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DRAFT 6 (04/04/2002) - SENT TO PRINTER
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 ss.240.14a-12
GUESS?, INC.
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(Name of Registrant as Specified In Its Charter)
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(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)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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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):
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4. Proposed maximum aggregate value transaction:
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5. Total fee paid:
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--------------------------------
|_| 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 number, or the Form or
Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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GUESS?, INC.
1444 SOUTH ALAMEDA STREET
LOS ANGELES, CALIFORNIA 90021
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 2002
------------------------
To the Stockholders of GUESS?, Inc:
The 2002 annual meeting of stockholders (the "Annual Meeting") of GUESS?,
Inc., a Delaware corporation (the "Company"), will be held at the Le Meridien
Hotel, 465 South La Cienega Boulevard, Beverly Hills, California 90048, on
Monday, May 13, 2002, at 10:00 a.m., pacific time, to:
1. Elect three directors for a term of three years each and until their
successors are duly elected and qualified;
2. Approve the Company's 2002 Employee Stock Purchase Plan;
3. Ratify the appointment of KPMG LLP as independent certified public
accountants of the Company for the fiscal year ending December 31,
2002; and
4. Transact such other business as may properly come before the Annual
Meeting and any and all adjournments or postponements thereof.
Only stockholders of record at the close of business on April 3, 2002, are
entitled to notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof.
If you plan to attend:
Please note that space limitations make it necessary to limit attendance
to stockholders and one guest. Admission to the Annual Meeting will be on a
first-come, first-served basis. Registration opens at 9:00 a.m., pacific time.
Cameras and recording devices will not be permitted at the Annual Meeting.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the Annual Meeting, you must obtain a letter from the broker,
bank or other nominee confirming your beneficial ownership of the shares as of
the record date and bring it to the Annual Meeting. In order to vote your shares
at the Annual Meeting, you must obtain from the record holder a proxy issued in
your name.
Your attention is called to the Proxy Statement on the following pages. We
hope that you will attend the Annual Meeting in person. The Board of Directors
and management look forward to greeting those stockholders able to attend.
Regardless of how many shares you own, your vote is very important. WHETHER OR
NOT YOU PLAN TO ATTEND, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY, WHICH
IS BEING SOLICITED BY THE BOARD OF DIRECTORS, IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.
On behalf of the Board of Directors, we would like to express our
appreciation for your continued interest in the affairs of the Company.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Maurice Marciano /s/ Paul Marciano
---------------------------- ----------------------------
Maurice Marciano Paul Marciano
Co-Chairman of the Board and Co-Chairman of the Board and
Co-Chief Executive Officer Co-Chief Executive Officer
Los Angeles, California
April 12, 2002
GUESS?, INC.
1444 SOUTH ALAMEDA STREET
LOS ANGELES, CALIFORNIA 90021
----------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 2002
----------------------
INTRODUCTION
This Proxy Statement and the enclosed form of proxy are being furnished
commencing on or about April 12, 2002, in connection with the solicitation by
the Board of Directors (the "Board of Directors" or the "Board") of Guess?, Inc.
(the "Company") of proxies in the enclosed form for use at the 2002 annual
meeting of stockholders (the "Annual Meeting") to be held at Le Meridien Hotel,
465 South La Cienega Boulevard, Beverly Hills, California 90048, on Monday, May
13, 2002, at 10:00 a.m., pacific time, and any adjournments or postponements
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders.
In connection with the solicitation by the Board of Directors of proxies
for use at the Annual Meeting, the Board of Directors has designated Carlos
Alberini and Ralph Flick to vote shares represented by such proxies. Any proxy
given pursuant to such solicitation and received in time for the Annual Meeting
and not revoked will be voted as specified in such proxy. If no instructions are
given, proxies will be voted FOR the election of the nominees named below under
the caption "Proposal No. 1: Election of Class III Directors," FOR the approval
of the 2002 Employee Stock Purchase Plan (the "Stock Purchase Plan") below under
the caption: "Proposal No. 2: Approval of the 2002 Employee Stock Purchase
Plan," and FOR the appointment of KPMG LLP as independent certified public
accountants of the Company for the year ending December 31, 2002, below under
the caption "Proposal No. 3: Ratification of Selection of Independent Certified
Accountants." Any proxy may be revoked by delivering written notice of such
revocation to the Secretary of the Company at any time prior to the voting
thereof or by delivering a later dated proxy to the Secretary of the Company at
any time prior to the voting thereof, or by voting in person at the Annual
Meeting in accordance with the instructions discussed in this Proxy Statement.
This solicitation is made by mail on behalf of the Board of Directors.
Costs of the solicitation will be borne by the Company. Further solicitation of
proxies may be made by telephone, telegraph, facsimile or personal interview by
the directors, officers and employees of the Company and its affiliates, who
will not receive additional compensation for the solicitation. The Company will
reimburse banks, brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to
stockholders.
Only holders of record of the Company's common stock, par value $0.01 per
share (the "Common Stock") at the close of business on April 3, 2002, are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on April 3, 2002, there were 43,554,889 shares of Common Stock
outstanding. Each share of Common Stock entitles the record holder thereof to
one vote on all matters properly brought before the Annual Meeting.
Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from the owners. If
instructions are not received, brokers may vote the shares at their discretion,
depending upon the type of proposals involved. "Broker non-votes" result when
brokers are precluded by the rules of the New York Stock Exchange from
exercising their discretion on certain types of proposals. Brokers have
discretionary authority to vote on the proposals being submitted. The Inspector
of Election will treat broker non-votes as shares that are present and entitled
to vote for purposes of determining the presence of a quorum, but not as shares
present and voting on such proposal, thus having no effect on the outcome of
such proposal.
Each director will be elected by a plurality of the votes cast at the
Annual Meeting. Stockholders may not cumulate their votes. Accordingly,
abstentions or broker non-votes will not affect the outcome of the election of
the Class III directors.
The favorable vote of a majority of votes cast will be required to approve
the 2002 Employee Stock Purchase Plan and to ratify the selection of KPMG LLP.
Accordingly, abstentions or broker non-votes will not affect the outcome of the
vote on these proposals.
The Board of Directors knows of no matters to come before the Annual
Meeting other than the matters referred to in this Proxy Statement. If, however,
any matters properly come before the Annual Meeting, it is the intention of each
of the persons named in the accompanying proxy to vote such proxies in
accordance with such person's discretionary authority to act in such person's
best judgment.
The principal executive offices of the Company are located at 1444 South
Alameda Street, Los Angeles, California 90021.
ELECTION OF DIRECTORS
Pursuant to the Company's Restated Certificate of Incorporation, the Board
of Directors is divided into three classes of directors serving staggered terms
(Classes I, II and III). One class of directors is elected at each annual
meeting of stockholders for a three-year term and will hold office until their
successors shall have been elected and qualified. The Company's Bylaws currently
authorize a Board of Directors consisting of not less than three nor more than
fifteen directors. The Board of Directors currently consists of seven members of
which Carlos Alberini and Alice Kane are Class I directors, Paul Marciano and
Robert Davis are Class II directors and Maurice Marciano, Howard Socol and Bryan
Isaacs are Class III directors.
PROPOSAL NO. 1: ELECTION OF CLASS III DIRECTORS
(ITEM 1 ON PROXY CARD)
At the Annual Meeting, three Class III directors are to be elected to
serve for a term to expire at the 2005 annual meeting of stockholders. The
nominees for these positions are Maurice Marciano, Howard Socol and Howard
Weitzman (the "Class III Nominees"). Mssrs. Socol and Weitzman are not employed
by, or affiliated with, the Company. Each of the Class III Nominees has
consented to being named in this Proxy Statement and has agreed to serve as a
member of the Board of Directors if elected. Information regarding the Class III
Nominees and the continuing directors whose terms expire in 2003 and 2004 is set
forth under the heading "Directors and Executive Officers" beginning on page 13.
The Class III directors will be elected by a plurality of the votes cast
at the Annual Meeting. Stockholders may not cumulate their votes. Accordingly,
abstentions or broker non-votes will not affect the outcome of the election of
the Class III directors. The accompanying proxy will be voted FOR the election
of the Class III Nominees unless contrary instructions are given. IF THE CLASS
III NOMINEES ARE UNABLE TO SERVE, WHICH IS NOT ANTICIPATED, THE PERSONS NAMED AS
PROXIES INTEND TO VOTE FOR SUCH OTHER PERSON OR PERSONS AS THE BOARD OF
DIRECTORS MAY DESIGNATE. IN NO EVENT WILL THE SHARES REPRESENTED BY THE PROXIES
BE VOTED FOR MORE THAN THREE CLASS III DIRECTORS AT THE ANNUAL MEETING. UNLESS
INSTRUCTED TO THE CONTRARY IN THE PROXY, THE SHARES REPRESENTED BY THE PROXIES
WILL BE VOTED FOR THE ELECTION OF THE CLASS III NOMINEES NAMED ABOVE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE CLASS III
NOMINEES.
2
PROPOSAL NO. 2:
APPROVAL OF THE 2002 EMPLOYEE STOCK PURCHASE PLAN
(ITEM 2 ON PROXY CARD)
The Board of Directors has adopted unanimously and recommends that the
stockholders approve the adoption of the Guess?, Inc. 2002 Employee Stock
Purchase Plan (the "Stock Purchase Plan"), under which 2,000,000 shares of
Common Stock are reserved for issuance.
The following is a brief description of the material features of the Stock
Purchase Plan and is qualified in its entirety by reference to the Stock
Purchase Plan, which is attached as an Appendix to this Proxy Statement and is
incorporated herein by reference. You should read the Appendix in its entirety.
PURPOSE AND ELIGIBILITY
The purpose of the Stock Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code (the "Code"), is to provide all of the
employees of the Company and subsidiaries which have been designated by the
Board of Directors (each, a "Designated Subsidiary") with an opportunity to
purchase our Common Stock through payroll deductions. The Stock Purchase Plan is
also drafted broadly enough to allow for the inclusion of any future
subsidiaries. The Stock Purchase Plan is intended to benefit both employees and
stockholders. The Stock Purchase Plan gives employees the opportunity to
purchase stock at a favorable price and we believe that this will assist us in
attracting, motivating and retaining valued employees. We believe that
stockholders will benefit from the interest of the participating employees in
our profitability and that we will benefit from the periodic investments of
equity capital provided by the Stock Purchase Plan.
Generally, individuals who are employed by the Company or a Designated
Subsidiary as of the deadline to enroll in an Offering Period (as defined below)
and who timely file a subscription agreement with the Company are eligible to
participate in the Stock Purchase Plan for that Offering Period. No person is
eligible to participate who, after the grant of options under the Stock Purchase
Plan, owns (including all shares which may be purchased under any outstanding
options) 5% or more of the total combined voting power or value of all classes
of shares of the Company or of any parent or subsidiary company. Currently,
approximately 5,000 individuals are eligible to participate in the Stock
Purchase Plan.
ADMINISTRATION
The Stock Purchase Plan is administered by the Compensation Committee of
the Board of Directors or such other committee as may be appointed by the Board
of Directors (the "Committee"). The Committee has full and exclusive
discretionary authority to construe, interpret and apply the terms of the Stock
Purchase Plan, to determine eligibility, and to adjudicate all disputed claims
filed under the Stock Purchase Plan.
PARTICIPATION
Each eligible employee electing to participate in the Stock Purchase Plan
must execute and deliver to the Company a subscription agreement which indicates
the amount to be deducted from the participant's paychecks. Such deduction may
not be less than 1% nor greater than 15% of the participant's compensation
(which includes wages, salary, overtime, bonus and commissions). Deductions are
accumulated for each quarter ("Offering Periods") which begins on March 1, June
1, September 1 and December 1 of each year (each, an "Enrollment Date"),
respectively, and ends on the last business day which falls on or prior to May
31, August 31, November 30 and on the last day in the month of February of each
year (each, an "Exercise Date"), respectively. The first Offering Period began
on March 1, 2002.
PURCHASE OF COMMON STOCK
For each Offering Period, on the Enrollment Date the Company will grant to
each participant an option to purchase on the Exercise Date at a price
determined as described below (the "Purchase Price") that number of full shares
of Common Stock which the participant's accumulated payroll deductions on the
Exercise Date will purchase at the Purchase Price (as defined below). The
"Purchase Price" for each Offering Period will be the lesser of (i) 85% of the
Fair Market Value (as defined in the Purchase Plan) of the Common Stock on the
Enrollment
3
Date, or (ii) 85% of the Fair Market Value of the Common Stock on the Exercise
Date. The closing price of the Common Stock on the New York Stock Exchange on
March 1, 2002, the first Enrollment Date, was $8.90.
As promptly as practicable after each Exercise Date, full shares of Common
Stock purchased for a participant will generally be deposited by the Company at
a brokerage house designated by the Committee and held for the benefit of the
participant until such time as the participant requests delivery of such shares
or requests that any shares be sold and the proceeds therefrom be distributed to
the participant. The closing price of the Common Stock on the New York Stock
Exchange on April 3, 2002, was $7.34 per share.
TERMINATION OF EMPLOYMENT
Termination of a Participant's employment for any reason, including
retirement or death, or the failure of the Participant to remain continuously
employed for at least 20 hours per week during the applicable Offering Period,
cancels his or her purchase right and participation in the Stock Purchase Plan.
Upon a participant's ceasing to be an employee of the Company for any reason,
all unused payroll deductions credited to the participant's account will be used
to purchase shares on the next Exercise Date after which the participant will be
automatically withdrawn. As an alternative, the Participant may elect to
withdraw from the Stock Purchase Plan immediately, in which case all unused
deductions will be returned to the participant (without interest) or, in the
case of his death, his designated beneficiary, and his options will be
automatically terminated.
WITHDRAWAL
Other than in the event of termination of a participant's employment, a
participant may withdraw all but not less than all of the payroll deductions
credited to his account and not yet used to exercise such participant's option
under the Stock Purchase Plan by giving written notice to the Company at least
two business days prior to the Exercise Date of an Offering Period. Once a
participant withdraws from the Stock Purchase Plan during an Offering Period,
the participant may not resume participation until the next Offering Period.
Such participant may resume participation by delivering to the Company a new
subscription agreement.
LIMITATION
No person shall be granted options which permit his or her right to
purchase Common Stock under the Stock Purchase Plan and any other similar stock
purchase plans of the Company to accrue at a rate which exceeds $25,000 worth of
Common Stock (determined at the "Fair Market Value", as defined in the Stock
Purchase Plan, of such stock at date of grant) for each calendar year in which
such options are at any time outstanding.
CHANGES IN CAPITAL
If any change is made in our capitalization during the Offering Period,
such as a stock split, stock combination or stock dividend, which results in an
increase or decrease in the number of shares of Common Stock outstanding without
receipt of consideration by us, appropriate adjustment will be made in the
purchase price and in the number of shares subject to purchase rights under the
Stock Purchase Plan.
AMENDMENT AND TERMINATION
The Stock Purchase Plan can be amended or terminated by the Board of
Directors at any time, but no such termination may adversely affect rights
previously granted. The Board of Directors must seek stockholder approval for
amendments to the Stock Purchase Plan which require such approval pursuant to
Section 423 of the Code.
FEDERAL TAX CONSEQUENCES
The following is a brief discussion of the Federal income tax consequences
of transactions under the Stock Purchase Plan based on the Code. The Stock
Purchase Plan is not qualified under Section 401(a) of the Code, which provides
certain protections to participants in qualified retirement plans. This
discussion does not address all aspects of Federal income taxation and does not
describe state or local tax consequences. Participants in the Stock Purchase
Plan should consult their own tax advisors.
4
The Stock Purchase Plan is intended to qualify under Section 423(a) of the
Code, which would entitle participants to certain benefits with respect to
transfers of Common Stock under Section 421(a) of the Code. Under Section
421(a), a participant will not be required to recognize income on an "Enrollment
Date", as defined in the Stock Purchase Plan, or on an Exercise Date. Section
423(c) of the Code requires that, provided the holding periods described below
are met, when the shares of Common Stock acquired during an Offering Period
pursuant to the Stock Purchase Plan are sold or otherwise disposed of in a
taxable transaction (or in the event of the death of the participant while
owning such shares whether or not the holding period requirements are met), the
participant will recognize income subject to Federal income tax as "ordinary
income", for the taxable year in which disposition or death occurs, in an amount
equal to the lesser of (i) the excess of the fair market value of the Common
Stock at the time of such disposition or death over the amount paid for such
shares, and (ii) the excess of the fair market value of the Common Stock on the
Enrollment Date of the applicable Offering Period over the option price,
determined on the Enrollment Date. Such recognition of income upon disposition
shall have the effect of increasing the taxable basis of the shares in the
participant's possession by an amount equal to the income subject to Federal
income tax. Any additional gain or loss resulting from the disposition (provided
it is not a disqualifying disposition), measured by the difference between the
amount paid for the shares and the amount realized (less the amount recognized
as income as described above), will be recognized by the participant as
long-term capital gain or loss. No portion of the amount received pursuant to
such a disposition will be subject to withholding for federal income taxes or be
subject to FICA or FUTA taxes; however, the Internal Revenue Service has
proposed regulations which, if made final, would require withholding for federal
income taxes in the future.
The Company will not be entitled to any deduction in the determination of
its taxable income with respect to the Stock Purchase Plan, except in connection
with a disqualifying disposition as discussed below.
In order for a participant to receive the favorable tax treatment provided
in Section 421(a) of the Code, Section 423(a) requires that the participant make
no disposition of the shares acquired during an Offering Period within two years
from the Enrollment Date nor within one year from the Exercise Date of the
Offering Period.
If a participant disposes of Common Stock acquired pursuant to the Stock
Purchase Plan before the expiration of the holding period requirements set forth
above (a "disqualifying disposition"), the participant will realize, at the time
of the disposition, "ordinary income" to the extent the Fair Market Value of the
Common Stock on the Exercise Date exceeds the amount paid for the shares. The
difference between the fair market value of the Common Stock on the Exercise
Date and the amount realized on disposition is treated as long-term or
short-term capital gain or loss, depending on the participant's holding period
in the Common Stock. The amount treated as "ordinary income" may be subject to
the income tax withholding requirements of the Code and FICA withholding
requirements. At the time of such disqualifying disposition, the Company will be
entitled to deduct an amount in the determination of its taxable income equal to
the amount taken into "ordinary income" by the participant.
NEW PLAN BENEFITS
The number of shares of Common Stock purchased under the Stock Purchase
Plan is entirely dependent on each participant's contribution to the Stock
Purchase Plan and the value of Common Stock on the Exercise Date. The Company
cannot forecast the number of shares that will be purchased in the future by any
individual. Therefore, the Company has omitted the tabular disclosure of the
benefits or amounts allocated under the Stock Purchase Plan. Information with
respect to compensation paid and other benefits, including options, granted with
respect to the 2001 fiscal year to the Named Executive Officers (as defined
below) is set forth in the Summary Compensation Table below under the heading
"Executive Compensation" beginning on page 16.
RECOMMENDATION AND VOTE
Approval of this Proposal requires the affirmative vote of a majority of
the votes cast, in person or by proxy, at the Annual Meeting by the holders of
shares entitled to vote thereon. Accordingly, abstentions or broker non-votes
will not affect the outcome of the vote on the proposal. Unless instructed to
the contrary in the proxy, the shares represented by the proxies will be voted
FOR the proposal to approve the Stock Purchase Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE STOCK PURCHASE PLAN PROPOSAL.
5
PROPOSAL NO. 3: RATIFICATION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
(ITEM 3 ON PROXY CARD)
The firm of KPMG LLP ("KPMG"), the Company's independent certified public
accountants for the year ended December 31, 2001, was selected by the Board of
Directors, upon the recommendation of the Audit Committee, to act in such
capacity for the fiscal year ending December 31, 2002, subject to ratification
by the stockholders. There are no affiliations between the Company and KPMG, its
partners, associates or employees, other than those which pertain to the (i)
engagement of KPMG as independent certified public accountants for the Company
in the previous year and (ii) engagement of KPMG's Internal Audit Group as
internal auditors for the Company commencing in October 2000. KPMG has served as
the Company's independent public accountants since 1990. Even if KPMG's
appointment is ratified by the stockholders, the Board of Directors may, at its
discretion, appoint a new independent accounting firm if it determines that such
a change would be in the best interests of the Company and its stockholders. We
expect a representative of KPMG to be present at the Annual Meeting to respond
to appropriate questions and to make such statements as he or she may desire.
The favorable vote of a majority of votes cast regarding the proposal is
required to ratify the selection of KPMG. Accordingly, abstentions or broker
non-votes will not affect the outcome of the vote on the proposal. Unless
instructed to the contrary in the proxy, the shares represented by the proxies
will be voted FOR the proposal to ratify the selection of KPMG to serve as
independent certified public accountants for the Company for the fiscal year
ending December 31, 2002.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF KPMG LLP.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The firm of KPMG has served as the Company's independent auditors since
1990 and served as the Company's independent auditor for the fiscal year ended
December 31, 2001. As stated in Proposal No. 3, the Board of Directors has
selected KPMG to serve as our independent auditors for the fiscal year ending
December 31, 2002.
Audit services performed by KPMG for fiscal 2001 consisted of the
examination of the Company's financial statements, services related to filings
with the Securities and Exchange Commission (the "SEC") and services related to
the Company's internal audit. All fees paid to KPMG were reviewed and considered
for independence by the Audit Committee.
FISCAL 2001 AUDIT FIRM FEE SUMMARY
During fiscal year 2001, we retained our principal auditor, KPMG, to
provide services in the following categories and amounts:
Audit Fees $ 545,000
===========
Financial Information Systems Design and Implementation Fees (1) -0-
===========
All Other Fees
Audit related fees (2) . . . . . . . . . . . . . . . . . . . 719,000
Other non-audit services (3) . . . . . . . . . . . . . . . . 565,000
-----------
Total all other fees . . . . . . . . . . . . . . . . . . . . . $ 1,284,000
===========
-----------------
(1) Financial information systems design and implementation consisted of
consulting for enterprise-wide financial information systems.
(2) Audit related fees consisted principally of internal audit services and
issuances of consents.
(3) Other non-audit fees consisted of tax compliance and related services.
The Audit Committee has considered whether the provision of non-audit
services provided by KPMG is compatible with maintaining KPMG's independence.
6
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the systems of
internal controls. We reviewed and discussed with management the audited
financial statements contained in the Company's fiscal year 2001 annual report.
Also, we reviewed with KPMG, who is responsible for expressing an opinion on the
conformity of our audited financial statements with accounting principles
generally accepted in the United States of America, their judgments as to the
quality and acceptability of our accounting principles and any other matters
that we are required to discuss under generally accepted auditing standards. In
addition, we have discussed with KPMG its independence from management and the
Company including matters set forth in the written disclosures required by
Independence Standards Board Standard No. 1 and matters required to be discussed
by Statement on Auditing Standards No. 61 pertaining to communications with
Audit Committees.
We discussed with KPMG the overall scope and plans of their audits. We met
with KPMG, as the Company's independent auditors, with and without management
present, to discuss results of their examinations, their evaluations of our
internal controls, and the overall quality of our financial reporting at each of
our nine meetings in 2001.
We also relied on the services of KPMG for the internal audit function. We
engaged KPMG for the internal audit function in 2000 only after carefully
reviewing the quality of such services being offered by other service providers.
We are of the opinion that the company's utilization of KPMG's internal audit
outsourcing services has not impaired the independence of KPMG as the company's
external auditor. Nonetheless, consistent with the new auditor independence
rules which become effective later in 2002 and with KPMG's own policies, we
intend to transition the internal audit function away from KPMG during the
current fiscal year.
Relying on the reviews and discussions referred to above, we recommended
to the Board of Directors, and the Board of Directors has approved, that the
audited financial statements be included in the Annual Report on Form 10-K for
the fiscal year ended December 31, 2001, for filing with the SEC.
By the Audit Committee,
Bryan Isaacs
Robert Davis
Howard Socol
Alice Kane
7
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information available to the
Company, as of April 3, 2002, with respect to shares of its Common Stock held by
(i) those persons known to the Company to be the beneficial owners (as
determined under the rules of the Securities and Exchange Commission) of more
than 5% of such shares, (ii) each individual who served as a Chief Executive
Officer during 2001 and the four other most highly compensated executive
officers as of December 31, 2001, including a former executive officer for whom
disclosure would have been provided under clause (ii) above except that the
individual was not serving as an executive officer at December 31, 2001
(together with the individuals in clause (ii) above, the "Named Executive
Officers"), (iv) all directors and nominees of the Company, and (v) as a group,
all directors and executive officers of the Company.
BENEFICIAL OWNERSHIP OF
COMMON STOCK
--------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER (1) NUMBER PERCENT OF CLASS (2)
---------- --------------------
Maurice Marciano (3) . . . . . . . . . . . . . . . . . . . . . . . . . . 16,062,594 36.9%
Paul Marciano (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,890,168 29.6%
Armand Marciano (5) . . . . . . . . . . . . . . . . . . . . . . . . . . 6,490,492 14.9%
Carlos Alberini(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . 305,680 *
Robert Davis (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,887 *
Bryan Isaacs (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,431 *
Alice Kane (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,178 *
Nancy Shachtman (10) . . . . . . . . . . . . . . . . . . . . . . . . . . 152,350 *
Frederick Silny (11) . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 *
Howard Socol (12). . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,174 *
Howard Weitzman (13) . . . . . . . . . . . . . . . . . . . . . . . . . . -- *
All directors and executive officers as a group (11 persons) (14). . . . 36,046,954 82.8%
-------------------
* Less than 1.0%
(1) Unless otherwise indicated, the address of the beneficial owner is c/o
Guess?, Inc., 1444 South Alameda Street, Los Angeles, California 90021.
Except as described below and subject to the Stockholders'Agreement (as
defined under "Certain Relationships and Related Transactions -
Stockholders' Agreement"), and applicable community property laws and
similar laws, each person listed above has sole voting and investment
power with respect to such shares. This table is based upon information
supplied by officers, directors and principal stockholders.
(2) The percentage is calculated on the basis of the amount of outstanding
shares of Common Stock, excluding shares held for the account of the
Company and including shares that may be acquired upon the exercise of
options exercisable within 60 days of April 3, 2002. The number of shares
of Common Stock outstanding on April 3, 2002 was 43,554,889.
(3) Includes shares of Common Stock beneficially owned by Maurice Marciano as
follows: 15,952,559 shares held as sole trustee of the Maurice Marciano
Trust (1995 Restatement), 90,000 shares held as president of the Maurice
Marciano Family Foundation, 10,000 shares held as sole adviser of the
Maurice Marciano 1990 Children's Trust and 35 shares held as sole trustee
of the Maurice Marciano Gift Trust FBO Caroline Marciano with respect to
which he has sole voting and dispositive power; and 10,000 shares held by
his wife with respect to which he shares voting and dispositive power.
(4) Includes shares of Common Stock beneficially owned by Paul Marciano as
follows: 11,749,298 shares held as sole trustee of the Paul Marciano Trust
dated February 20, 1986, and 1,000,000 shares held as sole trustee of the
Paul Marciano Grantor Retained Annuity Trust No. II with respect to which
he has sole voting and dispositive power; and 140,870 shares held as
co-trustee of the Maurice Marciano 1996 Grantor Retained Annuity Trust
with respect to which he shares voting and dispositive power.
8
(5) Includes shares of Common Stock beneficially owned by Armand Marciano as
follows: 6,485,492 shares held as sole trustee of the Armand Marciano
Trust dated February 20, 1986, 1,000 shares held indirectly as sole
trustee of the Armand Marciano Gift Trust-Anastasia, 1,000 shares held
indirectly as sole trustee of the Armand Marciano Gift Trust-Francisca,
1,000 shares held indirectly as sole trustee of the Armand Marciano Gift
Trust-Harrison, 1,000 shares held indirectly as sole trustee of the Armand
Marciano Gift Trust-Dominique, and 1,000 shares held indirectly as sole
trustee of the Armand Marciano Gift Trust-Julien with respect to all of
which he has sole voting and dispositive power.
(6) Includes shares of Common Stock beneficially owned by Carlos Alberini as
follows: 100,000 shares of Common Stock that may be acquired upon the
exercise of options exercisable within 60 days of April 3, 2002, pursuant
to the Company's 1996 Equity Incentive Plan.
(7) Includes shares of Common Stock beneficially owned by Robert Davis as
follows: 43,387 shares of Common Stock that may be acquired upon the
exercise of options exercisable within 60 days of April 3, 2002, pursuant
to the Company's Amended and Restated 1996 Non-Employee Directors' Stock
Option Plan.
(8) Includes shares of Common Stock beneficially owned by Bryan Isaacs as
follows: 17,931 shares of Common Stock that may be acquired upon the
exercise of options exercisable within 60 days of April 3, 2002, pursuant
to the Company's Amended and Restated 1996 Non-Employee Directors' Stock
Option Plan and 3,000 shares of Common Stock beneficially owned by the
Bryan E. and Helga J. Isaacs Living Trust with respect to which he shares
voting and dispositive power with his wife.
(9) Includes shares of Common Stock beneficially owned by Alice Kane as
follows: 30,678 shares of Common Stock that may be acquired upon the
exercise of options exercisable within 60 days of April 3, 2002, pursuant
to the Company's Amended and Restated 1996 Non-Employee Directors' Stock
Option Plan.
(10) Includes shares of Common Stock beneficially owned by Nancy Shachtman as
follows: 152,000 shares of Common Stock that may be acquired upon the
exercise of options exercisable within 60 days of April 3, 2002, pursuant
to the Company's 1996 Equity Incentive Plan.
(11) Mr. Silny was appointed as Senior Vice President and Chief Financial
Officer on November 12, 2001.
(12) Includes shares of Common Stock beneficially owned by Howard Socol as
follows: 21,174 shares of Common Stock that may be acquired upon the
exercise of options exercisable within 60 days of April 3, 2002, pursuant
to the Company's Amended and Restated 1996 Non-Employee Directors' Stock
Option Plan.
(13) Howard Weitzman was nominated as a Class III director and will begin
serving his term, if elected, at the Annual Meeting.
(14) Includes 365,170 shares of common stock that may be acquired upon the
exercise of options within 60 days of April 3, 2002.
9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is engaged in various transactions with entities affiliated
with trusts for the respective benefit of Maurice, Paul and Armand Marciano (the
"Marciano Trusts"). The Company believes that the arrangements involving each of
the companies in which the Marciano Trusts have an investment and related party
transactions discussed below were entered into on terms no less favorable to the
Company than could have been obtained from an unaffiliated third party.
LICENSE AGREEMENTS AND LICENSEE TRANSACTIONS
On September 28, 1990, the Company entered into a license agreement with
Charles David of California ("Charles David"). The Marciano Trusts and Nathalie
Marciano (the spouse of Maurice Marciano) together own 50% of Charles David, and
the remaining 50% is owned by the father-in-law of Maurice Marciano. The license
agreement grants Charles David the rights to manufacture worldwide and
distribute worldwide (except Japan and certain European countries) for men,
women and some children, leather and rubber footwear which bear the Company
trademark. The license also includes related shoe care products and accessories.
Gross royalties earned by the Company under such license agreement for the
fiscal year ended December 31, 2001, and for the first quarter ended March 31,
2002, were $2.0 million and $0.8 million, respectively. Additionally, the
Company purchased $5.0 million and $1.8 million, respectively, of products from
Charles David for resale in the Company's retail stores during the same periods.
CONSULTING ARRANGEMENT
Subsequent to the fiscal year ended December 31, 2001, the Company agreed
to pay Bryan Isaacs $42,000 in connection with consulting services provided by
him to the Company during 2001. The Company paid this amount to Mr. Isaacs in
February 2002.
LEASES
The Company leases manufacturing, warehouse and administrative facilities
from partnerships affiliated with the Marciano Trusts and certain of its
affiliates. There were three leases in effect at December 31, 2001, two of which
expire in July 2008, and one of which expires in February 2006. The total lease
payments to these limited partnerships are currently $263,916 per month.
Aggregate lease payments under leases in effect for the fiscal year ended
December 31, 2001, and for the first quarter ended March 30, 2002, were $3.0
million and $0.8 million, respectively.
STOCKHOLDERS' AGREEMENT
Upon consummation of the Company's initial public offering, Maurice
Marciano, Paul Marciano and Armand Marciano (the "Principal Stockholders") and
the Company entered into an Amended and Restated Stockholders' Agreement (the
"Stockholders' Agreement"). Pursuant to the Stockholders' Agreement, the
Principal Stockholders have agreed to vote their shares of Common Stock to elect
each of Maurice, Paul and Armand Marciano, or one designee of any such person
(if such designee shall be reasonably acceptable to the other Principal
Stockholders), to the Board of Directors. The Stockholders' Agreement provides
that each of the Principal Stockholders has granted to each other and to the
Company rights of first refusal with respect to the sale of any shares of the
Company's outstanding Common Stock held by each of the Principal Stockholders
(with certain limited exceptions).
INDEBTEDNESS OF MANAGEMENT
Pursuant to his employment agreement, on March 22, 2001, the Company
loaned Carlos Alberini $1,000,000 for the purchase of his primary residence in
Los Angeles (the "Relocation Loan"). The Relocation Loan is secured by a second
deed of trust on the residence and bears interest at the rate of seven percent
(7%) per annum; provided that no interest shall accrue during Mr. Alberini's
employment with the Company. As of December 31, 2001, there was a principal
balance outstanding on the Relocation Loan of $837,772.24.
10
LEGAL PROCEEDINGS
On approximately January 15, 1999, UNITE filed an unfair labor practice
charge against us, alleging that attorney Dennis Hershewe violated Section
8(a)(1) of the National Labor Relations Act ("the Act") by questioning our
employee Maria Perez about her union activities at the deposition he conducted
in her workers' compensation case. Mr. Hershewe represents Fireman's Fund
Insurance Company, our workers' compensation insurance carrier. GUESS?
investigated the charge and responded to it on March 10, 1999. The NLRB issued a
complaint on part of the charge on October 14, 1999, and we filed an answer on
October 21, 1999. On July 6, 2000, the complaint was dismissed in its entirety.
The NLRB appealed the decision and both sides submitted briefs in September of
2000. A decision on the appeal is pending.
On June 9, 1999, we commenced a lawsuit in the Los Angeles County Superior
Court against Kyle Kirkland, Kirkland Messina LLC, and CKM Securities
(collectively "Kirkland") for tortious interference, unfair competition, fraud
and related claims. This action arises out of alleged misrepresentations and
omissions of material fact made by Kirkland in connection with the operations
and financial performance of Pour Le Bebe, Inc., a former licensee ("PLB").
Following Kirkland's efforts to compel arbitration of this matter, on March 29,
2000, the California Court of Appeal determined that the action will proceed in
court. After unsuccessfully requesting reconsideration before the appellate
court, Kirkland sought review before the California Supreme Court. Kirkland's
petition for review to the California Supreme Court was denied on July 12, 2000.
This matter has now been remitted back to the state court, where discovery is
almost completed. A trial date has been set for July 17, 2002.
On March 28, 2000 a complaint was filed against us in San Diego County
Superior Court entitled Snodgrass v. Guess?, Inc. and GUESS? Retail, Inc. The
complaint alleged that certain current and former store management employees
were incorrectly classified as exempt from overtime laws. The Company, without
admitting or acknowledging any wrongdoing, tentatively settled the matter on
September 28, 2001. The court preliminarily approved the settlement on February
22, 2002 and the final approval hearing is scheduled for May 10, 2002.
Furthermore, the Company does not expect any changes to its ongoing cost
structure as a result of this settlement.
On May 4, 2000, a complaint was filed against the Company and Mr. Paul
Marciano in the Los Angeles Superior Court - Michel Benasra v. Paul Marciano and
Guess?, Inc. The complaint grows out of the arbitration between the Company and
PLB, wherein the Company was awarded $7.7 million. The plaintiff, the President
of PLB, alleges that defendants made defamatory statements about him during the
arbitration. Plaintiff seeks general damages of $50,000,000 and unspecified
punitive damages. Defendants moved to compel arbitration of this matter, or
alternatively, to strike the action under the state's anti-SLAPP (Strategic
Litigation Against Public Participation) statute. The motion to compel
arbitration was denied and that ruling was affirmed on appeal. Defendant's
anti-SLAPP motion is pending.
On January 30, 2001, Guess?, Inc., Maurice Marciano, Armand Marciano, Paul
Marciano, and Brian Fleming were named as defendants in a securities class
action entitled David Osher v. Guess?, Inc., et al., filed in the United States
District Court for the Central District of California. Seven additional class
actions have been filed in the Central District, naming the same defendants:
Robert M. Nuckols v. Guess?, Inc. et al., Brett Dreyfuss v. Guess?, Inc. et al.,
both filed February 1, 2001; Jerry Sloan v. Guess?, Inc., et al., filed February
6, 2001; Jerry Byrd v. Guess?, Inc., et al; filed February 13, 2001; Patrick and
Kristine Liska v. Guess?, Inc., et al, filed February 14, 2001; Darrin Wegman v.
Guess?, Inc., et al., filed February 22, 2001; and Rosie Gindie v. Guess?, Inc.,
et al., filed February 22, 2001. All eight complaints purport to state claims
under Section 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of
1934 and allege that defendants made materially false and misleading statements
relating to the Company's inventory and financial condition during the class
period. In Osher, Nuckols, Byrd, Wegman and Sloan, the class period is February
14, 2000 through January 26, 2001; in Dreyfuss, Liska and Gindie the class
period is February 14, 2000 through November 9, 2000. On April 25, 2001, the
court entered an order consolidating all of the eight class actions, captioned
In re Guess, Inc. Securities Litigation. The lead plaintiff for the class is the
Policeman and Fireman's Retirement System of the City of Detroit. On July 9,
2001, the plaintiff filed a consolidated amended class action complaint. Our
motion to dismiss was granted, with leave to amend, on November 29, 2001. On
March 14, 2002, the court issued orders dismissing all eight class action cases
without prejudice.
On March 15, 2001, a complaint was filed by Susan Goldman, derivatively on
behalf of nominal defendant Guess?, Inc. against Bryan Isaacs, Alice Kane,
Robert Davis, Armand Marciano, Paul Marciano, Maurice Marciano, Howard Socol and
Guess?, Inc. in the Court of Chancery for the State of Delaware. The complaint
11
alleges misappropriation of corporate information, insider trading and other
purported breaches of fiduciary duty by the Company and its Board of Directors.
On February 12, 2002, the court granted plaintiff's motion to dismiss this
action without prejudice.
On May 7, 2001, a complaint was filed by Suzanne Bell, derivatively on
behalf of nominal defendant Guess?, Inc. against Maurice Marciano, Paul
Marciano, Armand Marciano, Alice Kane, Robert Davis, Howard Socol, Bryan Isaacs
and Brian Fleming, in the United States District Court for the Central District
of California. The complaint alleges corporate mismanagement, insider trading
and other purported breaches of fiduciary duty by the Company and its Board of
Directors. On July 5, 2001, the court stayed the action pursuant to stipulation
of the parties pending the outcome of the Goldman derivative action. As a result
of the dismissal of the Goldman derivative action on February 12, 2002, the stay
expired. The parties subsequently stipulated to a dismissal which was approved
by the court on March 28, 2002.
We cannot predict the outcome of these matters. We believe the outcome of
one or more of the above cases could have a material adverse effect on our
results of operations or financial condition.
Most major corporations, particularly those operating retail businesses,
become involved from time to time in a variety of employment-related claims and
other matters incidental to their business in addition to those described above.
In the opinion of our management, the resolution of any of these pending
incidental matters is not expected to have a material adverse effect on our
results of operations or financial condition.
12
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company as of April 3, 2002 are
as follows:
NAME AGE POSITION
---- --- --------
Maurice Marciano 53 Director, Co-Chairman of the Board and Co-Chief Executive Officer
Paul Marciano 49 Director, Co-Chairman of the Board and Co-Chief Executive Officer
Armand Marciano 57 Senior Executive Vice President and Assistant Secretary
Carlos Alberini 46 Director, President and Chief Operating Officer
Robert Davis 54 Director
Bryan Isaacs 63 Director
Alice Kane 54 Director
Frederick Silny 51 Senior Vice President and Chief Financial Officer
Howard Socol 56 Director
Howard Weitzman 62 Nominee for Director
Pursuant to the Stockholders' Agreement described herein under "Certain
Relationships and Related Transactions," the Principal Stockholders have agreed
to vote their shares of Common Stock to elect each of Maurice, Paul and Armand
Marciano, or one designee of any such person (if such designee shall be
reasonably acceptable to the other Principal Stockholders), to the Board of
Directors. Maurice, Paul and Armand Marciano are brothers and have worked
together in the fashion industry for the last 28 years.
With respect to the directors and the nominee named above, Robert Davis,
Bryan Isaacs, Alice Kane, Howard Socol and Howard Weitzman are deemed to be
"independent" directors under the New York Stock Exchange rules.
Maurice Marciano, age 53, who was one of the founders of the Company in
1981, has served as Co-Chairman of the Board and Co-Chief Executive Officer
since November 15, 1999. Mr. Marciano served as Chairman of the Board and Chief
Executive Officer of the Company from August 1993 to November 15, 1999. Mr.
Marciano served as President of the Company from June 1990 to September 1992 and
as Executive Vice President from 1981 until June 1990. Mr. Marciano's direct
supervisory responsibilities include design, merchandising and manufacturing.
Additionally, Mr. Marciano, along with Mr. Paul Marciano, is responsible for the
Company's corporate marketing. From February 1993 to May 1993, Mr. Marciano was
Chairman, Chief Executive Officer and Director of Pepe Clothing USA, Inc. Mr.
Marciano has served as a director of the Company since 1981 (except for the
period from January 1993 to May 1993) and his present term as a Class III
director will expire at the Annual Meeting.
Paul Marciano, age 49, joined the Company two months after its inception
in 1981 and has served as creative director for the Company's advertising
worldwide, and served as President and Chief Operating Officer of the Company
from September 1992 to December 2000. Mr. Marciano has served as Co-Chairman and
Co-Chief Executive Officer of the Company since November 15, 1999. Mr.
Marciano's responsibilities include direct supervisory responsibility for the
Company's global advertising and image, licensing, international business and
the retail operation. Additionally, Mr. Marciano, along with Maurice Marciano,
is responsible for the Company's corporate marketing. Mr. Marciano served as
Senior Executive Vice President of the Company from August 1990 to September
1992 and has served as a director of the Company since 1990. His present term as
a Class II director will expire at the 2004 annual meeting of stockholders.
Armand Marciano, age 57, joined the Company two months after its inception
in 1981 and has served as Senior Executive Vice President of the Company since
November 1992. Mr. Marciano is responsible for distribution, customer service
and European exports. Mr. Marciano served as Secretary of the Company from 1983
to August 1997, as Executive Vice President of the Company from July 1988 to
1992, and as Assistant Secretary of the Company since August 1997. Mr. Marciano
served as a director of the Company from 1983 through his resignation as a
director in December 2001.
Carlos Alberini, age 46, joined the Company in December 2000 as President
and Chief Operating Officer. Mr. Alberini is responsible for product sourcing,
logistics, retail sales (including store operations and real estate), MIS,
finance, human resources, legal (excluding litigation management) and wholesale
sales for the Company. Mr. Alberini became a director of the Company on December
11, 2000, and his present term as a Class I director
13
will expire at the 2003 annual meeting of stockholders. Prior to joining the
Company, Mr. Alberini served as Senior Vice President and Chief Financial
Officer of Footstar, Inc. from October 1996 to December 2000. Prior to his
position at Footstar, Inc., from May 1995 to October 1996 Mr. Alberini served as
Vice President of Finance and Acting Chief Financial Officer of the Melville
Corporation, from 1987 to 1995 he served as Corporate Controller and rose to
Senior Vice President and Chief Financial Officer and Treasurer of The Bon Ton
Stores, and he spent 10 years with Price Waterhouse until leaving the firm as an
audit manager in 1987.
Robert Davis, age 54, is the former President and Chief Operating Officer
of St. John Knits, Inc. Following his resignation in April 1996, Mr. Davis has
remained active at St. John and is currently a consultant to its Chairman and
Founder, Bob Gray. Mr. Davis, a director of St. John since 1984, became
President of St. John in 1992 and served as Chief Operating Officer and
Secretary from 1988 to 1996. From 1980 to 1988, Mr. Davis held various other
administrative positions at St. John ending with Vice President - Operations.
Prior to that, Mr. Davis was a partner in a Chicago area law firm, where he
advised on corporate, labor and litigation matters from 1973 to 1980. Mr. Davis
has served as a director of the Company since May 1997 and his present term as a
Class II director will expire at the 2004 annual meeting of stockholders.
Bryan Isaacs, age 63, spent the majority of his career with KPMG LLP, an
international audit, tax and consulting firm. Mr. Isaacs was appointed to the
KPMG partnership in 1972 and, until his retirement in June 1999, led the
expansion of KPMG's international corporate services practice in the firm's
Western Region. Mr. Isaacs also served on a number of KPMG's global tax
committees and, from 1996 to 1999, chaired the firm's global information,
communication and entertainment tax committee. Mr. Isaacs has served as a
director of the Company since January 2000 and his present term as a Class III
director will expire at the Annual Meeting.
Alice T. Kane, age 54, has been a consultant with Blalock & Partners LP,
an investment banking firm, since December 2001. From June 1998 through November
2001, Ms. Kane was President of American General Fund Group and Chairman of
VALIC Group Annuity Funds. Ms. Kane joined American General Corporation as
Executive Vice President of their investments advisory subsidiary, American
General Investment Management L.P. in June 1998. Prior to joining American
General Corporation, Ms. Kane served her entire financial services industry
career at New York Life Insurance Company where she joined the company in 1972.
Up until her departure from New York Life, she was Executive Vice President and
Chief Marketing Officer after serving as Executive Vice President with
responsibility for managing the company's asset management division from 1994 to
1997. Ms. Kane was also Chairman of New York Life's MainStay Mutual Funds, and
served as General Counsel of New York Life from 1986 to 1995. Ms. Kane has
served as a director of the Company since June 1998 and her present term as a
Class I director will expire at the 2003 annual meeting of stockholders. Ms.
Kane is a member of the Board of Directors of Unified Financial Services, Inc.,
a financial services holding company and of Global Crossing, a
telecommunications provider.
Frederick G. Silny, age 51, joined the Company as Senior Vice President
and Chief Financial Officer in November 2001 from CarsDirect.com, Inc., where he
was Chief Financial Officer and Corporate Secretary from 1999. Prior to that, he
spent 10 years at IHOP Corp., the parent company of a leading chain of family
restaurants, serving as Chief Financial Officer, Vice President-Finance and
Treasurer. Between 1979 and 1989, Mr. Silny held a variety of financial and
operational positions with Carnation Company, now a division of Nestle, and from
1982 to 1984, he headed international treasury for Litton Industries, Inc. He
began his career as a certified public accountant with Coopers & Lybrand in
1976.
Howard Socol, age 56, became the Chairman, Chief Executive Officer and
President of Barneys New York, Inc. in January 2001. From March 1999 through
January 2001, he was President of Socol Consulting Group that provides retail
and internet consulting services. From March 1998 to January 1999, he was the
Chief Executive Officer of J. Crew Group Inc. Mr. Socol spent the majority of
his career rising through the ranks of Burdines Department Stores, a division of
Federated Department Stores, to become Burdines Chairman and Chief Executive
Officer. Mr. Socol, considered one of the apparel industry's premier merchants,
served as Chairman and Chief Executive Officer of Burdines from 1984 to May
1997. Having joined Burdines in 1969 as an assistant buyer and after holding
various positions over a twelve-year period, he was appointed the youngest
division president in Federated's history. Mr. Socol has served as a director of
the Company since September 1999 and his present term as a Class III director
will expire at the Annual Meeting.
Howard L. Weitzman, 62, has been a partner at Proskauer Rose LLP in the
Litigation and Dispute Resolution Department since August 1998 and has been a
practicing attorney for 36 years. From September 1995 through
14
August 1998, Mr. Weitzman was Executive Vice President, Corporate Operations for
Universal Studios (then MCA) and, during his tenure, he also ran the Theme Parks
division for one year. Mr. Weitzman was Chairman and one of the managing
partners in the firm of Katten Munchin Zavis & Weitzman from 1991 through 1995
and was one of the managing partners of the Wyman Bautzer firm from 1986 through
1991. Prior to 1986, Mr. Weitzman had his own law firm for 22 years. In addition
to his legal experience, Mr. Weitzman taught at the University of Southern
California Law School for 12 years and has been a frequent speaker and lecturer
at many law schools, seminars and symposiums. Mr. Weitzman has also been a guest
on many national, local and syndicated television and radio shows. Mr. Weitzman
currently practices law and acts as a consultant to several businesses.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held six meetings during 2001, and each director
attended at least 75 percent of the aggregate of the meetings of the Board of
Directors and of the committees of which he or she was a member.
The Board of Directors has the following standing committees:
AUDIT COMMITTEE
The Audit Committee, which was established on July 30, 1996, recommends
the appointment of the Company's external auditors and meets with both internal
and external auditors to review the scope of their audits and the results
thereof. The Audit Committee is governed by a written charter adopted by the
Board of Directors. In addition, the Audit Committee reviews and comments on the
proposed plans of the internal and external auditors, audit fee proposals,
financial statements and other documents submitted to stockholders and
regulators and reviews the internal control policies and procedures of the
Company. There are currently four members of the Audit Committee: Mr. Isaacs,
who serves as Chairman, Ms. Kane, Mr. Socol and Mr. Davis. The members of the
Audit Committee are all non-employee directors. There were nine meetings of the
Audit Committee held during 2001.
With respect to the members of the Audit Committee named above, Bryan
Isaacs, Robert Davis, Alice Kane and Howard Socol are deemed to be "independent"
members under the New York Stock Exchange listing standards.
COMPENSATION COMMITTEE
The Compensation Committee, which was established on March 3, 1997,
reviews and approves the remuneration arrangements for the officers and
directors of the Company and reviews and recommends new executive compensation
or stock plans in which the officers and/or directors are eligible to
participate, including the granting of stock options and the determination of
annual bonuses. There are currently four members of the Compensation Committee:
Mr. Davis, who serves as Chairman, Ms. Kane, Mr. Socol and Mr. Isaacs. There
were four meetings of the Compensation Committee held during 2001.
The General Corporation Law of the State of Delaware (the "Delaware
Corporation Law") provides that a company may indemnify its directors and
officers as to certain liabilities. The Company's Restated Certificate of
Incorporation and Bylaws provide for the indemnification of its directors and
officers to the fullest extent permitted by law, and the Company has entered
into separate indemnification agreements with each of its directors and officers
to effectuate these provisions and to purchase directors' and officers'
liability insurance. The effect of such provisions is to indemnify, to the
fullest extent permitted by law, the directors and officers of the Company
against all costs, expenses and liabilities incurred by them in connection with
any action, suit or proceeding in which they are involved by reason of their
affiliation with the Company.
15
EXECUTIVE COMPENSATION
The following table sets forth each component of compensation paid or
awarded to, or earned by, the Named Executive Officers for the fiscal years
ended December 31, 1999, 2000 and 2001.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARD(S)
----------------------------------- -----------------------
SECURITIES ALL
OTHER UNDER- OTHER
ANNUAL RESTRICTED LYING COMPEN-
NAME AND PRINCIPAL COMPENSATION STOCK OPTIONS/ SATION
POSITION YEAR SALARY ($) BONUS ($) ($) (1) AWARD(S)($) SARS (#) (2) ($)
------------------ ---- ---------- --------- ------------ ----------- ----------- -------
Maurice Marciano(3). . . . . . . . . 2001 540,000 -- 86,328 -- -- 1,431
Co-Chairman of the Board and 2000 900,000 360,000 62,678 -- -- 1,067
Co-Chief Executive Officer 1999 900,000 900,000 120,032 -- -- 1,038
Paul Marciano(3) . . . . . . . . . . 2001 540,000 -- 125,198 -- -- 1,431
Co-Chairman of the Board and 2000 900,000 360,000 100,812 -- -- 1,067
Co-Chief Executive Officer 1999 900,000 900,000 147,683 -- -- 1,038
Armand Marciano(3) . . . . . . . . . 2001 390,000 -- 64,577 -- -- 1,388
Senior Executive Vice President 2000 650,000 260,000 104,250 -- -- 1,125
and Assistant Secretary 1999 650,000 650,000 52,604 -- -- 1,125
Carlos Alberini(4) . . . . . . . . . 2001 675,000 -- 145,394 -- -- --
President and 2000 37,500 130,000 -- 949,213 500,000 --
Chief Operating Officer 1999 -- -- -- -- -- --
Nancy Shachtman(5) . . . . . . . . . 2001 555,692 -- -- -- 25,000 1,875
Former President of 2000 459,616 50,000 -- -- 44,000 1,950
Wholesale 1999 400,000 280,000 -- -- 0 2,025
Frederick Silny(6) . . . . . . . . . 2001 34,615 -- -- 55,700 80,000 --
Senior Vice President and 2000 -- -- -- -- -- --
Chief Financial Officer 1999 -- -- -- -- -- --
------------------
(1) Includes the following amounts paid for transportation on behalf of: Mr.
Maurice Marciano $109,381 in 1999, $51,177 in 2000 and $71,896 in 2001,
Mr. Paul Marciano, $137,032 in 1999, $82,968 in 2000 and $98,619 in 2001
and Mr. Armand Marciano, $41,953 in 1999, $67,044 in 2000 and $34,898 in
2001. Includes $143,176 paid on behalf of Carlos Alberini in connection
with his relocation to Los Angeles.
(2) Consists solely of contributions to the Company's 401(k) Plan, dated
January 1, 1992, as amended, by the Company on behalf of such executive
officers.
(3) These three named Executive Officers had previously agreed to reduce their
2001 compensation by the amounts of their 2000 annual bonus compensation.
See "Compensation Committee Report - Components of Compensation."
(4) Mr. Alberini joined the Company on December 11, 2000. Mr. Alberini waived
the Guaranteed Bonus (as defined under "Employment Agreements") due to him
in 2001 under his employment agreement. See "Employment Agreements."
(5) On October 31, 2002, Ms. Shachtman relinquished her duties as an executive
officer of the Company and resigned her employment effective February 28,
2002.
(6) Mr. Silny joined the Company on November 12, 2001.
16
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS/SARS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OF FOR OPTION TERM (2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------
NAME GRANTED (1)(#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- -------------- ------------ ------------ ---------- ------------ ------------
Maurice Marciano . . . . . . . . -- -- -- -- -- --
Paul Marciano . . . . . . . . . -- -- -- -- -- --
Armand Marciano . . . . . . . . -- -- -- -- -- --
Carlos Alberini . . . . . . . . -- -- -- -- -- --
Nancy Shachtman(3) . . . . . . . 25,000 4.04% 7.00 3/6/2011 284,977 453,778
Frederick Silny . . . . . . . . 80,000 12.94% 5.58 11/12/2011 727,088 1,157,766
(1) The options identified in this table were granted under the Company's 1996
Equity Incentive Plan and are exercisable in equal 25% installments on
each of the first four anniversaries of the date of grant. In the event a
Named Executive Officer terminates his or her employment for any reason
other than death, disability or retirement, his or her options may
thereafter be exercised, to the extent they were exercisable on the date
of termination, for a period of 60 days from the date of such termination
of employment.
(2) The potential gains shown are net of the option exercise price and do not
include the effect of any taxes associated with exercise. The amounts
shown are for the assumed rates of appreciation only, do not constitute
projections of future stock performance and may not necessarily be
realized. Actual gains, if any, on stock option exercises depend on the
future performance of the Common Stock, continued employment of the
optionee through the term of the option and other factors.
(3) All of Ms. Shachtman's unvested options expired on February 28, 2002 and
any vested and unexercised options will expire on April 29, 2002.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION/SAR VALUES
The following table provides information regarding the number and value of
unexercised options to purchase the Common Stock held by the Named Executive
Officers as of December 31, 2001, based upon a value of $7.50 per share, which
was the closing price of the Common Stock on the New York Stock Exchange on
December 31, 2001.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED ON VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END
EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME ($) ($) (#) ($)
---- ----------- -------- ------------------------- -------------------------
Maurice Marciano . . . . . . . . . . 0 0 0/0 0/0
Paul Marciano . . . . . . . . . . . 0 0 0/0 0/0
Armand Marciano . . . . . . . . . . 0 0 0/0 0/0
Carlos Alberini . . . . . . . . . . 0 0 100,000/400,000 287,000/1,148,000
Nancy Shachtman . . . . . . . . . . 45,000 177,580 131,000/73,000 50,000/65,930
Frederick Silny . . . . . . . . . . 0 0 0/80,000 0/153,598
17
EMPLOYMENT AGREEMENTS
The Company has entered into individual employment agreements (the
"Executive Employment Agreements") with each of Maurice Marciano, Paul Marciano
and Armand Marciano (the "Executives"). The initial term of the Executive
Employment Agreements began on August 13, 1996 (the "Effective Date") and
terminated on the third anniversary of the Effective Date. However, the
Executive Employment Agreements automatically extend after the initial term for
successive one-year terms, unless notice not to extend is given by either party
at least 90 days prior to the end of the then current term. No notice has been
given. The Executive Employment Agreements provide for an annual base salary of
$900,000, $900,000 and $650,000 for Maurice Marciano, Paul Marciano and Armand
Marciano, respectively, which may be increased by the Compensation Committee
based on annual reviews. In addition, the Executive Employment Agreements
provide for annual bonuses to be determined in accordance with the Company's
Annual Incentive Bonus Plan, with a minimum expected target bonus equal to 100%
of base salary. Commencing on the expiration of the term of an Executive
Employment Agreement, or earlier should an Executive Employment Agreement be
terminated other than due to the Executive's death or for cause (as defined in
the Executive Employment Agreements), the Company and Maurice Marciano, Paul
Marciano or Armand Marciano, as the case may be, will enter into a two-year
consulting agreement under which such Executive will render certain consulting
services for which the Company will pay an annual consulting fee equal to 50% of
such Executive's annual base salary, as in effect immediately prior to the
commencement of the consulting period. In addition, each Executive is entitled
to certain fringe benefits, including full Company-paid health and life
insurance for himself and his immediate family during his lifetime. If any of
the Executives is terminated without cause or resigns for good reason (as such
terms are defined in the Executive Employment Agreements), then such Executive
will receive as severance his then current base salary and annual target bonus
for the remainder of his term of employment. The Executive will also continue to
participate in Company-sponsored health and life insurance, and other fringe
benefit plans and programs during the severance period. Each Executive
Employment Agreement further provides that upon the death or permanent
disability of the Executive, such Executive (or his beneficiary) will receive a
pro rata portion of his annual target bonus for the year in which the
Executive's death or permanent disability occurs. The Executive Employment
Agreements also include certain noncompetition, nonsolicitation and
confidentiality provisions.
In November 2000, Carlos Alberini entered into an employment agreement
with the Company (the "Employment Agreement") for a term commencing on December
11, 2000 through December 31, 2003 (the "Term"). The Employment Agreement will
automatically extend after the Term for successive one-year terms unless notice
not to extend is given by either party at least 180 days prior to the end of the
then current term. The Employment Agreement provides for an annual base salary
of $650,000, which may be increased by the Compensation Committee based on
annual reviews. In addition, the Employment Agreement provides for annual
bonuses to be determined in accordance with the Company's Annual Incentive Bonus
Plan, with the minimum expected target bonus to be 70% of base salary, up to a
maximum bonus of 120% of base salary if the applicable stretch performance goals
(as defined in the Bonus Plan) are met. The Employment Agreement also provides
for a guaranteed bonus of $260,000 payable in two prorated installments
(December 31, 2000 and December 11, 2001) provided that Mr. Alberini is employed
with the Company through the applicable installment date (the "Guaranteed
Bonus"). Mr. Alberini subsequently waived his right to receive the Guaranteed
Bonus due to him in 2001. The amount of the target bonus, if any, to be paid to
Mr. Alberini in 2001 would have been reduced by the second installment of the
Guaranteed Bonus. On December 11, 2000, Mr. Alberini was granted 205,680
restricted shares of Common Stock under the 1996 Equity Incentive Plan which
shares vest as follows: 105,680 shares on January 1, 2002, 50,000 shares on
January 1, 2003 and 50,000 shares on January 1, 2004. He was also granted a
stock option for 500,000 shares of Common Stock under the Company's 1996 Equity
Incentive Plan with an exercise price equal to the closing price on December 11,
2000 and which vests in five equal annual installments beginning on December 31,
2001. Mr. Alberini is eligible to participate in the Company's 401(k) Plan and
is entitled to other similar benefits provided to senior executives. If Mr.
Alberini's employment is terminated by the Company at any time other than for
his death, disability or for cause or if Mr. Alberini terminates his employment
for good reason (as such terms are defined in the Employment Agreement), the
Company and Mr. Alberini will enter into a consulting agreement for up to
eighteen months under which Mr. Alberini will render consulting services for
which the Company will pay an annualized consulting fee equal to Mr. Alberini's
base salary, as in effect prior to the commencement of the consulting period. In
addition, Mr. Alberini will be entitled to receive (i) any benefits to which he
would otherwise be entitled with respect to the Relocation Loan; (ii) an amount
equal to the portion of any Guaranteed Bonus for the expired portion of the
fiscal year in which his termination date occurs;
18
(iii) accelerated vesting of the restricted stock; and (iv) continuing vesting
of any then outstanding options over the consulting period. The Employment
Agreement further provides for certain payments upon a change in control (as
such term is defined in the Employment Agreement), including an additional
payment to reimburse him for any excess taxes that he may incur with respect to
such payments. The Employment Agreement also includes certain noncompetition,
nonsolicitation and confidentiality provisions. In addition, the Employment
Agreement provides that Mr. Alberini is eligible for reimbursement by the
Company for relocation expenses and assistance with respect to the purchase of a
primary residence in Los Angeles.
On October 22, 2001, the Company extended an offer of employment to
Frederick Silny (the "Silny Letter"). Pursuant to the Silny Letter, Mr. Silny
receives a base salary of $300,000 per year. In addition, the Silny Letter
provides for annual bonuses to be determined in accordance with the Company's
Annual Incentive Bonus Plan. Pursuant to the Silny Letter, Mr. Silny was granted
incentive stock options to purchase 71,685 shares of Common Stock and
non-qualified stock options to purchase 8,315 shares of Common Stock under the
1996 Equity Incentive Plan which vest over a period of four years beginning on
the first anniversary of the date of grant. In addition, Mr. Silny was granted
10,000 shares of restricted Common Stock under the 1996 Equity Incentive Plan
which vest over a three year period beginning on the first anniversary of the
date of grant. The Silny Letter also provides for a severance payment in an
amount equal to six months of base salary and health and disability benefits,
upon termination of Mr. Silny's employment by the Company for reasons other than
for cause. The amount of the severance payment that would be due to Mr. Silny is
also subject to offset equal to any amounts that he earns from other employment
during the period ending six months after his termination.
On October 31, 2001, Nancy Shachtman relinquished her duties as an
executive officer of the Company and resigned her employment effective February
28, 2002. The Company agreed to pay Ms. Shactman's full salary from November 1,
2001, through February 28, 2002, plus a severance payment equal to two months'
salary. In addition, the Company agreed to pay severance beginning May 1, 2002,
in accordance with its regular payroll policies, and continuing for six months
at a rate equal to Ms. Shachtman's salary as of October 31, 2001; provided,
however, that any payments after May 1, 2002, are subject to offset from income
earned from other employment.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no additional
compensation for serving on the Board of Directors.
During the 2001 fiscal year, directors who were not employees of the
Company were entitled to receive an annual retainer fee of $20,000 for their
services and attendance fees of $1,500 per Board meeting and $1,000 (committee
chairman) or $750 (committee member) per committee meeting attended. Annual
retainer fees may, however, be waived in exchange for non-qualified options to
purchase a number of shares of Common Stock equal in value to 2 1/2 times that
of the fees so waived. The aggregate exercise price of these options is equal to
the closing market price of the Common Stock on the day of the grant. The
options will become exercisable in 25% installments on the first day of each of
the four fiscal quarters following the date of grant. Pursuant to the Company's
Amended and Restated 1996 Non-Employee Directors' Stock Option Plan ("1996
Plan"), if there is a change in control of the Company (as defined in the 1996
Plan), all options become immediately exercisable. Further, during the 2001
fiscal year, pursuant to the 1996 Plan, each non-employee director of the
Company received an additional 1,500 shares of Common Stock and is entitled to
receive similar grants of stock on the first business day of each calendar year
thereafter. All directors are reimbursed for expenses incurred in connection
with attendance at Board or committee meetings.
In addition, pursuant to the 1996 Plan, each non-employee director of the
Company, upon joining the Board of Directors, will receive non-qualified options
to purchase 10,000 shares of Common Stock and will receive non-qualified options
to purchase an additional 3,000 shares of Common Stock on the first day of each
fiscal year thereafter. The exercise price of such options was equal to 85% of
the fair market value of the Common Stock on the respective date of grant and
the term of the options will be for ten years. The options will become
exercisable in 25% installments on each of the first four anniversaries of the
date of grant, provided that the options will immediately become exercisable in
full upon the occurrence of a change in control of the Company. Further,
pursuant to the 1996 Plan, each non-employee director of the Company, upon
joining the Board of Directors, will receive 1,500 shares of Common Stock. No
new directors were appointed or elected during the 2001 fiscal year.
19
In March 2002, the Board of Directors approved a new outside director
compensation plan (the "New Director Compensation Plan") which will take effect
at the Annual Meeting for all continuing directors and for any newly elected or
appointed directors after the Annual Meeting. Under the New Director
Compensation Plan directors who were not employees of the Company ("Non-Employee
Directors") will be entitled to receive an annual retainer fee of $30,000, plus
$5,000 annual retainer for each chair of each committee, for their services and
attendance fees of $1,500 per Board meeting and $750 per committee member per
committee meeting attended. Annual retainer fees may, however, be waived in
exchange for non-qualified options to purchase a number of shares of Common
Stock equal in value to 2 1/2 times that of the fees so waived. The aggregate
exercise price of these options is equal to the closing market price of the
Common Stock on the day of the grant. The options will become exercisable in 25%
installments on the first day of each of the four fiscal quarters following the
date of grant. Pursuant to the 1996 Plan, if there is a change in control of the
Company (as defined in the 1996 Plan), all options become immediately
exercisable. Further, under the New Director Compensation Plan, pursuant to the
1996 Plan, each Non-Employee Director of the Company will receive an additional
2,000 shares of restricted Common Stock which vest in full on the earlier of the
second anniversary of the date of issuance or on the last day of such
Non-Employee Director's term if such terms is served in full. In addition, each
Non-Employee Director is entitled to receive similar grants of restricted stock
on the first business day of each calendar year thereafter. All Non-Employee
Directors are reimbursed for expenses incurred in connection with attendance at
Board or committee meetings.
In addition, under the New Director Compensation Plan and pursuant to the
1996 Plan, each Non-Employee Director of the Company, upon joining the Board of
Directors, will receive non-qualified options to purchase 12,000 shares of
Common Stock and will receive non-qualified options to purchase an additional
7,500 shares of Common Stock on the first day of each fiscal year thereafter.
The exercise price of such options will be equal to the fair market value of the
Common Stock on the respective date of grant and the term of the options will be
for ten years. The options will become exercisable in 25% installments on each
of the first four anniversaries of the date of grant, provided that the options
will immediately become exercisable in full upon the occurrence of a change in
control of the Company. Further, pursuant to the 1996 Plan, each Non-Employee
director of the Company, upon joining the Board of Directors, will receive 2,000
shares of restricted Common Stock which vest in full on the earlier of the
second anniversary of the date of issuance or on the last day of such
Non-Employee Director's term if such terms is served in full.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 2001 were Mr. Davis, as
Chairman, Mr. Isaacs, Ms. Kane and Mr. Socol. None of the executive officers of
the Company served as a member of the compensation committee (or other board
committee performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another entity during the fiscal
year ended December 31, 2001.
COMPENSATION COMMITTEE REPORT
The report of the Compensation Committee of the Board of Directors with
respect to compensation in fiscal 2001 is as follows:
COMPENSATION PHILOSOPHY
The initial framework of compensation paid to the Company's executive
officers was determined at the time of the IPO. Based on discussions with the
Company's investment bankers and an independent compensation consultant and
based on comparisons with other companies in the textile industry, the Board of
Directors established ranges of salary, bonus and stock option compensation for
its executive officers. The Company established a Compensation Committee during
1997 which now has responsibilities over the Company's formal policies for
executive compensation. In its hiring practices, the Company seeks to obtain the
services of the most highly qualified individuals in the industry, and has
provided compensation accordingly.
20
COMPONENTS OF COMPENSATION
The principal components of executive officer compensation are generally
as follows:
BASE SALARY. The base salary of certain of the Named Executive Officers is
fixed pursuant to the terms of their respective Employment Agreements. See " -
Employment Agreements."
ANNUAL PERFORMANCE BONUS. Annual bonuses are payable to the Company's
executive officers under the Company's Annual Incentive Bonus Plan (the "Bonus
Plan") based on the Company's achievement of certain pre-set corporate financial
performance targets established for the fiscal year. The Company failed to meet
the Bonus Plan's financial targets for the 2001 fiscal year; accordingly, no
bonus was payable under the Bonus Plan with respect to fiscal 2001. Maurice,
Paul and Armand Marciano agreed to reduce their 2001 compensation by the amount
of the bonuses paid to them in 2000. See "Executive Compensation - Summary
Compensation Table."
LONG-TERM INCENTIVE COMPENSATION. Long-term incentives are provided
through stock option grants and other stock-based awards under the Bonus Plan.
Awards under the Bonus Plan are designed to further align the interests of each
executive officer with those of the stockholders and provide each officer with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the Company's business.
COMPENSATION OF THE CO-CHIEF EXECUTIVE OFFICERS. Pursuant to the terms of
each of their employment agreements entered into at the time of the IPO, Maurice
Marciano and Paul Marciano each receive a base salary of $900,000 per year.
Their annual target bonus under the Bonus Plan is equal to 100% of each of their
base salaries. Messrs. Marciano, major stockholders in the Company, have not
been granted any options to purchase shares of Common Stock. Messrs. Marciano
each agreed to reduce their 2001 compensation by the amounts of their 2000
annual bonus compensation and received a salary of $540,000. The company did not
meet its financial targets and, therefore, no bonuses were paid to Messrs.
Marciano.
COMPENSATION OF THE PRESIDENT AND CHIEF OPERATING OFFICER. Pursuant to the
terms of his employment agreement, entered into in November 2000, Carlos
Alberini receives a base salary of $650,000 per year. In addition, Mr. Alberini
was entitled to receive a guaranteed bonus equal to $260,000 payable in two
prorated installments (December 31, 2000 and December 11, 2001) provided that
Mr. Alberini is employed with the Company through the applicable installment
date. Mr. Alberini subsequently waived his right to receive the 2001
installment. In addition, Mr. Alberini is entitled to receive an annual bonus
under the Bonus Plan, with the minimum expected target bonus to be 70% of base
salary, up to a maximum bonus of 120% of base salary if the applicable
performance goals are met. The company did not meet its financial targets in
2001 and, therefore, no bonus was paid to Mr. Alberini.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of
the Internal Revenue Code of 1986, as amended, generally provides that publicly
held companies may not deduct compensation paid to certain of their top
executive officers to the extent such compensation exceeds $1 million per
officer in any year. However, pursuant to regulations issued by the Treasury
Department, certain limited exceptions to Section 162(m) apply with respect to
"qualified performance-based compensation" and to compensation paid in certain
circumstances by companies in the first few years following their IPO. The
Company has taken steps to provide that these exceptions will apply to
compensation paid to its executive officers, and the Company will continue to
monitor the applicability of Section 162(m) to its ongoing compensation
arrangements.
By the Compensation Committee,
Robert Davis Alice
Kane Howard Socol
Bryan Isaacs
21
STOCK PERFORMANCE GRAPH
The Securities and Exchange Commission requires the Company to present a
graph comparing the cumulative total stockholder return on its shares with the
cumulative total stockholder return on (1) a broad equity market index and (2) a
published industry index or peer group.
The Stock Price Performance Graph below compares the cumulative total
stockholder return on the Common Stock from January 1, 1997 to December 31, 2001
with the return on the Standard and Poor's 500 Stock Index ("S&P 500 Index") and
the Standard and Poor's Textiles Index ("S&P Textiles"). The stock price
performance shown is not necessarily indicative of future price performance.
COMPARES 5-YEAR CUMULATIVE TOTAL RETURN AMONG
GUESS?, S&P 500 INDEX AND S&P TEXTILE INDEX
[ PERFORMANCE GRAPH ]
----------------------------- -------- -------- --------- -------- -------- ---------
DEC-96 DEC-97 DEC-98 DEC-99 DEC-00 DEC-01
----------------------------- -------- -------- --------- -------- -------- ---------
GUESS INC. $100 $ 48 $ 33 $151 $ 37 $ 52
----------------------------- -------- -------- --------- -------- -------- ---------
S&P 500 INDEX $100 $133 $171 $208 $189 $166
----------------------------- -------- -------- --------- -------- -------- ---------
S&P TEXTILES (APPAREL) INDEX $100 $108 $ 93 $ 70 $ 83 $ 78
----------------------------- -------- -------- --------- -------- -------- ---------
22
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and any beneficial owner of more than ten percent of a
registered class of the Company's equity securities, to file reports (Forms 3, 4
and 5) of stock ownership and changes in ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Officers, directors and
beneficial owners of more than ten percent of the Company's stock are required
by Securities and Exchange Commission regulation to furnish the Company with
copies of all such forms that they file.
Based solely on the Company's review of the copies of Forms 3, 4 and 5 and
the amendments thereto received by it for the year ended December 31, 2001, or
written representations from certain reporting persons that no Forms 5 were
required to be filed by those persons, the Company believes that during the
period ended December 31, 2001, all filing requirements were complied with by
its executive officers, directors and beneficial owners of more than ten percent
of the Company's Common Stock.
STOCKHOLDERS' PROPOSALS
Proposals of stockholders intended to be presented at the 2003 annual
meeting of stockholders must be received by the Company, marked to the attention
of the Secretary, no earlier than February 12, 2003 and no later than March 14,
2003. Proposals must comply with the requirements as to form and substance
established by the Securities and Exchange Commission for proposals in order to
be included in the Proxy Statement; provided, however, if no annual meeting is
held in the prior year or the date of the annual meeting is changed by more than
30 days from the date contemplated at this time, notice by a shareholder must be
so received not later than the close of business on the 10th day following the
day on which a notice of the date of the meeting is mailed or a public
announcement thereof is made.
THE BOARD OF DIRECTORS
Los Angeles, California
April 12, 2002
23
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APPENDIX
GUESS?, INC.
2002 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of the Plan is to provide employees of the Company
with an opportunity to purchase Common Stock of the Corporation through
accumulated payroll deductions. It is the intention of the Company to have
the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of
the Internal Revenue Code of 1986, as amended. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation in
a manner consistent with the requirements of that section of the Code.
2. DEFINITIONS
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Commission" shall mean the Securities and Exchange Commission.
(d) "Committee" shall mean the Committee appointed by the Board to
administer the Plan pursuant to Section 14.
(e) "Common Stock" shall mean the Common Stock of the Corporation.
(f) "Company" shall mean the Corporation and any of its Designated
Subsidiaries.
(g) "Compensation" shall have the same meaning as given under the
Guess?, Inc. Savings Plan or such other definition as may be
determined by the Committee.
(h) "Corporation" shall mean Guess?, Inc., a Delaware corporation
(i) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(j) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes and whose customary employment with the
Company is at least twenty (20) hours per week and more than five
(5) months in any calendar year. For purposes of the Plan, the
employment relationship shall be treated as continuing intact while
the individual is on sick leave or other leave of absence approved
by the Company. Where the period of leave exceeds ninety (90) days
and the individual's right to reemployment is not guaranteed either
by statute or by contract, the employment relationship shall be
deemed to have terminated on the ninety-first (91st) day of such
leave.
(k) "Enrollment Date" shall mean the first day of each Offering Period.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(m) "Exercise Date" shall mean the last day of each Offering Period.
(n) "Fair Market Value" shall mean, on any given date, the value of
Common Stock determined as follows:
(i) if the Common Stock is listed or admitted to trade on a
national securities exchange, the closing price of the shares
of Common Stock on the Composite Tape, as published in the
Western Edition of The Wall Street Journal, of the principal
national securities exchange on which the Common Stock is so
listed or admitted to trade, on such date;
(ii) if the Common Stock is not listed or admitted to trade on a
national securities exchange, the last price for the Common
Stock on such date, as furnished by the National Association
of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System or a similar organization if
the NASD is no longer reporting such information;
A-1
(iii) if the Common Stock is not listed or admitted to trade on a
national securities exchange and is not reported on the
National Market Reporting System, the mean between the bid and
asked price for the Common Stock on such date, as furnished by
the NASD or a similar organization; or
(iv) if the Common Stock is not listed or admitted to trade on a
national securities exchange, is not reported on the National
Market Reporting System and if bid and asked prices for the
stock are not furnished by the NASD or a similar organization,
the value as established by the Board at such time for
purposes of this Plan.
(o) "Offering Period" shall mean a period of approximately three (3)
months, commencing on (i) the first Trading Day on or after March 1
and terminating on the last Trading Day in the period ending the
following May 31, (ii) commencing on the first Trading Day on or
after June 1 and terminating on the last Trading Day in the period
ending the following August 31, (iii) commencing on the first
Trading Day on or after September 1 and terminating on the last
Trading Day in the period ending the following November 30, or (iv)
commencing on the first Trading Day on or after December 1 and
terminating on the last Trading Day in the period ending the
following the last calendar day of the month of February. The
duration of Offering Periods may be changed pursuant to Section 4 of
this Plan.
(p) "Plan" shall mean this 2002 Employee Stock Purchase Plan.
(q) "Purchase Price" shall mean an amount equal to eighty-five percent
(85%) of the Fair Market Value of a share of Common Stock on the
Enrollment Date or on the Exercise Date, whichever is lower.
(r) "Reserves" shall mean the number of shares of Common Stock covered
by each option under the Plan which have not yet been exercised and
the number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under option.
(s) "Rule 16b-3" means Rule 16b-3 as promulgated by the Commission under
Section 16 of the Exchange Act, as amended from time to time.
(t) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than fifty percent (50%) of the voting shares are held by
the Corporation or a Subsidiary, whether or not such corporation now
exists or is hereafter organized or acquired by the Corporation or a
Subsidiary.
(u) "Trading Day" shall mean a day on which national stock exchanges and
the Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan for the
corresponding Offering Period.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent
that, immediately after the grant, such Employee (or any other
person whose stock would be attributed to such Employee pursuant to
Section 424(d) of the Code) would own capital stock of the Company
and/or hold outstanding options (granted under this Plan or
otherwise) to purchase such stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of
the capital stock of the Company or of any parent corporation (if
any) or any Subsidiary, or (ii) to the extent that his or her rights
to purchase stock under all employee stock purchase plans of the
Company and its parent corporation (if any) and its Subsidiaries
qualified under Section 423 of the Code accrues at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000.00) worth of stock
(determined at the Fair Market Value of the shares at the time such
option is granted) for each calendar year in which such option is
outstanding at any time.
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4. OFFERING PERIODS. The Plan shall be implemented by consecutive Offering
Periods with a new Offering Period commencing on the first Trading Day on
or after March 1, June 1, September 1 and December 1 each year, or on such
other date as the Board shall determine, and continuing thereafter until
terminated in accordance with Section 20 hereof. The Board shall have the
power to change the duration of Offering Periods (not to exceed 27
months), including the commencement dates thereof, with respect to future
offerings without stockholder approval if such change is announced at
least five (5) days prior to the beginning of the first Offering Period to
be affected thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions
in the form of Exhibit A to this Plan. Such subscription agreement
must be filed with the Company at least five (5) business days prior
to the applicable Enrollment Date (or such other date as the
Committee may designate).
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is
applicable, unless sooner terminated by the participant as provided
in Section 10 hereof.
(c) For purposes of this Plan, if a Designated Subsidiary ceases to be a
Subsidiary, each person employed by that Subsidiary will be deemed
to have terminated employment for purposes of this Plan and will no
longer be an Employee unless the person continues as an Employee in
respect of another Company entity.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay
day during the Offering Period in an amount not less than one
percent (1%) and not in excess of fifteen percent (15%) of the
Employee's Compensation during the Offering Period.
(b) Subject to Section 6(a), all payroll deductions made for a
participant shall be credited to his or her account under the Plan
and shall be withheld in whole percentages or as a fixed dollar
amount. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof. A participant's subscription
agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof or by filing a
new subscription agreement with the Company at least five (5)
business days prior to the Enrollment Date of the immediately
following Offering Period (or such other date as the Committee may
designate).
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 7 hereof or Section 423(b)(8) of the Code and Section
3(b) hereof, a participant's payroll deductions may be decreased to
zero percent (0%) at any time during an Offering Period. Payroll
deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first
Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10
hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if
any, which arise upon the exercise of the option or the disposition
of the Common Stock. At any time, the Company may, but shall not be
obligated to, withhold from the participant's compensation the
amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to
the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee. Notwithstanding
anything herein to the contrary, with respect to any withholding
obligation that may arise upon the exercise of an option, the
Company may, but shall not be obligated to, deduct from a
participant's account balance as of an Exercise Date, before the
exercise of the participant's option is given effect, the amount
which the Company reasonably determines to be required to withhold
with respect to such exercise. In such event, the maximum number of
whole shares subject to the option (subject to the other limits set
forth in the Plan) shall be purchased at the Purchase Price with the
balance of the participant's account (after reduction for the tax
withholding amount).
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7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted
an option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided
that, in no event, shall an Employee be permitted to purchase during each
Offering Period more than 100,000 shares (subject to any adjustment
pursuant to Section 19), and provided further that such purchase shall be
subject to the limitations set forth in Section 3(b) and 13 hereof.
Exercise of the option shall occur as provided in Section 8 hereof, unless
the participant has withdrawn pursuant to Section 10 hereof. The Option
shall expire on the last day of the Offering Period.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the
maximum number of full shares subject to option shall be purchased for
such participant at the applicable Purchase Price with the accumulated
payroll deductions in his or her account. No fractional shares shall be
purchased; any payroll deductions accumulated in a participant's account
which are not sufficient to purchase a full share shall be retained in the
participant's account for the subsequent Offering Period, subject to
earlier withdrawal by the participant as provided in Section 10 hereof.
Any other monies left over in a participant's account after the Exercise
Date shall be returned to the participant unless the participant requests
such funds to be rolled over to the next offering period. During a
participant's lifetime, a participant's option to purchase shares
hereunder is exercisable only by him or her.
9. DELIVERY. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, or to a record keeping service of a
certificate representing the shares purchased upon exercise of his or her
option.
10. WITHDRAWAL.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account during an Offering Period
and not yet used to exercise his or her option under the Plan at any
time by giving written notice to the Company in the form of Exhibit
B to this Plan. A withdrawal election pursuant to this Section 10(a)
with respect to an Offering Period shall be effective if it is
received by the Company no later than two (2) business days prior to
the Exercise Date of that Offering Period. All of the participant's
payroll deductions credited to his or her account shall be paid to
such participant promptly after receipt of notice of withdrawal and
such participant's option for the Offering Period shall be
automatically terminated, and no further payroll deductions for the
purchase of shares shall be made for such Offering Period. If a
participant withdraws from an Offering Period, payroll deductions
shall not resume at the beginning of the succeeding Offering Period
unless the participant delivers to the Company a new subscription
agreement. A participant may also withdraw from participation in a
succeeding Offering Period by giving written notice to the Company
in the form of Exhibit B, provided that the notice of withdrawal is
received by the Company no later than one (1) business day prior to
the Enrollment Date of the succeeding Offering Period (or such other
date as the Committee may designate).
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the
Offering Period from which the participant withdraws.
11. TERMINATION OF EMPLOYMENT. Upon a participant's ceasing to be an Employee
for any reason, he or she shall be deemed to have elected to exercise his
or her option at the next Exercise Date unless the participant gives
notice to the Company at least two (2) business days prior to the
applicable Exercise Date (or such other date as the Committee may
designate) in the form of Exhibit C to this Plan. Upon the participant's
timely filing of such notice, the participant shall be withdrawn from the
Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall
be returned to such participant or, in the case of his or her death, to
the person or persons entitled thereto under Section 15 hereof, and such
participant's option shall be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of
notice of termination of employment shall be
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treated as continuing to be an Employee for the participant's customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.
12. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. STOCK.
(a) The maximum number of shares of the Common Stock which shall be made
available for sale under the Plan shall be two million (2,000,000)
shares, subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof. If, on a given Exercise
Date, the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the
Plan, the Company shall make a pro rata allocation of the shares
remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the
participant and his or her spouse.
14. ADMINISTRATION.
(a) The Board shall appoint the Committee, which shall be composed of
not less than two members of the Board. Each member of the
Committee, in respect of any transaction at a time when an affected
participant may be subject to Section 16 of the Exchange Act, shall
be a "non-employee director" within the meaning of Rule 16b-3. The
Board may, at any time, increase or decrease the number of members
of the Committee, may remove from membership on the Committee all or
any portion of its members, and may appoint such person or persons
as it desires to fill any vacancy existing on the Committee, whether
caused by removal, resignation, or otherwise. The Board may also, at
any time, assume or change the administration of this Plan.
(b) The Committee shall supervise and administer this Plan and shall
have full power and discretion to adopt, amend and rescind any rules
deemed desirable and appropriate for the administration of this Plan
and not inconsistent with the terms of this Plan, and to make all
other determinations necessary or advisable for the administration
of this Plan. The Committee shall act by majority vote or by
unanimous written consent. No member of the Committee shall be
entitled to act on or decide any matter relating solely to himself
or herself or solely to any of his or her rights or benefits under
this Plan. The Committee shall have full power and discretionary
authority to construe and interpret the terms and conditions of this
Plan, which construction or interpretation shall be final and
binding on all parties including the Company, participants and
beneficiaries. The Committee may delegate ministerial
non-discretionary functions to third parties, including individuals
who are officers or employees of the Company.
(c) Subject only to compliance with the express provisions hereof, the
Board and Committee may act in their absolute discretion in matters
within their authority related to this Plan. Any action taken by, or
inaction of, the Company, any Designated Subsidiary, the Board or
the Committee relating or pursuant to this Plan shall be within the
absolute discretion of that entity or body and will be conclusive
and binding upon all persons. In making any determination or in
taking or not taking any action under this Plan, the Board or
Committee, as the case may be, may obtain and may rely on the advice
of experts, including professional advisors to the Company. No
member of the Board or Committee, or officer or agent of the
Company, will be liable for any action, omission or decision under
the Plan taken, made or omitted in good faith.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's
account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but
prior to delivery to such participant of such shares and cash. In
addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death
prior to exercise of
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the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant's
death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge
of the Company), the Company, in it discretion, may deliver such
shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, if no spouse, dependent or relative is
known to the Company, then to such other person as the Company may
designate.
16. TRANSFERABILITY. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to
receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent
and distribution or as provided in Section 15 hereof) by the participant.
Any such attempt at assignment, transfer, pledge or other disposition
shall be without effect, except that the Company may treat such act as an
election to withdraw funds from an Offering Period in accordance with
Section 10 hereof.
17. USE OF FUNDS. All payroll deductions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. REPORTS. Individual accounts shall be maintained for each participant in
the Plan. Statements of account shall be given to participating Employees
as soon as administratively practicable following each Exercise Date,
which statements shall set forth the amounts of payroll deductions, the
Purchase Price, the number of shares purchased and the remaining cash
balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of
shares each participant may purchase per Offering Period (pursuant
to Section 7), as well as the price per share and the number of
shares of Common Stock covered by each option under the Plan which
has not yet been exercised shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of Company
shall not be deemed to have been "effected without receipt of
consideration". Such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise
Date"), and shall terminate immediately prior to the consummation of
such proposed dissolution or liquidation, unless provided otherwise
by the Board. The new Board shall notify each participant in
writing, at least ten (10) business days prior to the New Exercise
Date, that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that that participant's option
shall be exercised automatically on the New Exercise Date, unless
prior to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.
(c) MERGER OR ASSET SALE. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option
shall be assumed or an equivalent option substituted by the
successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to
assume or substitute for the option, the Offering Period then in
progress shall be shortened by setting a New Exercise Date and shall
end on the New Exercise Date. The New Exercise Date shall be before
the date of the Company's
A-6
proposed sale or merger. The Board shall notify each participant in
writing, at least ten (10) business days prior to the New Exercise
Date, that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option
shall be exercised automatically on the New Exercise Date, unless
prior to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.
20. AMENDMENT OR TERMINATION.
(a) The Board may at any time and for any reason terminate or amend the
Plan. Except as provided in Section 19 hereof, no such termination
can affect options previously granted, provided that an Offering
Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its stockholders. Except as
provided in Section 19 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423
of the Code (or any successor rule or provision or any other
applicable law, regulation or stock exchange rule), the Company
shall obtain stockholder approval in such a manner and to such a
degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change
the Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit
payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the
Company's processing of properly completed withholding elections,
establish reasonable waiting and adjustment period and/or accounting
and crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each participant properly correspond
with amounts withheld from the participant's Compensation, and
establish such other limitations or procedures as the Board (or its
committee) determines in its sole discretion advisable which are
consistent with the Plan.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt
thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, as
amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by
any of the aforementioned applicable provisions of law.
23. TERM OF PLAN.
(a) The Plan shall become effective upon its adoption by the Board. No
new Offering Periods shall commence on after the day before the
tenth (10th) anniversary of the effective date of the Plan and the
Plan shall terminate as of the Exercise Date on or immediately
following such date unless sooner terminated under Section 20
hereof.
(b) Notwithstanding anything else contained herein to the contrary, the
effectiveness of the Plan is subject to the approval of this Plan by
the stockholders of the Company within twelve (12) months after the
effective date of the Plan.
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24. EMPLOYEES' RIGHTS.
(a) Nothing in this Plan (or in any other documents related to this
Plan) will confer upon any Employee or participant any right to
continue in the employ or other service of the Company, constitute
any contract or agreement of employment or other service or effect
an employee's status as an employee at will, nor shall interfere in
any way with the right of the Company to change such person's
compensation or other benefits or to terminate his or her employment
or other service with or without cause. Nothing contained in this
Section 24(a), however, is intended to adversely affect any express
independent right of any such person under a separate employment or
service contract other than a subscription agreement.
(b) No participant or other person will have any right, title or
interest in any fund or in any specific asset (including shares) of
the Company by reason of any option hereunder. Neither the
provisions of this Plan (or of any related documents), nor the
creation or adoption of this Plan, nor any action taken pursuant to
the provisions of this Plan will create, or be construed to create,
a trust of any kind or a fiduciary relationship between the Company
and any participant or other person. To the extent that a
participant or other person acquires a right to receive payment
pursuant to this Plan, such right will be no greater than the right
of any unsecured general creditor of the Corporation. No special or
separate reserve, fund or deposit will be made to assure any such
payment.
(c) A participant will not be entitled to any privilege of stock
ownership as to any shares not actually delivered to and held of
record by the participant. No adjustment will be made for dividends
or other rights as a stockholder for which a record date is prior to
such date of delivery.
25. MISCELLANEOUS.
(a) This Plan, the options, and related documents shall be governed by,
and construed in accordance with, the laws of the State of Delaware.
If any provision shall be held by a court of competent jurisdiction
to be invalid and unenforceable, the remaining provisions of this
Plan shall continue in effect.
(b) Captions and headings are given to the sections of this Plan solely
as a convenience to facilitate reference. Such captions and headings
shall not be deemed in any way material or relevant to the
construction of interpretation of this Plan or any provision hereof.
(c) The adoption of this Plan shall not affect any other Company
compensation or incentive plans in effect. Nothing in this Plan will
limit or be deemed to limit the authority of the Board or Committee
(i) to establish any other forms of incentives or compensation for
employees of the Company (with or without reference to the Common
Stock), or (ii) to grant or assume options (outside the scope of and
in addition to those contemplated by this Plan) in connection with
any proper corporate purpose; to the extent consistent with any
other plan or authority.
(d) Benefits received by a participant under an option granted pursuant
to this Plan shall not be deemed a part of the participant's
compensation for purposes of the determination of benefits under any
other employee welfare or benefit plans or arrangements, if any,
provided by the Company, except where the Committee or the Board
expressly otherwise provides or authorizes in writing.
26. NOTICE OF SALE. Any person who has acquired shares under this Plan shall
give prompt written notice to the Company of the sale or other transfer of
the shares if such sale or transfer occurs (i) within the two (2) year
period after the Enrollment Date (date the option is granted) of the
Offering Period with respect to which such shares were acquired or (ii)
within the twelve (12) month period after the Exercise Date of the
Offering Period with respect to with such shares were acquired.
******
Adoption
Adopted by the Board of Directors on January 4, 2002 Adopted
by the stockholders on [ ]
--------------
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EXHIBIT A
---------
Subscription Agreement
GUESS?, INC.
2002 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
Original Application
-------
Change in Payroll Deduction Rate
-------
Change in Beneficiary(ies)
-------
1. I, ________________________, hereby elect to participate in the GUESS?,
INC. 2002 Employee Stock Purchase Plan (the "Plan") for the next Offering
Period, and subscribe to purchase shares of the Company's Common Stock in
accordance with this Subscription Agreement and the Plan.
2. I elect to have contributions in the amount of _____% of my Compensation,
as defined in the Plan, applied to this purchase. I understand that this
amount must not be less than 1% and not more than 15% of my Compensation
during the Offering Period. (Please note that no fractional percentages
are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription
Agreement. I understand that all payroll deductions made by me shall be
credited to my account under the Plan and that I may not make any
additional payments into such account. I understand that all payments made
by me shall be accumulated for the purchase of shares of Common Stock at
the applicable purchase price determined in accordance with the Plan. I
further understand that, except as otherwise set forth in the Plan, shares
will be purchased for me automatically on the Exercise Date of each
Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company's Legal Department no later than two (2)
business days before an Exercise Date for such purpose.
4. I acknowledge that, unless I discontinue my participation in the Plan by
filing a notice of withdrawal with the Company as provided in Section 10
of the Plan, my election will continue to be effective for each successive
Offering Period. I understand that I may withdraw my participation in the
Plan at any time prior to an Exercise Date by giving written notice to the
Company's Legal Department no later than two (2) business days before such
Exercise Date for such purposes. I also understand that I may not increase
or decrease the rate of my contributions during any Offering Period;
however, I may change the rate of contributions for future Offering
Periods by filing a new Subscription Agreement with the Company's Legal
Department no later than five (5) business days prior to the next Offering
Period, and any such change will be effective as of the Enrollment Date of
the next Offering Period.
5. I have received a copy of the Company's most recent Prospectus for the
Plan and a copy of the complete "Guess?, Inc. 2002 Employee Stock Purchase
Plan." I understand that my participation in the Plan is in all respects
subject to the terms of the Plan.
6. I understand that all Shares purchased for me under the Plan will be
deposited into an account established by me at a brokerage chosen by the
Company. I understand that if I wish to receive a physical share
certificate or sell my shares, I may be required to pay a fee to the
brokerage.
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all paymentsH and shares due to me under the
Plan1:
NAME: (Please print) -----------------------------------------
(First) Middle) (Last)
------------------------------- -----------------------------------------
(Relationship) (Address)
-----------------------------------------
----------------
1 If you are married and you name someone other than your spouse as your
beneficiary, your spouse must consent to such designation by signing the
Subscription Agreement in the space indicated on page two of this form.
A-9
8. I understand that if I dispose of any shares acquired by me pursuant to
the Plan (i) within two (2) years after the Enrollment Date (the first day
of the Offering Period with respect to which I purchased such shares) or
(ii) within one (1) year after the Exercise Date of the Offering Period
with respect to which I acquired such shares, I will be treated for
federal income tax purposes as having received ordinary compensation
income at the time of such disposition in an amount equal to the excess of
the fair market value of the shares on the Exercise Date over the price
which I paid for the shares, regardless of whether I disposed of the
shares at a price less than their fair market value at the Exercise Date.
The remainder of the gain or loss, if any, recognized on such disposition
will be treated as capital gain or loss.
I HEREBY AGREE TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER THE
DATE OF ANY SUCH DISPOSITION, AND I WILL MAKE ADEQUATE PROVISION FOR
FEDERAL, STATE OR OTHER TAX WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE
UPON THE DISPOSITION OF THE COMMON STOCK. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to the sale or early disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the
extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares under the option, or (2) the
amount by which the fair market value of the shares on the Enrollment Date
exceeded the purchase price that I paid for the shares (calculated as
though the option was exercised on the Enrollment Date of the Offering
Period). The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I UNDERSTAND THAT THIS TAX SUMMARY IS ONLY A SUMMARY, IS NOT A COMPLETE
DESCRIPTION OF THE TAX CONSEQUENCES RELATING TO THE DISPOSITION OF SHARES
THAT MAY BE ACQUIRED UNDER THE PLAN AND IS SUBJECT TO CHANGE. I further
understand that I should consult a tax advisor concerning the tax
implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The effectiveness of
this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE:
----------------------------------------------
(Signature)
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(Print Name)
EMPLOYEE ID NUMBER:
---------------------------
DATE:
-----------------------------------------
SPOUSE'S SIGNATURE (necessary only if beneficiary is not spouse):
I hereby consent to the designation made by my spouse to have any amounts
available and/or payable under the Plan in the event of his or her death paid to
the persons listed on this form in the manner and circumstances described in
this form.
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(Signature)
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(Print Name)
A-10
EXHIBIT B
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Withdrawal Notice
GUESS?, INC.
2002 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my participation
in the Guess?, Inc. 2002 Employee Stock Purchase Plan (the "Plan") for the
___ Current Offering Period or
___ Next Offering Period.
This withdrawal covers all contributions credited to my account and is
effective upon the Company's receipt of this Notice of Withdrawal.
I understand that, in order for this Notice of Withdrawal to be effective
for the current Offering Period, I must submit this form to the Company's Legal
Department no later than two (2) business days before the Exercise Date of the
current Offering Period. I understand that a Notice of Withdrawal form submitted
after the second (2nd) business day before the end of the Offering Period but
before the end of the Offering Period will be null and void unless I have
selected "Next Offering Period" above.
I understand that all contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current Offering Period will automatically
terminate, and that no further contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding Offering Periods only by delivering to the
Company a new completed and signed Subscription Agreement.
Dated:
-------------------- ------------------------------------
Signature of Employee
------------------------------------
Employee ID Number
A-11
EXHIBIT C
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Termination Notice and Request to Withdraw
GUESS?, INC.
2002 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL UPON TERMINATION OF EMPLOYMENT
I, __________________________, hereby elect to withdraw my participation
in the Guess?, Inc. 2002 Employee Stock Purchase Plan (the "Plan") for the
current Offering Period.
This withdrawal covers all contributions credited to my account as of the
date of my termination of employment with the Company and is effective when
received by the Company.
I understand that if I do not submit this form to the Company's Legal
Department at least two (2) business days prior to the Exercise Date of the
current Offering Period, any contributions I have made during the current
Offering Period through and including my last date of employment with the
Company will be used to purchase stock upon the Exercise Date of the current
Offering Period in accordance with the Plan. By submitting this form to the
Company, I am electing to withdraw from the Plan and receive a refund of my
contributions.
I understand that all contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal Upon Termination of Employment and that my option for the current
Offering Period will automatically terminate, and that no further contributions
for the purchase of shares can be made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall no
longer be eligible to participate in succeeding Offering Periods as a result of
his or her termination of employment with the Company and its Designated
Subsidiaries.
Dated:
-------------------- ------------------------------------
Signature of Employee
------------------------------------
Employee ID Number
A-12
[LOGO]
ANNUAL MEETING OF STOCKHOLDERS
to be held on May 13, 2002
Le Meridien Hotel
465 South La Cienega Boulevard
Beverly Hills, California 90048
Registration begins at 9:00 a.m. o Meeting begins at 10 00 a.m.
Cameras and recording devices will not be allowed in the meeting.
ADMITTANCE TICKET
This ticket entitles you, the stockholder, and one
guest to attend this Annual Meeting. Seating will
be on a first come, first served basis.
--------------------------------------------------------------------------------
For wheelchair and hearing impaired seating,
please see a host/hostess for assistance.
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DIRECTIONS TO THE LE MERIDIEN HOTEL
MAIN TELEPHONE NUMBER: (310) 247-0400
FROM LOS ANGELES INTERNATIONAL AIRPORT
Take Century Boulevard east to the 405 freeway north to the 10 freeway east,
exit La Cienega Boulevard north.
(approximately 9 miles)
FROM DOWNTOWN LOS ANGELES
Take the 10 freeway west, exit La Cienega Boulevard north
(approximately 12 miles)
FROM THE BEACH CITIES
Take Pacific Coast Highway to the 10 freeway east, exit La Cienega north.
(approximately 6 miles)
FROM HOLLYWOOD
Take Sunset Boulevard west to La Cienega Boulevard south.
(approximately 2 miles)
If your shares are held of record by a broker, bank, or other nominee and you
wish to attend the meeting, you must obtain a letter from the broker, bank, or
other nominee confirming your beneficial ownership of the shares as of the
record date and bring it to the meeting. In order to vote your shares at the
meeting, you must obtain from the record holder a proxy issued in your name.
DETACH HERE
PROXY
GUESS?, INC.
COMMON STOCK
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoint(s) Carlos Alberini and Ralph W. Flick as proxies
with full power of substitution, and hereby authorize(s) each of them to
represent and to vote, as designated on the reverse side hereof, all shares of
Common Stock of GUESS?, Inc. (the "Company") held of record by the undersigned
on April 3, 2002 at the Annual Meeting of Stockholders to be held on May 13,
2002 at 10 a.m., pacific time, or any adjournments or postponements thereof, at
the Le Meridien Hotel, 465 South La Cienega Boulevard, Beverly Hills, California
90048, and hereby revoke(s) any proxies heretofore given.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR
DIRECTORS, FOR THE APPROVAL OF THE 2002 EMPLOYEE STOCK PURCHASE PLAN, FOR THE
RATIFICATION OF THE SELECTION OF KPMG LLP AS THE COMPANY'S INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS AND, IN THE DISCRETION OF THE PROXY HOLDERS, ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
This proxy is revocable and the undersigned may revoke it at any time prior to
its exercise. Attendance of the undersigned at the above meeting or any
adjourned or postponed session thereof will not be deemed to revoke this proxy
unless the undersigned will indicate affirmatively thereat the intention of the
undersigned to vote said shares in person.
/ SEE RESERVE / CONTINUED AND TO BE SIGNED ON REVERSE SIDE / SEE RESERVE /
SIDE SIDE
GUESS?, INC.
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02940
DETACH HERE
PLEASE MARK
|X| VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS OF GUESS?, INC. RECOMMENDS A VOTE FOR ITEMS 1 AND 2 AND 3.
1. Election of Director (term expiring in 2005)
NOMIEES: (01) Maurice Marciano
(02) Howard Socol and (03) Howard Weitzman
For Withhold
/ / / /
--------------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve the Company's 2002 Employee Stock Purchase Plan
3. To ratify the appointment of KPMG LLP as the Company's independent
certified public accountants for the 2002 fiscal year.
4. In their discretion, the proxyholders are authorized to vote on such other matters that may properly come
before this Annual Meeting or any adjournment or postponement thereof.
MARK HERE FOR MARK HERE IF
ADDRESS CHANGE AND YOU PLAN TO ATTEND
NOTE BELOW THE MEETING
IMPORTANT: Please sign exactly as your name appears on this proxy. When shares
are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. When signing
in a representative capacity, please sign in full corporate name by president or
other authorized officer. If a partnership or limited liability company, please
sign in the partnership or limited liability company name by and authorized
person.
The undersigned hereby acknowledges receipt of notice of the Annual Meeting of
the stockholders and a proxy statement for the Annual Meeting prior to the
signing of this proxy.
Signature: Date: Signature: Date:
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