1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
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Exchange Act of 1934
For the quarterly period ended October 31, 1996
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Transition report pursuant to Section 13 or 15(d) of the Securities
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Exchange Act of 1934
For the transition period from to
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Commission file number
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MOVADO GROUP, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
New York 13-2595932
----------------------------------- ---------------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
(201)-406-4800
(Registrant's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of December 12, 1996 the rgeistrant had 2,586,891 shares of Class A Common
Stock, par value $0.01 per share, outstanding and 3,440,806 shares of Common
Stock, par value $0.01 per share, outstanding.
2
MOVADO GROUP, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
OCTOBER 31, 1996
Page
Part I Financial Information ----
Item 1. Consolidated Balance Sheets as of October 31, 1996, October 31, 1995 and
January 31, 1996 3
Consolidated Statements of Income for the nine
months ended October 31, 1996 and 1995 and the three
months ended October 31, 1996 and 1995
4
Consolidated Statements of Cash Flows for the nine months ended October
31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 7-9
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit Index 12
2
3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
OCTOBER, 31 OCTOBER 31, JANUARY 31,
1996 1995 1996
--------- --------- ---------
ASSETS
Current assets:
Cash $ 4,040 $ 5,770 $ 3,829
Trade receivables, net 112,701 99,591 75,335
Inventories 102,894 96,664 89,101
Other 10,972 11,833 12,521
--------- --------- ---------
Total current assets 230,607 213,858 180,786
--------- --------- ---------
Plant, property and equipment, net 14,312 12,274 11,794
Other assets 8,338 7,827 7,800
--------- --------- ---------
$ 253,257 $ 233,959 $ 200,380
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable to banks $ 43,859 $ 35,778 $ 8,782
Accounts payable 20,681 18,415 22,042
Accrued liabilities 17,012 13,971 9,289
Deferred and current taxes payable 9,129 9,230 7,994
--------- --------- ---------
Total current liabilities 90,681 77,394 48,107
--------- --------- ---------
Long-term debt 45,000 40,000 40,000
Deferred and non-current foreign income taxes 4,033 3,860 3,860
Other liabilities 3,396 3,909 3,572
Shareholders' equity:
Preferred Stock, $0.01 par value,
5,000,000 shares authorized; no shares issued
Common Stock, $0.01 par value,
20,000,000 shares authorized; 3,431,732, 3,411,410 and
3,426,610 shares issued, respectively 34 34 34
Class A Common Stock, $0.01 par value,
10,000,000 shares authorized; 2,588,891, 2,588,891, and
2,588,891 shares issued and outstanding, respectively 26 26 26
Capital in excess of par value 34,315 34,009 34,252
Retained earnings 68,335 57,638 60,319
Cumulative translation adjustment 7,565 17,217 10,338
Treasury Stock, 9,201 shares, at cost (128) (128) (128)
--------- --------- ---------
110,147 108,796 104,841
--------- --------- ---------
$ 253,257 $ 233,959 $ 200,380
========= ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
4
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
NINE MONTHS ENDED OCTOBER 31, THREE MONTHS ENDED OCTOBER 31,
-------------------------------------- --------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
Net sales $158,629 $140,269 $ 76,864 $ 68,079
Costs and expenses:
Cost of sales 70,681 65,909 33,897 31,947
Selling, general and administrative 72,568 60,863 31,439 25,468
-------- -------- -------- --------
143,249 126,772 65,336 57,415
-------- -------- -------- --------
Operating income 15,380 13,497 11,528 10,664
Net interest expense 3,490 3,650 1,367 1,369
-------- -------- -------- --------
Income before income taxes 11,890 9,847 10,161 9,295
Provision for income taxes 3,330 2,954 2,811 2,789
-------- -------- -------- --------
Net income $ 8,560 $ 6,893 $ 7,350 $ 6,506
======== ======== ======== ========
Income per share: $ 1.42 $ 1.15 $ 1.22 $ 1.08
======== ======== ======== ========
Shares used in per share computations: 6,009 5,998 6,011 6,003
======== ======== ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
5
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
NINE MONTHS ENDED OCTOBER 31,
---------------------------------------
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 8,560 $ 6,893
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 2,691 2,381
Deferred and non-current foreign income taxes (530) (307)
Provision for losses on accounts receivable (5) (560)
Changes in current assets and liabilities:
Trade receivables (37,471) (30,597)
Inventories (14,975) (8,584)
Other current assets (2,694) 5,606
Accounts payable 125 (4,807)
Accrued liabilities 7,867 4,916
Deferred and current taxes payable 2,326 2,547
(Increase) decrease in other non-current assets (1,204) 938
Increase in other non-current liabilities 223 875
-------- --------
Net cash used in operating activities (35,087) (20,699)
-------- --------
Cash flows used for investing activities:
Capital expenditures (4,382) (2,292)
Goodwill, trademarks and other intangibles (69) (99)
-------- --------
Net cash used in investing activities (4,451) (2,391)
-------- --------
Cash flows from financing activities:
Net proceeds from current borrowings under lines of credit 35,641 24,915
Proceeds from long-term debt 5,000 --
Principal payments under capital leases (365) (621)
Exercise of stock options 63 6
Purchase of treasury stock -- (128)
Dividends paid (529) (443)
-------- --------
Net cash provided by financing activities 39,810 23,729
-------- --------
Effect of exchange rate changes on cash (61) 235
Net decrease in cash 211 874
Cash at beginning of period 3,829 4,896
-------- --------
Cash at end of period $ 4,040 $ 5,770
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
6
MOVADO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
by Movado Group, Inc. (the "Company") in a manner consistent with that used in
the preparation of the financial statements included in the Company's fiscal
1996 Annual Report filed on form 10-K. In the opinion of management, the
accompanying financial statements reflect all adjustments, consisting of only
normal and recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for the periods presented. These
consolidated financial statements should be read in conjunction with the
aforementioned annual report.
NOTE 1 - RECLASSIFICATION
Certain amounts from prior years have been reclassified to conform to the fiscal
1997 presentation.
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands):
OCTOBER 31, JANUARY 31,
1996 1996
----------- -----------
Finished goods $ 61,392 $ 51,034
Work-in-process and component parts 41,502 38,067
-------- --------
$102,894 $ 89,101
======== ========
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
The following is provided as supplemental information to the consolidated
statements of cash flows (in thousands):
NINE MONTHS
ENDED OCTOBER 31,
--------------------
1996 1995
---- ----
Cash paid during the period for:
Interest $2,727 $3,010
Income taxes 1,745 1,127
Non-cash investing and financing activities:
Equipment acquired under capital leases $ 198 $ 116
6
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Nine months ended October 31, 1996 compared to nine months ended October 31,
1995.
Net Sales. Net sales increased 13.1% to $158.7 million from $140.3 million for
the nine months ended October 31, 1996 and October 31, 1995, respectively. The
increase was attributable to a 15.7% increase in domestic sales reflecting
growth in the Company's Concord, Movado and ESQ brands. International sales
increased 2.5%.
Gross Margins. Gross profit for the nine months ended October 31, 1996 was $87.9
million (55.4% of net sales) as compared to $74.4 million (53.0% of net sales)
for the comparable prior year period. The increase in margin is mainly
attributable to the Company continuing to experience a shift in overall sales
mix toward its higher margin Movado, Concord and Esquire brands, as well as a
strengthening of the U.S. dollar against the Swiss franc which affects the
Company's product acquisition costs.
Operating Expenses. Operating expenses increased 19.2% for the nine months ended
October 31, 1996 to 45.7% of net sales from 43.4% of net sales for the
comparable prior year period. Excluding the effect of a one-time, pre-tax charge
of $600,000 included in last year's results, operating expenses increased
approximately $12.3 million. The increase in operating expenses is mainly
attributable to increases in advertising, marketing and other variable costs
related to higher sales volumes.
Interest Expense. Net interest expense, which consists primarily of interest on
the Company's $40,000,000 of 6.56% Senior Notes and borrowings against its
working capital and revolving lines of credit, was $3.5 million for the nine
months ended October 31, 1996 as compared to $3.7 million for the comparable
prior year period. The lower interest expense is mainly due to a reduction in
average interest rates partially offset by increased average amounts
outstanding, as compared to the period ended October 31, 1995.
Income Taxes. The Company recorded a provision for income taxes of $3.3 million
for nine months ended October 31, 1996 as compared to a provision of $3.0
million for the comparable prior year period. Taxes were provided at a 28%
effective rate which the Company believes will approximate the effective annual
rate for fiscal 1997; however, there can be no assurance of this as it is
dependent on a number of factors including: mix of foreign to domestic earnings,
local statutory tax rates and utilization of net operating losses. The 28%
effective rate differs from the United States statutory rate due to the mix of
earnings between the Company's U.S. and international operations, the most
significant of which are located in Switzerland. The Company's international
operations are generally subject to tax rates that are significantly lower than
U.S. statutory rates.
Three months ended October 31, 1996 compared to three months ended October 31,
1995.
Net Sales. Net sales increased 12.9% to $76.9 million from $68.1 million for the
three months ended October 31, 1996 and October 31, 1995, respectively. The
increase was attributable to a 9.9% increase in domestic sales reflecting unit
sales increases in the Company's Movado and ESQ brands. International sales for
the quarter increased 33%.
7
8
Gross Margins. Gross profit for the three months ended October 31, 1996 was
$43.0 million (55.9% of net sales) as compared to $36.1 million (53.1% of net
sales) for the comparable prior year period. The increase in margin is mainly
attributable to the Company continuing to experience a shift in overall sales
mix toward its higher margin Movado, Concord and ESQ brands as well as a
strengthening of the U.S. dollar against the Swiss franc which affects the
Company's product acquisition costs.
Operating Expenses. Operating expenses increased 23.4% for the three months
ended October 31, 1996 to 40.9% of net sales from 37.4% of net sales for the
comparable prior year period. Operating expenses increased approximately $6.0
million. The increase in operating expenses is mainly attributable to increases
in advertising, marketing and other variable costs related to higher sales
volumes.
Interest Expense. Net interest expense, which consists primarily of interest on
the Company's $40,000,000 of 6.56% Senior Notes and borrowings against its
working capital and revolving lines of credit, was $1.4 million for the three
months ended October 31, 1996 and 1995, respectively. Interest expense remained
flat as compared with the prior year period as a result of a slight decrease in
interest rates on the working capital lines offset by higher average borrowings.
Income Taxes. The Company recorded a provision for income taxes of $2.8 million
for three months ended October 31, 1996 as compared to a provision of $2.8
million for the comparable prior year period. Taxes were provided at a 28%
effective rate which the Company believes will approximate the effective annual
rate for fiscal 1997; however, there can be no assurance of this as it is
dependent on a number of factors including: mix of foreign to domestic earnings,
local statutory tax rates and utilization of net operating losses. The 28%
effective rate differs from the United States statutory rate due to the mix of
earnings between the Company's U.S. and international operations, the most
significant of which are located in Switzerland. The Company's international
operations are generally subject to tax rates that are significantly lower than
U.S. statutory rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs have been, and are expected to remain, primarily a
function of its seasonal working capital requirements which have increased due
to significant growth in domestic sales over the two previous years. The
Company's business is not capital intensive and liquidity needs for capital
investments have not been significant in relation to the Company's overall
financing requirements.
The Company has met its liquidity needs primarily through funds from operations
and bank borrowings under working capital lines of credit with domestic and
Swiss banks. The Company's domestic lines of credit were renewed during the
third quarter. The Company has also entered into a revolving credit agreement
with its domestic banks. Funds available under this agreement are in addition to
the Company's working capital lines. The Company's debt to total capitalization
ratio was 44.7% at October 31, 1996, 41.1% at October 31, 1995 and 31.8% at
January 31, 1996. The increase from January 31, 1996 was primarily the result
of the Company financing seasonal working capital requirements under its
working capital lines of credit.
8
9
The Company's net working capital consisting primarily of trade receivables and
inventories amounted to $139.9 million at October 31, 1996, $136.4 million at
October 31, 1995 and $132.7 million at January 31, 1996.
Accounts receivable at October 31, 1996 were $112.7 million as compared to $99.6
million at October 31, 1995 and $75.3 million at January 31, 1996. The increase
in the receivables was primarily the result of the Company's increased domestic
sales volume and the timing of shipments during the third quarter of fiscal
1997.
Inventories at October 31, 1996 were $102.9 million as compared to $96.7 million
at October 31, 1995 and $89.1 million at January 31, 1996. The increase in
inventories reflects both the seasonal build in inventories as well as the
expansion of the company's sales base and product line.
The Company's fiscal 1997 year-to-date capital expenditures approximate $4.4
million compared to $2.3 million through October 31, 1995. Expenditures were
primarily related to improvements in the Company's management and sales
management information systems, costs incurred in connection with the expansion
of domestic distribution operations and the move of the Company's Swiss
distribution operations. Additionally, costs related to the company's new Piaget
flagship store in New York City are included in fiscal 1997. The Company expects
that its annual capital expenditures in fiscal year 1997 will exceed the average
levels experienced over the last three fiscal years due to planned improvements
in management information systems, expansion of its retail store network,
including the Piaget store, and the expansion of distribution operations to
support continued sales growth.
9
10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Line of Credit Letter Agreement dated August 30, 1996,
signed September 18, 1996 between The Chase Manhattan
Bank and the Registrant.
10.2 Letter Agreement dated August 9, 1996 amending line of
credit letter agreement dated May 31, 1995 between
Fleet Bank, NA and the Registrant.
10.3 Line of Credit Letter Agreement dated November 13, 1996
between Marine Midland Bank and the Registrant.
10.4 Amended and restated Movado Group, Inc. Deferred
Compensation Plan for Executives dated June 15, 1996.
10.5 Movado Group, Inc. 1996 Stock Incentive Plan amending
and restating 1993 Employee Stock Option Plan.
10.6 Movado Group, Inc. Annual Incentive Compensation Plan
for fiscal year 1997.
11. Computation of net income per share.
27. Financial schedules.
(b) Reports on Form 8-K
None
10
11
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOVADO GROUP, INC.
(Registrant)
Dated: December 13, 1996 By: /s/ Kenneth J. Adams
-------------------------------
Kenneth J. Adams
Senior Vice President and
Chief Financial Officer
(Chief Financial Officer)
Dated: December 13, 1996 By: /s/ John J. Rooney
-------------------------------
John J. Rooney
Corporate Controller
(Principal Accounting Officer)
11
12
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10.1 Line of Credit Letter Agreement dated August 30, 1996, signed
September 18, 1996 between The Chase Manhattan Bank and the
Registrant.
10.2 Letter Agreement dated August 9, 1996 amending line of credit
letter agreement dated May 31, 1995 between Fleet Bank, NA and
the Registrant.
10.3 Line of Credit Letter Agreement dated November 13, 1996
between Marine Midland Bank and the Registrant.
10.4 Amended and restated Movado Group, Inc. Deferred Compensation
Plan for Executives dated June 15, 1996.
10.5 Movado Group, Inc. 1996 Stock Incentive Plan amending and
restating 1993 Employee Stock Option Plan.
10.6 Movado Group, Inc. Annual Incentive Compensation Plan for
fiscal year 1997.
11. Computation of net income per share.
27. Financial schedules.
12
1
[CHASE Logo]
THE CHASE MANHATTAN BANK
270 Park Avenue
New York, NY 10017-2070
August 30, 1996
Mr. Kenneth J. Adams
Senior Vice President and Chief Financial Officer
Movado Group, Inc.
125 Chubb Avenue - 4th Floor
Lyndhurst, New Jersey 07071
Re: LINE OF CREDIT
Dear Ken:
Upon the terms outlined below, The Chase Manhattan Bank (the
"Bank"), is prepared in its sole discretion to offer a line of credit (the
"Line of Credit") of up to a maximum amount of Twelve Million Five Hundred
Thousand Dollars ($12,500,000) to Movado Group, Inc. (the "Company"), the
proceeds of which are for working capital and to finance the seasonal
increases in assets.
The advances, if any, under the Line of Credit will be for loans,
stand-by and/or commercial letters of credit. The maximum amount of such
advances under the Line of Credit cannot exceed the Line of Credit
Availability (as hereinafter defined); PROVIDED HOWEVER, that the
aggregate face amount of stand-by letters of credit will not at any time
exceed U.S. $500,000.
Loans shall be available in U.S. Dollars and Swiss Francs. In any
determination of the aggregate outstanding amount of advances in U.S.
Dollars under the Line of Credit, the U.S. Dollar equivalent of any loans
denominated in Swiss Francs will be calculated using the spot rate at
which the Bank at its principal office offers to exchange Swiss Francs for
U.S. Dollars in New York City at 11:00 a.m. (New York City time) two
business days prior to the date on which such equivalent is to be
calculated.
For the purposes of this Line of Credit, the following terms have
the following meanings:
"Line of Credit Availability" for any date means (a) U.S.
$12,500,000 LESS (b) the Excess Foreign Exchange Amount on such
date.
Movado Group, Inc. 1
2
"Excess Foreign Exchange Amount" for any date means (a) the cost
to Chase in U.S. Dollars of replacing its foreign exchange
contracts with the Company on such date in excess of (b) U.S.
$1,875,000.
INTEREST RATE: The loans will bear interest at the following rates
as selected by the Company at the time of each
borrowing request: (1) a fixed rate equal to the (a)
one, two, three, or six month reserve adjusted London
Interbank Offered Rate plus 100 basis points, (b) 30,
60, 90, or 180 day adjusted certificate of deposit
rate plus 125 basis points, or (c) a rate offered by
the Bank and accepted by the Borrower for borrowings
of one to twenty-nine days; or (2) a variable rate
equal to the Prime Rate. "Prime Rate:" shall mean
that rate of interest from time to time announced by
the Bank at its head office as its prime commercial
lending rate.
LETTER OF
CREDIT FEES: Fees relating to any letter of credit shall be
determined by the Bank on the date of the issuance of
such letter of credit.
REPAYMENTS: The terms relating to the repayment of any loan or
reimbursement obligation relating to any letter of
credit shall be set forth in the documentation
(satisfactory in form and substance to the Bank)
evidencing such loan or letter of credit.
MANDATORY
PREPAYMENT: In the event that the U.S. Dollar equivalent of all
advances under this Line of Credit shall exceed the
Line of Credit Availability, the Company agrees to
prepay promptly an amount of loans equal to such
excess. If, after the repayment of all outstanding
loans, the U.S. Dollar equivalent of all advances
under this Line of Credit remains in excess of the
Line of Credit Availability, the Company shall
deliver to the Bank cash in amount equal to such
excess and such cash shall be held as collateral
security for the payment of obligations relating to
letters of credit.
MAINTENANCE
OF INSURANCE: The Company will maintain adequate insurance coverage
in amounts acceptable to the Bank.
Movado Group, Inc. 2
3
LIMITATION ON
DISTRIBUTIONS AND
RESTRICTED
INVESTMENTS: The Company will not:
(a) Declare or pay any dividends (other than
dividends payable solely in common stock);
(b) Make other distributions on any class of the
Company's capital stock;
(c) Acquire or permit the Company or any Subsidiary
to acquire shares of the Company's capital
stock; or
(d) Make any Restricted Investment as defined in the
Prudential Note Agreement;
if, after giving effect thereto, the sum of all
payments listed in (a) through (d) above, since
February 1, 1993, would exceed:
(i) 50% of the Consolidated Net Income (as defined in
the Prudential Note Agreement) less 100% of any
Consolidated Net Loss since February 1, 1993
(calculated as of the end of each fiscal year), plus;
(ii) $3,600,000.
For the purposes hereof, "Prudential Note Agreement" means the Prudential Note
Agreement dated November 9, 1993 between The Prudential Insurance Company of
America ("Prudential") and the Company pursuant to which the Company issued $40
million of 6.56% Senior Notes due 2005.
CLEAN-UP: No loan amounts may be outstanding under the Line of
Credit during one thirty (30) consecutive day period
between January 31, 1997 and March 31, 1997.
NEGATIVE PLEDGE: The Company shall not create, incur, assume or suffer
to exist any liens on any of its accounts receivable
or inventory, or pledge any of its common stock.
REPORTING REQUIREMENTS:
The Company will provide the following to the Bank:
1. Unaudited quarterly financial statements. As soon as available and in
any event within seventy-five (75) days after the end of each of the
first three quarters of each fiscal year of the Company, consolidated
and consolidating balance sheets of the Company and its subsidiaries as
of the end of such quarter, consolidated statements of changes in
shareholder's equity and cash flows of the Company and its subsidiaries
as of the end of such quarter and consolidated and consolidating
statements of income and retained earnings of the Company and its
subsidiaries for the period commencing at the end of
Movado Group, Inc. 3
4
the respective consolidated figures for the corresponding date and
period in the previous fiscal year and ending with the end
of such quarter, stating in comparative form consistently applied and
certified by the chief financial officer of the Company (subject to
year end adjustments). Certification by the chief financial officer may
take the form of a written statement to the effect that, "To the best
of my knowledge these financial statements fairly present all assets
and liabilities, both direct and contingent, and all sources of income
and expense of the Company".
2. Annual financial statement. As soon as available and in any event
within one hundred and twenty (120) days after the end of each fiscal
year of the Company, consolidated and consolidating balance sheets of
the Company and its subsidiaries as of the end of such fiscal year,
consolidated statements of changes in shareholder's equity and cash
flows of the Company and its subsidiaries as of the end of such fiscal
year and consolidated and consolidating statements of income and
retained earnings of the Company and its subsidiaries for such fiscal
year, starting in comparative form the respective consolidated figures
for the corresponding date and period in the prior fiscal year and all
prepared in accordance with generally accepted accounting principles
consistently applied and as to the consolidated statements accompanied
by an opinion thereon acceptable to the Bank by an independent
accountant selected by the Company and acceptable to the Bank.
3. Quarterly financial statements. As soon as available and in any event
within seventy-five (75) days after the end of each fiscal quarter,
evidence of compliance (in form and substance satisfactory to the Bank)
with the Prudential Note Agreement Financial Covenants. The Company
will provide prompt notification of any violation or modification of
such covenant.
4. Weekly financial statements. As soon as available and in any event
within two (2) days after the end of each week, a marked to market
position report (in form and substance satisfactory to the Bank) on all
outstanding foreign exchange contracts.
5. Annual projections. As soon as available, and in any event, within
ninety (90) days after the end of each fiscal year of the Company,
annual projections of the Company for the next fiscal year in a form
acceptable to the Bank.
6. Any documents or notifications related to the Prudential Note
Agreement.
7. Other financial information as requested by the Bank.
The Bank will continue to offer the Line of Credit until October 31,
1997, unless earlier terminated by the Bank or the Company. If the Bank should
terminate this Line of Credit, it will notify the Company orally and confirm the
same in writing. Although no further advances will then be available under this
Line of Credit, outstanding loans will only mature according to the terms of the
notes evidencing the loans.
7 This letter does not constitute a commitment or in any way obligate the
Bank to lend whether or not the conditions stated herein are satisfied, and is
issued subject to the Bank, in its sole discretion, continuing to be satisfied
with the financial condition and economic prospects of the Company and the
maintenance of a satisfactory relationship with the Bank.
Movado Group, Inc. 4
5
Please acknowledge the Company's understanding and agreement to the
above terms and conditions by signing the attached copy of this letter and
returning it to the Bank.
Very truly yours,
THE CHASE MANHATTAN BANK
By: /s/ Andrew J. Meara
------------------------
Andrew J. Meara, Assistant Vice President
ACKNOWLEDGED AND AGREED TO:
This day of , 19
------------ ------------- --
MOVADO GROUP, INC.
By: /s/ Signature Illegible Date: 9-18-96
------------------------- -----------
(Title)
By: /s/ Signature Illegible Date: 9-18-96
------------------------- -----------
(Title)
Movado Group, Inc. 5
1
[FLEET LETTERHEAD]
FLEET BANK
1133 Avenue of the Americas
New York, NY 10036
August 9, 1996
North American Watch Company,
a division of Movado Group, Inc.,
125 Chubb Avenue
Lyndhurst, New Jersey 07071
Re: Letter Agreement dated May 31, 1995 (as amended, the
"Letter Agreement"; capitalized terms are used herein
as defined therein) between Fleet Bank, N. A.
(formerly NatWest Bank N.A.) (the "Bank") and North
American Watch Company (now a division of Movado
Group, Inc.) (the "Company")
Ladies and Gentlemen:
We are please to confirm that we have extended the $12,500,000 Advised Line and
the $15,000,000 FX Line for the Company on the same terms and conditions as set
forth in the Letter Agreement; provided, however, that (i) availability under
the Advised Line is hereby extended to August 8, 1997 (and all Loans and
Acceptances shall mature on and all letters of Credit shall expire no later than
that date) and (ii) availability under the FX Line is hereby extended to
August 8, 1997.
This extension shall be effective upon our receipt of the enclosed copy of this
letter signed by the Company and receipt of the enclosed Endorsement No. 1 to
the promissory note dated as of May 31, 1995, as amended, duly executed by the
Company.
Very truly yours,
FLEET BANK, N.A.
(formerly NatWest Bank N.A.)
By: /s/ Signature Illegible
----------------------------
Title: Vice President
-------------------------
ACCEPTED AND AGREED:
NORTH AMERICAN WATCH COMPANY,
a division of MOVADO GROUP, INC.
By: /s/ Signature Illegible
-------------------------
Title: Chief Operating Officer
-------------------------
2
ENDORSEMENT NO. 1
The undersigned, NORTH AMERICAN WATCH COMPANY, a division of MOVADO
GROUP, INC. (the "Borrower") and FLEET BANK, N.A. (formerly NatWest Bank N.A.)
(the "Bank") hereby agree that the $12,500,000 Promissory Note of the Borrower
in favor of the Bank dated as of May 31, 1995, as amended (the "Note"), to
which this Endorsement is attached is hereby amended as follows:
The maturity of the Note is extended to August 8, 1997 and accordingly
the reference to the Maturity Date on the first line of the Note is modified to
read August 8, 1997.
All references to "NatWest Bank N.A." or "NatWest" or "NatWest Bank"
are, effective as of May 1, 1996 deemed to refer to "Fleet Bank, N.A.".
Except as expressly amended by this Endorsement all the terms and
conditions of the Note to which this Endorsement is attached shall continue in
full force and effect.
This Endorsement shall be effective as of August 8, 1996.
NORTH AMERICAN WATCH COMPANY,
a division of MOVADO GROUP, INC.
By: /s/ Signature Illegible
----------------------------
Title: Chief Operating Officer
-------------------------
FLEET BANK, N.A.
(formerly NatWest Bank N.A.)
By: /s/ Signature Illegible
----------------------------
Title: Vice President
-------------------------
1
[MARINE MIDLAND BANK LETTERHEAD]
November 13, 1996
Howard Regenbogen
Treasurer
The Movado Group Inc.
125 Chubb Avenue
Lyndhurst, NJ 07071
Dear Mr. Regenbogen:
I am pleased to inform you that Marine Midland Bank ("The Bank") is willing to
make available to The Movado Group Inc. ("The Company") the following credit
facilities:
1) A line of credit for direct borrowings to a maximum of
$10,000,000. The interest rate on these borrowings will
be at LIBOR plus 1.0% or a money market based rate to be
determined at the time of each borrowing. The maturity of each
borrowing will be as mutually agreed upon.
A sublimit under this facility will allow for the issuance of
Documentary and Standby Letter of Credit, to a maximum of
$1,500,000. The company will be required to maintain a 30
consecutive day out of debt period once annually, applicable
only to the direct loans under this facility.
2) A line of credit for the purchase of spot and forward foreign
exchange contracts up to one year, to a maximum of $75,000,000
(US). This facility will have a daily settlement limit of
$8,000,000 (US). In addition, a sublimit of this facility will
allow for the purchase of forward foreign exchange contracts up
to two years to a maximum of $20,000,000 (US).
3) A $1,000,000 line of credit for standby letters of credit only;
with the granting and maturity of each drawdown to be mutually
agreed upon.
The granting of these facilities is subject to the execution of loan
documentation satisfactory to the Bank.
Outstandings under these facilities will be cross defaulted to the conditions of
all Note Agreements between the company and The Prudential Insurance Company of
America.
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Advances under the direct borrowing line will be made at our discretion from
time to time and all advances are repayable under the terms of the note
executed at the time of each advance. It is understood that the lines of credit
are uncommitted facilities and that availability under the lines of credit are
uncommitted facilities and that availability under the lines shall remain
subject to our evaluation of The Movado Group Inc. as an acceptable credit
risk. In the event of termination by either party, your obligations under the
notes and forward contracts shall remain in force.
We will fully review the credit basis for these non-contractual lines at least
annually. The lines are scheduled to be reviewed by October 31, 1997.
This letter replaces the letter sent to you dated 11/7/96.
If these terms are acceptable to you, please acknowledge and forward the
enclosed copy of this letter to me. We look forward to strengthening our
relationship in the year ahead.
Sincerely,
MARINE MIDLAND BANK
/s/ John S. Wamboldt
John S. Wamboldt
Vice President
Acknowledged:
Name: Name:
---------------------- ------------------------
Date: Date:
----------------------- ------------------------
cc: Kenneth J. Adams, Chief Financial Officer
The Movado Group Inc.
1
MOVADO GROUP, INC.
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
2
MOVADO GROUP, INC.
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
Page
----
Table of Contents
-----------------
ARTICLE I
1.1 Account .......................................................... 1
1.2 Administrator .................................................... 1
1.3 Base Salary ...................................................... 1
1.4 Class Year Account ............................................... 2
1.5 Code ............................................................. 2
1.6 Company .......................................................... 2
1.7 Company Stock .................................................... 2
1.8 Compensation ..................................................... 2
1.9 Effective Date ................................................... 2
1.10 Eligible Employee ................................................ 2
1.11 Employee ......................................................... 2
1.12 Employers ........................................................ 2
1.13 Employer Contribution ............................................ 2
1.14 ERISA ............................................................ 3
1.15 Exchange Act ..................................................... 3
1.16 Group I Employee ................................................. 3
1.17 Group II Employee ................................................ 3
1.18 Matching Contribution ............................................ 3
1.19 Participant ...................................................... 3
1.20 Plan ............................................................. 3
1.21 Plan Year ........................................................ 3
1.22 Salary Deferrals ................................................. 4
1.23 Salary Deferral Election ......................................... 4
1.24 Total and Permanent Disability ................................... 4
1.25 Trust ............................................................ 4
1.26 Trustee .......................................................... 4
1.27 Year of Service .................................................. 4
ARTICLE II
2.1 Eligibility for Participation .................................... 5
2.2 Commencement of Participation .................................... 5
2.3 Benefits ......................................................... 5
ARTICLE III
3.1 Salary Deferrals ................................................. 6
3.2 Matching Contributions ........................................... 7
3
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3.3 Company Stock ................................................... 9
3.4 Employer Contributions .......................................... 10
3.5 Time of Contributions ........................................... 10
3.6 Form of Contributions ........................................... 11
ARTICLE IV
4.1 Vesting ......................................................... 11
ARTICLE V
5.1 Accounts ........................................................ 13
5.2 Investments, Gains and Losses ................................... 14
5.3 Forfeitures ..................................................... 15
ARTICLE VI
6.1 Payment ......................................................... 15
6.2 Commencement of Payment ......................................... 16
ARTICLE VII
7.1 Beneficiaries ................................................... 17
7.2 Lost Beneficiary ................................................ 17
ARTICLE VIII
8.1 Prohibition Against Funding ..................................... 18
8.2 Deposits in Trust ............................................... 19
8.3 Indemnification of Trustee ...................................... 19
8.4 Withholding of Employee Contributions ........................... 20
ARTICLE IX
9.1 General ......................................................... 20
9.2 Claim Review .................................................... 20
9.3 Right of Appeal ................................................. 21
9.4 Review of Appeal ................................................ 21
9.5 Designation ..................................................... 21
4
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ARTICLE X
10.1 Committee as Administrator ...................................... 22
10.2 Actions Taken by the Committee .................................. 22
10.3 Bond and Compensation ........................................... 22
10.4 Duties of the Committee ......................................... 23
10.5 Employers to Furnish Information ................................ 24
10.6 Expenses ........................................................ 24
10.7 Indemnification ................................................. 24
ARTICLE XI
11.1 No Assignment ................................................... 25
11.2 No Employment Rights ............................................ 26
11.3 Incompetence .................................................... 26
11.4 Identity ........................................................ 26
11.5 Other Benefits .................................................. 27
11.6 No Liability .................................................... 27
11.7 Insolvency ...................................................... 27
11.8 Amendment and Termination ....................................... 28
11.9 Employer Determinations ......................................... 28
11.10 Construction .................................................... 28
11.11 Governing Law ................................................... 29
11.12 Severability .................................................... 29
11.13 Headings ........................................................ 29
11.14 Terms ........................................................... 29
11.15 Approval of IRS ................................................. 30
11.16 Effective Date .................................................. 30
ARTICLE XII
12.1 Execution ....................................................... 30
5
MOVADO GROUP, INC.
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
Movado Group, Inc., a New York corporation, and Swiss-Am, Inc., a New
Jersey corporation, hereby amends, restates and adopts this Movado Group, Inc.
Deferred Compensation Plan for Executives this 15th day of June, 1996.
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
base 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 commissions and bonuses.
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1.4 Class Year Account. The bookkeeping sub-accounts established for
each Participant as provided in section 5.1 hereof.
1.5 Code. The Internal Revenue Code of 1986, as amended.
1.6 Company. Movado Group, Inc., a New York corporation.
1.7 Company Stock. Common stock of the Company.
1.8 Compensation. The Participant's Base Salary, bonuses and other
remuneration from the Employer.
1.9 Effective Date. February 1, 1996.
1.10 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.
1.11 Employee. Any person employed by an Employer.
1.12 Employers. Movado Group, Inc., a New York corporation; and
Swiss-Am, Inc., a New Jersey corporation.
1.13 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 3.4 hereof.
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1.14 ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
1.15 Exchange Act. The Securities Exchange Act of 1934, 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.
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 Participant. An Eligible Employee who has become a Participant as
provided in Section 2.1 and whose Account has not been fully distributed.
1.20 Plan. The Movado Group, Inc. Deferred Compensation Plan for
Executives.
1.21 Plan Year. Effective June 1, 1995, the twelve (12) month period
ending January 31.
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1.22 Salary Deferrals. The portion of Compensation that a Participant
elects to defer in accordance with Section 3.1 hereof.
1.23 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 Deferrals hereunder.
1.24 Total and Permanent Disability. Any medically determinable
physical or mental disorder that 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.
1.25 Trust. The Trust under the Movado Group, Inc. Deferred
Compensation Plan for Executives.
1.26 Trustee. The trustee under the Trust and any successor Trustee
appointed pursuant to the Trust.
1.27 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.
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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 2.1) 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
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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.
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 shall 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 Participant 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
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Employee is first eligible to participate, respectively, with respect to
Compensation earned during the remainder of the calendar year; provided further,
however, that such Salary Deferral Election of a Participant who is subject to
section 16 of the Exchange Act may be filed, in the form of an irrevocable
election to participate in the Plan, six (6) or more months before any Salary
Deferral becomes effective.
(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. The maximum salary Deferrals
permitted for each Participant shall not exceed the amount of Base Salary that
may be matched under Section 3.2 for that Participant.
(d) Except as otherwise provided herein, a Participant may
amend his or her Salary Deferral Election from time to time; provided, however,
that any amendment to the amount of a Participant's Salary Deferrals shall
comply with the provisions of subsection (b), above.
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 Matching 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.
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(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 Matching 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 the
preceding portion of 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) (1) Matching Contributions for Participants for each Plan
Year shall be made in rights to Company Stock up to a limit equal to the lesser
of:
(A) twenty percent (20%) of the Matching
Contributions for that Plan Year; and
(B) one percent (1%) of the Company Stock outstanding
on the December 31 immediately preceding the Plan Year for which the Matching
Contributions are being made.
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(2) In determining the Matching Contribution that will be
made in rights to Company Stock, the rights to Company Stock shall be valued on
either the last day of the month preceding the date the Matching Contribution is
made or the date of the investment (under ARTICLE V) of the Participant's Salary
Deferral that is being matched, as determined in the sole discretion of the
Administrator.
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
determined in accordance with Section 3.2(d)(2). All determinations of the value
of Company Stock will be made by the Treasurer of the Company in his or her sole
discretion.
(b) Dividends declared on Company Stock shall be credited to
the Accounts and Class Year Accounts of each Participant based on the dividends
that would have been paid if the Company Stock rights credited consisted instead
of issued and outstanding Company Stock. Dividends shall be credited in the form
of bookkeeping credits only and shall not be transferred to the Trust. Dividend
credits shall not receive interest or other gains.
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(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 the credited dividend amounts
and 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. Notwithstanding anything to the
contrary contained herein, in no event will any Employer Contributions vest for
the benefit of any Participant who is subject to Section 16 of the Exchange Act
earlier than six (6) months after the date of grant.
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) 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
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the same time any necessary instructions regarding the allocation of such
amounts among the Accounts of Participants.
(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 Employer Contributions to the Trust shall be made in the form of cash or
cash equivalents of United States currency, except as otherwise provided herein.
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 provided 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 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
16
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Year as long as the Participant is still an Employee and therefore shall be
fully vested on the last day of the fifth Plan Year following the Plan Year of
such Class Year Account if the Participant is still an Employee. No further
increases in vesting shall occur after a Participant is no longer an Employee.
(c) The portion of a Participant's Class Year Accounts
attributable to Salary Deferrals, and earnings thereon, shall be fully vested.
(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 Accounts.
(f) Any amounts credited to a Participant's Class Year
Accounts that are not vested at 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.
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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 also establish and
maintain subaccounts in each Participant's Account for rights to Company Stock
and dividends thereon.
(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 Employer
Contributions and any earnings or losses on the foregoing. Each Participant's
Account shall be reduced by any 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, 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
18
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shall be separately maintained for a Participant for each Plan Year until such
Class Year Accounts are fully vested (as provided in ARTICLE IV), at which time
such fully 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 of the next
calendar quarter 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
to 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).
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(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, Matching
Contributions, Employer Contributions, investment experience, distributions and
any other appropriate adjustments. Such adjustments 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) Benefits shall be paid in roughly equal annual
installments over a period of ten (10) years payable in January of each year.
(b) Notwithstanding subsection (a), the
Administrator, in its sole discretion, may pay any payments due to a Participant
in a lump-sum.
20
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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 termination of employment with an
Employer.
(b) The Administrator may permit an early
distribution 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 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) 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 five percent (5%) of the amount otherwise
designated for distribution shall be treated as a forfeiture under Section 5.3.
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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.
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(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 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
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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.
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.
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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):
(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
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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
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choosing to make any determination otherwise required under this ARTICLE IX.
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 for 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,
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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;
(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;
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(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 facts 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.
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
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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.
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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.
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.
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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 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.
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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,
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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 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.
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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 Employers 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 Effective Date. Except as otherwise expressly provided
herein, the Plan, as amended and restated, shall be effective on and after the
Effective Date.
ARTICLE XII
Adoption
12.1 Execution. To record the adoption of this amended and
restated Plan by the Employers, the Employers have caused this instrument to be
executed this ________day of _____________, 1996.
Attest: MOVADO GROUP, INC.
______________________________ By:________________________________
Secretary President
Attest: SWISS-AM, INC.
______________________________ By:________________________________
Secretary President
1
MOVADO GROUP, INC.
1996 STOCK INCENTIVE PLAN
1. Purpose.
(a) The purpose of this Stock Incentive Plan (the "Plan") is
to provide for certain officers, directors and key employees of the Movado
Group, Inc. (the "Company") and certain of its affiliates an incentive to
maintain and enhance the performance and profitability of the Company.
(b) The Plan is an amendment and restatement of the North
American Watch Corporation's 1993 Employee Stock Option Plan (the "1993 Plan");
however all options granted under the 1993 Plan will continue to be governed by
the terms of the 1993
Plan and the Award Agreements thereunder.
2. Administration.
(a) The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board"),
which Committee shall consist of two or more directors, at least two of whom
shall be "outside directors" as defined in Section 162(m) of the Code and the
regulations promulgated thereunder, and, to the extent necessary to comply with
Rule 16b-3 of the Securities Exchange Act of 1934 (the "Act") or any successor
rule thereto, each of whom shall be a "disinterested person" within the meaning
of the Act. The members of the Committee may be changed at any time and from
time to time in the discretion of, the Board.
(b) The Committee shall have the authority (i) to exercise all
of the powers granted to it under the Plan, (ii) to construe, interpret and
implement the Plan and any Award Agreements executed pursuant to the Plan, (iii)
to prescribe, amend and rescind rules relating to the Plan, (iv) to make any
determination necessary or advisable in administering the Plan and (v) to
correct any defect, supply any omission and reconcile any inconsistency in the
Plan.
(c) The determination of the Committee on all matters relating
to the Plan or any Award Agreement shall be conclusive.
(d) 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
granted hereunder.
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(e) Notwithstanding anything to the contrary contained herein:
(i) until the Board shall appoint the members of the Committee, the Plan shall
be administered by the Board and (ii) the Board may, in its sole discretion, at
any time and from time to time, resolve to administer the Plan. In either of the
foregoing events, the term Committee as used herein shall mean the Board.
3. Eligibility.
Awards under the Plan may be granted to such officers,
directors and executive, managerial or professional employees of the Company or
its Affiliates as the Committee shall from time to time in its sole discretion
select; provided, that directors who are not employees of either the Company or
an affiliate shall not be eligible to receive an Award under the Plan.
4. Shares of Stock Subject to the Plan.
(a) Subject to Section 13 (relating to adjustments upon
changes in capitalization), the aggregate number of shares of Stock upon which
Awards may be based shall not exceed 800,000 shares. The number of shares
delivered in full or partial payment of any Option Price (if permitted under
Section 5.5(b)(iii)) shall be deducted from the number of shares delivered to
the grantee pursuant to such Option for purposes of determining the number of
shares acquired pursuant to the Plan. Without limiting the generality of the
foregoing, shares of Stock covered by Options, which Options expire, terminate
or are canceled for any reason (other than an Option or part thereof, which is
canceled as a result of the exercise of a related Stock Appreciation Right)
shall again become available for award under the Plan.
(b) Subject to Section 13 (relating to adjustments upon
changes in capitalization), the total number of shares of Stock available for
grants to any one participant of (a) Awards under the Plan shall not exceed
250,000.
(c) Shares of Stock that shall be subject to issuance pursuant
to the Plan shall be authorized and unissued or treasury shares of Stock.
(d) Without limiting the generality of the foregoing, the
Committee may, with the grantee's consent, cancel any Award under the Plan and
issue a new Award in substitution therefor upon such terms as the Committee may
in its sole discretion determine, provided that the substituted Award shall
satisfy all applicable Plan requirements as of the date such new Award is
granted.
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5. Stock Options.
5.1 Grant of Stock Options.
The Committee may grant Options to purchase shares of Stock in
such amounts and subject to such terms and conditions as the Committee shall
from time to time in its sole discretion determine, subject to the terms of the
Plan.
5.2 Types of Options Under Plan.
(a) Options granted under the Plan may be either (i)
Non-ISOs, or (ii) ISOs.
(b) All Options when granted are intended to be NonISOs,
unless the applicable Award Agreement explicitly states that the Option is
intended to be an ISO. If an Option is intended to be an ISO, and if for any
reason such Option (or any portion thereof) shall not qualify as an ISO, then,
to the extent of such nonqualification, such Option (or portion) shall be
regarded as a Non-ISO appropriately granted under the Plan, provided that such
Option (or portion) otherwise meets the Plan's requirements relating to
Non-ISOs.
5.3 Option Price.
Except as provided in Section 5.7 of the Plan, the Option
Price shall be no less than the Fair Market Value of a share of Stock on the
date the Option is granted.
5.4 Period of Exercise.
The Committee shall determine the dates after which Options
may be exercised in whole or in part; provided, however, that an Option shall
not be exercised prior to the effective date of the Plan nor later than the
Option's Termination Date and, provided, further, that no Option shall be
exercisable more than 10 years after the date of grant. The Committee may amend
an Option to accelerate the date after which such Option may be exercised in
whole or in part. An Option which has not been exercised on or prior to its
Termination Date shall be cancelled.
5.5 Notice of Exercise; Exercise Date.
(i) An Option shall be exercisable by the filing of a
written notice of exercise with the Company, on such form and in such
manner as the Committee shall in its sole discretion prescribe, and by
payment in accordance with Section 5.6.
(ii) For purposes of the Plan, the "Option Exercise
Date" shall be deemed to be the business day on which the written
notice of exercise is received by the Company.
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5.6 Payment of Option Price.
(a) Tender Due Upon Notice of Exercise. Unless the applicable
Award Agreement otherwise provides or the Committee in its sole discretion
otherwise determines, (i) any written notice of exercise of an Option shall be
accompanied by payment of the full purchase price for the shares being purchased
and (ii) the grantee shall have no right to receive shares of Stock with respect
to an Option exercise prior to the Option Exercise Date.
(b) Manner of Payment. Payment of the Option Price
shall be made in any combination of the following:
(i) by certified or official bank check payable to the
Company (or the equivalent thereof acceptable to the Committee);
(ii) with the consent of the Committee in its sole
discretion, by personal check (subject to collection);
(iii) if and to the extent provided in the applicable
Award Agreement, by delivery of previously acquired shares of Stock
owned by the grantee having a Fair Market Value (determined as of the
Option Exercise Date) equal to the portion of the Option Price being
paid thereby;
(iv) if authorized by the Committee, by delivery of a
properly executed exercise notice together with irrevocable
instructions to a securities broker (or, in the case of pledges,
lender) approved by the Company to, (a) sell shares of Stock subject to
the option and to deliver promptly to the Company a portion of the
proceeds of such sale transaction on behalf of the exercising
participant to pay the Option Price, or (b) pledge shares of Stock
subject to the Option to a margin account maintained with such broker
or lender, as security for a loan, and such broker or lender, pursuant
to irrevocable instructions, delivers to the Company the loan proceeds,
at the time of exercise to pay the Option Price; and
(v) by other means the Committee deems appropriate.
5.7 Special ISO Requirements.
In order for a grantee to receive special tax treatment with
respect to stock acquired under an Option intended to be an ISO, the grantee of
such Option must be, at all times during the period beginning on the date of
grant and ending on the day three months before the date of exercise of such
Option, an employee of the Company or any of the Company's parent or subsidiary
corporations (within the meaning of section 424 of the Code), or of a
corporation or a parent or subsidiary corporation of such corporation issuing or
assuming a stock option in a transaction to which section 424(a) of the Code
applies. If an
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Option granted under the Plan is intended to be an ISO and if the grantee, at
the time of grant, owns stock possessing 10% or more of the total combined
voting power of all classes of stock of the grantee's employer corporation or of
its parent or subsidiary corporation, then (a) the Option Price per share shall
in no event be less than 110% of the Fair Market Value of the Stock on the date
of such grant and (b) such Option shall not be exercisable after the expiration
of five years after the date such Option is granted.
6. Stock Appreciation Rights
(a) Grant of Stock Appreciation Rights. A Stock Appreciation
Right may be granted (a) independent of an Option or (b) in conjunction with an
Option, or portion thereof. A Stock Appreciation Right granted pursuant to
clause (b) of the preceding sentence may be granted at the time the related
Option is granted or at any time prior to the exercise or cancellation of the
related Option.
(b) Exercise Price. The exercise price per share of a Stock
Appreciation Right shall be an amount determined by the Committee but in no
event shall such amount be less than the Fair Market Value of a share of Stock
on the date the Stock Appreciation Right is granted or, in the case of a Stock
Appreciation Right granted in conjunction with an Option, or portion thereof,
the Option Price of the related Option.
(c) Period of Exercise. The Committee shall determine the
dates after which Stock Appreciation Rights may be exercised in whole or in
part; provided, however, that a Stock Appreciation Right shall not be exercised
prior to the effective date of the Plan nor later than the Termination Date of
the Stock Appreciation Right. The Committee may amend a Stock Appreciation Right
to accelerate the date after which it may be exercised in whole or in part. A
Stock Appreciation Right which has not be exercised on or prior to its
Termination Date shall be cancelled. A Stock Appreciation Right granted in
conjunction with an Option, or portion thereof, shall not be exercised unless
such Option, or portion thereof, is otherwise exercisable, and such a Stock
Appreciation Right shall be cancelled to the extent the Option to which it
relates has been exercised, or has expired, been terminated or been cancelled
for any reason.
(d) Exercise of Stock Appreciation Rights. A Stock
Appreciation Right, or portion thereof, shall be exercised in accordance with
such procedures as may be established by the Committee. Upon the exercise of a
Stock Appreciation Right, the participant or his or her legal representative
shall be entitled to receive from the Company with respect to each share of
Stock to which such Stock Appreciation Right relates an amount equal to the
excess of (a) the Fair Market Value of a share of Common Stock on the date of
exercise over (b) the exercise price of the Stock Appreciation Right. Such
amount shall be paid in cash
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6
and/or shares of Stock at the discretion of the Committee. The number of shares
of Stock, if any, issued as a result of the exercise of a Stock Appreciation
Right shall be based on the Fair Market Value of such share of Stock on the date
of exercise. Upon the exercise of a Stock Appreciation Right, or portion
thereof, granted in conjunction with an Option, or portion thereof, the Option,
or portion thereof, to which such Stock Appreciation Right relates shall be
deemed in the case of a cash payment to have been cancelled and in the case of a
payment of shares of Stock to have been exercised.
7. Other Share-Based Awards
Other Awards of Stock and Awards that are valued in whole or
in part by reference to, or are otherwise based on the Fair Market Value of,
shares of Stock may be granted under the Plan in the discretion of the
Committee. Such Awards shall be in such form, and dependent on such conditions,
as the Committee shall determine, including, without limitation, the right to
receive one or more shares of Stock, or the equivalent cash value of such Stock,
upon the completion of a specified period of service, the occurrence of an event
and/or the attainment of performance objectives. Such Awards may be granted
alone or in addition to any other Awards granted under the Plan. Subject to the
provisions of the Plan, the Committee shall determine to whom and when such
Awards will be made, the number of shares of Stock to be awarded under (or
otherwise related to) such Awards, whether such Awards shall be settled in cash,
Stock or a combination of cash and Stock, and all other terms and conditions of
such Awards. Notwithstanding the foregoing, certain Awards granted under this
Section 7 of the Plan may be granted in a manner which is deductible by the
Company under Section 162(m) of the Code. Such Awards (the "Performance-Based
Awards") shall be based upon stock price, market share, sales, earnings per
share, return on equity or costs.
8. Definitions of Certain Terms.
(a) The term "1993 Plan" as used herein means the North
American Watch Corporation 1993 Employee Stock Option Plan.
(b) The term "Act" as used herein means the Securities
Exchange Act of 1934.
(c) The term "Affiliate" as used herein means any person or
entity, which, at the time of reference, directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the Company.
(d) The term "Award" as used herein means an Option, Stock
Appreciation Right or other award granted under the Plan.
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(e) The term "Award Agreement" as used herein has the meaning
ascribed to it in Section 21(a).
(f) The term "Board" as used herein means the Board of
Directors of the Company.
(g) The term "Change in Control" as used herein has the
meaning ascribed to it in Section 19(c).
(h) The term "Code" as used herein means the United States
Internal Revenue Code of 1986, as amended.
(i) The term "Committee" as used herein means the committee
appointed by the Board to administer the Plan.
(j) The term "Company" as used herein means the Movado Group,
Inc.
(k) The term "Consent" as used herein has the meaning ascribed
to it in Section 10(b).
(l) The term "Election Contest" as used herein has the meaning
ascribed to it in Section 19(c).
(m) Except as otherwise determined by the Committee in its
sole discretion, the "Fair Market Value" as of any date and in respect of any
share of Stock shall be the mean between the high and low prices of a share of
Stock as reported on NASDAQ -- National Market System if shares of Stock are
then trading in such system, or if not, then the mean between the high and low
prices of a share of Stock on the principal United States national securities
exchange on which shares of Stock are principally trading. In no event shall
the Fair Market Value of any share be less than its par value.
(n) The term "ISO" as used herein means an incentive stock
option with the meaning of Section 422 of the Code.
(o) The term "Non-Control Acquisition" as used herein has the
meaning ascribed to it in Section 19(c).
(p) The term "Non-Control Transaction" as used herein has the
meaning ascribed to it in Section 19(c).
(q) The term "Non-ISO" as used herein means a stock option
that is not an ISO.
(r) The term "Option" as used herein means a stock option
granted under the Plan.
(s) The term "Option Exercise Date" as used herein has the
meaning ascribed to it in Section 5.5.
8
8
(t) The term "Option Price" as used herein means the purchase
price of one share of Stock under an Option.
(u) The term "Plan" as used herein means the Movado Group,
Inc. 1996 Stock Incentive Plan.
(v) The term "Plan Action" as used herein has the meaning
ascribed to it in Section 10(a).
(w) The term "Stock" as used herein means common stock, par
value $.01 per share, of the Company as constituted on the effective date of the
Plan, and any other shares into which such common stock shall thereafter be
changed by reason of a recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like.
(x) The term "Stock Appreciation Right" as used herein means a
stock appreciation right granted under the Plan.
(y) The term "Termination Date" as used herein means, with
respect to each Award, a date fixed by the Committee.
(z) The term "Voting Securities" as used herein has the
meaning ascribed to it in Section 19(c).
9. Amendment of the Plan; Modification of Options.
(a) Plan Amendments. The Board may, without shareholder
approval, at any time and from time to time, suspend, discontinue or amend the
Plan in any respect whatsoever, except that no such amendment shall impair any
rights under any Award theretofore granted under the Plan without the consent of
the grantee of such Award. Furthermore, except as and to the extent otherwise
permitted by Section 13 or 19 hereof, no such amendment shall, without
shareholder approval:
(i) materially increase, beyond the amounts set forth
in Section 4, the number of shares of Stock in respect of which Awards
may be issued under the Plan;
(ii) materially modify the designation in Section 3 of
the class of persons eligible to receive Awards under the Plan;
(iii) provide for the grant of Awards having an Option
Price less than 100% of the Fair Market Value of a share of Stock on
the date of grant;
(iv) permit an Option to be exercisable more than 10
years after the date of grant; or
(v) extend the term of the Plan beyond the period set
forth in Section 23.
9
9
10. Restrictions.
(a) Consent Requirements. If the Committee shall at any time
determine that any Consent (as hereinafter defined) is necessary or desirable as
a condition of, or in connection with, the granting of any Award under the Plan,
the acquisition, issuance or purchase of shares or other rights hereunder or the
taking of any other action hereunder (each such action being hereinafter
referred to as a "Plan Action"), then such Plan Action shall not be taken, in
whole or in part, unless and until such Consent shall have been effected or
obtained to the full satisfaction of the Committee. Without limiting the
generality of the foregoing, if (i) the Company may make any payment under the
Plan in cash, Stock or both and (ii) the Committee determines that Consent is
necessary or desirable as a condition of, or in connection with, payment in any
one or more of such forms, then the Committee shall be entitled to determine not
to make any payment whatsoever until such Consent has been obtained.
Certificates representing shares of Stock may bear such legends as the Committee
shall deem advisable to reflect restrictions which may be imposed by laws,
including without limitation, the Securities Act of 1933.
(b) Consent Defined. The term "Consent" as used herein with
respect to any Plan Action means (i) any and all listings, registrations or
qualifications in respect thereof upon any securities exchange or other
self-regulatory organization or under any federal, state or local law, rule or
regulation, (ii) the expiration, elimination or satisfaction of any
prohibitions, restrictions or limitations under any federal, state or local law,
rule or regulation or the rules of any securities exchange or other
self-regulatory organization, (iii) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Committee shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made and (iv) any and all consents,
clearances and approvals in respect of a Plan Action by any governmental or
other regulatory bodies or any parties to any loan agreements or other
contractual obligations of the Company or any Affiliate.
11. Nontransferability.
No Award granted to any grantee shall be assignable or
transferable by the grantee other than by will or by the laws of descent and
distribution. During the lifetime of the grantee, all rights with respect to any
Award granted to the grantee shall be exercisable only by the grantee. This
Section 11 (or any part thereof) may be altered by the Committee to the extent
that it is no longer required under the rules promulgated under Section 16 of
the Act or any other law, rule or regulation applicable to the Company.
10
10
12. Withholding Taxes.
(a) Whenever, under the Plan, shares of Stock are to be
delivered pursuant to an Award, the Committee may require as a condition of
delivery that the grantee remit an amount sufficient to satisfy all federal,
state and other governmental withholding tax requirements related thereto.
Whenever cash is to be paid under the Plan, the Company may, as a condition of
its payment, deduct therefrom, or from any salary or other payments due to the
grantee, an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto or to the delivery of
any shares of Stock under the Plan.
(b) Without limiting the generality of the foregoing, (i) a
grantee may elect to satisfy all or part of the foregoing withholding
requirements by delivery of unrestricted shares of Stock owned by the grantee
having a Fair Market Value (determined as of the date of such delivery by the
grantee) equal to all or part of the amount to be so withheld, and (ii) the
Committee may permit any such delivery to be made by withholding shares of Stock
from the shares otherwise issuable pursuant to the Award giving rise to the tax
withholding obligation (in which event the date of delivery, for an Option,
shall be deemed the date such Option was exercised).
13. Adjustments Upon Changes in Capitalization.
If (and to the extent) specified by the Committee, the number
of shares of Stock that may be issued pursuant to Awards under the Plan, the
number of shares of Stock subject to Awards, the exercise price of Options
theretofore granted under the Plan and the amount payable by a grantee in
respect of an Option shall be appropriately adjusted (as the Committee may
determine) for any change in the number of issued shares of Stock resulting from
the subdivision or combination of shares of Stock or other capital adjustments,
or the payment of a stock dividend after the effective date of the Plan, or
other change in such shares of Stock effected without receipt of consideration
by the Company; provided that any Awards covering fractional shares of Stock
resulting from any such adjustment shall be eliminated and provided further that
each ISO granted under the Plan shall not be adjusted in a manner that causes
such Option to fail to continue to qualify as an ISO within the meaning of
section 422 of the Code. Adjustments under this Section shall be made by the
Committee, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive.
14. Right of Discharge Reserved.
Nothing in the Plan or in any Award Agreement shall confer
upon any person the right to continue in the employment of the Company or an
Affiliate or affect any right which the Company
11
11
or an Affiliate may have to terminate the employment of such person.
15. No Rights as a Shareholder.
No grantee or other person shall have any of the rights of a
shareholder of the Company with respect to shares of Stock subject to an Option
until the issuance of a stock certificate to such-grantee for such shares of
Stock. Except as otherwise provided in Section 13, no adjustment shall be made
for dividends, distributions or other rights (whether ordinary or extraordinary,
and whether in cash, securities or other property) for which the record date is
prior to the date such stock certificate is issued.
16. Nature of Payments.
(a) All Awards granted hereunder shall be granted, issued,
delivered or paid, as the case may be, in consideration of services performed
for the Company or for its Affiliates by the grantee.
(b) No Award shall be considered special incentive payments to
the grantee or, unless otherwise determined by the Committee, be taken into
account in computing the grantee's salary or compensation for the purposes of
determining any benefits under (i) any pension, retirement, life insurance or
other benefit plan of the Company or any Affiliate or (ii) any agreement between
the Company or any Affiliate and the grantee.
(c) By accepting an Award under the Plan, the grantee thereby
waives any claim to continued exercise of an Option or vesting of an Award or to
damages or severance entitlement related to non-continuation of the Award beyond
the period provided herein or in the applicable Award Agreement, notwithstanding
any contrary provision in any written employment contract with the grantee,
whether any such contract is executed before or after the grant date of the
Award.
17. Non-Uniform Determinations.
The Committee's determinations under the Plan need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, Awards under the Plan (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the
Committee shall be entitled, among other things, to make non-uniform and
selective determinations, and to enter into non-uniform and selective Award
Agreements, as to (a) the persons to receive Awards under the Plan, and (b) the
terms and provisions of Awards under the Plan.
12
12
18. Other Payments or Options.
Nothing contained in the Plan shall be deemed in any way to
limit or restrict the Company, any Affiliate or the Committee from making any
option, award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
19. Reorganization.
(a) In the event that the Company is merged or consolidated
with another corporation and, whether or not the Company shall be the surviving
corporation, there shall be any change in the shares of Stock by reason of such
merger or consolidation, or in the event that all or substantially all of the
assets of the Company are acquired by another person, or in the event of a
Change of Control (as defined in Section 19(c) below) after the date of the
adoption of this Plan or in the event of a reorganization or liquidation of the
Company (each such event being hereinafter referred to as a "Reorganization
Event") or in the event that the Board shall propose that the Company enter into
a Reorganization Event, then the Committee may in its discretion, by written
notice to a grantee, provide that such grantee's Options will be terminated
unless exercised within 30 days (or such longer period as the Committee shall
determine in its sole discretion) after the date of such notice; provided that
if the Committee takes such action, the Committee also shall accelerate the
dates upon which all outstanding Options of such grantee shall be exercisable.
The Committee also may in its discretion by written notice to a grantee provide
that all or some of the restrictions on any of his Awards may lapse in the event
of a Reorganization Event upon such terms and conditions as the Committee may
determine.
(b) Whenever deemed appropriate by the Committee, the actions
referred to in Section 19(a) may be made conditional upon the consummation of
the applicable Reorganization Event.
(c) The term Change of Control means the occurrence during the
term of the Plan of:
(i) The commencement (within the meaning of Rule 14d-2 under
the Act) of a tender offer for more than 20% of the Company's
outstanding shares of capital stock having ordinary voting power in the
election of directors (the "Voting Securities").
(ii) An acquisition (other than directly from the Company) of
any voting securities of the Company by any "Person" (as the term
person 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 combined voting power of the Company's
13
13
then outstanding Voting Securities; provided, however, 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 (i) an employee
benefit plan (or a trust forming a part thereof or a trustee thereof
acting solely in its capacity as trustee) maintained by (A) the Company
or (B) any corporation or other Person of which a majority of its
voting power or its voting equity securities or equity interest is
owned, directly or indirectly, by the Company (for purposes of this
definition, a "Subsidiary"), (ii) the Company or its Subsidiaries, or
(iii) 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 (b).
(iii) The individuals who, as of June 14, 1996, are members of
the Board (the "Incumbent Board"), ceasing for any reason to constitute
at least two-thirds 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 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 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 1934 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; or
(iv) Approval by stockholders of the Company of:
(A) 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 (A), (B), and (C) below:
a) the stockholders of the Company, immediately
before such merger, consolidation or reorganization,
own, directly or indirectly immediately following such
14
14
merger, consolidation or reorganization, at least seventy
percent (70%) of the combined voting power of the outstanding
voting securities of the corporation resulting from such
merger or 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;
b) 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 of the members of the board of
directors of the Surviving Corporation immediately following
the consummation of such merger, consolidation or
reorganization; and
c) 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 thirty 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.
(B) A complete liquidation or dissolution of the
Company; or
(C) 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).
20. Governing Law.
The Plan shall be governed by the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state.
21. Award Agreements.
(a) Awards granted under the Plan shall be evidenced by
written agreements, which shall (i) contain such provisions not inconsistent
with the terms of the Plan as the Committee may in its sole discretion deem
necessary or desirable and (ii) be referred to herein as "Award Agreements."
15
15
(b) With respect to Options, each Award Agreement shall set
forth the number of shares of Stock subject to the Option granted thereby and
the Option Price. The Option Price per share shall not be less than the Fair
Market Value of a share of Stock on the date the Option is granted.
22. Section Headings.
The section headings contained herein are for convenience only
and are not intended to define or limit the contents of said sections.
23. Effective Date.
(a) The Plan, as amended and restated herein, shall be deemed
adopted and become effective upon the approval thereof by the Board or such
other date as the Board shall determine; provided that, notwithstanding any
other provision of the Plan, no Option granted under the amended and restated
Plan shall be exercisable unless the Plan, is approved, directly or indirectly,
by the express consent of shareholders holding at least a majority of the
Company's voting stock voting in person or by proxy at a duly held shareholders'
meeting within 12 months before or after the date the Plan is adopted.
(b) No further Awards shall be granted under the Plan on or
after the tenth anniversary of the earlier of the date on which it is (1)
adopted or (2) approved by shareholders. All Awards granted under the Plan prior
to such tenth anniversary date shall remain in effect until such Options have
been exercised or have terminated in accordance with the terms and provisions of
the Plan and the applicable Award Agreement.
1
MOVADO GROUP, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
FISCAL YEAR 1997
2
PLAN OBJECTIVES:
- - Motivate key managers to achieve Company objectives
- - Financially reward managers in fair proportion to their contribution towards
Company objectives.
- - Ensure that financial awards are competitive with industry practices.
ELIGIBILITY:
Eligibility is granted to managers who occupy positions that can significantly
influence the attainment of Business Unit and/or Corporate objectives.
PLAN CONCEPT:
1. Performance Period: The performance period of the short-term incentive plan
will begin on the first day of the fiscal year (February 1) and will end on
the last day of the fiscal year (January 31).
2. Award Values: Participants in this plan shall have a target bonus as a
percentage of salary or a percentage of sales and their bonus level will be
based upon their management level and ability to influence company
performance. The actual awards paid will be based on business unit and/or
Corporate performance first and individual performance second.
3. Business Units: For purposes of this plan, there are the following business
units: Corporate, U.S. Wholesale, Swiss Am (Retail Division), Switzerland
(includes NA Trading, Grand Jean, Swiss Corporate, Concord SA and Movado SA
manufacturing), International Sales and Marketing (includes Movado SA, and
Concord SA sales and Montres Bienne), the Far East (Hong Kong and Singapore),
Germany and Canada.
3
4. Bonus Pool Funding: The actual awards are based first upon the business unit
and/or Corporate performance and then on individual performance after the
pool has been funded.
5. Business Unit Performance: Awards for Company performance will be based on
Pre-Tax Profit goals and Operating Cash Flow (in local currency).
6. Individual Performance: Participants will establish annual objectives at the
start of each fiscal year which will be reviewed by two levels of management.
These objectives should cover key results expected, both those designed to
support annual Company and department performance and those expected to
benefit longer term performance. Performance on these objectives will be
judged and rated as part of overall performance in the annual review.
7. A number of managers may have goals attached to both business unit and
Corporate performance. Their bonus pool will therefore have both a corporate
and business unit component.
4
BONUS PAYMENTS
After the pool is funded, the actual bonus amount paid will be dependent upon
overall performance against objectives which will be reviewed in conjunction
with the performance evaluation program as follows:
If a participant's overall evaluation is at the "1" level (denoting a marginal
or dissatisfactory level of performance), then no bonus will be paid. If
performance is at the "2" or satisfactory level but where some improvement is
indicated, then the bonus will be paid at 50%. At the "3" or fully competent
level, 100% of the bonus will be paid. Finally, if an individual meets and often
exceeds performance targets which is the "4" level of performance, 120% of the
bonus target may be paid. When judging an individual's overall evaluation level,
performance against agreed upon objectives will be an important factor in
determining the final score.
Once the Business Unit achieves at least a threshold level of performance, the
bonus pool will be funded at the minimum level. Actual individual awards will be
determined by individual performance against agreed upon objectives.
For senior managers who have the ability to influence overall corporate goals, a
portion of their pool will be based on Corporate performance and in order to
receive the Corporate portion of their bonus pool, the Corporation must meet at
least the threshold level of performance. Therefore, the business unit and/or
Corporation must meet the threshold level of performance for the pool to be
funded. If the threshold level is not achieved, the pool will not be funded and
bonus payments will be strictly discretionary.
5
BONUS POOL FUNDING
The bonus pool will be funded according to Pre-tax Profit goals and Pre-tax
Operating Cash flow as follows:
BONUS POOL FUNDING
% GOAL EARNINGS CASH FLOW
ACHIEVED FUNDING FUNDING
120% 150% 150%
110% 115% 115%
100% 100% 100%
90% 75% 75%
80% 50% 50%
According to the above table, if the pre-tax profits (Goal A) and pre-tax
operating cash flow (Goal B) were 120% of the budgeted number, the pool would be
funded at 150% or at the maximum bonus level. If the targets of pre-tax profit
(Goal A) and operating cash flow (Goal B) were reached, the pool would be funded
at 100%, and if the pre-tax profits and operating cash flow were at 80% of the
goal, then the pool would be funded at 50%. If results are below 80% of the
pre-tax profit goal but the goal of operating cash flow is above 80%, then the
pool would be funded at 40%. If the pre-tax profit goal is 80% or above but the
operating cash flow goal is below 80%, then the pool will be funded at 40%. If
pre-tax profits and operating cash flow are below 80% of the goal, then the pool
will not be funded and any bonuses granted would be strictly discretionary.
All individuals will have a portion of their Business Unit goals tied to the
Worldwide Corporate goals.
6
ADMINISTRATIVE GUIDELINES
- - Employees hired or transferred into a bonus eligible position prior to
August 1st are eligible to participate in this plan and to receive a
prorated bonus award based upon their performance against those objectives
mutually agreed to at the start of employment.
- - Employees hired or transferred into a bonus eligible position in the second
six months of the fiscal year do not become eligible for participation in
this plan until February 1 of the following fiscal year. However, they are
eligible to receive a discretionary bonus for performance during the second
half of the year.
- - Participants whose employment is terminated by the Company or who resign
voluntarily prior to the date bonuses are paid, will not be eligible to
receive a bonus payment.
- - Participants who are terminated because of a reorganization, who retire from
active employment, who become disabled or who die, will be eligible to
receive a discretionary payment for their period of active employment.
- - The calculation of all awards shall be based upon average salary for the
entire performance period with all adjustments for promotion, merit, etc.,
included proportionately.
- - The calculation of Worldwide Corporate and Business Unit performance will be
verified by the Chief Financial Officer. Individual awards will be
recommended by each participant's supervisor and approved by the top
department manager. Final approval of bonus awards will be made by the
President. Awards for Corporate Officers will also be approved by the
Compensation Committee of the Board of Directors of North American Watch
Corporation.
7
MISCELLANEOUS
1. The Company reserves the unilateral right with or without notice, at any
time and from time to time, in its sole and absolute discretion to (i) amend
or modify in whole or in part any of the provisions of the plan in any
respect whatsoever, (ii) to likewise suspend or cancel the Plan and (iii) to
make exceptions to any or all of the provisions of the Plan on a case by
case basis.
2. THIS PLAN DOES NOT CONSTITUTE A CONTRACT OF EMPLOYMENT AND THE COMPANY
SPECIFICALLY RESERVES THE RIGHT TO TERMINATE A PARTICIPANT'S EMPLOYMENT AT
ANY TIME WITH OR WITHOUT CAUSE AND WITH OR WITHOUT NOTICE OR ASSIGNING A
REASON.
3. At all times, payment under this plan is subject to the Company's
discretion. Payment will be made to individual participants not only based
upon Corporate and Individual achievement against goals but also will be
based upon overall individual performance.
4. Notwithstanding anything to the contrary contained herein, the amount of the
bonus payment, if any, will at all times be ultimately determined by the
Company in its sole and absolute discretion and the Company expressly
reserves the right to pay any amount (including zero) which is less than or
more than the amount otherwise determined by reference to Corporate
Performance and Individual Performance.
5. The Company reserves the right to adjust Worldwide Corporate or Business
Unit performance for extraordinary events.
1
EXHIBIT 11
MOVADO GROUP, INC.
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED THREE MONTHS ENDED
OCTOBER 31, 1996 OCTOBER 31, 1996
----------------------------- -----------------------------
PRIMARY
Net income $8,560 $7,350
============================ =============================
Weighted average number of common shares outstanding 6,009 6,011
Add common equivalent shares
(determined using the "Treasury Stock" Method) representing
shares issuable upon exercise of employee stock options 90 120
---------------------------- -----------------------------
Weighted average number of shares used in primary net income
per share 6,099 6,131
============================ =============================
Primary net income per share $1.40 $1.20
============================ =============================
FULLY DILUTED
Net income $8,560 $7,350
============================ =============================
Weighted average number of common shares outstanding 6,009 6,011
Add common equivalent shares
(determined using the "Treasury Stock" Method) representing
shares issuable upon exercise of employee stock options 171 171
---------------------------- -----------------------------
Weighted average number of shares used in fully diluted net
income per share 6,180 6,182
============================ =============================
Fully diluted net income $1.39 $1.19
============================ =============================
5
1,000
3-MOS
JAN-31-1997
AUG-01-1996
OCT-31-1996
4,040
0
112,701
0
102,894
230,607
14,312
0
253,257
90,681
40,000
0
0
60
110,087
253,257
76,864
76,864
33,897
31,439
0
0
1,367
10,161
2,811
7,350
0
0
0
7,350
1.20
1.19
