<PAGE> 1
SCHEDULE 14A INFORMATION
(RULE 14A-101)
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:
<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 sec.240.1a-11(C) or sec.240.1a-12
</TABLE>
BEAUTICONTROL COSMETICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
BEAUTICONTROL COSMETICS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(I)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(I)(3).
/ / 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:
------------------------------------------------------------------------
(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;*
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
/ / 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:
------------------------------------------------------------------------
Notes:
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
BEAUTICONTROL COSMETICS, INC.
2121 MIDWAY ROAD
CARROLLTON, TX 75006
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 2, 1996
To the Holders of Common Stock of
BEAUTICONTROL COSMETICS, INC.:
Notice is hereby given that the 1996 Annual Meeting of Stockholders of
BeautiControl Cosmetics, Inc., a Delaware corporation (the "Company"), will be
held at the Company's executive offices, 2121 Midway Road, Carrollton, Texas, on
Tuesday, April 2, 1996 at 10:00 A.M., Dallas, Texas time, for the following
purposes:
(1) To elect three persons to serve as directors until the 1999 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified;
(2) To consider and act upon a proposal to adopt the Company's 1996
Incentive Stock Option Plan;
(3) To consider and act upon a proposal to adopt the Company's 1996
Non-Qualified Stock Option Plan; and
(4) To transact any other proper business brought before the meeting
or any adjournments or postponements thereof.
The Board of Directors has fixed February 2, 1996, at the close of
business, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the meeting and any adjournment or postponement
thereof. Only holders of record of the Company's Common Stock on that date are
entitled to vote on matters coming before the meeting and any adjournment or
postponement thereof. A complete list of stockholders entitled to vote at the
meeting will be maintained at the Company's offices at 2121 Midway Road,
Carrollton, Texas, for ten days prior to the meeting.
Please advise the Company's transfer agent, Society National Bank, 1201 Elm
Street, Suite 5050, Dallas, Texas 75270, of any change in your address.
Your vote is important. Whether or not you plan to attend the meeting in
person, please mark, sign, date, and return the enclosed proxy in the envelope
provided, which requires no postage if mailed within the United States. With
regard to the election of directors, votes may be cast in favor or withheld;
votes that are withheld will be excluded entirely from the vote and will have no
effect.
A broker is entitled to vote on the election of directors if such broker
holds shares in street name for a customer who does not deliver voting
instructions. Under applicable Delaware law, a broker non-vote resulting from
the failure to deliver voting instructions to a broker will have no effect on
the outcome of the election of directors.
By Order of the Board of Directors,
/s/ M. DOUGLAS TUCKER
M. DOUGLAS TUCKER
Senior Vice President -- Finance,
Secretary and Treasurer
Carrollton, Texas
February 27, 1996
<PAGE> 3
BEAUTICONTROL COSMETICS, INC.
2121 MIDWAY ROAD
CARROLLTON, TEXAS 75006
---------------------------------------------
PROXY STATEMENT
---------------------------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 2, 1996
The accompanying proxy, mailed together with this Proxy Statement to
stockholders on or about February 27, 1996, is solicited by BeautiControl
Cosmetics, Inc. (the "Company") in connection with the Annual Meeting of
Stockholders to be held on April 2, 1996. The proxy may be revoked by the
stockholder at any time prior to its exercise by executing and returning a proxy
bearing a later date, by giving written notice of revocation to the Secretary of
the Company, or by attending the meeting and voting in person.
As stated in the Notice to which this Proxy Statement is attached, matters
to be acted upon at the meeting include (1) election of three directors to the
Board of Directors to serve as directors until the 1999 Annual Meeting of
Stockholders or until their successors are duly elected and qualified; (2)
consideration of a proposal to adopt the Company's 1996 Incentive Stock Option
Plan; and (3) consideration of a proposal to adopt the Company's 1996
Non-Qualified Stock Option Plan.
All properly executed, unrevoked proxies received before the meeting will
be voted in accordance with the directions contained therein. When no direction
has been given by a stockholder returning a proxy, the proxy will be voted FOR
the election as directors of the nominees named in this Proxy Statement, FOR the
adoption of the Company's Incentive Stock Option Plan, and FOR the adoption of
the Company's Non-Qualified Stock Option Plan.
The close of business on February 2, 1996, has been set as the record date
for determination of stockholders entitled to vote at the meeting. Holders of
the Common Stock will be entitled to one vote per share on all business at the
meeting.
On the record date, there were outstanding and entitled to vote 5,912,061
shares of Common Stock. The presence, in person or by proxy, of a majority of
the outstanding shares of Common Stock entitled to vote at the meeting will
constitute a quorum.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of January 19, 1996, the number and
percentage of outstanding shares of Common Stock beneficially owned by all
persons known by the Company to own more than 5% of the Company's Common Stock,
by each director of the Company, by each nominee for director, by each named
executive officer, and by all officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
---------------------------------------------------------- ------------ --------
<S> <C> <C>
Jinger L. Heath........................................... 1,503,887(2) 22.8%
2121 Midway Rd.
Carrollton, Texas 75006
Richard W. Heath.......................................... 1,503,887(2) 22.8%
2121 Midway Rd.
Carrollton, Texas 75006
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
---------------------------------------------------------- ------------ --------
<S> <C> <C>
J. Robert Ward-Burns...................................... 40,000(3) *
2121 Midway Rd.
Carrollton, Texas 75006
Henry H. Dickerson, Jr.................................... 67,500(4)(10) 1%
8333 Douglas
Suite 1500
Dallas, Texas 75225
Charles M. Diker.......................................... 339,625(5) 5.1%
One New York Plaza -- 31st Floor
New York, New York 10004
Robert S. Folsom.......................................... 250,500(6) 3.8%
16475 Dallas Parkway
Dallas, Texas 75248
Jo-Anne C. Jaeger......................................... 44,060(7) *
2121 Midway Rd.
Carrollton, Texas 75006
Denise I. Lites........................................... 0 *
3729 Maplewood Avenue
Dallas, Texas 75205
Clifton R. Sanders........................................ 16,210(8) *
2121 Midway Rd.
Carrollton, Texas 75006
A. Starke Taylor, Jr...................................... 33,750(9) *
16800 Dallas Parkway
Dallas, Texas 75248
Joel T. Williams, Jr...................................... 69,750(4) 1%
P.O. Box 12150
Dallas, Texas 75225
All officers and directors as a group (16 persons)........ 3,938,727(11) 59.6%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise noted, each of the listed individuals has sole voting
power for the shares beneficially owned.
(2) Includes options to purchase 150,000 shares of Common Stock exercisable
within 60 days.
(3) Includes options to purchase 40,000 shares of Common Stock exercisable
within 60 days.
(4) Includes options to purchase 67,500 shares of Common Stock exercisable
within 60 days.
(5) Includes options to purchase 90,000 shares of Common Stock exercisable
within 60 days. Includes 12,125 shares of Common Stock which are indirectly
owned by Mr. Diker and for which Mr. Diker shares voting and investment
power. Does not include 11,250 shares of Common Stock owned by the wife of
Mr. Diker, for which Mr. Diker disclaims beneficial ownership.
(6) Includes options to purchase 22,500 shares of Common Stock exercisable
within 60 days. Does not include 3,000 shares of Common Stock owned by the
wife of Mr. Folsom, for which Mr. Folsom disclaims beneficial ownership.
(7) Includes options to purchase 44,060 shares of Common Stock exercisable
within 60 days.
(8) Includes options to purchase 16,210 shares of Common Stock exercisable
within 60 days.
2
<PAGE> 5
(9) Includes options to purchase 33,750 shares of Common Stock exercisable
within 60 days. Does not include 55,205 shares of Common Stock owned by the
wife of Mr. Taylor, for which Mr. Taylor disclaims beneficial ownership.
(10) Does not include 8,625 shares of Common Stock owned by the wife of Mr.
Dickerson, for which Mr. Dickerson disclaims beneficial ownership.
(11) Includes options to purchase 740,432 shares of Common Stock exercisable
within 60 days.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation divides the Board of Directors
into three classes. The term of office of one class of directors expires at this
Annual Meeting of Stockholders. A second class of directors will serve until the
1997 Annual Meeting of Stockholders, and a third class of directors will serve
until the 1998 Annual Meeting of Stockholders. Richard W. Heath, Charles M.
Diker and Joel T. Williams, Jr. will stand for election at this Annual Meeting
for a three-year term of office expiring at the 1999 Annual Meeting of
Stockholders or until their successors are duly elected and qualified. Proxies
cannot be voted for the election of more than three persons to the Board.
The Company is informed that Mr. Heath, Mr. Diker and Mr. Williams are
willing to serve as directors. However, if Mr. Heath, Mr. Diker or Mr. Williams
should decline or become unable to serve as a director for any reason, votes
will be cast instead for a substitute nominee designated by the Board of
Directors or, if none is so designated, will be cast according to the judgment
of the person or persons voting the proxy.
The following table sets forth certain information as to the directors of
the Company as of January 1, 1996.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES DIRECTOR
NAME AND AGE WITH THE COMPANY SINCE
- ------------------------------ --------------------------------------------- --------
<S> <C> <C>
NOMINEES
--------
Present Term Expiring in 1996
Richard W. Heath, 53 Director, President, and Chief Executive
Officer 1981
Charles M. Diker, 61 Director 1987
Joel T. Williams, Jr., 75 Director 1986
DIRECTORS CONTINUING IN OFFICE
------------------------------
Present Term Expiring in 1997
Robert S. Folsom, 68 Director 1985
A. Starke Taylor, Jr., 73 Director 1985
Denise I. Lites, 40 Director 1995
Present Term Expiring in 1998
Jinger L. Heath, 43 Chairman of the Board of Directors 1981
Henry H. Dickerson, Jr., 69 Director 1985
J. Robert Ward-Burns, 51 Director, Executive Vice President and Chief
Operating Officer 1993
</TABLE>
3
<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
Jinger L. Heath is a founder of the Company and has been Chairman of the
Board of Directors of the Company since its inception in January 1981. Ms. Heath
conceived the concept of free color and image analysis supported by color-coded
cosmetics and image improvement products to be marketed through a sales force of
career-oriented women. She identifies the Company's product needs and manages
the development and quality of the Company's skin care, cosmetics and
accessories. Ms. Heath is also Chairman of the Board of the Company's division,
BeautiControl Research Institute.
Richard W. Heath is a founder of the Company and has been President, Chief
Executive Officer, and a director of the Company since its inception in January
1981. Mr. Heath has over 28 years' experience in the direct sales industry. Mr.
Heath currently serves as a director of Haggar Corp., a public company.
J. Robert Ward-Burns has been Executive Vice President, Chief Operating
Officer and a director of the Company since July 1993. Prior to joining the
Company, Mr. Ward-Burns was with Stanhome Direct Selling Group for 13 years
where he served as President from 1988 to 1993.
Robert L. Esson, 51, has been Senior Vice President -- Manufacturing of the
Company since November 1995 and was Vice President -- Manufacturing prior to
that and since April 1994 and assumed responsibility for the Distribution
Department in August 1994. Prior to joining the Company, Mr. Esson was with
Lockwood Greene Engineers from September 1991 as a management consultant. Prior
to September 1991, Mr. Esson was associated with Peachtree Doors for eight years
as a General Manager and prior to that was with the Quaker Oats Company for
thirteen years in operational management.
Carl A. Flowers, 46, has been Vice President -- Sales Promotion of the
Company since November 1991. Prior to that time and since 1983, Mr. Flowers was
Director of Sales Promotion. His responsibilities include special events, sales
incentives, awards and recognition.
Robert S. Heath, 33, has been Senior Vice President -- Sales of the Company
since November 1995 and was Vice President -- Sales Development prior to that
and since May 1992. Prior to that time, Mr. Heath was Director of Sales
Promotion from November 1991 to May 1992, Director of Distribution from January
1990 to November 1991, and Operations Manager from November 1988 to January
1990.
Jo-Anne C. Jaeger, 52, has been Senior Vice President -- Marketing
Strategies of the Company since November 1991. Ms. Jaeger joined the Company in
April 1990 as Vice President -- Product Marketing. Prior to joining the Company,
Ms. Jaeger was with Avon Products, Inc. for 15 years where she served as Vice
President -- Sales Planning for the last four years.
Linda K. Pottenger, 46, has been Vice President -- Field and Information
Services of the Company since December 1993. Prior to that time and since March
1992, she was Vice President -- Information Technology, Strategic and Quality
Planning. Prior to that time, Ms. Pottenger was Consulting Services Manager for
Hewlett-Packard from 1982 to 1992.
Clifton R. Sanders, 50, has been Senior Vice President -- Research and
Development of the Company since November 1991. Prior to that time and since
December 1990, Mr. Sanders was Vice President -- Research and Development of the
Company. He joined the Company as Managing Director -- Research and Development
in October 1989. Prior to joining the Company, Mr. Sanders was Vice
President -- Product Development at Mary Kay Cosmetics for ten years. Mr.
Sanders is also President of the Company's division, BeautiControl Research
Institute.
M. Douglas Tucker, 52, has been Senior Vice President -- Finance and Chief
Financial Officer since April 1995 and Secretary and Treasurer of the Company
since August 1995. Prior to that time and from April 1993, Mr. Tucker was a
business and financial consultant. From July 1990 to April 1993, Mr. Tucker was
Vice President-Finance at The BOC Group Americas. Prior to July 1990, Mr. Tucker
was with Tambrands, Inc. one year as International Director of Finance and with
General Foods Corporation twenty-one years in financial management.
4
<PAGE> 7
Henry H. Dickerson, Jr. has been a director of the Company since June 1985.
Since 1964, Mr. Dickerson has been Chairman of the Board of Directors of Hank
Dickerson & Company, a commercial real estate brokerage company. Mr. Dickerson
currently serves as a director of Metroplex Bancshares, Inc.
Charles M. Diker has been a director of the Company since May 1987. Since
1986, Mr. Diker has been Chairman of the Board of Directors of Cantel Industries
Inc. Mr. Diker currently serves as a director of Chyron Corporation,
International Specialty Products, Inc. and Data Broadcasting Corporation.
Robert S. Folsom has been a director of the Company since June 1985. Mr.
Folsom is Chairman of the Board of Directors of Folsom Properties, Inc., a real
estate development firm. Mr. Folsom served as Mayor of the City of Dallas from
1976 to 1981. Mr. Folsom currently serves as a director of DSC Communications
Corporation.
Denise I. Lites has been a director of the Company since October 1995. Ms.
Lites, who is President and founder of Bright Lites Marketing Advisors, is also
an attorney and serves as a Director and member of the Executive Committee of
the Dallas Stars hockey team. Ms. Lites also serves on the Board of Directors
for Little Caesar Enterprises, Inc. and was Senior Executive Vice President of
Little Caesar Enterprises, Inc. from 1987 to 1993.
A. Starke Taylor, Jr. has been a director of the Company since June 1985.
From 1978 until 1987, Mr. Taylor was Chairman of the Board of Directors of
Graylor Investments, a private investment firm. Mr. Taylor served as Mayor of
the City of Dallas from 1983 to 1987. Mr. Taylor currently serves as President
of Taylor Investments, a private investment firm.
Joel T. Williams, Jr. has been a director of the Company since January
1986. From 1985 to 1989, Mr. Williams was an advisory director of Bright Banc
Savings Association. From 1969 to 1985, Mr. Williams was Chairman of the Board
and Chief Executive Officer of Texas Federal Savings and Loan Association.
Richard W. Heath and Jinger L. Heath are husband and wife. Robert S. Heath
is the son of Richard W. Heath. There are no other family relationships between
other directors or executive officers of the Company.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
GENERAL
The Board of Directors has established a Compensation Committee, an Audit
Committee, and a Nominating Committee. The Company's Bylaws provide that the
Compensation Committee and the Audit Committee are required to be comprised of
directors who are not employees of the Company.
The Compensation Committee, currently composed of Messrs. Dickerson,
Folsom, and Taylor, met one time during the fiscal year ended November 30, 1995.
This committee reviews and approves salaries and bonuses of executive officers
and administers the Company's Incentive Stock Option Plan, Non-Qualified Stock
Option Plan, and Special Stock Option Plan.
The Audit Committee, currently composed of Ms. Lites, Messrs. Williams and
Diker, met three times during the fiscal year ended November 30, 1995. This
committee recommends to the Board of Directors the appointment of independent
auditors, reviews the plan and scope of audits, reviews the Company's
significant accounting policies and internal controls, and has general
responsibility for related matters.
The Nominating Committee, currently composed of Messrs. Folsom and Taylor,
met one time during the fiscal year ended November 30, 1995. This committee
nominates persons for election to the Board of Directors.
The Board of Directors held six meetings during the fiscal year ended
November 30, 1995. None of the directors attended fewer than 75% of the meetings
of the Board of Directors and its committees on which they served.
5
<PAGE> 8
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not officers or employees of the
Company receive an annual fee of $12,000 together with $1,500 for each
directors' meeting they attend and $750 for each committee meeting they attend.
Directors are reimbursed for expenses relating to attendance at meetings.
SPECIAL STOCK OPTION PLAN
The Company's Special Stock Option Plan provides for the granting of
options to purchase a maximum of 412,500 shares of Common Stock to non-employee
directors of the Company. Under the terms of the Special Plan, a non-employee
director receives an automatic grant of options for 2,500 shares of Common Stock
when such person first becomes a director of the Company. Additional options to
purchase 1,000 shares of Common Stock are automatically granted to non-employee
directors annually if the Company's net income is equal to or greater than 105%
of net income for the previous year. All grants of options under the Special
Stock Option Plan are made automatically and without any discretion on the part
of the Compensation Committee with respect to the grantee, the number of options
granted and the exercise price of the options. The Special Stock Option Plan
requires that the exercise price for each option be equal to 100% of the fair
market value of the Common Stock on the date of the grant. Each option will
expire ten years from the date of grant and no option is exercisable until one
year from the date of grant. Notwithstanding any other restriction in the
Special Stock Option Plan, options will become immediately exercisable upon a
reorganization, merger or consolidation of the Company or a change in control of
the Company.
At November 30, 1995, there were outstanding options to purchase 261,250
shares of Common Stock under the Special Stock Option Plan.
CERTAIN TRANSACTIONS
Beginning November 20, 1995, Ms. Denise I. Lites, a member of the Board of
Directors of the Company, signed a consulting agreement with the Company to
provide consulting services for a minimum of two days per week at a rate of $200
per hour for a period of up to six months with a potential bonus to be paid at
the end of 1996 based on the Company's 1996 increase in sales over 1995 results.
On April 24, 1992, Mr. Carl A. Flowers, the Company's Vice
President -- Sales Promotion, borrowed $115,137 from the Company. This
indebtedness is evidenced by a promissory note and bears interest at the prime
rate. The largest principal amount outstanding on this loan during fiscal 1995
was $89,697. On February 15, 1996, the principal amount outstanding on this loan
was $75,362.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued by
the Company for services rendered during the fiscal years ended November 30,
1995, 1994 and 1993 to the Company's Chief Executive Officer and the four other
most highly compensated executive officers whose total cash compensation for the
year ended November 30, 1995 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
------------------------------------------------ LONG-TERM
NAME AND OTHER ANNUAL OPTION INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARDS(#) PAYOUTS($) COMPENSATION
- ------------------------------ ---- --------- -------- ------------------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard W. Heath 1995 358,740 220,946 62,475 0 N/A 0
President and Chief 1994 340,000 302,224 0 50,000 N/A
Executive Officer 1993 316,660 272,390 0 75,000 N/A
Jinger L. Heath 1995 358,740 220,946 106,837(2) 0 N/A 0
Chairman of the Board 1994 340,000 302,224 0 50,000 N/A
1993 316,660 272,390 0 75,000 N/A
J. Robert Ward-Burns 1995 293,748 159,421 0 25,000 N/A 6,350(3)
Executive Vice President 1994 275,000 204,331 0 0 N/A
And Chief Operating 1993* 114,580 100,000 0 100,000 N/A
Officer
Jo-Anne C. Jaeger 1995 147,883 10,000 0 5,000 N/A 3,712(4)
Senior Vice President -- 1994 143,000 37,310 0 0 N/A
Marketing Strategies 1993 135,541 20,000 0 13,500 N/A
Clifton R. Sanders 1995 162,666 15,000 0 10,000 N/A 2,406(4)
Senior Vice President -- 1994 135,333 50,000 0 0 N/A
Research and Development 1993 116,750 30,000 0 7,000 N/A
</TABLE>
- ---------------
* Hired July 1, 1993.
(1) Exceeding the lesser of $50,000 or 10% of salary and bonus.
(2) Includes $50,000 for wardrobe for numerous video productions, stage and
television appearances.
(3) Premium for term life insurance and Company match for 401(k) plan.
(4) Company match for 401(k) plan.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options during fiscal 1995 to the individuals named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- -------------------------------------------------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR A
GRANTED TO PERIOD OF TEN
EMPLOYEES YEARS($)(2)
OPTIONS IN FISCAL EXERCISE EXPIRATION --------------------
NAME GRANTED(#) YEAR PRICE($/SH) DATE 5% 10%
- ------------------------------------------ ---------- ---------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Heath.......................... N/A
Jinger L. Heath........................... N/A
J. Robert Ward-Burns...................... 25,000(1) 28.2 14.00 12/27/04 26,682 249,803
Jo-Anne C. Jaeger......................... 5,000(1) 5.6 14.00 12/27/04 5,336 49,961
Clifton R. Sanders........................ 10,000(1) 11.3 14.00 12/27/04 10,673 99,921
</TABLE>
7
<PAGE> 10
- ---------------
(1) Options are exercisable at twenty percent per year beginning one year from
date of grant.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall market conditions. There can be
no assurance that the amounts reflected in this table will be achieved. The
exercise price of the options for which this calculation was made is above
the current market value of the stock. The market value as of November 30,
1995 ($9.25) was used to compute this potential realizable value.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT
FISCAL YEAR END
The following table provides information, with respect to the named
executive officers, concerning the exercise of options during the last fiscal
year and unexercised options held as of November 30, 1995.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Heath................ N/A N/A 150,000 0 112,500 0
Jinger L. Heath................. N/A N/A 150,000 0 112,500 0
J. Robert Ward-Burns............ N/A N/A 40,000 85,000 60,000 90,000
Jo-Anne C. Jaeger............... N/A N/A 40,730 19,420 5,850 8,775
Clifton R. Sanders.............. N/A N/A 12,980 19,020 3,300 5,400
</TABLE>
- ---------------
(1) Based on closing price of $9.25 for the Common Stock on November 30, 1995,
the Company's fiscal year-end.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During fiscal 1995, the Compensation Committee consisted of Messrs.
Dickerson, Folsom, and Taylor. None of the members of the Compensation Committee
has ever been an officer or employee of the Company. During fiscal 1995, no
executive officer of the Company served as a member of the board of directors or
compensation committee of another company one of whose executive officers served
on the Company's Board of Directors or Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE ON ANNUAL COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for overseeing all stock option plans, setting the compensation for
the Chief Executive Officer ("CEO") and the Chairman of the Board ("Chairman"),
and providing guidelines to the CEO for determining the annual compensation of
other officers.
Executive Officer Compensation Other than CEO and Chairman
The Committee believes that total compensation for the Company's officers
must be in amounts sufficient to attract, retain and motivate key employees,
while at the same time maintaining reasonable linkage between executive
compensation and Company performance.
The Committee sets guidelines for officer pay based upon industry levels.
As in prior years, 1995 base salaries were set at mid-range pay levels when
compared to similar companies in the industry, with potential additional
compensation to be made through cash bonuses. In 1995, cash bonuses for all
officers other than the Chief Operating Officer, CEO and Chairman, were based on
a combination of individual performance and Company performance. Fifty percent
of the bonus amount was tied to individual performance against stated objectives
and the remaining fifty percent was dependent upon the Company reaching stated
pre-tax profit objectives. For 1995, no bonus amounts were paid for the portion
tied to Company objectives. However, bonus amounts were paid for 1995 tied to
individual performance against stated objectives. The annual bonus amount for
the Chief Operating Officer is set at 2% of the Company's pre-tax profits and
therefore fluctuates directly with the Company's annual earnings.
8
<PAGE> 11
Stock options are granted to executive officers by the Committee at the
time the officers are hired and thereafter based on individual contributions.
Stock options are granted at the fair market value of the Common Stock on the
date of grant, with an exercise period ranging from five to seven years.
CEO and Chairman Compensation
The compensation for both the CEO and the Chairman is determined by the
Committee based upon a combination of base pay and cash bonus, with the total
cash compensation being strongly affected by Company performance. The base pay
for both the CEO and Chairman was set by the Committee at $340,000 in July 1993
where it remained for fiscal 1994. In March 1995, the Committee authorized an
increase in the annual base pay to $365,000 each. Annual cash bonus payments for
the CEO and the Chairman are each set at 3% of the Company's pre-tax profits for
the fiscal year. As a result, bonus payments to the CEO and the Chairman
fluctuate based upon the Company's pre-tax profits. The Committee may grant
additional discretionary cash bonuses to the CEO and the Chairman based on the
Committee's evaluation of individual performance. No additional discretionary
bonuses were granted to the CEO and the Chairman for fiscal 1995.
The Committee grants stock options to the CEO and the Chairman based upon a
subjective evaluation of many factors including performance, leadership,
motivational effect, and extraordinary contributions to the Company.
This report is submitted by the members of the Compensation Committee:
Henry H. Dickerson, Jr.
Robert S. Folsom
A. Starke Taylor, Jr.
9
<PAGE> 12
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return for the Company's Common Stock from December 1, 1990
through November 30, 1995 with the cumulative total return for the NASDAQ Market
Index and the Peer Group Index(1). The comparison assumes $100 was invested in
the Company's Common Stock on December 1, 1990 and in each of the foregoing
indices and assumes reinvestment of dividends.
[GRAPH]
<TABLE>
<CAPTION>
Measurement Period Beauticontrol NASDAQ Market
(Fiscal Year Covered) Cosmetics Peer Group Index
<S> <C> <C> <C>
1990 100 100 100
1991 127.41 160.50 122.19
1992 103.45 219.57 131.24
1993 116.56 250.65 156.22
1994 149.75 304.50 168.24
1995 97.33 356.08 213.31
</TABLE>
- ---------------
(1) The Peer Group includes Aloette Cosmetics, Inc., Avon Products, Inc.,
Nature's Sunshine Products Inc., Premark International Inc., and Stanhome
Inc.
SECTION 16(A) REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's Common Stock, to file with the Securities and Exchange Commission (the
"SEC") initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Such persons are
required by SEC regulations to furnish the Company with copies of all Section
16(a) reports they file. To the Company's knowledge, based on its review of the
copies of such reports and written representations that no other reports were
required, during the fiscal year ended November 30, 1995, such reports were
filed on a timely basis. The Company is not aware of any failure to file a
required report.
10
<PAGE> 13
PROPOSED ADOPTION OF THE
1996 INCENTIVE STOCK OPTION PLAN
THE PROPOSED ADOPTION
The Company's 1985 Incentive Stock Option Plan expired on September 23,
1995 leaving 131,656 shares unused. Therefore, the Board of Directors is seeking
stockholder approval of the adoption of the 1996 Incentive Stock Option Plan
(the "Incentive Plan") approved by the Board of Directors on February 7, 1996.
The number of shares of Common Stock authorized to be issued under the Incentive
Plan will be 130,000 shares, subject to adjustments to reflect possible future
stock splits, stock dividends, combinations or exchanges of shares, or similar
transactions.
The Board of Directors is seeking approval of the adoption of the Incentive
Plan because it believes that the Company will require additional options to
attract and retain persons of ability as officers, directors, and employees.
SUMMARY OF THE INCENTIVE PLAN
General. The Incentive Plan provides a means whereby the Company may,
through the grant of options, attract and retain persons of ability as
employees. The Incentive Plan is also intended to motivate such persons to exert
their best efforts on behalf of the Company. No cash consideration is paid by
the employee upon the grant of an option to him. To exercise the options,
grantees must pay the exercise price in cash or Common Stock, or any combination
of cash or Common Stock. Each option expires no later than ten years from the
date of grant. A copy of the Incentive Plan is attached as Exhibit A.
Amendments. The Incentive Plan may be amended or discontinued by the Board
of Directors without the approval of the stockholders of the Company.
Certain Federal Income Tax Aspects. Options granted under the Incentive
Plan may be "Incentive Stock Options" within the meaning of Section 422A of the
Code, nonqualified options (options which do not meet the requirements of
Section 422A of the Code) or both. The Incentive Plan contains various
provisions to ensure that Incentive Stock Options comply with Section 422A.
The Incentive Plan is not a "qualified plan" within the meaning of Section
401 of the Code. The options granted under the Incentive Plan are intended to be
"incentive stock options" ("ISO's") conforming to the requirements of Section
422A of the Code. To receive ISO treatment, a grantee must not dispose of the
stock within two years after the ISO is granted, and must hold the stock for at
least one year after exercise. In addition, the grantee must have been an
employee of the Company for the entire time from the date of granting the ISO
until three months (one year if the employee is disabled) before the date of the
exercise. If all such requirements are met, no tax will be imposed upon exercise
of the ISO and any gain upon sale of the stock will be entitled to capital gain
treatment. In that event, the Company will not be entitled to any deduction in
connection with the option.
If the two-year and one-year holding requirements are not met, but all
other requirements are met, the tax will be imposed on the sale of the stock but
the grantee's gain on exercise (the excess of the value at the time of exercise
over the exercise price) will be treated as ordinary income rather than capital
gain, and the Company will be entitled to a corresponding tax deduction at that
time. If the individual who acquired the stock by the exercise of an ISO makes a
disposition of it within the two-year period so as to disqualify him from
capital gain treatment on the entire amount of the gain, the individual will
generally be subject to ordinary income tax to the extent of the difference
between the sales price and the exercise or purchase price. The individual's tax
consequences may vary depending upon the period of time between the date of
exercise and the date of sale.
PARTICIPANTS
At November 30, 1995, the Company had 272 employees eligible to participate
in the Incentive Plan.
11
<PAGE> 14
PROPOSED ADOPTION OF THE 1996
NON-QUALIFIED STOCK OPTION PLAN
THE PROPOSED ADOPTION
The Company's existing Non-Qualified Stock Option Plan will expire December
1996 leaving 143,400 options not granted. Therefore, the Board of Directors is
seeking stockholder approval of the adoption of the Company's 1996 Non-Qualified
Stock Option Plan (the "Non-Qualified Plan") approved by the Board of Directors
on February 7, 1996. The number of shares of Common Stock authorized to be
issued under the Non-Qualified Plan will be 140,000 shares, subject to
adjustments to reflect possible future stock splits, stock dividends,
combinations or exchanges of shares, or similar transactions.
The Board of Directors is seeking stockholder approval of the adoption of
the Non-Qualified Plan because it believes that the Company will require
additional options to attract and retain persons of ability as officers,
directors, and employees. The Board believes that it is prudent to seek
stockholder approval of the increase at the present time in order to assure that
in the future the Company has sufficient shares available for issuance under the
Non-Qualified Plan to avoid granting options that are subject to subsequent
stockholder approval.
SUMMARY OF THE NON-QUALIFIED PLAN
General. The purpose of the Non-Qualified Plan is to attract and retain
persons of ability as officers, directors, and employees through the grant of
stock options. The Non-Qualified Plan is also intended to motivate such persons
to exert their best efforts on behalf of the Company. A copy of the
Non-Qualified Plan is attached as Exhibit B.
Options for the purchase of Common Stock under the Non-Qualified Plan are
granted to key individuals selected from time-to-time by the Compensation
Committee. No director, while a member of the Compensation Committee, is
eligible to receive options under the Non-Qualified Plan. The exercise price for
any options granted pursuant to the Non-Qualified Plan will be determined by the
Compensation Committee on the date the options are granted. Each option has a
term of up to ten years and is exercisable only at such times as the
Compensation Committee determines at the time of the grant. No cash
consideration is paid by the grantee upon the grant of an option to him. To
exercise the options, grantees must pay the full exercise price in cash, Common
Stock, a promissory note, or any combination of the foregoing.
Amendments. The Board of Directors may amend or discontinue the
Non-Qualified Plan without the approval of the stockholders.
Certain Federal Income Tax Aspects. Stock options granted under the
Non-Qualified Plan are not entitled to the treatment for federal income tax
purposes provided by Section 422A of the Code. The grantee will have no taxable
income, and the Company will not be entitled to a deduction, at the time or as a
result of the grant of an option.
PARTICIPANTS
At November 30, 1995, the Company had 272 employees eligible to participate
in the Non-Qualified Plan.
AUDITORS
Representatives of Grant Thornton LLP, the Company's independent auditors
for 1995, are expected to be present at the meeting with the opportunity to make
a statement if they desire to do so and to be available to respond to
appropriate questions.
On February 12, 1996, the Company dismissed Grant Thornton LLP as its
independent auditors and appointed Ernst & Young as the new auditors. The
decision to dismiss Grant Thornton LLP and appoint Ernst & Young was proposed by
management, recommended by the Audit Committee of the Board of Directors,
12
<PAGE> 15
and approved by the Board of Directors. Representatives of Ernst & Young are
expected to be present at the meeting with the opportunity to make a statement
if they desire to do so and to be available to respond to appropriate questions.
Grant Thornton LLP's report on the financial statements for the fiscal
years ending November 30, 1995 and 1994 contained no adverse opinion or
disclaimer of opinion or was qualified or modified as to uncertainty, audit
scope or accounting principles. Further, during the fiscal years ending November
30, 1995 and 1994 and the subsequent interim period preceding the dismissal,
there were no disagreements with Grant Thornton LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
During the two most recent fiscal years and the subsequent interim period
preceding the dismissal, there have been no "reportable events" (as defined in
Item 304 of the Securities Exchange Commission Regulation S-K) with Grant
Thornton LLP.
BOARD OF DIRECTORS' RECOMMENDATIONS; VOTE REQUIRED
The Board of Directors unanimously recommends a vote FOR the election as
director of each of the nominees named in the proxy, FOR the adoption of the
1996 Incentive Stock Option Plan and FOR the adoption of the 1996 Non-Qualified
Stock Option Plan.
Nominees for director receiving a plurality of the votes cast will be
elected as directors. The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock present at the meeting, either in person or
represented by proxy, is required to approve the adoption of the 1996 Incentive
Stock Option Plan and the 1996 Non-Qualified Stock Option Plan.
STOCKHOLDER PROPOSALS
In order for stockholder proposals to receive consideration for inclusion
in the Company's Proxy Statement for next year, such proposals must be received
at the Company's offices at 2121 Midway, Carrollton, Texas 75006, Attention:
Secretary, by October 27, 1996.
The Company's By-Laws contain a provision which requires that a stockholder
may nominate a person for election as a director only if written notice of such
stockholder's intent to make such nomination has been given to the Secretary of
the Company not later than 60 days prior to an annual meeting. This provision
also requires that the notice set forth, among other things, a description of
all arrangements or understandings between the nominating stockholder and the
nominee pursuant to which the nomination is to be made or the nominee is to be
elected, and such notice must also contain such other information regarding the
nominee as would be required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had the nominee
been nominated by the Board of Directors of the Company. This provision is
intended to give the Company the opportunity to obtain all relevant information
regarding persons nominated for director. The Board of Directors may disqualify
any nominee who fails to provide the Company with complete and accurate
information as required by this provision. No stockholder has nominated a
candidate for election to the Board of Directors at the 1996 Annual Meeting.
SOLICITATION OF PROXIES
The Company will pay the expenses of this proxy solicitation. In addition
to solicitation by mail, some of the officers and regular employees of the
Company may solicit proxies personally or by telephone, if deemed necessary. The
Company will request brokers and other fiduciaries to forward proxy soliciting
material to the beneficial owners of shares which are held of record by the
brokers and fiduciaries, and the Company may reimburse them for reasonable
out-of-pocket expenses incurred by them in connection therewith.
13
<PAGE> 16
OTHER BUSINESS
The Board of Directors is not aware of any matter, other than the matters
described above, to be presented for action at the meeting. However, if any
other proper items of business should come before the meeting, it is the
intention of the person or persons acting under the enclosed form of proxy to
vote in accordance with their best judgment on such matters.
By Order of the Board of Directors,
/s/ M. DOUGLAS TUCKER
M. DOUGLAS TUCKER
Senior Vice President -- Finance,
Secretary and Treasurer
Carrollton, Texas
February 27, 1996
14
<PAGE> 17
EXHIBIT A
BEAUTICONTROL COSMETICS, INC.
1996 INCENTIVE STOCK OPTION PLAN
1. PURPOSE. The purpose of the Plan is to attract key employees to the
Company and to provide such persons with a proprietary interest in the Company
through the granting of options which will:
(a) increase the interest of the employees in the Company's welfare;
(b) furnish an incentive to the employees to continue their services
for the Company; and
(c) provide a means through which the Company may attract able persons
to enter its employ.
Options granted under the Plan may qualify as "Incentive Stock Options" as
defined by Section 422 of the Internal Revenue Code of 1986, as amended, or may
constitute non-qualified options.
2. ADMINISTRATION. The Plan shall be administered by the Board of Directors
of the Company (the "Board") or a committee thereof. The Board in its discretion
may appoint a Stock Option Committee (the "Committee") consisting of at least
two (2) members of the Board, for the purpose of administering the Plan. Except
as otherwise provided by the Board in written directions to the Committee, the
Committee shall have all of the powers with respect to the Plan. Any member of
the Committee may be removed at any time, with or without cause, by resolution
of the Board. Any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board. Each member of the Committee, at the time of
his appointment to the Committee and while he is a member thereof, must be a
"disinterested person" as defined in Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 or any successor provision thereto, as applicable.
The Committee shall select one of its members to act as its Chairman, and
shall make such rules and regulations for its operation as it deems appropriate.
A majority of the Committee shall constitute a quorum and the act of a majority
of the members of the Committee present at a meeting at which a quorum is
present shall be the act of the Committee. Subject to the terms hereof, the
Committee shall determine and designate from time to time the employees of the
Company to whom options will be granted and the number of Shares subject to such
options, interpret the Plan, prescribe, amend, and rescind any rules and
regulations necessary or appropriate for the administration of the Plan, and
make such other determinations and take such other actions as it deems necessary
or advisable. In this regard, the Committee shall consider and give appropriate
weight to input from representatives of management of the Company regarding the
contributions or potential contributions to the Company of certain of the
employees or potential employees of the Company. Any interpretation,
determination, or other action made or taken by the Committee shall be final,
binding, and conclusive on all interested parties.
If a Stock Option Committee is not appointed by the Board, then all
references herein to "Committee" shall refer instead to any other committee of
the Board that administers the Plan, or, if there is no such committee, to the
Board.
3. PARTICIPANTS. The Committee shall, from time to time, select the
particular employees of the Company to whom options are to be granted, and who
will, upon such grant, become participants in the Plan.
4. STOCK OWNERSHIP LIMITATION. No option granted hereunder to a participant
which is intended to constitute an Incentive Stock Option may be granted to an
employee who owns more than 10% of the total combined voting power of all
classes of stock of the Company or its Parent or Subsidiaries. This limitation
will not apply if the option price is at least 110% of the fair market value of
the stock at the time the option is granted and the option is not exercisable
more than five years from the date it was granted.
5. SHARES SUBJECT TO PLAN. The Committee may not grant options under the
Plan, in the aggregate, for more than 130,000 shares of Common Stock of the
Company (subject to adjustment in accordance with Section 14). Shares to be
optioned and sold may be made available from either authorized but unissued
Common Stock or Common Stock held by the Company in its treasury. Shares that by
reason of the
A-1
<PAGE> 18
expiration of an option or otherwise are no longer subject to purchase pursuant
to an option granted under the Plan may be re-offered under the Plan.
6. LIMITATION ON AMOUNT. To the extent required by the Internal Revenue
Code for Incentive Stock Options, the exercise of Incentive Stock Options
granted under the Plan shall be subject to the $100,000 calendar year limit as
set forth in Section 422(d) of the Internal Revenue Code.
7. ALLOTMENT OF SHARES. The Committee shall determine the number of shares
of Common Stock to be offered from time to time by grant of options to
participants under the Plan. The grant of an option to a participant shall not
be deemed either to entitle the participant to, or to disqualify the participant
from, participation in any other grant of options under the Plan.
8. GRANT OF OPTIONS. All options under the Plan shall be granted by the
Committee. The grant of options shall be evidenced by stock option agreements
containing such items and provisions as are approved by the Board, but not
inconsistent with the Plan, including provisions that may be necessary to assure
that the option is an incentive stock option under the Internal Revenue Code.
The Company shall execute stock option agreements upon instructions from the
Committee. The Plan shall be submitted to the Company's stockholders for
approval; however, the Committee may grant options under the Plan prior to the
time of stockholder approval.
9. OPTION PRICE. The Committee shall specify the option price for each
option granted under the Plan. The option price shall not be less than 100% of
the fair market value per share of the Common Stock on the date the option is
granted. The Committee shall determine the fair market value of the Common Stock
on the date of grant, and shall set forth the determination in its minutes,
using any reasonable valuation method.
10. OPTION PERIOD. The Option Period will begin and terminate on the
respective dates specified by the Committee, but may not terminate later than
ten years from the date the option is granted. The Committee may provide for the
exercise of options in installments and upon such terms, conditions and
restrictions as it may determine. A stock option agreement may provide for
termination of the Option Period in the case of termination of employment or for
any other reason.
11. RIGHTS IN EVENT OF DEATH. If a participant dies prior to the
termination of his right to exercise an option in accordance with the provisions
of his stock option agreement without having totally exercised the option, the
option may be exercised, to the extent of the shares with respect to which the
option could have been exercised by the participant on the date of the
participant's death, by the participant's estate or by the person who acquired
the right to exercise the option by bequest or inheritance or by reason of the
death of the participant. Any option exercised after the death of a participant
must be exercised prior to the date of its expiration according to its terms or
one year from the date of the participant's death, whichever first occurs.
12. PAYMENT. Full payment for shares purchased upon exercising an option
shall be made in cash or by check, by the optionee's delivery to the Company of
shares of Common Stock which have a fair market value equal to the option price,
or any combination of cash and shares of Common Stock having an aggregate fair
market value equal to the option price. No shares may be issued until full
payment of the purchase price therefor has been made, and a participant will
have none of the rights of a stockholder until shares are issued to him. Nothing
herein shall prohibit the Company, in its sole discretion, from lending to the
participant, guaranteeing a loan to the participant, or otherwise assisting the
participant to obtain the cash necessary to exercise all or a portion of an
option granted hereunder.
13. EXERCISE OF OPTION. An option granted under the Plan may be exercised
during the Option Period at such times and in such amounts as provided in the
applicable stock option agreement, and upon the terms and conditions and subject
to such restrictions as provided in such agreement. In no event may an option be
exercised or shares be issued pursuant to an option if any necessary listing of
the shares on a stock exchange or any necessary registration under state or
federal securities laws has not been accomplished.
14. CAPITAL ADJUSTMENTS. The aggregate number of shares of Common Stock
which may be purchased pursuant to options to be granted under the Plan, the
number of shares of Common Stock covered by each outstanding option granted
under the Plan, and the option price for outstanding options, shall be
proportion-
A-2
<PAGE> 19
ately adjusted to reflect any stock dividend, stock split, share combination,
exchange of shares, recapitalization, merger, consolidation, reorganization,
liquidation, or the like, of or by the Company. Any fractional shares resulting
from any such adjustment shall be eliminated for the purposes of such
adjustment.
15. NON-ASSIGNABILITY. An option granted to a participant may not be
transferred other than by will or by the laws of descent and distribution, or
pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code, or Title I of the Employee Retirement Income Security Act, or the
rules thereunder. Except as described in the previous sentence, during a
participant's lifetime, options granted to a participant may be exercised only
by the participant.
16. DISQUALIFYING DISPOSITION. If stock acquired upon exercise of an
Incentive Stock Option is disposed of by a participant prior to the expiration
of either two years from the date of grant of such option or one year from the
transfer of shares to the participant pursuant to the exercise of such option or
in any other disqualifying disposition within the meaning of Section 422 of the
Internal Revenue Code, such participant shall notify the Company in writing of
the date and terms of such disposition. A disqualifying disposition by a
participant shall not affect the status of any other option granted under the
Plan as an Incentive Stock Option with in the meaning of Section 422 of the
Internal Revenue Code.
17. INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or the
Committee, nor any officer or employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board and the Committee and each officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination or interpretation.
18. TAX REQUIREMENTS. The option holder receiving shares of Common Stock
issued upon exercise of any option shall be required to pay the Company the
amount of any taxes which the Company is required to withhold with respect to
such shares. Such payments shall be required to be made prior to the delivery of
any certificate representing such shares. Such payment may be made in cash, by
check, or through the delivery of shares of Common Stock owned by the option
holder (which may be effected by the actual delivery of shares of Common Stock
by the option holder or by the Company's withholding a number of shares to be
issued upon the exercise of the stock option), which shares have an aggregate
fair market value equal to the required withholding payment, or any combination
thereof.
19. INTERPRETATION. The Committee shall interpret the Plan and shall
prescribe such rules in connection with the operation of the Plan as it
determines to be advisable for the administration of the Plan. The Committee may
rescind and amend its rules.
20. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued by
the Board without the approval of the stockholders of the Company.
21. EFFECT OF THE PLAN. Neither the adoption of this Plan nor any action of
the Board or the Committee shall be deemed to give any officer or employee any
right to continue in the employment of the Company or to be granted an option to
purchase Common Stock or any other rights except as may be evidenced by a stock
option agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company and then only to the extent and upon the terms
and conditions expressly set forth therein.
22. TERM. Unless sooner terminated by action of the Board, the Plan will
terminate on September 24, 2005. The Committee may not grant options under the
Plan after that date, but options granted before that date will continue to be
effective in accordance with their terms and conditions.
23. DEFINITIONS. For the purpose of this Plan, unless the context requires
otherwise, the following terms shall have the meanings indicated:
(a) "Plan" means this Incentive Stock Option Plan as amended from time
to time.
(b) "Company" means BeautiControl Cosmetics, Inc., a Delaware
corporation.
A-3
<PAGE> 20
(c) "Board" means the Board of Directors of the Company and, to the
extent applicable, such members thereof as are delegated powers under
Section 2 of this Plan.
(d) "Common Stock" means the common stock which the Company is
currently authorized to issue or may in the future be authorized to issue.
(e) "Subsidiary" means any corporation in any unbroken chain of
corporations beginning with the Company if, at the time of the granting of
the option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in
the chain, and "subsidiaries" means more than one of any such corporations.
(f) "Parent" means any corporation (other than the employer
corporation) in an unbroken chain of corporations ending with the employer
corporation if, at the time of the granting of the option, each of the
corporations other than the employer corporation own stock possessing 50%
or more of the total combined voting power of all classes of stock in one
of the other corporations in such claim.
(g) "Incentive Stock Option" means an option to purchase Common Stock
of the Company granted under this Plan or under any other incentive stock
option plan of the Company which is intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue Code.
(h) "Option Period" means the period during which an option may be
exercised.
(i) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended.
A-4
<PAGE> 21
EXHIBIT B
BEAUTICONTROL COSMETICS, INC.
1996 NON-QUALIFIED STOCK OPTION PLAN
1. PURPOSE. The purpose of the Plan is to attract key persons to the
Company and to provide such persons with a proprietary interest in the Company
through the granting of options which will:
(a) increase the interest of such persons in the Company's welfare;
(b) furnish an incentive to such persons to continue their services
for the Company; and
(c) provide a means through which the Company may attract able persons
to enter its employ or otherwise provide services to the Company.
2. ADMINISTRATION. The Plan shall be administered by the Board of Directors
of the Company (the "Board") or a committee thereof. The Board in its discretion
may appoint a Stock Option Committee (the "Committee") consisting of at least
two (2) members of the Board, for the purpose of administering the Plan. Except
as otherwise provided by the Board in written directions to the Committee, the
Committee shall have all of the powers with respect to the Plan. Any member of
the Committee may be removed at any time, with or without cause, by resolution
of the Board. Any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board. Each member of the Committee, at the time of
his appointment to the Committee and while he is a member thereof, must be a
"disinterested person" as defined in Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 or any successor provision thereto, as applicable.
The Committee shall select one of its members to act as its Chairman, and
shall make such rules and regulations for its operation as it deems appropriate.
A majority of the Committee shall constitute a quorum and the act of a majority
of the members of the Committee present at a meeting at which a quorum is
present shall be the act of the Committee. Subject to the terms hereof, the
Committee shall determine and designate from time to time the persons to whom
options will be granted and the number of Shares subject to such options,
interpret the Plan, prescribe, amend, and rescind any rules and regulations
necessary or appropriate for the administration of the Plan, and make such other
determinations and take such other actions as it deems necessary or advisable.
In this regard, the Committee shall consider and give appropriate weight to
input from representatives of management of the Company regarding the
contributions or potential contributions to the Company of potential recipients
of options granted hereunder. Any interpretation, determination, or other action
made or taken by the Committee shall be final, binding, and conclusive on all
interested parties.
If a Stock Option Committee is not appointed by the Board, then all
references herein to "Committee" shall refer instead to any other committee of
the Board that administers the Plan, or, if there is no such committee, to the
Board.
3. PARTICIPANTS. The Committee shall, from time to time, select the
particular persons to whom options are to be granted, and who will, upon such
grant, become participants in the Plan.
4. SHARES SUBJECT TO PLAN. The Committee may not grant options under the
Plan, in the aggregate, for more than 140,000 shares of Common Stock of the
Company (subject to adjustment in accordance with Section 12). Shares to be
optioned and sold may be made available from either authorized but unissued
Common Stock or Common Stock held by the Company in its treasury. Shares that by
reason of the expiration of an option or otherwise are no longer subject to
purchase pursuant to an option granted under the Plan may be re-offered under
the Plan.
5. ALLOTMENT OF SHARES. The Committee shall determine the number of shares
of Common Stock to be offered from time to time by grant of options to
participants under the Plan. The grant of an option to a participant shall not
be deemed either to entitle the participant to, or to disqualify the participant
from, participation in any other grant of options under the Plan.
B-1
<PAGE> 22
6. GRANT OF OPTIONS. All options under the Plan shall be granted by the
Committee. The grant of options shall be evidenced by stock option agreements
containing such items and provisions as are approved by the Board, but not
inconsistent with the Plan. The Company shall execute stock option agreements
upon instructions from the Committee.
7. OPTION PRICE. The Committee shall specify the option price for each
option granted under the Plan. The option price may be equal to, greater than,
or less than the fair market value per share of the Common Stock on the date the
option is granted.
8. OPTION PERIOD. The Option Period will begin and terminate on the
respective dates specified by the Committee, but may not terminate later than
ten years from the date the option is granted. The Committee may provide for the
exercise of options in installments and upon such terms, conditions and
restrictions as it may determine. A stock option agreement may provide for
termination of the Option Period in the case of termination of employment (in
the case of employees) or for any other reason.
9. RIGHTS IN EVENT OF DEATH. If a participant dies prior to the termination
of his right to exercise an option in accordance with the provisions of his
stock option agreement without having totally exercised the option, the option
may be exercised, to the extent of the shares with respect to which the option
could have been exercised by the participant on the date of the participant's
death, by the participant's estate or by the person who acquired the right to
exercise the option by bequest or inheritance or by reason of the death of the
participant. Any option exercised after the death of a participant must be
exercised prior to the date of its expiration according to its terms or one year
from the date of the participant's death, whichever first occurs.
10. PAYMENT. Full payment for shares purchased upon exercising an option
shall be made in cash or by check, by the optionee's delivery to the Company of
shares of Common Stock which have a fair market value equal to the option price,
or any combination of cash and shares of Common Stock having an aggregate fair
market value equal to the option price. No shares may be issued until full
payment of the purchase price therefor has been made, and a participant will
have none of the rights of a stockholder until shares are issued to him. Nothing
herein shall prohibit the Company, in its sole discretion, from lending to the
participant, guaranteeing a loan to the participant, or otherwise assisting the
participant to obtain the cash necessary to exercise all or a portion of an
option granted hereunder.
11. EXERCISE OF OPTION. An option granted under the Plan may be exercised
during the Option Period at such times and in such amounts as provided in the
applicable stock option agreement, and upon the terms and conditions and subject
to such restrictions as provided in such agreement. In no event may an option be
exercised or shares be issued pursuant to an option if any necessary listing of
the shares on a stock exchange or any necessary registration under state or
federal securities laws has not been accomplished.
12. CAPITAL ADJUSTMENTS. The aggregate number of shares of Common Stock
which may be purchased pursuant to options to be granted under the Plan, the
number of shares of Common Stock covered by each outstanding option granted
under the Plan, and the option price for outstanding options, shall be
proportionately adjusted to reflect any stock dividend, stock split, share
combination, exchange of shares, recapitalization, merger, consolidation,
reorganization, liquidation, or the like, of or by the Company. Any fractional
shares resulting from any such adjustment shall be eliminated for the purposes
of such adjustment.
13. NON-ASSIGNABILITY. An option granted to a participant may not be
transferred other than by will or by the laws of descent and distribution, or
pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code, or Title I of the Employee Retirement Income Security Act, or the
rules thereunder. Except as described in the previous sentence, during a
participant's lifetime, options granted to a participant may be exercised only
by the participant.
14. INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or the
Committee, nor any officer or employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board and the Committee and each officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination or interpretation.
B-2
<PAGE> 23
15. TAX REQUIREMENTS. The option holder receiving shares of Common Stock
issued upon exercise of any option shall be required to pay the Company the
amount of any taxes which the Company is required to withhold with respect to
such shares. Such payments shall be required to be made prior to the delivery of
any certificate representing such shares. Such payment may be made in cash, by
check, or through the delivery of shares of Common Stock owned by the option
holder (which may be effected by the actual delivery of shares of Common Stock
by the option holder or by the Company's withholding a number of shares to be
issued upon the exercise of the stock option), which shares have an aggregate
fair market value equal to the required withholding payment, or any combination
thereof.
16. INTERPRETATION. The Committee shall interpret the Plan and shall
prescribe such rules in connection with the operation of the Plan as it
determines to be advisable for the administration of the Plan. The Committee may
rescind and amend its rules.
17. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued by
the Board without the approval of the stockholders of the Company.
18. EFFECT OF THE PLAN. Neither the adoption of this Plan nor any action of
the Board or the Committee shall be deemed to give any participant any right to
continue in the employment of the Company (if the participant is an employee) or
to be granted an option to purchase Common Stock or any other rights except as
may be evidenced by a stock option agreement, or any amendment thereto, duly
authorized by the Committee and executed on behalf of the Company and then only
to the extent and upon the terms and conditions expressly set forth therein.
19. TERM. Unless sooner terminated by action of the Board, the Plan will
terminate on February 12, 2006. The Committee may not grant options under the
Plan after that date, but options granted before that date will continue to be
effective in accordance with their terms and conditions.
20. DEFINITIONS. For the purpose of this Plan, unless the context requires
otherwise, the following terms shall have the meanings indicated:
(a) "Plan" means this Incentive Stock Option Plan as amended from time
to time.
(b) "Company" means BeautiControl Cosmetics, Inc., a Delaware
corporation.
(c) "Board" means the Board of Directors of the Company and, to the
extent applicable, such members thereof as are delegated powers under
Section 2 of this Plan.
(d) "Common Stock" means the common stock which the Company is
currently authorized to issue or may in the future be authorized to issue.
(e) "Option Period" means the period during which an option may be
exercised.
(f) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended.
B-3
<PAGE> 24
<TABLE>
<S> <C>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election NOMINEES: Richard W. Heath 2. Proposal to adopt the Company's [ ] [ ] [ ]
Of Three [ ] [ ] Charles M. Diker 1996 Incentive Stock Option Plan.
Directors: Joel T. Williams, Jr.
For, except vote withheld from the following nominee(s): 3. Proposal to adopt the Company's [ ] [ ] [ ]
1996 Non-Qualified Stock Option
Plan.
--------------------------------------------------------
In their discretion, the proxies [ ] [ ] [ ]
are authorized to vote upon such
other business as may properly
come before the Annual Meeting.
This Proxy will be voted at the
Annual Meeting or any adjournment
or postponement thereof as
specified. If no specifications
are made, this Proxy will be
voted FOR the election as
directors of the three nominees
named to the term described in
the accompanying Proxy Statement,
FOR the proposal to adopt the 1996
Incentive Stock Option Plan, and
FOR the proposal to adopt the 1996
Non-Qualified Stock Option Plan.
This Proxy hereby revokes all prior
proxies given with respect to the
shares of the undersigned.
SIGNATURE(S) DATE
----------------------------------------------------------------------- -------------------------
SIGNATURE(S) DATE
----------------------------------------------------------------------- -------------------------
IMPORTANT: Please date this Proxy and sign exactly as your name appears to the left. If shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give title
as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
</TABLE>
<PAGE> 25
BEAUTICONTROL COSMETICS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
P
The undersigned hereby appoint(s) Richard W. Heath and M. Douglas
Tucker, or either of them, with full power of substitution, proxies of
R the undersigned, with all the powers that the undersigned would possess
if personally present to cast all votes that the undersigned would be
entitled to vote at the Annual Meeting of Stockholders of BeautiControl
O Cosmetics, Inc. (the "Company") to be held on Tuesday, April 2, 1996,
at the Company's executive offices, 2121 Midway Road, Carrollton,
Texas, at 10:00 A.M., Dallas, Texas time, and any and all adjournment
X or postponements thereof (the "Annual Meeting"), including (without
limiting the generality of the foregoing) to vote and act as follows:
Y 1) Election of Directors, Nominees:
Richard W. Heath, Charles M. Diker, and Joel T. Williams, Jr.
Proposal(s)
2) Proposal to adopt the Company's 1996 Incentive Stock Option Plan.
3) Proposal to adopt the Company's 1996 Non-Qualified Stock Option Plan.
Please complete, date, sign, and mail this Proxy promptly in the enclosed
envelope. No postage is required for mailing in the United States.
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SEE REVERSE
SIDE
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