SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CONSOLIDATED CIGAR HOLDINGS 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 of transaction:
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(5) Total fee paid:
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( ) Fee paid previously with preliminary materials.
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( ) 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.
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(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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March 31, 1997
To Our Stockholders:
You are cordially invited to attend the 1997 Annual
Meeting of Stockholders of Consolidated Cigar Holdings Inc. to
be held at The St. Regis Hotel, 2 East 55th Street, New York,
New York, on Wednesday, May 14, 1997, at 3:30 p.m. local time.
The business of the meeting will be to elect directors,
approve the Consolidated Cigar Performance Bonus Plan, approve
the Consolidated Cigar Holdings Inc. 1996 Stock Option Plan and
ratify the selection of independent auditors for 1997.
Information on each of these matters can be found in the
accompanying Proxy Statement.
While stockholders may exercise their right to vote their
shares in person, we recognize that many stockholders may not
be able to attend the Annual Meeting. Accordingly, we have
enclosed a proxy which will enable you to vote your shares on
the issues to be considered at the Annual Meeting even if you
are unable to attend. If you desire to vote in accordance with
management's recommendations, you need only sign, date and
return the proxy in the enclosed postage-paid envelope to
record your vote. Otherwise, please mark the proxy to indicate
your vote; date and sign the proxy; and return it in the
enclosed postage-paid envelope as soon as conveniently
possible.
Sincerely,
Theo W. Folz
Chief Executive Officer
CONSOLIDATED CIGAR HOLDINGS INC.
5900 NORTH ANDREWS AVENUE
SUITE 700
FORT LAUDERDALE, FLORIDA 33309-2369
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
Consolidated Cigar Holdings Inc.:
Notice is hereby given that the Annual Meeting of
Stockholders of Consolidated Cigar Holdings Inc., a Delaware
corporation (the "Company"), will be held on the 14th day of
May, 1997, at 3:30 p.m., local time, at The St. Regis Hotel, 2
East 55th Street, New York, New York, for the following
purposes:
1. To re-elect five members of the Company's Board
of Directors to serve until the Company's next
Annual Meeting and until such directors'
successors are duly elected and shall have
qualified.
2. To ratify the selection of Ernst & Young LLP as
the Company's independent auditors for 1997.
3. To approve the adoption of the Consolidated
Cigar Performance Bonus Plan.
4. To approve the adoption of the Company's 1996
Stock Option Plan.
5. To transact such other business as may properly
come before the Annual Meeting or at any
adjournments or postponements thereof.
A Proxy Statement describing the matters to be considered
at the Annual Meeting is attached to this notice. Only
stockholders of record at the close of business on March 20,
1997 (the "Record Date") are entitled to notice of, and to vote
at, the Annual Meeting and at any adjournments thereof. A list
of stockholders entitled to vote at the Annual Meeting will be
located at the offices of the Company at 5900 North Andrews
Avenue, Suite 700, Fort Lauderdale, Florida 33309-2369, at
least ten days prior to the Annual Meeting and will also be
available for inspection at the Annual Meeting.
To ensure that your vote will be counted, please complete,
date and sign the enclosed proxy card and return it promptly in
the enclosed postage-paid envelope, whether or not you plan to
attend the Annual Meeting. Since proxies may be revoked at any
time, any stockholder attending the Annual Meeting may vote in
person even if that stockholder has returned a proxy.
By Order of the Board of Directors
Consolidated Cigar Holdings Inc.
MARCH 31, 1997
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
THIS WILL ENSURE THAT YOUR SHARES ARE VOTED
IN ACCORDANCE WITH YOUR WISHES.
CONSOLIDATED CIGAR HOLDINGS INC.
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1997
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This Proxy Statement is being furnished in connection with
the solicitation by the Board of Directors (the "Board of
Directors") of Consolidated Cigar Holdings Inc., a Delaware
corporation ( the "Company"), of proxies to be voted at the
1997 Annual Meeting of Stockholders to be held on the 14th day
of May, 1997, at 3:30 p.m., local time, at The St. Regis Hotel,
2 East 55th Street, New York, New York, and at any adjournments
or postponements thereof (the "Annual Meeting"). This Proxy
Statement and the enclosed proxy are first being sent to
stockholders on or about April 2, 1997.
At the Annual Meeting, the Company's stockholders will be
asked (1) to re-elect the following persons as Directors of the
Company until the Company's next Annual Meeting and until such
Directors' successors are duly elected and shall have
qualified: Ronald O. Perelman, Howard Gittis, Theo W. Folz, Lee
A. Iacocca and Robert Sargent Shriver III; (2) to ratify the
selection of Ernst & Young LLP as the Company's independent
auditors for 1997; (3) to approve the adoption of the
Consolidated Cigar Performance Bonus Plan; (4) to approve the
adoption of the Company's 1996 Stock Option Plan and (5) to
transact such other business as may properly come before the
Annual Meeting or at any adjournments or postponements thereof.
The principal executive offices of the Company are located
at 5900 North Andrews Avenue, Suite 700, Fort Lauderdale,
Florida 33309-2369 and the telephone number is 954-772-9000.
SOLICITATION AND VOTING OF PROXIES; REVOCATION
All proxies duly executed and received by the Company will
be voted on all matters presented at the Annual Meeting in
accordance with the instructions given therein by the person
executing such proxy or, in the absence of such instructions,
will be voted FOR the election to the Board of Directors of the
five nominees for Director identified in this Proxy Statement,
the ratification of Ernst & Young LLP as the Company's
auditors, the approval and adoption of the Consolidated Cigar
Performance Bonus Plan and the approval and adoption of the
Company's 1996 Stock Option Plan. The submission of a signed
proxy will not affect a stockholder's right to attend, or vote
in person at, the Annual Meeting. Any stockholder may revoke
his or her proxy at any time before it is voted by written
notice to such effect received by the Company at 5900 North
Andrews Avenue, Suite 700, Fort Lauderdale, Florida 33309-2369,
Attention: Secretary, by delivery of a subsequently dated proxy
or by attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of
itself constitute a revocation of a proxy).
The accompanying form of proxy is being solicited on
behalf of the Board of Directors. The solicitation of proxies
may be made by mail and may also be made by personal interview,
telephone and facsimile transmission, and by directors,
officers and regular employees of the Company without special
compensation therefor. The Company will bear the costs incurred
in connection with the solicitation of proxies and expects to
reimburse banks, brokers and other persons for their reasonable
out-of-pocket expenses in handling proxy materials for
beneficial owners.
RECORD DATE; OUTSTANDING SHARES; VOTING AT THE ANNUAL
MEETING
Only holders of record of the Company's Class A common
stock, par value $0.01 per share (the "Class A Common Stock"),
and holders of record of the Company's Class B common stock,
par value $0.01 per share (the "Class B Common Stock" and,
together with the Class A Common Stock, the "Common Stock"), at
the close of business on March 20, 1997 (the "Record Date")
were entitled to notice of and to vote at the Annual Meeting.
On that date, there were issued and outstanding 30,675,000
shares of Common Stock comprised of 6,075,000 shares of Class A
Common Stock and 24,600,000 shares of Class B Common Stock.
Each share of Class A Common Stock entitles the holder of
record to one vote and each share of Class B Common Stock
entitles the holder of record to ten votes. All of the shares
of Class B Common Stock are owned by Mafco Consolidated Group
Inc. ("Mafco Consolidated Group"), a corporation which is
indirectly 85% owned, through Mafco Holdings Inc. ("Mafco
Holdings"), by Ronald O. Perelman, Chairman of the Board of
Directors of the Company. Mafco Consolidated Group beneficially
owns shares of Class B Common Stock representing approximately
97% of the combined voting power of the outstanding shares of
Common Stock. Mafco Consolidated Group has informed the Company
that it will vote FOR the election of the nominees to the Board
of Directors identified herein, vote FOR the ratification of
the selection of Ernst & Young LLP as the Company's independent
auditors for 1997, vote FOR the adoption of the Consolidated
Cigar Performance Bonus Plan and vote FOR the adoption of the
Company's 1996 Stock Option Plan. Accordingly, the affirmative
vote of Mafco Consolidated Group is sufficient, without the
concurring vote of any other stockholder of the Company, to
approve and adopt each of the proposals to be considered at the
Annual Meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
All of the Company's Directors will be elected at the
Annual Meeting to serve until the next succeeding Annual
Meeting of stockholders and until their successors are duly
elected and shall have qualified. All of the nominees are
currently members of the Board of Directors and the proxies
solicited hereby will be voted FOR their election. All of the
nominees, if elected, are expected to serve until the next
succeeding Annual Meeting. Directors of the Company will be
elected by a plurality vote of the outstanding shares of Common
Stock present in person or represented by proxy at the Annual
Meeting. Under applicable Delaware law, in tabulating the
votes, abstentions from voting on the election of Directors
(including broker non-votes) will be disregarded and have no
effect on the outcome of the vote.
The Board of Directors has been informed that all persons
listed below are willing to serve as Directors, but if any of
them should decline or be unable to act as a Director, the
individuals named in the proxies will vote for the election of
such other person or persons as they, in their discretion, may
choose. The Board of Directors has no reason to believe that
any such nominees will be unable or unwilling to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE FOR THE ELECTION OF EACH OF THE NOMINEES LISTED
HEREIN FOR DIRECTOR.
NOMINEES FOR ELECTION AS DIRECTORS
The name, age (as of March 21, 1997), principal occupation
for the last five years, selected biographical information and
period of service as a Director of the Company of each of the
nominees for Director are set forth hereafter.
RONALD O. PERELMAN (54) has been Chairman of the Board of
Directors and a Director of the Company and Consolidated Cigar
Corporation ("Consolidated Cigar") since 1993. Mr. Perelman has
been Chairman of the Board and Chief Executive Officer of Mafco
Holdings and MacAndrews & Forbes Holdings Inc. ("MacAndrews &
Forbes Holdings" and, together with Mafco Holdings, "MacAndrews
& Forbes"), a diversified holding company, and various
affiliates since 1980. Mr. Perelman also is Chairman of the
Board of Directors of Andrews Group Incorporated ("Andrews
Group"), Mafco Consolidated Group, Meridian Sports Incorporated
("Meridian Sports") and Power Control Technologies Inc. ("PCT")
and is the Chairman of the Executive Committees of the Boards
of Directors of Marvel Entertainment Group, Inc. ("Marvel"),
Revlon Consumer Products Corporation ("Revlon Products") and
Revlon, Inc. ("Revlon"). Mr. Perelman is also a Director of the
following corporations which file reports pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"): Andrews Group, California Federal Bank, a Federal
Savings Bank ("California Federal"), The Coleman Company, Inc.
("Coleman"), Coleman Holdings Inc. ("Coleman Holdings"),
Coleman Worldwide Corporation ("Coleman Worldwide"), First
Nationwide Holdings Inc. ("First Nationwide"), First Nationwide
(Parent) Holdings Inc. ("First Nationwide Parent"), Mafco
Consolidated Group, Marvel, Marvel Holdings Inc. ("Marvel
Holdings"), Marvel (Parent) Holdings Inc. ("Marvel Parent"),
Marvel III Holdings Inc. ("Marvel III"), Meridian Sports, PCT,
Pneumo Abex Corporation ("Pneumo Abex"), successor by merger to
Mafco Worldwide Corporation ("Mafco Worldwide"), Revlon, Revlon
Products, Revlon Worldwide Corporation ("Revlon Worldwide") and
Toy Biz, Inc. ("Toy Biz"). (On December 27, 1996, Marvel
Holdings, Marvel Parent, Marvel III and Marvel and several of
its subsidiaries filed voluntary petitions for reorganization
under Chapter 11 of the United States Bankruptcy Code.)
HOWARD GITTIS (63) has been a Director of the Company and
Consolidated Cigar since 1993 and Vice Chairman of the Boards
of Directors of the Company and Consolidated Cigar since July
1996. Mr. Gittis has been Vice Chairman and a Director of
MacAndrews & Forbes, a diversified holding company, and various
affiliates since 1985. Mr. Gittis is a Director of the
following corporations which file reports pursuant to the
Exchange Act: Andrews Group, California Federal, First
Nationwide, First Nationwide Parent, Mafco Consolidated Group,
PCT, Pneumo Abex, Revlon, Revlon Products, Revlon Worldwide,
Jones Apparel Group, Inc., Loral Space & Communications Ltd.
and Rutherford-Moran Oil Corporation.
THEO W. FOLZ (53) has been President, Chief Executive
Officer and a Director of the Company and Consolidated Cigar
since June 1996 and August 1984, respectively. Mr. Folz has
been a Director, President and Chief Executive Officer of PCT
since 1996, a Director and President and Chief Executive
Officer of the Tobacco Products Group of Mafco Consolidated
Group since June 1995 and Vice Chairman, Director and Chief
Executive Officer of Pneumo Abex, successor by merger to Mafco
Worldwide, since January 1995.
LEE A. IACOCCA (72) has been a director of the Company
since October 1996. Mr. Iacocca was elected a Director and
President of Chrysler Corporation in November 1978 and served
as Chairman of the Board from September 1979 until his
retirement in December 1992. Mr. Iacocca was employed by Ford
Motor Company from 1946 to October 1978. After serving in
various field and executive positions, he was elected a
Director of Ford Motor Company in 1965 and President in 1970
and served in those capacities until October 1978. Mr. Iacocca
is Chairman Emeritus of the Statue of Liberty/Ellis Island
Foundation, Inc., Chairman of the Committee for Corporate
Support for the Joslin Diabetes Foundation and founder and
Chairman of the Advisory Board of the Iacocca Institute of
Lehigh University.
ROBERT SARGENT SHRIVER III (42) has been a Director of the
Company since January 1997. Mr. Shriver is President of RSS
Inc. and was President of Special Olympic Productions, Inc. for
more than five years prior thereto. Mr. Shriver also is a
Director of MK Gold Company, which files reports pursuant to
the Exchange Act.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has an Executive Committee, an
Audit Committee and a Compensation Committee.
The Executive Committee consists of Messrs. Perelman,
Gittis and Folz. The Executive Committee may exercise all the
powers and authority of the Board of Directors, except as
otherwise provided under the Delaware General Corporation Law.
The Audit Committee, consisting of Mr. Shriver, makes
recommendations to the Board of Directors regarding the
engagement of the Company's independent auditors, reviews the
plan, scope and results of the audit, reviews with the auditors
and management the Company's policies and procedures with
respect to internal accounting and financial controls and
reviews the changes in accounting policy and the scope of the
non-audit services which may be performed by the Company's
independent auditors. The Compensation Committee, consisting of
Messrs. Gittis and Drapkin, makes recommendations to the Board
of Directors regarding compensation, benefits and incentive
arrangements for officers and other key managerial employees of
the Company. The Compensation Committee may consider and
recommend awards of options to purchase shares of Common Stock
pursuant to the Consolidated Cigar Holdings Inc. 1996 Stock
Plan (the "Stock Plan").
During 1996, the Board of Directors acted three times by
unanimous written consent and held one meeting. During 1996,
the Executive Committee did not hold a meeting. The
Compensation Committee acted two times by unanimous written
consent and the Audit Committee was not formed until February
6, 1997, and, to date, has not held a meeting.
COMPENSATION OF DIRECTORS
Directors who are not currently receiving compensation as
officers or employees of the Company or any of its affiliates
are paid an annual $25,000 retainer fee, payable in monthly
installments, plus reasonable out-of-pocket expenses and a fee
of $1,000 for each meeting of the Board of Directors or any
committee thereof they attend.
EXECUTIVE OFFICERS
The following table sets forth as of the date hereof the
executive officers of the Company and executive officers of its
operating subsidiary, Consolidated Cigar.
NAME POSITION
Ronald O. Perelman Chairman of the Board and Director
Howard Gittis Vice Chairman and Director
Theo W. Folz President, Chief Executive Officer
and Director
Barry F. Schwartz Executive Vice President and
General Counsel
Gary R. Ellis Senior Vice President, Chief Financial
Officer and Treasurer of the Company
and Senior Vice President, Chief
Financial Officer, Secretary and
Treasurer of Consolidated Cigar
James M. Parnofiello Vice President and Controller of the
Company and Vice President and
Controller of Consolidated Cigar
Richard L. DiMeola Executive Vice President and
Chief Operating Officer of
Consolidated Cigar
James L. Colucci Senior Vice President-Sales and
Marketing of Consolidated Cigar
George F. Gershel, Jr. Senior Vice President-Tobacco of
Consolidated Cigar
Denis F. McQuillen Senior Vice President-Manufacturing
of Consolidated Cigar
For biographical information about Messrs. Perelman,
Gittis and Folz, see "Nominees for Election as Directors."
Barry F. Schwartz (47) has been Executive Vice President
and General Counsel of the Company since January 1993. He has
been Executive Vice President and General Counsel of MacAndrews
& Forbes, a diversified holding company, and various affiliates
since 1993. Mr. Schwartz was Senior Vice President of
MacAndrews & Forbes from 1989 to 1993. (On December 27, 1996,
Marvel Holdings, Marvel Parent and Marvel III, of which Mr.
Schwartz is an executive officer, filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy
Code.)
Gary R. Ellis (43) has been Senior Vice President, Chief
Financial Officer and Treasurer of the Company since June 1996
and Senior Vice President, Chief Financial Officer, Secretary
and Treasurer of Consolidated Cigar since November 1988. Mr.
Ellis has been Senior Vice President and Chief Financial
Officer of the Tobacco Products Group of Mafco Consolidated
Group since June 1995. From 1987 to 1988, Mr. Ellis was the
Executive Vice President, Chief Financial Officer and Treasurer
of Brooks Drug, Inc. and from 1985 to 1987, he was the Vice
President and Controller of MacAndrews & Forbes Holdings.
James M. Parnofiello (48) has been Vice President and
Controller of the Company since June 1996. Mr. Parnofiello has
been Vice President of Consolidated Cigar since January 1996
and Controller of Consolidated Cigar since September 1989. Mr.
Parnofiello was Assistant Controller of Consolidated Cigar from
March 1989 to September 1989.
Richard L. DiMeola (62) has been Executive Vice President
and Chief Operating Officer of Consolidated Cigar since
November 1988. Mr. DiMeola joined Consolidated Cigar in January
1985 as President of the Premium Products Division.
James L. Colucci (50) has been Senior Vice President of
Sales and Marketing of Consolidated Cigar since November 1988.
Mr. Colucci was Vice President of Sales and Marketing of
Consolidated Cigar from 1985 to 1988. From 1982 to 1985, Mr.
Colucci was Senior Vice President and General Manager of Design
Wire, Inc. (a company selling wire racks to supermarkets).
George F. Gershel, Jr. (67) has been Senior Vice
President-Tobacco of Consolidated Cigar since June 1977. Mr.
Gershel joined Consolidated Cigar in 1961.
Denis F. McQuillen (51) has been Senior Vice
President-Manufacturing of Consolidated Cigar since December
1985. Mr. McQuillen joined Consolidated Cigar in 1981.
EXECUTIVE COMPENSATION
The Company, as a holding company with no business
operations of its own, conducts its business through
Consolidated Cigar. The executive officers of the Company
receive no compensation for their services to the Company.
Accordingly, the following table presents certain information
concerning compensation paid or accrued for services rendered
to Consolidated Cigar in all capacities during the three years
ended December 31, 1996 for the Chief Executive Officer and the
four other most highly compensated executive officers of
Consolidated Cigar whose total annual salary and bonus in the
last fiscal year exceeded $100,000 (collectively, the "Named
Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-
Term
Compen-
sation
ANNUAL COMPENSATION Awards
-----------------------------------------------------------------------------------------
Number of
Securities
Other Underlying All
Name and Annual Options/ Other
Principal Compen- SARs (a) Compen-
Position Year Salary($) Bonus($) sation ($) (#) sation (b)($)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Theo W. Folz 1996 770,000 1,155,000 51,243(c) 250,000 3,000
Chief Execu- 1995 700,000 700,000 0 0 3,000
tive Officer 1994 675,000 400,000 0 0 3,000
and President
Richard L. DiMeola 1996 275,000 412,500 0 55,000 3,000
Executive Vice 1995 260,000 260,000 0 0 3,000
President and 1994 245,000 120,000 0 3,000
Chief Operating
Officer
Gary R. Ellis 1996 217,500 326,250 0 50,000 3,000
Senior Vice 1995 200,000 200,000 0 0 3,000
President, 1994 185,000 100,000 0 0 3,000
Chief Financial
Officer,
Secretary and
Treasurer
James L. Colucci 1996 217,500 326,250 0 50,000 3,000
Senior Vice 1995 200,000 200,000 0 0 3,000
President of 1994 185,000 100,000 0 0 3,000
Sales and
Marketing
George F. 1996 247,500 297,000 0 50,000 3,000
Gershel, Jr. 1995 230,000 170,000 0 0 3,000
Senior Vice 1994 214,000 75,000 0 0 3,000
President-
Tobacco
</TABLE>
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(a) All options were granted on August 15, 1996 at
an exercise price equal to $23.00 per share. The
options vest one third each year beginning on the
first anniversary of the date of grant and become
100% vested on the third anniversary of the date of
grant.
(b) Represents the Company's contributions to the
employee's account under Consolidated Cigar's 401(k)
plan.
(c) Represents perquisites and other personal benefits,
which, in total, are valued in excess of $50,000 of
which $39,046 was related to the personal use of a
company automobile.
STOCK OPTION TRANSACTIONS IN 1996
During 1996, the following grants were made under
the 1996 Stock Option Plan to each of the Named Executive
Officers.
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN 1996
Individual Grants
----------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration Grant Date
Name Granted(1) Fiscal Year (Per Share) Date Present Value(2)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Theo W. Folz . . . . 250,000 20.2% $23.00 8/15/06 $4,203,000
Richard L. DiMeola . . 55,000 4.4% 23.00 8/15/06 924,550
Gary R. Ellis . . . . 50,000 4.0% 23.00 8/15/06 840,500
James L. Colucci . . . 50,000 4.0% 23.00 8/15/06 840,500
George F. Gershel, Jr. 50,000 4.0% 23.00 8/15/06 840,500
</TABLE>
______________________
(1) All options were granted on August 15, 1996 at an exercise
price equal to $23.00 per share. The options vest one
third each year beginning on the first anniversary of the
date of grant and become 100% vested on the third
anniversary of the date of grant.
(2) The present value of the options are based on the
Black-Scholes option pricing model using the following
assumptions: (i) stock price volatility of 90%, (ii) a
risk-free rate of 6.13%, (iii) a dividend yield of 0%,
(iv) an exercise price equal to the fair market value of
the Common Stock on the date of grant, (v) an expected
life of 5 years and (vi) no discounts for forfeiture or
nontransferability.
The following table shows, for 1996, the number of
stock options exercised and the 1996 year-end value of
the options held by the Named Executive Officers:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN 1996 AND
YEAR-END 1996 OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Number of FY-End FY-End*
Shares Acquired Value Exercisable(E)/ Exercisable(E)/
Name on Exercise Realized Unexercisable(U) Unexercisable(U)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Theo W. Folz . . . 0 $0 0(E) $ 0(E)
250,000(U) 437,500(U)
Richard L. DiMeola. 0 0 0(E) 0(E)
55,000(U) 96,250(U)
Gary R. Ellis . . . 0 0 0(E) 0(E)
50,000(U) 87,500(U)
James L. Colucci . 0 0 0(E) 0(E)
50,000(U) 87,500(U)
George F. Gershel, Jr. 0 0 0(E) 0(E)
50,000(U) 87,500(U)
</TABLE>
_____________
* Based on the closing price of Class A Common Stock on the
NYSE on December 31, 1996 of $24 3/4 per share.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Compensation Committee") is comprised of Messrs. Gittis and
Drapkin, neither of whom are officers of the Company. The
Compensation Committee's duties include determination of the
Company's compensation and benefit policies and practices for
executive officers and key managerial employees. In accordance
with rules established by the Securities and Exchange
Commission (the "SEC"), the Company is required to provide
certain data and information in regard to the compensation
provided to the Company's Chief Executive Officer and the four
other most highly compensated executive officers. The
Compensation Committee has prepared the following report for
inclusion in this Proxy Statement.
Compensation Policies. The Company's current compensation
arrangements for senior executives are affected by the
Company's history as a private company until the Company
became a subsidiary of Mafco Consolidated Group Inc. in 1995
and the Company's 1996 initial public offering, after which
the Compensation Committee was established. The overall
compensation program for officers historically emphasized a
strong base salary position in relation to competitive
practice and competitive annual bonus opportunity dependent
upon the financial performance of the Company. The Company did
not offer long-term incentive opportunities as an executive
compensation element until 1996 when the first stock option
awards were made.
The overall objectives of the Company's compensation
program are to attract and retain the best possible executive
talent, to motivate these executives to achieve the goals
inherent in the Company's business strategy, to maximize the
link between executive and stockholder interests through a
stock option plan and to recognize individual contributions as
well as overall business results. To achieve these objectives,
the Company has developed an overall compensation strategy and
specific compensation plans that tie a substantial portion of
an executive's compensation to performance.
The key elements of the Company's compensation program
consist of fixed compensation in the form of base salary, and
variable compensation in the forms of annual incentive
compensation and stock option awards. An executive officer's
annual base salary represents the fixed component of such
executive officer's total compensation, and variable
compensation is intended to comprise a substantial portion of
an executive's total annual compensation. The Compensation
Committee's policies with respect to each of these elements,
including the bases for the compensation awarded to Mr. Folz,
the Company's Chief Executive Officer, are discussed below. In
addition, while the elements of compensation described below
are considered separately, the Compensation Committee takes
into account the full compensation package afforded by the
Company to the individual, including pension benefits,
insurance and other benefits, as well as the programs
described below.
Base Salaries. Base salaries for executive officers are
determined based upon the Compensation Committee's evaluation
of the responsibilities of the position held and the
experience of the individual, and by reference to historical
levels of salary paid by the Company and its predecessors.
Salary adjustments are based on a periodic evaluation of
the performance of the Company and each executive officer, as
well as financial results of the business. The Compensation
Committee takes into account the effect of corporate
transactions that have been consummated during the relevant
year and, where appropriate, also considers non-financial
performance measures. These include increases in market share,
manufacturing efficiency gains, improvements in product
quality and improvements in relations with customers,
suppliers and employees.
Annual Incentive Compensation Awards. The variable
compensation payable annually to executive officers (including
the Chief Executive Officer) generally consists principally of
annual incentive compensation awards. Annual incentive
compensation is payable pursuant to contractual provisions
with certain executives which provide eligibility to receive
bonuses under the Consolidated Cigar Performance Bonus Plan
determined in accordance with a formula relating to
achievement of Company performance goals. The Consolidated
Cigar Performance Bonus Plan is described elsewhere in this
Proxy Statement. Such performance goals, are based upon the
Company's earnings before interest, taxes, depreciation and
amortization (EBITDA). The annual incentive compensation
earned by the executives with respect to 1996 was determined
in accordance with such provisions.
Other Incentive Compensation Awards. The other principal
component of executives' compensation is stock options, which
are intended as a tool to attract, provide incentive to and
retain those executives who make the greatest contribution to
the business, and who can have the greatest effect on the
long-term profitability of the Company. The exercise price of
stock options is set at a price equal to the market price of
the Common Stock at the time of the grant. The options
therefore do not have any value to the executive unless the
market price of the Common Stock rises. The Compensation
Committee believes that these stock options more closely align
the executives' interests with those of its stockholders, and
focus management on building profitability and long-term
stockholder value.
In 1996, in connection with the initial public offering of
the Company's common stock, stock options were granted to the
Company's executive officers and other key employees.
Chief Executive Officer Compensation. Mr. Folz serves as
Chief Executive Officer of the Company and has served as Chief
Executive Officer of the Company's operating subsidiary
Consolidated Cigar for the past 13 years. Mr. Folz also serves
as the Chief Executive Officer of the Company's affiliate,
Power Control Technologies Inc. Until August 1, 1996, Mr. Folz
served the Company and Mafco Consolidated Group Inc. pursuant
to an employment agreement with Mafco Consolidated Group Inc.
(the "MCG Employment Agreement"). The MCG Employment Agreement
provides for a performance bonus under the Tobacco Products
Group Performance Bonus Plan based on achievement of certain
EBITDA targets. As of August 1, 1996, for the services to be
rendered by Mr. Folz to the Company and Consolidated Cigar
Corporation, Consolidated Cigar has assumed the obligations of
Mafco Consolidated Group under the MCG Employment Agreement
with respect to a portion of the base salary and employee
benefits to be provided to Mr. Folz under the MCG Employment
Agreement. The Compensation Committee believes that the
allocation of the MCG Employment Agreement to the Company is
appropriate in light of the experience and expertise Mr. Folz
brings to the position and the portion of the time that Mr.
Folz dedicates to his position with the Company, and
considering compensation levels of Chief Executive Officers of
comparable companies (including, but not limited to, companies
comprising the peer group selected for the performance graph,
as well as other companies of similar size with which the
Compensation Committee believes the Company competes for
executive talent).
Deductibility of Compensation. The Compensation Committee
intends to limit executive compensation in order to ensure
full deductibility of compensation in light of the limitation
on the deductibility of certain compensation in excess of one
million dollars under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). The Consolidated Cigar
Performance Bonus Plan and the 1996 Stock Option Plan,
described elsewhere in this Proxy Statement, are designed so
as to cause stock options and bonuses granted thereunder to be
exempt from the limitations contained in such Section 162(m).
The Compensation Committee
of the Board of Directors
Howard Gittis, Chairman
Donald G. Drapkin
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company and Consolidated Cigar did not have a
Compensation Committee prior to the Company's initial pubic
offering of the Class A Common Stock (the "IPO"), completed on
August 21, 1996. Officers' compensation prior to the IPO was
determined by the Compensation Committee of Mafco Consolidated
Group. Following the IPO, the Compensation Committee of the
Company was comprised of Messrs. Gittis and Drapkin.
EMPLOYMENT ARRANGEMENTS
Mafco Consolidated Group entered into an employment
agreement (the "MCG Employment Agreement") with Mr. Folz with
respect to an employment term commencing on July 1, 1995 and
ending on December 31, 1998, unless sooner terminated by Mr.
Folz's death, disability, gross neglect or willful misconduct
(in which case Mafco Consolidated Group may terminate Mr.
Folz's employment immediately upon written notice), or breach
by Mafco Consolidated Group of the MCG Employment Agreement.
In the event of Mr. Folz's death or disability, a pro-rated
performance bonus and 60% of his base compensation is to be
paid to Mr. Folz or his beneficiaries, as the case may be, for
the longer of the remaining term of the MCG Employment
Agreement or twelve months. In the event that Mafco
Consolidated Group breaches the MCG Employment Agreement, Mr.
Folz is entitled to terminate his employment under the MCG
Employment Agreement; in that event, a pro-rated performance
bonus and the remaining base compensation specified in the MCG
Employment Agreement is to be paid to Mr. Folz offset by any
other compensation Mr. Folz receives during this period, and
Mr. Folz is entitled to group life, health and pension plan
coverage, for the remaining term of the MCG Employment
Agreement or, if longer and if no non-renewal notice has been
given by Consolidated Cigar prior to that time, twelve months.
Until August 1, 1996, Mr. Folz served the Company and
Consolidated Cigar pursuant to the MCG Employment Agreement.
The MCG Employment Agreement also provides for a performance
bonus under the Tobacco Products Group Performance Bonus Plan
based on achievement of certain EBITDA targets. As of August
1, 1996, for the services to be rendered by Mr. Folz to the
Company and Consolidated Cigar, Consolidated Cigar has assumed
the obligations of Mafco Consolidated Group under the MCG
Employment Agreement with respect to a portion of the base
salary and employee benefits to be provided to Mr. Folz under
the MCG Employment Agreement and, simultaneously therewith,
has entered into a new employment agreement with Mr. Folz
memorializing such assumption and expiring on December 31,
1999. After December 31, 1998, Consolidated Cigar may give
notice of non-renewal, in which case the term of the agreement
will be extended for a period of twelve months following such
notice. From and after January 1, 2000, the term will be
automatically extended day-by-day until Consolidated Cigar
gives notice of non-renewal, in which case the term will be
extended for a period of twelve months. Consolidated Cigar has
assumed 70% of the obligations of Mafco Consolidated Group
under the MCG Employment Agreement with respect to any
payments or benefits payable upon Mr. Folz's severance, death
or disability. The employment agreement provides for an
initial annual base salary of $770,000. In addition, subject
to approval by stockholders, Mr. Folz is eligible to receive
annual performance bonus payments, subject to an annual
maximum of $2 million, based on achievement by Consolidated
Cigar of certain EBITDA targets, which bonus payments shall be
made pursuant to the Consolidated Cigar Performance Bonus
Plan, as set forth in his employment agreement. See
"--Consolidated Cigar Performance Bonus Plan."
On August 1, 1996, Consolidated Cigar entered into an
employment agreement with each of Messrs. DiMeola, Ellis,
Colucci and Gershel, each of which expires on December 31,
1999, unless sooner terminated by the employee's death,
disability (in which case Consolidated Cigar may elect to
terminate the employment agreement), gross neglect or willful
misconduct (in which case Consolidated Cigar may terminate the
employment agreement immediately upon written notice), the
employee's willful and material failure to perform his
contractual obligations or by Consolidated Cigar's material
breach of the agreement. After December 31, 1998, Consolidated
Cigar may give notice of non-renewal, in which case the term
of the agreement will be extended for a period of twelve
months following such notice. From and after January 1, 2000,
the term will be automatically extended day-by-day until
Consolidated Cigar gives notice of non-renewal, in which case
the term will be extended for a period of twelve months. In
the event of Consolidated Cigar's breach, the employee is
entitled to terminate the employment agreement; in that event,
base salary, performance bonuses and benefits are to be paid
to the employee for the remaining term of the employment
agreement or, if longer and if no non-renewal notice has been
given by Consolidated Cigar prior to that time, twelve months,
offset by any other compensation the employee receives during
this period. The employment agreements provide for initial
annual base salaries of $275,000 for Mr. DiMeola, $217,500 for
each of Messrs. Ellis and Colucci and $247,500 for Mr.
Gershel. The employment agreements also provide, subject to
approval by stockholders, for annual performance bonus
payments, subject to an annual maximum of $1 million, based on
achievement by Consolidated Cigar of certain EBITDA targets,
which bonus payments shall be made pursuant to the
Consolidated Cigar Performance Bonus Plan, as set forth in the
employment agreements.
Consolidated Cigar Performance Bonus Plan
Consolidated Cigar has entered into employment agreements
with certain employees, including Messrs. Folz, DiMeola,
Ellis, Colucci and Gershel, each of which provides, among
other things, for payment of performance bonuses (the
"Consolidated Cigar Performance Bonus Plan"), subject to
stockholder approval. Compensation payable under the
Consolidated Cigar Performance Bonus Plan is intended to
qualify as "performance based compensation" under Section
162(m) of the Code. Under the Consolidated Cigar Performance
Bonus Plan, the participants are eligible to receive annual
performance bonus cash awards based on achievement of EBITDA
targets established by the Compensation Committee and set
forth in their respective employment agreements with respect
to each calendar year. The payments under the Consolidated
Cigar Performance Bonus Plan to any one individual during any
calendar year may not exceed $2 million for the Chief
Executive Officer and $1 million for each of the other
participants.
Defined Benefit Plan
Domestic (United States) salaried employees of
Consolidated Cigar are eligible to participate in the
Consolidated Cigar Domestic Salaried Employees' Defined
Benefit Plan, a defined benefit pension plan (the "Plan"),
which, effective as of the end of 1995, was merged into a
defined benefit pension plan sponsored by a subsidiary of
Mafco Consolidated Group. The merger of the plan did not
change the level of pension benefits provided to Consolidated
Cigar employees. Plan benefits are a factor of service (up to
a maximum of 33 years) with Consolidated Cigar and "Average
Final Compensation" (average monthly compensation during the
60 consecutive months in which compensation was highest in the
ten years prior to termination of employment). Compensation
includes total wages, overtime, bonuses and 401(k) salary
deferrals, and excludes fringe benefits and employer
contributions to other deferred compensation plans. Benefits
in the plan are reduced by (i) any annuity purchased under the
Gulf Western Consumer Products Salaried Employees Retirement
Plan (the "Gulf & Western Plan") as of March 8, 1983 and (ii)
the actuarial equivalent of any Consolidated Cigar-provided
benefits received under Consolidated Cigar's 401(k) plan.
Consolidated Cigar established a benefit restoration plan
effective January 1, 1994 (the "BRP") which was designed to
restore retirement benefits to those employees whose eligible
pension earnings were limited to $150,000 under regulations
recently enacted by the Internal Revenue Service. The BRP is
not funded and all other vesting and payment rules follow the
Plan.
Beginning in 1996, the annual payment under the Plan and
BRP, expressed as a straight life annuity, before adjustment
for social security beginning at age 65 and before reduction
for benefits payable under the Gulf & Western Plan or the
Company's 401(k) plan, are as follows:
YEARS OF SERVICE
----------------------------------------------------
REMUNERATION 5 10 15 20 25 35
----------------------------------------------------
$ 50,000 $ 3,788 $ 7,575 $ 11,363 $ 15,150 $ 18,938 $ 25,000
75,000 5,681 11,363 17,044 22,725 28,406 37,500
100,000 7,575 15,150 22,725 30,300 37,875 50,000
125,000 9,469 18,938 28,406 37,875 47,344 62,500
150,000 11,363 22,725 34,088 45,450 56,813 75,000
175,000 13,256 26,513 39,769 53,025 66,281 87,500
200,000 15,150 30,300 45,450 60,600 75,750 100,000
225,000 17,044 34,088 51,131 68,175 85,219 112,500
250,000 18,938 37,875 56,813 75,750 94,688 125,000
300,000 22,725 45,450 68,175 90,900 113,625 150,000
400,000 30,300 60,600 90,900 121,200 151,500 200,000
450,000 34,088 68,175 102,263 136,350 170,438 225,000
500,000 37,875 75,750 113,625 151,500 189,375 250,000
Benefits under the Plan are subject to the maximum
limitations imposed by federal law on pension benefits. The
annual limitation in 1996 was $120,000 or $10,000 per month,
based on a maximum annual compensation of $150,000. the
maximum annual remuneration considered for purposes of the BRP
was $500,000 in 1996.
As of December 31, 1996, the credited years of service
under the Plan were 13 years for Mr. Folz, 12 years for Mr.
DiMeola, eight years for Mr. Ellis, 20 years for Mr. Colucci
and 36 years for Mr. Gershel.
Common Stock Performance
The Company's Common Stock commenced trading on the New
York Stock Exchange (the "NYSE") on August 16, 1996. The graph
set forth below presents a comparison of cumulative
stockholder return through December 31, 1996, assuming
reinvestment of dividends, by an investor who invested $100 on
August 16, 1996 in each of (i) the Class A Common Stock (ii)
the Russell 2000 Index and (iii) a self determined peer group.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
COMPANY COMMON STOCK, THE RUSSELL 2000 INDEX AND
A SELF DETERMINED PEER GROUP
[GRAPH APPEARS HERE]
Measurement Period Russell 2000
(Fiscal Year Covered) Company Index Peer Group(a)
----------------------------------------------------------------
Measurement Pt. $100.00 $100.00 $100.00
8/16/96 ------- ------- -------
FYE 12/31/96 $108.00 $116.00 $118.00
------- ------- -------
______________________________
(a) Includes Caribbean Cigar Company and Culbro Corporation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's
officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the SEC and the NYSE.
Officers, directors and greater than ten percent owners are
required to furnish the Company with copies of all Forms 3, 4
and 5 they file.
Based solely on the Company's review of the copies of such
forms it has received and written representations from certain
reporting persons that they were not required to file Forms 5
for a specified fiscal year, the Company believes that all its
officers, Directors and greater than ten percent beneficial
owners complied with all filing requirements applicable to
them with respect to transactions during 1996.
PROPOSAL 2 - RATIFICATION OF SELECTION OF AUDITORS
The Audit Committee and the Board of Directors has
appointed Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 31, 1997.
Although stockholder action on this matter is not required,
this appointment is being recommended to the stockholders for
ratification. Pursuant to applicable Delaware law, the
ratification of the selection of Ernst & Young LLP requires
the affirmative vote of the holders of a majority of the votes
cast at the Annual Meeting, in person or by proxy, and
entitled to vote. Abstentions and broker non-votes will be
counted and will have the same effect as a vote against the
proposal.
Ernst & Young LLP representatives will be present at the
Annual Meeting and will have an opportunity to make a
statement if they desire to do so and will be available to
respond to appropriate questions.
THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR 1997.
PROPOSAL 3 - APPROVE THE ADOPTION OF THE CONSOLIDATED CIGAR
PERFORMANCE BONUS PLAN
Consolidated Cigar has entered into employment agreements
with Messrs. Folz, DiMeola, Ellis, Colucci and Gershel, each
of which provides, among other things, for payment of bonuses,
pursuant to the Consolidated Cigar Performance Bonus Plan,
subject to approval by stockholders of the Consolidated Cigar
Performance Bonus Plan. Compensation payable under the
Consolidated Cigar Performance Bonus Plan is intended to
qualify as "performance based compensation" under Section
162(m) of the Code. Under the Consolidated Cigar Performance
Bonus Plan, the participants are eligible to receive annual
performance bonus awards based upon achievement of performance
goals established by the Compensation Committee and set forth
in their respective employment agreements. Performance goals
under the Consolidated Cigar Performance Bonus Plan are based
upon the achievement of EBITDA goals established by the
Compensation Committee and set forth in their respective
employment agreements with respect to each calendar year. The
payments under the Consolidated Cigar Performance Bonus Plan
may not exceed $2,000,000 with respect to the Chief Executive
Officer and $1,000,000 with respect to each of the other
participants in any calendar year and shall not be made unless
the Compensation Committee certifies that the performance
goals with respect to the applicable year have been met.
The approval of the Consolidated Cigar Performance Bonus
Plan will require the affirmative vote of the majority of the
votes cast, in person or represented by proxy, at the Annual
Meeting. Under applicable Delaware law, abstentions from
voting on the approval of the adoption of the Performance
Bonus Plan (including broker non-votes) will be counted and
will have the same effect as a vote against the proposal.
THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE ADOPTION OF THE CONSOLIDATED CIGAR PERFORMANCE
BONUS PLAN.
PROPOSAL 4 - APPROVE THE ADOPTION OF THE
CONSOLIDATED CIGAR HOLDINGS INC. 1996 STOCK OPTION PLAN
DESCRIPTION OF THE CONSOLIDATED CIGAR HOLDINGS INC. 1996
STOCK OPTION PLAN
The following is a summary of the terms of the Consolidated
Cigar Holdings Inc. 1996 Stock Option Plan (the "Stock Plan").
Although the Company believes that the following summary
describes the material terms of the Stock Plan, such summary is
qualified in its entirety by reference to the full text of the
Stock Plan, a copy of which is attached as Annex A to this Proxy
Statement and is incorporated herein by reference.
The Company has adopted and Mafco Consolidated Group, as
the sole stockholder of the Company prior to the IPO, has
approved the Stock Plan. The Company intends to
discontinue the Stock Plan unless the Stock Plan is approved
by the stockholders of the Company at the Annual Meeting. A
maximum of 3,000,000 shares of Class A Common Stock are
reserved for issuance under the Stock Plan, subject to
equitable adjustment upon the occurrence of any stock
dividend, stock split, recapitalization, combination, exchange
of shares, merger, consolidation, liquidation, split-up,
spin-off or other similar change in capitalization, any
distribution to common stockholders, including a rights
offering, other than cash dividends, or similar corporate
transaction. Unless otherwise determined by the Board of
Directors, the Stock Plan will be administered by the
Compensation Committee. Grants of stock options, stock
appreciation rights, restricted stock and unrestricted stock
(collectively, "Awards") may be made under the Stock Plan
(subject to specified aggregate limits and annual individual
limits on certain types of awards) to selected employees,
consultants and Directors of the Company and its present or
future affiliates.
The Compensation Committee and the Board of Directors each
have authority, subject to the terms of the Stock Plan, to
determine, among other things, when and to whom to grant
Awards under the plan, the number of shares to be covered by
Award, the types and terms of options, stock appreciation
rights, restricted stock and unrestricted stock granted and
the exercise price of the stock options and stock appreciation
rights and to prescribe, amend and rescind the rules and
regulations relating to the Stock Plan.
Stock options granted under the Stock Plan may be either
"incentive stock options," as such term is defined in Section
422 of the Code, or nonqualified stock options. The exercise
price of nonqualified stock options may be above, at or below
the fair market value per share of Class A Common Stock on the
date of grant. With respect to any participant who owns stock
possessing more than 10% of the voting power of all classes of
the Company's outstanding capital stock (a "10% Stockholder"),
the exercise price of any incentive stock option granted must
equal at least 110% of the fair market value of the Class A
Common Stock on the date of the grant. The exercise price of
incentive stock options for all other employees must be at or
above the fair market value per share of Class A Common Stock
on the date of the grant. The maximum term of any incentive
stock option granted under the Stock Plan is ten years (five
in the case of an incentive stock option granted to a 10%
Stockholder).
Stock appreciation rights may be granted alone or in
tandem with stock options under the Stock Plan. A stock
appreciation right is a right to be paid an amount equal to
the excess of the fair market value of a share of Class A
Common Stock on the date the stock appreciation right is
exercised over either the grant price determined by the
Compensation Committee or the Board of Directors (in the case
of a free standing stock appreciation right) or the exercise
price of the related stock option (in the case of a tandem
stock appreciation right), with payment to be made in cash,
Class A Common Stock, or both, as specified in the agreement
granting the Award (the "Award Agreement") or as otherwise
determined by the Compensation Committee or the Board of
Directors.
No person may be granted stock options or stock
appreciation rights under the Stock Plan in any calendar year
representing an aggregate of more than 750,000 shares of Class
A Common Stock. Stock options and stock appreciation rights
shall be exercisable at the times and upon the conditions that
the Compensation Committee or the Board of Directors may
determine, as reflected in the applicable Award Agreement.
Restricted or unrestricted stock awards, either alone or
in tandem with other awards, may be granted under the Stock
Plan. Vesting of restricted stock awards may be conditioned
upon the completion of a specified period of service, the
attainment of specific performance goals or such other factors
as the Compensation Committee or the Board of Directors may
determine. During the restricted period, the grantee may not
transfer, assign or otherwise encumber or dispose of the
restricted stock except as permitted by the Compensation
Committee or the Board of Directors. During the restricted
period, the grantee will have the right to vote the restricted
stock and to receive any dividends if and to the extent so
provided in the applicable Award Agreement.
Unless otherwise provided in a grantee's Award
Agreement, (i) upon termination of such grantee's employment
or service as a consultant or a Director due to death or
disability, any unvested options, stock appreciation rights
and restricted stock shall vest in full, all options and
stock appreciation rights remain exercisable for a period of
one year and shall terminate thereafter and (ii) upon
termination of such grantee's employment or service as a
consultant or a Director for any reason other than death or
disability, any unvested options, stock appreciation rights
and restricted stock shall terminate and all vested options
and stock appreciation rights shall remain exercisable for a
period of three months and shall terminate thereafter.
Unless otherwise provided in a grantee's Award Agreement,
awards granted under the Stock Plan may be transferred by the
grantee only by will or by the laws of descent and
distribution, and may be exercised only by the grantee during
his or her lifetime. The Stock Plan may, at any time and from
time to time, be altered, amended, suspended or terminated by
the Board of Directors or by the Compensation Committee, in
whole or in part; provided that no amendment which requires
stockholder approval in order for the Stock Plan to continue
to comply with Section 162(m) of the Code will be effective
unless such amendment has received the requisite approval by
the Company's stockholders. In addition, no amendment may be
made which adversely affects any of the rights of the grantee
under any Award theretofore granted without such grantee's
consent. No Awards will be made under the Stock Plan following
the tenth anniversary of the date of adoption of the Stock
Plan.
NEW PLAN BENEFITS
In 1996, the Company has made initial grants under the
Stock Plan of nonqualified options having terms of ten years
to purchase Class A Common Stock at an exercise price equal to
$23.00, of which options to purchase 250,000, 55,000, 50,000,
50,000, 50,000, 455,000 and 737,500 shares of Class A Common
Stock were granted to Messrs. Folz, DiMeola, Ellis, Colucci
and Gershel, all executive officers as a group, and all
employees as a group, respectively. These initial grants will
vest one-third each year beginning on the first anniversary of
the date of grant and will become 100% vested on the third
anniversary of the date of grant. In addition, the Company has
granted options to purchase 500,000 shares of Class A Common
Stock to Mr. Perelman on the same terms as the options granted
to executive officers of the Company. See "Certain
Relationships and Related Transactions-Relationship with
Mafco Consolidated Group and Mafco Holdings."
FEDERAL INCOME TAX CONSEQUENCES
The following sets forth a summary of federal income tax
consequences of participation in the Stock Plan.
A holder of an incentive stock option will generally
realize taxable income only upon disposition of shares acquire
upon exercise of the incentive stock option rather than upon
the grant or timely exercise of the incentive stock option.
Tax consequences of an untimely exercise of an incentive stock
option are determined in accordance with rules applicable to
nonqualified stock options. The amount by which the fair
market value of the Class A Common Stock on the exercise date
of an incentive stock option exceeds the exercise price
generally will increase the option holder's "alternative
minimum taxable income."
A holder of a nonqualified stock option generally will not
be subject to tax at the time of the grant of the nonqualified
stock option. Rather, upon exercise of a nonqualified stock
option, the optionee generally will include in ordinary income
the excess, if any, of the fair market value of the Class A
Common Stock purchased over the exercise price. The Company
generally will be entitled to a deduction at the time and in
the amount that the holder recognized ordinary income.
The grant of stock appreciation rights has no federal
income tax consequences at the time of grant. Upon the
exercise of stock appreciation rights, the amount received is
generally taxable as ordinary income, and the Company is
entitled to a corresponding deduction.
Generally, the grant of restricted stock has no federal
income tax consequences at the time of grant. Rather, at the
time the shares are no longer subject to a substantial risk of
forfeiture (as defined in the Code) the holder will recognize
income in an amount equal to the fair market value of such
shares. A holder may, however, elect to be taxed at the time
of the grant in accordance with Section 83(b) of the Code. The
Company generally will be entitled to a deduction at the time
and in the amount that the holder recognized ordinary income.
The foregoing constitutes a brief summary of the principal
federal income tax consequences of the transactions based on
current federal income tax laws. This summary is not intended
to be exhaustive and does not describe state, local or foreign
tax consequences.
The approval of the Stock Plan will require the
affirmative vote of the majority of the votes cast in person
or represented by proxy, at the Annual Meeting, under
applicable Delaware law, abstentions from voting on the
approval of the Stock Plan (including broker non-votes) will
be counted and will have the same effect as a vote against the
proposal.
THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE ADOPTION OF THE STOCK PLAN.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table sets forth as of March 26, 1997, the
total number of shares of Common Stock beneficially owned, and
the percent so owned, by each Director of the Company, by each
person known to the Company to be the beneficial owner of more
than 5% of the outstanding Common Stock, by the Named
Executive Officers and by all directors and officers
(including a former executive officer) as a group. The number
of shares owned are those "beneficially owned," as determined
under the rules of the SEC, and such information is not
necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any
shares as to which a person has sole or shared voting power or
investment power and any shares of Common Stock which the
person has the right to acquire within 60 days through the
exercise of any option, warrant or right, through conversion
of any security, or pursuant to the automatic termination of
power of attorney or revocation of trust, discretionary
account or similar arrangement.
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
----------------------- ------------------------
Number Number Percent
of Shares of Shares of Total
Name and Address Beneficially Percent Beneficially Percent Voting
of Beneficial Owner Owned(1) of Class Owned of Class Power
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ronald O. Perelman(2) . . . 19,600,000 63.9% 19,600,000 100% 94.7%
35 East 62nd Street
New York, New York 10021
FMR Corp. . . . . . . . . . 728,500 6.6%(3) -- -- *
82 Devonshire Street
Boston, Massachusetts 02109
Morgan Stanley Group Inc. . 719,600 6.5%(3) -- -- *
1585 Broadway
New York, New York 10036
T. Rowe Price Associates,
Inc. . . . . . . . . . . 646,400 5.8%(3) -- -- *
100 E. Pratt Street
Baltimore, Maryland 21202
Howard Gittis . . . . . . 5,000 * -- -- *
Donald G. Drapkin(4) . . . 6,000 * -- -- *
Theo W. Folz . . . . . . . 50,000 * -- -- *
Lee A. Iacocca . . . . . . 0 * -- -- *
Robert Sargent Shriver III 15,000 * -- -- *
Barry F. Schwartz . . . . 3,000 * -- -- *
Gary R. Ellis . . . . . . 4,000 * -- -- *
Richard L. DiMeola . . . . 10,000 * -- -- *
James L. Colucci . . . . . 3,000 * -- -- *
George F. Gershel, Jr. . . 1,000 * -- -- *
All Directors and
executive officers 19,698,000 64.2% 19,600,000 100% 94.7%
as a group (12
persons) . . . . . . . .
</TABLE>
__________________
* Less than 1%.
(1) Shares of Class A Common Stock issuable upon conversion
of the Class B Common Stock owned by Mafco Consolidated
Group are deemed to be outstanding for purposes of
computing the percentage ownership of Class A Common
Stock of Mr. Perelman through Mafco Consolidated Group,
but are not deemed to be outstanding for the purposes of
computing the percentage ownership of Class A Common
Stock of any other person shown in the table.
(2) Represents shares of Class A Common Stock issuable upon
the conversion of the Class B Common Stock owned by
Mafco Consolidated Group. Currently, Mafco Holdings
indirectly owns approximately 85% of the outstanding
shares of common stock of Mafco Consolidated Group.
Mafco Holdings is wholly owned by Mr. Perelman. All of
the shares of common stock of Mafco Consolidated Group
owned by Mafco Holdings are and shares of intermediate
holding companies are, or may from time to time be,
pledged to secure obligations of Mafco Holdings or its
affiliates.
(3) Reflects the percentage of shares of Class A Common
Stock beneficially owned by such person. In each case,
such person beneficially owns less than 3% of the
outstanding Common stock and less than 1% of the
combined voting power of the outstanding Common Stock.
(4) Represents shares held in trust for the benefit of Mr.
Drapkin's children for which Mr. Drapkin disclaims
beneficial ownership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationship with Mafco Consolidated Group and Mafco Holdings
As a result of Mafco Consolidated Group's stock ownership,
the Company's Board of Directors is, and is expected to
continue to be, comprised entirely of designees of Mafco
Consolidated Group, and Mafco Consolidated Group is, and is
expected to continue to be, able to direct and control the
policies of the company and its subsidiaries, including with
respect to mergers, sales of assets and similar transactions.
Mafco Consolidated Group is 85% owned through Mafco
Holdings by Ronald O. Perelman, Chairman of the Board of
Directors of the Company. Mafco Holdings is a diversified
holding company with interests in several industries. Through
its 80% ownership of the Company, Mafco Holdings is engaged in
the manufacture and distribution of cigars and pipe tobacco
and, through its 36% ownership, on a fully diluted basis, of
pct, mafco holdings is engaged in the processing of licorice
and other flavors. Mafco Holdings is engaged in the cosmetics
and skin care, fragrance and personal care products business
through its 83% ownership of Revlon. Mafco Holdings owns 83%
of Coleman, which is engaged in the manufacture and marketing
of recreational outdoor products, portable generators,
Power-washing equipment, spas and hot tubs and 65% of meridian
sports, a manufacturer and marketer of specialized boats and
water sports equipment. Marvel, a youth entertainment company,
is 80% owned by Mafco Holdings. Mafco holdings is also engaged
in the financial services business through its 80% ownership
of California Federal. The principal executive offices of
Mafco Holdings are located at 35 East 62nd Street, New York,
New York 10021.
The Company is insured under policies maintained by Mafco
Holdings, and the Company reimburses Mafco Holdings for the
portion of the cost of such policies attributable to the
Company. Management of the Company believes that such cost is
lower than would be incurred were such entities to be
separately insured. In addition, the Company reimburses Mafco
Holdings for the Company's allocable portion of certain costs
such as legal, accounting and other professional fees and
other services and related expenses.
In connection with the IPO, the Company granted options to
purchase 500,000 shares of Class A Common Stock to Mr.
Perelman as compensation for services rendered and to be
rendered to the company by Mr. Perelman in his capacity as
Chairman of the Board of Directors. Such options were granted
pursuant to the Stock Plan at an exercise price equal to
$23.00 per share. the options vest one third each year
beginning on the first anniversary of the date of grant.
Tax Sharing Agreement
The Company, Consolidated Cigar and Mafco Consolidated
Group have been, for federal income tax purposes, members of
an affiliated group of corporations of which Mafco Holdings is
the common parent (the "Tax Group"). As a result of such
affiliation, the Company, Consolidated Cigar, and Mafco
Consolidated Group have been included in the consolidated
federal income tax returns and, to the extent permitted by
applicable law, included in combined state or local income tax
returns filed on behalf of the Tax Group. Pursuant to a tax
sharing agreement among the Company, Consolidated Cigar, and
Mafco Consolidated Group and a tax sharing agreement between
Mafco Consolidated Group and Mafco Holdings (collectively, the
"Tax Sharing Agreements"), the Company has been required to
pay to Mafco Consolidated Group with respect to each taxable
year an amount equal to the consolidated federal, state and
local income taxes that would have been incurred by the
Company had it not been included in the consolidated federal
and any combined state or local income tax returns filed by
the Tax Group. The net amounts paid by Consolidated Cigar,
through the Company, during the years ended December 31, 1994,
1995 and 1996 were approximately $0.4 million, $0.4 million
and $9.8 million, respectively.
The Company completed a second offering of Class A Common
Stock on March 26, 1997, and as a result thereof, the Company
is no longer included in the Tax Group's consolidated tax
returns and will, instead, file its own tax returns and pay
its own taxes on a separate company basis. The Company has net
operating losses of approximately $15 million for the period
prior to the acquisition of Consolidated Cigar by Mafco
Consolidated Group on March 3, 1993 ("Pre-Acquisition"),
which, pursuant to the Tax Sharing Agreements, were not
available to the Company to offset taxable income generated in
the period after the acquisition of Consolidated Cigar by
Mafco Consolidated Group ("Post-Acquisition"). The
Pre-Acquisition net operating losses that were previously
restricted, pursuant to the Tax Sharing Agreements, are
available to the extent that the loss carryforwards are not
utilized in a Mafco Holding's consolidated tax return. Since
these losses relate to the Pre-Acquisition period, a deferred
tax asset will be recorded with a corresponding reduction in
goodwill.
In addition, the Company incurred tax losses in the
Post-Acquisition period which the Company utilized under the
Tax Sharing Agreements. A portion of these losses may be
allocated to the Company pursuant to the Treasury Regulation
Section 1.1502-79 which deals with consolidated returns. This
tax attribute will be recorded as a deferred tax asset with a
corresponding decrease to capital deficiency.
Under existing federal income tax regulations, the
Company, Consolidated Cigar and Mafco Consolidated Group are
severally liable for the consolidated federal income taxes of
the Tax Group for any taxable year in which they are a member
of the Tax Group. Pursuant to the Tax Sharing Agreements,
Mafco Holdings has agreed to indemnify the Company and
Consolidated Cigar for any such federal income tax liability.
PROMISSORY NOTE
In connection with the IPO, the Company issued a
promissory note in an original principal amount of $70 million
(the "Promissory Note") to Mafco Consolidated Group as a
dividend. The Promissory Note is noninterest bearing,
unsecured, subordinated to senior indebtedness (as defined in
the Promissory Note) and repayable in whole or in part at any
time or from time to time without premium or penalty. The
Promissory Note is payable in quarterly installments of $2.5
million beginning March 31, 1997 with the final installment
payable on December 31, 2003.
Purchase of Licorice Extract
The Company purchases all of the licorice extract used as
flavoring and moistening agents in its manufacturing processes
from Pneumo Abex (successor by merger to Mafco Worldwide which
was formerly an indirect wholly owned subsidiary of Mafco
Consolidated Group). During the years ended December 31, 1994,
1995 and 1996, the Company purchased approximately $265,000,
$269,000 and $211,000 of licorice extract from Pneumo Abex.
The Company believes that the licorice extract purchased from
Pneumo Abex was purchased on terms no less favorable to the
Company than those obtainable in an arm's length transaction
with an independent third party.
Specialty Products Division
The Company's Specialty Products Division assembles
lipstick containers for Revlon Products, an 83% owned
subsidiary of Mafco Holdings. Revlon Products purchased
lipstick containers from the Company for approximately
$763,000, $874,000 and $958,000 for the years ended December
31, 1994, 1995 and 1996, respectively. The Company believes
that the terms of such arrangements with Revlon Products were
no less favorable to the Company than those obtainable in an
arm's length transaction with an independent third party.
Registration Rights Agreement
Prior to the consummation of the IPO, the Company and
Mafco Consolidated Group entered into the Registration Rights
Agreement pursuant to which Mafco Consolidated Group and
certain transferees of Class B Common Stock held by Mafco
Consolidated Group (the "Holders") have the right to require
the Company to register (a "Demand Registration") under the
Securities Act of 1933, as amended (the "Securities Act"), all
or part of the Class A Common Stock issuable upon conversion
of the Class B Common Stock owned by such Holders; provided
that the Company (i) is not obligated to effect a Demand
Registration prior to February 11, 1997, unless Goldman, Sachs
& Co. has given its consent and (ii) may postpone giving
effect to a Demand Registration for up to a period of 30 days
if the Company believes such registration might have a
material adverse effect on any plan or proposal by the Company
with respect to any financing, acquisition, recapitalization,
reorganization or other material transaction, or the Company
is in possession of material non-public information that, if
publicly disclosed, could result in a material disruption of a
major corporate development or transaction then pending or in
progress or in other material adverse consequences to the
Company. In addition, the Holders will have the right to
participate in registrations by the Company of its Class A
Common Stock (a "Piggyback Registration"). The Company will
pay any expenses incurred in connection with any Demand
Registration or Piggyback Registration, except for
underwriting discounts, commissions and certain expenses
attributable to the shares of Class A Common Stock sold by
such Holders.
ADDITIONAL INFORMATION
The Company will make available a copy of its Annual
Report on Form 10-K for the fiscal year ended December 31,
1996 and any Quarterly Reports on Form 10-Q filed thereafter,
without charge, upon written request to the Secretary,
Consolidated Cigar Holdings Inc., 5900 North Andrews Avenue,
Suite 700, Fort Lauderdale, Florida 33309-2369. Each such
request must set forth a good faith representation that, as of
the Record Date, March 20, 1997, the person making the request
was a beneficial owner of Common Stock entitled to vote.
In order to ensure timely delivery of such documents prior
to the Annual Meeting, any request should be received by the
Company promptly.
STOCKHOLDER PROPOSALS
Under the rules and regulations of the SEC as currently in
effect, any holder of at least $1,000 in market value of
Common Stock who has held such securities for at least one
year and who desires to have a proposal presented in the
Company's proxy material for use in connection with the Annual
Meeting of stockholders to be held in 1998 must transmit that
proposal (along with his or her name, address, the number of
shares of Common Stock that he or she holds of record or
beneficially, the dates upon which the securities were
acquired and documentary support for a claim of beneficial
ownership) in writing as set forth below. Proposals of
stockholders intended to be presented at the next annual
meeting must be received by the Secretary, Consolidated Cigar
Holdings Inc., 5900 North Andrews Avenue, Suite 700, Fort
Lauderdale, Florida 33309-2369, not later than December 1,
1997.
OTHER BUSINESS
The Company knows of no other matters which may come
before the annual meeting. However, if any such matters
properly come before the meeting, the individuals named in the
proxies will vote on such matters in accordance with their
best judgment.
March 31, 1997
BY ORDER OF THE BOARD OF DIRECTORS
CONSOLIDATED CIGAR HOLDINGS INC.
CONSOLIDATED CIGAR HOLDINGS INC
COMMON STOCK
Proxy Solicited on Behalf of the Board of Directors
for Annual Meeting to be held on May 14, 1997
P
R The undersigned appoints Gary R. Ellis, Joram C. Salig and Barry
O Schwartz, and each of them, attorneys and proxies, each with
X power of substitution, to vote all shares of Common Stock of Consoli-
Y dated Cigar Holdings Inc. ("Consolidated Cigar Holdings") that the
undersigned may be entitled to vote at the Annual Meeting of Stockholders
of Consolidated Cigar Holdings to be held Wednesday, May 14, 1997 at
3:30 P.M., local time, at The St. Regis Hotel, 2 East 55th Street, New
York, New York, on the proposals set forth on the reverse side hereof
and on such other matters as may properly come before the meeting and
any adjournments or postponements thereof.
The proxy holders will vote the shares represented by this proxy
in the manner indicated on the reverse side hereof. Unless a
contrary direction is indicated, the proxy holders will vote such
shares "FOR" the proposals set forth on the reverse side hereof.
If any further matters properly come before the Annual Meeting, it
is the intention of the persons named above to vote such proxies in
accordance with their best judgment.
SEE REVERSE
SIDE
PLEASE MARK YOUR
X VOTES AS IN THIS
EXAMPLE
The Board of Directors recommends a vote FOR the following proposals.
WITHHOLD
AUTHORITY
FOR to vote
all for all
Nominees Nominees
1. To elect Ronald O. ( ) ( )
Perelman, Howard Gittis,
Theo W. Folz, Lee A.
Iacocca and Robert Sargent
Shriver III as directors
of Consolidated Cigar
Holdings until the next
annual meeting and
until their successors
are duly elected and
qualified.
WITHHOLD for the
following only: (Write
the name of the
nominee(s) in the space
below)
--------------------------
FOR AGAINST ABSTAIN
2. To ratify the appoint- ( ) ( ) ( )
ment of Ernst & Young
LLP as independent certi-
fied public accountants
of Consolidated Cigar
Holdings for the fiscal
year ending December 31,
1997.
3. To approve the adoption ( ) ( ) ( )
of the Performance
Bonus Plan, as decribed
in the accompanying Proxy
Statement.
4. To approve the ( ) ( ) ( )
adoption of the
1996 Stock Option Plan,
as described in the
accompanying Proxy
Statement.
5. To transact such ( ) ( ) ( )
other business as may
properly come before the
Annual Meeting and any
adjournments or
postponements thereof.
SIGNATURE __________________________ DATE _______________________
NOTE: Please sign exactly as
name appears hereon. If
a joint account, each joint
owner must sign. If signing
for a corporation or partner-
ship or as agent, attorney or
fiduciary, indicate the
capacity in which you are
signing.
ANNEX A
CONSOLIDATED CIGAR HOLDINGS INC.
1996 STOCK PLAN
1. PURPOSE: RESTRICTIONS ON AMOUNT AVAILABLE UNDER THE PLAN.
This Consolidated Cigar Holdings Inc. 1996 Stock Plan ("Plan") is
intended to afford an incentive to selected employees, consultants and
directors of Consolidated Cigar Holdings, Inc. (the "Parent"),
Consolidated Cigar Corporation or any Affiliated Corporations (as defined
in Section 2(a) hereof) (collectively referred to as the "Company"), to
acquire a proprietary interest in the Company, to continue to perform
services for the Company, to increase their efforts on behalf of the
Company and to promote the success of the Company's business.
2. DEFINITIONS.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Affiliate Corporation" or "Affiliate" shall mean any
corporation, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control
with the Parent.
(b) "Award" shall mean any Option, SAR, Restricted Stock or
Unrestricted Stock granted under the Plan.
(c) "Award Agreement" shall mean any written agreement,
contract, or other instrument or document between the Company and a
Participant evidencing an Award.
(d) "Board" shall mean the Board of Directors of the Parent.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) "Disability" shall mean a Participant's inability to
engage in any substantial gainful activity by reason of medically
determinable physical or mental impairment that can be expected to
result in death or that has lasted or can be expected to last for a
continuous period of not less than twelve (12) months.
(g) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(h) "Fair Market Value" per share as of a particular date
shall mean (i) the closing sales price per share of Common Stock
(as defined in Section 5 hereof) on the New York Stock Exchange for
the last preceding date on which there was a sale of such Common
Stock on such exchange, or (ii) if the shares of Common Stock are
not then admitted for trading on the New York Stock Exchange, the
closing price for the shares of Common Stock in such other national
securities exchange or interdealer quotation system on which Common
Stock is then traded for the last preceding date on which there was
a sale of such Common Stock in such market, or (iii) if the shares
of Common Stock are not then listed on a national securities
exchange or interdealer quotation system, such value as the
Committee in its discretion may determine.
(i) "Incentive Stock Option" shall mean an Option that meets
the requirements of Section 422 of the Code, or any successor
provision, and that is designated by the Committee as an Incentive
Stock Option.
(j) "Nonqualified Stock Option" shall mean an Option other
than an Incentive Stock Option.
(k) "Option" shall mean the right, granted pursuant to this
Plan, of a holder to purchase shares of Common Stock at a price and
upon the terms to be specified by the Committee.
(l) "Parent Corporation" shall mean any corporation (other
than the Parent) in an unbroken chain of corporations ending with
the Parent if, at the time of granting an Award, each of such
corporations (other than the Parent) owns stock possessing fifty
percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(m) "Participant" shall mean an officer, employee, consultant
or director of the Company who is, pursuant to Section 4 of the
Plan, selected to participate herein.
(n) "Restricted Stock" shall mean an Award of shares of
Common Stock to a Participant under Section 8 that may be subject
to certain restrictions and to a risk of forfeiture.
(o) "SAR" shall mean a tandem or freestanding stock
appreciation right, granted to a Participant under Section 7, to be
paid an amount measured by the appreciation in the Fair Market
Value of Common Stock from the date of grant to the date of
exercise of the right.
(p) "Subsidiary Corporation" shall mean any corporation
(other than the Parent) in an unbroken chain of corporations
beginning with the Parent if, at the time of granting an Award,
each of such corporations other than the last corporation in the
unbroken chain owns stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of
the other corporations in such chain.
(q) "Ten Percent Stockholder" shall mean a Participant who,
at the time an Incentive Stock Option is granted, owns stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Parent or of its Parent
Corporation or Subsidiary Corporations.
(r) "Unrestricted Stock" shall mean an Award of shares of
Common Stock to a Participant under Section 9.
3. ADMINISTRATION.
Unless otherwise determined by the Board, the Plan shall be
administered by a committee of the Board ("Compensation Committee"),
which shall consist of two or more members of the Board who are "outside
directors" within the meaning of section 162(m) of the Code. The
Compensation Committee may, in its discretion, delegate to a subcommittee
or to an officer of the Company its duties hereunder, including the grant
of Awards. The full Board shall also have the authority, in its
discretion, to grant Awards under the Plan and to administer the Plan.
For all purposes under the Plan, any entity which performs the duties
described herein, shall be referred to as the "Committee."
The Committee shall have the authority in its discretion, subject
to and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in
the administration of the Plan, including, without limitation, the
authority to grant Awards; to determine the persons to whom and the time
or times at which Awards shall be granted; to determine the type and
number of Awards to be granted, the number of shares of Common Stock to
which an Award may relate and the terms, conditions and restrictions
relating to any Award; to determine whether, to what extent, and under
what circumstances an Award may be settled, cancelled, forfeited,
exchanged, or surrendered; to construe and interpret the Plan and any
Award; to prescribe, amend and rescind rules and regulations relating
to the Plan; to determine the terms and provisions of Award Agreements;
and to make all other determinations deemed necessary or advisable for
the administration of the Plan.
No member of the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award
granted hereunder.
4. ELIGIBILITY.
Awards may be granted to employees, consultants and directors of
the Company, except that Incentive Stock Options shall be granted only to
individuals who, on the date of such grant, are employees of the Parent
or a Parent Corporation or a Subsidiary Corporation. In determining the
persons to whom Awards shall be granted and the number of shares to be
covered by each Award, the Committee shall take into account the duties
of the respective persons, their present and potential contributions to
the success of the Company and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan.
5. STOCK.
The stock subject to Awards hereunder shall be shares of the
Parent's Class A common stock, par value $0.01 per share ("Common
Stock"). Such shares may, in whole or in part, be authorized but unissued
shares or shares that shall have been or that may be reacquired by the
Company. The aggregate number of shares of Common Stock as to which
Awards may be granted from time to time under the Plan shall not exceed
3,000,000. No person may be granted Options or SARs under the Plan during
any calendar year representing an aggregate of more than 750,000 shares
of Common Stock. The limitations established by the preceding two
sentences shall be subject to adjustment as provided in Section 10
hereof.
6. STOCK OPTIONS.
The Committee shall have authority to grant Nonqualified Stock
Options and Incentive Stock Options to Participants on the following
terms and conditions:
(a) Number of Shares. Each Award Agreement shall state the
number of shares of Common Stock to which the Option relates.
(b) Type of Option. Each Award Agreement shall specifically
state that the Option constitutes an Incentive Stock Option or a
Nonqualified Stock Option.
(c) Option Price. Each Award Agreement shall state the Option
Price. The Option Price per share of Common Stock purchasable under an
Option shall be determined by the Committee; provided that, in the case
of an Incentive Stock Option, such exercise price shall be not less than
the Fair Market Value of a share of Common Stock on the date of grant of
such Option. The date as of which the Committee adopts a resolution
expressly granting an Option shall be considered the day on which such
Option is granted.
(d) Method and Time of Payment. The Option Price shall be
paid in full, at the time of exercise, in cash or in shares of Common
Stock having a Fair Market Value equal to such Option Price or in a
combination of cash and Common Stock or, in the sole discretion of the
Committee, through a cashless exercise procedure.
(e) Term and Exercisability of Options. Options shall be
exercisable over the exercise period (which, with respect to Incentive
Stock Options, shall not exceed ten years from the date of grant), at
such times and upon such conditions as the Committee may determine, as
reflected in the Award Agreement; provided that, the Committee shall have
the authority to accelerate the exercisability of any outstanding Option
at such time and under such circumstances as it, in its sole discretion,
deems appropriate. An Option may be exercised, as to any or all full
shares of Common Stock as to which the Option has become exercisable, by
written notice delivered in person or by mail to the Compensation
Committee, specifying the number of shares of Common Stock with respect
to which the Option is being exercised. The exercise period shall be
subject to earlier termination as provided in Section 6(f) hereof.
(f) Termination. If a Participant's employment by, or service
as a consultant or director with, the Company terminates:
(i) Unless provided otherwise in the applicable Award
Agreement, upon a Participant's termination of employment or
service as a consultant or a director with the Company by
reason of death or Disability, all Options shall become
immediately exercisable and shall remain exercisable for a
period of one year following such termination and shall
terminate thereafter;
(ii) Unless provided otherwise in the applicable Award
Agreement, if a Participant's employment or service as a
consultant or a director with the Company is terminated for
any reason other than death or Disability, all Options that
are not then exercisable shall immediately terminate and all
Options that are then exercisable shall remain exercisable
for a period of three months from the date of such
termination and shall terminate thereafter.
(g) Other Provisions. Options may be subject to such other
conditions including, but not limited to, restrictions on transferability
of the shares acquired upon exercise of such Options, as the Committee
may prescribe in its discretion.
(h) Incentive Stock Options. Options granted as Incentive
Stock Options shall be subject to the following special terms and
conditions, in addition to the general terms and conditions specified in
this Section 6(h).
(i) Value of Shares. The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is granted)
of the shares of Common Stock with respect to which Incentive
Stock Options granted under this Plan and all other plans of the
Company become exercisable for the first time by each Participant
during any calendar year shall not exceed $100,000.
(ii) Ten Percent Stockholder. In the case of an Incentive
Stock Option granted to a Ten Percent Stockholder, (x) the Option
Price shall not be less than one hundred ten percent (110%) of the
Fair Market Value of the shares of Common Stock on the date of
grant of such Incentive Stock Option, and (y) the exercise period
shall not exceed five (5) years from the date of grant of such
Incentive Stock Option.
7. STOCK APPRECIATION RIGHTS. The Committee is authorized to grant
freestanding SARs and SARs granted in tandem with an Option to Participants
on the following terms and conditions:
(a) In General. Unless the Committee determines otherwise,
(1) an SAR granted in tandem with a Nonqualified Stock Option may be
granted at the time of grant of the related Nonqualified Stock Option or
at any time thereafter or (2) an SAR granted in tandem with an Incentive
Stock Option may only be granted at the time of grant of the related
Incentive Stock Option. An SAR granted in tandem with an Option shall be
exercisable only to the extent the underlying Option is exercisable.
(b) SARs. An SAR shall confer on the Participant a right to
receive with respect to each share subject thereto, upon exercise
thereof, the excess of (1) the Fair Market Value of one share of Common
Stock on the date of exercise over (2) the grant price of the SAR (which
in the case of an SAR granted in tandem with an Option shall be equal to
the exercise price of the underlying Option, and which in the case of any
other SAR shall be such price as the Committee may determine).
(c) Treatment of Related Options and Tandem SARs Upon
Exercise. Upon the exercise of a tandem SAR, the related Option shall be
cancelled to the extent of the number of shares of Common Stock as to
which the tandem SAR is exercised and upon the exercise of an Option
granted in connection with a tandem SAR, the tandem SAR shall be
cancelled to the extent of the number of shares of Common Stock as to
which the Option is exercised.
(d) Method of Exercise. SARs shall be exercised by a
Participant only by a written notice delivered in person or by mail to
the Compensation Committee, specifying the number of shares of Common
Stock with respect to which the SAR is being exercised.
(e) Form of Payment. Payment of the amount determined under
paragraph (b) above may be made in whole shares of Common Stock in a
number determined based upon their Fair Market Value on the date of
exercise of the SAR or, alternatively, at the sole discretion of the
Committee, solely in cash, or in a combination of cash and shares of
Common Stock as the Committee deems advisable. If the Committee decides
to make full payment in shares of Common Stock, and the amount payable
results in a fractional share, payment for the fractional share will be
made in cash.
(f) Term and Exercisability of Freestanding SARs. Each Award
Agreement shall provide the exercise schedule for the freestanding SAR as
determined by the Committee, provided, that, the Committee shall have the
authority to accelerate the exercisability of any freestanding SAR at
such time and under such circumstances as it, in its sole discretion,
deems appropriate. The exercise period shall be ten (10) years from the
date of the grant of the freestanding SAR or such other period as is
determined by the Committee. The exercise period shall be subject to
earlier termination as provided in Section 7(g) hereof.
(g) Termination. The terms and conditions set forth in
Section 6(f) hereof, relating to exercisability of Options in the event
of termination of employment or service as a consultant or director with
the Company, shall apply equally with respect to the exercisability of
freestanding SARs following termination of employment or service as a
consultant or director.
8. RESTRICTED STOCK. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(a) Issuance and Restrictions. The Award Agreement shall set
forth the number of shares of Restricted Stock granted pursuant to the
Award Agreement. Restricted Stock shall be subject to such restrictions
on transferability and other restrictions, if any, as the Committee may
impose at the date of grant or thereafter, which restrictions may lapse
separately or in combination at such times, under such circumstances, in
such installments, or otherwise, as the Committee may determine at the
date of grant or thereafter.
(b) Restrictions. Except as permitted by the Committee, prior
to vesting, shares of Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by
will or the laws of descent and distribution. Certificates for shares of
Common Stock issued pursuant to awards of Restricted Stock shall bear an
appropriate legend referring to such restrictions, and any attempt to
dispose of any such shares of Common Stock in contravention of such
restrictions shall be null and void and without effect. Prior to vesting,
such certificates shall be held in escrow by an escrow agent appointed by
the Committee.
(c) Forfeiture. If the Participant's employment or service as
a consultant or director with the Company shall terminate for any reason
other than death or Disability prior to vesting of the Restricted Stock,
then, except to the extent provided otherwise in the applicable Award
Agreement, any shares remaining subject to restrictions shall thereupon
be forfeited by the Participant and transferred to, and reacquired by,
the Company at no cost to the Company. If the Participant's employment or
service as a consultant or director with the Company shall terminate by
reason of death or Disability prior to vesting of Restricted Stock, then,
except to the extent provided otherwise in the applicable Award
Agrreement, restrictions or forfeiture conditions relating to Restricted
Stock will be waived.
(d) Rights as a Stockholder. Except to the extent provided
otherwise under the Award Agreement, a Participant shall have all of the
rights of a stockholder including, without limitation, the right to vote
Restricted Stock and the right to receive dividends thereon. Dividends
paid on Restricted Stock shall be either paid at the dividend payment
date, or deferred for payment to such date as determined by the
Committee, in cash or in shares of unrestricted Common Stock having a
Fair Market Value equal to the amount of such dividends. Stock
distributed in connection with a stock split or stock dividend, and other
property distributed as a dividend, shall be subject to restrictions and
a risk of forfeiture to the same extent as the Restricted Stock with
respect to which such Common Stock or other property has been
distributed.
(e) Other Provisions. The Restricted Stock Agreements
authorized under the Plan shall contain such other provisions not
inconsistent with this Plan, including, without limitation, the
imposition of restrictions upon the transferability of Restricted Stock
and conditions on vesting of Restricted Stock as the Committee shall deem
advisable.
9. UNRESTRICTED STOCK AWARDS. The Committee is authorized to grant
to Participants such Awards of Common Stock, as deemed by the Committee
to be consistent with the purposes of the Plan. The Committee shall
determine the terms and conditions of such Awards at the date of grant or
thereafter.
10. EFFECT OF CERTAIN CHANGES.
If there is any change in the number of outstanding shares of
Common Stock by reason of any stock dividend, stock split,
recapitalization, combination, exchange of shares, merger, consolidation,
liquidation, split-up, spin-off or other similar change in
capitalization, any distribution to common shareholders, including a
rights offering, other than cash dividends, or any like change, then the
number of shares of Common Stock available for Awards, the number of such
shares covered by outstanding Awards, and the Option Price of such
Options or the applicable grant price of SARs, shall be proportionately
adjusted by the Compensation Committee to reflect such change or
distribution; provided, however, that any fractional shares resulting
from such adjustment shall be eliminated. In the event of a change in the
Common Stock of the Company as presently constituted, which is limited to
a change of all of its authorized shares with par value into the same
number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be the Common
Stock within the meaning of the Plan. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Committee, whose determination in that
respect shall be final, binding and conclusive, provided that each
Incentive Stock Option granted pursuant to this Plan shall not be
adjusted in a manner that causes such Option to fail to continue to
qualify as an Incentive Stock Option within the meaning of Section 422 of
the Code.
11. GENERAL PROVISIONS.
(a) Compliance with Legal Requirements. The Plan and the
granting and exercising of Awards, and the other obligations of the
Company under the Plan and any Award Agreement or other agreement shall
be subject to all applicable federal and state laws, rules and
regulations, and to such approvals by any regulatory or governmental
agency as may be required. The Company, in its discretion, may postpone
the issuance or delivery of Common Stock under any Award as the Company
may consider appropriate, and may require any Participant to make such
representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of Common Stock
in compliance with applicable laws, rules and regulations.
(b) Nontransferability. Except to the extent provided
otherwise in the applicable Award Agreement, Awards shall not be
transferable by a Participant except by will or the laws of descent and
distribution and shall be exercisable during the lifetime of a
Participant only by such Participant or his guardian or legal repre-
sentative.
(c) No Right To Continued Employment. Nothing in the Plan or
in any Award granted or any Award Agreement or other agreement entered
into pursuant hereto shall confer upon any Participant the right to
continue in the employ of the Company or to be entitled to any
remuneration or benefits not set forth in the Plan or such Award
Agreement or other agreement or to interfere with or limit in any way the
right of the Company to terminate such Participant's employment.
(d) Withholding Taxes. Where a Participant or other person is
entitled to receive shares of Common Stock or cash pursuant to an Award
hereunder, the Company shall have the right to require the Participant or
such other person to pay to the Company the amount of any taxes which the
Company may be required to withhold before delivery to such Participant
or other person of cash or a certificate or certificates representing
such shares. Unless otherwise prohibited by the Committee or by
applicable law, a Participant may satisfy any such withholding tax
obligation by either of the following methods, or by a combination of
such methods: (a) tendering a cash payment; or (b) delivering to the
Company previously acquired shares of Common Stock having an aggregate
Fair Market Value, determined as of the date the withholding tax
obligation arises, less than or equal to the amount of the total
withholding tax obligation.
(e) Amendment and Termination of the Plan. The Board or the
Committee may at any time and from time to time alter, amend, suspend, or
terminate the Plan in whole or in part; provided that, no amendment which
requires stockholder approval under applicable law or in order for the
Plan to continue to comply with Code Section 162(m) shall be effective
unless the same shall be approved by the requisite vote of the
stockholders of the Company. Notwithstanding the foregoing, no amendment
shall affect adversely any of the rights of any Participant, without such
Participant's consent, under any Award theretofore granted under the
Plan. The power to grant Awards under the Plan will automatically
terminate ten years after the adoption of the Plan by the Board. If the
Plan is terminated, any unexercised Award shall continue to be
exercisable in accordance with its terms and the terms of the Plan in
effect immediately prior to such termination.
(f) Participant Rights. No Participant shall have any claim
to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment for Participants. Except as provided specifically
herein, a Participant or a transferee of an Award shall have no rights as
a stockholder with respect to any shares covered by any Award until the
date of the issuance of a stock certificate to him for such shares.
(g) No Fractional Shares. No fractional shares of Common
Stock shall be issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other Awards, or other property
shall be issued or paid in lieu of such fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
(h) Governing Law. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State
of Delaware without giving effect to the conflict of laws principles
thereof.
(i) Interpretation, Construction. The Plan is designed and
intended to comply with Section 162(m) of the Code, and all provisions
hereof shall be construed in a manner to so comply. The section and
subsection headings contained herein are for convenience only and shall
not affect the construction hereof.
12. EFFECTIVENESS.
The Plan shall take effect upon its adoption by the Board.
