<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]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 Rule 14a-11(c) or Rule 14a-12
TOMMY HILFIGER CORPORATION
-----------------------------------------------------
(Name of Registrant as specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 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>
TOMMY HILFIGER CORPORATION
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 27, 1997
The 1997 Annual Meeting of Shareholders of Tommy Hilfiger Corporation will
be held at The Sandy Lane Hotel, Sandy Lane, St. James, Barbados, on October
27, 1997 at 12:00 noon, local time, for the following purposes:
1. To elect four directors to the Board of Directors of the Company for a
term to expire at the 2000 Annual Meeting of Shareholders;
2. To amend the Company's Stock Option Plans to increase by 750,000 the
number of Ordinary Shares, par value $.01 per share, of the Company
authorized for issuance under the Stock Option Plans of the Company and its
subsidiaries;
3. To consider and act upon a proposal to ratify the appointment of Price
Waterhouse LLP as the Company's auditors for the fiscal year ending March
31, 1998;
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on September 12, 1997
as the record date for the determination of shareholders entitled to notice
of, and to vote at, the Annual Meeting or any adjournments thereof.
Shareholders are invited to attend the Annual Meeting. Any shareholder
entitled to attend and vote at the Annual Meeting is entitled to appoint a
proxy to attend and vote instead of him. Whether or not you expect to attend,
WE URGE YOU TO VOTE, SIGN, DATE AND PROMPTLY RETURN the enclosed Proxy Card in
the envelope provided which requires no postage if mailed in the United
States. A proxy may be revoked by a shareholder at any time before the
effective exercise thereof.
By order of the Board of Directors
LAWRENCE T.S. LOK
Secretary
September 19, 1997
<PAGE>
TOMMY HILFIGER CORPORATION
6/F, PRECIOUS INDUSTRIAL CENTRE
18 CHEUNG YUE STREET
CHEUNG SHA WAN, KOWLOON, HONG KONG
TEL: 852-2745-7798
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Tommy Hilfiger Corporation (the "Company") of proxies to
be used at the 1997 Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held on Monday, October 27, 1997 at 12:00 noon, local time, at
The Sandy Lane Hotel, Sandy Lane, St. James, Barbados, and at any adjournment
thereof.
The expected date of the first mailing of this Proxy Statement and the
accompanying Proxy Card to the Company's shareholders is September 22, 1997.
PROXY SOLICITATION
A Proxy Card is enclosed for use at the Annual Meeting. Proxies that are
properly completed, signed and received prior to the Annual Meeting will be
voted in accordance with the instructions of the persons executing the same.
Unless instructed to the contrary, the proxies will be voted FOR Proposals 1,
2 and 3 set forth in the Notice of the Annual Meeting. If any other matters
are properly presented to the Annual Meeting for action, it is intended that
the persons named in the enclosed Proxy Card and acting thereunder will vote
in accordance with their best judgment on such matters. A proxy may be revoked
by a shareholder at any time before the effective exercise thereof.
The expense of preparing, printing and mailing this Proxy Statement and the
proxies solicited hereby will be borne by the Company. Additional solicitation
may be made by telephone, facsimile or other contact by certain directors,
officers, employees or agents of the Company, none of whom will receive
additional compensation therefor. The Company will reimburse brokerage houses
and other custodians, nominees and fiduciaries for their reasonable expenses
for forwarding material to the beneficial owners of shares held of record by
others.
A copy of the Annual Report of the Company containing audited financial
statements for the fiscal year ended March 31, 1997 is enclosed herewith or
has previously been sent to you. Such report is not a part of this Proxy
Statement.
On September 12, 1997, the record date for the determination of shareholders
entitled to vote at the Annual Meeting, 37,361,994 Ordinary Shares, par value
$.01 per share, of the Company (the "Ordinary Shares") were outstanding and
carry the right to one vote for each such share with respect to each matter to
be voted on at the Annual Meeting.
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth data as of August 31, 1997 concerning the
beneficial ownership of Ordinary Shares by (i) the persons known to the
Company to beneficially own more than five percent of the outstanding Ordinary
Shares of the Company, (ii) all directors and nominees and each Named
Executive Officer (as defined below) and (iii) all directors and executive
officers as a group as reported by each person.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT
OWNED OF CLASS(1)
------------ -----------
<S> <C> <C>
Pilgrim Baxter & Associates, Ltd.(2)
1255 Drummers Lane, Suite 300
Wayne, PA 19087-1590........................... 2,510,200 6.6%
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Silas K.F. Chou................................. -- --
Thomas J. Hilfiger.............................. 10,000 *
Joel J. Horowitz................................ 10,600 *
Benjamin M.T. Ng................................ 151,070(3) *
Lawrence S. Stroll.............................. -- --
Ronald K.Y. Chao................................ 2,000(4) *
Lester M.Y. Ma.................................. 4,200(4) *
Joseph M. Adamko................................ 5,600(5) *
Clinton V. Silver............................... 6,200(4) *
Simon Murray.................................... -- --
All directors and executive officers as a group
(12 persons)................................... 200,670 *
</TABLE>
- --------
* Less than 1%.
(1) Shares outstanding includes the right to acquire beneficial ownership of
659,315 Ordinary Shares pursuant to currently exercisable stock options
under Company stock option plans. For purposes of this table, "currently
exercisable" stock options include options becoming vested and exercisable
within 60 days from August 31, 1997.
(2) Information based on Amendment to Schedule 13G dated February 14, 1997
filed with the SEC by Pilgrim Baxter & Associates, Ltd. ("Pilgrim").
According to the Schedule 13G, Pilgrim, an investment adviser, has sole
dispositive power and shared voting power over all of the shares.
(3) Issuable upon the exercise of currently exercisable stock options under
the Plans (as defined below).
(4) Issuable upon the exercise of currently exercisable stock options under
the Directors Option Plan (as defined below).
(5) Includes 4,200 Ordinary Shares issuable upon the exercise of currently
exercisable stock options under the Directors Option Plan.
2
<PAGE>
PROPOSAL ONE: ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes with
staggered three-year terms. At each Annual Meeting of Shareholders, the
successors of the class of directors whose terms expire at such meeting are
elected for three-year terms.
NOMINEES FOR DIRECTOR
The Company's Board of Directors has nominated four directors to be elected
to the Board of Directors at the Annual Meeting for three-year terms, each of
whom is currently a director of the Company: Benjamin M.T. Ng, Lawrence S.
Stroll, Lester M.Y. Ma and Clinton V. Silver.
The principal occupations and other biographical information of the nominees
are as follows:
Benjamin M.T. Ng, 35, has been a Director and Executive Vice President--
Corporate Finance and Assistant Secretary of the Company since 1992. From 1988
to 1991, Mr. Ng was employed in the mergers and acquisitions department at
Goldman, Sachs & Co. Mr. Ng devotes a significant portion of his time to
matters related to AIHL Investment Group Limited (together with its
predecessor, "AIHL") and its affiliates other than the Company.
Lawrence S. Stroll, 38, has been a Director of the Company since 1992 and
has served as Chief Executive Officer of Tommy Hilfiger (HK) Limited ("THHK")
since 1993. Prior to 1993, he was active in the senior management of Tommy
Hilfiger, Inc. ("THI") from 1989 to 1990 and has served as an advisor to the
Company and its predecessors since 1989 through a consulting arrangement. Mr.
Stroll has also been Group Chief Executive Officer of Pepe Jeans London
Corporation and its predecessor (collectively, "Pepe") since 1993 and Chairman
of the Board of AIHL since 1992. Mr. Stroll's legal name is Lawrence S.
Strulovitch.
Lester M.Y. Ma, 50, has been a Director of the Company since 1992 and its
Treasurer since 1996. Mr. Ma has been an Executive Director and Group Chief
Accountant of Novel Enterprises Limited ("Novel Enterprises") for more than
the past five years. In addition, Mr. Ma has been a director of Novel Denim
Holdings Limited ("Novel Denim"), a Mauritius-based manufacturer of denim
garments and fabric quoted on the Nasdaq National Market and an affiliate of
Novel Enterprises, since 1992 and its Treasurer since February 1997. Mr. Ma's
legal name is Mang Yin Ma.
Clinton V. Silver, 67, has been a Director of the Company since 1994. Mr.
Silver currently serves as a consultant to, and from 1991 until his retirement
in 1994, as Deputy Chairman of, Marks & Spencer plc ("Marks & Spencer"), an
international retailer based in London. Mr. Silver served as a director of
Marks & Spencer from 1974 to 1994 and as Joint Managing Director from 1990 to
1994.
The election of the directors requires the affirmative vote of a plurality
of the Ordinary Shares voted at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL ONE.
3
<PAGE>
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
The principal occupations and other biographical information of the
directors of the Company whose terms continue are as follows:
<TABLE>
<CAPTION>
EXPIRATION OF
NAME AGE PRESENT TERM
---- --- -------------
<S> <C> <C>
Silas K.F. Chou......................................... 51 1999
Thomas J. Hilfiger...................................... 46 1999
Joel J. Horowitz........................................ 46 1998
Ronald K.Y. Chao........................................ 58 1998
Joseph M. Adamko........................................ 65 1999
Simon Murray............................................ 57 1998
</TABLE>
Silas K.F. Chou has been Chairman of the Board of Directors of the Company
since 1992. Mr. Chou also has served for more than the past five years as an
Executive Director of Novel Enterprises. Mr. Chou was appointed as Managing
Director of Novel Enterprises in 1996. In addition, Mr. Chou has been the
Chairman of the board of directors of Novel Denim since 1996. Since 1992, Mr.
Chou has been the Chairman of the board of directors of Pepe and Chief
Executive Officer of AIHL.
Thomas J. Hilfiger has been a Director since 1992 and Honorary Chairman of
the Board of Directors of the Company since 1994. Prior thereto, Mr. Hilfiger
was Vice Chairman of the Board of the Company and its predecessors since 1989,
and President of THI from 1982 to 1989. Mr. Hilfiger has been designing
clothes under the TOMMY HILFIGER(R) trademark since 1984.
Joel J. Horowitz is Chief Executive Officer and President of the Company.
Mr. Horowitz has served as Chief Executive Officer since 1994 and as President
since June 1995. From 1989 to 1994, Mr. Horowitz served as President and Chief
Operating Officer of the Company and its predecessors. Mr. Horowitz has been a
Director of the Company since 1992.
Ronald K.Y. Chao has been a Director of the Company since 1992. In 1996, Mr.
Chao was appointed as Vice Chairman of Novel Enterprises. For more than five
years prior thereto, Mr. Chao served as the Managing Director of Novel
Enterprises. In addition, Mr. Chao has served as a director of Novel Denim
since February 1997.
Joseph M. Adamko has been a Director of the Company since 1993. Since 1992,
Mr. Adamko has been a director of Sterling Bancorp and Vice Chairman and a
director of Sterling National Bank. Prior thereto, Mr. Adamko was employed by
Manufacturers Hanover Trust Company of New York in a variety of positions for
over 30 years, including most recently as a Managing Director.
Simon Murray has been a Director of the Company since April 1997. Since
1994, Mr. Murray has been the Executive Chairman of Deutsche Bank AG for the
Asia/Pacific region. From 1984 to 1993, Mr. Murray was the Group Managing
Director of the Hutchison Whampoa Group, a major Hong Kong-based conglomerate,
where he continues to be a member of the board of directors. In addition, Mr.
Murray is currently the Deputy Chairman of China North Industries Investment
Limited and a director of a number of public companies in the Far East,
including Cheung Kong Holdings.
Ronald K.Y. Chao and Silas K.F. Chou are brothers.
4
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established an Audit Committee, a
Compensation Committee and an Investment Committee.
The Audit Committee recommends to the Board of Directors an accounting firm
to serve as the Company's independent accountants, reviews the scope and
results of the annual audit of the Company's consolidated financial
statements, reviews nonaudit services provided to the Company by the Company's
independent accountants and monitors transactions among the Company and its
affiliates. The Audit Committee currently consists of Mr. Silver, who is the
Chairman, Mr. Adamko and Mr. Murray.
The Compensation Committee is responsible for supervising the Company's
compensation policies, administering the employee incentive plans, reviewing
officers' salaries and bonuses, approving significant changes in employee
benefits, and recommending to the Board such other forms of remuneration as it
deems appropriate. The Compensation Committee currently consists of Mr.
Adamko, who is the Chairman, Mr. Silver and Mr. Murray.
The Investment Committee is responsible for overseeing the performance of
the Company's investments, identifying and interviewing potential investment
managers and determining the investment policies for the Company's short and
long term cash management. The Investment Committee is comprised of Mr. Ma,
who is the Chairman, and Mr. Ng.
During the last fiscal year, the Board of Directors held five meetings. The
Compensation Committee held four meetings during the year. Each of the Audit
and Investment Committees held two meetings. While serving as a director, each
of the directors participated in at least 75% of the meetings held by all
Committees of the Board on which such director served during the 1997 fiscal
year and, except for Messrs. Hilfiger and Stroll, at least 75% of the meetings
of the Board of Directors.
DIRECTOR COMPENSATION
Directors who are employees of the Company or its subsidiaries receive no
additional compensation for their service on the Board and its Committees. All
other directors of the Company receive a retainer of $25,000 per annum. Each
member of a Committee of the Board of Directors receives a retainer of $5,000
per annum, and each Chairman of a Committee of the Board of Directors receives
an additional retainer of $3,000 per annum. These directors also receive
$2,000 for attendance at each meeting of the Board or a Committee.
In August 1994, the Board of Directors and the Company's shareholders
approved the Directors Option Plan, whereby directors who are not officers or
employees of the Company or any of its subsidiaries are eligible to receive an
initial grant of 10,000 options, and subsequent annual grants of 1,000
options, to acquire Ordinary Shares of the Company at the fair market value on
the dates of grant. See "Stock Option Plans."
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid and accrued by the
Company and its subsidiaries for the fiscal years ended March 31, 1997, 1996
and 1995 to the Company's chief executive officer and the four other most
highly compensated executive officers (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- -----------------
AWARDS
-----------------
SECURITIES
NAME AND PRINCIPAL FISCAL SALARY UNDERLYING ALL OTHER
POSITION YEAR ($) BONUS ($) STOCK OPTIONS (#) COMPENSATION ($)
------------------ ------ --------- --------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Joel J. Horowitz........ 1997 473,000 7,174,000 -- 353(1)
Chief Executive Officer
and 1996 430,000 5,016,000 -- 270
President 1995 400,000 3,312,000 -- 465
Thomas J. Hilfiger...... 1997 8,498,223 4,500,000(2) -- 353(1)
Honorary Chairman and 1996 6,510,179 800,000 -- 270
Principal Designer 1995 4,699,414 -- -- 465
Silas K.F. Chou......... 1997 750,000(3) 325,000 -- --
Chairman of the Board 1996 750,000(3) 325,000 -- --
1995 750,000(3) -- -- --
Lawrence S. Stroll...... 1997 625,000(4) 325,000 -- --
Director; Chief
Executive 1996 625,000(4) 325,000 -- --
Officer of THHK 1995 625,000(4) -- -- --
Benjamin M.T. Ng........ 1997 250,000 211,375 5,000 4,044(5)
Director; Executive
Vice President
--Corporate Finance 1996 150,000 288,625 150,000 4,093
1995 150,000 150,000 -- 2,789
</TABLE>
- --------
(1) Amount represents premiums paid by the Company for group term life
insurance on behalf of the Named Executive Officer.
(2) Of this amount, $3,500,000 will be payable on a deferred basis. See
"Certain Employment Agreements."
(3) 1997 amount includes 50% of the fees paid pursuant to a consulting
agreement between Tommy Hilfiger (Eastern Hemisphere) Limited ("THEH") and
Fasco International, Inc. ("Fasco International"), a subsidiary of
Sportswear Holdings Limited ("Sportswear Holdings"). 1996 and 1995 amounts
include 50% of the fees paid pursuant to a consulting agreement between
Tommy Hilfiger U.S.A., Inc. ("TH USA") and Falcon International, Inc.
("Falcon International"), a subsidiary of Sportswear Holdings. See "Certain
Relationships and Related Transactions."
(4) Includes (i) for 1997, 50% of the fees paid pursuant to a consulting
agreement between THEH and Fasco International, and for 1996 and 1995, 50%
of the fees paid pursuant to a consulting agreement between TH USA and
Falcon International; and (ii) all of the fees paid pursuant to a consulting
agreement between THEH and an affiliate of Mr. Stroll. See "Certain
Relationships and Related Transactions."
(5) Amount represents employer matching contribution under the Tommy Hilfiger
U.S.A. 401(k) Profit Sharing Plan of $3,750 and premiums paid by the Company
for group term life insurance on behalf of Mr. Ng of $294.
6
<PAGE>
STOCK OPTION GRANTS
The following table sets forth information regarding grants of stock options
during fiscal year 1997 made to the only Named Executive Officer who has
received Company option grants.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE (1)
- ------------------------------------------------------------ -------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL STOCK
UNDERLYING OPTIONS
STOCK GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) FISCAL YEAR (2) ($/SH) DATE PRESENT VALUE ($)
---- ---------- -------------- ----------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
Benjamin
M.T.
Ng..... 5,000 0.71% 45.125 04/01/06 100,775
</TABLE>
- --------
(1) The fair value of these options on the date of grant was estimated using
the Black-Scholes option-pricing model with the following assumptions:
volatility of 40%; risk-free interest rate of 6%; expected life of 5 years;
and no future dividends. The dollar amount in this column is not intended to
forecast potential future appreciation, if any, of the Company's Ordinary
Shares.
(2) This percentage is calculated with respect to stock options granted under
the Plans during the last fiscal year. The stock options granted to Mr. Ng
during the last fiscal year were non-qualified options granted pursuant to
the Plans. Such options become exercisable in 20% increments each April 30,
commencing April 30, 1997. See "Stock Option Plans."
STOCK OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding stock option exercises
during fiscal year 1997 by the only Named Executive Officer who has received
Company option grants, and the values of such officer's unexercised options as
of March 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES STOCK OPTIONS AT STOCK OPTIONS AT
ACQUIRED ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Benjamin
M.T.
Ng..... 30,000 1,455,825 150,070/5,000 3,303,133/35,625
</TABLE>
7
<PAGE>
CERTAIN EMPLOYMENT AGREEMENTS
Subsidiaries of the Company had employment agreements with Messrs. Hilfiger
and Horowitz during fiscal 1997.
The employment agreement with Tommy Hilfiger, the Company's Honorary
Chairman of the Board and Principal Designer, provides for his employment as
the designer of all products carrying the TOMMY HILFIGER(R) trademark until
his death, disability or incompetence. Mr. Hilfiger receives an annual base
salary of $900,000, subject to adjustments. If net sales of TH USA and its
subsidiaries are less than $48,333,333 in any year, Mr. Hilfiger's base salary
for such year is reduced by 1.5% of such shortfall, to not less than $500,000.
If net sales are greater than $48,333,333 in any fiscal year, Mr. Hilfiger
receives an additional payment equal to 1.5% of such excess. If Mr. Hilfiger
terminates his employment without the consent of TH USA other than by reason
of his death, disability or incompetence, TH USA will have no further
obligations under the agreement. The employment agreement provides that TH USA
and its subsidiaries cannot enter into any line of business without the
consent of Mr. Hilfiger if he shall reasonably determine that such line of
business would be detrimental to the TOMMY HILFIGER(R) trademark.
The amended employment agreement with Mr. Horowitz provides for his
employment as Chief Executive Officer of the Company and TH USA until March
14, 1999. The agreement provided for an annual base salary in fiscal year 1997
of $473,000. The base salary is subject to increase each year thereafter by
the average percentage increase for all employees of TH USA. In addition, Mr.
Horowitz is entitled to receive an amount equal to 5 percent of the Company's
earnings before depreciation, interest on financing of fixed assets, non-
operating expenses and taxes ("operating earnings"), subject to a minimum of
$200,000 per year and a maximum of $777,000 per year, which maximum has been
reduced each year (from an original level of $900,000) by the increase in his
base salary; provided, that if the Company's operating earnings are below $2
million in any year, TH USA is entitled to offset 10% of any shortfall (up to
$75,000) against such payments in future years to the extent they would
otherwise exceed $200,000.
Beginning in fiscal 1995, the Company became subject to Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), under which public
companies are not permitted to deduct annual compensation paid to certain
executive officers in excess of $1,000,000 per executive, unless such excess
is paid pursuant to an arrangement based upon performance and approved by
shareholders and provided that the other requirements set forth in Section
162(m) and related regulations are met. Payments required to be made pursuant
to the Company's aforementioned employment agreements with Messrs. Hilfiger
and Horowitz, which were entered into prior to the effective date of Section
162(m), are not subject to such restrictions.
On May 22, 1995, the Compensation Committee approved and the Board of
Directors adopted, and on July 28, 1995, the shareholders approved, the Tommy
Hilfiger U.S.A., Inc. Supplemental Executive Incentive Compensation Plan (the
"SEIC Plan"), effective as of April 1, 1995 for each of the four fiscal years
ending March 31, 1999. The purpose of the SEIC Plan is to provide a
significant and flexible economic opportunity to Mr. Horowitz, Chief Executive
Officer and President of the Company and Chief Executive Officer of TH USA, in
an effort to reward his contribution to the Company and its subsidiaries. The
SEIC Plan replaced the performance-based compensation arrangement for Mr.
Horowitz that was in effect for fiscal year 1995. The SEIC Plan is
administered by the Compensation Committee and provides for a cash award to
Mr. Horowitz equal to 5 percent of the operating earnings (as defined above)
of the Company. Awards under the plan are calculated and paid quarterly based
on 3.75 percent of operating earnings for the first three fiscal quarters,
with the remaining amount of the bonus (based on the 5 percent rate) payable
at the end of the fiscal year. The amount of the award is reduced by the
amount of any other bonuses based on the operating earnings of the Company or
any of its subsidiaries granted to Mr. Horowitz. The 5 percent operating
earnings bonus payable under Mr. Horowitz's employment agreement is credited
against bonuses payable under the SEIC Plan. The SEIC Plan does not contain
any cap on the maximum amount of the bonus payable thereunder. The SEIC Plan
bonus payable to Mr. Horowitz in respect of fiscal year 1997, net of the
$777,000 bonus payable under his employment agreement, was $6,397,000. While
the Company believes that compensation payable pursuant to the SEIC Plan will
be deductible for federal income tax purposes pursuant to Section 162(m),
there can be no assurance in this regard.
8
<PAGE>
The employment agreements with Messrs. Hilfiger and Horowitz also provide
that such executives are eligible to receive additional annual bonuses at the
discretion of TH USA's Compensation Committee if the TH USA Compensation
Committee determines that certain performance levels established by the
Company's Compensation Committee have been satisfied. If, however,
compensation is awarded based on an arrangement that has not been approved by
the shareholders, the Company would not be allowed to deduct for tax purposes
any payments in excess of the $1,000,000 limitation. The Compensation
Committee approved discretionary bonuses of $4,500,000, of which $3,500,000
was granted by the Company on a deferred basis as described below (the
"Deferred Bonus"), and $800,000 for Mr. Hilfiger in fiscal years 1997 and
1996, respectively.
The Deferred Bonus (and any interest accrued thereon) will be paid in annual
installments on the last day of each fiscal year of the Company (commencing
with the fiscal year ending March 31, 1998) in the largest possible amounts
that can be paid, after taking into account any base salary and other
compensation in that fiscal year which would be counted for purposes of
Section 162(m), and still be fully deductible under such regulations. The
unpaid portion of the Deferred Bonus will accrue interest at a rate equal to
TH USA's bank borrowing rate. While the Company believes that such Deferred
Bonus payments will be deductible for federal income tax purposes pursuant to
Section 162(m), there can be no assurance in this regard.
STOCK OPTION PLANS
Tommy Hilfiger U.S.A., Inc. and Tommy Hilfiger (Eastern Hemisphere) Limited
1992 Stock Incentive Plans
In September 1992, the Company and its subsidiaries adopted stock option
plans (collectively, the "Plans") authorizing the issuance of an aggregate of
up to 1,450,000 Ordinary Shares to directors, officers and employees of the
Company and its subsidiaries, as well as 1,520,000 Ordinary Shares that were
reserved for issuance in connection with an option granted to a former
director and executive officer of the Company pursuant to his employment
agreement. Messrs. Hilfiger, Horowitz, Chou, Chao and Stroll are not eligible
for grants under the Plans. In December 1993, July 1995 and November 1996, the
Company's shareholders approved amendments to the Plans to increase by
1,000,000, 1,000,000 and 500,000, respectively, the number of Ordinary Shares
reserved for issuance under the Plans. The Company is proposing a further
increase of 750,000 Ordinary Shares reserved for issuance under the Plans. See
PROPOSAL TWO.
The Plan for employees of TH USA has been administered by the Compensation
Committee of the Board of Directors of TH USA and the Plan for employees of
the Company's non-United States subsidiaries have been administered by the
Company's Compensation Committee (collectively, the "Compensation
Committees"). The Compensation Committees determine the employees to whom
awards are granted, the number of awards granted and the specific terms and
conditions of each grant, subject to the provisions of the Plans.
Under the Plans, awards may include stock options, stock appreciation rights
and restricted stock. An option or right granted under the Plans must have an
exercise price of not less than market value at the date of grant, provided
that options granted prior to the offering must have an exercise price of not
less than the initial public offering price. Options may be exercisable at
such times, in such amounts, in accordance with such terms and conditions, and
subject to such restrictions as are set forth in the option agreement
evidencing the grant of such options.
Adjustments in the number and kind of shares subject to options granted
under the Plans are made by the Compensation Committees in the event of a
merger, consolidation, recapitalization, reclassification, stock split,
warrants or rights issuance, stock dividend or combination of shares. In
addition, the grants may provide for acceleration or immediate vesting in the
event of a change of control of the Company or its subsidiaries.
Non-Employee Directors Stock Option Plan
In August 1994, the Board of Directors and shareholders of the Company
approved the Tommy Hilfiger Corporation Non-Employee Directors Stock Option
Plan (the "Directors Option Plan"). Under the Directors
9
<PAGE>
Option Plan, directors who are not officers or employees of the Company or any
subsidiary of the Company ("Non-Employee Directors") are eligible to receive
stock options.
The Directors Option Plan is administered by the Company's Compensation
Committee consisting of not less than two members of the Board, each of whom
is a "disinterested person" as that term is used in Rule 16b-3 promulgated
under the Exchange Act ("Rule 16b-3"). Subject to certain specific limitations
and restrictions set forth in the Directors Option Plan, the Company's
Compensation Committee has full and final authority to interpret the Directors
Option Plan, to prescribe, amend and rescind rules and regulations, if any,
relating to the Directors Option Plan and to make all determinations necessary
or advisable for the administration of the Directors Option Plan. However,
grants of stock options to participants under the Plan and the amount, nature
and timing of the grants are not subject to the determination of the
Committee.
The total number of Ordinary Shares for which options may be granted under
the Directors Option Plan may not exceed 200,000 shares while the Directors
Option Plan is in effect, subject to certain adjustments described in the
Directors Option Plan. Each Non-Employee Director receives an initial stock
option to purchase 10,000 Ordinary Shares at a price equal to the fair market
value at the time of the grant of the Ordinary Shares subject to such stock
option.
Prior to termination of the Directors Option Plan, on the first to occur of
either the April 1 or October 1 following the first anniversary of each Non-
Employee Director's date of initial grant (the "First Annual Grant Date"), and
on each anniversary of such Non-Employee Director's First Annual Grant Date,
such Non-Employee Director will receive an additional stock option to purchase
1,000 Ordinary Shares at a price equal to the fair market value of the
Ordinary Shares at the time of the grant, provided such individual continues
to be a Non-Employee Director.
The term of each stock option will be 10 years unless earlier terminated by
termination of the director status of a Non-Employee Director. The stock
options will be exercisable in equal installments over five years from the
date of grant. The stock options granted under the Directors Option Plan may
not be assigned or transferred except by will, applicable laws of descent and
distribution or pursuant to a qualified domestic relations order.
The Board may amend, alter or discontinue the Directors Option Plan, but no
amendment, alteration or discontinuation will be made which would (i) impair
the rights of an optionee under a stock option without the optionee's consent,
except such an amendment as would cause the Directors Option Plan to qualify
for the exemption provided by Rule 16b-3 or (ii) disqualify the Directors
Option Plan from the exemption provided by Rule 16b-3. In addition, (i) no
amendment will be made without the approval of the Company's shareholders to
the extent such approval is required by law or agreement, and (ii) the
Directors Option Plan will not be amended more often than once every six
months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
All stock options granted by the Company are non-qualified stock options for
purposes of the Code. The grant of non-qualified stock options does not result
in any taxable income to the participant. Upon the exercise of a non-qualified
stock option, the excess of the market value of the shares acquired over their
cost to the participant is taxable to the participant as ordinary income. TH
USA will generally be entitled to a corresponding deduction at the time such
amounts are included in income by a TH USA Plan participant. The participant's
tax basis for the shares is their fair market value at the time of exercise.
Income realized on the exercise of a non-qualified stock option is subject to
federal and (where applicable) state and local withholding taxes.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From August 1994 through the end of the Company's last fiscal year, the
Compensation Committee consisted of Mr. Adamko, who is the Chairman, and Mr.
Silver. In April 1997, Mr. Murray was appointed as an additional member of the
Compensation Committee.
10
<PAGE>
During the Company's last fiscal year, Sportswear Holdings was 50% owned by
Novel Enterprises, a Hong Kong corporation privately owned by members of the
Chao family (including Messrs. Silas K.F. Chou and Ronald K.Y. Chao), and 50%
owned by Gadwal Limited, a Hong Kong corporation in which Mr. Stroll has a
indirect beneficial ownership interest ("Gadwal"). In January 1997, Novel
Enterprises transferred its ownership interest in Sportswear Holdings to a
Hong Kong corporation under common control with Novel Enterprises. AIHL is
owned by Sportswear Holdings, Mr. Hilfiger and Mr. Horowitz. AIHL owns,
indirectly through a subsidiary, substantially all of the outstanding shares
of Pepe. Novel Enterprises and its affiliates also hold other interests in the
apparel industry, including an approximately 48% ownership interest in Novel
Denim.
Mr. Chou, the Chairman of the Board of Directors of the Company, is Chairman
of the Board of Directors of Pepe. Mr. Stroll, a Director of the Company and
Chief Executive Officer of THHK, is Group Chief Executive Officer and a
director of Pepe. Mr. Ng, an executive officer and Director of the Company, is
also a director of Pepe. Mr. Ma, an executive officer and Director of the
Company, and Mr. Chao, a Director of the Company, are directors of certain
subsidiaries of Pepe.
Messrs. Chou, Hilfiger, Stroll and Horowitz, executive officers and
Directors of the Company, are executive officers and directors of AIHL. Mr.
Ng, an executive officer and Director of the Company, is an executive officer,
and until May 1997 was a director, of AIHL.
Messrs. Chou and Stroll, executive officers and Directors of the Company,
are executive officers and directors of Sportswear Holdings. Mr. Chao, a
Director of the Company, is a director of Sportswear Holdings.
Messrs. Chou and Ma, executive officers and Directors of the Company, and
Mr. Chao, a Director of the Company, are executive officers and directors of
both Novel Enterprises and the transferee of Novel Enterprises' ownership
interest in Sportswear Holdings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain relationships and transactions between the Company and certain
directors and officers of the Company and certain of their affiliates are
described below.
Effective February 1, 1997, the Company entered into a licensing agreement
with Pepe to distribute the Company's men's and boys' sportswear (excluding
jeanswear and jeans related apparel) throughout the European market. Under
this agreement, the licensee pays Tommy Hilfiger Licensing, Inc. ("THLI") a
royalty based on a percentage of the value of licensed products sold by Pepe.
Except with the approval of THLI, all products sold by or through Pepe must be
purchased through THEH or TH USA pursuant to buying agency agreements. Under
these agreements, THEH and TH USA are paid a buying agency commission based on
a percentage of the cost of products sourced through them.
Effective June 30, 1996, the Company's joint venture arrangement with Tommy
Hilfiger Japan Co., Ltd. ("TH Japan") covering the Company's Japanese
operations expired. Effective July 1, 1996, the Company entered into an
exclusive license agreement for Japan with Novel-ITC Licensing Limited
("NIL"), a company jointly controlled by Itochu Corporation, which was the 51%
owner of TH Japan, and Novel Enterprises. Mr. Stroll indirectly owns a 3.5%
equity interest in NIL. Under the license agreement, NIL pays THLI a royalty
based on a percentage of the value of licensed products sold by THMJ
Incorporated ("THMJ"), NIL's sublicensee. Novel Enterprises and Messrs.
Stroll, Hilfiger and Horowitz indirectly own equity interests of 15.2%, 15.2%,
9.7% and 3.2%, respectively, in THMJ. Except with the approval of THLI, all
products sold by or through NIL or THMJ must be purchased through THEH or TH
USA pursuant to buying agency agreements. Under these agreements, THEH and TH
USA are paid a buying agency commission based on a percentage of the cost of
products sourced through them. Pursuant to this new arrangement, royalties and
commissions totaled $2,745,000 during fiscal year 1997. Pursuant to the prior
arrangement, royalties and commissions totaled $488,000 during fiscal year
1997, $1,939,000 during fiscal year 1996 and $1,222,000 during fiscal year
1995.
11
<PAGE>
Effective October 1, 1995, the Company entered into a license agreement with
a related party, AIHL (formerly SEL International Investments Corp.), the
parent of Pepe, for the manufacture, sale and distribution of men's, women's
and girl's jeanswear and jeans related apparel (which includes women's and
girls' casual wear) bearing the TOMMY HILFIGER(R) registered trademarks. The
Company received a non-interest bearing note receivable from AIHL in
connection with this transaction. The note which has a face value of
$5,000,000, and is due on September 30, 2000, is recorded at its present value
of $3,735,000. Under this license agreement, the Company receives royalties
from subsidiaries of Pepe based upon a percentage of net sales of licensed
products. The fiscal 1997 results of operations include $9,963,000 of such
royalties. Net sales included in the Company's consolidated statements of
operations for these licensed products prior to this agreement were
$12,370,000 in fiscal 1996 and $9,104,000 in fiscal 1995. In addition, in
connection with this license, a subsidiary of Pepe leases certain space at the
Company's U.S. headquarters, for which rent of $214,000 was received by the
Company in fiscal 1997.
TH USA purchases finished goods in the ordinary course of business from
affiliates of Novel Enterprises. Such purchases amounted to $9,852,000 during
the fiscal year ended March 31, 1997. In addition, contractors of the Company
purchase raw materials in the ordinary course of business from affiliates of
Novel Enterprises pursuant to the Company's designation of such sources as
acceptable suppliers. Such purchases amounted to $5,811,000 during the fiscal
year ended March 31, 1997.
THEH has entered into a buying agency agreement with Tommy Hilfiger Canada,
Inc., a Canadian licensee, in which Mr. Stroll, a Director of the Company and
Chief Executive Officer of THHK, has an indirect beneficial ownership
interest. Under this agreement, THEH receives commissions based on a
percentage of the cost of goods sourced on behalf of the licensee. THLI
receives a royalty from the licensee based upon a percentage of net sales of
licensed products. The Company's results of operations include $2,378,000 for
the year ended March 31, 1997 for commissions and royalties received from this
licensee.
The Company sells merchandise in the ordinary course of business to a retail
store that is owned by Mr. Hilfiger's sister. Sales to this customer amounted
to approximately $435,000 during the year ended March 31, 1997.
THEH has a consulting agreement with an affiliate, Fasco International,
pursuant to which THEH pays Fasco International $500,000 per year, plus
reimbursement of expenses. The agreement has renewable one year terms. The
fees and related expenses under this consulting agreement totaled $500,000
during the year ended March 31, 1997.
THEH has a consulting agreement with an affiliate of Mr. Stroll. THEH paid
fees of $375,000 in fiscal 1997 to such affiliate.
Under the terms of an agreement with Novel Enterprises, THHK reimburses
Novel Enterprises for certain general and administrative expenses incurred by
it on behalf of THHK. Payments made to Novel Enterprises for the year ended
March 31, 1997 were $58,000.
The law firm of Gursky & Associates, P.C., of which Steven Gursky, Secretary
of TH USA and Assistant Secretary of the Company, is a member, provides legal
services to the Company and its subsidiaries. Payments to Gursky & Associates,
P.C., excluding reimbursement of expenses, were approximately $1,301,000 in
fiscal year 1997. Mr. Gursky is a cousin of Mr. Horowitz, an executive officer
and Director of the Company.
The Audit Committee of the Board of Directors monitors and approves
transactions between the Company and its affiliates to seek to provide that
such transactions are on terms which are no less favorable as a whole to the
Company than could be obtained from unaffiliated parties. The Audit Committee
is composed of Non-Employee Directors who are not affiliated with Novel
Enterprises, Novel Denim, Gadwal, Sportswear Holdings, AIHL, Pepe, NIL or
THMJ.
12
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
reviewing and approving the Company's compensation policies and the
compensation paid to its executive officers, including the Named Executive
Officers. The Committee is currently comprised of Messrs. Joseph M. Adamko,
who serves as Chairman, Clinton V. Silver and Simon Murray, each of whom is a
Non-Employee Director.
GENERAL POLICIES REGARDING COMPENSATION OF EXECUTIVE OFFICERS
In establishing compensation and benefit levels for executive officers, the
Committee seeks to (1) attract and retain individuals of superior ability and
managerial talent, (2) motivate executive officers to increase Company
performance, and (3) reward executives for exceptional individual
contributions to the achievement of the Company's business objectives. Each of
these compensation criteria is measured both internally and in comparison to
industry averages and standards, thereby providing the Committee with
comparative guidelines when determining executive compensation levels. The
Company's compensation structure consists of base salary, variable annual cash
bonuses and stock based long-term incentive awards in the form of stock
options.
In determining salary and bonus levels for executive officers, the
Compensation Committee reviews certain Company performance factors, including
net revenue, operating earnings, net income and net profit margin. Performance
is measured in terms of both quantitative and qualitative goals at the
corporate, departmental and individual levels.
The Committee has adopted a policy to seek to maintain full deductibility of
executive compensation within the guidelines of Section 162(m) of the Internal
Revenue Code of 1986, as amended. Pursuant to this policy, the Committee
adopted and the shareholders approved the SEIC Plan described above under
"Certain Employment Agreements."
Certain of the Company's executive officers are eligible to receive stock
options in accordance with the Company's stock incentive plans. See "Stock
Option Plans." The objective of such grants is to align the long-term
interests of the Company's executives with those of its shareholders. The
Compensation Committee has the responsibility of governing stock option grants
to eligible executive officers and employees of the Company.
Cash compensation levels, including salary and bonus, of certain of the
Company's executive officers, including certain of the Named Executive
Officers, are determined based upon the amounts and formulas prescribed by
each such executive's employment agreement. See "Certain Employment
Agreements." These employment agreements are generally long-term with a view
toward achieving consistency at the higher levels of the Company's management
ranks, and contain variable salary and bonus structures which directly link
the compensation paid to certain executive officers to the Company's
satisfactory achievement of certain performance goals. Performance-based
compensation is generally determined based upon the attainment of certain
annual net revenue, operating earnings and net profit margin thresholds. Such
bonus payments, other than bonus payments prescribed by the employment
agreements, are generally at the discretion of the Committee and may be
reduced from the amounts prescribed by the formulas if, in the determination
of the Committee, such an adjustment is warranted.
Compensation levels are analyzed by the Committee through an assessment of
prevailing compensation levels among the Company's competitors. The Company's
competitors, for this purpose, include certain of the companies included in
the industry index used for comparison with the Company's performance in the
Cumulative Total Return graph which follows this report, as well as other
companies which, in the Committee's view, compete with the Company for
executive talent. These competitors may also include non-public companies and
companies in related industries such as retailing or general apparel
manufacturing.
In selected cases, the Committee may feel that exceptional executive talent
may only be attracted and retained by compensation at the high end of
prevailing levels among the Company's competitors. In view of the
13
<PAGE>
considerations described below, the Committee believes that compensation for
certain executive officers, and Messrs. Hilfiger and Horowitz in particular,
which are at the high end of the range for the Company's competitors, are
appropriate.
Long-term incentive compensation of the Company's executive officers, when
granted, generally takes the form of stock option grants of the Company's
Ordinary Shares. These stock option grants are available under the Plans to
certain executive officers and may be utilized to provide incentives to
certain of the Company's officers, as well as the majority of its employees.
FISCAL YEAR 1997 COMPENSATION
Pursuant to Mr. Hilfiger's employment agreement, which has been in effect
since 1989, his annual cash compensation is fixed at 1.5% of certain of the
Company's net sales and, accordingly, year-to-year increases in his
compensation are tied to increases in such sales. The Company's net sales
increased 38.4% in fiscal year 1997, which increase was largely due to the
success of Mr. Hilfiger's designs, his development of the TOMMY HILFIGER(R)
brand and image across an increasingly broad range of in-house and licensed
products and his insight into the direction of fashion industry trends. The
Committee reviewed other compensation arrangements in the apparel industry
which are based on a percentage of net sales and found that Mr. Hilfiger's
compensation, while at the high end of the range in terms of total dollars
paid, was not unreasonable in terms of the percentage paid. In addition, in
consideration of the increasing importance of licensing as a component of the
Company's profitability and growth, and specifically in recognition of Mr.
Hilfiger's personal contribution in furthering the licensing activity, the
Compensation Committee approved a special discretionary bonus for fiscal year
1997 of $4,500,000, of which $3,500,000 was granted on a deferred basis.
Consistent with the Committee's policy regarding deductibility of executive
compensation, the Deferred Bonus payments are intended to be fully deductible
under Section 162(m). See "Certain Employment Agreements."
The other Named Executive Officers, except for Mr. Horowitz, received salary
and bonus compensation pursuant to employment and/or consulting arrangements.
Such compensation represents, in the opinion of the Committee based upon a
review of industry standards, compensation commensurate with their respective
contributions to the continued growth, profitability, strategic direction and,
ultimately, shareholder return as depicted in the Cumulative Total Return
graph which follows this report. Significant achievements by these executives
during the past year include the continued expansion of the Company's men's
in-store shop and boyswear fixtured area programs, a significant broadening of
the range of product offerings (both in-house and through licensing
arrangements), including athletic wear, women's fragrance, prescription
eyewear, footwear and women's casualwear, the continued expansion of Company's
channels of distribution in the retail arena, and the development and
implementation of strategies for international growth.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Joel J. Horowitz is the Chief Executive Officer and President of the
Company. The fiscal year 1997 base salary of $473,000 represents a 10%
increase over the prior year and is consistent with the average increase given
to all employees of the Company. The contractual bonus paid under his
employment agreement was capped at $777,000 and is based upon a percentage of
operating earnings. Mr. Horowitz's fiscal year 1997 performance-based
compensation, which is determined in accordance with the SEIC Plan approved by
the shareholders at the 1995 Annual Meeting of Shareholders, is based on a
percentage of operating earnings less the amount of all other bonuses (which
includes the 1997 contractual bonus) based on the operating earnings of the
Company or any of its subsidiaries. Mr. Horowitz received aggregate bonuses of
$7,174,000 under these arrangements in respect of fiscal year 1997.
The Committee compared the total compensation of Mr. Horowitz to a sample
which included chief executive officers of companies with publicly disclosed
compensation data. The Company and the Committee consider this sample group of
companies to be either peers or competitors in the apparel industry. The total
fiscal
14
<PAGE>
year 1997 compensation payable to Mr. Horowitz was at the high end of the
range of the sample group and is consistent with the Company's executive
compensation philosophy described above. The Committee noted that, as depicted
by the graph that follows this report, the cumulative total return achieved by
the Company's shareholders since the Company's initial public offering in 1992
far exceeds the returns realized by the general and industry-specific indexes.
COMPENSATION COMMITTEE
Joseph M. Adamko, Chairman
Clinton V. Silver
Simon Murray
15
<PAGE>
COMPARATIVE PERFORMANCE BY THE COMPANY
The Securities and Exchange Commission requires the Company to present a
chart comparing the cumulative total shareholder return on its Ordinary Shares
with the cumulative total shareholder return on (1) a broad equity market
index and (2) a published industry index or peer group, in each case assuming
reinvestment of all dividends. Although the chart would normally be for a
five-year period, the Ordinary Shares of the Company began public trading on
September 22, 1992 and, as a result, the following chart commences as of such
date. This chart compares the cumulative total shareholder return of the
Ordinary Shares with (1) the S&P 500 Index and (2) the S&P Textiles Index,
assuming in each case an investment of $100 on September 22, 1992 and
reinvestment of all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG TOMMY HILFIGER CORPORATION, S&P 500 INDEX, AND S&P TEXTILES INDEX
<CAPTION>
Measurement period Tommy
Hilfiger
(Fiscal year Covered) Corp. S&P 500 Index S&P Textiles Index
- --------------------- --------- ------------- ------------------
<S> <C> <C> <C>
Measurement PT -
9/22/92 $ 100 $ 100 $ 100
FYE 3/31/93 $ 173 $ 110 $ 101
FYE 3/31/94 $ 239 $ 112 $ 83
FYE 3/31/95 $ 293 $ 129 $ 82
FYE 3/31/96 $ 612 $ 170 $ 96
FYE 3/31/97 $ 697 $ 204 $ 130
</TABLE>
16
<PAGE>
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities ("Reporting
Persons") to file reports of ownership and changes in ownership ("Section 16
Reports") with the Securities and Exchange Commission ("SEC") and the New York
Stock Exchange. Reporting Persons are required by SEC regulation to furnish
the Company with copies of all Section 16 Reports they file.
Based solely on its review of the copies of such Section 16 Reports received
by it, or written representations received from certain Reporting Persons, all
Section 16(a) filing requirements applicable to the Company's Reporting
Persons during and with respect to the fiscal year ended March 31, 1997 have
been complied with on a timely basis.
PROPOSAL TWO: AMENDMENT OF STOCK OPTION PLANS
In September 1992, the Company and its subsidiaries adopted the Plans
authorizing the issuance of an aggregate of up to 1,450,000 Ordinary Shares to
directors, officers and employees of the Company and its subsidiaries, as well
as 1,520,000 Ordinary Shares that were reserved for issuance in connection
with an option granted a former director and executive officer of the Company
pursuant to his employment agreement. In December 1993, July 1995 and November
1996, the Company's shareholders approved amendments to the Plans to increase
by 1,000,000, 1,000,000 and 500,000, respectively, the number of Ordinary
Shares reserved for issuance under the Plans. Messrs. Hilfiger, Horowitz,
Chou, Chao and Stroll are not eligible for grants under the Plans.
As of August 31, 1997, 5,463,075 options, net of cancellations, were granted
under the Plans, of which 2,791,695 have been exercised, including 2,010,000
options granted under the Plans to directors and officers of the Company as a
group, of which 1,689,930 have been exercised. The average exercise price of
all such options granted was $22.30 per Ordinary Share. The outstanding
options expire on the tenth anniversary of their date of grant.
As of August 31, 1997, 336,690 of the outstanding options granted were
vested and exercisable and 6,925 shares were available for future grants under
the Plans.
In May 1997, the Board of Directors of the Company and its subsidiaries
amended the Plans to increase by 750,000 the number of Ordinary Shares
authorized for issuance in connection with options granted to directors,
officers and employees of the Company and its subsidiaries, subject to the
approval of the Company's shareholders at the Annual Meeting. See "Stock
Option Plans" for a further description of the Plans.
The affirmative vote of a majority of the shares voting, in person or by
proxy, on the proposal at the Annual Meeting is required to approve the
amendment of the Plans.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL TWO.
17
<PAGE>
PROPOSAL THREE: APPOINTMENT OF AUDITORS
The Board of Directors has selected the firm of Price Waterhouse LLP as
independent accountants to audit the accounts of the Company for the 1998
fiscal year, subject to approval by shareholders. A majority of the votes cast
at the Annual Meeting is required for such approval.
Price Waterhouse LLP has served as independent accountants for the Company
since 1992. A representative of Price Waterhouse LLP will attend the Annual
Meeting and will have the opportunity to make a statement and respond to
appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL THREE.
PROPOSALS OF SHAREHOLDERS
Shareholder proposals intended to be included in the Company's Proxy
Statement for the 1998 Annual Meeting of Shareholders must by received by the
Company by May 22, 1998.
OTHER MATTERS
The Board does not know of any other business that may be presented for
consideration at the Annual Meeting. If any business not described herein
should come before the Annual Meeting, the persons named in the enclosed Proxy
Card will vote on those matters in accordance with their best judgment.
The Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1997, and its Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, in each case exclusive of exhibits, will be mailed without charge to any
shareholder entitled to vote at the Annual Meeting, upon written request to
Tommy Hilfiger U.S.A., Inc., 25 West 39th Street, New York, New York 10018,
Attn: Investor Relations.
By order of the Board of Directors
LAWRENCE T.S. LOK
Secretary
Hong Kong
September 19, 1997
18
<PAGE>
TOMMY HILFIGER CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
1997 ANNUAL MEETING OF SHAREHOLDERS--OCTOBER 27,1997
The undersigned hereby appoints Silas K.F. Chou and Benjamin M.T. Ng, and each
of them, with full power of substitution, for and in the name of the undersigned
to vote all Ordinary Shares, par value $.01 per share, of Tommy Hilfiger
Corporation, a British Virgin Islands corporation, that the undersigned would be
entitled to vote if personally present at the 1997 Annual Meeting of
Shareholders, to be held at The Sandy Lane Hotel, Sandy Lane, St. James,
Barbados on Monday, October 27, 1997 at 12:00 noon, local time, and at any
adjournment thereof, upon the matters described in the Notice of Annual Meeting
and Proxy Statement dated September 19, 1997, receipt of which is hereby
acknowledged, subject to any direction indicated on the reverse side of this
card and upon any other business that may properly come before the meeting or
any adjournment thereof, hereby revoking any proxy heretofore executed by the
undersigned to vote at said meeting.
This proxy is being solicited by the Board of Directors of Tommy Hilfiger
Corporation. THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICATED,
THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1,2 AND 3 AND, WITH RESPECT TO ITEM 4,
AS SAID PROXIES, AND EACH OF THEM, MAY DETERMINE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.
Please mark
your vote as
indicated in [X]
this example
1. Election of Directors.
FOR all nominees
listed to the right NOMINEES: B.M.T. Ng, L.S. Stroll, L.M.Y. Ma,
(except as marked C.V. Silver
to the contrary) [ ]
WITHHOLD AUTHORITY (INSTRUCTION: To withhold authority to vote for
to vote for all nominees any individual nominee, write that nominee's
listed to the right [ ] name in the space provided below.)
------------------------------------------------
2. Approval of Amendment of Stock Option Plans.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratification of Appointment of Auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion on such other matters as may properly come before the
meeting or any adjournment thereof.
NOTE: Please date and sign this proxy exactly as your names appears hereon. In
the case of joint owners, each joint owner should sign. When signing in a
fiduciary or representative capacity, please give your full title. If this proxy
is submitted by a corporation or partnership, it should be executed in the full
corporate or partnership name by a duly authorized person.
Dated: , 1997
------------------
- ------------------------------
Signature
- ------------------------------
Signature
- --------------------------------------------------------------------------------
