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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): DECEMBER 15, 2005
MOVADO GROUP, INC.
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(Exact Name of Registrant as Specified in Charter)
NEW YORK
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(State or Other Jurisdiction of Incorporation)
1-16497 13-2595932
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(Commission File Number) (IRS Employer Identification Number)
650 FROM ROAD
PARAMUS, NEW JERSEY 07652
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (201) 267-8000
NOT APPLICABLE
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
SWISS CREDIT FACILITY.
On December 15, 2005, Movado Group, Inc. (the "Company"), MGI Luxury
Group S.A. ("MGI") and Movado Watch Company SA ("Movado SA" and, together with
MGI, "Foreign Subsidiary Borrowers") entered into a Credit Agreement, among the
Company, Foreign Subsidiary Borrowers, the Lenders party thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent, JPMorgan Securities, Inc., as sole lead
arranger and sole bookrunner, Bank of America, N.A., as syndication agent, and
The Bank of New York and Citibank, N.A., as documentation agents (the "Swiss
Credit Agreement").
The Swiss Credit Agreement provides for a revolving credit facility
of 90.0 million Swiss francs. The proceeds from the revolving credit facility
will be used for (a) working capital and other general corporate purposes, (b)
purposes of effecting a corporate reorganization of the ownership of Foreign
Subsidiary Borrowers, and/or (c) purposes of making a repatriation dividend to
the Company. The revolving credit facility will mature on December 15, 2010.
The obligations of the Foreign Subsidiary Borrowers are guaranteed
by the Company under a Parent Guarantee, dated as of December 15, 2005, in favor
of the Lenders.
Until the date immediately preceding the first day of the calendar
month following the date of delivery of the first annual or quarterly financial
statements after December 15, 2005, the credit facility bears interest at a rate
equal to the LIBO Rate (as defined in the Swiss Credit Agreement) plus .50% per
annum, after which it will bear interest at a rate equal to the LIBO Rate plus a
margin ranging from .50% per annum to .875% per annum (depending upon a leverage
ratio).
The representations, covenants, and events of default in the Swiss
Credit Agreement are customary for financing transactions of this nature. Events
of default in the Swiss Credit Agreement include, among others, (a) the failure
to pay when due the obligations owing under the credit facility; (b) the failure
to perform and not timely remedy certain covenants; (c) cross default; (d) the
occurrence of bankruptcy or insolvency events; (e) the occurrence of certain
unsatisfied judgements against the Company or any of its subsidiaries; and (f)
the failure to repay certain indebtedness. Upon the occurrence of an event of
default, the lenders may terminate the loan commitments, accelerate all loans
and exercise any of their rights under the Swiss Credit Agreement.
The affirmative and negative covenants in the Swiss Credit Agreement
include, among others, (a) preservation of existence, (b) payment of taxes, (c)
maintenance of insurance, (d) limitations on liens, (e) limitations on
dividends, redemptions and repurchases with respect of capital stock (subject to
a dividend basket), and (f) limitations on transactions with affiliates.
2
The financial covenants in the Swiss Credit Agreement include (a) an
average debt coverage ratio not to exceed 3.25x and (b) a minimum interest
coverage ratio of 3.50x. The credit facility is also subject to a maximum
capital expenditures limit of $25,000,000 per fiscal year, and $100,000,000 in
the aggregate through maturity.
US CREDIT FACILITY.
On December 15, 2005, the Company and the Foreign Subsidiary
Borrowers (together the "Borrowers") entered into a Credit Agreement, among
Borrowers, the Lenders party thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, as Swing Line Bank, and as Issuing Bank, JPMorgan
Securities, Inc., as sole lead arranger and sole bookrunner, Bank of America,
N.A., as syndication agent, and The Bank of New York and Citibank, N.A., as
documentation agents (the "US Credit Agreement").
The US Credit Agreement provides for a revolving credit facility of
$50.0 million (including a sublimit for borrowings in Swiss francs of up to
$25.0 million) with a provision to allow for an increase of an additional $50.0
million subject to certain terms and conditions. The proceeds from the revolving
credit facility will be used for working capital and other general corporate
purposes. The revolving credit facility will mature on December 15, 2010.
The obligations of the Foreign Subsidiary Borrowers are guaranteed
by the Company under a Parent Guarantee, dated as of December 15, 2005, in favor
of the Lenders. The obligations of the Company are guaranteed by certain
domestic subsidiaries of the Company under subsidiary guarantees, dated as of
December 15, 2005, in favor of the Lenders.
Until the date immediately preceding the first day of the calendar
month following the date of delivery of the first annual or quarterly financial
statements after December 15, 2005, the credit facility bears interest, at
Borrower's option, at a rate equal to the Adjusted LIBO Rate (as defined in the
US Credit Agreement) plus .50% per annum, or the Alternate Base Rate (as defined
in the US Credit Agreement), after which it will bear interest, at Borrower's
option, at a rate equal to the Adjusted LIBO Rate plus a margin ranging from
.50% per annum to .875% per annum (depending upon a leverage ratio), or the
Alternate Base Rate.
The representations, covenants, and events of default in the US
Credit Agreement are customary for financing transactions of this nature. Events
of default in the US Credit Agreement include, among others, (a) the failure to
pay when due the obligations owing under the credit facility; (b) the failure to
perform and not timely remedy certain covenants; (c) cross default; (d) the
occurrence of bankruptcy or insolvency events; (e) the occurrence of certain
unsatisfied judgements against the Company or any of its subsidiaries; and (f)
the failure to repay certain indebtedness. Upon the occurrence of an event of
default, the lenders may terminate the loan commitments, accelerate all loans
and exercise any of their rights under the US Credit Agreement.
3
The affirmative and negative covenants in the US Credit Agreement
include, among others, (a) preservation of existence, (b) payment of taxes, (c)
maintenance of insurance, (d) limitations on liens, (e) limitations on
dividends, redemptions and repurchases with respect of capital stock (subject to
a dividend basket), and (f) limitations on transactions with affiliates.
The financial covenants in the US Credit Agreement include (a) an
average debt coverage ratio not to exceed 3.25x and (b) a minimum interest
coverage ratio of 3.50x. The credit facility is also subject to a maximum
capital expenditures limit of $25,000,000 per fiscal year, and $100,000,000 in
the aggregate through maturity.
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER
AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
See the discussion under Item 1.01 above, which discussion is
incorporated by reference herein.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned, hereunto duly authorized.
Dated: December 20, 2005
MOVADO GROUP, INC.
By: /s/ Frank V. Kimick
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Name: Frank V. Kimick
Title: Vice President and Treasurer