<PAGE> 1
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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
LIZ CLAIBORNE
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
[LIZ CLAIBORNE, INC. LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
LIZ CLAIBORNE, INC.
The annual meeting of stockholders of Liz Claiborne, Inc., a Delaware
corporation (the "Company"), will be held at the Company's offices at One
Claiborne Avenue, North Bergen, New Jersey, on Thursday, May 20, 1999, at 10:00
A.M., local time, for the following purposes:
1. To elect three directors to serve until the 2002 annual meeting of
stockholders and until their respective successors are duly elected and
qualified;
2. To approve the Amended and Restated Liz Claiborne sec.162(m) Cash Bonus
Plan;
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants of the Company for the 1999 fiscal year; and
4. To transact such other business as may be properly brought before the
meeting and any adjournments or postponements thereof.
Only stockholders of record at the close of business on March 26, 1999, are
entitled to notice of and to vote at the annual meeting and any adjournments or
postponements thereof.
Your attention is called to the Proxy Statement on the following pages. We
hope that you will attend the meeting in person. If you need directions to the
meeting site, please call 201-295-6222. Your Board of Directors and management
look forward to greeting those stockholders able to attend. WHETHER OR NOT YOU
PLAN TO ATTEND, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ Roberta Schuhalter Karp
ROBERTA SCHUHALTER KARP
Vice President - Corporate
Affairs, General Counsel and Secretary
New York, New York
April 2, 1999
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN YOUR
PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
<PAGE> 3
[LIZ CLAIBORNE, INC. LOGO]
------------------------
PROXY STATEMENT
This Proxy Statement and enclosed form of proxy are being furnished
commencing on or about April 2, 1999, in connection with the solicitation by the
Board of Directors of Liz Claiborne, Inc. (the "Company") of proxies in the
enclosed form for use at the annual meeting of stockholders to be held on
Thursday, May 20, 1999, and any adjournments or postponements thereof (the
"Annual Meeting"), for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. Any proxy given pursuant to this solicitation
and received in time for the Annual Meeting will be voted as specified in the
proxy. If no instructions are given, proxies will be voted FOR the election of
the nominees named below under the caption "Proposal 1 -- Election of
Directors -- Nominees for Election;" FOR the approval of the Amended and
Restated Liz Claiborne sec.162(m) Cash Bonus Plan; FOR the ratification of the
appointment of Arthur Andersen LLP as independent public accountants of the
Company for the 1999 fiscal year; and in the discretion of the proxies named on
the proxy card with respect to any other matters properly brought before the
Annual Meeting. Any proxy may be revoked by written notice received by the
Secretary of the Company at the Company's principal executive offices at 1441
Broadway, New York, New York 10018 at any time prior to the voting thereof.
Only stockholders of record at the close of business on March 26, 1999, are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on March 26, 1999, there were 63,993,315 shares of the Company's Common
Stock, par value $1.00 per share (the "Common Stock"), outstanding. Each share
of Common Stock entitles the record holder thereof to one vote on all matters
properly brought before the Annual Meeting.
Abstentions may be specified on all proposals being submitted other than
election of directors. The inspectors of election will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. Abstentions will not be treated as shares present and
voting on the proposals set out in this Proxy Statement, and will have no effect
on the outcome of such proposals.
Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from the owners. If
instructions are not received, brokers may vote the shares in their discretion,
depending upon the type of proposals involved. "Broker non-votes" result when
brokers are precluded by the New York Stock Exchange from exercising their
discretion on certain types of proposals. Brokers have discretionary authority
to vote on the proposals set out in this Proxy Statement. The inspectors of
election will treat broker non-votes as shares that are present and entitled to
vote for purposes of determining the presence of a quorum, but not as shares
present and voting on a specific proposal, thus having no effect on the outcome
of such proposal.
If a stockholder participates in the Company's Dividend Reinvestment Plan
(the "DRIP"), the proxy to vote shares represents the number of shares held in
custody for the stockholder pursuant to the DRIP, as well as shares registered
in the stockholder's own name. Accordingly, First Chicago Trust Company of New
York, as Agent for the DRIP, will cause shares held for the account of
stockholders participating in the DRIP to be voted in the same way as the
stockholder votes shares registered in his or her own name. If the stockholder
does not give a proxy, such shares will not be voted. The Company will mail a
proxy and this Proxy Statement to all persons who, according to the records of
the Company's Transfer Agent, hold shares of Common Stock beneficially in the
DRIP but do not own any other shares of Common Stock.
<PAGE> 4
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The members of the Company's Board of Directors are divided into three
classes with the term of office of one class expiring each year. At the Annual
Meeting, three Directors will be elected to serve a three-year term (until the
2002 annual meeting) and until their respective successors are duly elected and
qualified. Unless authority to vote for the election of Directors is withheld,
the enclosed proxy will be voted FOR the election of the nominees named below.
Directors are elected by a plurality of the shares of Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote on the election of
directors. While management has no reason to believe that the nominees will not
be available as candidates, should such a situation arise, proxies may be voted
for the election of such other persons as a Director as the holders of the
proxies may, in their discretion, determine.
Paul R. Charron, J. James Gordon and Kay Koplovitz, each of whom is
presently a Director of the Company, have been nominated by the Board of
Directors for re-election to the Board, to serve until the 2002 annual meeting
and until their respective successors are duly elected and qualified.
INFORMATION CONCERNING THE DIRECTORS
Background information with respect to the nominees for election and the
six Directors whose terms of office will continue after the Annual Meeting
appears below. See "Security Ownership of Management" for information regarding
such persons' holdings of Common Stock.
NOMINEES TO SERVE UNTIL 2002:
PAUL R. CHARRON -- Mr. Charron, 56, joined the Company as Vice Chairman and
Chief Operating Officer, and became a Director, in 1994. In 1995, Mr. Charron
became President (a position he held until October 1996) and Chief Executive
Officer of the Company. In 1996, Mr. Charron became Chairman of the Board of the
Company. Prior to joining the Company, Mr. Charron served in various executive
capacities at VF Corporation, an apparel manufacturer, from 1988.
J. JAMES GORDON -- Mr. Gordon, 68, has served as a Director of the Company
since 1977. Since 1984, Mr. Gordon has been President of Gordon Textiles
International, Ltd., a consultant and distributor/importer of apparel fabrics.
Mr. Gordon is also a director of Cornerstone Bancorp, Inc. a regional commercial
bank.
KAY KOPLOVITZ -- Ms. Koplovitz, 53, was elected a Director of the Company
in 1992. Since 1998, she has served as Chief Executive Officer of Koplovitz &
Co., a media and communications consulting company. From 1980 to 1998, she
served as Founder, Chairman and Chief Executive Officer of USA Networks, an
international cable television programming company. Ms. Koplovitz is also a
director of Nabisco Holdings Corp. Inc., a food products company, and Oracle
Corporation, a computer software company.
DIRECTORS WHOSE TERMS EXPIRE IN 2000:
BERNARD W. ARONSON -- Mr. Aronson, 52, was elected a Director of the
Company in January 1998. Mr. Aronson has been Chairman of ACON Investments LLC,
a private investment vehicle, since 1996. He also served as International
Advisor to Goldman Sachs & Co. from 1993 to 1996 and as Assistant Secretary of
State for Inter-American Affairs from 1989 to 1993. Mr. Aronson is also a
director of Royal Caribbean Cruises Ltd., a global cruise company.
ANN M. FUDGE -- Ms. Fudge, 47, was elected a Director of the Company in
1993. Ms. Fudge joined General Foods USA in 1986 and held several planning and
marketing positions before being appointed Executive Vice President and General
Manager of the Dinners and Enhancers Division in 1991. In 1994, she was named
President of Kraft General Foods' Maxwell House Coffee Company. In 1995, Ms.
Fudge became Executive Vice President of Kraft Foods, Inc. (the successor to
Kraft General Foods, Inc., of which General
2
<PAGE> 5
Foods USA was an operating unit), the multinational food business of Philip
Morris Companies, Inc., while continuing to head the Maxwell House Coffee
Division as General Manager. She became President of Kraft's Maxwell House and
Post Divisions in 1997. Ms. Fudge is also a director of Allied Signal, Inc., an
advanced systems and equipment manufacturer, and The Federal Reserve Bank of New
York.
PAUL E. TIERNEY, JR. -- Mr. Tierney, 56, was elected a Director of the
Company in 1995. Mr. Tierney is a co-founding Member of Development Capital,
LLC, a private investment vehicle formed in 1996. From 1978 to 1996, Mr. Tierney
served as Managing Director of Gollust, Tierney & Oliver, an investment banking
partnership. He is Chairman of the Board of Directors of TechnoServe, Inc., a
not-for profit corporation, and D.C. United, a major league soccer team, and
also serves as a director of UAL Corporation, an air transportation company, C &
B Publishing plc (UK), The Argentine Investment Fund, and St. John's College.
DIRECTORS WHOSE TERMS EXPIRE IN 2001:
ROGER N. FARAH -- Mr. Farah, 46, was elected a Director of the Company in
June 1998. Mr. Farah has served as Chairman of the Board and Chief Executive
Officer of Venator Group, Inc., retail merchants, since October 1994. From July
to October 1994, he served as President and Chief Operating Officer of R.H. Macy
& Co., Inc., and from 1991 to July 1994, he was Chairman of the Board and Chief
Executive Officer of Federated Merchandising Services, a division of Federated
Department Stores, Inc., retail merchants. Mr. Farah is member of the
Undergraduate Executive Board of The Wharton School of Business of the
University of Pennsylvania.
GEORGE L. JONES -- Mr. Jones, 48, was elected a Director of the Company in
March 1999. Mr. Jones has served as President - Worldwide Licensing at the
Warner Brothers consumer products division of Time Warner Inc., an international
entertainment and media company, since 1994, and additionally as
President - Warner Brothers Studio Stores since 1998. Mr. Jones served as
President and Chief Executive Officer of Rose's Stores, Inc., retail merchants,
from 1991 to 1994.
KENNETH P. KOPELMAN -- Mr. Kopelman, 47, was elected a Director of the
Company in 1996. Mr. Kopelman has been a partner in the New York City law firm
of Kramer Levin Naftalis & Frankel LLP, corporate counsel to the Company, for
more than 10 years and served as the Company's Secretary from 1991 to 1996. Mr.
Kopelman is also a director of Mobius Management Systems, Inc., a computer
software company.
MEETINGS, COMMITTEES AND COMPENSATION OF THE BOARD
The Board of Directors met seven times during the 1998 fiscal year. During
such year, each Director attended more than 75% of the meetings held by the
Board of Directors and the committees on which he or she served. The Company's
Board also acts from time to time by unanimous written consent in lieu of
meetings.
The Board of Directors has four standing committees, all of which are
composed solely of non-management Directors of the Company: the Audit Committee,
the Compensation Committee, the Committee on Directors and the Finance
Committee.
Audit Committee. This Committee recommends to the Board the independent
public accountants to be engaged, reviews the audit plan and results of the
auditing engagement with such accountants, reviews the independence and fees of,
and approves non-audit services provided by, such accountants, and reviews with
the accountants the overall internal accounting controls and other matters. The
Committee, whose present members are Bernard W. Aronson, Ann M. Fudge (chair),
J. James Gordon, George L. Jones, Kenneth P. Kopelman and Kay Koplovitz, held
three meetings during the 1998 fiscal year.
3
<PAGE> 6
Compensation Committee. This Committee determines the salaries and bonuses
for the Chief Executive Officer and President, approves the general policies
applicable to salaries and bonuses for the other executive officers, makes all
award decisions regarding equity-based compensation plans, and makes
recommendations to the Board and senior management regarding Company
compensation programs. The Committee, whose present members are Roger N. Farah,
J. James Gordon, Kay Koplovitz (chair) and Paul E. Tierney, Jr., held seven
meetings during the 1998 fiscal year.
Committee on Directors. This Committee is responsible for making
recommendations with respect to the nominations by the Board of qualified
candidates to serve as Directors of the Company and reviewing and advising the
Board on issues of corporate governance and corporate responsibility, as well as
directorship practices. The Committee, whose present members are Roger N. Farah,
Ann M. Fudge and J. James Gordon (chair), held three meetings during the 1998
fiscal year. The Company's Certificate of Incorporation provides procedures
under which stockholders may nominate persons for election as directors. Written
notice of any nomination must be delivered to the Secretary of the Company at
1441 Broadway, New York, New York 10018 not less than 14 days nor more than 50
days prior to the date of the meeting at which directors are to be elected and
must contain the name, age, business and residence address and principal
occupation or employment of, and the number of shares of Common Stock
beneficially owned by, each nominee.
Finance Committee. This Committee advises the Board on a variety of
corporate finance issues, including the Company's policies regarding dividends,
issuances and purchases of securities, capital expenditures and proposed
acquisition and divestiture matters. The Committee, whose present members are
Bernard W. Aronson, Kenneth P. Kopelman and Paul E. Tierney, Jr. (chair), held
five meetings during the 1998 fiscal year.
The Company currently pays its non-management Directors an annual retainer
of $30,000, $15,000 of which is paid in shares of the Company's Common Stock as
described below, plus $1,000 for each Board meeting, executive session and
committee meeting attended. In addition, each committee chair receives an
additional annual retainer of $4,000. Directors are reimbursed for out-of-pocket
travel expenses incurred in connection with attendance at Board and committee
meetings. Directors who are employees of the Company receive no fees or
compensation for their services as Directors.
The Company has, since 1991, paid a portion of each Director's annual
retainer in shares of Common Stock pursuant to the Liz Claiborne, Inc. Outside
Directors' 1991 Stock Ownership Plan, as amended (the "Outside Director Plan").
Under the Outside Director Plan, each non-management Director having served as
such for at least six months receives an annual award of shares of Common Stock
having a value of $15,000 on the first business day of each fiscal year; newly
elected non-management Directors receive such an award upon their election to
the Board. During fiscal 1998, the following awards of shares of Common Stock
were made under the Outside Director Plan: 348 shares on January 5, 1998 to each
of Mss. Fudge and Koplovitz and Messrs. Gordon, Kopelman and Tierney; 375 shares
on January 23, 1998 to Mr. Aronson; and 276 shares on June 26, 1998 to Mr. Farah
(all such Directors, collectively, the "Director Recipients"). All shares
awarded under the Outside Director Plan are nontransferable for a period of
three years following the applicable award date, subject to exceptions in the
case of death or retirement from the Board.
The Outside Director Plan also provides for each non-management Director to
receive a grant of options to purchase 1,000 shares of Common Stock on the first
business day of each fiscal year of the Company. All options granted under such
Plan carry terms substantially equivalent to options granted to Company
employees under the stockholder-approved Liz Claiborne, Inc. 1992 Stock
Incentive Plan, as amended (the "1992 Plan"): an exercise price equal to the
market price on the grant date, a term of ten years, and a vesting schedule of
25% on each of the first and second anniversaries of the grant date, with the
remaining 50% vesting on the third anniversary, subject to earlier vesting on a
change of control (as defined in the Outside Director
4
<PAGE> 7
Plan) or upon death or retirement from the Board after at least five years of
service. During fiscal 1998, the following awards of options were made under the
Outside Director Plan: options covering 1,000 shares (at an exercise price of
$43.00) on January 5, 1998, to each of the Director Recipients other than
Messrs. Aronson and Farah; options covering 1,000 shares (at an exercise price
of $40.00) on January 23, 1998, to Mr. Aronson; and options covering 1,000
shares (at an exercise price of $54.18) on June 26, 1998, to Mr. Farah.
The Outside Director Plan further enables each non-management Director to
elect prior to any calendar year to defer cash and/or Common Stock fees
otherwise payable in that and succeeding calendar years. Deferred cash fees are
deemed invested in phantom shares of Common Stock or credited with imputed
interest at the prime rate plus one percent, whichever the Director specifies at
the time of election. Deferred Common Stock fees are deemed invested in phantom
shares of Common Stock, with dividends deemed reinvested in additional phantom
shares.
5
<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation for
services in all capacities for the 1998, 1997 and 1996 fiscal years of the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company as of January 2, 1999 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION(1) ------------------------ -------
--------------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING
FISCAL ANNUAL STOCK OPTIONS/ LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS(3) COMPENSATION AWARDS SARS(#)(4) PAYOUTS
- --------------------------- ------ ---------- ---------- ------------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul R. Charron................ 1998 $1,064,300(6) $ 500,000 $ 73,839(7) $2,961,000(8) 85,000 --
Chairman of the Board and 1997 $1,052,800(6) $1,186,500 $ 77,146 -- 50,000 --
Chief Executive Officer 1996 $ 894,200 $1,208,000 $ 67,525 -- 50,000 --
- ------------------------------------------------------------------------------------------------------------------------
Denise V. Seegal............... 1998 $ 700,200 $ 300,000 -- $1,213,188(8) 28,000 --
President 1997 $ 706,200 $ 625,000 -- -- 18,900 --
1996(9) $ 96,800 $ 680,000 $218,750 $ 437,500 35,000 --
- ------------------------------------------------------------------------------------------------------------------------
Samuel M. Miller(10)........... 1998 $ 372,700 $ 85,000 -- $ 514,063(8) -- --
1997 $ 374,000 $ 200,000 -- -- 8,300 --
1996 $ 343,800 $ 220,000 -- -- 8,000 --
- ------------------------------------------------------------------------------------------------------------------------
Robert J. Zane................. 1998 $ 313,100 $ 100,000 -- $ 514,063(8) 13,000 --
Senior Vice President - 1997 $ 313,300 $ 190,000 -- -- 8,300 --
Manufacturing and Sourcing 1996 $ 288,900 $ 175,000 -- $ 330,000 5,625 --
- ------------------------------------------------------------------------------------------------------------------------
John R. Thompson............... 1998 $ 321,200 $ 50,000 -- $ 514,063(8) 12,500 --
Senior Vice
President - Service, 1997 $ 312,100 $ 205,000 -- -- 8,300 --
Systems and Distribution and 1996 $ 279,200 $ 175,000 -- -- 8,000 --
Chief Information Officer
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION(5)
- --------------------------- ---------------
<S> <C>
Paul R. Charron................ $657,683
Chairman of the Board and $618,437
Chief Executive Officer $484,472
- ----------------------------------------------------------------
Denise V. Seegal............... $ 48,861
President $ 48,685
$ 8,225
- --------------------------------------------------------------------------------
Samuel M. Miller(10)........... $ 32,167
$ 38,925
$ 35,977
- ------------------------------------------------------------------------------------------------
Robert J. Zane................. $ 26,730
Senior Vice President - $ 32,594
Manufacturing and Sourcing $ 21,786
- ----------------------------------------------------------------------------------------------------------------
John R. Thompson............... $ 23,173
Senior Vice
President - Service, $ 28,427
Systems and Distribution and $ 25,694
Chief Information Officer
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) The Company has concluded that the aggregate amount of perquisites and
other personal benefits paid to each of the Named Executive Officers other
than Mr. Charron for fiscal 1998 did not exceed the lesser of 10% of each
such officer's total annual salary and bonus for such year, or $50,000;
such amounts are not included in the table.
(2) Amounts for fiscal 1997 reflect a fifty-three week period.
(3) A description of the Company's bonus arrangements is contained under the
caption "Board Compensation Committee Report on Executive Compensation"
below (the "Compensation Committee Report").
(4) For fiscal 1998, 1997, and 1996 includes options granted on January 4,
1999, January 6, 1998, and January 9, 1997, respectively, under the 1992
Plan. For Mr. Charron, each of fiscal 1998, 1997 and 1996 includes options
subject to a special vesting condition. See "Option Grants Table for Fiscal
1998" below. For Ms. Seegal, fiscal 1996 includes options granted on
October 24, 1996, upon the commencement of her employment. See "Employment
Arrangements -- Employment Agreement with Denise V. Seegal."
(5) For fiscal 1998 includes (a) for each of the Named Executive Officers (i)
$6,400 contributed under the Company's Profit-Sharing Retirement Plan; (ii)
$4,000 contributed as matching contributions under the Company's Savings
Plan; (iii) the full amount of all premiums paid by the Company for
universal life insurance coverage under the Company's supplemental life
insurance plan under which each participant is entitled to any cash
surrender value under the policy, providing coverage equal to two times
annual base salary, as follows: Mr. Charron -- $21,466; Ms. Seegal: $3,349;
Mr. Miller -- $7,942; Mr. Zane -- $6,380; and Mr. Thompson -- $2,298; and
(iv) amounts accrued under an unfunded Supplemental Executive Retirement
Plan (the "SERP") with respect to services rendered during fiscal 1998, as
follows: Mr. Charron -- $58,777; Ms. Seegal -- $35,112; Mr.
Miller -- $13,825; Mr. Zane -- $9,950; and Mr. Thompson -- $10,475; and (b)
for Mr. Charron (i) $345,365 accrued as of January 4, 1998, under an
unfunded deferred compensation plan established in 1996 (the "UDCP") and
(ii) above-market earnings on all amounts accrued and deferred under the
UDCP through January 2, 1999, as calculated pursuant to the terms of the
UDCP, in an amount equal to $221,675 (see "Employment
Arrangements -- Employment Agreement with Paul R. Charron" below).
(6) Includes amounts deferred under the SERP and the UDCP (see "Employment
Arrangements -- Employment Agreement with Paul R. Charron" below).
(7) Includes (a) $25,861 representing reimbursement of certain transportation
expenses; and (b) $30,348 representing reimbursement of certain tax
obligations.
6
<PAGE> 9
(8) Represents the value (based on the closing price of the Common Stock on
January 6, 1998, the date of grant) of the following shares of restricted
stock issued under the 1992 Plan pursuant to the Company's Transformation
Share Program ("Transformation Shares") as described in the Compensation
Committee Report below: Mr. Charron -- 72,000 Shares; Ms. Seegal -- 29,500
Shares; Mr. Miller -- 12,500 Shares; Mr. Zane -- 12,500 Shares; and Mr.
Thompson -- 12,500 Shares. These Shares, which are subject to restrictions
on transfer and risk of forfeiture until earned by continued service, vest
nine and one half years from the date of grant. Vesting may be accelerated
if and to the extent the cumulative total return to the Company's
stockholders exceeds the total stockholder return achieved by a group of
peer companies, such comparison to be made for each of three consecutive
three-year performance periods, with the first performance period
commencing on January 1, 1998. Prior to vesting, dividends on such
restricted shares are held in escrow and deemed reinvested in phantom
shares of Common Stock. On January 2, 1999, all such Transformation Shares
remained restricted, with a value (based on the closing price of the Common
Stock on December 31, 1998) as follows: Mr. Charron -- $2,272,500; Ms.
Seegal -- $931,093; Mr. Miller -- $394,531; Mr. Zane -- $394,531; and Mr.
Thompson -- $394,531. Upon his retirement on January 15, 1999, Mr. Miller
forfeited 7,987 of his Transformation Shares pursuant to the terms of the
Transformation Share Program. No additional Transformation Share grants are
expected to be made unless the vesting of the prior grant has been
accelerated.
(9) Reflects a partial year, including any guaranteed bonus payments.
(10) Mr. Miller, who served as Senior Vice President-Finance and Chief Financial
Officer during fiscal 1998, retired from the Company on January 15, 1999.
OPTION GRANTS TABLE FOR FISCAL 1998
The following table sets forth additional information concerning stock
option grants made during fiscal 1998 to the Named Executive Officers. For
purposes of the table, grants made on January 4, 1999 are treated as having been
made during fiscal 1998 and grants made on January 6, 1998, are treated as
having been made during fiscal 1997; these grants are also so reflected in the
Summary Compensation Table. In addition, in accordance with SEC disclosure
rules, the hypothetical gains, or "option spreads," for each option grant are
shown based on compound annual rates of stock price appreciation of 5% and 10%
from the grant date to the expiration date. The assumed rates of growth are
prescribed by the SEC and are for illustration purposes only; they are not
intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance and prospects. All options were
issued under the 1992 Plan. The Company has not granted any stock appreciation
rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTION TERM(2)
---------------------------------------------------------- ------------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL OPTIONS EXERCISE
OPTIONS GRANTED TO EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#) IN FISCAL 1998(3) ($/SHARE) DATE 5%($) 10%($)
---- ---------- -------------------- --------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Charron....... 85,000(4) 6.40% $32.5625 1/4/09 $1,740,588 $4,411,288
- -------------------------------------------------------------------------------------------------------------------
Denise V. Seegal...... 28,000 2.11% $32.5625 1/4/09 $ 573,370 $1,453,130
- -------------------------------------------------------------------------------------------------------------------
Samuel M. Miller...... -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
John R. Thompson...... 12,500 0.94% $32.5625 1/4/09 $ 255,969 $ 648,719
- -------------------------------------------------------------------------------------------------------------------
Robert J. Zane........ 13,000 0.98% $32.5625 1/4/09 $ 266,208 $ 674,668
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Except as set forth in footnote (4) below, options become exercisable in
three annual installments with 25% becoming exercisable on each of the first
and second anniversaries of the grant date and 50% on the third anniversary,
subject to earlier vesting upon a change of control. A "change of control"
occurs if any person acquires 20% or more of the outstanding shares of
Common Stock, the stockholders approve a merger, consolidation, liquidation
or sale of all or substantially all of the assets of the Company, a cash
offer for 50% or more of the outstanding shares of the Common Stock is
commenced, or two or more directors are elected to the Board of Directors
without approval of incumbent Board members.
7
<PAGE> 10
(2) Assumes that the stock price on the grant date ($32.5625 on January 4, 1999)
has grown, as indicated, at (a) 5% per annum over the term of the option to
$53.04, or (b) at 10% per annum over the term of the option to $84.46.
(3) During fiscal 1998, the Company granted to 760 employees options to purchase
an aggregate of 1,328,238 shares. All grants were made at exercise prices
equal to the market price on the grant date.
(4) Includes options covering 17,000 shares which vest only if Mr. Charron is
employed full-time as Chairman of the Board ("Chairman") and Chief Executive
Officer of the Company on December 28, 2002 (unless his employment is
terminated before such time by reason of death, disability or a change in
control).
AGGREGATED OPTION EXERCISES IN FISCAL 1998
AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides information concerning all exercises of stock
options during fiscal 1998 by the Named Executive Officers and the fiscal
year-end value of unexercised options on an aggregated basis. The Company has
not granted any stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NUMBER OF OPTIONS AT 1/2/99 AT 1/2/99(1)
SHARES ACQUIRED VALUE ------------------------------ ------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
---- --------------- -------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Charron...... -- -- 71,665 198,335 $629,467 $133,346
- -------------------------------------------------------------------------------------------------------------------
Denise V. Seegal..... -- -- 13,750 68,150 $ -0- $ -0-
- -------------------------------------------------------------------------------------------------------------------
Samuel M. Miller..... 16,500 $509,438 67,883 19,717 $103,512 $ 34,769
- -------------------------------------------------------------------------------------------------------------------
John R. Thompson..... 5,000 $179,375 10,500 30,300 $ 91,719 $ 16,406
- -------------------------------------------------------------------------------------------------------------------
Robert J. Zane....... -- -- 9,843 26,457 $ 66,736 $ 4,397
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Options are "in-the-money" as of January 2, 1999, to the extent that the
market price of the Common Stock (based on the closing price of the Common
Stock on December 31, 1998) exceeded the exercise price of such options.
(2) Includes grants made on January 4, 1999.
EMPLOYMENT ARRANGEMENTS
EMPLOYMENT AGREEMENT WITH PAUL R. CHARRON. The Company has an employment
agreement with Paul R. Charron, which expires on April 30, 1999, with automatic
one year renewal terms. Such agreement was amended with effect from Mr.
Charron's election to the additional position of Chairman in May 1996 to provide
for a minimum annual base salary of $1,000,000, an annual target bonus
commencing in the 1997 fiscal year equal to 75% of base salary and the annual
grant of options covering at least 50,000 shares of Common Stock, twenty percent
of which are subject to a special vesting condition. See "Option Grants Table
for Fiscal 1998." The agreement also provides that if his employment is
terminated either by the Company other than for cause or by him for certain
specified reasons, Mr. Charron shall receive a severance payment of $1,750,000;
provided that in the event Mr. Charron terminates his employment after a change
of control (as defined in his agreement), such severance payment shall be
$2,250,000.
As part of the 1996 amendments to Mr. Charron's employment agreement, the
Company established an unfunded deferred compensation plan (the "UDCP"). Under
the UDCP, the Company established two unfunded bookkeeping accounts: a
Retirement Income Account and a Deferred Salary Account. Upon cessation for any
reason of Mr. Charron's full-time employment as Chairman and Chief Executive
Officer, he (or his beneficiary) will be entitled to receive the amount credited
to the Deferred Salary Account (which is fully vested at all times), plus the
amount credited to the Retirement Income Account to the extent vested, plus, in
each case, imputed earnings. As of December 31, 1995 (the first day of the
Company's 1996 fiscal year) and as of the first day of each of the subsequent
five fiscal years, the Retirement Income Account is credited with an amount
equal to 15% of the sum of Mr. Charron's base salary for such fiscal year and
his cash
8
<PAGE> 11
bonus (if any) for the immediately preceding fiscal year. The Retirement Income
Account becomes fully vested on December 28, 2002, provided Mr. Charron is then
employed full-time as Chairman and Chief Executive Officer of the Company;
vesting is accelerated upon death, disability or termination in connection with
a change of control (as defined in the UDCP). As of December 29, 1996 (the first
day of the Company's 1997 fiscal year) and as of the first day of each
subsequent fiscal year, the Deferred Salary Account is credited with an amount
equal to the portion of Mr. Charron's base salary for such fiscal year that
exceeds $1 million (and is therefore deferred pursuant to his employment
agreement). As of December 28, 1996 (the last day of the Company's 1996 fiscal
year) and as of the last day of each subsequent fiscal year, each of the
Retirement Income and Deferred Salary Accounts is credited with an amount equal
to the balance standing credited thereto on the first day of such fiscal year
multiplied by an imputed earnings rate. For the 1996-2001 fiscal years, the
imputed earnings rate is the greater of (i) the Company's after-tax rate of
return on average capital (as defined in the UDCP) for such fiscal year and (ii)
the Federal mid-term rate at the first day of such year. After the 2001 fiscal
year, or earlier if Mr. Charron's employment terminates prior to December 30,
2001, the imputed earnings will be the Federal mid-term rate at the first day of
the fiscal year.
EMPLOYMENT AGREEMENT WITH DENISE V. SEEGAL. The Company entered into an
employment agreement with Denise V. Seegal, the Company's President, in
September 1996. Such agreement expires on September 30, 1999 and provides for a
minimum base salary of $680,000, plus bonus. As provided in such employment
agreement, the Company paid Ms. Seegal a bonus of $680,000 for fiscal 1996, and
issued to Ms. Seegal (i) 5,000 unrestricted shares of Common Stock, (ii) 10,000
restricted shares of Common Stock (which vested on the last day of each of the
1997 and 1998 fiscal years at the rate of 5,000 shares per year) and (iii)
options covering 20,000 shares of Common Stock. The agreement also provides that
if her employment is terminated either by the Company other than for cause or by
her for certain specified reasons, Ms. Seegal will be entitled to continue to
receive her base salary under such agreement through August 30, 1999, but in no
event less than $1 million.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee is composed of four Directors who meet
the test for independence under the Company's stockholder-approved sec.162(m)
Cash Bonus Plan (the "sec.162(m) Plan"). The Committee (i) determines the
salaries for the Chairman/Chief Executive Officer ("CEO") and the President,
(ii) administers the sec.162(m) Plan, including the determination of bonuses for
participants thereunder, (iii) approves the general policies applicable to
salaries and bonuses for the other executive officers and reviews and acts on
bonuses for those officers, (iv) makes all award decisions regarding equity-
based compensation to executive officers and other employees under the Company's
stockholder-approved 1992 Stock Incentive Plan, as amended (the "1992 Plan"),
and (v) makes recommendations to the full Board and senior management with
respect to the adoption and administration of Company compensation programs.
OVERVIEW. During 1995, the Committee, assisted by an executive
compensation consulting firm, performed a wide ranging review of Company
compensation programs which culminated in the Board's adoption of a new
executive compensation program (the "Program"). As in prior years, during 1998,
the Committee sought to continue the "pay for performance" approach inherent in
the Program, while providing Company executives with a highly competitive total
compensation opportunity through a balancing of rewards based on short-term
performance (measured by annual business unit and corporate results) with
rewards based on long-term performance (measured principally by stock price
appreciation over time).
The Program components are base salary, an annual incentive bonus, and
long-term incentives encompassing stock option grants and restricted stock
grants to certain executives. Base pay is generally set within a range
comparable to the competitive median, while the annual incentive bonus (if
targets are achieved) and long-term incentive components provide
performance-based opportunities which may result in rewards significantly higher
than the competitive median.
The annual incentive cash bonus plan applies to all salaried employees
(except participants in the sec.162(m) Plan) and emphasizes the annual
achievement of objectively measurable goals. Quantitatively measurable
performance targets which attempt to best measure the implementation of each
business unit's
9
<PAGE> 12
critical business strategies are set annually. For executives in corporate
departments which serve a number of operating divisions, a majority of the
annual bonus amount is determined by the performance of the operating divisions
served and overall corporate performance. The long-term performance component of
the Program rewards executives for the collective success of all business units,
as measured by stock price appreciation, using both an absolute standard (i.e.,
increase in the Company's share price, rewarded through stock options) and a
relative-to-industry peer group performance standard (i.e., through the
Transformation Share program described below).
1998 COMPENSATION
CASH COMPENSATION. Salary. Salary adjustments are typically made annually,
under the same increase guideline that applies to all salaried employees. The
guideline for 1998 was 3.5%; this level has been adopted for 1999 as well.
Incentive Cash Bonuses. sec.162(m) Plan. Mr. Charron and Ms. Seegal were
the sole participants in the sec.162(m) Plan in 1998. As required pursuant to
the Internal Revenue Code (the "Code") and the sec.162(m) Plan, the Committee
establishes, in advance, quantitatively measurable objective performance goals
for each participant and the maximum bonus potentially payable under the Plan to
such participant. For fiscal 1998, the Committee established under the Plan two
objective earnings-based goals, relating to earnings per share and return on
invested operating capital employed in operations. The Committee also set in
advance the maximum bonus payable based on the Company's levels of achievement
as against these goals. In addition, the Committee established a number of
individual goals; to the extent that the Committee determined that such
individual goals were not fully achieved, the maximum bonus otherwise determined
under the objective Plan formula could be reduced in the discretion of the
Committee. (The Committee further retains absolute discretion to reduce the
actual bonuses paid below such maximum levels to the extent that it considers
appropriate.)
The maximum bonus payable to any sec.162(m) Plan participant in respect of
the 1998 fiscal year was capped at $1.5 million. Under the Amended and Restated
Liz Claiborne sec.162(m) Cash Bonus Plan being submitted for stockholder
approval, the maximum bonus payable to any sec.162(m) Plan participant in
respect of fiscal year 2000 or later shall be capped at $2.0 million. See
"Proposal 2 -- Approval of the Amended and Restated Liz Claiborne sec.162(m)
Cash Bonus Plan" below. Although the Committee intends to continue to structure
the compensation arrangements for executive officers in a manner that will
generally avoid the deduction limitation imposed by sec.162(m) of the Code, the
Committee and the Board continue to strongly believe that it is important and
necessary that the Committee retain the right, in the exercise of its business
judgment, to provide arrangements from time to time that may not qualify under
sec.162(m) if such arrangements are, in the Committee's view, in the best
interests of the Company and its stockholders, and the Committee has expressly
retained that right. The Committee has designated Mr. Charron, Ms. Seegal and
Richard F. Zannino, the Company's Senior Vice President -- Finance and
Administration and Chief Financial Officer, as the only participants in the Plan
for fiscal 1999.
Cash Incentive Bonus Plan. Under the cash incentive bonus plan, all other
salaried employees, including the three participating Named Executive Officers,
were eligible to receive a bonus for 1998 based upon (i) where applicable, the
achievement of targeted levels of divisional direct operating profit and/or
departmental performance considerations; and (ii) a combination of earnings per
share and return on invested operating capital achievement as measured against
pre-established targets. Business unit performance against target during 1998
resulted in payouts under the divisional component of the bonus program ranging
from 0% to 200% of divisional target bonus amounts.
1998 Cash Bonus Awards. The 1998 bonus awards to Ms. Seegal (under the
sec.162(m) Plan) and to the three other Named Executive Officers (under the cash
incentive bonus plan) were based upon corporate, departmental and divisional
achievement against goals, and reflect the Committee's assessment of the level
and quality of individual business initiatives and achievements (taking into
account the evaluations of the CEO).
10
<PAGE> 13
SHARE COMPENSATION. The Company provides equity-based compensation to its
executives under its stock option program and under restricted share programs,
administered by the Committee under the 1992 Plan.
Transformation Shares. As discussed in last year's Committee Report,
during 1997, the Committee adopted a new restricted share ("Transformation
Shares") program, modeled on its "Career Share" program adopted in 1995. The
Transformation Share program is administered by the Committee under the 1992
Plan. In making the first award of Transformation Shares, the Company awarded on
January 6, 1998, an aggregate of 341,350 shares of restricted stock to an
aggregate of 118 Company executives. The scope of the participant group and the
size of the individual grants were recommended by the CEO, based on guidelines
derived from market data, and approved by the Committee. As was the case with
Career Shares, the near-term incentive value of Transformation Shares derives in
large part from the Company's ability to produce stockholder returns in excess
of those of an industry peer group. The Committee selected 38 public company
competitors from within the apparel, retail and related fields (see "Performance
Graph" below) as the peer group for the Transformation Share program ("Peer
Group"). Transformation Shares, which are subject to restrictions on transfer
and the risk of forfeiture until earned by continued service, will not vest
until July 6, 2007, unless certain performance targets, which accelerate
vesting, are reached. Thus, Transformation Shares may vest at the end of any
three-year performance period ending on the third, sixth, or ninth anniversaries
of the start of the initial performance period if the Company's total
stockholder return (share price appreciation plus reinvestment of any dividends;
"TSR") for the prior three-year performance period ranks at or above the 50th
percentile of the TSR of the companies comprising the Peer Group, as follows: at
the 50th percentile: 50% vesting; at or above the 75th percentile: full vesting;
between the 50th and 75th percentiles: proportional vesting. If the Company's
TSR does not attain the 50th percentile, the Transformation Shares remain
unvested and a new three-year performance period begins. Executives receiving
5,000 or more Transformation Shares (an aggregate of 23 Company executives) may
not sell or otherwise transfer (other than to pay related taxes) vested
Transformation Shares unless they continue to own, directly or indirectly,
Company shares having a value at least equal to annual base salary; all other
Transformation Share recipients (who received between 500 and 2,000
Transformation Shares) are expected to accumulate a lesser, yet significant,
equity ownership position in Company shares. Transformation Share vesting will
be accelerated upon a change of control that results in Company shares no longer
being quoted on an established market. The Company's TSR through the first 12
months of the initial three-year performance period ranked below the 50th
percentile of the TSR of the Peer Group companies.
Stock Options. The Company has a long-standing policy of granting stock
options to a substantial number of employees as a way of establishing a
long-term incentive compensation component that emphasizes the importance of
increasing stockholder value. In January 1999, concurrent with the annual grant
to employees, the Committee granted options to all executive officers at an
exercise price equal to the market price on the grant date. See "Option Grants
Table for Fiscal 1998" above. These options vest at the rate of 25% on each of
the first and second anniversaries of the grant date with the remaining 50%
vesting on the third anniversary, and carry a 10-year term. Individual grants
(other than for the CEO) are recommended by the CEO and approved by the
Committee.
CEO COMPENSATION. Mr. Charron's salary is set pursuant to the Company's
multi-year arrangement with him described under "Employment
Arrangements -- Employment Agreement with Paul R. Charron" above. Other elements
of these compensation arrangements retain the structure of annual and long-term
incentives which may result in rewards significantly higher than the competitive
median. Of particular significance to the Committee are the long-term
performance-based elements built into the stock option and deferred income
components. Moreover, Mr. Charron's realization of many of the benefits under
his arrangements are contingent on his continuing to serve as Chairman and CEO
of the Company, at the pleasure of the Board, through the end of fiscal 2002. As
discussed in last year's Committee Report, on January 6, 1998, contemporaneously
with the general grant of Transformation Shares to over 100 company executives,
Mr. Charron was awarded 72,000 shares of restricted stock under the
Transformation Share program described above.
11
<PAGE> 14
For 1998, the Committee set under the sec.162(m) Plan certain earnings per
share and return on invested operating capital goals, with the level of
achievement against them resulting in a variety of maximum bonus opportunities.
In addition, a number of individual goals (including continued development and
implementation of product, marketing, production, systems and other
transformation initiatives) were established. Based upon achievement against the
foregoing, the Committee awarded Mr. Charron a cash bonus of $500,000, a
significant reduction from his 1997 cash bonus. In order to provide him with
continuing strong future incentives, the Committee, after review and analysis of
competitive practices within the Peer Group, awarded Mr. Charron options
covering 85,000 shares of Common Stock.
ROGER N. FARAH
J. JAMES GORDON
KAY KOPLOVITZ (Chair)
PAUL E. TIERNEY, JR.
12
<PAGE> 15
PERFORMANCE GRAPH
The line graph below compares the cumulative total stockholder return on
the Company's Common Stock over a 5-year period with the return on (i) the
Standard & Poor's 500 Stock Index ("S&P 500 Index") and (ii) an index comprised
of the Company and the following 38 competitors comprising the Transformation
Share peer group (the "Peer Group"): AnnTaylor Stores Corporation; Authentic
Fitness Corporation; Benetton Group; Chic by H.I.S., Inc.; Cintas Corporation;
Cyrk, Inc.; Donna Karan International, Inc.; Donnkenny, Inc.; Farah
Incorporated; Fruit of the Loom, Inc.; The Gap, Inc.; Gucci Group N.V.; Guess,
Inc.; The Gymboree Corporation; Haggar Corp; Hartmarx Corporation; Jones Apparel
Group, Inc.; Kellwood Company; The Limited, Inc.; Nautica Enterprises, Inc.; The
North Face, Inc.; Norton McNaughton, Inc.; Oshkosh B'Gosh, Inc.; Oxford
Industries, Inc.; Philips Van-Heusen Corporation; Polo Ralph Lauren Corporation;
Quiksilver, Inc.; Russell Corporation; Salant Corporation; Starter Corporation;
St. John Knits, Inc.; The Talbots, Inc.; Tarrant Apparel Group; Tommy Hilfiger
Corporation; Tultex Corporation; Unitog Company; VF Corporation; and The Warnaco
Group, Inc.
In accordance with SEC disclosure rules, the measurements are indexed to a
value of $100 at December 25, 1993 (the last trading day before the beginning of
the Company's 1994 fiscal year) and assume that all dividends were reinvested.
[CLAIBORNE, INC. PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
LIZ CLAIBORNE INC S&P 500 INDEX PEER GROUP
----------------- ------------- ----------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 76.66 101.32 95.51
'1995' 126.77 139.40 107.22
'1996' 180.30 171.40 137.64
'1997' 197.13 228.59 166.44
'1998' 150.58 293.91 234.65
</TABLE>
13
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning any person
who, to the knowledge of the Company, beneficially owns, as of March 15, 1999,
more than 5% of the outstanding shares of the Company's Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT AND NATURE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
------------------------------------ -------------------- -------------
<S> <C> <C>
FMR Corp.................................................... 9,438,826(1) 14.75%
Edward C. Johnson, 3rd
Abigail P. Johnson
Fidelity Management & Research Company
Fidelity Advisor Growth Opportunities Fund
82 Devonshire Street
Boston, MA 02109
Amvescap PLC................................................ 4,778,176(2) 7.47%
11 Devonshire Square
London EC2M 4YR
England
Manning & Napier Advisors, Inc.............................. 3,968,958(3) 6.20%
1100 Chase Square
Rochester NY 14604
Morgan Stanley Dean Witter & Co............................. 3,513,677(4) 5.49%
1585 Broadway
New York, NY 10036
</TABLE>
- ---------------
(1) Based upon information as of December 31, 1998, contained in an Amendment to
Schedule 13G, dated February 11, 1999, filed with the SEC by FMR Corp.
("FMR"), Edward C. Johnson 3rd, Abigail P. Johnson, and Fidelity Management
& Research Company ("Fidelity") and Fidelity Advisor Growth Opportunities
Fund (the "Fund"). According to the Schedule 13G, the shares of Common Stock
listed include (i) 9,220,998 shares beneficially owned by Fidelity, a wholly
owned subsidiary of FMR and a registered investment advisor, as a result of
acting as investment advisor to several registered investment companies
(including the Fund, which owns 4,375,400 shares) and (ii) 217,828 shares
beneficially owned by Fidelity Management Trust Company, a wholly owned
subsidiary of FMR ("FMT"), as a result of FMT serving as investment manager
for certain institutional accounts. According to the Schedule 13G, Mr.
Johnson and FMR each has sole power to dispose of the shares beneficially
owned by Fidelity, and neither FMR nor Mr. Johnson has the sole power to
vote or direct the voting of the shares beneficially owned by Fidelity,
which power resides with the funds' Board of Trustees. Fidelity carries out
the voting of the shares under written guidelines established by the funds'
Board of Trustees. Mr. Johnson and FMR, through its control of FMT, each has
sole dispositive power over the shares beneficially owned by FMT, and sole
power to vote or to direct the voting of 172,128 of such shares and no power
to vote or to direct the voting of 45,700 of such shares.
(2) Based upon information as of December 31, 1998, contained in an Amendment to
Schedule 13G dated February 8, 1999, filed with the SEC by Amvescap PLC
(formerly Invesco PLC), a parent holding company ("Amvescap") and certain of
its subsidiaries. According to the amended Schedule 13G, Amvescap, a company
organized under the laws of England, has shared voting and dispositive power
with respect to the shares which are held on behalf of persons (none of whom
holds in excess of 5% of the Company's Common Stock) who have the right to
receive dividends from, or the proceeds from the sale of, such securities.
(3) Based upon information as of December 31, 1998, contained in a Schedule 13G
dated February 2, 1999, filed with the SEC by Manning & Napier Advisors,
Inc. ("Manning"), a registered investment advisor. According to the Schedule
13G, Manning has sole voting power over 3,653,258 shares and sole
dispositive power over 3,968,958 shares.
(4) Based upon information as of December 31, 1998, contained in a Schedule 13G
dated February 4, 1999, filed with the SEC by Morgan Stanley Dean Witter &
Co., a registered investment advisor ("Morgan"). According to the Schedule
13G, Morgan manages certain accounts on a discretionary basis and such
accounts are known to have the right to receive or the power to direct the
receipt of dividends from the proceeds from the sale of any shares. Morgan
indicated that it has shared voting power over 2,971,377 shares and shared
dispositive power over 3,513,677 shares and that no account holds more than
5% of the Common Stock.
14
<PAGE> 17
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 15, 1999, the number of shares
of Common Stock (the Company's only voting security) beneficially owned by each
Director, each of the Named Executive Officers, and by all executive officers
and Directors of the Company as a group. These shares represent in the aggregate
less than one percent of the outstanding shares of Common Stock as of such date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)
------------------------ -----------------------
<S> <C>
Paul R. Charron(2).......................................... 285,991
Bernard W. Aronson(3)(5).................................... 1,100
Roger N. Farah(5)........................................... 751
Ann M. Fudge(4)............................................. 4,045
J. James Gordon(4)(5)....................................... 4,350
George L. Jones............................................. 461
Kenneth P. Kopelman(4)...................................... 2,425
Kay Koplovitz(4)(5)......................................... 4,080
Paul E. Tierney, Jr.(4)(5).................................. 17,811
Denise V. Seegal(6)......................................... 60,999
Samuel M. Miller(7)......................................... 80,667
John R. Thompson(8)......................................... 34,437
Robert J. Zane(9)........................................... 32,657
All executive officers and Directors as a group (14
persons)(10).............................................. 515,855
</TABLE>
- ---------------
(1) Except as otherwise indicated below, the persons listed have advised the
Company that they have sole voting power and sole investment power with
respect to the securities indicated as owned by them.
(2) Includes (a) 19,100 shares held in a grantor annuity trust over which Mr.
Charron's wife serves as sole trustee, (b) 113,332 shares issuable upon the
exercise of currently exercisable stock options ("Exercisable Options")
under the Company's stock option plans, and (c) 72,000 restricted
Transformation Shares.
(3) Includes 250 shares issuable upon the exercise of Exercisable Options under
the Outside Director Plan.
(4) Includes 1,250 shares issuable upon the exercise of Exercisable Options
under the Outside Director Plan.
(5) Includes shares awarded under the Outside Director Plan, receipt of which
has been deferred under such Plan as follows: Mr. Aronson: 850 shares; Mr.
Farah: 751 shares; Mr. Gordon: 1,012 shares; Ms. Koplovitz: 1,201 shares;
and Mr. Tierney: 1,201 shares.
(6) Includes 21,225 shares issuable upon the exercise of Exercisable Options
and 29,500 restricted Transformation Shares.
(7) Includes 75,708 shares issuable upon the exercise of Exercisable Options
(50,000 of which bear an exercise price of $58.50) and 4,513 restricted
Transformation Shares.
(8) Includes 14,575 shares issuable upon the exercise of Exercisable Options
and 12,500 restricted Transformation Shares.
(9) Includes 13,324 shares issuable upon the exercise of Exercisable Options
and 12,500 restricted Transformation Shares.
(10) Includes 195,888 shares issuable upon the exercise of Exercisable Options,
160,500 restricted shares issued under the 1992 Plan, 414 shares held under
the Company's Savings Plan and other shares indicated as included in the
foregoing footnotes.
15
<PAGE> 18
PROPOSAL 2 -- APPROVAL OF THE AMENDED AND RESTATED LIZ CLAIBORNE
SEC.162(m) CASH BONUS PLAN
BACKGROUND
In 1994, the Board of Directors adopted and the Company's stockholders
approved the Liz Claiborne sec.162(m) Cash Bonus Plan (the "1994 Plan"), so as
to qualify bonuses paid under the 1994 Plan as "performance-based" for purposes
of sec.162(m) of the Internal Revenue Code (the "Code"). This enables the
Company to deduct compensation paid thereunder to Plan participants in excess of
$1 million in any year. Under sec.162(m), the material terms of a plan such as
the 1994 Plan must be submitted to stockholders for approval every five years,
as the Compensation Committee of the Board (the "Committee") has discretion
thereunder to fix performance goals annually. Accordingly, on March 3, 1999, the
Board of Directors adopted, subject to and effective upon stockholder approval,
the Amended and Restated Liz Claiborne sec.162(m) Cash Bonus Plan (the "Amended
and Restated sec.162(m) Plan"). The purpose of the Amended and Restated
sec.162(m) Plan is to provide annual incentives to certain senior executive
officers in a manner designed to reinforce the Company's performance goals; to
strengthen the Company's "pay for performance" ethic by linking a significant
portion of participants' compensation to the achievement of such goals; and to
continue to attract, motivate and retain high performing executives on a
competitive basis, while seeking to preserve for the benefit of the Company the
associated federal income tax deduction. There will be presented at the Annual
Meeting a proposal to approve the adoption of the Amended and Restated
sec.162(m) Plan, which will have effect commencing with bonuses payable in
respect of the Company's 2000 fiscal year; the 1994 Plan already in place
remains in force with respect to bonuses which may be paid in respect of the
current fiscal year (which will end on January 1, 2000). The major difference
between the Amended and Restated sec.162(m) Plan and the 1994 Plan it will
replace is an increase in the maximum bonus payable to any individual in respect
of a particular fiscal year from $1.5 to $2.0 million; other amendments deal
with the group of financial measures from which the Committee can select in
setting annual performance goals, and the administration of the Plan. The
following description of the Amended and Restated sec.162(m) Plan is qualified
in its entirety by reference to the full text of such Plan, which is set forth
in the attached Exhibit A.
MATERIAL TERMS OF THE AMENDED AND RESTATED SEC.162(m) PLAN
Eligible Executives. For each fiscal year commencing on or after the date
of the upcoming Annual Meeting, the Amended and Restated sec.162(m) Plan will
cover all employees (i) having a base salary in excess of $500,000, or whose
compensation is reasonably expected by the Committee to exceed the $1 million
threshold, and (ii) who are executive officers of the Company at the start of
such year or are hired or promoted into that status during such year. The
Committee reserves the right to establish alternative incentive compensation
arrangements for otherwise eligible executives if it determines, in its
discretion, that it would be in the best interests of the Company and its
stockholders to do so, even if the result is a loss of deductibility for certain
compensation payments. For fiscal 1999, three of the Company's executive
officers are participants in the 1994 Plan; these executives are currently
expected to be the sole executives eligible to participate in the Amended and
Restated sec.162(m) Plan.
Business Criteria Upon Which Performance Goals will be Based. Specific
performance goals for participating executives will be selected from among the
business criteria described below. These goals will be established for each
participant by the Committee prior to the 91st day of each fiscal year.
Under the Amended and Restated sec.162(m) Plan, the Committee will set one
or more objective performance goals for each participant each year using one or
more earnings-based measures (which may be based on net income, operating
income, cash flow, residual income, or any combination thereof), and/or, if the
Committee so determines, one or more sales-based measures. The goals set by the
Committee may be expressed on an absolute and/or relative basis, and may include
comparisons with the current or past performance of the Company (including one
or more of its divisions), and/or other companies. In addition, earnings-based
goals may also be expressed as comparisons to capital, stockholders' equity
and/or shares outstanding (e.g., return on capital, return on equity or earnings
per share). While the degree of achievement of the objective goals will
determine the maximum bonus potentially payable to each participant pursuant to
16
<PAGE> 19
the goal formula(s) (subject to the maximum level per participant described
below), the Committee will have absolute discretion to reduce the actual payment
below that level to the extent that it considers appropriate. The Committee will
not have discretion to increase bonus amounts over the level determined by
application of the performance goal formula(s) and will be required to certify
that the performance goals underlying the bonus payments have been satisfied.
For these purposes, the measures used in performance goals set under the
Amended and Restated sec.162(m) Plan shall be determined in a manner consistent
with generally accepted accounting principles ("GAAP") and in a manner
consistent with the methods of reporting used in the Company's Form 10-K and
10-Q reports, without regard to special, unusual or non-recurring items or
events, items related to the disposal or acquisition of a business, or to
changes in accounting principles or law, unless otherwise determined by the
Committee. To the extent that any objective performance goals are expressed
using any earnings or sales-based measures that require deviations from GAAP,
such deviations are at the discretion of the Committee.
Maximum Bonus Opportunity. The bonus opportunity for each participant
under the Amended and Restated sec.162(m) Plan each year will be related by a
specific formula to his or her base salary at the start of such year, provided
that the maximum bonus paid under the Plan to any individual in respect of any
fiscal year shall not exceed $2.0 million. As a point of reference, the highest
bonus that the Company has ever paid to an individual executive in any year was
$1,319,000, in 1995.
Administration. The Amended and Restated sec.162(m) Plan will be
administered by the Committee, which at all times shall be composed solely of at
least two directors who are "outside directors" within the meaning of
sec.162(m). All determinations of the Committee with respect to the Amended and
Restated sec.162(m) Plan are binding. The expenses of administering the Amended
and Restated sec.162(m) Plan are borne by the Company.
Protection of Deduction. The Amended and Restated sec.162(m) Plan provides
that the Compensation Committee may delay the payment of any bonus if and to the
extent that it determines that the Company might not be permitted to receive a
deduction in respect of such performance bonus as a result of the deduction
limit under sec.162(m). The amount so delayed generally will be credited with
interest, as if it were invested in any investment vehicle or vehicles selected
by the Committee from the date the distribution otherwise would have been made
until the last day of the month immediately preceding the month in which such
amount is paid to the participant. Any amount so delayed will be paid to the
participant if and to the extent that the Compensation Committee determines that
the Company's deduction in respect of such amount is not limited by sec.162(m)
and, in any case, within 90 days after the participant no longer is a "covered
employee" within the meaning of sec.162(m).
Power to Amend. The Board of Directors may at any time terminate or
suspend the Amended and Restated sec.162(m) Plan or revise it in any respect;
provided that no amendment shall be made which would cause bonuses payable under
the Plan to fail to qualify for the exemption from the limitations of sec.162(m)
provided in sec.162(m)(4)(C) of the Code.
NEW PLAN BENEFITS. As the Committee sets performance goals, targets and
related maximum bonus opportunities annually, amounts payable under the Amended
and Restated sec.162(m) Plan are not determinable. For information regarding
awards made in respect of fiscal 1998 under the 1994 Plan, see "Executive
Compensation -- Summary Compensation Table" and the Compensation Committee
Report.
VOTING ON THE PROPOSAL
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy and voting thereon is required for approval
of the Amended and Restated sec.162(m) Plan. Under applicable regulations, if
the Amended and Restated sec.162(m) Plan is approved, it may remain in effect
without further stockholder approval until the annual meeting of stockholders in
2005, unless materially amended prior to such meeting. In the event stockholders
do not approve this proposal, awards will not be granted or paid out under the
Amended and Restated sec.162(m) Plan to the extent required under Treasury
Regulation 1.162-27(e)(4) to meet the stockholder approval requirements of that
Regulation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDED AND
RESTATED SEC.162(M) PLAN.
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<PAGE> 20
PROPOSAL 3 -- APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors, based on the recommendation of the Audit Committee,
has retained Arthur Andersen LLP, the Company's independent public accountants
for the fiscal year ended January 2, 1999, as the Company's independent public
accountants for the fiscal year ending January 1, 2000.
The Company expects that representatives of Arthur Andersen LLP will be
present at the Annual Meeting, with the opportunity to make a statement if they
desire to do so, and to be available to respond to appropriate questions.
VOTING ON THE PROPOSAL
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy at the Annual Meeting and voting thereon is
required for ratification of Arthur Andersen LLP as the Company's independent
public accountants for the fiscal year ending January 1, 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF SUCH
APPOINTMENT.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2000 annual meeting
of stockholders must be received by the Company, addressed to the attention of
the Company's Secretary at its principal executive offices at 1441 Broadway, New
York, New York 10018, no later than December 4, 1999, in order to be included in
the Company's proxy statement relating to that meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers, and persons owning more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of such equity securities with the Securities
and Exchange Commission and the New York Stock Exchange. To the Company's
knowledge, based solely on the information furnished to the Company and written
representations by such persons, all filing requirements under Section 16(a)
have been complied with.
OTHER INFORMATION
The Board of Directors is aware of no other matters that are to be
presented to stockholders for formal action at the Annual Meeting. If, however,
any other matters properly come before the Annual Meeting or any adjournments or
postponements thereof, it is the intention of the persons named in the enclosed
form of proxy to vote such proxies in accordance with their judgment on such
matters.
18
<PAGE> 21
MANNER AND EXPENSE OF SOLICITATION
The cost of the solicitation of proxies in the accompanying form will be
borne by the Company. In addition to solicitations by mail, the Company's
officers, directors and employees may, without additional compensation,
personally solicit proxies by telephone, telegraph or similar means. The Company
has engaged Innisfree M&A Incorporated, a proxy solicitation firm, to assist in
soliciting proxies for a fee not to exceed $7,500, plus reimbursement of
reasonable out-of-pocket expenses. The Company will, if requested, reimburse
banks, brokers and other custodians, nominees and certain fiduciaries for their
reasonable expenses incurred in mailing proxy material to their principals.
Independent inspectors of election will be appointed to inspect all stockholder
proxies and ballots and to tabulate quorum and voting information.
By Order of the Board of Directors
ROBERTA SCHUHALTER KARP
Vice President - Corporate
Affairs, General Counsel and Secretary
New York, New York
April 2, 1999
19
<PAGE> 22
EXHIBIT A
AMENDED AND RESTATED LIZ CLAIBORNE SEC.162(M) CASH BONUS PLAN
1. Definitions.
--------------
The following terms have the meanings indicated unless a different meaning
is clearly required by the context:
1.1 "Board of Directors" means the Board of Directors of the Company.
1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.3 "Committee" means the Compensation Committee of the Board of Directors
or a subcommittee thereof. The Committee at all times shall be composed of at
least two directors of Liz Claiborne, Inc., each of whom shall be "outside
directors" within the meaning of sec.162(m) of the Code.
1.4 "Company" means Liz Claiborne, Inc. and its consolidated subsidiaries
and affiliates.
1.5 "Executive Officer" has the meaning set forth in Rule 3b-7 promulgated
under the Securities Exchange Act of 1934, as amended.
1.6 "Participant" means an individual who participates in the Plan pursuant
to Section 3.1.
2. Purpose.
-----------
The purpose of the Plan is to provide annual incentives to certain senior
executive officers in a manner designed to reinforce the Company's performance
goals; to strengthen the Company's "pay for performance" ethic by linking a
significant portion of participants' compensation to the achievement of such
goals; and to continue to attract, motivate and retain high performing
executives on a competitive basis, while seeking to preserve for the benefit, to
the extent practicable, a tax deduction by the Company for payments of incentive
compensation to such executives through payment of qualified "performance-based"
compensation within the meaning of sec.162(m)(4)(C) of the Code.
3. Participation.
----------------
3.1 An individual shall be a Participant in the Plan for a fiscal year of
the Company if he or she (a) is an Executive Officer of Liz Claiborne, Inc. on
the first day of such year or becomes an Executive Officer of Liz Claiborne,
Inc. during such year by virtue of being hired or promoted and (b) has a base
salary in excess of $500,000 per year or is reasonably expected by the Committee
to have compensation for such year in excess of $1.0 million; provided, however,
that if the Committee determines, in its discretion, prior to the ninety-first
day (91st) day of such fiscal year, that it would be in the best interests of
the Company and its stockholders for one or more otherwise eligible Executive
Officers not to be a participant for such year, such person shall not be a
Participant for such year and the Committee may in its discretion establish
alternative incentive compensation arrangements for such person; provided,
however, no individual who is so excluded as a Participant for a fiscal year
shall have any entitlement to participate in any such alternative incentive
compensation arrangement.
3.2 An individual who is a Participant in the Plan for a fiscal year shall
not participate for such fiscal year in the Company's regular annual bonus
program.
4. Performance Goals.
-----------------------
4.1 Prior to the ninety-first (91st) day of each fiscal year of the
Company, the Committee shall set one or more objective performance goals for
each Participant for such year. Such goals shall be expressed in terms of (a)
one or more corporate or divisional earnings-based measures (which may be based
on the following: net income, operating income, cash flow, residual income, or
any combination thereof) and/or (b) one or more
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<PAGE> 23
corporate or divisional sales-based measures. Each such goal may be expressed on
an absolute and/or relative basis, may employ comparisons with past performance
of the Company (including one or more divisions) and/or the current or past
performance of other companies, and in the case of earnings-based measures, may
employ comparisons to capital, stockholders' equity and shares outstanding.
4.2 Except as otherwise provided herein, the measures used in performance
goals set under the Plan shall be determined in accordance with generally
accepted accounting principles ("GAAP") and in a manner consistent with the
methods used in the Company's regular reports on Forms 10-K and 10-Q, without
regard to any of the following unless otherwise determined by the Committee
consistent with the requirements of sec.162(m)(4)(C) and the regulations
thereunder:
(a) all items of gain, loss or expense for the fiscal year that are
related to special, unusual or non-recurring items, events or circumstances
affecting the Company or the financial statements of the Company;
(b) all items of gain, loss or expense for the fiscal year that are
related to (i) the disposal of a business or discontinued operations or
(ii) the operations of any business acquired by Company during the fiscal
year; and
(c) all items of gain, loss or expense for the fiscal year that are
related to changes in accounting principles or to changes in applicable law
or regulations.
4.3 To the extent any objective performance goals are expressed using any
earnings or sales-based measures that require deviations from GAAP, such
deviations shall be at the discretion of the Committee.
5. Bonus Awards.
------------------
5.1 At the time that annual performance goals are set for Participants, the
Committee shall establish a maximum award opportunity for each Participant for
the year that is related to the Participant's base salary at the start of the
year by a formula that takes account of the degree of achievement of the goals
set for the Participant; provided, however, that the Committee shall have
absolute discretion to reduce the actual bonus payment that would otherwise be
payable to any Participant on the basis of achievement of performance goals.
5.2 The maximum award paid to a Participant in respect of a particular
fiscal year shall in no event exceed $2.0 million.
5.3 Bonuses determined under the Plan shall be paid to Participants in cash
at such time as bonuses are generally paid to other Executive Officers;
provided, however, that no such payment shall be made until the Committee has
certified (in the manner prescribed under applicable regulations under
sec.162(m) of the Code) that the performance goals and any other material terms
related to the award were in fact satisfied; and provided further that the
timing of any such payment may be deferred pursuant to an agreement between the
Company and a Participant or under Section 7.6 hereof.
5.4 In the event of the death of a Participant prior to any payment
otherwise required pursuant to Section 5.3, such payment shall be made to the
representative of the Participant's estate.
5.5 In the event of the death, disability, retirement or other termination
of employment of a Participant during a fiscal year, the Committee shall, in its
discretion, have the power to award to such Participant (or the representative
of the Participant's estate) an equitably prorated portion of the bonus which
otherwise would have been earned by such Participant.
5.6 The right of a Participant or of any other person to any payment under
the Plan shall not be assigned, transferred, pledged or encumbered in any manner
and any attempted assignment, transfer, pledge or encumbrance shall be null and
void and of no force or effect.
A-2
<PAGE> 24
6. Administrative Provisions.
- ---------------------------
6.1 The Plan shall be administered by the Committee. The Committee shall
have full, exclusive and final authority in all determinations and decisions
affecting the Plan and Participants, including sole authority to interpret and
construe any provision of the Plan, to adopt such rules and regulations for
administering the Plan as it may deem necessary or appropriate in the
circumstances, and to make any other determination it deems necessary or
appropriate for the administration of the Plan. Decisions of the Committee shall
be final and binding on all parties. All expenses of the Plan shall be borne by
the Company.
6.2 No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company or its affiliates to whom any duty or power relating to the
administration or interpretation of the Plan has been delegated against any cost
or expense (including counsel fees, which fees shall be paid as incurred) or
liability (including any sum paid in settlement of a claim with the approval of
the Committee) arising out of or in connection with any action, omission or
determination relating to the Plan, unless, in each case, such action, omission
or determination was taken or made by such member, director or employee in bad
faith and without reasonable belief that it was in the best interests of the
Company.
7. Miscellaneous.
------------------
7.1 The Plan was initially adopted by the Board of Directors on March 9,
1994, subject to stockholder approval (which was obtained on May 12, 1994), and
took effect beginning with the fiscal year of the Company starting January 1,
1995. The Plan was amended and restated as of March 3, 1999, and, pursuant to
the requirements necessary for awards under the Plan to constitute qualified
performance-based compensation under sec.162(m) of the Code, the Plan, as so
amended and restated, is being resubmitted for stockholder approval in 1999,
with effect for payments otherwise payable in respect of fiscal years of the
Company after the Company's 1999 fiscal year. No amount will be awarded
hereunder in respect of any fiscal year after the 1999 fiscal year unless the
Plan, as amended and restated, is approved by the Company's stockholders at
their 1999 annual meeting. No bonus will be payable hereunder in respect of any
fiscal year beginning after December 30, 2004.
7.2 The Board of Directors may at any time amend the Plan in any fashion or
terminate or suspend the Plan; provided that no amendment shall be made which
would cause bonuses payable under the Plan to fail to qualify for the exemption
from the limitations of sec.162(m) of the Code provided in sec.162(m)(4)(C) of
the Code. Upon any such termination, all rights of a Participant with respect to
any fiscal year that has not ended on or prior to the effective date of such
termination shall become null and void.
7.3 The Plan shall be governed by and construed in accordance with the
internal laws of the State of New York applicable to contracts made, and to be
wholly performed, within such State, without regard to principles of choice of
laws.
7.4 All amounts required to be paid under the Plan shall be subject to any
required Federal, state, local and other applicable withholdings or deductions.
7.5 Nothing contained in the Plan shall confer upon any Participant or any
other person any right with respect to the continuation of employment by the
Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation payable to
the Participant from the rate in effect at the commencement of a fiscal year or
to otherwise modify the terms of such Participant's employment. No person shall
have any claim or right to participate in or receive any award under the Plan
for any particular fiscal year.
7.6 Notwithstanding any other provision hereunder, if and to the extent
that the Committee determines the Company's Federal tax deduction in respect of
an award hereunder may be limited as a result of sec.162(m) of the Code, the
Committee may delay such payment as provided below. In the event the Committee
A-3
<PAGE> 25
determines to delay the payment of a bonus or any portion thereof hereunder, the
Committee shall credit the amount of the award so delayed to a book account. The
amount so credited to the book account shall be adjusted to reflect gains and
losses that would have resulted from the investment of such amount in any
investment vehicle or vehicles selected by the Committee. Part or all of the
amount credited to the Participant's account hereunder shall be paid to the
Participant at such time or times as shall be determined by the Committee, if
and to the extent the Committee determines that the Company's deduction for any
such payment will not be reduced by sec.162(m) of the Code. Notwithstanding the
foregoing, the entire balance credited to the Participant's book account shall
be paid to the Participant within 90 days after the Participant ceases to be a
"covered employee" within the meaning of sec.162(m) of the Code. The Participant
shall have no rights in respect of such book account and the amount credited
thereto shall not be transferrable by the Participant other than by will or laws
of descent and distribution; any book account created hereunder shall represent
only an unfunded unsecured promise by the Company to pay the amount credited
thereto to the Participant in the future.
A-4
<PAGE> 26
[LIZ CLAIBORNE, INC. LOGO]
<PAGE> 27
LIZ CLAIBORNE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 1999
The undersigned hereby appoints PAUL R. CHARRON and DENISE V SEEGAL,
and each of them, as proxies, with full power of substitution,
P to vote all shares of Common Stock the undersigned is entitled to vote
at the Annual Meeting of Stockholders of LIZ CLAIBORNE, INC., to be
R held at the offices of Liz Claiborne, Inc. at One Claiborne Avenue,
North Bergen, New Jersey, on Thursday, May 20, 1999 at 10:00 a.m.,
O prevailing local time, and at any adjournments or postponements
thereof, as set forth on the reverse side hereof.
X
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF LIZ
Y CLAIBORNE, INC. AND WHEN PROPERLY EXECUTED AND RETURNED WILL BE VOTED
WITH RESPECT TO THE ELECTION OF DIRECTORS, THE APPROVAL OF THE AMENDED
AND RESTATED LIZ CLAIBORNE SECTION 162(m) CASH BONUS PLAN, THE
RATIFICATION OF THE APPOINTMENT OF THE COMPANY'S ACCOUNTANTS, AND IN
ACCORDANCE WITH THE DISCRETION OF THE PROXIES UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF. TO FOLLOW THE BOARD OF DIRECTORS'
RECOMMENDATIONS, SIMPLY SIGN ON THE REVERSE SIDE; NO BOX NEED BE
CHECKED.
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING.
(Please date and sign on the reverse side)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
ANNUAL MEETING OF STOCKHOLDERS
LIZ CLAIBORNE
MAY 20, 1999
10:00 A.M.
OFFICES OF THE COMPANY
ONE CLAIBORNE AVENUE
NORTH BERGEN, NEW JERSEY
(201) 295-6000
FOR DIRECTIONS, CALL (201) 295-6222
WE INVITE YOU TO JOIN US.
YOUR VOTE IS IMPORTANT
======================
PLEASE COMPLETE, DATE AND SIGN YOUR PROXY CARD AND
PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 28
6727 PROXY, 2
IR
LIZ CLAIBORNE, INC.-- PROXY CARD
- --------------------------------------------------------------------------------
/X/ PLEASE MARK YOUR 3693
VOTES AS IN THIS
EXAMPLE.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR the nominees named herein and FOR Proposals 2 and 3.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all nominees
and FOR Proposals 2 and 3.
- --------------------------------------------------------------------------------
1. Election FOR WITHHELD
of Directors. / / / / NOMINEES TERM EXPIRING
Paul R. Charron 2002
J. James Gordon 2002
Kay Koplovitz 2002
FOR, except vote withheld from the following nominee(s):
- ---------------------------------------------------------
2. Approval of the Amended and Restated FOR AGAINST ABSTAIN
Liz Claiborne Section 162(m) Cash / / / / / /
Bonus Plan
3. Ratification of Arthur Andersen / / / / / /
LLP as independent public
accountants.
4. In accordance with their discretion upon
such other matters as may properly come
before the meeting and any adjournments
or postponements
thereof.
- --------------------------------------------------------------------------------
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. The undersigned acknowledges receipt of the accompanying
Notice of Meeting and Proxy Statement for the 1999 Annual Meeting.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
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