UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO.)
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[ ] Soliciting Material Pursuant to Section 240.14a-12
MOVADO GROUP, INC.
(Name of Registrant as Specified In Its Charter)
______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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MOVADO GROUP, INC.
650 FROM ROAD
PARAMUS, NEW JERSEY 07652
May 15, 2006
Dear Fellow Shareholder:
You are cordially invited to attend the 2006 Annual Meeting of Shareholders
of Movado Group, Inc. to be held on Thursday, June 15, 2006 at 10:00 a.m.,
Eastern Daylight Time, at the Company's executive offices in Paramus, New
Jersey. The official Notice of Meeting, Proxy Statement and form of proxy are
enclosed with this letter. The matters listed in the Notice of Meeting are
described in the enclosed Proxy Statement.
We sincerely hope you will be able to attend the meeting. We will report on
the Company's progress and respond to questions you may have about the Company's
business.
Whether or not you plan to attend, the vote of every shareholder is
important and your cooperation in completing, signing and returning your proxy
promptly will be appreciated.
We hope to see you at the Annual Meeting.
Sincerely,
Gedalio Grinberg Efraim Grinberg
CHAIRMAN OF THE BOARD OF DIRECTORS PRESIDENT AND CHIEF EXECUTIVE OFFICER
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND RETURN
YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
MOVADO GROUP, INC.
650 FROM ROAD
PARAMUS, NEW JERSEY 07652
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 15, 2006
Notice is hereby given that the Annual Meeting of Shareholders of Movado Group,
Inc. will be held on Thursday, June 15, 2006 at 10:00 a.m., Eastern Daylight
Time, at the Company's executive offices located at 650 From Road, Paramus, New
Jersey for the following purposes:
1. To elect nine directors to serve until the next Annual Meeting and
until their successors are elected and qualified; and
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending January 31, 2007;
and
3. To approve an amendment and restatement of the Company's Executive
Performance Plan, originally established effective February 1, 2001;
and
4. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
Holders of the Company's Common Stock and Class A Common Stock of record at the
close of business on May 12, 2006 are entitled to notice of and to vote at the
Annual Meeting of Shareholders or any postponements or adjournments thereof.
Dated: May 15, 2006 By order of the Board of Directors
Timothy F. Michno
Secretary and General Counsel
MOVADO GROUP, INC.
650 FROM ROAD
PARAMUS, NJ 07652
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
This proxy statement and the accompanying proxy are being furnished to the
shareholders of Movado Group, Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company to be used for
voting at the Annual Meeting of Shareholders (the "Annual Meeting") to be held
on Thursday, June 15, 2006 at 10:00 a.m., Eastern Daylight Time, at the
Company's executive offices located at 650 From Road, Paramus, New Jersey and at
any adjournments thereof. It is expected that this proxy statement and the form
of proxy will first be sent to shareholders on or about May 15, 2006.
At the Annual Meeting, the holders of the Company's Common Stock and Class
A Common Stock (together the "Capital Stock") will be asked to consider and vote
upon the following proposals:
1. To elect nine directors to serve until the next annual meeting and
until their successors are elected and qualified; and
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending January 31, 2007;
and
3. To approve an amendment and restatement of the Company's Executive
Performance Plan, originally established effective February 1, 2001;
and
4. To transact such other business as may properly come before the Annual
Meeting or any postponement or adjournment thereof.
The Board of Directors knows of no other business to be presented at the
Annual Meeting. If any other business is properly presented, the persons named
in the enclosed proxy will have the power to vote all proxies received, and not
theretofore revoked, in accordance with the recommendations of the Board of
Directors. If the enclosed proxy is properly executed, returned to the Company
in time for the Annual Meeting and not revoked, your shares will be voted in
accordance with the instructions contained thereon. Where a signed proxy is
returned, but no specific instructions are indicated, your shares will be voted
as follows: FOR the nominees for Directors identified below; FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants for fiscal year 2007; and FOR approval of the Company's
amended and restated Executive Performance Plan.
Abstentions will be treated as present for purposes of determining a quorum
for the Annual Meeting. Proxies returned by brokers as "non-votes" will not be
treated as present for purposes of determining the presence of a quorum.
Any shareholder who executes and returns a proxy may revoke it in writing
at any time before it is voted at the Annual Meeting by: (i) filing with the
Secretary of the Company, at the above address, written notice of such
revocation bearing a later date than the proxy or a subsequent proxy relating to
the same shares or (ii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
revocation of a proxy).
The solicitation of proxies in the enclosed form is made on behalf of the
Board of Directors. The entire cost of soliciting these proxies will be borne by
the Company. In addition to solicitation by mail, proxies may be solicited
personally or by telephone by officers, directors and employees of the Company,
who will receive no additional compensation for such activities. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of shares
held of record by such persons, who will be reimbursed for their reasonable
expenses incurred in such connection.
OUTSTANDING VOTING SECURITIES
The Board of Directors has fixed the close of business on May 12, 2006 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting (the "Record Date"). Only holders of record of the
Capital Stock at the close of business on the Record Date are entitled to notice
of and to vote at the Annual Meeting or any and all adjournments thereof. On
April 19, 2006 there were 18,645,968 shares of Common Stock outstanding and
6,766,909 shares of Class A Common Stock outstanding. Each share of Common Stock
is entitled to one vote, and each share of Class A Common Stock is entitled to
10 votes. The holders of a majority in voting power of the outstanding shares of
Capital Stock entitled to vote at the Annual Meeting, present in person or
represented by proxy, constitute a quorum at the Annual Meeting. Directors are
elected by a plurality of the votes cast at the Annual Meeting. The approval of
each of the proposals to ratify the selection of PricewaterhouseCoopers LLP as
the Company's independent accountants for fiscal 2007 and to approve the amended
and restated Executive Performance Plan requires the affirmative vote of a
majority of the votes cast at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Class A Common Stock and the Common Stock as of
April 19, 2006 (except as otherwise noted in footnotes 3, 4, 6 and 13) by (i)
each shareholder who is known by the Company to beneficially own in excess of 5%
of the outstanding shares of Class A Common Stock or of the outstanding shares
of Common Stock, (ii) each director, (iii) each Named Executive Officer (as
hereinafter defined) and (iv) all executive officers and directors as a group.
Unless otherwise noted, all shares are beneficially owned by the persons
indicated.
PERCENT OF
OUTSTANDING
SHARES OF SHARES OF
CLASS A SHARES OF CAPITAL STOCK
COMMON COMMON ---------------- PERCENT OF
STOCK STOCK CLASS A TOTAL
BENEFICIALLY BENEFICIALLY COMMON COMMON VOTING
NAME OF BENEFICIAL OWNER OWNED OWNED STOCK STOCK POWER (1)
------------------------------------------------- ------------ ------------ ------- ------ ----------
Margaret Hayes Adame (2) ........................ -- 15,750 -- * *
AXA Assurances I.A.R.D. Mutuelle (3) ............ -- 944,230 -- 5.1% 1.1%
Babson Capital Management LLC (4) ............... -- 2,590,143 -- 13.9% 3.0%
Richard J. Cote (5) ............................. -- 1,165,394 -- 6.0% 1.3%
Dimensional Fund Advisors Inc. (6) .............. -- 1,756,892 -- 9.4% 2.0%
Alexander Grinberg (7) .......................... 2,591,220 21,518 38.3% * %
Efraim Grinberg (8) ............................. 3,930,165 1,272,209 58.1% 6.5% 46.5%
Gedalio Grinberg (9) ............................ 1,586,015 154,345 23.4% * 18.6%
Alan H. Howard (2) .............................. -- 13,874 -- * *
Richard Isserman ................................ -- -- -- -- --
Eugene J. Karpovich (10) ........................ -- 55,077 -- * *
Nathan Leventhal ................................ -- -- -- -- --
Timothy F. Michno ............................... -- 18 -- * *
Donald Oresman (2) .............................. 3,920 12,000 * * *
Miriam Phalen (11) .............................. 2,594,744 -- 38.3% -- 30.1%
Leonard L. Silverstein (2) (12) ................. 942,283 104,646 13.9% * 11.0%
SunTrust Banks, Inc. (13) ....................... -- 984,500 -- 5.3% 1.1%
All executive officers and directors as a group
(13 persons) (14) ............................ 5,520,100 2,674,026 81.6% 13.1% 65.7%
----------
* DENOTES LESS THAN ONE PERCENT
The address for Messrs. Cote, A. Grinberg, G. Grinberg, E. Grinberg, Howard,
Isserman, Karpovich, Leventhal, Michno, Oresman and Silverstein and Ms. Hayes
Adame and Ms. Phalen is c/o Movado Group, Inc., 650 From Road, Paramus, New
Jersey 07652.
2
(1) In calculating the percent of total voting power, the voting power of
shares of Common Stock (one vote per share) and Class A Common Stock (10
votes per share) has been aggregated.
(2) The total shares of Common Stock reported as beneficially owned by each of
Ms. Hayes Adame and Messrs. Howard, Oresman and Silverstein includes 12,000
shares each has the right to acquire by the exercise of options under the
Company's 1996 Stock Incentive Plan.
(3) On February 14, 2006, in a joint filing on Schedule 13G under the
Securities Exchange Act of 1934, as amended ("Exchange Act") by AXA
Financial Inc.; AXA, which owns AXA Financial, Inc.; and AXA Assurances
I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle and AXA Courtage Assurance
Mutuelle (collectively "AXA Mutuelle") which, as a group control AXA, AXA
Mutuelle reported beneficial ownership as of December 31, 2005 of 944,230
shares of Common Stock. It reported having sole dispositive power as to all
and sole voting power as to 420,850 of such shares. It also reported that
all such shares were acquired in the ordinary course of business and not
for the purpose or with the effect of changing or influencing control of
the Company, or in connection with any transaction having such purpose or
effect. The address of AXA Mutuelle is 26 rue Drouot, 75009 Paris, France.
(4) In a filing on Schedule 13G under the Exchange Act dated January 30, 2006,
Babson Capital Management LLC ("Babson") reported beneficial ownership as
of December 31, 2005 of 2,590,143 shares of Common Stock as to which it
reported having sole dispositive power. Babson also reported having sole
voting power as to 2,589,288 and shared voting power as to 875 of such
shares of Common Stock. Babson also reported that all of the shares of
Common Stock that it beneficially owns were acquired in the ordinary course
of business and not for the purpose or with the effect of changing or
influencing control of the Company, or in connection with any transaction
having such purpose or effect. The address of Babson is 470 Atlantic
Avenue, Boston MA 02210.
(5) The total shares of Common Stock reported as beneficially owned by Mr. Cote
includes 755,599 shares which he has the right to acquire by the exercise
of options under the Company's 1996 Stock Incentive Plan and 2,200 shares
held by a trust for the benefit of his children as to which shares Mr. Cote
has shared dispositive power with his spouse who is the trustee with sole
voting power.
(6) On February 1, 2006 in a filing on Schedule 13G under the Exchange Act,
Dimensional Fund Advisors, Inc. ("DFA") reported beneficial ownership as of
December 31, 2005 of 1,756,892 shares of Common Stock as to all of which it
has sole voting and investment power. DFA also reported that all of the
shares of Common Stock that it beneficially owns were acquired in the
ordinary course of business and not for the purpose or with the effect of
changing or influencing control of the Company, or in connection with any
transaction having such purpose or effect. The address of DFA is 1299 Ocean
Avenue, 11th Floor, Santa Monica, CA 90401.
(7) The total number of shares of Class A Common Stock beneficially owned by
Mr. A. Grinberg includes 2,225,924 shares owned by Grinberg Partners L.P.,
a Delaware limited partnership, of which Mr. A. Grinberg is a limited
partner, and 78,920 shares owned by trusts for the benefit of Mr. A.
Grinberg's niece and nephew, of which trusts he is a co-trustee with Mr.
Mark Fishman. Mr. A. Grinberg has shared voting power with Grinberg
Partners L.P., Grinberg Group Partners, a Delaware general partnership
(general partner of Grinberg Partners L.P.) and Miriam Phalen over the
2,225,924 shares owned by Grinberg Partners L.P., and shared voting and
investment power with Mr. Fishman over the 78,920 shares owned by the
trusts. The Common Stock owned by Mr. A. Grinberg includes 13,156 shares he
has the right to acquire by the exercise of options under the Company's
1996 Stock Incentive Plan.
(8) The total number of shares of Class A Common Stock beneficially owned by
Mr. E. Grinberg includes an aggregate of 563,306 shares held by several
trusts for the benefit of Mr. E. Grinberg's siblings and himself, of which
trusts Mr. E. Grinberg is sole trustee. As sole trustee, Mr. E. Grinberg
has sole investment and voting power with respect to the shares held by
such trusts. In addition, the amount of shares of Class A Common Stock
reported for Mr. E. Grinberg includes an aggregate of 862,940 shares of
Class A Common Stock held by several trusts for the benefit of Mr. E.
Grinberg's siblings and himself, of which trusts Mr. E. Grinberg is
co-trustee with Mr. Leonard L. Silverstein. As a co-trustee, Mr. E.
Grinberg has shared investment and voting power with Mr. Silverstein with
respect to the shares of Class A Common Stock held
3
by such trusts. The total number of shares of Class A Common Stock
beneficially owned by Mr. E. Grinberg also includes 2,225,924 shares owned
by Grinberg Partners L.P., a Delaware limited partnership, of which
Grinberg Group Partners, a Delaware general partnership ("GGP"), is the
general partner. As the managing partner of GGP, Mr. E. Grinberg has shared
power to direct the voting and disposition of the shares owned by Grinberg
Partners L.P. Also included in the total number of shares of Class A Common
Stock reported as beneficially owned by Mr. E. Grinberg are 15,000 shares
owned by the Efraim Grinberg Family Foundation, a non-profit corporation,
as to which shares Mr. E. Grinberg has shared investment and voting control
together with the other member of the Board of Directors of that non-profit
corporation. The total number of shares of Common Stock owned by Mr. E.
Grinberg includes 64,278 shares of Common Stock held under the Company's
Employee Savings and Investment Plan ("401(k) Plan"), the trustees of which
are Messrs. G. Grinberg and E. Grinberg, both of whom have shared
investment and voting power as to such shares, and 68,617 shares of Common
Stock held under the Company's Stock Bonus Plan, for which Mr. E. Grinberg
is a co-trustee and as to which shares he has shared investment and voting
power. The total number of shares of Common Stock owned by Mr. E. Grinberg
also includes 884,736 shares of Common Stock which he has the right to
acquire by the exercise of options under the Company's 1996 Incentive Stock
Plan. Mr. E. Grinberg disclaims beneficial ownership as to the 954,218
shares of Class A Common Stock held by the trusts for the benefit of his
siblings of which he is trustee or co-trustee; the 64,278 shares of Common
Stock held under the Company's 401(k) Plan (except to the extent of his
pecuniary interest in such shares); the 68,617 shares of Common Stock held
under the Company's Stock Bonus Plan; and all the shares held by the Efraim
Grinberg Family Foundation.
(9) The total number of shares of Class A Common Stock beneficially owned by
Mr. G. Grinberg includes: 89,343 shares of Class A Common Stock owned by
The Grinberg Family Foundation, a non-profit corporation of which Mr. G.
Grinberg, Sonia Grinberg and Leonard L. Silverstein are the directors and
officers and as to which shares these three individuals have shared
investment and voting power. Also included in the total number of shares of
Class A Common Stock beneficially owned by Mr. G. Grinberg are 38,000
shares owned by CAP I Partners L.P., a limited partnership of which CAP I
Partners LLC is the general partner. Mr. G. Grinberg, as the managing
member of CAP I Partners LLC, has the sole power to vote and dispose of the
shares owned by CAP I Partners L.P. The total number of shares of Common
Stock beneficially owned by Mr. G. Grinberg includes 64,278 shares of
Common Stock held under the Company's 401(k) Plan, the trustees for which
are Messrs. G. Grinberg and E. Grinberg, both of whom have shared
investment and voting power as to such shares; 68,617 shares of Common
Stock held under the Company's Stock Bonus Plan, for which Mr. G. Grinberg
is a co-trustee and as to which shares he has shared investment and voting
power; and 10,000 shares of Common Stock held by a charitable remainder
trust for which Mr. G. Grinberg is a co-trustee together with Mr. Andrew
Weiss. Mr. G. Grinberg disclaims beneficial ownership as to the shares of
Class A Common Stock owned by The Grinberg Family Foundation and by CAP I
Partners L.P.; the shares of Common Stock held under the Company's 401(k)
Plan (except to the extent of his pecuniary interest therein) and the
shares of Common Stock held under the Company's Stock Bonus Plan.
(10) The total number of shares of Common Stock reported as beneficially owned
by Mr. Karpovich includes 50,225 shares which he has the right to acquire
by the exercise of options under the Company's 1996 Stock Incentive Plan.
(11) The total number of shares of Class A Common Stock beneficially owned by
Ms. Miriam Phalen includes 2,225,924 shares owned by Grinberg Partners
L.P., a Delaware limited partnership of which Ms. Phalen is a limited
partner, and 78,914 shares owned by trusts for the benefit of Ms. Phalen's
children, of which trusts Ms. Phalen is the sole trustee. Ms. Phalen has
shared voting power with Grinberg Partners L.P., Grinberg Group Partners, a
Delaware general partnership (general partner of Grinberg Partners L.P.)
and A. Grinberg over the 2,225,924 shares owned by Grinberg Partners L.P.,
and sole voting and investment power over the 78,914 shares owned by the
trusts.
(12) The total number of shares of Class A Common Stock beneficially owned by
Mr. Leonard L. Silverstein includes an aggregate of 862,940 shares of Class
A Common Stock held by several trusts for the benefit of Mr. G. Grinberg's
three children, of which trusts Mr. Silverstein is co-trustee with Mr. E.
Grinberg, with whom he has shared investment and voting power as to the
shares held by such trusts. The total number of shares of Class A Common
Stock reported for Mr. Silverstein also includes 89,343 shares of Class A
Common Stock owned by The Grinberg Family Foundation, of which Mr. G.
Grinberg, his wife and Mr. Silverstein are the directors and officers and
as to which shares these three individuals have shared
4
investment and voting power. The total number of shares of Common Stock
beneficially owned by Mr. Silverstein includes: 4,000 shares owned by the
Leonard and Elaine Silverstein Family Foundation of which Mr. Silverstein
and his wife are the directors and officers and as to which shares they
have shared investment and voting power, and 88,646 shares held by a trust
of which Mr. Silverstein is trustee and as to which shares he has sole
investment and voting power. Mr. Silverstein disclaims beneficial ownership
of the shares of Class A Common Stock held by the trusts of which he is
co-trustee with E. Grinberg, by The Grinberg Family Foundation and by The
Leonard and Elaine Silverstein Family Foundation.
(13) On February 13, 2006 in a filing on Schedule 13G under the Exchange Act,
SunTrust Banks, Inc. ("STB") reported beneficial ownership as of December
31, 2005 of 984,500 shares of Common Stock, as to all of which it has sole
voting and investment power. STB also reported that all of the shares of
Common Stock that it beneficially owns were acquired in the ordinary course
of business and not for the purpose or with the effect of changing or
influencing control of the Company, or in connection with any transaction
having such purpose or effect. The address of STB is 303 Peachtree Street,
Suite 1500, Atlanta, GA 30308.
(14) Excludes double counting of shares deemed to be beneficially owned by more
than one person. Unless otherwise indicated, the individuals named have
sole investment and voting power.
PROPOSAL 1 - ELECTION OF DIRECTORS
Directors hold office until the next annual meeting of shareholders and
until the election and qualification of their successors. The Company's By-laws
provide that the number of directors constituting the Board may be changed by
action of the Board of Directors, so long as the number is not less than three.
The Board currently consists of nine directors. All of the nominees are members
of the present Board of Directors. If any nominee for election to the Board of
Directors of the Company should be unable to accept nomination or election as a
director, which is not expected, the proxies may be voted with discretionary
authority for a substitute or substitutes designated by the Board of Directors
or the number of directors constituting the Board may be reduced in accordance
with the Company's By-laws. Directors shall be elected by the holders of a
plurality of the voting power present in person or represented by proxy and
entitled to vote. Abstentions and broker "non-votes" shall not be counted for
purposes of the election of directors. THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE ELECTION OF THE NOMINEES LISTED BELOW. PROXIES SOLICITED BY THE
BOARD WILL BE SO VOTED EXCEPT WHERE AUTHORITY HAS BEEN WITHHELD.
The following table lists information with respect to the nominees for
election as Directors of the Company.
DIRECTOR
NAME AGE SINCE POSITION
---- --- -------- --------
Margaret Hayes Adame 66 1993 Director
Richard J. Cote 51 2000 Executive Vice President and Chief
Operating Officer; Director
Efraim Grinberg 48 1988 President and Chief Executive Officer;
Director
Gedalio Grinberg 74 1967 Chairman of the Board of Directors
Alan H. Howard 46 1997 Director
Richard Isserman 71 2005 Director
Nathan Leventhal 63 2003 Director
Donald Oresman 80 1981 Director
Leonard L. Silverstein 84 1975 Director
There are no family relationships between any of the Company's directors,
except for Efraim Grinberg who is the son of Gedalio Grinberg. There are no
arrangements between any director and any other person pursuant to which any of
them was elected a director.
5
Ms. Hayes Adame is the President of Fashion Group International, Inc., a
non-profit organization working with the fashion industry, which she joined in
March 1993. From 1981 to March 1993, Ms. Hayes Adame was a senior vice president
and general merchandise manager at Saks Fifth Avenue, a major retailer. She is
also a member of the board of directors of International Flavors & Fragrances,
Inc.
Mr. Cote joined the Company in January 2000 as Executive Vice President -
Finance and Administration. In May 2001 Mr. Cote was promoted to Executive Vice
President - Chief Operating Officer. Prior to joining the Company, Mr. Cote
worked for Colgate-Palmolive, a consumer goods company, where, from 1998 to 2000
he was Vice President and Chief Financial Officer for U.S. operations, and from
1993 to 1998, he was Vice President and Chief Financial Officer for Asia/Pacific
operations.
Mr. E. Grinberg joined the Company in June 1980 and served as the Company's
Vice President of Marketing from February 1985 until July 1986, at which time he
was elected to the position of Senior Vice President of Marketing. From June
1990 to October 1995, Mr. E. Grinberg served as the Company's President and
Chief Operating Officer and since October 1995 served as the Company's
President. In May 2001, Mr. E. Grinberg was elected to the position of President
and Chief Executive Officer. Mr. E. Grinberg also serves on the Board of
Directors of Lincoln Center for the Performing Arts, Inc., the American Watch
Association and the Jeweler's Fund for Children.
Mr. G. Grinberg founded the Company's predecessor in 1961 and the Company
in 1967. He has been the Chairman of the Board of Directors since then. Mr. G.
Grinberg served as the Company's Chief Executive Officer until May 2001.
Mr. Howard is a Managing Director of Credit Suisse First Boston LLC
("CSFB"), an international provider of financial services. He has been with CSFB
and its predecessor companies since 1986. Mr. Howard has announced his
retirement from CSFB effective June 30, 2006.
Mr. Isserman was appointed to the Board in June 2005. In his nearly 40 year
career with KPMG LLP, Mr. Isserman served as Audit Partner in KPMG's New York
office for 26 years. He also led KPMG's real estate audit practice in New York
and was a member of the firm's SEC Reviewing Partner's Committee. He currently
teaches accounting courses at Yeshiva University and Long Island University
business schools. A licensed New York state CPA, Mr. Isserman also serves as the
chairman of the corporate compliance committee and a member of the audit
committee for Federation Employment and Guidance Services, a social service
agency in New York City.
Mr. Leventhal served as Chief of Staff to John Lindsay, Deputy Mayor to Ed
Koch, and Transition Chairman for both Mayors David Dinkins and Michael
Bloomberg. He currently chairs Mayor Bloomberg's Committee on Appointments. In
the not-for-profit sector, Mr. Leventhal served for 17 years as President of
Lincoln Center for the Performing Arts, where he is now President Emeritus and
Chairman of the Avery Fisher Artist Program. He currently serves on the boards
and is chairman of the audit committees of 23 equity and fixed income mutual
funds managed by the Dreyfus Corporation, an investment advisor. Mr. Leventhal
is a former partner of the law firm Poletti Freidin Prashker Feldman & Gartner.
Mr. Oresman was Executive Vice President and General Counsel of Paramount
Communications, Inc., a publishing and entertainment company, from December 1983
until his retirement in March 1994. Prior to December 1983, Mr. Oresman was
engaged in the practice of law as a partner of Simpson Thacher & Bartlett where
he is now Of Counsel.
Mr. Silverstein has been engaged in the practice of law at Silverstein and
Mullens, a division of Buchanan Ingersoll, in Washington, D.C., for over 40
years. Mr. Silverstein also serves as Vice President and Director of Tax
Management, Inc., a wholly owned subsidiary of BNA, Inc., and a director of
Chevy Chase Federal Savings Bank. He is a former Vice Chairman and currently an
active honorary trustee of the John F. Kennedy Center for the Performing Arts,
Past President of the Alliance Francaise of Washington, formerly President and
currently a director of the National Symphony Orchestra Association, Treasurer
of the Madison Council of the Library of Congress and President, French-American
Cultural Foundation.
6
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board Meetings and Committees
The Board of Directors has three committees: a Compensation Committee, an
Audit Committee and a Nominating/Corporate Governance Committee. The Board of
Directors held twelve meetings during fiscal 2006.
Audit Committee
The Audit Committee of the Board of Directors is currently composed of
Messrs. Oresman, Howard and Isserman. Mr. Oresman is the chairman of the Audit
Committee. The Board of Directors believes that each member of the Audit
Committee is an "audit committee financial expert" as defined under the rules
adopted by the SEC and, therefore, has accounting or related financial expertise
in accordance with the NYSE listing standards. The Audit Committee held five
meetings in fiscal 2006.
The principal functions of the Audit Committee are to (i) appoint, approve
the compensation of, terminate and oversee the work of the Company's independent
auditors; (ii) approve in advance all audit and permissible non-audit services
provided to the Company by independent auditors; (iii) review, in consultation
with the Company's independent auditors, management and the Company's internal
auditors, the Company's financial reporting process, including its internal
controls; (iv) review with management and the Company's independent auditors,
the Company's annual and quarterly financial statements before the same are
publicly filed, and (v) report regularly to the Board with respect to any issues
that arise concerning, among other things, the quality or integrity of the
Company's financial statements, the performance of the internal audit function,
the Company's compliance with legal requirements and the performance and
independence of the Company's independent auditors. The Audit Committee operates
under a written charter which is available on the Company's website at
www.movadogroup.com and in print upon the written request of any shareholder.
Compensation Committee
The directors serving on the Compensation Committee of the Board of
Directors are Ms. Hayes Adame and Messrs. Howard, Oresman and Silverstein. Mr.
Howard is the chairman of the Compensation Committee. The Compensation Committee
held four meetings in fiscal 2006. The principal functions of the Compensation
Committee are to (i) review and approve corporate goals and objectives relevant
to CEO compensation, evaluate the CEO's performance in light of those goals and
objectives and set the CEO's compensation level based on that evaluation; (ii)
review and approve compensation levels for executive non-CEO officers and key
employees of the Company; (iii) review significant employee benefit programs and
(iv) establish and administer executive compensation programs, including bonus
plans, stock option and other equity-based programs, deferred compensation plans
and any other cash or stock incentive programs. The Compensation Committee
operates under a written charter, which is available on the Company's website at
www.movadogroup.com and in print upon the written request of any shareholder.
Nominating/ Corporate Governance Committee
The Nominating/Corporate Governance Committee, currently composed of Ms.
Hayes Adame and Messrs. Leventhal and Silverstein, held three meetings in fiscal
2006. Mr. Leventhal is the chairman of the Nominating/Corporate Governance
Committee. The principal functions of the Nominating/Corporate Governance
Committee are to (i) identify individuals qualified to become directors,
consistent with criteria approved by the Board, and recommend director
candidates to the Board of Directors; (ii) develop and recommend corporate
governance principles to the Board of Directors; (iii) oversee the adoption of a
code of ethics for directors, officers and employees of the Company and assure
that procedures are in place for disclosure of any waivers of that code for
directors or executive officers; and (iv) oversee the evaluation of the Board.
The Nominating/Corporate Governance Committee operates under a written charter.
Copies of the Nominating/Corporate Governance Committee charter, the Company's
Corporate Governance Guidelines and its Code of Business Conduct and Ethics are
available on the Company's website at www.movadogroup.com and in print upon the
written request of any shareholder.
In considering possible candidates for director, the Nominating/Corporate
Governance Committee will take into account all appropriate qualifications,
qualities and skills in the context of the current make-up of the Board and will
consider the entirety of each candidate's credentials. In addition, the
Nominating/Corporate Governance
7
Committee will evaluate each nominee according to the following criteria:
personal character, accomplishments, integrity, and reputation in the business
community; knowledge of the industry in which the Company does business; sound
business judgment; leadership ability and capacity for strategic thinking;
experience working constructively with others; sufficient time to devote to
Board matters; diversity of viewpoints and backgrounds and the absence of any
conflict of interest that might interfere with performance as a director.
Shareholders may recommend director candidates for consideration by the
Nominating/Corporate Governance Committee. To have a candidate considered by the
Nominating/Corporate Governance Committee, a shareholder must submit the
recommendation in writing and must include the following information:
- The name of the shareholder and evidence of the person's ownership of
Company stock, including the number and class of shares owned and the
length of time of ownership; and
- The name of the candidate, the candidate's resume or a listing of his or
her qualifications to be a director of the Company and the person's consent
to be named as a director if nominated by the Board of Directors.
Each such recommendation must be sent to the Secretary of the Company at
Movado Group, Inc., 650 From Road, Paramus, New Jersey 07652 and must be
received by the Secretary not less than 120 days prior to the anniversary date
of the Company's most recent annual meeting of shareholders. The
Nominating/Corporate Governance Committee will evaluate shareholder recommended
director candidates in the same manner as it evaluates director candidates
identified by other means.
Richard Isserman, who is a nominee for election as a director, was
initially recommended to the Nominating/Corporate Governance Committee as a
nominee for appointment to the Board by the Company's CEO in May 2005.
Executive Sessions of Non-Management Directors
The non-management directors hold regular executive sessions without
management at least once each quarter. The chairman of the Nominating/Corporate
Governance Committee is designated to chair these executive sessions under the
Company's Corporate Governance Guidelines.
Communications with the Board of Directors
Shareholders may communicate directly with the full Board of Directors, the
Audit Committee of the Board of Directors or any individual director by sending
such communication in writing to the attention of the General Counsel of the
Company, 650 From Road, Paramus, NJ 07652. Such communications should indicate
to whom they are intended to be directed. All communications received that
relate to accounting, internal accounting controls or auditing matters will be
referred to the chairman of the Audit Committee unless the communication is
otherwise addressed. Parties may communicate anonymously and/or confidentially
if they desire. All communications received will be forwarded to the appropriate
director or directors.
Director Attendance at Annual Meeting
The Company encourages all of the directors to attend each annual meeting
of shareholders. To that end, and to the extent reasonably practicable, the
Company regularly schedules a meeting of the Board of Directors on the same day
as the Annual Meeting of Shareholders. All members of the Board of Directors
attended the 2005 Annual Meeting of Shareholders.
Director Independence
The listing standards of the New York Stock Exchange ("NYSE") require that
a majority of the Board of Directors be independent. No director qualifies as
independent unless the Board of Directors affirmatively determines that the
director has no material relationship with the Company (directly or as a
partner, shareholder or officer of an organization that has a relationship with
the Company). The Board of Directors broadly considers all relevant facts and
circumstances relative to independence and considers the issue not merely from
the standpoint of the director, but also from the viewpoint of persons or
organizations with which the director has an affiliation.
8
Material relationships can include commercial, industrial, banking, consulting,
legal, accounting, charitable and familial relationships (among others). In
accordance with the NYSE listing standards the Board has adopted categorical
standards of director independence that provide that none of the following
relationships will be considered a material relationship that would impair a
director's independence:
- A director who is a director, an executive officer or an employee, or whose
immediate family member is a director, an executive officer or an employee,
of a company that makes payments to, or receives payments from, the Company
for goods or services in an amount which, in any single fiscal year, is
less than the greater of $1,000,000 and 2% of such other company's
consolidated gross revenues; or
- A director who serves, or whose immediate family member serves, as an
executive, officer, director, trustee or employee of a charitable
organization and the Company's discretionary charitable contributions to
the organization are less than the greater of $1,000,000 and 2% of that
organization's consolidated gross revenues.
The Board of Directors has determined that all of the members of the Board
of Directors, with the exception of those three members who are employees of the
Company (namely Messrs. E. Grinberg, G. Grinberg and R. Cote), representing a
majority of the entire Board, are independent under the NYSE listing standards
and satisfy the Company's categorical standards set forth above.
In addition, in accordance with the NYSE listing standards, the Board of
Directors has determined that the Compensation Committee and
Nominating/Corporate Governance Committee are composed entirely of independent
directors. The Board of Directors has also determined that each member of the
Audit Committee is independent under the applicable rules of the SEC and under
the NYSE listing standards.
DIRECTOR COMPENSATION
No executive officer of the Company receives any additional compensation
for serving the Company as a member of the Board of Directors or any of its
committees. In fiscal 2006, directors who were not employees of the Company
received an annual fee of $30,000. In addition, effective beginning in June
2005, the Chair of each committee receives an annual retainer of $5,000 (except
that for the Chair of the Audit Committee, the annual retainer is $10,000) and
each committee member also is paid $1,500 for each committee meeting attended.
Also beginning in June 2005, each non-employee director receives an annual grant
of a stock option to purchase 1,500 shares of the Company's Common Stock under
the 1996 Stock Incentive Plan, as amended. All such options vest in one-third
increments on each of the first three anniversaries following the grant date,
expire after 10 years and have an exercise price equal to the fair market value
of the Company's Common Stock on the date of grant.
EXECUTIVE OFFICERS
For detailed information concerning Richard Cote, Gedalio Grinberg and
Efraim Grinberg, see the listing for each under the heading "Election of
Directors" above. The names of the other executive officers of the Company (and
their respective ages as of the filing date of this report) are set forth below
together with the positions held by each during the past five years.
NAME AGE POSITION
---- --- --------
Eugene J. Karpovich 59 Senior Vice President and Chief
Financial Officer
Frank V. Kimick 39 Vice President, Treasurer and
Assistant Secretary
Ernest R. LaPorte 54 Vice President Finance - Principal
Accounting Officer
Timothy F. Michno 49 Secretary and General Counsel
9
Mr. Karpovich came to the Company in 1998 as CFO for the Movado brand. From
2000 to 2001 he was Vice President, Financial Planning for the Company. He was
promoted to Senior Vice President and Chief Financial Officer in October 2001.
Before joining the Company, Mr. Karpovich had been the CFO of the watch company
Wittnauer International, Inc., a subsidiary of Westinghouse Electric
Corporation, Inc., where he was employed for 23 years.
Mr. Kimick began with the Company in 1996 as Assistant Treasurer and in May
2001 was promoted to Vice President, Treasurer. Mr. Kimick is responsible for
worldwide treasury operations, banking relationships and all aspects of cash and
risk management. Before joining the Company, Mr. Kimick had been the Treasurer
for Sunshine Biscuits, Inc., a food company, and held several treasury and
consulting positions at other organizations.
Mr. LaPorte was hired in February 2005 as Vice President - Finance and was
appointed Principal Accounting Officer in June 2005. Prior to joining the
Company, he spent over five years at Barnes & Noble, Inc., a nation-wide
retailer, in various senior management positions. Prior to that, Mr. LaPorte
worked at GE Capital Corporation, a financial services company, in financial
planning and controller capacities. Mr. LaPorte is a CPA.
Mr. Michno joined the Company in April 1992 and since then has served as
its Secretary and General Counsel. He has been engaged in the practice of law
since 1983. Immediately prior to joining the Company and since 1986, he was an
associate at the New York firm of Chadbourne & Parke. From 1988 to 1991 he
served as a resident outside counsel to Fortune Brands, Inc. (formerly known as
American Brands, Inc.), a consumer products company.
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to, earned by or
paid to the Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company who were serving as such as of the
end of the Company's last fiscal year (collectively, the "Named Executive
Officers") during fiscal 2006, 2005 and 2004 (each fiscal year ending January
31) for services rendered in all capacities to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation Awards
------------------------------------------ --------------------------------------
Other Restricted Number of All
Annual Stock Securities Other
Compensation Awards Underlying Compensation
Name and Principal Position Year Salary($) Bonus($) ($) ($) (1) Options(#) ($)
--------------------------- ---- --------- -------- ------------ ---------- ---------- ------------
Efraim Grinberg, 2006 891,538 500,000 -- 14,216 100,000 123,094(2)
President and Chief Executive 2005 850,000 605,000 -- 13,600 177,541 119,554
Officer 2004 834,232 650,000 -- 13,179 511,552 117,050
Gedalio Grinberg, 2006 650,000 0 62,293(3) 0 0 427,024(4)
Chairman of the Board 2005 650,000 150,000 -- 0 0 425,775
2004 650,000 195,000 -- 0 0 414,934
Richard Cote, Executive 2006 520,770 300,000 -- 187,908 50,000 55,323(5)
Vice President, Chief Operating 2005 495,866 356,000 -- 307,400 105,051 52,775
Officer 2004 463,173 375,000 -- 7,300 354,206 49,025
Eugene J. Karpovich 2006 246,953 95,000 -- 64,826 0 15,242(6)
Senior Vice President, Chief 2005 230,842 116,000 -- 61,742 20,913 14,913
Financial Officer 2004 221,058 100,000 -- 71,750 1,312 14,337
Timothy F. Michno 2006 270,770 60,000 -- 23,706 0 16,861(7)
Secretary and General Counsel 2005 245,865 75,000 -- 37,890 20,000 15,587
2004 223,423 81,000 -- 25,780 0 14,525
10
----------
(1) At January 31, 2006 the aggregate number of shares of restricted stock held
by each of the Named Executive Officers and the aggregate value thereof
(based on the closing price of the Company's Common Stock as of January 31,
2006) were as follows: Mr. G. Grinberg: none; Mr. E. Grinberg: 2,202.51
shares, $41,605; Mr. Cote: 31,291.17 shares, $591,090; Mr. Karpovich:
14,806.01 shares, $279,685; and Mr. Michno: 5,495.80 shares, $103,816. All
of such shares held by Mr. E. Grinberg are phantom stock units ("Stock
Units") granted under the Company's Deferred Compensation Plan for
Executives ("Deferred Compensation Plan"). The Stock Units vest 20% at the
end of each calendar year beginning in the calendar year in which awarded,
except that, for participants 65 years or older, vesting is 100% at the end
of the calendar year in which awarded. Mr. E. Grinberg was awarded
1,394.60, 1,181.37 and 956.04 Stock Units in calendar years 2003, 2004 and
2005 respectively. Mr. Cote was awarded 818.76, 592.37 and 558.70 Stock
Units in calendar years 2003, 2004 and 2005 respectively. Mr. Karpovich was
awarded 196.78, 135.72 and 132.28 Stock Units in calendar years 2003, 2004
and 2005 respectively. Mr. Michno was awarded 187.44, 137.59 and 144.77
Stock Units in calendar years 2003, 2004 and 2005 respectively. No
dividends accrue in respect of the Stock Units. In addition, the shares of
restricted stock held by Messrs. Cote, Karpovich and Michno include the
following shares of Common Stock granted under the Company's 1996 Stock
Incentive Plan: for Mr. Cote, 30,000 shares, 20,000 of which vest April 8,
2007 and 10,000 of which vest April 8, 2008; for Mr. Karpovich, 14,500
shares vesting: 7,000 on April 28, 2006, 4,000 on April 8, 2007, and 3,500
on April 8, 2008; and for Mr. Michno, 5,180 shares vesting: 2,400 on April
28, 2006, 1,580 on April 8, 2007, and 1,200 on April 8, 2008. No dividends
accrue in respect of the restricted stock grants under the 1996 Stock
Incentive Plan.
(2) Includes a $3,400 matching contribution made by the Company in respect of
fiscal 2006 for the account of Mr. E. Grinberg pursuant to the Company's
Employee Savings and Investment Plan ("401(k) Plan"). Also includes a
matching cash contribution of $71,077 and a non-cash contribution of 956.04
Stock Units valued at $17,770 (based on the closing prices of the Company's
Common Stock on the grant dates) for fiscal 2006 to his account under the
Company's Deferred Compensation Plan. Also includes $30,847 in total annual
premiums paid in respect of certain life insurance policies purchased for
Mr. E. Grinberg by the Company. Under his arrangement with the Company, Mr.
E. Grinberg is entitled to the cash surrender value in respect of certain
of these life insurance policies and his beneficiary is entitled to the
applicable benefit without, in either event, reimbursement to the Company
of any premiums paid by the Company under such policies.
(3) Represents income allocated to Mr. G. Grinberg in accordance with IRS
regulations for the use of an automobile leased by the Company, including
allocated portion of lease payments; garage, maintenance and fuel costs;
and charges for driver.
(4) Includes $208,624 in total annual premiums paid in respect of certain life
insurance policies and one travel accident policy purchased for Mr. G.
Grinberg by the Company. Under his arrangement with the Company, Mr. G.
Grinberg is entitled to the cash surrender value under these policies and
his beneficiary is entitled to the applicable benefit without, in either
event, reimbursement to the Company of any premiums paid by the Company
under such policies. Also includes a $3,400 matching contribution made by
the Company in respect of fiscal 2006 for the account of Mr. G. Grinberg
pursuant to the Company's 401(k) Plan. Also includes $150,000 accrued by
the Company in respect of a Death and Disability Benefit Plan agreement
with Mr. G. Grinberg. See "Certain Relationships and Related Transactions"
below. Also includes a matching cash contribution of $52,000 and a non-cash
contribution of 699.30 Stock Units valued at $13,000 (based on the closing
prices of the Company's Common Stock on the grant dates) made by the
Company for fiscal 2006 to Mr. G. Grinberg's account pursuant to the
Company's Deferred Compensation Plan.
(5) Includes a $3,400 matching contribution made by the Company in respect of
fiscal 2006 for the account of Mr. Cote pursuant to the Company's 401(k)
Plan. Also includes a matching cash contribution of $41,538 and a non-cash
contribution of 558.70 Stock Units valued at $10,385 (based on the closing
prices of the Company's Common Stock on the grant dates) for fiscal 2006 to
his account under the Company's Deferred Compensation Plan.
(6) Includes a $3,400 matching cash contribution made by the Company in respect
of fiscal 2006 for the account of Mr. Karpovich pursuant to the Company's
401(k) Plan. Also includes a matching cash contribution of $9,384 and a
non-cash contribution of 132.28 Stock Units valued at $2,458 (based on the
closing prices of the Company's Common Stock on the grant dates) for fiscal
2006 to his account under the Company's Deferred Compensation Plan.
(7) Includes a $3,400 matching contribution made by the Company in respect of
fiscal 2006 for the account of
11
Mr. Michno pursuant to the Company's 401(k) Plan. Also includes a matching
cash contribution of $10,769 and a non-cash contribution of 144.77 Stock
Units valued at $2,692 (based on the closing prices of the Company's Common
Stock on the grant dates) for fiscal 2006 to his account under the
Company's Deferred Compensation Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has an agreement with Mr. Cote that provides for the
continuation of his then applicable annual base salary paid bi-weekly for 24
months following Mr. Cote's termination of employment within two years after a
change in control (defined as the acquisition by a person or group of more than
50% of the combined aggregate voting power represented by the Company's then
outstanding shares; or certain mergers and asset sales; or a liquidation or
dissolution), except that nothing is due if his termination is because of his
death, disability or for cause.
Messrs. Karpovich, Kimick, LaPorte and Michno each have an employment
agreement with the Company providing that, although each is employed at will, he
will be entitled to receive severance payments upon termination of his
employment by the Company without Cause (as defined in the relevant employment
agreement). The severance payments will be paid, for Messrs. Karpovich, Kimick
and Michno, for 12 months after termination, and for Mr. LaPorte, for six
months, in bi-weekly installments equal to the employee's base salary, and the
employee will also be entitled to post-termination medical benefits under COBRA.
Under a Death and Disability Benefit Plan Agreement with Mr. G. Grinberg,
dated September 23, 1994, in the event of Mr. G. Grinberg's death or disability
while employed by the Company, the Company will pay to his spouse, if she is
then living, an annual benefit equal, as of fiscal 2006, to $373,014 (increased
October 1 each year by an amount equal to two percent of the benefit that would
have been payable in the prior year). Benefits are payable for the lesser of 10
years or the life of Mr. G. Grinberg's spouse, and are payable only from the
general assets of the Company. Neither Mr. G. Grinberg nor his spouse may assign
the Agreement or any of the benefits payable thereunder and none of the benefits
are payable to the estates or any of the heirs of Mr. G. Grinberg or his spouse.
The Agreement provides that it automatically terminates in the event of the
termination of Mr. G. Grinberg's employment with the Company for any reason
other than his death or disability and further provides that it is not to be
considered a contract of employment. For purposes of the Agreement "disability"
means the inability of Mr. G. Grinberg to perform the duties pertaining to his
job because of accident, sickness or other illness as determined by a majority
of disinterested directors.
In fiscal 1996, the Company entered into an agreement with a trust which,
at that time, owned an insurance policy issued on the lives of Gedalio Grinberg
and his spouse. The insurance policy provides for a death benefit of $27
million. The trustees of the trust are the three children of Mr. G. Grinberg and
his spouse, namely, Efraim Grinberg, Alexander Grinberg and Miriam Phalen. Under
the agreement, the trust assigned the insurance policy to the Company as
collateral to secure repayment by the trust of interest free loans made by the
Company to the trust in amounts equal to the premiums on the insurance policy
(approximately $740,000 per annum). The agreement required the trust to repay
the loans from the death benefit proceeds of the policy. At January 31, 2003 the
Company had loaned the trust $5,186,860 under this agreement. On April 4, 2003,
the agreement was amended and restated to transfer the policy (which at that
time had a cash surrender value of $4,595,591) from the trust to the Company in
partial repayment of the then outstanding loan balance which, as of that date,
was reduced to $591,269. If the policy is terminated prior to the death of the
insureds, the trust must repay the Company the amount of the accumulated
premiums which the Company would also recover from the death benefit in the
event it is paid.
Mr. Alex Grinberg, a beneficial owner of more than five percent of the
Company's Class A Common Stock and the brother of Efraim Grinberg, is the
President of the Company's Concord brand in the United States and earned
$248,230 in salary in fiscal 2006. In addition, as a participant in the
Company's Stock Incentive Plan, Mr. Alex Grinberg received an award of 2,400
shares of Common Stock last year, subject to the same terms and conditions
applicable to similar awards made to the other participants in that plan,
including a three year vesting requirement.
Mr. David Phalen is the spouse of Miriam Phalen, a beneficial owner of more
than five percent of the Company's Class A Common Stock, and the brother-in-law
of Efraim Grinberg. Mr. Phalen is President of Movado Company Stores and earned
$453,000 in salary and annual bonus in fiscal 2006. In addition, as a
participant in the Company's Stock Incentive Plan, Mr. Phalen received an award
of 2,400 shares of Common Stock last year, subject
12
to the same terms and conditions applicable to similar awards made to the other
participants in that plan, including a three year vesting requirement.
See "Compensation Committee Interlocks and Insider Participation" for
information regarding certain business relationships between the Company and Mr.
Silverstein's law firm.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was at all times during fiscal year
2006 comprised entirely of independent Directors who at no time were executive
officers or employees of the Company. Until June 24, 2005, the Compensation
Committee was comprised of Margaret Hayes Adame, Alan H. Howard, Donald Oresman,
Leonard L. Silverstein and Nathan Leventhal. Thereafter, for the duration of the
fiscal year the Committee was comprised of the same individuals with the
exception of Mr. Leventhal. Mr. Silverstein is a partner at the law firm of
Silverstein & Mullens, a division of Buchanan & Ingersoll, P.C. That firm
rendered legal services to the Company during fiscal 2006. No executive officer
of the Company has ever served as a member of the board of directors or
compensation committee of any company whose executive officers include a member
of the Board of Directors or the Compensation Committee.
FISCAL 2006 STOCK OPTION GRANTS
The following table provides certain information regarding grants of stock
options made during fiscal 2006 to the Named Executive Officers pursuant to the
Company's 1996 Stock Incentive Plan. Each such option granted, becomes
exercisable with respect to one-third of the underlying shares subject thereto
on each anniversary of the grant date, thus becoming fully exercisable on the
third such anniversary.
INDIVIDUAL GRANTS
------------------------------------------------------
% OF TOTAL
NUMBER OF GRANT
NUMBER OF SECURITIES DATE
SECURITIES UNDERLYING VALUE (1)
UNDERLYING OPTIONS EXERCISE ----------
OPTIONS GRANTED TO OR BASE GRANT DATE
GRANTED EMPLOYEES IN PRICE PRESENT
NAME (#) FISCAL YEAR ($/SH) EXPIRATION DATE VALUE($)
---- ---------- ------------ -------- --------------- ----------
Efraim Grinberg 100,000 60.06 18.34 March 22, 2015 811,300
Gedalio Grinberg -- -- -- -- --
Richard Cote 50,000 30.03 18.34 March 22, 2015 405,650
Eugene Karpovich -- -- -- -- --
Timothy F. Michno -- -- -- -- --
(1) The grant date present values set forth in the foregoing table were arrived
at using the Black-Scholes option pricing model based on the following
assumptions. Volatility was assumed to be 46.5% based on the weekly closing
prices of the underlying Common Stock for the period ending March 22, 2005.
The risk free rate of return for each option was determined based on the
yield on the grant date on a U.S. Government Zero Coupon Bond with a
maturity equal to the expected term of the option prior to exercise.
Exercise was assumed to occur after 7 years. A dividend yield of 1.74% was
assumed to be constant over the life of the options. This schedule does not
take into account provisions of the options providing for termination of
the option following termination of employment or nontransferability. The
dollar amounts under this column are the result of calculations using a
certain option pricing model based on the foregoing assumptions and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's Common Stock price.
13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning exercises of stock
options by the Named Executive Officers during the last fiscal year and the
fiscal year-end value of shares of Common Stock represented by unexercised stock
options held by each of the Named Executive Officers as of January 31, 2006.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR END IN-THE-MONEY OPTIONS
ACQUIRED VALUE (#) AT FISCAL YEAR END ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
Gedalio Grinberg ..... 0 0 0 0 0 0
Efraim Grinberg ...... 220,796 4,156,485 851,402 100,000 3,582,150 55,000
Richard Cote ......... 0 0 738,932 50,000 4,855,810 27,500
Eugene J. Karpovich .. 0 0 50,225 15,000 71,502 72,600
Timothy F. Michno .... 38,376 351,774 0 20,000 0 96,800
EQUITY COMPENSATION PLAN INFORMATION
The table below sets forth information with respect to shares of Common
Stock that may be issued under the Company's equity compensation plans as of
January 31, 2006.
Number of securities
Remaining Available For
Future Issuance Under
Number of Securities to Weighted-Average Equity Compensation
be Issued Upon Exercise Exercise Price of Plans (Excluding
Of Outstanding Options, Outstanding Options, securities Reflected in
Warrants and Rights Warrants and Rights Column (a))
Plan category (a) (b) (c)
------------- ----------------------- -------------------- -----------------------
Equity compensation plans
approved by security
holders (1) ............ 3,581,608(2) $12.98(3) 2,289,507(4)
Equity compensation plans
not approved by
security holders (5) ... 68,617 Not applicable 107,550
--------- -------------- ---------
Total ..................... 3,650,225 $12.98 2,397,057
----------
(1) Includes the 1996 Stock Incentive Plan and the Deferred Compensation Plan.
(2) Includes 3,499,483 shares of Common Stock issuable upon the exercise of
options and the vesting of stock awards outstanding under 1996 Stock
Incentive Plan and 82,125 phantom stock units issuable as 82,125 shares of
Common Stock under the Deferred Compensation Plan.
(3) Weighted average exercise price of options outstanding under the 1996 Stock
Incentive Plan.
(4) Number of shares available for issuance under the 1996 Stock Incentive Plan
as options and as other share based awards. The Deferred Compensation Plan
does not provide for a limit on the number of phantom stock units available
for issuance.
(5) Includes the Stock Bonus Plan described in Note 13 to the Company's
consolidated financial statements included in the Company's Form 10-K filed
for the year ended January 31, 2006.
14
COMPENSATION COMMITTEE REPORT
General
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for reviewing and approving annually corporate objectives relative
to the compensation of the Chief Executive Officer ("CEO"), evaluating the
performance of the CEO against those objectives and determining the CEO's
compensation based on that evaluation. In addition, the Committee also reviews
and approves the structure for and levels of compensation for the Company's
other executive officers and management, reviews significant employee benefit
programs and reviews and administers the Company's 1996 Stock Incentive Plan.
The Committee is comprised of Ms. Margaret Hayes Adame, Mr. Donald Oresman, Mr.
Leonard L. Silverstein and Mr. Alan H. Howard, all of whom are independent
directors.
The compensation policies established by the Company and which were in
effect during fiscal year 2006 are designed to enable the Company to attract,
retain, motivate and appropriately reward a group of highly qualified
individuals who are expected to contribute to the Company's continued success.
The three primary components of executive compensation are base pay, cash
bonuses and stock based awards primarily in the form of stock grants but also,
to a lesser extent, stock options. The Committee reviews each component of
executive compensation on an annual basis with reference to the competitive
marketplace for skilled professionals, both at peer group companies and other
organizations, inside as well as outside the watch and jewelry industry, and
considering corporate, business unit and individual performance. To assist the
Committee with such review in respect of fiscal 2006, the Committee retained a
nationally recognized compensation consulting firm.
Base Salaries
Base salary levels for senior management of the Company are reviewed by the
Committee in light of the Committee's assessment of the responsibilities
relative to the position under consideration, as well as each individual's
background, training, experience and by reference to the competitive marketplace
for comparable talent. Annual increases in base salary levels, if warranted, are
reviewed with reference to the individual's performance, the performance of his
or her business unit and the performance of the Company as a whole. Individual
performance is evaluated by reference to the extent to which specific individual
and departmental goals and objectives are met. These goals and objectives vary
from department to department and, within any single department, from individual
to individual. Corporate performance is measured by the Committee by reference
to the Company's achievement of financial performance targets set at the
beginning of the fiscal year.
In fiscal 2005, the Committee approved management's recommendation to enter
into retention agreements with certain executive officers and senior managers
providing for severance payments that generally range from the equivalent of six
to twelve months of base salary, payable only when employment is terminated
without cause. Those agreements, which also contain non-compete and
non-solicitation covenants on the part of the employee, also included limited
equity grants in the form of stock options fully vesting after five years.
Cash Bonuses
Cash bonuses, the second key component of executive compensation, are
intended to provide incentives to senior management in the short term to achieve
certain operating results, which are determined at the beginning of the fiscal
year by management in consultation with the Board and the Committee.
Concurrently with approving the annual operating objectives under the Company's
annual bonus plan and the Executive Performance Plan (see below), the Committee
establishes target and maximum bonuses for the coming fiscal year as a
percentage of the base salary of each executive officer. In fiscal 2006, the
target bonus for each of the CEO and the Chief Operating Officer ("COO") was set
at 75% of their respective base salaries and bonus targets ranged from 25% to 50
% of base salary for the other executive officers. Actual incentive compensation
awards may be more or less than targeted amounts depending on actual results
compared with corporate, group and individual performance measures, but for
those employees covered by the Executive Performance Plan (namely the CEO and
the other Named Executive Officers - see "Executive Compensation", above) actual
incentive compensation awards may be reduced or eliminated but not increased
above the maximum bonus amount established for each such officer at the
beginning of the year. Certain mid-level managers are also eligible to receive
bonuses, which are used as an additional, incentive-based element of
compensation dependent on corporate performance and individual merit.
15
Based on the Company's performance in fiscal 2006 and its achieving many of
its key operating results, including the achievement of the performance
criterion under the Executive Performance Plan, the Committee authorized funding
of the bonus pool for the fiscal year and the payment of individual bonus
amounts in-line with the achievement of those corporate results. Individual
bonus amounts were also determined by reference to subjective criteria and the
extent to which individual performance objectives were achieved.
Equity Based Plans
Stock ownership is the third key element of the Company's executive
compensation program. Executive officers and senior and mid-level management
employees generally receive annual long term equity grants under the Company's
1996 Stock Incentive Plan (the "Incentive Plan") which generally tend to be in
the form of stock awards. To a lesser extent, stock options are granted under
the Incentive Plan but generally are limited primarily to certain newly hired
and/or newly promoted employees and to the CEO and the COO. The Committee
believes that for the CEO, and to a lesser extent the COO, stock options are a
more effective means to closely tie individual performance directly to that of
the Company's stock price since the options, unlike stock awards which will have
some value upon vesting even if the price of the Company's stock has declined
since the date of grant, will have no value unless the Company's share price has
increased. In addition to the Incentive Plan, equity participation is also
afforded to executives and certain key employees who participate in the
Company's Deferred Compensation Plan as well as to all other employees, not
eligible to participate in the Deferred Compensation Plan through the Company's
Employee Stock Bonus Plan, adopted in fiscal 1999 ("Stock Bonus Plan").
Stock awards and options have been awarded under the Incentive Plan on the
basis of the position held by the grantee, contributions made by the person for
the given fiscal year as well as expectations of future contributions. Both
option and stock grants are designed to retain executive officers and enhance
shareholder value by aligning the financial interests of each executive officer
or other key employee with the interests of the Company's shareholders over the
long term. All options granted under the Incentive Plan have an exercise price
equal to or greater than the market value of the stock on the date of grant,
generally vest in equal annual increments over three or five years and expire
ten years from the date of grant. Some previously granted options also contained
a reload feature under which option holders can use Company Common Stock (or
Class A Common Stock) they have owned for at least six months to pay the
exercise price of their options, have shares withheld for the payment of income
taxes due on exercise and receive a new reload option to make up for the shares
used or withheld. The Committee no longer grants any options with reload rights
and most reload rights previously granted have been terminated, including all
those granted to the CEO and the other executive officers. In fiscal 2006, the
Committee made performance awards under the Incentive Plan in the form of stock
awards and generally limited option grants to newly hired or promoted key
employees and, as discussed above, to the CEO and COO. All stock awards of
Common Stock granted under the Incentive Plan in fiscal 2006 are subject to a
three year vesting requirement.
Under the Deferred Compensation Plan, participants' salary deferrals, up to
either five or ten percent of base salary, are fully matched by the Company.
Eighty percent of the match is in the form of cash and twenty percent is in the
form of rights to Common Stock representing the number of shares (including
fractional shares) of Common Stock that such twenty percent portion of the
matching contribution could purchase based on the closing price of the Common
Stock at the end of the calendar quarter in which the contribution is made.
Vesting in Company matching contributions is 20% per year. Distributions are
made beginning in January following termination of the participant's employment
and are in ten annual installments unless the Company determines to make them in
a lump sum.
Under the terms of the Stock Bonus Plan, the Company determines after the
end of each fiscal year, depending on financial performance and subject to
Compensation Committee and Board approval, whether to make a contribution of
shares of Common Stock to the plan from its treasury shares, up to an amount
equivalent in value to one percent (1%) of the total base salaries of all
participants in the plan. Each participant vests in 100% of their pro-rata
portion (based on salary) of such contribution after five years or upon
attaining retirement age if sooner. All distributions to plan participants are
in the form of shares of Common Stock of the Company, with cash payments for any
fractional share amounts. The last contribution to the plan was for fiscal 2005
when the Company contributed 15,954 shares, representing one percent (1.0%) of
total base salaries of all plan participants. Effective for fiscal 2006, in lieu
of making any further contributions to the Stock Bonus Plan, the Company has
increased the maximum amount of its 401(K) match from two percent (2%) to three
percent (3%).
16
Compensation of Chief Executive Officer
The compensation paid to the Company's CEO in fiscal 2006 consisted
primarily of salary, bonus and the grant of a stock option for the purchase of
100,000 shares of Common Stock. The option is exercisable at a price equal to
the market price of the Common Stock on the grant date, vests incrementally over
three years and expires 10 years after the grant date. The bonus of $500,000 was
awarded to Mr. E. Grinberg under the terms of the Company's 2001 Executive
Performance Plan based of the Company achieving the performance criteria for
fiscal 2006 as set forth in that plan and as previously approved by the
Committee, namely achieving the targeted earnings per share for that performance
period.
Policy Regarding Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to the CEO and the four other most highly
compensated executive officers of the Company. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are
met. The Company's 2001 Executive Performance Plan which was adopted in fiscal
2002 is structured such that annual incentive bonuses and long-term equity-based
compensation paid thereunder for the Company's most senior executives should
constitute qualifying performance-based compensation under Section 162(m).
However, the Compensation Committee recognizes that unanticipated future events,
such as a change of control of the Company or a change in executive personnel,
could result in a disallowance of compensation deduction under Section 162(m).
Moreover, the Compensation Committee may from time to time award compensation
that is non-deductible under Section 162(m) when in the exercise of the
Compensation Committee's business judgment such award would be in the best
interest of the Company.
COMPENSATION COMMITTEE
Alan H. Howard (Chairman)
Margaret Hayes Adame
Donald Oresman
Leonard L. Silverstein
17
Comparison of Five--Year Cumulative Total Returns
Performance Graph for
MOVADO GROUP INC
Produced on 04/12/2006 including data to 01/31/2006
PERFORMANCE GRAPH
The performance graph set forth below compares the cumulative total
shareholder return of the Company's Common Stock for the last five fiscal years
through the fiscal year ended January 31, 2006 with that of the Broad Market
(CRSP Total Return Index for the NYSE Stock Market) and a peer group index
comprised of the following two companies: Fossil Inc. and Tiffany & Co. (the
"peer group"). The returns of each company in the peer group index have been
weighted according to the respective issuer's stock market capitalization. Each
graph assumes an initial investment of $100 on January 30, 2001 and the
reinvestment of dividends (where applicable).
(PERFORMANCE GRAPH)
Legend
Symbol CRSP Total Returns Index for: 01/2001 01/2002 01/2003 01/2004 01/2005 01/2006
------ ----------------------------- ------- ------- ------- ------- ------- -------
(symbol) MOVADO GROUP INC 100.0 128.5 134.0 210.1 271.3 284.3
(symbol) NYSE Stock Market (US Companies) 100.0 90.0 72.9 97.6 106.1 119.6
(symbol) Self-Determined Peer Group 100.0 98.3 70.7 119.0 109.6 120.6
Companies in the Self-Determined Peer Group
FOSSIL INC TIFFANY & CO NEW
18
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933 or the Exchange Act
the following report of the Audit Committee shall not be deemed to be
incorporated by reference into any such filing and shall not otherwise be deemed
filed under such acts.
The Audit Committee has reviewed and discussed with the Company's
management and with PricewaterhouseCoopers LLP management's assessment of the
effectiveness of the Company's internal control over financial reporting, the
evaluation by PricewaterhouseCoopers LLP of the Company's internal control over
financial reporting and the audited financial statements of the Company for the
fiscal year ended January 31, 2006. The Audit Committee has discussed with
PricewaterhouseCoopers LLP the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended (Communications with Audit Committees) by
the Auditing Standards Board of the American Institute of Certified Public
Accountants.
The Audit Committee has also received the written disclosures and the
letter from PricewaterhouseCoopers LLP required by the Independence Standards
Board Standard No. 1 (Independence Discussion with Audit Committees) and the
Audit Committee has discussed the independence of PricewaterhouseCoopers LLP
with that firm.
Based on the Audit Committee's review and discussions noted above, the
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 2006 for filing with the Securities and
Exchange Commission.
The Committee and the Board also have recommended, subject to shareholder
approval, the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for fiscal 2007.
Members of the Audit Committee:
Donald Oresman (chairman)
Alan H. Howard
Richard Isserman
FISCAL 2006 AND 2005 AUDIT FIRM FEE SUMMARY
The following table presents the aggregate fees billed for professional
services rendered by the Company's independent auditors, PricewaterhouseCoopers
LLP, in the "audit fees", "audit - related fees", "tax fees", and "all other
fees" categories, in each case as such terms are defined by the SEC, for the
fiscal years ended January 31, 2006 and 2005.
YEAR AUDIT ($) AUDIT RELATED ($) TAX ($) ALL OTHERS ($) TOTALS ($)
---- --------- ----------------- ------- -------------- ----------
2005 1,410,913 294,730 354,349 1,500 2,061,492
2006 1,312,200 61,000 51,050 2,320 1,426,570
Audit fees include fees for audit or review services in accordance with
generally accepted auditing standards and fees for services that generally only
the Company's auditors provide, such as statutory audits and review of documents
filed with the SEC.
Audit related fees include fees for assurance and related services that are
traditionally performed by the Company's auditors. The services include audits
of employee benefit plans and consultation in connection with financial and
accounting standards.
Tax fees include fees for services that are performed by professional tax
staff other than in connection with the audit. The services include tax
compliance, tax advice and tax planning services.
All other fees are subscription fees for the use of the independent
auditors' database of authoritative literature and accounting and financial
guidance.
The Audit Committee reviews and approves all audit and non-audit services
to be rendered in every instance by the Company's independent auditors before
such auditors are engaged to render any such services. Therefore the Audit
Committee has not adopted a pre-approval policy with respect to such services.
19
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed PricewaterhouseCoopers LLP to be the Company's independent accountants
for the year ending January 31, 2007, subject to ratification of such
appointment by the Company's shareholders. PricewaterhouseCoopers LLP has served
as the Company's independent accountants since fiscal year 1977 and is
considered by the Audit Committee and the Board to be well qualified.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
Annual Meeting. Such representatives will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions. THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR SUCH
RATIFICATION. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS
SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
PROPOSAL 3 - APPROVAL AND ADOPTION OF AMENDMENT AND RESTATEMENT OF 2001
EXECUTIVE PEFORMANCE PLAN
On March 27, 2006, the Compensation Committee of the Board of Directors of
the Company unanimously approved the adoption of an amendment and restatement,
effective February 1, 2007, of the Movado Group, Inc. Executive Performance Plan
originally established effective February 1, 2001 (the "2001 Plan"; as amended
and restated, the "Executive Plan") and recommended that the Executive Plan be
submitted to the Company's shareholders for approval at the Annual Meeting. The
following summary is qualified in its entirety by reference to the complete text
of the Executive Plan, which is attached hereto as Appendix A. Capitalized terms
used but not defined herein shall have the meanings set forth in the Executive
Plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") generally does not allow publicly held companies to obtain tax
deductions for compensation of more than $1 million paid in any year to their
chief executive officer, or any of their other four most highly compensated
executive officers ("Named Executive Officers"), unless such payments are
"performance-based" in accordance with conditions specified under Section 162(m)
of the Code and the Treasury Regulations promulgated thereunder. One of those
conditions requires the Company to obtain stockholder approval of the material
terms of the performance goals set by a committee of outside directors. The 2001
Plan was approved by the Company's shareholders on June 19, 2001 but that plan
provides by its terms that it automatically expires on January 31, 2007. The
Board of Directors is recommending that the shareholders approve the terms of
the Executive Plan as described below, the effect of which would be to extend
the termination date of the 2001 Plan to January 31, 2012; provided, however,
that any compensation awards granted prior to January 31, 2007 would continue to
be governed by the terms of the 2001 Plan. Subject to such approval, and if the
applicable performance goals are satisfied, this proposal would enable the
Company to continue to pay performance-based compensation to Named Executive
Officers of the Company after the expiration of the 2001 Plan and to obtain tax
deductions for such payments, without regard to the limitations of Section
162(m) of the Code.
Summary of the Executive Plan
PURPOSE
The purpose of the Executive Plan is to establish a program of incentive
compensation for the Named Executive Officers that is directly related to the
performance results of the Company. The Executive Plan provides for annual
incentives to be awarded to Named Executive Officers, as described below.
ADMINISTRATION
The Executive Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee"). The Committee is composed of two or more
members of the Board, each of whom is required to be an "outside director"
(within the meaning of Section 162(m) of the Code). The Committee has the
authority that may be necessary or helpful to enable it to discharge its
responsibilities with respect to the Executive Plan, including authority to
establish the maximum bonus award which may be earned by each Named Executive
Officer, to establish the performance goals upon which such bonus awards shall
be based, calculate and determine each Named Executive Officer's level of
attainment of such performance goals, and calculate the bonus award for each
Named Executive Officer based upon such level of attainment.
20
The Executive Plan will be effective as of February 1, 2007, subject to
approval of the stockholders, as requested herein. The Executive Plan will
terminate on January 31, 2012.
BONUS AWARDS AND PERFORMANCE GOALS
The Executive Plan provides that for each fiscal year (the "Performance
Period"), no bonuses shall be payable thereunder to the Named Executive Officers
unless the Company's earnings per share for the Performance Period, calculated
in accordance with generally accepted accounting principals as consistently
applied by the Company ("EPS"), equal or exceed the EPS target (the "Performance
Goal") for the Performance Period. If the Performance Goal is met or exceeded
for any Performance Period, the maximum aggregate bonus amount payable to all of
the Named Executive Officers may not exceed a total of $5 million which also
means that no individual Named Executive Officer may receive more than that
amount for any Performance Period and if that total maximum amount were to be
paid to any one such Named Executive Officer for any Performance Period then the
others could not be paid any bonus under the Executive Plan. The Committee
retains the right to reduce or eliminate entirely any bonus payments to any or
all of the Named Executive Officers. If the minimum Performance Goal for a
Performance Period is not met, no bonus payments will be made to the Named
Executive Officers under the Executive Plan.
AMENDMENT TO PLAN
The Committee may amend, suspend or terminate the Executive Plan at any
time; provided that no amendment may be made without the approval of the
Company's shareholders if the effect of such amendment would be to cause
outstanding or pending bonus awards that are intended to qualify for the
performance-based compensation exception to Section 162(m) of the Code to cease
to qualify for such exception.
NEW PLAN BENEFITS
Because amounts payable under the Executive Plan are based on satisfaction
of certain Performance Goals in each applicable Performance Period, it cannot be
determined at this time what amounts, if any will be received by any of the
Named Executive Officers with respect to the 2008 fiscal year under the
Executive Plan. However, under the 2001 Plan which was in effect last fiscal
year, the following bonus awards were paid to the Named Executive Officers:
NAME AND POSITION DOLLAR VALUE ($)
----------------- ----------------
Efraim Grinberg 500,000
President and Chief Executive Officer
Gedalio Grinberg 0
Chairman of the Board
Richard Cote 300,000
Executive Vice President/Chief Operating Officer
Eugene J. Karpovich 95,000
Senior Vice President/Chief Financial Officer
Timothy F. Michno 60,000
Secretary and General Counsel
Executive Group 955,000
Non-Executive Director Group 0
Non-Executive Officer Employee Group 0
REQUIRED VOTE
The Treasury Regulations promulgated under Section 162(m) of the Code
require the affirmative vote of a majority of the votes cast on the issue at a
meeting to approve the Executive Plan.
Approval of the Executive Plan requires the affirmative vote of the holders
of a majority in voting power of the outstanding shares of Capital Stock present
in person or represented by proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE EXECUTIVE PLAN. Proxies solicited by the Board will be so voted
unless shareholders specify in their proxies a contrary choice.
21
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
The Company's By-Laws set forth procedures requiring that any shareholder
wishing to bring business before an annual meeting of shareholders, including
the nomination of candidates to the Board of Directors, give timely written
notice to the Secretary of the Company. To be timely such notice must be
delivered personally or mailed to and received at the Company's principal
executive offices not less than 60 or more than 90 days before the Annual
Meeting, except that, if less than 70 days notice or prior public disclosure of
the Annual Meeting date is given to shareholders, notice by a shareholder is
timely if received not later than the close of business on the 10th day after
the date notice of the Annual Meeting was mailed or public disclosure thereof
was made. Shareholders' proposals intended to be presented at the 2007 Annual
Meeting of Shareholders must be received by the Company no later than January
19, 2007 for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's executive officers, directors, and persons who own more
than 10% of a registered class of the Company's equity securities (the "10%
Stockholders") to file reports of ownership and changes of ownership with the
Securities and Exchange Commission. As a practical matter, the Company assists
its directors, officers and certain 10% Stockholders by completing and filing
Section 16 reports on their behalf. The Company's executive officers, directors
and 10% Stockholders timely complied with all such filing requirements
applicable to them with respect to their beneficial ownership of Capital Stock,
except that a Form 3 ("Initial Statement of Beneficial Ownership") for Ernest
LaPorte, the Company's Vice President Financial Reporting - Principal Accounting
Officer, was inadvertently filed six days late.
OTHER MATTERS
The Board of Directors, at the time of the preparation of this Proxy
Statement, knows of no business to come before the Annual Meeting other than
that referred to herein. If any other business should come before the Annual
Meeting, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies received and not theretofore revoked in accordance
with their best judgment.
Upon the written request of any record holder or beneficial owner of Common
Stock or Class A Common Stock entitled to vote at the Annual Meeting, the
Company, without charge, will provide a copy of its Annual Report on Form 10-K
for the year ended January 31, 2006, as filed with the Securities and Exchange
Commission. Requests should be directed to Suzanne Michalek, Vice President
Corporate Communications, Movado Group, Inc., 650 From Road, Paramus, New Jersey
07652.
May 15, 2006
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE ANNUAL MEETING AND WISH THEIR STOCK TO BE VOTED ARE URGED
TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
22
APPENDIX A
MOVADO GROUP, INC. EXECUTIVE PERFORMANCE PLAN
(AMENDED AND RESTATED AS OF FEBRUARY 1, 2007)
I. PURPOSE
The purpose of the Plan is to establish a program of incentive compensation
for the Company's Covered Employees that is directly related to the performance
results of the Company and such employees. The Plan provides annual incentives,
contingent upon continued employment and meeting certain corporate goals, to
certain key executives who make substantial contributions to the Company.
This Plan is an amendment and restatement of the Movado Group, Inc.
Executive Performance Plan, originally established effective February 1, 2001
(the "2001 Plan"); provided, however, that all Bonus Awards granted under the
2001 Plan will continue to be governed by the terms of the 2001 Plan.
II. DEFINITIONS
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means a committee selected by the Board to administer the Plan
and composed of not less than two directors, each of whom is an "outside
director" (within the meaning of Section 162(m) of the Code). If at any time
such a Committee has not been so designated, the Compensation Committee of the
Board shall constitute the Committee or if there shall be no Compensation
Committee of the Board, the Board shall constitute the Committee.
"COMPANY" means Movado Group, Inc. and each of its subsidiaries.
"COVERED EMPLOYEES" means the Company's Chief Executive Officer and the
other four most highly compensated executive officers of the Company whose
compensation is or may be required to be disclosed under Item 402 of Regulation
S-K pursuant to the Securities Exchange Act of 1934, as amended. For each
Performance Period, the Committee shall designate in writing the other four most
highly compensated executive officers who are eligible to participate in the
Plan for such period.
"DESIGNATED BENEFICIARY" means the beneficiary or beneficiaries designated
in accordance with Article XII hereof to receive the amount, if any, payable
under the Plan upon the Covered Employee's death.
"BONUS AWARDS" means the awards which are intended to qualify for the
performance-based compensation exception to Section 162(m) of the Code, as
further described in Article VI, and which shall be payable under this Plan for
any Performance Period only if the Performance Criteria for such Performance
Period are met or exceeded and if and to the extent the Committee, in its
discretion, authorizes such payment to be made. Bonus Awards for all Covered
Employees may not exceed, in the aggregate, the maximum amount of five million
dollars ($5 million) in any Performance Period. Necessarily, therefore, no
individual Covered Employee may receive more than that amount for any
Performance Period and if the total maximum aggregate Bonus Awards amount of $5
million were to be paid to any one such Covered Employee for any Performance
Period then the others could not be paid any Bonus Awards.
"PERFORMANCE CRITERIA" means the Company's targeted earnings per share for
the applicable Performance Period, calculated in accordance with generally
accepted accounting principles as consistently applied by the Company, as
established by the Committee on or before April 30 of such Performance Period.
If the Committee determines that a change in the business, operations, corporate
structure or capital structure of the Company, or the manner in which it
conducts its business, or other events or circumstances render the Performance
Criteria to be unsuitable, the Committee may modify such Performance Criteria or
the related minimum acceptable level of achievement, in whole or in part, as the
Committee deems appropriate and equitable; provided, however, that no such
modification shall be made if the effect would be to cause a 162(m) Bonus Award
to fail to qualify for the performance-based compensation exception to Section
162(m) of the Code.
"PERFORMANCE PERIOD" means each fiscal year of the Company, which is the
12-month period beginning February 1st and ending January 31st.
"PLAN" means the Movado Group, Inc. Executive Performance Plan, as amended
and restated as of February 1, 2007.
III. ADMINISTRATION
Except as otherwise herein expressly provided, full power and authority to
construe, interpret, and administer the Plan shall be vested in the Committee,
including the power to amend or terminate the Plan as further described in
Article XV. The Committee may at any time adopt such rules, regulations,
policies, or practices as, in its sole discretion, it shall determine to be
necessary or appropriate for the administration of, or the performance of its
respective responsibilities under, the Plan. The Committee may at any time
amend, modify, suspend, or terminate such rules, regulations, policies, or
practices.
IV. BONUS AWARDS
The Committee, based upon information to be supplied by management of the
Company and, where determined as necessary by the Board, the ratification of the
Board, will establish for each Performance Period a maximum award (and, if the
Committee deems appropriate, a threshold and target award) and Performance
Criteria for each Covered Employee and communicate such award levels and
criteria to each Covered Employee prior to or during the Performance Period for
which such award may be made. Bonus Awards will be earned by each Covered
Employee based upon the level of attainment of his or her Performance Criteria
during the applicable Performance Period. In no event shall the Committee have
any discretion to increase the Bonus Awards payable to the Covered Employees but
the Committee may reduce the amount of any Bonus Award in its sole and absolute
discretion. As soon as practicable after the end of the applicable Performance
Period, the Committee shall determine the level of attainment of the Performance
Criteria for each Covered Employee and the Bonus Award to be made to each
Covered Employee.
V. PAYMENT OF BONUS AWARDS
The amount of any Bonus Awards earned during any Performance Period shall
be determined by the Committee and any such Bonus Awards shall be paid as soon
as practicable following the end of such Performance Period, but in no event
later than March 15th of the calendar year immediately following the calendar
year in which the Performance Period ends. Payment of Bonus Awards shall be made
in the form of cash or, as otherwise determined by the Committee, in shares of
Common Stock of the Company. Bonus Award amounts earned but not yet paid will
not accrue interest.
VI. 162(M) REQUIREMENTS
Each Bonus Award awarded under the Plan shall meet the criteria for
qualification as a 162(m) award and will be subject to the following
requirements, notwithstanding any other provision of the Plan to the contrary:
1. No Bonus Award may be paid unless and until the shareholders of the
Company have approved the Plan in a manner which complies with the
shareholder approval requirements of Section 162(m) of the Code.
2. Bonus Awards may only be made by a Committee which is comprised solely
of not less than two directors, each of whom is an "outside director"
(within the meaning of Section 162(m) of the Code).
3. The performance goals to which a 162(m) Bonus Award is subject must be
based solely on Performance Criteria. Such performance goals, and the
maximum, target and/or threshold (as applicable) Bonus Award amounts
payable upon attainment thereof, must be established by the Committee
within the time limits required in order for the 162(m) Bonus Award to
qualify for the performance-based compensation exception to Section
162(m) of the Code.
4. No Bonus Award may be paid until the Committee has certified in
writing the level of attainment of the applicable Performance
Criteria.
5. Bonus Awards for all Covered Employees may not exceed in the aggregate
the maximum amount of five million dollars ($5 million) in any
Performance Period.
VII. TERMINATION OF EMPLOYMENT
A Covered Employee shall be eligible to receive payment of his or her Bonus
Award earned during a Performance Period, so long as the Covered Employee is
employed on the last day of such Performance Period, notwithstanding any
subsequent termination of employment prior to the actual payment of the Bonus
Award. In the event of a Covered Employee's death after the last date of the
Performance Period and prior to the payment of a Bonus Award which has been
earned, such payment shall be made to the Covered Employee's Designated
Beneficiary. If a Covered Employee dies without a Designated Beneficiary
surviving, the Covered Employee's spouse shall be deemed to be such Covered
Employee's Designated Beneficiary, but if the deceased Covered Employee does not
have a spouse surviving, then such Covered Employee's issue, per stirpes, shall
be deemed to be such Covered Employee's Designated Beneficiary, but if the
deceased Covered Employee has neither spouse nor issue surviving then such
Covered Employee's estate shall be deemed to be such Covered Employee's
Designated Beneficiary.
VIII. REORGANIZATION OR DISCONTINUANCE
The obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from merger, consolidation or
other reorganization of the Company, or upon any successor corporation or
organization succeeding to substantially all of the assets and business of the
Company. The Company will make appropriate provision for the preservation of
Covered Employees' rights under the Plan in any agreement or plan which it may
enter into or adopt to effect any such merger, consolidation, reorganization or
transfer of assets.
If the business conducted by the Company shall be discontinued, any
previously earned and unpaid Bonus Awards under the Plan shall become
immediately payable to the Covered Employees then entitled thereto.
IX. NON-ALIENATION OF BENEFITS
Covered Employee may not assign, sell, encumber, transfer or otherwise
dispose of any rights or interests under the Plan except by will or the laws of
descent and distribution. Any attempted disposition in contravention of the
preceding sentence shall be null and void.
X. NO CLAIM OR RIGHT TO PLAN PARTICIPATION
No employee or other person shall have any claim or right to be selected as
a Covered Employee under the Plan. Neither the Plan nor any action taken
pursuant to the Plan shall be construed as giving any employee any right to be
retained in the employ of the Company.
XI. TAXES
The Company shall deduct from all amounts paid under the Plan all federal,
state, local and other taxes required by law to be withheld with respect to such
payments.
XII. DESIGNATION AND CHANGE OF BENEFICIARY
Each Covered Employee may indicate upon notice to him or her by the
Committee of his or her right to receive a Bonus Award a designation of one or
more persons as the Designated Beneficiary who shall be entitled to receive the
amount, if any, payable under the Plan upon the death of the Covered Employee.
Such designation shall be in writing on a form prescribed by the Committee. A
Covered Employee may, from time to time, revoke or change his or her Designated
Beneficiary without the consent of any prior Designated Beneficiary by filing a
written designation with the Committee. The last such designation received by
the Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the Covered Employee's death, and in no event shall it be
effective as of a date prior to such receipt.
XIII. PAYMENTS TO PERSONS OTHER THAN THE COVERED EMPLOYEE
If the Committee shall find that any person to whom any amount is payable
under the Plan is unable to care for his or her affairs because of incapacity,
illness or accident, or has died, then any payment due to such person or his or
her estate (unless a prior claim therefor has been made by a duly appointed
legal representative) may, if the
Committee so directs, be paid to his or her spouse, a child, a relative, an
institution maintaining or having custody of such person, or any other person
deemed by the Committee, in its sole discretion, to be a proper recipient on
behalf of such person otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Company therefor.
XIV. NO LIABILITY OF COMMITTEE MEMBERS
No member of the Committee shall be personally liable by reason of any
contract or other instrument related to the Plan executed by such member or on
his or her behalf in his or her capacity as a member of the Committee, nor for
any mistake of judgment made in good faith, and the Company shall indemnify and
hold harmless each employee, officer, or director of the Company to whom any
duty or power relating to the administration or interpretation of the Plan may
be allocated or delegated, against any cost or expense (including legal fees,
disbursements and other related charges) or liability (including any sum paid in
settlement of a claim with the approval of the Board) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or bad faith.
XV. TERMINATION OR AMENDMENT OF THE PLAN
The Committee may amend, suspend or terminate the Plan at any time;
provided that no amendment may be made without the approval of the Company's
shareholders if the effect of such amendment would be to cause outstanding or
pending 162(m) Bonus Awards to cease to qualify for the performance-based
compensation exception to Section 162(m) of the Code. The 2001 Plan provided
that it would automatically terminate on January 31, 2007. Subject to
shareholder approval in accordance with Section 162(m) of the Code, this
amendment and restatement of the Plan extends the automatic termination date to
January 31, 2012; provided, however, that any Bonus Awards granted prior to
January 31, 2007 shall continue to be governed by the terms of the 2001 Plan and
any Bonus Awards granted after January 31, 2007 and prior to January 31, 2012
shall continue to be governed by the terms of the Plan as amended and restated
effective February 1, 2007.
XVI. UNFUNDED PLAN
Covered Employees shall have no right, title, or interest whatsoever in or
to any investments which the Company may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Company and any Covered
Employee, Beneficiary, legal representative or any other person. To the extent
that any person acquires a right to receive payments from the Company under the
Plan, such right shall be no greater than the right of an unsecured general
creditor of the Company. All payments to be made hereunder shall be paid from
the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan.
The Plan is not intended to be subject to the Employee Retirement Income
Security Act of 1974, as amended.
XVII. GOVERNING LAW
The terms of the Plan and all rights thereunder shall be governed by and
construed in accordance with the laws of the State of New York without reference
to principles of conflict of laws.
XVIII. EFFECTIVE DATE
The original effective date of the Plan was February 1, 2001, and the
effective date of the Plan as amended and restated herein is February 1, 2007.
As originally adopted by the Compensation Committee of the Board of
Directors of Movado Group, Inc. at a meeting held on March 16, 2001, and as
amended and restated herein by adoption of this Plan document by the
Compensation Committee of the Board of Directors of Movado Group, Inc. at a
Meeting held on March 27, 2006.
MOVADO GROUP,INC. NOTICE OF ANNUAL MEETING OF
650 FROM ROAD, PARAMUS, NJ 07652 SHAREHOLDERS TO BE HELD JUNE 15, 2006
Dear Shareholder:
The Annual Meeting of Shareholders of Movado Group, Inc.will be held at 10:00
a.m.on Thursday, June 15, 2006, at the Company's executive offices, 650 From
Road, Paramus, NJ, for the following purposes:
1. To elect nine directors to the Board of Directors.
2. To ratify selection of independent public accountants.
3. To approve an amendment and restatement of the Company's Executive
Performance Plan.
Only holders of Common Stock and Class A Common Stock of Movado Group, Inc.of
record at the close of business on May 12, 2006 will be entitled to vote at the
meeting or any adjournment thereof.
TO BE SURE THAT YOUR VOTE IS COUNTED,WE URGE YOU TO COMPLETE AND SIGN THE
PROXY/VOTING INSTRUCTION CARD BELOW,DETACH IT FROM THIS LETTER AND RETURN IT IN
THE POSTAGE PAID ENVELOPE ENCLOSED IN THIS PACKAGE. The giving of such proxy
does not affect your right to vote in person if you attend the meeting.The
prompt return of your signed proxy will aid the Company in reducing the expense
of additional proxy solicitation.
BY ORDER OF THE BOARD OF DIRECTORS
----------------------------------------
May 15, 2006 TIMOTHY F.MICHNO
General Counsel and Secretary
[ ] - DETACH PROXY CARD HERE -
PLEASE SIGN, DATE AND RETURN [X]
THE PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE. VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK.
1. Election of Directors
FOR all nominees [ ] WITHHOLD AUTHORITY [ ] *EXCEPTIONS [ ]
listed below to vote for all
nominees listed below
Nominees: Gedalio Grinberg, Efraim Grinberg, Margaret Hayes-Adame, Richard Cote,
Alan H. Howard, Richard Isserman, Nathan Leventhal, Donald Oresman and
Leonard L. Silverstein
* Exceptions ___________________________________________________________________
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE
"EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED.
FOR AGAINST ABSTAIN
2. To ratify and approve the selection by the Audit [ ] [ ] [ ]
Committee of the Board of Directors of
PricewaterhouseCoopers LLP as independent public
accountants for the Company for the fiscal year
ending January 31, 2007.
FOR AGAINST ABSTAIN
3. To approve an amendment and restatement of the [ ] [ ] [ ]
Company's Executive Performance Plan, originally
established February 1, 2001.
In their discretion the Proxies are authorized to vote upon such other matters
as may properly come before the meeting or any adjournment or postponement
thereof.
To change your address, please mark this box. [ ]
If you plan to attend the meeting, please mark this [ ]
box.
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SCAN LINE
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The signature on this Proxy should correspond exactly with stockholder's name as
printed to the left. In the case of joint tenancies, co-executors, or
co-trustees, both should sign. Persons signing as Attorney, Executor,
Administrator, Trustee or Guardian should give their full title.
---------- -------------------------------- --------------------------------
Date Share Owner sign here Co-Owner sign here
MOVADO GROUP, INC. PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF MOVADO GROUP,INC.
FOR THE ANNUAL MEETING ON JUNE 15, 2006
The undersigned appoints Timothy F. Michno and Frank Kimick, and each of
them, with full power of substitution in each, the proxies of the undersigned,
to represent the undersigned and vote all shares of Movado Group, Inc., which
the undersigned may be entitled to vote at the Annual Meeting of Shareholders to
be held on June 15, 2006, and at any adjournment or postponement thereof, as
indicated on the reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder.If no direction is given, this proxy will
be voted FOR proposals 1, 2 and 3.
MOVADO GROUP, INC.
P.O. BOX 11346
NEW YORK, N.Y. 10203-0346
(Continued, and to be signed and dated on reverse side.)