SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
LILLIAN VERNON CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (set forth the amount on which the
filing fee is calculated and state how it was determined:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
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[LILLIAN VERNON LETTERHEAD]
June 12, 2000
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders, to be
held at 10:00 a.m. on Wednesday, July 19, 2000 at the Company's corporate
headquarters, One Theall Road, Rye, New York. The agenda of the Annual Meeting
includes the election of three directors and the approval of auditors.
Management will also report on the Company, its activities and plans for the
future. We hope you will be able to join us. Please call 914-925-1350 for
directions.
Since your vote is very important, please fill out, sign and date your proxy
card, and return it as soon as possible if you are unable to attend the meeting.
I look forward to seeing you.
Faithfully yours,
/s/ LILLIAN VERNON
Lillian Vernon
Chairman of the Board
Chief Executive Officer
Lillian Vernon Corporation
One Theall Road, Rye, New York 10580 / Phone: 914-925-1200 / Fax: 914-925-1444
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<PAGE>
LILLIAN VERNON CORPORATION
ONE THEALL ROAD
RYE, NEW YORK 10580
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Lillian
Vernon Corporation will be held at the Company's corporate headquarters located
at One Theall Road, Rye, New York on July 19, 2000 at 10:00 a.m. for the
following purposes:
1. To elect three (3) directors for a three year term expiring at the
Annual Meeting of Stockholders to be held in the year 2003 and until the due
election and qualification of their successors;
2. To consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as independent auditors for the fiscal year of the
Company ending February 24, 2001; and
3. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Stockholders of Lillian Vernon Corporation of record at the close of
business on May 26, 2000 are entitled to vote at the Annual Meeting and any
adjournments thereof. All stockholders are encouraged to attend the Meeting or
to vote by proxy.
If you do not expect to attend the Meeting, please sign and date the
enclosed proxy and return it promptly in the enclosed envelope in order that
your stock may be voted in accordance with the terms of the Proxy Statement.
By Order of the Board of Directors
/S/ SUSAN C. HANDLER
Susan C. Handler
Secretary
Rye, New York
June 12, 2000
<PAGE>
LILLIAN VERNON CORPORATION
ONE THEALL ROAD
RYE, NEW YORK 10580
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
This proxy statement is furnished to the stockholders of Lillian Vernon
Corporation (herein, called the "Company") in connection with the Board of
Directors' solicitation of proxies to be used at the Annual Meeting of
Stockholders on July 19, 2000 at the Company's corporate headquarters at One
Theall Road, Rye, New York, at 10:00 a.m. or any adjournments thereof. The date
of first distribution of this Proxy Statement will be on or about June 12, 2000.
VOTING AT THE MEETING
Only holders of Common Stock of record on the books of the Company at the
close of business on May 26, 2000 will be entitled to notice of and to vote at
the meeting. On that date, there were 8,703,179 shares of Common Stock, par
value $.01 per share, outstanding (excluding 1,686,495 shares held as Treasury
Stock). Each holder of record of Common Stock of the Company as of the record
date will be entitled to one vote for each share of stock registered in his or
her name. A majority of the shares having voting power at the meeting will
constitute a quorum for the transaction of business.
Shares entitled to vote, represented by each properly executed proxy in the
accompanying form received by the Company in time to permit its use at the
meeting or any adjournments thereof, will be voted in accordance with
instructions indicated in such proxy. If no instructions are indicated, such
shares will be voted as recommended by the Board. A stockholder who has given a
proxy may revoke it by voting in person at the meeting, or by giving written
notice of revocation or a later-dated proxy to the Secretary of the Company at
any time before the voting.
Directors are elected by a plurality of the votes cast. The affirmative
vote of the holders of a majority of the shares voted, with respect to any other
proposals presented at the meeting, is required to approve such other proposals.
An automated system administered by the Company's transfer agent counts the
votes. The Company's Certificate of Incorporation and By-Laws do not contain any
provisions concerning the treatment of abstentions and broker nonvotes. Delaware
law treats abstentions as votes which are not cast in favor of a proposal or
nominee. Delaware law does not address the treatment of broker nonvotes. Broker
nonvotes will be included in the determination of the presence of a quorum, but
will not be counted for purposes of determining whether a proposal or nominee
has been approved.
EXPENSES OF SOLICITATION
It is expected that the solicitation of proxies will be primarily by mail.
Proxies may also be solicited personally and by telephone by officers and
directors of the Company. The total expense of preparing, assembling and mailing
the proxy statement, accompanying notice and form of proxy will be borne by the
Company. Such expense may also include reimbursement for out-of-pocket
disbursements incurred by brokerage houses and custodians, nominees or other
fiduciaries, for forwarding such documents to stockholders.
<PAGE>
1. ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The Board of Directors of the Company presently consists of seven members
divided into three classes. At the Annual Meeting, three Directors are to be
elected to hold office for three year terms until the Annual Meeting to be held
in the year 2003. If no instructions are indicated to the contrary, the proxy
will be voted for election of the three Directors named in the following table,
whose election has been proposed and recommended by the Board of Directors. If
any nominee shall, prior to the meeting, become unavailable for election as a
Director, which is not expected, the persons named in the accompanying form of
proxy will vote for such nominee, if any, in their discretion as may be
recommended by the Board of Directors.
In addition to information regarding the nominees and directors, the
following table and footnotes show the amount and percent of equity securities
of the Company beneficially owned, directly or indirectly, by each nominee or
director, as of May 26, 2000, including stock options which are presently
exercisable or which will become exercisable within 60 days of the date hereof,
held by such individuals.
<TABLE>
<CAPTION>
SHARES OF
NAME, PRINCIPAL OCCUPATION COMMON STOCK
AND SELECTED OTHER BENEFICIALLY PERCENT
INFORMATION CONCERNING OWNED AS OF OF CLASS
NOMINEES AND DIRECTORS MAY 26, 2000 (IF OVER 1%)
--------------------------- ------------ ------------
NOMINEES FOR THREE YEAR TERM EXPIRING IN 2003
<S> <C> <C> <C>
David C. Hochberg (a) Vice President--Public Affairs; 1,434,833(f) 16.3%
Age-43 Director since 1978.
Mr. Hochberg has held the above position since 1986. He joined the Company in 1978 and was subsequently promoted to
Director - Public Affairs.
Elizabeth M. Eveillard (b)(c) Managing Director, Investment 14,500(g) --
Age-53 Banking Division, PaineWebber
Incorporated; Director since 1997
Ms. Eveillard has served as Managing Director, Investment Banking Division of PaineWebber Incorporated since April
1988. Prior to her association with PaineWebber Incorporated, Ms. Eveillard served in various capacities, rising
ultimately to Managing Director at Shearson Lehman Brothers. Ms. Eveillard serves on the board of directors of two
private companies.
Jonah Gitlitz (a) Director since 1997. 14,500(g) --
Age-71
Mr. Gitlitz was appointed Acting President of the Company on December 18, 1998, and served in that capacity until
June, 2000, when Kevin Green was appointed President. Mr. Gitlitz served as President and Chief Executive Officer
of the Direct Marketing Association ("DMA") from January 1985 through December 1996. He joined the DMA in May 1981
as Senior Vice President, Public Affairs. Prior to joining the DMA, he served as Executive Vice President of the
American Advertising Federation from 1968 to 1981. Since January 1997,
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
when he retired from the DMA, Mr. Gitlitz has been involved in management consulting activities. He serves on the
boards of several non-profit organizations and private companies.
DIRECTORS CONTINUING IN OFFICE WHOSE TERMS EXPIRE IN 2001
<S> <C> <C> <C>
Bert W. Wasserman (b)(c) Director since 1995. 25,000(h) --
Age-67
Mr. Wasserman served as Executive Vice President and Chief Financial Officer of Time Warner, Inc. from 1990 through
1994, having served on the Board of Directors of Time Warner, Inc. and its predecessor company from 1981 to 1993.
He joined Warner Communications in 1966 and had been an officer of that company since 1970. Mr. Wasserman is a
director of several investment companies in the Dreyfus Family of Funds. He is a director of Malibu Entertainment
International, Inc., Winstar Communications, Inc., and IDT Corp. Mr. Wasserman is on the Board of Directors of the
Baruch College Fund. Mr. Wasserman is a Certified Public Accountant.
Richard A. Berman (b) (c) President, Manhattanville 13,100(g) --
Age-55 College; Director since 1997.
Mr. Berman has served as President of Manhattanville College since January 1995. From November 1991 until December
1994, he was employed by Howe-Lewis International, first serving as President of North America, and finally as
President and Chief Executive Officer of that company. Howe-Lewis International is a company engaged in executive
search and management consulting in a variety of industries. Before joining Howe-Lewis International, Mr. Berman
was engaged, for over 20 years in the health care industry. Mr. Berman serves on the boards of several
not-for-profit organizations including Health Insurance Plan of Greater New York and Florida, Westchester Education
Coalition, Inc. and The Independent College Fund.
DIRECTORS CONTINUING IN OFFICE WHOSE TERMS EXPIRE IN 2002
Lillian Vernon (a) Chairman of the Board and 2,780,802(d) 31.4%
Age-72 Chief Executive Officer;
Director since inception.
Lillian Vernon is the founder of the Company and has served as its Chairman of the Board and Chief Executive
Officer since the Company's inception. She served as President from inception until July 1989. Lillian Vernon is
the mother of David Hochberg, an officer, Director, and a principal stockholder of the Company. Miss Vernon also
serves on the boards of several not-for-profit organizations including New York University and Lincoln Center for
the Performing Arts.
Joel Salon Partner - Salon, Marrow, 6,000(e) --
Age-56 Dyckman & Newman, LLP;
Director since 1999.
Mr. Salon is a senior partner of the law firm of Salon, Marrow, Dyckman & Newman, LLP, which firm acts as general
and securities counsel to the Company.
</TABLE>
--------------
(a) Member of Executive Committee.
3
<PAGE>
(b) Member of Compensation Committee.
(c) Member of Audit Committee.
(d) Includes 490,098 shares of Common Stock held by the Lillian Vernon
Foundation (the "Foundation"). Lillian Vernon is the sole trustee of the
Foundation. Also includes options to purchase 165,000 shares which are
presently exercisable or which will become exercisable within 60 days of
the date hereof.
(e) Includes options to purchase 5,000 shares which are presently exercisable
or which become exercisable within 60 days of the date hereof.
(f) Includes 130,000 shares of Common Stock held by the David Hochberg
Foundation. David Hochberg is the sole trustee of the David Hochberg
Foundation. Also includes 87,833 options which are presently exercisable or
which become exercisable within 60 days of the date hereof.
(g) Includes options to purchase 12,500 shares which are presently exercisable
or which become exercisable within 60 days of the date hereof.
(h) Includes options to purchase 20,000 shares which are presently exercisable
or which become exercisable within 60 days of the date hereof.
MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES
During the last fiscal year, the Board of Directors held seven meetings.
The Company believes that attendance at meetings is one means by which Directors
can contribute to the effective management of the Company and that the
contributions of all Directors have been substantial and highly valued.
The Compensation Committee, which administers the Company's employee
compensation plans, met five times in fiscal 2000. The Audit Committee, which
reviews and makes recommendations to the Board of Directors with respect to the
Report of the Independent Accountants and reviews the accounting systems and
controls of the Company on a continuous basis, met three times in fiscal 2000.
All of the Directors attended at least 75% of the aggregate of all Board
Meetings and Meetings of the Committees of the Board of which he or she is a
member.
The Company does not have a nominating committee.
EXECUTIVE OFFICERS
The following table sets forth the name, age and position of the executive
officers of the Company:
NAME AGE POSITION
---- --- --------
Lillian Vernon 72 Chairman of the Board and Chief Executive
Officer
Kevin A. Green 42 President
John V. Fermelia 62 Executive Vice President - Chief
Operating Officer
Laura L. Zambano 48 Executive Vice President - Merchandising
Norman Foster 56 Senior Vice President - Quality Assurance
Paul C. Pecorin 60 Senior Vice President - Chief Information
Officer
Ralph J. Thomann 57 Senior Vice President - Operations
Susan C. Handler 39 Vice President - Corporate
Controller/Secretary
David C. Hochberg 43 Vice President - Public Affairs and
Director
William L. Sharkey, Jr. 50 Vice President - Human Resources
4
<PAGE>
Richard P. Randall's employment as Senior Vice President - Chief Financial
Officer ended on May 19, 2000.
George J. Mollo, Jr.'s employment as Senior Vice President - Merchandise
Operations ended on March 7, 2000.
Kevin A. Green was appointed as President in June 2000, after serving as
Executive Vice President - Marketing/Merchandising/Lillian Vernon Online since
March 2000. He previously served as Senior Vice President - Marketing since
April 1996. From December 1993 until April 1996, he served as Vice President -
Marketing. Mr. Green joined the Company in March 1990 as Manager - Marketing and
subsequently in April 1992 was promoted to Director - Marketing. Prior to
joining the Company, Mr. Green held various marketing positions at Doubleday
Book and Music Club and Better Homes and Gardens Book Club.
John V. Fermelia joined the Company as Executive Vice President - Chief
Operating Officer on May 1, 2000. In this capacity, he is responsible for the
Company's distribution and telemarketing operations, customer service,
management information systems, quality control, human resources and the
Company's outlet stores. From 1988 to 1996 Mr. Fermelia was the Company's Vice
President - Operations. In 1996 he joined Hanover Direct, a multi-title catalog
and internet company where he served as Vice President Logistics. Prior to his
initial employment with the Company, Mr. Fermelia held senior positions at The
Sharper Image and Spiegel Inc. (direct marketing companies).
Laura L. Zambano was promoted to Executive Vice President - Merchandising
in January 1996. From July 1989 until her promotion she served as Senior Vice
President - General Merchandise Manager. From 1983 until her promotion in 1989,
she was Vice President of Merchandising. Ms. Zambano joined the Company in 1978
as a catalog coordinator; she became Associate Vice President in 1982. Prior to
joining the Company, Ms. Zambano was employed as an advertising production
manager by H.O. Gerngross & Co.
Norman Foster joined the Company in August 1983 as Director - Distribution
and served in that position until March 1988, when he assumed the position of
Director - Inventory. In May 1992, Mr. Foster was promoted to Vice President -
Quality Assurance and in December 1998 he was promoted to Senior Vice President
- Quality Assurance. From 1969 until he joined the Company in 1983, Mr. Foster
held various distribution, inventory, operational and production planning
positions for the Sherwin Williams Co., a paint manufacturing and distribution
company.
Paul C. Pecorin was promoted to Senior Vice President - Chief Information
Officer in July 1997. Prior to his promotion, he served as Vice President -
Chief Information Officer since joining the Company in 1984. From 1982 until he
joined the Company, Mr. Pecorin was Vice President - Systems of Lands' End,
Inc., a direct mail catalog company marketing clothes and related products.
Prior to his employment at Lands' End, Inc., Mr. Pecorin was manager, systems
development for Pratt & Whitney Aircraft Co.
Ralph J. Thomann was promoted to Senior Vice President - Operations in
January 1998. Prior to his promotion he served as Vice President - Operations
since July 1996. Since joining the Company in February 1984, Mr. Thomann has
held a variety of positions including Vice President - Distribution, Director -
Order Processing, Director - Distribution, and Director - Engineering. From June
1967 until joining the Company, Mr. Thomann held various engineering positions
with Avon Products, Inc., a manufacturer and distributor of cosmetics and beauty
related products.
5
<PAGE>
Susan C. Handler joined the Company in April 1989 as Corporate Controller
and Secretary. She was promoted to Vice President in July 1994. From 1982 to
April 1989, Ms. Handler was employed by Coopers & Lybrand, a predecessor of
PricewaterhouseCoopers LLP, Certified Public Accountants, in various capacities,
the last position being as audit manager. Ms. Handler is a Certified Public
Accountant.
William L. Sharkey, Jr. was promoted to Vice President - Human Resources
in March 1995. Prior to his promotion and since joining the Company in August
1990, he served as Director - Human Resources. From 1980 until he joined the
Company, Mr. Sharkey was Director of Personnel for Anheuser-Busch / Busch
Gardens in Williamsburg, Virginia. From 1972 until 1980, Mr. Sharkey held
various personnel and operational management positions in the theme park
industry with Busch Gardens and Opryland, USA.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of May 26, 2000, the beneficial
ownership of the Company's shares by (i) the Chief Executive Officer and the
four other most highly compensated executive officers of the Company at the end
of the fiscal year; and (ii) the directors; and (iii) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
OUTSTANDING AND
NAME AND ADDRESS AMOUNT OF SHARES OPTIONS EXERCISABLE
OF BENEFICIAL OWNER BENEFICIALLY OWNED WITHIN 60 DAYS
------------------- ------------------ ---------------------
<S> <S> <C>
Lillian Vernon (1) 2,780,802(2)(3) 31.4%
David C. Hochberg (1) 1,434,833(4)(5) 16.3%
Elizabeth M. Eveillard (1) 14,500(6) *
Jonah Gitlitz (1) 14,500(6) *
Richard A. Berman (1) 13,100(6) *
Joel Salon (1) 6,000(7) *
Bert W. Wasserman (1) 25,000(8) *
Kevin A. Green (1) 57,035(9) *
Laura L. Zambano (1) 71,537(10) *
Paul C. Pecorin (1) 112,530(11) 1.3%
Richard P. Randall (1) 8,333(12) *
Lillian Vernon Foundation (13) 490,098 5.6%
David Hochberg Foundation (1) 130,000 1.5%
All Executive Officers and Directors as a group
(16 persons) 4,694,712(14) 50.0%
</TABLE>
----------
* Less than 1%.
(1) The address of the stockholders is One Theall Road, Rye, New York 10580.
(2) Includes 490,098 Shares owned by the Lillian Vernon Foundation (the
"Foundation"). Lillian Vernon is the sole trustee of the Foundation.
(3) Includes options to purchase 165,000 shares which are presently exercisable
or which become exercisable within 60 days of the date hereof.
6
<PAGE>
(4) Includes 130,000 shares of Common Stock held by the David Hochberg
Foundation. David Hochberg is the sole trustee of the David Hochberg
Foundation.
(5) Includes options to purchase 87,833 shares which are presently exercisable
or which become exercisable within 60 days of the date hereof.
(6) Includes options to purchase 12,500 shares which are presently exercisable
or which become exercisable within 60 days of the date hereof.
(7) Includes options to purchase 5,000 shares which are presently exercisable
or which become exercisable within 60 days of the date hereof. Also
includes 250 shares owned by Mr. Salon's wife, of which he disclaims
beneficial ownership.
(8) Includes options to purchase 20,000 shares which are presently exercisable
or which become exercisable within 60 days of the date hereof.
(9) Includes options to purchase 57,000 shares which are presently exercisable
or which become exercisable within 60 days hereof.
(10) Includes options to purchase 60,000 shares which are presently exercisable
or which become exercisable within 60 days of the date hereof.
(11) Includes options to purchase 90,000 shares which are presently exercisable
or which become exercisable within 60 days hereof.
(12) Includes options to purchase 8,333 shares which are presently exercisable
or which become exercisable within 60 days hereof. Mr. Randall resigned
from the Company effective May 19, 2000.
(13) The address of the Foundation is 8 Dublin Hill Road, Greenwich,
Connecticut.
(14) Includes 490,098 shares owned by the Lillian Vernon Foundation, of which
Lillian Vernon is the sole trustee. Includes 130,000 shares owned by the
David Hochberg Foundation, of which David Hochberg is the sole trustee.
Includes options to purchase 678,833 shares which are presently exercisable
or which become exercisable within 60 days of the date hereof.
7
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of May 26, 2000, the beneficial
ownership of the Company's shares by persons who are believed to beneficially
own more than 5% of the shares of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING
------------------- ------------------ --------------------
<S> <C> <C>
Gabelli Funds, Inc.(1) .................... 2,107,200(2) 24.2%
Dimensional Fund Advisors, Inc.(3) ........ 574,350(4) 6.6%
</TABLE>
----------------
(1) The address of Gabelli Funds, Inc., is One Corporate Center, Rye, New York
10580-1434.
(2) The number of shares is based upon an amended Schedule 13-D filed by
Gabelli Funds, Inc. and affiliates. The shares include shares owned by
entities that may be deemed to be controlled or under the control of
Gabelli Funds, Inc.
(3) The address of Dimensional Fund Advisors Inc., ("Dimensional") is 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(4) The number of shares is based upon a Schedule 13-G filed by Dimensional on
February 11, 2000 as of December 31, 1999. All shares reported are owned by
investment companies and other investment vehicles managed by Dimensional
as to which Dimensional disclaims beneficial ownership therein.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and Directors, and persons who
beneficially own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the American Stock
Exchange. Officers, Directors and greater-than-10% stockholders are required by
the Commission's regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that during Fiscal 2000, all Section 16(a) filing
requirements applicable to its Officers, Directors and greater-than-10%
beneficial owners were complied with in a timely fashion.
8
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company, to or on behalf of the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company (determined as of February 26, 2000) (the
"Named Executive Officers") for the Company's last three fiscal years:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------- ----------------------- ----------
FISCAL OTHER RESTRICTED LONG TERM
YEAR ANNUAL STOCK NUMBER OF INCENTIVE ALL OTHER
NAME AND PRINCIPAL POSITION ENDED SALARY(1) BONUS COMPENSATION(2) AWARD(S) OPTIONS PAYOUTS COMPENSATION (6)
--------------------------- ----- --------- ----- --------------- ---------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lillian Vernon 2/26/00 $468,000 $ 0 $ 463,450(3) $ 0 75,000 $ 0 $198,105
Chairman of the Board and 2/27/99 520,000 0 463,450(3) 0 0 0 208,037
Chief Executive Officer 2/28/98 520,000 0 463,450(3) 0 0 0 215,551
Laura L. Zambano 2/26/00 $295,000 $ 0 $ 0 $ 0 12,500 $ 0 $ 10,070
Executive Vice President 2/27/99 295,000 0 0 0 0 0 10,371
Merchandising 2/28/98 288,846 64,000 0 0 17,500 0 9,975
Richard P. Randall(4) 2/26/00 $245,000 $ 0 $ 0 $ 0 0 $ 0 $ 3,019
Senior Vice President 2/27/99 115,385 0 0 0 25,000 0 0
Chief Financial Officer 2/28/98 0 0 0 0 0 0 0
Kevin A. Green(5) 2/26/00 $225,000 $ 0 $ 0 $ 0 12,500 $ 0 $ 8,019
President 2/27/99 207,692 0 0 0 0 0 8,468
2/28/98 190,194 50,000 0 0 17,500 0 8,212
Paul C. Pecorin 2/26/00 $202,600 $ 0 $ 0 $ 0 12,500 $ 0 $ 16,726
Senior Vice President 2/27/99 202,600 0 0 0 0 0 16,482
Chief Information Officer 2/28/98 199,070 35,000 0 0 17,500 0 15,587
</TABLE>
---------------
(1 Consists of base salaries. No amounts were deferred at the election of the
executive officers.
(2) Perquisites to any executive officer (except as noted) did not exceed, for
such individual, the lesser of $50,000 or 10% of compensation.
(3) Represents payment of deferred compensation from fiscal years 1986 - 1989.
(4) Mr. Randall commenced employment on September 8, 1998, and he resigned from
the Company effective May 19, 2000.
(5) Mr. Green was appointed President in June 2000, having previously served as
Executive Vice President-Marketing/Merchandising/ Lillian Vernon Online.
9
<PAGE>
(6) All Other Compensation consists of employer contributions pursuant to the
Company's Profit Sharing / 401 (k) Plan (profit sharing amounts estimated),
compensation related to split-dollar life insurance premiums, and
above-market earnings on deferred compensation, in the following amounts:
<TABLE>
<CAPTION>
401(K)
PROFIT MATCHING SPLIT-DOLLAR ABOVE-MARKET
SHARING CONTRIBUTION LIFE INSURANCE EARNINGS
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lillian Vernon 2/26/00 $ 0 $ 0 $25,601 $172,504
2/27/99 0 0 23,531 184,506
2/28/98 0 0 21,627 193,924
Laura L. Zambano 2/26/00 $3,019 $5,000 $ 2,051 $ 0
2/27/99 3,468 5,000 1,903 0
2/28/98 3,462 4,750 1,763 0
Richard P. Randall 2/26/00 $3,019 $ 0 $ 0 $ 0
2/27/99 0 0 0 0
2/28/98 0 0 0 0
Kevin A. Green 2/26/00 $3,019 $5,000 $ 0 $ 0
2/27/99 3,468 5,000 0 0
2/28/98 3,462 4,750 0 0
Paul C. Pecorin 2/26/00 $3,019 $5,000 $ 8,707 $ 0
2/27/99 3,468 5,000 8,014 0
2/28/98 3,462 4,750 7,375 0
</TABLE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth information concerning grants of stock
options to the Named Executive Officers during the Company's fiscal year ended
February 26, 2000:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
PERCENT OF TOTAL STOCK PRICE APPRECIATION
OPTIONS GRANTED FOR OPTION TERM (1)
NUMBER OF to EMPLOYEES EXERCISE PRICE -----------------------------
NAME OPTIONS GRANTED (2) IN FISCAL YEAR PER SHARE EXPIRATION DATE 5% 10%
---- ------------------- ----------------- --------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lillian Vernon 75,000 28.68% $13.88 March 9, 2009 $654,679 $1,659,086
Laura L. Zambano 12,500 4.78% $13.88 March 9, 2009 $109,113 $ 276,514
Richard P. Randall -- -- -- -- -- --
Kevin A. Green 12,500 4.78% $13.88 March 9, 2009 $109,113 $ 276,514
Paul C. Pecorin 12,500 4.78% $13.88 March 9, 2009 $109,113 $ 276,514
</TABLE>
-----------
(1) In accordance with SEC rules, these columns show gains that might exist for
the respective options over a period of ten years. This valuation is
hypothetical; if the stock price does not increase above the exercise
price, compensation to the Named Executive Officers will be zero. There is
no guarantee that if and when the options are exercised, they will have
these values.
(2) One third of the options are exercisable on March 10, 2000, 2001, and 2002,
respectively.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the exercise of
options by the Named Executive Officers during the Company's fiscal year ended
February 26, 2000, and the value of unexercised options held by the Named
Executive Officers as of the end of the fiscal year:
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END YEAR-END (1)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME OF INDIVIDUAL ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
------------------ --------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Lillian Vernon 0 $0
Exercisable 165,000 $0
Unexercisable 50,000 $0
Laura L. Zambano 0 $0
Exercisable 60,000 $0
Unexercisable 12,500 $0
Richard P. Randall (2) 0 $0
Exercisable 8,333 $0
Unexercisable 16,667 $0
Kevin A. Green 0 $0
Exercisable 57,000 $0
Unexercisable 12,500 $0
Paul C. Pecorin 0 $0
Exercisable 90,000 $0
Unexercisable 12,500 $0
</TABLE>
-------------
(1) Calculated using the fair market value of shares at the close of the market
on February 26, 2000, of $10.50.
(2) Mr. Randall resigned effective May 19, 2000. Options for 16,667 shares were
cancelled as of May 19, 2000, while options for 8,333 shares will expire on
August 18, 2000.
11
<PAGE>
DIRECTOR COMPENSATION
The Company pays Mr. Salon and Ms. Eveillard an annual retainer of $20,000,
and Richard Berman and Bert W. Wasserman, Chairpersons of the Compensation and
Audit Committees, respectively, an annual retainer of $22,500. Additionally, all
non-employee Directors receive $1,000 (plus expenses) per Board meeting attended
and $1,000 (plus expenses) per Committee meeting attended.
Since his appointment as Acting President in December 1998 until June 2000,
Mr. Gitliz was compensated at an annual salary of $180,000. While he served as
Acting President, he was not paid an annual retainer to serve as a director.
The Company has a Stock Option Plan for Non-Employee Directors (the
"Non-Employee Directors Plan"), which provides for a grant of options to
purchase not less than 2,500, nor more than 5,000 shares of Common Stock to
non-employee directors on the date of appointment to the Board of Directors, as
well as on the date of each Annual Meeting, the amount to be determined by the
directors who are ineligible to receive options under the Non-Employee Directors
Plan. Such options have an exercise price equal to 100% of the fair market value
per share of Common Stock on the day the option is granted.
In fiscal 2000, Messrs. Wasserman, Berman and Ms. Eveillard, each received
options to purchase 5,000 shares at an exercise price of $14.13 per share,
pursuant to the Non-Employee Directors Plan.
In fiscal 2000, Joel Salon, Leo Salon and Jonah Gitlitz each received
options to purchase 5,000 shares at an exercise price of $14.13 per share,
pursuant to the 1997 Performance Unit, Restricted Stock, Non-Qualified Option
and Incentive Stock Option Plan (the "Incentive Compensation Plan").
CERTAIN TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
The Company formerly occupied a 41,000 square foot corporate headquarters
facility in New Rochelle, New York, pursuant to a sublease between the Company
and Fred P. and David C. Hochberg (the "Hochbergs") until July 1998. David
Hochberg is an executive officer and a Director of the Company. Fred P. Hochberg
was a Director of the Company through November 20, 1995. David and Fred Hochberg
are sons of Lillian Vernon. Pursuant to the sublease, the Company paid $179,000
in fiscal 1999 to the Hochbergs. In July 1998 the Company relocated its
corporate headquarters to a building in Rye, New York, which is leased from a
non-affiliated entity.
Effective February 27, 1985, Fred P. Hochberg entered into a deferred
compensation agreement with the Company that provided for deferred compensation
for four years commencing in fiscal 1986. This agreement, as amended, provides
that his retirement benefit is $5,525,000, payable over a 10 year period
commencing 2017, and that his death benefit calculated as of February 26, 2000
was $1,917,998. The agreement further provides that these payments are due Mr.
Hochberg or his beneficiaries whether or not he is employed by the Company.
Effective February 27, 1985, David C. Hochberg entered into a deferred
compensation agreement with the Company that provided for deferred compensation
for four years commencing in fiscal 1986. This agreement, as amended, provides
that his retirement benefit is $3,540,000, payable over a 10 year period
commencing 2022, and that his death benefit calculated as of February 26, 2000
was $958,587. The agreement further provides that these payments are due Mr.
Hochberg or his beneficiaries whether or not he is employed by the Company.
12
<PAGE>
Joel Salon is senior partner of Salon, Marrow, Dyckman & Newman, LLP, which
firm provides legal services to the Company. In fiscal 2000, the Company paid
$294,200 in legal fees to Salon, Marrow, Dyckman & Newman, LLP.
In July 1997, the Company entered into agreements with certain members of
the Company's senior management (the "Executives"). The agreements provide, in
part, that if there is a change of control (as defined in the agreement) on or
prior to June 30, 2002 and the Executive is terminated (i) without cause by the
Company within two years of the change of control; or (ii) without cause by the
Company after the execution of the agreement, but prior to the change in control
and the change of control occurs within 6 months of the agreement; or (iii) with
good reason (as defined in the agreement) by the Executive within two years of
the change of control, the Executive shall be paid a lump sum on the termination
date. The lump sum is based upon the time elapsed since the change of control,
the Executive's termination date, and a formula starting at 200% of the
Executive's adjusted income, as defined in the Agreement, if 0 - 12 months have
elapsed, and decreasing, in stages, to 0% if more than 24 months have elapsed
since the change in control.
Additionally, the agreements provide that after a change of control has
occurred, while its stock remains publicly traded, the Company will honor,
whether vested or not, the Executive's exercise of all of his or her stock
options. In the event that the Company's shares are not publicly traded after
the change of control, the Company will pay the Executive an amount, calculated
as set forth in the agreements, which is the equivalent of the economic value of
such options.
REPORT OF THE COMPENSATION COMMITTEE
The Report of the Compensation Committee and the Performance Graph herein
shall not be incorporated by reference into any filing, notwithstanding anything
to the contrary set forth in any of the Company's previous filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934 that
might incorporate future filings in whole or in part, including this Proxy
Statement.
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of independent, non-employee directors. The Committee is
responsible for setting and administering the Company's employee compensation
plans, subject to the approval of the Board of Directors. The Committee applies
a philosophy based on the premise that the achievements of the Company result
from the coordinated efforts of all individuals working toward common
objectives.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance, and to enable the Company to attract,
retain and reward competent executives who contribute to the long-term success
of the Company.
o The Company pays competitively. The Company is committed to providing
a compensation program that helps attract and retain highly competent
executive officers. To ensure that pay is competitive, the Company
regularly compares its pay practices with those of other leading
companies in the retail and direct mail catalog industries.
o The Company pays for sustained and improved performance. Executive
officers are rewarded based upon meeting a combination of individual
performance goals, Company goals and management's
13
<PAGE>
discretion. Each year the Committee approves an incentive compensation
plan (Performance Unit Plan) which establishes a dollar bonus pool and
guidelines for bonus payments based upon per share earnings.
Performance is evaluated by reviewing the individual's performance
against both quantitative and qualitative objectives.
o The Company encourages stock ownership by management. The Company
believes stock ownership by management fosters an interest in the
enhancement of stockholder value and thus aligns management's interest
with that of the stockholders.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Lillian Vernon, the Chairman of the Board and Chief Executive Officer,
founded the Company forty-nine years ago. She has played and continues to play a
pivotal role in the Company and its development. She is involved in all aspects
of the Company's business. In determining Miss Vernon's total compensation, the
Committee considered her leadership and contributions to the Company during
fiscal 2000. In 1992, the Company extended Miss Vernon's employment agreement
for five years. By its provisions, at the end of its term, the employment
agreement continues at will, terminable upon ninety (90) days written notice.
Miss Vernon received a base salary of $468,000 per annum in fiscal 2000, which
represented a voluntary ten (10%) percent reduction in her annual salary from
the annual salary she received in fiscal 1999. Her salary is reviewed annually
by the Committee and may be increased at the Board of Directors' discretion. In
reviewing Miss Vernon's base salary, the Board of Directors consider the base
salaries paid to the chief executive officers of other companies in the retail
and direct mail catalog industry. In addition, the Board of Directors, upon the
recommendation of the Committee, may award a bonus to Miss Vernon. The
employment agreement also provides for the full payment of salary to Lillian
Vernon for a two year period should she become disabled and unable to perform
her duties.
Miss Vernon's compensation is tied to the performance of the Company,
specifically earnings per share. In fiscal 2000 the Compensation Committee, at
the request of Miss Vernon, and with the approval of the Board of Directors, did
not award her a bonus.
Miss Vernon is eligible to participate in the Company's stock option
program and other benefit plans, as are all other executives of the Company.
Effective February 27, 1985, Lillian Vernon entered into a deferred
compensation agreement with the Company which provided for deferred compensation
for four years commencing in fiscal 1986. The Deferred Compensation Agreement,
which was amended on April 30, 1992, provides that her retirement benefit is
$4,634,500 payable over a ten year period commencing 1997. Her death benefit
consists of the remaining portion of the deferred compensation payments at the
time of her death.
COMPENSATION VEHICLES
The Company uses a total compensation program that consists of cash and
equity based compensation.
Cash Based Compensation
Salary
Individual salary determinations of the Company's executive officers are
based on experience, sustained performance and comparison to peers inside and
outside the Company.
14
<PAGE>
Bonus-Performance Unit Plan
As previously discussed, under the Company's Performance Unit Plan, the
Committee establishes a dollar bonus pool and guidelines for bonus payments
based upon per share earnings. Corporate vice presidents, department directors
and managers participate in the Performance Unit Plan. Generally, payments are
based in part upon the achievement of individual performance goals, Company
goals and management's discretion. Bonus compensation may be paid in cash or in
shares of the Company's Common Stock, at the Company's option. The Company's
fiscal 2000 results did not meet the specific goals previously established by
the Board of Directors. However, the Board, cognizant that certain members of
management were deserving of a bonus for their efforts, provided $225,000 to be
distributed at the discretion of Miss Vernon.
Profit-Sharing Plan
The Company maintains a profit sharing plan for the benefit of all
employees, including its executive officers, who have met certain minimum
service requirements. The Company's annual contribution is discretionary, as
determined by the Board of Directors.
The Company's profit sharing plan also includes an employee contribution
and employer matching contribution (401(k)) feature. Under the 401(k) feature of
the plan, eligible employees may make pre-tax contributions up to 10% of their
annual compensation. Employee contributions of up to 6% of compensation are
currently matched by the Company at a rate of 50%.
Equity Based Compensation
Restricted Stock and Stock Options
The purpose of these programs is to provide additional incentives to
employees to work to maximize stockholder value. The restricted stock and stock
option plans are administered by the Committee, which has the authority to
determine the individuals to whom, the times at which options and/or restricted
stock may be granted or awarded and the number of shares to be covered by each
such grant or award. The Company may grant stock options and restricted stock
awards to the Company's management -- the officers and departmental directors.
The programs utilize vesting periods, which are determined by the Committee, to
encourage key employees to continue in the employ of the Company.
The Compensation Committee: Richard A. Berman
Bert W. Wasserman
Elizabeth M. Eveillard
15
<PAGE>
PERFORMANCE GRAPH
Set forth below is a performance graph that shows the cumulative total return
(assuming dividend reinvestment) on the Company's Common Stock compared with the
cumulative total return of the Standard & Poor's 500 Stock Index and the
Standard & Poor's Specialty Retail Index for the period of the Company's last
five fiscal years (February 1995 = 100):
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG LILLIAN VERNON, S&P 500, AND S&P SPECIALTY RETAIL
Lillian Vernon S&P Specialty
Corp. S&P 500 Retail
--------------------------------------------------------------------
1995 ...... 100.00 100.00 100.00
1996 ...... 76.17 134.70 97.80
1997 ...... 70.81 169.94 111.87
1998 ...... 100.24 229.43 118.20
1999 ...... 82.42 274.71 105.08
2000 ...... 61.99 306.93 77.35
The Board of Directors recognize that the market price of stock is influenced by
many factors, only one of which is company performance. The stock price
performance shown on the graph is not necessarily indicative of future price
performance.
16
<PAGE>
2. RATIFICATION OF APPOINTMENT OF AUDITORS
Subject to stockholder ratification, the Board of Directors has appointed
the firm of PricewaterhouseCoopers LLP as independent auditors for the fiscal
year ending February 24, 2001. This firm and Coopers & Lybrand L.L.P., a
predecessor of PricewaterhouseCoopers LLP, has audited the accounts of the
Company since fiscal year 1985. If the stockholders do not ratify this
appointment, other certified public accountants will be considered by the Board.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting and will be available to respond to questions.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy at the Annual Meeting and entitled to vote
is required to ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors for the fiscal year ended February 24, 2001.
The Board of Directors recommends a vote "FOR" ratifying the appointment of
PricewaterhouseCoopers LLP.
3. STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING
TO BE HELD IN 2001
No person who intends to present a proposal for action at a forthcoming
stockholders' meeting of the Company may seek to have the proposal included in
the proxy statement or form of proxy for such meeting unless that person (a) is
a record beneficial owner of at least 1% or $2,000 in market value of shares of
Common Stock, has held such shares for at least one year at the time the
proposal is submitted, and such person shall continue to own such shares through
the date on which the meeting is held; (b) provides the Company in writing with
his or her name, address, the number of shares held by him or her and the date
upon which he or she acquired such shares, and with documentary support for a
claim of beneficial ownership; (c) notifies the Company of his or her intention
to appear personally at the meeting or by a qualified representative under
Delaware law to present his or her proposal for action; and (d) submits his or
her proposal timely. A proposal to be included in the proxy statement or proxy
for the Company's next annual meeting of stockholders will be submitted timely
only if the proposal has been received at the Company's principal executive
office no later than February 11, 2001. If the date of such meeting is changed
by more than 30 calendar days from the date such meeting is scheduled to be held
under the Company's By-Laws, or if the proposal is to be presented at any
meeting other than the next annual meeting of stockholders, the proposal must be
received at the Company's principal executive office at a reasonable time before
the solicitation of proxies for such meeting is made.
Even if the foregoing requirements are satisfied, a person may submit only
one proposal of not more than 500 words with a supporting statement if the
latter is requested by the proponent for inclusion in the proxy materials, and
under certain circumstances enumerated in the Securities and Exchange
Commission's rules relating to the solicitation of proxies, the Company may be
entitled to omit the proposal and any statement in support thereof from its
proxy statement and form of proxy.
17
<PAGE>
4. OTHER BUSINESS
So far as the Board of Directors is aware, no matters will be presented at
the Meeting for action on the part of the stockholders other than those stated
in the notice of this meeting.
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended February 26, 2000, may be obtained
without charge, by calling or writing David C. Hochberg, Lillian Vernon
Corporation, One Theall Road, Rye, New York 10580, (914) 925-1350.
By Order of the Board of Directors
/S/ SUSAN C. HANDLER
Susan C. Handler
Secretary
June 12, 2000
18
<PAGE>
LILLIAN VERNON CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING ON JULY 19, 2000 AT
THE COMPANY'S CORPORATE HEADQUARTERS AT
ONE THEALL ROAD, RYE, NEW YORK 10580, 10:00 A.M.
The undersigned hereby appoints Lillian Vernon and Susan C. Handler and each
of them, the attorneys and proxies of the undersigned, with full powers of
substitution, to vote all shares of stock of Lillian Vernon Corporation which
the undersigned is entitled to vote at the Annual Meeting of Stockholders
thereof, to be held on July 19, 2000 and any adjournments thereof, with all
powers the undersigned would have if present, upon the proposals set forth
herein and in their discretion on all other matters properly coming before the
meeting, including those described in the Notice of Meeting of Stockholders and
Proxy Statement therefor, receipt of which is acknowledged.
This Proxy will be voted as directed, or where no direction is given, will
be voted "FOR" Proposals Nos. 1 and 2. If any nominee for the Board of Directors
named in the Proxy Statement is unavailable to serve, this Proxy will be voted
for such substitute nominee as may be recommended by the Board of Directors. The
Board of Directors is not aware of other matters to come before the meeting.
The Board of Directors recommends a vote "FOR" Proposals 1 and 2.
1. Election of David C. Hochberg, Elizabeth M. Eveillard and Jonah Gitlitz
to serve as directors for a term expiring in 2003.
FOR ALL NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY [ ]
(EXCEPT AS MARKED TO THE CONTRARY BELOW) FOR ALL NOMINEES LISTED ABOVE
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
--------------------------------------------------------------------------------
(Continued, and to be voted, signed and dated on the reverse side.)
2. Proposal to approve the appointment of PricewaterhouseCoopers LLP as the
independent auditors of the Company for the fiscal year ending February
24, 2001.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
DATED ______________________, 2000
___________________________________
SIGNATURE(S) OF STOCKHOLDER(S)
(Please sign exactly as name
appears herein. When signing as
executor, administrator, trustee,
guardian or attorney, please give
full title as such. For joint
accounts or co-fiduciaries, all
joint or co-fiduciaries should
sign.)
This proxy is solicited on behalf
of the Board of Directors.
