<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
GERALD STEVENS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(GERALD STEVENS, INC. LOGO)
January 18, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Gerald Stevens, Inc. to be held at 10:00 a.m. on Tuesday, February 29, 2000
at the Sheraton Fort Lauderdale, Airport Hotel, Empire Ballroom, Fort
Lauderdale, Florida.
The accompanying Notice of Annual Meeting and Proxy Statement describe the
specific matters to be acted upon. In addition to these matters, we will report
on our progress and provide an opportunity for questions of general interest to
our stockholders.
Whether or not you plan to attend in person, it is important that your
shares be represented at the Annual Meeting. PLEASE SIGN, DATE AND RETURN YOUR
PROXY CARD IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE. The Board of Directors
unanimously recommends that stockholders vote FOR each of the matters on the
proxy card. Thank you.
Sincerely,
/s/ Steven R. Berrard
Steven R. Berrard
Chairman of the Board
<PAGE> 3
(GERALD STEVENS, INC. LOGO)
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Gerald Stevens, Inc. will be held at
the Sheraton Fort Lauderdale, Airport Hotel, Empire Ballroom, Fort Lauderdale,
Florida at 10:00 a.m. on Tuesday, February 29, 2000. At the Annual Meeting,
stockholders will vote on the following matters:
(1) the election of directors;
(2) the reincorporation of Gerald Stevens, Inc. in the State of Florida;
(3) the approval and adoption of the Gerald Stevens, Inc. 2000 Stock Option
Plan;
(4) the approval of the selection of our independent accountants for the
2000 fiscal year; and
(5) any other business that properly comes before the Annual Meeting.
EVEN IF YOU PLAN TO ATTEND THE MEETING, WE REQUEST YOU TO COMPLETE AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE so that your shares will be represented and voted in accordance with
your instructions. Of course, if you attend the meeting, you may vote your
shares personally, even if you have already returned your signed proxy. You may
revoke your proxy at any time before the meeting either in writing or by
personal notification.
Only stockholders of record at the close of business on January 3, 1999
will be entitled to notice of and to vote at the meeting or any adjournments or
postponements of the meeting.
By order of the Board of Directors,
/s/ Adam D. Phillips
Adam D. Phillips
Corporate Secretary
January 18, 2000
301 E. Las Olas Boulevard, Suite 300, Fort Lauderdale, Florida 33301 - Phone
(954) 713-5000
<PAGE> 4
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Record Date................................................. 1
Proxy and Voting Procedures................................. 1
Votes Required.............................................. 1
Solicitation Procedures..................................... 1
Item 1. Election of Directors....................................... 2
Nominees............................................... 2
Board Committees and Meetings.......................... 3
Compensation........................................... 5
Report of the Compensation Committee on Executive
Compensation......................................... 7
Compensation Committee Interlocks and Insider
Participation........................................ 9
Performance Comparison................................. 10
Security Ownership of Management and Others............ 11
Compliance with Section 16(a) of the Exchange Act...... 12
Item 2. Reincorporation of Gerald Stevens as a Florida
Corporation............................................... 12
Reason For Proposed Reincorporation in Florida......... 12
No Change in Name, Business or Physical Location....... 13
The Subsidiary......................................... 13
The Plan and Agreement of Merger....................... 13
Comparison of the Rights of Holders of Our Common Stock
and the Surviving Corporation's Common Stock.......... 14
Possible Disadvantages of a Change in Domicile......... 21
Tax Consequences of the Merger......................... 21
Stockholder Appraisal Rights........................... 22
Effective Date......................................... 22
Item 3. 2000 Stock Option Plan...................................... 22
Description of the Plan................................ 22
Federal Income Tax Consequences of the Plan............ 24
Item 4. Selection of Independent Accountants........................ 26
Other Matters.......................................................... 26
Proposals for 2001 Annual Meeting........................... 26
Appendix A -- Form of Plan and Agreement of Merger..................... A-1
Appendix B -- Charter of Florida Subsidiary............................ B-1
Appendix C -- Gerald Stevens, Inc. 2000 Stock Option Plan.............. C-1
</TABLE>
<PAGE> 5
PROXY STATEMENT
The Annual Meeting of Stockholders of Gerald Stevens, Inc. will be held on
February 29, 2000. We are furnishing this Proxy Statement in connection with the
solicitation of proxies to be used at the Annual Meeting and any adjournments.
Our mailing address is 301 East Las Olas Blvd., Suite 300, Fort Lauderdale,
Florida 33301. We mailed this Proxy Statement and the enclosed proxy to our
stockholders beginning on January 20, 2000.
RECORD DATE
Only stockholders of record at the close of business on January 3, 2000 are
entitled to vote at the Annual Meeting and any adjournments. On the record date,
we had 45,134,740 shares of common stock outstanding. The common stock is our
only outstanding class of voting securities.
PROXY AND VOTING PROCEDURES
The enclosed proxy relates to all of the shares of our common stock that
the stockholder is entitled to vote on the close of business on January 3, 2000.
The proxy enables a stockholder to vote on the proposals covered by this
Proxy Statement. The shares represented by each valid proxy received in a timely
manner will be voted in accordance with the choices indicated on the proxy. The
stockholder may revoke the proxy by written notice to Gerald Stevens, Inc. at
any time before the Annual Meeting, or at the Annual Meeting before it is voted.
A valid proxy will be voted FOR each of the proposals unless otherwise indicated
on the proxy.
VOTES REQUIRED
Under Delaware law, the election of directors requires the affirmative vote
of a plurality of the votes present at the Annual Meeting in person or by proxy
and entitled to vote. Under our bylaws, the approval of the other matters to be
voted on at the Annual Meeting requires the affirmative vote of a majority of
the votes cast on each such matter at the Annual Meeting, except for the
approval of the Plan and Agreement of Merger which requires the affirmative vote
of the holders of a majority of all outstanding shares of our common stock
entitled to vote on the merger. Shares abstaining or withheld from voting, as
well as "non-votes," are counted as shares represented at the Annual Meeting in
order to determine a quorum. Such shares and non-votes are not voted for the
election of directors or for the other matters presented at the Annual Meeting.
As such, absentions and votes withheld, as well as "non-votes," have no effect
on the vote with respect to the election of directors or other matters presented
at the meeting, except for the reincorporation matter where they will have the
effect of a vote against the reincorporation.
SOLICITATION PROCEDURES
Proxies will be solicited primarily by mail; however, our employees may
also solicit proxies in person or otherwise. We will not pay employees for these
services. We are requesting certain holders of record, including brokers,
custodians and nominees, to distribute proxy materials to beneficial owners and
to obtain the beneficial owners' instructions concerning the voting of proxies.
We will pay all costs of the proxy solicitation, and will reimburse brokers and
other persons for the expenses they incur in sending proxy materials to
beneficial owners.
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<PAGE> 6
ITEM 1. ELECTION OF DIRECTORS
The nominees for our Board of Directors and their biographies are set forth
below. It is anticipated that all nominees will be candidates when the election
is held. If for any reason any nominee is not a candidate at that time, proxies
will be voted for any substitute nominee that our board of directors designates
(except where a proxy withholds authority with respect to the election of
directors).
NOMINEES
STEVEN R. BERRARD has served as a member of our board of directors since
April 1999, and as Chairman of the Board since October 1999. In 1997, Mr.
Berrard co-founded New River Capital Partners, a private equity firm with an
investment strategy focused on branded specialty retail, e-commerce and
education, and he controls New River Capital's managing general partner. Mr.
Berrard served as Co-Chief Executive Officer of AutoNation, Inc. from October
1996 until September 1999. During his tenure, AutoNation became the world's
largest automotive retailer with over 380 dealerships throughout the United
States and also owned and operated the Alamo Rent-A-Car, National Car Rental
System and CarTemps USA auto rental businesses. From September 1994 through
March 1996, Mr. Berrard served as President and Chief Executive Officer of
Blockbuster Entertainment Group, a division of Viacom, Inc. and the world's
largest video store operator. From January 1993 to September 1994, Mr. Berrard
served as President and Chief Operating Officer of Blockbuster. Mr. Berrard
joined Blockbuster in June 1987 as Senior Vice President, Treasurer and Chief
Financial Officer, and he became a director of Blockbuster in May 1989. In
addition, Mr. Berrard served as President and Chief Executive Officer and as a
director of Spelling Entertainment Group Inc., a televised and filmed
entertainment producer and distributor, from March 1993 through March 1996, and
served as a director of Viacom from September 1994 until March 1996. Mr. Berrard
serves as a director of Birmingham Steel Corporation, a steel producer, and of
Boca Resorts, Inc., which owns and operates luxury resorts, arena and
entertainment facilities and a professional sports franchise.
GERALD R. GEDDIS has served as a member of our board of directors and as
our Chief Executive Officer and President since April 1999. He co-founded Gerald
Stevens Retail with Mr. Berrard in May 1998 and served as its Chief Executive
Officer and President until its merger with us on April 30, 1999. From 1988 to
1996, Mr. Geddis served in various executive positions at Blockbuster. He served
Blockbuster as President from 1995 to 1996 and as Chief Operating Officer in
1996. During his tenure at Blockbuster, Mr. Geddis was involved in all facets of
the company's operations, including worldwide store operations, merchandising,
marketing and training. For the 17 years prior to 1988, Mr. Geddis served in
various positions with Tandy Corporation, the owner and operator of Radio Shack
stores.
ROBERT L. JOHNSON has served as a member of our board of directors since
October 1999. In 1980, Mr. Johnson founded BET Holdings, Inc., a diversified
media holding company that owns Black Entertainment Television. He has served as
BET's Chairman and Chief Executive Officer since March 1996, and prior to that,
also as its President. Mr. Johnson is also Chairman and President of District
Cablevision, Inc., a cable operator in the District of Columbia. He serves as a
director of U.S. Airways Group, Inc., Hilton Hotels Corp. and General Mills,
Inc.
RUTH M. OWADES has served as a member of our board of directors since
August 1999 following our acquisition of Calyx & Corolla, Inc. Ms. Owades
founded Calyx & Corolla in 1988 and has served as its Chief Executive Officer
since that time. Ms. Owades serves as a director of Providian Financial Corp., a
consumer lending institution, and J. Jill Group, Inc., a specialty direct
marketer.
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<PAGE> 7
ADAM D. PHILLIPS has served as a member of our board of directors since
October 1999, and as our Senior Vice President, Chief Administrative Officer,
and Secretary since April 1999. Mr. Phillips also served as our General Counsel
from April 1999 until November 1999. From July 1998 until April 1999, Mr.
Phillips was Senior Vice President of Gerald Stevens Retail. From January 1998
until July 1998, Mr. Phillips was a shareholder of the law firm of Akerman,
Senterfitt & Eidson, P.A. in Fort Lauderdale, Florida. From 1993 through 1997,
Mr. Phillips served in various capacities at Blockbuster, having most recently
served as Executive Vice President, Chief Administrative Officer and General
Counsel in 1996 and 1997. While at Blockbuster, Mr. Phillips was responsible for
the company's legal, human resources and communications departments. Prior to
joining Blockbuster, Mr. Phillips was associated with the law firm of Kirkland &
Ellis in Chicago, Illinois.
KENNETH G. PUTTICK has served as a member of our board of directors since
January 1995. Mr. Puttick is President and owner of Tiffany Scott Cadillac in
Vero Beach, Florida. Mr. Puttick has been in the automobile dealership business
since 1968. Mr. Puttick also has owned and operated several retail and real
estate businesses.
KENNETH ROYER has served as a member of our board of directors since April
1999. Prior to joining Gerald Stevens Retail in October 1998, Mr. Royer was a
consultant in the floral industry. For over 40 years, Mr. Royer was Chairman of
the Board of Directors of Royer's Flowers, a privately owned floral retailer.
Founded in 1945, Royer's Flowers, by 1998, had become one of the five largest
florists in the United States with 35 locations in central Pennsylvania. Mr.
Royer has served as Chairman of the Retail Council of the Society of American
Florists, and also has served as director of the Society of American Florists.
Mr. Royer also has served as Chairman of the American Florists Marketing Council
and recently completed a term as Treasurer of the American Florists Endowment. A
regular speaker at national florist conventions, Mr. Royer writes a regular
column for The Florist Review entitled "Royer on Retailing" and in 1998 authored
a book on the floral industry entitled Retailing Flowers Profitably.
ANDREW W. WILLIAMS has served as a member of our board of directors since
December 1988. Mr. Williams served as Chairman of the Board of Directors from
November 1992 until April 1999 and as Chief Executive Officer from September
1994 until April 1999. Since 1978, Mr. Williams has been a certified public
accountant practicing principally in Vero Beach, Florida. He has served as
President and Director of Confidential Investment Services, Inc., a privately
owned investment company, since April 1999.
BOARD COMMITTEES AND MEETINGS
The Board of Directors has established an Audit Committee, Compensation
Committee and Executive Committee. The Board of Directors has not established a
Nominating Committee.
The functions of the Audit Committee are to:
- review the qualifications and independence of the independent auditors;
- recommend the appointment of the independent auditors;
- review the scope of the annual audit and the annual audit process;
- review the annual audited and unaudited quarterly financial statements;
and
- report the activities of the audit committee to the board of directors.
Prior to April 30, 1999, the Audit Committee members were William E.
Mercer, S. Oden Howell, Jr. and Mr. Puttick. From May 1, 1999 through October
18, 1999, the Audit Committee
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<PAGE> 8
members were Messrs. Puttick and Royer. Since October 18, 1999, the Audit
Committee members have been Messrs. Williams, who serves as Chairman, Puttick
and Johnson. The Audit Committee met once during the 1999 fiscal year.
The functions of the Compensation Committee are to review the compensation
of officers and other management personnel and to make recommendations
concerning such compensation. The Compensation Committee also administers our
stock incentive plans, determining the recipients and terms of stock incentives,
and administers some of our employee benefit plans. Prior to April 30, 1999, the
Compensation Committee members were Messrs. Howell, Puttick and Mercer. From May
1, 1999 through October 18, 1999, the Compensation Committee members were
Messrs. Puttick and Royer. Since October 18, 1999, the Compensation Committee
members have been Messrs. Johnson, who serves as Chairman, and Royer and Thomas
C. Byrne. The Compensation Committee met once during the 1999 fiscal year.
The Board of Directors formed the Executive Committee on October 18, 1999.
The functions of the Executive Committee are to exercise all powers and
authority of the entire Board of Directors to the extent not restricted by
Delaware law or by our charter or bylaws, except that the Executive Committee
may not (1) declare a dividend, (2) authorize the issuance of stock with a
market value greater than $10 million in any single transaction or series of
related transactions, or (3) appoint executive officers with a position of
Senior Vice President or more senior authority. The members of the Executive
Committee are Messrs. Berrard, Geddis and Phillips.
The Board of Directors held six meetings, and took actions by written
consent on eight occasions, in our 1999 fiscal year. Each current director
attended 75% or more of the 1999 fiscal year meetings of the Board and the Board
committees on which he or she served.
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<PAGE> 9
COMPENSATION
Summary Compensation Table. The following Summary Compensation Table
contains information concerning the compensation of (a) Andrew W. Williams, who
served as Chief Executive Officer through April 30, 1999; (b) Gerald R. Geddis,
who has served as Chief Executive Officer since April 30, 1999; and (c) our
other three executive officers who were serving as such at the end of our 1999
fiscal year. Information that is not applicable or not required under the rules
of the Securities and Exchange Commission ("SEC") has been omitted from the
Summary Compensation Table.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ----------------------------
NO. OF SHARES
OTHER UNDERLYING ALL
FISCAL ANNUAL OPTIONS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION GRANTED COMPENSATION
- --------------------------- ------ -------- ------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gerald R. Geddis(a) 1999 $ 50,000 $ 0 $ 0 0 $ 0
President, Chief 1998 -- -- -- -- --
Executive Officer 1997 -- -- -- -- --
and Director
Andrew W. Williams(b) 1999 81,729 53,818 3,200(d) 0 2,042(e)
Director and Former 1998 127,042 20,000 4,800(d) 0 2,042(e)
Chief Executive Officer 1997 105,241 67,500 4,800(d) 150,000 2,856(e)
Albert J. Detz(c) 1999 33,333 0 0 0 0
Senior Vice President 1998 -- -- -- -- --
and Chief Financial 1997 -- -- -- -- --
Officer
Steven J. Nevill(c) 1999 50,000 25,000 0 0 29,983(f)
Senior Vice President 1998 -- -- -- -- --
and Chief Information 1997 -- -- -- -- --
Officer
Adam D. Phillips(c) 1999 33,333 0 0 0 0
Senior Vice President, 1998 -- -- -- -- --
Chief Administrative 1997 -- -- -- -- --
Officer, Secretary and
Director
</TABLE>
- ---------------
(a) Mr. Geddis became President and Chief Executive Officer on April 30, 1999
upon completion of the merger with Gerald Stevens Retail. No information is
provided for periods prior to April 30, 1999, because Mr. Geddis was not
employed by Gerald Stevens prior to such date.
(b) Mr. Williams served as President and Chief Executive Officer through April
30, 1999.
(c) Messrs. Detz, Nevill and Phillips became executive officers on April 30,
1999. No information is provided for periods prior to April 30, 1999,
because Messrs. Detz, Nevill and Phillips were not employed by Gerald
Stevens prior to such date.
(d) Represents payments made for a company-provided vehicle.
(e) Represents company-matching contributions under a 401(k) plan.
(f) Represents reimbursement of moving expenses in connection with the hiring of
Mr. Nevill.
Stock Options. We granted no options to the executive officers named in
the Summary Compensation Table in our 1999 fiscal year.
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<PAGE> 10
The following table contains information concerning stock options exercised
in the 1999 fiscal year, including the "value realized" upon exercise (the
difference between the total purchase price of the options exercised and the
market value, on the date of exercise, of the shares acquired), and the value of
unexercised "in-the-money" options held on August 31, 1999 (the difference
between the aggregate purchase price of all such options held and the market
value of the shares covered by such options on August 31, 1999).
<TABLE>
<CAPTION>
OPTION EXERCISES IN FY 1999 AND OPTION VALUES AT 8/31/99
---------------------------------------------------------------------------------------------------
NO. OF SHARES UNDERLYING
NO. OF SHARES UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
ACQUIRED ON OPTIONS ON 8/31/99 OPTIONS ON 8/31/99
NAME EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------- -------------- ------------------------------ ---------------------------------
<S> <C> <C> <C> <C>
Gerald R. Geddis...... 0 $ 0 0/13,500 0/$1$11,125
Andrew W. Williams.... 150,000 1,532,475 175,000/0 1,389,750/0
Albert J. Detz........ 0 0 8,437/72,563 93,073/593,178
Steven J. Nevill...... 0 0 0/54,000 0/369,500
Adam D. Phillips...... 0 0 8,437/113,063 93,073/814,053
</TABLE>
Management Incentive Stock Plan. Our board of directors adopted the
Management Incentive Stock Plan on October 26, 1995. The stockholders approved
this plan on January 30, 1996. Under the Management Incentive Stock Plan, we may
periodically grant employees market-based awards, including nonqualified stock
options, incentive stock options, stock appreciation rights, restricted stock
and performance share awards. We grant these awards to those individuals whose
judgment, initiative and efforts contribute to our success. Each individual
award is established by an award agreement with the participant that sets forth
the terms and conditions applicable to the award. The exercise price of an
option is determined at the time of grant. The exercise price may not be less
than the fair market value of the shares of our common stock subject to the
award on the date of grant.
We did not grant options to any executive officer during our fiscal year
ended August 31, 1999. On December 13, 1999, 389,355 shares of our common stock
subject to options under the Management Incentive Stock Plan were outstanding.
Also on such date, 1,584,206 shares of our common stock subject to options
assumed in connection with acquisitions, 180,000 shares of our common stock
subject to options granted under our former Nonemployee Directors Plan and
30,000 shares of our common stock subject to non-plan options were outstanding.
We have no long-term incentive plan, pension plan or other plan as defined
by the rules and regulations of the Securities and Exchange Commission except
for the Management Incentive Stock Plan.
Employment Agreements. We have employment agreements with each of the
executive officers named in the Summary Compensation Table. Each agreement
provides that the executive officer will receive an annual base salary of
$150,000. In addition, each executive officer will be eligible for an annual
bonus of up to 20% of base salary, based on the achievement of certain corporate
goals and objectives. If any executive officer is terminated "without cause" or
if the executive officer elects to terminate employment for "good reason," in
each case as defined in the employment agreement, then the executive officer
will be entitled to continue to receive the base salary and bonus through the
end of the employment term, and all unvested stock options will automatically
vest on the date of termination and will be exercisable in full. In addition,
following a change of control, all unvested stock options held by Messrs. Detz
and Phillips will automatically vest and will be exercisable in full. Each of
the executive officers is also subject to confidentiality obligations as well as
to non-compete and non-solicitation covenants during the term of employment and
for two years thereafter. The employment agreements with Messrs. Geddis, Detz
and Phillips terminate on December 31, 2000, the
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<PAGE> 11
employment agreement with Mr. Nevill terminates on February 2, 2001, and the
employment agreement with Eleanor Marcus Callison terminates on September 27,
2001.
We also have an employment agreement with Ms. Owades on substantially the
same terms as those described above except that the annual base salary is
$185,000. Ms. Owades' employment agreement terminates on July 30, 2001.
Directors' Compensation. Under the compensation program for nonemployee
directors, each nonemployee director receives (a) an annual retainer of $20,000;
(b) an additional $1,000 for each board meeting in excess of four meetings per
year; (c) $750 for each committee meeting attended (except that a committee
chairman receives $1,000 per committee meeting); and (d) an annual grant of
options to purchase up to 2,500 shares of common stock at the fair market value
of the stock on the date of grant. Nonemployee directors are reimbursed for
expenses they incur in attending board of directors and committee meetings.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee approves compensation actions with respect to
our executive officers (including the Chief Executive Officer), other officers
who report to the Chief Executive Officer, and other key employees. The
Compensation Committee is composed of directors who are not employees of Gerald
Stevens and who have no consulting arrangements or significant contractual or
other relationships with Gerald Stevens.
This Report describes our performance-based compensation philosophy and
executive compensation program, as approved by the Compensation Committee. In
particular, it discusses the compensation decisions and recommendations made by
the Compensation Committee in the 1999 fiscal year regarding Mr. Williams, our
Chief Executive Officer through April 30, 1999, Mr. Geddis, our President and
Chief Executive Officer since April 30, 1999, and the other executive officers
named in the Summary Compensation Table.
Executive Compensation Philosophy and Program Components. Our executive
compensation program is structured for us to compete effectively with other
firms in attracting, motivating and retaining executives of the caliber needed
to ensure our growth and profitability. The components of this program consist
of base salary and annual bonus (both paid in cash) and stock options. These
compensation components are intended to (1) stimulate performance that benefits
our stockholders by increasing stockholder value, (2) reward such performance
with competitive levels of compensation, and (3) employ and retain key
executives. We compare our executive officer compensation to other specialty
retail companies, particularly those of similar size.
The following sections of this Report describe the compensation program for
executive officers in effect in our 1999 fiscal year and the manner in which the
Compensation Committee and the Board reached their determinations as to
performance-based compensation.
Base Salary. Salaries of executive officers are generally eligible for
review once each year. All of our current executive officers started working for
Gerald Stevens or Gerald Stevens Retail during or shortly before our 1999 fiscal
year. As a result, no salary increases were given to the current executive
officers during the 1999 fiscal year. Mr. Williams' base salary was increased in
the 1999 fiscal year, as described under "Compensation of the Chief Executive
Officers" below. We compensate our executive officers in accordance with their
employment agreements that were originally entered into with Gerald Stevens
Retail. Under these agreements, each executive officer's annual base salary is
$150,000. Gerald Stevens Retail paid its executive officers annual base salaries
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<PAGE> 12
of no greater than $150,000, which it determined to be an appropriate salary for
executive officers of a "start-up" company. Notwithstanding these agreements, in
consideration for the opportunity to make investments in Gerald Stevens Retail
in 1998, Messrs. Detz and Phillips agreed with Gerald Stevens Retail to be paid
an annual base salary of $100,000 until December 31, 1999, which agreements were
assumed by Gerald Stevens.
Annual Bonuses. We have established an annual bonus program under which
each of the executive officers may receive a cash bonus of up to 20% of such
individual's base salary, based on Gerald Stevens' financial performance and the
individual's performance. Bonuses in excess of 20% of salary may be paid to
reward exceptional performance. Since all of our current executive officers
started working for Gerald Stevens or Gerald Stevens Retail in or shortly prior
to the 1999 fiscal year, we awarded no bonuses to the current executive officers
(other than Mr. Nevill) under our annual bonus program in the 1999 fiscal year.
Mr. Nevill's bonus was $25,000 and was determined based on Mr. Nevill's
individual performance. Mr. Williams received a bonus of $53,818 in the 1999
fiscal year, as described under "Compensation of the Chief Executive Officers"
below.
Stock Options. All stock options granted to executive and other officers
become exercisable in four equal annual installments beginning one year after
the date of the grant. The number of options granted to an individual generally
is based on the individual's position and ability to affect our performance.
Since we assumed options that Gerald Stevens Retail granted to each of our
current executive officers in connection with the merger transaction with Gerald
Stevens Retail in April 1999, we did not grant any options to our current
executive officers in the 1999 fiscal year.
Compensation of the Chief Executive Officers. Prior to the merger
transaction with Gerald Stevens Retail in April 1999, Mr. Williams served as our
Chief Executive Officer. We paid Mr. Williams an annual base salary commensurate
with salaries of chief executive officers of companies with a similar market
capitalization, as determined by an independent compensation consulting firm.
This consulting firm also developed an annual bonus plan designed to provide our
executive officers with bonuses appropriate for a company with our market
capitalization. The plan, which is no longer in effect, determined the amount of
the bonuses by a formula based on return on equity. As a result of our financial
performance in the 1998 fiscal year and the beginning of the 1999 fiscal year,
we paid Mr. Williams bonuses totaling $53,818 in the 1999 fiscal year. We
granted no options to Mr. Williams in the 1999 fiscal year.
We compensate Mr. Geddis in accordance with his employment agreement that
was originally entered into with Gerald Stevens Retail. Under this agreement,
Mr. Geddis is paid an annual base salary of $150,000. Gerald Stevens Retail paid
its executive officers annual base salaries of no greater than $150,000, which
it determined to be an appropriate salary for a chief executive officer of a
"start-up" floral and gift company. Like our other executive officers, Mr.
Geddis may receive a cash bonus of up to 20% of his base salary, based on Gerald
Stevens' financial performance and his personal performance. A bonus in excess
of 20% of salary may be paid to reward exceptional performance. As stated above,
no bonuses were paid under the annual bonus program in the 1999 fiscal year, and
no options were granted to our executive officers in the 1999 fiscal year.
Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code prohibits us from deducting annual compensation in excess of $1
million paid to the executive officers named in the Summary Compensation Table
of the Proxy Statement, unless such compensation is performance-based and
satisfies certain other conditions. It is the Committee's view that:
1. Base salaries and annual bonuses awarded under our annual bonus program
do not qualify as performance-based compensation and are therefore not
expected to be deductible.
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<PAGE> 13
2. Amounts that are reportable as ordinary income by an executive under our
stock option plans do qualify as performance-based compensation and are
therefore expected to be fully deductible.
COMPENSATION COMMITTEE
Robert L. Johnson (Chair)
Thomas C. Byrne
Kenneth Royer
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Howell, Puttick, Mercer and Royer served as members of the
Compensation Committee during the 1999 fiscal year. In connection with our
acquisition of Royer's Flower Shops, we assumed five leases that were entered
into in July 1994 between Royer's Flower Shops, as tenant, and Kenneth Royer and
his spouse, as landlord. The leases are for retail flower shops we own and
operate in central Pennsylvania. The aggregate annual rent payable by us to Mr.
and Mrs. Royer for the leases is approximately $260,000. We believe that each of
the leases is on terms no less favorable than could be obtained from third
parties for comparable retail space in the same markets.
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<PAGE> 14
PERFORMANCE COMPARISON
The following graph and table compare the cumulative total stockholder
return on our common stock from August 31, 1994 through August 31, 1999 with the
Standard & Poor's SmallCap 600 Stock Index and the Specialty Retail SmallCap
Index (neither of which include Gerald Stevens, Inc.), using data supplied by
the Compustat Services unit of Standard & Poor's Corporation. Until April 30,
1999, our company was known as Florafax International, Inc. and our common stock
traded on the Nasdaq Small Cap Market under the symbol "FIIF." The comparisons
reflected in the graph and table are not intended to forecast the future
performance of our common stock and may not be indicative of such future
performance. The graph and table assume an investment of $100 in our common
stock and each index on August 31, 1994, as well as the reinvestment of
dividends.
(Performance Graph)
<TABLE>
<CAPTION>
S&P SMALLCAP 600 STOCK SPECIALTY RETAIL SMALLCAP
GERALD STEVENS, INC. INDEX INDEX
-------------------- ---------------------- -------------------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 240.82 122.41 71.87
1996 828.98 138.67 67.69
1997 1402.86 185.97 78.74
1998 1887.76 151.94 74.32
1999 4795.92 188.72 83.10
</TABLE>
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<PAGE> 15
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth the shares of our common stock beneficially
owned, directly or indirectly, on December 1, 1999, by (1) each person that we
know to beneficially own more than 5% of our outstanding common stock, (2) each
current director and nominee, (3) each of the executive officers named in the
Summary Compensation Table and (4) all directors, nominees and executive
officers as a group. The table also includes shares that the individuals have
the right to acquire within 60 days pursuant to outstanding options. Unless
otherwise indicated, the address of each party is 301 East Las Olas Boulevard,
Suite 300, Fort Lauderdale, Florida 33301, our principal business address.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
- ---------------- ---------------------- -------
<S> <C> <C>
New River Capital Partners, L.P............................. 7,977,104 17.8%
100 S.E. Third Avenue
Ft. Lauderdale, Florida 33394
Gerald R. Geddis(1)......................................... 3,455,380 7.7%
Albert J. Detz(2)........................................... 354,375 *
Steven J. Nevill(3)......................................... 13,500 *
Adam D. Phillips(4)......................................... 502,625 1.1%
Steven R. Berrard(5)........................................ 7,977,104 17.8%
Thomas C. Byrne(1)(6)....................................... 193,893 *
Robert L. Johnson........................................... 0 *
Ruth M. Owades(7)........................................... 361,474 *
Kenneth G. Puttick(8)....................................... 1,155,000 2.6%
Kenneth Royer(9)............................................ 51,997 *
Andrew W. Williams(10)...................................... 1,056,559 2.4%
All Directors and Executive Officers as a Group (11)........ 15,215,151 33.8%
</TABLE>
- ---------------
* Indicates less than 1%
(1) Includes 3,375 shares of our common stock subject to options that are
exercisable within 60 days.
(2) Includes 20,250 shares of our common stock subject to options that are
exercisable within 60 days.
(3) Consists of 13,500 shares of our common stock subject to options that are
exercisable within 60 days.
(4) Includes 30,375 shares of our common stock subject to options that are
exercisable within 60 days. Mr. Phillips owns his shares of common stock
jointly with his wife.
(5) The aggregate amount of our common stock deemed beneficially owned by Mr.
Berrard consists of the 7,977,104 shares owned by New River Capital
Partners. Mr. Berrard disclaims beneficial ownership of the shares owned by
New River Capital Partners except to the extent of his pecuniary interest
therein. Mr. Berrard controls and beneficially owns his interests in New
River Capital Partners indirectly through other entities.
(6) The aggregate amount of our common stock deemed beneficially owned by Mr.
Byrne consists of 190,518 shares owned directly by him, but does not
include any shares owned by New River Capital Partners. Mr. Byrne has a
non-controlling interest in New River Capital Partners.
(7) Includes 8,500 shares of our common stock that Ms. Owades owns jointly with
her husband and 7,340 shares of our common stock subject to options owned
by her husband that are exercisable within 60 days.
(8) Includes 637,000 shares held by Puttick Enterprises, of which Mr. Puttick
is President, director and owner. Includes 60,000 shares of our common
stock subject to options that are exercisable within 60 days.
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<PAGE> 16
(9) Includes 4,966 shares of our common stock subject to options that are
exercisable within 60 days.
(10) Includes 383,453 shares of our common stock that Mr. Williams owns jointly
with his wife; 85,883 shares of our common stock held for the benefit of
Mr. Williams' children; 39,285 shares of our common stock owned by Mr.
Williams' wife; 2,160 shares of our common stock owned by Mr. Williams'
son; 47,378 shares of our common stock owned by Equity Resource Group of
Indian River County, Inc., of which Mr. Williams is president, director and
majority owner; and 77,000 shares of our common stock owned by Confidential
Investment Services, Inc., of which Mr. Williams is sole owner. Also
includes 25,000 shares of our common stock subject to options that are
exercisable within 60 days.
(11) Includes 168,181 shares of our common stock subject to options that are
exercisable within 60 days.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under Section 16 of the Securities Exchange Act of 1934, our directors,
certain officers, and beneficial owners of more than 10% of our outstanding
common stock are required to file reports with the SEC concerning their
ownership of and transactions in our common stock; such persons are also
required to furnish us with copies of such reports. Based solely upon the
reports and related information furnished to us, we believe that all such filing
requirements were complied with in a timely manner during and with respect to
our 1999 fiscal year.
ITEM 2. REINCORPORATION OF GERALD STEVENS AS A FLORIDA CORPORATION
At the Annual Meeting, stockholders will be asked to vote upon the
reincorporation of Gerald Stevens, Inc., which presently is a Delaware
corporation, as a Florida corporation. Effective January 1, 2000, the Board of
Directors approved a Plan and Agreement of Merger by which Gerald Stevens, Inc.
will be merged into a wholly owned subsidiary organized under Florida law, with
the subsidiary becoming the surviving corporation. Stockholders are being
requested to consider and approve the Plan and Agreement of Merger, which is
attached as Appendix "A." We have summarized the Plan and Agreement of Merger
below. This summary may not be complete and is subject to and qualified in its
entirety by reference to the text of the Plan and Agreement of Merger itself.
The affirmative vote of the holders of a majority of the outstanding shares of
our common stock entitled to vote is necessary for approval of the Plan and
Agreement of Merger.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO REINCORPORATE
FROM DELAWARE TO FLORIDA IN ACCORDANCE WITH THE PLAN AND AGREEMENT OF MERGER.
REASON FOR PROPOSED REINCORPORATION IN FLORIDA
We are requesting stockholder approval of the Plan and Agreement of Merger
to effect the change of the state of incorporation of Gerald Stevens, Inc. from
Delaware to Florida. The primary reason for the change in the state of
incorporation is to achieve cost savings. Corporations organized under the
Delaware General Corporation Law ("DGCL") are required to pay a franchise tax to
the State of Delaware. The annual franchise tax payable by Gerald Stevens to
Delaware for 2000, absent the change of domicile, would be approximately
$150,000. By contrast, corporations organized under the Florida Business
Corporation Act ("FBCA") do not pay annual franchise taxes to the State of
Florida but instead pay a nominal fee of $200 in connection with the filing of
annual reports.
If the Plan and Agreement of Merger is approved and Gerald Stevens, Inc. is
merged with and into the Florida subsidiary, we will be required to pay the
pro-rata portion of the 2000 Delaware
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<PAGE> 17
franchise tax applicable to the portion of 2000 in which Gerald Stevens existed
as a Delaware corporation. We also will incur one-time costs, which costs are
not expected to be material.
In addition to the proposed cost savings, we believe reincorporation from
Delaware to Florida is consistent with our philosophy of maintaining a positive
corporate presence in Florida. We maintain our principal executive and
administrative offices in Fort Lauderdale, Florida, and maintain the offices and
retail locations of several of our principal operating subsidiaries throughout
Florida.
We believe that the FBCA will meet our business needs, and that the DGCL
does not offer corporate law advantages sufficient to warrant payment of the
franchise tax burden that results from maintaining a Delaware domicile. The FBCA
is a modern, comprehensive and flexible statute based on the Revised Model
Business Corporation Act. In all material respects, it provides the flexibility
in management of a corporation and in the conduct of various business
transactions that is characteristic of the DGCL.
NO CHANGE IN NAME, BUSINESS OR PHYSICAL LOCATION
The proposed merger will effect a change in the legal domicile of Gerald
Stevens, Inc. and other changes of a legal nature, the most significant of which
are described below. However, the merger will not result in any change in our
name, business, management, location of our principal executive offices, assets,
liabilities or net worth (other than as a result of the costs incident to the
merger, which are immaterial). Our employee benefit plans will be continued
after the merger by the surviving corporation upon their existing terms and
conditions. Our management, including all directors and officers, will remain
the same after the merger and will assume identical positions with the surviving
corporation. Our common stock will continue to be listed without interruption
under the symbol "GIFT" on the Nasdaq Stock Market.
THE SUBSIDIARY
The Florida subsidiary that will be the surviving corporation was
incorporated under the FBCA on December 30, 1999, exclusively for the purpose of
merging with Gerald Stevens, Inc. Prior to the merger, the subsidiary will have
no material assets or liabilities and will not have carried on any business.
The subsidiary's charter and bylaws are substantially identical to the
current charter and bylaws of Gerald Stevens, Inc., except for statutory
references necessary to conform to the FBCA and other differences attributable
to the differences between the FBCA and the DGCL. A copy of the subsidiary's
charter is attached as Appendix "B."
THE PLAN AND AGREEMENT OF MERGER
The Plan and Agreement of Merger provides that Gerald Stevens, Inc. will
merge with and into the Florida subsidiary, with the subsidiary then becoming
the surviving corporation. The surviving corporation will assume all assets and
liabilities of Gerald Stevens, Inc., including obligations under our outstanding
indebtedness and contracts. Our existing Board of Directors and officers will
become the Board of Directors and officers of the surviving corporation for
identical terms of office. The subsidiary will also assume the name of "Gerald
Stevens, Inc." in the merger.
Upon the effective date of the merger, each share of our issued and
outstanding common stock will automatically be converted into one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the surviving
corporation. Each currently outstanding stock option automatically will be
converted into an option to purchase the same number of shares of common
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<PAGE> 18
stock of the surviving corporation at the same exercise price per share and upon
the same terms and subject to the same conditions as currently set forth in the
option. We do not intend to issue new stock certificates to stockholders of
record upon the effective date of the merger. Instead, each certificate
representing issued and outstanding shares of our common stock immediately prior
to the effective date of the merger will evidence ownership of the shares of
common stock of the surviving corporation after the effective date of the
merger.
We anticipate that delivery of existing certificates of our common stock
will constitute "good delivery" of shares of common stock of the surviving
corporation in transactions on the Nasdaq Stock Market subsequent to the merger.
PLEASE NOTE: Stockholders need not exchange their existing stock
certificates for stock certificates of the surviving corporation. However, any
stockholders desiring new stock certificates representing common stock of the
surviving corporation may submit their existing stock certificates to Registrar
& Transfer Company, our transfer agent, and obtain new certificates.
COMPARISON OF THE RIGHTS OF HOLDERS OF OUR COMMON STOCK AND THE SURVIVING
CORPORATION'S COMMON STOCK
We are incorporated in the State of Delaware, and the surviving corporation
is incorporated in the State of Florida. Our stockholders, whose rights are
currently governed by the DGCL and our charter and bylaws, will, upon
consummation of the Plan and Agreement of Merger, become stockholders of the
surviving corporation and their rights will be governed by the FBCA and the
charter and bylaws of the surviving corporation.
Although it is not practical to compare all of the differences between (a)
Delaware law and our current charter and bylaws and (b) Florida law and the
charter and bylaws of the surviving corporation, the following is a summary of
differences that we believe may significantly affect the rights of our
stockholders. This summary is not intended to be relied upon as an exhaustive
list of all differences or a complete description of the differences, and is
qualified in its entirety by reference to the DGCL, the FBCA and the forms of
the charter and bylaws of the surviving corporation.
Dividends and Repurchases. A Delaware corporation may pay dividends out of
"surplus" or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared or for the preceding fiscal year. Surplus is
defined as the net assets of the corporation over the corporation's capital.
Under the DGCL, a corporation may repurchase its shares only if the capital of
the corporation is not impaired and the repurchase does not impair the
corporation's capital.
Under the FBCA, a corporation may make distributions to stockholders
(subject to any restrictions contained in the corporation's charter) as long as,
after giving effect to the distribution, (a) the corporation will be able to pay
its debts as they become due in the usual course of business and (b) the
corporation's total assets will not be less than the sum of its total
liabilities plus (unless the charter permits otherwise) the amount that would be
needed, if the corporation were to be dissolved at the time of the distribution,
to satisfy the preferential rights upon dissolution of stockholders whose
preferential rights are superior to those receiving the distribution. Pursuant
to the FBCA, a corporation's repurchase of its own capital stock is deemed to be
a distribution.
Special Meetings. Under Florida and Delaware law, special meetings of the
stockholders may be called by the Board of Directors or by such persons as may
be authorized by the charter or the bylaws. In addition, Florida law permits the
holders of not less than 10% of all votes entitled to be cast on any issue
(unless a greater percentage, not to exceed 50%, is specified in the charter) to
call a special meeting. Our bylaws, both before and after the reincorporation,
provide that special meetings may be called by the Board of Directors or by the
President, and must be called by the
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<PAGE> 19
President or the Secretary upon the request in writing of the holders of record
of at least 25% of the issued and outstanding shares of stock entitled to vote
at a meeting.
Quorum for Stockholder Meetings. Under the DGCL, unless otherwise provided
in a corporation's charter or its bylaws, a majority of shares entitled to vote
on a matter constitutes a quorum at a meeting of stockholders, but in no event
may a quorum consist of less than one-third of the shares entitled to vote on
such matter. Our current bylaws provide that a quorum exists if a majority of
the voting power entitled to vote is present in person or by proxy at a meeting.
The FBCA is similar to the DGCL, except that the quorum requirement may be
provided in a corporation's charter but not its bylaws. The surviving
corporation's charter does not alter the stockholder quorum requirement.
Stockholder Voting Requirements. Under both the FBCA and the DGCL, if a
quorum is present, directors are generally elected if they receive more votes
favoring their election than opposing it, unless a greater number of votes is
required by the charter or by-laws (in the case of a Delaware corporation) or
the charter (in the case of a Florida corporation). With respect to matters
other than the election of directors, unless a greater number of affirmative
votes is required by the FBCA or a Florida corporation's charter (but not its
bylaws), if a quorum is present a proposal generally is approved if the votes
cast by stockholders favoring the action exceed the votes cast by stockholders
opposing the action. Under the DGCL, and unless otherwise provided by the DGCL
or a Delaware corporation's charter or bylaws, a proposal is approved by the
affirmative vote of a majority of the shares represented at a meeting and
entitled to vote on the matter. As a result, abstentions under Delaware law have
the effect of a vote against most proposals. Our current bylaws provide that a
proposal generally is approved if the votes cast by stockholders favoring the
action exceed the votes cast by stockholders opposing the action.
Under both the FBCA and the DGCL, in the case of a merger, consolidation or
a sale, lease or exchange of all or substantially all of the assets of a
corporation, the affirmative vote of the holders of a majority of the issued and
outstanding shares entitled to vote is generally required. Accordingly, under
the DGCL and the FBCA abstentions have the same effect as votes against such a
transaction.
Proxies. Under Delaware law, a proxy executed by a stockholder will remain
valid for a period of three years unless the proxy provides for a longer period.
Under Florida law, a proxy is effective only for a period of 11 months unless
otherwise provided in the proxy.
Board Recommendations Regarding Merger. Both the FBCA and the DGCL
generally provide that the stockholders of a corporation must approve a merger.
In order to obtain stockholder approval, the board of directors of a Florida
corporation must "recommend" the plan of merger and, in Delaware, the board of
directors must make a declaration of the merger's "advisability." The DGCL,
however, permits the board of directors to change its recommendation without
withdrawing the merger agreement from stockholder consideration. Further, the
DGCL provides that the terms of the merger agreement may require that the merger
agreement be submitted to the stockholders whether or not the board of directors
subsequently determines that the agreement is no longer advisable.
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<PAGE> 20
Under the FBCA, the board of directors may condition its submission of the
proposed merger on any basis.
Merger with Subsidiary. Under the DGCL, a parent corporation may merge
with its subsidiary, without stockholder approval, where the parent corporation
owns at least 90% of the outstanding shares of each class of capital stock of
its subsidiary. The FBCA permits such a merger with a subsidiary without
shareholder approval if the parent owns 80% of each class of capital stock of
the subsidiary.
Consideration for Stock. Under the DGCL, shares cannot be issued for less
than par value. The par value must be paid in a combination of cash, property or
past services. The balance may be paid by a secured promissory note or other
binding obligation. Under the FBCA, a corporation may only issue its capital
stock in return for tangible or intangible property or benefit to the
corporation. Shares may be issued for less than par value.
Board Vacancies. The DGCL provides that, unless otherwise provided in a
corporation's charter or bylaws, a vacancy or newly created directorship on the
board of directors may be filled by a majority of the remaining directors, even
though less than a quorum. Under the FBCA, a vacancy on the board of directors
may be filled by an affirmative vote of a majority of the remaining directors or
by the shareholders, unless the charter provides otherwise. The surviving
corporation's charter does not provide otherwise.
Affiliated Transactions and Control Share Acquisitions. The FBCA has a
statute governing "affiliated transactions," and the DGCL has a similar
governing "business combinations." The FBCA also has a statute governing
"control share acquisitions." As permitted by the FBCA and DGCL, both our
current charter and the surviving corporation's charter contain provisions
electing to be exempt from these provisions.
Under the DGCL, a corporation may not engage in any "business combination"
(as defined in the DGCL) with an "interested stockholder" for three years after
such stockholder becomes an interested stockholder. An interested stockholder is
any person who is the beneficial owner of 15% or more of the outstanding voting
stock of the corporation. These business combinations are substantially the same
as the "affiliated transactions" described below with respect to the FBCA. A
corporation may enter into a business combination with an interested stockholder
if (a) the Board of Directors approves either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder
before the date on which the stockholder becomes an interested stockholder, (b)
upon consummation of the transaction resulting in the stockholder reaching the
15% threshold, the stockholder owned 85% of the outstanding voting shares at the
time the transaction commenced, excluding those shares held by directors who are
also officers, or employee stock plans in which the participants do not have the
right to determine confidentially whether shares subject to the plan will be
tendered in a tender or exchange offer, or (c) on or subsequent to becoming an
interested stockholder, the business combination is approved by the board of
directors and is authorized at a meeting by the affirmative vote of at least
two-thirds of the outstanding voting stock not owned by the interested
stockholder. These restrictions do not apply if the corporation does not have a
class of stock (a) listed on a national securities exchange, (b) authorized for
quotation on the Nasdaq Stock Market, or (c) held of record by more than 2,000
stockholders unless any of the foregoing results from the actions of the
interested stockholder.
The FBCA provides that an "affiliated transaction" with an "interested
shareholder" must generally be approved by the affirmative vote of the holders
of two-thirds of the voting shares, other than the shares owned by the
interested shareholder. An interested shareholder is any person who is the
beneficial owner of 10% or more of the outstanding voting stock of the
corporation. The
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<PAGE> 21
transactions covered by the statute include, with certain exceptions, (a)
mergers and consolidations to which the corporation and the interested
shareholder are parties, (b) sales or other dispositions of substantial amounts
of the corporation's assets to the interested shareholder, (c) issuances by the
corporation of substantial amounts of its securities to the interested
shareholder, (d) the adoption of any plan for the liquidation or dissolution of
the corporation proposed by or pursuant to an arrangement with the interested
shareholder, (e) any reclassification of the corporation's securities that has
the effect of substantially increasing the percentage of outstanding voting
shares of the corporation beneficially owned by the interested shareholder, and
(f) the receipt by the interested shareholder of certain loans or other
financial assistance from the corporation. The two-thirds approval requirement
does not apply if, among other things: (a) the transaction has been approved by
a majority of the corporation's disinterested directors (as defined in the
statute), (b) the interested shareholder has been the beneficial owner of at
least 80% of the corporation's outstanding voting shares for at least five years
preceding the transaction, (c) the interested shareholder is the beneficial
owner of at least 90% of the outstanding voting shares, (d) the corporation has
not had more than 300 shareholders of record at any time during the preceding
three years, or (e) certain fair price and procedural requirements are
satisfied.
The FBCA's control share acquisition statute provides that a person who
acquires shares in an issuing public corporation in excess of certain specified
thresholds will generally not have any voting rights with respect to such shares
unless such voting rights are approved by a majority of the shares entitled to
vote, excluding the interested shares. The thresholds specified in the FBCA are
the acquisition of a number of shares representing: (a) 20% or more, but less
than 33% of the voting power of the corporation, (b) 33% or more but less than a
majority of the voting power of the corporation, or (c) a majority or more of
the voting power of the corporation. This statute does not apply if, among other
things, the acquisition is (a) approved by the corporation's board of directors,
(b) pursuant to a pledge or other security interest created in good faith and
not for the purpose of circumventing the statute, (c) pursuant to the laws of
intestate succession or pursuant to gift or testamentary transfer, or (d)
pursuant to a statutory merger or share exchange to which the corporation is a
party. This statute also permits a corporation to adopt a provision in its
charter or bylaws providing for the redemption by the corporation of such
acquired shares in certain circumstances. Unless otherwise provided in the
corporation's charter or bylaws prior to the pertinent acquisition of shares, in
the event that such shares are accorded full voting rights by the stockholders
of the corporation and the acquiring stockholder acquires a majority of the
voting power of the corporation, all stockholders who did not vote in favor of
according voting rights to such acquired shares are entitled to dissenters'
rights.
Delaware does not have any statutory provision comparable to Florida's
control share acquisition statute.
Other Constituencies. The FBCA provides that in discharging their
fiduciary duties to the corporation, directors may consider the social,
economic, legal or other effects of corporate action on the employees, suppliers
and customers of the corporation or its subsidiaries and the communities in
which the corporation and its subsidiaries operate, in addition to the effect on
stockholders. Delaware does not have a comparable statutory provision.
Removal of Directors. The DGCL provides that, except with respect to
corporations with classified boards or cumulative voting, a director may be
removed, with or without cause, by the holders of the majority in voting power
of the shares entitled to vote at an election of directors. In the event the
corporation's board of directors is classified, stockholders may effect such
removal only for cause, unless the corporation's charter provides otherwise.
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<PAGE> 22
The FBCA provides that, except with respect to corporations with directors
elected by a voting group of stockholders or by cumulative voting, stockholders
may remove one or more directors with or without cause unless the corporation's
charter provides that directors may be removed only for cause. None of our
directors are elected by a voting group and there is no cumulative voting. The
surviving corporation's charter does not provide that a director may be removed
only for cause.
Committees of the Board of Directors. The FBCA and the DGCL both provide
that the board of directors of a corporation may delegate many of its duties to
one or more committees elected by a majority of the board. A Delaware
corporation may delegate to a committee of the board of directors, among other
things, the responsibility of nominating candidates for election to the office
of director, to fill vacancies on the board of directors, and to reduce earned
or capital surplus and authorize the acquisition of the corporation's own stock.
Moreover, if either the corporation's charter or bylaws or the resolution of the
board of directors creating the committee so permits, a committee of the board
of directors may declare dividends and authorize the issuance of stock.
The FBCA places more limitations on the types of activities that can be
delegated to committees of the board. Under Florida law, a committee of the
board of directors may not approve or recommend to stockholders actions or
proposals required to be approved by the stockholders, fill a vacancy on the
board, adopt, amend or repeal the bylaws, authorize the issuance of stock, or
authorize the reacquistion of the corporation's own stock.
Dissenters' Rights. Under the DGCL, dissenters' rights are afforded to
stockholders who follow prescribed statutory procedures in connection with a
merger or consolidation (subject to restrictions similar to those provided by
the FBCA, as described below). Under the DGCL, there are no appraisal rights in
connection with sales of substantially all the assets of a corporation,
reclassifications of stock or other amendments to the charter that adversely
affect a class of stock, unless specifically provided in the charter. Our
current charter does not provide for dissenters' rights in these circumstances.
Dissenters' rights do not apply to a stockholder of a Delaware corporation if
the stockholder's shares were (a) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Security Dealers, Inc. or (b) held of
record by more than 2,000 stockholders. Notwithstanding the foregoing sentence,
however, under the DGCL, a stockholder does have dissenters' rights if the
stockholder is required by the terms of the agreement of merger or consolidation
to accept anything for his shares other than (a) shares of stock of the
corporation surviving or resulting from the merger or consolidation, (b) shares
of stock of any other corporation which is so listed or designated or held of
record by more than 2,000 stockholders, (c) cash in lieu of fractional shares,
or (d) any combination of the foregoing.
Under the FBCA, dissenting stockholders who follow prescribed statutory
procedures are, in certain circumstances, entitled to appraisal rights in the
case of (a) a merger or consolidation; (b) a sale or exchange of all of
substantially all the assets of a corporation; (c) amendments to the charter
that adversely affect the rights or preferences of stockholders; (d)
consummation of a plan of share exchange if the stockholder is entitled to vote
on the plan; and (e) the approval of a control share acquisition pursuant to
Florida law. Such rights are not provided when (a) such stockholders are
stockholders of a corporation surviving a merger or consolidation where no vote
of the stockholders is required for the merger or consolidation; or (b) shares
of the corporation are listed on a national securities exchange, designated as a
national market security by the Nasdaq Stock Market or held of record by more
than 2,000 stockholders. Our shares of common stock are designated as a national
market security by the Nasdaq Stock Market.
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Derivative Actions. The DGCL provides that:
- a person may not bring a derivative action unless the person was a
stockholder of the corporation at the time of the challenged
transaction or unless the stock thereafter devolved on such person by
operation of law;
- a complaint in a derivative proceeding must set out the efforts made
by a person, if any, to obtain the desired action from the directors
or comparable authority and the reason for the failure to obtain such
action or for not making the effort; and
- a derivative proceeding may be settled or discontinued only with court
approval.
In addition, under the DGCL, a court may dismiss a derivative proceeding
if:
- the court finds that a committee of independent directors has
determined in good faith after conducting a reasonable investigation
that the maintenance of the action is not in the best interests of the
corporation; and
- the court determines in its own business judgment that the action
should be dismissed.
The FBCA provides for similar requirements, except that:
- a complaint in a derivative proceeding must be verified and must
allege that a demand was made to obtain action by the board of
directors and that the demand was refused or ignored;
- a court may dismiss a derivative proceeding if the court finds that
independent directors (or a committee of independent persons appointed
by such directors) have determined in good faith after conducting a
reasonable investigation that the maintenance of the action is not in
the best interests of the corporation; and
- if an action was brought without reasonable cause, the court may
require the plaintiff to pay the corporation's reasonable expenses.
Amendment to Charter. The FBCA and the DGCL generally provide that an
amendment to the charter must be approved by the Board of Directors and by the
corporation's stockholders. The DGCL provides that a vote to amend the
corporation's charter requires the approval of a majority of the outstanding
stock entitled to vote. Therefore, under the DGCL, an abstention or a non-vote
effectively counts as a vote against a charter amendment.
Under the FBCA, an amendment to a Florida corporation's charter generally
requires that the votes cast in favor of the amendment exceed the votes cast
against the amendment unless the FBCA, a Florida corporation's charter or the
corporation's board of directors requires a greater vote.
Amendments to Bylaws. The DGCL provides that the stockholders and, if
provided in the charter, the Board of Directors, are entitled to amend the
bylaws. The FBCA provides that the stockholders, as well as the directors, may
amend the bylaws, unless such power is reserved to the stockholders by the
charter or by specific action of the stockholders. The surviving corporation's
charter will permit the Board of Directors to make or amend the bylaws, subject
to the stockholders' right to repeal such by-laws or amendments thereto, as is
permitted under our current charter.
Liability of Directors. The DGCL permits a Delaware corporation to include
in its charter a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for
breaches of fiduciary duty, including conduct that could be characterized as
negligence or gross negligence. However, the DGCL provides that the charter can
not eliminate or limit liability for (a) breaches of the director's duty of
loyalty, (b) acts or omissions
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not in good faith or involving intentional misconduct or knowing violation of
the law, (c) an unlawful distribution, or (d) the receipt of improper personal
benefits. The DGCL further provides that no such provision will eliminate or
limit the liability of a director for any act or omission occurring prior to the
date when such provision becomes effective. Our current charter includes a
provision eliminating director liability for monetary damages for breaches of
fiduciary duty to the maximum extent permitted by the DGCL.
Under the FBCA, a director is not personally liable for monetary damages to
the corporation or any other person for any statement, vote, decision or failure
to act, regarding corporate management or policy, unless the director breached
or failed to perform his duties as a director and such breach or failure
constitutes (a) a violation of criminal law unless the director had reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe
his conduct was unlawful, (b) a transaction from which the director derived an
improper personal benefit, (c) a circumstance resulting in an unlawful
distribution, (d) in a proceeding by or in the right of the corporation to
procure a judgment in its favor or by or in the right of a stockholder,
conscious disregard for the best interests of the corporation or willful
misconduct, or (e) in a proceeding by or in the right of one other than the
corporation or a stockholder, recklessness or an act or omission committed in
bad faith or with malicious purpose or in a manner exhibiting wanton and willful
disregard of human rights, safety, or property.
Indemnification. Under both the FBCA and the DGCL, a corporation may
generally indemnify its officers, directors, employees and agents against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement of any proceedings (other than derivative actions), if they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in derivative actions, except that
indemnification may be made only for (a) expenses (including attorneys' fees)
and certain amounts paid in settlement and (b) in the event the person seeking
indemnification has been adjudicated liable, amounts deemed proper, fair and
reasonable by the appropriate court upon application thereto. The FBCA and the
DGCL each provide that to the extent that such persons have been successful in
defense of any proceeding, they must be indemnified by the corporation against
expenses actually and reasonably incurred in connection therewith. The FBCA also
provides that, unless a corporation's charter provides otherwise, if a
corporation does not so indemnify such persons, they may seek, and a court may
order, indemnification under certain circumstances even if the board of
directors or stockholders of the corporation have determined that the persons
are not entitled to indemnification.
Our current bylaws and the bylaws of the surviving corporation each provide
that directors and officers and former directors and officers will be
indemnified to the fullest extent permitted by the DGCL or the FBCA, as the case
may be.
Stockholder Inspection of Books and Records. The DGCL permits any
stockholder the right, during usual business hours, to inspect and copy the
corporation's stock ledger, stockholders list and other books and records for
any proper purpose upon written demand under oath stating the purpose thereof.
Under the FBCA a stockholder is entitled to inspect and copy the charter,
bylaws, certain board and stockholder resolutions, certain written
communications to stockholders, a list of the names and business addresses of
the corporation's directors and officers, and the corporation's most recent
annual report during regular business hours only if the stockholder gives at
least five business days' prior written notice to the corporation. In addition,
a stockholder of a Florida corporation is entitled to inspect and copy other
books and records of the corporation during regular business hours only if the
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stockholder gives at least five business days' prior written notice to the
corporation and (a) the stockholder's demand is made in good faith and for a
proper purpose, (b) the demand describes with particularity its purpose and the
records to be inspected or copied and (c) the requested records are directly
connected with such purpose. The FBCA also provides that a corporation may deny
any demand for inspection if the demand was made for an improper purpose or if
the demanding stockholder has, within two years preceding such demand, sold or
offered for sale any list of stockholders of the corporation or any other
corporation, has aided or abetted any person in procuring a list of stockholders
for such purpose or has improperly used any information secured through any
prior examination of the records of the corporation or any other corporation.
Treasury Stock. A Delaware corporation may reacquire its own issued and
outstanding capital stock, and such capital stock is deemed treasury stock that
is issued but not outstanding. A Florida corporation may also reacquire its own
issued and outstanding capital stock. Under the FBCA, however, all capital stock
reacquired by a Florida corporation is automatically returned to the status of
authorized but not issued or outstanding, and is not deemed treasury stock.
POSSIBLE DISADVANTAGES OF A CHANGE IN DOMICILE
You should be aware that Florida corporation law is not as well developed
as Delaware corporation law. The State of Delaware has long been the leader in
adopting, construing and implementing comprehensive, flexible corporation laws
that are conducive to the operational needs of corporations domiciled in that
state. The corporation law of Delaware also is widely regarded as the most
extensive and well-defined body of corporate law in the United States. Both the
legislature and the courts of Delaware have demonstrated an ability and a
willingness to act quickly and effectively to meet changing business needs. The
Delaware judiciary has acquired considerable expertise in dealing with complex
corporate issues and has repeatedly shown its willingness to accelerate the
resolution of complex corporate legal issues within the limited time available
to meet the needs of parties engaged in corporate litigation. It is anticipated
that the DGCL will continue to be interpreted and construed in significant court
decisions, thereby lending predictability to corporate legal affairs.
Many of the provisions of the FBCA have not yet received as extensive
scrutiny and interpretation as the DGCL. However, Florida courts often rely on
Delaware decisions to establish their own corporate doctrines, although Delaware
decisions are not binding on Florida courts.
TAX CONSEQUENCES OF THE MERGER
The merger and resulting reincorporation of Gerald Stevens, Inc. from
Delaware to Florida will constitute a tax-free reorganization within the meaning
of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended.
Accordingly, for federal income tax purposes, no gain or loss will be recognized
by stockholders upon the conversion of our common stock into the surviving
corporation's common stock. Each stockholder whose shares are converted into the
surviving corporation's common stock will have the same basis in the common
stock of the surviving corporation as such stockholder had in the common stock
of Gerald Stevens, Inc. held immediately prior to the effective date of the
merger. The stockholder's holding period in the surviving corporation's common
stock will include the period during which the corresponding shares of our
common stock were held, provided such corresponding shares of our common stock
were held as a capital asset on the effective date of the merger.
We will recognize no gain or loss as a result of the merger and
reincorporation, and the surviving corporation generally will succeed, without
adjustment, to the tax attributes of Gerald Stevens, Inc. Because we are
currently based in Florida, we are already qualified to transact business in
Florida and we pay Florida corporate income tax. Changing our state of
incorporation will not affect the amount
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of corporate income and other taxes payable, other than eliminating liability
for the Delaware franchise tax.
PLEASE NOTE: No information is provided in this proxy statement regarding
the tax consequences, if any, under applicable state, local or foreign laws, and
each stockholder is advised to consult his or her personal attorney or tax
advisor as to the federal, state, local or foreign tax consequences of the
proposed reincorporation in view of the stockholder's individual circumstances.
STOCKHOLDER APPRAISAL RIGHTS
Stockholders will not be entitled to appraisal rights in connection with
the merger.
EFFECTIVE DATE
The merger will become effective as soon as practicable after stockholder
approval is obtained and all other conditions to the merger are satisfied. The
merger may be abandoned at any time prior to its effectiveness if the Board of
Directors determines, in its discretion, that consummation of the merger is no
longer advisable.
ITEM 3. 2000 STOCK OPTION PLAN.
Our Board of Directors adopted the Gerald Stevens, Inc. 2000 Stock Option
Plan effective January 1, 2000, subject to stockholder approval at the Annual
Meeting, to provide for the grant of options to purchase our common stock to our
employees, consultants and non-employee directors. On December 31, 1999, we had
approximately 5,400 employees, consultants and non-employee directors.
We believe that stock options are important to attract, and to encourage
the continued employment and service of, employees, consultants and non-employee
directors. Stock options also align the interests of the option holders with
those of our stockholders.
We have summarized the principal provisions of the plan below. The summary
may not be complete and is qualified in its entirety by the terms of the plan, a
copy of which is attached as Appendix C.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE 2000 STOCK
OPTION PLAN.
DESCRIPTION OF THE PLAN
The Plan provides that options may be granted to any of our employees,
consultants or non-employee directors. A total of 3,000,000 shares of common
stock will be reserved for issuance under the Plan. Based on the closing price
of $8.125 on the Nasdaq Stock Market on December 28, 1999, the aggregate value
of the 3,000,000 shares reserved for issuance under the Plan is $24,375,000. The
Plan will terminate 10 years after the Effective Date, and no options may be
granted under the Plan thereafter.
The Compensation Committee - or if no Compensation Committee exists, our
Board of Directors - will administer the Plan. The Compensation Committee
selects the employees, consultants and non-employee directors to whom options
will be granted. We may grant options to purchase no more than 150,000 shares of
our common stock to any person in any calendar year.
The exercise price of the options granted under the Plan may not be less
than 100% of the fair market value of our common stock on the date of grant (or
110% in the case of an incentive stock option granted to a beneficial owner of
more than 10% of our outstanding common stock). The
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maximum option term is 10 years (or five years in the case of an incentive stock
option granted to a beneficial owner of more than 10% of our outstanding common
stock). Options vest and become exercisable to the extent of 25% of the shares
covered thereby on the first four anniversaries of the date of grant, except as
otherwise determined by the Compensation Committee and provided in the
particular option agreement. Under the Plan, the Compensation Committee has the
discretion to accelerate the vesting of, and ability to exercise, options.
If an option is exercised before six months have elapsed following the
later of (i) the date of grant of the option or (ii) the date of stockholder
approval of the Plan, and a subsequent sale of the acquired stock would subject
the person exercising the option to liability under Section 16 of the Securities
Exchange Act of 1934, then the certificate or certificates evidencing the
acquired stock shall bear a legend restricting the transfer of the stock until
the expiration of the six-month period described above.
Generally, during an optionee's lifetime, only the optionee (or guardian or
legal representative if the optionee is incapacitated) may exercise an option,
except that, upon approval by the Compensation Committee, nonqualified options
may be transferred to certain family members or charitable organizations or to
trusts for the benefit of such family members or charitable organizations.
Incentive stock options are non-transferable except upon death.
Payment of an option's exercise price may generally be made in cash or in
shares of our common stock or by delivery of a promissory note, and such
payments may be accomplished through "cashless" exercise features involving a
licensed stock broker.
If an employee's employment with us terminates by reason of death or
permanent and total disability, options held by the employee, to the extent
vested and exercisable on the date of termination, may be exercised during the
12 months after the date of termination (but not later than the date the option
would otherwise expire). If an employee's employment with us terminates for
cause, options held by the employee shall expire and terminate on the date of
termination of employment, except as otherwise determined by the Compensation
Committee and provided in the particular option agreement. If an employee's
employment with us terminates for any other reason, options held by such
employee, to the extent vested and exercisable on the date of termination, may
be exercised during the 90 days after the date of termination (but not later
than the date the option would otherwise expire).
If our outstanding shares of common stock are increased or decreased or
changed into or exchanged for a different number or kind of shares or
securities, by reason of merger, consolidation, reorganization,
recapitalization, reclassification, stock split, combination of shares, exchange
of shares, stock dividend or other distribution payable in capital stock, or
other increase or decrease in such shares without receipt of consideration by
Gerald Stevens, an appropriate and proportionate adjustment will be made in the
number and kinds of shares subject to the Plan, and in the number, kinds and
exercise price of shares subject to outstanding options granted under the Plan.
If we dissolve or liquidate, the Plan and all outstanding options will
terminate and all outstanding options will be exercisable in full immediately
prior to the occurrence of such event and during such reasonable period as the
Board of Directors in its discretion shall determine.
If we reorganize, merge or consolidate with another entity and we are not
the surviving corporation, or if we sell all or substantially all of our assets
to another corporation, or if the Board of Directors approves any other
transaction that results in any person or entity owning more than 50% of the
total combined voting power of all classes of our stock, Gerald Stevens and the
acquiring or surviving entity shall provide for (1) the continuation of the Plan
and the assumption of the options granted under the Plan, or (2) substitution
for such options of new options covering the stock of a
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successor entity, or a parent or subsidiary thereof, with appropriate
adjustments to the number and kind of shares and exercise prices.
The Board of Directors may amend the Plan. However, our stockholders must
approve any amendment that would (i) change the requirements as to eligibility
to receive incentive stock options; (ii) increase the maximum number of shares
in the aggregate for which incentive stock options may be granted (except for
adjustments upon changes in capitalization); or (iii) otherwise cause the Plan
to fail to satisfy the requirements of Section 162(m) of the Internal Revenue
Code relating to limitations on the deduction of amounts not constituting
qualified performance-related compensation.
Our Board of Directors may terminate or suspend the Plan at any time.
Unless previously terminated, the Plan will terminate automatically on January
1, 2010, the tenth anniversary of the date of adoption of the Plan by the Board
of Directors. No termination, suspension or amendment of the Plan may, without
the consent of the person to whom an option has been granted, adversely affect
the rights of the holder of the option.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
General. Below, we have summarized the principal federal income tax
consequences of stock option grants under the Plan. Recipients of options under
the Plan should consult with their personal tax advisors concerning option
grants and transactions in stock acquired pursuant to the Plan.
The grant of an option is not a taxable event for the optionee or Gerald
Stevens.
Non-Qualified Options. Non-qualified options are options that do not
qualify for the U.S. tax rules applicable to incentive stock options. Upon
exercising a non-qualified option, an optionee will recognize ordinary income in
an amount equal to the difference between the exercise price and the fair market
value of the common stock on the date of exercise. If we comply with applicable
reporting requirements, we will be entitled to a business expense deduction in
the same amount. The U.S. tax laws impose a limitation of $1,000,000 on the
deduction of annual compensation paid to each of the executive officers named in
our Summary Compensation Table. This limitation does not apply to "qualified
performance-related compensation," as defined by the U.S. tax laws. We believe
the non-qualified options under the Plan satisfy the requirements to be
"qualified performance-related compensation," and we believe we would be
entitled to deduct the full amount of the business expense available upon
exercise of the options. Generally, upon a sale of shares acquired pursuant to
the exercise of a non-qualified option, the optionee will recognize a capital
gain or loss equal to the difference between (1) the amount realized on the
disposition and (2) the amount paid for the shares plus the amount treated as
ordinary income at the time the option was exercised.
If the optionee surrenders shares of common stock in payment of part or all
of the exercise price for non-qualified options, no gain or loss will be
recognized with respect to the shares surrendered and the optionee will be
treated as receiving an equivalent number of shares pursuant to the exercise of
the option in a non-taxable exchange. The basis of the shares surrendered will
be treated as the substituted tax basis for an equivalent number of option
shares received. However, the fair market value of any shares received in excess
of the number of shares surrendered will be taxed as ordinary income.
Incentive Stock Options. Upon exercising an incentive stock option, an
optionee will not recognize taxable income and any gain realized upon a
disposition of shares received pursuant to the exercise of an incentive stock
option will be taxed as long-term capital gain if the optionee holds the shares
for at least two years after the date of grant and at least one year after the
date of exercise. However, the excess of the fair market value of the shares
subject to an incentive stock option on the exercise date over the option
exercise price will be included in the optionee's alternative minimum
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taxable income in the year of exercise for purposes of the alternative minimum
tax. An optionee may be entitled to a credit against regular tax liability in
future years for alternative minimum taxes paid with respect to the exercise of
incentive stock options. We will not be entitled to any business expense
deduction with respect to the grant or exercise of an incentive stock option,
except as discussed below.
For the exercise of an incentive stock option to qualify for the foregoing
tax treatment, the optionee generally must be our employee from the date the
option is granted through a date within three months before the date of
exercise. In the case of an optionee who is disabled, this three-month period is
extended to one year. In the case of an employee who dies, the three-month
period and the holding period for shares received pursuant to the exercise of
the option are waived.
If all of the foregoing requirements for incentive stock option treatment
are met, but the holding period rules are not met, the optionee will recognize
ordinary income upon the disposition of the shares in an amount equal to the
excess of the fair market value of the shares at the time the option was
exercised over the option exercise price. The balance of the realized gain, if
any, will be long-term or short-term capital gain, depending upon whether or not
the shares were sold more than one year after the option was exercised. If the
optionee sells the shares prior to the satisfaction of the holding period rules
but at a price below the fair market value of the shares at the time the option
was exercised (or other applicable measurement date), the amount of ordinary
income (and the amount included in alternative minimum taxable income, if the
sale occurs during the same year as the option was exercised) will be limited to
the excess of the amount realized on the sale over the option exercise price. If
we comply with applicable reporting requirements, we will be allowed a business
expense deduction to the extent the optionee recognizes ordinary income.
If an optionee exercises an incentive stock option by tendering shares of
common stock with a fair market value equal to part or all of the option
exercise price, the exchange of shares generally will be treated as a
non-taxable exchange (except that this treatment would not apply if the optionee
had acquired the shares being transferred pursuant to the exercise of an
incentive stock option and had not satisfied the holding period requirements
summarized above). To the extent the exercise is treated as a tax-free exchange,
the optionee would have no taxable income from the exchange and exercise (other
than alternative minimum taxable income as discussed above) and the tax basis of
the shares exchanged would be treated as the substituted basis for the shares
received. If the optionee used shares received pursuant to the exercise of an
incentive stock option (or another statutory option) as to which the optionee
had not satisfied the applicable holding period requirement, the exchange would
be treated as a taxable disqualifying disposition of the exchanged shares, with
the result that the excess of the fair market value of the shares tendered over
the optionee's basis in the shares would be taxable.
Options Granted Under the Plan. It is not possible to state who will be
granted stock options under the Plan, or the value or number of shares subject
to any particular option, since these matters will be determined by the
Compensation Committee in the future. However, we anticipate that we will make
future grants under the 2000 Stock Option Plan on a basis generally comparable
to grants made by Gerald Stevens Retail in January 1999. At that time, Gerald
Stevens Retail granted options covering a total of 557,627 shares of its common
stock (including grants of options covering 0 shares to Mr. Geddis, 67,500
shares to Mr. Phillips, 27,000 shares to Mr. Detz and 13,500 shares to Mr.
Nevill). On December 6, 1999, five executive officers, 19 other officers and 300
other current and former employees held options under our stock option plans;
however, assuming stockholder approval of the Plan, no shares will be available
for grants under any of our plans other than the 2000 Stock Option Plan.
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Stockholder Approval. The Gerald Stevens, Inc. 2000 Stock Option Plan is
being submitted for stockholder approval to reduce the effect of provisions of
U.S. tax laws that may limit our ability to deduct compensation in excess of $1
million per year paid to any executive officer named in the Summary Compensation
Table. The limitation does not apply to "qualified performance-related
compensation," as discussed above. If our stockholders approve the Plan, we
believe the business expense normally available upon exercise of options would
be "qualified performance-related compensation" and therefore would not be
subject to the limitation. If the Plan is not approved by our stockholders, we
will reconsider the alternatives available with respect to stock options and
other forms of long-term, performance-based compensation.
ITEM 4. SELECTION OF INDEPENDENT ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors has
selected Arthur Andersen LLP to be the independent accountants of Gerald Stevens
and its consolidated subsidiaries for our 2000 fiscal year. Although the
submission of this matter for stockholder ratification at the Annual Meeting is
not required by law or our bylaws, the Board is nevertheless doing so to
determine the stockholders' views. If the selection is not ratified, the Board
will reconsider its selection of independent accountants.
Arthur Andersen LLP has acted as independent accountants of Gerald Stevens
and its consolidated subsidiaries since May 13, 1999. In addition, during our
1999 fiscal year Arthur Andersen LLP performed special audits and reviews in
connection with our merger with Gerald Stevens Retail and our public offering of
common stock in July 1999, consulted with Gerald Stevens on various matters and
performed other services for us for fees and expenses totaling approximately
$767,000. A representative of Arthur Andersen LLP will attend the Annual
Meeting, will be available to answer questions and will have an opportunity to
make a statement if he wishes to do so. Members of the Audit Committee are also
expected to attend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF ARTHUR ANDERSEN LLP.
OTHER MATTERS
We do not know of any other business that will be presented for
consideration at the Annual Meeting. However, if any other business should come
before the Annual Meeting, the persons named in the enclosed proxy (or their
substitutes) will have discretion to act in accordance with their best judgment.
PROPOSALS FOR 2001 ANNUAL MEETING
Any stockholder wishing to submit a proposal for inclusion in the Proxy
Statement for the 2001 Annual Meeting, pursuant to the stockholder proposal
rules of the SEC, should submit the proposal in writing to Secretary, Gerald
Stevens, Inc., 301 East Las Olas Boulevard, Suite 300, Fort Lauderdale, Florida
33301. We must receive a proposal prior to August 31, 2000 in order to consider
it for inclusion in the 2001 Proxy Statement.
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APPENDIX A
FORM OF PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER, dated January 1, 2000 ("Agreement"), is
entered into between GERALD STEVENS REINCORPORATION, INC., a Florida corporation
("GSRI"), and GERALD STEVENS, INC., a Delaware corporation ("Gerald Stevens").
RECITALS
A. Gerald Stevens has an aggregate authorized capital of 250,600,000
shares, consisting of 250 million shares of common stock, par value $0.01 per
share ("Gerald Stevens Common Stock"), and 600,000 shares of preferred stock,
par value $10.00 per share ("Gerald Stevens Preferred Stock"). On January 1,
2000, there were 45,134,940 shares of Gerald Stevens Common Stock and no shares
of Gerald Stevens Preferred Stock issued and outstanding.
B. GSRI has an aggregate authorized capital stock of 250,600,000 shares,
consisting of 250 million shares of Common Stock, par value $0.10 per share
("GSRI Common Stock"), and 600,000 shares of preferred stock, par value $10.00
per share ("GSRI Preferred Stock"). On the date hereof, there were 100 shares of
GSRI Common Stock and no shares of GSRI Preferred Stock issued and outstanding.
C. The respective Boards of Directors of GSRI and Gerald Stevens believe
that the best interests of GSRI and Gerald Stevens and their respective
stockholders will be served by the merger of Gerald Stevens with GSRI under and
pursuant to the provisions of this Agreement and the Delaware General
Corporation Law and the Florida Business Corporation Act.
AGREEMENT
In consideration of the Recitals and of the mutual agreements contained in
this Agreement, the parties hereto agree as set forth below.
1. Merger. Gerald Stevens shall be merged with and into GSRI ("Merger").
2. Effective Date. The Merger shall become effective immediately upon the
later of the filing of this Agreement or a certificate of merger with the
Secretary of State of Delaware in accordance with the Delaware General
Corporation Law and the filing of articles of merger with the Secretary of State
of Florida in accordance with the Florida Business Corporation Act. The time of
such effectiveness is hereinafter called the "Effective Date."
3. Surviving Corporation. GSRI shall be the surviving corporation of the
Merger and shall continue to be governed by the laws of the State of Florida. On
the Effective Date, the separate corporate existence of Gerald Stevens shall
cease.
4. Name Of Surviving Corporation. On the Effective Date, the Articles of
Incorporation of GSRI shall be amended to change the name of GSRI to "Gerald
Stevens, Inc."
5. Articles Of Incorporation. Except as provided in Section 4, the Articles
of Incorporation of GSRI as it exists on the Effective Date shall be the
Articles of Incorporation of GSRI following the Effective Date, unless and until
the same shall thereafter be amended or repealed in accordance with the laws of
the State of Florida.
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6. Bylaws. The Bylaws of GSRI as they exist on the Effective Date shall be
the Bylaws of GSRI following the Effective Date, unless and until the same shall
be amended or repealed in accordance with the provisions thereof and the laws of
the State of Florida.
7. Board of Directors and Officers. The members of the Board of Directors
and the officers of Gerald Stevens immediately prior to the Effective Date shall
be the members of the Board of Directors and the officers, respectively, of GSRI
following the Effective Date, and such persons shall serve in such offices for
the terms provided by law or in the Bylaws, or until their respective successors
are elected and qualified.
8. Retirement of Outstanding GSRI Stock. Forthwith upon the Effective Date,
each of the 100 shares of the GSRI Common Stock presently issued and outstanding
shall be retired, and no shares of GSRI Common Stock or other securities of GSRI
shall be issued in respect thereof.
9. Conversion of Outstanding Gerald Stevens Stock. Forthwith upon the
Effective Date, each issued and outstanding share of Gerald Stevens Common Stock
and all rights in respect thereof shall be converted into one fully paid and
nonassessable share of GSRI Common Stock, and each certificate representing
shares of Gerald Stevens Common Stock shall for all purposes be deemed to
evidence the ownership of the same number of shares of GSRI Common Stock as are
set forth in such certificate. After the Effective Date, each holder of an
outstanding certificate representing shares of Gerald Stevens Common Stock may,
at such shareholder's option, surrender the same to GSRI's registrar and
transfer agent for cancellation, and each such holder shall be entitled to
receive in exchange therefor a certificate(s) evidencing the ownership of the
same number of shares of GSRI Common Stock as are represented by the Gerald
Stevens certificate(s) surrendered to GSRI's registrar and transfer agent.
10. Stock Options, Warrants and Convertible Debt. Forthwith upon the
Effective Date, each stock option, stock warrant, convertible debt instrument
and other right to subscribe for or purchase shares of Gerald Stevens Common
Stock shall be converted into a stock option, stock warrant, convertible debt
instrument or other right to subscribe for or purchase the same number of shares
of GSRI Common Stock, and each certificate, agreement, note or other document
representing such stock option, stock warrant, convertible debt instrument or
other right to subscribe for or purchase shares of Gerald Stevens Common Stock
shall for all purposes be deemed to evidence the ownership of a stock option,
stock warrant, convertible debt instrument or other right to subscribe for or
purchase shares of GSRI Common Stock.
11. Rights and Liabilities of GSRI. On and after the Effective Date, and
all in the manner of and as more fully set forth in Section 607.1106 of the
Florida Business Corporation Act and Section 259 of the Delaware General
Corporation Law, the title to all real estate and other property, or any
interest therein, owned by each of Gerald Stevens and GSRI shall be vested in
GSRI without reversion or impairment; GSRI shall succeed to and possess, without
further act or deed, all estates, rights, privileges, powers, and franchises,
both public and private, and all of the property, real, personal and mixed, of
each of Gerald Stevens and GSRI without reversion or impairment; GSRI shall
thenceforth be responsible and liable for all the liabilities and obligations of
each of Gerald Stevens and GSRI; any claim existing or action or proceeding
pending by or against Gerald Stevens or GSRI may be continued as if the Merger
did not occur or GSRI may be substituted for Gerald Stevens in the proceeding;
neither the rights of creditors nor any liens upon the property of Gerald
Stevens or GSRI shall be impaired by the Merger; and GSRI shall indemnify and
hold harmless the officers and directors of each of the parties hereto against
all such debts, liabilities and duties and against all claims and demands
arising out of the Merger.
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12. Termination. This Agreement may be terminated and abandoned by action
of the respective Boards of Directors of Gerald Stevens and GSRI at any time
prior to the Effective Date, whether before or after approval by the
stockholders of either or both of the parties hereto.
13. Amendment. The Boards of Directors of the parties hereto may amend this
Agreement at any time prior to the Effective Date; provided that an amendment
made subsequent to the approval of this Agreement by the stockholders of either
of the parties hereto shall not: (a) change the amount or kind of shares,
securities, cash, property or rights to be received in exchange for or on
conversion of all or any of the shares of the parties hereto, (b) change any
term of the Articles of Incorporation of GSRI, or (c) change any other terms or
conditions of this Agreement if such change would adversely affect the holders
of any capital stock of either party hereto.
14. Registered Office. The registered office of GSRI in the State of
Florida is located at 1201 Hays Street, Tallahassee, Florida 32301, and
Corporation Services Company is the registered agent of GSRI at such address.
15. Inspection of Agreement. Executed copies of this Agreement will be on
file at the principal place of business of GSRI at 301 East Las Olas Boulevard,
Suite 300, Fort Lauderdale, Florida 33301. A copy of this Agreement shall be
furnished by GSRI, on request and without cost, to any stockholder of either
Gerald Stevens or GSRI.
16. Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Florida.
17. Service Of Process. On and after the Effective Date, GSRI agrees that
it may be served with process in Delaware in any proceeding for enforcement of
any obligation of Gerald Stevens or GSRI arising from the Merger.
18. Designation of Delaware Secretary of State as Agent for Service of
Process. On and after the Effective Date, GSRI irrevocably appoints the
Secretary of State of Delaware as its agent to accept service of process in any
suit or other proceeding to enforce the rights of any stockholders of Gerald
Stevens or GSRI arising from the Merger. The Delaware Secretary of State is
requested to mail a copy of any such process to GSRI at 301 East Las Olas
Boulevard, Suite 300, Fort Lauderdale, Florida 33301, Attention: General
Counsel.
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IN WITNESS WHEREOF, each of the parties hereto, pursuant to authority duly
granted by their respective Board of Directors, has caused this Plan and
Agreement of Merger to be executed, respectively, by its President and attested
by its Secretary.
<TABLE>
<S> <C>
GERALD STEVENS REINCORPORATION, INC.,
ATTEST: a Florida Corporation
By:
- ------------------------------ ------------------------------
Secretary Its: President
GERALD STEVENS, INC.,
ATTEST: a Delaware Corporation
By:
- ------------------------------ ------------------------------
Secretary Its: President
</TABLE>
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<PAGE> 35
APPENDIX B
CHARTER OF FLORIDA SUBSIDIARY
ARTICLES OF INCORPORATION
OF
GERALD STEVENS REINCORPORATION, INC.
---------------------
The undersigned does hereby act as incorporator in adopting the following
Articles of Incorporation for the purpose of organizing a corporation for
profit, pursuant to the provisions of the Florida Business Corporation Act.
FIRST: The name of the corporation is GERALD STEVENS REINCORPORATION, INC.
SECOND: The street address of the principal office of the Corporation is
301 East Las Olas Boulevard, Suite 300, Fort Lauderdale, Florida 33301.
THIRD: The total number of shares that the Corporation is authorized to
issue is Two Hundred Fifty Million (250,000,000) shares of Common Stock, par
value $0.01 per share, and Six Hundred Thousand (600,000) shares of Preferred
Stock, par value $10.00 per share.
The Preferred Stock shall be issued in one or more series. The Board of
Directors is hereby expressly authorized to issue the shares of Preferred Stock
in such series and to fix from time to time before issuance the number of shares
to be included in any series and the designation, relative rights, preferences
and limitations of all shares of such series. The authority of the Board of
Directors with respect to each series shall include, without limitation thereto,
the determination of any or all of the following and the shares of each series
may vary from the shares of any other series in the following respects:
(a) The number of shares constituting such series and the designation
thereof to distinguish the shares of such series from the shares of all other
series;
(b) The annual dividend rate on the shares of that series and whether such
dividends shall be cumulative and, if cumulative, the date from which dividends
shall accumulate;
(c) The redemption price or prices for the particular series, if
redeemable, and the terms and conditions of such redemption;
(d) The preference, if any, of shares of such series in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation;
(e) The voting rights, if any, in addition to the voting rights prescribed
by law and the terms of exercise of such voting rights;
(f) The right, if any, of shares of such series to be converted into shares
of any other series or class and the terms and conditions of such conversion;
and
(g) Any other relative rights, preferences and limitations of that series.
FOURTH: The amount of the authorized stock of the Corporation of any class
or classes may be increased or decreased by the affirmative vote of the holders
of a majority of the stock of the Corporation entitled to vote.
FIFTH: The street address of the initial registered office of the
Corporation in the State of Florida is c/o Corporation Service Company, 1201
Hays Street, Tallahassee, Florida 32301.
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The name of the initial registered agent of the Corporation at the said
registered office is Corporation Service Company.
The written acceptance of the said initial registered agent, as required by
the provisions of Section 607.0501(3) of the Florida Business Corporation Act,
is set forth following the signature of the incorporator and is made a part of
these Articles of Incorporation.
SIXTH: The name and the address of the incorporator are:
<TABLE>
<CAPTION>
NAME ADDRESS
- ---- -------
<S> <C>
Jeffrey M. Mattson 301 East Las Olas Boulevard, Suite 300
Fort Lauderdale, Florida 33301
</TABLE>
SEVENTH: The purposes for which the Corporation is organized are as
follows: To engage in any lawful business for which corporations may be
organized under the Florida Business Corporation Act.
EIGHTH: The duration of the Corporation shall be perpetual.
NINTH: No contract or transaction between the Corporation and one or more
of its directors or officers or between the Corporation and any other
corporation, partnership, association or other organization in which one or more
of its directors or officers are directors or officers or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the directors or officers are present at or participate in the meeting of the
board or committee thereof which authorizes the contract or transaction, or
solely because the directors or officers or their votes are counted for such
purpose.
TENTH: In furtherance and not in limitation of the power conferred upon
the Board of Directors by law, the Board of Directors shall have power to make,
adopt, alter, amend and repeal from time to time Bylaws of the Corporation,
subject to the right of the stockholders to alter and repeal Bylaws made by the
Board of Directors.
ELEVENTH: To the maximum extent permitted by the Florida Business
Corporation Act as the same exists or may hereafter be amended, no director of
this Corporation shall be liable to the Corporation or its shareholders for
monetary damages arising by reason of actions or omissions constituting a breach
of fiduciary duty as a director.
TWELFTH: The Corporation expressly elects not to be governed by Section
607.0901 of the Florida Business Corporation Act.
THIRTEENTH: The Corporation expressly elects not to be governed by Section
607.0902 of the Florida Business Corporation Act.
Signed on December 29, 1999.
/s/ Jeffrey M. Mattson
--------------------------------------
Jeffrey M. Mattson, Incorporator
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<PAGE> 37
Having been named as registered agent and to accept service of process for the
above-named corporation at the place designated in these Articles of
Incorporation, I hereby accept the appointment as registered agent and agree to
act in this capacity. I further agree to comply with the provisions of all
statutes relating to the proper and complete performance of my duties, and I am
familiar with and accept the obligations of my position as registered agent.
CORPORATION SERVICE COMPANY
By:
Date:
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<PAGE> 38
APPENDIX C
GERALD STEVENS, INC.
2000 STOCK OPTION PLAN
Gerald Stevens, Inc. (the "Company") hereby adopts this Gerald Stevens,
Inc. 2000 Stock Option Plan (the "Plan"), the terms of which shall be as
follows:
1. PURPOSE
The Plan is intended to advance the interests of the Company by providing
eligible individuals (as designated pursuant to Section 4 below) with an
opportunity to acquire or increase a proprietary interest in the Company, which
thereby will create a stronger incentive to expend maximum effort for the growth
and success of the Company and its subsidiaries, and will encourage such
eligible individuals to remain in the employ of the Company or one or more of
its subsidiaries. Each stock option granted under the Plan (an "Option") shall
be an option that is not intended to constitute an "incentive stock option"
("Incentive Stock Option") within the meaning of Section 422 of the Internal
Revenue Code of 1986, or the corresponding provision of any subsequently enacted
tax statute, as amended from time to time (the "Code"), unless such Option is
granted to an employee of the Company or a "subsidiary corporation" (a
"Subsidiary") thereof within the meaning of Section 424(f) of the Code and is
specifically designated at the time of grant as being an Incentive Stock Option.
Any Option so designated shall constitute an Incentive Stock Option only to the
extent that it does not exceed the limitations set forth in Section 7 below.
2. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board of Directors of the
Company (the "Board"), which shall have the full power and authority to take all
actions, and to make all determinations required or provided for under the Plan
or any Option granted or Option Agreement (as defined in Section 8 below)
entered into under the Plan and all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan deemed by the
Board to be necessary or appropriate to the administration of the Plan or any
Option granted or Option Agreement entered into hereunder. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting at which any issue relating to the Plan is
properly raised for consideration or without a meeting by written consent of the
Board executed in accordance with the Company's Certificate of Incorporation and
Bylaws, and with applicable law. The interpretation and construction by the
Board of any provision of the Plan or of any Option granted or Option Agreement
entered into hereunder shall be final and conclusive.
(b) Committee. The Board may from time to time appoint a Stock Option
Committee or a Compensation Committee (the "Committee") consisting of not less
than two members of the Board, none of whom shall be an officer or other
salaried employee of the Company or any Subsidiary, and each of whom shall
qualify in all respects as a "non-employee director" as defined in Rule 16b-3 of
the Securities and Exchange Commission under the Securities Exchange Act of 1934
(the "Exchange Act") and an "outside director" for purposes of Section 162(m) of
the Code. The Board, in its sole discretion, may provide that the role of the
Committee shall be limited to making recommendations to the Board concerning any
determinations to be made and actions to be taken by the Board pursuant to or
with respect to the Plan, or the Board may delegate to the Committee such powers
and authorities related to the administration of the Plan, as set forth in
Section 2(a) above, as the Board shall determine, consistent with the
Certificate of Incorporation and Bylaws of the Company and applicable law. The
Board may remove members, add members, and fill vacancies on the Committee from
time to time, all in accordance with the Company's Certificate of Incorporation
and Bylaws, and with applicable
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law. The majority vote of the Committee, or acts reduced to or approved in
writing by a majority of the members of the Committee, shall be the valid acts
of the Committee.
(c) No Liability. No member of the Board or of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted or Option Agreement entered into hereunder.
(d) Delegation to the Committee. In the event that the Plan or any Option
granted or Option Agreement entered into hereunder provides for any action to be
taken by or determination to be made by the Board, such action may be taken by
or such determination may be made by the Committee if the power and authority to
do so has been delegated to the Committee by the Board as provided for in
Section 2(b) above. Unless otherwise expressly determined by the Board, any such
action or determination by the Committee shall be final and conclusive.
3. STOCK
The stock that may be issued pursuant to Options granted under the Plan
shall be shares of common stock, $.01 par value, of the Company (the "Stock"),
which shares may be treasury shares or authorized but unissued shares. The
number of shares of Stock that may be issued pursuant to Options granted under
the Plan shall not exceed in the aggregate 3,000,000 shares, subject to
adjustment as provided in Section 16 below; provided, however, the number of
shares of Stock issuable pursuant to Options then outstanding (whether vested or
not) shall not exceed 10 percent of the outstanding shares of Stock. If any
Option expires, terminates, or is terminated or canceled for any reason prior to
exercise in full, the shares of Stock that were subject to the unexercised
portion of such Option shall be available for future Options granted under the
Plan.
4. ELIGIBILITY
Options may be granted under the Plan to any employee, consultant or
non-employee director of the Company, a Subsidiary or any other entity in which
the Company has a significant equity or other interest as determined by the
Committee (any other entity in which the Company has a significant equity or
other interest as determined by the Committee referred to as an "Affiliate"). An
individual may hold more than one Option, subject to such restrictions as are
provided herein.
5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) Effective Date. The Plan shall be effective as of January 1, 2000.
(b) Term. The Plan shall terminate on the date 10 years from the effective
date.
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board may, at any time
and from time to time, prior to the date of termination of the Plan, grant to
such eligible individuals as the Board may determine ("Optionees"), Options to
purchase such number of shares of the Stock on such terms and conditions as the
Board may determine. The date on which the Board approves the grant of an Option
(or such later date as is specified by the Board) shall be considered the date
on which such Option is granted. The Company shall not issue Options to an
Optionee covering more than 150,000 shares in any one calendar year.
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7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option intended to constitute an Incentive Stock Option (and so
designated at the time of grant) shall qualify as an Incentive Stock Option only
to the extent that the aggregate fair market value (determined at the time the
Option is granted) of the stock with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
(under the Plan and all other plans of the Optionee's employer corporation and
its parent and subsidiary corporations within the meaning of Section 422(d) of
the Code) does not exceed $100,000. This limitation shall be applied by taking
Options into account in the order in which they were granted.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
notification from the Company ("Option Agreements"), to be executed by the
Company and by the Optionee, in such form or forms as the Board shall from time
to time determine. Option Agreements covering Options granted from time to time
or at the same time need not contain similar provisions; provided, however, that
all such Option Agreements shall comply with all terms of the Plan.
9. EXERCISE PRICE
The purchase price of each share of the Stock subject to an Option (the
"Exercise Price") shall be fixed by the Board and stated in each Option
Agreement, and shall be not less than 100 percent of the fair market value of a
share of the Stock on the date the Option is granted (as determined in good
faith by the Board); provided, however, that in the event the Optionee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to stock
ownership of more than 10 percent), the Exercise Price of an Option that is
intended to be an Incentive Stock Option shall be not less than 110 percent of
the fair market value of a share of Stock at the time such Option is granted.
The fair market value of a share of Stock on any date of reference shall mean
the "Closing Price" (as defined below) of the Stock on the business day
immediately preceding such date, unless the Board or the Committee in its sole
discretion shall determine otherwise. For the purpose of determining fair market
value, the "Closing Price" of the Stock on any business day shall be (i) if the
Stock is listed or admitted for trading on any United States national securities
exchange, or if actual transactions are otherwise reported on a consolidated
transaction reporting system, the last reported sale price of Stock on such
exchange or reporting system, as reported in any newspaper of general
circulation, (ii) if the Stock is quoted on the National Association of
Securities Dealers Automated Quotations System ("NASDAQ"), or any similar system
of automated dissemination of quotations of securities prices in common use, the
last reported sale price of Stock on such system or, if sales prices are not
reported, the mean between the closing high bid and low asked quotations for
such day of Stock on such system, as reported in any newspaper of general
circulation, or (iii) if neither clause (i) or (ii) is applicable, the mean
between the high bid and low asked quotations for the Stock as reported by the
National Quotation Bureau, Incorporated if at least two securities dealers have
inserted both bid and asked quotations for Stock on at least five of the ten
preceding days. If neither (i), (ii) or (iii) above is applicable, then fair
market value shall be determined in good faith by the Committee or the Board,
and the Committee or the Board may determine such fair market value as of any
date that is not more than one year prior to the date for which such
determination is being made.
10. TERM AND EXERCISE OF OPTIONS
(a) Option Period. Each Option granted under the Plan shall terminate and
all rights to purchase shares thereunder shall cease upon the expiration of ten
years from the date such Option is
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granted, or on such date prior thereto as may be fixed by the Board and stated
in the Option Agreement relating to such Option; provided, however, that in the
event the Optionee would otherwise be ineligible to receive an Incentive Stock
Option by reason of the provisions of Sections 422(b)(6) and 424(d) of the Code
(relating to stock ownership of more than 10 percent), an Option granted to such
Optionee that is intended to be an Incentive Stock Option shall in no event be
exercisable after the expiration of five years from the date it is granted.
(b) Vesting and Limitations on Exercise. Each Option shall become
exercisable with respect to 25% of the total number of shares subject to the
Option on the date that is 12 months after the date of its grant (the "Vesting
Date") and with respect to an additional 25% of the number of such shares on
each of the next three succeeding anniversaries of the Vesting Date; provided,
however, that the Board may in its discretion provide that an Option may be
exercised, in whole or in part, at any time and from time to time, over a period
commencing on or after the date of grant and ending upon the expiration or
termination of the Option, as the Board shall determine and set forth in the
Option Agreement relating to such Option. Without limiting the foregoing, the
Board, subject to the terms and conditions of the Plan, may in its sole
discretion provide that an Option may be exercised immediately upon grant or
that it may not be exercised in whole or in part for any period or periods of
time during which such Option is outstanding; provided, however, that any
vesting requirement or other such limitation on the exercise of an Option may be
rescinded, modified or waived by the Board, in its sole discretion, at any time
and from time to time after the date of grant of such Option, so as to
accelerate the time at which the Option may be exercised.
(c) Method of Exercise. An Option that is exercisable hereunder may be
exercised by delivery to the Company on any business day, at its principal
office (or to such other address that the Company notifies the Optionee),
addressed to the attention of the Stock Option Administrator, of written notice
of exercise, which notice shall specify the number of shares with respect to
which the Option is being exercised, and shall be accompanied by payment in full
of the Exercise Price of the shares for which the Option is being exercised,
except as provided below. The minimum number of shares of Stock with respect to
which an Option may be exercised, in whole or in part, at any time shall be the
lesser of 100 shares or the maximum number of shares available for purchase
under the Option at the time of exercise. Payment of the Exercise Price for the
shares of Stock purchased pursuant to the exercise of an Option shall be made
(i) in cash or in cash equivalents; (ii) in shares of Stock with a fair market
value equal to the Exercise Price; or (iii) by delivering a written direction to
the Company that the Option be exercised pursuant to a "cashless" exercise/sale
procedure (pursuant to which funds to pay for exercise of the Option are
delivered to the Company by a broker upon receipt of stock certificates from the
Company) or a cashless exercise/loan procedure (pursuant to which the Optionees
would obtain a margin loan from a broker to fund the exercise) through a
licensed broker acceptable to the Company whereby the stock certificate or
certificates for the shares of Stock for which the Option is exercised will be
delivered to such broker as the agent for the individual exercising the Option
and the broker will deliver to the Company cash (or cash equivalents acceptable
to the Company) equal to the Exercise Price for the shares of Stock purchased
pursuant to the exercise of the Option plus the amount (if any) of federal and
other taxes that the Company, may, in its judgment, be required to withhold with
respect to the exercise of the Option. Payment in full of the Exercise Price
need not accompany the written notice of exercise if the Option is exercised
pursuant to the cashless exercise/sale procedure described above. An attempt to
exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Promptly after the exercise of an Option,
the individual exercising the Option shall be entitled to the issuance of a
Stock certificate or certificates evidencing his ownership of such shares. A
separate Stock certificate or certificates shall be issued for any shares
purchased pursuant to the exercise of an Option that is intended to be an
Incentive Stock Option, which certificate or certificates shall not include any
shares that were purchased pursuant to the exercise of an Option that is not an
Incentive
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Stock Option. An individual holding or exercising an Option shall have none of
the rights of a shareholder until the shares of Stock covered thereby are fully
paid and issued to him and, except as provided in Section 16 below, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date of such issuance.
(d) Restrictions on Transfer of Stock. If an Option is exercised before
the date that is six months from the later of (i) the date of grant of the
Option or (ii) the date of shareholder approval of the Plan and the sale of
stock acquired pursuant to such exercise would subject the individual exercising
the Option to liability under Section 16 of the Exchange Act, then such
certificate or certificates shall bear a legend restricting the transfer of the
Stock covered thereby until the expiration of six months from the later of the
date specified in clause (i) above or the date specified in clause (ii) above.
11. TRANSFERABILITY OF OPTIONS
No Option shall be assignable or transferable by the Optionee to whom it is
granted, other than by will or the laws of descent and distribution, except
that, upon approval by the Board, the Optionee may transfer an Option that is
not intended to constitute an Incentive Stock Option (a) pursuant to a qualified
domestic relations order as defined for purposes of the Employee Retirement
Income Security Act of 1974, as amended, or (b) by gift to a member of the
"Family" (as defined below) of the Optionee, to or for the benefit of one or
more organizations qualifying under Code Sections 501(c)(3) and 170(c)(2) (a
"Charitable Organization") or to a trust for the exclusive benefit of the
Optionee, one or more members of the Optionee's Family, one or more Charitable
Organizations, or any combination of the foregoing, provided that any such
transferee shall enter into a written agreement to be bound by the terms of the
Option Agreement. For this purpose, "Family" shall mean the ancestors, spouse,
siblings, spouses of siblings, lineal descendants and spouses of lineal
descendants of the Optionee. During the lifetime of an Optionee to whom an
Incentive Stock Option is granted, only such Optionee (or, in the event of legal
incapacity or incompetence, the Optionee's guardian or legal representative) may
exercise the Incentive Stock Option.
12. TERMINATION OF EMPLOYMENT OR SERVICE
Upon an Optionee's termination of employment or other service with the
Company, any Subsidiary or Affiliate, any Option that was not vested and
exercisable on the date of the termination of such Optionee's employment or
other service shall expire and be forfeited as of such date, and any Option that
was vested and exercisable on the date of the termination of such Optionee's
employment or other service shall expire and be forfeited as of such date,
except that: (i) if any Optionee dies or has a "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), such Optionee's Option, to
the extent vested and exercisable on the date of death or "permanent and total
disability," shall expire 12 months after the date of his death or "permanent
and total disability," but in no event after the termination of the Option
pursuant to Section 10(a) above, and (ii) if any Optionee is terminated other
than for "cause," such Optionee's Option, to the extent vested and exercisable
on the date of termination, shall expire 90 days after the date of his
termination, but in no event after the termination of the Option pursuant to
Section 10(a) above. Notwithstanding the foregoing provisions of this Section
12, the Board may provide, in its discretion, that following the termination of
employment or service of an Optionee with the Company, or any Subsidiary or
Affiliate, an Optionee may exercise an Option, in whole or in part, at any time
subsequent to such termination of employment or service and prior to termination
of the Option pursuant to Section 10(a) above, either subject to or without
regard to any vesting or other limitation on exercise imposed pursuant to
Section 10(b) above. Whether a leave of absence or leave on military or
government service shall constitute a termination of employment of service with
the Company, or any
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Subsidiary or Affiliate, shall not be deemed to occur if the Optionee is
immediately thereafter employed by or otherwise providing services to the
Company, or any Subsidiary or Affiliate. Whether a termination of employment or
service is to be considered by reason of "permanent and total disability" for
purposes of this Plan shall be determined by the Board, which determination
shall be final and conclusive. For the purposes of this Plan, "cause" shall mean
(i) an Optionee's theft or embezzlement, or attempted theft or embezzlement, of
money or property of the Company, or any Subsidiary or Affiliate, an Optionee's
perpetration or attempted perpetration of fraud, or an Optionee's participation
in a fraud or attempted fraud on the Company, or any Subsidiary or Affiliate, or
an Optionee's unauthorized appropriation of, or an Optionee's attempt to
misappropriate, any tangible or intangible asset or property of the Company, or
any Subsidiary or Affiliate, (ii) any act or acts of disloyalty, dishonesty,
misconduct or moral turpitude by an Optionee materially injurious to the
interest, property, operations, business or reputation of the Company, or any
Subsidiary or Affiliate, or an Optionee's conviction of a crime the commission
of which results in injury to the Company, or any Subsidiary or Affiliate, or
(iii) an Optionee's failure or inability (other than by reason of "permanent and
total disability") to carry out effectively his duties and obligations to the
Company, or any Subsidiary or Affiliate or to participate effectively and
actively in the management of the Company, or any Subsidiary or Affiliate, as
determined in the reasonable judgment of the Board and after an Optionee has
been given notice by the Company, or any Subsidiary or Affiliate, and a
reasonable opportunity to cure such failure or inability.
13. USE OF PROCEEDS
The proceeds received by the Company from the sale of Stock pursuant to
Options granted under the Plan shall constitute general funds of the Company.
14. REQUIREMENTS OF LAW
(a) Violations of Law. The Company shall not be required to sell or issue
any shares of Stock under any Option if the sale or issuance of such shares
would constitute a violation by the individual exercising the Option or the
Company of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. Any determination in this connection by the Board shall be final,
binding, and conclusive. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of an Option or the issuance
of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable unless and until the shares
of Stock covered by such Option are registered or are subject to an available
exemption from registration, the exercise of such Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
(b) Compliance with Rule 16b-3. The intent of this Plan is to qualify for
the exemption provided by Rule 16b-3 under the Exchange Act. To the extent any
provision of the Plan does not comply with the requirements of Rule 16b-3, it
shall be deemed inoperative to the extent permitted by law and deemed advisable
by the Board and shall not affect the validity of the Plan. In the event Rule
16b-3 is revised or replaced, the Board, or the Committee acting on behalf of
the Board, may exercise discretion to modify this Plan in any respect necessary
to satisfy the requirements of the revised exemption or its replacement.
15. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted; provided, however, that no
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amendment by the Board shall, without approval by a majority of the shares
present and entitled to vote at a duly held meeting of the shareholders of the
Company at which a quorum representing a majority of all outstanding voting
stock is, either in person or by proxy, present and voting on the amendment, or
by written consent in accordance with applicable state law and the Certificate
of Incorporation and Bylaws of the Company, change the requirements as to
eligibility to receive Options that are intended to qualify as Incentive Stock
Options, increase the maximum number of shares of Stock in the aggregate that
may be sold pursuant to Options that are intended to qualify as Incentive Stock
Options granted under the Plan (except as permitted under Section 16 hereof) or
modify the Plan so that Options granted under the Plan could not satisfy the
applicable requirements of Code Section 162(m). Except as permitted under
Section 16 hereof, no amendment, suspension or termination of the Plan shall,
without the consent of the holder of the Option, alter or impair rights or
obligations under any Option theretofore granted under the Plan.
16. EFFECT OF CHANGES IN CAPITALIZATION
(a) Recapitalization. If the outstanding shares of Stock are increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Company, occurring after the effective date of the Plan, the number and
kinds of shares for the purchase of which Options may be granted under the Plan
shall be adjusted proportionately and accordingly by the Company. In addition,
the number and kind of shares for which Options are outstanding shall be
adjusted proportionately and accordingly so that the proportionate interest of
the holder of the Option immediately following such event shall, to the extent
practicable, be the same as immediately prior to such event. Any such adjustment
in outstanding Options shall not change the aggregate Exercise Price payable
with respect to shares subject to the unexercised portion of the Option
outstanding but shall include a corresponding proportionate adjustment in the
Exercise Price.
(b) Reorganization in Which the Company Is the Surviving
Corporation. Subject to Subsection (c) hereof, if the Company shall be the
surviving corporation in any reorganization, merger, or consolidation of the
Company with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Exercise Price so that the
aggregate Exercise Price thereafter shall be the same as the aggregate Exercise
Price of the shares remaining subject to the Option immediately prior to such
reorganization, merger, or consolidation.
(c) Dissolution or Liquidation; Reorganization in Which the Company Is Not
the Surviving Corporation or Sale of Assets or Stock. Upon the dissolution or
liquidation of the Company the Plan and all Options outstanding hereunder shall
terminate. In the event of any termination of the Plan under this Section 16(c),
each individual holding an Option shall have the right, immediately prior to the
occurrence of such termination and during such reasonable period as the Board in
its sole discretion shall determine and designate, to exercise such Option in
whole or in part, whether or not such Option was otherwise exercisable at the
time such termination occurs and without regard to any vesting or other
limitation on exercise imposed pursuant to Section 10(b) above. In connection
with a merger, consolidation, reorganization or other business combination of
the Company with one or more other entities in which the Company is not the
surviving entity, or upon a sale of all or substantially all of the assets of
the Company to another entity, or upon any transaction (including, without
limitation, a merger or reorganization in which the Company is the surviving
corporation) that results
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<PAGE> 45
in any person or entity (or persons or entities acting as a group or otherwise
in concert) owning more than 50 percent of the combined voting power of all
classes of stock of the Company, the Company and the acquiring or surviving
entity shall provide for the continuation of the Plan and the assumption of the
Options theretofore granted, or for the substitution for such Options of new
options covering the stock of a successor entity, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds of shares and
exercise prices. The Board shall send prior written notice of the occurrence of
an event described in this Section 16(c) to all individuals who hold Options not
later than the time at which the Company gives notice to its shareholders that
such event is proposed.
(d) Adjustments. Adjustments under this Section 16 related to stock or
securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(e) No Limitations on Corporation. The grant of an Option pursuant to the
Plan shall not affect or limit in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, consolidate, dissolve or liquidate, or to
sell or transfer all or any part of its business or assets.
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ or service of the Company, any
Subsidiary or Affiliate, or to interfere in any way with the right and authority
of the Company, any Subsidiary or Affiliate either to increase or decrease the
compensation of any individual at any time, or to terminate any employment or
other relationship between any individual and the Company, any Subsidiary or
Affiliate.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options or stock
appreciation rights otherwise than under the Plan.
* * *
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REVOCABLE PROXY
GERALD STEVENS, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 29, 2000
The undersigned appoints Adam D. Phillips and Albert J. Detz as agents to
vote all shares of Common Stock of Gerald Stevens, Inc. that the undersigned is
entitled to vote at the Annual Meeting of Stockholders, to be held at the
Sheraton Fort Lauderdale, Airport Hotel, Empire Ballroom, Fort Lauderdale,
Florida, on Tuesday, February 29, 2000, at 10:00 a.m., Eastern Time, and at any
adjournments. As more fully described in the Proxy Statement for the meeting,
such persons (or their substitutes) are directed to vote as indicated on this
card and are authorized to vote in their discretion upon any other business that
properly comes before the meeting.
OUR BOARD OF DIRECTORS IS SOLICITING THIS PROXY.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSALS.
1. Election of directors:
For all nominees listed (except as marked to the contrary):
[ ] FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT
<TABLE>
<S> <C> <C> <C>
Steven R. Berrard Robert L. Johnson Adam D. Phillips Kenneth Royer
Gerald R. Geddis Ruth M. Owades Kenneth G. Puttick Andrew W. Williams
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write the nominee's name in the space below.
- --------------------------------------------------------------------------------
2. Approval of the Reincorporation in Florida.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the 2000 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of the selection of Arthur Andersen LLP as independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES
LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY IN THE BOX BELOW.
- ------------------------------------------------------------
Date
- ------------------------------------------------------------
Stockholder sign above
- ------------------------------------------------------------
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage-paid envelope provided.
The above-signed stockholder acknowledges receipt from Gerald Stevens, Inc.,
prior to the execution of this proxy, of a notice of the meeting, a proxy
statement dated January 18, 2000 and the 1999 Annual Report to Stockholders.
Please sign exactly as your name appears on this card. When signing on behalf of
a corporation, estate, trust or another stockholder, please give such entity's
full name and your full title.
PLEASE ACT PROMPTLY.
SIGN, DATE & MAIL YOUR PROXY CARD TODAY.
