SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14(a)-11(c) or Section
240.14a-12
Movado Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
MOVADO GROUP, INC.
650 FROM ROAD
PARAMUS, NEW JERSEY 07652
May 17, 2004
Dear Fellow Shareholder:
You are cordially invited to attend the 2004 Annual Meeting of the
shareholders of Movado Group, Inc. to be held on Thursday, June 17, 2004 at
10:00 a.m., Eastern Daylight Time, at the Company's executive offices in
Paramus, New Jersey. The official Notice of Meeting, Proxy Statement and form of
proxy are enclosed with this letter. The matters listed in the Notice of Meeting
are described in the enclosed Proxy Statement.
We sincerely hope you will be able to attend the meeting. We will
report on the Company's progress and respond to questions you may have about the
Company's business.
Whether or not you plan to attend, the vote of every shareholder is
important and your cooperation in completing, signing and returning your proxy
promptly will be appreciated.
We hope to see you at the Annual Meeting.
Sincerely,
/s/ Gedalio Grinberg /s/ Efraim Grinberg
- -------------------------- -------------------------
Gedalio Grinberg Efraim Grinberg
Chairman of the Board of Directors President and Chief Executive Officer
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,
SIGN AND RETURN YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
- --------------------------------------------------------------------------------
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MOVADO GROUP, INC.
650 FROM ROAD
PARAMUS, NEW JERSEY 07652
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 17, 2004
Notice is hereby given that the Annual Meeting of Shareholders of Movado Group,
Inc. will be held on Thursday, June 17, 2004 at 10:00 a.m., Eastern Daylight
Time, at the Company's executive offices located at 650 From Road, Paramus, New
Jersey for the following purposes:
1. To elect eight directors to serve until the next Annual
Meeting and until their successors are elected and qualified;
and
2. To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending
January 31, 2005;
3. To approve extending the term of the Company's Deferred
Compensation Plan for Executives, as amended and restated;
4. To approve the adoption of an amendment and restatement of the
Company's 1996 Stock Incentive Plan;
5. To approve an amendment to the Company's Restated Certificate
of Incorporation to increase the number of authorized shares
of Common Stock and Class A Common Stock; and
6. To transact such other business as may properly come before
the meeting or any postponement or adjournment thereof.
Holders of the Company's Common Stock and Class A Common Stock of record at the
close of business on May 10, 2004 are entitled to notice of and to vote at the
Annual Meeting of Shareholders or any postponements or adjournments thereof.
Dated: May 17, 2004 By order of the Board of Directors
/s/ Timothy F. Michno
-------------------------------
Timothy F. Michno
Secretary and General Counsel
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MOVADO GROUP, INC.
650 FROM ROAD
PARAMUS, NJ 07652
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
This proxy statement and the accompanying proxy are being furnished to
the shareholders of Movado Group, Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company to be used for
voting at the Annual Meeting of Shareholders (the "Annual Meeting") to be held
on Thursday, June 17, 2004 at 10:00 a.m., Eastern Daylight Time, at the
Company's executive offices located at 650 From Road, Paramus, New Jersey and at
any adjournments thereof. It is expected that this proxy statement and the form
of proxy will first be sent to shareholders on or about May 17, 2004.
At the Annual Meeting, the holders of the Company's Common Stock and
Class A Common Stock (together the "Capital Stock") will be asked to consider
and vote upon the following proposals:
1. To elect eight directors to serve until the next annual meeting
and until their successors are elected and qualified;
2. To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending
January 31, 2005;
3. To approve extending the term of the Company's Deferred
Compensation Plan for Executives, as amended and restated;
4. To approve the adoption of an amendment and restatement of the
Company's 1996 Stock Incentive Plan;
5. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of
Common Stock and Class A Common Stock; and
6. To transact such other business as may properly come before the
Annual Meeting or any postponement or adjournment thereof.
The Board of Directors knows of no other business to be presented at
the Annual Meeting. If any other business is properly presented, the persons
named in the enclosed proxy will have the power to vote all proxies received,
and not theretofore revoked, in accordance with the recommendations of the Board
of Directors. If the enclosed proxy is properly executed, returned to the
Company in time for the Annual Meeting and not revoked, your shares will be
voted in accordance with the instructions contained thereon. Where a signed
proxy is returned, but no specific instructions are indicated, your shares will
be voted as follows: FOR the nominees for Directors identified below; FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants for fiscal year 2005 and FOR proposals 3, 4 and 5.
Abstentions will be treated as present for purposes of determining a
quorum for the Annual Meeting. Proxies returned by brokers as "non-votes" will
not be treated as present for purposes of determining the presence of a quorum.
Any shareholder who executes and returns a proxy may revoke it in
writing at any time before it is voted at the Annual Meeting by: (i) filing with
the Secretary of the Company, at the above address, written notice of such
revocation bearing a later date than the proxy or a subsequent proxy relating to
the same shares or (ii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
revocation of a proxy).
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The solicitation of proxies in the enclosed form is made on behalf of
the Board of Directors. The entire cost of soliciting these proxies will be
borne by the Company. In addition to use of the mails, proxies may be solicited
personally or by telephone by officers, directors and employees of the Company,
who will receive no additional compensation for such activities. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of shares
held of record by such persons, who will be reimbursed for their reasonable
expenses incurred in such connection.
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OUTSTANDING VOTING SECURITIES
The Board of Directors has fixed the close of business on May 10, 2004
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date"). Only holders of record of
the Capital Stock at the close of business on the Record Date are entitled to
notice of and to vote at the Annual Meeting or any and all adjournments thereof.
On April 16, 2004 there were 8,863,658 shares of Common Stock outstanding and
3,400,906 shares of Class A Common Stock outstanding. Each share of Common Stock
is entitled to one vote, and each share of Class A Common Stock is entitled to
10 votes. The holders of a majority in voting power of the outstanding shares of
Capital Stock entitled to vote at the Annual Meeting, present in person or
represented by proxy, constitute a quorum at the Annual Meeting. Directors are
elected by a plurality of the votes cast at the Annual Meeting. The approval of
the proposal to ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants for fiscal 2005 requires the affirmative vote
of a majority of the votes cast at the Annual Meeting. The approval of each of
proposal nos. 3 and 4 requires the affirmative vote of a majority of the votes
cast on the proposal, provided that a majority in voting power of the
outstanding shares of Capital Stock vote on the proposal. The approval of
proposal no. 5 requires the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3 %) of the voting power of the
outstanding shares of Capital Stock entitled to vote at the Annual Meeting.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Class A Common Stock and the Common Stock as of
April 30, 2004 (except as otherwise noted in footnotes 3, 4, 5, 7 and 8) by (i)
each shareholder who is known by the Company to beneficially own in excess of 5%
of the outstanding shares of Class A Common Stock or of the outstanding shares
of Common Stock, (ii) each director, (iii) each Named Executive Officer (as
hereinafter defined) and (iv) all executive officers and directors as a group.
Unless otherwise noted, all shares are beneficially owned by the persons
indicated.
PERCENT OF OUTSTANDING
SHARES OF CAPITAL STOCK
-----------------------
SHARES OF
CLASS A SHARES OF
COMMON COMMON PERCENT OF
STOCK STOCK CLASS A TOTAL
BENEFICIALLY BENEFICIALLY COMMON COMMON VOTING
NAME OF BENEFICIAL OWNER OWNED OWNED STOCK STOCK POWER (1)
- ------------------------------------------------------------------------------------------------------------------------------
Margaret Hayes Adame (2).......................... - 6,875 - * *
David L. Babson & Co.Inc. (3)..................... - 721,950 - 8.1% 1.7%
Barclays Global Investors, NA (4)................. - 476,596 - 5.4% 1.1%
Bricoleur Capital Management LLC (5).............. - 621,801 - 7.0% 1.5%
Richard J. Cote (6)............................... - 441,428 - 5.0% 1.0%
Dimensional Fund Advisors Inc. (7)................ - 678,637 - 7.7% 1.6%
FMR Corp. (8)..................................... - 895,830 - 10.1% 2.1%
Alexander Grinberg (9)............................ 1,436,667 15,113 42.2% * 33.5%
Efraim Grinberg(10)............................... 843,890 565,033 24.8% 6.4% 21.0%
Gedalio Grinberg (11)............................. 2,029,989 78,920 59.7% * 47.5%
Alan H. Howard (2)................................ - 5,937 - * *
Eugene J. Karpovich (12).......................... - 26,547 - * *
Nathan Leventhal.................................. - - - - -
Timothy F. Michno (13)............................ - 16,629 - * *
Donald Oresman (2)................................ 1,960 5,000 * * *
Miriam Phalen (14)................................ 1,448,381 - 42.6% - 33.8%
Leonard L. Silverstein (2) (15)................... 456,470 51,323 13.4% * 10.8%
All executive officers and directors as
a group (12) persons) (16)........................ 2,875,839 1,135,681 84.6% 12.8% 69.7%
- ----------
* DENOTES LESS THAN ONE PERCENT
The address for Messrs. Cote, A. Grinberg, G. Grinberg. E. Grinberg, Howard,
Karpovich, Leventhal, Michno, Oresman and Silverstein and Ms. Hayes Adame and
Ms. Phalen is c/o Movado Group, Inc., 650 From Road, Paramus, New Jersey 07652.
6
(1) In calculating the percent of total voting power, the voting power of
shares of Common Stock (one vote per share) and Class A Common Stock
(10 votes per share) has been aggregated.
(2) The total shares of Common Stock reported as beneficially owned by each
of Ms. Hayes Adame and Messrs. Howard, Oresman and Silverstein includes
5,000 shares each has the right to acquire by the exercise of options
under the Company's 1996 Stock Incentive Plan.
(3) In a filing on Schedule 13G dated February 3, 2004 under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), David L. Babson &
Co. Inc. ("Babson") reported beneficial ownership as of December 31,
2003 of 721,950 shares of Common Stock as to which it reported having
sole dispositive power; shared voting power as to 301,000 shares and
sole voting power as to 420,950 shares. Babson also reported that all
of the shares of Common Stock that it beneficially owns were acquired
in the ordinary course of business and not for the purpose or with the
effect of changing or influencing control of the Company, or in
connection with any transaction having such purpose or effect. The
address of Babson is One Memorial Drive, Cambridge, MA 02142.
(4) On February 13, 2004 in a filing on Schedule 13G under the Exchange
Act, Barclays Global Investors, NA ("BGI"), Barclays Global Fund
Advisors ("BGF") and Barclays Capital Inc. reported beneficial
ownership as of December 31, 2003, respectively, of 370,037, 70,859 and
35,700 shares of Common Stock for an aggregate total of 476,496 shares.
Each of BGI, BGF and Barclays Capital Inc. reported having sole
dispositive power and sole voting power over all the shares it reported
as beneficially owning. Each reporting person also reported that all of
the shares of Common Stock which it beneficially owns were acquired in
the ordinary course of business and not for the purpose or with the
effect of changing or influencing control of the Company, or in
connection with any transaction having such purpose or effect. The
address of BGI and BGF is 45 Fremont Street, San Francisco, CA 94105.
The address of Barclays Capital Inc. is 200 Park Avenue, New York, NY
10166.
(5) In a filing on Schedule 13G dated February 6, 2004 under the Exchange
Act, Bricoleur Capital Management LLC ("Bricoleur") reported beneficial
ownership of 621,801 shares of Common Stock, as to which it has shared
voting and shared dispositive power. Bricoleur also reported that all
of the shares of Common Stock that it beneficially owns were acquired
in the ordinary course of business and not for the purpose or with the
effect of changing or influencing control of the Company, or in
connection with any transaction having such purpose or effect. The
address of Bricoleur is 12230 El Camino Real, Suite 100, San Diego, CA
92130.
(6) The total shares of Common Stock reported as beneficially owned by Mr.
Cote includes 264,000 shares which he has the right to acquire by the
exercise of options under the Company's 1996 Stock Incentive Plan and
1,100 shares held by a trust for the benefit of his children as to
which shares Mr. Cote has shared dispositive power with his spouse who
is the trustee with sole voting power.
(7) On February 6, 2004 in a filing on Schedule 13G under the Exchange Act,
Dimensional Fund Advisors, Inc. ("DFA") reported beneficial ownership
as of December 31, 2003 of 678,637 shares of Common Stock as to all of
which it has sole voting and investment power. DFA also reported that
all of the shares of Common Stock that it beneficially owns were
acquired in the ordinary course of business and not for the purpose or
with the effect of changing or influencing control of the Company, or
in connection with any transaction having such purpose or effect. The
address of DFA is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA
90401.
(8) FMR Corp., together with its wholly owned subsidiary, Fidelity
Management and Research Company ("Fidelity"), and Edward C. Johnson 3rd
and Abigail P. Johnson in their capacity as a controlling group of FMR
Corp., in a joint filing on Schedule 13G dated February 16, 2004, under
the Exchange Act, reported beneficial ownership as of December 31, 2003
of 895,830 shares of Common Stock as to which FMR Corp. reported having
sole dispositive power and no voting power. The reporting persons also
reported that all of the shares of Common Stock beneficially owned by
them were acquired in the ordinary course of business and not for the
purpose or with the effect of changing or influencing control of the
Company, or in connection with any transaction having such purpose or
effect. The address of each such reporting person is 82 Devonshire
Street, Boston, Massachusetts 02109.
(9) The total number of shares of Class A Common Stock beneficially owned
by Mr. A. Grinberg includes 1,265,677 shares owned by Grinberg Partners
L.P., a Delaware limited partnership, of which Mr. A.
7
Grinberg is a limited partner, and 37,910 shares owned by trusts for
the benefit of Mr. A. Grinberg's niece and nephew, of which trusts he
is a co-trustee with Mr. Mark Fishman. Mr. A. Grinberg has shared
voting and investment power with Grinberg Partners L.P., Grinberg Group
Partners, a Delaware general partnership (general partner of Grinberg
Partners L.P.) and Miriam Phalen over the 1,265,677 shares owned by
Grinberg Partners L.P., and shared voting and investment power with Mr.
Fishman over the 37,910 shares owned by the trusts. The Common Stock
owned by Mr. A. Grinberg includes 7,032 shares he has the right to
acquire by the exercise of options under the Company's 1996 Stock
Incentive Plan.
(10) The total number of shares of Class A Common Stock beneficially owned
by Mr. E. Grinberg includes an aggregate of 281,653 shares held by
several trusts for the benefit of Mr. E. Grinberg's siblings and
himself, of which trusts Mr. E. Grinberg is sole trustee. As sole
trustee, Mr. E. Grinberg has sole investment and voting power with
respect to the shares held by such trusts. In addition, the amount of
shares of Class A Common Stock reported for Mr. E. Grinberg includes an
aggregate of 431,470 shares of Class A Common Stock held by several
trusts for the benefit of Mr. E. Grinberg's siblings and himself, of
which trusts Mr. E. Grinberg is co-trustee with Mr. Leonard L.
Silverstein. As a co-trustee, Mr. E. Grinberg has shared investment and
voting power with Mr. Silverstein with respect to the shares of Class A
Common Stock held by such trusts. The total number of shares of Common
Stock owned by Mr. E. Grinberg includes 34,973 shares of Common Stock
held under the Company's Employee Savings and Investment Plan ("401(k)
Plan"), the trustees of which are Messrs. G. Grinberg and E. Grinberg,
both of whom have shared investment and voting power as to such shares
and 29,222 shares of Common Stock held under the Company's Stock Bonus
Plan, for which Mr. E. Grinberg is a co-trustee and as to which shares
he has shared investment and voting power. Mr. E. Grinberg disclaims
beneficial ownership as to the 477,109 shares of Class A Common Stock
held by the trusts for the benefit of his siblings of which he is
trustee or co-trustee; the 34,973 shares of Common Stock held under the
Company's 401(k) Plan and the 29,222 shares of Common Stock held under
the Company's Stock Bonus Plan except to the extent of his pecuniary
interest in the 35,608 shares held under the Company's 401(k) Plan. The
total number of shares of Common Stock owned by Mr. E. Grinberg also
includes 420,832 shares of Common Stock which he has the right to
acquire by the exercise of options under the Company's 1996 Incentive
Stock Plan.
(11) The total number of shares of Class A Common Stock beneficially owned
by Mr. G. Grinberg includes: 25,000 shares of Class A Common Stock
owned by The Grinberg Family Foundation, a non-profit corporation of
which Mr. G. Grinberg, Sonia Grinberg and Leonard L. Silverstein are
the directors and officers and as to which shares these three
individuals have shared investment and voting power, and 1,265,677
shares owned by Grinberg Partners L.P., a Delaware limited partnership,
of which Grinberg Group Partners, a Delaware general partnership
("GGP"), is the general partner. As the managing partner of GGP, Mr. G.
Grinberg has shared power to direct the voting and disposition of the
shares owned by Grinberg Partners L.P. Also included in the total
number of shares of Class A Common Stock beneficially owned by Mr. G.
Grinberg are 19,000 shares owned by CAP I Partners L.P., a limited
partnership of which CAP I Partners LLC is the general partner. Mr. G.
Grinberg, as the managing member of CAP I Partners LLC, has the sole
power to vote and dispose of the shares owned by CAP I Partners L.P.
The total number of shares of Common Stock beneficially owned by Mr. G.
Grinberg includes 34,973 shares of Common Stock held under the
Company's 401(k) Plan, the trustees for which are Messrs. G. Grinberg
and E. Grinberg, both of whom have shared investment and voting power
as to such shares; 29,222 shares of Common Stock held under the
Company's Stock Bonus Plan, for which Mr. G. Grinberg is a co-trustee
and as to which shares he has shared investment and voting power; and
9,000 shares of Common Stock held by a charitable remainder trust for
which Mr. G. Grinberg is a co-trustee together with Mr. Andrew Weiss.
Mr. G. Grinberg disclaims beneficial ownership as to the shares of
Class A Common Stock owned by The Grinberg Family Foundation and by CAP
I Partners L.P. and the shares of Common Stock held under the Company's
401(k) Plan and under the Company's Stock Bonus Plan, except to the
extent of his pecuniary interest therein.
(12) The total number of shares of Common Stock reported as beneficially
owned by Mr. Karpovich includes 19,762 shares which he has the right to
acquire by the exercise of options under the Company's 1996 Stock
Incentive Plan.
(13) The total number of shares of Common Stock reported as beneficially
owned by Mr. Michno includes 16,620 shares which he has the right to
acquire by the exercise of options under the Company's 1996 Stock
Incentive Plan.
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(14) The total number of shares of Class A Common Stock beneficially owned
by Ms. Miriam Phalen includes 1,265,677 shares owned by Grinberg
Partners L.P., a Delaware limited partnership of which Ms. Phalen is a
limited partner, and 37,907 shares owned by trusts for the benefit of
Ms. Phalen's children, of which trusts Ms. Phalen is the sole trustee.
Ms. Phalen has shared voting power with Grinberg Partners L.P.,
Grinberg Group Partners, a Delaware general partnership (general
partner of Grinberg Partners L.P.) and A. Grinberg over the 1,265,677
shares owned by Grinberg Partners L.P., and sole voting and investment
power over the 37,907 shares owned by the trusts.
(15) The total number of shares of Class A Common Stock beneficially owned
by Mr. Leonard L. Silverstein includes an aggregate of 431,470 shares
of Class A Common Stock held by several trusts for the benefit of Mr.
G. Grinberg's three children, of which trusts Mr. Silverstein is
co-trustee with Mr. E. Grinberg, with whom he has shared investment and
voting power as to the shares held by such trusts. The total number of
shares of Class A Common Stock reported for Mr. Silverstein also
includes 25,000 shares of Class A Common Stock owned by The Grinberg
Family Foundation, of which Mr. G. Grinberg, his wife and Mr.
Silverstein are the directors and officers and as to which shares these
three individuals have shared investment and voting power. The total
number of shares of Common Stock beneficially owned by Mr. Silverstein
includes: 2,000 shares owned by the Leonard and Elaine Silverstein
Family Foundation of which Mr. Silverstein and his wife are the
directors and officers and as to which shares they have shared
investment and voting power, and 44,323 shares held by a trust of which
Mr. Silverstein is trustee and as to which shares he has sole
investment and voting power. Mr. Silverstein disclaims beneficial
ownership of the shares of Class A Common Stock held by the trusts of
which he is co-trustee with E. Grinberg, by The Grinberg Family
Foundation and by The Leonard and Elaine Silverstein Family Foundation.
(16) Excludes double counting of shares deemed to be beneficially owned by
more than one person. Unless otherwise indicated, the individuals named
have sole investment and voting power.
PROPOSAL 1 - ELECTION OF DIRECTORS
Directors hold office until the next annual meeting of shareholders and
until the election and qualification of their successors. The Company's By-laws
provide that the number of Directors constituting the Board may be changed by
action of the Board of Directors, so long as the number is not less than three.
The Board currently consists of eight directors. All of the nominees are members
of the present Board of Directors. If any nominee for election to the Board of
Directors of the Company should be unable to accept nomination or election as a
director, which is not expected, the proxies may be voted with discretionary
authority for a substitute or substitutes designated by the Board of Directors
or the number of Directors constituting the Board may be reduced in accordance
with the Company's By-laws. Directors shall be elected by the holders of a
plurality of the voting power present in person or represented by proxy and
entitled to vote. Abstentions and broker "non-votes" shall not be counted for
purposes of the election of directors. THE BOARD OF DIRECTORS RECOMMENDS THE
ELECTION OF THE NOMINEES LISTED BELOW. THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE ELECTION OF THE NOMINEES. PROXIES SOLICITED BY THE BOARD WILL BE SO
VOTED EXCEPT WHERE AUTHORITY HAS BEEN WITHHELD.
The following table lists information with respect to the nominees for
election as Directors of the Company.
NAME AGE POSITION
---- --- --------
Margaret Hayes Adame 64 Director
Richard J. Cote 49 Executive Vice President and Chief
Operating Officer; Director
Efraim Grinberg 46 President and Chief Executive Officer;
Director
Gedalio Grinberg 72 Chairman of the Board of Directors
Alan H. Howard 44 Director
Nathan Leventhal 61 Director
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Donald Oresman 78 Director
Leonard L. Silverstein 82 Director
There are no family relationships between any of the Company's
directors with the exception of Efraim Grinberg, who is the son of Gedalio
Grinberg. There are no arrangements between any director and any other person
pursuant to which any of them was elected a director.
MS. HAYES ADAME was elected to the Board of Directors of the Company in
September 1993. Ms. Hayes Adame is the President of the Fashion Group
International, Inc. which she joined in March 1993. From 1981 to March 1993, Ms.
Hayes Adame was a senior vice president and general merchandise manager at Saks
Fifth Avenue. She is also a member of the board of directors of International
Flavors & Fragrances, Inc.
MR. COTE joined the Company in January 2000 as Executive Vice President
- - Finance and Administration. In May 2001 Mr. Cote's title was changed to
Executive Vice President - Chief Operating Officer. Prior to joining the
Company, Mr. Cote worked for Colgate-Palmolive, where, from 1998 to 2000 he was
Vice President and Chief Financial Officer for U.S. operations, and from 1993 to
1998, he was Vice President and Chief Financial Officer for Asia/Pacific
operations.
MR. E. GRINBERG joined the Company in June 1980 and served as the
Company's Vice President of Marketing from February 1985 until July 1986, at
which time he was elected to the position of Senior Vice President of Marketing.
In 1988, Mr. E. Grinberg was elected to the Board of Directors of the Company.
From June 1990 to October 1995, Mr. E. Grinberg served as the Company's
President and Chief Operating Officer and since October 1995 served as the
Company's President. In May 2001, Mr. E. Grinberg was elected to the position of
President and Chief Executive Officer. Mr. E. Grinberg also serves on the Board
of Directors of Lincoln Center for the Performing Arts, Inc., the American Watch
Association and the Jeweler's Security Alliance.
MR. G. GRINBERG founded the Company in 1961 and is the Chairman of the
Board of Directors. Mr. G. Grinberg served as the Company's Chief Executive
Officer until May 2001.
MR. HOWARD was elected to the Board of Directors of the Company in
September 1997. Mr. Howard is a Managing Director of Credit Suisse First Boston
LLC ("CSFB"). He has been with CSFB and its predecessor companies since 1986.
Prior to 1986, Mr. Howard worked with the James River Corporation and the Dixie
Products Group of American Can Company.
MR. LEVENTHAL, who was appointed to the Board in November 2003, served
as Chief of Staff to John Lindsay, Deputy Mayor to Ed Koch, and Transition
Chairman for both Mayors David Dinkins and Michael Bloomberg. He currently
chairs Mayor Bloomberg's Committee on Appointments. In the not-for-profit
sector, Mr. Leventhal served for 17 years as President of Lincoln Center for the
Performing Arts, where he is now President Emeritus and Chairman of the Avery
Fisher Artist Program. He currently serves on the boards and is chairman of the
audit committees of 16 equity and fixed income mutual funds managed by the
Dreyfus Corporation. Mr. Leventhal is a former partner of the law firm Poletti
Freidin Prashker Feldman & Gartner.
MR. ORESMAN has served on the Board of Directors of the Company since
1981. He was Executive Vice President and General Counsel of Paramount
Communications, Inc., a publishing and entertainment company, from December 1983
until his retirement in March 1994. Prior to December 1983, Mr. Oresman was
engaged in the practice of law as a partner of Simpson Thacher & Bartlett where
he is now Of Counsel.
MR. SILVERSTEIN has served on the Board of Directors of the Company
since 1975. He has been engaged in the practice of law at Silverstein and
Mullens, a division of Buchanan Ingersoll, in Washington, D.C., for over 40
years. Mr. Silverstein also serves as Vice President and Director of Tax
Management, Inc., a wholly owned subsidiary of BNA, Inc., and a director of
Chevy Chase Federal Savings Bank. He is a former Vice Chairman and currently an
active honorary trustee of the John F. Kennedy Center for the Performing Arts,
Past President of the Alliance Francaise of Washington, formerly President and
currently a director of the National Symphony Orchestra Association, Treasurer
of the Madison Council of the Library of Congress and President, French-American
Cultural Foundation.
10
INFORMATION REGARDING THE BOARD OF DIRECTORS
AND ITS COMMITTEES
BOARD MEETINGS AND COMMITTTEES
The Board of Directors held nine meetings during fiscal 2004, at all
but one of which every director was in attendance. In fiscal 2004, the Board of
Directors had two committees: a Compensation Committee and an Audit Committee.
In March 2004 the Board established its Nominating/Corporate Governance
Committee.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors is currently composed of
Ms. Hayes Adame and Messrs. Howard, Leventhal and Oresman. Mr. Oresman is the
chairman of the Audit Committee. The Board of Directors believes that each
member of the Audit Committee is an "audit committee financial expert" as
defined under the rules adopted by the SEC. The Audit Committee held six
meetings in fiscal 2004 and each member of the committee attended every meeting.
The principal functions of the Audit Committee are to (i) appoint,
approve the compensation of, terminate and oversee the work of the Company's
independent auditors; (ii) approve in advance all audit and permissible
non-audit services provided to the Company by independent auditors; (iii)
review, in consultation with the Company's independent auditors, management and
the Company's internal auditors, the Company's financial reporting process,
including its internal controls; (iv) review with management and the Company's
independent auditors, the Company's annual and quarterly financial statements
before the same are publicly filed, and (v) report regularly to the Board with
respect to any issues that arise concerning, among other things, the quality or
integrity of the Company's financial statements, the performance of the internal
audit function, the Company's compliance with legal requirements and the
performance and independence of the Company's independent auditors. The Audit
Committee operates under a written charter which is attached to this Proxy
Statement as Appendix A. The charter of the Audit Committee is also available on
the Company's website at WWW.MOVADOGROUPINC.COM.
COMPENSATION COMMITTEE
The directors serving on the Compensation Committee of the Board of
Directors are Ms. Hayes Adame and Mesrrs. Howard, Leventhal, Oresman and
Silverstein. Mr. Howard is the chairman of the Compensation Committee. The
Compensation Committee held five meetings in fiscal 2004 and each member of the
committee attended every meeting. The principal functions of the Compensation
Committee are to (i) review and approve corporate goals and objectives relevant
to CEO compensation, evaluate the CEO's performance in light of those goals and
objectives and set the CEO's compensation level based on that evaluation; (ii)
review and approve compensation levels for executive non-CEO officers and key
employees of the Company; (iii) review significant employee benefit programs and
(iv) establish and administer executive compensation programs, including bonus
plans, stock option and other equity-based programs, deferred compensation plans
and any other cash or stock incentive programs. The Compensation Committee
operates under a written charter, which is available on the Company's website at
WWW.MOVADOGROUPINC.COM.
NOMINATING/ CORPORATE GOVERNANCE COMMITTEE
The Nominating/Corporate Governance Committee, currently composed of
Ms. Hayes Adame and Mssrs. Howard, Leventhal, Oresman and Silverstein, was
established in March 2004 and therefore did not meet in fiscal 2004. The
principal functions of the Nominating/Corporate Governance Committee are to (i)
identify individuals qualified to become directors, consistent with criteria
approved by the Board, and recommend director candidates to the Board of
Directors; (ii) develop and recommend corporate governance principles to the
Board of Directors; (iii) oversee the adoption of a code of ethics for
directors, officers and employees of the Company and assure that procedures are
in place for disclosure of any waivers of that code for directors or executive
officers; and (iv) oversee the evaluation of the Board. The Nominating/Corporate
Governance Committee operates under a written charter, which is available on the
Company's website at WWW.MOVADOGROUPINC.COM. Mr. Leventhal is the chairman of
the Nominating/Corporate Governance Committee.
In considering possible candidates for director, the Nominating/Corporate
Governance Committee will take into account all appropriate qualifications,
qualities and skills in the context of the current make-up of the Board and will
consider the entirety of each candidate's credentials. In addition, the
Nominating/Corporate Governance Committee
11
will evaluate each nominee according to the following criteria: personal
character, accomplishments, integrity, and reputation in the business community;
knowledge of the industry in which the Company does business; sound business
judgment; leadership ability and capacity for strategic thinking; experience
working constructively with others; sufficient time to devote to Board matters;
diversity of viewpoints and backgrounds and the absence of any conflict of
interest that might interfere with performance as a director.
Shareholders may recommend director candidates for consideration by the
Nominating/Corporate GovernanceCommittee. To have a candidate considered by the
Nominating/Corporate Governance Committee, a shareholdermust submit the
recommendation in writing and must include the following information:
o The name of the shareholder and evidence of the person's
ownership of Company stock, including the number and class of
shares owned and the length of time of ownership; and
o The name of the candidate, the candidate's resume or a listing
of his or her qualifications to be a director of the Company
and the person's consent to be named as a director if
nominated by the Board of Directors.
Each such recommendation must be sent to the Secretary of the Company at Movado
Group, Inc., 650 From Road, Paramus, New Jersey 07652 and must be received by
the Secretary not less than 120 days prior to the anniversary date of the
Company's most recent annual meeting of shareolders. The Nominating/Corporate
Governance Committee will evaluate shareholder recommended director candidates
in the same manner as it evaluates director candidates identified by other
means.
Nathan Leventhal, who is a nominee for election as a director, was originally
nominated for appointment to the Board in November 2003 by the Company's CEO.
EXECUTIVE SESSIONS OF NON-MANAGEMENT DIRECTORS
The non-management directors hold regular executive sessions without management,
and at least once each quarter. The presiding director of these executive
sessions rotates among each of the non-management directors.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Shareholders may communicate directly with the full Board of Directors, the
Audit Committee of the Board of Directors or any individual director by sending
such communication in writing to the attention of the General Counsel of the
Company, 650 From Road, Paramus, NJ 07652. Such communicatons should indicate to
whom they are intended to be directed. All communications received that relate
to accounting, internal accounting controls or auditing matters will be referred
to the chairman of the Audit Committee unless the communication is otherwise
addressed. Parties may communicate anonymously and/or confidentially if they
desire. All communications received will be forwarded to the appropriate
director or directors.
DIRECTOR ATTENDANCE AT ANNUAL MEETING
The Company encourages all of the directors to attend each annual meeting of
shareholders. To that end, and to the extent reasonably practicable, the Company
regularly schedules a meeting of the Board of Directors on the same day as the
Annual Meeting of Shareholders. Each member of the Board of Directors attended
the 2003 Annual Meeting of Shareholders.
DIRECTOR INDEPENDENCE
The listing standards of the New York Stock Exchange ("NYSE") require that a
majority of the Board of Directors be independent. No director qualifies as
independent unless the Board of Directors affirmatively determines that the
director has no material relationship with the Company (directly or as a
partner, shareholder or officer of an organization that has a relationship with
the Company). The Board of Directors broadly considers all relevant facts and
circumstances relative to independence and considers the issue not merely from
the standpoint of the director, but also from the viewpoint of persons or
organizations with which the director has an affiliation. Material relationships
can include commercial, industrial, banking, consulting, legal, accounting,
charitable and familial relationships (among others). In accordance with the
NYSE listing standards the Board has adopted categorical standards of director
independence that provide that none of the following relationships will be
considered a material relationship that would impair a director's independence:
12
o A director who is a director, an executive officer or an
employee, or whose immediate family member is a director, an
executive officer or an employee, of a company that makes
payments to, or receives payments from, the Company for goods
or services in an amount which, in any single fiscal year, is
less than the greater of $1,000,000 and 2% of such other
company's consolidated gross revenues; or
o A director who serves, or whose immediate family member
serves, as an executive, officer, director, trustee or
employee of a charitable organization and the Company's
discretionary charitable contributions to the organization are
less than the greater of $1,000,000 and 2% of that
organization's consolidated gross revenues.
The Board of Directors has determined that all of the non-management members of
the Board of Directors are independent under the NYSE listing standards and
satisfy the Company's categorical standards set forth above.
In addition, in accordance with the NYSE listing standards, the Board of
Directors has determined that the Audit Committee, Compensation Committee, and
Nominating/Corporate Governance Committee are composed entirely of independent
directors. The Board of Directors has also determined that each member of the
Audit Committee is independent under the provisions of the Sarbanes-Oxley Act of
2002 applicable to audit committee independence, including the rules of the SEC
thereunder.
DIRECTOR COMPENSATION
No executive officer of the Company receives any additional
compensation for serving the Company as a member of the Board of Directors or
any of its committees. In fiscal 2004, Directors who were not employees of the
Company received an annual fee of $25,000. In addition, non-employee Directors
are eligible to receive stock awards under the 1996 Stock Incentive Plan, as
amended. To date, Ms. Hayes Adame and Messrs. Howard, Oresman and Silverstein
have each been awarded options to purchase 8,000 shares of the Company's Common
Stock under that plan. Of these, options for the purchase of 2,000 shares were
immediately vested when granted in calendar 1998 and expired in calendar year
2003. The remaining options that have been granted to date to these non-employee
directors vest in one-third increments on each of the first three anniversaries
following the grant date, expire after 10 years and have an exercise price equal
to or greater than the fair market value of the Company's Common Stock on the
date of grant.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of
the Company's previous or future filings under the Securities Act of 1933 or the
Exchange Act the following report of the Audit Committee shall not be deemed to
be incorporated by reference into any such filing and shall not otherwise be
deemed filed under such acts.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended January 31, 2004 with the
Company's management. The Audit Committee has discussed with
PricewaterhouseCoopers LLP the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended (Communications with Audit Committees) by
the Auditing Standards Board of the American Institute of Certified Public
Accountants.
The Audit Committee has also received the written disclosures and the
letter from PricewaterhouseCoopers LLP required by the Independence Standards
Board Standard No. 1 (Independence Discussion with Audit Committees) and the
Audit Committee has discussed the independence of PricewaterhouseCoopers LLP
with that firm.
Based on the Audit Committee's review and discussions noted above, the
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 2004 for filing with the Securities and
Exchange Commission. The
13
Committee and the Board also have recommended, subject to shareholder approval,
the selection of PricewaterhouseCoopers LLP as the Company's independent
auditors for fiscal 2005.
Members of the Audit Committee:
Margaret Hayes Adame
Alan H. Howard
Nathan Leventhal
Donald Oresman
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, the Company's executive officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities (the "10% Stockholders"), are required to file
reports of ownership and changes of ownership with the Securities and Exchange
Commission. Executive officers, directors and 10% Stockholders of the Company
are required by law to furnish the Company with copies of all forms so filed.
Based solely on review of copies of such forms received or written
representations that no other reports were required, the Company believes that,
during the last fiscal year, its executive officers, directors and 10%
Stockholders timely complied with all such filing requirements applicable to
them with respect to their beneficial ownership of Capital Stock, except that
Kathy Melita, the Company's former Controller, inadvertently filed a Form 3
("Initial Statement of Beneficial Ownership") one day late.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has an agreement with Mr. Cote that provides for the
continuation of his then applicable annual base salary paid bi-weekly for 24
months following Mr. Cote's termination of employment within two years after a
change in control (defined as the acquisition by a person or group of more than
50% of the combined aggregate voting power represented by the Company's then
outstanding shares; or certain mergers and asset sales; or a liquidation or
dissolution), except that nothing is due if his termination is because of his
death, disability or for cause.
In fiscal 1996, the Company entered into an agreement with a trust
which, at that time, owned an insurance policy issued on the lives of Gedalio
Grinberg and his spouse. The insurance policy provides for a death benefit of
$27 million. The trustees of the trust are the three children of Mr. G. Grinberg
and his spouse, namely, Efraim Grinberg, Alexander Grinberg and Miriam Phalen.
Under the agreement, the trust assigned the insurance policy to the Company as
collateral to secure repayment by the trust of interest free loans made by the
Company to the trust in amounts equal to the premiums on the insurance policy
(approximately $740,000 per annum). The agreement required the trust to repay
the loans from the death benefit proceeds of the policy. At January 31, 2003 the
Company had loaned the trust $5,186,860 under this agreement. On April 4, 2003,
the agreement was amended and restated to transfer the policy (which at that
time had a cash surrender value of $4,595,591) from the trust to the Company in
partial repayment of the then outstanding loan balance which, as of that date,
was reduced to $591,269.
See "Compensation Committee Interlocks and Insider Participation" for
information regarding certain business relationships between the Company and Mr.
Silverstein's law firm.
14
EXECUTIVE OFFICERS
For detailed information concerning Richard Cote, Gedalio Grinberg and
Efraim Grinberg, see the listing for each under the heading "Election of
Directors" above. The names of the other executive officers of the Company (and
their respective ages as of the filing date of this report) are set forth below
together with the positions held by each during the past five years.
NAME AGE POSITION
---- --- --------
Eugene J. Karpovich 57 Senior Vice President and Chief
Financial Officer
Frank V. Kimick 37 Vice President, Treasurer and Assistant
Kimick Secretary
Timothy F. Michno 47 Secretary and General Counsel
MR. KARPOVICH joined the Company in 1998 as CFO for the Movado brand.
From 2000 to 2001 he was Vice President, Financial Planning for the Company. He
was promoted to Senior Vice President and Chief Financial Officer in October
2001. Before joining the Company, Mr. Karpovich had been the CFO of the watch
company Wittnauer International, Inc., a subsidiary of Westinghouse Electric
Corporation, Inc., where he was employed for 23 years.
MR. KIMICK joined the Company in 1996 as Assistant Treasurer and in May
2001 was promoted to Vice President, Treasurer. Mr. Kimick is responsible for
worldwide treasury operations, banking relationships and all aspects of cash and
risk management. Before joining the Company, Mr. Kimick had been the Treasurer
for Sunshine Biscuits, Inc. and held several treasury and consulting positions
at other organizations.
MR. MICHNO joined the Company in April 1992 and since then has served
as its Secretary and General Counsel. He has been engaged in the practice of law
since 1983. Immediately prior to joining the Company and since 1986, he was an
associate at the New York firm of Chadbourne & Parke. From 1988 to 1991 he
served as a resident outside counsel to Fortune Brands, Inc. (formerly known as
American Brands, Inc.), a consumer products company.
15
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to, earned by
or paid to the Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company who were serving as such as of the
end of the Company's last fiscal year (collectively, the "Named Executive
Officers") during fiscal 2004, 2003 and 2002 (each fiscal year ending January
31) for services rendered in all capacities to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation Awards
--------------------------------------- -----------------------------------------------
Other Number of
Annual Restricted Securities All Other
Name and Compensation Awards Underlying Compensation
Principal Position Year Salary ($) Bonus ($) ($) ($) (1) Options (#) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
Efraim Grinberg 2004 834,232 650,000 -- 13,179 0 117,050 (3)
President and Chief 2003 778,847 200,000 -- 11,077 0 108,386
Executive Officer 2002 760,866 150,000 -- 12,323 400,000 108,850
Gedalio Grinberg 2004 650,000 195,000 -- 0 0 414,934 (4)
Chairman of the Board 2003 675,000 150,000 -- 0 0 438,580
2002 650,000 100,000 -- 1,000 0 430,352
Richard Cote 2004 463,173 375,000 -- 7,300 0 49,025 (6)
Executive Vice President 2003 415,385 200,000 -- 5,908 0 43,400
Chief Operating Officer 2002 400,000 120,000 (5) -- 41,023 240,000 (2) 43,400
Eugene J. Karpovich 2004 221,058 100,000 -- 71,750 0 14,337 (7)
Senior Vice President and 2003 207,693 65,000 -- 1,354 15,000 13,400
Chief Financial Officer 2002 165,742 40,000 (5) -- 12,971 5,000 12,211
Timothy F. Michno 2004 223,423 81,000 -- 25,780 0 14,525 (8)
Secretary and 2003 221,385 45,000 -- 1,720 5,000 14,150
General Counsel 2002 208,000 35,000 -- 1,664 5,000 13,800
- ------------------
(1) At January 31, 2004 the aggregate number of shares of restricted stock
held by each of the Named Executive Officers and the aggregate value
thereof (based on the closing price of the Company's Common Stock as of
January 31, 2004) were as follows: Mr. G. Grinberg: none; Mr. E.
Grinberg: 1,563.67 shares, $44,595; Mr. Cote: 875.17 shares, $24,960;
Mr. Karpovich: 201.35 shares, $5,743; and Mr. Michno: 220.73 shares,
$6,295. All of such shares are phantom stock units ("Stock Units")
granted under the Company's Deferred Compensation Plan for Executives
("Deferred Compensation Plan"). The Stock Units vest 20% at the end of
each calendar year beginning in the calendar year in which awarded,
except that, for participants 65 years or older, vesting is 100% at the
end of the calendar year in which awarded. Mr. E. Grinberg was awarded
907.56, 756.04 and 697.30 Stock Units in calendar years 2001, 2002 and
2003 respectively. Mr. Cote was awarded 479.91, 403.22 and 409.38 Stock
Units in calendar years 2001, 2002 and 2003 respectively. Mr. Karpovich
was awarded 98.15, 100.12 and 98.39 Stock Units in calendar years 2001,
2002 and 2003 respectively. Mr. Michno was awarded 120.20, 106.15 and
93.72 Stock Units in calendar years 2001, 2002 and 2003 respectively.
No dividends accrue in respect of the Stock Units.
16
(2) All the options granted to Mr. E. Grinberg and Mr. Cote in fiscal 2002
were granted March, 16 2001 subject to shareholder approval of
amendments to the Company's 1996 Stock Incentive Plan, which were
approved at the 2001 Annual Meeting. The exercise price for one quarter
of those options was set at the market price for the Common Stock on
the grant date with the balance of those options exercisable at prices
between 20% and 50% more than the grant date market price. The options
vest in one third increments on each of the first three anniversaries
of the grant date and represent the total expected to be granted to
them until fiscal 2006.
(3) Includes a $3,400 matching contribution made by the Company in respect
of fiscal 2004 for the account of Mr. E. Grinberg pursuant to the
Company's Employee Savings and Investment Plan ("401(k) Plan"). Also
includes a matching cash contribution of $66,026 and a non-cash
contribution of 697.30 Stock Units valued at $16,474 (based on the
closing prices of the Company's Common Stock on the grant dates) for
fiscal 2004 to his account under the Company's Deferred Compensation
Plan. Also includes $31,150 in total annual premiums paid in respect of
certain life insurance policies purchased for Mr. E. Grinberg by the
Company. Under his arrangement with the Company, Mr. E. Grinberg is
entitled to the cash surrender value in respect of certain of these
life insurance policies and his beneficiary is entitled to the
applicable benefit without, in either event, reimbursement to the
Company of any premiums paid by the Company under such policies.
(4) Includes $191,595 in total annual premiums paid in respect of certain
life insurance policies and one travel accident policy purchased for
Mr. G. Grinberg by the Company. Under his arrangement with the Company,
Mr. G. Grinberg is entitled to the cash surrender value under these
life insurance policies and his beneficiary is entitled to the
applicable benefit without, in either event, reimbursement to the
Company of any premiums paid by the Company under such policies. Also
includes a $3,400 matching contribution made by the Company in respect
of fiscal 2004 for the account of Mr. G. Grinberg pursuant to the
Company's 401(k) Plan. Also includes $154,939 accrued by the Company in
respect of a Death and Disability Benefit Plan agreement with Mr. G.
Grinberg. See "Contract with Chairman" below. Also includes a matching
cash contribution of $52,000 and a non-cash contribution of 620.99
Stock Units valued at $13,000 (based on the closing prices of the
Company's Common Stock on the grant dates) made by the Company for
fiscal 2004 to Mr. G. Grinberg's account pursuant to the Company's
Deferred Compensation Plan.
(5) Mr. Cote and Mr. Karpovich each elected to receive, in lieu of 20% of
the cash bonus that otherwise would have been awarded for fiscal 2002,
restricted stock which is reported under the "Restricted Stock Awards"
column for that fiscal year.
(6) Includes a $3,400 matching contribution made by the Company in respect
of fiscal 2004 for the account of Mr. Cote pursuant to the Company's
401(k) Plan. Also includes a matching cash contribution of $36,500 and
a non-cash contribution of 409.38 Stock Units valued at $9,125 (based
on the closing prices of the Company's Common Stock on the grant dates)
for fiscal 2004 to his account under the Company's Deferred
Compensation Plan.
(7) Includes a $3,400 matching cash contribution made by the Company in
respect of fiscal 2004 for the account of Mr. Karpovich pursuant to the
Company's 401(k) Plan. Also includes a matching cash contribution of
$8,750 and a non-cash contribution of 98.39 Stock Units valued at
$2,187 (based on the closing prices of the Company's Common Stock on
the grant dates) for fiscal 2004 to his account under the Company's
Deferred Compensation Plan.
(8) Includes a $3,400 matching contribution made by the Company in respect
of fiscal 2004 for the account of Mr. Michno pursuant to the Company's
401(k) Plan. Also includes a matching cash contribution of $8,900 and a
non-cash contribution of 93.72 Stock Units valued at $2,225 (based on
the closing prices of the Company's Common Stock on the grant dates)
for fiscal 2004 to his account under the Company's Deferred
Compensation Plan.
CONTRACT WITH CHAIRMAN
Under a Death and Disability Benefit Plan Agreement with Mr. G.
Grinberg, dated September 23, 1994, in the event of Mr. G. Grinberg's death or
disability while employed by the Company, the Company will pay to his spouse, if
she is then living, an annual benefit equal, as of fiscal 2004, to $358,530
(increased October 1 each year by an amount equal to two percent of the benefit
that would have been payable in the prior year). Benefits are
17
payable for the lesser of 10 years or the life of Mr. G. Grinberg's spouse, and
are payable only from the general assets of the Company. Neither Mr. G. Grinberg
nor his spouse may assign the Agreement or any of the benefits payable
thereunder and none of the benefits are payable to the estates or any of the
heirs of Mr. G. Grinberg or his spouse.
The Agreement provides that it automatically terminates in the event of
the termination of Mr. G. Grinberg's employment with the Company for any reason
other than his death or disability and further provides that it is not to be
considered a contract of employment. For purposes of the Agreement "disability"
means the inability of Mr. G. Grinberg to perform the duties pertaining to his
job because of accident, sickness or other illness as determined by a majority
of disinterested directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was at all times during fiscal
year 2004 comprised entirely of Directors who at no time were executive officers
or employees of the Company. The Compensation Committee for fiscal year 2004 was
comprised of Margaret Hayes Adame, Alan H. Howard, Donald Oresman, Leonard L.
Silverstein and (as of his appointment to the Board on November 25, 2003) Nathan
Leventhal. Mr. Silverstein is a partner at the law firm of Silverstein &
Mullens, a division of Buchanan & Ingersoll, P.C. That firm rendered legal
services to the Company during fiscal 2004. No executive officer of the Company
has ever served as a member of the board of directors or compensation committee
of any company whose executive officers include a member of the Board of
Directors or the Compensation Committee.
18
FISCAL 2004 STOCK OPTION GRANTS
The following table provides certain information regarding grants of
stock options made during fiscal 2004 to the Named Executive Officers pursuant
to the Company's 1996 Stock Incentive Plan. No new discretionary option grants
were made in fiscal 2004 to any of the Named Executive Officers. Rather, the
only options granted to such individuals were reload options, the issuance of
which resulted from rights that were granted to the option holders as part of
their initial option grants made in prior years. Under the reload program,
option holders may use Company Common Stock or Class A Common Stock they have
owned for at least six months to pay the exercise price of their options and
have shares withheld for the payment of income taxes due on the exercise. They
then receive a new reload option to make up for the shares they used or had
withheld. The reload option does not "vest" (i.e., become exercisable) for six
months and expires on the expiration date of the initial grant.
GRANT
INDIVIDUAL GRANTS DATE VALUE (1)
---------------------------------------------------------------------- -------------
% OF
TOTAL
NUMBER OF NUMBER OF
SECURITIES SECURITIES
UNDERLYING UNDERLYING
OPTIONS OPTIONS GRANTED EXERCISE OR BASE GRANT DATE
GRANTED TO EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE
NAME (#) FISCAL YEAR ($/SH) DATE ($)
- ------------------ ------------ ----------------- ---------------- ------------ -------------
Gedalio Grinberg 0 0 -- -- 0
Efraim Grinberg 55,543 55.62 23.88 March 16, 2011 574,870
151,949 30.06 March 16, 2011 1,928,233
48,284 31.15 March 16, 2011 633,486
Richard Cote 62,573 38.51 23.88 March 16, 2011 647,630
114,530 31.15 March 16, 2011 1,502,634
Eugene Karpovich 656 0.14 23.86 March 16, 2011 6,835
Timothy F. Michno 0 0 -- -- 0
(1) The grant date present values set forth in the foregoing table
were arrived at using the Black-Scholes option pricing model based on the
following assumptions. Volatility was assumed to be 50.00% and 52.48% based on
the weekly closing prices of the underlying Common Stock for the periods ending
July 31, 2003 and January 31, 2004, respectively. The risk free rate of return
for each option was determined based on the yield on the grant date on a U.S.
Government Zero Coupon Bond with a maturity equal to the expected term of the
option prior to exercise. Exercise was assumed to occur after 4.17 and 4.18
years, respectively, for the options granted with exercise prices of $30.06 and
$31.15 and after 5.0 years for the options granted with exercise prices of
$23.88 and $23.86. Dividend yields of 1.01%, 0.80% and 0.77% were assumed to be
constant over the life of the options granted in July 2003 and on January 9 and
January 14, 2004, respectively. Option grant dates were (grant date/exercise
price): January 14, 2004/$31.15; January 9, 2004/$30.06; July 16, 2003/$23.86
and July 14, 2003/$23.88. This schedule does not take into account provisions of
the options providing for termination of the option following termination of
employment or nontransferability. The dollar amounts under this column are the
result of calculations using a certain option pricing model based on the
foregoing assumptions and, therefore, are not intended to forecast possible
future appreciation, if any, of the Company's Common Stock price.
19
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning exercises of
stock options by the Named Executive Officers during the last fiscal year and
the fiscal year-end value of shares of Common Stock represented by unexercised
stock options held by each of the Named Executive Officers as of January 31,
2004.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED VALUE FISCAL YEAR END (#) AT FISCAL YEAR END ($)
ON EXERCISE REALIZED -------------------- ----------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ----------- -------- ----------- ------------- ----------- -------------
Gedalio Grinberg 0 0 0 0 0 0
Efraim Grinberg 309,418 2,555,312 277,500 343,565 2,967,800 1,403,187
Richard Cote 222,573 1,923,706 218,000 206,530 2,077,560 841,840
Eugene J. Karpovich 12,967 89,330 104,797
890 8,437 12,299
Timothy F. Michno
2,000 29,000 11,789 7,399 105,880 83,260
EQUITY COMPENSATION PLAN INFORMATION
The table below sets forth information with respect to shares of Common
Stock that may be issued under the Company's equity compensation plans as of
January 31, 2004.
Number of Securities to be Weighted-Average Number of securities
Issued Upon Exercise Of Exercise Price of Remaining
Outstanding Options, Warrants Outstanding Options, Available For
and Rights Warrants and Rights Future Issuance Under
Equity Compensation Plans
(Excluding securities
Plan Category Reflected in Column (A))
- -------------------------- ----------------------------- -------------------- ------------------------
(a) (b) (c)
Equity compensation plans
approved by security
holders (1)................. 1,963,923 (2) $19.41 (3) 545,962 (4)
Equity compensation plans
not approved by
security holders (5)......... 25,370 NOT APPLICABLE 61,752
------------------- --------------
Total........................ 1,989,294 $19.41 607,714
- ------------------
(1) Includes the 1996 Stock Incentive Plan and the Deferred Compensation Plan.
(2) Includes 1,925,359 options outstanding under 1996 Stock Incentive Plan and
38,564 phantom stock units issuable as 38,564 shares of Common Stock under
the Deferred Compensation Plan.
(3) Weighted average exercise price of options outstanding under the 1996
Stock Incentive Plan.
(4) Includes 533,649 shares available for issuance under the 1996 Stock
Incentive Plan as options and other share based awards, and 12,313 shares
available for issuance under the Deferred Compensation Plan.
(5) Includes the Stock Bonus Plan described in Note 11 to the Company's
consolidated financial statements included in the Company's Form 10-K
filed for the year ended January 31, 2004.
20
COMPENSATION COMMITTEE REPORT
GENERAL
The Compensation Committee of the Board of Directors (the "Committee")
is responsible for reviewing and approving the Company's compensation policies
affecting senior management, reviewing significant employee benefit programs and
reviewing and administering the Company's 1996 Stock Incentive Plan. The
Committee is comprised of Ms. Margaret Hayes Adame, Mr. Nathan Leventhal, Mr.
Donald Oresman, Mr. Leonard L. Silverstein and Mr. Alan H. Howard, all of whom
are non-management members of the Board.
The compensation policies established by the Company and which were in
effect during fiscal year 2004 are designed to enable the Company to attract,
retain, motivate and appropriately reward a group of highly qualified
individuals who are expected to contribute to the Company's continued success.
The Committee believes that the relevant market for executive and management
level talent includes not only those companies comprising its Industry Peer
Group but also other companies engaged in other business activities in other
industries. The three primary components of executive compensation are base pay,
cash bonuses and stock based awards, primarily stock grants. The Committee
reviews each component of executive compensation on an annual basis.
To assist the Committee in its evaluation and approval of the Company's
compensation policies for fiscal 2004, the Committee analyzed historic
compensation data relative to the Company's executive and mid-level management.
BASE SALARIES
Base salary levels for members of the Company's senior management team
are reviewed by the Committee in light of the Committee's assessment of the
responsibilities relative to the position under consideration, as well as each
individual's background, training, experience and by reference to the
competitive marketplace for comparable talent. Annual increases in base salary
levels, if warranted, are reviewed with reference to the executive officer's
performance and the performance of the Company as a whole. Executive performance
is evaluated by the Committee by reference to the extent to which specific
individual and departmental goals and objectives are met. These goals and
objectives vary from department to department and, within any single department,
from individual to individual. Corporate performance is measured by the
Committee by reference to the Company's achievement of pre-tax profit goals and
other financial performance targets set at the beginning of the fiscal year. For
fiscal 2004, the Committee accepted the Company's recommendation to implement a
general increase in base salary levels.
CASH BONUSES
Cash bonuses, the second key component of executive compensation, are
intended to provide incentives to senior management in the short term to achieve
certain operating results, which are generally determined at the beginning of
the fiscal year by management in consultation with the Board and, typically,
tied to net income results. Concurrently with approving the annual operating
objectives, the Committee establishes target bonuses for the coming fiscal year
as a percentage of the base salary of each executive officer. In fiscal 2004,
75% was the target bonus for the CEO; 75% was the target bonus for Mr. Cote,
with bonus targets ranging from 25% to 50 % for the other executive officers.
Actual incentive compensation awards may be either more or less than targeted
amounts depending on actual results compared with corporate, group and
individual performance measures. By thus placing a significant percentage of
each executive officer's compensation at risk, this approach creates a direct
incentive for executive officers to achieve desired performance goals. Certain
mid-level managers are also eligible to receive bonuses, which are used as an
additional, incentive-based element of compensation dependent on corporate
performance and individual merit.
Based on the Company's overall performance in fiscal 2004 and its
achieving all of its key operating results, the Committee authorized funding of
the bonus pool at a 100% level for the fiscal year and the payment of individual
bonus amounts in-line with the achievement of those corporate results.
Individual bonus amounts were also determined by reference to subjective
criteria and the extent to which individual performance objectives were
achieved.
21
EQUITY BASED PLANS
Equity participation is the third key element of the Company's
executive compensation program and is afforded to executive officers and certain
employees primarily through stock based awards and, to a lesser extent, stock
options granted under the Company's 1996 Stock Incentive Plan (the "Incentive
Plan"). In addition to the Incentive Plan, equity participation is also afforded
to executives and certain key employees who participate in the Company's
Deferred Compensation Plan as well as to all other employees, not eligible to
participate in the Deferred Compensation Plan through the Company's Employee
Stock Bonus Plan, adopted in fiscal 1999 ("Stock Bonus Plan").
Stock awards and options have been awarded under the Incentive Plan on
the basis of the position held by the grantee, contributions already made by the
person meriting recognition and, more importantly, the Company's expectations of
the contribution the person will make over the long term to the Company's
growth. All options granted under the Incentive Plan have an exercise price
equal to or greater than the market value of the stock on the date of grant,
generally vest yearly over three or five years and expire ten years from the
date of grant. In addition, certain options that have been granted contain a
reload feature under which option holders can use Company common stock (or class
A common stock) they have owned for at least six months to pay the exercise
price of their options, have shares withheld for the payment of income taxes due
on exercise and receive a new reload option to make up for the shares used or
withheld. In fiscal 2004, in-line with management's recommendation, the
Committee determined that, as a general rule, it would make grants of stock
awards rather than options. All stock awards of Common Stock granted under the
Incentive Plan in fiscal 2004 are subject to a three year vesting requirement.
Thus, both option and stock grants are designed to retain executive officers and
enhance shareholder value by aligning the financial interests of each executive
officer or other key employee with the interests of the Company's shareholders
over the long term.
Under the Deferred Compensation Plan, participants' salary deferrals,
up to either five or ten percent of base salary, are fully matched by the
Company. Eighty percent of the match is in the form of cash and twenty percent
is in the form of rights to Common Stock representing the number of shares
(including fractional shares) of Common Stock that such twenty percent portion
of the matching contribution could purchase based on the closing price of the
Common Stock at the end of the calendar quarter in which the contribution is
made. Vesting in Company matching contributions is 20% per year. Distributions
are made beginning in January following termination of the participant's
employment and are in ten annual installments unless the Company determines to
make them in a lump sum.
Under the terms of the Stock Bonus Plan, the Company determines after
the end of each fiscal year, depending on financial performance and subject to
Compensation Committee and Board approval, whether to make a contribution of
shares to the plan from its treasury shares, up to an amount equivalent in value
to up to 1% of the total base salaries of all participants in the plan. For
fiscal 2004 the Company contributed 5,791 shares to the plan representing one
percent (1.0%) of total base salaries of all plan participants. Each participant
vests in 100% of their pro-rata portion (based on salary) of such contribution
after five years or upon attaining retirement age if sooner. All distributions
to plan participants are in the form of shares of Common Stock of the Company,
with cash payments for any fractional share amounts.
COMPENSATION OF CHIEF EXECUTIVE OFFICER FOR FISCAL 2004
The compensation paid to the Company's Chief Executive Officer ("CEO")
in fiscal 2004 consisted primarily of salary and bonus. No new discretionary
stock options or other stock awards under the Incentive Plan were granted to the
CEO last year. An increase in Mr. E. Grinberg's base salary was approved by the
Committee at the beginning of the year based on its assessment of his
performance in the prior year, specifically having achieved positive cash flow,
reduction of operating expenses, maintenance of strong gross margin and
significant sales and net income results, and considering that there was no
increase in the CEO's base salary in the prior year. Under the terms of the
Company's 2001 Executive Performance Plan (SEE BELOW), the bonus paid to the CEO
for fiscal 2004 was approved by the Committee on the basis of the Company
achieveing the "Performance Criteria" for fiscal 2004 as set forth in that plan
and as previously approved by the Committee, namely achieving the targeted
earnings per share for that performance period.
22
POLICY REGARDING DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits the tax deduction to
$1 million for compensation paid to the CEO and the four other most highly
compensated executive officers of the Company. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are
met. The Company's 2001 Executive Performance Plan which was adopted in fiscal
2002 is structured such that annual incentive bonuses and long-term equity-based
compensation paid thereunder for the Company's most senior executives should
constitute qualifying performance-based compensation under Section 162(m).
However, the Compensation Committee recognizes that unanticipated future events,
such as a change of control of the Company or a change in executive personnel,
could result in a disallowance of compensation deduction under Section 162(m).
Moreover, the Compensation Committee may from time to time award compensation
that is non-deductible under Section 162(m) when in the exercise of the
Compensation Committee's business judgment such award would be in the best
interest of the Company.
COMPENSATION COMMITTEE
Margaret Hayes Adame
Alan H. Howard
Nathan Leventhal
Donald Oresman
Leonard L. Silverstein
23
PERFORMANCE GRAPH
The performance graph set forth below compares the cumulative total
shareholder return of the Company's Common Stock for the last five fiscal years
through the fiscal year ended January 31, 2004 with that of the Broad Market
(CRSP Total Return Index for the NYSE Stock Market) and a peer group index
comprised of the following four companies: Fossil Inc., Gucci Group NV, Tiffany
& Co. and Friedmans Inc. (the "peer group"). The returns of each company in the
peer group index have been weighted according to the respective issuer's stock
market capitalization. Each graph assumes an initial investment of $100 on
January 30, 1999 and the reinvestment of dividends (where applicable).
[GRAPHIC OMITTED - LINE CHART]
Comparison of Five-Year Cumulative Total Returns
Performance Report for
MOVADO GROUP, INC.
Date Company Index Market Index Peer Index
---- ------------- ------------ ----------
01/29/1999 100.000 100.000 100.000
02/26/1999 84.029 97.831 101.039
03/31/1999 98.280 100.695 118.216
04/30/1999 94.932 105.857 119.076
05/28/1999 94.932 103.893 113.587
06/30/1999 101.819 108.224 125.858
07/30/1999 95.513 104.474 132.299
08/31/1999 104.867 102.019 142.793
09/30/1999 90.589 98.743 147.393
10/29/1999 86.747 104.604 144.321
11/30/1999 93.647 105.499 162.515
12/31/1999 86.008 108.381 202.268
01/31/2000 75.001 103.516 178.032
02/29/2000 71.054 98.745 152.210
03/31/2000 39.721 108.481 173.702
04/28/2000 34.134 108.214 160.423
05/31/2000 37.844 108.259 146.475
06/30/2000 47.491 108.053 160.679
07/31/2000 54.532 107.850 162.106
08/31/2000 55.524 113.756 184.247
09/29/2000 68.909 112.931 173.481
10/31/2000 57.113 113.488 180.850
11/30/2000 47.428 108.109 158.019
12/29/2000 60.589 112.624 148.508
01/31/2001 55.243 114.110 167.853
02/28/2001 59.971 108.323 148.988
03/30/2001 55.492 103.288 136.188
04/30/2001 61.364 110.060 155.303
05/31/2001 71.219 111.548 162.933
06/29/2001 80.595 108.549 161.808
07/31/2001 75.689 108.082 159.851
08/31/2001 72.932 103.069 145.460
09/28/2001 61.942 96.016 119.962
10/31/2001 65.246 96.313 128.266
11/30/2001 74.053 102.083 146.790
12/31/2001 76.855 104.120 155.534
01/31/2002 70.975 102.667 169.049
02/28/2002 73.782 102.798 162.949
03/28/2002 88.017 106.719 175.364
04/30/2002 91.548 102.363 190.722
05/31/2002 86.328 101.951 187.093
06/28/2002 100.984 95.394 178.543
07/31/2002 80.374 88.113 154.384
08/30/2002 73.218 89.024 156.257
09/30/2002 65.337 80.220 143.582
10/31/2002 68.731 85.330 158.104
11/29/2002 71.713 89.425 161.887
12/31/2002 75.782 85.461 156.270
01/31/2003 74.003 83.120 157.108
02/28/2003 78.684 81.087 158.167
03/31/2003 76.666 82.255 160.874
04/30/2003 82.848 88.821 166.992
05/30/2003 92.870 93.662 179.100
06/30/2003 87.899 95.079 180.154
07/31/2003 93.591 96.284 185.104
08/29/2003 96.832 98.036 194.883
09/30/2003 88.729 97.075 191.551
10/31/2003 97.684 102.401 213.146
11/28/2003 110.437 103.904 207.776
12/31/2003 114.661 109.095 207.735
01/30/2004 116.063 111.302 198.271
The index level for all series was set to 100.0 on 01/29/1999
24
FISCAL 2004 AND 2003 AUDIT FIRM FEE SUMMARY
The following table presents the aggregate fees billed for professional
services rendered by the Company's independent auditors, PricewaterhouseCoopers
LLP, in the "audit fees", "audit - related fees", "tax fees", and "all other
fees" categories, in each case as such terms are defined by the SEC, for the
fiscal years ended January 31, 2004 and 2003.
- ----------------------------------------------------------------------------------------------------------------------
YEAR AUDIT ($) AUDIT RELATED ($) TAX ($) ALL OTHERS ($) TOTALS ($)
- ----------------------------------------------------------------------------------------------------------------------
2003 511,000 11,000 147,000 0 669,000
- ----------------------------------------------------------------------------------------------------------------------
515,000 1,053,000 94,000 1,400 1,663,400
2004
- ----------------------------------------------------------------------------------------------------------------------
Audit fees include fees for audit or review services in accordance with
generally accepted auditing standards and fees for services that generally only
the Company's auditors provide, such as statutory audits and review of documents
filed with the SEC.
Audit related fees include fees for assurance and related services that
are traditionally performed by the Company's auditors. The services include
audits of employee benefit plans, due diligence on the Ebel acquisition and
consultation in connection with financial and accounting standards.
Tax fees include fees for services that are performed by professional
tax staff other than in connection with the audit. The services include tax
compliance, tax advice and tax planning services.
All other fees represent professional services other than those covered
above.
The Audit Committee reviews and approves all audit and non-audit
services to be rendered in every instance by the Company's independent auditors
before such auditors are engaged to render any such services. Therefore the
Audit Committee has not adopted a pre-approval policy with respect to such
services.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee,
has appointed PricewaterhouseCoopers LLP to be the Company's independent
accountants for the year ending January 31, 2005, subject to ratification of
such appointment by the Company's shareholders. PricewaterhouseCoopers LLP has
served as the Company's independent accountants since fiscal year 1977 and is
considered by the Audit Committee and the Board to be well qualified.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
Annual Meeting. Such representatives will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions. THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR SUCH
RATIFICATION. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS
SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
PROPOSAL 3 - APPROVAL OF EXTENSION OF THE TERM OF THE
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
The Movado Group, Inc. Amended and Restated Deferred Compensation Plan for
Executives (the "Deferred Compensation Plan") was originally adopted effective
June 1, 1995, and was approved by our shareholders on June 14, 1996. It has been
amended and restated twice since then, most recently effective January 1, 2002.
The Board of Directors further amended the Deferred Compensation Plan at a
meeting held on February 12, 2004 to add a provision stating that the Deferred
Compensation Plan expires on the tenth anniversary of its original date of
shareholder approval, unless the term is extended by the affirmative vote of a
majority of the votes cast by the Company's shareholders, present or represented
by proxy, at a duly called meeting of such shareholders. (This amendment was
adopted on order to comply with new listing requirements adopted by the New York
Stock Exchange.) The Board further determined at that same meeting to present a
proposal to the shareholders, for approval at the next annual shareholders
meeting, to extend the term of the Deferred Compensation Plan for the period
expiring on the tenth anniversary of such approval. Consequently, if the
shareholders approve this proposal, the term of the Deferred Compensation Plan
will be extended to June 17, 2014. If the shareholders do not approve this
proposal, the Deferred Compensation Plan will expire on June 14, 2006.
25
PLAN SUMMARY
The Company designates certain management or highly compensated employees to
participate in the Deferred Compensation Plan as either a Group I participant or
a Group II participant (such designation may be changed by the Company at any
time). Eligible employees will be permitted to defer a percentage of their base
salary, as determined by the plan administrator, and must deliver a "Salary
Deferral Election" to the Company in order for salary deferrals to become
effective.
The Deferred Compensation Plan is administered by a committee comprised of
certain executive officers of the Company as appointed by the Company. The
committee shall have authority to administer the Deferred Compensation Plan, to
interpret the terms of the Deferred Compensation Plan in its sole discretion, to
decide questions regarding the eligibility of any person to participate in the
Deferred Compensation Plan, to compute amounts due and to authorize the
distribution of payments under the Deferred Compensation Plan.
The Company shall establish for each participant a separate bookkeeping account
and credit to the account an amount designated in the participant's Salary
Deferral Election for each year. Such amounts shall not be made available to the
participant, except as described below, and shall reduce the participant's
compensation. Amounts credited to participants shall be subject to the rights of
the general creditors of the Company.
Participants shall cease to contribute after their employment with the Company
ends. The Salary Deferral Election and any changes thereto must be submitted
before the beginning of the calendar year during which the amount to be deferred
will be earned; provided, however, that in the year in which the Deferred
Compensation Plan is first adopted or an employee is first eligible to
participate, Salary Deferral Elections may be filed within thirty days of the
date on which an employee is first eligible to participate with respect to
compensation earned during the remainder of the calendar year.
The Company shall also credit to the account of each Group I participant a
matching contribution in an amount equal to one hundred percent of the salary
deferral contributed by such participant up to ten percent of the participant's
base salary and, for each Group II participant, a matching contribution in an
amount equal to one hundred percent of the salary deferral contributed by such
participant up to five percent of the participant's base salary.
Twenty percent of the matching contributions for a participant shall be made in
the form of rights to Common Stock of the Company representing the number of
shares (including fractional shares) of Common Stock that the matching
contribution could purchase based upon the value of the Company Stock at the end
of the month in which the matching contribution is made.
When a participant or a participant's beneficiary is entitled to a distribution
with respect to his or her rights to Common Stock, the Company shall issue to
the participant or beneficiary the number of shares of Common Stock equal to the
number of full shares then credited in such participant's account. The Company
shall pay the credited dividend amounts and any fractional shares in cash.
The Company reserves the right to make discretionary contributions to
participant's accounts in such amounts and in such manner as may be determined
by the Company.
A participant's salary deferrals and earnings thereon are immediately vested.
Company matching contributions or discretionary contributions vest at the rate
of 20% per year as long as the participant remains employed by the Company. A
participant who attains the age of 65 or whose employment terminates due to
death or disability shall be fully vested in all amounts in such participant's
account. A participant whose employment terminates for other reasons shall
forfeit unvested amounts. If there is a "change in control" (as defined in the
Deferred Compensation Plan) of the Company, all amounts attributable to matching
contributions (but not discretionary Company contributions) shall become fully
vested on the date of such change in control.
A participant may direct the investment of amounts in the account (other than
rights to Common Stock) among investment funds which will be made available.
Distributions from the Deferred Compensation Plan shall commence in the January
following termination of the participant's employment. Benefits, including
shares of Common Stock, will be paid in ten annual installments unless (i) the
Company determined to pay the benefits in a lump sum or (ii) a participant who
is a former employee
26
provides services to a competitor within two years following termination of
employment, in which case all remaining benefits will be paid to the participant
in a lump sum.
The Company may modify, amend or terminate the Deferred Compensation Plan
provided that no modification, amendment or termination shall adversely affect a
participant's right to amounts already credited to his or her account without
such participant's consent. Following any termination of the Deferred
Compensation Plan, payment of any credited amounts may be made to participants
in a single-sum payment at the Company's discretion. Any such decision to pay in
a single sum shall apply to all participants. The Deferred Compensation Plan, if
approved by the shareholders of the Company, will expire on June 17, 2014.
PLAN BENEFITS FOR YEAR 2004
DEFERRED COMPENSATION PLAN
--------------------------------------------------------------------------
NAME AND POSITION DOLLAR VALUE ($)
--------------------------------------------------------------------------
Efraim Grinberg 84,605
President and Chief Executive Officer
--------------------------------------------------------------------------
Gedalio Grinberg 65,000
Chairman of the Board
--------------------------------------------------------------------------
Richard Cote 49,080
Executive Vice President/Chief Operating Officer
--------------------------------------------------------------------------
Eugene J. Karpovich 11,465
Senior Vice President/Chief Financial Officer
--------------------------------------------------------------------------
Timothy F. Michno 12,500
Secretary and General Counsel
--------------------------------------------------------------------------
Executive Group 171,275
--------------------------------------------------------------------------
The dollar values of plan benefits indicated for the individual Deferred
Compensation Plan participants named above and for the Executive Group are based
on the participants' salary deferral elections for calendar year 2004 and the
Company's projected match.
SHAREHOLDER APPROVAL
Approval of the Deferred Compensation Plan requires the affirmative vote of the
holders of a majority in voting power of the outstanding shares of the Company's
Capital Stock present, or represented by proxy, and entitled to vote at the
Annual Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE EXTENSION OF THE TERM OF THE
DEFERRED COMPENSATION PLAN. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED
UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
PROPOSAL 4 - PROPOSAL TO AMEND AND RESTATE THE 1996 STOCK INCENTIVE
PLAN
GENERAL. At the Annual Meeting shareholders will be asked to consider and, if
deemed advisable, to approve a proposal to amend and restate the Company's 1996
Stock Incentive Plan (the "Stock Plan"). The Stock Plan is being amended and
restated to (i) provide for the availability of additional types of awards, (ii)
increase the number of shares available for the granting of awards from
3,500,000 to 4,500,000, and (iii) generally update the Stock Plan to conform to
prevailing market practices, as described in more detail below. The amendment
and restatement of the Stock Plan was approved by the Board at a meeting held on
April 8, 2004 (the "Effective Date"). In addition, the Stock Plan is being
submitted to shareholders in view of the Company's desire that awards granted
under the Stock Plan continue to qualify as "performance-based compensation" for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code").
If the holders of a majority in voting power of the Capital Stock
present in person or represented by proxy and entitled to vote at the Annual
Meeting approve the foregoing proposed amendments to the Plan (the "Plan
Amendments"), such Plan Amendments will thereupon become effective. If such
approval by the Company's shareholders is not obtained, the proposed Plan
Amendments will not become effective and the Plan will continue as
27
it currently exists. Neither the effectiveness of the proposed Plan Amendments
nor the failure to approve them will have any effect on awards outstanding under
the Plan at the time of the Annual Meeting.
The following summary of the Stock Plan, as amended and restated, is
qualified in its entirety by the specific language of the amended and restated
Stock Plan, a copy of which is attached hereto as Appendix B.
PURPOSE. The purpose of the Stock Plan is to provide a means through
which the Company and its affiliates may attract capable persons to enter and
remain in the employ of the Company and affiliates and to provide a means
whereby employees, directors and consultants of the Company and its affiliates
can acquire and maintain Common Stock ownership, thereby strengthening their
commitment to the welfare of the Company and its affiliates and promoting an
identity of interest between shareholders and these employees. The number of
persons expected to participate is approximately 150.
ADMINISTRATION. The Stock Plan will be administered by a committee of
the Board of Directors (the "Committee"). It is intended, but not required, that
the directors appointed to serve on the Committee shall be "Non-Employee
Directors" (within the meaning of Rule 16b-3 under the Exchange Act) and
"Outside Directors" (within the meaning of Section 162(m) of the Code), to the
extent Rule 16b-3 and Section 162(m) are applicable; however, the fact that a
Committee member shall fail to qualify under the foregoing requirements shall
not invalidate any award which is otherwise validly made under the Stock Plan.
The members of the Committee may be changed at any time and from time to time in
the discretion of the Board of Directors of the Company. Subject to the terms of
the Stock Plan, the Committee shall have authority to grant awards, to determine
the number of shares for which each award shall be granted and to determine any
terms and conditions pertaining to the exercise or to the vesting of each award;
provided, however, that the Committee may, in its sole discretion accelerate the
vesting of any award granted under the Stock Plan. The Committee shall have full
power to construe and interpret the Stock Plan and any award agreement executed
pursuant to the Stock Plan and to establish, amend, suspend or waive any rules
for the proper administration of the Stock Plan. The determination of the
Committee on all matters relating to the Stock Plan or any award agreement shall
be conclusive.
ELIGIBILITY. Any officer, employee or director of, and certain types of
consultants to, the Company or any of its subsidiaries or affiliates shall be
eligible to be designated a participant under the Stock Plan. The Committee has
the sole and complete authority to determine the participants to whom awards
shall be granted under the Stock Plan.
TYPES OF AWARDS. Under the Stock Plan, the Committee may grant awards
of nonqualified stock options ("NSOs"), incentive stock options ("ISOs"), stock
appreciation rights ("SARs"), performance share units, restricted stock awards,
phantom stock units, stock bonus awards, or any combination of the foregoing.
NUMBER OF SHARES AUTHORIZED. A maximum of 4,500,000 aggregate shares
are available for granting awards under the Stock Plan. In no event may the
aggregate number of shares with respect to which options and SARs are granted
under the Stock Plan to any individual exceed 1,200,000 in any one calendar
year. The number of shares with respect to performance share units, restricted
stock, phantom share units and stock bonuses that may be granted to any
individual under the Stock Plan also is limited to 1,200,000 shares in any one
calendar year. As described more fully in the Stock Plan, if an award expires or
terminates for any reason prior to the holder of such award receiving any
economic benefit therefrom, the number of shares previously subject to but not
delivered under such award shall be available to be awarded thereafter. Through
April 30, 2004, total awards (including options exercised, exercisable, and
unexercisable) representing 3,017,461 shares has been granted under the Stock
Plan. As of April 30, 2004, the closing price of one share was $30.00.
If the Committee determines that certain corporate transactions or
events (as described in the Stock Plan), such as a stock split, affect the
shares such that an adjustment is determined by the Committee in its discretion
to be consistent with such event and necessary or equitable to carry out the
purposes of the Stock Plan, the Committee has the discretion to appropriately
adjust or substitute the maximum number of shares subject to awards under the
Stock Plan and the maximum number of shares that may be granted to any one
participant under the Stock Plan as to the number, price or kind of share or
other consideration subject to outstanding awards. In addition, upon the
occurrence of certain corporate events or transactions (as described in the
Stock Plan), such as a merger, consolidation, or reorganization, the Committee
may, in its discretion and upon at least 10 days prior notice to the
participants, cancel all outstanding awards and pay the holders thereof the
value of such awards in a form and an amount equal to what other shareholders
received or will receive in connection with such event. In the event of a
"change in control" (as defined in the Stock Plan) of the Company, all options
and SARs shall become immediately exercisable prior to such change in control
and the restricted period with respect to phantom stock units or shares of
restricted stock shall immediately expire to the extent that participants can
participate in the change in control
28
transaction with respect to shares that are subject to outstanding awards. The
Committee has the discretion, in the event of a change in control and upon at
least 10 days prior notice to the participants, to cancel all outstanding awards
and pay the holders thereof the value of such awards in a form and an amount
equal to what other shareholders received or will receive in connection with
such change in control.
OPTIONS. An option granted under the Stock Plan provides a participant
with the right to purchase, within a specified period of time, a stated number
of shares at the price specified in the award agreement. Options granted under
the Stock Plan will be subject to such terms, including the exercise price and
the conditions and timing of exercise, not inconsistent with the Stock Plan, as
may be determined by the Committee and specified in the applicable award
agreement or thereafter. The maximum term of an option granted under the Stock
Plan shall be 10 years from the date of grant (or five years in the case of an
ISO granted to a 10% shareholder).
The price per share of Common Stock paid by the participant shall be
determined by the Committee at the time of grant but shall not be less than 100%
of the fair market value of one share on the date the option is granted (or no
less than 110% of such fair market value in the case of an ISO granted to an
employee who is a 10% shareholder). Payment in respect of the exercise of an
option may be made (i) in cash and/or shares of Common Stock valued at fair
market value at the time the option is exercised, provided that such shares are
"mature" shares for accounting purposes, (ii) in the discretion of the
Committee, either (A) in other property having a fair market value on the date
of exercise equal to the option price or (B) by delivery to the Committee a copy
of irrevocable instructions to a broker to deliver the proceeds of a loan or
proceeds from the sale of shares subject to the option, sufficient to pay the
exercise price, (iii) to the extent provided in the applicable award agreement,
by delivery of, or attestation as to ownership of, shares of the Company's Class
A Common Stock convertible into an equivalent number of shares of Common Stock
with a fair market value equal to the option price, or (iv) by such other method
as the Committee may determine. The Committee may also establish rules
permitting the deferral of the delivery of shares upon the exercise of options
for tax planning purposes.
The Committee may provide, in connection with the grant of NSOs, for
the grant to any participant of reload options upon the exercise of such NSOs,
including reload options, through the delivery of shares of Common Stock or
shares of Class A Common Stock of the Company; PROVIDED, HOWEVER, that the
reload options (i) may only be granted with respect to the same number of shares
of Common Stock or Class A Common Stock as were surrendered to exercise the NSOs
and the number of shares withheld for tax purposes, (ii) have an exercise price
per share not less than the greater of (A) five dollars more than the exercise
price of the NSOs (the exercise of which resulted in the reload option grant) or
(B) 110% of the fair market value of a share of Common Stock on the date of
exercise of the NSOs (which resulted in the reload option grant), (iii) are not
exercisable until six months after the exercise of the NSOs (which resulted in
the reload option grant) (iv) are not exercisable after the expiration of the
term of the NSOs (the exercise of which resulted in the reload option grant),
and (v) otherwise are subject to the same terms and conditions of the NSOs
(which resulted in the reload option grant).
SARS. A SAR is a contractual right that allows a participant to
receive, either in the form of cash, shares or any combination of the foregoing,
the appreciation, if any, in the value of a share over a certain period of time.
An option granted under the Stock Plan may include SARs, either on the date of
grant or, except in the case of an ISO, by subsequent amendment. The Committee
may also award SARs to a participant independent of the grant of an option. SARs
granted in connection with an option shall become exercisable, be transferable
and shall expire according to the same vesting schedule, transferability rules
and expiration provisions as the corresponding option. If SARs are granted
independent of an option, the SARs shall become exercisable, transferable and
expire in accordance with the vesting schedule, transferability rules and the
expiration provisions established by the Committee and reflected in the award
agreement.
PERFORMANCE SHARE AWARDS. The Committee is authorized to establish a
performance share program to be effective over a designated period of time (an
"award period") to be determined by the Committee in its discretion. At the
beginning of each award period the Committee shall establish performance goals
for the award period. The Committee shall also determine the participants who
shall be eligible to receive an award of performance shares and the number of
performance shares each participant is eligible to receive. At the completion of
the award period, or at other times as specified by the Committee, the Committee
shall determine the number of shares earned with respect to each participant's
performance share award by multiplying the number of performance shares granted
to the participant by the performance factor representing the degree of
attainment of the performance goals. Performance share awards shall be payable
in the form of shares, provided that the Committee may, in its discretion,
provide for payment in the form of cash. During an award period, the Committee
may equitably adjust the performance goals to reflect extraordinary or
non-recurring corporate events, or any significant changes in the accounting
rules, tax laws or other laws or regulations that affect the calculation of the
performance goals. With respect to an award of
29
performance shares that are intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, the timing, establishment and
adjustment of performance goals shall be implemented by the Committee in a
manner designed to preserve the treatment of such awards as "performance-based
compensation" for purposes of Section 162(m) of the Code.
RESTRICTED STOCK. An award of restricted stock is a grant of shares at
price determined by the Committee, which may be zero. The grant or the vesting
of an award of restricted stock may be conditioned upon service to the Company
or its affiliates or the attainment of performance goals or other factors, as
determined in the discretion of the Committee. The Committee may, in its
discretion, provide for the lapse of restrictions imposed upon an award of
restricted stock. Holders of an award of restricted stock will have, with
respect to the restricted stock granted, all of the rights of a shareholder of
the Company, including the right to vote and to receive dividends; provided
that, at the discretion of the Committee, dividends may either be paid currently
to the participant or withheld by the Company for the participant's account and
paid, along with interest at a rate determined by the Committee, upon the
vesting the restricted stock to which the dividends relate. With respect to an
award of restricted stock which is intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, the timing, establishment and
adjustment of performance goals shall be implemented by the Committee in a
manner designed to preserve the treatment of such award as "performance-based
compensation" for purposes of Section 162(m) of the Code.
PHANTOM STOCK UNITS. The Committee is authorized to award phantom stock
units to participants. The Committee shall establish the terms, conditions and
restrictions applicable to each award of phantom stock units, including the time
or times at which phantom stock units shall be granted or vested and number of
units to be covered by each award. The terms and conditions of each phantom
stock award shall be reflected in a phantom stock unit agreement. Each phantom
stock unit (representing one share) awarded to a participant may be credited
with an amount equal to the cash dividends paid by the Company in respect of one
share ("dividend equivalents"). At the discretion of the Committee, dividend
equivalents may either be paid currently to the participant or withheld by the
Company for the participant's account and interest shall be credited on the
amount of cash dividend equivalents withheld at rate determined by the
Committee. Upon expiration of the vesting period with respect to any phantom
stock units covered by a phantom stock award the Company shall deliver to the
participant or his beneficiary one share for each phantom stock unit with
respect to which the vesting period has expired and cash equal to the dividend
equivalents credited to such phantom stock unit and any interest accrued
thereon; provided, however, if the phantom stock unit award agreement so
provides, the Committee may, in its discretion, elect to settle an award in the
form of cash, shares or any combination of the foregoing. With respect to an
award of phantom stock units which is intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, the timing, establishment and
adjustment of performance goals shall be implemented by the Committee in a
manner designed to preserve the treatment such of award as "performance-based
compensation" for purposes of Section 162(m) of the Code.
STOCK BONUS AWARDS. The Committee may, in its discretion, grant an
award of unrestricted shares, or other awards denominated in stock, either alone
or in tandem with other awards, under such terms and conditions as the Committee
in its sole discretion may decide. A stock bonus award shall be granted as, or
in payment of, a bonus, or to provide special incentives or recognize special
achievements or contributions. With respect to a stock bonus award which is
intended to qualify as "performance-based compensation" under Section 162(m) of
the Code, the timing, establishment and adjustment of performance goals shall be
implemented by the Committee in a manner designed to preserve the treatment such
of award as "performance-based compensation" for purposes of Section 162(m) of
the Code.
PERFORMANCE CRITERIA. The Committee may, in its discretion, condition
the vesting of any award granted under the Stock Plan on the satisfaction of
certain performance goals. To the extent an award is intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, the
performance goals shall be established by the Committee with reference to one or
more of the following, either on a Company-wide basis or, as relevant, in
respect of one or more affiliates, divisions or operations of the Company: (i)
earnings (gross, net or per share), (ii) stock price, (iii) market share, (iv)
gross or net profit margin, (v) return on equity, (vi) sales or (vii) costs or
expenses.
TRANSFERABILITY. Subject to the following paragraph, each award may be
exercised during the participant's lifetime only by the participant or, if
permissible under applicable law, by the participant's guardian or legal
representative, and may not be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a participant other than by will or by
the laws of descent and distribution, provided that the designation of a
beneficiary will not constitute an assignment, alienation, pledge, attachment,
sale, transfer or encumbrance for purposes of the Stock Plan.
30
Notwithstanding the foregoing, the Committee may, in its discretion,
provide that awards granted under the Stock Plan may be transferred by a
participant without consideration to certain Permitted Transferees (as defined
in the Stock Plan), pursuant to the terms of the Stock Plan and subject to such
rules as the Committee may adopt to preserve the purposes of the Stock Plan.
AMENDMENT AND TERMINATION. The Board may amend, alter, suspend,
discontinue, or terminate the Stock Plan or any portion thereof at any time;
provided, that no such action may be taken without shareholder approval if such
approval is necessary to comply with any regulatory requirement and provided,
further, that no such action that would impair any rights under any previous
award shall be effective without the consent of the person to whom such award
was made. In addition, the Committee is authorized to amend the terms of any
award granted under the Stock Plan, provided that the amendment would not impair
the rights of any participant without his consent, and further provided that,
without shareholder approval, (i) no such amendment may reduce the exercise
price of an option, (ii) the Committee may not cancel an existing option and
replace it with a new option (with a lower exercise price) in a manner would
result in such option being considered "repriced" for purposes of the Company's
proxy statement, or result in any option being accounted for under the variable
method of accounting, and (iii) the Committee may take no other action which is
considered a repricing for purposes of the shareholder approval rules of any
applicable stock exchange. The Stock Plan expires on the day prior to the tenth
anniversary of the Effective Date (April 7, 2014).
FEDERAL INCOME TAX CONSEQUENCES.
The following summary of the federal income tax consequences of the
grant and exercise of awards under the Stock Plan and the disposition of shares
purchased pursuant to the exercise of such awards is intended to reflect the
current provisions of the Internal Revenue Code and the regulations thereunder.
This summary is not intended to be a complete statement of applicable law, nor
does it address state and local tax considerations. Moreover, the federal income
tax consequences to any particular participant may differ from those described
herein by reason of, among other things, the particular circumstances of such
participant. FOR THESE REASONS, PARTICIPANTS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE CONSEQUENCES OF THEIR PARTICIPATION IN THE STOCK
PLAN.
OPTIONS. No income will be realized by a participant upon grant of a
NSO. Upon the exercise of a NSO, the participant will recognize ordinary
compensation income in an amount equal to the excess, if any, of the fair market
value of the underlying shares over the option exercise price (the "Spread") at
the time of exercise. The Spread will be deductible by the Company for federal
income tax purposes, subject to the possible limitations on deductibility under
Sections 280G and 162(m) of the Code for compensation paid to executives
designated in those Sections. The Participant's tax basis in the underlying
shares acquired through the exercise of a NSO will equal the exercise price plus
the amount taxable as compensation to the participant. Upon the sale of the
shares received by the participant upon exercise of the NSO, any gain or loss is
generally long-term or short-term capital gain or loss, depending on the holding
period. The Participant's holding period for shares acquired pursuant to the
exercise of a NSO will begin on the date of exercise of such option.
Pursuant to currently applicable rules under Section 16(b) of the
Exchange Act, the grant of an option (and not its exercise) to a person who is
subject to the reporting and short-swing profit provisions under Section 16 of
the Exchange Act (a "Section 16 Person") begins the six-month period of
potential short-swing liability. The taxable event for the exercise of an option
that has been outstanding at least six months ordinarily will be the date of
exercise. If an option is exercised by a Section 16 Person within six months
after the date of grant, however, taxation ordinarily will be deferred until the
date which is six months after the date of grant, unless the person has filed a
timely election pursuant to Section 83(b) of the Code to be taxed on the date of
exercise. Under current rules promulgated under Section 16(b) of the Exchange
Act, the six month period of potential short-swing liability may be eliminated
if the option grant (i) is approved in advance by the Company's board of
directors (or a committee composed solely of two or more Non-Employee Directors)
or (ii) approved in advance, or subsequently ratified by the Company's
shareholders no later than the next annual meeting of shareholders.
Consequently, the taxable event for the exercise of an option that satisfies
either of the conditions described in clauses (i) or (ii) above will be the date
of exercise.
The Code requires that, for ISO treatment, shares acquired through the
exercise of an ISO cannot be disposed of before the later of (i) two years from
the date of grant of the option, or (ii) one year from the date of exercise. ISO
holders will generally incur no federal income tax liability at the time of
grant or upon exercise of such options. However, the spread at exercise will be
an "item of tax preference" which may give rise to "alternative minimum tax"
liability for the taxable year in which the exercise occurs. If the participant
does not dispose of the shares before two years following the date of grant and
one year following the date of exercise, the difference between the exercise
price and the amount realized upon disposition of the shares will constitute
long-term capital
31
gain or loss, as the case may be. Assuming both holding periods are satisfied,
no deduction will be allowed to the Company for federal income tax purposes in
connection with the grant or exercise of an ISO. If, within two years following
the date of grant or within one year following the date of exercise, the holder
of shares acquired through the exercise of an ISO disposes of such shares, the
participant will generally realize taxable compensation at the time of such
disposition equal to the difference between the exercise price and the lesser of
the fair market value of the share on the date of initial exercise or the amount
realized on the subsequent disposition of the shares, and such amount will
generally be deductible by the Company for federal income tax purposes, subject
to the possible limitations on deductibility under Sections 280G and 162(m) of
the Code for compensation paid to executives designated in those Sections.
Finally, if an otherwise qualifying ISO becomes first exercisable in any one
year for shares having a value in excess of $100,000 (grant date value), the
portion of the option in respect of such excess shares will be treated as a NSO
for federal income tax purposes.
The payment by a participant of the exercise price, in full or in part,
with previously acquired shares will not affect the tax treatment of the
exercise described above. No gain or loss generally will be recognized by the
participant upon the surrender of the previously acquired shares to the Company,
and the shares received by the participant, equal in number to the previously
surrendered shares, will have the same tax basis as the shares surrendered to
the Company and will have a holding period that includes the holding period of
the shares surrendered. The value of the shares received by the participant in
excess of the number of shares surrendered to the Company will be taxable to the
participant. Such additional shares will have a tax basis equal to the fair
market value of such additional shares as of the date ordinary income is
realized, and will have a holding period that begins on the date ordinary income
is realized.
SARS. No income will be realized by a participant upon the grant of a
SAR. Upon the exercise of a SAR a participant who receives a cash payment will
have taxable compensation equal to the full amount of such payment. If the
participant receives shares upon the exercise of a SAR, the participant will
have ordinary taxable income equal to the excess of the fair market value of the
shares on the date of exercise over the amount paid for such shares. In either
case, the amount of taxable compensation to the participant will be deductible
by the Company for federal income tax purposes, subject to the possible
limitations on deductibility under Sections 280G and 162(m) of the Code for
compensation paid to executives designated in those Sections. If the participant
receives shares upon the exercise of a SAR, the participant's tax basis in the
shares will be equal to the amount taxable as compensation to the participant.
Upon the sale of the shares acquired through the exercise of a SAR, any gain or
loss is generally long-term or short-term capital gain or loss, depending on the
holding period. The participant's holding period for shares acquired pursuant to
the exercise of a SAR will begin on the date of exercise of such SAR.
PERFORMANCE SHARE UNITS. A participant will not be subject to tax upon
the grant of a performance share unit award. Upon the delivery of shares
pursuant to the settlement of a performance share unit award, the participant
will have taxable compensation equal to the excess of the fair market value of
the shares on the date of delivery over the amount the participant paid for such
shares. (Special rules apply to the receipt and disposition of shares received
by officers and directors who are subject to Section 16(b) of the Exchange Act.)
The participant will have a tax basis in the shares equal the amount the
participant paid for such shares plus the amount taxable as compensation to the
participant. Upon the sale of the shares, any gain or loss is generally
long-term or short-term capital gain or loss, depending on the holding period.
The participant's holding period for shares acquired pursuant to the settlement
of a performance share unit award will begin on the date the participant
receives the shares. If the participant receives a cash payment in settlement of
his performance share unit award, the full amount of such cash payment will
taxable compensation to him. In either case, the amount of taxable compensation
to the participant will be deductible by the Company for federal income tax
purposes, subject to the possible limitations on deductibility under Sections
280G and 162(m) of the Code for compensation paid to executives designated in
those Sections.
RESTRICTED STOCK. A participant will not be subject to tax upon the
grant of an award of restricted stock unless the participant otherwise elects to
be taxed pursuant to Section 83(b) of the Code. On the date an award of
restricted stock becomes transferable or is no longer subject to a substantial
risk of forfeiture, the participant will have taxable compensation equal to the
excess of the fair market value of the shares on that date over the amount the
participant paid for such shares, unless the participant made an election under
Section 83(b) of the Code to be taxed at the time of grant. (Special rules apply
to the receipt and disposition of restricted shares received by officers and
directors who are subject to Section 16(b) of the Exchange Act.) The participant
will have a tax basis in the shares equal to the amount the participant paid for
such shares plus the amount taxable as compensation to the participant. Upon the
sale of the shares, any gain or loss is generally long-term or short-term
capital gain or loss, depending on the holding period. The amount of taxable
compensation to the participant will be deductible by the Company for federal
income tax purposes, subject to the possible limitations on deductibility under
Sections 280G and 162(m) of the Code for compensation paid to executives
designated in those Sections.
32
PHANTOM STOCK UNITS. A participant will not be subject to tax upon the
grant of a phantom stock unit award. On the date the participant receives shares
pursuant to a phantom stock unit award, the participant will have taxable
compensation equal to the excess of the fair market value of the shares on that
date over the amount the participant paid for such shares. (Special rules apply
to the receipt and disposition of shares received by officers and directors who
are subject to Section 16(b) of the Exchange Act.) The participant will have a
tax basis in the shares equal the amount the participant paid for such shares
plus the amount taxable as compensation to the participant. Upon the sale of the
shares, any gain or loss is generally long-term or short-term capital gain or
loss, depending on the holding period. The amount of taxable compensation to the
participant will be deductible by the Company for federal income tax purposes,
subject to the possible limitations on deductibility under Sections 280G and
162(m) of the Code for compensation paid to executives designated in those
Sections.
STOCK BONUS AWARDS. A participant who is granted a stock bonus award of
shares which are transferable or are not subject to a substantial risk of
forfeiture will recognize ordinary taxable income equal to the excess of the
fair market value of the shares on the date of grant over the amount the
participant paid for such shares. The participant will have a tax basis in the
shares equal to the amount the participant paid for such shares plus the amount
taxable as compensation to the participant. Upon the sale of the shares, any
gain or loss is generally long-term or short-term capital gain or loss,
depending on the holding period. The amount of taxable compensation to the
participant will be deductible by the Company for federal income tax purposes,
subject to the possible limitations on deductibility under Sections 280G and
162(m) of the Code for compensation paid to executives designated in those
Sections.
In general, Section 162(m) of the Code denies a publicly held
corporation a deduction for federal income tax purposes for compensation paid in
excess of $1,000,000 per year per person to its chief executive officer and the
four other officers whose compensation is disclosed in its proxy statement,
subject to certain exceptions. One of those exceptions is for "performance-based
compensation," as described in the Code and the related Treasury Regulations.
Stock options and SARs will generally qualify under the "performance-based
compensation" exception if they are granted under a plan that states the maximum
number of shares with respect to which options and SARs may be granted to any
employee during a specified period, the exercise or strike price is not less
than the fair market value of the common stock at the time of grant, and the
plan under which the options or SARs are granted is approved by shareholders and
is administered by a committee comprised of two or more outside directors. The
Stock Plan is intended to satisfy these requirements with respect to grants of
options or SARs to covered employees.
With respect to awards of performance share units, restricted stock,
phantom stock units, and stock bonus awards, in order to satisfy the
"performance-based compensation" exception to the deduction limitation of
Section 162(m) of the Code, the vesting of the award must be contingent solely
on the attainment of one or more performance goals determined by a committee of
two or more outside directors. The award must also be granted pursuant to a
shareholder approved plan containing the performance criteria pursuant to which
the performance goals may be established and a specified limit on the number of
shares a participant may receive within a certain time period or periods. The
Stock Plan is designed to permit awards of performance share units, restricted
stock, phantom stock units and stock bonus awards to qualify under the
"performance-based compensation" exception to Section 162(m) of the Code.
NEW PLAN BENEFITS. Because awards to be granted in the future under the
Stock Plan are at the discretion of the Compensation Committee, it is not
possible to determine the benefits or the amounts to be received under the Stock
Plan by the Company's directors, officers, employees or service providers. Of
the 3,017,461 shares underlying all awards granted under the Stock Plan through
April 30, 2004, awards for 1,778,493 shares had been granted to all current
executive officers as a group; awards for 32,000 shares had been granted to all
current directors who are not executive officers as a group; awards for zero
shares for each nominee for election as a director; and awards for 1,206,968 had
been granted to all employees, including all current officers who are not
executive officers, as a group. The following named executive officers have been
granted the following awards through April 30, 2004: Efraim Grinberg, President
and Chief Executive Officer: 1,018,276; Gedalio Grinberg, Chairman of the Board:
none; Richard Cote, Executive Vice President/Chief Operating Officer: 672,103;
Eugene J. Karpovich, Senior Vice President/Chief Financial Officer: 33,156; and
Timothy F. Michno, Secretary and General Counsel: 38,428.
On April 8, 2004, the Board of Directors of the Company unanimously
approved the amendment and restatement of the Stock Plan, subject to shareholder
approval as described above. Approval of the amendment and restatement of the
Stock Plan requires the affirmative vote of the holders of a majority in voting
power of the outstanding shares of Capital Stock present in person or
represented by proxy and entitled to vote at the Annual Meeting.
33
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ADOPTION OF THE
PROPOSED PLAN AMENDMENTS. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS
SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
PROPOSAL 5 - PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK AND CLASS A COMMON STOCK
The Company's Restated Certificate of Incorporation currently
authorizes the issuance of up to 20,000,000 shares of Common Stock, par value
$0.01 per share, and up to 10,000,000 shares of Class A Common Stock, par value
$0.01 per share. On March 10, 2004, the Board of Directors conditionally
approved a two-for-one stock split, to be effected in the form of a stock
dividend of one share of Common Stock for each issued share of Common Stock and
one share of Class A Common Stock for each issued share of Class A Common Stock,
payable on June 25, 2004 to shareholders of record on June 11, 2004. As of April
16, 2004, a total of 8,863,658 shares of Common Stock (excluding 2,043,362
treasury shares) and 3,400,906 shares of Class A Common Stock were issued and
outstanding. As provided in the Company's Restated Certificate of Incorporation,
the Class A Common Stock is convertible on a one for one basis into the same
number of shares of Common Stock and 3,400,906 shares of Common Stock have been
reserved, out of the authorized but unissued shares, solely for the purpose of
issuance upon the conversion of the outstanding shares of Class A Common Stock.
In addition, an aggregate of approximately 1,989,000 shares are reserved for
issuance pursuant to the Company's 1996 Stock Incentive Plan and Deferred
Compensation Plan. Inasmuch as the Company does not currently have a sufficient
number of shares of Common Stock available to effectuate the stock split, it is
conditioned upon, and shall be due and payable only upon, approval by the
shareholders of the proposed amendment discussed below, the filing of the
necessary documents with the New York Secretary of State to amend the Restated
Certificate of Incorporation, and compliance with all necessary laws,
regulations and rules of the New York Stock Exchange.
The board of directors has unanimously adopted a resolution setting
forth a proposed amendment to Article 4 of the Company's Restated Certificate of
Incorporation that would increase the number of authorized shares of Common
Stock from 20,000,000 to 100,000,000 shares and increase the number of
authorized shares of Class A Common Stock from 10,000,000 to 30,000,000 shares,
with the par value of all the shares remaining at $0.01 per share. That
resolution, which is being presented for approval by the shareholders at the
Annual Meeting, recommended that the Company's Restated Certificate of
Incorporation be amended to replace the current first paragraph of Article 4 and
Paragraph 4.1 with the following:
"The total number of shares of all classes of stock that the
Corporation shall have authority to issue is one-hundred-thirty-five
million (135,000,000), of which one-hundred-thirty million
(130,000,000) shall be shares of common stock, par value one cent
($0.01) per share, and five million (5,000,000) shall be shares of
preferred stock, par value one cent ($0.01) per share.
4.1 COMMON SHARES. The common stock, par value one cent ($0.01) per
share, shall be divided into Common Stock and Class A Common Stock.
There shall be one-hundred million (100,000,000) shares of Common Stock
and thirty million (30,000,000) shares of Class A Common Stock
(sometimes collectively referred to herein as the "Common Shares"). All
Common Shares will be identical and will entitle the holders thereof to
the same rights and privileges, except as otherwise provided herein."
At the Annual Meeting, shareholders will be asked to consider, and, if
deemed advisable, to approve the foregoing amendment to the Company's Restated
Certificate of Incorporation.
Increasing the authorized number of shares of the Company's Common
Stock and Class A Common Stock will enable the Company to have a sufficient
number of authorized shares of Common Stock to effectuate the stock dividend. If
the amendment to the Company's Certificate of Incorporation is not approved by
the Company's shareholders at the Annual Meeting (or any adjournment thereof),
no such dividend will be distributed.
In addition to giving effect to the stock dividend, the amendment to
the Company's Certificate of Incorporation will ensure that the Company will
continue to have an adequate number of authorized and unissued shares of Common
Stock available for future use. As is the case with the shares of Common Stock
which are currently authorized but unissued, if this amendment to the Company's
Certificate of Incorporation is adopted by the shareholders, the Board of
Directors will have authority to issue the additional shares of Common Stock
from time to
34
time without further action on the part of stockholders. The additional
authorized shares would be available for issuance at such times and for such
proper corporate purposes as the Board of Directors may approve, including
possible future stock splits or stock dividends and future financing and
acquisition transactions. As a result, the additional number of authorized
shares could have the effect of making it more difficult for a third party to
take over the Company in a transaction not approved by the Board of Directors.
Shareholders do not have any preemptive or other rights to subscribe for any
shares of Common Stock which may in the future be issued by the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION. PROXIES
SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR
PROXIES A CONTRARY CHOICE.
35
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
The Company's By-Laws set forth procedures requiring that any
shareholder wishing to bring business before an annual meeting of shareholders,
including the nomination of candidates to the Board of Directors, give timely
written notice to the Secretary of the Company. To be timely such notice must be
delivered personally or mailed to and received at the Company's principal
executive offices not less than 60 or more than 90 days before the Annual
Meeting, except that, if less than 70 days notice or prior public disclosure of
the Annual Meeting date is given to shareholders, notice by a shareholder is
timely if received not later than the close of business on the 10th day after
the date notice of the Annual Meeting was mailed or public disclosure thereof
was made.
Shareholders' proposals intended to be presented at the 2005 Annual
Meeting of Shareholders must be received by the Company no later than January
19, 2005 for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
OTHER MATTERS
The Board of Directors, at the time of the preparation of this Proxy
Statement, knows of no business to come before the Annual Meeting other than
that referred to herein. If any other business should come before the Annual
Meeting, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies received and not theretofore revoked in accordance
with their best judgment.
Upon the written request of any record holder or beneficial owner of
Common Stock or Class A Common Stock entitled to vote at the Annual Meeting, the
Company, without charge, will provide a copy of its Annual Report on Form 10-K
for the year ended January 31, 2004, as filed with the Securities and Exchange
Commission. Requests should be directed to Suzanne Michalek, Director Corporate
Communications, Movado Group, Inc., 650 From Road, Paramus, New Jersey 07652.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Timothy F. Michno
--------------------------
Timothy F. Michno
Secretary and General Counsel
Paramus, New Jersey
May 17, 2004
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE ANNUAL MEETING AND WISH THEIR STOCK TO BE VOTED ARE URGED
TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
36
APPENDIX A
----------
AUDIT COMMITTEE CHARTER
MEMBERSHIP
1. The Audit Committee (the "Committee") of the Board of Directors shall
consist of at least three directors who shall be appointed annually by
the Board of Directors. New members of the Committee will be proposed
by the Company's Nominating and Corporate Governance Committee for
approval and appointment by the Board. Each member of the Committee
shall, in the Board's judgment, satisfy the financial literacy and
independence requirements under the Sarbanes-Oxley Act (the "Act") and
applicable rules of the New York Stock Exchange ("NYSE") and the
Securities and Exchange Commission ("SEC"). At least one member of the
Committee must be an "audit committee financial expert" and have
"accounting or related financial management expertise" under the
requirements of the Act and the applicable rules of the NYSE and SEC.
Unless a Chair is elected by the full Board of Directors, the Committee
shall designate one by majority vote of the full Committee membership.
No member of the Committee may serve on the audit committees of more
than two other public companies, unless the Board of Directors
determines that such simultaneous service will not impair the ability
of such member to effectively serve on the Committee.
2. No member of the Committee shall receive any compensation from the
Company other than compensation for service as a director of the
Company, compensation for serving on the Committee and compensation
under a retirement plan for prior services with the Company (if such
compensation is not contingent on continued service with the Company).
PURPOSE
1. The Committee will assist the Board in its general oversight regarding:
a. The quality and integrity of the Company's financial
statements;
b. The independent auditor's qualifications and independence;
c. The performance of the Company's internal audit function and
independent auditors; and
d. The Company's compliance with legal and regulatory
requirements.
2. The Committee will prepare the Audit Committee Report required by the
rules of the SEC to be included in the Company's annual proxy
statement.
MEETINGS AND PROCEDURES
1. The Committee shall meet at least four times each year and at such
other times as it deems necessary to carry out its responsibilities.
The Chair of the Committee or any two Committee meeting members may
call a Committee meeting whenever deemed necessary.
2. In the performance of its duties and responsibilities, it is not the
Committee's duty to plan or conduct audits, to determine that the
Company's financial statements are complete, accurate and in
A-1
accordance with generally accepted accounting principles or to assure
compliance with laws. These are the responsibilities of management and
the internal audit department. The independent auditor is responsible
for the audit of the Company's financial statements in accordance with
the standards of the profession.
RESPONSIBILITIES
The Committee shall:
1. Have the sole authority to appoint, retain, compensate,
oversee, evaluate and, where appropriate, replace the
independent auditor.
2. Annually review and approve the proposed scope of each fiscal
year's internal and outside audit at the beginning of each new
fiscal year.
3. Inform each registered public accounting firm performing
audit, review or attest work for the Company that such firm
shall report directly to the Committee.
4. Directly oversee the work of any registered public accounting
firm employed by the Company, including the resolution of any
disagreement between management and the auditor regarding
financial reporting, for the purpose of preparing or issuing
an audit opinion or related work.
5. Review and approve in advance any audit and permitted
non-audit services and fees to be provided by the Company's
independent auditor. The Committee has the sole authority to
make these approvals.
6. At, or shortly after the end of each fiscal year, review with
the independent auditor, the internal auditor and Company
management, the audited financial statements and related
opinion and costs of the audit of that year.
7. Annually obtain and review a report by the independent auditor
describing: the audit firm's internal quality-control
procedures; any material issues raised by the most recent
internal quality-control review, or peer review of the firm,
or by any inquiry or investigation by governmental or
professional authorities within the preceding five years
regarding one or more independent audits carried out by the
firm, and any steps taken to deal with any such issues; and,
to assess the auditor's independence, all relationships
between the independent auditor and the Company.
8. Review with the chief executive officer and chief financial
officer and independent auditors, periodically, the following:
(a) The Company's administrative and operational controls
and internal controls over financial reporting and
evaluate whether the Company is operating in accordance
with its prescribed policies, procedures and code of
conduct.
(b) All significant deficiencies in the design or operation
of internal controls which could adversely affect the
Company's ability to record, process, summarize, and
report financial data, including any material weakness
in internal controls identified by the Company's
independent auditors and internal auditors.
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(c) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the Company's internal controls.
(d) Any significant changes in internal controls or in
other factors that could significantly affect internal
controls, including any corrective actions with regard
to significant deficiencies and material weaknesses.
9. Provide any recommendations, certifications and reports that
may be required by the NYSE or the SEC including the report of
the Committee that must be included in the Company's annual
proxy statement.
10. Review and discuss with management and the independent auditor
the Company's interim financial results to be included in the
Company's quarterly reports to be filed with the SEC including
a review and discussion with management of the Company's
disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations", and a
discussion with the independent auditor of the matters
required to be discussed by Statement on Auditing Standards
No. 61 (Communications with Audit Committees), as it may be
modified or supplemented.
11. Review with management and the independent auditor the
financial statements to be included in the Company's Annual
Report on Form 10-K, including a review and discussion with
management of the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations", as well as the auditor's judgment about the
quality, not just acceptability, of the Company's accounting
principles as applied to its financial reporting. The review
shall also include a discussion of the reasonableness of
judgments and estimates made in the preparation of the
financial statements that may be viewed as critical, as well
as the clarity of financial statement disclosure. In addition,
the Committee shall discuss the results of the annual audit
and any other matters required to be communicated to the
Committee by the independent auditor under generally accepted
auditing standards, including the matters required to be
discussed by Statement on Auditing Standards No. 61
(Communications with Committees)), as it may be modified or
supplemented. Based on its review and discussions, the
Committee shall recommend to the Board of Directors whether
the financial statements should be included in the Annual
Report on Form 10-K.
12. Discuss with management the type of presentation and type of
information to be included in the Company's earnings press
releases and the financial information and earnings guidance
provided to analysts and rating agencies.
13. Have the authority to engage independent counsel and other
advisers as it determines necessary to carry out its duties.
The Company shall provide for appropriate funding, as
determined by the Committee, in its capacity as a committee of
the Board of Directors, for payment of compensation to any
advisers employed by the Committee and to the independent
auditor employed by the Company for the purpose of rendering
or issuing an audit report or performing other audit, review
or attest services and ordinary administrative expenses of the
audit committee that are necessary or appropriate in carrying
out its duties.
14. Ensure the rotation of the audit partners of the Company's
independent auditor as defined in and as required by the Act
and the rules of the SEC.
15. Discuss with management and the independent auditor the
Company's policies with respect to risk assessment and risk
management.
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16. Meet separately, periodically, with management, with internal
auditors and with the independent auditor.
17. In consultation with the independent auditor, management and
the internal auditors, review the integrity of the Company's
financial reporting process.
18. Review periodically major issues regarding accounting
principles and financial statement presentations, including
any significant changes in the Company's selection or
application of accounting principles, and major issues as to
the adequacy of the Company's internal controls and any
special audit steps adopted in light of material control
deficiencies; analyses prepared by management and/or the
independent auditor setting forth significant financial
reporting issues and judgments made in connection with the
preparation of the financial statements, including analyses of
the effects of alternative GAAP methods on the financial
statements; and the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures, on the
financial statements of the Company.
19. Review with the independent auditor any audit problems or
other difficulties encountered by the auditor in the course of
the audit process, including any restrictions on the scope of
the independent auditor's activities or on access to requested
information, and any significant disagreements with management
and management's responses to such matters. In addition, the
Committee shall timely receive (and, in any event, prior to
the filing of any audited financial statements with the SEC) a
report from the independent auditor on (a) all critical
accounting policies and practices; (b) all alternative
treatments of financial information within generally accepted
accounting principles that have been discussed with
management, including ramifications of the use of such
alternative disclosures and treatments, and the treatment
preferred by the registered public accounting firm; and (c)
other material written communications between the registered
public accounting firm and Company management, such as any
management letter or schedule of unadjusted differences.
20. Regularly review the responsibilities, budget and staffing of
the internal audit function of the Company, including the
proposed audit programs for the coming year and review
summaries of findings from completed internal audits and a
progress report on the proposed audit plan with explanations
for any deviations from the original plan.
21. Ensure that the chief executive officer, chief financial
officer, chief accounting officer, controller, or any other
person serving in an equivalent position was not, within one
year prior to the initiation of the audit, an employee of the
independent auditor who participated in any capacity in the
Company's audit.
22. Report regularly to the Board of Directors. Such report to the
Board of Directors may take the form of an oral report by the
Chair or any other member of the Committee designated by the
Committee to make such report.
23. Meet with the Company's General Counsel, as appropriate, to
review legal and regulatory matters, including any matters
that may have a material impact on the financial statements of
the Company.
24. Maintain procedures, as set forth in Annex A hereto, for the
receipt, retention and treatment of complaints received by the
Company regarding financial statement disclosures, accounting,
internal accounting controls or auditing matters, and the
A-4
confidential, anonymous submission by employees of the Company
of concerns regarding financial statement disclosures,
accounting, internal accounting controls or auditing matters.
25. Perform a review and evaluation, at least annually, of the
performance of the Committee. In addition, the Committee shall
review and reassess, at least annually, the adequacy of this
Charter and recommend to the Board of Directors any
improvements to this Charter that the Committee considers
necessary or valuable. The Committee shall conduct such
evaluations and reviews in such manner as it deems
appropriate.
26. Perform such additional activities, and consider such other
matters, within the scope of its responsibilities, as the
Committee or the Board deems necessary or appropriate. In
carrying out its responsibilities, the policies and procedures
of the Committee should remain flexible in order in order that
it can best react to changing conditions and assure the
directors and shareholders that the corporate accounting and
reporting practices of the Company are in accordance with all
requirements and are of the highest quality.
A-5
ANNEX A
PROCEDURES FOR THE SUBMISSION OF COMPLAINTS OR CONCERNS
REGARDING FINANCIAL STATEMENT DISCLOSURES, ACCOUNTING,
INTERNAL ACCOUNTING CONTROLS OR AUDITING MATTERS
1. The Company shall forward to the Audit Committee of the Board of
Directors any complaints that it has received regarding financial statement
disclosures, accounting, internal accounting controls or auditing matters.
2. Any employee of the Company may submit, on a confidential, anonymous
basis if the employee so desires, any concerns regarding financial statement
disclosures, accounting, internal accounting controls or auditing matters by
setting forth such concerns in writing and forwarding them in a sealed envelope
to the Chair of the Audit Committee, in care of the Company's General Counsel
at: Movado Group, Inc., Legal Department, 650 From Road, Paramus, NJ 07652, such
envelope to be labeled with a legend such as: "To be opened by the Audit
Committee only". If any employee would like to discuss any matter with the Audit
Committee, the employee should indicate this in the submission and include a
telephone number at which he or she might be contacted if the Audit Committee
deems it appropriate. Any such envelopes received by the Company's General
Counsel shall be forwarded promptly to the Chair of the Audit Committee.
3. At each of its meetings, including special meeting called by the Chair
of the Audit Committee following the receipt of any information pursuant to this
Annex, the Audit Committee shall review and consider any such complaints or
concerns that it has received and take any action that it deems appropriate in
order to respond thereto.
4. The Audit Committee shall retain any such complaints or concerns for a
period of no less than 7 years.
5. Neither the Company nor any of its employees may discharge, demote,
suspend, threaten, harass or in any manner discriminate against any employee
who: (a) lawfully provides information regarding any conduct encouraged to be
reported under this policy which the employee reasonably believes has occurred
to a regulatory or law enforcement agency, to any member or committee of
Congress, or to any person with supervisory authority over the employee or the
authority to investigate such misconduct; (b) participates in or otherwise
assists with a proceeding relating to conduct encouraged to be reported this
policy; or (c) submits a complaint pursuant to this policy regarding any conduct
encouraged to be reported this policy which the employee reasonably believes has
occurred, even if after investigation the Company determines that there has not
been a violation; provided, however, that the foregoing shall in no event be
construed as in any way limiting the Company from discharging, demoting,
suspending or taking any other disciplinary measures in respect of an employee
for legitimate reasons . Disciplinary action will be taken against any
supervisor who retaliates, directly or indirectly, or encourages other to do so,
against an employee who takes any of the above-mentioned actions.
6. This Annex A shall appear on the Company's website as part of this
Charter.
A-6
APPENDIX B
----------
MOVADO GROUP, INC.
1996 STOCK INCENTIVE PLAN
(AMENDED AND RESTATED AS OF APRIL 8, 2004)
1. PURPOSE
The purpose of the Plan is to provide a means through which
the Company and its Affiliates may attract able persons to enter and remain in
the employ of the Company and its Affiliates and to provide a means whereby
employees, directors and consultants of the Company and its Affiliates can
acquire and maintain Common Stock ownership, or be paid incentive compensation
measured by reference to the value of Common Stock, thereby strengthening their
commitment to the welfare of the Company and its Affiliates and promoting an
identity of interest between stockholders and these persons.
So that the appropriate incentive can be provided, the Plan
provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Phantom Stock Units, Performance
Share Units and Stock Bonuses, or any combination of the foregoing.
This Plan in an amendment and restatement of the Movado Group,
Inc. 1996 Stock Incentive Plan (the "1996 Plan"); provided, however, that all
awards granted under the 1996 Plan will continue to be governed by the terms of
the 1996 Plan and the Award Agreements issued thereunder.
2. DEFINITIONS
The following definitions shall be applicable throughout the
Plan.
(a) "Affiliate" means (i) any entity that directly or
indirectly is controlled by, controls or is under common control with the
Company and (ii) any entity in which the Company has a significant equity
interest, in either case as determined by the Committee.
(b) "Award" means, individually or collectively, any
Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right,
Restricted Stock Award, Phantom Stock Unit Award, Performance Share Unit Award
or Stock Bonus Award.
(c) "Award Period" means a period of time within which
performance is measured for the purpose of determining whether an Award of
Performance Share Units has been earned.
(d) "Board" means the Board of Directors of the Company.
B-2
(e) "Change in Control," shall, unless in the case of
a particular Award, the applicable Award agreement states otherwise or contains
a different definition of "Change in Control," be deemed to occur upon:
(i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more (on a fully diluted basis) of (A) the then
outstanding shares of common stock of the Company, taking into account as
outstanding for this purpose such common stock issuable upon the exercise of
options or warrants, the conversion of convertible stock or debt, and the
exercise of any similar right to acquire such common stock (the "Outstanding
Company Common Stock") and (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); PROVIDED, HOWEVER, that
for purposes of this Agreement, the following acquisitions shall not constitute
a Change of Control: (I) any acquisition by the Company or any Affiliate, (II)
any acquisition by any employee benefit plan sponsored or maintained by the
Company or any Affiliate, (III) any acquisition by a "Permitted Transferee," as
defined in the Company's Certificate of Incorporation, (IV) any acquisition
which complies with clauses (A), (B) and (C) of subsection (v) of this Section
2(e), or (V) in respect of an Award held by a particular Participant, any
acquisition by the Participant or any group of persons including the Participant
(or any entity controlled by the Participant or any group of persons including
the Participant);
(ii) Individuals who, on the date hereof, constitute
the Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof, whose election or nomination for election was
approved by a vote of at least two-thirds of the Incumbent Directors then on the
Board (either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent Director; PROVIDED, HOWEVER,
that no individual initially elected or nominated as a director of the Company
as a result of an actual or threatened election contest with respect to
directors or as a result of any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board shall be
deemed to be an Incumbent Director;
(iii) the dissolution or liquidation of the Company;
(iv) the sale of all or substantially all of the
business or assets of the Company; or
(v) the consummation of a merger, consolidation,
statutory share exchange or similar form of corporate transaction involving the
Company that requires the approval of the Company's stockholders, whether for
such transaction or the issuance of securities in the transaction (a "Business
Combination"), unless immediately following such Business Combination: (A) at
least 50% of the total voting power of (x) the corporation resulting from such
Business Combination (the "Surviving
B-3
Company"), or (y) if applicable, the ultimate parent corporation that directly
or indirectly has beneficial ownership of sufficient voting securities eligible
to elect a majority of the directors of the Surviving Company (the "Parent
Company"), is represented by the Outstanding Company Voting Securities that were
outstanding immediately prior to such Business Combination (or, if applicable,
is represented by shares into which the Outstanding Company Voting Securities
were converted pursuant to such Business Combination), and such voting power
among the holders thereof is in substantially the same proportion as the voting
power of the Outstanding Company Voting Securities among the holders thereof
immediately prior to the Business Combination, (B) no Person (other than any
employee benefit plan sponsored or maintained by the Surviving Company or the
Parent Company or a "Permitted Transferee," as defined in the Company's
Certificate of Incorporation), is or becomes the beneficial owner, directly or
indirectly, of 20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Company (or, if there is no
Parent Company, the Surviving Company) and (C) at least a majority of the
members of the board of directors of the Parent Company (or, if there is no
Parent Company, the Surviving Company) following the consummation of the
Business Combination were Board members at the time of the Board's approval of
the execution of the initial agreement providing for such Business Combination.
(f) "Code" means the Internal Revenue Code of 1986, as
amended. Reference in the Plan to any section of the Code shall be deemed to
include any amendments or successor provisions to such section and any
regulations under such section.
(g) "Committee" means a committee of at least two people as
the Board may appoint to administer the Plan or, if no such committee has been
appointed by the Board, the Board. Unless the Board is acting as the Committee
or the Board specifically determines otherwise, each member of the Committee
shall, at the time he takes any action with respect to an Award under the Plan,
be an Eligible Director. However, the mere fact that a Committee member shall
fail to qualify as an Eligible Director shall not invalidate any Award made by
the Committee which is otherwise validly granted under the Plan.
(h) "Common Stock" means the common stock, par value $0.01
per share, of the Company, but does not include the Class A common stock of the
Company.
(i) "Company" means Movado Group, Inc.
(j) "Date of Grant" means the date on which the granting of
an Award is authorized, or such other date as may be specified in such
authorization or, if there is no such date, the date indicated on the applicable
Award agreement.
(k) "Effective Date" of this amendment and restatement means
April 8, 2004.
B-4
(l) "Eligible Director" means a person who is (i) a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act,
or a person meeting any similar requirement under any successor rule or
regulation and (ii) an "outside director" within the meaning of Section 162(m)
of the Code, and the Treasury Regulations promulgated thereunder; PROVIDED,
HOWEVER, that clause (ii) shall apply only with respect to grants of Awards with
respect to which the Company's tax deduction could be limited by Section 162(m)
of the Code if such clause did not apply.
(m) "Eligible Person" means any (i) individual regularly
employed by the Company, a Subsidiary or Affiliate who satisfies all of the
requirements of Section 6; PROVIDED, HOWEVER, that no such employee covered by a
collective bargaining agreement shall be an Eligible Person unless and to the
extent that such eligibility is set forth in such collective bargaining
agreement or in an agreement or instrument relating thereto; (ii) director of
the Company, a Subsidiary or an Affiliate or (iii) consultant or advisor to the
Company, a Subsidiary or an Affiliate who may be offered securities pursuant to
Form S-8 (which, as of the Effective Date, includes those who (A) are natural
persons and (B) provide BONA FIDE services to the Company other than in
connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the Company's securities).
(n) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(o) "Fair Market Value, on a given date means (i) if the
Stock is listed on a national securities exchange, the mean between the highest
and lowest sale prices reported as having occurred on the primary exchange with
which the Stock is listed and traded on the date prior to such date, or, if
there is no such sale on that date, then on the last preceding date on which
such a sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") on a
last sale basis, the average between the high bid price and low ask price
reported on the date prior to such date, or, if there is no such sale on that
date, then on the last preceding date on which a sale was reported; or (iii) if
the Stock is not listed on a national securities exchange nor quoted in NASDAQ
on a last sale basis, the amount determined by the Committee to be the fair
market value based upon a good faith attempt to value the Stock accurately and
computed in accordance with applicable regulations of the Internal Revenue
Service.
(p) "Incentive Stock Option" means an Option granted by the
Committee to a Participant under the Plan which is designated by the Committee
as an incentive stock option as described in Section 422 of the Code and
otherwise meets the requirements set forth herein.
(q) "Mature Shares" means shares of Stock or shares of Class
A common stock of the Company owned by a Participant which are not subject to
any pledge or other security interest and have either been held by the
Participant for six months, previously acquired by the Participant on the open
market or meet such other
B-5
requirements as the Committee may determine are necessary in order to avoid an
accounting earnings charge on account of the use of such shares to pay the
Option Price or satisfy a withholding obligation in respect of an Option.
(r) "Nonqualified Stock Option" means an Option granted by
the Committee to a Participant under the Plan which is not designated by the
Committee as an Incentive Stock Option.
(s) "Option" means an Award granted under Section 7.
(y) "Option Period" means the period described in Section
7(c).
(u) "Option Price" means the exercise price for an Option as
described in Section 7(a).
(v) "Participant" means an Eligible Person who has been
selected by the Committee to participate in the Plan and to receive an Award
pursuant to Section 6.
(w) "Performance Goals" means the performance objectives of
the Company or Affiliate during an Award Period or Restricted Period established
for the purpose of determining whether, and to what extent, Awards will be
earned for an Award Period or Restricted Period. To the extent an Award is
intended to qualify as "performance-based compensation" under Section 162(m) of
the Code, the Performance Goals shall be established with reference to one or
more of the following, either on a Company-wide basis or, as relevant, in
respect of one or more Affiliates, divisions or operations of the Company:
(i) earnings (gross, net or per share)
(ii) stock price (absolute or relative to other
companies)
(iii) market share
(iv) gross or net profit margin
(v) return on equity
(vi) sales
(vii) costs or expenses
(x) "Performance Share Unit" means a hypothetical investment
equivalent to one share of Stock granted in connection with an Award made under
Section 9.
(y) "Phantom Stock Unit" means a hypothetical investment
equivalent to one share of Stock granted in connection with an Award made under
Section 10.
(z) "Plan" means this Movado Group, Inc. 1996 Stock
Incentive Plan, as amended and restated as of April 8, 2004.
B-6
(aa) "Restricted Period" means, with respect to any share of
Restricted Stock or any Phantom Stock Unit, the period of time determined by the
Committee during which such Award is subject to the restrictions set forth in
Section 10.
(bb) "Restricted Stock" means shares of Stock issued or
transferred to a Participant subject to forfeiture and the other restrictions
set forth in Section 10.
(cc) "Restricted Stock Award" means an Award of Restricted
Stock granted under Section 10.
(dd) "Securities Act" means the Securities Act of 1933, as
amended.
(ee) "Stock" means the Common Stock or such other authorized
shares of stock of the Company as the Committee may from time to time authorize
for use under the Plan.
(ff) "Stock Appreciation Right" or "SAR" means an Award
granted under Section 8 of the Plan.
(gg) "Stock Bonus" means an Award granted under Section 11.
(hh) "Stock Option Agreement" means any agreement between the
Company and a Participant who has been granted an Option pursuant to Section 7
which defines the rights and obligations of the parties thereto.
(ii) "Strike Price" means, in respect of an SAR, (i) in the
case of an SAR granted in tandem with an Option, the Option Price of the related
Option, or (ii) in the case of an SAR granted independent of an Option, the Fair
Market Value on the Date of Grant.
(jj) "Subsidiary" means any subsidiary of the Company as
defined in Section 424(f) of the Code.
(kk) "Vested Unit" shall have the meaning ascribed thereto in
Section 10(d).
3. Effective Date, Duration and Shareholder Approval
The amendment and restatement of the Plan is effective as of
the Effective Date; PROVIDED that the validity and exercisabilty of any and all
Awards granted on or after the Effective Date pursuant to the amended and
restated Plan (i) in respect of shares of Stock in excess of that available
under the Plan immediately prior to the Effective Date, (ii) of a type not
available under the Plan immediately prior to the Effective Date or (iii) to any
person not eligible to receive Awards under the Plan immediately prior to the
Effective Date, is contingent upon approval of the Plan by the shareholders of
the Company following the Effective Date, in a manner intended to comply with
the
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shareholder approval requirements of Sections 162(m) and 422 of the Code, and of
the New York Stock Exchange. No Option shall be treated as an Incentive Stock
Option unless the Plan has been approved by the shareholders of the Company in a
manner intended to comply with the shareholder approval requirements of Section
422(b)(i) of the Code; PROVIDED that any Option intended to be an Incentive
Stock Option shall not fail to be effective solely on account of a failure to
obtain such approval, but rather such Option shall be treated as a Nonqualified
Stock Option unless and until such approval is obtained.
The expiration date of the Plan, on and after which no Awards
may be granted hereunder, shall be the day prior to the tenth anniversary of the
Effective Date; PROVIDED, HOWEVER, that the administration of the Plan shall
continue in effect until all matters relating to Awards previously granted have
been settled.
4. ADMINISTRATION
The Committee shall administer the Plan. The majority of the
members of the Committee shall constitute a quorum. The acts of a majority of
the members present at any meeting at which a quorum is present or acts approved
in writing by a majority of the Committee shall be deemed the acts of the
Committee.
Subject to the provisions of the Plan and applicable law, the
Committee shall have the power, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to a
Participant; (iii) determine the number of shares of Stock to be covered by, or
with respect to which payments, rights, or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any Award;
(v) determine whether, to what extent, and under what circumstances Awards may
be settled or exercised in cash, shares of Stock, other securities, other Awards
or other property, or canceled, forfeited, or suspended and the method or
methods by which Awards may be settled, exercised, canceled, forfeited, or
suspended; (vi) determine whether, to what extent, and under what circumstances
the delivery of cash, Stock, other securities, other Options other property and
other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret, administer, reconcile any inconsistency, correct any default
and/or supply any omission in the Plan and any instrument or agreement relating
to, or Award made under, the Plan; (viii) establish, amend, suspend, or waive
such rules and regulations and appoint such agents as it shall deem appropriate
for the proper administration of the Plan; and (ix) make any other determination
and take any other action specified under the Plan or that the Committee deems
necessary or desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Award or any documents evidencing Awards granted
pursuant to the Plan shall be within the sole discretion of the Committee, may
be made at any time and shall be final,
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conclusive and binding upon all parties, including, without limitation, the
Company, any Affiliate, any Participant, any holder or beneficiary of any Award,
and any shareholder.
(c) No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any Award
hereunder.
5. Grant of Awards; Shares Subject to the Plan
The Committee may, from time to time, grant Awards of Options,
Stock Appreciation Rights, Restricted Stock, Phantom Stock Units, Performance
Share Units and/or Stock Bonuses to one or more Eligible Persons; PROVIDED,
HOWEVER, that:
(a) Subject to Section 13, the aggregate number of shares of
Stock in respect of which Awards may be made under the Plan is 4,500,000 shares;
(b) Shares of Stock shall be deemed to have been used in
settlement of Awards whether they are actually delivered or the Fair Market
Value equivalent of such shares is paid in cash; PROVIDED, HOWEVER, that shares
of Stock or Company Class A common stock delivered (either directly or by means
of attestation) in full or partial payment of the Option Price in accordance
with the third sentence of Section 7(b) shall be deducted from the number of
shares of Stock delivered to the Participant pursuant to such Option for
purposes of determining the number of shares of Stock acquired pursuant to the
Plan. In accordance with (and without limitation upon) the preceding sentence,
if and to the extent an Award under the Plan expires, terminates or is canceled
for any reason whatsoever without the Participant having received any benefit
therefrom, the shares covered by such Award shall again become available for
future Awards under the Plan. For purposes of the foregoing sentence, a
Participant shall not be deemed to have received any "benefit" in the case of
forfeited Restricted Stock Awards by reason of having enjoyed voting rights and
dividend rights prior to the date of forfeiture;
(c) Stock delivered by the Company in settlement of Awards
may be authorized and unissued Stock or Stock held in the treasury of the
Company or purchased on the open market or by private purchase;
(d) Subject to Section 13, no person may be granted Options
or SARs under the Plan during any calendar year with respect to more than
1,200,000 shares of Stock; PROVIDED that such number shall be adjusted pursuant
to Section 13, and shares otherwise counted against such number, only in a
manner which will not cause Options or SARs granted under the Plan to fail to
qualify as "performance-based compensation" under Section 162(m) of the Code;
and
(e) Subject to Section 13, with respect to awards of
Performance Share Units, Restricted Stock or Phantom Stock Units intended to
qualify as "performance-based compensation" under Section 162(m) of the Code, no
person may be granted Performance Share Units, Restricted Stock or Phantom Stock
Units under the Plan during any calendar year with respect to more than
1,200,000 shares of Stock;
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PROVIDED that such number shall be adjusted pursuant to Section 13, and shares
otherwise counted against such number, only in a manner which will not cause
such Performance Share Units, Restricted Stock or Phantom Stock Units granted
under the Plan to fail to qualify as "performance-based compensation" under
Section 162(m) of the Code.
6. ELIGIBILITY
Participation shall be limited to Eligible Persons who have
received written notification from the Committee, or from a person designated by
the Committee, that they have been selected to participate in the Plan.
7. OPTIONS
The Committee is authorized to grant one or more Incentive
Stock Options or Nonqualified Stock Options to any Eligible Person; PROVIDED,
HOWEVER, that no Incentive Stock Options shall be granted to any Eligible Person
who is not an employee of the Company or a Subsidiary. Each Option so granted
shall be subject to the following conditions, or to such other conditions as may
be reflected in the applicable Stock Option Agreement.
(a) OPTION PRICE. Subject to Section 7(e), the exercise
price ("Option Price") per share of Stock for each Option shall be set by the
Committee at the time of grant but shall not be less than the Fair Market Value
of a share of Stock at the Date of Grant.
(b) MANNER OF EXERCISE AND FORM OF PAYMENT. No shares of
Stock shall be delivered pursuant to any exercise of an Option until payment in
full of the Option Price therefor is received by the Company. Options which have
become exercisable may be exercised by delivery of written notice of exercise to
the Committee accompanied by payment of the Option Price. The Option Price shall
be payable (i) in cash and/or shares of Stock valued at the Fair Market Value at
the time the Option is exercised (including by means of attestation of ownership
of a sufficient number of shares of Stock in lieu of actual delivery of such
shares to the Company); PROVIDED, that such shares of Stock are Mature Shares,
(ii) in the discretion of the Committee, either (A) in other property having a
fair market value on the date of exercise equal to the Option Price or (B) by
delivering to the Committee a copy of irrevocable instructions to a stockbroker
to deliver promptly to the Company an amount of loan proceeds, or proceeds from
the sale of the Stock subject to the Option, sufficient to pay the Option Price,
(iii) to the extent provided in the Stock Option Agreement, by delivery of, or
attestation as to ownership of, shares of the Company's Class A common stock
convertible into an equivalent number of shares of Stock with a fair market
value equal to the portion of the Option Price to be paid thereby; PROVIDED that
such shares of Class A common stock are Mature Shares, or (iv) by such other
method as the Committee may allow.
(c) VESTING, OPTION PERIOD AND EXPIRATION. Options shall
vest and become exercisable in such manner and on such date or dates determined
by the Committee and shall expire after such period, not to exceed ten years, as
may be
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determined by the Committee (the "Option Period"); PROVIDED, HOWEVER, that
notwithstanding any vesting dates set by the Committee, the Committee may, in
its sole discretion, accelerate the exercisability of any Option, which
acceleration shall not affect the terms and conditions of such Option other than
with respect to exercisability. If an Option is exercisable in installments,
such installments or portions thereof which become exercisable shall remain
exercisable until the Option expires.
(d) STOCK OPTION AGREEMENT - OTHER TERMS AND CONDITIONS.
Each Option granted under the Plan shall be evidenced by a Stock Option
Agreement. Except as specifically provided otherwise in such Stock Option
Agreement, each Option granted under the Plan shall be subject to the following
terms and conditions:
(i) Each Option or portion thereof that is
exercisable shall be exercisable for the full amount or for any part
thereof.
(ii) Each share of Stock purchased through the
exercise of an Option shall be paid for in full at the time of the
exercise. Each Option shall cease to be exercisable, as to any share of
Stock, when the Participant purchases the share or exercises a related
SAR or when the Option expires.
(iii) Subject to Section 12(k), Options shall not be
transferable by the Participant except by will or the laws of descent
and distribution and shall be exercisable during the Participant's
lifetime only by him.
(iv) Each Option shall vest and become exercisable
by the Participant in accordance with the vesting schedule established
by the Committee and set forth in the Stock Option Agreement.
(v) At the time of any exercise of an Option, the
Committee may, in its sole discretion, require a Participant to deliver
to the Committee a written representation that the shares to be
acquired upon such exercise are to be acquired for investment and not
for resale or with a view to the distribution thereof. Upon such a
request by the Committee, delivery of such representation prior to the
delivery of any shares issued upon exercise of an Option shall be a
condition precedent to the right of the Participant or such other
person to purchase any shares. In the event certificates for Stock are
delivered under the Plan with respect to which such investment
representation has been obtained, the Committee may cause a legend or
legends to be placed on such certificates to make appropriate reference
to such representation and to restrict transfer in the absence of
compliance with applicable federal or state securities laws.
(vi) Each Participant awarded an Incentive Stock
Option under the Plan shall notify the Company in writing immediately
after the date he or she makes a disqualifying disposition of any Stock
acquired pursuant to the exercise of such Incentive Stock Option. A
disqualifying disposition is any
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disposition (including any sale) of such Stock before the later of (A)
two years after the Date of Grant of the Incentive Stock Option or (B)
one year after the date the Participant acquired the Stock by
exercising the Incentive Stock Option. The Company may, if determined
by the Committee and in accordance with procedures established by it,
retain possession of any Stock acquired pursuant to the exercise of an
Incentive Stock Option as agent for the applicable Participant until
the end of the period described in the preceding sentence, subject to
complying with any instructions from such Participant as to the sale of
such Stock.
(e) INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS.
Notwithstanding anything to the contrary in this Section 7, if an Incentive
Stock Option is granted to a Participant who owns stock representing more than
ten percent of the voting power of all classes of stock of the Company or of a
Subsidiary, the Option Period shall not exceed five years from the Date of Grant
of such Option and the Option Price shall be at least 110 percent of the Fair
Market Value (on the Date of Grant) of the Stock subject to the Option.
(f) $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK
OPTIONS. To the extent the aggregate Fair Market Value (determined as of the
Date of Grant) of Stock for which Incentive Stock Options are exercisable for
the first time by any Participant during any calendar year (under all plans of
the Company) exceeds $100,000, such excess Incentive Stock Options shall be
treated as Nonqualified Stock Options.
(g) RELOAD OPTIONS. The Committee may provide for the grant
to any Participant of additional Options ("Reload Options") upon the exercise of
Options, including Reload Options, through the delivery of shares of Stock or
shares of Class A common stock of the Company; PROVIDED, HOWEVER, that the
Reload Options (i) may only be granted in connection with a grant of
Nonqualified Stock Options; (ii) may only be granted with respect to the same
number of shares of Stock or Class A common stock as were surrendered to
exercise the Nonqualified Stock Options and the number of shares of Stock
withheld for tax purposes pursuant to Section 12(d)(ii), (iii) shall have an
exercise price per share not less than the greater of (A) five dollars more than
the exercise price of the Nonqualified Stock Options, the exercise of which
resulted in the grant of the Reload Options, or (B) 110% of the Fair Market
Value of a share of Stock on the date of exercise of the Nonqualified Stock
Options which resulted in the grant of the Reload Options, (iv) shall not be
exercisable until six months after the exercise of the Nonqualified Stock
Options which resulted in the grant of the Reload Options, (v) shall not be
exercisable after the expiration of the term of the Nonqualified Stock Options,
the exercise of which resulted in the grant of the Reload Options, and (vi)
shall otherwise be subject to the same terms and conditions of the Nonqualified
Stock Options, the exercise of which resulted in the grant of the Reload
Options. Notwithstanding any provision of this Plan or a Stock Option Agreement
to the contrary, unless the Stock Option Agreement specifically provides for the
grant of Reload Options pursuant to Section 7(g) of the Plan, no grant of a
Nonqualified Stock Option shall include a grant of Reload Options.
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8. STOCK APPRECIATION RIGHTS
Any Option granted under the Plan may include SARS, either at
the Date of Grant or, except in the case of an Incentive Stock Option, by
subsequent amendment. The Committee also may award SARs to Eligible Persons
independent of any Option. An SAR shall be subject to such terms and conditions
not inconsistent with the Plan as the Committee shall impose, including, but not
limited to, the following:
(a) VESTING, TRANSFERABILITY AND EXPIRATION. SARs granted in
connection with an Option shall become exercisable, be transferable and shall
expire according to the same vesting schedule, transferability rules and
expiration provisions as the corresponding Option. An SAR granted independent of
an Option shall become exercisable, be transferable and shall expire in
accordance with a vesting schedule, transferability rules and expiration
provisions as established by the Committee and reflected in an Award agreement.
(b) AUTOMATIC EXERCISE. If on the last day of the Option
Period (or in the case of an SAR independent of an option, the period
established by the Committee after which the SAR shall expire), the Fair Market
Value exceeds the Strike Price, the Participant has not exercised the SAR or the
corresponding Option, and neither the SAR nor the corresponding Option has
expired, such SAR shall be deemed to have been exercised by the Participant on
such last day and the Company shall make the appropriate payment therefor.
(c) PAYMENT. Upon the exercise of an SAR, the Company shall
pay to the Participant an amount equal to the number of shares subject to the
SAR multiplied by the excess, if any, of the Fair Market Value of one share of
Stock on the exercise date over the Strike Price. The Company shall pay such
excess in cash, in shares of Stock valued at Fair Market Value, or any
combination thereof, as determined by the Committee. Fractional shares shall be
settled in cash.
(d) METHOD OF EXERCISE. A Participant may exercise an SAR at
such time or times as may be determined by the Committee at the time of grant by
filing an irrevocable written notice with the Committee or its designee,
specifying the number of SARs to be exercised, and the date on which such SARs
were awarded.
(e) EXPIRATION. Except as otherwise provided in the case of
SARs granted in connection with Options, an SAR shall expire on a date
designated by the Committee which is not later than ten years after the Date of
Grant of the SAR.
9. PERFORMANCE SHARES
(a) AWARD GRANTS. The Committee is authorized to establish
Performance Share programs to be effective over designated Award Periods
determined by the Committee. At the beginning of each Award Period, the
Committee will establish in writing Performance Goals based for such Award
Period and a schedule relating the accomplishment of the Performance Goals to
the Awards to be earned by Participants.
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The Committee shall determine the number of Performance Share Units to be
awarded, if any, to each Participant who is selected to receive such an Award.
The Committee may add new Participants to a Performance Share program after its
commencement by making pro-rata grants.
(b) DETERMINATION OF AWARD. At the completion of a
Performance Share Award Period, or at other times as specified by the Committee,
the Committee shall calculate the number of shares of Stock earned with respect
to each Participant's Performance Share Unit Award by multiplying the number of
Performance Share Units granted to the Participant by a performance factor
representing the degree of attainment of the Performance Goals.
(c) PARTIAL AWARDS. A Participant for less than a full Award
Period, whether by reason of commencement or termination of employment or
otherwise, shall receive such portion of an Award, if any, for that Award Period
as the Committee shall determine.
(d) PAYMENT OF PERFORMANCE SHARE UNIT AWARDS. Performance
Share Unit Awards shall be payable in that number of shares of Stock determined
in accordance with Section 9(b); PROVIDED, HOWEVER, that, at its discretion, the
Committee may make payment to any Participant in the form of cash. The amount of
any payment made in cash shall be based upon the Fair Market Value of the Stock
on the day prior to payment. Payments of Performance Share Unit Awards shall be
made as soon as practicable after the completion of an Award Period.
(e) ADJUSTMENT OF PERFORMANCE GOALS. The Committee may,
during the Award Period, make such adjustments to Performance Goals as it may
deem appropriate to compensate for, or reflect, (i) extraordinary or
non-recurring events experienced during an Award Period by the Company or by any
other corporation whose performance is relevant to the determination of whether
Performance Goals have been attained; (ii) any significant changes that may have
occurred during such Award Period in applicable accounting rules or principles
or changes in the Company's method of accounting or in that of any other
corporation whose performance is relevant to the determination of whether an
Award has been earned or (iii) any significant changes that may have occurred
during such Award Period in tax laws or other laws or regulations that alter or
affect the computation of the measures of Performance Goals used for the
calculation of Awards.
(f) APPLICABILITY OF SECTION 162(M). With respect to Awards
of Performance Shares intended to qualify as "performance-based compensation"
under Section 162(m) of the Code, this Section 9 (including the substance of the
Performance Goals, the timing of establishment of the Performance Goals, the
adjustment of the Performance Goals and determination of the Award) shall be
implemented by the Committee in a manner designed to preserve such Awards as
such "performance-based compensation."
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10. Restricted Stock Awards and Phantom Stock Units
(a) AWARD OF RESTRICTED STOCK AND PHANTOM STOCK UNITS.
(i) The Committee shall have the authority (1) to
grant Restricted Stock and Phantom Stock Unit Awards to Eligible
Persons, (2) to issue or transfer Restricted Stock to Participants, and
(3) to establish terms, conditions and restrictions applicable to such
Restricted Stock and Phantom Stock Units, including the Restricted
Period, which may differ with respect to each grantee, the time or
times at which Restricted Stock or Phantom Stock Units shall be granted
or become vested and the number of shares or units to be covered by
each grant.
(ii) Each Participant granted a Restricted Stock
Award shall execute and deliver to the Company an Award agreement with
respect to the Restricted Stock setting forth the restrictions and
other terms and conditions applicable to such Restricted Stock. If the
Committee determines that the Restricted Stock shall be held in escrow
rather than delivered to the Participant pending the release of the
applicable restrictions, the Committee may require the Participant to
additionally execute and deliver to the Company (i) an escrow agreement
satisfactory to the Committee and (ii) the appropriate blank stock
powers with respect to the Restricted Stock covered by such agreement.
If a Participant shall fail to execute a Restricted Stock agreement
and, if applicable, an escrow agreement and stock powers, the Award
shall be null and void. Subject to the restrictions set forth in
Section 10(b), the Participant generally shall have the rights and
privileges of a stockholder as to such Restricted Stock, including the
right to vote such Restricted Stock. At the discretion of the
Committee, cash dividends and stock dividends with respect to the
Restricted Stock may be either currently paid to the Participant or
withheld by the Company for the Participant's account, and interest may
be credited on the amount of cash dividends withheld at a rate and
subject to such terms as determined by the Committee. The cash
dividends or stock dividends so withheld by the Committee and
attributable to any particular share of Restricted Stock (and earnings
thereon, if applicable) shall be distributed to the Participant upon
the release of restrictions on such share and, if such share is
forfeited, the Participant shall have no right to such cash dividends,
stock dividends or earnings.
(iii) Upon the Award of Restricted Stock, the
Committee shall cause a stock certificate registered in the name of the
Participant to be issued and, if it so determines, deposited together
with the stock powers with an escrow agent designated by the Committee.
If an escrow arrangement is used, the Committee may cause the escrow
agent to issue to the Participant a receipt evidencing any stock
certificate held by it registered in the name of the Participant.
(iv) The terms and conditions of a grant of Phantom
Stock Units shall be reflected in a written Award agreement. No shares
of Stock shall be issued at the time a Phantom Stock Unit Award is
made, and the
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Company will not be required to set aside a fund for the payment of any
such Award. At the discretion of the Committee, each Phantom Stock Unit
(representing one share of Stock) awarded to a Participant may be
credited with cash and stock dividends paid by the Company in respect
of one share of Stock ("Dividend Equivalents"). At the discretion of
the Committee, Dividend Equivalents may be either currently paid to the
Participant or withheld by the Company for the Participant's account,
and interest may be credited on the amount of cash Dividend Equivalents
withheld at a rate and subject to such terms as determined by the
Committee. Dividend Equivalents credited to a Participant's account and
attributable to any particular Phantom Stock Unit (and earnings
thereon, if applicable) shall be distributed to the Participant upon
settlement of such Phantom Stock Unit and, if such Phantom Stock Unit
is forfeited, the Participant shall have no right to such Dividends
Equivalents.
(b) RESTRICTIONS.
(i) Restricted Stock awarded to a Participant shall
be subject to the following restrictions until the expiration of the
Restricted Period, and to such other terms and conditions as may be set
forth in the applicable Award agreement: (1) if an escrow arrangement
is used, the Participant shall not be entitled to delivery of the stock
certificate; and (2) the shares shall be subject to forfeiture during
the Restricted Period and restrictions on transferability, each as set
forth in the Award agreement and, to the extent such shares are
forfeited, the stock certificates shall be returned to the Company, and
all rights of the Participant to such shares and as a shareholder shall
terminate without further obligation on the part of the Company.
(ii) Phantom Stock Units awarded to any Participant
shall be subject to (1) forfeiture until the expiration of the
Restricted Period, to the extent provided in the applicable Award
agreement, and to the extent such Phantom Stock Units are forfeited,
all rights of the Participant to such Phantom Stock Units shall
terminate without further obligation on the part of the Company and (2)
such other terms and conditions as may be set forth in the applicable
Award agreement.
(iii) The Committee shall have the authority to
remove any or all of the restrictions on the Restricted Stock and
Phantom Stock Units whenever it may determine that, by reason of
changes in applicable laws or other changes in circumstances arising
after the date of the Restricted Stock Award or Phantom Stock Award,
such action is appropriate.
(c) RESTRICTED PERIOD. The Restricted Period of Restricted
Stock and Phantom Stock Units shall commence on the Date of Grant and shall
expire from time to time as to that part of the Restricted Stock and Phantom
Stock Units indicated in a schedule established by the Committee in the
applicable Award agreement.
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(d) DELIVERY OF RESTRICTED STOCK AND SETTLEMENT OF PHANTOM
STOCK UNITS. Upon the expiration of the Restricted Period with respect to any
shares of Stock covered by a Restricted Stock Award, the restrictions set forth
in Section 10(b) and the applicable Award agreement shall be of no further force
or effect with respect to shares of Restricted Stock which have not then been
forfeited, except as otherwise set forth in the applicable Award agreement. If
an escrow arrangement is used, upon such expiration, the Company shall deliver
to the Participant, or his beneficiary, without charge, the stock certificate
evidencing the shares of Restricted Stock which have not then been forfeited and
with respect to which the Restricted Period has expired (to the nearest full
share) and any cash dividends or stock dividends credited to the Participant's
account with respect to such Restricted Stock and the interest thereon, if any.
Upon the expiration of the Restricted Period with respect to
any Phantom Stock Units covered by a Phantom Stock Unit Award, the Company shall
deliver to the Participant, or his beneficiary, without charge, one share of
Stock for each Phantom Stock Unit which has not then been forfeited and with
respect to which the Restricted Period has expired ("Vested Unit"); PROVIDED,
HOWEVER, that, if so noted in the applicable Award agreement, the Committee may,
in its sole discretion, elect to pay cash or part cash and part Stock in lieu of
delivering only Stock for Vested Units. If cash payment is made in lieu of
delivering Stock, the amount of such payment shall be equal to the Fair Market
Value of the Stock as of the date on which the Restricted Period lapsed with
respect to such Vested Unit.
(e) STOCK RESTRICTIONS. Each certificate representing
Restricted Stock awarded under the Plan shall bear a legend substantially in the
form of the following until the lapse of all restrictions with respect to such
Stock:
Transfer of this certificate and the shares represented hereby
is restricted pursuant to the terms of the Movado Group, Inc. 1996
Stock Incentive Plan and a Restricted Stock Purchase and Award
Agreement, dated as of _____________, between Movado Group, Inc. and
__________________. A copy of such Agreement is on file at the offices
of Movado Group, Inc.
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
(f) APPLICABILITY OF SECTION 162(M). With respect to Awards
of Restricted Stock or Phantom Stock Units intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, the Committee
shall establish and administer Performance Goals in the manner described in
Section 9 as an additional condition to the vesting and payment of such Awards.
11. STOCK BONUS AWARDS
The Committee may issue unrestricted Stock, or other awards
denominated in Stock, under the Plan to Eligible Persons, alone or in tandem
with other
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Awards, in such amounts and subject to such terms and conditions as the
Committee shall from time to time in its sole discretion determine. Stock Bonus
Awards under the Plan shall be granted as, or in payment of, a bonus, or to
provide incentives or recognize special achievements or contributions. With
respect to Stock Bonus Awards intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, the Committee shall establish
and administer Performance Goals in the manner described in Section 9 as an
additional condition to the vesting and payment of such Stock Bonus Awards.
12. GENERAL
(a) ADDITIONAL PROVISIONS OF AN AWARD. Awards to a
Participant under the Plan also may be subject to such other provisions (whether
or not applicable to the benefit awarded to any other Participant) as the
Committee determines appropriate including, without limitation, provisions to
assist the Participant in financing the purchase of Stock upon the exercise of
Options (provided, that the Committee determines that providing such financing
does not violate the Sarbanes-Oxley Act of 2002), provisions for the forfeiture
of or restrictions on resale or other disposition of shares of Stock acquired
under any Award, provisions giving the Company the right to repurchase shares of
Stock acquired under any Award in the event the Participant elects to dispose of
such shares, provisions allowing the Participant to elect to defer the receipt
of payment in respect of Awards for a specified period or until a specified
event, and provisions to comply with Federal and state securities laws and
Federal and state tax withholding requirements. Any such provisions shall be
reflected in the applicable Award agreement.
(b) PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise
specifically provided in the Plan, no person shall be entitled to the privileges
of ownership in respect of shares of Stock which are subject to Awards hereunder
until such shares have been issued to that person.
(c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Company to settle Awards in Stock shall be subject to all applicable laws,
rules, and regulations, and to such approvals by governmental agencies as may be
required. Notwithstanding any terms or conditions of any Award to the contrary,
the Company shall be under no obligation to offer to sell or to sell and shall
be prohibited from offering to sell or selling any shares of Stock pursuant to
an Award unless such shares have been properly registered for sale pursuant to
the Securities Act with the Securities and Exchange Commission or unless the
Company has received an opinion of counsel, satisfactory to the Company, that
such shares may be offered or sold without such registration pursuant to an
available exemption therefrom and the terms and conditions of such exemption
have been fully complied with. The Company shall be under no obligation to
register for sale under the Securities Act any of the shares of Stock to be
offered or sold under the Plan. If the shares of Stock offered for sale or sold
under the Plan are offered or sold pursuant to an exemption from registration
under the Securities Act, the Company may restrict the transfer of such shares
and may legend the Stock
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certificates representing such shares in such manner as it deems advisable to
ensure the availability of any such exemption.
(d) TAX WITHHOLDING.
(i) A Participant may be required to pay to the
Company or any Affiliate and the Company or any Affiliate shall have the right
and is hereby authorized to withhold from any shares of Stock or other property
deliverable under any Award or from any compensation or other amounts owing to a
Participant the amount (in cash, Stock or other property) of any required tax
withholding and payroll taxes in respect of an Award, its exercise, or any
payment or transfer under an Award or under the Plan and to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes.
(ii) Without limiting the generality of clause (i)
above, the Committee may, in its sole discretion, permit a Participant to
satisfy, in whole or in part, the foregoing withholding liability (but no more
than the minimum required withholding liability) by (A) delivery of Mature
Shares of Stock or Class A common stock owned by the Participant with a Fair
Market Value equal to such withholding liability or (B) having the Company
withhold from the number of shares of Stock otherwise issuable pursuant to the
exercise or settlement of the Award a number of shares with a Fair Market Value
equal to such withholding liability.
(e) CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. No employee of
the Company, a Subsidiary or Affiliate, or other person, shall have any claim or
right to be granted an Award under the Plan or, having been selected for the
grant of an Award, to be selected for a grant of any other Award. Neither the
Plan nor any action taken hereunder shall be construed as giving any Participant
any right to be retained in the employ or service of the Company, a Subsidiary
or an Affiliate.
(f) DESIGNATION AND CHANGE OF BENEFICIARY. Each Participant
shall file with the Committee a written designation of one or more persons as
the beneficiary who shall be entitled to receive the amounts payable with
respect to an Award, if any, due under the Plan upon his death. A Participant
may, from time to time, revoke or change his beneficiary designation without the
consent of any prior beneficiary by filing a new designation with the Committee.
The last such designation received by the Committee shall be controlling;
PROVIDED, HOWEVER, that no designation, or change or revocation thereof, shall
be effective unless received by the Committee prior to the Participant's death,
and in no event shall it be effective as of a date prior to such receipt. If no
beneficiary designation is filed by a Participant, the Beneficiary shall be
deemed to be his or her spouse or, if the Participant is unmarried at the time
of death, his or her estate.
(g) PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. If the
Committee shall find that any person to whom any amount is payable under the
Plan is unable to care for his affairs because of illness or accident, or is a
minor, or has died, then any payment due to such person or his estate (unless a
prior claim therefor has been made
B-19
by a duly appointed legal representative) may, if the Committee so directs the
Company, be paid to his spouse, child, relative, an institution maintaining or
having custody of such person, or any other person deemed by the Committee to be
a proper recipient on behalf of such person otherwise entitled to payment. Any
such payment shall be a complete discharge of the liability of the Committee and
the Company therefor.
(h) NO LIABILITY OF COMMITTEE MEMBERS. No member of the
Committee shall be personally liable by reason of any contract or other
instrument executed by such member or on his behalf in his capacity as a member
of the Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Committee and each
other employee, officer or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; PROVIDED, HOWEVER, that approval of the Board
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
(i) GOVERNING LAW. The Plan shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to contracts made and performed wholly within the State of New York.
(j) FUNDING. No provision of the Plan shall require the
Company, for the purpose of satisfying any obligations under the Plan, to
purchase assets or place any assets in a trust or other entity to which
contributions are made or otherwise to segregate any assets, nor shall the
Company maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for such
purposes. Holders shall have no rights under the Plan other than as unsecured
general creditors of the Company, except that insofar as they may have become
entitled to payment of additional compensation by performance of services, they
shall have the same rights as other employees under general law.
(k) NONTRANSFERABILITY.
(i) Each Award shall be exercisable only by a
Participant during the Participant's lifetime, or, if permissible under
applicable law, by the Participant's legal guardian or representative. No Award
may be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant otherwise than by will or by the laws of descent and
distribution and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company, a Subsidiary or an Affiliate; provided that the designation of a
beneficiary shall not constitute an assignment, alienation, pledge, attachment,
sale, transfer or encumbrance.
B-20
(ii) Notwithstanding the foregoing, the Committee
may, in its sole discretion, permit Awards other than Incentive Stock Options to
be transferred by a Participant, without consideration, subject to such rules as
the Committee may adopt consistent with any applicable Award agreement to
preserve the purposes of the Plan, to:
(A) any person who is a "family member" of the
Participant, as such term is used in the
instructions to Form S-8 (collectively, the
"Immediate Family Members");
(B) a trust solely for the benefit of the
Participant and his or her Immediate Family
Members;
(C) a partnership or limited liability company
whose only partners or shareholders are the
Participant and his or her Immediate Family
Members; or
(D) any other transferee as may be approved either
(a) by the Board or the Committee in its sole
discretion, or (b) as provided in the
applicable Award agreement;
(each transferee described in clauses (A), (B), (C) and (D) above is hereinafter
referred to as a "Permitted Transferee"); PROVIDED that the Participant gives
the Committee advance written notice describing the terms and conditions of the
proposed transfer and the Committee notifies the Participant in writing that
such a transfer would comply with the requirements of the Plan.
(iii) The terms of any Award transferred in
accordance with the immediately preceding sentence shall apply to the Permitted
Transferee and any reference in the Plan, or in any applicable Award Agreement,
to a Participant shall be deemed to refer to the Permitted Transferee, except
that (A) Permitted Transferees shall not be entitled to transfer any Awards,
other than by will or the laws of descent and distribution; (B) Permitted
Transferees shall not be entitled to exercise any transferred Option unless
there shall be in effect a registration statement on an appropriate form
covering the shares of Stock to be acquired pursuant to the exercise of such
Option if the Committee determines, consistent with any applicable Award
agreement, that such a registration statement is necessary or appropriate, (C)
the Committee or the Company shall not be required to provide any notice to a
Permitted Transferee, whether or not such notice is or would otherwise have been
required to be given to the Participant under the Plan or otherwise, and (D) the
consequences of the termination of the Participant's employment by, or services
to, the Company, a Subsidiary or an Affiliate under the terms of the Plan and
the applicable Award agreement shall continue to be applied with respect to the
Participant, following which any transferred Options shall be exercisable by the
Permitted Transferee only to the extent, and for the periods, specified in the
Plan and the applicable Award agreement.
(l) RELIANCE ON REPORTS. Each member of the Committee and
each member of the Board shall be fully justified in relying, acting or failing
to act, and
B-21
shall not be liable for having so relied, acted or failed to act in good faith,
upon any report made by the independent public accountant of the Company and its
Affiliates and upon any other information furnished in connection with the Plan
by any person or persons other than himself.
(m) RELATIONSHIP TO OTHER BENEFITS. No payment under the
Plan shall be taken into account in determining any benefits under any pension,
retirement, profit sharing, group insurance or other benefit plan of the Company
or any Subsidiary except as otherwise specifically provided in such other plan.
(n) EXPENSES. The expenses of administering the Plan shall
be borne by the Company and its Affiliates.
(o) PRONOUNS. Masculine pronouns and other words of
masculine gender shall refer to both men and women.
(p) TITLES AND HEADINGS. The titles and headings of the
sections in the Plan are for convenience of reference only, and in the event of
any conflict, the text of the Plan, rather than such titles or headings shall
control.
(q) TERMINATION OF EMPLOYMENT. Unless an applicable Award
agreement provides otherwise, for purposes of the Plan a person who transfers
from employment or service with the Company to employment or service with a
Subsidiary or an Affiliate or vice versa shall not be deemed to have terminated
employment or service with the Company, a Subsidiary or an Affiliate.
(r) SEVERABILITY. If any provision of the Plan or any Award
agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in
any jurisdiction or as to any person or Award, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to the applicable laws, or if it
cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, person or Award and the
remainder of the Plan and any such Award shall remain in full force and effect.
13. Changes in Capital Structure
Awards granted under the Plan and any agreements evidencing
such Awards, the maximum number of shares of Stock subject to all Awards stated
in Section 5(a) and the maximum number of shares of Stock with respect to which
any one person may be granted Awards during any period stated in Sections 5(d)
or 5(e) shall be subject to adjustment or substitution, as determined by the
Committee in its sole discretion, as to the number, price or kind of a share of
Stock or other consideration subject to such Awards or as otherwise determined
by the Committee to be equitable (i) in the event of changes in the outstanding
Stock or in the capital structure of the Company by reason of stock or
extraordinary cash dividends, stock splits, reverse stock splits,
recapitalization,
B-22
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the Date of Grant of any such
Award or (ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution or
enlargement of the rights granted to, or available for, Participants, or which
otherwise warrants equitable adjustment because it interferes with the intended
operation of the Plan. Any adjustment in Incentive Stock Options under this
Section 13 shall be made only to the extent not constituting a "modification"
within the meaning of Section 424(h)(3) of the Code, and any adjustments under
this Section 13 shall be made in a manner which does not adversely affect the
exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with
respect to Awards intended to qualify as "performance-based compensation" under
Section 162(m) of the Code, such adjustments or substitutions shall be made only
to the extent that the Committee determines that such adjustments or
substitutions may be made without causing the Company to be denied a tax
deduction on account of Section 162(m) of the Code. The Company shall give each
Participant notice of an adjustment hereunder and, upon notice, such adjustment
shall be conclusive and binding for all purposes.
Notwithstanding the above, in the event of any of the
following:
A. The Company is merged or consolidated with another
corporation or entity and, in connection therewith, consideration is received by
shareholders of the Company in a form other than stock or other equity interests
of the surviving entity;
B. All or substantially all of the assets of the Company
are acquired by another person;
C. The reorganization or liquidation of the Company; or
D. The Company shall enter into a written agreement to
undergo an event described in clauses A, B or C above,
then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and pay to the
holders thereof, in cash or stock, or any combination thereof, the value of such
Awards based upon the price per share of Stock received or to be received by
other shareholders of the Company in the event. The terms of this Section 13 may
be varied by the Committee in any particular Award agreement.
14. Effect of Change in Control
Except to the extent reflected in a particular Award
agreement:
(a) In the event of a Change in Control, notwithstanding
any provision of the Plan to the contrary, all Options and SARs shall become
immediately exercisable with respect to 100 percent of the shares subject to
such Option or SAR, and the Restricted Period shall expire immediately with
respect to 100 percent of such Phantom Stock Units or shares of Restricted Stock
(including a waiver of any applicable
B-23
Performance Goals) and, to the extent practicable, such acceleration of
exercisability and expiration of the Restricted Period (as applicable) shall
occur in a manner and at a time which allows affected Participants the ability
to participate in the Change in Control transaction with respect to the Stock
subject to their Awards.
(b) In the event of a Change in Control, all incomplete
Award Periods in effect on the date the Change in Control occurs shall end on
the date of such change, and the Committee shall (i) determine the extent to
which Performance Goals with respect to each such Award Period have been met
based upon such audited or unaudited financial information then available as it
deems relevant, (ii) cause to be paid to each Participant partial or full Awards
with respect to Performance Goals for each such Award Period based upon the
Committee's determination of the degree of attainment of Performance Goals, and
(iii) cause all previously deferred Awards to be settled in full as soon as
possible.
(c) In addition, in the event of a Change in Control, the
Committee may in its discretion and upon at least 10 days' advance notice to the
affected persons, cancel any outstanding Awards and pay to the holders thereof,
in cash or stock, or any combination thereof, the value of such Awards based
upon the price per share of Stock received or to be received by other
shareholders of the Company in the event.
(d) The obligations of the Company under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to substantially all of the
assets and business of the Company. The Company agrees that it will make
appropriate provisions for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
15. Nonexclusivity of the Plan
Neither the adoption of this Plan by the Board nor the
submission of this Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under this Plan, and
such arrangements may be either applicable generally or only in specific cases.
16. Amendments and Termination
(a) AMENDMENT AND TERMINATION OF THE PLAN. The Board may
amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof
at any time; PROVIDED that no such amendment, alteration, suspension,
discontinuation or termination shall be made without shareholder approval if
such approval is necessary to comply with any tax or regulatory requirement
applicable to the Plan (including as necessary to comply with any applicable
stock exchange listing requirement or to prevent the Company from being denied a
tax deduction on account of Section 162(m) of the
B-24
Code); and PROVIDED FURTHER that any such amendment, alteration, suspension,
discontinuance or termination that would impair the rights of any Participant or
any holder or beneficiary of any Award theretofore granted shall not to that
extent be effective without the consent of the affected Participant, holder or
beneficiary.
(b) AMENDMENT OF AWARD AGREEMENTS. The Committee may, to the
extent consistent with the terms of any applicable Award agreement, waive any
conditions or rights under, amend any terms of, or alter, suspend, discontinue,
cancel or terminate, any Award theretofore granted or the associated Award
agreement, prospectively or retroactively; provided that any such waiver,
amendment, alteration, suspension, discontinuance, cancellation or termination
that would impair the rights of any Participant or any holder or beneficiary of
any Option theretofore granted shall not to that extent be effective without the
consent of the affected Participant, holder or beneficiary; and PROVIDED FURTHER
that, without stockholder approval, (i) no amendment or modification may reduce
the exercise price of any Option, (ii) the Committee may not cancel any
outstanding Option and replace it with a new Option (with a lower exercise
price) in a manner which would either (A) be reportable on the Company's proxy
statement as Options which have been "repriced" (as such term is used in Item
402 of Regulation S-K promulgated under the Exchange Act), or (B) result in any
Option being accounted for under the "variable" method for financial statement
reporting purposes and (iii) the Committee may not take any other action which
is considered a "repricing" for purposes of the shareholder approval rules of
any applicable stock exchange.
* * *
As amended and restated by the Board of
Directors of Movado Group, Inc. at a meeting
held on April 8, 2004
APPENDIX C
----------
MOVADO GROUP, INC.
AMENDED AND RESTATED
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
Effective June 1, 1995
Amended and Restated Effective January 1, 1998
Amended and Restated Effective January 1, 2002
Amended and Restated Effective _____ 17, 2004
MOVADO GROUP, INC.
AMENDED AND RESTATED
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
TABLE OF CONTENTS
PAGE
----
ARTICLE I
Definitions
1.1 Account.............................................................1
1.2 Administrator.......................................................1
1.3 Base Salary.........................................................1
1.4 Change in Control...................................................1
1.5 Class Year Account..................................................3
1.6 Code................................................................4
1.7 Company.............................................................4
1.8 Company Stock.......................................................4
1.9 Compensation........................................................4
1.10 Effective Date......................................................4
1.11 Eligible Employee...................................................4
1.12 Employee............................................................4
1.13 Employers...........................................................4
1.14 Employer Contribution...............................................4
1.15 ERISA...............................................................4
1.16 Group I Employee....................................................4
1.17 Group II Employee...................................................4
1.18 Matching Contribution...............................................5
1.19 Option Deferrals....................................................5
1.20 Participant.........................................................5
1.21 Plan................................................................5
1.22 Plan Year...........................................................5
1.23 Salary Deferrals....................................................5
1.24 Salary Deferral Election............................................5
1.25 Total and Permanent Disability......................................5
1.26 Trust...............................................................5
1.27 Trustee.............................................................5
1.28 Year of Service.....................................................5
ARTICLE II
Participation
2.1 Eligibility for Participation.......................................6
2.2 Commencement of Participation.......................................6
2.3 Benefits............................................................6
PAGE
----
ARTICLE III
Contributions
3.1 Salary Deferrals....................................................7
3.2 Matching Contributions..............................................8
3.3 Company Stock.......................................................8
3.4 Employer Contributions..............................................9
3.5 Time of Contributions...............................................9
3.6 Form of Contributions..............................................10
ARTICLE IV
Vesting
4.1 Vesting............................................................10
ARTICLE V
Accounts
5.1 Accounts...........................................................11
5.2 Investments, Gains and Losses......................................12
5.3 Forfeitures........................................................13
ARTICLE VI
Distributions
6.1 Payment............................................................13
6.2 Commencement of Payment............................................13
ARTICLE VII
Beneficiarie
7.1 Beneficiaries......................................................15
7.2 Lost Beneficiary...................................................15
ARTICLE VIII
Funding
8.1 Prohibition Against Funding........................................16
8.2 Deposits in Trust..................................................16
8.3 Indemnification of Trustee.........................................17
8.4 Withholding of Employee Contributions..............................17
ARTICLE IX
Claims Procedure
9.1 General............................................................17
9.2 Claim Review.......................................................17
9.3 Right of Appeal....................................................18
9.4 Review of Appeal...................................................18
9.5 Designation........................................................18
-ii-
PAGE
----
ARTICLE X
Administration of the Plan
10.1 Committee as Administrator.........................................19
10.2 Actions Taken by the Committee.....................................19
10.3 Bond and Compensation..............................................19
10.4 Duties of the Committee............................................19
10.5 Employers to Furnish Information...................................20
10.6 Expenses...........................................................20
10.7 Indemnification....................................................21
ARTICLE XI
General Provisions
11.1 No Assignment......................................................21
11.2 No Employment Rights...............................................21
11.3 Incompetence.......................................................22
11.4 Identity...........................................................22
11.5 Other Benefits.....................................................22
11.6 No Liability.......................................................22
11.7 Insolvency.........................................................22
11.8 Amendment and Termination..........................................23
11.9 Employer Determinations............................................23
11.10 Construction.......................................................23
11.11 Governing Law......................................................23
11.12 Severability.......................................................24
11.13 Headings...........................................................24
11.14 Terms..............................................................24
11.15 Approval of IRS....................................................24
11.16 Term...............................................................24
-iii-
MOVADO GROUP, INC.
AMENDED AND RESTATED
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
Movado Group, Inc., a New York corporation, Swiss-Am, Inc., a
New Jersey corporation, and Movado Retail Group, Inc., a New Jersey corporation,
hereby adopt this Amended and Restated Movado Group, Inc. Deferred Compensation
Plan for Executives.
ARTICLE I
DEFINITIONS
1.1 ACCOUNT. The bookkeeping account established for each
Participant as provided in Section 5.1 hereof.
1.2 ADMINISTRATOR. The committee appointed pursuant to ARTICLE X.
1.3 BASE SALARY.
(a) The amount payable to a Participant by the Employers as
basic salary attributable to services performed in a Plan Year. Base Salary
shall only include regularly scheduled salary payable throughout the year, as
determined by the Employers, and shall not include bonuses or irregular
remuneration.
(b) Notwithstanding subsection (a), for those Employees
classified by an Employer as sales executives, the term Base Salary shall only
include base salary and shall not include commissions and bonuses.
1.4 CHANGE IN CONTROL. The occurrence during the term of the Plan
of:
(a) The commencement (within the meaning of Rule 14d-2 under
the Securities Exchange Act of 1934 (the "Act")) of a tender offer for more than
twenty percent (20%) of the Company's outstanding shares of capital stock having
voting power in the election of directors (the "Voting Securities").
(b) An acquisition (other than directly from the Company) of
any voting securities of the Company by any "Person" (as the term is used for
purposes of section 13(d) or 14(d) of the Act) immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the Act) of twenty percent (20%) or more of the combine l voting power of
the Company's then outstanding Voting Securities, provided, however that in
determining whether a Change in Control has occurred, Voting Securities which
are acquired in a "Non-Control Acquisition") (as hereinafter defined) shall not
constitute an acquisition) which would cause a Change in Control. A Non-Control
Acquisition shall mean an acquisition by (1) an employee benefit plan (or a
trust forming a part thereof or a trustee thereof acting solely in its capacity
as trustee) maintained by the Company or by any corporation or other Person of
which a majority of its voting power or its voting equity securities or equity
interest as owned, directly or indirectly, by the Company (for purposes of this
definition, a subsidiary); (2) the Company or its subsidiaries; or (3) any
Person who files in connection with such acquisition a Schedule 13D which
expressly disclaims any intention to seek control of the Company and does not
expressly reserve the right to seek such control; provided, however, that any
amendment to such statement of intent which either indicates an intention or
reserves the right to seek control shall be deemed an "acquisition" of the
securities of the Company reported in such filing as beneficially owned by such
Person for purposes of this paragraph.
(c) The individuals who, as of July 1, 2002, are members of
the board (the "Incumbent Board"), ceasing for any reason to constitute at least
two-thirds (2/3) of the members of the board; provided, however, that if the
election, or nomination for election by the Company's common stockholders, of
any new director was approved by a vote of at least two-thirds (2/3) of the
Incumbent Board, such new director shall, for purposes of this Plan, be
considered as a member of the Incumbent Board; provided further, however, that
no individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
Act) or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest") including by reason
of any agreement intended to avoid or settle any Election Contest or Proxy
Contest.
2
(d) Approval by stockholders of the Company of:
(1) merger, consolidation or reorganization involving
the Company, unless such merger, consolidation or reorganization is a
"Non-Control Transaction," i.e., meets each of the requirements described in
(i), (ii) or (iii) below: (i) the stockholders of the Company, immediately
before such merger, consolidation or reorganization, own, directly or
indirectly, immediately following such merger, consolidation or reorganization,
at least seventy percent (70%) if the outstanding voting securities of the
corporation resulting from such merger, consolidation or reorganization (the
"Surviving Corporation") in substantially the same proportion as their ownership
of the voting securities immediately before such merger, consolidation or
reorganization; or (ii) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such merger,
consolidation or reorganization constitute at least two-thirds (2/3) of the
members of the board of director of the Surviving Corporation immediately
following the consummation of such merger, consolidation or reorganization; and
(iii) no Person other than the Company, any subsidiary, any employee benefit
plan (or any trust forming a part thereof or a trustee thereof acting solely in
its capacity as trustee) maintained by the Company, the Surviving Corporation,
or any Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of twenty percent (20%)
or more of the then outstanding Voting Securities has Beneficial Ownership of
thirty percent (30%) or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities immediately following the
consummation of such merger, consolidation or reorganization.
(2) A complete liquidation or dissolution of the
Company.
(3) An agreement for the sale or other disposition of
all or substantially all of the assets of the Company to any Person (other than
a transfer to an affiliate).
1.5 CLASS YEAR ACCOUNT. The bookkeeping subaccounts established
for each Participant as provided in section 5.1 hereof.
3
1.6 CODE. The Internal Revenue Code of 1986, as amended.
1.7 COMPANY. Movado Group, Inc., a New York corporation.
1.8 COMPANY STOCK. Common stock of the Company.
1.9 COMPENSATION. The Participant's Base Salary, bonuses and other
remuneration from the Employer.
1.10 EFFECTIVE DATE. The Plan was originally effective on June 1,
1995. This amendment and restatement is effective _____ 2004.
1.11 ELIGIBLE EMPLOYEE. An Employee of an Employer who is a
management or highly compensated Employee within the meaning of sections 201(2),
301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974,
as amended.
1.12 EMPLOYEE. Any person employed by an Employer.
1.13 EMPLOYERS. Movado Group, Inc., a New York corporation;
Swiss-Am, Inc., a New Jersey corporation, and Movado Retail Group, Inc., a New
Jersey corporation.
1.14 EMPLOYER CONTRIBUTION. A discretionary contribution made by
the Employers to the Trust that is credited to one or more Participant's
Accounts in accordance with the terms of Section 2.3 hereof.
1.15 ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
1.16 GROUP I EMPLOYEE. An Employee. who is designated as a Group I
Employee by an Employer in Schedule A attached hereto, as such schedule may be
amended by the Employer from time to time.
1.17 GROUP II EMPLOYEE. An Employee who is designated as a Group II
Employee by an Employer in Schedule A attached hereto, as such schedule may be
amended by the Employer from time to time.
4
1.18 MATCHING CONTRIBUTION. A contribution made by the Employers to
the Trust that is credited to one or more Participant's Accounts in accordance
with the terms of Section 3.2 hereof.
1.19 OPTION DEFERRALS. The amount of potential option gain that a
Participant elects to defer in accordance with Section 3.5 hereof.
1.20 PARTICIPANT. An Eligible Employee who has become a Participant
as provided in Section 3.1 and whose Account has not been fully distributed.
1.21 PLAN. The Amended and Restated Movado Group, Inc. Deferred
Compensation Plan for Executives.
1.22 PLAN YEAR. The twelve (12) month period ending December 31.
1.23 SALARY DEFERRALS. The portion of Compensation that a
Participant elects to defer in accordance with Section 3.1 hereof.
1.24 SALARY DEFERRAL ELECTION. The separate written agreement,
submitted to the Administrator, by which an Eligible Employee agrees to
participate in this Plan and make Salary Deferral hereunder.
1.25 TOTAL AND PERMANENT DISABILITY. Any medically determinable
physical or mental disorder hat renders a Participant incapable of continuing in
the employment of an Employer and is (expected to continue for the remainder of
a Participant's life, as determined by the Administrator in its sole discretion.
1.26 TRUST. The Trust under the Plan.
1.27 TRUSTEE. The trustee under the Trust and any successor Trustee
appointed pursuant to the Trust.
1.28 YEAR OF SERVICE. A Participant's twelve (12) month period of
employment with an Employer beginning on the Participant's first day of
employment with the Employer. Periods of employment of less than twelve (12)
full months shall not constitute a Year of Service.
5
ARTICLE II
PARTICIPATION
2.1 ELIGIBILITY FOR PARTICIPATION.
(a) The Employers shall determine which Eligible Employees
shall become Participants and the category of benefits, under Section 2.3, to
which they will be entitled. The Employers' determination under this Section 2.1
and under Section 2.3 shall be set forth in Schedule A, attached hereto.
(b) An Employer may determine that a Participant shall cease
being a Participant as of any date specified by it; provided, however, that the
Employer may not reduce the Account of such Participant as of the date such
determination is made. Such determination shall be specified in Schedule B.
2.2 COMMENCEMENT OF PARTICIPATION.
(a) Each Eligible Employee selected to become a Participant
(pursuant to Section 1.1) shall become a Participant as of the date specified by
an Employer, as set forth in Schedule A.
(b) Notwithstanding subsection (a), a Salary Deferral
Election with respect to a Plan year shall not be effective except to the extent
it complies with Section 3.1.
2.3 BENEFITS. The Employers shall determine, from time to time,
whether a Participant is to be treated as a Group I or Group II Employee. An
Employer may change the classification of any Participant as of any date
specified by it; provided, however, that the Account of such Participant shall
not be reduced by such change of classification. The classification of any
Participant shall be set forth in Schedule A. Participants shall cease to
contribute hereunder after they cease to be employed by any of the Employers.
6
ARTICLE III
CONTRIBUTIONS
3.1 SALARY DEFERRALS.
(a) The Employers shall credit to the Account of a
Participant an amount equal to the amount designated in the Participant's Salary
Deferral Election for each Plan Year. Such amounts shall not be made available
to such Participant, except as provided in ARTICLE VI, and hall reduce such
Participant's Compensation from an Employer in accordance with the provisions of
the applicable Salary Deferral Election; provided, however, that all such
amounts shall be subject to the rights of the general creditors of each of the
Employers as provided in ARTICLE VIII.
(b) Each Eligible Employee shall deliver a Salary Deferral
Election to his or her Employer before any Salary Deferrals become effective.
Such Salary Deferral Election shall be void with respect to any Salary Deferral
unless submitted before the beginning of the calendar year during which the
amount to be deferred will be earned; provided, however, that in the year in
which this Plan is first adopted or an Employee is first eligible to
participate, such Salary Deferral election may be filed within thirty (30) days
of the date on which this Plan is adopted or the date on which an Employee is
first eligible to participate, respectively, with respect to Compensation earned
during the remainder of the calendar year.
(c) The Salary Deferral Election shall designate the amount
of Compensation deferred by each Participant and such other items as the
Administrator may prescribe. Such designations shall remain effective unless
amended as provided in subsection (d), below. There shall be no maximum limit on
the Salary Deferrals permitted for each Participant.
(d) A Participant may amend his or her Salary Deferral
Election from time to time for any Plan Year that has not yet commenced. If a
Participant amends his or her Salary Deferral Election in a given Plan Year to
reduce or discontinue Salary Deferrals for the balance of that Plan Year, then
the Participant's Account shall be reduced by ten
7
percent (10%) of such unpaid amount, with such reduction being made from the
Participant's Salary Deferral subaccount (or such other subaccount as the
Administrator shall determine).
3.2 MATCHING CONTRIBUTIONS.
(a) Each Employer shall also credit to the Account of each
Participant who is its Employee, who is a Group I Employee and who makes Salary
Deferrals a Marching Contribution in an amount equal to one hundred percent
(100%) of the Salary Deferrals contributed by such Participant up to a maximum
of ten percent (10%) of such Participant's Base Salary.
(b) Each Employer shall also credit to the Account of each
Participant who is its Employee, who is a Group II Employee and who makes Salary
Deferrals a Marching Contribution in an amount equal to one hundred percent
(100%) of the Salary Deferrals contributed by such Participant up to a maximum
of five percent (5%) of such Participant's Base Salary.
(c) Matching Contributions for a Plan Year will be credited
to the Account of a Participant under this Section 3.2 only if such Participant
is an Employee on the last day of such Plan Year. The requirement set forth in
this Section 3.2(c) shall be waived in the event of: (i) the death of a
Participant during such Plan Year, (ii) the termination of the Participant's
employment after having incurred a Total and Permanent Disability during such
Plan Year, or (iii) the termination of the Participant's employment during such
Plan Year after having reached the age of sixty-five (65).
(d) Twenty percent (20%) of the Matching Contributions for a
Participant shall be made in rights to Company Stock, as determined under
Section 3.3.
(e) Matching Contributions for a Plan Year shall be made no
earlier than the last day of each quarter of such Plan Year. Matching
Contributions made during a Plan Year shall remain subject to all conditions
specified in this Plan, including those in subsection (c) above.
8
3.3 COMPANY STOCK.
(a) Matching Contributions for a Participant in the form of
rights to Company Stock shall consist of bookkeeping credits to the Accounts and
Class Year Accounts for such Participant. Such credits will initially be
determined by crediting to such Participant's Accounts and Class Year Accounts
the number of shares (including fractional shares) of Company Stock that such
Matching Contribution could purchase based upon the value of the Company Stock
at the end of the month in which such Matching Contribution is made (or
credited). All determinations of the value of Company Stock will be made by the
Treasurer of the Company in his or he sole discretion.
(b) Dividends declared on Company Stock shall not be
credited to the Account and Class Year Accounts of any Participant.
(c) When a Participant or Beneficiary is entitled to a
distribution pursuant to ARTICLE VI with respect to his or her rights to Company
Stock, the Company shall issue to the Participant or Beneficiary the number of
shares of Company Stock that equal the number of full shares then credited in
such Participant's Accounts. The Company shall pay any fractional shares in
cash. If payment to the Participant or Beneficiary is being made in
installments, the Administrator, in its sole discretion, shall determine whether
such Company Stock shall be paid in like installments, as a lump-sum in
connection with such installments or in any other manner consistent with such
installment payments.
3.4 EMPLOYER CONTRIBUTIONS. The Employers reserve the right to
make discretionary contributions to Participants' Accounts in such amount and in
such manner as may be determined by the Employers.
3.5 TIME OF CONTRIBUTIONS.
(a) Salary Deferrals shall be transferred to the Trust as
soon as administratively feasible following each payroll period. Matching
Contributions (other than Company Stock or the rights to Company Stock) and
Option Deferrals shall be transferred to the Trust no later than thirty (30)
days following the last day of the Plan Year. The Employers shall also transmit
at the same time any necessary instructions regarding the allocation of such
amounts among the Accounts of Participants.
9
(b) Employer Contributions shall be transferred to the Trust
at such time as the Employers shall determine. The Employers shall also transmit
at that time any necessary instructions regarding the allocation of such amounts
among the Accounts of Participants.
3.6 FORM OF CONTRIBUTIONS. All Salary Deferrals, Matching
Contributions and Employs Contributions to the Trust shall be made in the form
of cash or cash equivalents of United States currency, except as otherwise
provided herein. Notwithstanding the foregoing, Salary Referrals may be made in
the form of Company Stock or rights to Company Stock which the Participant would
otherwise be entitled to receive as Compensation.
ARTICLE IV
VESTING
4.1 VESTING.
(a) Except as otherwise provided herein, a Participant shall
have a nonforfeitable right to the vested portion of his or her Class Year
Accounts; provided, however, that all such amounts shall be subject to the
rights of the general creditors of the Employers as provide in ARTICLE VII.
(b) Each Class Year Account of a Participant will vest
twenty percent (20%) if the Participant is still an Employee on the last day of
each Plan Year beginning with the Plan Year of such Class Year Account.
Thereafter, such Class Year Account shall vest an additional twenty percent
(20%) on the last day of each Plan Year as long as the Participant is still an
Employee and therefore shall be fully vested on the last day of the fourth Plan
Year following the first plan Year of such Class Year Account if the Participant
is still then an Employee. Further vesting shall cease once a Participant is no
longer an Employee.
(c) The portion of a Participant's Class Year Accounts
attributable to Salary Deferral and Option Deferrals, and earnings thereon,
shall be fully vested.
10
(d) A Participant who attains the age of sixty-five (65)
shall be fully vested in the amounts credited to all of his or her Accounts.
(e) A Participant who has a termination of employment due to
Total and Permanent Disability shall be fully vested in the amounts credited to
all of his or her Class Year Account.
(f) If a Change in Control occurs, all amounts attributable
to Matching Contributions shall be fully vested as of the effective date of such
Change in Control.
(g) Any amounts credited to a Participant's Class Year
Accounts that arc not vested a the time of his or her termination of employment
with an Employer shall be forfeited. The Administrator shall determine the
extent to which such forfeiture shall consist of rights to Company Stock.
ARTICLE V
ACCOUNTS
5.1 ACCOUNTS.
(a) (1) The Administrator shall establish and maintain a
bookkeeping account in the name of each Participant. Unless otherwise directed
by the Employers, the Trustee shall also maintain and invest separate omnibus
accounts that correspond to each Participant's Account.
(2) The Administrator may also establish any
subaccounts that it feels may be appropriate. The Administrator shall also
establish and maintain subaccounts in each Participant's Account that shall be
denominated as Class Year Accounts. The Administrator shall all ) establish and
maintain subaccounts in each Participant's Account for rights to Company Stock.
(b) (1) Each Participant's Account shall be credited with
Salary Deferrals (as specified in the Participant's Salary Deferral Election),
any Matching Contributions allocable thereto, any Option Deferrals, any Employer
Contributions and any earnings or losses on the foregoing. Each Participant's
Account shall be reduced by any
11
distributions made plus any federal and state tax withholding and any social
security withholding tax as may be required by law.
(2) Separate Class Year Accounts for a Participant
shall consist of each Participant's Salary Deferrals, Option Deferrals, Matching
Contributions and Employer Contributions that are made with respect to a given
Plan Year and any earnings or losses on such amounts Class Year Accounts shall
be separately maintained for a Participant for each Plan Year un I such Class
Year Accounts are fully vested (as provided in ARTICLE IV), at which time
successfully vested Class Year Accounts shall be merged.
5.2 INVESTMENTS, GAINS AND LOSSES.
(a) (1) By written investment directions to the
Administrator, each Participant shall direct the investment of his or her
Account (other than the subaccount for rights to Company Stock) among the
investment funds available under this Plan. The Administrator may require
separate investment directions with respect to each Class Year Account of a
Participant. In the absence of timely instructions, a Participant's Account
shall be invested in a money market fund as selected by the Administrator. In
accordance with rules established by the Administrator, each Participant shall
be allowed to modify his or her investment directions (or the initial investment
made in the absence of directions from the Participant) with respect to all or
any portion of his or her Account, effective as of the first day following the
date of modification (or such other time specified by the Administrator). A
Participant's change of investment directions shall apply to the existing
balance in his or her Account and to future amounts o be credited thereto, as
the Participant may elect.
(2) Notwithstanding subsection (a)(1), neither the
Administrator nor the Trustee are obligated to follow any investment instruction
received by a Participant pursuant to subsection (a)(1).
(3) The Employers, or the Trustee if an Employer so
directs, shall, from time to time, establish the investment funds available
under the Plan.
(b) The Administrator shall adjust the amounts credited to
each Participant's Account to reflect Salary Deferrals, Option Deferrals,
Matching Contributions,
12
Employer Contributions, investment experience, distributions and any other
appropriate adjustments. Such adjustments its shall be made as frequently as is
administratively feasible.
5.3 FORFEITURES. Any forfeitures from a Participant's Account
shall continue to be held in the Trust, shall be separately invested and shall
be used to reduce succeeding Matching Contributions and Employer Contributions
until such forfeitures have been entirely so applied. If no further Matching
Contributions or Employee Contributions will be made, then such forfeitures
shall be returned to the Employer that made such contribution.
ARTICLE VI
DISTRIBUTIONS
6.1 PAYMENT.
(a) (1) Benefits shall be paid in roughly equal annual
installments over a period of ten (10) years payable in January of each year.
(2) Notwithstanding subsection (a)(1), the
Administrator, in its sole discretion may pay any amounts due to a Participant
in a lump-sum.
(b) In the event that a Participant who is a former Employee
and who is receiving installment payments under subsection (a)(1) is determined
by the Administrator to be providing services for a competitor of an Employer
within two (2) years after his or her terminate m of employment with an
Employer, then all remaining amounts due such Participant under the Plan shall
be paid in a lump sum.
(c) Payment may be made in Company Stock to the extent the
Participant's Account has been denominated in Company Stock (under Section 3.3
or otherwise). Otherwise, payment shall be made in cash.
6.2 COMMENCEMENT OF PAYMENT.
(a) Except as otherwise provided herein, payments to a
Participant shall commence in the January immediately after the calendar year in
which the Participant has had a terminal )n of employment with an Employer.
13
(b) The Administrator may permit an early distribution
(before the date set forth in Section 6.2(a)) of part or all of any deferred
amounts; provided, however, that such distribution shall be made only if the
Administrator, in its sole discretion, determines that the Participant has
experienced an unforeseen emergency that is caused by an event beyond the
control of the Participant and that would result in severe financial hardship to
the Participant if early distribution were not permitted. Any distribution
pursuant to this subsection is limited to the amount it necessary to meet the
hardship.
(c) Upon the death of a Participant, all amounts credited
to his or her Account shall be fully vested and shall be paid to his or her
beneficiary or beneficiaries, as determined under ARTICLE VII hereof.
(d) (1) A Participant who has experienced a hardship, as
determined by the Administrator, in its sole discretion, shall be permitted to
receive, in a lump-sum payment, a distribution of up to fifty percent (50%) of
the vested portion of his or her Account exclusive of the subaccount for Company
Stock; provided, however, that ten percent (10%) of the amount designated for
distribution shall be treated as a forfeiture under Section 5.3 from the balance
of the Participant's Account.
(2) A Participant who receives a hardship distribution
under subsection (d)(1) shall not receive any Matching Contributions or Employer
Contributions and shall not be permitted to make any further Salary Deferrals
for the balance of the Plan Year and for the following Plan Year.
(3) A Participant shall not be permitted to receive
more than two (2) hardship distributions under subsection (d)(1).
(e) (1) A Participant who filed an election under this
subsection (e) shall receive distribution from the vested portion of his or her
Account in accordance with that election; provided, however, that amounts in the
Participant's Account distributed under this subsection (e) shall not include
Matching Contributions or Employer Contributions.
(2) An election under this subsection (e) shall be
made with the Administrator on a form prescribed by the Administrator. The
election shall only be valid if
14
filed at least two (2) years before the date of distribution; provided, however,
that a Participant may amend an otherwise valid election to defer the date of
distribution as long as that amendment is filed with the Administrator at least
six (6) months before the otherwise applicable date of distribution.
ARTICLE VII
BENEFICIARIES
7.1 BENEFICIARIES. Each Participant may from time to time
designate one or more persons who may be any one or more members of such
Participant's family or other persons, administrators, trusts, foundations or
other entities) as his or her beneficiary under this Plan. Such designation
shall be made on a form prescribed by the Administrator. Each Participant may at
any time and from time to time, change any previous beneficiary designation,
without notice to or consent of any previously designated beneficiary, by
amending his or her previous designation on a form prescribed by the
Administrator. If the beneficiary does not survive the Participant (or is
otherwise unavailable to receive payment) or if no beneficiary is validly
designated, then the amounts payable under this Plan shall be paid to the
Participant's surviving spouse, if any, and, if none, to the Participant's
estate and such person shall be deemed to be a beneficiary hereunder. If more
than one person is the beneficiary of a deceased Participant, each such person
shall receive a pro rata share of any death benefit payable unless otherwise
designated on the applicable form. If a beneficiary who is receiving benefits
dies, all benefits that were payable to such beneficiary shall then be payable
to the estate of that beneficiary.
7.2 LOST BENEFICIARY.
(a) All Participants and beneficiaries shall have the
obligation to keep the Administrator informed of their current address until
such time as all benefits due have been paid.
(b) If a Participant or beneficiary cannot be located by
the Administrator exercising due diligence, then, in its sole discretion, the
Administrator may presume that the Participant or beneficiary is deceased for
purposes of this Plan and all unpaid amounts (net
15
of due diligence expenses) owed to the Participant or beneficiary shall be paid
accordingly or, if a beneficiary cannot be so located, then such amounts may be
forfeited. Any such presumption of death shall be final, conclusive and binding
on all parties.
ARTICLE VIII
FUNDING
8.1 PROHIBITION AGAINST FUNDING. Should any investment be
acquired in connection with the liabilities assumed under this Plan, it is
expressly understood and agreed that the Participants and beneficiaries shall
not have any right with respect to, or claim against, such assets nor shall any
such purchase be construed to create a trust of any kind or a fiduciary
relationship between the Employers and the Participants, their beneficiaries or
any other person. Any such assets (including any amounts deferred by a
Participant or contributed by the Employers pursuant to ARTICLE III hereof)
shall be and remain a part of the general, unpledged, unrestricted assets of the
Employers, subject to the claims of its general creditors. It is the express
intention of the parties hereto that this arrangement shall be unfunded for tax
purposes and for purposes of Title I of ERISA. Each Participant and beneficiary
shall be required to look to the provisions of this Plan and to the Employers
themselves for enforcement of any and all benefits due under this Plan, and to
the extent any such person acquires a right to receive payment under this Plan,
such right shall be no greater than the right of any unsecured general creditor
of the Employers. The Employers or the Trust shall be designated the owner and
beneficiary of any investment acquired in connection with its obligation under
this Plan.
8.2 DEPOSITS IN TRUST. Notwithstanding Section 8.1, or any other
provision of this Plan to the contrary, the Employers may deposit into the Trust
any amounts they deem appropriate to pay the benefits under this Plan. The
amounts so deposited may include all contributions made pursuant to a Salary
Deferral Election by a Participant, any Employer Contributions and any Matching
Contributions.
16
8.3 INDEMNIFICATION OF TRUSTEE.
(a) The Trustee shall not be liable for the making,
retention, or sale of any investment or reinvestment made by it, as herein
provided, nor for any loss to, or diminution of, the Trust assets, unless due to
its own negligence, willful misconduct or lack of good faith.
(b) Such Trustee shall be indemnified and saved harmless by
the Employers from and against all personal liability to which it may be subject
by reason of any act done or omitted to be done in its official capacity as
Trustee in good faith in the administration of this Plan and the Trust,
including all expenses reasonably incurred in its defense in the event an
Employer fails to provide such defense upon the request of the Trustee. The
Trustee is relieved of all responsibility in connection with its duties
hereunder to the fullest extent permitted by law, short of breach of duty to the
beneficiaries.
8.4 WITHHOLDING OF EMPLOYEE CONTRIBUTIONS. The Administrator is
authorized to make any and all necessary arrangements with the Employers in
order to withhold the Participant's Salary Deferrals under Section 3.1 hereof
from his or her pay. The Administrator shall determine the amount and timing of
such withholding.
ARTICLE IX
CLAIMS PROCEDURE
9.1 GENERAL. In the event that a Participant or his or her
beneficiary does not receive any Plan benefit that is claimed, such Participant
or beneficiary shall be entitled to consideration and review as provided in this
ARTICLE IX. Such consideration and review shall be conducted in a manner
designed to comply with section 503 of ERISA.
9.2 CLAIM REVIEW. Upon receipt of any written claim for benefits,
the Administrator shall be notified and shall give due consideration to the
claim presented. If the claim is denied to any extent by the Administrator, the
Administrator shall furnish the claimant with a written notice setting forth (in
a manner calculated to be understood by the claimant):
17
(a) the specific reason or reasons for denial of the claim;
(b) a specific reference to this Plan provisions on which
the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) an explanation of the provisions of this ARTICLE IX.
9.3 RIGHT OF APPEAL. A claimant who has a claim denied under
Section 9.2 may appeal to the Administrator for reconsideration of that claim. A
request for reconsideration under this Section 9.3 must be filed by written
notice within sixty (60) days after receipt by the claimant of the notice of
denial under Section 9.2.
9.4 REVIEW OF APPEAL. Upon receipt of an appeal, the Administrator
shall promptly take action to give due consideration to the appeal. Such
consideration may include a hearing of the parties involved, if the
Administrator feels such a hearing is necessary. In preparing for the appeal,
the claimant shall be given the right to review pertinent documents and the
right to submit in writing a statement of issues and comments. After
consideration of the merits of the appeal, the Administrator shall issue a
written decision which shall be binding on all parties. The decision shall be
written in a manner calculated to be understood by the claimant and shall
specifically state its reasons and pertinent Plan provisions on which it relies.
The Administrator's decision shall be issued within sixty (60) days after the
appeal is filed, except that if a hearing is held the decision may be issued
within one hundred twenty (120) days after the appeal is filed.
9.5 DESIGNATION. The Administrator may designate one or more of
its members or any other person of its choosing to make any determination
otherwise required under this ARTICLE IX.
18
ARTICLE X
ADMINISTRATION OF THE PLAN
10.1 COMMITTEE AS ADMINISTRATOR. The committee designated in this
Section 10.1 shall be the Administrator. The name of the committee shall be the
Deferred Compensation Committee and shall consist of such individuals,
corporations or other entities as the Employers shall from time to time appoint.
Until otherwise designated by the Employers, the members of the Deferred
Compensation Committee shall be those persons holding the following positions
(or their nearest equivalent) at the Company: Chief Financial Officer;
Treasurer; President and Chief Operating Officer; and Vice President, Human
Resources.
10.2 ACTIONS TAKEN BY THE COMMITTEE. All resolutions or other
actions taken by the Deferred Compensation Committee at a meeting shall be by
the affirmative vote of a majority of those present at the meeting. More than
half of the members must be present to constitute a quorum or a meeting. Any
member of the Deferred Compensation Committee may sign any document or
instrument requiring the signature of the Deferred Compensation Committee or
otherwise act on behalf of the Deferred Compensation Committee, unless otherwise
directed by the Deferred Compensation Committee. The Deferred Compensation
Committee may adopt such additional rules of procedures and conduct as it deems
appropriate.
10.3 BOND AND COMPENSATION. The members of the Deferred
Compensation Committee shall serve without bond, except as otherwise required by
law, and without remuneration for their services as such.
10.4 DUTIES OF THE COMMITTEE. The Deferred Compensation Committee
shall undertake all duties assigned to it under the Plan and Trust and shall
undertake all actions, express or implied, necessary for the proper
administration of the Plan. All actions and decisions of the Deferred
Compensation Committee shall be made in its sole discretion, unless expressly
otherwise provided in the Plan. The Deferred Compensation Committee's duties and
responsibilities include, but are not limited to, the following:
(a) adopting and enforcing such rules and regulations that
it deems necessary or appropriate for the administration of the Plan in
accordance with applicable law;
19
(b) interpreting the Plan, in its sole discretion, with its
good faith interpretation thereof to be final and conclusive on any Employee,
former Employee, Participant, former Participant, beneficiary or other party;
(c) deciding all questions concerning the Plan, including
the eligibility of any person to participate in the Plan in accordance with the
Plan provisions;
(d) computing the amounts to be distributed to any
Participant, former Participant or beneficiary in accordance with the provisions
of the Plan, determining the person or persons to whom such amounts will be
distributed and determining when such amounts will be distributed;
(e) authorizing the payment of distributions;
(f) keeping such records and submitting such filings,
elections, applications, returns or other documents or forms as may be required
under the Code and applicable regulations, or under other federal, state or
local law and regulations; and
(g) appointing such agents, counsel, accountants and
consultants as may be required to assist in administering the Plan.
10.5 EMPLOYERS TO FURNISH INFORMATION. To enable the
Deferred Compensation Committee to perform its functions, the Employers shall
supply full and timely information to the Deferred Compensation Committee on all
matters relating to the remuneration of all Participants, their retirement,
death or other cause of separation from service, and such other pertinent acts
as the Deferred Compensation Committee may require.
10.6 EXPENSES. All expenses of Plan administration and
operation, including the fees of any agents or counsel employed and including
any expenses attributable to a termination of the Plan, shall be paid by the
Employers. To the extent that the Employers may be liable for social security or
other withholding tax, the Administrator, in its sole discretion, may charge
such expenses to the benefits due to the applicable Participant or Beneficiary.
20
10.7 INDEMNIFICATION. The Employers hereby agree to indemnify
each and every member of the Deferred Compensation Committee or Employee acting
on behalf of the Deferred Compensation Committee for any expenses or liabilities
(other than those due to willful misconduct) actually incurred in or arising out
of the performance of their duties under the Plan, including but not limited to,
litigation expenses and attorneys fees.
ARTICLE XI
GENERAL PROVISIONS
11.1 NO ASSIGNMENT. Benefits or payments under this Plan shall not
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Participant or the Participant's beneficiary, whether voluntary or involuntary,
and any attempt to so anticipate, alienate, sell, transfer, assign, pledge,
encumber, attach or garnish the same shall not be valid, nor shall any such
benefit or payment be in any way liable for or subject to the debts, contracts,
liabilities, engagement or torts of any Participant or beneficiary, or any other
person entitled to such benefit or payment pursuant to the terms of this Plan,
except to such extent as may be required by law. If any Participant or
beneficiary or any other person entitled to a benefit or payment pursuant to the
terms of this Plan becomes bankrupt or attempts to anticipate, alienate, sell,
transfer, assign, pledge, encumber, attach or garnish any benefit or payment
under this Plan, in whole or in part, or if any attempt is made to subject any
such benefit or payment, in whole or in part, to the debts, contracts,
liabilities, engagements or torts of the Participant or beneficiary or any other
person entitled to any such benefit or payment pursuant to the terms of this
Plan, then such benefit or payment, in the discretion of the Administrator,
shall cease and terminate with respect to such Participant or beneficiary, or
any other such person.
11.2 NO EMPLOYMENT RIGHTS. Participation in this Plan shall not be
construed to confer upon any Participant the legal right to be retained in the
employ of the Employers, or give a Participant or beneficiary, or any other
person, any right to any payment whatsoever, except to the extent of the
benefits provided for hereunder. Each Participant shall remain subject to
discharge to the same extent as if this Plan had never been adopted.
21
11.3 INCOMPETENCE. If the Administrator determines that any person
to whom a benefit is payable under this Plan is incompetent by reason of
physical or mental disability, the Administrator shall have the power to cause
the payments becoming due to such person to be made to another for his or her
benefit without responsibility of the Administrator or the Employers to see to
the application of such payments. Any payment made pursuant to such power shall,
as to such payment, operate as a complete discharge of the Employers, the
Administrator and the Trustee.
11.4 IDENTITY. If, at any time, any doubt exists as to the identity
of any person entitled to any payment hereunder or the amount or time of such
payment, the Administrator shall be entitled to hold such sum until such
identity or amount or time is determined or until an order of a court of
competent jurisdiction is obtained. The Administrator shall also be entitled to
pay such sum into court in accordance with the appropriate rules of law. Any
expenses incurred by the Employers, Administrator, and Trust incident to such
proceeding or litigation shall be charged against the Account of the affected
Participant.
11.5 OTHER BENEFITS. The benefits of each Participant or
beneficiary hereunder shall be in addition to any benefits paid or payable to or
on account of the Participant or beneficiary under any other pension,
disability, annuity or retirement plan or policy whatsoever.
11.6 NO LIABILITY. No liability shall attach to or be incurred by
any employee, officer, director or manager of an Employer, Trustee or any
Administrator under or by reason of the terms, conditions and provisions
contained in this Plan, or for the acts or decisions taken or made hereunder or
in connection herewith; and as a condition precedent to the establishment of
this Plan or the receipt of benefits thereunder, or both, such liability, if
any, is expressly waived and released by each Participant and by any and all
persons claiming under or through any Participant or any other person. Such
waiver and release shall be conclusively evidenced by any act or participation
in or the acceptance of benefits or the making of any election under this Plan.
11.7 INSOLVENCY. Should an Employer be considered insolvent (as
defined by the Trust), such Employer, through its board of directors and chief
executive officer, shall give
22
immediate written notice of such to the Administrator of this Plan and the
Trustee. Upon receipt of such notice, the Administrator or Trustee shall cease
to make any payments to Participants who were Employees of the Employer or their
beneficiaries and shall hold any and all assets attributable to such Employer
for the benefit of the general creditors of that Employer.
11.8 AMENDMENT AND TERMINATION.
(a) Except as otherwise provided in this Section 11.8, the
Employers shall have the sole authority to modify, amend or terminate this Plan;
provided, however, that any modification or termination of this Plan shall not
reduce, alter or impair, without the consent of a Participant, a Participant's
right to any amounts already credited to his or her Account on the day before
the effective date of such modification or termination. Following such
termination, payment of such credited amounts may be made in a single-sum
payment if the Employers so designate. Any such decision to pay in a single sum
shall apply to all Participants.
(b) Any funds remaining in the Trust after termination of
this Plan and satisfaction of all liabilities to Participants and others, shall
be returned to the Employers.
11.9 EMPLOYER DETERMINATIONS. Any determinations, actions or
decisions of the Employers (including but not limited to, Plan amendments and
Plan termination) shall be made by the board of directors of the Employers in
accordance with their established procedures or by such other individuals,
groups or organizations that have been properly delegated by the board of
directors to make such determination or decision.
11.10 CONSTRUCTION. All questions of interpretation, construction
or application arising under or concerning the terms of this Plan shall be
decided by the Administrator, in its sole and final discretion, whose decision
shall be final, binding and conclusive upon all persons.
11.11 GOVERNING LAW. This Plan shall be governed by, construed and
administered in accordance with the applicable provisions of ERISA, and any
other applicable federal law, provided however, that to the extent not preempted
by federal law this Plan shall be
23
governed by, construed and administered under the laws of the State of New York,
other than its laws respecting choice of law.
11.12 SEVERABILITY. If any provision of this Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provision of this Plan and this Plan shall be construed and enforced as if such
provision had not been included therein. If the inclusion of any Employee (or
Employees) as a Participant under this Plan would cause this Plan to fail to
comply with the requirements of sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA, then this Plan shall be severed with respect to such Employee or
Employees, who shall be considered to be participating in a separate
arrangement.
11.13 HEADINGS. The headings contained herein are inserted only as
a matter of convenience and for reference and in no way define, limit, enlarge
or describe the scope or intent of this Plan nor in any way shall they affect
this Plan or the construction of any provision thereof.
11.14 TERMS. Capitalized terms shall have meanings as defined
herein. Singular nouns shall be read as plural, masculine pronouns shall be read
as feminine, and vice versa, as appropriate.
11.15 APPROVAL OF IRS. If an Employer seek a private letter ruling
from the Internal Revenue Service and the Internal Revenue Service does not
issue a ruling acceptable to the Employees regarding this Plan, then this Plan
(and the Trust), at the election of the Employers, shall be void ab initio and
all Salary Deferrals shall be returned to the Employees who made such
contributions and all Employer Contributions and Matching Contributions shall be
returned to the Employer that made such contributions.
11.16 TERM. This Plan shall continue in effect, unless sooner
terminated as provided herein, for a term expiring on June 17, 2014. Such term
may be extended only by the affirmative vote of a majority of the votes cast by
the shareholders of Movado Group, Inc., present in person or represented by
proxy, at a duly called meeting of such shareholders. Any expiration of this
Plan under this Section 11.16, shall be treated in the same manner as
termination of the Plan under Section 11.8.
24
APPENDIX D
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M O V A D O G R O U P, I N C. NOTICE OF ANNUAL MEEETING
650 FROM ROAD, PARAMUS NJ 07652 SHAREHOLDERS TO BE HELD JUNE 17, 2004
Dear Shareholder:
The Annual Meeting of Shareholders of Movado Group, Inc. will be held at 10:00
a.m. on Thursday, June 17, 2004, at the Company's executive offices, 650 From
Road, Paramus, NJ, for the following purposes:
1. To elect eight directors to the Board of Directors.
2. To ratify selection of independent public accountants.
3. To approve extending the term of the Company's Deferred Compensation
Plan for Executives, as amended and restated.
4. To approve the adoption of an amendment and restatement of the
Company's 1996 Stock Incentive Plan.
5. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized Shares of the
Common Stock and Class A Common Stock.
Only holders of Common Stock and Class A Common Stock of Movado Group, Inc. of
record at the close of business on May 10, 2004 will be entitled to vote at the
meeting or any adjournment thereof.
TO BE SURE THAT YOUR VOTE IS COUNTED, WE URGE YOU TO COMPLETE AND SIGN THE
PROXY/VOTING INSTRUCTION CARD BELOW, DETACH IT FROM THIS LETTER AND RETURN IT IN
THE POSTAGE PAID ENVELOPE ENCLOSED IN THIS PACKAGE. The giving of such proxy
does not affect your right to vote in person if you attend the meeting. The
prompt return of your signed proxy will aid the Company in reducing the expense
of additional proxy solicitation.
BY ORDER OF THE BOARD OF DIRECTORS
May 17, 2004 TIMOTHY F. MICHNO GENERAL
COUNSEL AND SECRETARY
DETACH PROXY CARD HERE
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PLEASE SIGN, DATE AND RETURN [X]
THE PROXY PROMPTLY USING THE VOTES MUST BE INDICATED
ENCLOSED ENVELOPE. (X) IN BLACK OR BLUE INK.
S C A N L I N E
FOR AGAINST ABSTAIN
In their discretion the Proxies are authorized to vote upon such other matters
as may properly come before the meeting or any adjournment or postponement
thereof. The signature on this Proxy should correspond exactly with
stockholder's name as printed to the left. In the case of joint tenancies,
co-executors, or co-trustees, both should sign. Persons signing as Attorney,
Executor, Administrator, Trustee or Guardian should give their full title. To
change your address, please mark this box.
If you plan to attend the meeting, please mark
this box.
1. Election of Directors
FOR all nominees [_] WITHHOLD AUTHORITY to vote [_] *EXCEPTIONS [_]
listed below for all nominees listed below
Nominees: Gedalio Grinberg, Efraim Grinberg, Margaret Hayes-Adame,
Richard Cote, Alan H. Howard, Nathan Leventhal, Donald Oresman
and Leonard L. Silverstein
*Exceptions ______________________________________________________________
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED.
2. To ratify and approve the selection by the
Board of Directors of PricewaterhouseCoopers FOR AGAINST ABSTAIN
LLP as independent public accountants for the [_] [_] [_]
Company for the fiscal year ending January
31, 2005.
3. To approve extending the term of the Company's FOR AGAINST ABSTAIN
Deferred Compensation Plan for Executives, as [_] [_] [_]
amended and restated.
4. To approve the adoption of an amendment and FOR AGAINST ABSTAIN
restatement of the Company's 1996 Stock [_] [_] [_]
Incentive Plan.
5. To approve an amendment to the Company's FOR AGAINST ABSTAIN
Restated Certificate of Incorporation to [_] [_] [_]
increase the number of authorized Shares of
the Common Stock and Class A Common Stock.
To change your address, please mark this box. [_]
If you plan to attend the meeting, please mark
this box. [_]
-------------------------------
S C A N L I N E
-------------------------------
The signature on this Proxy should
correspond exactly with stockholder's
name as printed to the left. In the
case of joint tenancies, co-executors,
or co-trustees, both should sign.
Persons signing as Attorney, Executor,
Administrator, Trustee or Guardian
should give their full title.
--------------------------------- --------------------------------
Date Share Owner sign here Co-Owner sign here
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M O V A D O G R O U P, I N C. PROXY/VOTING INSTRUCTION CARD
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THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF MOVADO GROUP, INC.
FOR THE ANNUAL MEETING ON JUNE 17, 2004
The undersigned appoints Timothy F. Michno and Frank Kimick, and each
of them, with full power of substitution in each, the proxies of the
undersigned, to represent the undersigned and vote all shares of Movado Group,
Inc., which the undersigned may be entitled to vote at the Annual Meeting of
Shareholders to be held on June 17, 2004, and at any adjournment or postponement
thereof, as indicated on the reverse side.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is given, this
proxy will be voted FOR proposals 1, 2, 3, 4 and 5.
MOVADO GROUP, INC.
P.O. BOX 11346
NEW YORK, N.Y. 10203-0346
(Continued, and to be signed and dated on reverse side.)
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