DEFA14A: Fossil Group Appoints Eugene Davis and Pamela Corrie to Board, Reaches Cooperation Agreement with Buxton Helmsley

Fossil Group has appointed Eugene Davis and Pamela Corrie to its Board of Directors and entered into a cooperation agreement with Buxton Helmsley Active Value Fund, L.P.

Summary

• Fossil Group, Inc. has entered into a Cooperation Agreement with Buxton Helmsley Active Value Fund, L.P.
• Pamela B. Corrie has been appointed to the Board of Directors and the Nominating and Corporate Governance Committee.
• Eugene I. Davis has also been appointed to the Board and will serve on the Audit Committee.
• The size of the Board will not exceed ten directors until the earlier of the 2025 Annual Meeting or a change of control.
• Buxton has agreed to certain standstill restrictions and voting commitments as part of the agreement.
• Buxton has withdrawn its nomination notice and demand to inspect company records.
• Both new directors will receive standard non-employee director compensation, including an annual cash retainer of $140,000, pro-rated for the first quarter.
• They will also receive grants of restricted stock units, with vesting conditions based on continued service.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The addition of experienced directors and the resolution of a potential activist situation are positive developments. However, the company still faces challenges in its turnaround efforts.

Positives

• The appointment of new independent directors reflects Fossil's commitment to ongoing Board refreshment and governance excellence.
• The new directors bring decades of experience in retail operations, turnarounds, and finance and accounting.
• The agreement with Buxton Helmsley resolves potential activist challenges and provides stability.
• Buxton's withdrawal of its nomination notice and demand to inspect company records simplifies the upcoming annual meeting process.

Risks

• The Cooperation Agreement includes a termination date, potentially leading to future activist actions.
• The agreement contains standstill restrictions for Buxton, which could limit their ability to influence company decisions.
• The Board retains the right to make a Fiduciary Duty Determination, which could terminate Buxton's rights under the agreement.

Future Outlook

The Board will recommend nine nominees to stand for election at the 2024 Annual Meeting of Stockholders, consisting of the two new directors and seven other nominees, who are current directors, to be selected by the Board.

Management Comments

• Kevin Mansell, Chairman of the Board, said, 'We are pleased to have individuals of Genes and Pamelas stature and experience join the Fossil Board. Together, Gene and Pamela have tremendous operating, retail, turnaround, governance and leadership expertise, which we believe will be particularly valuable as we conduct a strategic review to maximize shareholder value, while continuing to advance the Companys Transform and Grow Plan.'
• Alexander Parker, Senior Managing Director at BHG, said, 'We are confident that with these additions to the Board, Fossil is well positioned to realize its full potential and drive value for all shareholders. We look forward to supporting Fossil as it executes its strategic plan.'

Industry Context

Activist investors often seek board representation to influence company strategy, particularly in turnaround situations. This agreement is a common resolution to avoid a proxy fight and allows the company to proceed with its strategic plan with some input from the activist investor.

Comparison to Industry Standards

• Cooperation agreements are a common tool used by companies to manage relationships with activist investors.
• The standstill provisions and voting commitments are typical terms in such agreements.
• The director compensation is consistent with industry standards for non-employee directors.
• The expense reimbursement cap is also within the typical range for such agreements.

Management Changes

Stakeholder Impact

• Shareholders: The agreement aims to maximize shareholder value through strategic review and board refreshment.
• Employees: The company's Transform and Grow Plan could impact employees.
• Customers: The company aims to deliver the best in design and innovation across its brands.
• Suppliers: The company's operations rely on a supply chain for key components and products.

Next Steps

• Fossil will file the Cooperation Agreement with the SEC.
• The Board will recommend nine nominees for election at the 2024 Annual Meeting of Stockholders.
• The company will continue its strategic review to maximize shareholder value and advance its Transform and Grow Plan.

Key Dates

Keywords

Cooperation Agreement, Board of Directors, Pamela Corrie, Eugene Davis, Buxton Helmsley, Appointment, Governance, Directors