<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
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 Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
TOMMY HILFIGER CORPORATION
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 2, 1998
The 1998 Annual Meeting of Shareholders of Tommy Hilfiger Corporation will
be held at PricewaterhouseCoopers, Price Waterhouse Centre, Lower Collymore
Rock, Bridgetown, St. Michael, Barbados, on Monday, November 2, 1998 at 11:00
a.m., local time, for the following purposes:
1. To elect three directors to the Board of Directors of the Company for
a term to expire at the 2001 Annual Meeting of Shareholders;
2. To consider and act upon a proposal to renew the Tommy Hilfiger
U.S.A., Inc. Supplemental Executive Incentive Compensation Plan;
3. To consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's auditors for the fiscal year
ending March 31, 1999;
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 18, 1998
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 25, 1998
<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 1998 Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held on Monday, November 2, 1998 at 11:00 a.m., local time, at
PricewaterhouseCoopers, Price Waterhouse Centre, Lower Collymore Rock,
Bridgetown, St. Michael, 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 25, 1998.
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, 1998 is enclosed herewith or
has previously been sent to you. Such report is not a part of this Proxy
Statement.
On September 18, 1998, the record date for the determination of shareholders
entitled to vote at the Annual Meeting, 46,861,878 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.
Ordinary Shares represented by proxies that withhold authority to vote for a
nominee for director or indicate an abstention or broker non-vote will be
treated as shares present and entitled to vote for purposes of determining the
presence of a quorum. However, such shares will not be treated as votes cast
at the Annual Meeting and thus will have no effect on the outcome. The
presence, in person or by proxy, of at least 50% of the votes of the Ordinary
Shares entitled to vote on proposals at the Annual Meeting will constitute a
quorum.
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth data as of September 15, 1998 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.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT
OWNED OF CLASS(1)
------------ -----------
<S> <C> <C>
AIHL Investment Holdings Limited(2)
Craigmuir Chambers
P.O. Box 71
Road Town, Tortola
British Virgin Islands...................... 9,045,930 19.1%
The Equitable Companies Incorporated(3)
1290 Avenue of the Americas
New York, NY 10104.......................... 4,474,120 9.4%
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Silas K.F. Chou.............................. -- (4) --
Thomas J. Hilfiger........................... 10,000(4) *
Joel J. Horowitz............................. 10,600(4) *
Lawrence S. Stroll........................... -- (4) --
Benjamin M.T. Ng............................. 153,070(5) *
Ronald K.Y. Chao............................. 2,800(4)(6) *
Lester M.Y. Ma............................... 7,000(6) *
Joseph M. Adamko............................. 8,600(7) *
Clinton V. Silver............................ 9,200(6) *
Simon Murray................................. 2,000(6) *
All directors and executive officers as a
group (including Ordinary Shares owned by
AIHL Investment Holdings Limited)
(14 persons)(2)............................. 9,252,200 19.5%
</TABLE>
- --------
* Less than 1%.
(1) Shares outstanding includes the right to acquire beneficial ownership of
551,486 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 September 15, 1998.
(2) Information based on Amendment to Schedule 13D dated September 7, 1998
filed with the Securities and Exchange Commission (the "SEC") by AIHL
Investment Holdings Limited ("Holdings"). According to the Schedule 13D,
Holdings has shared dispositive power and shared voting power over all of
the shares. As set forth in the Schedule 13D, Holdings is owned 67.9% by
Sportswear Holdings Limited ("Sportswear"), 21.825% by Mr. Hilfiger,
7.275% by Mr. Horowitz and 3% by Anasta Holdings Limited ("Anasta"), an
affiliate of Mr. Chou, and Sportswear is owned 50% by Westleigh Limited
("Westleigh"), which is privately owned by members of the Chao family
(including Messrs. Chou and Chao), and 50% by Flair Investment Holdings
Limited ("Flair"), in which Mr. Stroll has an indirect beneficial
ownership interest. According to the Schedule 13D, each of Sportswear,
Anasta, Westleigh, Flair, Mr. Hilfiger and Mr. Horowitz may be deemed to
have shared dispositive power and shared voting power over, and thus to
beneficially own, all of the Ordinary Shares owned by Holdings through
their respective direct or indirect ownership of the capital stock of
Holdings.
(3) Information based on Amendment to Schedule 13G dated March 9, 1998 filed
with the SEC by The Equitable Companies Incorporated ("Equitable").
According to the Schedule 13G, (a) Equitable, a parent holding company,
has sole dispositive power over 4,417,920 of the shares, shared
dispositive power over
2
<PAGE>
1,600 of the shares, sole voting power over 1,134,032 of the shares and
shared voting power over 3,281,200 of the shares and (b) certain of
Equitable's subsidiaries have sole dispositive power over 4,472,500 of the
shares, shared dispositive power over 1,600 of the shares, sole voting
power over 1,188,632 of the shares and shared voting power over 3,281,200
of the shares.
(4) Not including Ordinary Shares owned by Holdings. See footnote 2 above.
(5) Issuable upon the exercise of currently exercisable stock options under
the Plans (as defined below).
(6) Issuable upon the exercise of currently exercisable stock options under
the Directors Option Plan (as defined below).
(7) Includes 7,200 Ordinary Shares issuable upon the exercise of currently
exercisable stock options under the Directors Option Plan.
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 three 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: Joel J. Horowitz, Ronald K.Y.
Chao and Simon Murray.
The principal occupations and other biographical information of the nominees
are as follows:
Joel J. Horowitz, 47, 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, 59, has been a Director of the Company since 1992. In
1996, Mr. Chao was appointed as Vice Chairman of Novel Enterprises Limited
("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 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 February 1997.
Simon Murray, 58, has been a Director of the Company since April 1997. From
1993 to 1997, Mr. Murray was the Executive Chairman Asia Pacific of Deutsche
Bank AG and is currently the Chairman of General Enterprise Management
Services, a private equity fund management company sponsored by Simon Murray
And Associates and Deutsche Bank. Mr. Murray is also a director of a number of
public companies in the Far East, including Hutchison Whampoa Limited and
Orient Overseas (International) Limited, and other companies in Europe,
including Compagnie General Des Eaux.
The election of the directors requires the affirmative vote of a plurality
of the Ordinary Shares voted, in person or by proxy, at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL ONE.
3
<PAGE>
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AND NON-DIRECTOR EXECUTIVE OFFICERS
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......................................... 52 1999
Thomas J. Hilfiger...................................... 47 1999
Lawrence S. Stroll...................................... 39 2000
Benjamin M.T. Ng........................................ 36 2000
Lester M.Y. Ma.......................................... 51 2000
Joseph M. Adamko........................................ 66 1999
Clinton V. Silver....................................... 68 2000
</TABLE>
Silas K.F. Chou has been Chairman of the Board 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 Novel Denim since 1996. From 1992 to 1998, Mr. Chou was Chairman of
the Board of Pepe Jeans London Corporation and its predecessor (collectively,
"PJLC") and Chief Executive Officer of AIHL Investment Group Limited and its
predecessor (collectively, "AIHL").
Thomas J. Hilfiger has been a Director since 1992 and Honorary Chairman of
the Board 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 Tommy Hilfiger, Inc. ("THI") from 1982 to 1989. Mr. Hilfiger has
been designing clothes under the Tommy Hilfiger trademarks since 1984.
Lawrence S. Stroll 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 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 was also Group Chief
Executive Officer of PJLC from 1993 to 1998 and Chairman of the Board of AIHL
from 1992 to 1998. Mr. Stroll's legal name is Lawrence S. Strulovitch.
Benjamin M.T. Ng has been a Director of the Company since 1992 and its Chief
Financial Officer and Executive Vice President-Strategic Development since May
1998. From 1992 to 1998, Mr. Ng served as Executive Vice President-Corporate
Finance of the Company. 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 and its affiliates
other than the Company.
Lester M.Y. Ma has been a Director of the Company since 1992 and served as
its Treasurer from 1996 to 1997. Mr. Ma has been an Executive Director and
Group Chief Accountant of Novel Enterprises for more than the past five years.
In addition, Mr. Ma has been a director of Novel Denim since 1992 and its
Treasurer since February 1997. Mr. Ma's legal name is Mang Yin Ma.
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.
Clinton V. Silver 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, served 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. Mr. Silver is also a non-executive director of Hillsdown Holdings plc
and the Pentland Group plc.
4
<PAGE>
Ronald K.Y. Chao and Silas K.F. Chou are brothers.
The principal occupations and other biographical information of the
Company's non-director executive officers are as follows:
Joel H. Newman, 57, has been the Company's Chief Administrative Officer and
Executive Vice President-Finance since May 1998. From 1997 to 1998, Mr. Newman
served as Executive Vice President-Operations of the Company. Since 1993, Mr.
Newman has also held various senior operations and financial positions with
Tommy Hilfiger U.S.A., Inc. ("TH USA"). Prior to joining the Company, Mr.
Newman held various senior operations and financial positions with major
companies in the apparel wholesale and retail industries.
Arthur Bargonetti, 64, has been Senior Vice President-Operations of the
Company since May 1998. In addition, Mr. Bargonetti has been the Chief
Operating Officer and Executive Vice President of Pepe Jeans USA, Inc. ("Pepe
USA"), which was acquired by TH USA in May 1998, since 1994. Prior thereto,
Mr. Bargonetti was the Chief Operating Officer and Executive Vice President of
Bidermann Industries U.S.A., Inc.
Joseph Scirocco, 41, has been Senior Vice President and Treasurer of the
Company since December 1997. Prior to joining the Company, Mr. Scirocco was
employed in the Retail and Consumer Products Group of Price Waterhouse LLP,
where he served as an Audit Partner since 1990.
Lawrence T.S. Lok, 41, has been Secretary of the Company and Novel
Enterprises since December 1994. In addition, Mr. Lok has been Secretary of
Novel Denim since February 1997. Mr. Lok has also been Deputy Group Chief
Accountant of Novel Enterprises for more than the past five years.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has standing Audit, Compensation and
Investment Committees (the "Standing Committees").
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.
In October 1997, a Special Committee of Independent Directors, consisting of
Messrs. Murray, Adamko and Silver (the "Special Committee"), was formed to
consider and negotiate the possible acquisition of the Company's womenswear,
jeanswear and Canadian licensees, which acquisition was completed in May 1998.
During the last fiscal year, each of the Board of Directors and the
Compensation Committee held four meetings. Each of the Audit and Investment
Committees held two meetings. The Special Committee held eight meetings. While
serving as a director, each of the directors participated in at least 75% of
the meetings of the Board of Directors during the 1998 fiscal year and, except
for Mr. Ma with respect to the Investment Committee, at least 75% of the
meetings of all Committees of the Board on which such director served.
5
<PAGE>
DIRECTOR COMPENSATION
Directors who are officers or employees of the Company or any of its
subsidiaries receive no additional compensation for their service on the Board
and its Committees. All other directors of the Company ("Non-Employee
Directors") receive the following retainers: $25,000 per annum for members of
the Board; $5,000 per annum for members of Standing Committees; and $3,000 per
annum for Chairmen of Standing Committees. Each member of the Special
Committee received a supplemental fee of $15,000 in fiscal year 1998. The Non-
Employee Directors also receive $2,000 for attendance at each meeting of the
Board or a Committee.
In August 1994, the Board of Directors and the Company's shareholders
approved the Directors Option Plan (as defined below), whereby directors who
are not officers or employees of the Company or any of its subsidiaries are
eligible to receive an initial grant of 10,000 options, and subsequent annual
grants of 1,000 options, to acquire Ordinary Shares of the Company at the fair
market value on the dates of grant. See "Stock Option Plans."
CERTAIN LITIGATION
On February 2, 1998, February 12, 1998 and February 17, 1998, three alleged
holders of Ordinary Shares filed purported derivative actions in New York
State court on behalf of the Company against the members of the Board of
Directors. The actions were later consolidated and an amended complaint was
served on May 29, 1998. The amended complaint alleges that the Board's
approval of the Acquisition (as defined below) constitutes a breach of
fiduciary duty and corporate waste, and seeks equitable relief and damages in
favor of the Company, and an award of fees to the plaintiffs' attorneys. On
June 15, 1998, the Company and its directors moved to dismiss the consolidated
action on several grounds. The motion to dismiss remains pending.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid and accrued by the
Company and its subsidiaries for the fiscal years ended March 31, 1998, 1997
and 1996 to the Company's chief executive officer and the four other most
highly compensated executive officers (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- -----------------
AWARDS
-----------------
SECURITIES
NAME AND PRINCIPAL FISCAL UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) STOCK OPTIONS (#) COMPENSATION ($)
------------------ ------ ---------- --------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Joel J. Horowitz........ 1998 505,000 9,343,000 -- 600(1)
Chief Executive Officer 1997 473,000 7,174,000 -- 353
and President 1996 430,000 5,016,000 -- 270
Thomas J. Hilfiger...... 1998 10,464,000 3,500,000(2) -- 600(1)
Honorary Chairman and 1997 8,498,223 4,500,000(2) -- 353
Principal Designer 1996 6,510,179 800,000 -- 270
Silas K.F. Chou......... 1998 750,000(3) 325,000 -- --
Chairman of the Board 1997 750,000(3) 325,000 -- --
1996 750,000(3) 325,000 -- --
Lawrence S. Stroll...... 1998 625,000(4) 325,000 -- --
Chief Executive Officer 1997 625,000(4) 325,000 -- --
of THHK 1996 625,000(4) 325,000 -- --
Benjamin M.T. Ng........ 1998 257,500 700,000 5,000 5,229(5)
Chief Financial Officer 1997 250,000 211,375 5,000 4,044
and Executive Vice 1996 150,000 288,625 150,000 4,093
President--Strategic
Development
</TABLE>
- --------
(1) Amount represents premiums paid by the Company for group term life
insurance on behalf of the Named Executive Officer.
(2) All of the 1998 amount, and $3,500,000 of the 1997 amount, will be payable
on a deferred basis. See "Certain Employment Agreements."
(3) 1998 and 1997 amounts include 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. 1996 amount includes 50% of the fees paid
pursuant to a consulting agreement between TH USA and Falcon
International, Inc. ("Falcon International"), a subsidiary of Sportswear.
See "Certain Relationships and Related Transactions."
(4) Includes (i) for 1998 and 1997, 50% of the fees paid pursuant to a
consulting agreement between THEH and Fasco International, and for 1996,
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 $4,629 and premiums paid by the
Company for group term life insurance on behalf of Mr. Ng of $600.
7
<PAGE>
STOCK OPTION GRANTS
The following table sets forth information regarding grants of stock options
during fiscal year 1998 made to the only Named Executive Officer who has
received Company option grants.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE (1)
- ------------------------------------------------------------ --------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL STOCK
UNDERLYING OPTIONS
STOCK GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) FISCAL YEAR (2) ($/SH) DATE PRESENT VALUE ($)
---- ----------- --------------- ----------- ---------- --------------------
<S> <C> <C> <C> <C> <C>
Benjamin
M.T.
Ng..... 5,000 0.36% 38.625 04/28/07 91,292
</TABLE>
- --------
(1) The fair value of these options on the date of grant was estimated using
the Black-Scholes option-pricing model with the following assumptions:
volatility of 43%; risk-free interest rate of 6.8%; expected life of 5
years; and no future dividends. The dollar amount in this column is not
intended to forecast potential future appreciation, if any, of the
Company's Ordinary Shares.
(2) This percentage is calculated with respect to stock options granted under
the Plans during the last fiscal year. The stock options granted to Mr. Ng
during the last fiscal year were non-qualified options granted pursuant to
the Plans. Such options become exercisable in 20% increments each April
30, commencing April 30, 1998. See "Stock Option Plans."
STOCK OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding stock option exercises
during fiscal year 1998 by the only Named Executive Officer who has received
Company option grants, and the values of such officer's unexercised options as
of March 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES STOCK OPTIONS AT STOCK OPTIONS AT
ACQUIRED ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Benjamin M.T. Ng........ -- -- 151,070/9,000 4,490,492/166,938
</TABLE>
8
<PAGE>
CERTAIN EMPLOYMENT AGREEMENTS
Subsidiaries of the Company had employment agreements with Messrs. Hilfiger
and Horowitz during fiscal year 1998.
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 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 trademarks.
The 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 1998 of $505,000.
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 consolidated
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 $745,000 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. In August 1998, the Compensation Committee approved
an amendment to Mr. Horowitz's employment agreement to (i) extend its term
through March 31, 2004, (ii) delete the operating earnings bonus provisions
contained therein and (iii) increase the duration of the non-competition
obligations set forth therein from one year to two years. This amendment is
conditioned upon shareholder approval of the renewal of the SEIC Plan (as
defined below). See "Proposal Two: Proposal to Renew the Tommy Hilfiger
U.S.A., Inc. Supplemental Executive Incentive Compensation Plan."
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 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. However, the payments under
Mr. Horowitz's employment agreement will become subject to such restrictions
if such agreement is extended as described above.
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
in the period 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 is administered by the Compensation Committee and
provides for a cash award to Mr. Horowitz equal to 5 percent of operating
earnings (as defined above). 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
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any other bonuses paid or payable under any employment or bonus agreement
between the Company or TH USA and 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 1998, net of the
$745,000 bonus paid under his employment agreement, was $8,598,000. 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.
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 does not satisfy the
requirements of Section 162(m), 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 $3,500,000,
$4,500,000 and $800,000 for Mr. Hilfiger in fiscal years 1998, 1997 and 1996,
respectively. The full amount of the fiscal year 1998 bonus, and $3,500,000 of
the fiscal year 1997 bonus, was granted on a deferred basis as described below
(the "Deferred Bonuses").
The Deferred Bonuses (and any interest accrued thereon) will be paid in
annual installments on the last day of each fiscal year of the Company 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 Bonuses 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, November 1996 and
October 1997, the Company's shareholders approved amendments to the Plans to
increase by a total of 3,250,000 the number of Ordinary Shares reserved for
issuance under the Plans. In addition, in January 1998 the Compensation
Committee approved, and in May 1998 the Board of Directors adopted, an
amendment to the Plans to increase by 1,500,000 the number of Ordinary Shares
reserved for issuance thereunder.
Currently, over half of the full-time employees of the Company and its
subsidiaries are participants in the Plans.
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 has 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. 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.
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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 Option Plan, Non-
Employee Directors are eligible to receive stock options.
The Directors Option Plan is administered by the Company's Compensation
Committee. 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 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 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or 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.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From August 1994 through the end of the Company's 1997 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.
During the Company's last fiscal year, Sportswear, a British Virgin Islands
corporation, was 49.99% owned by Westleigh, a British Virgin Islands
corporation privately owned by members of the Chao family (including Messrs.
Silas K.F. Chou, Chairman of the Board of the Company, and Ronald K.Y. Chao, a
Director of the Company) and an affiliate of Novel Enterprises, and 49.99%
owned by Gadwal Limited, a Hong Kong corporation in which Mr. Stroll, a
Director of the Company and Chief Executive Officer of THHK, has a indirect
beneficial ownership interest ("Gadwal"). At the end of fiscal year 1998,
Gadwal transferred all of its assets, including its ownership interest in
Sportswear, to Flair, a British Virgin Islands corporation and a wholly owned
subsidiary of Gadwal. Also, subsequent to the end of fiscal year 1998,
Westleigh and Flair each increased its ownership percentage in Sportswear to
50%.
During the Company's last fiscal year, PJLC, a British Virgin Islands
corporation, was owned 100% by Blackwatch Investments Limited, a British
Virgin Islands corporation ("Blackwatch"). Blackwatch was owned 97% by AIHL, a
British Virgin Islands corporation, and 3% by Anasta, a British Virgin Islands
corporation and an affiliate of Mr. Chou. AIHL was owned 70% by Sportswear,
22.5% by Mr. Hilfiger, Honorary Chairman of the Board and Principal Designer
of the Company, and 7.5% by Mr. Horowitz, Chief Executive Officer, President
and a Director of the Company. Mr. Ng, Chief Financial Officer, Executive Vice
President--Strategic Development and a Director of the Company, and Mr. Ma, a
Director of the Company, may have certain economic interests based on the
performance of AIHL and its affiliates. Novel Enterprises and its affiliates
also hold other interests in the apparel industry, including an approximately
48% ownership interest in Novel Denim.
During the Company's last fiscal year, (i) Mr. Chou was Chairman of the
Board of PJLC and Mr. Stroll was Group Chief Executive Officer and a director
of PJLC, (ii) Mr. Ng was a director of PJLC, (iii) Messrs. Chao and Ma were
directors of certain subsidiaries of PJLC, (iv) Messrs. Chou, Stroll and Ng
were executive officers and directors of Blackwatch, (v) Messrs. Chou, Stroll,
Hilfiger, Horowitz and Ma were executive officers and directors of AIHL and
(vi) Mr. Ng was an executive officer, and until May 1997 was a director, of
AIHL.
Messrs. Chou and Stroll are executive officers and directors of Sportswear
and Mr. Chao is a director of Sportswear.
Messrs. Chou and Chao are directors of Westleigh Limited.
Messrs. Chou, Chao and Ma are executive officers and directors of Novel
Enterprises.
Mr. Chou is an executive officer, director and chairman of the compensation
committee of Novel Denim. Mr. Chao is a director of Novel Denim and Mr. Ma is
an executive officer and director of Novel Denim.
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.
The Acquisition
On January 26, 1998, Pepe USA entered into a share purchase agreement with
Lawvest Holdings Inc. ("Lawvest"), a company in which Mr. Stroll and his
descendants have a 100% beneficial ownership interest, to acquire Tomcan
Investments Inc. ("Tomcan"), the parent corporation of Tommy Hilfiger Canada
Inc. ("TH Canada"), the Company's Canadian licensee. Lawvest's sole
shareholder executed a guarantee of
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Lawvest's indemnification obligations under this agreement. On January 31,
1998, the Company entered into a stock purchase agreement (the "Stock Purchase
Agreement") with PJLC to acquire Pepe USA, the Company's United States
womenswear and jeanswear licensee, and TJ Far East Limited ("Pepe Far East"),
Pepe USA's buying agency affiliate. Also on January 31, 1998, AIHL executed a
guarantee of the performance by PJLC of its obligations (which guarantee and
obligations were subsequently assumed by affiliates of AIHL) under the Stock
Purchase Agreement. On May 8, 1998, following the approval by the shareholders
of the Company on May 5, 1998, the Company, through its wholly owned
subsidiaries, acquired Pepe USA and Pepe Far East from PJLC for an aggregate
purchase price of $755,760,000 in cash plus 9,045,930 Ordinary Shares of the
Company (the "Purchase Price Shares"; such transactions being referred to
herein as the "Acquisition"). Immediately following this transaction, Pepe USA
acquired from Lawvest all of the outstanding shares of Tomcan with funds
provided by PJLC using proceeds from the cash consideration paid to it in the
Acquisition.
At the time of the execution of the Stock Purchase Agreement, the Company
entered into a lock-up agreement (the "Lock-Up Agreement") with PJLC,
Blackwatch, AIHL, Anasta, Sportswear, Westleigh, Gadwal (which subsequently
assigned its rights and obligations thereunder to Flair), Mr. Hilfiger and Mr.
Horowitz (collectively, the "PJLC Affiliates"), prohibiting the transfer of
the Purchase Price Shares for two years from the date of the Acquisition, with
additional restrictions during the following three years on transfers of the
shares as a block, subject in each case to certain exceptions. Under the Lock-
Up Agreement, the two-year prohibition on transfers may only be amended with
the approval of a majority of the votes cast by disinterested holders of
Ordinary Shares at a meeting of the Company's shareholders. In connection with
the transfer of the Purchase Price Shares to Holdings in accordance with the
terms of the Lock-Up Agreement with respect to permitted transfers, Holdings
agreed to be bound by the terms and provisions of the Lock-Up Agreement.
At the time of the closing of the Acquisition, the Company entered into a
registration rights agreement with the PJLC Affiliates (with Flair substituted
for Gadwal) under which the PJLC Affiliates, along with their successors and
permitted transferees (including Holdings) under the Lock-Up Agreement, will
have the right to require the Company to register sales of the Purchase Price
Shares following the second anniversary of the Acquisition. At that time,
Messrs. Chou and Stroll also entered into a non-competition agreement with the
Company restricting their ability to compete in the United States or Canada
with the Pepe USA businesses for four years following the Acquisition.
At the date of the Acquisition, the licenses between the acquired companies
and the Company consisted of: a license with Pepe USA covering jeans and jeans
related apparel and women's and girls' casualwear in the United States (the
"Pepe United States License"); a license with T.H. International N.V., a
subsidiary of PJLC, covering jeans and jeans related apparel and women's and
girls' casualwear worldwide (other than in the United States and certain
specified countries) (the "Pepe International License"); a geographic license
with Tommy Hilfiger Europe B.V., a subsidiary of PJLC, covering men's and
boys' sportswear lines in Europe and certain other countries (the "Pepe
European License"); and a master geographic license for Canada with TH Canada
(the "Canadian License").
In connection with the Acquisition, the Company acquired the businesses
operated under the Pepe United States License and the Canadian License, the
Pepe International License was canceled and the license arrangements for
Europe previously covered by the Pepe International License were consolidated
under the Pepe European License. Accordingly, the Pepe European License was
amended to, among other things, include in its scope men's, women's and
children's jeanswear and jeans related apparel (including women's and girls'
casualwear) and to increase the minimum sales levels, guaranteed minimum
royalties and minimum advertising payments required thereunder. The Pepe
European License was also amended to provide the Company certain additional
rights in connection with any proposed future transfer of the business
conducted under the Pepe European License. In addition, in connection with the
Acquisition, the $5,000,000 note receivable from AIHL (as described below) was
canceled in consideration for a capital contribution being made to Pepe USA in
the same amount as the receivable.
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Other Relationships and Transactions
Effective February 1, 1997, the Company entered into the Pepe European
License with PJLC. PJLC subsequently assigned the license to a subsidiary,
Tommy Hilfiger Europe B.V. 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 the licensee. Except with the approval of THLI,
all products sold by or through the licensee 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. The distribution of products under this
arrangement began in fiscal 1998. Results of operations include $1,641,000,
for the year ended March 31, 1998, of royalties and commissions under this
arrangement.
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 its affiliates
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 $4,211,000 during fiscal year 1998.
Effective October 1, 1995, the Company entered into the Pepe United States
License and the Pepe International License with a related party, AIHL
(formerly SEL International Investments Corp.), the parent of PJLC. The U.S.
and international licenses were subsequently assigned by AIHL to PJLC, and by
PJLC to two of its subsidiaries, Pepe USA and T.H. International N.V.,
respectively. The Company received a note receivable from AIHL in connection
with this transaction. The note, which had a face value of $5,000,000 and a
maturity of September 30, 2000, was recorded at its present value of
$4,097,000 at March 31, 1998. Under this license agreement, the Company
received royalties from subsidiaries of PJLC based upon a percentage of net
sales of licensed products. The fiscal 1998 results of operations include
$19,016,000 of such royalties. In addition, in connection with this license,
Pepe USA leased certain space at the Company's U.S. headquarters, for which
rent of $262,000 was received by the Company in fiscal 1998.
Prior to the Acquisition, TH USA purchased finished goods in the ordinary
course of business from subsidiaries of PJLC. Such purchases amounted to
$8,400,000 in the fiscal year ended March 31, 1998.
TH USA purchases finished goods in the ordinary course of business from
affiliates of Novel Enterprises. Such purchases amounted to $14,600,000 during
the fiscal year ended March 31, 1998. 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 $5,930,000 during the fiscal
year ended March 31, 1998.
Prior to the Acquisition, the Company was party to the Canadian License and
a related buying agency agreement with TH Canada, in which Mr. Stroll, a
Director of the Company and Chief Executive Officer of THHK, had an indirect
beneficial ownership interest. Under the Canadian License, the Company
received a royalty from the licensee based upon a percentage of net sales of
licensed products. Under the buying agency agreement, the Company received
commissions based on a percentage of the cost of goods sourced on behalf of
the licensee. Results of operations include $3,885,000 for the year ended
March 31, 1998 for royalties and commissions earned 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 $476,000 during the year ended March 31, 1998.
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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, 1998.
THEH has a consulting agreement with an affiliate of Mr. Stroll. THEH paid
fees of $375,000 in fiscal 1998 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, 1998 were $77,000.
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 $1,919,000 in
fiscal year 1998. 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 comprised of Non-Employee Directors who are not affiliated with Novel
Enterprises, Novel Denim, Westleigh, Flair, Sportswear, Anasta, Holdings,
AIHL, Blackwatch, PJLC, NIL or THMJ.
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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 (i) attract and retain individuals of superior ability and
managerial talent, (ii) motivate executive officers to increase Company
performance and (iii) reward executives for exceptional individual
contributions to the achievement of the Company's business objectives. 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 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.
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, as well as the SEIC Plan approved
by the Company's shareholders. 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 and the SEIC
Plan, 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.
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 Company's
stock incentive 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. 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 Committee has the responsibility of overseeing
stock option grants to eligible executive officers and employees of the
Company.
Compensation levels are analyzed by the Committee from time to time 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.
While the Committee has a policy of seeking, in all material respects, to
maintain full deductibility of executive compensation within the guidelines of
Section 162(m) of the Code, the Committee has retained the flexibility to
structure compensation arrangements that are not fully deductible under
Section 162(m) where the Committee determines, based upon its business
judgment, that such arrangements are in the best interests of the Company and
its shareholders.
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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
considerations described below, the Committee believes that the compensation
arrangements for the Company's 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.
FISCAL YEAR 1998 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 revenue
increased 28.0% in fiscal year 1998, which increase was largely due to the
success of Mr. Hilfiger's designs, his development of the Tommy Hilfiger 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
has reviewed other compensation arrangements in the apparel industry which are
based on a percentage of net sales and has determined that Mr. Hilfiger's
compensation, while at the high end of the range in terms of total dollars
paid, is 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
Committee approved a special discretionary bonus for fiscal year 1998 of
$3,500,000, which 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,
as well as discretionary bonus awards. Such compensation represents, in the
opinion of the Committee in light 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 in-store shop and fixtured area programs,
a significant broadening of the range of product offerings, including the in-
house launches of athleticwear and infants and toddlers lines and the launch
through licensees of boy's footwear, men's sunglasses and formal accessories,
the continued expansion of the Company's channels of distribution in the
retail arena, and the development and implementation of strategies for
international growth, including the launch through licensees of men's
sportswear in Europe and the Asia-Pacific region.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Joel J. Horowitz is the Chief Executive Officer and President of the
Company. The fiscal year 1998 base salary of $505,000 represents a 6.8%
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 $745,000 and is based upon a percentage of
operating earnings. Mr. Horowitz's fiscal year 1998 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 1998 contractual bonus) based on the operating earnings of the
Company or any of its subsidiaries. Mr. Horowitz received aggregate bonuses of
$9,343,000 under these arrangements in respect of fiscal year 1998.
17
<PAGE>
The Committee believes that the total fiscal year 1998 compensation payable
to Mr. Horowitz, while at the high end of the range for the Company's
competitors, is consistent with the Company's executive compensation
philosophy described above. The Committee also noted that, as depicted by the
graph that follows this report, the cumulative total return achieved by the
Company's shareholders for the past five years far exceeds the returns for the
general and industry-specific indices.
COMPENSATION COMMITTEE
Joseph M. Adamko, Chairman
Clinton V. Silver
Simon Murray
18
<PAGE>
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
The following graph compares the cumulative total shareholder return on the
Company's Ordinary Shares over a 5-year period with that of (i) the S&P 500
Index and (ii) the S&P Textiles Index, assuming in each case an investment of
$100 on March 31, 1993 and reinvestment of all dividends.
[GRAPH APPEARS HERE]
19
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and certain 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
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, 1998 have
been complied with on a timely basis.
PROPOSAL TWO: PROPOSAL TO RENEW THE TOMMY HILFIGER U.S.A., INC.
SUPPLEMENTAL EXECUTIVE INCENTIVE COMPENSATION PLAN
On August 6, 1998, the Compensation Committee of the Board of Directors of
the Company recommended, and the Board of Directors adopted, subject to
shareholder approval, the renewal of the SEIC Plan to be effective as of April
1, 1999 for each of the five fiscal years in the period ending March 31, 2004.
Except for the extension of the term for an additional five years, the renewed
SEIC Plan will be identical to the SEIC Plan that is currently in effect. The
purpose of the SEIC Plan is to provide a significant and flexible economic
opportunity to Joel J. Horowitz, Chief Executive Officer and President of the
Company and Chief Executive Officer of TH USA, in an effort to reward his
contribution to TH USA and its subsidiaries. In the event Mr. Horowitz's
employment is terminated for any reason, another executive may, at the
discretion of the Compensation Committee, become a participant under the SEIC
Plan in the future; however, the Board currently expects that only Joel J.
Horowitz will participate in the SEIC Plan. In August 1998, the Compensation
Committee approved an amendment to Mr. Horowitz's employment agreement with TH
USA to (i) extend its term through March 31, 2004, (ii) delete the operating
earnings bonus provisions contained therein and (iii) increase the duration of
the non-competition obligations set forth therein from one year to two years.
This amendment is conditioned upon shareholder approval of the renewal of the
SEIC Plan. See "Certain Employment Agreements."
The SEIC Plan was prepared in response to the enactment of Section 162(m) of
the Code which denies a corporate tax deduction for annual compensation
exceeding $1,000,000 paid to the chief executive officer and the four other
most highly compensated officers of a public company. Certain types of
compensation, including performance-based compensation, may be excluded from
this deduction limit. In an effort to ensure that compensation payable under
the SEIC Plan will qualify as performance-based compensation which is fully
tax deductible, the renewal of the SEIC Plan is being submitted to
shareholders for approval at the 1998 Annual Meeting. 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. By approving the SEIC Plan, the
shareholders will be approving, among other things, the performance measures,
eligibility requirements and bonus amounts contained therein. 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 renewal of the SEIC
Plan.
THE BOARD OF DIRECTORS (WITH MR. HOROWITZ ABSTAINING) RECOMMENDS A VOTE
"FOR" PROPOSAL TWO.
Set forth below is a summary of certain important features of the SEIC Plan,
which summary is qualified in its entirety by reference to the actual plan
attached as Exhibit A to this Proxy Statement:
Administration. The SEIC Plan will be administered by the Compensation
Committee or such other committee of the Board as the Board may from time to
time designate. Any such committee shall be comprised of not less than two
"disinterested persons" who qualify as "outside directors" for purposes of
Section 162(m)
20
<PAGE>
of the Code. Such committee will have sole authority to make rules and
regulations relating to the administration of the SEIC Plan, and any
interpretations and decisions of such committee with respect to the SEIC Plan
will be final and binding.
Eligibility. Joel J. Horowitz will be the only participant in the plan for
so long as he remains a senior executive officer of TH USA. In the event Mr.
Horowitz's employment is terminated for any reason, the Committee may, in its
sole discretion, select for each fiscal year not more than one officer of TH
USA to be the participant in the SEIC Plan, based upon such officer's ability
to have a substantial impact on TH USA's operating results.
Plan Features. The SEIC Plan provides for a cash award to the participant
equal to 5 percent of the "operating earnings" of the Company and its
subsidiaries. The SEIC Plan defines "operating earnings" as the earnings of
the Company and its subsidiaries before depreciation, interest on financing of
fixed assets, non-operating expenses and taxes. Awards under the plan are to
be calculated and paid quarterly based upon 3.75 percent of such 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. If
a participant is a party to an employment or bonus agreement with the Company
or TH USA, any bonus paid or payable under such an agreement will be
subtracted from any award earned by the participant under the SEIC Plan. In
the fiscal year ended March 31, 1998, the SEIC Plan bonus paid to Mr.
Horowitz, net of the $745,000 bonus paid under his employment agreement, was
$8,598,000. The SEIC Plan does not contain any cap on the maximum amount of
the bonus payable thereunder.
Termination of Employment. In the event that a participant's employment with
the Company or TH USA terminates for any reason, any SEIC Plan bonus award
which remains unpaid at the time of such termination shall be forfeited by the
participant other than with respect to an accrued but unpaid bonus award
relating to any fiscal quarter ending prior to the termination date.
Amendment and Termination. The Board shall have the right to modify the SEIC
Plan from time to time, but shareholder approval shall be required to (i)
alter the performance criteria on which the bonus amounts are based,
(ii) materially increase the benefits accruing to a participant or (iii)
materially modify the eligibility requirements for participation in the SEIC
Plan. No amendment shall, without the consent of the participant affected,
impair the participant's rights under the SEIC Plan. The SEIC Plan will
terminate on April 1, 2004.
PRO FORMA BENEFITS FOR SEIC PLAN
Given that payments under the SEIC Plan are determined based upon a
percentage of the Company's annual operating earnings, it is not possible to
conclusively state the amount of benefits which will be paid under the SEIC
Plan in any year. Instead, the following table sets forth for the fiscal year
ended March 31, 1998, (i) the amounts that were actually paid under the SEIC
Plan and (ii) the unaudited pro forma amounts that would have been payable
assuming the Acquisition took place as of April 1, 1997.
21
<PAGE>
NEW PLAN BENEFITS
SUPPLEMENTAL EXECUTIVE INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
ACTUAL PRO FORMA NUMBER
DOLLAR DOLLAR OF
NAME AND POSITION VALUE($) VALUE($) UNITS
----------------- --------- ----------- ------
(UNAUDITED)
<S> <C> <C> <C>
Joel J. Horowitz, Chief Executive Officer and
President................................... 8,598,000(1) 10,474,000(1) N/A
Thomas J. Hilfiger, Honorary Chairman and
Principal Designer.......................... -- -- N/A
Silas K.F. Chou, Chairman of the Board....... -- -- N/A
Lawrence S. Stroll, Chief Executive Officer
of THHK..................................... -- -- N/A
Benjamin M.T. Ng, Chief Financial Officer and
Executive Vice President--Strategic
Development................................. -- -- N/A
Executive Group.............................. 8,598,000(1) 10,474,000(1) N/A
Non-Executive Director Group................. -- -- N/A
Non-Executive Officer Employee Group......... -- -- N/A
</TABLE>
- --------
(1) Net of the $745,000 bonus paid under Mr. Horowitz's employment agreement
with TH USA.
PROPOSAL THREE: APPOINTMENT OF AUDITORS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP
as independent accountants to audit the accounts of the Company for the 1999
fiscal year, subject to approval by shareholders. The affirmative vote of a
majority of the shares voting, in person or by proxy, on the proposal at the
Annual Meeting is required for such approval.
PricewaterhouseCoopers LLP and one of its predecessors, Price Waterhouse
LLP, have served as independent accountants for the Company since 1992. A
representative of PricewaterhouseCoopers 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 1999 Annual Meeting of Shareholders pursuant to Rule 14a-8
of the Exchange Act must be received by the Company by May 28, 1999. Proposals
for the 1999 Annual Meeting of Shareholders submitted outside the processes of
Rule 14a-8 will be considered untimely for purposes of Rule 14a-4(c) of the
Exchange Act if not received by the Company by August 11, 1999.
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.
22
<PAGE>
The Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1998, and its Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, 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 25, 1998
23
<PAGE>
EXHIBIT A
TOMMY HILFIGER U.S.A., INC.
SUPPLEMENTAL EXECUTIVE INCENTIVE COMPENSATION PLAN
I
PURPOSE
This Tommy Hilfiger U.S.A., Inc. Supplemental Executive Incentive
Compensation Plan (the "Plan") which, subject to approval by the Tommy
Hilfiger Corporation's stockholders, shall be effective as of April 1, 1999,
is designed to provide a significant and variable economic opportunity to Mr.
Joel J. Horowitz, Chief Executive Officer of the Company, or, following his
termination of employment, at the discretion of the Compensation Committee of
the Board of Directors, another designated executive of the Company, as a
reflection of his contribution to the success of the Company and its
subsidiaries. Payments pursuant to Article V of the Plan are intended to
qualify under Section 162(m)(4)(c) of the Internal Revenue Code of 1986, as
amended, as excluded from the term "applicable employee remuneration" (such
payments are hereinafter referred to as "Excluded Income").
II
DEFINITIONS
"Board" shall mean the Board of Directors of THC.
"Bonus" shall mean a cash award payable to a Participant pursuant to the
terms of the Plan.
"Calculation Date" shall have the meaning set forth in Article V hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board.
"Company" shall mean Tommy Hilfiger U.S.A., Inc., a Delaware corporation,
and its subsidiaries.
"Disinterested Person" shall mean a member of the Board who qualifies as an
"outside director" for purposes of Section 162(m) of the Code.
"Operating Earnings" shall have the meaning set forth in Article V hereof.
"Other Bonus Payments" shall have the meaning set forth in Article V hereof.
"Participant" shall have the meaning set forth in Article IV hereof.
"Payment Date" shall have the meaning set forth in Article V hereof.
"THC" shall mean Tommy Hilfiger Corporation, a British Virgin Islands
corporation, and its subsidiaries, including the Company.
III
ADMINISTRATION
The Plan shall be administered by the Committee or such other committee of
the Board which is composed of not less than two Disinterested Persons, each
of whom shall be appointed by and serve at the pleasure of the Board.
In administering the Plan the Committee may at its option employ
compensation consultants, accountants and counsel (who may be the independent
auditors and outside counsel and compensation consultants of THC or any of its
subsidiaries) and other persons to assist or render advice to the Committee,
all at the expense of the Company.
<PAGE>
IV
ELIGIBILITY
The sole participant in the Plan (the "Participant") shall be Joel J.
Horowitz for so long as he shall be a senior executive officer of the Company.
In the event Mr. Horowitz' employment is terminated for any reason, the
Committee may, in its sole discretion, determine for each fiscal year not more
than one officer of the Company who shall be eligible to be the Participant
based upon such officer's ability to have a substantial impact on the
Company's operating results, and shall list any such Participant on Schedule A
hereto, as such Schedule A shall be amended from time to time. Nothing
contained in the Plan shall be construed as, or be evidence of, any contract
of employment with any Participant for a term of any length nor shall
participation in the Plan in any fiscal year by any Participant require
continued participation by such Participant in any subsequent fiscal year.
V
DETERMINATION OF BONUS
Bonuses under the Plan shall be paid in such amounts, at such times, and
subject to such performance criteria as follows:
(A) AMOUNT. The Participant shall be awarded in each fiscal year a bonus
in an amount equal to 5 percent of the Operating Earnings of THC, less any
bonus payments (but not base salary or "base amount") paid or payable to
such Participant under any employment or bonus payment agreement between
such Participant and THC or the Company, if any ("Other Bonus Payments").
"Operating Earnings" is defined as earnings of THC before depreciation,
interest on financing of fixed assets, non-operating expenses and taxes.
(B) TIMING OF PAYMENTS; METHOD OF CALCULATION. Bonus awards under the
Plan shall be calculated quarterly and shall be paid as soon as practicable
following the last day of each fiscal quarter and following certification
by the Committee as to Operating Earnings for such quarter (each such date,
a "Payment Date") to the extent set forth below. Subsequent to each of the
first, second and third fiscal quarters (the last date of each such fiscal
quarter, a "Calculation Date") of each fiscal year, the Participant shall
be awarded an amount equal to 3.75 percent of the Operating Earnings for
the entire fiscal year up to the Calculation Date, less any Other Bonus
Payments paid or payable to such Participant and less any Bonus payments
previously paid to the Participant under the Plan with respect to prior
fiscal quarters of such fiscal year. Subsequent to the fourth fiscal
quarter of each fiscal year, the Participant shall be awarded an amount
equal to 5 percent of the Operating Earnings for the entire fiscal year
then ended, less any Other Bonus Payments paid or payable to the
Participant and less any Bonus payments previously paid to Participant
under the Plan with respect to the first three fiscal quarters of such
fiscal year.
VI
TERMINATION OF EMPLOYMENT
In the event that a Participant's employment with the Company or THC
terminates for any reason, any Bonus which remains unpaid at the time of such
termination shall be forfeited by the Participant other than with respect to
an accrued but unpaid Bonus relating to any fiscal quarter ending prior to the
termination date, which accrued Bonus shall be paid to the Participant.
VII
AMENDMENT AND TERMINATION
The Board shall have the right to modify the Plan from time to time but no
such modification shall (i) without prior approval of the THC's stockholders,
change Article V of this Plan to alter the performance criteria on which Bonus
amounts are based, materially increase the benefits accruing to Participants
or materially modify the requirements regarding eligibility for participation
in the Plan or (ii) without consent of the Participant affected, impair the
Participant's rights under the Plan. This Plan shall terminate on April 1,
2004.
<PAGE>
VIII
MISCELLANEOUS
Bonus payments shall be made from the general funds of the Company and no
special or separate fund shall be established or other segregation of assets
made to assure payment. No participant or other person shall have under any
circumstances any interest in any particular property or assets of the Company.
IX
DEFERRAL ELECTIONS
The Committee may at its option establish procedures pursuant to which a
Participant is permitted to defer the receipt of the Bonus payable hereunder.
<PAGE>
SCHEDULE A
PARTICIPANT
Joel J. Horowitz
<PAGE>
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TOMMY HILFIGER CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
1998 ANNUAL MEETING OF SHAREHOLDERS--NOVEMBER 2, 1998
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 1998 Annual Meeting of
Shareholders, to be held at PricewaterhouseCoopers, Price Waterhouse Centre,
Lower Collymore Rock, Bridgetown, St. Michael, Barbados, on Monday, November 2,
1998 at 11:00 a.m., local time, and at any adjournment thereof, upon the
matters described in the Notice of Annual Meeting and Proxy Statement dated
September 25, 1998, receipt of which is herby 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 votes as -----
indicated in | X |
this example -----
1. Election of Directors.
FOR all nominess WITHHOLD NOMINEES: J.J. Horowitz,
listed to the right AUTHORITY R.K.Y. Chao, S. Murray
(except as marked) to vote for all nominees
to the contrary) listed to the right
------ ------
| | | |
------ ------
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- ------------------------------------------------------------------------------
2. Approval of Renewal of the Tommy Hilfiger U.S.A., Inc.
Supplemental Executive Incentive Compensation Plan.
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 name 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: ______________________________________ , 1998
____________________________________________________
Signature
____________________________________________________
Signature
- --------------------------------------------------------------------------------
