SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant X
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Filed by a Party other than the Registrant
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Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the
|X| Definitive Proxy Statement Commission Only (as permitted by
|_| Definitive Additional Materials Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
MOVIE STAR, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(3) Per unit price or other underlying value of transaction computed pursuant
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or the form or schedule and the date of its filing.
(1) Amount previously paid:
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MOVIE STAR, INC.
NOTICE OF ANNUAL SHAREHOLDERS' MEETING
The Annual Meeting of Shareholders of Movie Star, Inc. will be held on
Tuesday, November 19, 2002, at 10:00 A.M. at Club 101 on the Main Floor at 101
Park Avenue, New York, New York, for the following purposes:
1) To elect directors.
2) To ratify the selection of Deloitte & Touche LLP as auditors.
3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Company's Board of Directors has fixed October 1, 2002 as the record
date for the determination of shareholders entitled to receive notice of and to
vote at the Annual Meeting, and only shareholders of record at the close of
business on that date will be entitled to vote at the Annual Meeting.
By Authority of the Board of Directors
Saul Pomerantz, Secretary
New York, New York
October 21, 2002
All shareholders are cordially invited to attend the Annual Meeting in
person. YOU ARE URGED TO PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND
THE ANNUAL MEETING. Your proxy will not be used if you are present at the Annual
Meeting and desire to vote your shares personally.
MOVIE STAR, INC.
1115 Broadway
New York, New York 10010
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement and the accompanying form of proxy are furnished
in connection with the solicitation of proxies by the Board of Directors of
Movie Star, Inc., a New York corporation (the "Company"), for use at the Annual
Meeting of its Shareholders to be held at Club 101 on the Main Floor at 101 Park
Avenue, New York, New York, on Tuesday, November 19, 2002, at 10:00 A.M. local
time. The Annual Report to Shareholders for the fiscal year ended June 30, 2002,
including financial statements and the report of the independent accountants,
also accompanies this statement.
This Proxy Statement, the accompanying Notice and the accompanying
proxy card are first being mailed on or about October 21, 2002, to shareholders
of record on October 1, 2002.
What matters am I voting on?
You are being asked to vote on the following matters:
o The election of Directors to serve for the ensuing one-year
period and until their respective successors are elected and
qualified;
o To ratify the selection of Deloitte & Touche LLP as auditors.
o To transact such other business as may properly come before
the meeting and any and all adjournments thereof.
Who is entitled to vote?
Persons who were holders of our common stock as of the close of
business on October 1, 2002, the record date, are entitled to vote at the
meeting. As of October 1, 2002, we had issued and outstanding 15,084,975 shares
of the Company's common stock, par value $0.01 per share (the "Common Stock"),
the Company's only class of voting securities outstanding.
What is the effect of giving a proxy?
Proxies in the form enclosed are solicited by and on behalf of the
board. The persons named in the proxy have been designated as proxies by the
board. If you sign and return the proxy in accordance with the procedures set
forth in this Proxy Statement, the persons designated as proxies by the board
will vote your shares at the meeting as specified in your proxy.
If you sign and return your proxy in accordance with the procedures set
forth in this Proxy Statement but you do not provide any instructions as to how
your shares should be voted, your shares will be voted as follows:
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o FOR the election of the nominees listed below under Proposal
1;
o FOR the ratification of the selection of Deloitte & Touche LLP
as auditors under Proposal 2.
If you give your proxy, your shares also will be voted in the
discretion of the proxies named on the proxy card with respect to any other
matters properly brought before the meeting and any adjournments thereof. In the
event that any other matters are properly presented at the meeting for action,
the persons named in the proxy will vote the proxies in accordance with their
best judgment.
May I change my vote after I return my proxy card?
Any proxy given pursuant to this solicitation may be revoked by you at
any time before it is exercised. You may effectively revoke your proxy by:
o delivering written notification of your revocation to the
Secretary of Movie Star;
o voting in person at the meeting; or
o delivering another proxy bearing a later date.
Please note that your attendance at the meeting will not alone serve to
revoke your proxy.
What is a quorum?
The presence, in person or by proxy, of a majority of the votes
entitled to be cast at the meeting will constitute a quorum at the meeting. A
proxy submitted by a shareholder may indicate that all or a portion of the
shares represented by the proxy are not being voted ("shareholder withholding")
with respect to a particular matter. Proxies that are marked "abstain" and
proxies relating to "street name" shares that are returned to the Company but
marked by brokers as "not voted" ("broker non-votes") and proxies reflecting
shares subject to shareholder withholding will be treated as shares present for
purposes of determining the presence of a quorum on all matters unless authority
to vote is completely withheld on the proxy. Abstentions are voted neither "for"
nor "against" a matter, but are counted in the determination of a quorum.
What is a "broker non-vote"?
A "broker non-vote" occurs when a broker submits a proxy that states
that the broker does not vote for some of the proposals because the broker has
not received instructions from the beneficial owners on how to vote on such
proposals and does not have discretionary authority to vote in the absence of
instructions.
How many votes are needed for approval of each matter?
o The election of directors requires a plurality vote of the
votes cast at the meeting. "Plurality" means that the
individuals who receive the largest number of votes cast "FOR"
are elected as directors. Consequently, any shares not voted
"FOR" a particular nominee (whether
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as a result of a direction of the shareholder to withhold
authority, abstentions or a broker non-vote) will not be
counted in such nominee's favor.
o The ratification of the selection of Deloitte & Touche LLP
must be approved by the affirmative of a majority of the votes
cast at the meeting. Abstentions from voting with respect to
this proposal are counted as "votes cast" with respect to such
proposal and, therefore, have the same effect as a vote
against the proposal. Shares which are subject to shareholder
withholding or broker non-vote are not counted as "votes cast"
with respect to such proposal and therefore will have no
effect on such vote.
How do I vote?
You may vote your shares in one of two ways: by mail or in person at
the meeting. The prompt return of the completed proxy card vote will assist
Movie Star in preparing for the meeting. Date, sign and return the accompanying
proxy in the envelope enclosed for that purpose (to which no postage need to be
affixed if mailed in the United States). You can specify your choices by marking
the appropriate boxes on the proxy card. If you attend the meeting, you may
deliver your completed proxy card in person or fill out and return a ballot that
will be supplied to you.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AS OF AUGUST 30, 2002
The following table sets forth certain information as of August 30,
2002 with respect to the stock ownership of (i) those persons or groups (as that
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) who
beneficially own more than 5% of the Company's Common Stock, (ii) each director
of the Company and (iii) all directors and officers of the Company as a group.
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
----------------- -------------------- ----------------
Mark M. David 3,095,428(2) 20.5199%
1115 Broadway
New York, NY 10010
Great Bank Trust Co. 560,123 3.7131%
as Trustee for
the Movie Star, Inc.
Employee Stock
Ownership Plan
45 Rockefeller Plaza
Suite 2055
New York, NY 10011
Melvyn Knigin 735,500(3) 4.6832%
1115 Broadway
New York, NY 10010
Saul Pomerantz 656,910(4) 4.1975%
1115 Broadway
New York, NY 10010
Thomas Rende 291,300(5) 1.9151%
1115 Broadway
New York, NY 10010
Joel M. Simon 74,166 0.4917%
1115 Broadway
New York, NY 10010
Gary W. Krat 253,333 1.6794%
1115 Broadway
New York, NY 10010
Michael A. Salberg 93,333(6) 0.6187%
600 Third Avenue
New York, NY 10016
All directors and officers 5,199,970(2)(3)(4)(5)(6) 31.7149%
officers as a group
(7 persons)
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(1) Based upon 15,084,975 shares (excluding 2,016,802 treasury shares)
outstanding and options, where applicable, to purchase shares of Common
Stock, exercisable within 60 days.
(2) Includes 336,072 shares owned by his spouse.
(3) Includes options granted to Melvyn Knigin for 445,000 shares pursuant
to the 1994 Plan, 75,000 pursuant to the 1988 Non-Qualified Plan and
100,000 pursuant to the 2000 Plan exercisable within 60 days and
100,000 shares owned by Mr. Knigin's wife.
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(4) Includes options granted to Saul Pomerantz for 395,000 shares and
Shelley Pomerantz for 60,000 shares (his wife who also is employed by
the Company) pursuant to the 1994 Plan, 45,000 pursuant to the 1988
Non-Qualified Plan and 65,000 pursuant to the 2000 Plan exercisable
within 60 days, and 244 shares owned by his spouse and 74,666 shares
held jointly with his spouse.
(5) Represents options granted to Thomas Rende for 91,000 shares, pursuant
to the 1994 Plan, and 35,000 pursuant to the 2000 Plan exercisable
within 60 days, 162,000 shares held jointly with his spouse, and 3,300
shares owned by his spouse.
(6) Represents 93,333 shares owned by Mr. Salberg's wife.
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PROPOSAL 1
Election of Directors
The Board of Directors, pursuant to the Bylaws, has set the number of
directors constituting the full Board at six directors. All six nominees have
agreed to serve if elected. All directors hold office until the next Annual
Meeting of Shareholders and until their successors have been elected and
qualified. Assuming the presence of a quorum, the directors shall be elected by
a plurality of the votes cast at the meeting with respect to the election of
directors. "Plurality" means that the individuals who receive the largest number
of votes cast "For" are elected as directors up to the maximum number of
directors to be elected. Consequently, any shares not voted "For" a particular
director (whether as a result of a direction to withhold authority or a broker
non-vote) will not be counted for purposes of determining a plurality.
-----------------------------------
Information Concerning Nominees for Directors
a) All nominees are the current directors.
Director Since Name Age Position
-------------- ---- --- --------
1981 Mark M. David 55 Chairman of the Board
1997 Melvyn Knigin 59 President, Chief Executive
Officer and Director
1983 Saul Pomerantz 53 Executive Vice President, Chief
Operating Officer, Secretary and
Director
1996 Joel M. Simon 57 Director
1996 Gary W. Krat 54 Director
2001 Michael A. Salberg 50 Director
Mark M. David was re-elected Chairman of the Board on December 3, 2001.
Effective as of July 1, 1999, Mr. David retired as a full-time executive
employee of the Company. Mr. David relinquished the position of Chief Executive
Officer in February 1999, but remained as Chairman of the Board. He had been
Chairman of the Board and Chief Executive Officer from December 1985 to August
1995 and from April 1996 until February 1999, President from April 1983 to
December 1987 and Chief Operating Officer of the Company since the merger with
Stardust Inc. in 1981 until December 1987. Prior to the merger, he was founder,
Executive Vice President and Chief Operating Officer of Sanmark Industries Inc.
Melvyn Knigin was re-elected Chief Executive Officer and to the Board of
Directors on December 3, 2001. Mr. Knigin had been appointed Chief Executive
Officer in February 1999. Mr. Knigin was appointed to fill a vacancy on the
Board of Directors and promoted to Senior Vice President and Chief Operating
Officer on February 5, 1997 and was promoted to President on September 4, 1997.
Since joining the Company in 1987, he was the President of Cinema Etoile, the
Company's upscale intimate apparel division. Prior to joining the Company, he
had spent most of his career in the intimate apparel industry.
Saul Pomerantz, CPA, was re-elected to the Board of Directors and Chief
Operating Officer on December 3, 2001. Mr. Pomerantz had been appointed Chief
Operating Officer in February 1999. Mr. Pomerantz was elected Senior Vice
President on December 3, 1987 and was promoted to Executive Vice President on
September 4, 1997. Previously, he was Vice President-Finance since 1981. He was
Chief Financial Officer from 1982 to February 1999 and has been Secretary of the
Company since 1983.
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Gary W. Krat was re-elected to the Board of Directors on December 3, 2001. Mr.
Krat is currently Chairman Emeritus of SunAmerica Financial Network. From 1990
and until his retirement in 1999, Mr. Krat was Senior Vice President of
SunAmerica Inc. and Chairman and Chief Executive Officer of SunAmerica Financial
Network, Inc. and its six NASD broker dealer companies with nearly ten thousand
registered representatives. From 1977 until 1990, Mr. Krat was a senior
executive with Integrated Resources, Inc. Prior to joining Integrated Resources,
Mr. Krat was a practicing attorney. He has a law degree from Fordham University
and a Bachelor of Arts degree from the University of Pittsburgh.
Joel M. Simon was re-elected to the Board of Directors on December 3, 2001. Mr.
Simon is a principal of Crossroads, LLC, a financial consulting firm. Mr. Simon
was the President and Chief Executive Officer of Starrett Corporation, a real
estate construction, development and management company from March to December
1998. From 1996 to 1998, Mr. Simon was self-employed as a private investor. From
1985 until 1996, Mr. Simon was a senior executive with Olympia and York
Companies (USA). Prior to joining Olympia and York, Mr. Simon was a practicing
CPA. He has a Bachelor of Science degree in Accounting from Queens College.
Michael A. Salberg was elected to the Board of Directors on December 3, 2001.
Mr. Salberg was appointed to fill a vacancy on the Board of Directors on May 25,
2001. Mr. Salberg is a practicing attorney in New York and was admitted to the
New York bar in 1977. Since 1989, he has been a partner in the New York law firm
of Graubard Miller and its predecessors. The Graubard Miller firm and its
predecessors have represented the Company as legal counsel for many years. Mr.
Salberg received his Juris Doctor degree from New York Law School in 1976 and a
Bachelor of Arts degree from the University of Cincinnati in 1973.
The Board of Directors unanimously recommends that you mark your proxy
"FOR" the election of all nominees to the Board.
Board of Directors Meetings and Committees
The Board of Directors, pursuant to the Bylaws, has set the number of
directors constituting the full Board of Directors at six directors. Six
directors will be elected at the Annual Meeting, each to hold office for a term
of one year or until his or her successor is duly elected and qualified or until
his or her earlier resignation or removal. During the fiscal year ended June 30,
2002, the Board of Directors met three times.
The members of the Nominating Committee are Mark M. David, Saul
Pomerantz and Gary W. Krat. This committee was formed in order to nominate
officers and/or directors. The Nominating Committee met once during the fiscal
year. Mark M. David, Saul Pomerantz and Gary W. Krat will serve on the
Nominating Committee again, subject to their election as directors.
Three non-employee directors, Messrs. Krat, Salberg and Simon, serve as
the Audit Committee. It recommends to the Board the engagement and discharge of
the independent auditors for the Company (subject to shareholder ratification),
analyzes the reports of such auditors, and makes such recommendations to the
Board with respect thereto as the committee may deem advisable. The Audit
Committee met four times relating to fiscal year 2002. Messrs. Krat, Salberg and
Simon will serve on the Audit Committee again, subject to their election as
directors.
8
The members of the Compensation Committee are Mark M. David, Gary W.
Krat and Joel M. Simon. This committee was formed in order to set compensation
and benefit levels for the Company's officers and other highly paid employees
and to decide which employees would be granted options. Mark M. David, Gary W.
Krat and Joel M. Simon will serve on the Compensation Committee again, subject
to their election as directors. The Compensation Committee met once during
fiscal year 2002.
Board of Directors Compensation
The Company currently pays its outside directors an annual fee of
$15,000 and a fee of $1,500 per meeting for attendance at meetings of the Board
and its Committees. Directors are also reimbursed for out-of-pocket expenses.
There are no family relationships between the various executive
officers and directors.
Consulting and Employment Agreements
Effective as of July 1, 1999, Mr. David retired as a full-time
executive employee of the Company. The Company and Mr. David have entered into a
series of written agreements which provided for the payment to Mr. David of a
lump sum retirement benefit of $500,000, the continuation of health insurance
benefits and a split dollar life insurance policy on Mr. David's life and the
retention of Mr. David's services as a consultant to the Company for a term of
five years. Pursuant to the consulting agreement, Mr. David receives an annual
fee of $200,000 and is prohibited from disclosing any confidential information
of the Company and from engaging in any business which is competitive with the
business of the Company.
Also effective as of July 1, 1999, the Company entered into written
employment agreements with each of Messrs. Knigin and Pomerantz. The agreements
provided for an initial term of two years ending June 30, 2001. Mr. Knigin's
annual base salary during the initial term was $400,000 and Mr. Pomerantz's
annual base salary was $250,000. In addition, they were each entitled to bonuses
under the Movie Star Senior Executive Incentive Compensation Plan (the "IC
Plan"). Each of Messrs. Knigin and Pomerantz were granted incentive options
pursuant to the 2000 Plan, which was approved by the shareholders at the
Company's Annual Meeting on November 28, 2000. The agreements with Messrs.
Knigin and Pomerantz provided that for a period of one year after termination of
employment in certain circumstances, they are prohibited from competing with the
Company without our prior written consent. The terms of the employment
agreements for Messrs. Knigin and Pomerantz expired on June 30, 2001. Mr.
Knigin's employment agreement was extended for an additional term of three years
ending on June 30, 2004 at an annual base salary of $450,000 for fiscal year
2002, $475,000 for fiscal year 2003 and $500,000 for fiscal year 2004. Mr.
Pomerantz's employment agreement was not extended. Mr. Pomerantz will continue
in his position as Executive Vice President and Chief Operating Officer on
substantially the same terms as were set forth in the employment agreement that
expired on June 30, 2001, except that there will be no term of years. Mr.
Pomerantz's base salary for fiscal year 2002 is the same as it was for fiscal
year 2001. In addition, Mr. Pomerantz and the Company entered into a written
agreement providing for the payment of severance benefits to Mr. Pomerantz in
the event his employment is terminated under certain circumstances.
Mr. Rende does not have a written employment agreement with Movie Star.
However, the Compensation Committee has determined that Mr. Rende is eligible to
receive a bonus under the IC Plan.
9
Executive Officers
The Company's executive officers are Melvyn Knigin, President and Chief
Executive Officer, Saul Pomerantz, Executive Vice President, Secretary and Chief
Operating Officer and Thomas Rende, Chief Financial Officer. Effective as of
June 30, 1999, Mark M. David is no longer an executive officer of the Company.
Except for the Company's Chief Financial Officer, Thomas Rende, information
concerning each executive officer's age and length of service with the Company
can be found herein under the section entitled "ELECTION OF DIRECTORS." Mr.
Rende is forty-one years old and was appointed Chief Financial Officer in
February 1999. Since joining Movie Star in 1989, Mr. Rende has held various
positions within the finance department.
Report of the Compensation Committee on Executive Compensation
Joel M. Simon, Gary W. Krat and Mark M. David were appointed by the
Board of Directors, and each of them agreed to serve, as members of the
Compensation Committee (the "Committee").
The employment of the Company's President and Chief Executive Office,
Melvyn Knigin, is governed by the terms of a written employment agreement which
expires on June 30, 2004. Saul Pomerantz, Executive Vice President and Chief
Operating Officer and Thomas Rende, Chief Financial Officer of the Company do
not have written employment agreements. However, Mr. Pomerantz and the Company
entered into a written agreement providing for the payment of severance benefits
to Mr. Pomerantz in the event his employment is terminated under certain
circumstances.
Compensation Policies
In determining the appropriate levels of executive compensation for
fiscal year 2002, the Committee based its decisions on (1) the success of the
Company's restructuring of its manufacturing operations, (2) the Company's
improved financial condition, (3) the need to retain experienced individuals
with proven leadership and managerial skills, (4) the executives' motivation to
enhance the Company's performance for the benefit of its shareholders and
customers, and (5) the executives' contributions to the accomplishment of the
Company's annual and long-term business objectives.
Salaries generally are determined based on the Committee's assessment
of the value of each executive's contribution to the Company, the results of
recent past fiscal years in light of prevailing business conditions, the
Company's goals for the ensuing fiscal year and, to a lesser extent, prevailing
levels at companies considered to be comparable to and competitors of the
Company.
In addition to base salary compensation, the Committee has also, from
time to time, recommended that stock options be granted to the executive
officers in order to reward and reinforce their commitment to maximizing
shareholder return and long-term results.
Base Salary Compensation
Based on recommendations from the Company's Chairman of the Board, the
collective business experience of the other Committee members and negotiations
with Messrs. Knigin, Pomerantz and Rende, the Committee established the base
salaries for each of Messrs. Knigin, Pomerantz and Rende. Mr. Knigin's base
salary is set forth in the written employment agreement and is fixed at $475,000
for fiscal year 2003 and $500,000 for fiscal year 2004. Mr. Pomerantz's base
salary for fiscal year 2003 will remain at $250,000 and Mr. Rende's base salary
10
for fiscal year 2003 is $165,000. The Committee does not utilize outside
consultants to obtain comparative salary information, but believes that the
salaries paid by the Company are competitive, by industry standards, with those
paid by companies with similar sales volume to the Company. The Committee places
considerably more weight on each executive's contribution to the Company's
development and maintenance of its sources of supply, manufacturing
capabilities, marketing strategies and customer relationships than on the
compensation policies of the Company's competitors; however, the Committee does
not establish or rely on target levels of performance in any of these areas to
arrive at its recommendations.
The current senior executives of the Company have been associated with
the Company in senior management positions for periods ranging from thirteen to
more than twenty-three years. They have been primarily responsible for the
formulation and implementation of the Company's recent financial and operational
restructuring and provide the Company with a broad range of management skills
which are considered by the Committee to be an essential source of stability and
a base for the Company's future growth.
Stock Option Grants
On July 15, 1994, the Committee adopted a new Incentive Stock Option
Plan (the "1994 ISOP") to replace the expired 1983 ISOP. The 1994 ISOP
authorized the grant of options to purchase up to 2,000,000 shares of the
Company's Common Stock. Options for all of the shares of the Company's Common
Stock under the 1994 ISOP have been granted. As a result of forfeitures by
participants, there are presently 160,000 shares available to be granted. All of
the Company's management and administrative employees are eligible to receive
grants under the 1994 ISOP. Subject to shareholder approval of the 1994 ISOP,
options under the 1994 ISOP were granted to each of the Company's senior
executives (except Mark M. David) on July 15, 1994 at fair market value at that
date. As a condition to the grant of options to the Company's senior executives,
the Committee required each of the recipients to surrender for cancellation any
interest in options granted prior to July 15, 1994. The 1994 ISOP was approved
by the Company's shareholders at the Company's Annual Meeting on December 8,
1994.
On February 21, 2000, the Committee adopted a new Performance Equity
Plan (including a new Incentive Stock Option Plan) (the "2000 Plan"). The 2000
Plan authorizes the Company to grant qualified and non-qualified options to
participants for the purchase of up to an additional 750,000 shares of the
Company's Common Stock and to grant other stock-based awards to eligible
employees of the Company. The 2000 Plan was approved by the Company's
shareholders at the Annual Meeting on November 28, 2000.
In addition to the ISOP, in 1988, the Committee recommended and the
Board of Directors adopted a non-qualified Management Option Plan (the "1988
Non-qualified Plan") to provide an additional continuing form of long-term
incentive to selected officers of the Company. The 1988 Non-qualified Plan was
approved by the Company's shareholders at the Company's Annual Meeting on
December 13, 1988. Generally, options under the 1988 Non-qualified Plan are
issued with a 5-year exercise period in order to encourage the executive
officers to take a long-term approach to the formulation and accomplishment of
the Company's goals.
In January 1997, the independent directors serving on the Committee
recommended that the Company grant new options under the 1994 ISOP to Melvyn
Knigin, Saul Pomerantz and Thomas Rende at a price equal to the market price for
the Company's shares on the date of the grant. The grant of new options to
Messrs. Knigin and Pomerantz was also subject to the condition that they
surrender for cancellation any interest in options granted to them prior to
January 29, 1997.
11
In November 1998, the independent directors serving on the Committee
recommended that the Company grant new options to Messrs. Knigin and Pomerantz
under the 1994 ISOP and the 1988 Non-qualified Plan and to Mr. Rende under the
1994 ISOP.
In February 2000, the Committee recommended that the Company grant
additional options to Messrs. Knigin and Pomerantz in conjunction with their
respective employment agreements and to Mr. Rende in connection with his
promotion to Chief Financial Officer.
Pursuant to Mr. Knigin's employment agreement, he was granted an
additional option to purchase an aggregate of 300,000 shares of the Company's
Common Stock. These additional options are to be issued in allotments of 100,000
each on July 1, 2001, July 1, 2002 and July 1, 2003 at a price per share equal
to the closing market price of the Company's shares on the American Stock
Exchange on the trading day preceding the date of issuance. The first two
allotments have been issued to Mr. Knigin. The additional options granted to Mr.
Knigin are intended to be qualified options under the 1994 ISOP or the 2000 Plan
and the Company has agreed that if there are not sufficient shares available
under the 2000 Plan, the Company will seek the approval of its shareholders for
an amendment of the 2000 Plan providing for an appropriate increase in the
number of shares available under the 2000 Plan in order to meet the contractual
obligation to Mr. Knigin.
Incentive Compensation
In September 1998, the Compensation Committee adopted an incentive
compensation plan for senior executives, other than Mr. David (the "1998
Incentive Plan"). Under the 1998 Incentive Plan, the Compensation Committee had
the discretion to award bonus compensation to senior executives in an amount not
to exceed five (5%) percent of any increases in net income before taxes over the
base amount of $1,200,000 (the "Bonus Pool"). Based on the collective efforts of
Messrs. Knigin and Pomerantz, the Compensation Committee determined to award
bonuses to them under the 1998 Incentive Plan for fiscal year 1999. Mr. Knigin
was eligible to receive incentive compensation equal to three (3%) percent and
Mr. Pomerantz was eligible to receive two (2%) of net income before taxes in
excess of $1,200,000.
In fiscal 2000, the Committee amended the 1998 Incentive Plan to
increase the Bonus Pool from 5% to 6.75%. Pursuant to their respective
employment agreements, Mr. Knigin was eligible to receive incentive compensation
equal to three (3%) percent and Mr. Pomerantz was eligible to receive two (2%)
percent of net income before taxes in excess of $1,200,000 for fiscal year 2000.
In addition, the Committee determined that Mr. Rende was eligible to participate
in the Bonus Pool and awarded him incentive compensation equal to 0.25% of net
income before taxes in excess of $1,200,000 for fiscal year 2000. In fiscal year
2001 and 2002, Messrs. Knigin, Pomerantz and Rende were eligible to receive
incentive compensation in the same percentages as the prior fiscal year. No
incentive compensation was paid to the senior executives of the Company for
fiscal year 2002.
12
Compensation of the Chief Executive Officer
For fiscal year 2002, the annual base salary paid to the Company's
Chief Executive Officer, Melvyn Knigin, pursuant to his employment agreement was
$450,000. Mr. Knigin's employment agreement provides for an annual base salary
of $475,000 in fiscal year 2003.
Compensation Committee Interlocks and Insider Participation
There are no Compensation Committee interlocks or insider
participation.
Mark M. David
Gary W. Krat
Joel M. Simon
13
Summary Compensation Table
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION RESTRICTED
------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) STOCK AWARDS($) (# SHARES) COMPENSATION
--------------------------- ----------- ---------- --------------- ---------- ------------
Melvyn Knigin 2002 452,790 - 900,000(1) 22,215
President and Chief 2001 402,340 - 800,000(1) 53,354
Executive Officer; Director 2000 405,127 - 800,000(1) 52,194
Saul Pomerantz 2002 250,300 - 630,000(2) 13,971
Executive Vice President 2001 250,000 - 630,000(2) 29,384
and Chief Operating 2000 252,254 - 630,000(2) 38,005
Officer; Director
Thomas Rende 2002 167,898 - 175,000(3) 11,608
Chief Financial Officer 2001 167,860 - 175,000(3) 3,283
2000 148,843 - 175,000(3) 3,772
(1) Represents options to purchase shares of Common Stock under the 1994
Incentive Stock Option Plan (the "1994 Plan") of which 350,000 shares
were granted on January 29, 1997, 125,000 shares granted on November 4,
1998; 125,000 shares granted on November 4, 1998 and 100,000 shares
were granted on July 2, 2001 under the Company's Non-Qualified Stock
Option Plan (the "1988 Plan") and 200,000 shares granted on February
22, 2000 pursuant to the 2000 Incentive Stock Option Plan (the "2000
Plan").
(2) Represents options to purchase shares of Common Stock under the 1994
Incentive Stock Option Plan (the "1994 Plan") of which 350,000 shares
were granted on January 29, 1997 and 75,000 shares were granted on
November 4, 1998; 75,000 shares granted on November 4, 1998 under the
Company's Non-Qualified Stock Option Plan (the "1988 Plan") and 130,000
shares granted on February 22, 2000 pursuant to the 2000 Incentive
Stock Option Plan (the "2000 Plan").
(3) Represents options to purchase shares of Common Stock under the 1994
Incentive Stock Option Plan (the "1994 Plan") of which 20,000 shares
were granted on July 15, 1994, 50,000 shares were granted on January
29, 1997, 35,000 shares were granted on November 4, 1998; and 70,000
shares granted on February 22, 2000 pursuant to the 2000 Incentive
Stock Option Plan (the "2000 Plan").
14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Shares Dollar Number of Value of Unexercised,
Acquired on Value Unexercised Options/SARs In-the-Money Options/SARs at Fiscal
Name Exercise Realized at Fiscal Year-End(#) Year-End ($)(3)
---- ---------------- --------- -------------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
MELVYN KNIGIN - - 620,000(1) 280,000(1) 800 3,200
SAUL POMERANTZ - - 505,000(1) 125,000(1) - -
THOMAS RENDE - - 126,000(2) 49,000(2) - -
(1) Consists of options to purchase shares pursuant to the Company's 1988
Non-Qualified Plan, the 1994 ISOP, and the 2000 Plan.
(2) Consists of options granted pursuant to the 1994 ISOP and the 2000
Plan.
(3) The value attributed to unexercised options/SARs at fiscal year-end is
based on the market value at June 30, 2002 less the cost to exercise
the Options/SARs.
15
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below compares cumulative total
return of the Company, the S&P 500 Index and a selected peer group index
selected by the Company.* The graph plots the growth in value of an initial $100
investment over the indicated time periods, with dividends reinvested. The stock
price performance shown on the graph below is not necessarily indicative of
future price performance.
Comparison of Cumulative Total Return
06/30/97 06/30/98 06/30/99 06/30/00 06/30/01 06/30/02
-------- -------- -------- -------- -------- --------
MSI 0.00% 37.50% 237.50% 37.50% 0.00% 8.00%
S&P 0.00% 28.10% 55.08% 64.34% 38.33% 11.83%
Peer Group 0.00% -35.30% -38.14% -37.50% -39.00% -33.60%
-----------------------------
* The peer group index is selected by the Company and is comprised of
the Company and the following companies, as adjusted for relative market
capitalization: Nitches, Inc., Jaclyn, Inc., Everlast Worldwide Inc., and
Donnkenny, Inc.
16
Employee Stock Ownership Plan
The Company adopted an Employee Stock Ownership and Capital
Accumulation Plan ("ESOP") as of July 1, 1983. The ESOP is intended to comply
with the provisions of the Employee Retirement Income Security Act of 1974, as
amended, the Tax Equity and Fiscal Responsibility Act of 1982, the Deficit
Reduction Act of 1984 and the Retirement Equity Act of 1984. A favorable
determination letter was initially issued by the Internal Revenue Service with
regard to the ESOP in February 1985. From time to time, the ESOP is amended as
required to comply with amendments to the applicable statutes. Contributions to
the ESOP by the Company are discretionary. The allocation of the contribution
made in any year to eligible employees is based on their earnings. All employees
over the age of 18 years who have been employed by the Company for one year are
eligible to participate in the ESOP. All participants in the ESOP at June 30,
1996 are fully vested. Employees hired on and after July 1, 1996 vest in the
ESOP as follows:
Service with Company after June 30, 1996
up to five years.... 0%
five years.......... 100%
For the fiscal year ended June 30, 2002 the Company did not make a contribution.
As of August 31, 2002, the ESOP owns 560,123 shares or 3.7131% of the
outstanding shares of the Company's Common Stock. Withdrawal of vested balances
by participants can take place upon death, disability or early or normal
retirement. Vested benefits will be paid to participants who have terminated
their employment for reasons other than death, disability or early or normal
retirement as quickly as possible after the third June 30 following departure.
Stock Options
2000 Performance Equity Plan
On February 21, 2000, the Board of Directors adopted the 2000
Performance Equity Plan authorizing the grant of up to 750,000 options.
Shareholders approved the Plan on November 28, 2000. As of June 30, 2002, there
were options outstanding to purchase 490,000 shares, exercisable at prices
ranging from $.625 to $1.0625 over the period June 30, 2002 to January 2, 2011,
of which 226,000 are vested. An aggregate of four persons hold options under the
2000 Performance Equity Plan.
1994 Incentive Stock Option Plan
In 1994, the Company adopted an Incentive Stock Option Plan (the "1994
ISOP"). The 1994 ISOP was approved by the shareholders of the Company on
December 8, 1994. The purpose of the 1994 ISOP is to enable the Company to
attract and retain key employees by providing them with an opportunity to
participate in the Company's ownership. Awards under the 1994 ISOP are made by
the Compensation Committee. The 1994 ISOP is intended to comply with Section
422A of the Internal Revenue Code of 1986, as amended. All options are granted
at market value as determined by reference to the price of shares of the Common
Stock on the American Stock Exchange.
As of June 30, 2002, there were options outstanding to purchase
1,730,000 shares, exercisable at prices ranging from $.50 to $1.125 over the
period June 30, 2002 to July 1, 2011, of which 1,520,000 are vested. An
aggregate of twenty-three persons hold options under the 1994 ISOP.
17
1988 Non-Qualified Stock Option Plan
On December 13, 1988, the Company's shareholders approved a
non-qualified stock option plan of up to 1,666,666 shares. As of June 30, 2002,
two persons hold options to purchase an aggregate of 200,000 shares, at an
exercise price of $.625 per share. These options vest over a period of five
years commencing November 4, 1999 and the vested portion may be exercised at any
time until November 3, 2008.
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who beneficially own more than ten
percent of our Common Stock to file initial reports of ownership and reports of
changes of in ownership of Common Stock with the Securities and Exchange
Commission ("SEC") and the American Stock Exchange. Executive officers,
directors and greater-than-ten percent shareholders are required by SEC
regulations to furnish us with copies of all such reports they file. To our
knowledge, based solely on review of the copies of such reports furnished to us
and written representations that no other reports were required during the year
ended June 30, 2002, all filings under Section 16(a) were made as required.
Audit Committee Report
The Audit Committee reviews the Company's financial reporting process
on behalf of the Board of Directors. Management has the primary responsibility
for the financial statements and reporting process. The Company's independent
auditors are responsible for expressing an opinion on the conformity of the
Company's audited financial statements to accounting principles generally
accepted in the United States of America.
In this context, the Audit Committee has reviewed and discussed with
management and the independent auditors the Company's audited financial
statements. The Audit Committee has discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees." In addition, the Audit Committee has
received from the independent auditors the written disclosures required by
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," and discussed with them their independence from the Company
and its management.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved that
the Company's audited financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30,2002, for filing with the
Securities and Exchange Commission.
Audit Committee
Joel S. Simon
Gary W. Krat
Michael A. Salberg
18
PROPOSAL 2
Ratification of Selection of Deloitte & Touche LLP as Auditors
The Board of Directors has selected Deloitte & Touche LLP to audit the
books and records of the Company for its fiscal year ending June 30, 2003. The
Company has been advised by Deloitte & Touche LLP, that the firm has no
relationship with the Company or its subsidiary other than that arising from the
firm's engagement as auditors, tax advisors and consultants.
In the event the shareholders fail to ratify the appointment, the Board
of Directors will consider it as direction to select other auditors for the
subsequent year. Even if the selection is ratified, the Board in its discretion
may direct the appointment of a different independent accounting firm at any
time during the year if the Board feels that such a change would be in the best
interest of the Company and its shareholders. The ratification requires a
majority vote of those shares of Common Stock represented at the meeting.
Consequently, any shares not voted "For" ratification (whether as a result of a
direction to withhold authority or a broker non-vote) will not be counted for
purposes of determining a majority.
The appointment of Deloitte & Touche LLP continues a relationship that
began prior to 1980. Representatives of Deloitte & Touche LLP will be present at
the Annual Meeting, during which they will be afforded the opportunity to make a
statement if they so desire, and shareholders will be afforded the opportunity
to ask appropriate questions.
Audit Fees: Audit fees billed to the Company by Deloitte & Touche LLP
for auditing the Company's annual financial statements for the fiscal year ended
June 30, 2002 and reviewing the financial statements included in the Company's
quarterly reports on Form 10-Q amounted to $92,500.
Financial Information Systems Design and Implementation Fees: No
services were performed by, or fees incurred to, Deloitte & Touche LLP in
connection with the financial information services design and implementation
projects for the fiscal year ended June 30, 2002.
All Other Fees: All other fees, including tax and employee benefit
related services, billed by Deloitte & Touche LLP with respect to the fiscal
year ended June 30, 2002 amounted to approximately $57,500.
19
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU MARK YOUR PROXY "FOR"
RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP TO AUDIT THE BOOKS AND
RECORDS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 2003
-----------------------------------------------------
OTHER BUSINESS
The Board of Directors does not intend to present any other business
for action at the Annual Meeting and does not know of any other business
intended to be presented by others.
SHAREHOLDERS' PROPOSALS
Proposals of shareholders for consideration at the 2003 Annual Meeting
of Shareholders must be received by the Company no later than September 1, 2003,
in order to be included in the Company's Proxy Statement and proxy relating to
the meeting.
20
ANNUAL REPORT AND FINANCIAL INFORMATION
A copy of the Company's Annual Report to Shareholders for the year
ended June 30, 2002 has been or will be mailed on or about October 21, 2002,
concurrently with or prior to the mailing of this Proxy Statement, by first
class mail, to each shareholder of record as of October 1, 2002.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 2002, filed by the Company with the Securities and Exchange
Commission, will be furnished without charge to any person requesting a copy
thereof in writing and stating that he is a beneficial Holder of shares of the
Company's Common Stock. The Company will also furnish copies of exhibits, if
any, to the Form 10-K to eligible persons requesting exhibits, at a charge of
$0.50 per page, paid in advance. The Company will indicate the number of pages
to be charged for upon written inquiry. Requests and inquiries should be
addressed to:
Saul Pomerantz, Secretary
Movie Star, Inc.
1115 Broadway
New York, New York 10010
Nothing contained in the Annual Report to Shareholders or in the Form
10-K is to be regarded as proxy soliciting material or as a communication by
means of which a solicitation of proxies is to be made.
By Order of the Board of Directors
Saul Pomerantz, Secretary
October 21, 2002
MOVIE STAR, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints MARK M. DAVID, and SAUL POMERANTZ, and each of
them, with full power of substitution, to represent the undersigned and to vote
all of the shares of stock in Movie Star, Inc. which the undersigned is entitled
to vote at the Annual Meeting of Shareholders of said Company to be held at Club
101 on the Main Floor, 101 Park Avenue, New York, New York, on November 19, 2002
at 10:00 A.M., and at any adjournments thereof;
IF NO DIRECTIONS ARE GIVEN, THE INDIVIDUALS DESIGNATED ABOVE WILL VOTE FOR
ALL PROPOSALS IN ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS.
(continued and to be signed on reverse side)
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Shareholders
MOVIE STAR, INC.
November 19, 2002
Please Detach and Mail in the Envelope Provided
---------------------------
A |X| Please mark your votes
as in this example
1. Election of For All Withhold From Nominees: Mark M. David
Directors Nominees All Nominees Melvyn Knigin
|_| |_| Saul Pomerantz
Gary W. Krat
(INSTRUCTION: To withhold authority to Joel M. Simon
vote for any individual nominee, strike a line Michael A. Salberg
through such nominee's name.)
2. Ratification of selection of Deloitte & FOR AGAINST ABSTAIN
Touch LLP as auditors. |_| |_| |_|
3. To transact such other business as may properly come before the
meeting or adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SIGNATURE(S) _____________________________ (L.S.) Dated: _____________, 2002
_____________________________ (L.S.)
(SIGNATURE IF HELD JOINTLY)
NOTE: Please sign exactly as your name appears hereon indicating your official
title when signing in a representative capacity.