<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1997
REGISTRATION NO. 33-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
- -------------------------------------------------------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LILLIAN VERNON CORPORATION
(Exact name of Registrant as specified in its character)
DELAWARE 13-2529859
(State or other jurisdiction of incorporation I.R.S.
or organization) Employer Identification
No.)
543 MAIN STREET, NEW ROCHELLE, NEW YORK 10801
(address of Principal Executive Office)
1997 PERFORMANCE UNIT, RESTRICTED STOCK,
NON-QUALIFIED OPTION AND INCENTIVE STOCK OPTION PLAN
and
1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
(Full Title of Plans)
Lillian Vernon
(Chairman and Chief Executive Officer)
Lillian Vernon Corporation
543 Main Street
New Rochelle, New York 10801
(914) 576-6400
(Name, address including zip code and
telephone number, including area code,
of agent for service).
Copies to:
Alan M. Rashes, Esq.
Salon, Marrow & Dyckman, LLP
685 Third Avenue
New York, New York 10017
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Proposed Proposed
Title of Maximum Maximum Amount of
Each Class Amount to be Price Per Offering Registration
to be Registered Registered Share Price Fee
- ---------------- ------------ --------- -------- ------------
Stock Options 575,000(1) -- -- -- (2)
Common Stock, $.01 575,000(3)(4) $16.875(5) $9,703,125 $3,345.91
Par Value
</TABLE>
- ---------------------------
(1) Represents the maximum number of options to be granted pursuant to the
1997 Performance Unit, Restricted Stock, Non-Qualified Option and Incentive
Stock Option Plan (the "Incentive Compensation Plan") - 525,000 options and
the number of options to be granted pursuant to the 1997 Stock Option Plan for
Non-Employee Directors (the "Non- Employee Directors Option Plan") - 50,000
options, both plans collectively referred to as the "Plans".
(2) No registration fee is required pursuant to Rule 457(h)(2).
(3) Shares issuable upon exercise of stock options or otherwise issued
pursuant to the Plans.
(4) Includes an indeterminable number of shares of common stock which may
become issuable pursuant to the anti-dilution provisions of the Plans.
(5) Calculated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) based upon the closing price of the Common Stock as
reported by the American Stock Exchange (the "AMEX") on September 23, 1997.
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LILLIAN VERNON CORPORATION
Cross Reference Sheet Pursuant to Rule SK 501(b)
Between Registration Statement (Form S-8) and Section 10(a)
Prospectus.
Item Number and Caption Heading in Prospectus
----------------------- ---------------------
1. (a) General Plan Information Cover, Prospectus
Summary, Business, Cover
(b) Securities to be Offered Cover
(c) Employees Who May Participate Eligibility and
Participation
(d) Purchase of Securities Pursuant Securities Covered by
to the Plan and Payment for the Prospectus
Securities Offered
(e) Resale Restrictions Not Applicable
(f) Tax Effects of Federal Income Tax
Plan Participation Consequences
(g) Investment of Funds Not Applicable
(h) Withdrawal from the Plan, Not Applicable
Assignment of Interest
(i) Forfeitures and Penalties Performance Unit Awards,
Restricted Stock Awards,
Non-qualified Options
Incentive Stock Options,
Summary of Non-Employee
Directors Plan
(j) Charges and Deductions Not Applicable
and Liens Therefor
2. Information with Respect Available Information,
to the Registrant Business
3. Incorporation of Certain Documents Incorporated
Information by Reference by Reference
4. Description of Securities Securities Covered by
Prospectus, Part II
5. Interests of Named Experts Legal Matters, Part II
and Counsel
6. Indemnification of Directors Indemnification of
and Officers Directors and Officers
Part II
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7. Exemption from Registration Not Applicable
Claimed
8. Exhibits Part II
9. Undertakings Part II
4
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PROSPECTUS
Lillian Vernon Corporation
$ .01 Par Value
This Prospectus relates to the offering of a maximum 575,000 shares
of Common Stock to employees, directors and consultants of Lillian Vernon
Corporation, as described in the 1997 Performance Unit, Restricted Stock,
Non-Qualified Option and Incentive Stock Option Plan and the 1997 Stock Option
Plan for Non-Employee Directors.
Securities Covered by Prospectus
525,000 shares of Common Stock $ .01 par value, under the 1997
Performance Unit, Restricted Stock, Non-Qualified Option and Incentive Stock
Option Plan and 50,000 shares of Common Stock $ .01 par value, under the 1997
Stock Option Plan for Non-Employee
Directors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than as contained in this
Prospectus, in connection with the offering described herein, and information
or representations not herein contained in this Prospectus, and if given or
made, must not be relied upon as having been authorized by the Company, or
anyone who may be an underwriter with respect to such offering. This
Prospectus does not constitute an offer to sell, or the solicitation of an
offer to buy the securities offered hereby in any state to any person to whom
it is unlawful to make such offer or solicitation, except where otherwise
indicated herein, this Prospectus speaks as of its date and neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof.
-----------------------
The date of this Prospectus is September 26, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission"), a registration statement on Form S-8 together with all
amendments (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act'), with respect to the Common Stock described in
this Prospectus and of which this Prospectus forms a part. Such Registration
Statement and the exhibits thereto can be inspected and copied at the Public
Reference Room of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports and other information with the Commission.
Such reports, proxy statements and other information filed by the Company with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at 7 World Trade
Center, New York, New York 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Statements herein concerning the contents of any contract or other
document are not necessarily complete, and in each instance reference is made
to such contract or other document filed with the Commission as an exhibit to
the Registration Statement, or otherwise, each such statement being qualified
and amplified in all respects by such reference.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to
the more detailed information appearing elsewhere in this Prospectus.
THE COMPANY
Lillian Vernon Corporation (the "Company"), a Delaware corporation,
is a direct mail specialty catalog company concentrating on the marketing of
gift, household, gardening, kitchen, Christmas and children's products. The
Company, a predecessor of which was founded in 1951, seeks to provide
customers with reasonably priced products that can be differentiated from
competitive products, either by design, price or personalization. In fiscal
1997, the Company published 29 catalog editions, and mailed over 175,000,000
catalogs to past and prospective customers.
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1997 Performance Unit, Restricted Stock, Non-Qualified
Option and Incentive Stock Option Plan
("Incentive Compensation Plan")
------------------------------------------------------
General
The Incentive Compensation Plan was adopted by the Company's Board of
Directors in March 1997 and approved by the Company's Stockholders at the
Company's annual meeting held on July 25, 1997.
The Incentive Compensation Plan replaced the Company's 1987
Performance Unit, Restricted Stock, Non-Qualified Option and Incentive Stock
Option Plan, which plan expired on February 22, 1997 and which plan contained
identical provisions to the Incentive Compensation Plan. The Incentive
Compensation Plan features a performance unit plan, a restricted stock plan, a
non-qualified option plan and incentive stock option plan designed to provide
a competitive and balanced incentive compensation plan for employees,
directors, consultants and others who render services to the Company. The
Board of Directors believes that the acquisition of such proprietary interests
in the Company has stimulated and will continue to stimulate the efforts of
such key employees, directors who are also employees and consultants on behalf
of the Company and will strengthen their desire to remain with and render
services to the Company.
There are an aggregate of 525,000 shares of Common Stock reserved for
issuance upon payment of performance units if awarded, the exercise of
non-qualified and incentive options and restricted stock granted under the
Incentive Compensation Plan.
The following is a summary of the basic provisions of the Incentive
Compensation Plan and its components to the extent applicable, which summary
does not purport to be complete and is subject in all respects to the
provisions of the Incentive Compensation Plan, to which reference is hereby
made. This summary is modified in its entirety by such reference and does not
relate, or give effect, to provisions of statutory or common law.
Administration of the Incentive Compensation Plan
The Incentive Compensation Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee"), which will not be
comprised of less than three members of the Board of Directors, who are not
employees of the Company. The Committee has full authority, in its discretion,
to determine the individuals to whom and the times at which performance units
or restricted stock will be awarded and options shall be granted and the
number of units and/or shares to be issued pursuant to each such award or
grant. Non-employee directors are not eligible to participate in the Incentive
Compensation Plan. Non-employee directors receive option grants pursuant to
the 1997 Stock Option Plan for Non-Employee Directors (the "Non-Employee
Directors Option Plan").
The Committee has full authority to interpret the Incentive
Compensation Plan, to prescribe, amend and rescind rules and regulations
relating thereto and to determine the terms and
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<PAGE>
provisions of the respective restricted stock and performance units
awards and option grants.
Shares Available for Distribution
As of the date of this Prospectus, the company has granted
non-qualified options exercisable for 27,500 shares under the Incentive
Compensation Plan. As of the date of this Prospectus there remains 497,500
shares of Common Stock from which the Committee may award performance units or
restricted stock or grant non-qualified or incentive stock options, in
accordance with the Incentive Compensation Plan. If any option grant or
restricted stock or performance award expires, terminates or is forfeited for
any reason, the shares subject thereto may be used again under the Incentive
Compensation Plan. The shares subject to the Incentive Compensation Plan shall
be furnished from either Treasury shares or authorized and unissued shares of
Common Stock.
Termination of Incentive Compensation Plan
The Incentive Compensation Plan shall terminate on and no awards of
performance units or restricted stock or grants of options shall be made after
February 28, 2007. However, the termination of the Incentive Compensation Plan
shall have no effect on awards of performance units or restricted stock or
options made prior thereto.
Amendment of Incentive Compensation Plan
The Incentive Compensation Plan may be terminated, modified or
amended by the stockholders of the Company. The Board of Directors may also
terminate, modify and amend the Incentive Compensation Plan, but no
modification or amendment may change (i) the total number of shares reserved
for the purposes of the Incentive Compensation Plan; (ii) the class of
individuals eligible to receive awards of performance units, restricted stock
and options; (iii) the period during which awards of performance units or
restricted stock may be made or options may be granted or exercised or (iv)
make any change which would prevent an Incentive Stock Option from qualifying
as a "incentive stock option" as such term is defined in the then existing
Internal Revenue Code. No termination, modification or amendment of the
Incentive Compensation Plan may, without consent of the individual to whom an
option has been previously granted, affect the right conferred by such option.
Interpretation
A determination of the Committee as to any question which may arise
with respect to the interpretation of the provisions of the Incentive
Compensation Plan, the performance units, restricted stock, the non-qualified
option and the incentive stock option agreements shall be conclusive.
Performance Unit Awards
Performance units can only be awarded to employees. Performance unit
awards may be paid in cash or shares of Common
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Stock of the Company, or a combination thereof. Performance units which are
awarded to an employee shall have a payment value at the end of the award
cycle (the period of not less than one fiscal year over which the performance
units granted during a particular year are to be earned out), contingent upon
the Company's performance. The Committee has discretion to apply performance
measures on an absolute basis or relative to industry indices and conclusively
determine whether the measures have been achieved. The Committee also has
authority to revise the payment schedules and performance measures formerly
determined by it if, in its judgment, significant economic or other changes
have occurred which were not foreseeable by it at the time of its initial
determination.
A performance unit award will terminate if the participant does not
remain in the employ of the Company during the entire award cycle, except as
the Committee otherwise determines and except in the case of death, disability
or retirement at age 65 or early retirement with the Company's consent, in
which event, if the performance criteria is met, a pro-rata portion of the
award will be paid based on the elapsed time of the award cycle prior to
death, disability or retirement.
Restricted Stock Awards
The Committee is authorized to make restricted stock awards to
employees. Directors who are not employees of the Company are not eligible to
receive restricted stock awards. Restricted stock may be issued to employees
in consideration of (i) cash in an amount not less than the par value thereof
or such greater amount as may be determined by the Committee and (ii) the
continued employment of the employee during the restricted period. The
Committee sets the term of the restricted period, which will in no event be
less than one year. During the restricted period, the restricted stock may not
be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered
except in the event of death, whereupon the restriction upon the stock will
lapse and the employee's estate will be free to transfer or otherwise dispose
of the stock.
In the event that, during the restricted period the employment of the
employee is terminated for any reason (including termination with or without
cause by the Company, resignation by the employee or retirement, except
retirement with the consent of the Company, which consent may be conditioned
upon the performance of consulting services, agreement as to non-competition
or such other conditions as may be imposed by the Company), other than
termination of employee due to death of the employee, then the shares of
restricted stocks held by the employee shall be forfeited to the Company. In
the event of such forfeiture, the Company shall reimburse the employee for all
amounts paid by the employee for such restricted stock in excess of the par
value thereof and the employee shall transfer and return all such restricted
stock to the Company.
Non-Qualified Options
Under the Incentive Compensation Plan, non-qualified options may be
granted to employees, employee-directors, consultants and other individuals
who render services to the Company. The option
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<PAGE>
price for each option granted is determined by the Committee. Each option may
have a term of not more than 10 years from the date of grant and may be
exercisable in installments as prescribed by the Committee.
Payment for shares issuable pursuant to the exercise of an option may
be in (i) cash, (ii) delivery of a full recourse promissory note, (iii) Common
Stock of the Company or (iv) a combination of cash, notes and Common Stock or
such other alternative payment arrangements as the Committee may fix in its
sole discretion. In lieu of payment by the Optionee, Committee may require the
optionee to surrender the option or a portion thereof for cancellation and
receive cash or shares of Common Stock or a combination thereof equivalent to
the appreciated value of the shares covered by the option surrendered for
cancellation. The Committee shall have ten business days following delivery of
the notice of exercise of the non-qualified options to elect to cancel the
shares and issue shares and/or cash representing the aforementioned
appreciated value.
In the event that an employee receiving a non-qualified option does
not remain in the employ of the Company for a period determined by the
Committee and set forth in the non-qualified option grant and the termination
of such employment is for cause or voluntary on the part of the employee,
without written consent of the Company, the non-qualified option will
terminate on the date of termination of employment. Retirement at age 65 is
deemed termination of employment with the Company's consent. In the event of
termination of employment other than by reason of death or retirement, the
employee may exercise his non-qualified option at any time within three months
after such termination (but no later than the option's original term).
Non-qualified options granted under the Incentive Compensation Plan
are non-transferrable otherwise than by will or by the laws of descent and
distribution.
The option grants may contain such provisions as the Committee may
determine as appropriate for the adjustment of the number and class of shares
subject to such options and the Option Price of the shares covered thereby, in
the event of changes in the outstanding Common Stock of the Company by reason
of stock dividends, stock splits, recapitalization, mergers, consolidations,
combinations, or exchanges of shares, split-ups, split-offs, liquidations or
other similar changes in capitalization, or any distributions to common
stockholders, other than cash dividends, and in the event of any such change
in the outstanding Common Stock of the Company, the aggregate number and class
of shares available under the Incentive Compensation Plan which may be awarded
or granted shall be appropriately adjusted by the Committee.
Incentive Stock Options
The Company's Incentive Compensation Plan provides for the grant to
employees of incentive stock options ("ISO's") to purchase shares of Common
Stock of the Company at option prices which are not less than the fair market
value of the Company's Common Stock at the date of grant ("fair market
value"), except that any ISO's
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granted to an employee holding 10% or more of the outstanding voting
securities of the Company ("10% Stockholder") must be for an option price not
less than 110% of fair market value.
ISO's granted under the Incentive Compensation Plan will expire not
more than 10 years from the date of grant (five years from the date of grant
in the case of a 10% Stockholder), and the ISO agreements entered into with
the holders will specify the extent to which ISO's may be exercised during
their respective terms. The aggregate fair market value of the shares of
common stock subject to ISO's that become first exercisable by an optionee in
a particular calendar year may not exceed $100,000. Payment for shares issued
upon the exercise of ISO's may be made in the same manner as provided for the
non-qualified options.
If the employment of an employee is terminated for cause or
voluntarily by the employee, his Incentive Stock Option shall expire upon such
termination. If the holder of the ISO dies (i) while employed by the Company
or (ii) after his termination of employment by reason of retirement at age 65
or earlier with the consent of the Company, the ISO may be exercised by the
employee's estate or by a person who acquired the right to exercise the ISOs
by bequest, inheritance or by reason of the death of such employee at any
time. If the holder of an ISO ceases employment because of permanent and total
disability while employed by the Company, the ISO shall be exercisable at any
time. However, the ISO may not be exercised after the expiration of the term
of the ISO and may be exercised only to the extent that the holder thereof was
entitled to exercise the ISO at the time of termination of employment or
death.
ISO grants under the Incentive Compensation Plan are nontransferrable
otherwise than by the laws of descent and distribution.
ISO grants may contain such provisions as the Committee may determine
as appropriate for the adjustment of the number and class of shares subject to
such ISOs and option prices of the shares covered thereby in the event of
changes in the outstanding Common Stock of the Company similar to those which
may be contained in non-qualified option grants, provided that in any such
event the Committee shall have the discretionary power to take any action
necessary or appropriate to prevent any ISO granted from being disqualified as
an "incentive stock option" under the existing provisions of the Internal
Revenue Code.
Federal Income Tax Consequences
Stock Options
The Company is of the opinion that an employee receiving a stock
option exercisable at the current market price at the date of grant (whether
an ISO or non-qualified stock option) will not realize any compensation income
under the Internal Revenue Code of 1986 as amended ("IRC" or the "Code") upon
the grant of the option.
The exercise of an ISO, which is qualified under Section 422A of the
Code, results in no tax consequences to the employee or the
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Company. However, the difference between the option price and the fair market
value of the underlying stock at the date of exercise is a tax preference item
which, under certain circumstances, may give rise to alternative minimum tax
liability to the employee in the year of exercise.
If the stock acquired by the exercise of the ISO is sold within two
years from the date of the grant of the option or one year from the date of
exercise of such option ("disqualifying disposition"), it will result in
taxable compensation income to the employee (and a corresponding deduction to
the Company) to the extent of the difference between the exercise price and the
lesser of the fair market value of stock on the exercise date or the amount
realized on such disposition.
The exercise of a non-qualified stock option results in immediate
taxable income to the individual in an amount equal to the difference between
the option price paid (whether in cash or otherwise) and the fair market value
of the Company's stock at the date of exercise. The Company will receive a
deduction, as compensation paid, equal to the amount included in income by the
employee as set forth above.
The basis of any stock acquired by the employee through a
non-qualified option is the amount paid for the stock by an employee plus the
amount of taxable income recognized. The basis of stock acquired by the
exercise of an ISO, not disposed of in a disqualifying disposition, is the
amount paid by the employee.
Restricted Stock Awards
The employee will recognize taxable income on restricted stock
granted to him at such time as the restriction period lapses. The amount of
income will be equal to the difference between the fair market value of such
stock and the amount paid by the employee for such restricted shares as of the
date the restriction period lapses. Due to liabilities imposed by Rule 16(b)
of the Securities Exchange Act of 1934 on certain officers, directors and 10%
Stockholders who dispose of stock in the Company held by them during the
prohibited period defined by Rule 16(b) (the "16(b) Restriction Period"), such
persons may not immediately recognize income as of the date the restriction
period lapses. If at such time the employee is subject to the provisions of
Rule 16(b), income will not be recognized until the 16(b) Restriction Period
lapses. The Company will receive a deduction at such time and in the same
amount as the employee includes in his income.
Performance Units
An employee will recognize income at such time as an actual payment
is made by the Company regardless of whether the employee receives cash or
shares of stock in the Company. If, however, the employee receives Company
stock and the employee is subject to the provisions of Rule 16(b), then the
employee will not recognize income and the Company will not be entitled to a
deduction until the 16(b) Restriction Period lapses. Otherwise, the Company
will be entitled to a deduction, as an accrual basis taxpayer, at such time
when all events which determine the liability to pay the
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performance award have occurred, and the amount thereof can be determined with
reasonable accuracy.
1997 Stock Option Plan for Non-Employee
Directors ("Non-Employee Directors Option Plan")
General
The Non-Employee Directors Option Plan was adopted by the Company's
Board of Directors in March 1997 and approved by the Company's Stockholders at
the Company's annual meeting held on July 25, 1997.
The Non-Employee Directors Option Plan replaced the Company's 1993
Stock Option Plan for Non-Employee Directors, which plan expired on July 26,
1997, and which plan contained identical provisions to the Non-Employee
Directors Option Plan.
The Non-Employee Directors Option Plan is based upon the Company's
belief that stock ownership by non-employee Directors benefits the
stockholders by giving such Directors a proprietary interest in the Company
and thus aligning the interest of such Directors with those of the
stockholders. Additionally, the Non-Employee Directors Option Plan will enhance
the Company's ability to attract, retain and suitably reward Directors of
exceptional ability.
There are an aggregate of 50,000 shares of Common Stock reserved for
issuance upon the exercise of options granted under the Non-Employee Directors
Option Plan.
The following is a summary of the basic provisions of the Non-Employee
Directors Option Plan and its components to the extent applicable, which
summary does not purport to be complete and is subject in all respects to the
provisions of the Non-Employee Directors Option Plan, to which reference is
made. This summary is modified in its entirety by such reference and does not
relate, or give effect to provisions of statutory or common law.
Administration of Non-Employee Directors Option Plan
The Board of Directors is authorized to administer the Non-Employee
Directors Option Plan in accordance with its terms. However, the Board shall
have no discretion with respect to the selection of Directors to receive
options, the number of shares of Common Stock subject to any such options or
the exercise price thereunder.
Eligibility and Participation
Only eligible Directors, as defined in the Non-Employee Directors
Option Plan, are eligible for grant of options under the Non-Employee
Directors Option Plan. An Eligible Director is defined as a director of the
Company who is not an employee of the Company or its subsidiaries and has not
within one year immediately preceding the time such determination is made,
received any award under any plan of the Company providing for the
discretionary
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issuance of stock, stock options or stock appreciation rights. There are
currently six Eligible Directors.
Shares Subject to the Non-Employee Directors Option Plan
An aggregate of 50,000 shares of Common Stock shall be available for
issuance upon the exercise of options granted under the Non-Employee Directors
Option Plan. This number is subject to adjustment in the event of a stock
split, stock dividend, subdivision or combination of the Common Stock or other
changes in corporate structure affecting the Common Stock.
As of the date of the Annual Stockholders' Meeting, each individual
who is then an Eligible Director will be granted an option to purchase 2,500
shares of Common Stock. The options will be nonstatutory stock options, not
intended to qualify under Section 422 of the Code as ISO's. The purchase price
per share of the Common Stock deliverable upon exercise of the option shall be
100% of the fair market value per share of Common Stock, determined as
provided in the Non-Employee Directors Option Plan, on the day the option is
granted. Eligible Directors shall pay the exercise price of the options in
either cash or in Common Stock. The options granted shall be for a term of not
more than 10 years from date of grant. Except as set forth below, options
shall be exercisable in whole, or in part, one year after the date of grant.
Forfeiture
All outstanding options held by an optionee shall automatically be
cancelled upon such optionee's termination of service as an Eligible Director
except in the following circumstances - if such termination of service as an
Eligible Director occurs by reason of (i) declining to stand for re-election,
(ii) becoming an employee of the Company or a subsidiary, or (iii) becoming
disabled (as defined in the Company's Profit Sharing Plan). All outstanding
options held by such optionee on the date of such termination shall continue
to be fully exercisable for up to five years following the date of such
termination, but in no event after the expiration date of the options. In the
event of the death of an optionee (whether before or after termination of
service as an Eligible Director), all outstanding options held by such
optionee and not previously cancelled or expired on the date of death shall be
fully exercisable by such optionee's legal representative within one-year
after the date of death (without regard to the expiration date of the option
specified in accordance with the preceding sentence).
Mergers, Sales and Change of Control
In the case of certain mergers, consolidations or combinations of the
Company with or into other corporations, and in the event of a Change of
Control of the Company, the holder of each option then outstanding shall
(unless the Board determines otherwise) have the right to receive, on the date
or effective date of such event, a cash or stock payment in an amount
calculated as set forth in the Non-Employee Directors Option Plan, which is
equivalent to the economic value of the option on such date. Change of control
is deemed to have occurred if following (i) a tender or exchange offer
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for voting securities of the Company (other than any such offer made by the
Company) or (ii) a proxy contest for the election of directors of the Company,
the persons who were directors of the Company immediately before the
initiation of such event (or directors who were appointed by such directors)
cease to constitute a majority of the Board of Directors of the Company upon
the completion of such tender or exchange offer or proxy contest or within
one-year after such completion.
Plan Amendments
The Non-Employee Directors Option Plan may be amended by the Board as
it shall deem advisable. Without the authorization and approval of the
Stockholders, however, the Board may not increase the number of shares which
may be purchased pursuant to options granted under the Non-Employee Directors
Option Plan, change the requirement that option grants be priced at 100% of
fair market value on the date of grant, modify in any respect the class of
individuals who constitute Eligible Directors or materially increase the
benefits accruing to optionees under the Non-Employee Directors Option Plan.
Plan provisions relating to the class of Directors eligible to receive options
under the Non-Employee Directors Option Plan and to the price, amount and
timing of option grants under the Non-Employee Directors Option Plan may not
be amended more than once every six months, other than to comply with changes
in applicable law.
Term of Plan
Options will be granted to eligible Directors at the Annual Meeting
of Stockholders in 1998 and at subsequent Annual Meetings. The Non-Employee
Directors Plan shall terminate on the day following the Annual Stockholders
Meeting held in the year 2002,unless the Non-Employee Directors Option Plan is
extended or terminated at an earlier date by the stockholders.
Federal Income Tax Consequences
Under present Federal income tax laws, options granted under the
Non-Employee Directors Option Plan would have the following tax consequences.
When an optionee exercises an option, the difference between the
option price and any higher market value of the stock on the date of exercise
will be ordinary income to the optionee and will be allowed as a deduction for
Federal income tax purposes to the Company. When an optionee disposes of
shares acquired by the exercise of the option, any amount received in excess
of the market value of the shares on the date of exercise will be treated as
long or short term capital gain, depending upon the holding period of the
shares. If the amount received is less than the market value of the shares on
the date of the exercise, the loss will be treated as long or short term
capital loss, depending upon the holding period of the shares.
The Non-Employee Directors Option Plan is not subject to any
provision of ERISA and is not qualified under Section 401(a) of the Code.
16
<PAGE>
Transfer Agent
The transfer agent for the Company's Common Stock is Continental
Stock Transfer & Trust Company, 2 Broadway, New York, New York 10004.
Documents Incorporated by Reference
The Company hereby incorporates by reference into this
Prospectus, (i) its Annual Report on Form 10-K for the year ended February 22,
1997, (ii) its Form 10-Q report for the period ended May 24, 1997; and (iii)
its Proxy Statement for the Annual Meeting of Stockholders held on July 25,
1997. The description of the Company's Common Stock as set forth in the final
prospectus contained in the Company's Form S-1 Registration Statement which
became effective on August 12, 1987 is also incorporated by reference. All
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d)
of the Exchange Act subsequent to the filing of the Registration Statement of
which the Prospectus is a part and prior to the termination of the offering
made hereby are also incorporated herein by reference. A copy of any such
document will be provided by the Company without charge to each person to whom
a copy of this Prospectus is delivered or the written or oral request of such
person to the Company at 543 Main Street, New Rochelle, New York 10801.
Attention: Susan Handler, Secretary, Telephone No. (914) 576-6400.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of the Prospectus to the effect that a statement
contained herein or in any subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
the Prospectus.
Legal Matters
The legality of the shares offered hereby have been passed
upon by Salon, Marrow & Dyckman, LLP, 685 Third Avenue, New York, New York
10017. Leo Salon, a partner of Salon, Marrow & Dyckman, LLP is a director of
the Company and owns 2,250 shares of Common Stock. Mr. Salon has the right to
acquire 4,500 shares of Common Stock pursuant to the Company's 1987
Performance Unit, Restricted Stock, Non-qualified Option and Incentive Stock
Option Plan. Mr. Salon also has the right to acquire 12,500 shares of Common
Stock pursuant to the Company's 1993 Stock Option Plan for Non-Employee
Directors. Mr. Salon is a director of the Lillian Menasche Vernon Foundation,
Inc. a charitable foundation, which foundation owns an aggregate of 543,788
shares of Common Stock.
Experts
The Company's consolidated financial statements as of
February 22, 1997 and February 24, 1996 and for each of the three fiscal years
in the period ended February 22, 1997 and the related supplemental schedules,
incorporated by reference in this Registration Statement have been
incorporated, herein, in reliance
17
<PAGE>
on the reports of Coopers & Lybrand, LLP, independent accountants, given on
the authority of the firm as experts in accounting and auditing.
Indemnification of Directors and Officers
Pursuant to the provisions of the Delaware General
Corporation Law, a corporation organized under the laws of the state of
Delaware has the power to indemnify a corporate agent (i.e., any person who is
or was an officer, director, employee or agent of a corporation) against his
expenses and liabilities in any proceeding brought against him or in the
defense of any claim, in connection with any proceeding involving the
corporate agent by reason of his being or having been such a corporate agent,
other than a proceeding by or in the right of the corporation if (a) such
corporate agent acted in good faith and a manner reasonably believed to be in
or not opposed to the best interests of the corporation; and (b) with respect
to any criminal proceeding, such corporate agent had no reasonable cause to
believe his conduct was unlawful. In certain cases, a corporate agent must be
indemnified where he has been successful on the merits or otherwise in defense
of any claim, issue or matter therein. In other cases, indemnification may be
made by a corporation upon a determination that indemnification is proper in
the circumstances because the corporate agent either acted in good faith and
in a manner he reasonably believed to be not opposed to the best interests of
the corporation or in the case of a criminal proceeding, had no reason to
believe his conduct was unlawful. In other instances, if a corporation upon
application of a corporate agent, has failed or refused to provide for
indemnification as either required or permitted, a corporate agent may apply
to a court for an award of indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the Company pursuant to the foregoing provisions or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by the director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction, the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such an issue.
18
<PAGE>
Part II
Item 3. Incorporation of Documents by Reference
The following documents filed with the Commission by Lillian
Vernon Corporation, a Delaware corporation (the "Company") are incorporated as
to their respective dates in this Registration Statement by reference:
(a) The Company's Annual Report on Form 10-K for the
fiscal year ended February 22, 1997;
(b) The Company's Quarterly Report on Form 10-Q for
three (3) months ended May 24, 1997;
(c) All other reports filed by the Company pursuant to
Section 13(a) and 15(d) of the Securities Exchange Act of 1934 since the end
of the Company's fiscal year ended February 22, 1997; and
(d) The description of the Company's Common Stock
contained in the Company's Registration Statement on Form S-1,
Registration No. 33-15430.
All documents filed by the Company with the Commission,
pursuant to Section 13, 14 or 15(d) of the Exchange Act hereto, but prior to
the filing of a post-effective amendment to the Registration Statement which
indicates that all securities offered hereby have been sold or which
deregisters all such securities then remaining unsold, shall be deemed to be
incorporated herein by reference and to be a part hereof from their respective
dates of filing. Any statement contained herein shall be deemed to be modified
or superseded for purposes of the Prospectus to the extent that a statement
contained herein or in any other subsequently filed document, which also is or
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interest of Named Experts and Counsel
The legality of the shares offered hereby has been passed
upon for the Company by Salon, Marrow & Dyckman, LLP, 685 Third Avenue, New
York, New York 10017. Leo Salon, a partner of Salon, Marrow & Dyckman, LLP, a
director of the Company, owns 2,250 shares of Common Stock. He has the right
to acquire 4,500 shares of Common Stock pursuant to the Company's 1987
Performance Unit, Restricted Stock, Non-Qualified Option and Incentive Stock
Option Plan. Mr. Salon also has the right to acquire 12,500 shares of Common
Stock pursuant to the Company's 1993 Stock Option Plan for Non-Employee
Directors. Mr. Salon is a director of the Lillian
II-1
<PAGE>
Menasche Vernon Foundation, Inc. a charitable foundation, which foundation
owns an aggregate of 543,788 share of Common Stock.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate the personal liability of directors of a Company to
the Company or to any of its stockholders for monetary damage for a breach of
his fiduciary duty as a director, except in the case where the director
breaches his duty of loyalty, fails to act in good faith, engages in
intentional misconduct or knowingly violates a law, authorizes the payment of
a dividend or approves a stock repurchase in violation of the DGCL or obtains
an improper personal benefit. The Company's Certificate of Incorporation, a
copy of which is incorporated by reference, contains a provision which
eliminates directors' personal liability as set forth above.
Section 145 of the DGCL permits a corporation to indemnify its directors
and officers.
Article IV of the Company's By-Laws provides for indemnification of
corporate agents as follows:
"Section 1. Non-Derivative Actions. The Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in right of the
Company) by reason of the fact that he is or was a director, officer or
employee of the Company, or is or was serving at the request of the Company as
a director, officer or employee of another corporation, partnership,
joint-venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, actually
and reasonably incurred by him in connection with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful."
"Section 2. Derivative Actions. The Company shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or contemplated action or suit by or in the right of the Company to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer or employee of the Company, or is or was serving at the
request of the Company as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against
II-2
<PAGE>
expenses (including attorneys' fees) judgments, fines and amounts paid in
connection with the defense or settlement of such action or suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Company unless
and only to the extent that the Court of Chancery of Delaware or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication or liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper."
"Section 3. Expenses. To the extent that a director, officer or employee of
the Company has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1 and 2 of this Article IV,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith."
"Section 4. Standard of Conduct. Any indemnification under Sections 1 and
2 of this Article IV (unless ordered by a court) shall be made by the Company
only as authorized in the specific case upon a determination that
indemnification of the director, officer or employee is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Sections 1 and 2. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by a
majority vote of the stockholders."
"Section 5. Undertakings. Expenses incurred in defending a civil,
criminal, administrative or investigative action, suit or proceeding may be
paid by the Company in advance of the final disposition of such action, suit
or proceeding if authorized by the Board of Directors in the specific case and
only upon receipt of an undertaking by or on behalf of the director, officer
or employee to repay such amount unless it shall ultimately be determined that
he is entitled to be indemnified by the Company as authorized in this Article
IV."
"Section 6. Non-Exclusivity. The indemnification provided by this Article
IV shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any By-Law, agreement, vote of
stockholders or disinterested directors, statute, court decision, insurance
policy or otherwise, now or hereafter in effect, and shall continue as to a
person who has ceased to be a director, officer or employee and shall inure to
the benefit of the heirs, executors and administrators of such a person."
II-3
<PAGE>
"Section 7. Insurance. The Company may purchase and maintain insurance on
behalf of any person who is or was a director, officer or employee of the
Company, or is or was serving at the request of the Company as a director,
officer or employee of another corporation, partnership, joint venture, trust
or other enterprise, against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether or
not the Company would have the power to indemnify him against such liability
under the provisions of this Article IV or of the General Corporation Law of
the State of Delaware."
"Section 8. Definitions. For the purpose of this Article IV, references to
"other enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
Company" shall include any service as a director, officer or employee of the
Company which imposes duties on, or involves services by, such director,
officer or employee with respect to any employee benefit plan, its
participants or beneficiaries; and a person who acting in good faith and in a
manner he reasonably believes to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in
this Article IV".
"Section 9. Indemnification Agreements. Without limiting the generality of
the foregoing, the Company shall have the express authority to enter into such
agreements as the Board of Directors deems appropriate for the indemnification
of present or future directors and officers of the Company in connection with
their service to or status with the Company or any other corporation, entity
or enterprise with whom such person is serving at the express written request
of the Company."
The Company has entered into indemnification agreements with its officers
and directors providing for payment of (i) all expenses incurred by an officer
and director in connection with any potential liability, (ii) any awards or
judgments rendered against said officer and director and (iii) any amount paid
in settlement provided that the officer and director did not act in bad faith
and acted in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Company. The indemnification agreements provide for
advancement of expenses in certain circumstances.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
II-4
<PAGE>
ITEM 8. EXHIBITS
3 Articles of Incorporation as amended
and By Laws(1)
4.1 1997 Performance Unit, Restricted Stock,
Non-Qualified Option and Incentive E-1
Option Plan
4.2 1997 Stock Option Plan for
Non-Employee Directors E-14
5.1 Opinion of Salon, Marrow & Dyckman, LLP E-18
24(a) Consent of Salon, Marrow & Dyckman, LLP to
be named in the Registration Statement.
Reference is made to Exhibit 5.1 to this
Registration Statement which includes
such consent.
24(b) Consent of Coopers & Lybrand, LLP E-20
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change of such information in the Registration Statement;
Provided however that paragraphs (a)(l)(i) and (a)(l)(ii) shall
not apply to information contained in periodic reports filed by the registrant
pursuant to Section 13 or Section l5(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this Registration Statement.
- -------------------------
(1) Filed with the Registration Statement on Form S-1 (File No. 33-15430) and
with Form 10-Q for the Quarter ended August 28, 1987 and incorporated by
reference herein.
II-5
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for the filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned; thereunto duly
authorized in New Rochelle, New York on this 23rd day of September, 1997.
LILLIAN VERNON CORPORATION
Dated: September 23, 1997 By: /s/ Lillian Vernon
----------------------------------
Lillian Vernon
Chairman of the Board
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below, hereby constitutes and appoints Lillian Vernon and Robert Mednick and
each acting alone, his true and lawful attorney-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments and
supplements to this Registration Statement and to file the same with all
exhibits thereto and other documents in connection with all exhibits thereto,
with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agents full power and authority to do and perform each
and every act and thing necessary or appropriate to be done with respect to
this Registration Statement or any amendments or supplements hereto and about
the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in their respective capacities with Lillian Vernon Corporation and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Lillian Vernon
- --------------------
Lillian Vernon Chairman of the Board September 23, 1997
of Directors and
Chief Executive Officer
(Principal Executive
Officer)
/s/ Robert Mednick
- ---------------------
Robert Mednick Vice President-Chief September 23, 1997
Financial Officer
(Principal Financial
and Accounting Officer)
II-7
<PAGE>
/s/ Howard P. Goldberg
- ----------------------
Howard P. Goldberg President and September 23, 1997
Director
/s/ David C. Hochberg
- ----------------------
David C. Hochberg Vice President - September 23, 1997
Public Affairs
and Director
/s/ Leo Salon
- ----------------------
Leo Salon Director September 23, 1997
/s/ William E. Phillips
- ----------------------
William E. Phillips Director September 23, 1997
/s/ Bert W. Wasserman
- ----------------------
Bert W. Wasserman Director September 23, 1997
- --------------------
Richard Berman Director September , 1997
/s/ Jonah Gitlitz
- ----------------------
Jonah Gitlitz Director September 23, 1997
/s/ Elizabeth Mugar Eveillard
- ----------------------
Elizabeth Mugar Eveillard Director September 23, 1997
II-8
<PAGE>
INDEX TO EXHIBITS
4.1 1997 Performance Unit, Restricted Stock, E-1
Non-Qualified Option and Incentive
Stock Option Plan.
4.2 1997 Stock Option Plan for Non-Employee Directors E-14
5.1 Opinion of Salon, Marrow & Dyckman E-18
24(a) Consent of Salon, Marrow & Dyckman
(included in Exhibit 5.1)
24(b) Consent of Coopers & Lybrand, LLP E-20
II-9
<PAGE>
EXHIBIT 4.1
LILLIAN VERNON CORPORATION
---------------------
1997
PERFORMANCE UNIT, RESTRICTED STOCK,
NONQUALIFIED OPTION AND INCENTIVE STOCK OPTION PLAN
(THE "PLAN")
1. Definitions.
The following terms shall have the following meanings for purposes of the
Plan:
"Code" means the Internal Revenue Code of 1986 as the same may be amended
from time to time.
"Committee" means the committee described in Paragraph 4 which shall
administer the Plan.
"Common Stock" means Common Stock, par value One ($.01) Cent per share, of
the Corporation.
"Corporation" means Lillian Vernon Corporation.
"Fair-Market Value" means with respect to Common Stock (or other stock of
the Corporation), its Mean Price on the day of determination as specified in
the Plan if such Common Stock (or other stock) is publicly traded and, if
not, then the Fair-Market Value shall be determined by the Committee in
accordance with applicable Treasury Regulations under the Code.
"Incentive Option(s)" means the qualified incentive stock options referred
to in Paragraph 9.
"Mean Price" means with respect to Common Stock (or other stock of the
Corporation), the Fair-Market Value thereof as shall be determined by the
Committee and, if the Common Stock (or such other stock) of the Corporation
is listed on a national securities exchange or traded on the Over-the-Counter
market, the Fair-Market Value shall be the mean of the high and low trading
prices or of the high bid and low asked prices of the Common Stock (or such
other stock) of the Corporation on such exchange, or on the Over-the-Counter
market as reported by the National Quotation Bureau, Inc., as the case may be
(rounded to the next highest cent in the case of fractions of a cent), on the
day of determination as specified in the Plan or, if there is no trading or
bid or asked price on that day, the mean of the high and low trading or high
bid and low asked prices (rounded to the next highest cent in the case of
fractions of a cent) on the most recent day preceding the day of
determination as specified in the Plan for which such prices are available.
"Nonqualified Option(s)" means the nonqualified options referred to in
Paragraph 7.
"Option(s)" means the Nonqualified Options and Incentive Options.
"Performance Unit(s)" means the Performance Units referred to in Paragraph
6.
E-1
<PAGE>
"Restricted Stock" means the shares of Common Stock referred to in
Paragraph 8.
2. Stock Subject to the Plan.
There are reserved for issuance upon the payment of Performance Units
awarded, for issuance as Restricted Stock awards and the exercise of Options
granted under the Plan an aggregate of five hundred twenty-five thousand
(525,000) authorized and unissued shares of Common Stock. If any Option
granted under the Plan shall expire or terminate for any reason (including,
without limitation, by reason of its surrender, pursuant to the provisions of
the third paragraph of Paragraph 7(b) or otherwise, or cancellation, in whole
or in part, pursuant to the provisions of Paragraph 7(f) or otherwise, or the
substitution in place thereof of a new Option) without having been exercised
in full, the shares subject thereto shall again be available for the purposes
of issuance pursuant to this Plan. Likewise, if Restricted Stock shall become
subject to forfeiture and be returned to the Corporation pursuant to the
provisions of Paragraph 8 hereof, such shares shall again be available for
the purposes of issuance pursuant to this Plan. In no event shall authorized
and unissued shares of Common Stock which, under the Plan, are authorized to
be used in payment of Performance Unit awards be deemed to be unavailable for
purposes of the Plan until such shares shall have been issued in payment
thereof in accordance with the provisions of Paragraph 6(g).
3. Administration.
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have plenary authority, in its
discretion, to determine the individuals to whom, and the time or times at
which, Performance Units or Restricted Stock shall be awarded and Options
shall be granted and the number of units and/or shares to be covered by each
such award or grant. In making such determinations, the Committee may take
into account the nature of the services rendered by the respective
individuals, their present and potential contributions to the Corporation's
success and such other factors as the Committee in its discretion may deem
relevant. Subject to the express provisions of the Plan, the Committee shall
also have plenary authority to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine the terms and
provisions of the respective Restricted Stock, Performance Unit and Option
agreements (which need not be identical) and to make all other determinations
necessary or advisable for the administration of the Plan. The Committee's
determinations of the matters referred to in this Paragraph 3 shall be
conclusive.
4. The Committee.
The Committee shall consist of three or more members of the Board of
Directors of the Corporation who are not employees of the Corporation or any
subsidiary thereof. The Committee shall be appointed by the Board of
Directors, which may from time to time appoint members of the Committee in
substitution for members previously appointed and may fill vacancies, however
caused, in the Committee. The Committee shall select one of its members as
its Chairman and shall hold its meetings at such times
E-2
<PAGE>
and places as it may determine. A majority of its members shall constitute a
quorum. All determinations of the Committee shall be made by not less than a
majority of its members. Any decision or determination reduced to writing and
signed by all the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held. The Committee may
appoint a secretary, shall keep minutes of its meetings and shall make such
rules and regulations for the conduct of its business as it shall deem
advisable. Members of the Committee shall not be eligible to receive any
option grants pursuant to the Plan.
5. Eligibility.
Performance Units and Restricted Stock may be awarded only to employees
(including officers) of the Corporation and of its present and future
subsidiary corporations (herein called subsidiaries). Incentive Options may
be awarded only to full-time employees (including officers) of the
Corporation or its subsidiaries. Nonqualified Options may be granted to
employees (including officers), consultants and other individuals who render
services to the Corporation and its subsidiaries. Any such eligible
individual may receive one or more Performance Unit awards or one or more
Options or one or more Restricted Stock awards, or a combination thereof, as
the Committee shall from time to time determine, and such determinations may
be different as to different individuals and may vary as to different awards
and grants. A Director of the Corporation or of a subsidiary who is not also
an employee of the Corporation or of a subsidiary will not be eligible to
receive Performance Units, Restricted Stock, Non-Qualified Options or
Incentive Options under the Plan.
6. Performance Unit Awards.
(a) Performance Units which are awarded to an employee shall have a
payment value at the end of the applicable award cycle contingent upon
performance of the Corporation and/or of such employee's subsidiary, division
or department over the award cycle. The length of the award cycle over which
Performance Units are to be earned out shall be determined by the Committee
at the time such Performance Units are awarded, but in no event shall the
award cycle be less than one (1) fiscal year. The performance measures may
include, but shall not be limited to, cumulative growth in pre-tax profits,
earnings per share, return on shareholders' equity, return on capital
employed or increase in the market value of the Common Stock of the
Corporation. Such measures may be applied on an absolute basis or relative to
industry indices and shall be defined in a manner which the Committee shall
deem appropriate. For each award cycle, the Committee shall establish a
payment schedule based upon the performance measures determined for such
award cycle. If during the course of an award cycle there should occur, in
the opinion of the Committee, significant changes in economic conditions or
in the nature of the operations of the Corporation or subsidiary, division or
department which the Committee did not foresee in establishing the
performance measures for such award cycle and which, in the Committee's sole
judgment, have, or are expected to have, a substantial effect on the
performance of the Corporation or an employee's subsidiary, division or
department during such award cycle, the Committee may revise the payment
schedule and performance measures formerly determined by it in such manner as
the Committee, in its sole judgment, may deem appropriate.
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(b) In determining the number of Performance Units to be awarded, the
Committee shall take into account an employee's responsibility level,
performance, potential, cash compensation level and such other considerations
as it deems appropriate.
(c) An award of Performance Units to an employee shall terminate for all
purposes if the employee does not remain, during the award cycle,
continuously in the employ of the Corporation or one of its subsidiaries,
except in the case of death, disability or retirement at age sixty-five (65)
or early retirement with the consent of the Corporation (hereinafter
"Retirement") in which case (and provided that the employee at the time of
death, disability or Retirement as aforesaid, shall have been continuously in
the employ of the Corporation or one of its subsidiaries during the period
commencing on the date the award is granted and ending on the first
anniversary thereof) the employee will be entitled to payment (such payment
to be made in accordance with the provisions of Paragraph 6(d)) of the same
portion of the payment value of the award the employee would otherwise have
been paid (such payment value, if any, to be determined at the conclusion of
the applicable award cycle in accordance with the provisions of Paragraphs
6(a) and 6(e)) as the portion of the award cycle during which the employee
was employed bears to the full award cycle. Under particular circumstances,
the Committee may make other determinations with respect to employees whose
services do not meet the foregoing requirements, including the waiver of any
of the requirements of this subparagraph (c) relating to periods of
employment.
(d) Unless the Committee otherwise determines, no payment with respect to
Performance Units will be made to an employee prior to the end of such
employee's award cycle applicable to the Performance Units awarded to such
employee.
(e) An employee's interest in any Performance Units awarded to him shall
mature on the last day of the award cycle for such award. The payment value
of a performance unit shall be the dollar amount calculated on the basis of
the payment schedule applicable to such award cycle.
(f) The total amount of payment value due an employee at the conclusion of
an award cycle shall be paid on such date following the conclusion of such
award cycle as the Committee shall designate, except as specifically
otherwise provided in the Plan.
(g) Payment of the payment value due an employee shall be made, at the
election of the Committee as to each employee, (i) in cash, (ii) in shares of
Common Stock of the Corporation (to be determined by dividing the payment
value of all matured Performance Units by the average of the Mean Price of
such stock during the five business days immediately preceding the date of
payment) or (iii) in a combination of cash and shares of Common Stock so
valued.
(h) A person to whom any award has been made shall not have any interest
in the cash or stock awarded to him until the cash has been paid to him or
the certificates for the stock have been delivered to him, as the case may
be, in accordance with the provisions of this Plan.
(i) In the event of any changes in the outstanding stock of the
Corporation by reason of stock dividends, stock splits, recapitalizations,
mergers, consolidations, combinations or exchanges of shares,
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split-ups, split-offs, spin-offs, liquidations or other similar changes in
capitalization, or any distribution to shareholders other than cash
dividends, the Committee shall make such adjustments, if any, in the light of
the change or distribution as the Committee in its sole discretion shall
determine to be appropriate, in the number of shares of stock covered by any
award for which certificates have not been delivered.
(j) In any case in which payment of an award is to be made in stock, the
Corporation shall have the right to retain or sell without notice sufficient
shares of stock (taken at the Mean Price of such stock on such date or dates
as may be determined by the Committee, but not more than five (5) business
days prior to the date on which such shares would otherwise have been
delivered) to cover the amount of any tax required by any government to be
withheld or otherwise deducted and paid with respect to such payment,
remitting any balance to the employee; provided, however, that the employee
shall have the option to provide the Corporation with the funds to enable it
to pay such tax. The Corporation shall also have the right, in lieu of
delivering the certificate or certificates for any of or all the stock which
would otherwise be deliverable to the employee pursuant to this Plan, to pay
to such employee on the date on which such certificate or certificates would
otherwise be deliverable an amount in cash equal to the Mean Price of such
stock on such date or dates as may be determined by the Committee, but not
more than five (5) business days prior to such date, but after withholding or
deducting any required amount of tax, all as the Committee may determine in
individual cases.
7. Nonqualified Option Grants.
(a) Each Nonqualified Option granted under the Plan shall be authorized by
the Committee and shall be evidenced by a Nonqualified Stock Option Agreement
which shall be executed by the Company and by the person to whom such
Nonqualified Option is granted. The Nonqualified Stock Option Agreement
shall, among other things, specify the number of shares of Common Stock as to
which Nonqualified Option is granted, the periods during which the
Nonqualified Option is exercisable and the purchase price per share thereof.
(b) The Committee shall be authorized in its discretion to prescribe in
the Nonqualified Option grant the installments, if any, in which Nonqualified
Option granted under the Plan shall become exercisable. The Committee shall
also be authorized to establish the manner and the effective date of the
exercise of a Nonqualified Option. The term of such Nonqualified Option shall
be not more than ten years from the date of grant thereof, or such shorter
period as is prescribed in Paragraphs 7(d) and (e).
A Nonqualified Option granted under the Plan shall be exercised by the
delivery by the holder thereof to the Corporation at its principal office
(attention of the Secretary) of written notice of the number of shares with
respect to which the Nonqualified Option is being exercised. Such notice
shall be accompanied by payment of the full purchase price of such shares,
and payment of such purchase price shall be made, at the discretion of the
Committee, by delivery of (i) cash, or (ii) his full recourse note payable to
the order of the Company (but only if and to the extent permitted by
applicable Delaware corporate law) having such due date, payment terms and
such annual interest rate (which is not less than the minimum rate then
required under the Code), as the Committee may fix in its sole discretion, or
(iii)
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in the Corporation's Common Stock owned by the optionee having a Fair-Market
Value on the date of exercise equal to the aggregate Nonqualified Option
price (provided, however, that no such payment in stock shall be made unless
said stock shall have been owned by the optionee for a period of more than
six (6) months), or (iv) such combination of Items (i), (ii) and (iii) as the
Committee may fix in its sole discretion, or (v) such other financial
arrangement may be made for the payment for such shares as the Committee may
fix in its sole discretion.
In lieu of requiring an optionee to deliver cash and/or notes and/or stock
and receive certificates for shares of Common Stock of the Corporation upon
the exercise of a Nonqualified Option, if the Nonqualified Option so
provides, the Committee may elect to require the optionee to surrender the
Nonqualified Option to the Corporation for cancellation as to all or any
portion of the number of shares covered by the intended exercise and receive
in exchange for such surrender a payment, at the election of the Committee,
in cash, in shares of Common Stock of the Corporation, or a combination of
cash and shares of Common Stock of the Corporation, equivalent to the
appreciated value of the shares covered by the Option surrendered for
cancellation. Such appreciated value shall be the difference between the
Nonqualified Option prices of such shares (as adjusted pursuant to Paragraph
12) and the Fair-Market Value of such shares. Upon delivery to the
Corporation of a notice to exercise a Nonqualified Option, the Committee may
avail itself of its right to require the optionee to surrender the
Nonqualified Option to the Corporation for cancellation as to shares covered
by such intended exercise. The Committee's right of election shall expire, if
not exercised, at the close of business on the tenth business day following
the delivery to the Corporation of such notice. Should the Committee not
exercise such right of election, the delivery of the aforesaid notice of
exercise shall constitute an exercise by the optionee of the Nonqualified
Option to the extent therein set forth, and payment for the shares covered by
such exercise shall become due immediately.
(c) In the event that an employee receiving a Nonqualified Option does not
remain in the employ of the Corporation or of one of its subsidiaries for the
period determined by the Committee and set forth in the Nonqualified Option
grant and the termination of such individual's service during such period is
either (i) for cause or (ii) voluntary on the part of such individual and
without the written consent of the Corporation or such subsidiary, the
Nonqualified Option shall forthwith terminate on the date of such termination
of employment. Retirement at age sixty-five (65) shall be deemed to be a
termination of employment with the Corporation's written consent.
(d) In the event of the termination of the employment of an employee
holder of any Nonqualified Option, other than by reason of Retirement or
death, he may (unless his Nonqualified Option shall have been terminated by
reason of the provisions of Paragraph 7(c) or unless otherwise provided in
his Nonqualified Option grant) exercise his Option at any time within three
(3) months after such termination, but not after the expiration of the
Nonqualified Option, to the extent of the number of shares covered by his
Nonqualified Option which were purchasable by him at the date of the
termination of his employment. In the event of the termination of the
employment of the holder of any Nonqualified Option because of Retirement, he
may (unless his Nonqualified Options shall have been previously terminated
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pursuant to the provisions of Paragraph 7(c) or unless otherwise provided in
his Nonqualified Option grant) exercise his Nonqualified Option at any time
after such termination, but not after the expiration of the Nonqualified
Option, to the extent of the number of shares covered by his Nonqualified
Option which were purchasable by him at the date of his termination of
employment. Notwithstanding the foregoing provisions hereof but subject to
the provisions of Paragraph 7(c), the Committee may determine, in its sole
discretion, in the case of any termination of employment that the holder of a
Nonqualified Option may exercise such Nonqualified Option to the extent of
the remaining shares covered thereby whether or not such shares had become
purchasable by such employee at the date of the termination of his
employment. Nonqualified Options granted under the Plan to employees shall
not be affected by any change of employment so long as the holder continues
to be an employee of the Corporation or of a subsidiary. The Nonqualified
Option grant may contain such provisions as the Committee may approve with
reference to the effect of approved leaves of absence.
(e) In the event of the death of an individual other than an employee to
whom a Nonqualified Option has been granted under the Plan, the Nonqualified
Option theretofore granted to him may be exercised by a legatee or legatees
of the Nonqualified Option holder under his last will, or by his personal
representative or distributees, at any time after his death, but not after
the expiration of the Nonqualified Option, to the extent of the remaining
shares covered by his Nonqualified Option whether or not such shares had
become purchasable by such an individual at the date of his death. In the
event of the death of an employee while he is employed by the Corporation or
a subsidiary or following Retirement or during the three (3) month period
following the termination of his employment, the Nonqualified Option (if not
previously terminated pursuant to the provisions of Paragraph 7(c)) may be
exercised by a legatee or legatees of the Nonqualified Option under the
employee's last will, or by the personal representatives or distributees of
the employee at any time after his death, but not after expiration of the
Nonqualified Option, but only to the extent of the number of shares
purchasable by such employee pursuant to the provisions of Paragraph 7(d) at
the date of termination of his employment.
(f) The Committee shall be authorized, in its absolute discretion, to
permit optionees to surrender outstanding Nonqualified Options in exchange
for the grant of new Nonqualified Options or require optionees to surrender
outstanding Nonqualified Options as a condition precedent to the grant of new
Nonqualified Options. The number of shares covered by the new Nonqualified
Options, the Nonqualified Option price, the Nonqualified Option period shall
all be determined in accordance with the Plan and may be different from the
provisions of the surrendered Nonqualified Options.
8. Restricted Stock Awards.
(a) The consideration to be received for shares of Restricted Stock issued
hereunder shall be (i) in such amount, to be paid in cash, as is determined
by the Committee, in its sole discretion, at the time of such award, but in
no event shall it be less than the par value thereof and (ii) the continued
employment by the employee during the "Restricted Period" (as hereinafter
defined). The recipient of Restricted Stock shall be recorded as a
stockholder of the Corporation and shall have, subject to the provisions
hereof, all the rights of a stockholder with respect to such shares and
receive all dividends or other
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distributions made or paid with respect to such shares; provided that the
shares themselves and any new, additional or different shares or securities
which the recipient may be entitled to receive with respect to such shares by
virtue of a stock split or stock dividend or any other change in the
corporate or capital structure of the Corporation, shall be subject to the
restrictions hereinafter described.
(b) During a period following the date of grant, as determined by the
Committee and set forth in the grant (hereinafter referred to as the
"Restricted Period"), the Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of by
the recipient, except in the event of (i) death as hereinafter provided or
(ii) the transfer thereof to the Corporation under the provisions of the next
succeeding paragraph. In the event of the death of the recipient during the
Restricted Period, the aforesaid restrictions on the Restricted Stock shall
immediately lapse and the legal representative of the estate of the recipient
shall be free to transfer, encumber or otherwise dispose of the Restricted
Stock.
In the event that, during the Restricted Period, the employment of the
recipient by the Corporation or one of its subsidiaries is terminated for any
reason (including termination with or without cause by the Corporation or
such subsidiary, resignation by the recipient, or retirement, except
retirement with the consent of the Corporation, which consent may be
conditioned upon the performance of consulting services, agreement as to
noncompetition or such other conditions as may be imposed by the Corporation)
other than termination of employment due to the death of the recipient, then
the shares of Restricted Stock held by him shall be forfeited to the
Corporation and the recipient shall immediately transfer and return to the
Corporation the certificates representing all the Restricted Stock and the
recipient's rights as a stockholder with respect to the Restricted Stock
shall cease, effective with such termination of employment; provided,
however, if the employee is required to pay more than the par value of such
shares, then the Corporation shall either pay to the employee within thirty
(30) days of receipt of such Restricted Stock the amount originally paid for
such Restricted Stock by such employee or return equivalent but unlegended
(except for required Securities Act legends) certificates to the employee
which the employee will then own absolutely. All certificates representing
Restricted Stock issued pursuant to this Plan shall bear a legend indicating
that the shares are subject to the restrictions set forth herein.
During the Restricted Period, the recipient's rights to the Restricted
Stock may not be assigned or transferred except by will or by the laws of
descent or distribution. In the event of any attempt to sell, exchange,
transfer, pledge or otherwise dispose of said shares by the recipient in
violation of the provisions hereof, such shares shall be forfeited to the
Corporation.
9. Incentive Options.
(a) Each Incentive Option granted under the plan shall be authorized by
the Committee and shall be evidenced by an Incentive Stock Option Agreement
which shall be executed by the Company and by the person to whom such
Incentive Option is granted. The Incentive Stock Option Agreement shall
specify, among other things, the number of shares of Common Stock as to which
any Incentive Option is granted, the periods during which the Incentive
Option is exercisable and the purchase price per share thereof.
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(b) The Committee shall grant Incentive Options under the Plan which are
intended to meet the requirements of Section 422A of the Code and which are
subject to the following terms and conditions and any other terms and
conditions as may at any time be required by Section 422A of the Code:
(i) No Incentive Option shall be granted to individuals other than
employees of the Corporation or of a subsidiary.
(ii) Each Incentive Option under the Plan must be granted within ten (10)
years from the date the Plan was adopted by the Board of Directors.
(iii) The purchase price of the shares subject to any Incentive Option
shall not be less than the Fair-Market Value of the Common Stock at the
time such Incentive Option is granted; provided, however, if an Incentive
Option is granted to an individual who owns, at the time the Incentive
Option is granted, more than ten (10%) per cent of the total combined
voting power of all classes of stock of the Corporation or of a
subsidiary, the purchase price of the shares subject to the Incentive
Option shall be at least one hundred ten (110%) per cent of the
Fair-Market Value of the Common Stock at the time the Incentive Option is
granted.
(iv) No Incentive Option granted under the Plan shall be exercisable
after the expiration of ten (10) years from the date of its grant.
However, if an Incentive Option is granted to an individual who owns, at
the time the Incentive Option is granted, more than ten (10%) percent of
the total combined voting power of all classes of stock of the Corporation
or of subsidiary, such Incentive Option shall not be exercisable after the
expiration of five (5) years from the date of its grant. Every Incentive
Option granted under the Plan shall be subject to earlier termination as
expressly provided in Paragraph 9(c) hereof.
(v) The aggregate Fair-Market Value, determined at the time the Incentive
Option is granted, of the shares with respect to which incentive stock
options are exercisable for the first time by any such person during any
calendar year, under the Plan, or incentive stock options (as defined in
Section 422A(b) of the Code) under any other stock option plan maintained
by the Corporation or a parent or subsidiary corporation of the
Corporation or a predecessor corporation of any such corporation, shall
not exceed One Hundred Thousand ($100,000) Dollars.
(vi) For purposes of the Plan, Fair-Market Value shall be as determined
by the Committee on the day preceding the day on which the Incentive
Option is granted.
(c) If the employment of an employee by the Corporation or a subsidiary
shall be terminated voluntarily by the employee or for cause, his Incentive
Option shall expire forthwith. For purposes of this subparagraph, an employee
who leaves the employ of the Corporation to become an employee of a
subsidiary or a corporation (or subsidiary or parent corporation of a
corporation) which has assumed the Incentive Option of the Corporation as a
result of a corporate reorganization, etc., shall not be considered to have
terminated his employment.
(d) If the holder of an Incentive Option under the Plan dies (i) while
employed by the Corporation or a subsidiary, or (ii) after the termination of
his employment by reason of retirement at age sixty-five
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(65) or early retirement with the consent of the Corporation, then such
Incentive Option may, subject to the provisions of subparagraph (f) of this
Paragraph 9, be exercised by the estate of the employee, or by a person who
acquired the right to exercise such Incentive Option by bequest or
inheritance or by reason of the death of such employee at any time.
(e) If the holder of an Incentive Option under the Plan ceases employment
because of permanent and total disability (within the meaning of Section
37(e)(3) or Section 105(d)(4) of the Code) while employed by the Corporation
or a subsidiary, then such Incentive Option may, subject to the provisions of
subparagraph (f) of this Paragraph 9, be exercised at any time.
(f) An Incentive Option may not be exercised pursuant to this Paragraph 9
except to the extent that the holder was entitled to exercise the Incentive
Option at the time of termination of employment or death, and in any event
may not be exercised after the expiration of the Incentive Option.
(g) For purposes of this Paragraph 9, the employment relationship of an
employee of the Corporation or of a subsidiary will be treated as remaining
intact while he is on military, sick leave or other bona fide leave of
absence (such as temporary employment by the Government) if such leave does
not exceed ninety (90) days, or if longer, so long as his right to
reemployment is guaranteed either by statute or by contract.
(h) Unless otherwise provided in the Incentive Stock Option Agreement, any
Incentive Option granted under the Plan shall be exercisable in whole at any
time, or in part from time to time, prior to expiration.
(i) An Incentive Option granted under the Plan shall be exercised by the
delivery by the holder thereof to the Corporation at its principal office
(attention of the Secretary) of written notice of the number of shares with
respect to which the Incentive Option is being exercised. Such notice shall
be accompanied by payment of the full purchase price of such shares, and
payment of such purchase price shall be made, in the sole discretion of the
Committee, by the holder's delivery of (i) his check certified payable to the
order of the Corporation, or (ii) his full recourse note payable to the order
of the Corporation (but only if and to the extent permitted by applicable
Delaware corporate law) having such due date, such payment terms and such
annual interest rate (which is not less than the minimum rate then required
under the Code), as the Committee may fix in its sole discretion, or (iii) in
the Common Stock owned by the holder having a Fair-Market Value on the date
of exercise of equal to the aggregate option price (provided, however, that
no such payment in stock shall be made unless said stock shall have been
owned by the holder of the Incentive Option for more than six (6) months), or
(iv) such combination of items (i), (ii) and (iii) as the Committee may
determine in its sole discretion, or (v) such other financial arrangement may
be made for the payment for such shares as the Committee may fix in its sole
discretion.
10. No Right to Employment.
Nothing in the Plan or in any Performance Unit, Restricted Stock or Option
award or grant pursuant to the Plan shall confer on any employee any right to
continue in the employ of the Corporation or any of its subsidiaries or
interfere in any way with the right of the Corporation or any of its
subsidiaries to terminate his employment at any time.
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11. Transferability and Shareholder Rights of Holders of Performance Units,
Nonqualified Options and Incentive Options.
No Performance Unit awarded and no Option granted under the Plan shall be
transferable otherwise than pursuant to Paragraphs 6(c), 7(e) or 9(d), by
will or by the laws of descent and distribution, and an Option may be
exercised, during the lifetime of the holder thereof, only by him. The holder
of a Performance Unit award or of an Option shall have none of the rights of
a shareholder until, in the case of Options, the shares subject thereto shall
have been registered in the name of the person or persons exercising such
Option on the transfer books of the Corporation upon such exercise.
12. Adjustments upon Changes in Capitalization.
(a) Notwithstanding any other provisions of the Plan, the Option grants
may contain such provisions as the Committee may determine as appropriate for
the adjustment of the number and class of shares subject to such options and
the option prices of the shares covered thereby, in the event of changes in
the outstanding Common Stock of the Corporation by reason of stock dividends,
stock splits, recapitalizations, mergers, consolidations, combinations, or
exchanges of shares, split-ups, split-offs, spin-offs, liquidations or other
similar changes in capitalization, or any distribution to common shareholders
other than cash dividends, and, in the event of any such change in the
outstanding Common Stock of the Corporation, the aggregate number and class
of shares available under the Plan which may be awarded or granted shall be
appropriately adjusted by the Committee; provided, however, that in any such
event the Committee shall have the discretionary power to take any action
necessary or appropriate to prevent any Incentive Option granted herein from
being disqualified as an "incentive stock option" under the then existing
provisions of the Code, or any law amendatory thereof or supplemental
thereto; and
(b) If fractions of a share would result from any such adjustment, the
adjustment shall be revised to the next lower whole number of shares.
13. Compliance with Securities Act.
(a) The Committee may in its discretion authorize the awarding of
Performance Units and Restricted Stock and the granting of Options, the
payment, issuance or exercise of which, respectively, shall be expressly
subject to the conditions that (i) the shares of Common Stock reserved for
issue under the Plan shall have been duly listed, upon official notice of
issuance, upon each stock exchange in the United States upon which the Common
Stock is traded and (ii) a registration statement under the Securities Act of
1933 with respect to such shares shall have become effective.
(b) The recipient of any shares under this Plan (whether by virtue of
exercise of an Option, receipt of Restricted Stock or otherwise) shall
represent and warrant to and agree with the Corporation that he takes such
shares for investment only and not for purposes of sale and that he will also
take for investment only and not for purposes of sale any rights, warrants,
shares, or securities which may be issued to him on account of his ownership
of such shares and that he will not sell or transfer any shares received by
him
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under the Plan or any rights, shares or securities issued to him on account
of the shares received by him under the Plan or any shares received by him
upon exercise of any such rights or warrants without first having obtained an
opinion of counsel for the Corporation that such shares, rights, warrants, or
other securities may be disposed of without registration or other action
under the Securities Act of 1933.
14. Withholding of Additional Federal, State and Local Income Tax.
The Company, in accordance with Section 3402(a) of the Internal Revenue
Code and the Regulations and Rulings promulgated thereunder and any
corresponding state or local laws, will (unless provision is otherwise made
to pay such withholding taxes which is satisfactory to the Committee)
withhold from the wages of employees who are awarded or granted Performance
Units, Restricted Stock or Options, in all payroll periods following and in
the same calendar year as the date on which compensation is deemed received
by the employee, additional income taxes in respect of the amount that is
considered compensation includible in the employee's gross income.
15. Amendment and Termination.
Unless the Plan shall theretofore have been terminated as hereinafter
provided, the Plan shall terminate on, and no awards of Performance Units or
Restricted Stock or Options shall be made after February 28, 2007 and
provided further that the said Plan termination shall have no effect on
awards of Performance Units or Restricted Stock or Options made prior
thereto. The Plan may be terminated, modified or amended by the shareholders
of the Corporation. The Board of Directors of the Corporation may also
terminate, modify or amend the Plan in such respects as it shall deem
advisable in order to conform to any change in any law or regulation
applicable thereto, or in other respects which shall not change (i) the total
number of shares as to which Options may be granted or which may be used in
payment of Performance Unit awards under the Plan or which may be issued as
Restricted Stock, (ii) the class of individuals eligible to receive awards of
Performance Units, Restricted Stock and Options, (iii) the period during
which awards of Performance Units or Restricted Stock may be made or Options
may be granted or exercised, or (iv) make any change which would prevent an
Incentive Option from qualifying as an "incentive stock option" as such term
is defined in the then existing Code or any law amendatory or supplemental
thereto.
No termination, modification or amendment of the Plan may, without the
consent of the individual to whom an Option shall have been previously
granted, affect the right conferred by such Option.
16. Use of Proceeds.
The proceeds from the sale of Restricted Stock or shares pursuant to
Options granted under the Plan shall constitute general funds of the
Corporation.
17. Definitions.
For purposes of the Plan, the terms "parent" and "subsidiary" shall have
the same meaning as "parent corporation" and "subsidiary corporation" as such
terms are defined in Sections 425(e) and 425(f) of the Code, respectively,
and the masculine shall include the feminine.
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18. Governing Law.
The Plan shall be governed by, and all questions arising hereunder shall
be determined in accordance with, the laws of the State of Delaware.
19. Effective Date of the Plan.
The Plan shall become effective on the date of its adoption by the Board
of Directors of the Corporation and Performance Unit and Restricted Stock
awards may be made and Options granted immediately thereafter, but no
Performance Unit award may be paid or Restricted Stock issued or Option
exercised under the Plan unless and until the Plan shall have been approved
by the holders of a majority of the outstanding shares of Common Stock of the
Corporation within twelve (12) months after the date of adoption of the Plan
by the Board of Directors and if such approval is not obtained within said
period, the Plan and any awards made or Options granted under the Plan shall
be null and void.
20. Indemnification of Committee.
In addition to such other rights of indemnification as they may have, the
members of the Committee shall be indemnified by the Corporation to the
extent permitted under applicable law against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding
to which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any rights granted
thereunder and against all amounts paid by them in settlement thereof or paid
by them in satisfaction of a judgment of any such action, suit or proceeding,
except a judgment based upon a finding of bad faith. Upon the institution of
any such action, suit or proceeding, the Committee member or members shall
notify the Corporation in writing, giving the Corporation an opportunity at
its own cost to defend the same before such Committee member or members
undertake to defend the same on their own behalf.
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EXHIBIT 4.2
LILLIAN VERNON CORPORATION
1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of the Lillian Vernon Corporation Stock Option Plan for
Non-Employee Directors (the "Plan") is to increase the proprietary and vested
interest of the non-employee directors of the Lillian Vernon Corporation (the
"Company") in the growth and performance of the Company by granting such
directors options to purchase shares of Common Stock, $.01 par value per
share (the "Stock"), of the Company.
2. ADMINISTRATION
The Plan shall be administered by the Company's Board of Directors (the
"Board"). Subject to the provisions of the Plan, the Board shall be
authorized to interpret the Plan, to establish, amend and rescind any rules
and regulations relating to the Plan and to make all other determinations
necessary or advisable for the administration of the Plan; provided, however,
that the Board shall have no discretion with respect to the selection of
directors to receive options under the Plan, the number of shares of Stock
subject to any such options, the purchase price thereunder or the timing of
grants of options under the Plan. The determination of the Board in the
administration of the Plan, as described herein, shall be final and
conclusive. The Secretary of the Company shall be authorized to implement the
Plan in accordance with its terms and to take such actions of a ministerial
nature as shall be necessary to effectuate the intent and purposes thereof.
The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the
laws of the State of Delaware.
3. ELIGIBILITY
The class of individuals eligible for grant of options under the Plan
shall be Eligible Directors, as defined below. An Eligible Director shall
mean a director of the Company who is not an employee of the Company or its
subsidiaries and has not, within one year immediately preceding the
determination of such director's eligibility, received any award under any
plan of the Company or its subsidiaries that entitles the participants
therein to acquire stock, stock options or stock appreciation rights of the
Company or its subsidiaries (other than any other plan under which
participants' entitlements are governed by provisions meeting the
requirements of Rule 16b-3(c)(2)(ii) promulgated under the Securities
Exchange Act of 1934). Any holder of an option granted hereunder shall
hereinafter be referred to as a "Participant".
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 6, an aggregate of 50,000
shares of Stock shall be available for issuance upon the exercise of options
granted under the Plan. The shares of Stock deliverable upon the exercise of
options may be made available from authorized but unissued shares or shares
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reacquired by the Company, including shares purchased in the open market or
in private transactions. If any option granted under the Plan shall terminate
for any reason without having been exercised, the shares subject to, but not
delivered under, such option shall be available for other options.
5. GRANT, TERMS AND CONDITIONS OF OPTIONS
Each individual who is an Eligible Director will be granted an option to
purchase 2,500 shares of Stock as of the date of each Annual Stockholders
Meeting, commencing with the Annual Stockholders Meeting following the
meeting approving the Plan. The options granted will be nonstatutory stock
options, not intended to qualify under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") and shall have the following terms and
conditions:
(a) Price. The Purchase price per share of Stock deliverable upon the
exercise of each option shall be 100% of the Fair Market Value per share
of the Stock on the date the option is granted. For purposes of this Plan,
Fair Market Value shall be the closing price per share as reported for
consolidated trading of issues listed on the principal securities exchange
where the Stock is traded on the date in question, or, if the Stock shall
not have traded on such date, the closing price per share on the first
date prior thereto on which the Stock was so traded or if the Stock is not
traded on a securities exchange, Fair Market Value shall be deemed to be
the average of the closing bid and asked prices of the Stock in the
over-the-counter-market on the date the option is granted or on the next
preceding date on which such closing bid and asked prices were recorded.
(b) Payment. Options may be exercised only upon payment of the purchase
price thereof in full. Such payment shall be made in cash or in Stock,
which shall have a Fair Market Value (determined in accordance with the
rules of Paragraph (a) above) at least equal to the aggregate exercise
price of the shares being purchased, or a combination of cash and stock.
(c) Exercisability and Term of Options. Options shall be exercisable in
whole or in part at all times during the period beginning one year from
the date of grant. The options granted shall be for a term of not more
than 10 years or until terminated, as provided in Paragraph (d) below.
(d) Termination of Service as Eligible Director.
(i) Except as provided in subparagraph (ii) of this Paragraph (d),
all outstanding options held by a Participant shall be automatically
cancelled upon such Participant's termination of service as an
Eligible Director.
(ii) Upon termination of a Participant's service as an Eligible
Director by reason of such Participant's declining to stand for
reelection, becoming an employee of the Company or a subsidiary
thereof or becoming disabled (as defined in the Company's Profit
Sharing Plan) all outstanding options held by such Participant on the
date of such termination shall expire up to five years from the date
upon which the Participant ceases to be an Eligible Director but in no
event after the specified expiration date of such option. In the event
of the death of a Participant (whether before or after termination of
service as an Eligible Director), all outstanding options held by such
Participant (and not previously cancelled or expired) on the date of
such death,
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shall be fully exercisable by the Participant's legal representative
within one year after the date of death (without regard to the
expiration date of the option specified in accordance with the
preceding sentence).
(e) Nontransferability of Options. No option shall be transferable by a
Participant otherwise than by will or the laws of descent and
distribution, and during the lifetime of the Participant to whom an option
is granted it may be exercised only by the Participant or by the
Participant's guardian or legal representative. Notwithstanding the above,
options may be transferred pursuant to a qualified domestic relations
order.
(f) Listing and Registration. Each option shall be subject to the
requirement that if at any time the Board shall determine, in its
discretion, that the listing, registration or qualification of the Stock
subject to such option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with,
the granting of such option or the issue or purchase of shares thereunder,
no such option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained free of any condition not acceptable to the Board.
(g) Option Agreement. Each option granted hereunder shall be evidenced by
an agreement with the Company which shall contain the terms and provisions
set forth herein and shall otherwise be consistent with the provisions of
the Plan.
6. ADJUSTMENT OF AND CHANGES IN STOCK
In the event of a stock split, stock dividend, subdivision or combination
of the Stock or other change in corporate structure affecting the Stock, the
number of shares of Stock authorized by the Plan shall be increased or
decreased proportionately, as the case may be, and the number of shares of
Stock subject to any outstanding option shall be increased or decreased
proportionately, as the case may be, with appropriate corresponding
adjustment in the purchase price per share of Stock thereunder.
7. MERGERS, SALES AND CHANGE OF CONTROL
In the case of (i) any merger, consolidation or combination of the Company
with or into another corporation (other than a merger, consolidation or
combination in which the Company is the continuing corporation and which does
not result in its outstanding Stock being converted into or exchanged for
different securities, cash or other property, or any combination thereof) or
a sale of all or substantially all of the assets of the Company or (ii) a
Change in Control (as defined below) of the Company, the holder of each
option then outstanding immediately prior to such Change in Control shall
(unless the Board determines otherwise) have the right to receive on the date
or effective date of such event an amount equal to the excess of the Fair
Market Value on such date of (a) the securities, cash or other property, or
combination thereof, receivable upon such merger, consolidation or
combination in respect of a share of Stock, in the cases covered by clause
(i) above, or in the case of a sale of assets referred to in such clause (i),
a share of Stock, or (b) the final tender offer price in the case of a tender
offer resulting in a Change
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in Control or (c) the value of the Stock covered by the option as determined
by the Board, in the case of Change in Control by reason of any other event,
over the exercise price of such option, multiplied by the number of shares of
Stock subject to such option. Such amount will be payable fully in cash or
stock.
Any determination by the Board made pursuant to this Section 7 will be
made as to all outstanding options and shall be made (a) in cases covered by
clause (i) above, prior to the occurrence of such event, (b) in the event of
a tender or exchange offer, prior to the purchase of any Stock pursuant
thereto by the offeror and (c) in the case of a Change in Control by reason
of any other event, just prior to or as soon as practicable after such Change
in Control.
A "Change in Control" shall be deemed to have occurred if following (i) a
tender or exchange offer for voting securities of the Company (other than any
such offer made by the Company), or (ii) a proxy contest for the election of
directors of the Company, the persons who were directors of the Company
immediately before the initiation of such event (or directors who were
appointed by such directors) cease to constitute a majority of the Board of
Directors of the Company upon the completion of such tender or exchange offer
or proxy contest or within one year after such completion.
8. NO RIGHTS OF SHAREHOLDERS
Neither a Participant nor a Participant's legal representative shall be,
or have any of the rights and privileges of, a stockholder of the Company in
respect of any shares purchasable upon the exercise of any option in whole or
in part, unless and until certificates for such shares shall have been
issued.
9. PLAN AMENDMENTS
The Plan may be amended by the Board, as it shall deem advisable or to
conform to any change in any law or regulation applicable thereto; provided,
that the Board may not, without the authorization and approval of
shareholders; (i) increase the number of shares which may be purchased
pursuant to options hereunder, either individually or in the aggregate, (ii)
change the requirements of Section 5(a) that option grants be priced at Fair
Market Value, (iii) modify in any respect the class of individuals who
constitute Eligible Directors; or (iv) materially increase the benefits
accruing to Participants hereunder. The provisions of Sections 3 and 5 may
not be amended more often than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act, or the
rules under either such statute.
10. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective on the day following the Company's Annual
Stockholders Meeting at which the Plan is approved by the holders of a
majority of the outstanding shares of Common Stock of the Company. The Plan
shall terminate on the day following the fifth Annual Stockholders Meeting at
which Directors are elected following the Annual Stockholders Meeting at
which the Plan was approved by Shareholders, unless the Plan is extended or
terminated at an earlier date by Stockholders.
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Exhibit 5.1
September 23, 1997
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Lillian Vernon Corporation
Gentlemen:
We have acted as counsel for Lillian Vernon Corporation (the
"Company") in connection with the preparation and filing of the Registration
Statement on Form S-8 (the "Registration Statement") pursuant to which (i)
50,000 shares of the Company's common stock ("Common Stock") are reserved for
issuance to non-employee directors of the Company upon the exercise of
non-qualified stock options pursuant to the Company's 1997 Stock Option Plan
for Non-Employee Directors and (ii) 525,000 shares of the Company's Common
Stock are reserved for issuance pursuant to the Company's 1997 Performance
Unit, Restricted Stock, Non-Qualified Option and Incentive Stock Option Plan
(both plans hereinafter referred to as the "Plans").
We are familiar with the proceedings by which the Plans and the
shares of Common Stock have been authorized. We are familiar with the
proceedings by which the 575,000 shares of Common Stock reserved for the Plans
were approved by the Company's stockholders. We have reviewed and are familiar
with the Certificate of Incorporation, as amended, and the By Laws of the
Company and such other corporate records and documents as we have deemed
necessary to express the opinion herein stated. We have assumed the
genuineness of all signatures and the authenticity of all documents submitted
to us as originals, the conformity to original documents
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of all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents.
Based upon the foregoing, and having regard to legal considerations
we deem relevant, we are of the opinion that the shares of Common Stock have
been duly and validly authorized for issuance by the Company, and when issued
under the circumstances contemplated by the Plan, will be legally issued,
fully paid and non-assessable.
We consent to the reference to our firm and the use of this opinion
as Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ Salon, Marrow & Dyckman, LLP
Salon, Marrow & Dyckman, LLP
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Exhibit 24(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
of Lillian Vernon Corporation on Form S-8 of our report dated April 11, 1997
on our audits of the consolidated financial statements and financial statement
schedules of Lillian Vernon Corporation and Subsidiaries as of February 22,
1997 and February 24, 1996, and for each of the three fiscal years in the
period ended February 22, 1997, which report is included in its Annual Report
on Form 10-K of Lillian Vernon Corporation filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1934. We also consent to
the reference to our Firm under the heading "Experts".
COOPERS & LYBRAND, LLP
Stamford, Connecticut
September 25, 1997
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