<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-22378
------------------------
MOVADO GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
NEW YORK 13-2595932
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
125 CHUBB AVENUE,
LYNDHURST, NEW JERSEY 07071
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (201) 460-4800
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the Issuer's classes
of Common Stock, as of the latest practicable date.
As of December 1, 1997, the Registrant had 3,572,460 shares of Class A
Common Stock, par value $0.01 per share, outstanding and 9,261,027 shares of
Common Stock, par value $0.01 per share, outstanding.
================================================================================
<PAGE> 2
MOVADO GROUP, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I Financial Information
Item 1. Consolidated Balance Sheets at October 31, 1997,
January 31, 1997 and October 31, 1996 3
Consolidated Statements of Income for the nine months
ended October 31, 1997 and 1996 and the three months
ended October 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the nine
months ended October 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
</TABLE>
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31, OCTOBER 31,
1997 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 2,882 $ 4,885 $ 4,040
Trade receivables, net 125,670 75,688 112,701
Inventories 103,574 87,177 102,894
Other 16,184 16,914 10,972
--------- --------- ---------
Total current assets 248,310 184,664 230,607
--------- --------- ---------
Plant, property and equipment, net 17,358 15,066 14,312
Other assets 10,331 8,713 8,338
--------- --------- ---------
$ 275,999 $ 208,443 $ 253,257
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable to banks $ 35,386 $ 7,778 $ 43,859
Current portion of long-term debt 5,000 5,000 --
Accounts payable 14,226 25,297 20,681
Accrued liabilities 19,353 13,188 17,012
Deferred and current taxes payable 8,572 6,711 9,129
--------- --------- ---------
Total current liabilities 82,537 57,974 90,681
--------- --------- ---------
Long-term debt 40,000 40,000 45,000
Deferred and non-current foreign income taxes 5,311 3,477 4,033
Other liabilities 2,861 3,122 3,396
Shareholders' equity:
Preferred Stock, $0.01 par value,
5,000,000 shares authorized; no shares issued -- -- --
Common Stock, $0.01 par value,
20,000,000 shares authorized; 9,259,902, 6,459,761 and
6,434,497 shares issued, respectively 93 65 64
Class A Common Stock, $0.01 par value,
10,000,000 shares authorized; 3,572,460, 4,847,478 and
4,854,170 shares issued and outstanding, respectively 36 48 49
Capital in excess of par value 64,039 34,450 34,262
Retained earnings 82,011 71,291 68,335
Cumulative translation adjustment (761) (1,856) 7,565
Treasury stock, 17,251 shares, at cost (128) (128) (128)
--------- --------- ---------
145,290 103,870 110,147
--------- --------- ---------
$ 275,999 $ 208,443 $ 253,257
========= ========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED OCTOBER 31, THREE MONTHS ENDED OCTOBER 31,
----------------------------- ------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $176,447 $158,629 $84,536 $76,864
Costs and expenses:
Cost of sales 75,223 70,681 35,438 33,897
Selling, general and administrative 82,448 72,568 35,398 31,439
-------- -------- ------- -------
Operating income 18,776 15,380 13,700 11,528
Net interest expense 3,968 3,490 1,685 1,367
-------- -------- ------- -------
Income before income taxes 14,808 11,890 12,015 10,161
Provision for income taxes 3,406 3,330 2,707 2,811
-------- -------- ------- -------
Net income $ 11,402 $ 8,560 $ 9,308 $ 7,350
======== ======== ======= =======
Income per share: $ 0.96 $ 0.76 $ 0.77 $ 0.65
======== ======== ======= =======
Shares used in per share computations: 11,846 11,267 12,089 11,271
======== ======== ======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE> 5
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED OCTOBER 31,
-----------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,402 $ 8,560
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 2,943 2,691
Deferred and non-current foreign income taxes 1,721 (530)
Provision for losses on accounts receivable 628 (5)
Changes in current assets and liabilities:
Trade receivables (50,540) (37,471)
Inventories (15,901) (14,975)
Other current assets 1,726 (2,694)
Accounts payable (11,164) 125
Accrued liabilities 6,043 7,867
Deferred and current taxes payable 1,779 2,326
Increase in other non-current assets (1,298) (1,204)
(Decrease) increase in other non-current liabilities (54) 223
-------- --------
Net cash used in operating activities (52,715) (35,087)
-------- --------
Cash flows used for investing activities:
Capital expenditures (4,764) (4,382)
Goodwill, trademarks and other intangibles (978) (69)
-------- --------
Net cash used in investing activities (5,742) (4,451)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of underwriting discounts and offering expenses 29,499 --
Net proceeds from current borrowings under lines of credit 27,838 35,641
Proceeds from long term debt -- 5,000
Principal payments under capital leases (221) (365)
Exercise of stock options 104 63
Dividends paid (682) (529)
-------- --------
Net cash provided by financing activities 56,538 39,810
-------- --------
Effect of exchange rate changes on cash (84) (61)
Net (decrease) increase in cash (2,003) 211
Cash at beginning of period 4,885 3,829
-------- --------
Cash at end of period $ 2,882 $ 4,040
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE> 6
MOVADO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
by Movado Group, Inc. (the "Company") in a manner consistent with that used in
the preparation of the financial statements included in the Company's fiscal
1997 Annual Report filed on Form 10-K. In the opinion of management, the
accompanying financial statements reflect all adjustments, consisting of only
normal and recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for the periods presented. These
consolidated financial statements should be read in conjunction with the
aforementioned annual report.
NOTE 1 - STOCK SPLIT
On April 3, 1997, the Company's Board of Directors approved a five-for-four
stock split of the Company's Common and Class A Common Stock. The stock split
was effected May 1, 1997. On September 11, 1997, the Company's Board of
Directors approved a three-for-two stock split of the Company's Common and Class
A Common Stock. The stock split was effected September 29, 1997. The
accompanying financial statements contained in this report have been
retroactively adjusted to reflect the impact of the stock splits.
NOTE 2 - RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, Earnings Per Share, which specifies the computation,
presentation and disclosure requirements for earnings per share. Management of
the Company believes that adoption of Statement No. 128 which is required for
the fiscal year ending January 31, 1998, will not have a material impact on the
Company's earnings per share calculation.
NOTE 3 - INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31, OCTOBER 31,
1997 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Finished goods $ 62,110 $ 53,497 $ 61,392
Work-in-process and component parts 41,464 33,680 41,502
-------- -------- --------
$103,574 $ 87,177 $102,894
======== ======== ========
</TABLE>
6
<PAGE> 7
NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
The following is provided as supplemental information to the consolidated
statements of cash flows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED OCTOBER 31,
-----------------
1997 1996
---- ----
<S> <C> <C>
Cash paid during the period for:
Interest $3,400 $2,727
Income taxes 92 1,745
Non-cash investing and financing activities:
Equipment acquired under capital leases -- $ 198
</TABLE>
NOTE 5 - BANK CREDIT ARRANGEMENT
On July 23, 1997, the Company amended its revolving credit and working capital
lines with its domestic bank group to provide for a three year $90.0 million
unsecured revolving line of credit and $16.6 million of uncommitted working
capital lines of credit. These new facilities replace the $20.0 million
revolving line of credit and $35.0 million domestic working capital line of
credit and certain of the Company's Swiss working capital lines.
NOTE 6 - PUBLIC OFFERING
On October 21, 1997, the Company completed a stock offering in which 1,500,000
shares of common stock were issued which provided the Company with proceeds of
approximately $29.5 million, net of underwriting discounts and offering
expenses.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Statements included under Management's Discussion and Analysis of Financial
Condition and Results of Operations, in this report, as well as statements in
future filings by the Company with the Securities and Exchange Commission
("SEC"), in the Company's press releases and oral statements made by or with the
approval of an authorized executive officer of the Company, which are not
historical in nature, are intended to be, and are hereby identified as, "forward
looking statements" for purposes of the safe harbor provided by Section 21E of
the Securities Exchange Act of 1934. The Company cautions readers that forward
looking statements include, without limitation, those relating to the Company's
future business prospects, revenues, working capital, liquidity, capital needs,
plans for future operations, effective tax rates, margins, interest costs, and
income, as well as assumptions relating to the foregoing. Forward looking
statements are subject to certain risks and uncertainties, some of which cannot
be predicted or quantified. Actual results and future events could differ
materially from those indicated in the forward looking statements due to several
important factors herein identified, among others, and other risks and factors
identified from time to time in the Company's reports filed with the SEC
including, without limitation, the following: general economic and business
conditions which may impact disposable income of consumers, competitive products
and pricing, ability to enforce intellectual property rights, and success of
hedging strategies in respect of currency exchange rate fluctuations.
Nine months ended October 31, 1997 compared to nine months ended October 31,
1996.
Net Sales. Net sales increased 11.2% to $176.4 million from $158.6 million for
the nine months ended October 31, 1997 and October 31, 1996, respectively. The
increase was attributable to an 8.7 % increase in domestic sales and a 23.2%
increase in international sales. The growth reflected sales increases in the
Company's Concord and Movado brands of 21% domestically and 15% internationally.
The growth in both domestic and international sales reflect increased unit sales
of the Concord and Movado brands and includes new product introductions. Concord
introduced the Veneto and LaScala lines and Movado introduced the Vizio line.
Geographically, international sales increases occurred in virtually all markets
including the Far East, Middle East and Caribbean. The increase in sales was
partially offset by decreases in sales of Piaget and ESQ brands. The sales
decrease in Piaget was due to the planned reduction in the Company's Piaget
retailer base in order to create greater exclusivity in the retail channel. The
decrease in ESQ sales was predominantly due to the expansion of the brand's
retail network, which occurred during fiscal 1997.
Gross Margins. Gross profit for the nine months ended October 31, 1997 was
$101.2 million (57.4% of net sales) as compared to $87.9 million (55.4% of net
sales) for the comparable prior year period. Gross margin was favorably impacted
by sales mix, particularly an increase in the proportion of sales of the
Company's higher margin Concord and Movado brands to total sales. The Company's
margin also benefited somewhat from increases in the U.S. dollar against the
Swiss Franc which occurred late in the previous year.
Operating Expenses. Operating expenses increased 13.6% for the nine months ended
October 31, 1997 to 46.7% of net sales from 45.7% of net sales for the
comparable prior year period. The increase in
8
<PAGE> 9
operating expenses occurred from planned increases in marketing and advertising
particularly in the Company's Concord, Movado and ESQ brands.
Interest Expense. Net interest expense, which consisted primarily of interest on
the Company's $40 million of 6.56% Senior Notes and borrowings against its
working capital and revolving lines of credit, was $4.0 million for the nine
months ended October 31, 1997 as compared to $3.5 million for the comparable
prior year period. The higher interest expense was mainly due to higher average
borrowings on the Company's bank credit lines due to increased seasonal working
capital requirements related to the Company's growth. This was offset somewhat
by reduced average borrowing rates as a result of renegotiating our bank credit
lines in July 1997.
Income Taxes. The Company recorded a provision for income taxes of $3.4 million
for the nine months ended October 31, 1997 as compared to a provision of $3.3
million for the comparable prior year period. Taxes were provided at a 23%
effective rate which the Company believes will approximate the effective annual
rate for fiscal 1998; however, there can be no assurance of this as it is
dependent on a number of factors including: mix of foreign to domestic earnings,
local statutory tax rates and utilization of net operating losses. The 23%
effective rate differs from the United States statutory rate due to the mix of
earnings between the Company's U.S. and international operations, the most
significant of which are located in Switzerland. The Company's international
operations are generally subject to tax rates that are significantly lower than
U.S. statutory rates.
Three months ended October 31, 1997 compared to three months ended October 31,
1996.
Net Sales. Net sales increased 10.0% to $84.5 million from $76.9 million for the
three months ended October 31, 1997 and October 31, 1996, respectively. The
increase was attributable to a 7.4% increase in domestic sales and a 24%
increase in international sales. The growth reflected sales increases in the
Company's Concord and Movado brands of 15% domestically and 21% internationally.
The growth in both domestic and international sales reflect unit sales increases
in the Concord and Movado brands and includes new product introductions. Concord
introduced the Veneto and LaScala lines and Movado introduced the Vizio line.
Geographically, international sales increases occurred in virtually all markets
including the Far East, Middle East and Caribbean. The increase in sales was
partially offset by decreases in sales of Piaget and ESQ. The sales decrease in
Piaget was due to the planned reduction in our Piaget retailer base in order to
create greater exclusivity in the retail channel. The decrease in ESQ sales was
predominately due to the expansion of the brand's retail network, which occurred
during fiscal 1997.
Gross Margins. Gross profit for the three months ended October 31, 1997 was
$49.1 million (58.1% of net sales) as compared to $43.0 million (55.9% of net
sales) for the comparable prior year period. The increase in margin was mainly
attributable to the Company continuing to experience a shift in overall sales
mix toward its higher margin Movado and Concord brands. The Company's margin
also benefited somewhat from increases in the U.S. dollar against the Swiss
Franc which occurred late in the previous year.
Operating Expenses. Operating expenses increased 12.6% for the three months
ended October 31, 1997 to 41.9% of net sales from 40.9% of net sales for the
comparable prior year period. The increase in operating expenses occurred from
planned increases in marketing and advertising particularly in the Company's
Concord, Movado and ESQ brands.
Interest Expense. Net interest expense, which consisted primarily of interest on
the Company's $40 million of 6.56% Senior Notes and borrowings against its
working capital and revolving lines of credit,
9
<PAGE> 10
was $1.7 million and $1.4 million for the three months ended October 31, 1997
and 1996, respectively. The higher interest expense was predominantly due to
higher average borrowings on the Company's bank credit lines due to increased
seasonal working capital requirements related to the Company's growth. This was
offset somewhat by reduced average borrowing rates as a result of renegotiating
our bank credit lines in July 1997.
Income Taxes. The Company recorded a provision for income taxes of $2.7 million
for the three months ended October 31, 1997 as compared to a provision of $2.8
million for the comparable prior year period. For the current year, taxes were
provided at a 23% annual effective rate which the Company believes will
approximate the effective annual rate for fiscal 1998; however, there can be no
assurance of this as it is dependent on a number of factors including: mix of
foreign to domestic earnings, local statutory tax rates and utilization of net
operating losses. The 23% effective rate differs from the United States
statutory rate due to the mix of earnings between the Company's U.S. and
international operations, the most significant of which are located in
Switzerland. The Company's international operations are generally subject to tax
rates that are significantly lower than U.S. statutory rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs have been, and are expected to remain, primarily a
function of its seasonal working capital requirements which have increased due
to significant growth in sales over the two previous years. The Company's
business is not capital intensive and liquidity needs for capital investments
have not been significant in relation to the Company's overall financing
requirements.
The Company has met its liquidity needs primarily through funds from operations
and bank borrowings under working capital lines of credit with domestic and
Swiss banks. The Company has also entered into a revolving credit agreement with
its domestic banks. Funds available under this agreement are in addition to the
Company's working capital lines. The Company's future requirements for capital
will relate not only to working capital requirements for the expected continued
growth of its existing brands, domestically and internationally, but also
funding new lines of business including the Spring 1998 launch of the Company's
new Coach watch line, product line extensions and retail boutiques for the
Movado brand. In addition, the Company is required to make a $5 million sinking
fund payment on February 2, 1998 in connection with its $40 million 6.56% Senior
Notes.
In order to meet the increase in working capital requirements, the Company
amended its revolving credit and working capital lines with its domestic bank
group to provide for a three year $90.0 million unsecured revolving line of
credit and $16.6 million of uncommitted working capital lines of credit. These
new facilities replaced a $20.0 million revolving line of credit and $35.0
million domestic working capital lines of credit and certain of the Company's
Swiss working capital lines. At October 31, 1997, the Company had an outstanding
balance of $ 40.4 million under these facilities.
The Company's debt to total capitalization ratio was 35.6% at October 31, 1997,
as compared to 44.7% at October 31, 1996. The decrease is predominantly due to a
1.5 million share stock offering on October 21, 1997. The use of the net
proceeds of $29.5 million from the offering are for working capital and general
corporate purposes including the expansion of existing brands, introduction of
new brands, the establishment of retail boutiques and other marketing,
advertising and distribution efforts. Such proceeds have been temporarily used
to reduce the Company's borrowings under its revolving credit line. Debt to
total capitalization at January 31, 1997 was 33.7%. The increase in debt to
total capitalization from January 31, 1997 was predominantly due to an increase
in loans payable to banks due to increases in seasonal working capital
requirements.
10
<PAGE> 11
The Company's net working capital, consisting primarily of trade receivables and
inventories, amounted to $165.8 million at October 31, 1997, $139.9 million at
October 31, 1996 and $126.7 million at January 31, 1997. The increase in the
working capital from October 31, 1996 was primarily the result of an increase in
receivables due to growth in the Company's business. The increase in working
capital from January 31, 1997 was primarily the result of an increase in
receivables due to growth in the Company's business and increase in inventories
which reflected the seasonal build.
Accounts receivable at October 31, 1997 were $125.7 million as compared to
$112.7 million at October 31, 1996 and $75.7 million at January 31, 1997. The
increase in the receivables was primarily the result of growth in the Company's
business.
Inventories at October 31, 1997 were $103.6 million as compared to $102.9
million at October 31, 1996 and $87.2 million at January 31, 1997. The inventory
balance at October 31, 1997 was relatively flat as compared to October 31, 1996.
The increase in inventories from January 31, 1997 reflects the seasonal build,
as well as the expansion of the Company's sales base and product line.
The Company's fiscal 1998 year-to-date capital expenditures approximate $ 4.8
million compared to $4.4 million through October 31, 1996. Expenditures were
primarily related to improvements in the Company's management and sales
management information systems and costs incurred in connection with the
expansion of domestic distribution operations. The Company expects its annual
capital expenditures in fiscal year 1998 will exceed the average levels
experienced over the last three fiscal years due to planned improvements in
management information systems, expansion of its retail store network and the
expansion of distribution operations to support continued sales growth.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(1) Articles of Incorporation.
11 Computation of net income per share.
27 Financial schedules.
(b) Reports on Form 8-K
None
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOVADO GROUP, INC.
(Registrant)
Dated: December 12, 1997 By: /s/ Kenneth J. Adams
----------------------------------
Kenneth J. Adams
Senior Vice President and
Chief Financial Officer
(Chief Financial Officer)
Dated: December 12, 1997 By: /s/ John J. Rooney
----------------------------------
John J. Rooney
Corporate Controller
(Principal Accounting Officer)
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3(1) Articles of Incorporation.
11 Computation of net income per share.
27 Financial schedules.
</TABLE>
14
<PAGE> 1
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
NORTH AMERICAN WATCH CORPORATION
- ------------------------------------------------------------------------------
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
- ------------------------------------------------------------------------------
North American Watch Corporation, a corporation organized and
existing under the Business Corporation Law of the State of New York (the
"Corporation"), hereby certifies as follows:
FIRST: The name of the Corporation is North American Watch
Corporation, which is the name under which the Corporation was formed.
SECOND: The Certificate of Incorporation of the Corporation was filed
by the Department of State on November 2, 1967. A Restated Certificate of
Incorporation was filed by the Department of State on May 5, 1969. A
Certificate of Amendment to the Restated Certificate of Incorporation was filed
by the Department of State on July 24, 1979. A Restated Certificate of
Incorporation was filed by the Department of State on September 27, 1993.
THIRD: The Certificate of Incorporation of the Corporation is hereby
amended by deleting Article 1 regarding the name of the Corporation and
substituting in lieu thereof the following new Article 1:
1. Name: The name of the corporation is Movado Group, Inc. (the
"Corporation").
FOURTH: Resolutions setting forth the proposed amendment to the
Certificate of Incorporation of the Corporation were duly adopted by the
unanimous written consent of the Board of Directors of the Corporation dated
March 18, 1996. Thereafter, pursuant to the By-
<PAGE> 2
2
Laws of the Corporation, a special meeting of shareholders of the Corporation
was duly held on April 12, 1996, at which meeting a majority of voting power of
all the outstanding shares entitled to vote thereon were voted in favor of said
amendment.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be affixed hereto and this certificate to be subscribed by its President and
its Secretary and affirmed by them as true under the penalties of perjury this
12 day of April, 1996.
/s/ Efraim Grinberg
---------------------------------
Efraim Grinberg
President
/s/ Timothy F. Michno
---------------------------------
Timothy F. Michno
Secretary
<PAGE> 3
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
MOVADO GROUP, INC.
- -----------------------------------------------------------------------------
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
- -----------------------------------------------------------------------------
Movado Group, Inc., a corporation organized and existing under the
Business Corporation Law of the State of New York (the "Corporation"), hereby
certifies as follows:
FIRST: The name of the Corporation is Movado Group, Inc. The name under
which the Corporation was formed was North American Watch Corporation.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on November 2, 1967. A Restated Certificate of
Incorporation was filed by the Department of State on May 5, 1969. A
Certificate of Amendment of the Restated Certificate of Incorporation was filed
by the Department of State on July 24, 1979. A Restated Certificate of
Incorporation was filed by the Department of State on September 27, 1993. A
Certificate of Amendment to the Certificate of Incorporation was filed by the
Department of State on April 26, 1996.
THIRD: The Certificate of Incorporation of the Corporation is hereby
amended by adding to Paragraph 4.1(d)(i), which restricts the transferability of
shares of Class A Common Stock only to those defined as "Permitted
Transferees", the following two categories of Permitted Transferees under
Paragraph 4.1(d)(i)(A) as new sub-clauses (6) and (7):
<PAGE> 4
"(6) a corporation, every beneficial owner of which is, or was at the time
of such owner's transfer of Class A Common Stock to such corporation, a Class A
Holder, any of such Class A Holder's family members or any Permitted
Transferee of any of the foregoing; and
(7) a partnership or limited partnership, every partner and limited
partner of which is, or was at the time of such partner's transfer of Class A
Common Stock to such partnership or limited partnership, a Class A Holder, any
of such Class A Holder's family members or any Permitted Transferee of any of
the foregoing".
FOURTH: Resolutions setting forth the proposed amendment to the
Certificate of Incorporation of the Corporation were duly adopted by the
unanimous written consent of the Board of Directors of the Corporation dated
May 6, 1997. Thereafter, pursuant to the Certificate of Incorporation and
By-laws of the Corporation, at the annual meeting of shareholders of the
Corporation which was duly held on June 10, 1997, at least sixty-six and
two-thirds percent (66 2/3) of the voting power of all the outstanding shares
of stock of the Corporation entitled to vote in the election of Directors of
the Corporation were voted in favor of said amendment.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this certificate to be subscribed by its President and its
Secretary and affirmed by them as true under the penalties of perjury this 20
day of June, 1997.
/s/ Efraim Grinberg
-------------------------------
Efraim Grinberg
President
/s/ Timothy F. Michno
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Timothy F. Michno
Secretary
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RESTATED CERTIFICATE OF INCORPORATION
OF
NORTH AMERICAN WATCH CORPORATION
(UNDER SECTION 807 OF THE BUSINESS
CORPORATION LAW OF THE STATE OF NEW YORK)
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FIRST: The name of the Corporation is NORTH AMERICAN WATCH CORPORATION.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on November 2, 1967. A Restated Certificate of
Incorporation was filed by the Department of State on May 5, 1969. A Certificate
of Amendment to the Restated Certificate of Incorporation was filed by the
Department of State on July 24, 1979.
THIRD: The Certificate of Incorporation, as heretofore amended, is hereby
further amended to effect one or more of the amendments or changes authorized by
the Business Corporation Law (the "BCL"), to wit:
1. To remove from the Corporation's authorized capital stock 217,530 issued
treasury shares of Class A (Voting) Common Stock, with a par value of fifty
cents ($.50) per share, thereby reducing the Corporation's aggregate stated
capital from $1,575,951.28 to $936,413.08.
2. To remove from the Corporation's authorized capital stock 50,000 shares
of Class B (Non Voting) Common Stock, representing 45,336 unissued shares and
4,664 issued
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treasury shares, thereby further reducing the Corporation's aggregate stated
capital from $936,413.08 to $934,081.08.
3. To change the designation of the Class A (Voting) Common Stock to Class
A Common Stock.
4. To reduce the par value of each share of Class A Common Stock from fifty
cents ($.50) per share to one cent ($.01) per share.
5. To change each issued share of old Class A (Voting) Common Stock into
10.46 shares of new Class A Common Stock, but if, as a result of said exchange,
any holder would receive fractional shares, then such holder shall be paid cash
in lieu of receiving fractional shares.
6. To authorize an increase in the number of authorized shares of Class A
Common Stock from two million (2,000,000) to ten million (10,000,000).
7. To authorize twenty million (20,000,000) shares of a new class of common
stock with a par value of one cent ($.01) per share, and to designate the same
as Common Stock.
8. To authorize a class of five million (5,000,000) shares of blank check
preferred stock, with a par value of one cent ($.01) per share.
9. To fix the designation and relative rights, preferences and limitations
of the different classes of new Class A Common Stock common stock and the class
of preferred stock.
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10. To provide that special meetings of the shareholders of the
Corporation may be called only at the direction of the Board of Directors of the
Corporation (the "Board of Directors") by resolution adopted by the affirmative
vote of a majority of the entire Board or by the Chairman, the President or the
Secretary of the Corporation and must be called by such officer at the written
request of the Board of Directors of the Corporation (the "Board of Directors"),
and to require for amendment of the provisions described in this clause a
greater proportion of the voting power of holders of shares of the Corporation's
capital stock than is required by the BCL.
11. To provide that directors of the Corporation may be removed from
office only for cause and only by a greater proportion of the voting power of
holders of shares of the Corporation's capital stock than is required by the
BCL and that vacancies on the Board of Directors may be filled only by the
remaining directors, not by the shareholders, and to require for amendment of
the provisions described in this clause the vote of a greater proportion of the
voting power of holders of shares of the Corporation's capital stock than is
required by the BCL.
12. To change the mailing address to which the Secretary of State shall
mail a copy of any process against the Corporation.
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13. To add provisions pertaining to limitation of the liability of
directors, the indemnification of directors, the duration of the Corporation
and the adoption, amendment or repeal of provisions of the Restated Certificate
of Incorporation and By-laws of the Corporation.
FOURTH: To accomplish the foregoing amendments, the following provisions
of the Corporation's Certificate of Incorporation have been amended:
1. Article 4, relating to the aggregate number of shares of capital stock
that the Corporation is authorized to issue, the par value thereof, and the
classes into which such shares are divided, is hereby amended to read as set
forth in the same numbered article of the Certificate of Incorporation of the
Corporation as hereinafter restated.
2. Article 5, relating to the designation of the Secretary of State for
service of process and the mailing address to which the Secretary of State
shall mail a copy of any process against the Corporation, is hereby renumbered
Article 9 and amended to read as set forth in said article of the Certificate
of Incorporation of the Corporation as hereinafter restated.
3. New Article 5, relating to the shareholders of the Corporation, is
hereby added to read as set forth in the Certificate of Incorporation of the
Corporation as hereinafter restated.
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4. Article 6, relating to preemptive rights, is hereby amended to read as
set forth in Section 4.5 of Article 4 of the Certificate of Incorporation of
the Corporation as hereinafter restated.
5. New Article 6, relating to directors, is hereby added to read as set
forth in the Certificate of Incorporation of the Corporation as hereinafter
restated.
6. New Article 7, relating to the limitation of directors' liability to
the Corporation and its shareholders, is hereby added to read as set forth in
the Certificate of Incorporation of the Corporation as hereinafter restated.
7. New Article 8, relating to indemnification of directors and officers
and certain other persons, is hereby added to read as set forth in the
Certificate of Incorporation of the Corporation as hereinafter restated.
8. New Article 9, relating to the designation of the Secretary of State
for service of process and the mailing address to which the Secretary of State
shall mail a copy of any process against the Corporation, is renumbered from
and amends former Article 5 of the Certificate of Incorporation of the
Corporation.
9. New Article 10, relating to the duration of the Corporation, is hereby
added to read as set forth in the Certificate of Incorporation of the
Corporation as hereinafter restated.
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10. New Article 11, relating to the adoption, amendment and/or repeal of
provisions of this Restated Certificate of Incorporation and to the
Corporation's By-laws, is hereby added to read as set forth in the Certificate
of Incorporation of the Corporation as hereinafter restated.
FIFTH: The restatement of the Certificate of Incorporation herein
provided for was authorized by the vote of the holders of at least a majority
of all of the outstanding shares of the Corporation entitled to vote on the
restatement of the Corporation's Certificate of Incorporation.
SIXTH: The text of the Certificate of Incorporation of North American
Watch Corporation is hereby restated as further amended or changed herein to
read in its entirety as follows:
CERTIFICATE OF INCORPORATION
OF
NORTH AMERICAN WATCH CORPORATION
Under Section 402 of the Business Corporation Law
1. Name. The name of the corporation is North American Watch Corporation
(the "Corporation").
2. Purposes. The purpose or purposes for which the Corporation is formed
are:
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(a) To engage in any mercantile or trading business of any kind or
character whatever, within or without the State of New York, buy and sell, as
broker or agent or on its own account, at wholesale and retail, import and
export, acquire, own, exchange, barter, transfer, contract, lease, encumber,
assemble, prepare for market, package, distribute, ship, install, service,
repair, alter, conduct, operate, and more particularly but without limiting the
generality of the foregoing, to carry on in all its branches and to generally
deal in watches, clocks, chronometers, instruments and devices of any and all
kinds, and independently or in connection with the foregoing, to generally deal
in jewelry, gems, precious and semiprecious stones, silver, platinum, gold, or
any other metal or stone from which jewelry or other objects of personal
adornment may be made.
(b) To manufacture, acquire, sell or otherwise dispose of, and deal in and
with, all kinds of personal property and to render all kinds of services.
(c) To acquire, sell or otherwise dispose of, and deal in and with, rights
or interests in real property.
(d) To acquire, sell or otherwise dispose of, deal in and with, and grant
and obtain licenses in respect of, all kinds of intangible property, including
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patent rights, inventions, discoveries, formulae and processes, copyrights,
trademarks, trade names and designs.
(e) To borrow or raise money, and to issue securities and other evidences
of indebtedness of all kinds and secure their payment by the creation of
security interests in any of its property.
(f) To acquire, sell or transfer its own securities.
(g) To lend any of its funds, with or without either security or interest.
(h) To acquire and to sell or otherwise dispose of (i) any interest in the
business or assets of any individual, corporation or other entity, and (ii)
securities and obligations issued or created by any corporation, governmental
unit or other entity, and to exercise any rights relating to them.
(i) To the extent permitted by law, to promote, finance, underwrite or
assist, financially or otherwise, and to assume or guarantee the obligations
of, any individual, corporation or other entity.
(j) To carry out any of the foregoing purposes as principal or agent,
either alone or in association with others.
(k) To carry on any similar lawful business.
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The listing of these purposes is not to imply any limitation on or exclusion of
any powers this Corporation may have under New York law now or hereafter in
effect.
3. Office. An office of the Corporation in the State of New York is located
in the City of New York, County of New York, State of New York.
4. Number and Designation of Shares of Capital Stock; Preemptive Rights
Denied. The total number of shares of all classes of stock that the Corporation
shall have authority to issue is thirty-five million (35,000,000), of which
thirty million (30,000,000) shall be shares of common stock, par value one cent
($.01) per share, and five million (5,000,000) shall be shares of preferred
stock, par value one cent ($.01) per share (the "Preferred Stock").
4.1 Common Shares. The common stock, par value one cent ($.01) per
share, shall be divided into Common Stock and Class A Common Stock. There shall
be twenty million (20,000,000) shares of Common Stock and ten million
(10,000,000) shares of Class A Common Stock (sometimes collectively referred to
herein as the "Common Shares").
All Common Shares will be identical and will entitle the holders thereof
to the same rights and privileges, except as otherwise provided herein.
(a) Voting Rights. Except as otherwise set forth herein or as
otherwise required by law, in all
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matters, every holder of Common Stock shall be entitled to one (1) vote in
person or by proxy for each share of Common Stock standing in such holder's
name on the transfer books of the Corporation and every holder of Class A
Common Stock shall be entitled to ten (10) votes in person or by proxy for each
share of Class A Common Stock standing in such holder's name on the transfer
books of the Corporation.
Except as otherwise required by law, the holders of Common Stock and Class
A Common Stock shall vote together as a single class in all matters.
(b) Dividends. Subject to the rights of holders of Preferred Stock,
and subject to any other provisions of the Certificate of Incorporation, as
amended from time to time, holders of Common Stock and Class A Common Stock
shall be entitled to receive such dividends and other distributions in cash,
property or shares of stock of the Corporation as may be declared thereon by the
Board of Directors of the Corporation (the "Board of Directors") from time to
time out of assets or funds of the Corporation legally available therefor.
Shares of Common Stock and Class A Common Stock will rank on a par with each
other as to dividends. No dividend in cash, property or shares of stock of the
Corporation may be declared and paid on any Common Shares unless a dividend of
the same character (i.e., cash, property or shares of stock of the Corporation)
is simultaneously declared and paid on all Common Shares,
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except as set forth in the sentence immediately following. If share dividends
are paid on the Common Shares, then the dividends paid with respect to (i) the
Common Stock shall be paid with shares of Common Stock and (ii) the Class A
Common Stock shall be paid with shares of Class A Common Stock. The rate per
share of each share dividend declared and paid on the Common Stock shall be
identical to the simultaneous dividend per share declared and paid on the Class
A Common Stock. No offering of rights to subscribe for shares of capital stock
may be made to holders of Common Stock or Class A Common Stock unless an
identical offering is made simultaneously to the holders of the other class,
except that if the offering is of rights to subscribe for Common Shares, the
holders of the Common Stock shall be offered the right to subscribe for shares
of Common Stock and the holders of Class A Common Stock shall be offered the
right to subscribe for shares of Class A Common Stock. All such rights offerings
shall offer the respective holders of Common Stock and Class A Common Stock the
right to subscribe at the same rate per share.
(c) Conversion Rights
(i) Conversion of Class A Common Stock. Subject to and upon
compliance with the provisions of this Paragraph 4.1(c) of Article 4, each
holder of shares of Class A Common Stock shall be entitled to convert, at any
time and from time to time after the Corporation commences
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the offer and sale of shares of Common Stock pursuant to an effective
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), any and all of the shares of such holder's Class A Common
Stock, on a one-for-one basis, into the same number of shares of Common Stock.
(ii) Conversion Procedure. Each conversion of shares of Class A Common
Stock into shares of Common Stock shall be effected by the surrender of the
certificate or certificates representing the shares to be converted (the
"Converting Shares") at the principal office of the Corporation (or such other
office or agency of the Corporation as the Corporation may designate by written
notice to the holders of Class A Common Stock) at any time during its usual
business hours, together with written notice by the holder of such Converting
Shares, stating that such holder desires to convert the Converting Shares, or a
stated number of the shares represented by such certificate or certificates,
into an equal number of shares of the Common Stock (the "Converted Shares").
Such notice shall also state the name or names (with addresses) and
denominations in which the certificate or certificates for Converted Shares are
to be issued and shall include instructions for the delivery thereof. Promptly
after such surrender and the receipt of such written notice, the Corporation
will issue and deliver in accordance with the surrendering holder's instructions
the certificate or certificates evidencing the Converted
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Shares issuable upon such conversion, and the Corporation will deliver to the
converting holder a certificate or certificates (which shall contain such
legends, if any, as were set forth on the surrendered certificate or
certificates) representing any shares which are represented by the certificate
or certificates that were delivered to the Corporation in connection with such
conversion, but which were not converted. Such conversion, to the extent
permitted by law, shall be deemed to have been effected as of the close of
business on the date on which such certificate or certificates shall have been
surrendered and such notice shall have been received by the Corporation, and at
such time the rights of the holder of the Converting Shares as such holder shall
cease and the person or persons in whose name or names the certificate or
certificates for the Converted Shares are to be issued upon such conversion
shall be deemed to have become the holder or holders of record of the Converted
Shares. Upon issuance of shares in accordance with this Paragraph 4.1(c) of
Article 4, such Converted Shares shall be deemed to be duly authorized, validly
issued, fully paid and non-assessable. All Converting Shares shall be retired
and cancelled.
(iii) Reservation of Shares. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issuance upon the conversion of
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shares of Class A Common Stock, such number of shares of such class as are then
issuable upon the conversion of all outstanding shares of Common Stock.
(iv) Stock Splits, Adjustments. If the Corporation shall in any manner
subdivide (by stock split, stock dividend or otherwise) or combine (by reverse
stock split or otherwise) the outstanding shares of the Common Stock, the Class
A Common Stock or the Class B Common Stock, then the outstanding shares of such
other classes of Common Shares will be subdivided or combined, as the case may
be, to the same extent, share and share alike, and effective provision shall be
made for the protection of the conversion rights hereunder.
In case of any reorganization, reclassification or change of shares of the
Common Stock (other than a change in par value or from par to no par value as a
result of a subdivision or combination), or in case of any consolidation of the
Corporation with one or more corporations or a merger of the Corporation with
another corporation (other than a consolidation or merger in which the
Corporation is the resulting or surviving corporation and which does not result
in any reclassification or change of outstanding shares of Common Stock) each
holder of a share of Class A Common Stock shall have the right at any time
thereafter, so long as the conversion right hereunder with respect to such
share would exist had such event not
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occurred, to convert such share into the kind and amount of shares of stock and
other securities and properties (including cash) receivable upon such
reorganization, reclassification, change, consolidation or merger by a holder
of the number of shares of Common Stock, into which such shares of Class A
Common Stock might have been converted immediately prior to such
reorganization, reclassification, change, consolidation or merger. In the event
of such a reorganization, reclassification, change, consolidation or merger,
effective provision shall be made in the certificate of incorporation of the
resulting or surviving corporation or otherwise for the protection of the
conversion rights of the shares of Class A Common Stock.
(v) No Charge. The issuance of certificates for shares of any
Common Stock upon conversion of shares of Class A Common Stock shall be made
without charge to the holders of such shares for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
conversion and the related issuance of shares of Common Stock; provided,
however, that the Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Class A Common Stock
converted.
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(d) Transfer
(i) No Transfers Except as Permitted. Shares of Class A Common Stock
shall be freely transferable (subject to compliance with Federal securities
laws and applicable state securities laws) until the offer and sale by the
Corporation of any shares of Common Stock pursuant to an effective Registration
Statement under the Securities Act. Subsequent thereto, no person holding
shares of Class A Common Stock of record (hereinafter called a "Class A
Holder") may transfer, and the Corporation shall not register the transfer of,
such shares of Class A Common Stock, whether by sale, assignment, gift,
bequest, appointment or otherwise, except to the Corporation or a "Permitted
Transferee." A Permitted Transferee" shall mean:
(A) With respect to a Class A Holder who is a natural person:
(1) The spouse of such Class A Holder provided, that such
spouse resides together with the Class A Holder (hereinafter a "spouse");
(2) Any lineal descendant of a parent of either such Class
A Holder or such Class A Holder's spouse, and any spouse of such lineal
descendant (said descendants, together with the Class A Holder and
their spouses, being hereinafter referred to as "such Class A Holder's family
members");
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(3) A trust established principally for the benefit of such
Class A Holder, one or more of such Class A Holder's family members
and/or other Permitted Transferees;
(4) The executor, administrator or personal representative of
the estate of such Class A Holder; and
(5) An organization established principally by or identified
with the Class A Holder and/or Class A Common Holder's family members,
contributions to which are deductible for federal income, estate or
gift tax purposes ("Charitable Organization").
(B) With respect to a Class A Holder holding shares of Class A Common
Stock as trustee pursuant to a trust other than a Charitable Organization or a
trust described in clause (C) below, "Permitted Transferee" means (I) any
grantor of Class A Common Stock to such trust and (II) any Permitted Transferee
of any such grantor determined pursuant to clause (A) of Paragraph 4.1(d)(i)
above.
(C) With respect to a Class A Holder holding shares of Class A Common
Stock as trustee pursuant to a trust (other than a Charitable Organization),
which was irrevocable on the record date for determining the persons to whom
such shares of Class A Common Stock are
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first issued by the Corporation, "Permitted Transferee" means (I) any person to
whom or for whose benefit principal may be distributed either during or at the
end of the term of such trust whether by power of appointment or otherwise (a
"Trust Beneficiary") and (II) any Permitted Transferee of any such Trust
Beneficiary determined pursuant to clause (A) of Paragraph 4.1(d)(i) above.
(D) With respect to a Class A Holder that is a Charitable
Organization holding record and beneficial ownership of the amount of shares of
Class A Common Stock in question, "Permitted Transferee" means (I) any grantor
of such amount of shares of Class A Common Stock to such Charitable Organization
and (II) any Permitted Transferee of such grantor as determined under clause (A)
of Paragraph 4.1(d)(i) above.
(E) With respect to a Class A Holder that is the executor,
administrator, personal representative or guardian of the estate of a deceased
Class A Holder, or that is the trustee or receiver of the estate of a bankrupt
or insolvent Class A Holder, which holds record or beneficial ownership of the
shares of Class A Common Stock, "Permitted Transferee" means a Permitted
Transferee of such deceased, bankrupt or insolvent Class A Holder as determined
pursuant to clauses (A), (B) or (D) of Paragraph 4.1(d)(i) above, as the case
may be.
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(ii) Pledges. Notwithstanding anything to the contrary set forth
herein, any Class A Holder may pledge such holder's shares of Class A
Common Stock to a pledgee pursuant to a bona fide pledge of such shares as
collateral security for indebtedness due to the pledgee, provided that such
shares shall not be transferred to or registered in the name of the pledgee
and shall remain subject to the provisions of this Paragraph 4.1(d)(ii). In
the event of foreclosure or other similar action by the pledgee, such
pledged shares of Class A Common Stock may only be transferred to a
Permitted Transferee of the pledgor or converted into shares of Common
Stock, as the pledgee may elect.
(iii) For purposes of this Paragraph 4.1(d):
(A) The relationship of any person that is derived by or through
legal adoption shall be considered a natural one.
(B) Each joint owner of shares of Class A Common Stock shall be
considered a "Class A Holder" of such shares.
(c) A minor for whom shares of Class A Common Stock are held
pursuant to a Uniform Gifts to Minors Act or similar law shall be
considered a Class A Holder of such shares.
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(D) Unless otherwise specified, the term "person" means both
natural persons and legal entities.
(E) Without derogating from the election conferred upon the
Corporation pursuant to Paragraph 4.1(d)(i)(A)(4) above, each
reference to a corporation shall include any successor corporation
resulting from merger or consolidation; each reference to a
partnership shall include any successor partnership resulting from the
death or withdrawal of a partner; and each reference to a trustee
shall include any successor trustee.
(iv) Automatic Conversion. Any transfer of shares of Class A Common
Stock other than to the Corporation or a Permitted Transferee after the
Corporation commences the offer and sale of shares of Common Stock pursuant
to an effective Registration Statement under the Securities Act shall
result in the conversion of the transferee's shares of Class A Common Stock
into shares of Common Stock, effective on the date on which certificates
representing such shares are presented for transfer on the books of the
Corporation. The Corporation may, in connection with preparing a list of
shareholders entitled to vote at any meeting of shareholders, or as a
condition to the transfer or the registration of shares of Class A Common
Stock on the Corporation's books, require the furnishing of
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such affidavits or other proof as it deems necessary to establish that any
person is the beneficial owner of shares of Class A Common Stock or is a
Permitted Transferee.
(v) Nominee Names; Legends. Except as provided above, shares of
Class A Common Stock shall be registered in the names of the beneficial owners
thereof and not in "street" or "nominee" name. For this purpose, a "beneficial
owner" of any shares of Class A Common Stock shall mean a person who, or an
entity which, possesses the power, either singly or jointly, to direct the
voting or disposition of such shares. The Corporation shall note on the
certificates for shares of Class A Common Stock the restrictions on transfer
and registration of transfer imposed by this Paragraph 4.1(d).
(e) Liquidation Rights. In the event of any dissolution,
liquidation or winding up of the affairs of the Corporation, whether voluntary
or involuntary, after payment or provision for payment of the debts and other
liabilities of the Corporation and after making provision for the holders of
each series of Preferred Stock, if any, the remaining assets and funds of the
Corporation, if any, shall be divided among and paid ratably to the holders of
the Common Stock and the Class A Common Stock treated as a single class. In the
event of any merger or consolidation of the Corporation with or into any other
corporation pursuant to which shares of either Common Stock or Class A
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Common Stock are converted into other securities, cash or other property, the
shares of the other class shall be converted into the identical consideration
at the same rate per share, unless the holders of a majority of each such class
shall have approved such merger or consolidation.
(f) No New Issuances of Shares of Class A Common Stock. Except as
provided in the first sentence of Paragraph 4.1(c)(iv) of Article 4, no shares
of Class A Common Stock may be issued by the Corporation after the date of
filing of this Certificate of Incorporation and any and all shares of Class A
Common Stock reacquired by the Corporation (by whatever means) shall be retired
and cancelled.
4.2 Preferred Shares. The shares of Preferred Stock may be issued from
time to time in one or more series of any number of shares, provided that the
aggregate number of shares issued and not canceled of any and all such series
shall not exceed the total number of shares of Preferred Stock hereinabove
authorized, and with distinctive serial designations, all as shall hereafter be
stated and expressed in the resolution or resolutions providing for the issue
of such shares of Preferred Stock from time to time adopted by the Board of
Directors pursuant to authority so to do, which is hereby vested in the Board
of Directors. Each series of shares of Preferred Stock (a) may have such voting
powers, full or limited, or may be without voting powers, (b) may be
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subject to redemption at such time or times and at such prices, (c) may be
entitled to receive dividends (which may be cumulative or non-cumulative) at
such rate or rates, on such conditions and at such times, and payable in
preference to, or in such relation to, the dividends payable on any other class
or classes or series of stock, (d) may have such rights upon the dissolution of,
or upon any distribution of the assets of, the Corporation, (e) may be made
convertible into, or exchangeable for, shares of any other class or classes or
of any other series of the same or any other class or classes of stock of the
Corporation or such other corporation or other entity at such price or prices or
at such rates of exchange and with such adjustments, (f) may be entitled to the
benefit of a sinking fund to be applied to the purchase or redemption of shares
of such series in such amount or amounts, (g) may be entitled to the benefit of
conditions and restrictions upon the creation of indebtedness of the Corporation
or any subsidiary, upon the issue of any additional shares (including additional
shares of such series or of any other series) and upon the payment of dividends
or the making of other distributions on, and the purchase, redemption or other
acquisition by the Corporation or any subsidiary of, any outstanding shares of
the Corporation, and (h) may have such other relative, participating, optional
or other special rights, qualifications, limitations or restrictions thereof,
all as shall be stated in
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said resolution or resolutions providing for the issue of such shares of
Preferred Stock. Shares of Preferred Stock of any series that have been redeemed
or repurchased by the Corporation (whether through the operation of a sinking
fund or otherwise) or that, if convertible or exchangeable, have been converted
or exchanged in accordance with their terms shall have the status of authorized
and unissued shares of Preferred Stock of the same series and may be reissued as
a part of the series of which they were originally a part or may be reclassified
and reissued as part of a new series of shares of Preferred Stock to be created
by resolution or resolutions of the Board of Directors or as part of any other
series of shares of Preferred Stock, all subject to the conditions or
restrictions on issuance set forth in the resolution or resolutions adopted by
the Board of Directors providing for the issue of any series of shares of
Preferred Stock.
4.3 Consideration for Shares. Subject to the provisions of this
Certificate of Incorporation and except as otherwise provided by law, the stock
of the Corporation, regardless of class, may be issued for such consideration
and for such corporate purposes as the Board of Directors may from time to time
determine.
4.4 No Preemptive Rights. Subject to any conversion rights of any shares
of Class A Common Stock or of any other class of stock, no holder of stock of
the
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Corporation of any class shall be entitled as of right to subscribe for or
receive any part of the authorized stock of the Corporation or any part of any
new, additional or increased issues of stock of any class or of any obligations
convertible into any class or classes of stock, but the Board of Directors may,
without offering any such shares of stock or obligations convertible into stock
to shareholders of any class, issue and sell or dispose of the same to such
persons and for such considerations permitted by law as it may from time to
time in its absolute discretion determine.
5. Shareholders.
5.1 Action by Shareholders. Any action required or permitted to be
taken by the holders of the issued and outstanding stock of the Corporation may
be effected at an annual or special meeting of shareholders duly called and
held in accordance with law and this Certificate of Incorporation and the
Corporation's By-laws, or without a meeting, on written consent, setting forth
the action so taken, signed by the holders of all outstanding shares entitled
to vote thereon.
5.2 Meetings of Shareholders. The annual meeting of shareholders of
the Corporation for the election of Directors and the transaction of such other
business as may be brought before such meeting in accordance with this
Certificate of Incorporation shall be held at such hour and on such business
day in each year as may be determined by
<PAGE> 30
26
resolution adopted by the affirmative vote of a majority of the entire Board of
Directors (the "entire Board"). Except as otherwise required by law, special
meetings of shareholders may be called only at the direction of the Board of
Directors by resolution adopted by the affirmative vote of a majority of the
entire Board or by the Chairman, the President or the Secretary. Upon a written
request by the Board of Directors to call a special meeting of shareholders,
the Chairman, the President or the Secretary shall call such meeting. Except as
otherwise required by law, shareholders of the Corporation shall not have the
right to request or call a special meeting of the shareholders. Annual and
special meetings of shareholders shall not be called or held otherwise than as
herein provided.
6. Directors.
6.1 Number of Directors and Quorum. The number of Directors that
shall constitute the entire Board shall be the number from time to time fixed
in the By-laws, (provided, however, that such number shall be increased
automatically from time to time to the extent provided for in any resolution or
resolutions adopted by the Board of Directors providing for the issuance of any
series of Preferred Stock). The number of Directors so fixed in the By-laws may
be changed from time to time solely by the affirmative vote of a majority of
the Directors in office at the
<PAGE> 31
27
time of the vote, provided that any such action does not operate to remove a
Director other than in the manner prescribed in this Certificate of
Incorporation or the By-laws of the Corporation. Directors need not be
shareholders.
6.2 Removal of Directors. No Director may be removed except for
cause and only by the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the voting power of the outstanding shares of
stock of the Corporation entitled to vote in the election of Directors of the
Corporation (excluding for this purpose any right of holders of Preferred Stock
to elect a limited number of Directors).
7. Limitation of Liability. No Director of the Corporation shall have
personal liability to the Corporation or its shareholders for monetary damages
for breach of fiduciary duty as a Director, provided that nothing in this
Section 7 shall eliminate or limit (a) the liability of any Director if a
judgment or other final adjudication adverse to such Director establishes that
such Director's acts or omissions were in bad faith or were the result of
active and deliberate dishonesty or that such Director personally gained in
fact a financial profit or other advantage to which such Director was not
legally entitled or that such a Director's acts violated Section 719 of the BCL
or (b) the liability of any Director for any act or omission prior to
<PAGE> 32
28
the date of first inclusion of this Article 7 in this Certificate of
Incorporation.
Any repeal or modification of the foregoing paragraph by the shareholders
of the Corporation pursuant to Article 11 hereof shall not adversely affect any
right or protection of a Director existing at the time of such repeal or
modification.
8. Indemnification.
8.1 Indemnity Undertaking. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or
proceeding (a "Proceeding"), whether civil, criminal, administrative or
investigative, including, without limitation, an action by or in the right of
the Corporation to procure a judgment in its favor, by reason of the fact that
such person, or a person of whom such person is the legal representative, is
or was a Director or officer of the Corporation, or is or was serving in any
capacity at the request of the Corporation for any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
(an "Other Entity"), against judgments, fines, penalties, excise taxes, amounts
paid in settlement and costs, charges and expenses (including, without
limitation, attorneys' fees and disbursements). Notwithstanding the foregoing,
no indemnification shall be provided to or on
<PAGE> 33
29
behalf of any Director or officer of the Corporation if a judgment or other
final adjudication adverse to such Director or officer establishes that (a) his
or her acts were committed in bad faith or were the result of active and
deliberate dishonesty and, in either case, were material to the cause of action
so adjudicated or (b) he or she personally gained in fact a financial profit or
other advantage to which he or she was not legally entitled. Persons who are
not Directors or officers of the Corporation may be similarly indemnified in
respect of service to the Corporation or to an Other Entity at the request of
the Corporation to the extent the Board at any time specifies that such persons
are entitled to the benefits of this Article 8.
8.2 Advancement of Expenses. The Corporation shall, from time to time,
reimburse or advance to any Director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses,
including, without limitation, attorneys' fees and disbursements, incurred in
connection with any Proceeding, in advance of the final disposition of such
Proceeding; provided, however, that, if required by the BCL, such expenses
incurred by or on behalf of any Director or officer or other person may be paid
in advance of the final disposition of a Proceeding only upon receipt by the
Corporation of an undertaking, by or on behalf of such Director or officer (or
other person indemnified hereunder), to repay any such
<PAGE> 34
30
amount so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right of appeal that such Director,
officer or other person is not entitled to be indemnified for such expenses.
8.3 Determination of Indemnification. Any indemnification permitted
hereunder (unless ordered by a court) shall be made by the Corporation only if
authorized in the specific case upon a finding that the Director or officer (or
other person indemnified hereunder) has met the standard of conduct set forth
in Section 722 of the BCL. Such determination shall be made (a) by the Board by
a majority vote of a quorum consisting of Directors who were or are not parties
to such proceeding, (b) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested Directors so directs, (i) by the Board
upon the opinion in writing of independent legal counsel that indemnification
is proper under the circumstances because the standard of conduct set forth in
Section 722 of the BCL has been met or (ii) by the shareholders, by a vote of a
majority of those voting on the question, upon a finding that the standard of
conduct set forth in Section 722 of the BCL has been met.
8.4 Rights Not Exclusive. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 not be deemed exclusive of any other rights to which a person
<PAGE> 35
31
seeking indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Certificate of Incorporation, the
By-laws, any agreement, any vote of shareholders or disinterested Directors or
otherwise, both as to action in his or her official capacity and as to action
in another capacity while holding such office.
8.5 Continuation of Benefits. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.6 Insurance. The Corporation shall have the power to purchase and
maintain insurance to indemnify (a) itself for any obligation that it incurs as
a result of the indemnification of Directors and officers under the provisions
of this Article 8 or (b) any Director or officer in instances in which he or
she may be indemnified under the provisions of this Article 8, against any
liability asserted, whether or not the Corporation would have the power to
indemnify such person against such liability under the laws of the State of New
York, subject to the limitations imposed under Section 726 of the BCL.
<PAGE> 36
32
8.7 Security. To secure payment of any obligation of indemnification or
advancement of expenses provided by, or granted pursuant to, this Article 8,
the Corporation may create a trust fund, grant a security interest or use other
means (including, without limitation, a letter of credit) to insure the payment
of such sums as may become necessary to effect indemnification or advancement
of expenses as provided herein.
8.8 Binding Effect. The provisions of this Article 8 shall be a contract
between the Corporation, on the one hand, and each Director and officer who
serves in such capacity at any time while this Article 8 is in effect and any
other person indemnified hereunder, on the other hand, pursuant to which the
Corporation and each such Director, officer or other person intend to be
legally bound. No repeal or modification of this Article 8 shall affect any
rights or obligations with respect to any state of facts then or theretofore
existing or thereafter arising or any proceeding theretofore or thereafter
brought or threatened based in whole or in part upon any such state of facts.
8.9 Procedural Rights. The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of
<PAGE> 37
33
competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its shareholders) to have made a
determination prior to the commencement of such action that such indemnification
or reimbursement or advancement of expenses is proper in the circumstances nor
an actual determination by the Corporation (including its Board of Directors,
its independent legal counsel and its shareholders) that such person is not
entitled to such indemnification or reimbursement or advancement of expenses
shall constitute a defense to the action or create a presumption that such
person is not so entitled. Such a person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her right
to such indemnification or reimbursement or advancement of expenses, in whole or
in part, in any such proceeding.
8.10 Service Deemed at Corporation's Request. Any Director or officer
of the Corporation serving in any capacity (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation
<PAGE> 38
34
referred to in clause (a) shall be deemed to be doing so at the request of the
Corporation.
8.11 Election of Applicable Law. Any person entitled to be indemnified
or to reimbursement or advancement of expenses as a matter of right pursuant to
this Section 8 may elect to have the right to indemnification or reimbursement
or advancement of expenses interpreted on the basis of the applicable law in
effect at the time of the occurrence of the event or events giving rise to the
applicable Proceeding, to the extent permitted by law, or on the basis of the
applicable law in effect at the time such indemnification or reimbursement or
advancement of expenses is sought. Such election shall be made, by a notice in
writing to the Corporation, at the time indemnification or reimbursement or
advancement of expenses is sought; provided, however, that if no such notice is
given, the right to indemnification or reimbursement or advancement of expenses
shall be determined by the law in effect at the time indemnification or
reimbursement or advancement of expenses is sought.
9. Designation of Secretary of State; Mailing Address. The Secretary
of State is designated as agent of the Corporation upon whom process against it
may be served. The post office address to which the Secretary of State shall
mail a copy of any process against the Corporation
<PAGE> 39
35
served upon him is 125 Chubb Avenue, Lyndhurst, New Jersey, 07071.
10. Duration. The duration of the Corporation shall be perpetual.
11. Adoption, Amendment and/or Repeal of Certificate of Incorporation and
By-Laws (as applicable).
11.1 By-laws. Except as set forth in the By-laws, the Board of
Directors may from time to time make, alter, amend or repeal the By-laws by a
vote of sixty-six and two-thirds percent (66-2/3%) of the entire Board of
Directors that would be in office if no vacancy existed, whether or not present
at a meeting; provided, however, that any By-laws made, altered, amended,
altered or repealed by the Board of Directors may be amended or repealed, and
any By-laws may be made, by the shareholders of the Corporation by the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of the outstanding shares of stock of the
Corporation entitled to vote in the election of Directors of the Corporation
(excluding for this purpose any right of holders of Preferred Stock to elect a
limited number of Directors).
Any repeal or modification of the foregoing paragraph by the shareholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
<PAGE> 40
36
11.2 Certificate of Incorporation. This Certificate of Incorporation
may be amended and/or restated only by the affirmative vote of the holders of
at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the
outstanding shares of stock of the Corporation entitled to vote in the election
of Directors of the Corporation (excluding for this purpose any right of
holders of Preferred Stock to elect a limited number of Directors), except any
amendment to Articles 1, 2, 3, 9 or 10 shall require only the affirmative vote
of the holders of at least a majority of voting power of the outstanding shares
of stock of the Corporation entitled to vote in the election of Directors of
the Corporation (excluding for this purpose any right of holders of Preferred
Stock to elect a limited number of Directors).
IN WITNESS WHEREOF, the undersigned have subscribed this document on
September 24, 1993 and do hereby affirm, under the penalties of perjury, that
the statements contained herein have been examined by us and are
<PAGE> 41
37
true and correct. This Certificate has been signed under penalties of perjury
on September 24, 1993.
/s/ Gedalio Grinberg
-------------------------------------------
Gedalio Grinberg,
Chairman of the Board of
Directors and Chief
Executive Officer
and
/s/ Timothy F. Michno
-------------------------------------------
Timothy F. Michno, Secretary
<PAGE> 1
EXHIBIT 11
MOVADO GROUP, INC.
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
OCTOBER 31, 1997 OCTOBER 31, 1997
----------------- ------------------
<S> <C> <C>
PRIMARY
Net income $11,402 $ 9,308
======= =======
Weighted average number of common shares
outstanding 11,365 11,490
Add common equivalent shares
(determined using the "Treasury Stock" Method)
representing shares issuable upon exercise of
employee stock options 481 599
------- -------
Weighted average number of shares used in
primary net income per share 11,846 12,089
======= =======
Primary net income per share $ 0.96 $ 0.77
======= =======
FULLY DILUTED
Net income $11,402 $ 9,308
======= =======
Weighted average number of common shares
outstanding 11,365 11,490
Add common equivalent shares
(determined using the "Treasury Stock" Method)
representing shares issuable upon exercise of
employee stock options 613 613
------- -------
Weighted average number of shares used in fully
diluted net income per share 11,978 12,103
======= =======
Fully diluted net income $ 0.95 $ 0.77
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 2,882
<SECURITIES> 0
<RECEIVABLES> 125,670
<ALLOWANCES> 0
<INVENTORY> 103,574
<CURRENT-ASSETS> 248,310
<PP&E> 17,358
<DEPRECIATION> 0
<TOTAL-ASSETS> 275,999
<CURRENT-LIABILITIES> 82,537
<BONDS> 40,000
0
0
<COMMON> 129
<OTHER-SE> 145,161
<TOTAL-LIABILITY-AND-EQUITY> 275,999
<SALES> 84,536
<TOTAL-REVENUES> 84,536
<CGS> 35,438
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,685
<INCOME-PRETAX> 12,015
<INCOME-TAX> 2,707
<INCOME-CONTINUING> 9,308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,308
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
