
the date on which such Initial Security has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iii) each Initial Security until the date on which such Initial
Security is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities
Act.
2. Method of Payment. The Issuers shall pay interest on
the Securities (except defaulted interest) to the Persons who are registered
holders of Securities at the close of business on the May 1 or November 1
immediately preceding the interest payment date even if Securities are canceled
after the record date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Issuers shall pay principal, premium, additional interest and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium, additional
interest and interest) shall be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Company. The Issuers
will make all payments in respect of a certificated Security (including
principal, premium and interest), by mailing a check to the registered address
of each Holder thereof; provided, however, that payments on the
Securities may also be made, in the case of a Holder of at least $1,000,000
aggregate principal amount of Securities, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).
3. Paying Agent and Registrar. Initially,
SunTrust Bank, a national banking corporation associated under the laws of the
State of Georgia (the "Trustee"), will act as Paying Agent and
Registrar. The Issuers may appoint and change any Paying Agent, Registrar or
coregistrar without notice. An Issuer or
D-8
any domestically incorporated Wholly
Owned Restricted Subsidiary of an Issuer may act as Paying Agent, Registrar or
coregistrar.
4. Indenture. The Issuers issued the Securities under an Indenture
dated as of November 22, 2004 (the "Indenture") among the
Issuers and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date
of the Indenture (the "TIA"). Terms defined in the Indenture
and not defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all terms and provisions of the Indenture, and
Securityholders are referred to the Indenture, and the TIA for a statement of
such terms and provisions. In the event of any conflict between the terms of
this Security and the terms of the Indenture, the Indenture shall govern.
The Securities are senior unsecured obligations of the Issuers. The Issuers
may issue Additional Securities of any series pursuant to the Indenture. This
Security is one of the Original Securities referred to in the Indenture. The
Securities include the Original Securities, any Additional Securities and any
Exchange Securities issued in exchange for Initial Securities. With respect to
each series of Securities, the Original Securities of such series, any
Additional Securities of such series and all Exchange Securities of such series
are treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of the Issuers and the Restricted
Subsidiaries to, among other things, create or incur Liens or enter into sale
and leaseback transactions. The Indenture also imposes limitations on the
ability of the Issuers to convey, transfer or lease all or substantially all of
the assets of any Issuer.
5. Optional Redemption. The 2014 Notes will be redeemable as a
whole or in part, at the option of the Issuers at any time or from time to time,
at a redemption price equal to the greater of (i) 100% of their principal amount
or (ii) the sum of the present values of the Remaining Scheduled Payments (as
defined below) discounted to the date of redemption, on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months), at a rate equal to
the sum of the Treasury Rate (as defined below) and 15 basis points.
In the case of each of clause (i) and (ii), accrued interest will be payable
to the redemption date.
"Treasury Rate" means, with respect to any redemption date,
(a) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded U.S. Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding
D-9
to the Comparable Treasury Issue (if no maturity
is within three months before or after the remaining life (as defined in the
definition of Comparable Treasury Issue) of the Securities, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
will be determined and the Treasury Rate will be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest month) or (b)
if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term ("remaining life") of the
Securities of such series to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
"Comparable Treasury Price" means, with respect to any
redemption date, (1) the average of five Reference Treasury Dealer Quotations
for such redemption date after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (2) if the Independent Investment
Banker obtains fewer than five such Reference Treasury Dealer Quotations, the
average of all such quotations.
"Reference Treasury Dealer" means Citigroup Global Markets
Inc. and J.P. Morgan Securities Inc. and their respective successors and, at the
Issuers' option, three other nationally recognized investment banking firms
that are primary dealers of U.S. Government securities in New York City (each, a
"Primary Treasury Dealer"). If any of the foregoing shall cease
to be a Primary Treasury Dealer, the Issuers shall substitute therefor another
Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third business day preceding such redemption
date.
"Remaining Scheduled Payments" means, with respect to any
Security to be redeemed, the remaining scheduled payments of principal of and
interest on such Security that would be due after the related redemption date
but for such redemption. If such redemption date is not an interest payment date
with respect
D-10
to such Security, the amount of the next succeeding scheduled
interest payment on such Security will be reduced by the amount of interest
accrued on such note to such redemption date.
"Independent Investment Banker" means either Citigroup
Global Markets Inc. or J.P. Morgan Securities Inc., as specified by the Issuers,
or, if neither of the foregoing is willing or able to select the Comparable
Treasury Issue, an independent investment banking institution of national
standing appointed by the Issuers.
6. Sinking Fund. The Securities are not subject to any sinking
fund.
7. Notice of Redemption. Notice of redemption will be
mailed by first- class mail at least 30 days but not more than 60 days before
the redemption date to each Holder of Securities to be redeemed at his or her
registered address. Securities in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued and unpaid interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date, interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
8. Denominations, Transfer, Exchange. The Securities are
in registered form without coupons in denominations of $1,000 and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or transfer or
exchange any Securities for a period of 15 days prior to a selection of
Securities to be redeemed.
9. Persons Deemed Owners. The registered Holder of this
Security may be treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent shall pay
the money back to the Issuers upon their written request unless an abandoned
property law designates another Person. After any such payment, Holders entitled
to the money must look only to the Issuers and not to the Trustee for payment.
11. Discharge and Defeasance. Subject to certain
conditions, the Issuers at any time may terminate some of or all their
obligations under the
D-11
Securities and the Indenture if the Issuers deposit with
the Trustee money or U.S. Government Obligations for the payment of principal
and interest on the Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver. Subject to certain exceptions set forth
in the Indenture, (i) the Indenture or the Securities may be amended without
prior notice to any Securityholder but with the written consent of the Holders
of a majority in aggregate principal amount of the outstanding Securities and
(ii) any default or noncompliance with any provisions may be waived with the
consent of the Holders of a majority in principal amount of the outstanding
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Holder of Securities, the Issuers and the Trustee may amend
the Indenture or the Securities (i) to cure any ambiguity, omission, defect or
inconsistency; (ii) to comply with Article 5 of the Indenture; (iii) to provide
for uncertificated Securities in addition to or in place of certificated
Securities; (iv) to add guarantees or co-obligors with respect to the Securities
or to secure the Securities; (v) to add to the covenants for the benefit of the
Securityholders or to surrender any right or power conferred upon the Issuers;
(vi) to comply with the requirements of the SEC in order to effect or maintain
the qualification of the Indenture under the TIA; (vii) to make any change that
does not adversely affect the rights of any Securityholder; or (viii) to provide
for the issuance of the Exchange Securities.
13. Defaults and Remedies. If an Event of Default occurs
(other than an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of any Issuer) and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the outstanding Securities
may declare the principal of and accrued but unpaid interest on all the
Securities to be due and payable. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of any Issuer occurs, the
principal of and interest on all the Securities shall become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in principal
amount of the outstanding Securities may rescind any such acceleration with
respect to the Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be under
no obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders have offered to
the Trustee indemnity or security satisfactory to it against any loss, liability
or expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Securities unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
25% in principal amount of the outstanding Securities have requested in writing
that the Trustee pursue the remedy, (iii) such Holders have offered the Trustee
reasonable
D-12
security or indemnity against any loss, liability or expense, (iv)
the Trustee has not complied with such request within 60 days after the receipt
of the request and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Securities have not given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would subject the Trustee to personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
14. Trustee Dealings with the Issuers.
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuers or their Affiliates and may otherwise deal with the Issuers
or their Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of any Issuer shall not have any
liability for any obligations of such Issuer under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
16. Authentication. This Security shall not be valid until an
authorized signatory of the Trustee (or an authenticating agent) manually signs
the certificate of Authentication on the other side of this Security.
17. Abbreviations. Customary abbreviations may be used in the name of
a Securityholder or an assignee, such as TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with rights of
survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=
Uniform Gift to Minors Act).
18. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
D-13
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Issuers have
caused CUSIP numbers to be printed on the Securities and have directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
The Issuers will furnish to any Holder of Securities upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Security.
D-14
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ________________ agent to transfer this Security on
the books of the Issuers. The agent may substitute another to act for him.
Date:
Your Signature:
Sign exactly as your name appears on the other side of this Security.
D-15
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $ _____________ principal amount of Securities
held in (check applicable space) ______ book-entry or _______ definitive form by
the undersigned.
The undersigned (check one box below):
[ ] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depositary a Security or
Securities in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Security (or the portion thereof indicated above);
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to an Issuer; or
(2) [ ]pursuant to an effective registration statement under the Securities
Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933) that purchases for
its own account or for the account of a qualified institutional buyer to whom
notice is given that such transfer is being made in reliance on Rule 144A, in
each case pursuant to and in compliance with Rule 144A under the Securities Act
of 1933; or
(4) [ ] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with Rule 904
under the Securities Act of 1933; or
(5) [ ] to an institutional "accredited investor" (as
defined in Rule 501 (a)(1), (2), (3) or (7) under the Securities Act of 1933)
that has furnished to the Trustee a signed letter containing certain
representations and agreements; or
(6) [ ]pursuant to another available exemption from registration provided by
Rule 144 under the Securities Act of 1933.
D-16
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any Person other
than the registered holder thereof provided, however, that if box
(4), (5) or (6) is checked, the Trustee may require, prior to registering any
such transfer of the Securities, such legal opinions, certifications and other
information as the Issuers have reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933.
Your Signature
Signature Guarantee:
Date: ___________________ ________________________________
Signature of Signature Guaranteed
Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Issuers as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
Signature
NOTICE: To be executed by an executive officer
D-17
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $ .
The following increases or decreases in this Global Security have been made:
Date of Exchange
Amount of decrease in Principal Amount of this Global Security
Amount of increase in Principal Amount of this Global Security
Principal Amount of this Global Security following such decrease or
increase
Signature of authorized signatory of Trustee or Securities Custodian
D-18
EXHIBIT E
[FORM OF FACE OF 2014 EXCHANGE SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(ANT) ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC). ANY TRANSFER, PLEDGE OR OTHER
USE OF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
E-1
5.125% Senior Note due 2014
No. ___ CUSIP No.
JONES APPAREL GROUP, INC., a Pennsylvania corporation, JONES APPAREL GROUP
HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP USA, INC., a
Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a Delaware
corporation, and JONES RETAIL CORPORATION, a New Jersey corporation, promise to
pay to Cede & Co., or registered assigns, the principal sum of
$
( Dollars)
on November 15, 2014.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other side of
this Security.
E-2
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
|
JONES APPAREL GROUP, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP USA, INC.
By: __________________
Name:
Title:
|
|
NINE WEST FOOTWEAR CORPORATION
By: __________________
Name:
Title:
|
|
JONES RETAIL CORPORATION
By: __________________
Name:
Title:
|
E-3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
SUNTRUST BANK, as Trustee, certifies that this is one of the Securities
referred to in the Indenture.
Dated:
By: __________________________
Authorized Signatory
E-4
[FORM OF REVERSE SIDE OF 2014 EXCHANGE SECURITY]
5.125% Senior Note due 2014
1. Interest. JONES APPAREL GROUP, INC. a Pennsylvania corporation,
JONES APPAREL GROUP HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP
USA, INC., a Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a
Delaware corporation and JONES RETAIL CORPORATION, a New Jersey corporation
(such corporations, and their successors and assigns under the Indenture are
collectively referred to herein as the "Issuers"), promise to
pay interest on the principal amount of this Security (a "2014 Note")
at the rate per annum, shown above. The Issuers shall pay interest semiannually
on May 15 and November 15 of each year. Interest on the Securities shall accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from November 22, 2004. Interest shall be computed on the basis of a
360-day year of twelve 30-day months. The Issuers shall pay interest on overdue
principal at the rate borne by the Securities, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment. The Issuers shall pay interest on the Securities
(except defaulted interest) to the Persons who are registered holders of
Securities at the close of business on the May 1 or November 1 immediately
preceding the interest payment date even if Securities are canceled after the
record date and on or before the interest payment date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Issuers shall
pay principal, premium and interest in money of the United States of America
that at the time of payment is legal tender for payment of public and private
debts. Payments in respect of the Securities represented by a Global Security
(including principal, premium and interest) shall be made by wire transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. The Issuers will make all payments in respect of a certificated
Security (including principal, premium and interest), by mailing a check to the
registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).
3. Paying Agent and Registrar. Initially, SunTrust Bank, a national
banking corporation associated under the laws of the State of Georgia (the
"Trustee"), will act as Paying Agent and Registrar. The Issuers
may appoint and change any Paying Agent, Registrar or coregistrar without
notice. An Issuer or any domestically incorporated Wholly Owned Restricted
Subsidiary of an Issuer may act as Paying Agent, Registrar or coregistrar.
E-5
4. Indenture. The Issuers issued the Securities under an indenture
dated as of November 22, 2004 (the "Indenture") among the
Issuers and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) as in effect on the date of the
Indenture (the "TIA"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all terms and provisions of the Indenture, and
Securityholders are referred to the Indenture and the TIA for a statement of
such terms and provisions. In the event of any conflict between the terms of
this Security and the terms of the Indenture, the Indenture shall govern.
The Securities are senior unsecured obligations of the Issuers. The Issuers
may issue Additional Securities of any series pursuant to the Indenture. The
Securities include the Original Securities, any Additional Securities and any
Exchange Securities issued in exchange for Initial Securities. With respect to
each series of Securities, the Original Securities of such series, any
Additional Securities of such series and all Exchange Securities of such series
are treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of the Issuers and the Restricted
Subsidiaries to, among other things, create or incur Liens or enter into sale
and leaseback transactions. The Indenture also imposes limitations on the
ability of the Issuers to convey, transfer or lease all or substantially all of
the assets of any Issuer.
5. Optional Redemption. The 2014 Notes will be redeemable as a whole
or in part, at the option of the Issuers at any time or from time to time, at a
redemption price equal to the greater of (i) 100% of their principal amount or
(ii) the sum of the present values of the Remaining Scheduled Payments (as
defined below) discounted to the date of redemption, on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months), at a rate equal to
the sum of the Treasury Rate (as defined below) and 15 basis points.
In the case of each of clause (i) and (ii), accrued interest will be payable
to the redemption date.
"Treasury Rate" means, with respect to any redemption date,
(a) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded U.S. Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the remaining life (as defined in the
definition of Comparable Treasury Issue) of the Securities, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
will be determined and the Treasury Rate will be interpolated or extrapolated
from such yields on a straight
E-6
line basis, rounding to the nearest month) or (b)
if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term ("remaining life") of the
Securities of such series to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
"Comparable Treasury Price" means, with respect to any
redemption date, (1) the average of five Reference Treasury Dealer Quotations
for such redemption date after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (2) if the Independent Investment
Banker obtains fewer than five such Reference Treasury Dealer Quotations, the
average of all such quotations.
"Reference Treasury Dealer" means Citigroup Global Markets
Inc. and J.P. Morgan Securities Inc. and their respective successors and, at the
Issuers' option, three other nationally recognized investment banking firms
that are primary dealers of U.S. Government securities in New York City (each, a
"Primary Treasury Dealer"). If any of the foregoing shall cease
to be a Primary Treasury Dealer, the Issuers shall substitute therefor another
Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third business day preceding such redemption
date.
"Remaining Scheduled Payments" means, with respect to any
Security to be redeemed, the remaining scheduled payments of principal of and
interest on such Security that would be due after the related redemption date
but for such redemption. If such redemption date is not an interest payment date
with respect to such Security, the amount of the next succeeding scheduled
interest payment on such Security will be reduced by the amount of interest
accrued on such note to such redemption date.
E-7
"Independent Investment Banker" means either Citigroup
Global Markets Inc. or J.P. Morgan Securities Inc., as specified by the Issuers,
or, if neither of the foregoing is willing or able to select the Comparable
Treasury Issue, an independent investment banking institution of national
standing appointed by the Issuers.
6. Sinking Fund. The Securities are not subject to any sinking fund.
7. Notice of Redemption. Notice of redemption will be mailed by first-
class mail at least 30 days but not more than 60 days before the redemption date
to each Holder of Securities to be redeemed at his or her registered address.
Securities in denominations larger than $1,000 may be redeemed in part but only
in whole multiples of $1,000. If money sufficient to pay the redemption price of
and accrued and unpaid interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
8. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 and whole multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture.
Upon any transfer or exchange, the Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes required by law or permitted by the Indenture.
The Registrar need not register the transfer of or exchange an), Securities
selected for redemption (except, in the case of a Security to be redeemed in
part, the portion of the Security not to be redeemed) or transfer or exchange
any Securities for a period of 15 days prior to a selection of Securities to be
redeemed or 15 days before an interest payment date.
9. Persons Deemed Owners. The registered Holder of this Security may
be treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent shall pay the money
back to the Issuers upon their written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the money
must look only to the Issuers and not to the Trustee for payment.
11. Discharge and Defeasance. Subject to certain conditions, the
Issuers at any time may terminate some of or all their obligations under the
Securities and the Indenture if the Issuers deposit with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
E-8
12. Amendment, Waiver. Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Securities may be amended without prior
notice to any Securityholder but with the written consent of the Holders of a
majority in aggregate principal amount of the outstanding Securities and (ii)
any default or noncompliance with any provisions may be waived with the consent
of the Holders of a majority in principal amount of the outstanding Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of Securities, the Issuers and the Trustee may amend the Indenture or
the Securities (i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article 5, of the Indenture; (iii) to provide for
uncertificated Securities in addition to or in place of certificated Securities;
(iv) to add guarantees or co-obligors with respect to the Securities or to
secure the Securities; (v) to add to the covenants for the benefit of the
Securityholders or to surrender any right or power conferred upon the Issuers;
(vi) to comply with the requirements of the SEC in order to effect or maintain
the qualification of the Indenture under the TIA; (vii) to make any change that
does not adversely affect the rights of any Securityholder; or (viii) to provide
for the issuance of the Exchange Securities.
13. Defaults and Remedies. If an Event of Default occurs (other than
an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of any Issuer) and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the outstanding Securities may declare the
principal of and accrued but unpaid interest on all the Securities to be due and
payable. If an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of any Issuer occurs, the principal of and interest
on all the Securities shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Securities may rescind any such acceleration with respect to the
Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be under
no obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders have offered to
the Trustee indemnity or security satisfactory to it against any loss, liability
or expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Securities unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
25% in principal amount of the outstanding Securities have requested in writing
that the Trustee pursue the remedy, (iii) such Holders have offered the Trustee
reasonable security or indemnity against any loss, liability or expense, (iv)
the Trustee has not complied with such request within 60 days after the receipt
of the request and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Securities have not given the
Trustee a direction
E-9
inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would subject the Trustee to personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
14. Trustee Dealings with the Issuer. Subject to certain limitations
imposed by the TIA, the Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with and collect obligations owed to it by the Issuers or their Affiliates
and may otherwise deal with the Issuers or their Affiliates with the same rights
it would have if it were not Trustee.
15. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of any Issuer shall not have any liability for any
obligations of such Issuer under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
16. Authentication. This Security shall not be valid until an
authorized signatory of the Trustee (or an authenticating agent) manually signs
the certificate of Authentication on the other side of this Security.
17. Abbreviations. Customary abbreviations may be used in the name of
a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
18. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
19. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Securities and have directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to
E-10
Securityholders.
No representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
The Issuers will furnish to any Holder of Securities upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Security.
E-11
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax T.D. No.)
and irrevocably appoint ______________ agent to transfer this Security on the
books of the Issuers. The agent may substitute another to act for him.
Date:
Your Signature:
Sign exactly as your name appears on the other side of this Security.
Signature must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guaranteed acceptable to the Trustee.
E-12
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $ .
The following increases or decreases in this Global Security have been made:
Amount of decrease in Principal Amount of this Global Security
Amount of increase in Principal Amount of this Global Security
Principal Amount of this Global Security following such decrease or
increase
Signature of authorized signatory of Trustee or Securities Custodian
E-13
EXHIBIT F
FORM OF TRANSFEREE LETTER OF REPRESENTATION
FOR 2014 NOTES
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $__________ principal
amount of the 5.125% Senior Notes due 2014 (the "Notes") of
Jones Apparel Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel
Group USA, Inc., Nine West Footwear Corporation and Jones Retail Corporation
(the "Issuers").
Upon transfer, the Securities would be registered in the name of the new
beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in
Rule 501(a)(l), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act")), purchasing for our own account or for
the account of such an institutional "accredited investor" at least
$250,000 principal amount of the Securities, and we are acquiring the Securities
not with a view to, or offer or sale in connection with, any distribution in
violation of the Securities Act. We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we invest in or purchase
securities similar to the Securities in the normal course of our business. We,
and any accounts for which we are acting, are each able to bear the economic
risk of our or its investment.
2. We understand that the Securities have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Securities to offer, sell or otherwise
transfer such Securities prior to the date that is two years after the later of
the date of original issue and the last date on which an Issuer or any affiliate
of an Issuer was the owner of such Securities (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to an Issuer,
(b) pursuant to a registration statement that has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act ("Rule 144A"), to a Person we
reasonably believe is a qualified
F-1
institutional buyer under Rule 144A (a "QIB")
that is purchasing for its own account or for the account of a QIB and to whom
notice is given that the transfer is being made in reliance on Rule 144A, (d) in
an offshore transaction within the meaning of, and in compliance with,
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(l), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of such
an institutional "accredited investor," in each case in minimum
principal amount of Securities of $250,000, or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter to
the Issuers and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it
is acquiring such Securities for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges that the Issuers
and the Trustee reserve the right prior to the offer, sale or other transfer
prior to the Resale Termination Date of the Securities pursuant to clause (d),
(e) or (f) above to require the delivery of an opinion of counsel,
certifications or other information satisfactory to the Issuers and the Trustee.
TRANSFEREE:
By: ____________________________
F-2
EXHIBIT G
[FORM OF FACE OF 2034 INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
G-1
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
("RULE 144A") UNDER THE SECURITIES ACT), (2) AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO (X) THE DATE WHICH
IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) OF
THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH ANY ISSUER OR ANY "AFFILIATE" (AS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT) OF ANY ISSUER WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) OR (Y) SUCH LATER DATE, IF
ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION
TERMINATION DATE") EXCEPT (A) TO THE ISSUERS, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO
ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF
SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL,
AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
THE ISSUERS AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE
G-2
OR TRANSFER (I) PURSUANT TO CLAUSE (E) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, BUT ONLY IF THIS SECURITY
IS NOT A GLOBAL SECURITY (AS DEFINED IN THE INDENTURE REFERRED TO HEREIN), TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE
OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE ISSUERS AND
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
[Definitive Securities Legend]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.
G-3
6.125% Senior Note due 2034
No. ___ CUSIP No.
JONES APPAREL GROUP, INC., a Pennsylvania corporation, JONES APPAREL GROUP
HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP USA, INC., a
Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a Delaware
corporation, and JONES RETAIL CORPORATION, a New Jersey corporation, promise to
pay to Cede & Co., or registered assigns, the principal sum of
$
( Dollars)
on November 15, 2034.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other side of
this Security.
G-4
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
|
JONES APPAREL GROUP, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP USA, INC.
By: __________________
Name:
Title:
|
|
NINE WEST FOOTWEAR CORPORATION
By: __________________
Name:
Title:
|
|
JONES RETAIL CORPORATION
By: __________________
Name:
Title:
|
G-5
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
SUNTRUST BANK, as Trustee, certifies that this is one of the Securities
referred to in the Indenture.
Dated:
By: __________________________
Authorized Signatory
G-6
[FORM OF REVERSE SIDE OF 2034 INITIAL SECURITY]
6.125% Senior Note due 2034
1. Interest.
(a) JONES APPAREL GROUP, INC., a Pennsylvania corporation, JONES APPAREL
GROUP HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP USA, INC., a
Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a Delaware
corporation and JONES RETAIL CORPORATION, a New Jersey corporation (such
corporations and, their successors and assigns under the Indenture are
collectively referred to herein as the "Issuers"), promise to
pay interest on the principal amount of this Security (a "2034 Note")
at the rate per annum shown above. The Issuers shall pay interest semiannually
on May 15 and November 15 of each year. Interest on the Securities shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from November 22, 2004. Interest shall be computed on
the basis of a 360-day year of twelve 30-day months. The Issuers shall pay
interest on overdue principal at the rate borne by the Securities, and it
shall pay interest on overdue installments of interest at the same rate to the
extent lawful.
(b) Additional Interest. The holder of this Security is entitled to
the benefits of an Exchange and Note Registration Rights Agreement, dated
November 22, 2004, among the Issuers and the Initial Purchasers named therein
(the "Registration Agreement"). Capitalized terms used in
this paragraph (b) but not defined herein have the meanings assigned to them
in the Registration Agreement. If (i) the Registered Exchange Offer is not
consummated on or prior to 210 days after the Issue Date, (ii) the Shelf
Registration Statement is not declared effective on or prior to the later of
(A) the date that is 210 days after the Issue Date and (B) 90 days after the
obligation to file such Shelf Registration Statement arises under Section 2 of
the Registration Agreement or (iii) the Shelf Registration Statement is filed
and declared effective within the period prescribed by clause (ii) but shall
thereafter cease to be effective at any time that the Issuers are obligated to
maintain the effectiveness thereof (other than (A) as contemplated by Section
4(o) of the Registration Agreement, provided that the period of time
during which the Shelf Registration Statement is not effective pursuant to
Section 4(o) of the Registration Agreement does not exceed either two periods
of up to 45 days or 90 days in the aggregate during any 365-day period, or (B)
as required by applicable law) (each such event referred to in clauses (i)
through (iii), a "Registration Default"), the Issuers shall be
obligated to pay additional interest to each Holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, at a
rate of 0.25% per annum for the first 90 days and 0.50% per annum thereafter,
determined daily, on the principal
G-7
amount of the Securities constituting
Transfer Restricted Securities held by such holder until (i) the Registered
Exchange Offer is consummated, (ii) the Shelf Registration Statement is
declared effective or (iii) the Shelf Registration Statement again becomes
effective, as the case may be. Following the cure of all Registration
Defaults, the accrual of additional interest shall cease. All accrued
additional interest shall be paid to holders in the same manner as interest
payments on the Securities on semi-annual payment dates which correspond to
interest payment dates for the Securities. The Trustee shall have no
responsibility with respect to the determination of the amount of any such
additional interest. As used herein, the term "Transfer Restricted
Securities" means (i) each Initial Security until the date on which
such Initial Security has been exchanged for a freely transferable Exchange
Security in the Registered Exchange Offer, (ii) each Initial Security until
the date on which such Initial Security has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iii) each Initial Security until the date on which such Initial
Security is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities
Act.
2. Method of Payment. The Issuers shall pay interest on
the Securities (except defaulted interest) to the Persons who are registered
holders of Securities at the close of business on the May 1 or November 1
immediately preceding the interest payment date even if Securities are canceled
after the record date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Issuers shall pay principal, premium, additional interest and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium, additional
interest and interest) shall be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Company. The Issuers
will make all payments in respect of a certificated Security (including
principal, premium and interest), by mailing a check to the registered address
of each Holder thereof; provided, however, that payments on the
Securities may also be made, in the case of a Holder of at least $1,000,000
aggregate principal amount of Securities, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).
3. Paying Agent and Registrar. Initially,
SunTrust Bank, a national banking corporation associated under the laws of the
State of Georgia (the "Trustee"), will act as Paying Agent and
Registrar. The Issuers may appoint and change any Paying Agent, Registrar or
coregistrar without notice. An Issuer or
G-8
any domestically incorporated Wholly
Owned Restricted Subsidiary of an Issuer may act as Paying Agent, Registrar or
coregistrar.
4. Indenture. The Issuers issued the Securities under an Indenture
dated as of November 22, 2004 (the "Indenture") among the
Issuers and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date
of the Indenture (the "TIA"). Terms defined in the Indenture
and not defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all terms and provisions of the Indenture, and
Securityholders are referred to the Indenture, and the TIA for a statement of
such terms and provisions. In the event of any conflict between the terms of
this Security and the terms of the Indenture, the Indenture shall govern.
The Securities are senior unsecured obligations of the Issuers. The Issuers
may issue Additional Securities of any series pursuant to the Indenture. This
Security is one of the Original Securities referred to in the Indenture. The
Securities include the Original Securities, any Additional Securities and any
Exchange Securities issued in exchange for Initial Securities. With respect to
each series of Securities, the Original Securities of such series, any
Additional Securities of such series and all Exchange Securities of such series
are treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of the Issuers and the Restricted
Subsidiaries to, among other things, create or incur Liens or enter into sale
and leaseback transactions. The Indenture also imposes limitations on the
ability of the Issuers to convey, transfer or lease all or substantially all of
the assets of any Issuer.
5. Optional Redemption. The 2034 Notes will be redeemable as a
whole or in part, at the option of the Issuers at any time or from time to time,
at a redemption price equal to the greater of (i) 100% of their principal amount
or (ii) the sum of the present values of the Remaining Scheduled Payments (as
defined below) discounted to the date of redemption, on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months), at a rate equal to
the sum of the Treasury Rate (as defined below) and 20 basis points.
In the case of each of clause (i) and (ii), accrued interest will be payable
to the redemption date.
"Treasury Rate" means, with respect to any redemption date,
(a) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded U.S. Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding
G-9
to the Comparable Treasury Issue (if no maturity
is within three months before or after the remaining life (as defined in the
definition of Comparable Treasury Issue) of the Securities, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
will be determined and the Treasury Rate will be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest month) or (b)
if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term ("remaining life") of the
Securities of such series to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
"Comparable Treasury Price" means, with respect to any
redemption date, (1) the average of five Reference Treasury Dealer Quotations
for such redemption date after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (2) if the Independent Investment
Banker obtains fewer than five such Reference Treasury Dealer Quotations, the
average of all such quotations.
"Reference Treasury Dealer" means Citigroup Global Markets
Inc. and J.P. Morgan Securities Inc. and their respective successors and, at the
Issuers' option, three other nationally recognized investment banking firms
that are primary dealers of U.S. Government securities in New York City (each, a
"Primary Treasury Dealer"). If any of the foregoing shall cease
to be a Primary Treasury Dealer, the Issuers shall substitute therefor another
Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third business day preceding such redemption
date.
"Remaining Scheduled Payments" means, with respect to any
Security to be redeemed, the remaining scheduled payments of principal of and
interest on such Security that would be due after the related redemption date
but for such redemption. If such redemption date is not an interest payment date
with respect
G-10
to such Security, the amount of the next succeeding scheduled
interest payment on such Security will be reduced by the amount of interest
accrued on such note to such redemption date.
"Independent Investment Banker" means either Citigroup
Global Markets Inc. or J.P. Morgan Securities Inc., as specified by the Issuers,
or, if neither of the foregoing is willing or able to select the Comparable
Treasury Issue, an independent investment banking institution of national
standing appointed by the Issuers.
6. Sinking Fund. The Securities are not subject to any sinking
fund.
7. Notice of Redemption. Notice of redemption will be
mailed by first- class mail at least 30 days but not more than 60 days before
the redemption date to each Holder of Securities to be redeemed at his or her
registered address. Securities in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued and unpaid interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date, interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
8. Denominations, Transfer, Exchange. The Securities are
in registered form without coupons in denominations of $1,000 and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or transfer or
exchange any Securities for a period of 15 days prior to a selection of
Securities to be redeemed.
9. Persons Deemed Owners. The registered Holder of this
Security may be treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent shall pay
the money back to the Issuers upon their written request unless an abandoned
property law designates another Person. After any such payment, Holders entitled
to the money must look only to the Issuers and not to the Trustee for payment.
11. Discharge and Defeasance. Subject to certain
conditions, the Issuers at any time may terminate some of or all their
obligations under the
G-11
Securities and the Indenture if the Issuers deposit with
the Trustee money or U.S. Government Obligations for the payment of principal
and interest on the Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver. Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Securities may be amended without prior
notice to any Securityholder but with the written consent of the Holders of a
majority in aggregate principal amount of the outstanding Securities and (ii)
any default or noncompliance with any provisions may be waived with the consent
of the Holders of a majority in principal amount of the outstanding Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of Securities, the Issuers and the Trustee may amend the Indenture or
the Securities (i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article 5 of the Indenture; (iii) to provide for
uncertificated Securities in addition to or in place of certificated Securities;
(iv) to add guarantees or co-obligors with respect to the Securities or to
secure the Securities; (v) to add to the covenants for the benefit of the
Securityholders or to surrender any right or power conferred upon the Issuers;
(vi) to comply with the requirements of the SEC in order to effect or maintain
the qualification of the Indenture under the TIA; (vii) to make any change that
does not adversely affect the rights of any Securityholder; or (viii) to provide
for the issuance of the Exchange Securities.
13. Defaults and Remedies. If an Event of Default occurs
(other than an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of any Issuer) and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the outstanding Securities
may declare the principal of and accrued but unpaid interest on all the
Securities to be due and payable. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of any Issuer occurs, the
principal of and interest on all the Securities shall become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in principal
amount of the outstanding Securities may rescind any such acceleration with
respect to the Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be under
no obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders have offered to
the Trustee indemnity or security satisfactory to it against any loss, liability
or expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Securities unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
25% in principal amount of the outstanding Securities have requested in writing
that the Trustee pursue the remedy, (iii) such Holders have offered the Trustee
reasonable
G-12
security or indemnity against any loss, liability or expense, (iv)
the Trustee has not complied with such request within 60 days after the receipt
of the request and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Securities have not given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would subject the Trustee to personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
14. Trustee Dealings with the Issuers.
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuers or their Affiliates and may otherwise deal with the Issuers
or their Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of any Issuer shall not have any
liability for any obligations of such Issuer under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
16. Authentication. This Security shall not be valid until an
authorized signatory of the Trustee (or an authenticating agent) manually signs
the certificate of Authentication on the other side of this Security.
17. Abbreviations. Customary abbreviations may be used in the name of
a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and UIG/M/A (=Uniform Gift to
Minors Act).
18. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
G-13
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Issuers have
caused CUSIP numbers to be printed on the Securities and have directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
The Issuers will furnish to any Holder of Securities upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Security.
G-14
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
_________________________________________________________________
(Print or type assignee's name, address and zip code)
__________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _________________ agent to transfer this Security on
the books of the Issuers. The agent may substitute another to act for him.
Date: __________________
Your Signature: ___________________
Sign exactly as your name appears on the other side of this Security.
G-15
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $___________ principal amount of Securities held
in (check applicable space) ______ book-entry or _______ definitive form by the
undersigned.
The undersigned (check one box below):
[ ] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depositary a Security or
Securities in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Security (or the portion thereof indicated above);
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to an Issuer; or
(2) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933)
that purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is being made
in reliance on Rule 144A, in each case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(4) [ ] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with Rule 904
under the Securities Act of 1933; or
(5) [ ] to an institutional "accredited investor"(as
defined in Rule 501(a)(1),(2), (3) or (7) under the Securities Act of 1933)
that has furnished to the Trustee a signed letter containing certain
representations and agreements; or
G-16
(6) [ ] pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any Person other
than the registered holder thereof, provided, however, that if box
(4), (5) or (6) is checked, the Trustee may require, prior to registering any
such transfer of the Securities, such legal opinions, certifications and other
information as the Issuers have reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933.
____________________________
Your Signature
Signature Guarantee:
Date: ____________
____________________________
Signature of Signature Guaranteed
Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Issuers as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: Signature
NOTICE: To be executed by an executive officer
G-17
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $ .
The following increases or decreases in this Global Security have been made:
Date of Exchange
Amount of decrease in Principal Amount of this Global Security
Amount of increase in Principal Amount of this Global Security
Principal Amount of this Global Security following such decrease or
increase
Signature of authorized signatory of Trustee or Securities Custodian
G-18
EXHIBIT H
[FORM OF FACE OF 2034 EXCHANGE SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE OF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
H-1
6.125% Senior Note due 2034
No. ___ CUSIP No.
JONES APPAREL GROUP, INC., a Pennsylvania corporation, JONES APPAREL GROUP
HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP USA, INC., a
Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a Delaware
corporation, and JONES RETAIL CORPORATION, a New Jersey corporation, promise to
pay to Cede & Co., or registered assigns, the principal sum of
$
( Dollars)
on November 15, 2034.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other side of
this Security.
H-2
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
|
JONES APPAREL GROUP, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: __________________
Name:
Title:
|
|
JONES APPAREL GROUP USA, INC.
By: __________________
Name:
Title:
|
|
NINE WEST FOOTWEAR CORPORATION
By: __________________
Name:
Title:
|
|
JONES RETAIL CORPORATION
By: __________________
Name:
Title:
|
H-3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
SUNTRUST BANK, as Trustee, certifies that this is one of the Securities
referred to in the Indenture.
Dated:
By: _____________________
Authorized Signatory
H-4
FORM OF REVERSE SIDE OF 2034 EXCHANGE SECURITY
6.125% Senior Note due 2034
1. Interest. JONES APPAREL GROUP, INC. a Pennsylvania corporation,
JONES APPAREL GROUP HOLDINGS, INC., a Delaware corporation, JONES APPAREL GROUP
USA, INC., a Pennsylvania corporation, NINE WEST FOOTWEAR CORPORATION, a
Delaware corporation, and JONES RETAIL CORPORATION, a New Jersey corporation
(such corporations, and their successors and assigns under the Indenture are
collectively referred to herein as the "Issuers"), promise to
pay interest on the principal amount of this Security (a "2034 Note")
at the rate per annum shown above. The Issuers shall pay interest semiannually
on May 15 and November 15 of each year. Interest on the Securities shall accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from November 22, 2004. Interest shall be computed on the basis of a
360-day year of twelve 30-day months. The Issuers shall pay interest on overdue
principal at the rate borne by the Securities, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment. The Issuers shall pay interest on
the Securities (except defaulted interest) to the Persons who are registered
holders of Securities at the close of business on the May 1 or November 1
immediately preceding the interest payment date even if Securities are canceled
after the record date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Issuers shall pay principal, premium and interest in money of the United States
of America that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium and interest) shall be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Issuers will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however,
that payments on the Securities may also be made, in the case of a Holder of at
least $1,000,000 aggregate principal amount of Securities, by wire transfer to a
U.S. dollar account maintained by the payee with a bank in the United States if
such Holder elects payment by wire transfer by giving written notice to the
Trustee or the Paying Agent to such effect designating such account no later
than 30 days immediately preceding the relevant due date for payment (or such
other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar. Initially,
SunTrust Bank, a national banking corporation associated under the laws of the
State of Georgia (the "Trustee"), will act as Paying Agent and
Registrar. The Issuers may appoint and change any Paying Agent, Registrar or
coregistrar without notice. An Issuer or
H-5
any domestically incorporated Wholly
Owned Restricted Subsidiary of an Issuer may act as Paying Agent, Registrar or
coregistrar.
4. Indenture. The Issuers issued the Securities under an Indenture
dated as of November 22, 2004 (the "Indenture") among the
Issuers and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) as in effect on the date of the
Indenture (the "TIA"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all terms and provisions of the Indenture, and
Securityholders are referred to the Indenture and the TIA for a statement of
such terms and provisions. In the event of any conflict between the terms of
this Security and the terms of the Indenture, the Indenture shall govern.
The Securities are senior unsecured obligations of the Issuers. The Issuers
may issue Additional Securities of any series pursuant to the Indenture. The
Securities include the Original Securities, any Additional Securities and any
Exchange Securities issued in exchange for Initial Securities. With respect to
each series of Securities, the Original Securities of such series, any
Additional Securities of such series and all Exchange Securities of such series
are treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of the Issuers and the Restricted
Subsidiaries to, among other things, create or incur Liens or enter into sale
and leaseback transactions. The Indenture also imposes limitations on the
ability of the Issuers to convey, transfer or lease all or substantially all of
the assets of any Issuer.
5. Optional Redemption. The 2034 Notes will be redeemable as a
whole or in part, at the option of the Issuers at any time or from time to time,
at a redemption price equal to the greater of (i) 100% of their principal amount
or (ii) the sum of the present values of the Remaining Scheduled Payments (as
defined below) discounted to the date of redemption, on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months), at a rate equal to
the sum of the Treasury Rate (as defined below) and 20 basis points.
In the case of each of clause (i) and (ii), accrued interest will be payable
redemption date.
"Treasury Rate" means, with respect to any redemption date,
(a) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded U.S. Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the remaining life (as defined in the
definition of Comparable Treasury
H-6
Issue) of the Securities, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
will be determined and the Treasury Rate will be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest month) or (b)
if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term ("remaining life") of the
Securities of such series to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
"Comparable Treasury Price" means, with respect to any
redemption date, (1) the average of five Reference Treasury Dealer Quotations
for such redemption date after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (2) if the Independent Investment
Banker obtains fewer than five such Reference Treasury Dealer Quotations, the
average of all such quotations.
"Reference Treasury Dealer" means Citigroup Global Markets
Inc. and J.P. Morgan Securities Inc. and their respective successors and, at the
Issuers' option, three other nationally recognized investment banking firms
that are primary dealers of U.S. Government securities in New York City (each, a
"Primary Treasury Dealer"). If any of the foregoing shall cease
to be a Primary Treasury Dealer, the Issuers shall substitute therefor another
Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third business day preceding such redemption
date.
"Remaining Scheduled Payments" means, with respect to any
Security to be redeemed, the remaining scheduled payments of principal of and
interest on such Security that would be due after the related redemption date
but for such redemption. If such redemption date is not an interest payment date
with respect to such Security, the amount of the next succeeding scheduled
interest payment
H-7
on such Security will be reduced by the amount of interest
accrued on such note to such redemption date.
"Independent Investment Banker" means either Citigroup
Global Markets Inc. or J.P. Morgan Securities Inc., as specified by the Issuers,
or, if neither of the foregoing is willing or able to select the Comparable
Treasury Issue, an independent investment banking institution of national
standing appointed by the Issuers.
6. Sinking Fund. The Securities are not subject to any sinking
fund.
7. Notice of Redemption. Notice of redemption will be
mailed by first- class mail at least 30 days but not more than 60 days before
the redemption date to each Holder of Securities to be redeemed at his or her
registered address. Securities in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued and unpaid interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
8. Denominations, Transfer, Exchange. The Securities are
in registered form without coupons in denominations of $1,000 and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or transfer or
exchange any Securities for a period of 15 days prior to a selection of
Securities to be redeemed or 15 days before an interest payment date.
9. Persons Deemed Owners. The registered Holder of this
Security may be treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent shall pay
the money back to the Issuers upon their written request unless an abandoned
property law designates another Person. After any such payment, Holders entitled
to the money must look only to the Issuers and not to the Trustee for payment.
11. Discharge and Defeasance. Subject to certain
conditions, the Issuers at any time may terminate some of or all their
obligations under the Securities and the Indenture if the Issuers deposit with
the Trustee money or U.S.
H-8
Government Obligations for the payment of principal
and interest on the Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver. Subject to certain exceptions set forth in
the Indenture, (i) the Indenture or the Securities may be amended without prior
notice to any Securityholder but with the written consent of the Holders of a
majority in aggregate principal amount of the outstanding Securities and (ii)
any default or noncompliance with any provisions may be waived with the consent
of the Holders of a majority in principal amount of the outstanding Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of Securities, the Issuers and the Trustee may amend the Indenture or
the Securities (i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article 5 of the Indenture; (iii) to provide for
uncertificated Securities in addition to or in place of certificated Securities;
(iv) to add guarantees or co-obligors with respect to the Securities or to
secure the Securities; (v) to add to the covenants for the benefit of the
Securityholders or to surrender any right or power conferred upon the Issuers;
(vi) to comply with the requirements of the SEC in order to effect or maintain
the qualification of the Indenture under the TIA; (vii) to make any change that
does not adversely affect the rights of any Securityholder; or (viii) to provide
for the issuance of the Exchange Securities.
13. Defaults and Remedies. If an Event of Default occurs
(other than an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of any Issuer) and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the outstanding Securities
may declare the principal of and accrued but unpaid interest on all the
Securities to be due and payable. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of any Issuer occurs, the
principal of and interest on all the Securities shall become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in principal
amount of the outstanding Securities may rescind any such acceleration with
respect to the Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be under
no obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Securities unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
25% in principal amount of the outstanding Securities have requested in writing
that the Trustee pursue the remedy, (iii) such Holders have offered the Trustee
reasonable security or indemnity against any loss, liability or expense, (iv)
the Trustee
H-9
has not complied with such request within 60 days after the receipt
of the request and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Securities have not given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would subject the Trustee to personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
14. Trustee Dealings with the Issuer.
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuers or their Affiliates and may otherwise deal with the Issuers
or their Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of any Issuer shall not have any
liability for any obligations of such Issuer under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
16. Authentication. This Security shall not be valid until an
authorized signatory of the Trustee (or an authenticating agent) manually signs
the certificate of Authentication on the other side of this Security.
17. Abbreviations. Customary abbreviations may be used in the name of
a Securityholder or an assignee, such as TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with rights of
survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=
Uniform Gift to Minors Act).
18. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
H-10
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Issuers have
caused CUSIP numbers to be printed on the Securities and have directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
The Issuers will furnish to any Holder of Securities upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Security.
H-11
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
________________________________________________________________
(Print or type assignee's name, address and zip code)
________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _________________ agent to transfer this Security on
the books of the Issuers. The agent may substitute another to act for him.
Date: _________________
Your Signature: ________________
Sign exactly as your name appears on the other side of this Security.
Signature must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guaranteed acceptable to the Trustee.
H-12
TO BE ATTACHED TO GLOBAL SECURITIES
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $ .
The following increases or decreases in this Global Security have been made:
Amount of decrease in Principal Amount of this Global Security
Amount of increase in Principal Amount of this Global Security
Principal Amount of this Global Security following such decrease or
increase
Signature of authorized signatory of Trustee or Securities Custodian
H-13
EXHIBIT I
FORM OF TRANSFEREE LETTER OF REPRESENTATION
FOR 2034 NOTES
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $__________ principal
amount of the 6.125% Senior Notes due 2034 (the "Notes") of
Jones Apparel Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel
Group USA, Inc., Nine West Footwear Corporation and Jones Retail Corporation
(the "Issuers").
Upon transfer, the Securities would be registered in the name of the new
beneficial owner as follows:
Name:________________________________
Address:_______________________________
Taxpayer ID Number:_____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act")), purchasing for our own account or for
the account of such an institutional "accredited investor" at
least $250,000 principal amount of the Securities, and we are acquiring the
Securities not with a view to, or offer or sale in connection with, any
distribution in violation of the Securities Act. We have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Securities, and we invest in or
purchase securities similar to the Securities in the normal course of our
business. We, and any accounts for which we are acting, are each able to bear
the economic risk of our or its investment.
2. We understand that the Securities have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Securities to offer, sell or otherwise
transfer such Securities prior to the date that is two years after the later of
the date of original issue and the last date on which an Issuer or any affiliate
of an Issuer was the owner of such Securities (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to an Issuer,
(b) pursuant to a registration statement that has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act ("Rule 144A"), to a Person we
reasonably believe is a qualified
I-1
institutional buyer under Rule 144A (a "QIB")
that is purchasing for its own account or for the account of a QIB and to whom
notice is given that the transfer is being made in reliance on Rule 144A, (d) in
an offshore transaction within the meaning of, and in compliance with,
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act that is purchasing for its own account or for the account of
such an institutional "accredited investor," in each case in
minimum principal amount of Securities of $250,000, or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter to
the Issuers and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it
is acquiring such Securities for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges that the Issuers
and the Trustee reserve the right prior to the offer, sale or other transfer
prior to the Resale Termination Date of the Securities pursuant to clause (d),
(e) or (f) above to require the delivery of an opinion of counsel,
certifications or other information satisfactory to the Issuers and the Trustee.
TRANSFEREE:
By: ___________________________
EX-4
4
exhibit4_15.htm
EXHIBIT 4.15
Exhibit 4.15
EXHIBIT 4.15
JONES APPAREL GROUP, INC.
JONES APPAREL GROUP HOLDINGS, INC.
JONES APPAREL GROUP USA, INC.
NINE WEST FOOTWEAR CORPORATION
JONES RETAIL CORPORATION
$250,000,000 Aggregate Principal Amount of 6.125% Senior Notes
due 2034
EXCHANGE AND NOTE REGISTRATION RIGHTS AGREEMENT
November 22, 2004
CITIGROUP GLOBAL MARKETS INC.
J.P. MORGAN SECURITIES INC.
As Representatives of the Several Initial
Purchasers listed in Schedule I hereto
c/o Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York 10013
J.P. Morgan Securities Inc.
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
Jones Apparel Group, Inc., a Pennsylvania corporation ("the Company"),
Jones Apparel Group Holdings, Inc., a Delaware corporation, Jones Apparel Group
USA, Inc., a Pennsylvania corporation, Nine West Footwear Corporation, a
Delaware corporation and Jones Retail Corporation, a New Jersey corporation
(collectively, the "Issuers"), as joint and several obligors,
propose to issue and sell to the several parties names in Schedule I hereto (the
"Initial Purchasers"), upon the terms and subject to the
conditions set forth in a purchase agreement dated November 22, 2004 (the "Purchase
Agreement"), $250,000,000 aggregate principal amount of their 6.125%
Senior Notes due 2034 (the "Securities"). Capitalized terms
used but not defined herein shall have the meanings given to such terms in the
Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Issuers jointly and severally agree with the Initial
Purchasers, for the benefit of the holders (including the Initial Purchasers) of
the Securities and the Exchange Securities (as defined herein) (collectively,
the "Holders"), as follows:
Section 1. Registered
Exchange Offer. The Issuers shall (i) prepare and file with the
Commission a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act with
respect to a proposed offer to the Holders of the Securities (the "Registered
Exchange Offer") to issue and deliver to such Holders, in exchange for
the Securities, a like aggregate principal amount of debt securities of the
Issuers (the "Exchange Securities"), that are identical in all
material respects to the Securities, except that the additional interest
provisions and the transfer restrictions relating to the Securities will be
eliminated, (ii) use their reasonable efforts to cause the Exchange Offer
Registration Statement to become effective under the Securities Act and the
Registered Exchange Offer to be consummated no later than 210 days after the
date of original issuance of the Securities (the "Issue Date"),
and (iii) keep the Exchange Offer Registration Statement effective for not less
than 30 calendar days (or longer, if required by applicable law) after the date
on which notice of the Registered Exchange Offer is mailed to the Holders (such
period being called the "Exchange Offer Registration Period").
The Exchange Securities will be issued under the Indenture or an indenture (the
"Exchange Securities Indenture") among the Issuers and the
Trustee or such other bank or trust company that is reasonably satisfactory to
the Initial Purchasers, as trustee (the "Exchange Securities
Trustee"), such indenture to be identical in all material respects to the
Indenture, except for the additional interest provisions and the transfer
restrictions relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement, the
Issuers shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of any of the Issuers (within the meaning of the Securities
Act) or an Exchanging Dealer (as defined herein) not complying with the
requirements of the next sentence, (b) is not an Initial Purchaser holding
Securities that have, or that are reasonably likely to have, the status of an
unsold allotment in an initial distribution, (c) acquires the Exchange
Securities in the ordinary course of such Holder's business and (d) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) to trade such Exchange Securities from
and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Issuers, the Initial Purchasers and
each Exchanging Dealer (as defined below) acknowledge that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act,
and in the absence of an applicable exemption therefrom, each Holder (which may
include the Initial Purchasers) that is a broker-dealer electing to exchange
Securities, acquired for its own account as a result of market-making activities
or other trading activities, for Exchange Securities (an "Exchanging
Dealer"), may be deemed to be an "underwriter" within the
meaning of the Securities Act and must therefore, deliver a prospectus
containing substantially
2
the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section
and the "Purpose of the Exchange Offer" section and in Annex C hereto
in the "Plan of Distribution" section of such prospectus in connection
with a sale of any such Exchange Securities received by such Exchanging Dealer
pursuant to the Registered Exchange Offer.
In connection with the Registered Exchange Offer, the Issuers shall:
(a) mail to each Holder a copy of the prospectus forming part of the Exchange
Offer Registration Statement, together with an appropriate letter of transmittal
and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 calendar
days (or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior to the
close of business, New York City time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable to the
Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange Offer, the
Issuers shall:
(a) accept for exchange all Securities validly tendered and not validly
withdrawn pursuant to the Registered Exchange Offer (it being understood that
all questions as to validity, form, eligibility (including time of receipt) and
acceptance of Securities tendered for exchange shall be determined by the
Issuers in their sole discretion, which determination shall be final and
binding);
(b) deliver to the Trustee for cancellation all Securities so accepted for
exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case may be,
promptly to authenticate and deliver to each Holder, Exchange Securities equal
in principal amount to the Securities of such Holder so accepted for exchange.
The Issuers shall use their reasonable efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein in order to permit such prospectus to be used by all persons
3
subject to the prospectus delivery requirements of the Securities Act for such
period of time as such persons must comply with such requirements in order to
resell the Exchange Securities; provided, that (i) in the case where such
prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Issuers shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case may be, shall
provide that the Securities and the Exchange Securities shall vote and consent
together on all matters as one class and that none of the Securities or the
Exchange Securities will have the right to vote or consent as a separate class
on any matter.
Interest on each Exchange Security issued pursuant to the Registered Exchange
Offer will accrue from the last interest payment date on which interest was paid
on the Securities surrendered in exchange therefor or, if no interest has been
paid on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be required
to represent to the Issuers that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of any of the
Issuers or, if it is such an affiliate, such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
Notwithstanding any other provisions hereof, the Issuers will ensure that (i)
any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
4
Section 2. Shelf
Registration. If (i) after the Issue Date, there is a change in
law or applicable interpretations thereof by the Commission's staff and as a
result the Issuers are not permitted to effect the Registered Exchange Offer as
contemplated by Section 1 hereof, or (ii) any Holder is not permitted to
participate in such Registered Exchange Offer because of any applicable law or
interpretation thereof, or (iii) such Registered Exchange Offer is not
consummated within 210 days after the Issue Date, or (iv) any Holder (other than
an Initial Purchaser holding Securities acquired directly from the Issuers) that
participates in the Registered Exchange Offer does not receive freely
transferable Exchange Securities in exchange for tendered Securities, other than
by reason of such Holder being an Affiliate of any of the Issuers (it being
understood that, for purposes of this Section 2, the requirement that an
Exchanging Dealer deliver a prospectus in connection with sales of Exchange
Securities acquired in the Registered Exchange Offer in exchange for Securities
acquired as a result of marketmaking activities or other trading activities
shall not result in such Exchange Securities being not "freely tradeable"),
or (v) any Initial Purchaser requests within 30 days after the consummation of
the exchange offers with respect to Securities acquired by them directly from
the Issuers that have, or that are reasonably likely to be determined to have,
the status of unsold allotments in an initial distribution, then the following
provisions shall apply:
(a) The Issuers shall use their reasonable efforts to file as promptly as
practicable with the Commission, and thereafter shall use their reasonable
efforts to cause to be declared effective as promptly as practicably after the
date on which the filing obligation arises, a shelf registration statement on an
appropriate form under the Securities Act relating to the offer and sale of the
Transfer Restricted Securities (as defined below) by the Holders thereof from
time to time in accordance with the methods of distribution set forth in such
registration statement (hereafter, a "Shelf Registration Statement"
and, together with any Exchange Offer Registration Statement, a "Registration
Statement"); provided, however, that, with respect to
Exchange Securities received by an Initial Purchaser in exchange for Securities
constituting any portion of an unsold allotment, the Issuers may, if permitted
by current interpretations by the Commission's staff, file a post-effective
amendment to the Exchange Offer Registration Statement containing the
information required by Regulation SK Items 507 and/or 508, as applicable, in
satisfaction of their obligations under this paragraph (a) with respect thereto,
and any such Exchange Offer Registration Statement, as so amended, shall be
referred to herein as, and governed by the provisions herein applicable to, a
Shelf Registration Statement.
(b) The Issuers shall use their reasonable efforts to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
forming part thereof to be used by Holders of Transfer Restricted Securities for
a period ending on the earlier of (i) two years from the Issue Date or such
shorter period that will terminate when all the Transfer Restricted Securities
covered by
5
the Shelf Registration Statement have been sold pursuant thereto and
(ii) the date on which the Securities become eligible for resale without volume
restrictions pursuant to Rule 144 under the Securities Act (in any such case,
such period being called the "Shelf Registration Period"). The
Issuers shall be deemed not to have used their reasonable efforts to keep the
Shelf Registration Statement effective during the requisite period if they
voluntarily take any action that would result in Holders of Transfer Restricted
Securities covered thereby not being able to offer and sell such Transfer
Restricted Securities during that period, unless (i) such action is required by
applicable law or (ii) such action is contemplated by Section 4(o).
(c) Notwithstanding any other provisions hereof, the Issuers will ensure that
(i) any Shelf Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included therein
in reliance upon or in conformity with written information furnished to the
Issuers by or on behalf of any Holder specifically for use therein (the "Holders'
Information")) does not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any prospectus forming part
of any Shelf Registration Statement, and any supplement to such prospectus (in
either case, other than with respect to Holders' Information), does not
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
Section 3. Additional
Interest. (a) The parties hereto agree
that the Holders of Transfer Restricted Securities will suffer damages if the
Issuers fail to fulfill their obligations under Section 1 or Section 2, as
applicable, and that it would not be feasible to ascertain the extent of such
damages. Accordingly, if (i) the Registered Exchange Offer is not consummated on
or prior to 210 days after the Issue Date, (ii) the Shelf Registration Statement
is not declared effective on or prior to the later of (A) the date that is 210
days after the Issue Date and (B) 90 days after the obligation to file such
Shelf Registration Statement arises under Section 2 or (iii) the Shelf
Registration Statement is filed and declared effective within the period
prescribed by clause (ii) but shall thereafter cease to be effective at any time
that the Issuers are obligated to maintain the effectiveness thereof (other than
(A) as contemplated by Section 4(o), provided that the period of time
during which the Shelf Registration Statement is not effective pursuant to
Section 4(o) does not exceed either two periods of up to 45 days or 90 days in
the aggregate during any 365-day period, or (B) as required by applicable law)
(each such event referred to in clauses (i) through (iii), a "Registration
Default"), the Issuers will be obligated to pay additional interest to each
Holder of Transfer
6
Restricted Securities, during the period of one or more such
Registration Defaults, at a rate of 0.25% per annum for the first 90 days and
0.50% per annum thereafter, determined daily, on the principal amount of the
Securities constituting Transfer Restricted Securities held by such holder until
(i) the Registered Exchange Offer is consummated, (ii) the Shelf Registration
Statement is declared effective or (iii) the Shelf Registration Statement again
becomes effective, as the case may be. Following the cure of all Registration
Defaults, the accrual of additional interest will cease. As used herein, the
term "Transfer Restricted Securities" means (i) each Security until
the date on which such Security has been exchanged for a freely transferable
Exchange Security in the Registered Exchange Offer, (ii) each Security until the
date on which it has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iii) each
Security until the date on which it is distributed to the public pursuant to
Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under
the Securities Act. Notwithstanding anything to the contrary in this Section
3(a), none of the Issuers shall be required to pay additional interest to a
Holder of Transfer Restricted Securities if such Holder failed to comply with
its obligations to make the representations set forth in the second to last
paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n).
(b) The Issuers shall notify the Trustee and the Paying Agent under the
Indenture promptly upon the happening of each and every Registration Default.
The Issuers shall pay the additional interest due on the Transfer Restricted
Securities by depositing with the Paying Agent (which may not be any of the
Issuers for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time, on the next interest payment date
specified by the Indenture and the Securities, sums sufficient to pay the
additional interest then due. The additional interest due shall be payable on
each interest payment date specified by the Indenture and the Securities to the
record holder entitled to receive the interest payment to be made on such date.
Each obligation to pay additional interest shall be deemed to accrue from and
including the date of the applicable Registration Default.
(c) The parties hereto agree that the additional interest provided for in
this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole and exclusive remedy for damages that will be suffered by
Holders of Transfer Restricted Securities by reason of the failure of (i) the
Shelf Registration Statement or the Exchange Offer Registration Statement to be
filed, (ii) the Shelf Registration Statement to remain effective or (iii) the
Exchange Offer Registration Statement to be declared effective and the
Registered Exchange Offer to be consummated, in each case to the extent required
by this Agreement.
Section 4. Registration Procedures. In
connection with any Registration Statement, the following provisions shall
apply:
7
(a) The Issuers shall (i) furnish to each Initial Purchaser, prior to the
filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and shall use their reasonable efforts to reflect in each such document,
when so filed with the Commission, such comments as any Initial Purchaser may
reasonably propose; (ii) include the information set forth in Annex A hereto on
the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C
hereto in the "Plan of Distribution" section of the prospectus forming
a part of the Exchange Offer Registration Statement, and include the information
set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to
the Registered Exchange Offer; and (iii) if requested by any Initial Purchaser,
include the information required by Item 507 or 508 of Regulation S-K, as
applicable, in the prospectus forming a part of the Exchange Offer Registration
Statement.
(b) The Issuers shall advise each Initial Purchaser, each Exchanging Dealer
which has provided in writing to any of the Issuers a telephone or facsimile
number and address for notice (in the case of clauses (iii), (iv) and (v) only)
and, in the case of a Shelf Registration Statement, the Holders of the
securities covered thereby and, if requested by any such person, confirm such
advice in writing (which advice pursuant to clauses (iii)-(v) hereof shall be
accompanied by an instruction to suspend the use of the prospectus until the
requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has been
filed with the Commission and when such Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to any
Registration Statement or the prospectus included therein or for additional
information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by any of the Issuers of any notification with respect
to the suspension of the qualification of the Securities or the Exchange
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the happening of any event that requires the
making of any changes in any Registration Statement or the prospectus included
therein in order that such document does not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to
8
make the statements therein (in the case of the prospectus
included therein, in the light of the circumstances under which they were
made) not misleading.
(c) The Issuers will make every reasonable effort to obtain the withdrawal at
the earliest possible time of any order suspending the effectiveness of any
Registration Statement.
(d) The Issuers will furnish to each Holder of Transfer Restricted Securities
included within the coverage of any Shelf Registration Statement, without
charge, at least one conformed copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if any such Holder so requests in writing, all exhibits thereto (including
those, if any, incorporated by reference).
(e) The Issuers will, during the Shelf Registration Period, promptly deliver
to each Holder of Transfer Restricted Securities included within the coverage of
any Shelf Registration Statement, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Issuers consent to the use of such prospectus or
any amendment or supplement thereto by each of the selling Holders of Transfer
Restricted Securities in connection with the offer and sale of the Transfer
Restricted Securities covered by such prospectus or any amendment or supplement
thereto.
(f) The Issuers will furnish to each Initial Purchaser and each Exchanging
Dealer and to any other Holder who so requests in writing, without charge, at
least one conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if any Initial Purchaser or Exchanging Dealer or any such Holder so
requests in writing, all exhibits thereto (including those, if any, incorporated
by reference).
(g) The Issuers will, during the Exchange Offer Registration Period or the
Shelf Registration Period, as applicable, promptly deliver to each Initial
Purchaser, each Exchanging Dealer and such other persons that are required to
deliver a prospectus following the Registered Exchange Offer, without charge, as
many copies of the final prospectus included in the Exchange Offer Registration
Statement or the Shelf Registration Statement and any amendment or supplement
thereto as such Initial Purchaser, Exchanging Dealer or other persons may
reasonably request; and the Issuers consent to the use of such prospectus or any
amendment or supplement thereto by any such Initial Purchaser, Exchanging Dealer
or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the Issuers
will use their reasonable efforts to register or qualify, or cooperate with the
Holders of
9
Securities or Exchange Securities included therein and their
respective counsel in connection with the registration or qualification of, such
Securities or Exchange Securities for offer and sale under the securities or
blue sky laws of such jurisdictions as any such Holder reasonably requests in
writing and do any and all other acts or things necessary or advisable to enable
the offer and sale in such jurisdictions of the Securities or Exchange
Securities covered by such Registration Statement; provided, that none of
the Issuers will be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(i) Subject to the provisions of the Indenture or the Exchange Securities
Indenture, as the case may be, and applicable law, the Issuers will cooperate
with the Holders of Securities or Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities or Exchange
Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
the Holders thereof may request in writing prior to sales of Securities or
Exchange Securities pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(iii)
through (v) occurs during the period for which the Issuers are required to
maintain an effective Registration Statement, the Issuers will promptly prepare
and file with the Commission a post-effective amendment to the Registration
Statement or a supplement to the related prospectus or file any other required
document so that, as thereafter delivered to purchasers of the Securities or
Exchange Securities from a Holder, the prospectus will not include an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Issuers will provide a CUSIP number for the Securities and the
Exchange Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Securities or the Exchange Securities, as the case
may be, in a form eligible for deposit with The Depository Trust Company.
(l) The Issuers shall use their reasonable efforts to comply with all
applicable rules and regulations of the Commission to the extent and so long as
they are applicable to the applicable Registration Statement, Registered
Exchange Offer or the shelf registration described in the Shelf Registration
Statement and will make generally available to their security holders as soon as
practicable after the effective date of the applicable Registration Statement an
earnings statement satisfying the provisions of Section 11 (a) of the Securities
Act; provided that in no event shall such earning statement be delivered
later than 90 days after the end of the first fiscal year of Jones Apparel
Group, Inc. commencing after the
10
effective date of the applicable Registration
Statement, which statement shall cover such fiscal year.
(m) The Issuers will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(n) The Issuers may require each Holder of Transfer
Restricted Securities to be registered pursuant to any Shelf Registration
Statement to furnish to the Issuers such information concerning the Holder and
the distribution of such Transfer Restricted Securities as the Issuers may from
time to time reasonably require for inclusion in such Shelf Registration
Statement, and the Issuers may exclude from such registration the Transfer
Restricted Securities of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement,
each Holder of Transfer Restricted Securities to be registered pursuant thereto
agrees by acquisition of such Transfer Restricted Securities that, upon receipt
of any notice from the Issuers pursuant to Section 4(b)(iii) through (v) or any
notice from the Issuers that the Shelf Registration Statement is not useable for
valid business reasons (not including avoidance of the Issuer's obligation
hereunder) in the good faith determination of the Issuers, including the
acquisition or divestiture of assets and other material transactions involving
the Issuers, such Holder will discontinue disposition of such Transfer
Restricted Securities until such Holder's receipt of copies of the
supplemental or amended prospectus contemplated by Section 4(j) or until advised
in writing (the "Advice") by the Issuers that the use of the
applicable prospectus may be resumed. If the Issuers shall give any notice
described in the immediately preceding sentence during the period that the
Issuers are required to maintain an effective Registration Statement (the "Effectiveness
Period"), such Effectiveness Period shall be extended by the number of
days during such period from and including the date of the giving of such notice
to and including the date when each seller of Transfer Restricted Securities
covered by such Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus contemplated by Section 4(j) (if an amended
or supplemental prospectus is required) or (y) the Advice (if no amended or
supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Issuers shall enter
into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as Holders
of a majority in aggregate principal amount of the Securities or Exchange
Securities being sold or the managing underwriters (if any) shall reasonably
request in order to facilitate any disposition of Securities or Exchange
Securities pursuant to such Shelf Registration Statement.
11
(q) In the case of a Shelf Registration Statement, the Issuers shall as may
reasonably be requested by any Holder (i) make reasonably available for
inspection by a representative of, and Special Counsel (as defined below) acting
for, Holders of a majority in aggregate principal amount of the Securities and
Exchange Securities being sold and any underwriter participating in any
disposition of Securities or Exchange Securities pursuant to such Shelf
Registration Statement, all relevant financial and other records, pertinent
corporate documents and properties of the Issuers and their respective
subsidiaries and (ii) use their reasonable efforts to have their officers,
directors, employees, accountants and counsel supply all relevant information
reasonably requested by such representative, Special Counsel or any such
underwriter (an "Inspector") in connection with such Shelf
Registration Statement; provided, however, that each such person
shall first agree in writing if requested by the Issuers that any information
that is designated in writing by the Issuers, in good faith, as confidential at
the time of delivery of such information shall be kept confidential by the
Holders or any Inspector, unless such disclosure is required by law or by court
or administrative order, or to assert any defenses available under the state and
federal securities laws, including without limitation, "due diligence"
defenses, or such information becomes available to the public generally other
than as a result of a disclosure or failure to safeguard such information by
such Holder or Inspector or to such person from a source other than the Issuers
and such source is not known, after due inquiry, by such person to be bound by
any obligation of confidentiality.
(r) In the case of a Shelf Registration Statement, the Issuers shall, if
requested by Holders of a majority in aggregate principal amount of the
Securities and Exchange Securities being sold, their Special Counsel or the
managing underwriters (if any) in connection with such Shelf Registration
Statement, use their reasonable efforts to cause (i) their counsel to deliver an
opinion relating to the Shelf Registration Statement and the Securities or
Exchange Securities, as applicable, in customary form, (ii) their respective
officers to execute and deliver all customary documents and certificates
requested by Holders of a majority in aggregate principal amount of the
Securities and Exchange Securities being sold, their Special Counsel or the
managing underwriters (if any) and (iii) their respective independent public
accountants to provide a comfort letter or letters in customary form, subject to
receipt of appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
Section 5. Registration
Expenses. The Issuers will bear all expenses incurred in
connection with the performance of their obligations under Sections 1, 2, 3 and
4 and the Issuers will reimburse the Initial Purchasers and the Holders for the
reasonable fees and disbursements of one firm of attorneys (in addition to any
local counsel) chosen by the Holders of a majority in aggregate principal amount
of the Securities and the Exchange Securities to be sold pursuant to each
Registration Statement (the "Special Counsel") acting for the
Initial Purchasers or
12
Holders in connection therewith.
Section 6.
Indemnification. Each of the Issuers,
jointly and severally, shall indemnify and hold harmless each Holder (including
any such Initial Purchaser or Exchanging Dealer), each of their respective
affiliates, each Person, if any, who controls any of such parties within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, and each of
their respective directors, officers, partners, employees, representatives and
agents, to the fullest extent lawful as follows:
(i) from and against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement, any prospectus contained therein or any amendment or supplement
thereto pursuant to which the offer and sale of the Securities or Exchange
Securities were registered under the Securities Act including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(ii) from and against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation or
proceeding by any court or governmental agency or body, whether commenced or
threatened, or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if and only if
such settlement is effected with the prior written consent of the Issuers; and
(iii) without duplication, from and against any and all expenses whatsoever
(including reasonable fees and disbursements of counsel chosen by such Initial
Purchaser, Holder or Exchanging Dealer (except to the extent otherwise
expressly provided in Section 6(c) hereof)), as incurred, reasonably incurred
in investigating, preparing for or defending against any litigation, or any
investigation or proceeding by any court or governmental agency or body,
whether commenced or threatened, and any amount paid in settlement thereof, or
any other claim whatsoever based upon any such untrue statement or omission,
or any such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section 6(a);
provided, however, that this indemnity does not apply to
any loss, liability, claim, damage or expense to the extent arising out of an
untrue statement or omission or alleged untrue statement or omission (i) made in
reliance upon and in conformity with information furnished to the Issuers by or
on behalf of such
13
Initial Purchaser, Holder or Exchanging Dealer in writing
expressly for use in the Registration Statement, any prospectus contained
therein, or any amendment or supplement thereto or (ii) contained in any
preliminary prospectus or any prospectus if such Initial Purchaser, Holder or
Exchanging Dealer failed to send or deliver a copy of the final prospectus where
such delivery is required by the Securities Act and such final prospectus (as so
amended or supplemented) would have corrected such untrue statement or omission
and the delivery thereof would have eliminated such losses, claims, damages or
liabilities. Any amounts advanced by the Issuers to an indemnified party
pursuant to this Section 6(a) as a result of such losses shall be returned to
the Issuers if it shall be finally judicially determined by such a court in a
judgment not subject to appeal or final review that such indemnified party was
not entitled to indemnification by the Issuers.
(b) Each Holder (including any such Initial Purchaser or Exchanging Dealer),
by its acceptance of its Securities or Exchange Securities, as the case may be,
agrees, severally and not jointly, to indemnify and hold harmless each Issuer
and each of their respective directors, officers (including each of the officers
of the Issuers who signed the Registration Statement), employees,
representatives and agents, and each Person, if any, who controls any of the
Issuers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all loss, liability, claim, damage and
expense whatsoever described in the indemnity contained in Section 6(a) hereof,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or any prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Issuers by or on behalf of such Holder expressly for use in the Registration
Statement (or any amendment thereto) or any such prospectus (or any amendment or
supplement thereto); provided, however, that, in the case of a
Shelf Registration Statement, no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by such Holder from
the sale of Securities or Exchange Securities pursuant to such Shelf
Registration Statement.
(c) Each indemnified party shall give prompt notice to
each indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers properly
served on such indemnified party (but failure to notify an indemnifying party
shall not relieve such indemnifying party from any liability hereunder to the
extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have other than on account
of this indemnity agreement). An indemnifying party may participate, at its own
expense, in the defense of any such action. If an indemnifying party so elects
within a reasonable time after receipt of such notice, such indemnifying party,
jointly with any other indemnifying party, may assume the defense of such action
with counsel chosen by it and reasonably satisfactory to the indemnified parties
defendant in such
14
action; provided, however, that if any such
indemnified party reasonably determines, upon written advice of counsel, that
there may be legal defenses available to any indemnified party which are
different from or in addition to those available to any indemnifying party or
that representation of such indemnifying party and any indemnified party by the
same counsel would present a conflict of interest, then such indemnifying party
or parties shall not so be entitled to assume such defense. If an indemnifying
party is not so entitled to assume the defense of such action, counsel for such
indemnifying party shall be entitled to conduct the defense of such indemnifying
party and counsel for each indemnified party or parties shall be entitled to
conduct the defense of such indemnified party or parties. If an indemnifying
party assumes the defense of an action in accordance with and as permitted by
the provisions of this Section 6(c), such indemnifying party shall not be liable
for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. No indemnifying party shall, without the prior written consent of the
indemnified parties, which consent shall not be unreasonably withheld, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6, unless
such settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and does not include a statement as to or an
admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) Notwithstanding any payment or payments made by any Issuer hereunder,
each Issuer hereby expressly waives subrogation to, and agrees that it shall not
be entitled to be subrogated to, any of the rights of any indemnified party
against any of the Issuers or any other right of offset held by any indemnified
party for the payment of any amounts owed to any indemnified party pursuant to
this Section 6; provided, however, that if any of the foregoing
provisions of this paragraph are held to be contrary to applicable law or
unenforceable by a court of competent jurisdiction, each of the Issuers hereby
expressly agrees that any right of subrogation or contribution that such Issuer
may have as a result of such applicable law or unenforceability, as the case may
be, shall be subordinate in right of payment to the payment in full in cash of
all amounts owed to any indemnified party pursuant to this Section 6.
(e) If the indemnification provided for in this
Section 6 is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each
15
indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as shall
be appropriate to reflect the relative benefits received by the Issuers from the
offering and sale of the Securities, on the one hand, and a Holder with respect
to the sale by such Holder of Securities, Exchange Securities, on the other, or
(ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
indemnifying party or parties on the one hand and of the indemnified party or
parties on the other hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations.
The relative benefits received by the Issuers, on the one hand, and a Holder,
on the other, with respect to such offering and such sale shall be deemed to be
in the same proportion as the total net proceeds from the offering of the
Securities (before deducting expenses) received by or on behalf of the Issuers
as set forth in the table on the cover of the Offering Memorandum, on the one
hand, bear to the total proceeds received by such Holder with respect to its
sale of Securities, Exchange Securities, on the other.
The relative fault of the Issuers on the one hand and the Holders on the
other hand shall be determined by reference to, among other things, whether any
such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Issuers or by the Holders, and the respective parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Issuers and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to above in this Section 6(e). The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 6(e) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing for or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 6(e), an indemnifying party
that is a Holder of Securities or Exchange Securities shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Securities or Exchange Securities sold by such indemnifying party to any
16
purchaser exceeds the amount of any damages which such indemnifying party has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
For purposes of this Section 6(e), each person, if any, who controls any
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Initial
Purchaser, and each director of any Issuer and each officer of any Issuer who
signed the Registration Statement and each person, if any, who controls any
Issuer within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act shall have the same rights to contribution as such Issuer.
Section 7. Rules 144 and 144a. The
Issuers shall use their reasonable efforts to file the reports required to be
filed by them under the Securities Act and the Exchange Act in a timely manner
and, if at any time the Issuers are not required to file such reports, they
will, upon the written request of any Holder of Transfer Restricted Securities,
make publicly available other information so long as necessary to permit sales
of such Holder's securities pursuant to Rules 144 and 144A. The Issuers
covenant that they will take such further action as any Holder of Transfer
Restricted Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Transfer Restricted Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including, without limitation, the
requirements of Rule 144A(d)(4)). Upon the written request of any Holder of
Transfer Restricted Securities, the Issuers shall deliver to such Holder a
written statement as to whether they have complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Issuers to register any of their securities pursuant to the Exchange
Act.
Section 8. Underwritten
Registrations. If any of the Transfer Restricted Securities
covered by any Shelf Registration Statement are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of such Transfer Restricted Securities included in
such offering, subject to the consent of the Issuers (which shall not be
unreasonably withheld or delayed), and such Holders shall be responsible for all
underwriting commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by
17
the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
Section 9. Miscellaneous. Amendments and
Waivers. (a) The provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Issuers have obtained the written consent of
Holders of a majority in aggregate principal amount of the Securities and the
Exchange Securities, taken as a single class. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose Securities or Exchange
Securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of a majority in aggregate principal amount of the Securities and the
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(i) if to a Holder, at the most current address given by such Holder to the
Issuers in accordance with the provisions of this Section 9(b), which address
initially is, with respect to each Holder, the address of such Holder
maintained by the Registrar under the Indenture, with a copy in like manner
to, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.;
(ii) if to an Initial Purchaser, initially at its address set forth in the
Purchase Agreement; and
(iii) if to any of the Issuers, initially at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; one business day after being
delivered to a next-day air courier; five business days after being deposited in
the mail; and when receipt is acknowledged by the recipient's telecopier
machine, if sent by telecopier.
(c) Successors and Assigns. This Agreement
shall be binding upon the Issuers and their respective successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be
18
deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement. (a) the term
"business day" means any day on which the New York Stock Exchange,
Inc. is open for trading, (b) the term "subsidiary" has the meaning
set forth in Rule 405 under the Securities Act and (c) except where otherwise
expressly provided, the term "affiliate" has the meaning set forth in
Rule 405 under the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by any Issuer or Holder of any
of its obligations under this Agreement, each Holder or the Issuers, as the case
may be, in addition to being entitled to exercise all rights granted by law,
including recovery of damages (other than the recovery of damages for a breach
by any Issuer of its obligations under Sections 1 or 2 hereof for which
additional interest have been paid pursuant to Section 3 hereof), will be
entitled to specific performance of their rights under this Agreement. The
Issuers and each Holder agree that monetary damages would not be adequate
compensation for any loss incurred by reason by it of a breach of any of the
provisions of this Agreement and hereby further agree that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. Each of the Issuers represents,
warrants and agrees for the period commencing on the date hereof and ending on
the date on which there are no Transfer Restricted Securities outstanding that (i)
it has not entered into, shall not, on or after the date of this Agreement,
enter into any agreement that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof,
(ii) it has not previously entered into any agreement which remains in effect
granting any registration rights with respect to any of its debt securities to
any person and (iii) without limiting the generality of the foregoing, without
the written consent of the Holders of a majority in aggregate principal amount
of the then outstanding Transfer Restricted Securities, it shall not grant to
any person the right to request the Issuers to register any debt securities of
the Issuers under the Securities Act unless the rights so granted are not in
conflict or inconsistent with the provisions of this Agreement.
(j) No Piggyback on Registrations. None of the Issuers or any of their
security holders (other than the Holders of Transfer Restricted Securities in
such
19
capacity) shall have the right to include any securities of the Issuers in
any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(k) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
[Rest of page intentionally left blank]
20
Please confirm that the foregoing correctly sets forth the agreement among
the Issuers and the Initial Purchasers.
|
JONES APPAREL GROUP, INC.
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: Executive Vice
President
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: President
|
|
JONES APPAREL GROUP USA, INC.
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: Secretary
|
|
NINE WEST FOOTWEAR CORPORATION
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: Executive Vice
President
and Secretary
|
|
JONES RETAIL CORPORATION
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: Secretary
|
21
Accepted in New York, New York.
CITIGROUP GLOBAL MARKETS INC.
J.P. MORGAN SECURITIES INC.
By: Citigroup Global Markets, Inc.
By: /s/ Ian Sugarman
Name: Ian Sugarman
Title: Vice President
By: J.P. Morgan Securities Inc.
By: /s/ Maria Sramek
Name: Maria Sramek
Title: Vice President
For themselves andthe other several Initial
Purchasers named in Schedule I to the
foregoing Agreement.
22
SCHEDULE I
Initial Purchasers
Citigroup Global Markets Inc.
J.P. Morgan Securities Inc.
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Greenwich Capital Markets, Inc.
Scotia Capital (USA) Inc.
SunTrust Capital Markets, Inc.
Wachovia Capital Markets, LLC
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Issuers have agreed that, starting on the date hereof and ending
on the close of business on the earlier to occur of (i) the date on which all
Exchange Securities held by broker-dealers eligible to use the Prospectus to
satisfy their prospectus delivery obligations under the Securities Act have been
sold and (ii) the date 180 days after the consummation of the Registered
Exchange Offer (the "Expiration Date"), it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution".
A-1
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of
Distribution".
B-1
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Issuers have agreed
that, starting on the date hereof and ending on the close of business on the
earlier to occur of (i) the date on which all Exchange Securities held by
broker-dealers eligible to use the Prospectus to satisfy their prospectus
delivery obligations under the Securities Act have been sold and (ii) the date
180 days after the consummation of the Registered Exchange Offer (the "Expiration
Date"), it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until
[ ],
20[ ], all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.
None of the Issuers will receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period starting on the date hereof and ending on the close of business
on the earlier to occur of (i) the date on which all Exchange Securities held by
broker-dealers eligible to use the Prospectus to satisfy their prospectus
delivery
C-1
obligations under the Securities Act have been sold and (ii) the
Expiration Date, the Issuers will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Issuers have agreed to pay all expenses incident to the Registered Exchange
Offer (including the expenses of one counsel for the Holders of the Securities)
other than commissions or concessions of any broker-dealers and will indemnify
the Holders of the Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
C-2
ANNEX D
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it
is (i) acquiring the Exchange Securities in the ordinary course of its business,
(ii) has no arrangement or understanding with any person, nor does it intend to
engage in, a distribution (as that term is interpreted by the Securities and
Exchange Commission) of Exchange Securities and (iii) it is not an affiliate (as
that term is interpreted by the Securities and Exchange Commission) of any of
the Issuers. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
D-1
Schedule to Omitted Agreements
The Exchange and Note Registration
Rights Agreements dated November 22, 2004 among Jones Apparel Group, Inc., Jones
Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc., Nine West Footwear
Corporation and Jones Retail Corporation, and Citigroup Global Markets Inc. and
J.P. Morgan Securities Inc., as Representatives of the Several Initial
Purchasers listed in Schedule I thereto, with respect to the 4.250% Senior Notes
due 2009 and the 5.125% Senior Notes due 2014 have been omitted. Those two
agreements are substantially identical to the Exchange and Note Registration
Rights Agreement with respect to the 6.125% Senior Notes due 2034; the only
material detail in which those agreements differ is the series of notes referred
to in the definition of "Securities" therein.
EX-10
5
exhibit10_3.htm
EXHIBIT 10.3
Exhibit 10.3
EXHIBIT 10.3
JONES APPAREL GROUP, INC.
1999 STOCK INCENTIVE PLAN
(as amended on December 10, 2004)
1. Purpose of
the 1999 Stock Incentive Plan. Jones Apparel Group, Inc. (the
"Company") desires to attract and retain the best available talent and
to encourage the highest level of performance. The 1999 Stock Incentive Plan
(the "Stock Incentive Plan") is intended to contribute significantly
to the attainment of these objectives by (i) providing long-term incentives and
rewards to all key employees of the Company (including officers and directors
who are key employees of the Company and also including key employees of any
subsidiary of the Company which may include officers or directors of any
subsidiary of the Company who are also key employees of said subsidiary), and
those directors and officers, consultants, advisers, agents or independent
representatives of the Company or of any subsidiary (together, "Eligible
Individuals"), who are contributing or in a position to contribute to the
long-term success and growth of the Company or of any subsidiary, (ii) assisting
the Company and any subsidiary in attracting and retaining Eligible Individuals
with experience and ability, and (iii) associating more closely the interests of
such Eligible Individuals with those of the Company's stockholders.
2. Scope and
Duration of the Stock Incentive Plan. Under the Stock Incentive Plan,
options ("Options") to purchase shares of common stock, par value $.01
per share ("Common Stock"), may be granted to Eligible Individuals.
Options granted to employees (including officers and directors who are
employees) of the Company or a subsidiary corporation thereof, may, at the time
of grant, be designated by the Company's Board of Directors either as incentive
stock options ("ISOs"), with the attendant tax benefits as provided
for under Sections 421 and 422 of the Internal Revenue Code of 1986, as amended
(the "Code") or as nonqualified stock options. Stock appreciation
rights (the "Rights") may be granted in association with Options.
Shares of Common Stock subject to restrictions and granted pursuant to Paragraph
7 of the Stock Incentive Plan ("Restricted Stock") may also be granted
to Eligible Individuals hereunder. The grant of any of an Option, a Right and/or
Restricted Stock is sometimes referred to herein as an "Award." The
aggregate number of shares of Common Stock reserved for grant from time to time
under the Stock Incentive Plan is 18,500,000 shares of Common Stock, which
shares of Common Stock may be authorized but unissued shares of Common Stock or
shares of Common Stock, which shall have been or which may be reacquired by the
Company, as the Board of Directors of the Company shall from time to time
determine. Restricted Stock issued pursuant to the Stock Incentive Plan, even
while subject to restrictions, will be counted against the maximum number of
shares issuable hereunder. Such aggregate numbers shall be subject to adjustment
as provided in Paragraph 11. If an Option shall expire or terminate for any
reason without having been exercised in full or surrendered in full in
connection with the exercise of a Right, the shares of Common Stock represented
by the portion of the Option not so exercised or surrendered shall (unless the
Stock Incentive Plan shall have been terminated) become available for other
Awards of Options under the Stock Incentive Plan, except that up to 2,000,000
shares of Common Stock represented by Options granted from and after May 19,
2004 which are not so exercised or surrendered shall (unless the Stock Incentive
Plan shall have been terminated) become available for other Awards of either
Options or Restricted Stock under the Stock Incentive
Plan. If Restricted Stock is forfeited for any reason, the
forfeited shares of Restricted Stock shall (unless the Stock Incentive Plan
shall have been terminated) become available for other Awards of Restricted
Stock or Options under the Stock Incentive Plan. Subject to Paragraph 14, no
Option, Right or Restricted Stock shall be granted under the Stock Incentive
Plan after May 19, 2009.
3. Administration
of the Stock Incentive Plan.
(a) This Stock
Incentive Plan will be administered by the Board of Directors of the Company
(the "Board of Directors"). The Board of Directors, in its discretion,
may designate a Compensation Committee (the "Compensation Committee"
or "Committee") composed of at least two members of the Board of
Directors to administer this Stock Incentive Plan. Members of the Compensation
Committee shall meet such qualifications as the Board of Directors may
determine; provided, however, that each member shall qualify as a
"Non-Employee Director" under Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and as an "Outside
Director" as defined in Code Section 162(m) and any regulations promulgated
thereunder. The Board, in its discretion, may also designate a CEO Committee
(the "CEO Committee"), composed of the director of the Company who is
serving as the Company's chief executive officer.
(b) The Board of
Directors or the Committee (hereinafter, the terms "Compensation
Committee" or "Committee", shall mean the Board of Directors
whenever no such Compensation Committee has been designated), shall have
authority in its discretion, subject to and not inconsistent with the express
provisions of this Stock Incentive Plan, to direct the grant of Awards; to
determine the purchase price of the Common Stock covered by each Award; the
Eligible Individuals to whom, and the time or times at which, Awards shall be
granted and subject to the maximum set forth in Paragraph 4 hereof, the number
of shares of Common Stock to be covered by each Award; to designate Options as
ISOs; to direct the grant of Rights in connection with any Option; to interpret
the Stock Incentive Plan; to determine the time or times at which Options may be
exercised; to determine the terms and conditions of the restrictions relating to
the Restricted Stock (which restrictions may vary among Awards as the Committee
shall deem appropriate); to prescribe, amend and rescind rules and regulations
relating to the Stock Incentive Plan, including, without limitation, such rules
and regulations as it shall deem advisable, so that transactions involving
Awards may qualify for exemption under such rules and regulations as the
Securities and Exchange Commission may promulgate from time to time exempting
transactions from Section 16(b) of the Securities and Exchange Act of 1934 (the
"Exchange Act"); to determine the terms and provisions of and to cause
the Company to enter into agreements with Eligible Individuals in connection
with Awards granted under the Stock Incentive Plan (the "Agreements"),
which Agreements may vary from one another as the Committee shall deem
appropriate; and to make all other determinations it may deem necessary or
advisable for the administration of the Stock Incentive Plan. Notwithstanding
the foregoing, except as provided in Section 11, the Committee shall not have
the authority to reduce the exercise price of any outstanding Option, to offer
to grant any new Option in exchange for the cancellation of an outstanding
Option with a higher exercise price, to increase the maximum number of shares of
Common Stock reserved for issuance under the Stock Incentive Plan or to alter
the classes of persons constituting Eligible Individuals.
2
Members of the
Committee shall serve at the pleasure of the Board of Directors. The Committee
shall have and may exercise all of the powers of the Board of Directors under
the Stock Incentive Plan, other than the power to appoint a director to
Committee membership. A majority of the Committee shall constitute a quorum, and
acts of a majority of the members present at any meeting at which a quorum is
present shall be deemed the acts of the Committee. The Committee may also act by
instrument signed by a majority of the members of the Committee.
Every action,
decision, interpretation or determination by the Committee with respect to the
application or administration of this Stock Incentive Plan shall be final and
binding upon the Company and each person holding any Award granted under this
Stock Incentive Plan.
(c) Subject to the
express provisions of this Plan, the Committee shall have the authority, in its
discretion, to delegate to the CEO Committee the authority to direct the grant
of Awards to Eligible Individuals (as such term is defined in the Plan), solely
in connection with either the hiring or the promotion of such Eligible
Individuals by the Company or by any subsidiary of the Company and, in
connection with such Awards, to determine the purchase price of the Common Stock
covered by such Awards, the number of shares of Common Stock to be covered by
such Awards, to designate any such Awards of Options as ISOs, to direct the
grant of Rights in connection with any such Options, to determine the time or
times at which such Options may be exercised, and to determine the terms and
conditions of the restrictions relating to such Awards of Restricted Stock; provided,
however, that the CEO Committee shall have no authority to (i) grant
Awards to the chief executive officer of the Company or to any other Eligible
Individual who at the time of the Award is, or is reasonably expected to become,
subject to the provisions of Section 16 of the Exchange Act, pursuant to Rule
16a-2 under the Exchange Act, (ii) during any calendar year, grant Options to
purchase more than 200,000 shares of Common Stock in the aggregate or grant more
than 75,000 shares of Restricted Stock in the aggregate, (iii) grant to any
Eligible Individual Awards of Options to purchase more than 25,000 shares of
Common Stock in the aggregate and/or Awards of more than 10,000 shares of
Restricted Stock in the aggregate or (iv) grant Awards that are inconsistent
with the express provisions of the Plan.
4. Eligibility:
Factors to be Considered in Granting Awards and Designating ISOs.
(a) Awards may be granted only to (i) key employees (including officers and
directors who are employees) of the Company or any subsidiary corporation
thereof on the date of grant (Options so granted may be designated as ISOs), and
(ii) directors or officers of the Company or a subsidiary corporation thereof on
the date of grant, without regard to whether they are employees, and (iii)
consultants or advisers to or agents or independent representatives of the
Company or a subsidiary thereof. In determining the persons to whom Awards shall
be granted and the number of shares of Common Stock to be covered by each Award,
the Committee, or, if applicable, the CEO Committee, shall take into account the
nature of the duties of the respective persons, their present and potential
contributions to the Company's (including subsidiaries') successful operation
and such other factors as the Board of Directors in its discretion shall deem
relevant. Subject to the provisions of Paragraph 2 and clause (c) below, an
Eligible Individual may receive Awards on more than one occasion under the Stock
Incentive Plan. No person shall be eligible for an Award if he shall have filed
with the Secretary of the Company an instrument waiving such eligibility;
provided that any
3
such waiver may be revoked by filing with the Secretary of
the Company an instrument of revocation, which revocation will be effective upon
such filing.
(b) In the case of each ISO granted to an employee, the aggregate fair market
value (determined at the time the ISO is granted) of the Common Stock with
respect to which the ISO is exercisable for the first time by such employee
during any calendar year (under all plans of the Company and any subsidiary
corporation thereof) may not exceed $100,000.
(c) In no event shall any Eligible Individual be granted Options to purchase
more than 3,000,000 shares of Common Stock or shares of Restricted Stock as
Performance-Based Awards (as defined in paragraph 12) in excess of 1,500,000
over the ten-year term of this Stock Incentive Plan.
5. Awards of
Options.
(a) Options.
(i) The
purchase price per share of the Common Stock covered by each Option shall be
established by the Committee, or, if applicable, the CEO Committee, but in
no event shall it be less than the fair market value of a share of the
Common Stock on the date the Option is granted; provided, however, that if
an Option is granted prior to May 19, 2004 to a director of the Company for
services solely as a director, and such grant is approved by the Board of
Directors, the purchase price may be less than such fair market value. If,
at the time an Option is granted, the Common Stock is publicly traded, such
fair market value shall be the closing price (or the mean of the latest bid
and asked prices) of a share of Common Stock on such date as reported in The
Wall Street Journal (or a publication or reporting service deemed equivalent
to The Wall Street Journal for such purpose by the Board of Directors) for
any national securities exchange or other securities market which at the
time is included in the stock price quotations of such publication. In the
event that the Committee shall determine such stock price quotation is not
representative of fair market value by reason of the lack of a significant
number of recent transactions or otherwise, the Committee may determine fair
market value in such a manner as it shall deem appropriate under the
circumstances. If, at the time an Option is granted, the Common Stock is not
publicly traded, the Committee shall make a good faith attempt to determine
such fair market value.
(ii) In the
case of an employee who at the time an ISO is granted owns stock possessing
more than 10% of the total combined voting power of all classes of the stock
of the employer corporation or of its parent or a subsidiary corporation
thereof (a "10% Holder"), the purchase price of the Common Stock
covered by any ISO shall in no event be less than 110% of the fair market
value of the Common Stock at the time the ISO is granted.
(b) Term of Options. The term of each Option shall be fixed by the
Committee, or, if applicable, the CEO Committee, but in no event shall it be
exercisable more than 10 years from the date of grant in the case of Options
granted prior to May 28, 2003, or more than seven years from the
4
date of grant in the case of Options granted from and after
May 28, 2003, in each case, subject to earlier termination as provided in
Paragraphs 9 and 10. An ISO granted to a 10% Holder shall not be exercisable
more than five years from the date of grant.
(c) Exercise of Options.
(i) Subject to
the provisions of the Stock Incentive Plan, an Option granted to an employee
under the Stock Incentive Plan shall become fully exercisable at such time
or times as the Committee or, if applicable, the CEO Committee, in its sole
discretion shall determine at the time of the granting of the Option or
thereafter, except that in no event shall any such Option be exercisable
later than 10 years after its grant in the case of Options granted prior to
May 28, 2003, or more than seven years from the date of grant in the case of
Options granted from and after May 28, 2003.
(ii) An Option
may be exercised as to any or all full shares of Common Stock as to which
the Option is then exercisable.
(iii) The
purchase price of the shares of Common Stock as to which an Option is
exercised shall be paid in full in cash at the time of exercise; provided,
that the purchase price may be paid (i) in whole or in part, by surrender or
delivery to the Company of previously-owned securities of the Company
already beneficially owned by the Optionee for at least six months and
having a fair market value on the date of the exercise equal to the portion
of the purchase price being so paid, or (ii) in cash by a broker-dealer
acceptable to the Company to whom the Optionee has submitted an irrevocable
notice of exercise. Fair market value shall be determined as provided in
Paragraph 5 for the determination of such value on the date of the grant. In
addition, the holder shall, upon notification of the amount due and prior to
or concurrently with delivery to the holder of a certificate representing
such shares of Common Stock, pay promptly any amount necessary to satisfy
applicable Federal, state or local tax requirements.
(iv) Except as
provided in Paragraphs 9 and 10, no Option may be exercised unless the
original grantee thereof is then an Eligible Individual.
(v) The Option
holder shall have the rights of a stockholder with respect to shares of
Common Stock covered by an Option only upon becoming the holder of record of
such shares of Common Stock.
(vi)
Notwithstanding any other provision of this Stock Incentive Plan, the
Company shall not be required to issue or deliver any share of stock upon
the exercise of an Option prior to the admission of such share to listing on
any stock exchange or automated quotation system on which the Company's
Common Stock may then be listed.
6. Awards and
Exercise of Rights.
5
(a) A Right may be
awarded by the Committee, or, if applicable, the CEO Committee, in association
with any Option either at the time such Option is granted or at any time prior
to the exercise, termination or expiration of such Option. Each such Right shall
be subject to the same terms and conditions as the related Option and shall be
exercisable only to the extent such Option is exercisable, and the Right Value,
as hereinafter defined, is a positive amount.
(b) A Right shall
entitle the holder to surrender to the Company unexercised the related Option
(or any portion or portions thereof which the holder from time to time shall
determine to surrender for this purpose) and to receive in exchange therefor,
subject to the provisions of the Stock Incentive Plan and such rules and
regulations as from time to time may be established by the Committee, a payment
having an aggregate value equal to the product of (A) the "Right
Value" of one share of Common Stock, as hereinafter defined, and (B) the
number of shares of Common Stock called for by the Option, or portion thereof,
which is surrendered. For purposes of the Stock Incentive Plan, the Right Value
of one share of Common Stock shall be the excess of: (i) the fair market value
of one share of Common Stock on the date on which the Right is exercised, over
(ii) the purchase price per share of the Common Stock covered by the surrendered
Option. The date on which the Committee shall receive notice from the holder of
the exercise of a Right shall be considered the date on which the Right is
exercised.
Upon exercise of a
Right, a holder shall indicate to the Committee what portion of the payment he
desires to receive in cash and what portion in shares of Common Stock of the
Company; provided, that the Board of Directors shall have sole discretion to
determine in any case or cases that payment will be made in the form of all
cash, all shares of Common Stock, or any combination thereof. If the holder is
to receive a portion of such payment in shares of Common Stock, the number of
shares of Common Stock shall be determined by dividing the amount of such
portion by the fair market value of one share of Common Stock on the date on
which the Right is exercised. The number of shares of Common Stock which may be
received pursuant to the exercise of a Right may not exceed the number of shares
of Common Stock covered by the related Option, or portion thereof, which is
surrendered. No fractional shares of Common Stock will be issued, but instead
cash will be paid for any such fractional share of Common Stock.
No payment will be
required from the holder upon exercise of a Right, except that the holder shall,
upon notification of the amount due and prior to or concurrently with delivery
to the holder of cash or a certificate representing shares of Common Stock, pay
promptly any amount necessary to satisfy applicable Federal, state or local tax
requirements, and the Company shall have the right to deduct from any payment
any taxes required by law to be withheld by the Company with respect to such
payment.
(c) The fair
market value of one share of Common Stock for the date on which a Right is
exercised shall be determined as provided in Paragraph 5 for the determination
of such value on the date of grant.
(d) Upon exercise
of a Right, the number of shares of Common Stock subject to exercise under the
related Option shall automatically be reduced by the number of shares of Common
Stock represented by the Option, or portion thereof, which is surrendered.
Shares of Common Stock subject to Options, or portions thereof, which are
surrendered in connection with the exercise
6
of Rights shall not be available for subsequent Option
or Restricted Stock grants under the Stock Incentive Plan.
(e) Whether
payments upon exercise of Rights are made in cash, shares of Common Stock or a
combination thereof, the Committee shall have the sole discretion as to the
timing of the payments, including whether payment shall be made in a lump sum or
installments, but payments may not be deferred beyond the first business day of
the twenty-fifth calendar month next following the month of exercise of a Right.
Deferred payments may bear interest at a rate determined by the Committee,
provided that such rate of interest shall not be less than the lowest rate which
avoids imputation of interest at a higher rate under the Code. The Board of
Directors may make such further provisions and adopt such rules and regulations
as it shall deem appropriate, not inconsistent with the Stock Incentive Plan,
related to the timing of the exercise of a Right and the determination of the
form and timing of payment to the holder upon such exercise.
7. Awards of
Restricted Stock. The Committee, or, if applicable, the CEO Committee, may
authorize the issuance or transfer of shares of Restricted Stock to Eligible
Individuals either alone or in addition to other Awards under the Stock
Incentive Plan. The terms and conditions of the vesting of an Award of
Restricted Stock shall be set forth in the Agreement with the recipient thereof,
except that Awards of Restricted Stock that will fully vest in fewer than three
years from the date of grant may not exceed 5% of the total number of shares of
Common Stock reserved for issuance under the Stock Incentive Plan. The
Committee, or, if applicable, the CEO Committee, may condition the grant of
Restricted Stock upon the attainment of specified performance goals pursuant to
Paragraph 12 hereof or such other factors as the Committee, or, if applicable,
the CEO Committee, may determine, in its sole discretion. Awards of Restricted
Stock shall also be subject to the following provisions:
(a) The Restricted
Stock may be issued at a purchase price less than the fair market value thereof
or for no consideration, as determined by the Committee, or, if applicable, the
CEO Committee.
(b) Restricted
Stock may be subject to: (i) restrictions on the sale or other disposition
thereof, (ii) rights of repurchase or first refusal, and (iii) such other
restrictions, conditions and terms as the Committee, or, if applicable, the CEO
Committee, deems appropriate.
(c) Each Award of
Restricted Stock will constitute an immediate transfer of ownership of such
shares, entitling the recipient to dividend, voting and other ownership rights.
The holder of Restricted Stock shall not be required to return any dividends
received thereon to the Company in the event of the forfeiture of such shares.
(d) The Committee
shall determine whether shares of Restricted Stock are to be held in escrow by
the Company or by an escrow agent appointed by the Committee, or if such shares
are to be delivered to the recipient of the Award with an appropriate legend
referring to the terms, conditions and restrictions applicable to the Award, in
substantially the following form:
"The sale, transfer, alienation, attachment,
assignment, pledge or encumbrance of the shares of stock represented hereby
are subject to the
7
terms and conditions (including forfeiture) of the Jones
Apparel Group, Inc. 1999 Stock Incentive Plan and an Agreement entered into
by the registered owner and the Company dated __________. Copies of such
Plan and Agreement are on file at the offices of the Company. Any attempt to
dispose of these shares in contravention of the applicable restrictions,
including by way of sale, assignment, transfer, pledge, hypothecation or
otherwise, shall be null and void and without effect."
If and when all restrictions on such shares have lapsed
without a prior forfeiture of the shares, such legend shall be removed from the
certificate representing the shares.
8. Nontransferability
of Awards. No Award granted under the Stock Incentive Plan shall be
transferable, other than by will or by the laws of descent and distribution,
except that all or any portion of an Option (other than Options which are ISOs)
may be transferred to or for the benefit of (by trust) the spouse or lineal
descendants of a holder of such Option, subject to such restrictions on transfer
which may be imposed by federal and state securities laws, and if prior thereto
the transferee agrees to be bound by the terms of the Stock Incentive Plan and
the Options, as the case may be ("Permitted Transferee"). Options
which are ISOs may be exercised, during the lifetime of the holder, only by the
holder, or by his guardian or legal representative.
9. Termination
of Relationship to the Company.
(a) In the event
that any original grantee of an Option or Right shall cease to be an Eligible
Individual of the Company (or any subsidiary corporation thereof), except as set
forth in Paragraph 10, such Award may (subject to the provisions of the Stock
Incentive Plan) be exercised (to the extent that the original grantee was
entitled to exercise such Option or Right at the termination of his employment
or service as a director, officer, consultant, adviser, agent or independent
representative, as the case may be) at any time within three months after such
termination (or for such other period following termination as the grantee and
the Company may have agreed to in writing), but not more than 10 years (five
years in the case of a 10% Holder) after the date on which such Award was
granted or the expiration of the Award, if earlier. Notwithstanding the
foregoing, except as provided in Paragraph 10, if the position of an original
grantee shall be terminated by the Company or any subsidiary thereof for cause
or if the original grantee terminates his employment or position voluntarily and
without the written consent of the Company or any subsidiary corporation
thereof, as the case may be, the Options or Rights granted to such person,
whether held by such person or by a Permitted Transferee shall, to the extent
not theretofore exercised, forthwith terminate immediately upon such
termination. Subject to such exceptions as may be determined by the Committee,
in the event any original Restricted Stock grantee shall cease to be an Eligible
Individual of the Company (or any subsidiary corporation thereof), except as set
forth in Paragraph 10, all shares of Restricted Stock remaining subject to
applicable restrictions shall be forfeited by the recipient and be immediately
transferred to, and reacquired by, the Company at no cost to the Company.
8
(b) Other than as
provided in Paragraph 10(a), Awards granted under the Stock Incentive Plan shall
not be affected by any change of duties or position so long as the holder
remains an Eligible Individual.
(c) Any Agreement
may contain such provisions as the Committee shall approve with reference to the
determination of the date employment terminates or the date other positions or
relationships terminate for purposes of the Stock Incentive Plan and the effect
of leaves of absence, which provisions may vary from one another.
(d) Nothing in the
Stock Incentive Plan or in any Award pursuant to the Stock Incentive Plan shall
confer upon any Eligible Individual or other person any right to continue in the
employ of the Company or any subsidiary corporation thereof (or the right to be
retained by, or have any continued relationship with, the Company or any
subsidiary corporation thereof), or affect the right of the Company or any such
subsidiary corporation thereof, as the case may be, to terminate his employment,
retention or relationship at any time. The grant of any Award pursuant to the
Stock Incentive Plan shall be entirely in the discretion of the Committee, or,
if applicable, the CEO Committee, and nothing in the Stock Incentive Plan shall
be construed to confer on any Eligible Individual any right to receive any Award
under the Stock Incentive Plan.
10. Death,
Disability or Retirement.
(a) If a person to
whom an Award has been granted under the Stock Incentive Plan shall (i) die (and
the conditions in sub-paragraph (b) below are met), or (ii) become permanently
and totally disabled or enter retirement (as such terms are defined below) while
serving as an Eligible Individual, then the following provisions shall apply:
(A) in the case of an Option or Stock Appreciation Right, the Award shall become
immediately fully exercisable and the period for exercise provided in Paragraph
9 shall be extended to (i) one year after the date of death of the original
grantee, or (ii) in the case of the permanent and total disability of the
original grantee, to one year after the date of permanent and total disability
of the original grantee, or (iii) three years in the case of a retirement (as
defined below), but, in any case, not more than 10 years (five years in the case
of a 10% Holder) after the date such Award was granted, or the expiration of the
Award, if earlier, as shall be prescribed in the original grantee's Award
Agreement, and (B) in the case of Restricted Stock, the period of restrictions
applicable to all unvested shares shall terminate on the date of termination of
employment by reason of retirement, disability or death. An Award may be
exercised as set forth herein in the event of the original grantee's death, by a
Permitted Transferee or the person or persons to whom the holder's rights under
the Award pass by will or applicable law, or if no such person has the right, by
his executors or administrators; or in the event of the original grantee's
permanent and total disability, by the holder or his guardian.
(b) In the case of
death of a person to whom an Award was originally granted, the provisions of
subparagraph (a) apply if such person dies (i) while in the employ of the
Company or a subsidiary corporation thereof or while serving as an Eligible
Individual of the Company or a subsidiary corporation thereof or (ii) within
three months after the termination of such position other
9
than termination for cause, or voluntarily on the original
grantee's part and without the consent of the Company or a subsidiary
corporation thereof, or (iii) within three years following his retirement.
(c) The term
"permanent and total disability" as used above shall have the meaning
set forth in Section 22(e)(3) of the Code.
(d) The term
"retirement" as used above shall mean voluntary termination of
employment with the Company or a subsidiary corporation thereof by the Eligible
Individual after attaining age 55 with at least 10 years of service with the
approval of the Company or, if the individual has not attained age 55 and/or has
less than 10 years of service, the Company determines that circumstances exist
that warrant the granting of retirement status.
11. Adjustments
upon Changes in Capitalization. Notwithstanding any other provision of the
Stock Incentive Plan, in the event of changes in the outstanding Common Stock of
the Company by reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
spin-offs, reorganizations, liquidations and the like, the Committee may
appropriately adjust the aggregate number and class of shares of Common Stock as
to which Awards may be granted under the Stock Incentive Plan, the maximum
number and class of shares that may be awarded to any Eligible Individual, the
number and class of shares subject to outstanding Awards, and the Option or
Restricted Stock price per share. In the event of (i) the dissolution or
liquidation of the Company, or (ii) the disposition by the Company of
substantially all of the assets or stock of a subsidiary of which the original
grantee is then an employee, officer or director, consultant, adviser, agent or
independent representative or if (iii) a "change in control" (as
hereinafter defined) of the Company has occurred or is about to occur, then, if
the Committee shall so determine: (A) with respect to Options, each Option under
the Stock Incentive Plan, if such event shall occur with respect to the Company,
or each Option granted to an employee, officer, director, consultant, adviser,
agent or independent representative of a subsidiary respecting which such event
shall occur, shall (x) become immediately and fully exercisable or (y) terminate
simultaneously with the happening of such event, and the Company shall pay the
Optionee in lieu thereof an amount equal to (a) the excess of the fair market
value over the exercise price of one share on the date on which such event
occurs, multiplied by (b) the number of shares subject to the Option, without
regard to whether the Option is then otherwise exercisable, and (B) with respect
to Restricted Stock, any Restricted Stock not forfeited prior to the change in
control shall become immediately and fully vested, and the Committee shall have
sole discretion to waive automatic forfeitures, if any, arising from the change
in control.
12. Performance-Based
Awards. Certain Awards of Restricted Stock granted under the Stock Incentive
Plan may be granted, in the sole discretion of the Committee, in a manner
constituting "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code. Such Awards (the "Performance-Based
Awards") shall be based upon one or more of the following factors: stock
price, earnings per share, net earnings, operating earnings, return on assets,
shareholder return, return on equity, growth in assets, sales, cash flow, market
share, relative performance to a group of companies comparable to the Company,
and strategic business criteria consisting of one or more objectives based on
the Company's meeting specified goals relating to revenue, market
10
penetration, business expansion, costs or acquisitions or
divestitures. With respect to Performance-Based Awards, (i) the Committee shall
establish in writing the objective performance-based goals applicable to a given
fiscal period no later than 90 days after the commencement of such fiscal period
(but in no event after 25% of such period has elapsed) and (ii) no
Performance-Based Awards shall be payable to any recipient for a given fiscal
period until the Committee certifies in writing that the objective performance
goals (and any other material terms) applicable to such period have been
satisfied.
13. Effectiveness
of the Stock Incentive Plan. Awards may be granted under the Stock Incentive
Plan, subject to its authorization and adoption by stockholders of the Company,
at any time or from time to time after its adoption by the Committee, but the
amendment and restatement of the Stock Incentive Plan shall not be effective
unless it shall have been authorized and adopted by a majority of the votes
properly cast thereon at a meeting of stockholders of the Company duly called
and held after the date of adoption of the amended and restated Stock Incentive
Plan by the Board of Directors. If so adopted, the amended and restated Stock
Incentive Plan shall become effective as of the date of its adoption by the
Board of Directors. The exercise of Options shall also be expressly subject to
the condition that at the time of exercise a registration statement under the
Securities Act of 1933, as amended (the "Act") shall be effective, or
other provisions satisfactory to the Committee shall have been made to ensure
that such exercise will not result in a violation of such Act, and such other
qualification under any state or Federal law, rule or regulation as the Company
shall determine to be necessary or advisable shall have been effected. If
the shares of Common Stock issuable upon exercise of an Option or if shares of
Restricted Stock are not registered under such Act, and if the Committee shall
deem it advisable, the recipient may be required to represent and agree in
writing (i) that any shares of Common Stock acquired pursuant to the Stock
Incentive Plan will not be sold except pursuant to an effective registration
statement under such Act or an exemption from the registration provisions of the
Act and (ii) that such recipient will be acquiring such shares of Common Stock
for his own account and not with a view to the distribution thereof and (iii)
that the holder accepts such restrictions on transfer of such shares, including,
without limitation, the affixing to any certificate representing such shares of
an appropriate legend restricting transfer as the Company may reasonably impose.
14. Termination
and Amendment of the Stock Incentive Plan. The Board of Directors of the
Company may amend, modify or terminate the Stock Incentive Plan at any time
prior to the termination of the Stock Incentive Plan, except that no amendment
may be made without shareholder approval (i) if the Board of Directors
determines that such approval is necessary to comply with any tax or regulatory
requirement, including any approval requirement which is a prerequisite for
exemptive relief from Section 16 of the Exchange Act, for which or with which
the Board of Directors determines that it is desirable to qualify or comply, or
(ii) if such amendment grants the Committee the authority, except as provided
for in Section 11, to (a) reduce the exercise price of any outstanding Option,
(b) offer to grant any new Option in exchange for the cancellation of an
outstanding Option with a higher exercise price, (c) increase the maximum number
of shares of Common Stock reserved for issuance under the Stock Incentive Plan,
(d) alter the classes of persons constituting Eligible Individuals or (e) grant
Awards of Restricted Stock that will fully vest in fewer than three years from
the date of grant in excess of 5% of the total number of shares of Common
11
Stock reserved for issuance under the Stock Incentive Plan.
No suspension, termination, modification or amendment of the Stock Incentive
Plan may, without the express written consent of the Eligible Individual (or his
Permitted Transferee) to whom an Award shall theretofore have been granted,
adversely affect the rights of such Eligible Individual (or his Permitted
Transferee) under such Award.
15. Financing
for Investment in Stock of the Company. The Board of Directors may cause the
Company or any subsidiary to give or arrange for financing, including direct
loans, secured or unsecured, or guaranties of loans by banks which loans may be
secured in whole or in part by assets of the Company or any subsidiary, to any
Eligible Individual under the Stock Incentive Plan who shall have been so
employed or so served for a period of at least six months at the end of the
fiscal year ended immediately prior to arranging such financing; but the Board
of Directors may, in any specific case, authorize financing for an Eligible
Individual who shall not have served for such a period. Such financing shall be
for the purpose of providing funds for the purchase by the Eligible Individual
of shares of Common Stock pursuant to the exercise of an Option or an Award of
Restricted Stock and/or for payment of taxes incurred in connection with such
exercise or Award, and/or for the purpose of otherwise purchasing or carrying a
stock investment in the Company. The maximum amount of liability incurred by the
Company and its subsidiaries in connection with all such financing outstanding
shall be determined from time to time in the discretion of the Board of
Directors. Each loan shall bear interest at a rate not less than that provided
by the Code and other applicable law, rules, and regulations in order to avoid
the imputation of interest at a higher rate. Each recipient of such financing
shall be personally liable for the full amount of all financing extended to him.
Such financing shall be based upon the judgment of the Board of Directors that
such financing may reasonably be expected to benefit the Company, and that such
financing as may be granted shall be consistent with the Certificate of
Incorporation and By-Laws of the Company or such subsidiary, and applicable
laws. If any such financing is authorized by the Board of Directors, such
financing shall be administered by the Board of Directors.
16. Severability.
In the event that any one or more provisions of the Stock Incentive Plan or any
Agreement, or any action taken pursuant to the Stock Incentive Plan or such
Agreement, should, for any reason, be unenforceable or invalid in any respect
under the laws of the United States, any state of the United States or any other
government, such unenforceability or invalidity shall not affect any other
provision of the Stock Incentive Plan or of such or any other Agreement, but in
such particular jurisdiction and instance the Stock Incentive Plan and the
affected Agreement shall be construed as if such unenforceable or invalid
provision had not been contained therein or if the action in question had not
been taken thereunder.
17. Applicable
Law. The Stock Incentive Plan shall be governed and interpreted, construed
and applied in accordance with the laws of the State of Pennsylvania.
18. Withholding.
A holder shall, upon notification of the amount due and prior to or concurrently
with delivery to such holder of a certificate representing such shares of Common
Stock, pay promptly any amount necessary to satisfy applicable Federal, state,
local or other tax requirements.
12
19. Miscellaneous.
(a) The terms "parent," "subsidiary" and "subsidiary
corporation" shall have the meanings set forth in Sections 424(e) and (f)
of the Code, respectively.
(b) The term "terminated for cause" shall mean termination by the
Company (or a subsidiary thereof) of the employment of or other relationship
with, the original grantee by reason of the grantee's (i) willful refusal to
perform his obligations to the Company (or a subsidiary thereof), (ii) willful
misconduct, contrary to the interests of the Company (or a subsidiary thereof),
or (iii) commission of a serious criminal act, whether denominated a felony,
misdemeanor or otherwise. In the event of any dispute regarding whether a
termination for cause has occurred, the Board of Directors may by resolution
resolve such dispute, and such resolution shall be final and conclusive on all
parties.
(c) The term "change in control" shall mean an event or series of
events that results in (i) a person, partnership, joint venture, corporation or
other entity, or two or more of any of the foregoing acting as a
"person" within the meaning of Sections 13(d)(3) of the Exchange Act,
other than the Company, a majority-owned subsidiary of the Company or an
employee benefit plan of the Company or such subsidiary (or such plan's related
trust), become(s) the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of 20% or more of the then outstanding voting stock of
the Company; (ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Company's Board of Directors
(together with any new director whose election by the Company's Board or whose
nomination for election by the Company's shareholders, was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors then in office; (iii) all or substantially all of the
business of the Company is disposed of pursuant to a merger, consolidation or
other transaction in which the Company is not the surviving corporation or the
Company combines with another company and is the surviving corporation (unless
the shareholders of the Company immediately following such merger,
consolidation, combination, or other transaction beneficially own, directly or
indirectly, more than 50% of the aggregate voting stock or other ownership
interests of (x) the entity or entities, if any, that succeed to the business of
the Company or (y) the combined company).
13
EX-10
6
exhibit10_4.htm
EXHIBIT 10.4
Exhibit 10.4
EXHIBIT 10.4
FORM OF STOCK OPTION AGREEMENT
JONES APPAREL GROUP, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT,
made as of this _____ day of __________, 2005 by JONES APPAREL GROUP, INC., a
Pennsylvania corporation (hereinafter called the "Company"), with the
person executing this Agreement (hereinafter called the "Holder"):
The Company has
adopted the stock option plan identified on Annex I attached hereto (the
"Plan"). Said Plan, as it may hereafter be amended and continued, is
incorporated herein by reference and made part of this Agreement.
The Committee,
which is charged with the administration of the Plan pursuant to Section 3
thereof, has determined that it would be to the advantage and interest of the
Company to grant the option provided for herein to the Holder as an inducement
to remain in the service of the Company or one of its subsidiaries, and as an
incentive for increased efforts during such service.
NOW, THEREFORE,
pursuant to the Plan, the Company with the approval of the Committee hereby
grants to the Holder as of the date hereof an option (the "Option") to
purchase all or any part of the number of shares of Common Stock of the Company
set forth on Annex I, at the price per share set forth on Annex I,
which price is not less than the fair market value of a share of Common Stock on
the date hereof, and upon the following terms and conditions:
1. The Option
shall continue in force through the "Expiration Date" stated on Annex
I, unless sooner terminated as provided herein and in the Plan. Subject to
the provisions of the Plan, the Option shall become exercisable as provided in
the Vesting Schedule in Annex I. Such installments shall be cumulative,
subject to the following:
a. Except as provided hereinbelow, the Option may not be exercised unless the
Holder is then an employee (including directors and officers who are employees),
director or officer of the Company or any subsidiary of the Company, in each
case, on the date of grant, or a consultant, advisor, agent or independent
representative of the Company or any subsidiary of the Company, or any
combination thereof.
2. In the event
that the employment or service of the Holder shall be terminated prior to the
Expiration Date (otherwise than by reason of death or disability), the Option
may, subject to the provisions of the Plan, be exercised (to the extent that the
Holder was entitled to do so at the termination of this employment or service)
at any time within three months after such termination, but not after the
Expiration Date, provided, however, that if such termination shall have
been for cause or voluntarily by the Holder and without the written consent of
the Company or any subsidiary corporation thereof, as the case may be, the
Option and all rights of the Holder hereunder, to the extent not theretofore
exercised, shall forthwith terminate immediately upon such termination. Nothing
in this Agreement shall confer upon the Holder any right to continue in the
employ or service of the Company or any subsidiary of the Company or affect the
right of the Company or any subsidiary to terminate his employment or service at
any time.
3. If the Holder
shall (a) die while he is employed by or serving the Company or a corporation
which is a subsidiary thereof or within three months after the termination of
such position (other than termination for cause, or voluntarily on his part and
without the consent of the Company or subsidiary corporation thereof, as the
case may be,) or within three years following his retirement (as such term is
defined in the Plan), or (b) become permanently and totally disabled within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), while employed by or serving any such company, or (c)
enter retirement, then the Option shall become immediately fully exercisable, as
set forth herein by the Holder or by the person or persons to whom the Holder's
rights under the Option pass by will or applicable law, or if no such person has
such right, by his executors or administrators, at any time within one year
after the date of death of the original Holder, or one year after the date of
permanent and total disability, or three years after the date of retirement, but
in each case, not later than the Expiration Date.
4. a. The Holder
may exercise the Option with respect to all or any part of the shares then
purchasable hereunder by giving the Company written notice in the form annexed,
as provided in paragraph 8 hereof, of such exercise. Such notice shall specify
the number of shares as to which the Option is being exercised and shall be
accompanied by payment in full in cash of an amount equal to the exercise price
of such shares multiplied by the number of shares as to which the Option is
being exercised; provided that, if permitted by the Board, the purchase
price may be paid, in whole or in part, by surrender or delivery to the Company
of securities of the Company having a fair market value on the date of the
exercise equal to the portion of the purchase price being so paid. In such event
fair market value should be determined pursuant to paragraph 5 of the Plan.
b. Prior to or concurrently with delivery by the Company to the Holder of a
certificate(s) representing such shares, the Holder shall, upon notification of
the amount due, pay promptly any amount necessary to satisfy applicable federal,
state or local tax requirements. In the event such amount is not paid promptly,
the Company shall have the right to apply from the purchase price paid any taxes
required by law to be withheld by the Company with respect to such payment and
the number of shares to be issued by the Company will be reduced accordingly.
5. Notwithstanding
any other provision of the Plan, in the event of a change in the outstanding
Common Stock of the Company by reason of a stock dividend, split-up, split-down,
reverse split, recapitalization, merger, consolidation, combination or exchange
of shares, spin-off, reorganization, liquidation or the like, then the aggregate
number of shares and price per share subject to the Option shall be
appropriately adjusted by the Board, whose determination shall be conclusive.
6. a. For
Non-Qualified Stock Options: No Non-Qualified Stock Options
("NQSO") granted hereunder shall be transferable other than by will or
by the laws of descent and distribution, except that all or any portion of the
NQSO may be transferred to or for the benefit of (by trust) the spouse or lineal
descendants of the Holder, subject to such restrictions on transfer which may be
imposed by federal and state securities laws, and if prior thereto the
2
transferee agrees to be bound by the terms of the Plan and
this Agreement. Options may be exercised, during the lifetime of the Holder,
only by the Holder, or by his guardian or legal representative. In the event of
any attempt by the Holder to transfer, assign, pledge, hypothecate or otherwise
dispose of this Option or of any right hereunder, except as provided for herein,
or in the event of the levy or any attachment, execution or similar process upon
the rights or interest hereby conferred, the Company may terminate this Option
by notice to the Holder and it shall thereupon become null and void.
b. For Incentive Stock Options: Incentive Stock Options ("ISO")
shall, during the Holder's lifetime, be exercisable only by him, and neither
the ISO nor any right hereunder shall be transferable by him, by operation of
law or otherwise, except by will or by the laws of descent and distribution. In
the event of any attempt by the Holder to transfer, assign, pledge, hypothecate
or otherwise dispose of this Option or of any right hereunder, except as
provided for herein, or in the event of the levy or any attachment, execution or
similar process upon the rights or interest hereby conferred, the Company may
terminate this Option by notice to the Holder and it shall thereupon become null
and void.
7. Neither the
Holder nor in the event of his death, any person entitled to exercise his
rights, shall have any of the rights of a stockholder with respect to the shares
subject to the Option until share certificates have been issued and registered
in the name of the Holder or his estate, as the case may be.
8. Any notice to
the Company provided for in this Agreement shall be addressed to the Company in
care of its Chief Financial Officer, 250 Rittenhouse Circle, Bristol,
Pennsylvania 19007 and any notice to the Holder shall be addressed to him at his
address now on file with the Company, or to such other address as either may
last have designated to the other by notice as provided herein. Any notice so
addressed shall be deemed to be given on the second business day after mailing,
by registered or certified mail, at a post office or branch post office within
the United States.
9. In the event
that any question or controversy shall arise with respect to the nature, scope
or extent of any one or more rights conferred by this Option, the determination
by the Committee (as constituted at the time of such determination) of the
rights of the Holder shall be conclusive, final and binding upon the Holder and
upon any other person who shall assert any right pursuant to this Option.
|
JONES APPAREL GROUP, INC.
By: _______________________ |
ACCEPTED AND AGREED
_____________________
Holder |
|
3
ANNEX I
[Insert]
4
EX-10
7
exhibit10_5.htm
EXHIBIT 10.5
Exhibit 10.5
EXHIBIT 10.5
FORM OF RESTRICTED STOCK AGREEMENT
JONES APPAREL GROUP, INC.
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT
dated as of ____________, 2005 between JONES APPAREL GROUP, INC., a Pennsylvania
corporation (the "Company") with the person executing this Agreement
(the "Employee").
The
Company has adopted a 1999 Stock Incentive Plan (the "Plan"). The
Plan, as it has been amended to date and may hereafter be amended and continued,
is incorporated herein by reference and made part of this Agreement.
The
Committee, which is charged with the administration of the Plan pursuant to
Section 3 thereof, has determined that it would be to the advantage and interest
of the Company to grant the award provided for herein to the Employee as an
inducement to remain in the service of the Company or one of its subsidiaries,
and as an incentive for increased efforts during such service.
In consideration
of mutual promises and covenants made herein and the mutual benefits to be
derived herefrom, the parties hereto agree as follows:
1. Grant of
Restricted Shares.
(a) Subject to the provisions of this Agreement and to the provisions of the
Plan, the Company hereby grants to the Employee that number of shares of
restricted Common Stock of the Company, par value $.01 per share, set forth on Annex
I attached hereto (the "Restricted Shares"). Subject to Section 3,
certificates evidencing the Restricted Shares shall be issued by the Company and
registered in the name of the Employee on the stock transfer books of the
Company. However, certificates issued with respect to Restricted Shares shall be
held by the Company in escrow under the terms hereof. Such certificates shall
bear the legend set forth in subsection (c) below or such other appropriate
legend as the Committee shall determine, which legend shall be removed only if
and when the Restricted Shares vest as provided herein, at which time the
certificates shall be delivered to the Employee. As a condition to the issuance
of Shares hereunder, the Employee shall deliver to the Company the attached
stock powers duly endorsed in blank. Upon the issuance of Restricted Shares
hereunder, the Employee shall be entitled to vote the Restricted Shares, and
shall be entitled to receive, free of all restrictions, ordinary cash dividends
and dividends in the form of shares thereon. The Employee will not be required
to return any such ordinary dividends to the Company in the event of forfeiture
of such Restricted Shares. The Employee's right to receive any extraordinary
dividends or other distributions with respect to Restricted Shares prior to
their becoming nonforfeitable shall be at the sole discretion of the Committee,
but in the event of any such extraordinary event, the Committee shall take such
action as is appropriate to preserve the value of, and prevent the unintended
enhancement of the value of, the Restricted Shares.
(b) In order to comply with any applicable securities laws, the Company may
require the Employee (i) to furnish evidence satisfactory to the Company
(including a written and signed
representation letter) to the effect that the Restricted
Shares were acquired for investment only and not for resale or distribution and
(ii) to agree that the Restricted Shares shall only be sold by the Employee
following registration under the Securities Act of 1933, as amended, or pursuant
to an exemption therefrom.
(c) Unless otherwise determined by the Committee, any certificate issued in
respect of the Restricted Shares prior to the lapse of any outstanding
restrictions relating thereto shall bear the following legend:
The sale, transfer, alienation, attachment, assignment,
pledge or encumbrance of the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture) of the Jones
Apparel Group, Inc. 1999 Stock Incentive Plan and an Agreement entered
into by the registered owner and the Company dated as of ___________,
2005. Copies of such Plan and Agreement are on file at the offices of the
Company. Any attempt to dispose of these shares in contravention of the
applicable restrictions, including by way of sale, assignment, transfer,
pledge, hypothecation or otherwise, shall be null and void and without
effect."
2. Vesting.
Subject
to Section 3 hereof, the restrictions on transfer of the Restricted Shares shall
lapse and the Restricted Shares shall become vested and nonforfeitable as
follows:
(a) See Annex I attached hereto.
(b) In the event of (i) the dissolution or liquidation of the Company, or (ii)
the disposition by the Company of substantially all of the assets or stock of a
subsidiary of which the Employee is then an employee, officer or director,
consultant, adviser, agent or independent representative or if (iii) a
"change in control" (as defined in the Plan) of the Company has
occurred or is about to occur, then, if the Committee shall so determine, any
Restricted Shares not forfeited prior to the change in control shall become
immediately and fully vested, and the Committee shall have sole discretion to
waive automatic forfeitures, if any, arising from the change in control.
3. Termination
of Employment.
Except as provided
in Paragraph 4 hereof, Restricted Shares shall not vest unless the Employee is
then an employee (including directors and officers who are employees), director
or officer of the Company or any subsidiary of the Company, or a consultant,
advisor, agent or independent representative of the Company or any subsidiary of
the Company, or any combination thereof and unless the Employee has remained
continuously so employed since the date of grant of the Restricted Shares.
2
In the event that
the employment of the Employee shall terminate (other than by reason of death,
Disability or Retirement), all unvested Restricted Shares shall be forfeited and
be immediately transferred to, and reacquired by, the Company at no cost to the
Company.
4. Acceleration
of Benefits upon Death, Disability or Retirement of Employee or Change in
Control.
The period of
restrictions applicable to all unvested Restricted Shares shall terminate on the
date of termination of employment by reason of retirement, disability (as such
terms are defined in the Plan) or death or, if the Committee shall so determine,
upon a change in control (as defined in the Plan).
5. Nontransferability
of Restricted Shares.
The Restricted
Shares are not nontransferable and may not be sold, assigned, transferred,
disposed of, pledged or otherwise encumbered by the Employee, other than by will
or the laws of descent and distribution until such Restricted Shares become
nonforfeitable in accordance with the provisions of this Agreement. Any Employee's
successor (a "Successor") shall take rights herein granted subject to
the terms and conditions hereof. No such transfer of the Restricted Shares to
any Successor shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and a copy of such evidence as
the Committee may deem necessary to establish the validity of the transfer and
the acceptance by such Successor of the terms and conditions hereof.
6. No Right to
Continued Employment.
Nothing in this
Agreement or the Plan shall confer upon the Employee any right to continue in
the employ of the Company or any of its affiliate corporations or interfere in
any way with the right of the Company or any such affiliate corporation to
terminate such employment at any time.
7. Withholding.
The Employee shall
pay to the Company promptly upon request, and in any event at the time the
Employee recognizes taxable income in respect of the Restricted Shares, an
amount equal to the taxes the Company determines it is required to withhold
under applicable tax laws with respect to the Restricted Shares. Such payment
shall be made in the form of cash, shares of Common Stock already owned for at
least six months, or in a combination of such methods, as irrevocably elected by
the Employee prior to the applicable tax due date with respect to such
Restricted Shares. The Employee shall promptly notify the Company of any
election made pursuant to Section 83(b) of the Code.
8. Effect of
Certain Changes.
Notwithstanding
any other provision of the Plan, in the event of a change in the outstanding
Common Stock of the Company by reason of a stock dividend, split-up, split-down,
3
reverse split, recapitalization, merger, consolidation,
combination or exchange of shares, spin-off, reorganization, liquidation or the
like, then the Committee may appropriately adjust the aggregate number of shares
and class of shares subject to this award, whose determination shall be
conclusive.
9. Payment of
Transfer Taxes, Fees, and Other Expenses.
The Company agrees
to pay any and all original issue taxes and stock transfer taxes that may be
imposed on the issuance of the Restricted Shares acquired pursuant to this
Agreement, together with any and all the fees and expenses necessarily incurred
by the Company in connection therewith.
10. Other
Restrictions.
The vesting of
each Restricted Share shall be subject to the requirement that, if at any time
the Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon any
securities exchange or under any state of federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the
Employee with respect to the disposition of shares of Common Stock, is necessary
or desirable as a condition of, or in connection with, such vesting, then in any
such event, such vesting shall not be effective unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.
11. Notices.
Any notices to be
given under the terms of this Agreement shall be in writing and addressed to the
Company at in care of its Chief Operating and Financial Officer, 250 Rittenhouse
Circle, Bristol, Pennsylvania 19007 and any notice to the Employee shall be
addressed to him at his address now on file with the Company, or to such other
address as either may last have designated to the other by notice as provided
herein. Any notice so addressed shall be deemed to be given on the second
business day after mailing, by registered or certified mail, at a post office or
branch post office within the United States.
12. Effect of
Agreement.
Except as
otherwise provided hereunder, this Agreement shall be binding upon and shall
inure to the benefit of any successor or successors of the Company.
13. Laws
Applicable to Construction.
This Agreement has
been granted, executed and delivered in the State of Pennsylvania, and the
interpretation, performance and enforcement of this Agreement shall be governed
by the laws of the State of Pennsylvania, as supplied to contracts executed in
and performed wholly within the State of Pennsylvania.
4
14. Conflicts
and Interpretation.
If there is any
conflict between this Agreement and the Plan, or if there is any ambiguity in
this Agreement, any term which is not defined in this Agreement, or any matter
as to which this Agreement is silent, in any such case the Plan shall govern
including, without limitation, the provisions thereof pursuant to which the
Committee has the power, among others, to (i) interpret the Plan, (ii)
prescribe, amend and rescind rules and regulations relating to the Plan and
(iii) make all other determinations deemed necessary or advisable for the
administration of the Plan. In the event that any question or controversy shall
arise with respect to the nature, scope or extent of any one or more rights
conferred by this award, the determination by the Committee (as constituted at
the time of such determination) of the rights of the Employee shall be
conclusive, final and binding upon the Employee and upon any other person who
shall assert any right pursuant to this award.
15. Headings.
The headings of
paragraphs herein are included solely for convenience of reference and shall not
affect the meaning or interpretation of any of the provisions of this Agreement.
16. Amendment.
This Agreement may
not be modified, amended or waived in any manner except by an instrument in
writing signed by both parties hereto. The waiver by either party of compliance
with any provision of this Agreement shall not operate or be construed as a
waiver of any other provision of this Agreement, or of any subsequent breach by
such party of a provision of this Agreement.
IN WITNESS
WHEREOF, the Company has caused this Agreement to be executed on its behalf by a
duly authorized officer and the Employee has hereunto set his hand.
|
JONES APPAREL GROUP, INC.
By: _____________________
EMPLOYEE:
_________________________
Employee |
5
ANNEX I
[Insert]
6
EX-10
8
exhibit10_30.htm
EXHIBIT 10.30
Exhibit 10.30
EXHIBIT 10.30
AMENDMENT NO. 2 TO THE
THREE YEAR CREDIT AGREEMENT
Dated as of November 17, 2004
AMENDMENT NO. 2 (this "Amendment")
TO THE THREE YEAR CREDIT AGREEMENT among Jones Apparel Group USA, Inc., a
Pennsylvania corporation (the "Borrower"), the Additional
Obligors referred to therein, the banks, financial institutions and other
institutional lenders parties to the Three Year Credit Agreement referred to
below (collectively, the "Lenders") and Wachovia Bank, National
Association, as agent (the "Administrative Agent") for the
Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Additional
Obligors, the Lenders, the Administrative Agent and other parties thereto have
entered into a Three Year Credit Agreement dated as of June 10, 2003 (as amended
to date, the "Three Year Credit Agreement"). Capitalized terms
not otherwise defined in this Amendment have the same meanings as specified in
the Three Year Credit Agreement.
(2) The Borrower has requested
that the Lenders agree to add Jones Retail Corporation and Kasper, Ltd. as an
Additional Obligor under the Three Year Credit Agreement.
(3) The Required Lenders are, on
the terms and conditions stated below, willing to grant the request of the
Borrower and the Borrower and the Required Lenders have agreed to amend the
Three Year Credit Agreement as hereinafter set forth.
SECTION 1. Amendments to Three
Year Credit Agreement. The Three Year Credit Agreement is, effective as of
the date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 3, hereby amended as follows:
(a) Section 1.1 is amended by inserting in the
appropriate alphabetical order the following definitions:
"Kasper, Ltd." means Kasper, Ltd., a Delaware
corporation.
"Jones Retail" means Jones Retail Corporation, a New
Jersey corporation.
(b) Section 1.1 is further amended by amending the
definition of "Additional Obligors" in full to read as follows:
"Additional Obligors" means the collective reference to
Jones Apparel Group, Jones Apparel Group Holdings, Kasper, Ltd., Nine West
Footwear and Jones Retail in their capacities as co-obligors under this
Agreement.
(c) Section 3.1 is amended by deleting the phrase
"for the account of the Borrower on any Business Day" and
substituting therefor the phase "for the account of the Borrower and its
specified Subsidiaries on any Business Day".
(d) Exhibit A of the Three Year Credit Agreement is
amended in full to read as set forth as Exhibit A to this Amendment.
SECTION 2. Condition Subsequent.
By execution below, each of Kasper, Ltd. and Jones Retail hereby covenants and
agrees that it will (a) provide an allonge endorsement to each Lender that has
requested a Revolving Credit Note in accordance with Section 2.4(c) of the Three
Year Credit Agreement promptly after receipt of such a request from such Lender
and (b) deliver to the Administrative Agent, not later than December 1, 2004,
certificates of incumbency, certified resolutions, articles of incorporation and
bylaws, and opinions of counsel substantially similar to those required by
Section 6.2(b) of the Three Year Credit Agreement, in each case in form and
substance reasonably satisfactory to the Administrative Agent.
SECTION 3. Conditions of
Effectiveness. This Amendment shall become effective as of the date first
above written when, and only when, on or before November 18, 2004 the
Administrative Agent shall have received counterparts of this Amendment executed
by the Credit Parties and the Required Lenders or, as to any of the Lenders,
advice satisfactory to the Administrative Agent that such Lender has executed
this Amendment. This Amendment is subject to the provisions of Section 14.11 of
the Three Year Credit Agreement.
SECTION 4. Representations and
Warranties of the Credit Parties. The Credit Parties represent and warrant
as follows:
(a) Each of the Credit Parties is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) The execution, delivery and performance by each
Credit Party of this Amendment and the performance by each Credit Party of its
obligations under the Three Year Credit Agreement, as amended hereby, do not
and will not, by the passage of time, the giving of notice or otherwise, (i)
require any of the Credit Parties or any of their Subsidiaries to obtain any
Governmental Approval not otherwise already obtained or violate any Applicable
Law relating to the Credit Parties or any of their Subsidiaries, (ii) conflict
with, result in a breach of or constitute a default under the articles of
incorporation, bylaws or other organizational documents of the Credit Parties
or any of their Subsidiaries or any indenture or other material agreement or
instrument to which such Person is a party or by which any of its properties
may be bound or any Governmental Approval relating to such Person except as
could not reasonably be expected to have a Material Adverse Effect, or (iii)
result in or require the creation or imposition of any material Lien upon or
with respect to any property now owned
2
or hereafter acquired by such Person other than a Lien permitted under the
terms of the Loan Documents.
(c) Each of the Credit Parties has the right, power and
authority and has taken all necessary corporate and other action to authorize
the execution, delivery and performance of this Amendment and the performance
of its obligations the Three Year Credit Agreement, as amended hereby, in
accordance with their respective terms. This Amendment has been duly executed
and delivered by the duly authorized officers of the Credit Parties and such
document constitutes, and each of the Loan Documents does and continues to
constitute, the legal, valid and binding obligation of the Credit Parties and,
if applicable, each of their Subsidiaries party thereto, enforceable in
accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar state
or federal debtor relief laws from time to time in effect which affect the
enforcement of creditors' rights in general and the availability of equitable
remedies.
(d) Except for matters existing on the Closing Date and
set forth on Schedule 7.1(q) to the Three Year Credit Agreement, there are no
actions, suits or proceedings pending nor, to the knowledge of the Credit
Parties, threatened against or affecting the Credit Parties or any Subsidiary
thereof or any of their respective properties in any court or before any
arbitrator of any kind or before or by any Governmental Authority, which could
reasonably be expected to have a Material Adverse Effect or which relate to
the enforceability of this Amendment or any Loan Documents, as amended hereby.
SECTION 5. Reference to and
Effect on the Three Year Credit Agreement and the Loan Documents. (a) On and
after the effectiveness of this Amendment, each reference in the Three Year
Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Three Year Credit
Agreement, and each reference in the Notes and each of the other Loan Documents
to "the Credit Agreement", "thereunder", "thereof"
or words of like import referring to the Three Year Credit Agreement, shall mean
and be a reference to the Three Year Credit Agreement, as amended by this
Amendment.
(b) The Three Year Credit Agreement, as specifically
amended by this Amendment, the Notes and each of the other Loan Documents, are
and shall continue, following the effectiveness of this Amendment, to be in
full force and effect and are hereby in all respects ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as specifically provided herein, operate as a
waiver of any right, power or remedy of any Lender or the Administrative Agent
under the Three Year Credit Agreement, nor constitute a waiver of any
provision of the Three Year Credit Agreement.
SECTION 6. Costs and Expenses.
The Borrower agrees to pay on demand all reasonable out-of-pocket expenses of
the Administrative Agent in connection
3
with the preparation, execution, delivery and administration, modification
and amendment of this Amendment and the other instruments and documents to be
delivered hereunder (including, without limitation, the reasonable fees and
disbursements of counsel for the Administrative Agent) in accordance with the
terms of Section 14.2 of the Three Year Credit Agreement.
SECTION 7. Execution in
Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement, binding upon all parties, their
successors and assigns. Delivery of an executed counterpart of a signature page
to this Amendment by telecopier shall be effective as delivery of a manually
executed counterpart of this Amendment.
SECTION 8. Governing Law.
This Amendment shall be governed by, and construed in accordance with, the laws
of the State of New York.
4
IN WITNESS WHEREOF, the parties
hereto have caused this Amendment to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
|
JONES APPAREL GROUP USA, INC.
as Borrower
By: /s/ Wesley R. Card
Name: Wesley R. Card
Title: Chief Financial Officer
|
|
JONES APPAREL GROUP, INC.
as Additional Obligor
By: /s/ Wesley R. Card
Name: Wesley R. Card
Title: Chief Operating and
Financial Officer
|
|
JONES APPAREL GROUP HOLDINGS, INC.
as Additional Obligor
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: President
|
|
KASPER LTD.
as Additional Obligor
By: /s/ Peter Boneparth
Name: Peter Boneparth
Title: President
|
|
NINE WEST FOOTWEAR CORPORATION
as Additional Obligor
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: Executive Vice President and
Secretary
|
|
JONES RETAIL CORPORATION
as Additional Obligor
By: /s/ Wesley R. Card
Name: Wesley R. Card
Title: Chief Financial Officer
|
|
WACHOVIA BANK, NATIONAL ASSOCIATION
as Administrative Agent and Lender
By: /s/ Thomas Harper
Name: Thomas Harper
Title: Managing Director
|
|
BANK OF AMERICA, N.A.
By: /s/ Douglas J. Bolt
Name: Douglas J. Bolt
Title: Vice President
|
|
BANK OF CHINA, NEW YORK BRANCH
By: /s/ William Smith
Name: William Smith
Title: Chief Lending Officer
|
|
THE BANK OF NEW YORK
By: /s/ Roger Grossman
Name: Roger Grossman
Title: Vice President
|
|
BARCLAYS BANK PLC
By: /s/ Nicholas A. Bell
Name: Nicholas A. Bell
Title: Director
Loan Transaction Management
|
|
CITIBANK, N.A.
By: /s/ Judith Green
Name: Judith Green
Title: Vice President
|
|
FLEET NATIONAL BANK
By: /s/ Douglas J. Bolt
Name: Douglas J. Bolt
Title: Vice President
|
|
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Howard Weinberg
Name: Howard Weinberg
Title: Senior Vice President
By: /s/ David Acosta
Name: David Acosta
Title: Assistant Vice President
|
|
JPMORGAN CHASE BANK, N.A.
(FORMERLY KNOWN AS JPMORGAN
CHASE BANK)
By: /s/ James A. Knight
Name: James A. Knight
Title: Vice President
|
|
SUNTRUST BANK
By: /s/ Patrick M. Stevens
Name: Patrick M. Stevens
Title: Vice President
|
EXHIBIT A-1 - FORM OF
REVOLVING CREDIT NOTE
$_____________________ _____________, 200_
FOR VALUE RECEIVED, the
undersigned JONES APPAREL GROUP USA, INC., a corporation organized under the
laws of Pennsylvania, (the "Borrower"), JONES APPAREL GROUP,
INC., a corporation organized under the laws of Pennsylvania, JONES APPAREL
GROUP HOLDINGS, INC., a corporation organized under the laws of Delaware,
KASPER, LTD., a corporation organized under the laws of Delaware, NINE WEST
FOOTWEAR CORPORATION, a corporation organized under the laws of Delaware, and
JONES RETAIL CORPORATION, a corporation organized under the laws of New Jersey
(collectively, with the Borrower, the "Debtors"), hereby
jointly and severally promise to pay to the order of _________________, (the
"Lender"), at the place and times provided in the Credit
Agreement referred to below, the principal sum of ______________________ DOLLARS
($_____________) or, if less, the aggregate unpaid principal amount of all
Revolving Credit Loans made to the Borrower by the Lender pursuant to that
certain Three Year Credit Agreement dated as of June 10, 2003 (as amended,
restated, supplemented or otherwise modified, the "Credit Agreement")
by and among Jones Apparel Group USA, Inc., the Additional Obligors referred to
therein, the Lenders who are or may become a party thereto (collectively, the
"Lenders"), J.P. Morgan Securities Inc. and Citigroup Global
Markets Inc., as Joint Lead Arrangers and Joint Bookrunners, Wachovia Bank,
National Association, as Administrative Agent, and JPMorgan Chase Bank, N.A.
(formerly known as JPMorgan Chase Bank) and Citibank, N.A., as Syndication
Agents, and Fleet National Bank and Bank of America, N.A., as Documentation
Agents. Capitalized terms used herein and not defined herein shall have the
meanings assigned thereto in the Credit Agreement.
The unpaid principal amount of
Revolving Credit Loans from time to time outstanding is subject to mandatory
repayment from time to time as provided in the Credit Agreement and shall bear
interest as provided in Section 5.1 of the Credit Agreement. All payments of
principal and interest on Revolving Credit Loans shall be payable in lawful
currency of the United States of America in immediately available funds to the
account designated in the Credit Agreement.
This Revolving Credit Note (the
"Revolving Credit Note") is entitled to the benefits of, and
evidences Obligations incurred under, the Credit Agreement, to which reference
is made for a statement of the terms and conditions on which the Borrower is
permitted and required to make prepayments and repayments of principal of the
Obligations evidenced by this Revolving Credit Note and on which such
Obligations may be declared to be immediately due and payable.
THIS REVOLVING CREDIT NOTE SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF.
The Debt evidenced by this
Revolving Credit Note is senior in right of payment to all Subordinated Debt
referred to in the Credit Agreement.
The Debtors hereby waive all
requirements as to diligence, presentment, demand of payment, protest and
(except as required by the Credit Agreement) notice of any kind with respect to
this Revolving Credit Note.
IN WITNESS WHEREOF, the
undersigned have executed this Revolving Credit Note under seal as of the day
and year first above written.
|
JONES APPAREL GROUP USA, INC.
By: ___________________
Name:
Title:
|
|
JONES APPAREL GROUP, INC.
By: ___________________
Name:
Title:
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: ___________________
Name:
Title:
|
|
KASPER, LTD.
By: ___________________
Name:
Title:
|
|
NINE WEST FOOTWEAR CORPORATION
By: ___________________
Name:
Title:
|
|
JONES RETAIL CORPORATION
By: ___________________
Name:
Title:
|
EX-10
9
exhibit10_31.htm
EXHIBIT 10.31
Exhibit 10.31
EXHIBIT 10.31
AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED
FIVE-YEAR CREDIT AGREEMENT
Dated as of November 17, 2004
AMENDMENT NO. 1 (this "Amendment")
TO THE AMENDED AND RESTATED FIVE-YEAR CREDIT AGREEMENT among Jones
Apparel Group USA, Inc., a Pennsylvania corporation (the "Borrower"),
the Additional Obligors referred to therein, the banks, financial institutions
and other institutional lenders parties to the Five-Year Credit Agreement
referred to below (collectively, the "Lenders") and Wachovia
Bank, National Association, as agent (the "Administrative Agent")
for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Additional
Obligors, the Lenders, the Administrative Agent and other parties thereto have
entered into an Amended and Restated Five-Year Credit Agreement dated as of June
15, 2004 (the "Five-Year Credit Agreement"). Capitalized terms
not otherwise defined in this Amendment have the same meanings as specified in
the Five-Year Credit Agreement.
(2) The Borrower has requested
that the Lenders agree to add Jones Retail Corporation as an Additional Obligor
under the Five-Year Credit Agreement.
(3) The Required Lenders are, on
the terms and conditions stated below, willing to grant the request of the
Borrower and the Borrower and the Required Lenders have agreed to amend the
Five-Year Credit Agreement as hereinafter set forth.
SECTION 1. Amendments to
Five-Year Credit Agreement. The Five-Year Credit Agreement is, effective as
of the date hereof and subject to the satisfaction of the conditions precedent
set forth in Section 3, hereby amended as follows:
(a) Section 1.1 is amended by inserting in the
appropriate alphabetical order the following definition:
"Jones Retail" means Jones Retail Corporation, a New
Jersey corporation.
(b) Section 1.1 is further amended by amending the
definition of "Additional Obligors" in full to read as follows:
"Additional Obligors" means the collective reference to
Jones Apparel Group, Jones Apparel Group Holdings, Kasper, Ltd., Nine West
Footwear and Jones Retail in their capacities as co-obligors under this
Agreement.
(c) Exhibit A-1 of the Five-Year Credit Agreement is
amended in full to read as set forth as Exhibit A-1 to this Amendment.
(d) Exhibit A-2 of the Five-Year Credit Agreement is
amended in full to read as set forth as Exhibit A-2 to this Amendment.
SECTION 2. Condition Subsequent.
By execution below, Jones Retail hereby covenants and agrees that it will (a)
provide an allonge endorsement to each Lender that has requested a Revolving
Credit Note in accordance with Section 2.4(c) of the Five-Year Credit Agreement
promptly after receipt of such a request from such Lender and (b) deliver to the
Administrative Agent, not later than December 1, 2004, certificates of
incumbency, certified resolutions, articles of incorporation and bylaws, and
opinions of counsel substantially similar to those required by Section 6.2(b) of
the Five-Year Credit Agreement, in each case in form and substance reasonably
satisfactory to the Administrative Agent.
SECTION 3. Conditions of
Effectiveness. This Amendment shall become effective as of the date first
above written when, and only when, on or before November 17, 2004 the
Administrative Agent shall have received counterparts of this Amendment executed
by the Credit Parties and the Required Lenders or, as to any of the Lenders,
advice satisfactory to the Administrative Agent that such Lender has executed
this Amendment. This Amendment is subject to the provisions of Section 14.11 of
the Five-Year Credit Agreement.
SECTION 4. Representations and
Warranties of the Credit Parties. The Credit Parties represent and warrant
as follows:
(a) Each of the Credit Parties is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) The execution, delivery and performance by each
Credit Party of this Amendment and the performance by each Credit Party of its
obligations under the Five-Year Credit Agreement, as amended hereby, do not
and will not, by the passage of time, the giving of notice or otherwise, (i)
require any of the Credit Parties or any of their Subsidiaries to obtain any
Governmental Approval not otherwise already obtained or violate any Applicable
Law relating to the Credit Parties or any of their Subsidiaries, (ii) conflict
with, result in a breach of or constitute a default under the articles of
incorporation, bylaws or other organizational documents of the Credit Parties
or any of their Subsidiaries or any indenture or other material agreement or
instrument to which such Person is a party or by which any of its properties
may be bound or any Governmental Approval relating to such Person except as
could not reasonably be expected to have a Material Adverse Effect, or (iii)
result in or require the creation or imposition of any material Lien upon or
with respect to any property now owned or hereafter acquired by such Person
other than a Lien permitted under the terms of the Loan Documents.
2
(c) Each of the Credit Parties has the right, power and
authority and has taken all necessary corporate and other action to authorize
the execution, delivery and performance of this Amendment and the performance
of its obligations the Five-Year Credit Agreement, as amended hereby, in
accordance with their respective terms. This Amendment has been duly executed
and delivered by the duly authorized officers of the Credit Parties and such
document constitutes, and each of the Loan Documents does and continues to
constitute, the legal, valid and binding obligation of the Credit Parties and,
if applicable, each of their Subsidiaries party thereto, enforceable in
accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar state
or federal debtor relief laws from time to time in effect which affect the
enforcement of creditors' rights in general and the availability of equitable
remedies.
(d) Except for matters existing on the Closing Date and
set forth on Schedule 7.1(q) to the Five-Year Credit Agreement, there are no
actions, suits or proceedings pending nor, to the knowledge of the Credit
Parties, threatened against or affecting the Credit Parties or any Subsidiary
thereof or any of their respective properties in any court or before any
arbitrator of any kind or before or by any Governmental Authority, which could
reasonably be expected to have a Material Adverse Effect or which relate to
the enforceability of this Amendment or any Loan Documents, as amended hereby.
SECTION 5. Reference to and
Effect on the Five-Year Credit Agreement and the Loan Documents. (a) On and
after the effectiveness of this Amendment, each reference in the Five-Year
Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Five-Year Credit
Agreement, and each reference in the Notes and each of the other Loan Documents
to "the Credit Agreement", "thereunder", "thereof"
or words of like import referring to the Five-Year Credit Agreement, shall mean
and be a reference to the Five-Year Credit Agreement, as amended by this
Amendment.
(b) The Five-Year Credit
Agreement, as specifically amended by this Amendment, the Notes and each of the
other Loan Documents, are and shall continue, following the effectiveness of
this Amendment, to be in full force and effect and are hereby in all respects
ratified and confirmed.
(c) The execution, delivery and
effectiveness of this Amendment shall not, except as specifically provided
herein, operate as a waiver of any right, power or remedy of any Lender or the
Administrative Agent under the Five-Year Credit Agreement, nor constitute a
waiver of any provision of the Five-Year Credit Agreement.
SECTION 6. Costs and Expenses.
The Borrower agrees to pay on demand all reasonable out-of-pocket expenses of
the Administrative Agent in connection with the preparation, execution, delivery
and administration, modification and amendment of this Amendment and the other
instruments and documents to be delivered hereunder (including, without
limitation, the reasonable fees and disbursements of
3
counsel for the Administrative Agent) in accordance with the terms of
Section 14.2 of the Five-Year Credit Agreement.
SECTION 7. Execution in
Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement, binding upon all parties, their
successors and assigns. Delivery of an executed counterpart of a signature page
to this Amendment by telecopier shall be effective as delivery of a manually
executed counterpart of this Amendment.
SECTION 8. Governing Law.
This Amendment shall be governed by, and construed in accordance with, the laws
of the State of New York.
4
IN WITNESS WHEREOF, the parties
hereto have caused this Amendment to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
|
JONES APPAREL GROUP USA, INC.
as Borrower
By: /s/ Wesley R. Card
Name: Wesley R. Card
Title: Chief Financial Officer
|
|
JONES APPAREL GROUP, INC.
as Additional Obligor
By: /s/ Wesley R. Card
Name: Wesley R. Card
Title: Chief Operating and Financial
Officer
|
|
JONES APPAREL GROUP HOLDINGS, INC.
as Additional Obligor
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: President
|
|
KASPER LTD.
as Additional Obligor
By: /s/ Peter Boneparth
Name: Peter Boneparth
Title: President
|
|
NINE WEST FOOTWEAR CORPORATION
as Additional Obligor
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: Executive Vice President and
Secretary
|
|
JONES RETAIL CORPORATION
as Additional Obligor
By: /s/ Wesley R. Card
Name: Wesley R. Card
Title: Chief Financial Officer
|
|
WACHOVIA BANK, NATIONAL ASSOCIATION
as Administrative Agent and Lender
By: /s/ Thomas Harper
Name: Thomas Harper
Title: Managing Director
|
|
BANCO BILBAO VIZCAYA ARGENTINA By: /s/ Hector O.
Villegas
Name: Hector O. Villegas
Title: Vice President
Global Corporate Banking By: /s/ Giampaolo Consigliere
Name: Giampaolo Consigliere
Title: Vice President
|
|
BANK OF AMERICA, N.A.
By: /s/ Douglas J. Bolt
Name: Douglas J. Bolt
Title: Vice President
|
|
BANK OF CHINA, NEW YORK BRANCH
By: /s/ William Smith
Name: William Smith
Title: Chief Lending Officer
|
|
THE BANK OF NEW YORK
By: /s/ Roger Grossman
Name: Roger Grossman
Title: Vice President
|
|
THE BANK OF NOVA SCOTIA By: /s/ Todd Meller
Name: Todd Meller
Title: Managing Director
|
|
BARCLAYS BANK PLC
By: /s/ Nicholas A. Bell
Name: Nicholas A. Bell
Title: Director
Loan Transaction Management
|
|
CHIAO TUNG BANK CO., LTD.
NEW YORK AGENCYBy: /s/ Kuang-Hua Wei
Name: Kuang-Hua Wei
Title: SVP & General Manager
|
|
CITIBANK, N.A.
By: /s/ Judith Green
Name: Judith Green
Title: Vice President
|
|
JPMORGAN CHASE BANK, N.A.
(FORMERLY KNOWN AS JPMORGAN
CHASE BANK)
By: /s/ James A. Knight
Name: James A. Knight
Title: Vice President
|
|
THE ROYAL BANK OF SCOTLAND PLC By: /s/ Maria
Amaral-LeBlanc
Name: Maria Amaral-LeBlanc
Title: Senior Vice President
|
|
STANDARD CHARTERED BANK By: /s/ Lalita Vadhri
Name: Lalita Vadhri
Title: Senior Vice President By: /s/
Robert K. Reddington
Name: Robert K. Reddington
Title: AVP/Credit Documentation
|
|
SUNTRUST BANK
By: /s/ Patrick M. Stevens
Name: Patrick M. Stevens
Title: Vice President
|
EXHIBIT A-1 - FORM OF
REVOLVING CREDIT NOTE
$_____________________ _____________, 200_
FOR VALUE RECEIVED, the undersigned JONES APPAREL GROUP USA, INC., a
corporation organized under the laws of Pennsylvania, (the "Borrower"),
JONES APPAREL GROUP, INC., a corporation organized under the laws of
Pennsylvania, JONES APPAREL GROUP HOLDINGS, INC., a corporation organized under
the laws of Delaware, KASPER, LTD., a corporation organized under the laws of
Delaware, NINE WEST FOOTWEAR CORPORATION, a corporation organized under the laws
of Delaware, and JONES RETAIL CORPORATION, a corporation organized under the
laws of New Jersey (collectively, with the Borrower, the "Debtors"),
hereby jointly and severally promise to pay to the order of _________________,
(the "Lender"), at the place and times provided in the Credit
Agreement referred to below, the principal sum of ______________________ DOLLARS
($_____________) or, if less, the aggregate unpaid principal amount of all
Revolving Credit Loans made to the Borrower by the Lender pursuant to that
certain Amended and Restated Five Year Credit Agreement dated as of June 15,
2004 (as amended, restated, supplemented or otherwise modified, the "Credit
Agreement") by and among Jones Apparel Group USA, Inc., the Additional
Obligors referred to therein, the Lenders who are or may become a party thereto
(collectively, the "Lenders"), Citigroup Global Markets Inc.
and J.P. Morgan Securities Inc., as Joint Lead Arrangers and Joint Bookrunners,
Wachovia Bank, National Association, as Administrative Agent, and Citibank, N.A.
and JPMorgan Chase Bank, N.A. (formerly known as JPMorgan Chase Bank), as
Syndication Agents, and Bank of America, N.A., Barclays Bank plc and SunTrust
Bank, as Documentation Agents. Capitalized terms used herein and not defined
herein shall have the meanings assigned thereto in the Credit Agreement.
The unpaid principal amount of Revolving Credit Loans from time to time
outstanding is subject to mandatory repayment from time to time as provided in
the Credit Agreement and shall bear interest as provided in Section 5.1 of the
Credit Agreement. All payments of principal and interest on Revolving Credit
Loans shall be payable in lawful currency of the United States of America in
immediately available funds to the account designated in the Credit Agreement.
This Revolving Credit Note (the "Revolving Credit Note") is
entitled to the benefits of, and evidences Obligations incurred under, the
Credit Agreement, to which reference is made for a statement of the terms and
conditions on which the Borrower is permitted and required to make prepayments
and repayments of principal of the Obligations evidenced by this Revolving
Credit Note and on which such Obligations may be declared to be immediately due
and payable.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.
The Debt evidenced by this Revolving Credit Note is senior in right of
payment to all Subordinated Debt referred to in the Credit Agreement.
The Debtors hereby waive all requirements as to diligence, presentment,
demand of payment, protest and (except as required by the Credit Agreement)
notice of any kind with respect to this Revolving Credit Note.
IN WITNESS WHEREOF, the undersigned have executed this Revolving Credit Note
under seal as of the day and year first above written.
|
JONES APPAREL GROUP USA, INC.
By: ___________________
Name:
Title:
|
|
JONES APPAREL GROUP, INC.
By: ___________________
Name:
Title:
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: ___________________
Name:
Title:
|
|
KASPER, LTD.
By: ___________________
Name:
Title:
|
|
NINE WEST FOOTWEAR CORPORATION
By: ___________________
Name:
Title:
|
|
JONES RETAIL CORPORATION
By: ___________________
Name:
Title:
|
EXHIBIT A-2 - FORM OF
COMPETITIVE BID
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 200_
FOR VALUE RECEIVED, the undersigned JONES APPAREL GROUP USA, INC., a
corporation organized under the laws of Pennsylvania, (the "Borrower"),
JONES APPAREL GROUP, INC., a corporation organized under the laws of
Pennsylvania, JONES APPAREL GROUP HOLDINGS, INC., a corporation organized under
the laws of Delaware, KASPER, LTD., a corporation organized under the laws of
Delaware, NINE WEST FOOTWEAR CORPORATION, a corporation organized under the laws
of Delaware, and JONES RETAIL CORPORATION, a corporation organized under the
laws of New Jersey (collectively, with the Borrower, the "Debtors"),
hereby jointly and severally promise to pay to the order of _________________,
(the "Lender"), at the place and times provided in that certain
Amended and Restated Five Year Credit Agreement dated as of June 15, 2004 (as
amended, restated, supplemented or otherwise modified, the "Credit
Agreement") by and among Jones Apparel Group USA, Inc., the Additional
Obligors referred to therein, the Lenders who are or may become a party thereto
(collectively, the "Lenders"), Citigroup Global Markets Inc.
and J.P. Morgan Securities Inc., as Joint Lead Arrangers and Joint Bookrunners,
Wachovia Bank, National Association, as Administrative Agent, and Citibank, N.A.
and JPMorgan Chase Bank, N.A. (formerly known as JPMorgan Chase Bank), as
Syndication Agents, and Bank of America, N.A., Barclays Bank plc and SunTrust
Bank, as Documentation Agents (as amended or modified from time to time, the
"Credit Agreement"; the terms defined therein being used herein
as therein defined)), on _______________, 200_, the principal amount of
[U.S.$_______________] [for a Competitive Bid Loan in an Alternative Currency,
list currency and amount of such Loan].
The undersigned promise to pay interest on the unpaid principal amount hereof
from the date hereof until such principal amount is paid in full, at the
interest rate and payable on the interest payment date or dates provided below:
Interest Rate: _____% per annum (calculated on the basis of a year of
_____ days for the actual number of days elapsed) (revise as appropriate for
a Floating Rate Loan).
Both principal and interest are payable in lawful money of ____________ to
Wachovia Bank, National Association, as administrative agent, for the account of
the Lender at its office, at _________________________ in same day funds.
This Promissory Note is one of the Competitive Bid Notes referred to in, and
is entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among
other things, contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events.
THIS COMPETITIVE BID NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.
The Debt evidenced by this Competitive Bid Note is senior in right of payment
to all Subordinated Debt referred to in the Credit Agreement.
The Debtors hereby waive all requirements as to diligence, presentment,
demand of payment, protest and (except as required by the Credit Agreement)
notice of any kind with respect to this Competitive Bid Note.
IN WITNESS WHEREOF, the undersigned have executed this Competitive Bid Note
under seal as of the day and year first above written.
|
JONES APPAREL GROUP USA, INC.
By: ___________________
Name:
Title:
|
|
JONES APPAREL GROUP, INC.
By: ___________________
Name:
Title:
|
|
JONES APPAREL GROUP HOLDINGS, INC.
By: ___________________
Name:
Title:
|
|
KASPER, LTD.
By: ___________________
Name:
Title:
|
|
NINE WEST FOOTWEAR CORPORATION
By: ___________________
Name:
Title:
|
|
JONES RETAIL CORPORATION
By: ___________________
Name:
Title:
|
EX-10
10
exhibit10_32.htm
EXHIBIT 10.32
Exhibit 10.32
EXHIBIT 10.32
JONES APPAREL GROUP, INC.
DEFERRED COMPENSATION PLAN
Effective February 1, 2004
1. Purpose.
The purpose of the Jones Apparel Group, Inc. Deferred Compensation Plan is to
provide a means whereby eligible employees of Jones Apparel Group, Inc. and its
participating affiliated companies may elect to defer receipt of certain
compensation that otherwise would be payable to them in cash until the earlier
of retirement, termination of employment, disability, or death. The Plan is
intended to be an unfunded deferred compensation arrangement for a select group
of management or highly compensated employees.
2. Definitions.
(a) "Account" means the Deferred Compensation Account
maintained for each Participant in accordance with Section 5.
(b) "Change-in-Control" means a Change-in-Control as described
in Appendix A to this Plan.
(c) "Company" means Jones Apparel Group, Inc. or any successor
company that adopts this Plan.
(d) "Compensation Deferral" means the amount of Eligible
Compensation that a Participant elects to defer pursuant to Section 4.
(e) "Eligible Compensation" means such forms of compensation
payable in cash as may be designated by the Plan Committee, from time to time,
in its sole discretion, as eligible for deferral under this Plan. Eligible
Compensation may include, but shall not be limited to, base salary, and any
bonus compensation, payable to the Participant.
(f) "In-Service Distribution Date" means the date selected by
the Participant for commencement of a scheduled in-service distribution pursuant
to Section 7.
(g) "In-Service Distribution Sub-Account" means the sub-account
established under a Participant's Account in connection with the Participant's
election of a scheduled in-service distribution pursuant to Section 7.
(h) "Participant" means an eligible employee who elects to
defer Eligible Compensation pursuant to the Plan.
(i) "Participating Employer" means Jones Apparel Group, Inc.,
and any of its participating affiliated companies, or any successor companies.
(j) "Plan" means the Jones Apparel Group, Inc. Deferred
Compensation Plan as set forth in this document and as amended from time to
time.
(k) "Plan Committee" means the committee designated by the
Company's Board of Directors or its Chief Executive Officer to administer the
Plan.
1
(l) "Retirement Date" means the date on which a Participant
elects to retire having an attained age of 50 or greater, plus 10 years of
employment by a Participating Employer.
3. Eligibility And Participation.
(a) Only employees who are designated by the Plan Committee shall be
eligible to participate in the Plan.
(b) An employee shall only be a Participant eligible to have compensation
deferred under this Plan while he or she is designated as an eligible employee
by the Plan Committee. If an employee subsequently ceases to be a designated
eligible employee after becoming a Participant, he or she shall remain a
Participant for the other purposes of the Plan to the extent of any existing
Account balance subject to Section 16(a) below.
4. Compensation Deferrals.
(a) Election to Defer Compensation. An eligible employee may elect to
defer receipt of Eligible Compensation for a calendar year as follows:
(i) Base Salary. An election to defer receipt of base salary payable
for a calendar year must be made no later than December 31 preceding that
calendar year during which the Participant will perform services for a
Participating Employer, which will entitle the Participant to receive
compensation from a Participating Employer.
(ii) Bonus Compensation. An election to defer receipt of bonus
compensation must be made no later than the earlier of (A) December 31 of the
year to which such bonus compensation relates or (B) the last day prior to the
date on which the amount of such bonus compensation first becomes definitely
determinable and nonforfeitable.
Notwithstanding the foregoing, (i) an employee who is eligible to participate
as of February 1, 2004 must make his or her election no later than March 1,
2004, and (ii) an employee who first becomes eligible to participate during a
calendar year may make an election to defer receipt of compensation payable
within thirty (30) days after he or she first becomes eligible to participate in
the Plan, to be effective the first calendar month after such election.
(b) Amount of Deferral. A Participant may elect to defer receipt of up to
90% of his or her base salary payable for the calendar year and/or up to 90% of
the bonus compensation payable for the calendar year, provided that
(i) the minimum amount of the deferral elected for the calendar year
must be at least $5,000, and
2
(ii) the amount of the deferral elected for the calendar year cannot
reduce the Participant's cash compensation payable for the calendar year
below the amount necessary to satisfy applicable federal, state and local
income and employment withholding taxes and any obligations to make benefit
plan contributions.
(c) General Rules. An election to defer Eligible Compensation shall be
made at the time, and in the form, manner, and in accordance with the notice
requirements, prescribed by the Plan Committee. Except as otherwise provided in
this Plan, the elections made by a Participant pursuant to this Section 4 are
irrevocable.
(d) Modification or Revocation of Deferral Election of Participant. A
Participant may not change the amount of his or her base salary deferrals during
a calendar year. However, a Participant may discontinue a base salary deferral
election at any time by filing such forms and subject to such limitations and
restrictions as the Plan Committee may prescribe in its discretion. If approved
by the Plan Committee, revocation shall take effect as of the first payroll
period next following approval by the Plan Committee. If a Participant
discontinues a base salary deferral election during a calendar year, he or she
will not be permitted to elect to make base salary deferrals again until the
next calendar year.
5. Deferred Compensation Accounts.
(a) The Company shall establish and maintain a separate memorandum
account in the name of each Participant. Such account shall be credited or
charged with (i) the amounts of Eligible Compensation deferred by the
Participant, (ii) income, gains, losses, and expenses of investments deemed held
in such account, and (iii) distributions from such account.
(b) The amount deferred by a Participant under Section 4 shall be
credited to his or her Account on or about the date such Eligible Compensation
otherwise would have been payable in cash to the Participant.
(c) A Participant's interest in his or her Account shall be fully
vested and nonforfeitable at all times (except as otherwise provided in Section
16(e)).
6. Investment of Deferred Compensation Accounts.
(a) The amount credited to a Participant's Account shall be deemed to
be invested and reinvested in life insurance, annuities, mutual funds, stocks,
bonds, securities, and any other assets or investment vehicles, as may be
selected by the Plan Committee in its sole discretion.
(b) A Participant may elect the manner in which his or her Account is
deemed to be invested and reinvested among the deemed investment options
selected by the Plan Committee. A Participant's investment election shall
remain in effect until the Participant properly files a change of election with
the Plan Committee. In the event that any Participant fails to
3
make an election with respect to the investment of all or a portion of the
balance in his or her account at any time, the Participant shall be deemed to
have elected that such balance be deemed to be invested in a money market (or
equivalent) fund and such assets shall remain in such investment fund until such
time as the Participant directs otherwise.
(c) A Participant's investment direction (or any change in his or her
investment direction) shall be made in the form, manner, and in accordance with
the notice requirements, prescribed by the Plan Committee.
(d) A Participant, by electing to participate in this Plan, agrees on
behalf of himself or herself and his or her designated beneficiaries, to assume
all risk in connection with any increase or decrease in value of the investments
which are deemed to be held in his or her account. Each Participant further
agrees that the Plan Committee and the Employer shall not in any way be held
liable for any investment decisions or for the failure to make any investments
by the Plan Committee.
7. Scheduled Distributions Prior to Termination of
Employment.
A Participant may elect to have Compensation Deferrals, and any earnings
thereon, distributed at a specified date or dates prior to his or her
termination of employment in accordance with the rules set forth in this Section
7.
(a) In-Service Distribution Date(s). A Participant may elect to have up
to five (5) separate In-Service Distribution Dates with respect to amounts
credited to his Account. The Participant may change or cancel an In-Service
Distribution Date as follows:
(i) The change or cancellation of an In-Service Distribution Date must
be submitted to the Plan Committee at least thirteen (13) months prior to the
date being changed or cancelled.
(ii) An In-Service Distribution Date may be postponed once only to a
later date that is at least thirteen (13) months after the original In-Service
Distribution Date. An In-Service Distribution Date cannot be changed to an
earlier date.
(iii) An In-Service Distribution Date may be cancelled regardless of
whether such date previously was changed.
(b) In-Service Distribution Sub-Account. A separate In-Service
Distribution Sub-Account will be established and maintained as part of the
Participant's Account for each In-Service Distribution Date elected by the
Participant. Such sub-account shall be credited or charged with (i) the amounts
of Compensation Deferrals designated by the Participant to be distributed as of
the In-Service Distribution Date, (ii) a portion of the income, gains, losses,
and expenses of investments deemed held in the Participant's Account as
allocated based on the Compensation Deferrals credited to such sub-account, and
(iii) distributions from such sub-account.
4
(c) Designation of Compensation Deferrals. The Participant may allocate
all or a portion of the Eligible Compensation to be deferred for each calendar
year pursuant to Section 4 to one or more of the In-Service Distribution
Sub-Accounts subject to the following rules:
(i) The allocation election must be made at the same time the
Participant elects to defer the Eligible Compensation for the calendar year.
(ii) Compensation Deferrals made for a particular calendar year cannot
be allocated to an In-Service Distribution Sub-Account with an In-Service
Distribution Date earlier than five (5) calendar years after the calendar year
in which the Eligible Compensation is deferred.
(iii) Compensation Deferrals allocated to an In-Service Distribution
Sub-Account cannot later be reallocated to a different In-Service Distribution
Sub-Account.
(iv) Except as otherwise provided in Section 8, if a Participant fails
to make a distribution election under this Section 7, or does not allocate the
full amount of the Compensation Deferrals for the calendar year to one or more
In-Service Distribution Sub-Accounts, such Compensation Deferrals will be
distributed in accordance with Section 9.
(d) Lump Sum or Installment Payment. The Participant may elect to have
the balance credited to an In-Service Distribution Sub-Account distributed in a
single lump sum payment, or in quarterly or annual installments over a period of
two (2) to five (5) years, subject to the following rules:
(i) If the balance credited to the Participant's In-Service
Distribution Sub-Account as of the In-Service Distribution Date is less than
$25,000, payment will be made in a single lump distribution.
(ii) The Participant may change his or her distribution election for
the In-Service Distribution Sub-Account by submitting a new election to the
Plan Committee at least thirteen (13) months prior to the In-Service
Distribution Date applicable to that sub-account.
(iii) If the Participant terminates employment prior to the
commencement of a scheduled in-service distribution or before scheduled
in-service distributions have been completed, then distribution will be made
in accordance with the rules applying to distributions following termination
of employment set forth in Section 9.
(iv) A lump sum distribution will be paid within the calendar month
following the calendar month of the In-Service Distribution Date. Installment
payments will commence within the first calendar month following the calendar
month of the In-Service Distribution Date.
5
(v) The amount of a quarterly installment payment will be equal to
one-fourth (1/4th) of the amount of an annual installment payment
that would have been made from the Participant's In-Service Distribution
Sub-Account for the calendar year.
(e) General Rules. An in-service distribution election shall be made in
the form, manner, and in accordance with the notice requirements prescribed by
the Plan Committee.
8. Other Distributions Prior to Termination of Employment.
A Participant may request that a distribution be made prior to his or her
termination of employment at a date other than an In-Service Distribution Date
in accordance with the rules set forth in this Section 8.
(a) Financial Hardship. The Plan Committee, in its sole discretion, may
permit a hardship payment to be made to a Participant prior to termination of
employment in the event of an "unforeseeable emergency". Withdrawals
of amounts because of an unforeseeable emergency will be permitted to the extent
reasonably needed to satisfy the emergency need.
For purposes of this paragraph (a), an "unforeseeable emergency" is
a severe financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a dependent (as defined
in Section 152(a) of the Internal Revenue Code) of the Participant, loss of the
Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant.
The circumstances that will constitute an unforeseeable emergency will depend
upon the facts of each case, but, in any case, payment may not be made to the
extent that such hardship is or may be relieved -
(i) Through reimbursement or compensation by insurance or otherwise;
(ii) By liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship;
or
(iii) By cessation of deferrals under the Plan.
(b) Accelerated In-Service Distribution. A Participant may request a
distribution of all or a portion of the balance of his or her Account at any
time prior to his or her termination of employment in accordance with the
following rules:
(i) The balance credited to the Participant's Account (as determined
prior to the requested distribution) will be reduced by an amount equal to 10%
of the amount of the requested distribution.
(ii) No Compensation Deferrals will be made on behalf of the
Participant from the date on which the distribution is made until the end of
the calendar year.
6
(iii) The distribution request shall be made in the form, manner, and
in accordance with the notice requirements, prescribed by the Plan Committee.
9. Distributions Following Termination of Employment.
The balance credited to a Participant's Account shall be distributed
following termination of his or her employment with all Participating Employers
as follows:
(a) Termination of Employment Prior to Retirement Date. In the event that
a Participant terminates employment for any reason other than death or becoming
totally disabled (within the meaning of the Employer's long term disability
insurance plan) prior to his or her Retirement Date, the balance credited to his
or her Account will be distributed to the Participant in a single lump sum
within the calendar month following the calendar month of the Participant's
employment termination date.
(b) Termination of Employment At or After Retirement Date or By Reason of
Death or Total Disability. In the event that a Participant terminates
employment at or after his or her Retirement Date, or terminates employment
prior to his or her Retirement Date by reason of his or her death or becoming
totally disabled (within the meaning of the Employer's long term disability
insurance plan), the balance credited to his or her Account will be distributed
to the Participant (or his or her designated beneficiary) in accordance with the
following rules:
(i) Unless the Participant elects otherwise, distribution will be made
in a single lump sum payment within the calendar month following the calendar
month of the Participant's employment termination date.
(ii) The Participant may elect to have the balance of his or her
Account distributed in quarterly or annual installments over a period of up to
fifteen (15) years commencing with the first calendar month following the
calendar month of the Participant's employment termination date.
Notwithstanding the foregoing, if the balance credited to the Participant's
Account as of the employment termination date is less than $50,000, then
distribution will be made in a single lump sum payment within the calendar
month following the calendar month of the Participant's employment
termination date.
(iii) Elections under this Section 9(b) shall be made in the form,
manner, and in accordance with the notice requirements prescribed by the Plan
Committee. Such election shall be made at the time the Participant first
elects to participate in this Plan; provided that the Participant may
change his or her retirement distribution election by submitting a new
election to the Plan Committee at least thirteen (13) months prior to his or
her Retirement Date.
7
(iv) Upon request of (A) a Participant whose employment is terminated
by reason of becoming totally disabled, or (B) a designated beneficiary
following a Participant's death, the Plan Committee in its sole discretion
may provide that the remaining balance in the Participant's Account will be
distributed in a single lump payment.
10. Designated Beneficiary.
(a) A Participant may designate one or more beneficiaries to whom the
unpaid balance of his or her Account shall be paid in the event of the
Participant's death prior to receipt of all payments due under the Plan. The
designation shall be made in the form, manner, and in accordance with the notice
requirements, prescribed by the Plan Committee.
(b) A Participant may from time to time revoke or change his or her
beneficiary designation without the consent of any prior beneficiary by filing a
new designation with the Plan Committee. The last designation received by the
Plan Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the Plan
Committee prior to the Participant's death.
(c) If no beneficiary designation is in effect at the time of Participant's
death or if the designated beneficiary is not living at the time of the
Participant's death or shall die prior to complete distribution, then payments
due thereafter shall be made to the Participant's estate.
11. Administration.
(a) Plan Committee. The Plan shall be administered by the Plan Committee.
The Plan Committee shall have full authority and power to administer and
construe the Plan, subject to applicable requirements of law. Without limiting
the generality of the foregoing, the Plan Committee shall have the following
powers and duties:
(i) To make and enforce such rules and regulations as it deems
necessary or proper for the administration of the Plan;
(ii) To interpret the Plan and to decide all questions concerning the
Plan;
(iii) To determine the eligibility of any person to participate in the
Plan, and to determine the amount and the recipient of any payments to be made
under the Plan;
(iv) To designate and value any investments deemed held in the
Accounts;
(v) To appoint such agents, counsel, accountants, consultants and other
persons as may be required to assist in administering the Plan; and
8
(vi) To make all other determinations and to take all other steps
necessary or advisable for the administration of the Plan.
All decisions made by the Plan Committee pursuant to the provisions of the
Plan shall be made in its sole discretion and shall be final, conclusive, and
binding upon all parties.
(b) Delegation of Duties. The Plan Committee may delegate such of its
duties and may engage such experts and other persons as it deems appropriate in
connection with administering the Plan. The Plan Committee shall be entitled to
rely conclusively upon, and shall be fully protected in any action taken by the
Plan Committee, in good faith in reliance upon any opinions or reports furnished
to it by any such experts or other persons.
(c) Expenses. All expenses incurred prior to the termination of the Plan
that shall arise in connection with the administration of the Plan, including,
without limitation, administrative expenses and compensation and other expenses
and charges of any actuary, counsel, accountant, specialist, or other person who
shall be employed by the Plan Committee in connection with the administration of
the Plan shall be paid by the Participating Employers, or at the discretion of
the Plan Committee, shall be charged against such assets as are deemed to be
investments under the Plan pursuant to Section 6.
(d) Indemnification of Plan Committee. The Participating Employers agree
to indemnify and to defend to the fullest extent permitted by law any person
serving as a member of the Plan Committee, and each employee of a Participating
Employer or any of their affiliated companies appointed by the Plan Committee to
carry out duties under this Plan, against all liabilities, damages, costs and
expenses (including attorneys' fees and amounts paid in settlement of any
claims approved by the Company) occasioned by any act or omission to act in
connection with the Plan, if such act or omission is in good faith.
(e) Liability. To the extent permitted by law, neither the Plan Committee
nor any other person shall incur any liability for any acts or for any failure
to act except for liability arising out of such person's own willful
misconduct or willful breach of the Plan.
12. Appeals Procedure.
(a) The Plan Committee shall approve or wholly or partially deny all
claims for benefits under the Plan within a reasonable period of time after all
required documentation has been furnished to the Plan Committee.
(b) If a claim is wholly or partially denied, the Plan Committee shall
provide the claimant with written notice setting forth the specific reasons for
the denial, making reference to the pertinent provisions of the Plan or the Plan
documents on which the denial is based; describe any additional material or
information that should be received before the claim may be acted upon
favorably, and explain why such material or information, if any, is needed; and
inform the person making the claim of his or her right pursuant to this Section
to request review of the decision by the Plan Committee.
9
(c) A claimant shall have the right to request a review of the decision
denying the claim. Such request must be made by filing a written application for
review with the Plan Committee no later than sixty (60) days after receipt by
the claimant of written notice of the denial of his or her claim. The claimant
may review pertinent Plan documents and shall submit such written comments and
other information which he or she wishes the Plan Committee to consider in
connection with his or her claim.
(d) The Plan Committee may hold any hearing or conduct any independent
investigation which it deems necessary to render its decision on review. Such
decision shall be made as soon as practicable after the Plan Committee receives
the request for review. Written notice of the decision on review shall be
promptly furnished to the claimant and shall include specific reasons for the
decision.
(e) For all purposes under the Plan, decisions on claims (where no review
is requested) and decisions on review (where review is requested) shall be
final, binding and conclusive on all interested persons.
13. Amendment or Termination of the Plan.
(a) The Plan Committee may, in its sole discretion, terminate, suspend or
amend this Plan at any time or from time to time, in whole or in part, with
respect to any Participants or beneficiaries whether or not payments have
commenced to such Participants or beneficiaries. Notwithstanding the foregoing,
no amendment, termination, or suspension of the Plan will affect a Participant's
right to receive amounts previously deferred under the Plan.
(b) In the event the Plan is terminated, the Plan Committee shall
distribute the remaining amounts in Participants' Accounts at such times and
in such ways as the Plan Committee, in its sole discretion, may deem
appropriate.
14. Unfunded Plan; Change-in-Control.
(a) Nothing in this Plan shall be construed as giving any Participant, or
his or her legal representative or designated beneficiary, any claim against any
specific assets of the Company or any of its affiliated companies or as imposing
any trustee relationship upon the Company or any of its affiliated companies in
respect of the Participant. The Participating Employers shall not be required to
segregate any assets in order to provide for the satisfaction of the obligations
hereunder. Investments deemed held in the Accounts shall continue to be a part
of the general funds of the applicable Participating Employers, and no
individual or entity other than the Participating Employer shall have any
interest whatsoever in such funds. If and to the extent that the Participant or
his or her legal representative or designated beneficiary acquires a right to
receive any payment pursuant to this Plan, such right shall be no greater than
the right of an unsecured general creditor of the applicable Participating
Employer.
10
(b) Except as set forth in paragraph (c) below, the Company in its sole
discretion may establish a trust for the purpose of providing funds for the
payment of the amounts credited to Participants under the Plan. Such trust shall
be an irrevocable grantor trust containing provisions which are the same as, or
are similar to, the provisions contained in the model "rabbi trust"
set forth in Internal Revenue Service Revenue Procedure 92-64. The Company shall
pay all costs relating to the establishment and maintenance of the trust and the
investment of funds held in such trust.
(c) In the event of a Change-in-Control, the Company shall take the
following actions:
(i) The Company shall establish a trust as described in paragraph (b)
above if such trust has not yet been established.
(ii) The Company shall, as soon as possible, but in no event later than
five (5) business days following a Change-in-Control, make an irrevocable
contribution to the Trust in an amount that is sufficient to pay the total
amount credited to all Accounts under the Plan as of the date of the
Change-in-Control.
15. Benefits Non-Assignable.
Benefits under the Plan may not be anticipated, assigned or alienated, and
will not be subject to claims of a Participant's creditors by any process
whatsoever, except as specifically provided in this Plan or by the Plan
Committee in its sole discretion.
16. Miscellaneous Provisions.
(a) Top-Hat Status. Notwithstanding any provision of the Plan to the
contrary, if the Plan Committee determines that participation in the Plan by any
one or more Participants shall cause the Plan to be subject to Parts 2, 3 or 4
of Title I of ERISA, the entire interest of such Participant or Participants
under the Plan shall be immediately paid to such Participant or Participants by
the Participating Employer, or shall otherwise be segregated from the Plan in
the discretion of the Plan Committee, and such Participant or Participants shall
cease to have any interest under the Plan.
(b) Right to Withhold Taxes. The Participating Employers shall have the
right to withhold such amounts from any payment under this Plan as it determines
necessary to fulfill any federal, state, or local wage or Eligible Compensation
withholding requirements.
(c) No Right to Continued Employment. Neither the Plan, nor any action
taken under the Plan, shall confer upon any Participant any right to continuance
of employment by the Company or any of its affiliated companies nor shall it
interfere in any way with the right of the Company or any of its affiliated
companies to terminate any Participant's employment at any time.
(d) Mental or Physical Incompetency. If the Plan Committee determines
that any person entitled to payments under the Plan is incompetent by reason of
physical or mental
11
disability, as established by a court of competent jurisdiction, the Plan
Committee may cause all payments thereafter becoming due to such person to be
made to any other person for his or her benefit, without responsibility to
follow the application of amounts so paid. Payments made pursuant to this
Section shall completely discharge the Plan Committee and the Employer.
(e) Unclaimed Benefit. Each Participant shall keep the Plan Committee
informed in writing of his or her current address and the current address of his
or her beneficiary. The Plan Committee shall not be obligated to search for the
whereabouts of any person. If the location of a Participant is not made known to
the Plan Committee within three (3) years after the date on which payment of the
Participant's Account may first be made, payment may be made as though the
Participant had died at the end of the three (3) year period. If, within one
additional year after such three (3) year period has elapsed, or, within three
years after the actual death of a Participant, the Plan Committee is unable to
locate any designated beneficiary of the Participant, then the Employer shall
have no further obligation to pay any benefit hereunder to such Participant or
beneficiary or any other person and such benefit shall be irrevocably forfeited.
(f) Suspension of Payments. If any controversy, doubt or disagreement
should arise as to the person to whom any distribution or payment should be
made, the Plan Committee, in its discretion, may, without any liability
whatsoever, retain the funds involved or the sum in question pending settlement
or resolution to the Plan Committee's satisfaction of the matter, or pending a
final adjudication by a court of competent jurisdiction.
(g) Governing Laws. The provisions of the Plan shall be construed,
administered and enforced according to applicable Federal law and the laws of
Commonwealth of Pennsylvania.
(h) Severability. The provisions of the Plan are severable. If any
provision of the Plan is deemed legally or factually invalid or unenforceable to
any extent or in any application, then the remainder of the provision and the
Plan, except to such extent or in such application, shall not be affected, and
each and every provision of the Plan shall be valid and enforceable to the
fullest extent and in the broadest application permitted by law.
(i) No Other Agreements or Understandings. This Plan represents the sole
agreement between the Participating Employers and Participants concerning its
subject matter, and it supersedes all prior agreements, arrangements,
understandings, warranties, representations, and statements between or among the
parties concerning its subject matter.
12
Appendix A
Change-in-Control
For purposes of this Plan, the term "Change-in-Control" shall mean
an event or series of events that results in
(a) a person, partnership, joint venture, corporation or other entity, or
two or more of any of the foregoing acting as a "person" within the
meaning of Sections 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), other than the Company, a majority-owned
subsidiary of the Company or an employee benefit plan of the Company or such
subsidiary (or such plan's related trust), become(s) the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of 20% or more of
the then outstanding voting stock of the Company;
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Company's Board of Directors (together
with any new director whose election by the Company's Board or whose
nomination for election by the Company's shareholders, was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors then in office; or
(c) all or substantially all of the business of the Company is disposed
of pursuant to a merger, consolidation or other transaction in which the Company
is not the surviving corporation or the Company combines with another company
and is the surviving corporation (unless the shareholders of the Company
immediately following such merger, consolidation, combination, or other
transaction beneficially own, directly or indirectly, more than 50% of the
aggregate voting stock or other ownership interests of (x) the entity or
entities, if any, that succeed to the business of the Company or (y) the
combined company).
13
EX-10
11
exhibit10_33.htm
EXHIBIT 10.33
exhibit10_33
EXHIBIT 10.33
JONES APPAREL GROUP, INC.
SCHEDULE OF NON-EMPLOYEE DIRECTORS' ANNUAL COMPENSATION
Effective February 25, 2005
RETAINER(1)(2) |
AMOUNT |
Service as a Director |
$ 30,000 |
Service as Audit Committee Chair |
$ 10,000 |
Service as Compensation Committee Chair |
$ 5,000 |
Service as Nominating / Corporate Governance Committee Chair |
$ 5,000 |
FEES |
AMOUNT |
Attendance at Board of Directors Meeting |
$ 2,000 per meeting |
Attendance at Committee Meeting |
$ 1,000 per meeting |
________________
(1) Retainers are paid in January of each year, in advance for
the calendar year. Meeting fees are paid quarterly in arrears.
(2) In the event that a non-employee director joins the Board
of Directors of Jones Apparel Group, Inc. at a time other than an Annual Meeting
of Stockholders or commences service on an additional Board committee, the
director is entitled to receive, promptly after joining the Board of Directors
or such committee, a pro-rated retainer in advance for services for the
remainder of the applicable calendar year.
EX-10
12
exhibit10_34.htm
EXHIBIT 10.34
Exhibit 10.34
EXHIBIT 10.34
Summary Sheet of Compensation of Named Executive Officers
(as defined in Regulation S-K Item 402(a)(3)) of Jones Apparel Group, Inc.
As approved by the Compensation Committee of the Board of
Directors on December 14, 2004
Executive Officer
|
2005 Salary
|
2004 Bonus
|
2005 Restricted Stock
Grant (1)
|
Peter
Boneparth
President and Chief Executive Officer |
$2,500,000 |
(2) |
$2,000,000 |
100,000 shares |
Sidney Kimmel
Chairman |
$1,200,000 |
(2) |
$1,800,000 |
- |
Wesley R. Card
Chief Operating and Financial Officer |
$1,100,000 |
|
$1,000,000 |
50,000 shares |
Rhonda J.
Brown
President and Chief Executive Officer, Footwear, Accessories and Retail
Group |
$1,300,000 |
(2) |
$1,500,000 |
25,000
shares |
Ira M.
Dansky
Executive Vice President, Secretary and General Counsel |
$650,000 |
|
$600,000 |
10,000 shares |
__________
(1) |
Grants are effective January 3, 2005.
Vesting restrictions lapse as to all of the shares
on the second business day immediately following the Company's public
announcement of fourth quarter financial results for the year 2007,
provided that the Company achieves certain performance targets. |
(2) |
No salary increase for 2005. |
EX-11
13
exhibit11.htm
EXHIBIT 11
Exhibit 11
JONES APPAREL GROUP, INC.
Computation of Basic and Diluted Earnings per Share
(In millions except per share amounts)
For the Year Ended December 31,
--------------------------------
2004 2003 2002
-------- -------- -------
Basic Earnings per Share:
- -------------------------
Net income........................... $301.8 $328.6 $318.5
======== ======== =======
Weighted average number of shares
outstanding.......................... 123.6 127.3 128.2
======== ======== =======
Basic earnings per share............. $2.44 $2.58 $2.48
======== ======== =======
Diluted Earnings per Share:
- ---------------------------
Net income........................... $301.8 $328.6 $318.5
Add: interest expense associated
with convertible notes,
net of tax benefit.............. 0.8 9.5 9.1
-------- -------- -------
Income available to common
shareholders....................... $302.6 $338.1 $327.6
======== ======== =======
Weighted average number of shares
outstanding........................ 123.6 127.3 128.2
Effect of dilutive securities:
Employee stock options............. 2.2 1.3 2.9
Assumed conversion of convertible
notes............................ 0.7 7.9 7.9
-------- -------- -------
126.5 136.5 139.0
======== ======== =======
Diluted earnings per share.......... $2.39 $2.48 $2.36
======== ======== =======
EX-12
14
exhibit12.htm
EXHIBIT 12
Exhibit 12
JONES APPAREL GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions)
Year Ended December 31,
------------------------------------
2004 2003 2002
-------- -------- --------
Income before income taxes........ $482.9 $527.0 $533.5
-------- -------- --------
Fixed charges
Interest expense and
amortization of
financing costs............... 51.2 58.8 62.7
Portion of rent expense
representing interest......... 39.3 34.1 32.1
-------- -------- --------
Total fixed charges............... 90.5 92.9 94.8
-------- -------- --------
Income before income taxes and
fixed charges................... $573.4 $619.9 $628.3
======== ======== ========
Ratio of earnings to
fixed charges................... 6.3 6.7 6.6
======== ======== ========
EX-21
15
exhibit21.htm
EXHIBIT 21
Exhibit 21
EXHIBIT 21
SUBSIDIARIES OF JONES APPAREL GROUP, INC.
Name
|
State or Country of Incorporation
|
Other Names Under Which Subsidiary Does Business
|
Anne Klein ULC |
Nova Scotia |
N/A |
Apparel Testing Services, Inc. |
New Jersey |
N/A |
Asia Expert Limited |
Hong Kong |
N/A |
Barney's, Inc. |
Delaware |
Barneys New York
Barneys Warehouse, Inc.
Barneys New York Outlet
Barneys (NY), Inc.
Barneys New York Co-Op
CO-OP |
Barneys America, Inc. |
Delaware |
Barneys New York |
Barneys New York, Inc. |
Delaware |
N/A |
BNY Licensing Corp. |
Delaware |
N/A |
Exportex de Mexico, S.A. de C.V. |
Mexico |
N/A |
Greater Durango, S. de R.L. de C.V. |
Mexico |
N/A |
Import Technology of Texas, Inc. |
Texas |
N/A |
JAG Management Services, Inc. |
Delaware |
JAG
Management Services of Delaware (New York only) |
Jones Apparel Group Canada Inc. |
Canada |
JNY Blue
Jones Factory Finale
Jones New York Factory Store
Jones New York |
Jones Apparel Group Holdings, Inc. |
Delaware |
N/A |
Jones Apparel Group USA, Inc. |
Pennsylvania |
N/A |
Jones Apparel of Texas, Ltd. |
Texas |
N/A |
Jones Canada, Inc. |
Canada |
N/A |
Jones Holding Inc. |
Delaware |
N/A |
Jones International Limited |
Hong Kong |
N/A |
Jones Investment Co. Inc. |
Delaware |
N/A |
Jones Management Service Company |
Delaware |
Apparel
Management Service Company (New Jersey only)
JAG Management Service Company (Rhode Island and Maine only) |
Jones Retail Corporation |
New Jersey |
Anne Klein
Banister Shoe Studio
Banister/Easy Spirit
Bandolino
Banister Shoe
Enzo Angiolini
Easy Spirit
Easy Spirit Outlet
Jones New York
Jones New York Sport
Jones New York
Factory Stores
Jones New York Country
Jones New York Company Store
Jones New York Country/Sport
Jones New York Sport Factory Stores
Jones New York Mens & Womens Suits
Jones New York The Executive Suite
Jones New York Factory Finale
Kasper
Nine West
Nine West Lifestyle
NW Clearance
Nine West Clearance
Rena Rowan
Steinmart Leased
Shoe Department
The Napier Factory Store
|
Kasper Europe, Ltd. |
Delaware |
N/A |
Kasper, Ltd. |
Delaware |
N/A |
Kasper Canada ULC |
Nova Scotia |
N/A |
Kasper Holdings, Inc. |
Delaware |
N/A |
Kasper Partnership, G.P. |
Canada |
N/A |
Manufacturera Sun Apparel, S. de R.L. de C.V. |
Mexico |
N/A |
Maquilas Pami, S.A. de C.V. |
Mexico |
N/A |
Maxwell Footwear of California, Inc. |
Delaware |
N/A |
Maxwell Shoe Company Inc. |
Delaware |
N/A |
McNaughton Apparel Group Inc. |
Delaware |
N/A |
Nine West Accessories (HK) Limited |
Hong Kong |
N/A |
Nine West Development Corporation |
Delaware |
N/A |
Nine West Footwear Corporation |
Delaware |
N/A |
Nine West Melbourne Pty Ltd |
Australia |
N/A |
Norton McNaughton of Squire, Inc. |
New York |
N/A |
Sun Apparel, Inc. |
Delaware |
N/A |
Victoria + Co International Ltd. |
Delaware |
N/A |
Victoria + Co Ltd. |
Rhode Island |
N/A |
Certain non-significant subsidiaries were omitted pursuant to Item
601(21)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as
amended.
EX-23
16
exhibit23.htm
EXHIBIT 23
EXHIBIT 23
EXHIBIT 23
Consent of Independent Registered Public Accounting Firm
Jones Apparel Group, Inc.
Bristol, Pennsylvania
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of the Registration Statements on Form S-8 filed on December
26, 1991, May 15, 1996, June 16, 1999, August 23, 1999, August 2, 2001, June 12,
2003 and June 2, 2004 of our reports dated February 11, 2005, relating to the
consolidated financial statements, the effectiveness of Jones Apparel Group,
Inc. and Subsidiaries' internal control over financial reporting and schedule of
Jones Apparel Group, Inc. and Subsidiaries appearing in the Company's Annual
Report on Form 10-K/A (Amendment No. 1) for the year ended December 31, 2004.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, New York
March 8, 2005
EX-31
17
exhibit31.htm
EXHIBIT 31
Exhibit 31
EXHIBIT 31
CERTIFICATIONS
I, Peter Boneparth, President and Chief Executive Officer, certify that:
1. |
I have reviewed this Annual
Report on Form 10-K/A (Amendment No. 1) of Jones Apparel Group, Inc.;
|
2. |
Based on my knowledge, this
report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the
financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for,
the periods presented in this report;
|
4. |
The registrant's other certifying
officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
|
|
|
(a) Designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during
the period in which this report is being prepared;
|
|
|
(b) Designed such internal control over
financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
|
|
|
(c) Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
|
|
|
(d) Disclosed in this report any change in
the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
|
5. |
The registrant's other certifying
officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
|
|
|
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and
|
|
|
(b) Any fraud, whether or not material, that
involves management or other employees who have a significant role in
the registrant's internal control over financial reporting. |
|
Date: March 11, 2005
|
|
/s/ Peter Boneparth
Peter Boneparth
President and Chief Executive Officer |
I, Wesley R. Card, Chief Operating and Financial Officer, certify that:
1. |
I have reviewed this Annual
Report on Form 10-K/A (Amendment No. 1) of Jones Apparel Group, Inc.;
|
2. |
Based on my knowledge, this
report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the
financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for,
the periods presented in this report;
|
4. |
The registrant's other certifying
officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
|
|
|
(a) Designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during
the period in which this report is being prepared;
|
|
|
(b) Designed such internal control over
financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
|
|
|
(c) Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
|
|
|
(d) Disclosed in this report any change in
the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
|
5. |
The registrant's other certifying
officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
|
|
|
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and
|
|
|
(b) Any fraud, whether or not material, that
involves management or other employees who have a significant role in
the registrant's internal control over financial reporting. |
|
Date: March 11, 2005
|
|
/s/ Wesley R. Card
Wesley R. Card
Chief Operating and Financial Officer |
EX-32
18
exhibit32.htm
EXHIBIT 32
Exhibit 32
EXHIBIT 32
CERTIFICATION OF CHIEF
EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION
1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter Boneparth, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
the Annual Report of Jones Apparel Group, Inc. on Form 10-K/A (Amendment No. 1)
for the year ended
December 31, 2004 fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Annual Report on Form 10-K/A (Amendment No. 1) fairly presents
in all material
respects the financial condition and results of operations of Jones Apparel
Group, Inc.
By: /s/ Peter Boneparth
Name: Peter Boneparth
Title: President and Chief Executive Officer
A signed original of this written statement required by
Section 906 has been provided to Jones Apparel Group, Inc. and will be retained
by Jones Apparel Group, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
I, Wesley R. Card, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
the Annual Report of Jones Apparel Group, Inc. on Form 10-K/A (Amendment No. 1)
for the year ended
December 31, 2004 fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Annual Report on Form 10-K/A (Amendment No. 1) fairly presents in all material
respects the financial condition and results of operations of Jones Apparel
Group, Inc.
By: /s/ Wesley R. Card
Name: Wesley R. Card
Title: Chief Operating and Financial Officer
A signed original of this written statement required by
Section 906 has been provided to Jones Apparel Group, Inc. and will be retained
by Jones Apparel Group, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
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end
-----END PRIVACY-ENHANCED MESSAGE-----