<PAGE> 1
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 [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
LIZ CLAIBORNE,INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(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 11, 2000, at 10:00
a.m., local time, for the following purposes:
1. To elect three directors to serve until the 2003 annual meeting of
stockholders and until their respective successors are duly elected and
qualified;
2. To approve the Liz Claiborne, Inc. 2000 Stock Incentive Plan;
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the 2000 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 24, 2000, 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
March 31, 2000
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 March 31, 2000, 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 11, 2000, 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 Liz Claiborne, Inc.
2000 Stock Incentive Plan (the "2000 Plan"); FOR the ratification of the
appointment of Arthur Andersen LLP as independent public accountants of the
Company for the 2000 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 24, 2000, are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on March 24, 2000, there were 55,236,230 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 other than the approval
of the 2000 Plan. 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
2003 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.
Bernard W. Aronson, Nancy J. Karch and Paul E. Tierney, Jr., 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 2003 annual meeting
and until their respective successors are duly elected and qualified. Ann M.
Fudge, a Director of the Company since 1993, will be leaving the Board at the
expiration of her current term at the Annual Meeting.
INFORMATION CONCERNING THE DIRECTORS
Background information with respect to the nominees for election and the
eight 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 2003:
BERNARD W. ARONSON -- Mr. Aronson, 53, was elected a Director of the
Company in 1998. Mr. Aronson has been Managing Partner of ACON Investments LLC,
a private investment vehicle, since 1996. He 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.
NANCY J. KARCH -- Ms. Karch, 52, was elected a Director of the Company in
January 2000. Ms. Karch was a senior partner of McKinsey & Co., an independent
consulting firm, from 1988 until her retirement in 2000. She had served in
various executive capacities at McKinsey since 1974. Ms. Karch is a member of
McKinsey's Advisory Council and a director of Nabisco Group Holdings Corp. and
Nabisco Holdings Corp., a food products company.
PAUL E. TIERNEY, JR. -- Mr. Tierney, 57, was elected a Director of the
Company in 1995. Mr. Tierney is the General Partner of Darwin Capital Partners,
an entity formed in 1999 to invest in Internet-related securities. He is also 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), APB
News.Com, The Argentine Investment Fund, and St. John's College.
DIRECTORS WHOSE TERMS EXPIRE IN 2002:
PAUL R. CHARRON -- Mr. Charron, 57, 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
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<PAGE> 5
VF Corporation, an apparel manufacturer, from 1988. Mr. Charron is also a
director of C-Bridge Internet Solutions, Inc., a provider of Internet-based
solutions.
J. JAMES GORDON -- Mr. Gordon, 69, 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, 54, was elected a Director of the Company
in 1992. Since January 2000, she has served as Chief Executive Officer of
Working Women Network, a cable television programming company, and since 1998,
she has been a principal of Koplovitz & Co., a media and communications
consulting company. Ms. Koplovitz was the founder of USA Networks, an
international cable television programming company, and served as its Chairman
and Chief Executive Officer from 1980 to 1998. Ms. Koplovitz is also a director
of Nabisco Holdings Corp., a food products company, and Oracle Corporation, a
computer software company.
CHRISTINE A. POON -- Ms. Poon, 47, was elected a Director of the Company in
January 2000. Since 1998, Ms. Poon has served as President, International
Medicines, for Bristol-Myers Squibb Company, a pharmaceutical company. She has
served in various executive capacities at Bristol-Myers since 1985, including
President, Medical Devices Group, from 1997 to 1998; President, Latin America
and Canada, Worldwide Pharmaceutical Group, in 1997; Senior Vice President,
Intercontinental Northern Region and Canada, from 1996 to 1997; Vice President,
Northern Region Latin America, Intercontinental, from 1995 to 1996; Vice
President OPS-Planning - Intercontinental and President, Canada, in 1995; and
President and General Manager - Canada, Pharmaceutical Group - Intercontinental,
from 1994 to 1995.
DIRECTORS WHOSE TERMS EXPIRE IN 2001:
ROGER N. FARAH -- Mr. Farah, 47, was elected a Director of the Company in
1998. Mr. Farah has served as Chairman of the Board of Venator Group, Inc.,
retail merchants, since 1994, and served as Chief Executive Officer of Venator
from 1994 to 1999. 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 a member of the Undergraduate Executive Board of The Wharton School of
Business of the University of Pennsylvania.
RAUL J. FERNANDEZ -- Mr. Fernandez, 33, was elected a Director of the
Company in March 2000. Mr. Fernandez is the founder of Proxicom, Inc., an
Internet development and e-business consulting company, and has served as its
Chairman of the Board and Chief Executive Officer since its inception in 1991,
and as its President from 1991 to 2000. Mr. Fernandez is also a director of the
Northern Virginia Technology Council, a trade organization, and a partner in
Lincoln Holdings LLC, which owns the Washington Capitals of the National Hockey
League and a significant interest in the Washington Wizards of the National
Basketball Association.
GEORGE L. JONES -- Mr. Jones, 49, was elected a Director of the Company in
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, 48, 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 15 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 six times during the 1999 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
3
<PAGE> 6
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, Raul J. Fernandez, Ann
M. Fudge (chair), J. James Gordon, George L. Jones, Nancy J. Karch, Kenneth P.
Kopelman, Kay Koplovitz and Christine A. Poon, held five meetings during the
1999 fiscal year.
Compensation Committee. This Committee determines the salaries and bonuses
for the Chief Executive Officer, President and Chief Financial Officer, 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, Nancy J. Karch, Kay Koplovitz (chair) and Paul E. Tierney, Jr.,
held three meetings during the 1999 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, J. James Gordon (chair), George L. Jones and Christine A. Poon,
held six meetings during the 1999 fiscal year. For a description of the
procedures under which stockholders may nominate persons for election as
directors, see "Stockholder Proposals and Nominations" below.
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, Raul J. Fernandez, Kenneth P. Kopelman and Paul E. Tierney,
Jr. (chair), held eight meetings during the 1999 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. In addition, the Company provides each Director with an annual $4,000
clothing allowance to be applied toward the purchase of Company products.
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 1999, the following awards of shares of Common Stock
were made under the Outside Director Plan: 475 shares on January 4, 1999 to each
of Mss. Fudge and Koplovitz and Messrs. Aronson, Farah, Gordon, Kopelman and
Tierney, and 461 shares on March 3, 1999 to Mr. Jones (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.
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<PAGE> 7
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; newly elected non-management
Directors receive such an award upon their election to the Board. 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 Plan) or upon death or
retirement from the Board after at least five years of service. During fiscal
1999, the following awards of options were made under the Outside Director Plan:
options covering 1,000 shares (at an exercise price of $31.5625) on January 4,
1999 to each of the Director Recipients other than Mr. Jones; options covering
1,000 shares (at an exercise price of $32.50) on March 3, 1999 to Mr. Jones.
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.
The Board has adopted a share ownership guideline, which sets out the
Board's expectation that each Director will over time accumulate a holding of
shares of Common Stock having a value equal to twice his or her annual retainer.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1999, the Company and certain of its contractors purchased,
in the ordinary course of their business for use in the manufacture of Company
products, fabric from certain European textile mills for which Gordon Textiles
International, Ltd, ("GTIL") acts as a sales agent in the United States. J.
James Gordon, a Director of the Company, is the sole shareholder of GTIL. Such
fabric purchases during fiscal 1999 aggregated approximately $4.0 million; GTIL
received commissions from its client mills, at customary industry rates, in
respect of such sales aggregating $207,226. The transactions between the Company
and the mills for which GTIL acts as agent were effected on an arms'-length
basis, and the Company believes that such transactions were effected on terms no
less favorable to the Company than those that would have been realized in
transactions with other mills.
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<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation for
services in all capacities for the 1999, 1998 and 1997 fiscal years of the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company as of January 1, 2000 (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................ 1999 $1,093,400 $1,050,000 $53,870(6) -- 185,000 --
Chairman of the Board and 1998 $1,064,300 $ 500,000 $73,839 $2,961,000(7) 85,000 --
Chief Executive Officer 1997 $1,052,800 $1,186,500 $77,146 -- 50,000 --
- ------------------------------------------------------------------------------------------------------------------------
Denise V. Seegal............... 1999 $ 724,800 $ 600,000 -- -- 50,000 --
President 1998 $ 700,200 $ 300,000 -- $1,213,188(7) 28,000 --
1997 $ 706,200 $ 625,000 -- -- 18,900 --
- ------------------------------------------------------------------------------------------------------------------------
Richard F. Zannino............. 1999 $ 493,800 $ 400,000 -- -- 42,000 --
Senior Vice 1998(8) $ 125,300 $ 50,000 -- $ 734,375(9) 87,000 --
President - Finance
and Administration and Chief 1997 -- -- -- -- -- --
Financial Officer
- ------------------------------------------------------------------------------------------------------------------------
John R. Thompson............... 1999 $ 332,900 $ 200,000 -- -- 20,000 --
Senior Vice President - 1998 $ 321,200 $ 50,000 -- $ 514,063(7) 12,500 --
Service, Systems and 1997 $ 312,100 $ 205,000 -- -- 8,300 --
Distribution
- ------------------------------------------------------------------------------------------------------------------------
Robert J. Zane................. 1999 $ 324,500 $ 200,000 -- -- 20,000 --
Senior Vice President - 1998 $ 313,100 $ 100,000 -- $ 514,063(7) 13,000 --
Manufacturing and Sourcing 1997 $ 313,300 $ 190,000 -- -- 8,300 --
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION(5)
- --------------------------- ---------------
<S> <C>
Paul R. Charron................ $640,881
Chairman of the Board and $657,683
Chief Executive Officer $618,437
- ----------------------------------------------------------------
Denise V. Seegal............... $ 52,795
President $ 48,861
$ 48,685
- --------------------------------------------------------------------------------
Richard F. Zannino............. $ 8,413
Senior Vice --
President - Finance
and Administration and Chief --
Financial Officer
- ------------------------------------------------------------------------------------------------
John R. Thompson............... $ 24,086
Senior Vice President - $ 23,173
Service, Systems and $ 28,427
Distribution
- ----------------------------------------------------------------------------------------------------------------
Robert J. Zane................. $ 27,993
Senior Vice President - $ 26,730
Manufacturing and Sourcing $ 32,594
- ------------------------------------------------------------------------------------------------------------------------
</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 1999 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. Amounts for Mr.
Charron include amounts deferred under the SERP and the UDCP (see
"Employment Arrangements -- Employment Agreement with Paul R. Charron"
below).
(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 1999, 1998, and 1997 includes options granted on January 25,
2000, January 4, 1999, and January 6, 1998, respectively, under the 1992
Plan. For Mr. Charron, (a) each of fiscal 1998 and 1997 includes options
subject to a special vesting condition and (b) fiscal 1999 includes 75,000
premium-priced options subject to an extended vesting schedule. See "Option
Grants Table for Fiscal 1999" below. For Mr. Zannino, fiscal 1998 includes
options granted on October 30, 1998, upon the commencement of his employment
with the Company, including premium-priced and extended vesting options. See
"Aggregated Option Exercises in Fiscal 1999 and Fiscal Year-End Option Value
Table" below.
(5) For fiscal 1999 includes (a) contributions under the Company's
Profit-Sharing Retirement Plan of $6,400 for each Named Executive Officer
other than Mr. Zannino and $3,333 for Mr. Zannino; (b) matching
contributions under the Company's Savings Plan of $4,000 for each Named
Executive Officer other than Mr. Zannino and $2,917 for Mr. Zannino; (c) 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 -- $21,790; Ms. Seegal: $5,685; Mr. Zannino -- $2,163; Mr.
Thompson -- $2,448; and Mr. Zane -- $6,891; (d) amounts accrued under an
unfunded Supplemental Executive Retirement Plan (the "SERP") with respect to
services rendered during fiscal 1999, as follows: Mr. Charron -- $60,668;
Ms. Seegal -- $36,710; Mr. Thompson -- $11,238; and Mr. Zane -- $10,702; and
(e) for Mr. Charron (i) $235,684 accrued as of January 3, 1999, 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 1, 2000, as calculated pursuant to the terms of the
UDCP, in an amount equal to $312,339 (see "Employment
Arrangements -- Employment Agreement with Paul R. Charron" below).
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<PAGE> 9
(6) Includes (a) $34,600 representing reimbursement of certain transportation
expenses; and (b) $13,370 representing reimbursement of certain tax
obligations.
(7) 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") described in the Compensation
Committee Report below: Mr. Charron -- 72,000 Shares; Ms. Seegal -- 29,500
Shares; Mr. Thompson -- 12,500 Shares; and Mr. Zane -- 12,500 Shares.
Transformation Shares are subject to restrictions on transfer and risk of
forfeiture until earned by continued service and 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 companies comprising an industry peer
group, 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 Transformation Shares are held in
escrow and deemed reinvested in phantom shares of Common Stock. On January
1, 2000, all such Transformation Shares remained restricted, with a value
(based on the closing price of the Common Stock on December 31, 1999) as
follows: Mr. Charron -- $2,709,000; Ms. Seegal -- $1,109,937; Mr.
Thompson -- $470,312; and Mr. Zane -- $470,312. No additional Transformation
Share grants are expected to be made unless the vesting of the prior grant
has been accelerated.
(8) Reflects a partial year, including any guaranteed bonus payments.
(9) Represents the value (based on the closing price of the Common Stock on
October 30, 1998, the date of grant) of 25,000 shares of restricted stock
issued under the 1992 Plan, 15,000 of which are Transformation Shares. The
remaining 10,000 restricted shares (the "Restricted Shares") are subject to
restrictions on transfer and risk of forfeiture until earned by continued
service and vest in equal installments on the last day of the Company's 1999
and 2000 fiscal years; prior to vesting, dividends are held in escrow and
deemed reinvested in phantom shares of Common Stock. On January 1, 2000,
5,000 of the Restricted Shares remained restricted, with a value of
$188,125, and all of the 15,000 Transformation Shares remained restricted
with a value of $564,375 (such values are based on the closing price of the
Common Stock on December 31, 1999).
OPTION GRANTS TABLE FOR FISCAL 1999
The following table sets forth additional information concerning stock
option grants made during fiscal 1999 to the Named Executive Officers. For
purposes of the table, grants made on January 25, 2000 and March 7, 2000 are
treated as having been made during fiscal 1999, and grants made on January 4,
1999 are treated as having been made during fiscal 1998; these grants are also
so reflected in the Summary Compensation Table. In addition, in accordance with
SEC disclosure rules, the hypothetical gains, or "option spreads," for each
option grant are shown based on compound annual rates of stock price
appreciation of 5% and 10% from the grant date to the expiration date. The
assumed rates of growth are prescribed by the SEC and are for illustration
purposes only; they are not intended to predict future stock prices, which will
depend upon market conditions and the Company's future performance and
prospects. All options were issued under the 1992 Plan. The Company has not
granted any stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTION TERM(2)
---------------------------------------------------------- ------------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL OPTIONS EXERCISE
OPTIONS GRANTED TO EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#) IN FISCAL 1999(3) ($/SHARE) DATE 5%($) 10%($)
---- ---------- -------------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Charron...... 110,000 5.78% $35.8125 1/25/10 $2,476,925 $6,278,525
25,000(4) 1.31% $46.0000 3/07/10 $ 540,000 $1,541,000
25,000(4) 1.31% $55.0000 3/07/10 $ 315,000 $1,316,000
25,000(4) 1.31% $65.0000 3/07/10 $ 65,000 $1,066,000
- ------------------------------------------------------------------------------------------------------------------
Denise V. Seegal..... 50,000 2.63% $35.8125 1/25/10 $1,125,575 $2,853,875
- ------------------------------------------------------------------------------------------------------------------
John R. Thompson..... 20,000 1.05% $35.8125 1/25/10 $ 450,350 $1,141,550
- ------------------------------------------------------------------------------------------------------------------
Robert J. Zane....... 20,000 1.05% $35.8125 1/25/10 $ 450,350 $1,141,550
- ------------------------------------------------------------------------------------------------------------------
Richard F. Zannino... 42,000 2.21% $35.8125 1/25/10 $ 945,735 $2,397,255
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
- ---------------
(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 in control. A "change in 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.
(2) Assumes that the stock price on the relevant grant date ($35.8125 on January
25, 2000 and $41.50 on March 7, 2000) has grown, as indicated, at (a) 5% per
annum over the term of the option to $58.33 and $67.60, respectively, or (b)
at 10% per annum over the term of the option to $92.89 and $107.64,
respectively.
(3) During fiscal 1999, the Company granted to 800 employees options to purchase
an aggregate of 1,901,550 shares. All grants were made at exercise prices
equal to the market price on the grant date other than the premium-priced
options granted to Mr. Charron referred to in footnote (4) below.
(4) These premium-priced options, issued pursuant to the 1992 Plan, become
exercisable on March 7, 2003 and expire on the tenth anniversary of the
grant date, subject to earlier vesting upon a change in control.
AGGREGATED OPTION EXERCISES IN FISCAL 1999
AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides information concerning all exercises of stock
options during fiscal 1999 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 1/1/00 AT 1/1/00(1)
SHARES ACQUIRED VALUE ------------------------------ ------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
- --------------------- --------------- -------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Charron...... -- -- 110,832 334,168 $1,221,336 $668,352
- -------------------------------------------------------------------------------------------------------------------
Denise V. Seegal..... -- -- 32,225 99,675 $ -0- $232,375
- -------------------------------------------------------------------------------------------------------------------
John R. Thompson..... -- -- 18,075 42,725 $ 180,875 $ 99,531
- -------------------------------------------------------------------------------------------------------------------
Robert J. Zane....... -- -- 14,262 42,038 $ 127,969 $102,063
- -------------------------------------------------------------------------------------------------------------------
Richard F. Zannino... -- -- 3,750 125,250 $ 30,938 $398,438
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Options are "in-the-money" as of January 1, 2000, to the extent that the
market price of the Common Stock (based on the closing price of the Common
Stock on December 31, 1999) exceeded the exercise price of such options.
(2) Includes grants made on January 25, 2000. For Mr. Charron, includes
premium-priced options with an extended vesting schedule granted on March 7,
2000. See "Option Grants Table for Fiscal 1999" above. For Mr. Zannino,
includes the following premium-priced and extended vesting options granted
on October 30, 1998, the commencement of his employment: options to purchase
10,000 shares of Common Stock at $29.375 (the closing price of the Common
Stock on the grant date), becoming exercisable on October 30, 2001; options
to purchase 15,000 shares at $35.250, becoming exercisable on October 30,
2002; and options to purchase 25,000 shares at $41.125, becoming exercisable
on October 30, 2003.
EMPLOYMENT ARRANGEMENTS
EMPLOYMENT AGREEMENT WITH PAUL R. CHARRON. The Company has an employment
agreement with Paul R. Charron, which expires on April 30, 2000, 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, plus bonus and the annual grant
of options covering at least 50,000 shares of Common Stock. 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.
8
<PAGE> 11
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 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 has an employment
agreement with Denise V. Seegal, the Company's President, which expires on
February 28, 2001, with automatic one year renewal terms. The agreement provides
for a minimum base salary of $730,000, plus bonus. 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 for twelve months, but in no
event less than $1 million.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (i) determines the salaries for the
Chairman/Chief Executive Officer ("CEO"), the President and the Chief Financial
Officer, (ii) administers the Amended and Restated Liz Claiborne sec.162(m) Cash
Bonus Plan approved by stockholders at the 1999 Annual Meeting (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. All Committee determinations
intended to comply with sec.162(m) of the Internal Revenue Code (the "Code") are
made by at least two Committee members who qualify as "outside directors" under
sec.162(m).
OVERVIEW. The Company adopted a new "pay for performance" executive
compensation program (the "Program") in 1995. In making its 1999 determinations,
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
9
<PAGE> 12
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 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).
1999 COMPENSATION
CASH COMPENSATION. Salary. Salary adjustments are typically made annually,
under the same increase guideline that applies to all salaried employees. The
guideline for 1999 was 3.5%; this level has been adopted for 2000 as well.
Incentive Cash Bonuses. sec.162(m) Plan. Messrs. Charron and Zaninno and
Ms. Seegal were the sole participants in the sec.162(m) Plan in 1999. As
required pursuant to 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 1999, the Committee established under the Plan two
objective earnings-based goals, relating to earnings per share and return on
invested capital. 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 1999 fiscal year
was capped at $2.0 million.
The Committee has designated Messrs. Charron and Zannino and Ms. Seegal as
the only participants in the Plan for fiscal 2000. 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.
Cash Incentive Bonus Plan. Under the cash incentive bonus plan, all other
salaried employees, including the two participating Named Executive Officers,
were eligible to receive a bonus for 1999 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 capital achievement as measured against
pre-established targets. Business unit performance against target during 1999
resulted in payouts under the divisional component of the bonus program ranging
from 0% to 200% of divisional target bonus amounts.
1999 Cash Bonus Awards. The 1999 bonus awards to Ms. Seegal and Mr.
Zannino (under the sec.162(m) Plan) and to the two 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. The Company is submitting for
stockholder approval at the Annual Meeting the Liz Claiborne, Inc. 2000 Stock
Incentive Plan (the "2000 Plan"); upon stockholder approval of the 2000 Plan, no
further grants will be made under the 1992 Plan. See "Proposal 2 -- Approval of
the Liz Claiborne, Inc. 2000 Stock Incentive Plan" below.
Transformation Shares. As discussed in previous Committee Reports, in 1997
the Committee adopted a 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. The Company made
the first award of Transformation Shares on January 6, 1998, covering 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. 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 generated by companies comprising
an industry peer group (the "Peer Group") made up of over 30 public company
competitors from within the apparel, retail and related fields (see "Performance
Graph" below). 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 who received
5,000 or more Transformation Shares 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 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 for the initial three-year performance period through
March 21, 2000 ranked it near the 60th percentile of the TSRs of the companies
comprising the Peer Group.
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. During 1999, the Committee, assisted by an
executive compensation firm, performed a review of Company compensation
programs, with an emphasis on long-term incentive compensation, especially stock
option grant levels. As a result of such review, which included consideration of
the option grant levels at the Peer Group companies, the Committee determined to
increase over historical grant levels the number of options granted to Company
employees in January 2000, and to propose that the 2000 Plan be approved by the
full Board. The Board has since approved the 2000 Plan and is submitting it to
stockholders for approval at the Annual Meeting. The Committee and the Board
believe that stockholder approval of the Plan is necessary to enable the Company
to continue to attract, retain, motivate and otherwise compete successfully for
individuals essential to the Company's long-term success. In January 2000,
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 1999" 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.
11
<PAGE> 14
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.
The 1999 corporate earnings per share and return on invested capital
targets set under the sec.162(m) Plan were exceeded. Moreover, the Committee
determined that Mr. Charron had fulfilled his individual goals (including goals
related to growth strategies, technology implementation, customer responsiveness
and management development) set under the Plan. Accordingly, the Committee
awarded Mr. Charron the maximum cash bonus permitted under the predetermined
sec.162(m) Plan formula, equal to $1.050 million. In light of his ongoing
outstanding leadership, and in order to provide him with continuing strong
future incentives, the Committee, after review and analysis of competitive
practices, awarded Mr. Charron options covering 110,000 shares of Common Stock
in January 2000 (concurrent with the annual grant to employees), together with a
special grant, in March 2000, of an additional 75,000 premium-priced options
subject to "cliff" vesting three years after grant. See "Option Grants Table for
Fiscal 1999" above.
Ms. Karch joined the Board in January 2000 and did not participate in the
Committee's deliberations with regard to 1999 awards.
ROGER N. FARAH
J. JAMES GORDON
NANCY J. KARCH
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 (which was acquired in 1999); Benetton Group; Chic by
H.I.S., Inc.; Cintas Corporation; Cyrk, Inc.; Donna Karan International, Inc.;
Donnkenny, Inc.; Farah Incorporated (which was acquired in July 1998); 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 (which was
liquidated in May 1999); St. John Knits, Inc. (which was acquired in July 1999);
The Talbots, Inc.; Tarrant Apparel Group; Tommy Hilfiger Corporation; Tultex
Corporation; Unitog Company (which was acquired in March 1999); VF Corporation;
and The Warnaco Group, Inc. Returns for companies in the Peer Group that have
been acquired or liquidated are reflected in the graph below through the end of
the year prior to the year of such acquisition or liquidation.
In accordance with SEC disclosure rules, the measurements are indexed to a
value of $100 at December 30, 1994 (the last trading day before the beginning of
the Company's 1995 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>
1994 100.00 100.00 100.00
1995 165.37 137.58 112.26
1996 235.18 169.17 144.12
1997 257.15 225.60 174.28
1998 196.41 290.08 245.70
1999 237.15 351.12 280.59
</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 24, 2000,
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>
Berkshire Hathaway, Inc..................................... 4,894,500(1) 8.86%
Warren E. Buffet
1440 Kiewit Plaza
Omaha, Nebraska 68131
FMR Corp.................................................... 4,231,238(2) 7.66%
Edward C. Johnson, 3rd
Abigail P. Johnson
Fidelity Management & Research Company
82 Devonshire Street
Boston, MA 02109
ESLPartners, L.P............................................ 3,774,800(3) 6.83%
ESL Limited
ESL Institutional Partners, L.P.
ESL Investors, LLC
One Lafayette Place
Greenwich, Connecticut 06830
Amvescap PLC................................................ 3,591,379(4) 6.50%
11 Devonshire Square
London EC2M 4YR
England
</TABLE>
- ---------------
(1) Based upon information as of December 31, 1999 contained in a Schedule 13G
dated February 14, 2000, filed with the Securities and Exchange Commission
(the "S.E.C.") by Berkshire Hathaway, Inc. ("Berkshire"), Warren E. Buffett,
OBH, Inc. and National Indemnity Company. According to the Schedule 13G, Mr.
Buffett may be deemed to control Berkshire Hathaway and each of Mr. Buffett,
Berkshire, OBH, Inc. and National Indemnity Company share the power to vote,
direct the vote and dispose of the shares.
(2) Based upon information as of March 10, 2000, contained in an Amendment to
Schedule 13G, dated March 10, 2000, filed with the S.E.C. by FMR Corp.
("FMR"), Edward C. Johnson 3rd, Abigail P. Johnson, and Fidelity Management
& Research Company ("Fidelity"). According to the Schedule 13G, the shares
of Common Stock listed include (i) 3,907,448 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, (ii) 180,680 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 and (iii) 143,110 shares beneficially owned by Fidelity
International Limited, a Bermuda joint stock company which acts as an
investment adviser ("FIL"). 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 53,280 of such shares and no power to
vote or to direct the voting of 127,400 of such shares. According to the
Schedule 13G, FIL operates as an entity independent of FMR and Fidelity. A
partnership controlled by Mr. Johnson and members of his family own 39.89%
of the voting rights of FIL. Mr. Johnson is the Chairman of FIL. According
to the Schedule 13G, investment decisions of FIL are made independently of
FMR, and FMR and FIL claim that they are not acting as a "group" for
purposes of Section 13(d) under the Securities Exchange Act of 1934, as
amended, and that the shares held by FIL were included in the Schedule 13G
on a voluntary basis. FIL has sole power to vote and dispose of the shares
of Common Stock beneficially owned by it.
(3) Based upon information as of February 28, 2000, contained in a Schedule 13G
dated February 28, 2000, filed with the S.E.C. by ESL Partners, L.P., a
Delaware limited partnership ("ESL"), ESL Limited, a Bermuda corporation
("Limited"), ESL Institutional Partners, L.P., a Delaware limited
partnership ("Institutional"),
14
<PAGE> 17
and ESL Investors, L.L.C., a Delaware limited liability company
("Investors"). The general partner of ESL is RBS Partners, L.P. (the
"General Partner"). The general partner of the General Partner of ESL is ESL
Investments, Inc., a Delaware corporation. ESL Investment Management, LLC, a
Delaware limited liability company, is the investment manager of Limited.
RBS Investment Management, LLC, a Delaware limited liability company, is the
general partner of Institutional. RBS Partners, L.P. is the manager of
Investors. ESL, Limited, Institutional, and Investors each may be deemed to
be the beneficial owner of the shares of Common Stock beneficially owned by
the other members of the group. According to the Schedule 13G, (i) ESL is
the record owner of 2,464,602 shares of Common Stock; (ii) Limited is the
record owner of 554,966 shares of Common Stock, (iii) Institutional was the
record owner of 51,801 shares of Common Stock; and (iv) Investors was the
record owner of 703,431 shares of Common Stock. Limited's address is
Hemisphere House, 9 Church Street, Hamilton, Bermuda.
(4) Based upon information as of December 31, 1999, contained in an Amendment to
Schedule 13G dated February 3, 2000, filed with the S.E.C. 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.
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<PAGE> 18
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 24, 2000, 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 Directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)
------------------------ -----------------------
<S> <C>
Paul R. Charron(2).......................................... 330,491
Bernard W. Aronson(3)(4).................................... 1,998
Roger N. Farah(4)(5)........................................ 1,649
Raul J. Fernandez(4)........................................ 326
Ann M. Fudge(6)............................................. 5,943
J. James Gordon(4)(6)....................................... 6,248
George L. Jones(7).......................................... 2,109
Nancy J. Karch(4)........................................... 412
Kenneth P. Kopelman(6)...................................... 4,323
Kay Koplovitz(4)(6)......................................... 5,978
Christine A. Poon........................................... 412
Paul E. Tierney, Jr.(4)(6).................................. 19,709
Denise V. Seegal(8)......................................... 91,224
John R. Thompson(9)......................................... 47,137
Robert J. Zane(10).......................................... 41,733
Richard F. Zannino(11)...................................... 31,724
All Directors and executive officers as a group (17
persons)(12).............................................. 634,363
</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. No officer or
director owns more than one percent of the outstanding shares of Common
Stock. No Director or executive officer beneficially owns more than 1% of
the shares of Common Stock outstanding. All Directors and executive
officers as a group own approximately 1.14% of the shares of Common Stock
outstanding as of March 24, 2000, assuming the exercise of all currently
exercisable stock options under the Company's stock option plans
("Exercisable Options") held by such Directors and executive officers.
(2) Includes (a) 28,718 shares held in a grantor annuity trust over which Mr.
Charron's wife serves as sole trustee, (b) 157,832 shares issuable upon the
exercise of Exercisable Options, and (c) 72,000 restricted Transformation
Shares.
(3) Includes 750 shares issuable upon the exercise of Exercisable Options under
the Outside Director Plan.
(4) Includes shares awarded under the Outside Director Plan, receipt of which
has been deferred under such Plan as follows: Mr. Aronson: 1,248 shares;
Mr. Farah: 1,149 shares; Mr. Fernandez: 326 shares; Mr. Gordon: 1,012
shares; Ms. Karch: 412 shares; Ms. Koplovitz: 1,599 shares; and Mr.
Tierney: 1,599 shares.
(5) Includes 500 shares issuable upon the exercise of Exercisable Options under
the Outside Directors Plan.
(6) Includes 2,750 shares issuable upon the exercise of Exercisable Options
under the Outside Director Plan.
(7) Includes 250 shares issuable upon the exercise of Exercisable Options under
the Outside Directors Plan.
(8) Includes 51,450 shares issuable upon the exercise of Exercisable Options
and 29,500 restricted Transformation Shares.
(9) Includes 27,275 shares issuable upon the exercise of Exercisable Options
and 12,500 restricted Transformation Shares.
(10) Includes 22,400 shares issuable upon the exercise of Exercisable Options
and 12,500 restricted Transformation Shares.
(11) Includes 9,250 shares issuable upon the exercise of Exercisable Options,
5,000 restricted shares and 15,000 restricted Transformation Shares.
(12) Includes 316,990 shares issuable upon the exercise of Exercisable Options,
155,500 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.
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<PAGE> 19
PROPOSAL 2 -- APPROVAL OF THE LIZ CLAIBORNE, INC.
2000 STOCK INCENTIVE PLAN
The Company is submitting the Liz Claiborne, Inc. 2000 Stock Incentive Plan
(the "2000 Plan") to its stockholders for approval at the Annual Meeting. The
2000 Plan is intended to continue the general purpose of the Liz Claiborne, Inc.
1992 Stock Incentive Plan, as amended (the "1992 Plan"), and no further grants
will be made under the 1992 Plan following stockholder approval of the 2000
Plan. Specifically, the purpose of the 2000 Plan is to enable the Company to
continue to provide certain key persons, on whose initiative and efforts the
successful conduct of the business of the Company depends, with incentives to
enter into and remain in the service of the Company (or a Company subsidiary or
joint venture), acquire a proprietary interest in the success of the Company,
maximize their performance, and thereby enhance the long-term performance of the
Company. The following discussion is qualified in its entirety by reference to
the full text of the 2000 Plan, a copy of which is attached hereto as Exhibit A.
GENERAL DESCRIPTION OF THE 2000 PLAN
Awards. The 2000 Plan authorizes the grants of non-qualified stock options
("NQOs"), incentive stock options ("ISOs"), stock appreciation rights ("SARs"),
shares of restricted stock, shares of unrestricted stock, performance shares,
and dividend equivalent rights ("DERs") (collectively, "Awards"). Under the 2000
Plan, the Company may deliver authorized but unissued shares of its Common
Stock, par value $1.00 per share ("Stock"), treasury shares of Stock, or shares
of Stock acquired by the Company for the purposes of the 2000 Plan.
Maximum Number of Shares. A maximum of 5,000,000 shares of Stock will be
available for grants pursuant to Awards under the 2000 Plan, provided that no
more than one million of those shares may be awarded pursuant to grants of
restricted stock. The following shares of Stock shall again become available for
Awards under the 2000 Plan: any shares that are subject to an Award under the
2000 Plan and that remain undelivered upon the cancellation or termination of
such Award for any reason; any forfeited shares of restricted stock, provided
that any dividends paid on such shares are also forfeited; and any shares
pursuant to an SAR or performance share award that is settled for cash. The
maximum number of shares of Stock with respect to which any individual may be
granted Awards during any one calendar year is 500,000 shares.
Committee; Authority. The Compensation Committee of the Board of
Directors, or such other committee or subcommittee of the Board of Directors as
the Board of Directors appoints or is formed by abstention or recusal of one or
more members of the Compensation Committee (the "Committee"), will administer
the 2000 Plan. The Committee is to consist of at least two individuals and each
Committee member must be both an "outside director" (within the meaning of
sec.162(m) of the Internal Revenue Code (the "Code") and a "non-employee
director" (as defined in Rule 16b-3 promulgated under the Securities Exchange
Act of 1934). The Committee will determine the key persons who will receive
Awards, the type of Awards granted, and the number of shares subject to each
Award. The Committee also will determine the prices, expiration dates and other
material features of Awards. No Award may be granted under the 2000 Plan after
March 9, 2010. The Committee has the authority to interpret and construe any
provision of the 2000 Plan and to adopt such rules and regulations for
administering the 2000 Plan as it deems necessary or appropriate. All decisions
and determinations of the Committee are final and binding on all parties. No
member of the Committee shall be liable for any action or determination made in
good faith with respect to the 2000 Plan or any Award.
Eligibility. Officers, directors, and executive, managerial, professional
or administrative employees of, and consultants to, the Company, its
subsidiaries and its joint ventures, as the Committee in its sole discretion
shall select, are eligible to receive Awards under the 2000 Plan. The number of
persons in any eligible class is indeterminable at this time.
Suspension, Discontinuance, Amendment. The Board of Directors may, at any
time, suspend or discontinue the 2000 Plan or revise or amend it in any respect
whatsoever; provided, however, that if and to the extent the Board of Directors
deems it appropriate to comply with either the ISO requirements contained in
sec.422 of the Code or the "performance-based compensation" exception under
sec.162(m) of the Code, then, to
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<PAGE> 20
the extent required under the respective Code section, no amendment shall be
effective without the approval of the stockholders of the Company that increases
the number of shares of Stock with respect to which Awards may be issued under
the 2000 Plan, modifies the class of individuals eligible to participate in the
2000 Plan, or materially increases the benefits accruing to individuals pursuant
to the 2000 Plan.
The Committee may, in its absolute discretion, without amending the 2000
Plan, amend any Award to (i) accelerate the date on which any option or SAR
becomes exercisable or otherwise adjust any of the terms of such option or SAR,
(ii) accelerate the date on which any Award vests, (iii) waive any condition
imposed under the 2000 Plan with respect to any Award, or (iv) otherwise adjust
any of the terms of any Award. No amendment or modification to the 2000 Plan or
any Award may reduce the grantee's rights under any previously granted and
outstanding Award without the consent of the grantee, except to the extent that
the Board of Directors determines that such amendment is necessary or
appropriate to prevent such Awards from being subject to the deduction limit of
sec.162(m) of the Code.
SUMMARY OF AWARDS AVAILABLE UNDER THE 2000 PLAN
Non-Qualified Stock Options. The exercise price of each NQO granted under
the 2000 Plan will be determined by the Committee on the grant date and will not
be less than that required by law. Each NQO will be exercisable for a term, not
to exceed ten years, established by the Committee on the grant date. The
exercise price shall be paid in cash or, subject to the approval of the
Committee, in shares of Stock valued at their fair market value on the date of
exercise.
The 2000 Plan contains provisions applicable to the exercise of NQOs
subsequent to a "termination of employment," as the result of a dismissal for
"cause," a dismissal other than for "cause," "retirement," "disability" (as each
such term is defined in the 2000 Plan), resignation without the Company's prior
consent, or death. In general, these provisions provide that options that are
not exercisable at the time of such termination shall expire at the close of
business on the termination of employment date and options that are exercisable
at the time of such termination shall remain exercisable until the earlier of
the expiration of their original term and (i) in the event of a grantee's
dismissal other than for cause, the expiration of three months after such
termination of employment, (ii) in the event of a grantee's disability or death,
the first anniversary of such termination, and (iii) in the event a grantee
retires, the third anniversary of such termination. In the event of a dismissal
for cause or by reason of a resignation without the Company's prior consent, all
options held by such grantee, whether or not then exercisable, terminate
immediately as of the termination of employment date. In addition, if a grantee
dies subsequent to a termination of employment but before the expiration of the
exercise period with respect to an option or an SAR, then the Award shall remain
exercisable until the first anniversary of the grantee's date of death (or the
expiration of the original exercise period, if earlier).
Incentive Stock Options. Generally, ISOs are options that may provide
certain federal income tax benefits to a grantee not available with NQOs. A
grantee must hold the shares acquired upon exercise of an ISO for at least two
years after the grant date and at least one year after the exercise date. The
exercise price per share of each ISO must be the fair market value of a share of
Stock on the grant date. An ISO will be exercisable for a maximum term, not to
exceed ten years, established by the Committee on the grant date. The exercise
price of an ISO will be paid in cash or, subject to the approval of the
Committee, in shares of Stock valued at their fair market value on the exercise
date. The aggregate fair market value of shares of Stock with respect to which
ISOs are exercisable for the first time by a grantee during any calendar year
(determined on the grant date) under the 2000 Plan or any other plan of the
Company or its subsidiaries may not exceed $100,000. An ISO granted to any
individual who owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company is subject to the following
additional limitations: the exercise price per share of the ISO must be at least
110% of the fair market value of a share of Stock at the time any such ISO is
granted, and the ISO cannot be exercisable more than five years from the grant
date.
In the event of a grantee's termination of employment, ISOs generally are
exercisable to the same extent as described above with respect to NQOs. However,
the definition of the term "disability" in respect of ISOs may differ and no
option that remains exercisable for more than three months following a grantee's
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<PAGE> 21
termination of employment for any reason other than death or disability, or for
more than one year following a grantee's termination of employment as the result
of disability, may be treated as an ISO. ISOs are not transferable other than by
will or by the laws of descent and distribution.
Reload Options. The Committee may include in any agreement evidencing an
option (the "original option") a provision that a "reload option" will be
granted to any grantee who delivers shares of Stock in partial or full payment
of the exercise price of the original option. The reload option will relate to
that number of shares of Stock equal to the number of shares of Stock delivered,
and will have an exercise price per share equal to the fair market value of a
share of Stock on the exercise date of the original option.
Stock Appreciation Rights. The Committee may grant SARs pursuant to the
2000 Plan. The exercise price of each SAR shall be such price as the Committee
shall determine on the grant date. Each SAR shall be exercisable for a term, not
to exceed ten years, established by the Committee on the grant date. The
exercise of an SAR with respect to a number of shares entitles the grantee to an
amount in cash, for each such share, equal to the excess of (i) the fair market
value of a share of Stock on the date of exercise over (ii) the exercise price
of the SAR. SARs may be granted as stand-alone awards or in connection with any
NQO or ISO with respect to a number of shares of Stock less than or equal to the
number of shares subject to the related option. The exercise of an SAR that
relates to a particular NQO or ISO causes the cancellation of its related option
with respect to the number of shares exercised. The exercise of an option to
which an SAR relates causes the proportionate cancellation of the SAR. In the
event of a grantee's termination of employment, SARs granted to the grantee are
generally exercisable to the same extent as described above with respect to
NQOs.
Restricted Stock. A grant of shares of restricted stock represents the
promise of the Company to deliver shares of Stock on a predetermined date to a
grantee, provided the grantee is continuously employed by the Company until that
date. Prior to the vesting of the shares, the shares are not transferable by the
grantee and are forfeitable. Vesting of the shares occurs on a later
predetermined date if the grantee remains continuously employed by the Company
until that later date. The Committee may at the time shares of restricted stock
are granted impose additional conditions, such as the achievement of specified
performance goals, to the vesting of the shares. Unvested shares of restricted
stock are automatically and immediately forfeited upon a grantee's termination
of employment for any reason.
Unrestricted Stock. Shares of Stock may be granted by the Committee and
may be payable at such times and subject to such conditions as the Committee
determines.
Performance Shares. The Committee may grant performance share awards to
such key persons, in such amounts, and subject to such terms and conditions, as
the Committee shall determine in its discretion. The grantee of such an award
will be entitled to receive shares or the cash value thereof if performance
goals specified by the Committee are met.
Dividend Equivalent Rights. The Committee may, in its discretion, grant
with respect to any option, SAR or performance share award, a DER entitling a
grantee to receive amounts equal to the ordinary dividends that would have been
paid on the shares of Stock covered by such Award as if such shares were then
outstanding. DERs may be payable in cash, in shares of Stock or in any other
form.
TRANSFERABILITY
No Award is transferable other than by will or the laws of descent and
distribution except to the extent an agreement with respect to an NQO or SAR
Award permits certain transfers to a grantee's family members or trusts.
CERTAIN CORPORATE CHANGES
The 2000 Plan provides for an adjustment in the number of shares of Stock
available to be delivered under the 2000 Plan, the number of shares subject to
Awards, and the exercise prices of certain Awards, in the event of a change in
the capitalization of the Company, a stock dividend or split, a merger or
combination of shares and certain other similar events. The 2000 Plan also
provides for the adjustment or termination of Awards upon the occurrence of
certain corporate events.
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<PAGE> 22
CERTAIN CHANGES IN THE CONTROL OF THE COMPANY
In the event of a "Change in Control" (as defined in the 2000 Plan), any
outstanding unvested or unexercisable Awards shall become vested and immediately
exercisable. A grantee who incurs a termination of employment for any reason
other than a dismissal for cause within one year following the Change in Control
may exercise any such option or SAR exercisable as of the termination of
employment until the earlier of (i) the original expiration date of the Award
and (ii) the later of (a) the first anniversary of his or her termination of
employment and (b) the expiration of the standard exercise period that applies
following termination of employment.
INCOME TAX WITHHOLDING
The 2000 Plan provides that a grantee may be required to meet certain
income tax withholding requirements by remitting to the Company cash or through
the withholding of shares otherwise payable to the grantee. In addition, the
grantee may meet such withholding requirements, subject to certain conditions,
by remitting previously acquired shares of Stock.
PERFORMANCE-BASED COMPENSATION
A federal income tax deduction will generally be unavailable for annual
compensation in excess of $1 million paid to any of the five most highly
compensated officers of a public corporation. However, amounts that constitute
"performance-based compensation" under sec.162(m) of the Code are not counted
toward the $1 million limit. If the 2000 Plan is approved by the Company
stockholders, grants of NQOs, ISOs, and SARs, generally would be eligible for
this exception to the $1 million limit. In order for other Awards to qualify as
performance-based compensation, the 2000 Plan permits the Committee to condition
Awards on the achievement of one or more objective performance goals based on
one or more of the following performance criteria: corporate or divisional
earnings-based measures (which may be based on net income, operating income,
cash flow, residual income or any combination thereof) and/or corporate or
divisional sales-based measures. To satisfy the requirements that apply to
performance-based compensation, these criteria must be approved by the
Corporation's stockholders, and approval of the 2000 Plan will also constitute
approval of the foregoing criteria.
The 2000 Plan authorizes the Committee to defer payment of Awards that do
not qualify as performance-based compensation, generally until the grantee is no
longer subject to the $1 million limit.
NEW PLAN BENEFITS
Since no Awards have been made under the 2000 Plan and since Awards under
the 2000 Plan are wholly discretionary, amounts payable under the 2000 Plan are
not determinable at this time. For information regarding certain awards made in
respect of fiscal 1999 under the Liz Claiborne, Inc. 1992 Stock Incentive Plan,
see "Executive Compensation -- Summary Compensation Table" and the Compensation
Committee Report.
SUMMARY OF FEDERAL TAX CONSEQUENCES
The following is a brief description of the federal income tax treatment
that will generally apply to Awards under the 2000 Plan based on current federal
income tax rules.
Non-Qualified Options. The grant of an NQO will not result in taxable
income to the grantee. Except as described below, the grantee will realize
ordinary income at the time of exercise in an amount equal to the excess of the
fair market value of the Stock acquired over the exercise price for those shares
and the Company will be entitled to a corresponding deduction. Gains or losses
realized by the grantee upon disposition of such shares will be treated as
capital gains and losses, with the basis in such Stock equal to the fair market
value of the shares at the time of exercise.
Incentive Stock Options. The grant of an incentive stock option will not
result in taxable income to the grantee. The exercise of an incentive stock
option will not result in taxable income to the grantee provided that
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<PAGE> 23
the grantee was, without a break in service, an employee of the Company or a
subsidiary during the period beginning on the date of the grant of the option
and ending on the date three months prior to the date of exercise (one year
prior to the date of exercise if the grantee is disabled, as that term is
defined in the Code). The excess of the fair market value of the Stock at the
time of the exercise of an incentive stock option over the exercise price is an
adjustment that is included in the calculation of the grantee's alternative
minimum taxable income for the tax year in which the incentive stock option is
exercised.
If the grantee does not sell or otherwise dispose of the Stock within two
years from the date of the grant of the incentive stock option or within one
year after the transfer of such Stock to the grantee, then, upon disposition of
such Stock, any amount realized in excess of the exercise price will be taxed to
the grantee as capital gain and the Company will not be entitled to a
corresponding deduction. A capital loss will be recognized to the extent that
the amount realized is less than the exercise price. If the foregoing holding
period requirements are not met, the grantee will generally realize ordinary
income at the time of the disposition of the shares, in an amount equal to the
lesser of (i) the excess of the fair market value of the Stock on the date of
exercise over the exercise price, or (ii) the excess, if any, of the amount
realized upon disposition of the shares over the exercise price and the Company
will be entitled to a corresponding deduction. If the amount realized exceeds
the value of the shares on the date of exercise, any additional amount will be
capital gain. If the amount realized is less than the exercise price, the
grantee will recognize no income, and a capital loss will be recognized equal to
the excess of the exercise price over the amount realized upon the disposition
of the shares. The Company will be entitled to a deduction to the extent that
the grantee recognizes ordinary income because of a disqualifying disposition.
Stock Appreciation Rights. The grant of an SAR will not result in taxable
income to the grantee. Upon exercise of an SAR, the amount of cash or the fair
market value of Stock received will be taxable to the grantee as ordinary income
and the Company will be entitled to a corresponding deduction. Gains and losses
realized by the grantee upon disposition of any such shares will be treated as
capital gains and losses, with the basis in such shares equal to the fair market
value of the shares at the time of exercise.
Performance Shares. A grantee who has been granted a performance share
award or performance unit award will not realize taxable income at the time of
grant and the Company will not be entitled to a corresponding deduction. The
grantee will have compensation income at the time of distribution equal to the
amount of cash received and the then fair market value of the distributed shares
and the Company will then be entitled to a corresponding deduction.
Restricted and Other Stock. A grantee who has been granted a restricted
stock award will not realize taxable income at the time of grant and the Company
will not be entitled to a corresponding deduction, assuming that the
restrictions constitute a "substantial risk of forfeiture" for federal income
tax purposes. Upon the vesting of Stock subject to an Award, the holder will
realize ordinary income in an amount equal to the then fair market value of
those shares, and the Company will be entitled to a corresponding deduction.
Gains or losses realized by the grantee upon disposition of such shares will be
treated as capital gains and losses, with the basis in such shares equal to the
fair market value of the shares at the time of vesting. Dividends paid to the
holder during the restriction period, if so provided, will also be compensation
income to the grantee and the Company will be entitled to a corresponding
deduction. A grantee may elect pursuant to sec.83(b) of the Code to have income
recognized at the date of grant of a restricted stock award and to have the
applicable capital gain holding period commence as of that date and the Company
will be entitled to a corresponding deduction.
Dividend Equivalent Rights. The grant of dividend equivalent rights will
not result in income to the recipient or in a tax deduction for the Company.
When any amount is paid or distributed to a recipient in respect of a dividend
equivalent right, the recipient will recognize ordinary income equal to the fair
market value of any property distributed and/or the amount of any cash
distributed, and the Company will be entitled to a corresponding deduction.
Withholding of Taxes. The Company may withhold amounts from grantees to
satisfy withholding tax requirements. Subject to guidelines established by the
Committee, grantees may have Stock withheld from Awards or may tender Stock to
the Company to satisfy tax withholding requirements.
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<PAGE> 24
$1 Million Limit. sec.162(m) of the Code disallows a federal income tax
deduction for certain compensation in excess of $1 million per year paid to each
of the Company's chief executive officer and its four other most highly
compensated executive officers. Compensation that qualifies as
"performance-based compensation" is not subject to the $1 million limit. The
2000 Plan has been structured to permit Awards and payments that will satisfy
the requirements applicable to performance-based compensation.
Change In Control. Any acceleration of the vesting or payment of Awards
under the 2000 Plan in the event of a change in control in the Company may cause
part or all of the consideration involved to be treated as an "excess parachute
payment" under the Code, which may subject the grantee to a 20% excise tax and
preclude deduction by the Company.
Tax Advice. The preceding discussion is based on federal tax laws and
regulations presently in effect, which are subject to change, and the discussion
does not purport to be a complete description of the federal income tax aspects
of the 2000 Plan. A grantee may also be subject to state and local taxes in
connection with the grant of Awards under the 2000 Plan. The Company suggests
that grantees consult with their individual tax advisors to determine the
applicability of the tax rules to the Awards granted to them in their personal
circumstances.
PRINCIPAL REASONS TO ADOPT THE 2000 PLAN
The Board of Directors views the issuance of stock options and other
equity-based awards to key individuals as necessary in order to attract and
retain the services of the individuals essential to the Company's long term
success. The purpose of the 2000 Plan is to encourage and enable the key
individuals associated with the Company, upon whose judgment, initiative and
efforts the Company will largely depend for the successful conduct of its
business, to acquire or increase their proprietary interest in the success of
the Company. It is anticipated that providing such persons with a direct stake
in the Company will assure a close identification of their interests with those
of the Company, thereby stimulating their efforts on the Company's behalf.
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 the approval of the adoption of the 2000 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE ADOPTION OF THE
2000 PLAN.
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 1, 2000, as the Company's independent public
accountants for the fiscal year ending December 30, 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.
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<PAGE> 25
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 December 30, 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF SUCH
APPOINTMENT.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Stockholder proposals intended to be presented at the 2001 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 1, 2000, in order to be included in
the Company's proxy statement relating to that meeting. Pursuant to the proxy
solicitation rules promulgated by the S.E.C., if a stockholder notifies the
Company after February 14, 2001 of an intent to present a proposal at the
Company's 2001 annual meeting of stockholders, the Company will have the right
to exercise its discretionary voting authority with respect to such proposal, if
presented at the meeting, without including information regarding such proposal
in its proxy materials.
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.
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 S.E.C. 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
ADDITIONAL INFORMATION
The Company has filed an Annual Report on Form 10-K for the fiscal year
ended January 1, 2000 with the S.E.C. Stockholders may obtain, without charge, a
copy of the Form 10-K (without exhibits) by writing to the Investor Relations
Department at Liz Claiborne, Inc., One Claiborne Avenue, North Bergen, New
Jersey 07047. The exhibits to the Form 10-K are available upon payment of
charges which approximate the Company's cost of reproduction.
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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
/s/ Roberta Schuhalter Karp
ROBERTA SCHUHALTER KARP
Vice President - Corporate Affairs,
General Counsel and Secretary
New York, New York
March 31, 2000
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EXHIBIT A
LIZ CLAIBORNE, INC.
2000 STOCK INCENTIVE PLAN
ARTICLE I
GENERAL
1.1 PURPOSE
The Liz Claiborne, Inc. 2000 Stock Incentive Plan (the "Plan") is designed
to provide certain key persons, on whose initiative and efforts the successful
conduct of the business of Liz Claiborne, Inc. (the "Company") depends, and who
are responsible for the management, growth and protection of the business of the
Company, with incentives to: (a) enter into and remain in the service of the
Company, a Company subsidiary or a Company joint venture, (b) acquire a
proprietary interest in the success of the Company, (c) maximize their
performance and (d) enhance the long-term performance of the Company (whether
directly or indirectly through enhancing the long-term performance of a Company
subsidiary or a Company joint venture). The Plan is also designed to provide
certain "performance-based" compensation to these key persons.
1.2 ADMINISTRATION
(a) Administration by Committee; Constitution of Committee. The Plan shall
be administered by the Compensation Committee of the board of directors of the
Company (the "Board") or such other committee or subcommittee as the Board may
designate or as shall be formed by the abstention or recusal of a non-Qualified
Member (as defined below) of such committee (the "Committee"). The members of
the Committee shall be appointed by, and serve at the pleasure of, the Board. At
all times that the Committee acts in connection with the Plan, the Committee
shall consist solely of Qualified Members, the number of whom shall not be less
than two. A "Qualified Member" is both a "non-employee director" within the
meaning of Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange
Act of 1934 (the "1934 Act") and an "outside director" within the meaning of
section 162(m) of the Internal Revenue Code of 1986 (the "Code").
(b) Committee's Authority. The Committee shall have the authority (i) to
exercise all of the powers granted to it under the Plan, (ii) to construe,
interpret and implement the Plan and any Grant Certificates executed pursuant to
Section 2.1, (iii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules governing its own operations, (iv) to make
all determinations necessary or advisable in administering the Plan, (v) to
correct any defect, supply any omission and reconcile any inconsistency in the
Plan, and (vi) to amend the Plan to reflect changes in applicable law.
(c) Committee Action. Actions of the Committee shall be taken by the vote
of a majority of its members. Any action may be taken by a written instrument
signed by a majority of the Committee members, and action so taken shall be
fully as effective as if it had been taken by a vote at a meeting.
(d) Determinations Final. The determination of the Committee on all
matters relating to the Plan or any Grant Certificate shall be final, binding
and conclusive.
(e) Limit on Committee Members' Liability. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any award thereunder.
1.3 PERSONS ELIGIBLE FOR AWARDS
The persons eligible to receive awards under the Plan are those officers,
directors, and executive, managerial, professional or administrative employees
of, and consultants to, the Company, its subsidiaries and its joint ventures
(collectively, "key persons") as the Committee in its sole discretion shall
select. The Committee may from time to time in its sole discretion determine
that any key person shall be ineligible to receive awards under the Plan.
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1.4 TYPES OF AWARDS UNDER PLAN
Awards may be made under the Plan in the form of (a) incentive stock
options, (b) non-qualified stock options, (c) stock appreciation rights, (d)
dividend equivalent rights, (e) restricted stock, (f) unrestricted stock, and
(g) performance shares, all as more fully set forth in Article II. The term
"award" means any of the foregoing. No incentive stock option may be granted to
a person who is not an employee of the Company on the date of grant.
1.5 SHARES AVAILABLE FOR AWARDS
(a) Aggregate Number Available; Certificate Legends. The total number of
shares of common stock of the Company ("Common Stock") with respect to which
awards may be granted pursuant to the Plan shall not exceed 5,000,000 shares and
no more than 1,000,000 of those shares may be granted pursuant to restricted
stock awards. Shares issued pursuant to the Plan may be authorized but unissued
Common Stock, authorized and issued Common Stock held in the Company's treasury
or Common Stock acquired by the Company for the purposes of the Plan. The
Committee may direct that any stock certificate evidencing shares issued
pursuant to the Plan shall bear a legend setting forth such restrictions on
transferability as may apply to such shares.
(b) Adjustment Upon Changes in Common Stock. Upon certain changes in
Common Stock, the number of shares of Common Stock available for issuance with
respect to awards that may be granted under the Plan pursuant to Section 1.5(a),
shall be adjusted pursuant to Section 3.7(a).
(c) Certain Shares to Become Available Again. The following shares of
Common Stock shall again become available for awards under the Plan: any shares
that are subject to an award under the Plan and that remain unissued upon the
cancellation or termination of such award for any reason whatsoever; any shares
of restricted stock forfeited pursuant to Section 2.7(e), provided that any
dividends paid on such shares are also forfeited pursuant to such Section
2.7(e); and any shares in respect of which a stock appreciation right or
performance share award is settled for cash.
(d) Individual Limit. Except for the limits set forth in this Section
1.5(d) and in Section 2.2(h), no provision of this Plan shall be deemed to limit
the number or value of shares with respect to which the Committee may make
awards to any eligible person. Subject to adjustment as provided in Section
3.7(a), the total number of shares of Common Stock with respect to which awards
may be granted to any one employee of the Company or a subsidiary during any one
calendar year shall not exceed 500,000 shares. Stock options and stock
appreciation rights granted and subsequently canceled or deemed to be canceled
in a calendar year count against this limit even after their cancellation.
1.6 DEFINITIONS OF CERTAIN TERMS
(a) The "Fair Market Value" of a share of Common Stock on any day shall be
the closing price on the New York Stock Exchange as reported for such day in The
Wall Street Journal or, if no such price is reported for such day, the average
of the high bid and low asked price of Common Stock as reported for such day. If
no quotation is made for the applicable day, the Fair Market Value of a share of
Common Stock on such day shall be determined in the manner set forth in the
preceding sentence using quotations for the next preceding day for which there
were quotations, provided that such quotations shall have been made within the
ten (10) business days preceding the applicable day. Notwithstanding the
foregoing, if deemed necessary or appropriate by the Committee, the Fair Market
Value of a share of Common Stock on any day shall be determined by the
Committee. In no event shall the Fair Market Value of any share of Common Stock
be less than its par value.
(b) The term "incentive stock option" means an option that is intended to
qualify for special federal income tax treatment pursuant to sections 421 and
422 of the Code as now constituted or subsequently amended, or pursuant to a
successor provision of the Code, and which is so designated in the applicable
Grant Certificate. Any option that is not specifically designated as an
incentive stock option shall under no circumstances be considered an incentive
stock option. Any option that is not an incentive stock option is referred to
herein as a "non-qualified stock option."
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(c) A grantee shall be deemed to have a "termination of employment" upon
(i) the date the grantee ceases to be employed by, or to provide consulting
services for, the Company, any Company subsidiary or Company joint venture, or
any corporation (or any of its subsidiaries) which assumes the grantee's award
in a transaction to which section 424(a) of the Code applies; (ii) the date the
grantee ceases to be a Board member; or (iii) in the case of a grantee who is,
at the time of reference, both an employee or consultant and a Board member, the
later of the dates determined pursuant to subparagraphs (i) and (ii) above. For
purposes of clause (i) above, a grantee who continues his employment or
consulting relationship with: (A) a Company subsidiary subsequent to its sale by
the Company, or (B) a Company joint venture subsequent to the Company's sale of
its interests in such joint venture, shall have a termination of employment upon
the date of such sale. The Committee may in its discretion determine whether any
leave of absence constitutes a termination of employment for purposes of the
Plan and the impact, if any, of any such leave of absence on awards theretofore
made under the Plan. Such determinations of the Committee shall be final,
binding and conclusive.
(d) The terms "parent corporation" and "subsidiary corporation" shall have
the meanings given them in section 424(e) and (f) of the Code, respectively.
(e) The term "employment" shall be deemed to mean an employee's employment
with, or a consultant's provision of services to, the Company, any Company
subsidiary or any Company joint venture and each Board member's service as a
Board member.
(f) The term "cause" in connection with a termination of employment by
reason of a dismissal for cause shall mean:
(i) to the extent that there is an employment, severance or other
agreement governing the relationship between the grantee and the Company, a
Company subsidiary or a Company joint venture, which agreement contains a
definition of "cause," cause shall consist of those acts or omissions that
would constitute "cause" under such agreement; and otherwise,
(ii) the grantee's termination of employment by the Company or an
affiliate on account of any one or more of the following:
(A) any failure by the grantee substantially to perform the
grantee's employment duties;
(B) any excessive unauthorized absenteeism by the grantee;
(C) any refusal by the grantee to obey the lawful orders of the
Board or any other person or committee to whom the grantee reports;
(D) any act or omission by the grantee that is or may be injurious
to the Company, monetarily or otherwise;
(E) any act by the grantee that is inconsistent with the best
interests of the Company;
(F) the grantee's material violation of any of the Company's
policies, including, without limitation, those policies relating to
discrimination or sexual harassment;
(G) the grantee's unauthorized (a) removal from the premises of the
Company or an affiliate of any document (in any medium or form) relating
to the Company or an affiliate or the customers or clients of the
Company or an affiliate or (b) disclosure to any person or entity of any
of the Company's, or its affiliates', confidential or proprietary
information;
(H) the grantee's commission of any felony, or any other crime
involving moral turpitude; and
(I) the grantee's commission of any act involving dishonesty or
fraud.
Notwithstanding the foregoing, in determining whether a termination of
employment by reason of a dismissal for cause has occurred pursuant to Section
1.6(f)(ii) for the purposes of Section 3.8 (b)(iii), reference shall be made
solely to subsections (C), (F), (G), (H), and (I) of Section 1.6 (f)(ii).
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Any rights the Company may have hereunder in respect of the events giving
rise to cause shall be in addition to the rights the Company may have under any
other agreement with a grantee or at law or in equity. Any determination of
whether a grantee's employment is (or is deemed to have been) terminated for
cause shall be made by the Committee in its discretion, which determination
shall be final, binding and conclusive on all parties. If, subsequent to a
grantee's voluntary termination of employment or involuntary termination of
employment without cause, it is discovered that the grantee's employment could
have been terminated for cause, the Committee may deem such grantee's employment
to have been terminated for cause. A grantee's termination of employment for
cause shall be effective as of the date of the occurrence of the event giving
rise to cause, regardless of when the determination of cause is made.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 AGREEMENTS EVIDENCING AWARDS
Each award granted under the Plan (except an award of unrestricted stock)
shall be evidenced by a written certificate ("Grant Certificate") which shall
contain such provisions as the Committee may in its sole discretion deem
necessary or desirable. By accepting an award pursuant to the Plan, a grantee
thereby agrees that the award shall be subject to all of the terms and
provisions of the Plan and the applicable Grant Certificate.
2.2 GRANT OF STOCK OPTIONS, STOCK APPRECIATION RIGHTS AND DIVIDEND EQUIVALENT
RIGHTS
(a) Stock Option Grants. The Committee may grant incentive stock options
and non-qualified stock options (collectively, "options") to purchase shares of
Common Stock from the Company, to such key persons, and in such amounts and
subject to such vesting and forfeiture provisions and other terms and
conditions, as the Committee shall determine in its sole discretion, subject to
the provisions of the Plan.
(b) Stock Appreciation Right Grants; Types of Stock Appreciation
Rights. The Committee may grant stock appreciation rights to such key persons,
and in such amounts and subject to such vesting and forfeiture provisions and
other terms and conditions, as the Committee shall determine in its sole
discretion, subject to the provisions of the Plan. The terms of a stock
appreciation right may provide that it shall be automatically exercised for a
cash payment upon the happening of a specified event that is outside the control
of the grantee, and that it shall not be otherwise exercisable. Stock
appreciation rights may be granted in connection with all or any part of, or
independently of, any option granted under the Plan. A stock appreciation right
granted in connection with a non-qualified stock option may be granted at or
after the time of grant of such option. A stock appreciation right granted in
connection with an incentive stock option may be granted only at the time of
grant of such option.
(c) Nature of Stock Appreciation Rights. The grantee of a stock
appreciation right shall have the right, subject to the terms of the Plan and
the applicable Grant Certificate, to receive from the Company an amount equal to
(i) the excess of the Fair Market Value of a share of Common Stock on the date
of exercise of the stock appreciation right over the Fair Market Value of a
share of Common Stock on the date of grant (or over the option exercise price if
the stock appreciation right is granted in connection with an option),
multiplied by (ii) the number of shares with respect to which the stock
appreciation right is exercised. Payment upon exercise of a stock appreciation
right shall be in cash or in shares of Common Stock (valued at their Fair Market
Value on the date of exercise of the stock appreciation right) or both, all as
the Committee shall determine in its sole discretion. Upon the exercise of a
stock appreciation right granted in connection with an option, the number of
shares subject to the option shall be reduced by the number of shares with
respect to which the stock appreciation right is exercised. Upon the exercise of
an option in connection with which a stock appreciation right has been granted,
the number of shares subject to the stock appreciation right shall be reduced by
the number of shares with respect to which the option is exercised.
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(d) Option Exercise Price. Each Grant Certificate with respect to an
option shall set forth the amount (the "option exercise price") payable by the
grantee to the Company upon exercise of the option evidenced thereby. The option
exercise price per share shall be determined by the Committee in its sole
discretion; provided, however, that the option exercise price of an incentive
stock option shall be at least 100% of the Fair Market Value of a share of
Common Stock on the date the option is granted, and provided further that in no
event shall the option exercise price be less than the par value of a share of
Common Stock.
(e) Exercise Period. Each Grant Certificate with respect to an option or
stock appreciation right shall set forth the periods during which the award
evidenced thereby shall be exercisable, whether in whole or in part. Such
periods shall be determined by the Committee in its sole discretion; provided,
however, that no incentive stock option (or a stock appreciation right granted
in connection with an incentive stock option) shall be exercisable more than 10
years after the date of grant, and provided further that, except as and to the
extent that the Committee may otherwise provide pursuant to Sections 2.5, 3.7 or
3.8, no option or stock appreciation right shall be exercisable prior to the
first anniversary of the date of grant. (See the default exercise period
provided for under Sections 2.3(a) and (b).)
(f) Reload Options. The Committee may in its sole discretion include in
any Grant Certificate with respect to an option (the "original option") a
provision that an additional option (the "reload option") shall be granted to
any grantee who, pursuant to Section 2.3 (e) (ii), delivers shares of Common
Stock in partial or full payment of the exercise price of the original option.
The reload option shall be for a number of shares of Common Stock equal to the
number thus delivered, shall have an exercise price equal to the Fair Market
Value of a share of Common Stock on the date of exercise of the original option,
and shall have an expiration date no later than the expiration date of the
original option. In the event that a Grant Certificate provides for the grant of
a reload option, such Agreement shall also provide that the exercise price of
the original option be no less than the Fair Market Value of a share of Common
Stock on its date of grant, and that any shares that are delivered pursuant to
Section 2.3 (e) (ii) in payment of such exercise price shall have been held for
at least six months.
(g) Dividend Equivalent Rights. The Committee may in its sole discretion
include in any Grant Certificate with respect to an option, stock appreciation
right or performance shares, a dividend equivalent right entitling the grantee
to receive amounts equal to the ordinary dividends that would be paid, during
the time such award is outstanding and unexercised, on the shares of Common
Stock covered by such award if such shares were then outstanding. In the event
such a provision is included in a Grant Certificate, the Committee shall
determine whether such payments shall be made in cash or in shares of Common
Stock, whether they shall be conditioned upon the exercise of the award to which
they relate, the time or times at which they shall be made, and such other
vesting and forfeiture provisions and other terms and conditions as the
Committee shall deem appropriate. Notwithstanding the foregoing, no dividend
equivalent rights shall be conditioned on the exercise of any option or stock
appreciation right if and to the extent that such dividend equivalent right
would cause the compensation represented by such option or stock appreciation
right not to constitute performance-based compensation under section 162(m) of
the Code.
(h) Incentive Stock Option Limitation: Exercisability. To the extent that
the aggregate Fair Market Value (determined as of the time the option is
granted) of the stock with respect to which incentive stock options are first
exercisable by any employee during any calendar year shall exceed $100,000, or
such higher amount as may be permitted from time to time under section 422 of
the Code, such options shall be treated as non-qualified stock options.
(i) Incentive Stock Option Limitation: 10% Owners. Notwithstanding the
provisions of paragraphs (d) and (e) of this Section 2.2, an incentive stock
option may not be granted under the Plan to an individual who, at the time the
option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of his employer corporation or of its
parent or subsidiary corporations (as such ownership may be determined for
purposes of section 422(b) (6) of the Code) unless (i) at the time such
incentive stock option is granted the option exercise price is at least 110% of
the Fair Market Value of the shares subject thereto and (ii) the incentive stock
option by its terms is not exercisable after the expiration of 5 years from the
date it is granted.
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2.3 EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS
Subject to the other provisions of this Article II, each option or stock
appreciation right granted under the Plan shall be exercisable as follows:
(a) Beginning of Exercise Period. Unless the applicable Grant Certificate
otherwise provides, an option or stock appreciation right shall become
exercisable in three installments of 25%, 25% and 50%, respectively, of the
shares subject to such option or stock appreciation right; the first installment
shall become exercisable on the first anniversary of the date of grant and the
remaining two installments shall become exercisable, respectively, on the second
and third anniversaries of the date of grant.
(b) End of Exercise Period. Unless the applicable Grant Certificate
otherwise provides, once an installment becomes exercisable, it shall remain
exercisable until the earlier of (i) the tenth anniversary of the date of grant
of the award or (ii) the expiration, cancellation or termination of the award.
(c) Timing and Extent of Exercise. Unless the applicable Grant Certificate
otherwise provides, an option or stock appreciation right may be exercised from
time to time as to all or part of the shares as to which such award is then
exercisable. A stock appreciation right granted in connection with an option may
be exercised at any time when, and to the same extent that, the related option
may be exercised.
(d) Notice of Exercise. An option or stock appreciation right shall be
exercised by the filing of a written notice with the Company or the Company's
designated exchange agent (the "exchange agent"), on such form and in such
manner as the Committee shall in its sole discretion prescribe.
(e) Payment of Exercise Price. Any written notice of exercise of an option
shall be accompanied by payment for the shares being purchased. Such payment
shall be made: (i) by certified or official bank check (or the equivalent
thereof acceptable to the Company or its exchange agent) for the full option
exercise price; or (ii) with the consent of the Committee, by delivery of shares
of Common Stock having a Fair Market Value (determined as of the exercise date)
equal to all or part of the option exercise price and a certified or official
bank check (or the equivalent thereof acceptable to the Company or its exchange
agent) for any remaining portion of the full option exercise price; or (iii) at
the discretion of the Committee and to the extent permitted by law, by such
other provision, consistent with the terms of the Plan, as the Committee may
from time to time prescribe (whether directly or indirectly through the exchange
agent).
(f) Delivery of Certificates Upon Exercise. Promptly after receiving
payment of the full option exercise price, or after receiving notice of the
exercise of a stock appreciation right for which payment will be made partly or
entirely in shares, the Company or its exchange agent shall, subject to the
provisions of Section 3.2, deliver to the grantee or to such other person as may
then have the right to exercise the award, a certificate or certificates for the
shares of Common Stock for which the award has been exercised. If the method of
payment employed upon option exercise so requires, and if applicable law
permits, an optionee may direct the Company, or its exchange agent as the case
may be, to deliver the stock certificate(s) to the optionee's stockbroker.
(g) No Stockholder Rights. No grantee of an option or stock appreciation
right (or other person having the right to exercise such award) shall have any
of the rights of a stockholder of the Company with respect to shares subject to
such award until the issuance of a stock certificate to such person for such
shares. Except as otherwise provided in Section 1.5(b), no adjustment shall be
made for dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property) for which the
record date is prior to the date such stock certificate is issued.
2.4 COMPENSATION IN LIEU OF EXERCISE OF AN OPTION
Upon written application of the grantee of an option, the Committee may in
its sole discretion determine to substitute, for the exercise of such option,
compensation to the grantee not in excess of the difference between the option
exercise price and the Fair Market Value of the shares covered by such written
application on the date of such application. Such compensation may be in cash,
in shares of Common Stock, or both, and the payment thereof may be subject to
conditions, all as the Committee shall determine in its sole discretion.
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In the event compensation is substituted pursuant to this Section 2.4 for the
exercise, in whole or in part, of an option, the number of shares subject to the
option shall be reduced by the number of shares for which such compensation is
substituted.
2.5 TERMINATION OF EMPLOYMENT; DEATH SUBSEQUENT TO A TERMINATION OF EMPLOYMENT
(a) General Rule. Except to the extent otherwise provided in paragraphs
(b), (c), (d) or (e) of this Section 2.5 or Section 3.8(b)(iii), a grantee who
incurs a termination of employment may exercise any outstanding option or stock
appreciation right on the following terms and conditions: (i) exercise may be
made only to the extent that the grantee was entitled to exercise the award on
the termination of employment date; and (ii) exercise must occur within three
months after termination of employment but in no event after the original
expiration date of the award.
(b) Dismissal for Cause; Resignation. If a grantee incurs a termination of
employment as the result of a dismissal for cause or resignation without the
Company's prior consent, all options and stock appreciation rights not
theretofore exercised shall terminate upon the grantee's termination of
employment.
(c) Retirement. If a grantee incurs a termination of employment as the
result of his retirement, then any outstanding option or stock appreciation
right shall be exercisable on the following terms and conditions: (i) exercise
may be made only to the extent that the grantee was entitled to exercise the
award on the termination of employment date; and (ii) exercise must occur by the
earlier of (A) the third anniversary of such termination of employment, or (B)
the original expiration date of the award. For this purpose "retirement" shall
mean a grantee's termination of employment, under circumstances other than those
described in paragraph (b) above, on or after: (x) his 65th birthday, (y) the
date on which he has attained age 60 and completed at least six years of vesting
service (within the meaning of the Company's 401(k) and profit-sharing plan as
it may be amended from time to time) or (z) if approved by the Committee, on or
after he has completed at least 20 years of vesting service.
(d) Disability. If a grantee incurs a termination of employment by reason
of a disability (as defined below), then any outstanding option or stock
appreciation right shall be exercisable on the following terms and conditions:
(i) exercise may be made only to the extent that the grantee was entitled to
exercise the award on such termination of employment; and (ii) exercise must
occur by the earlier of (A) the first anniversary of the grantee's termination
of employment, or (B) the original expiration date of the award. For this
purpose "disability" shall mean: (x) except in connection with an incentive
stock option, any physical or mental condition that would qualify a grantee for
a disability benefit under the long-term disability plan maintained by the
Company or, if there is no such plan, a physical or mental condition that
prevents the grantee from performing the essential functions of the grantee's
position (with or without reasonable accommodation) for a period of six
consecutive months and (y) in connection with an incentive stock option, a
disability described in section 422(c)(6) of the Code. The existence of a
disability shall be determined by the Committee in its absolute discretion.
(e) Death.
(i) Termination of Employment as a Result of Grantee's Death. If a
grantee incurs a termination of employment as the result of his death, then
any outstanding option or stock appreciation right shall be exercisable on
the following terms and conditions: (A) exercise may be made only to the
extent that the grantee was entitled to exercise the award on such
termination of employment; and (B) exercise must occur by the earlier of
(1) the first anniversary of the grantee's termination of employment, or
(2) the original expiration date of the award.
(ii) Death Subsequent to a Termination of Employment. If a grantee
dies subsequent to incurring a termination of employment but prior to the
expiration of the exercise period with respect to a non-qualified stock
option or a stock appreciation right (as provided by paragraphs (a), (c),
or (d) above), then the award shall remain exercisable until the earlier to
occur of (A) the first anniversary of the grantee's date of death or (B)
the original expiration date of the award.
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(iii) Restrictions on Exercise Following Death. Any such exercise of
an award following a grantee's death shall be made only by the grantee's
executor or administrator or other duly appointed representative reasonably
acceptable to the Committee, unless the grantee's will specifically
disposes of such award, in which case such exercise shall be made only by
the recipient of such specific disposition. If a grantee's personal
representative or the recipient of a specific disposition under the
grantee's will shall be entitled to exercise any award pursuant to the
preceding sentence, such representative or recipient shall be bound by all
the terms and conditions of the Plan and the applicable Grant Certificate
which would have applied to the grantee including, without limitation, the
provisions of Sections 3.2 and 3.8 hereof.
(f) Special Rules for Incentive Stock Options. No option that remains
exercisable for more than three months following a grantee's termination of
employment for any reason other than death or disability, or for more than one
year following a grantee's termination of employment as the result of his
becoming disabled, may be treated as an incentive stock option.
(g) Committee Discretion. The Committee, in the applicable Grant
Certificate, may waive or modify the application of the foregoing provisions of
this Section 2.5.
2.6 TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Except as otherwise provided in an applicable Grant Certificate evidencing
an option or stock appreciation right, during the lifetime of a grantee, each
option or stock appreciation right granted to a grantee shall be exercisable
only by the grantee and no option or stock appreciation right shall be
assignable or transferable otherwise than by will or by the laws of descent and
distribution. The Committee may, in any applicable Grant Certificate evidencing
an option (other than an incentive stock option to the extent inconsistent with
the requirements of section 422 of the Code applicable to incentive stock
options), permit a grantee to transfer all or some of the options to (A) the
grantee's spouse, children or grandchildren ("Immediate Family Members"), (B) a
trust or trusts for the exclusive benefit of such Immediate Family Members, or
(C) other parties approved by the Committee in its absolute discretion.
Following any such transfer, any transferred options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
the transfer.
2.7 GRANT OF RESTRICTED STOCK
(a) Restricted Stock Grants. The Committee may grant restricted shares of
Common Stock to such key persons, in such amounts, and subject to such vesting
and forfeiture provisions and other terms and conditions as the Committee shall
determine in its sole discretion, subject to the provisions of the Plan.
Restricted stock awards may be made independently of or in connection with any
other award under the Plan. A grantee of a restricted stock award shall have no
rights with respect to such award unless such grantee accepts the award within
such period as the Committee shall specify by accepting delivery of a restricted
stock agreement in such form as the Committee shall determine and, in the event
the restricted shares are newly issued by the Company, makes payment to the
Company or its exchange agent by certified or official bank check (or the
equivalent thereof acceptable to the Company) in an amount at least equal to the
par value of the shares covered by the award.
(b) Issuance of Stock Certificate(s). Promptly after a grantee accepts a
restricted stock award, the Company or its exchange agent shall issue to the
grantee a stock certificate or stock certificates for the shares of Common Stock
covered by the award or shall establish an account evidencing ownership of the
stock in uncertificated form. Upon the issuance of such stock certificate(s), or
establishment of such account, the grantee shall have the rights of a
stockholder with respect to the restricted stock, subject to: (i) the
nontransferability restrictions and forfeiture provision described in paragraphs
(d) and (e) of this Section 2.7; (ii) in the Committee's discretion, to a
requirement that any dividends paid on such shares shall be held in escrow until
all restrictions on such shares have lapsed; and (iii) any other restrictions
and conditions contained in the applicable restricted stock agreement.
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(c) Custody of Stock Certificate(s). Unless the Committee shall otherwise
determine, any stock certificates issued evidencing shares of restricted stock
shall remain in the possession of the Company until such shares are free of any
restrictions specified in the applicable restricted stock agreement. The
Committee may direct that such stock certificate(s) bear a legend setting forth
the applicable restrictions on transferability.
(d) Nontransferability. Shares of restricted stock may not be sold,
assigned, transferred, pledged or otherwise encumbered or disposed of except as
otherwise specifically provided in this Plan or the applicable restricted stock
agreement. The Committee at the time of grant shall specify the date or dates
(which may depend upon or be related to the attainment of performance goals and
other conditions) on which the nontransferability of the restricted stock shall
lapse.
(e) Consequence of Termination of Employment. A grantee's termination of
employment for any reason (including death) shall cause the immediate forfeiture
of all shares of restricted stock that have not yet vested as of the date of
such termination of employment. All dividends paid on such shares also shall be
forfeited, whether by termination of any escrow arrangement under which such
dividends are held, by the grantee's repayment of dividends he received
directly, or otherwise.
2.8 GRANT OF UNRESTRICTED STOCK
The Committee may grant (or sell at a purchase price at least equal to par
value) shares of Common Stock free of restrictions under the Plan, to such key
persons and in such amounts and subject to such forfeiture provisions as the
Committee shall determine in its sole discretion. Shares may be thus granted or
sold in respect of past services or other valid consideration.
2.9 GRANT OF PERFORMANCE SHARES
(a) Performance Share Grants. The Committee may grant performance share
awards to such key persons, and in such amounts and subject to such vesting and
forfeiture provisions and other terms and conditions, as the Committee shall in
its sole discretion determine, subject to the provisions of the Plan. Such an
award shall entitle the grantee to acquire shares of Common Stock, or to be paid
the value thereof in cash, as the Committee shall determine, if specified
performance goals are met. Performance shares may be awarded independently of,
or in connection with, any other award under the Plan. A grantee shall have no
rights with respect to a performance share award unless such grantee accepts the
award by accepting delivery of a Grant Certificate at such time and in such form
as the Committee shall determine.
(b) Stockholder Rights. The grantee of a performance share award will have
the rights of a stockholder only as to shares for which a stock certificate has
been issued pursuant to the award and not with respect to any other shares
subject to the award.
(c) Consequence of Termination of Employment. Except as may otherwise be
provided by the Committee at any time prior to a grantee's termination of
employment, the rights of a grantee of a performance share award shall
automatically terminate upon the grantee's termination of employment by the
Company and its subsidiaries for any reason (including death).
(d) Exercise Procedures; Automatic Exercise. At the discretion of the
Committee, the applicable Grant Certificate may set out the procedures to be
followed in exercising a performance share award or it may provide that such
exercise shall be made automatically after satisfaction of the applicable
performance goals.
(e) Tandem Grants; Effect on Exercise. Except as otherwise specified by
the Committee, (i) a performance share award granted in tandem with an option
may be exercised only while the option is exercisable, (ii) the exercise of a
performance share award granted in tandem with any other award shall reduce the
number of shares subject to such other award in the manner specified in the
applicable Grant Certificate, and (iii) the exercise of any award granted in
tandem with a performance share award shall reduce the number of shares subject
to the latter in the manner specified in the applicable Grant Certificate.
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(f) Nontransferability. Performance shares may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as otherwise
specifically provided in this Plan or the applicable Grant Certificate. The
Committee at the time of grant shall specify the date or dates (which may depend
upon or be related to the attainment of performance goals and other conditions)
on which the nontransferability of the performance shares shall lapse.
ARTICLE III
MISCELLANEOUS
3.1 AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS
(a) Amendment of the Plan. The Board may from time to time suspend,
discontinue, revise or amend the Plan in any respect whatsoever, except that no
such amendment shall materially impair any rights or materially increase any
obligations under any award theretofore made under the Plan without the consent
of the grantee (or, upon the grantee's death, the person having the right to
exercise the award). For purposes of this Section 3.1, any action of the Board
or the Committee that in any way alters or affects the tax treatment of any
award shall not be considered to materially impair any rights of any grantee.
(b) Stockholder Approval Requirement. Stockholder approval shall be
required with respect to any amendment to the Plan which (i) increases the
aggregate number of shares which may be issued pursuant to incentive stock
options or changes the class of employees eligible to receive such options; or
(ii) materially increases the benefits under the Plan to persons whose
transactions in Common Stock are subject to section 16(b) of the 1934 Act or
increases the benefits under the Plan to someone who is, or who is anticipated
to be a "162(m) covered employee" (as defined in Section 3.9(a)(i)), materially
increases the number of shares which may be issued to such persons, or
materially modifies the eligibility requirements affecting such persons.
(c) Modification of Awards. The Committee may cancel any award under the
Plan. The Committee also may amend any outstanding Grant Certificate, including,
without limitation, by amendment which would: (i) accelerate the time or times
at which the award becomes unrestricted or may be exercised, provided that,
except as and to the extent that the Committee may otherwise provide pursuant to
Section 2.5, 3.7 or 3.8, no option or stock appreciation right shall be
exercisable prior to the first anniversary of its date of grant; (ii) waive or
amend any goals, restrictions or conditions set forth in the Agreement; or (iii)
waive or amend the operation of Section 2.5 with respect to the termination of
the award upon termination of employment. However, any such cancellation or
amendment (other than an amendment pursuant to Sections 3.7 or 3.8(b)) that
materially impairs the rights or materially increases the obligations of a
grantee under an outstanding award shall be made only with the consent of the
grantee (or, upon the grantee's death, the person having the right to exercise
the award).
3.2 CONSENT REQUIREMENT
(a) No Plan Action without Required Consent. If the Committee shall at any
time determine that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the granting of any award
under the Plan, the issuance or purchase of shares or other rights thereunder,
or the taking of any other action thereunder (each such action being hereinafter
referred to as a "Plan Action"), then such Plan Action shall not be taken, in
whole or in part, unless and until such Consent shall have been effected or
obtained to the full satisfaction of the Committee.
(b) Consent Defined. The term "Consent" as used herein with respect to any
Plan Action means (i) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or under any federal, state or
local law, rule or regulation, (ii) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Committee shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made and (iii) any and all consents,
clearances and approvals in respect of a Plan Action by any governmental or
other regulatory bodies.
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3.3 NONASSIGNABILITY
Except as provided in Sections 2.5(e), 2.6, 2.7(d) and 2.9(f): (a) no award
or right granted to any person under the Plan or under any Grant Certificate
shall be assignable or transferable other than by will or by the laws of descent
and distribution; and (b) all rights granted under the Plan or any Grant
Certificate shall be exercisable during the life of the grantee only by the
grantee or the grantee's legal representative.
3.4 REQUIREMENT OF NOTIFICATION OF ELECTION UNDER SECTION 83(B) OF THE CODE
If any grantee shall, in connection with the acquisition of shares of
Common Stock under the Plan, make the election permitted under section 83(b) of
the Code (i.e., an election to include in gross income in the year of transfer
the amounts specified in section 83(b) ), such grantee shall notify the Company
of such election within 10 days of filing notice of the election with the
Internal Revenue Service, in addition to any filing and notification required
pursuant to regulations issued under the authority of Code section 83(b).
3.5 REQUIREMENT OF NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION
421(B) OF THE CODE
Each Grant Certificate with respect to an incentive stock option shall
require the grantee to notify the Company of any disposition of shares of Common
Stock issued pursuant to the exercise of such option under the circumstances
described in section 421(b) of the Code (relating to certain disqualifying
dispositions), within 10 days of such disposition.
3.6 WITHHOLDING TAXES
(a) With Respect to Cash Payments. Whenever cash is to be paid pursuant to
an award under the Plan, the Company shall be entitled to deduct therefrom an
amount sufficient in its opinion to satisfy all federal, state and other
governmental tax withholding requirements related to such payment.
(b) With Respect to Delivery of Common Stock. Whenever shares of Common
Stock are to be delivered pursuant to an award under the Plan, the Company shall
be entitled to require as a condition of delivery that the grantee remit to the
Company an amount sufficient in the opinion of the Company to satisfy all
federal, state and other governmental tax withholding requirements related
thereto. With the approval of the Committee, which the Committee shall have sole
discretion whether or not to give, the grantee may satisfy the foregoing
condition by electing to have the Company withhold from delivery shares having a
value equal to the amount of tax to be withheld. Such shares shall be valued at
their Fair Market Value as of the date on which the amount of tax to be withheld
is determined. Fractional share amounts shall be settled in cash. Such a
withholding election may be made with respect to all or any portion of the
shares to be delivered pursuant to an award.
3.7 ADJUSTMENT UPON CHANGES IN COMMON STOCK
(a) Shares Available for Grants. In the event of any change in the number
of shares of Common Stock outstanding by reason of any stock dividend or split,
reverse stock split, recapitalization, merger, consolidation, combination or
exchange of shares or similar corporate change, the maximum number of shares of
Common Stock with respect to which the Committee may grant awards under Article
II hereof, as described in Section 1.5(a), and the individual annual limit
described in Section 1.5(d), shall be appropriately adjusted by the Committee.
In the event of any change in the number of shares of Common Stock outstanding
by reason of any other event or transaction, the Committee may, but need not,
make such adjustments in the number and class of shares of Common Stock with
respect to which awards: (i) may be granted under Article II hereof and (ii)
granted to any one employee of the Company or a subsidiary during any one
calendar year, in each case as the Committee may deem appropriate, unless such
adjustment would cause any award that would otherwise qualify as performance
based compensation with respect to a "162(m) covered employee" (as defined in
Section 3.9(a)(i)), to cease to so qualify.
(b) Outstanding Restricted Stock and Performance Shares. Unless the
Committee in its absolute discretion otherwise determines, any securities or
other property (including dividends paid in cash) received by a grantee with
respect to a share of restricted stock, the issue date with respect to which
occurs prior to such event, but which has not vested as of the date of such
event, as a result of any dividend, stock split,
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reverse stock split, recapitalization, merger, consolidation, combination,
exchange of shares or otherwise will not vest until such share of restricted
stock vests, and shall be promptly deposited with the Company or other custodian
designated pursuant to Section 2.7(c) hereof.
The Committee may, in its absolute discretion, adjust any grant of shares
of restricted stock, the issue date with respect to which has not occurred as of
the date of the occurrence of any of the following events, or any grant of
performance shares, to reflect any dividend, stock split, reverse stock split,
recapitalization, merger, consolidation, combination, exchange of shares or
similar corporate change as the Committee may deem appropriate to prevent the
enlargement or dilution of rights of grantees.
(c) Outstanding Options, Stock Appreciation Rights and Dividend Equivalent
Rights -- Increase or Decrease in Issued Shares Without Consideration. Subject
to any required action by the stockholders of the Company, in the event of any
increase or decrease in the number of issued shares of Common Stock resulting
from a subdivision or consolidation of shares of Common Stock or the payment of
a stock dividend (but only on the shares of Common Stock), or any other increase
or decrease in the number of such shares effected without receipt of
consideration by the Company, the Committee shall proportionally adjust the
number of shares of Common Stock subject to each outstanding option and stock
appreciation right, and the exercise price-per-share of Common Stock of each
such option and stock appreciation right and the number of any related dividend
equivalent rights.
(d) Outstanding Options, Stock Appreciation Rights and Dividend Equivalent
Rights -- Certain Mergers. Subject to any required action by the stockholders
of the Company, in the event that the Company shall be the surviving corporation
in any merger or consolidation (except a merger or consolidation as a result of
which the holders of shares of Common Stock receive securities of another
corporation), each option, stock appreciation right and dividend equivalent
right outstanding on the date of such merger or consolidation shall pertain to
and apply to the securities which a holder of the number of shares of Common
Stock subject to such option, stock appreciation right or dividend equivalent
right would have received in such merger or consolidation.
(e) Outstanding Options, Stock Appreciation Rights and Dividend Equivalent
Rights -- Certain Other Transactions. In the event of (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of the
Company's assets, (iii) a merger or consolidation involving the Company in which
the Company is not the surviving corporation or (iv) a merger or consolidation
involving the Company in which the Company is the surviving corporation but the
holders of shares of Common Stock receive securities of another corporation
and/or other property, including cash, the Committee shall, in its absolute
discretion, have the power to:
(A) cancel, effective immediately prior to the occurrence of such
event, each option and stock appreciation right (including each dividend
equivalent right related thereto) outstanding immediately prior to such
event (whether or not then exercisable), and, in full consideration of such
cancellation, pay to the grantee to whom such option or stock appreciation
right was granted an amount in cash, for each share of Common Stock subject
to such option or stock appreciation right, respectively, equal to the
excess of (x) the value, as determined by the Committee in its absolute
discretion, of the property (including cash) received by the holder of a
share of Common Stock as a result of such event over (y) the exercise price
of such option or stock appreciation right; or
(B) provide for the exchange of each option and stock appreciation
right (including any related dividend equivalent right) outstanding
immediately prior to such event (whether or not then exercisable) for an
option on or stock appreciation right and dividend equivalent right with
respect to, as appropriate, some or all of the property which a holder of
the number of shares of Common Stock subject to such option or stock
appreciation right would have received and, incident thereto, make an
equitable adjustment as determined by the Committee in its absolute
discretion in the exercise price of the option or stock appreciation right,
or the number of shares or amount of property subject to the option, stock
appreciation right or dividend equivalent right or, if appropriate, provide
for a cash payment to the grantee to whom such option or stock appreciation
right was granted in partial consideration for the exchange of the option
or stock appreciation right.
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(f) Outstanding Options, Stock Appreciation Rights and Dividend Equivalent
Rights -- Other Changes. In the event of any change in the capitalization of the
Company or a corporate change other than those specifically referred to in
Sections 3.7(c), (d) or (e) hereof, the Committee may, in its absolute
discretion, make such adjustments in the number and class of shares subject to
options, stock appreciation rights and dividend equivalent rights outstanding on
the date on which such change occurs and in the per-share exercise price of each
such option and stock appreciation right as the Committee may consider
appropriate to prevent dilution or enlargement of rights. In addition, if and to
the extent the Committee determines it is appropriate, the Committee may elect
to cancel each option and stock appreciation right (including each dividend
equivalent right related thereto) outstanding immediately prior to such event
(whether or not then exercisable), and, in full consideration of such
cancellation, pay to the grantee to whom such option or stock appreciation right
was granted an amount in cash, for each share of Common Stock subject to such
option or stock appreciation right, respectively, equal to the excess of (i) the
Fair Market Value of Common Stock on the date of such cancellation over (ii) the
exercise price of such option or stock appreciation right.
(g) No Other Rights. Except as expressly provided in the Plan, no grantee
shall have any rights by reason of any subdivision or consolidation of shares of
stock of any class, the payment of any dividend, any increase or decrease in the
number of shares of stock of any class or any dissolution, liquidation, merger
or consolidation of the Company or any other corporation. Except as expressly
provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Common Stock subject to an award or the exercise price of
any option or stock appreciation right.
3.8 CHANGE IN CONTROL
(a) Change in Control Defined. For purposes of this Section 3.8, a "Change
in Control" shall be deemed to have occurred upon the happening of any of the
following events: (i) any "person," including a "group," as such terms are
defined in sections 13(d) and 14(d) of the 1934 Act and the rules promulgated
thereunder, becomes the beneficial owner, directly or indirectly, whether by
purchase or acquisition or agreement to act in concert or otherwise, of 20% or
more of the outstanding shares of Common Stock of the Company; (ii) a cash
tender or exchange offer for 50% or more of the outstanding shares of Common
Stock of the Company is commenced; (iii) the shareholders of the Company approve
an agreement to merge, consolidate, liquidate, or sell all or substantially all
of the assets of the Company; or (iv) two or more directors are elected to the
Board without having previously been nominated and approved by the members of
the Board incumbent on the day immediately preceding such election.
(b) Effect of a Change in Control. Upon the occurrence of a Change in
Control:
(i) notwithstanding any other provision of this Plan, any award then
outstanding shall become fully vested and any award in the form of an
option or stock appreciation right shall be immediately exercisable;
(ii) to the extent permitted by law, the Committee may, in its sole
discretion, amend any Grant Certificate in such manner as it deems
appropriate;
(iii) a grantee who incurs a termination of employment for any
reason, other than a dismissal for cause, concurrent with or within one
year following the Change in Control may exercise any outstanding option or
stock appreciation right, but only to the extent that the grantee was
entitled to exercise the award on his termination of employment date, until
the earlier of (A) the original expiration date of the award and (B) the
later of (x) the date provided for under the terms of Section 2.5 without
reference to this Section 3.8(b)(iii) and (y) the first anniversary of the
grantee's termination of employment.
(c) Miscellaneous. Whenever deemed appropriate by the Committee, any
action referred to in paragraph (b) (ii) of this Section 3.8 may be made
conditional upon the consummation of the applicable Change in Control
transaction.
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3.9 LIMITATIONS IMPOSED BY SECTION 162(M)
(a) Qualified Performance-Based Compensation. To the extent the Committee
determines it is desirable to grant an award to an individual it anticipates
might be a "162(m) covered employee" (as defined below), with respect to which
award the compensation realized by the grantee will or may not otherwise be
deductible by operation of section 162(m) of the Code, the Committee may, as
part of its effort to have such an award treated as "qualified performance-based
compensation" within the meaning of Code section 162(m), make the vesting of the
award subject to the attainment of one or more preestablished objective
performance goals.
(i) An individual is a "162(m) covered employee" if, as of the last
day of the Company's taxable year for which the compensation related to an
award would otherwise be deductible (without regard to section 162(m)), he
or she is (A) the chief executive officer of the Company (or is acting in
such capacity) or (B) one of the four highest compensated officers of the
Company other than the chief executive officer. Whether an individual is
described in either clause (A) or (B) above shall be determined in
accordance with applicable regulations under section 162(m) of the Code.
(ii) If the Committee has determined to grant an award to an
individual it anticipates might be a 162(m) covered employee pursuant to
this Section 3.9(a), then prior to the earlier to occur of (A) the first
day after 25% of each period of service to which the performance goal
relates has elapsed and (B) the ninety first (91st) day of such period and,
in either case, while the performance outcome remains substantially
uncertain, the Committee shall set one or more objective performance goals
for each such 162(m) covered person for such period. Such goals shall be
expressed in terms of (A) one or more corporate or divisional
earnings-based measures (which may be based on net income, operating
income, cash flow, residual income or any combination thereof) and/or (B)
one or more 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. The terms of the award shall
state an objective formula or standard for computing the amount of
compensation payable, and shall preclude discretion to increase the amount
of compensation payable, if the goal is attained.
(iii) 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 section
162(m)(4)(C) and the regulations thereunder: (A) all items of gain, loss or
expense for the period that are related to special, unusual or nonrecurring
items, events or circumstances affecting the Company or the financial
statements of the Company; (B) all items of gain, loss or expense for the
period that are related to (x) the disposal of a business or discontinued
operations or (y) the operations of any business acquired by the Company
during the period; and (C) all items of gain, loss or expense for the
period that are related to changes in accounting principles or to changes
in applicable law or regulations.
(b) Nonqualified Deferred Compensation. Notwithstanding any other
provision hereunder, prior to a Change in Control, if and to the extent that the
Committee determines the Company's federal tax deduction in respect of an award
may be limited as a result of section 162(m) of the Code, the Committee may take
the following actions:
(i) With respect to options, stock appreciation rights or dividend
equivalent rights, the Committee may delay the exercise or payment, as the
case may be, in respect of such options, stock appreciation rights or
dividend equivalent rights until a date that is within 30 days after the
earlier to occur of (A) the date that compensation paid to the grantee no
longer is subject to the deduction limitation under section 162(m) of the
Code and (B) the occurrence of a Change in Control. In the event that a
grantee exercises an option, stock appreciation right or would receive a
payment in respect of a dividend equivalent right at a time when the
grantee is a 162(m) covered employee, and the Committee
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determines to delay the exercise or payment, as the case may be, in respect
of any such award, the Committee shall credit cash or, in the case of an
amount payable in Common Stock, the Fair Market Value of the Common Stock,
payable to the grantee to a book account. The grantee shall have no rights
in respect of such book account and the amount credited thereto shall not
be transferable by the grantee other than by will or laws of descent and
distribution. The Committee may credit additional amounts to such book
account as it may determine in its sole discretion. Any book account
created hereunder shall represent only an unfunded, unsecured promise by
the Company to pay the amount credited thereto to the grantee in the
future.
(ii) With respect to restricted stock, unrestricted stock or
performance shares, the Committee may require the grantee to surrender to
the Committee any certificates with respect to restricted stock and
unrestricted stock and agreements with respect to performance shares, in
order to cancel the awards of such restricted stock, unrestricted stock and
performance shares (and any related dividend equivalent rights). In
exchange for such cancellation, the Committee shall credit to a book
account a cash amount equal to the Fair Market Value of the shares of
Common Stock subject to such awards. The amount credited to the book
account shall be paid to the grantee within 30 days after the earlier to
occur of (A) the date that compensation paid to the grantee no longer is
subject to the deduction limitation under section 162(m) of the Code and
(B) the occurrence of a Change in Control. The grantee shall have no rights
in respect of such book account and the amount credited thereto shall not
be transferable by the grantee other than by will or laws of descent and
distribution. The Committee may credit additional amounts to such book
account as it may determine in its sole discretion. Any book account
created hereunder shall represent only an unfunded, unsecured promise by
the Company to pay the amount credited thereto to the grantee in the
future.
3.10 RIGHT OF DISCHARGE RESERVED
Nothing in the Plan or in any Grant Certificate shall confer upon any
grantee the right to continue his employment or affect any right which the
Company may have to terminate such employment.
3.11 NATURE OF PAYMENTS
(a) Consideration for Services Performed. Any and all grants of awards and
issuances of shares of Common Stock under the Plan shall be in consideration of
services performed for the Company by the grantee.
(b) Not Taken into Account for Benefits. All such grants and issuances
shall constitute a special incentive payment to the grantee and shall not be
taken into account in computing the amount of salary or compensation of the
grantee for the purpose of determining any benefits under any pension,
retirement, profit-sharing, bonus, life insurance or other benefit plan of the
Company or under any agreement between the Company and the grantee, unless such
plan or agreement specifically otherwise provides.
3.12 NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan need not be uniform and may
be made by it selectively among persons who receive, or who are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Grant Certificates,
as to (a) the persons to receive awards under the Plan, (b) the terms and
provisions of awards under the Plan, and (c) the treatment of leaves of absence
pursuant to Section 1.6(c).
3.13 OTHER PAYMENTS OR AWARDS
Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
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3.14 HEADINGS
Any section, subsection, paragraph or other subdivision headings contained
herein are for the purpose of convenience only and are not intended to expand,
limit or otherwise define the contents of such subdivisions.
3.15 EFFECTIVE DATE AND TERM OF PLAN
(a) Adoption; Stockholder Approval. The Plan was adopted by the Board on
March 9, 2000, subject to approval by the Company's stockholders. All awards
under the Plan prior to such stockholder approval are subject in their entirety
to such approval. If such approval is not obtained prior to the first
anniversary of the date of adoption of the Plan, the Plan and all awards
thereunder shall terminate on that date.
(b) Termination of Plan. Unless sooner terminated by the Board or pursuant
to Paragraph (a) above, the provisions of the Plan respecting the grant of
incentive stock options shall terminate on the tenth anniversary of the adoption
of the Plan by the Board, and no incentive stock option awards shall thereafter
be made under the Plan. All such awards made under the Plan prior to its
termination shall remain in effect until such awards have been satisfied or
terminated in accordance with the terms and provisions of the Plan and the
applicable Grant Certificates.
3.16 RESTRICTION ON ISSUANCE OF STOCK PURSUANT TO AWARDS
The Company shall not permit any shares of Common Stock to be issued
pursuant to Awards granted under the Plan unless such shares of Common Stock are
fully paid and non-assessable, within the meaning of Section 152 of the Delaware
General Corporation Law, except as otherwise permitted by Section 153(c) of the
Delaware General Corporation Law.
3.17 GOVERNING LAW
Except to the extent preempted by any applicable federal law, the Plan will
be construed and administered in accordance with the laws of the State of
Delaware, without giving effect to principles of conflict of laws.
A-16
<PAGE> 43
[LIZ CLAIBORNE, INC. LOGO]
<PAGE> 44
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 11, 2000
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 11, 2000 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 LIZ
CLAIBORNE INC. 2000 STOCK INCENTIVE 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 11, 2000
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> 45
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
Bernard W. Aronson 2003
Nancy J. Karch 2003
Paul E. Tierney, Jr. 2003
FOR, except vote withheld from the following nominee(s):
- ---------------------------------------------------------
2. Approval of the Liz Claiborne, FOR AGAINST ABSTAIN
Inc. 2000 Stock Incentive / / / / / /
Plan
3. Ratification of Arthur Andersen / / / / / /
LLP as independent public
accountants.
4. In accordance with the named proxies 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 2000 Annual Meeting.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
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