<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14(a)-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
RUSS BERRIE AND COMPANY, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
RUSS BERRIE AND COMPANY, INC.
111 BAUER DRIVE
OAKLAND, NEW JERSEY 07436
April 7, 2000
Dear Shareholder:
It is my pleasure, on behalf of your Board of Directors, to extend to you a
cordial invitation to attend our Annual Meeting of Shareholders, which will be
held this year at the Company's corporate headquarters, 111 Bauer Drive,
Oakland, New Jersey, at 2:00 p.m. on Tuesday, May 9, 2000.
At the meeting, shareholders will be asked to elect 9 directors; to approve
amendments to the Company's 1999 Stock Option and Restricted Stock Plan, the
1999 Stock Option Plan for Outside Directors, the 1999 Stock Option Plan, and
the 1999 Employee Stock Purchase Plan; and to transact such other business as
may properly come before the meeting.
I look forward to greeting you at the meeting. Whether or not you expect to
attend, I urge you to sign and return your proxy card immediately.
Sincerely,
/s/ Russell Berrie
RUSSELL BERRIE
Chairman
<PAGE> 3
RUSS BERRIE AND COMPANY, INC.
111 BAUER DRIVE
OAKLAND, NEW JERSEY 07436
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, MAY 9, 2000
The Annual Meeting of Shareholders of Russ Berrie and Company, Inc. (the
"Company") will be held this year at the Company's corporate headquarters, 111
Bauer Drive, Oakland, New Jersey on Tuesday, May 9, 2000, at 2:00 p.m., for the
following purposes:
1. To elect 9 directors to serve until the next Annual Meeting of
Shareholders and until their successors shall have been elected and
qualified;
2. To approve an amendment to the Company's 1999 Stock Option and
Restricted Stock Plan;
3. To approve an amendment to the Company's 1999 Stock Option Plan for
Outside Directors;
4. To approve an amendment to the Company's 1999 Stock Option Plan;
5. To approve an amendment to the Company's 1999 Employee Stock Purchase
Plan; and
6. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on March 24, 2000 are
entitled to notice of and to vote at such meeting.
BY ORDER OF THE
BOARD OF DIRECTORS,
/s/ Arnold S. Bloom
ARNOLD S. BLOOM
Secretary
Oakland, New Jersey
April 7, 2000
Please complete, date, sign, and promptly return your proxy card in the enclosed
envelope.
<PAGE> 4
RUSS BERRIE AND COMPANY, INC.
111 BAUER DRIVE
OAKLAND, NEW JERSEY 07436
PROXY STATEMENT
DATED APRIL 7, 2000
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Russ Berrie and Company, Inc. (the "Company") of
proxies for use at the Annual Meeting of Shareholders of the Company to be held
on Tuesday, May 9, 2000, at 2:00 p.m., at the Company's corporate headquarters,
111 Bauer Drive, Oakland, New Jersey, and at any adjournments thereof.
Shareholders of record at the close of business on March 24, 2000, will be
entitled to one vote for each share they then held on all matters to come before
the meeting. There were outstanding on that date 20,551,260 shares of common
stock of the Company, stated value $.10 per share ("Common Stock"). The Company
has no other class of stock outstanding. The holders of a majority of the shares
of Common Stock entitled to vote at the meeting will constitute a quorum.
An executed proxy may be revoked at any time by written notification to the
Secretary of the Company if such notice is actually received by the Secretary
before such proxy is exercised, or by attending and voting at the meeting in
person. Proxies in the accompanying form which are properly executed by
shareholders, duly returned to the Company and not revoked will be voted in the
manner specified. If no specification is indicated, the proxy will be voted as
indicated below. The cost of solicitation will be borne by the Company.
The Annual Report of the Company for the fiscal year ended December 31,
1999 accompanies this Proxy Statement, but is not part of the proxy soliciting
materials.
This Proxy Statement and the form of proxy will be mailed to shareholders
on or about April 12, 2000.
<PAGE> 5
ELECTION OF DIRECTORS
Nine directors are to be elected to hold office until the next Annual
Meeting of Shareholders and until their respective successors are elected and
qualified. The election of directors requires the affirmative vote of the
holders of a plurality of the shares of Common Stock voting at the meeting. It
is intended that proxies in the accompanying form which do not withhold the
authority to vote for any or all of the nominees will be voted for the election
as directors of all of the persons named below. Should any nominee become unable
or unwilling to serve as a director, the proxies will be voted in favor of the
remainder of those named and may be voted for substitute nominees who would be
nominated by the Board of Directors in place of those who are not candidates. At
this time, the Board of Directors knows of no reason why any nominee might not
be a candidate at the meeting. The information concerning the nominees has been
furnished by them to the Company.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION;
NAME AGE SINCE OTHER DIRECTORSHIPS
- ---- --- -------- -------------------------------------
<S> <C> <C> <C>
Raphael Benaroya(1).......................... 52 1993 Chairman of the Board, President and
Chief Executive Officer, since 1988,
of United Retail Group, Inc., which
operates a chain of retail specialty
stores. Mr. Benaroya is also Managing
Director of American Licensing Group,
L.P., which specializes in consumer
goods' brand name licensing.
Angelica Berrie(2)........................... 45 1998 Director -- Product Development of
the Company since November 1991.
Russell Berrie(2)............................ 67 1966 Chairman and Chief Executive Officer
of the Company since its
incorporation in 1966. Mr. Berrie is
the founder of the Company. Mr.
Berrie is also a Director of United
Retail Group, Inc.
Ilan Kaufthal(3)............................. 52 1995 Vice Chairman, since April 1997, of
Schroder & Co., Inc. (formerly known
as Schroder, Wertheim & Co., Inc.),
an investment banking firm. Managing
Director, from February 1987 to March
1997, of Schroder & Co., Inc. Mr.
Kaufthal is also a Director of United
Retail Group, Inc., Cambrex
Corporation, a company which
manufactures specialty chemicals, and
ASI Solutions Incorporated, a company
which provides human resources
outsourcing services.
Charles Klatskin............................. 65 1983 Chairman of the Board and President
of Charles Klatskin Company, Inc., a
commercial real estate brokerage and
development firm, since its
incorporation in 1966.
Joseph Kling................................. 70 1988(4) President and Chief Executive Officer
of MLJ, Inc. (formerly Pamsco, Inc.),
a consulting company, since April
1991.
William A. Landman(1,3)...................... 47 1994 Principal, since 1987, and Chief
Investment Officer, since March 1998,
of CMS Companies, an investment firm.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION;
NAME AGE SINCE OTHER DIRECTORSHIPS
- ---- --- -------- -------------------------------------
<S> <C> <C> <C>
Sidney Slauson(1)............................ 90 1978 Mr. Slauson was General Counsel to
the Company from 1966 until 1990.
From 1990 until June 30, 1995, Mr.
Slauson was of counsel to Rosner and
Feltman, a law firm which provided
legal services to the Company. Mr.
Slauson is currently retired.
Josh S. Weston............................... 71 1999 Honorary Chairman, since April 1998,
of Automatic Data Processing, Inc.
("ADP"), a computerized transaction
processing, data communication and
information services company. Mr.
Weston served as Chairman of the
Board of ADP from August 1996 to
April 1998. Prior to August 1996, and
for more than five years prior
thereto, he served as Chairman of the
Board and Chief Executive Officer of
ADP. Mr. Weston is also a Director of
Gentiva Health Services, Inc., a
provider of home health care
services, and Shared Medical Systems
Corporation, a provider of health
information services.
</TABLE>
- ---------------
(1) Member of Compensation Committee of the Board of Directors.
(2) Angelica Berrie is the spouse of Russell Berrie.
(3) Member of Audit Committee of the Board of Directors.
(4) Mr. Kling did not stand for re-election to the Board of Directors of the
Company in April 1995, but was re-elected as a Director in October 1995.
------------------------------------------
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held five meetings during 1999. The
Audit Committee of the Board of Directors, which held one meeting during 1999,
consists of Messrs. Kaufthal and Landman. The Audit Committee is responsible for
ensuring maintenance of an adequate system of internal financial controls,
causing the books of account and annual financial statements of the Company to
be audited by certified public accountants, discussing with the certified public
accountants the results of their audit, and recommending to the Board of
Directors the appointment of certified public accountants. The Compensation
Committee, which held one meeting during 1999, consists of Messrs. Benaroya,
Landman and Slauson. The Compensation Committee reviews and recommends to the
Board of Directors remuneration arrangements for senior management of the
Company and various Company compensation plans. The report of the Compensation
Committee is set forth in this Proxy Statement. There is no standing nominating
committee. In November 1999, the Board of Directors established a Special
Committee to consider a proposal received by the Company from Evercore Partners,
L.L.C. to acquire all of the Company's outstanding Common Stock other than
certain shares owned by Mr. Berrie. The Special Committee, which held two
meetings in 1999, consisted of Messrs. Kling, Landman and Weston. All of the
directors attended, in 1999, at least 83% of the aggregate number of meetings of
the Board of Directors and the Audit Committee, Compensation Committee and
Special Committee (if they were members of those Committees).
3
<PAGE> 7
DIRECTOR COMPENSATION
Directors who are full-time employees of the Company receive no additional
compensation for services as a director. Each director who is not an employee of
the Company receives $8,000 per year plus $1,000 for each Board meeting and
$1,000 for each Audit or Compensation Committee meeting attended. The three
members of the Special Committee each received a one-time payment of $25,000. In
addition, commencing January 1, 1989, directors who were not officers or other
employees of the Company became eligible to receive non-qualified stock options
and stock appreciation rights ("SARs"), if granted, under the Company's 1989
Stock Option Plan for Outside Directors (the "1989 Directors Plan"). (See "1989
Directors Plan" below.) Commencing January 1, 1994, directors who were not
officers or other employees of the Company became eligible to receive
non-qualified stock options under the Company's 1994 Stock Option Plan for
Outside Directors (the "1994 Directors Plan"). (See "1994 Directors Plan"
below.) Commencing January 1, 1999, directors who were not officers or other
employees of the Company became eligible to receive non-qualified stock options
under the Company's 1999 Stock Option Plan for Outside Directors (the "1999
Directors Plan" and, together with the 1989 Directors Plan and the 1994
Directors Plan, "All Directors Plans"). (See "1999 Directors Plan" below.)
ALL DIRECTORS PLANS
All Directors Plans are currently administered by a committee comprised of
two members of the Board of Directors who are not participants in any of such
plans: Russell Berrie and Angelica Berrie.
Options granted under All Directors Plans vest and become exercisable one
year after the date of grant and remain exercisable for ten years from the date
of grant. Options are transferable to spouses, lineal descendants, certain
trusts and charitable organizations; otherwise, such options are not
transferable other than by will or under the laws of descent and distribution,
and are exercisable only by the grantee or a permitted transferee or by the
grantee's or permitted transferee's legal representative(s) after death or
disability. If the grantee ceases to be a member of the Board of Directors for
reasons other than death or disability, non-vested options expire immediately
and vested options are only exercisable for 30 days thereafter, or the remaining
option term, if shorter. In the event of the grantee's death or disability,
non-vested options shall vest and all outstanding options may be exercised
within 12 months after the death or disability or the remaining option term, if
shorter.
Options granted under All Directors Plans are issued on each January 1 at
an exercise price equal to the closing market price of the Common Stock on the
New York Stock Exchange on the first trading day of each such year.
1989 DIRECTORS PLAN
A total of 150,000 shares of Common Stock were reserved for the grant of
options and related SARs, if any, under the 1989 Directors Plan. Grantees have
been granted options to purchase 3,000 shares of Common Stock in each year from
1989 through 1993. In 1999, Mr. Klatskin exercised options, pursuant to the 1989
Directors Plan, for 3,000 shares of Common Stock at an exercise price of $10.09
per share.
Until December 31, 1991, the committee administering the 1989 Directors
Plan had the discretion to grant SARs subject to related options, which are
exercisable only to the same extent and subject to the same terms and conditions
as the related options. In general, a grantee who exercises an SAR will be
entitled to securities and/or cash in an amount equal to the excess of the
closing market price of the Common Stock on the New York Stock Exchange on the
date of exercise over the exercise price of the related option, multiplied
4
<PAGE> 8
by the number of shares as to which the SAR is exercised. Exercise of all or any
part of an SAR will reduce on a share-for-share basis the number of shares
subject to a grantee's related option. Payment due upon exercise of an SAR shall
be made (i) in cash, (ii) in Common Stock, or (iii) partly in cash and partly in
Common Stock, all as determined by the committee in its discretion.
This plan terminated on December 31, 1993, although options and SARs
previously granted may be exercised beyond that date.
1994 DIRECTORS PLAN
A total of 150,000 shares of Common Stock were reserved for the grant of
options under the 1994 Directors Plan. Grantees have been granted options to
purchase 3,000 shares of Common Stock in each year from 1994 through 1998. In
1999, Mr. Slauson exercised options, pursuant to the 1994 Directors Plan, for
3,000 shares of Common Stock at an exercise price of $14.875 per share, and for
2,000 shares of Common Stock at an exercise price of $13.75 per share.
This plan terminated on December 31, 1998, although options previously
granted may be exercised beyond that date.
1999 DIRECTORS PLAN
A total of 150,000 shares of Common Stock have been reserved for the grant
of options under the 1999 Directors Plan. Grantees are granted options to
purchase 3,000 shares of Common Stock in each year from 1999 through 2003. In
1999 and 2000, options were granted to all eligible directors at an exercise
price of $23.625 per share and $25.1875 per share, respectively.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
CHIEF EXECUTIVE OFFICER
Mr. Russell Berrie, Chairman and Chief Executive Officer of the Company, is
party to an employment arrangement with the Company that provides for
compensation, in 1999, consisting of a base salary at an annual rate of $485,000
and a bonus equal to 1% of the Company's net income after taxes ("Incentive
Compensation"). Mr. Berrie does not participate in any of the Company's stock
option or restricted stock plans. The bonus arrangement has been in effect since
July 1, 1983, prior to the Company's initial public offering.
The Compensation Committee (the "Committee") and Mr. Berrie discuss his
base compensation annually. After discussions with Mr. Berrie, the Committee
concluded that his base compensation for 2000 should be increased by 8% to
$525,000 plus the Incentive Compensation.
The Committee has not conducted a study of chief executive officer
compensation at companies comparable to the Company. Mr. Berrie's base salary
was determined based upon the subjective assessment by the members of the
Committee of Mr. Berrie's individual performance and contribution to the
business of the Company and taking into account the members' own awareness of
executive compensation levels at other companies. The Committee believes that
basing the Incentive Compensation, a substantial portion of Mr. Berrie's
compensation, on a fixed percentage of the Company's net income after taxes
provides an appropriate linkage between his Incentive Compensation and the
Company's performance. The Committee also notes that, although Mr. Berrie does
not participate in any of the Company's stock option or restricted
5
<PAGE> 9
stock plans, he is the beneficial owner of approximately 25.7% of the
outstanding Common Stock. (See "Security Ownership of Management" table below.)
OTHER EXECUTIVE OFFICERS
The Committee determines the compensation of executive officers, other than
the chief executive officer, in consultation with Mr. Berrie. Generally, the
compensation received by these individuals consists of the following principal
components: base salary, cash bonuses, stock options and, for one executive
officer, restricted stock awards under the Company's 1999 Stock Option and
Restricted Stock Plan (including predecessor plans, the "Stock Option and
Restricted Stock Plans"). The Committee, after discussion with Mr. Berrie, has
followed a policy of determining increases in base compensation based
principally upon the Company's and the individual executive officer's
performance.
The Committee views stock options and restricted stock awards as serving
two functions: compensation to executive officers and providing executive
officers with an equity stake in the Company that aligns their interests with
shareholders. In January 1999, executive officers received grants of stock
options under the Company's 1999 Stock Option and Restricted Stock Plan to
purchase stock having an aggregate fair market value (measured at the date of
grant) ranging from 32% to 40% of base compensation. One of the executive
officers named in the Summary Compensation Table received in 1999 a restricted
stock award under the Company's 1999 Stock Option and Restricted Stock Plan
relating to shares having a fair market value (measured at the date of grant)
equal to 33.3% of 80% of base compensation. Although the amount of these awards
does not vary on the basis of the recipients' other holdings of the Company's
stock, it may vary on the basis of the Company's performance or other factors
deemed relevant by the Committee. The ultimate value to the recipient of such
awards depends upon the market price of the Company's Common Stock.
Awards of cash bonuses to executive officers are based upon a bonus pool in
which approximately 65 of the Company's personnel participate and are paid if
the Company exceeds certain operating profit levels from its core domestic
business. Participants are eligible to receive a maximum award ranging from 50%
(in the case of certain executive officers) to 4% of the recipient's base
salary. Participants receive the maximum bonus for which they are eligible if
the amount of the bonus pool is sufficient to pay the maximum bonus to all
participants; otherwise, each participant receives the same percentage of the
bonus pool as such participant would have received had maximum bonuses been
paid. (See also "Summary Compensation Table" below.)
Additional awards of cash bonuses to executive officers (and certain other
eligible personnel) are also paid if the Company exceeds certain goals of annual
profitability from its core domestic business. Participants are eligible to
receive an award ranging from 4% to 10% of the recipient's base salary depending
upon the level of operating profit for the relevant period.
Mr. Berrie does not participate in the bonus pool or additional cash bonus
described above.
Russ Berrie and Company, Inc., Compensation Committee
Raphael Benaroya, William A. Landman, Sidney Slauson, 1999 Members
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1999, the Compensation Committee consisted of Messrs. Benaroya, Landman
and Slauson.
Russell Berrie, Chairman and Chief Executive Officer of the Company, serves
as a member of the Board of Directors of United Retail Group, Inc. Raphael
Benaroya, Chairman of the Board, President and Chief Executive Officer of United
Retail Group, Inc., serves on the Compensation Committee of the Board of
Directors of the Company.
6
<PAGE> 10
RUSS BERRIE AND COMPANY, INC.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
RUSS BERRIE AND COMPANY, INC., THE S & P 500 INDEX
AND PEER GROUP COMPANIES
[INDEXED RETURNS GRAPH]
<TABLE>
<CAPTION>
RUSS BERRIE & CO INC S&P 500 INDEX PEER GROUP
-------------------- ------------- ----------
<S> <C> <C> <C>
Dec 94 100.00 100.00 100.00
Dec 95 95.86 137.58 101.73
Dec 96 141.66 169.17 96.42
Dec 97 212.36 225.60 121.52
Dec 98 196.39 290.08 125.20
Dec 99 226.64 351.12 75.04
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Base
Period
Company/Index Name Dec 94 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99
- ------------------------------------------------------------------------------------------------------------------------
RUSS BERRIE & CO., INC. $100 $ 95.86 $141.66 $212.36 $196.39 $226.54
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX 100 137.58 169.17 225.60 290.08 351.12
- ------------------------------------------------------------------------------------------------------------------------
PEER GROUP 100 101.73 96.42 121.52 125.20 75.04
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Assumes $100 invested December 31, 1994, and reinvestment of all dividends.
Peer Group Companies are as follows: American Greetings (Class A), Cross
(A.T.) & Co. (Class A), Department 56 Inc. (Series A), Enesco Group Inc.
(formerly, Stanhome Inc.), First Years, Inc., Gibson Greetings Inc., Ohio Art
Co., and Tandycrafts Inc.
Peer Group Companies were selected on the basis of similarity of their
products or distribution channels to those of the Company.
7
<PAGE> 11
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 2000, the shares of Common
Stock beneficially owned by each director of the Company, by certain executive
officers of the Company and by all directors and officers of the Company as a
group.
<TABLE>
<CAPTION>
APPROXIMATE
TOTAL SHARES PERCENTAGE OF
SHARES OF OF COMMON STOCK OUTSTANDING
NAME OF DIRECTOR, COMMON STOCK BENEFICIALLY COMMON
OFFICER OR IDENTITY OF GROUP OWNED(1) OWNED(1)(2) STOCK(1)(2)
---------------------------- ------------ --------------- -------------
<S> <C> <C> <C>
Raphael Benaroya................................. 720 18,720 *
Angelica Berrie(3)............................... 190,356 196,141 *
Russell Berrie(4)................................ 5,276,872 5,282,657 25.7%
Arnold Bloom..................................... 151 11,654 *
Ricky Chan(5).................................... 12,106 20,268 *
Chris Collins(8)................................. 0 8,715 *
Ilan Kaufthal.................................... 0 12,000 *
Charles Klatskin................................. 3,100 30,100 *
Joseph Kling..................................... 0 12,000 *
William A. Landman............................... 65 15,065 *
Y.B. Lee(5)...................................... 2,552 16,246 *
Sidney Slauson................................... 9,000 22,000 *
Josh S. Weston................................... 300 300 *
Leslie Berrie, Russell Berrie and Myron Rosner,
as co-trustees under The Leslie Berrie 1993
Trust(6)....................................... 126,541 126,541 *
All directors and officers as a group (20
persons)(4)(5)(7).............................. 5,305,966 5,484,601 26.5%
</TABLE>
- ---------------
* Less than 1%
(1) Each individual has the sole power to vote and dispose of the shares of
Common Stock, except as provided in notes 3, 4 and 6 below; and, in the case
of restricted shares granted under Russ Berrie and Company, Inc. Stock
Option and Restricted Stock Plans, subject to the provisions of such plans.
(2) Includes the number of shares subject to stock options granted by the
Company which are exercisable within 60 days.
(3) Includes (a) 1,000 shares held by the Angelica 1992 Trust for the benefit of
Mrs. Berrie and (b) 189,356 shares held of record by The Russell Berrie 1995
Annuity Trust, of which Mrs. Berrie is a co-trustee possessing shared voting
power and shared dispositive power with respect to the shares held by such
trust. Shares deemed to be beneficially owned also include 5,785 shares
subject to stock options. Does not include 181,779 shares of Common Stock
held beneficially and of record by The Russell Berrie Foundation, a New
Jersey Nonprofit Corporation, of which Mrs. Berrie is a co-trustee.
(4) Includes (a) 2,061,477 shares held of record by Mr. Russell Berrie, (b)
898,348 shares held by The Russell Berrie 1999 Trust, of which Mr. Berrie is
the grantor possessing the unrestricted power to revoke
8
<PAGE> 12
the trust, a co-trustee with Mr. Myron Rosner possessing shared voting power
and shared dispositive power with respect to the shares held by such trust
and, until his death, the sole beneficiary, (c) 2,000,000 shares held of
record by The Russell Berrie 1999 Annuity Trust, of which Mr. Berrie is the
grantor and a co-trustee with Mr. Rosner possessing shared voting power and
shared dispositive power with respect to the shares held by such trust, and
(d) 150 shares held of record by Mr. Berrie as custodian for one of his
daughters. Also includes (a) 1,000 shares held by the Angelica 1992 Trust
for the benefit of Mr. Berrie's spouse, (b) 189,356 shares held of record by
The Russell Berrie 1995 Annuity Trust, of which Mr. Berrie's spouse is a
co-trustee possessing shared voting power and shared dispositive power with
respect to the shares held by such trust, and (c) 126,541 shares held of
record by The Leslie Berrie 1993 Trust, of which Mr. Berrie is a co-trustee;
all of which Mr. Berrie disclaims beneficial ownership. (See "Security
Ownership of Management" table above, note 3 above and note 6 below). Shares
deemed to be beneficially owned also include 5,785 shares subject to stock
options held by Mr. Berrie's spouse, of which Mr. Berrie disclaims
beneficial ownership. Does not include shares of Common Stock held
beneficially and of record by (i) The Russell Berrie Foundation, a New
Jersey Nonprofit Corporation (181,779 shares) of which Mr. Berrie is a
co-trustee, and (ii) The Russell Berrie 1999 Charitable Remainder Trust
(5,305,194 shares) for the benefit of Mr. Berrie during his life and
thereafter for the benefit of The Russell Berrie Foundation, a New Jersey
Nonprofit Corporation. Mr. Berrie is not a trustee of, and has no power to
revoke, The Russell Berrie 1999 Charitable Remainder Trust. (See "Security
Ownership of Certain Beneficial Owners" table, below).
(5) Includes shares awarded under the Company's Stock Option and Restricted
Stock Plans which are not vested as of March 1, 2000, as follows: 5,266
shares for Mr. Chan; 1,022 shares for Mr. Lee; and 6,288 shares for all
directors and officers as a group.
(6) Leslie Berrie, Russell Berrie and Myron Rosner are co-trustees, each having
the power to vote and dispose of these shares. Messrs. Berrie and Rosner
disclaim beneficial ownership of these shares.
(7) Includes shares held by trusts included in the table.
(8) Mr. Chris Collins, Vice President -- Sales of the Company, has resigned
effective May 1, 2000.
---------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of March 1, 2000, with respect to each
person who is known to the Company to be the beneficial owner of more than five
percent of the outstanding shares of Common Stock: (i) the name and address of
such owner, (ii) the number of shares beneficially owned, and (iii) the
percentage of the total number of shares of Common Stock outstanding so owned.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------- ------------------ --------
<S> <C> <C>
Russell Berrie(1)........................................... 5,282,657(2) 25.7%
111 Bauer Drive
Oakland, New Jersey 07436
U.S. Trust Company of New York.............................. 5,527,639(3)(4) 26.9%
114 West 47th Street
New York, New York 10036
</TABLE>
- ---------------
(1) See note 4 under "Security Ownership of Management" table, above.
(2) Of Mr. Berrie's 5,282,657 shares, Mr. Myron Rosner, in his capacity as a
trustee, is deemed also to be the beneficial owner of 3,214,245 shares. Mr.
Rosner's trusteeships are as follows: (a) 898,348 shares held by
9
<PAGE> 13
The Russell Berrie 1999 Trust, of which Mr. Rosner is a co-trustee with Mr.
Berrie possessing shared voting power and shared dispositive power with
respect to the shares held by such trust, subject to Mr. Berrie's
unrestricted power to revoke the trust, (b) 2,000,000 shares held of
record by The Russell Berrie 1999 Annuity Trust, of which Mr. Rosner is a
co-trustee with Mr. Berrie possessing shared voting power and shared
dispositive power with respect to the shares held by such trust, (c)
189,356 shares held of record by The Russell Berrie 1995 Annuity Trust, of
which Mr. Rosner is a co-trustee possessing shared voting power and shared
dispositive power with respect to the shares held by such trust, and (d)
126,541 shares held of record by The Leslie Berrie 1993 Trust, of which
Mr. Rosner is a co-trustee and of which Mr. Rosner disclaims beneficial
ownership. In addition, there are 242,782 shares held of record by The
Russell Berrie 1996 Annuity Trust, of which Mr. Rosner is a trustee
possessing sole voting power and sole dispositive power with respect to
the shares held by such trust. Mr. Rosner also owns (a) 2,037 shares held
of record by The Myron Rosner P.A. Pension Plan, of which Mr. Rosner has
sole voting power and sole dispositive power with respect to the shares,
(b) 720 shares held by a Keogh plan, of which Mr. Rosner has sole voting
power and sole dispositive power with respect to the shares, and (c) 750
shares held by Mr. Rosner as joint tenant with his spouse, of which Mr.
Rosner has shared voting power and shared dispositive power with respect
to the shares. In all capacities, Mr. Rosner is deemed to be the
beneficial owner of 3,460,534 shares (approximately 16.8% of the
outstanding Common Stock of the Company). Mr. Rosner's ownership does not
include shares of Common Stock held beneficially and of record by The
Russell Berrie Foundation, a New Jersey Nonprofit Corporation (181,779
shares). Mr. Rosner is a co-trustee of the Foundation. Mr. Rosner's
ownership does not include shares of Common Stock held beneficially and of
record by The Russell Berrie 1999 Charitable Remainder Trust (5,305,194
shares). Mr. Rosner is not a trustee of such trust and has no power to
revoke such trust, but does have the right to remove the trustee and
appoint a successor trustee. Mr. Rosner is a shareholder and director of
Wilentz, Goldman & Spitzer, P.A., 90 Woodbridge Center Drive, Woodbridge,
New Jersey 07095.
(3) As reported on the Schedule 13G filed by U.S. Trust Company of New York with
the Securities and Exchange Commission on February 4, 2000, relating to
holdings as of December 31, 1999.
(4) Includes 5,305,194 shares held beneficially and of record by The Russell
Berrie 1999 Charitable Remainder Trust. U.S. Trust Company of New York is
the sole trustee of such trust. (See note 2 above).
------------------------------------------------------
10
<PAGE> 14
EXECUTIVE COMPENSATION
The following table sets forth compensation for the years ended December
31, 1999, 1998, and 1997 paid to or accrued for the benefit of the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company as of December 31, 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
------------------------------------- --------------------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING LTIP
NAME AND ANNUAL STOCK OPTIONS/ PAYOUTS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) AWARDS($)(3) SARS (SHARES) ($) COMPENSATION(4)
- ------------------ ---- -------- -------- --------------- ------------ ------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Russell Berrie,........ 1999 $485,000 $373,687 $29,250 -0- -0- -0- $257,909
Chairman and 1998 475,000 415,095 30,070 -0- -0- -0- 258,488
Chief Executive 1997 425,000 834,583 25,893 -0- -0- -0- 259,107
Officer
Ricky Chan,............ 1999 284,350 147,643 4,099 $68,914 3,501 -0- 54,800
Senior Vice 1998 258,500 134,221 4,185 68,933 3,151 -0- 54,418
President -- 1997 235,000 122,019 4,574 62,660 4,064 -0- 54,239
Product Development
Chris Collins,......... 1999 184,800 95,954 3,245 -0- 3,128 -0- 4,000
Vice President -- 1998 168,000 87,231 2,954 -0- 2,560 -0- 4,418
Sales(5) 1997 140,000 49,359 2,361 -0- 3,027 -0- 4,239
Y.B. Lee,.............. 1999 184,184 92,092 -0- -0- 3,118 -0- 1,495
President -- Far 1998 177,100 88,550 -0- -0- 2,698 -0- 1,080
East Operations 1997 177,100 88,550 -0- 47,212 3,063 -0- 88
Arnold Bloom,.......... 1999 210,000 26,538 4,145 -0- 3,555 -0- 4,800
Vice President and 1998 205,000 26,192 4,312 -0- 3,123 -0- 4,418
General Counsel 1997 202,000 25,985 4,293 -0- 4,367 -0- 4,239
</TABLE>
- ---------------
(1) All salary and bonus payments are reported for the year in which they are
earned.
(2) While the aggregate of "Other Annual Compensation" received by the named
executive officers is lower than the lesser of $50,000 or 10 percent of
total annual salary and bonus for each named executive officer, the
perquisites and other personal benefits included within the "Other Annual
Compensation" which individually exceed 25% of the total perquisites and
other personal benefits for each named executive officer include (i) Mr.
Berrie's travel allowance ($20,800) for each of years 1999, 1998, and 1997,
(ii) Mr. Chan's personal use of a Company car (valued at $3,083 for each of
years 1999, 1998 and 1997), (iii) Mr. Collins' personal use of a Company car
(valued at $3,083 for 1999, $2,795 for 1998 and $1,950 for 1997), and (iv)
Mr. Bloom's personal use of a Company car (valued at $3,083 for 1999, $2,936
for 1998, and $2,917 for 1997).
(3) Value is calculated by multiplying the number of shares awarded by the
closing price of the Common Stock on the New York Stock Exchange on the date
of grant. 8,583 shares of restricted stock were held by 2 of the named
executive officers at December 31, 1999, with an aggregate value as of such
date of $225,303 (calculated by multiplying the number of shares held by the
closing price of the Common Stock on the New York Stock Exchange on December
31, 1999, the last day of the Company's last completed fiscal year). At
December 31, 1999, of the outstanding restricted shares, the value of Mr.
Chan's holdings was $185,088 and Mr. Lee's was $40,215. The number of shares
of restricted stock awarded in 1999, 1998, and 1997 to (i) Mr. Chan was
2,917, 2,626, and 3,387, respectively, and (ii) Mr. Lee was 0, 0, and 2,552,
respectively. Restricted stock awards vest over five years at 20 percent per
year provided the
11
<PAGE> 15
recipient remains in the employ of the Company or as otherwise provided
under the applicable plan. Dividends are paid on all outstanding restricted
stock.
(4) For all named executive officers except Mr. Lee, "All Other Compensation"
consists of the Company's contributions under the 401(k) Plan during 1997,
1998, and 1999. Does not include investment gains or losses under the 401(k)
Plan. (See "401(k) Plan" below.) Because the Company contributions to the
40l(k) Plan are not fixed, and because it is impossible to calculate future
income, it is not currently possible to calculate an individual
participant's retirement benefits. For Mr. Lee, "All Other Compensation"
consists of the Company's contributions under a Korean national pension
plan. For Mr. Berrie, "All Other Compensation" also consists of $253,109
paid in 1999, $254,070 paid in 1998, and $254,868 paid in 1997 for split
dollar life insurance policies on the joint lives of Mr. Berrie and his
spouse. The split dollar life insurance policies have been assigned to the
Company to secure repayment of the premiums. For Mr. Chan, "All Other
Compensation" also consists of $50,000 paid in each of years 1999, 1998 and
1997 for the premium on a life insurance policy for Mr. Chan. (See
"Employment Agreements and Arrangements," below.)
(5) Mr. Collins has resigned, effective May 1, 2000.
---------------------------------------------
401(k) PLAN
In February 1995, the Company amended its existing retirement plan (a
defined contribution plan) to convert such retirement plan to a plan (the
"401(k) Plan") based on employees' pretax salary deferrals with Company matching
contributions pursuant to Section 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"). Participating employees may elect to contribute from 1%
to 15% (but not in excess of the amount permitted by the Code, i.e., $10,000 in
1999 and $10,500 in 2000) of their compensation, on a pretax basis, to the
401(k) Plan. Because the 401(k) Plan is a qualified defined contribution plan,
if certain highly compensated employees' contributions exceed the amount
prescribed by the Code, such contributions will be reduced or limited. In 1999,
contributions of certain highly compensated employees were limited to $9,489.
Employees' contributions are invested in one or more of eight funds (as selected
by each participating employee). The Company matches a portion (one-half of 6%
contributed) of the compensation deferred by each employee. The Company's
matching contribution is fully vested after four years of employment at the rate
of 25% per year of employment. Under certain circumstances, the 401(k) Plan
permits participants to make withdrawals or receive loans from the 401(k) Plan
prior to retirement age.
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS
Pursuant to Mr. Berrie's compensation arrangement with the Company, the
Company pays the cost of certain split dollar life insurance policies insuring
the joint lives of Mr. Berrie and his spouse, Mrs. Angelica Berrie, who is a
Director and an employee of the Company. The policies have been assigned to the
Company to secure repayment of the premiums. (See also "Compensation Committee
Report -- Chief Executive Officer" above, "Summary Compensation Table" above,
and "Certain Transactions" below.)
The Company has an agreement with Ricky Chan, Senior Vice
President -- Product Development of the Company, under which Mr. Chan will
receive the following retirement and life insurance benefits: (i) if Mr. Chan is
employed by the Company and reaches the age of 59, he would receive retirement
compensation in the amount of $2,750,000 payable to Mr. Chan (or his designated
beneficiary) at the rate of $250,000 per year for a period of 11 years, or (ii)
if Mr. Chan dies prior to the age of 59 and is employed by the Company at the
time of such death, the Company would pay, to Mr. Chan's designated beneficiary,
a lump sum death
12
<PAGE> 16
benefit by means of a life insurance arrangement, in the amount of $1,000,000.
The foregoing benefits would be in addition to other benefits to which Mr. Chan
is entitled as an employee of the Company.
1999 OPTION GRANTS
The following table sets forth the options granted to the named officers in
the Summary Compensation Table of the Company during the year ended December 31,
1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES PERCENT OF TOTAL STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR 10
OPTIONS GRANTED EXERCISE OR YEAR OPTION TERM
GRANTED TO EMPLOYEES BASE PRICE EXPIRATION ---------------------
NAME (#)(1) IN FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- ---------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Russell Berrie........ -0- -0- -0- -0- -0- -0-
Ricky Chan............ 3,501 1.65 $23.625 1/4/09 $52,016 $131,820
Chris Collins......... 3,128 1.47 23.625 1/4/09 46,474 117,776
Y.B. Lee.............. 3,118 1.47 23.625 1/4/09 46,326 117,399
Arnold Bloom.......... 3,555 1.68 23.625 1/4/09 52,819 133,853
</TABLE>
- ---------------
(1) All options granted vest and become exercisable one year from the date of
grant. In any 12 month period, an option holder may exercise no more than
the number of options received in the most recent grant plus one-third of
the option holder's remaining exercisable options.
------------------------------------------------------
AGGREGATED OPTION EXERCISES IN 1999 AND
YEAR-END OPTION VALUES
The following table sets forth option exercises during 1999 and year-end
option values for the named officers in the Summary Compensation Table of the
Company based upon the closing price of the Common Stock of the Company on the
New York Stock Exchange on December 31, 1999 ($26.25).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES ACQUIRED VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END($)
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Russell Berrie........... -0- -0- -0- -0-
Ricky Chan............... 7,332 $67,249 4,661/3,501 $13,515/$9,190
Chris Collins............ -0- -0- 5,587/3,128 23,459/ 8,211
Y.B. Lee................. -0- -0- 10,576/3,118 70,602/ 8,185
Arnold Bloom............. -0- -0- 7,948/3,555 37,774/ 9,332
</TABLE>
- ---------------
(1) Value is calculated by determining the difference between the price of the
Common Stock underlying the options on the New York Stock Exchange at the
time of exercise and the exercise or base price of the options.
13
<PAGE> 17
CERTAIN TRANSACTIONS
Several warehouse, office and distribution facilities are leased to the
Company by Russell Berrie, Chairman and Chief Executive Officer of the Company,
or trusts for the benefit of members of his immediate family or by a partnership
in which he and Murray Berrie, his brother, are both general partners. The
Company believes that the terms of those leases are no less favorable to the
Company than could have been obtained from an unaffiliated third party. The
Company is also a guarantor under mortgage loan payments on the facilities in
South Brunswick and Oakland, New Jersey. The aggregate amount outstanding on the
loans as of December 31, 1999 was $7,804,000. The table below lists such
facilities, the current rentals and the lease expiration dates.
<TABLE>
<CAPTION>
ANNUAL LEASE
FACILITY RENTAL(1) EXPIRATION(2)
- -------- ---------- -------------
<S> <C> <C>
Petaluma, California........................................ $ 937,000 June 30, 2004
Oakland, New Jersey......................................... 439,285 April 1, 2004
South Brunswick, New Jersey................................. 2,478,522 May 31, 2004
----------
Total.................................................. $3,854,807
==========
</TABLE>
- ---------------
(1) Reflects base rental obligations. Does not include payments for real estate
taxes and certain other items applicable to the premises. Base rentals are
subject to periodic increases during the remainder of the term of certain of
the leases.
(2) Not including renewal options, if any.
---------------------------------------------
The Company paid $196,274 during 1999 to Wilentz, Goldman & Spitzer, P.A.
("Wilentz"), a law firm which provides legal services to the Company. Mr.
Rosner, who is deemed to beneficially own more than five percent of the
Company's Common Stock, is a shareholder and director of Wilentz. See note 2 to
"Security Ownership of Certain Beneficial Owners," above.
The Company paid $81,929 during 1999 to Automatic Data Processing, Inc.
("ADP"), a computerized transaction processing, data communication and
information services company that provides payroll services to the Company. Mr.
Weston, a member of the Company's Board of Directors, is Honorary Chairman of
ADP.
14
<PAGE> 18
APPROVAL OF AMENDMENTS TO THE COMPANY'S 1999 STOCK OPTION AND
RESTRICTED STOCK PLAN, 1999 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS,
1999 STOCK OPTION PLAN, AND 1999 EMPLOYEE STOCK PURCHASE PLAN,
TO REPRICE STOCK OPTIONS AND TO ADJUST THE NUMBER OF OPTIONS
GRANTED IN JANUARY 2000
Effective February 29, 2000, the Board of Directors unanimously approved
and recommended for shareholder adoption amendments to each of:
(a) the Company's 1999 Stock Option and Restricted Stock Plan (the "Stock
Option and Restricted Stock Plan"),
(b) the Company's 1999 Stock Option Plan for Outside Directors (the
"Directors Option Plan"),
(c) the Company's 1999 Stock Option Plan (the "Stock Option Plan"), and
(d) the Company's 1999 Employee Stock Purchase Plan (the "Stock Purchase
Plan"),
(collectively, the "Plans"). The amendments are designed to permit, for grants
of options made during January 2000 only, the repricing of such grants that were
made in accordance with the terms of each of the Plans. Repricing is contingent
upon shareholder approval. In addition, for the Stock Option Plan and the Stock
Option and Restricted Stock Plan, the amendments will result in a recalculation
of the number of options eligible participants will receive effective January
2000.
Under the terms of each of the Plans, options are granted to qualifying
persons in the beginning of each year in which the Plans are in effect. The
exercise price of the options granted under each of the Plans is determined by
the market price of the Company's Common Stock on the date of the option grant.
Under all Plans other than the Stock Purchase Plan, the option exercise price is
the closing price of the Common Stock on the grant date. Under the Stock
Purchase Plan, the option exercise price is 90% of the closing price of the
Common Stock on the grant date.
PURPOSE OF PROPOSED AMENDMENTS
On November 17, 1999, the Company issued a press release announcing that it
was in receipt of a proposal from Evercore Partners, L.L.C. ("Evercore
Partners") to acquire all of the outstanding Common Stock, other than certain
shares owned by Mr. Berrie, at a price of $27.00 per share. Upon issuance of the
press release, the Company's stock price rose immediately from approximately
$20.00 per share prior to the announcement, to approximately $25.00 per share.
As of January 3, 2000, the Company's stock price continued to maintain a level
of approximately $25.00 per share and, accordingly, options granted on that date
were issued with an exercise price of $25.1875 per share.
Discussions between the Company and Evercore Partners continued until
February 14, 2000, at which time the parties announced that discussions were
terminated without agreement on a transaction. The Company's stock price
immediately fell from approximately $25.00 per share to approximately $17.50 per
share.
15
<PAGE> 19
Due to the effect of the pending proposal from Evercore Partners on the
level of the Company's stock price on January 3, 2000, the Board of Directors
has determined that it would be in the best interests of the Company and its
shareholders to adjust the options granted in January 2000 to properly reflect
the market value of the Company's Common Stock following the withdrawal of the
proposed transaction with Evercore Partners. The Board of Directors approved,
subject to shareholder approval, the repricing of the options granted in January
2000 to the price on a date that the Board considered was a reasonable amount of
time after the termination of the discussions between Evercore Partners and the
Company. As approved by the Board of Directors, and subject to shareholder
approval, the repricing will be based upon the closing price of the Company's
Common Stock on February 29, 2000, of $18.375 per share. The options granted in
January 2000 under the Directors Option Plan will be reset to $20.375, which is
$2.00 per share above the $18.375 per share closing price of the Company's
Common Stock on February 29, 2000.
Furthermore, the number of options granted under the Stock Option Plan and
the Stock Option and Restricted Stock Plan will be recalculated, as described in
further detail in "Descriptions of the Plans" below. The recalculations will
result in an increase in the number of options granted under each of these two
plans.
DESCRIPTIONS OF THE PLANS
THE STOCK OPTION AND RESTRICTED STOCK PLAN
Eligibility
The Stock Option and Restricted Stock Plan was adopted by the Board of
Directors and approved by holders of a majority of the shares of the Company's
Common Stock voting at the Company's 1998 Annual Meeting of Shareholders. The
Stock Option and Restricted Stock Plan became effective on January 1, 1999. The
Stock Option and Restricted Stock Plan provides for the grant of stock options
to officers and other key employees of the Company selected by the committee
designated to administer the Plan and who generally have been employed by the
Company for at least 18 months. As of January 1, 2000, there were eleven
eligible participants. The Plan also provides for the award of restricted stock
to certain officers of the Company who have been granted options. The committee
is presently comprised of Messrs. Berrie and Kling, neither of whom is a
participant in the Plan.
Exercise Price
The exercise price for options granted under the Plan for any year is equal
to the closing market price of the Common Stock on the New York Stock Exchange
on the first trading day of each such year. The date of grant for options under
the Plan for calendar year 2000 was January 3; accordingly, the exercise price
for such options is $25.1875.
The Plan provides that a grantee is granted options in each plan year to
purchase shares of Common Stock with a fair market value (determined as of the
date of grant) equal to 25% - 80% (as determined by the committee) of the
employee's annual base salary and prior year's earned commissions, if any.
16
<PAGE> 20
Number of Options Granted
Because the date of grant for calendar year 2000 was January 3, the number
of options granted to each grantee was determined based on a price of $25.1875
and totaled 31,062 options. The proposed amendment will reduce this price to
$18.375, which is equal to the closing market price of the Common Stock on
February 29, 2000, and the options granted for January 2000 will be recalculated
using $18.375 as the market value of the Common Stock on the date of grant. As a
result, approval of the proposed amendment will increase the number of shares
subject to options granted as of January 2000 from 31,062 to 42,581.
Other Plan Terms
Options granted under the Stock Option and Restricted Stock Plan are
subject to an option agreement between the Company and the grantee, will vest
and be exercisable one year after the date of grant and remain exercisable for
ten years from the date of grant. The number of options that may be exercised in
any plan year may not exceed the number of options in the most recent grant plus
one-third of the remaining exercisable options. Exercise must be accompanied by
payment in cash. Upon expiration of an option or forfeiture of restricted stock,
the remaining shares subject to the option and the forfeited restricted shares
may again be subject to options or awards. Options are not transferable other
than by will or under the laws of descent and distribution, provided, however,
that each grantee may transfer all or any portion of his/her options to his/her
spouse and/or lineal descendants and/or a trust for the benefit of the grantee
or any of the foregoing and/or any organization exempt under Section 501(c) of
the Code. All unexpired options may be exercised within 12 months after a
grantee's retirement, death or disability or the remaining option term, if
shorter. If a grantee's employment is terminated for any other reason, any
unexercised options will be canceled immediately, except that if a grantee's
employment is terminated by the Company for reasons other than cause (as defined
in the Plan), options may be exercised (to the extent exercisable on the date of
termination) within thirty days after termination or the remaining option term,
if shorter.
The committee under the Stock Option and Restricted Stock Plan may award
shares of restricted stock to any officer or other key employee who is also
granted an option under the Plan. The proposed amendment to the Stock Option and
Restricted Stock Plan does not affect any award of shares of restricted stock.
Unless terminated sooner as provided therein, the Stock Option and
Restricted Stock Plan will terminate on December 31, 2003, although options
previously granted may be exercised and restrictions on stock previously awarded
may extend beyond that date.
As of December 31, 1999, a total of 321,085 shares of Common Stock were
reserved for grants of options and awards of restricted stock under the Stock
Option and Restricted Stock Plan and a total of 31,038 options were outstanding.
Options Granted and Restricted Stock Awarded in Calendar Year 2000
On January 3, 2000, a total of 31,062 options were granted, each bearing an
exercise price of $25.1875 per share, and a total of 3,176 shares of restricted
stock were awarded to the Company's eleven officers under the Stock Option and
Restricted Stock Plan. This includes the following grants and awards to named
executive officers: (i) 3,811 options granted and 3,176 shares of restricted
stock awarded to Ricky Chan, (ii) 3,053 options granted to Chris Collins, (iii)
3,041 options granted to Y.B. Lee, and (iv) 3,414 options granted to Arnold
Bloom.
17
<PAGE> 21
Effect of Amendment
Upon shareholder approval of the proposed amendment, the stock option
agreements relating to the 31,062 options granted under the Stock Option and
Restricted Stock Plan, each bearing an exercise price of $25.1875 per share,
will be amended to provide a lower option exercise price of $18.375 per share
and an increase in the number of shares subject to the options calculated as if
$18.375 was the closing market price for the Common Stock on January 3, 2000.
This will result in a total grant of options for 42,581 shares of Common Stock
with an exercise price of $18.375 per share. As a result, the number of options
granted to the named executive officers effective January 2000 will be increased
to the following: (i) 5,224 options granted to Ricky Chan, (ii) 4,186 options
granted to Chris Collins, (iii) 4,169 options granted to Y.B. Lee, and (iv)
4,680 options granted to Arnold Bloom.
THE DIRECTORS OPTION PLAN
The Directors Option Plan was adopted by the Board of Directors and
approved by holders of a majority of the shares of the Company's Common Stock
voting at the Company's 1998 Annual Meeting of Shareholders. The Directors
Option Plan became effective on January 1, 1999. The Directors Option Plan
provides for the grant of stock options to members of the Board of Directors who
are not officers or other employees of the Company. Currently, seven persons are
eligible. The Plan is administered by a committee comprised of two Directors or
such greater number, as may be determined by the Board of Directors from time to
time, who are not participants in the Plan. Presently, the committee is
comprised of Russell Berrie and Angelica Berrie.
Under the Directors Option Plan, grantees were each granted options to
purchase 3,000 shares of Common Stock on each of January 1, 1999, and January 1,
2000, at an exercise price equal to the closing market price of the Common Stock
on the New York Stock Exchange on the first trading day of such years. Grantees
will each be granted options to purchase 3,000 shares of Common Stock on January
1, 2001, January 1, 2002 and January 1, 2003 at an exercise price equal to the
closing market price of the Common Stock on the New York Stock Exchange on the
first trading day of each such year.
Options granted under the Plan are subject to an option agreement between
the Company and the grantee, will vest and be exercisable one year after the
date of grant and remain exercisable for ten years from the date of grant.
Options are not transferable other than by will or under the laws of descent and
distribution, provided, however, that each grantee may transfer all or any
portion of his/her options to his/her spouse and/or lineal descendants and/or a
trust for the benefit of the grantee or any of the foregoing and/or any
organization exempt under Section 501(c) of the Code. If the grantee ceases to
be a member of the Board of Directors for reasons other than death or
disability, nonvested options expire immediately and vested options are only
exercisable for 30 days thereafter, or the remaining option term, if shorter. In
the event of the grantee's death or disability, nonvested options shall vest and
all outstanding options may be exercised within 12 months after death or
disability or the remaining option term, if shorter. Exercise must be
accompanied by payment in cash.
Unless terminated sooner as provided therein, the Directors Option Plan
will terminate on December 31, 2003, although options previously granted may be
exercised beyond that date.
As of December 31, 1999, a total of 132,000 shares of Common Stock were
reserved for the grant of options under the Plan and a total of 18,000 options
were outstanding.
18
<PAGE> 22
Effect of Amendment
As noted above, on January 1, 2000, a total of 21,000 options were granted
to the Company's directors not employed by the Company under the Directors
Option Plan, with each such director receiving a grant of 3,000 shares. Upon
shareholder approval of the proposed amendment to the Directors Option Plan, no
additional options will be granted, but the price of the original grants made in
January 2000 will be adjusted from $25.1875, the closing market price of the
Common Stock on the first trading day of such year, to $20.375, which is $2.00
per share greater than the closing market price of the Common Stock on February
29, 2000.
THE STOCK OPTION PLAN
Eligibility
The Stock Option Plan was adopted by the Board of Directors and approved by
holders of a majority of the shares of the Company's Common Stock voting at the
Company's 1998 Annual Meeting of Shareholders. The Stock Option Plan became
effective on January 1, 1999. The Stock Option Plan provides for the grant of
stock options to employees who (i) have been employed by the Company for at
least 18 months (or such shorter period as the committee administering the Plan
may, in its discretion, authorize), (ii) are not members of the Company's Board
of Directors, and (iii) have annual base salaries plus the immediate prior
year's earned commissions, if any, that equal or exceed the amount to be
determined for such plan year by the committee (or such other amount as the
Board of Directors may, from time to time, determine). On January 3, 2000,
employees earning at least $64,120, and who were otherwise eligible, were
entitled to participate in the Stock Option Plan.
154 employees are currently eligible, including certain executive officers
who are not also Directors of the Company. The Plan is administered by a
committee comprised of two Directors or such greater number, as may be
determined by the Board of Directors from time to time, who are not participants
in the Plan. Presently, the committee is comprised of Messrs. Berrie and Kling.
Exercise Price
The exercise price for options granted under the Plan for any year is equal
to the closing market price of the Common Stock on the New York Stock Exchange
on the first trading day of each such year. The date of grant for options under
the Plan for calendar year 2000 was January 3; accordingly, the exercise price
for such options currently outstanding under the plan is $25.1875.
Number of Options Granted
Grantees are granted options in each plan year to purchase shares of Common
Stock with a fair market value (determined as of the date of grant) equal to 25%
of the grantee's annual base salary plus the immediate prior year's earned
commissions, if any.
Other Plan Terms
Options granted under the plan are subject to an option agreement between
the Company and the grantee, will vest and become exercisable one year after the
date of grant, and remain exercisable for ten years from the date of the grant.
The number of options that may be exercised in any calendar year may not exceed
the number of options in the most recent grant plus one-third of the remaining
exercisable options. Exercise must be accompanied by payment in cash.
Options are not transferable other than by will or under the laws of
descent and distribution, provided, however, that each grantee may transfer all
or any portion of his/her options to his/her spouse and/or lineal
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<PAGE> 23
descendants and/or a trust for the benefit of the grantee or any of the
foregoing and/or any organization exempt under Section 501(c) of the Code. All
unexpired options may be exercised within 12 months after a grantee's
retirement, death or disability (or the remaining period of the option if
shorter). If a grantee's employment is terminated for any other reason, any
unexercised options will be cancelled immediately, except that if the employment
was terminated by the Company for other than cause (as defined in the Plan),
options may be exercised (to the extent exercisable on the date of termination)
for 30 days after termination or the remaining option term, if shorter.
Unless terminated sooner as provided therein, the Stock Option Plan will
terminate on December 31, 2003, although options previously granted may be
exercised beyond that date.
As of December 31, 1999, a total of 1,855,404 shares of Common Stock were
reserved for the grant of options under the Stock Option Plan. Upon expiration
or cancellation of an option, the remaining shares subject to the option may
again be subject to options. As of December 31, 1999, a total of 165,243 options
were outstanding.
Options Granted in Calendar Year 2000
On January 3, 2000, a total of 157,583 options were granted to the
Company's employees under the Stock Option Plan, each bearing an exercise price
of $25.1875 per share.
Effect of Amendment
Upon shareholder approval of the proposed amendment, the stock option
agreements relating to the 157,583 options granted under the Stock Option Plan
will be amended to provide a lower option exercise price of $18.375 and an
increase in the number of shares subject to the options calculated as if $18.375
was the closing market price for the Common Stock on January 3, 2000. This will
result in an increase in the total grant of the number of shares of common stock
subject to options granted as of January 2000 from 157,583 to 216,035 shares,
with an exercise price of $18.375 per share.
THE STOCK PURCHASE PLAN
The Stock Purchase Plan was adopted by the Board of Directors and approved
by holders of a majority of the shares of the Company's Common Stock voting at
the Company's 1998 Annual Meeting of Shareholders. The Stock Purchase Plan
became effective on January 1, 1999. The purpose of the Stock Purchase Plan is
to provide the Company's employees the opportunity, through regular payroll
savings, to acquire Common Stock at a discount from market price, and thereby
offer employees a share in the growth of the Company. The Stock Purchase Plan
provides for the grant of stock options to full-time employees of the Company
who have at least 18 consecutive months of service with the Company and whose
annual base salaries plus the immediate prior year's earned commissions, if any,
is less than the amount to be determined for such plan year by the committee (or
such other amount as the Board of Directors may, from time to time, determine).
As of March 3, 2000, there were 227 persons participating in the Plan. The Plan
is administered by a committee comprised of two Directors or such greater
number, as may be determined by the Board of Directors from time to time, who
are not participants in the Plan. Presently, the committee is comprised of
Messrs. Berrie and Kling. No Director or executive officer participates or will
participate in the Plan.
As of December 31, 1999, a total of 132,236 shares of Common Stock were
reserved for issuance for grants of options under the Plan. As of the first
trading day of each plan year beginning on or after January 1, 1999, each
eligible employee will be granted an option to purchase the number of full
shares of Common Stock which may be purchased with the amount credited to his
account as described below. In each plan year, an eligible employee may elect to
participate in the Plan by filing a payroll deduction authorization form for up
20
<PAGE> 24
to 10% (in whole percentages) of his annual base salary plus commissions, if
any. These funds are held for the employee and are used to exercise his option
on the last trading day of the plan year, or any other day in December which the
committee designates, unless the employee elects not to exercise his option. If
an employee elects not to exercise his option, the total amount credited to his
account during that plan year, with interest, is returned to him, and his option
expires. An employee may withdraw from the Plan at any time, at which time
payroll deductions will cease, the total amount credited to his account, with
interest, will be either returned to him and the option granted to him for such
year will terminate, or, at his election, such amount will be used at the end of
the year to purchase the number of full shares of Common Stock which may be
purchased with the amount credited to his account.
The exercise price of options granted on the first trading day of each year
is 90% of the closing market price of the Common Stock on the New York Stock
Exchange on that day. Options are not transferable other than by will or under
the laws of descent and distribution. All unexercised options shall expire upon
termination of employment other than by reason of retirement. In the event of
expiration, the total amount credited to the employee's account, with interest,
will be returned to him or to his personal representative.
Unless terminated sooner as provided therein, the Stock Purchase Plan will
terminate on December 31, 2003.
Effect of Amendment
Upon shareholder approval of the proposed amendment to the Stock Purchase
Plan, the option price will be adjusted from 90% of $25.1875, the closing market
price of the Common Stock on the first trading day of 2000, to 90% of $18.375,
the closing market price of the Common Stock on February 29, 2000.
PROPOSED AMENDMENTS
The amendments to each Plan for which shareholder approval is being sought
shall read as follows:
THE STOCK OPTION AND RESTRICTED STOCK PLAN
The Stock Option and Restricted Stock Plan shall be amended by adding the
following Section 5.13:
5.13 January 2000 Option Exercise Price. Notwithstanding any provision of
this Plan to the contrary, the per share exercise price of any Option granted
hereunder in January 2000 shall be equal to $18.375, which is equal to the
closing market price of the Common Stock on February 29, 2000, on the New York
Stock Exchange or such other national securities exchange as the Common Stock
may be traded.
The Board of Directors recommends a vote FOR approval of the proposed
amendment to the Stock Option and Restricted Stock Plan, and proxies not marked
to the contrary will be so voted.
THE DIRECTORS OPTION PLAN
The Directors Option Plan shall be amended by adding the following Section
4.4:
4.4 Notwithstanding any provision of this Plan to the contrary, the price
per share of options granted in January 2000 will be $20.375, which is equal to
$2.00 per share greater than $18.375, the closing market price of the Common
Stock on February 29, 2000, on the New York Stock Exchange or such other
national securities exchange as the Common Stock may be traded.
The Board of Directors recommends a vote FOR approval of the proposed
amendment to the Directors Option Plan, and proxies not marked to the contrary
will be so voted.
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<PAGE> 25
THE STOCK OPTION PLAN
The Stock Option Plan shall be amended by adding the following Section
5.13:
5.13 January 2000 Exercise Price. Notwithstanding any provision of this
Plan to the contrary, the per share exercise price of any Option granted
hereunder in January 2000 shall be $18.375, which is equal to the closing market
price of the Common Stock on February 29, 2000, on the New York Stock Exchange
or such other national securities exchange as the Common Stock may be traded.
The Board of Directors recommends a vote FOR approval of the proposed
amendment to the Stock Option Plan, and proxies not marked to the contrary will
be so voted.
THE STOCK PURCHASE PLAN
The Stock Purchase Plan shall be amended by adding the following Section
5.4:
5.4 Notwithstanding any provision of this Plan to the contrary, during
calendar year 2000 an Option will be granted to each Participant as of the first
trading day of each Plan Year to purchase from the Company the number of full
shares of Common Stock that may be purchased at the Year 2000 Option Price with
the aggregate amount that will be credited to him in the Account, with interest
during that Plan Year. For purposes of this Section 5.4, "Year 2000 Option
Price" shall mean 90% of $18.375, which is equal to the closing market price of
the Common Stock on February 29, 2000 on the New York Stock Exchange or such
other national securities exchange as the Common Stock may be traded.
The Board of Directors recommends a vote FOR approval of the proposed
amendment to the Stock Purchase Plan, and proxies not marked to the contrary
will be so voted.
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the New York Stock Exchange. Officers,
directors and greater than ten percent shareholders are required to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the fiscal year
ended December 31, 1999, all filing requirements applicable to its officers,
directors and greater than ten percent shareholders were complied with on a
timely basis except that (i) Mr. Jeffery Schaum, Chief Operating Officer, filed
a late report on Form 3, (ii) Mr. Slauson filed two late reports on Form 4 (one
with respect to five transactions and one with respect to four transactions,
each including transactions for the exercise of options and simultaneous sale of
shares of Common Stock being counted as separate transactions); (iii) Mr. Berrie
filed a late report on Form 4 (with respect to four transactions, including
transactions relating to trusts of which Mr. Berrie is a trustee); and (iv) Mr.
Rosner failed to timely file two reports on Form 4 (with respect to nine
transactions, including transactions relating to trusts of which Mr. Rosner is a
trustee, all of which were reported on a Form 5 filed by Mr. Rosner).
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<PAGE> 26
OTHER MATTERS
The Board of Directors knows of no business to be presented at the meeting
other than that set forth in the accompanying Notice of Annual Meeting of
Shareholders. However, if other matters properly come before the meeting, the
holders of the proxies intend to vote the proxies in accordance with their best
judgment on such matters.
Until August 1997, Coopers & Lybrand L.L.P. served as the Company's
independent accountants. The Board of Directors, upon the recommendation of the
Audit Committee, selected Arthur Andersen LLP to be the Company's independent
accountants for the remainder of 1997, for 1998 and for 1999. The Board of
Directors has not yet selected independent public accountants for 2000 and is
awaiting the recommendation of the Audit Committee in this regard. It is
expected that only representatives of Arthur Andersen will be present at the
meeting to respond to appropriate questions and, if they so desire, to make a
statement.
VOTING PROCEDURES
Election of Directors: Directors are elected by a plurality of the votes
cast at the annual meeting. Only shares that are voted in favor of a particular
nominee will be counted toward such nominee's achievement of a plurality. Shares
present at the meeting that are not voted for a particular nominee or shares
present by proxy where the shareholder properly withheld authority to vote for
such nominee (including broker non-votes) will not be counted toward such
nominee's achievement of a plurality.
Other Matters: The affirmative vote of the holders of a majority of the
shares of Common Stock voting at the meeting (in person or by proxy) is required
for a particular matter to be deemed an act of the shareholders. Shares electing
to abstain are considered present at the meeting for the particular matter, but
since they are not affirmative votes for the matter, abstentions have the same
effect as votes against the matter. In the event of broker non-votes, shares are
not considered present at the meeting for the particular matter as to which the
broker withheld authority. Broker non-votes are not counted in respect of the
matter, but have the practical effect of reducing the number of affirmative
votes required to achieve a majority for such matter by reducing the total
number of shares from which the majority is calculated.
SHAREHOLDER PROPOSALS
In order to be included in the proxy statement and form of proxy relating
to the 2001 Annual Meeting of Shareholders, proposals of shareholders intended
to be presented at such meeting must be received by the Company on or before
December 13, 2000. Any such proposals should be submitted in writing to:
Secretary, Russ Berrie and Company, Inc., 111 Bauer Drive, Oakland, New Jersey
07436.
By Order of the Board of Directors
/s/ Arnold S. Bloom
ARNOLD S. BLOOM
Secretary
Oakland, New Jersey
April 7, 2000
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<PAGE> 27
RUSS BERRIE AND COMPANY, INC.
111 Bauer Drive
Oakland, New Jersey 07436
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Russell Berrie and Ilan Kaufthal, and each of
them, as proxies of the undersigned, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote as designated
below all the shares of Common Stock of Russ Berrie and Company, Inc. held of
record by the undersigned on March 24, 2000, at the Annual Meeting of
Shareholders to be held on May 9, 2000 and any adjournment thereof.
<TABLE>
<CAPTION>
<S> <C>
Election of Directors. Nominees: (Change of Address/Comments)
Raphael Benaroya, Angelica Berrie, Russell Berrie, ___________________________________
Ilan Kaufthal, Charles Klatskin, Joseph Kling, ___________________________________
William A. Landman, Sidney Slauson, Josh S. Weston ___________________________________
</TABLE>
Your vote for the election of Directors and other proposals submitted to
Shareholders may be indicated on the reverse.
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR all Proposals.
A VOTE FOR ALL PROPOSALS IS RECOMMENDED.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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<PAGE> 28
Please mark
your votes as [X]
indicated in
this example.
<TABLE>
<CAPTION>
FOR WITHHOLD
all nominees listed on the AUTHORITY
front of this card (except as to vote for all nominees listed
marked to the contrary below). on the front of this card
<S> <C> <C>
1. Election of Directors to serve [ ] [ ]
until the 2001 Annual Meeting of
the Shareholders and until their
successors shall have been elected
and qualified.
INSTRUCTION: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE, CHECK
THE BOX MARKED "FOR" ABOVE AND WRITE
THAT NOMINEE'S NAME ON THE LINE
PROVIDED.
________________________________________
</TABLE>
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this Proxy will be
voted FOR all Proposals.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Adoption of amendment to the 1999 Stock Option and
Restricted Stock Plan. [ ] [ ] [ ]
3. Adoption of amendment to the 1999 Stock Option Plan
for Outside Directors. [ ] [ ] [ ]
4. Adoption of amendment to the 1999 Stock Option Plan. [ ] [ ] [ ]
5. Adoption of amendment to the 1999 Employee Stock
Purchase Plan. [ ] [ ] [ ]
6. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the meeting.
</TABLE>
Signature_____________________________________________Date:_______________, 2000
Signature if held jointly_____________________________________Date:_______, 2000
IMPORTANT:Please sign exactly as name appears above. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please sign your name and indicate full
title as such. If a corporation, an authorized officer should sign his/her name
and indicate his/her title. If a partnership, please sign in partnership name by
authorized person.
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