SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Schedule 14A Information of
the Securities Exchange Act of 1934 (Amendment No. ___ )
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|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MARKS BROS. JEWELERS, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
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MARKS BROS. JEWELERS
Est. 1895
MARKS BROS. JEWELERS, INC.
155 North Wacker Drive
Suite 500
Chicago, Illinois 60606
May 6, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Marks Bros. Jewelers, Inc., a Delaware corporation, to be held at 10:00 a.m.
(Chicago time) on Thursday, June 5, 1997 at The Standard Club, 320 South
Plymouth Court, Chicago, Illinois 60604.
The formal notice of the meeting, Proxy Statement and 1996 Annual Report
are enclosed. The matters to be considered at the meeting are described in the
accompanying Proxy Statement. Regardless of your plans for attending in person,
it is important that your shares be represented at the meeting. Therefore,
please complete, sign, date and return the enclosed proxy card in the enclosed,
postage prepaid envelope. This will enable you to vote on the business to be
transacted whether or not you attend the meeting.
We hope that you can attend the 1997 Annual Meeting of Stockholders, which
will be our first annual meeting as a publicly-held corporation.
Sincerely,
/s/ Hugh M. Patinkin
------------------------
Hugh M. Patinkin
Chairman, President and
Chief Executive Officer
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MARKS BROS. JEWELERS, INC.
155 North Wacker Drive
Suite 500
Chicago, Illinois 60606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 5, 1997
To the Stockholders of
MARKS BROS. JEWELERS, INC.
The 1997 Annual Meeting of Stockholders of Marks Bros. Jewelers, Inc. a
Delaware corporation (the "Company"), will be held at The Standard Club, 320
South Plymouth Court, Chicago, Illinois 60604 on Thursday, June 5, 1997, at
10:00 a.m., Chicago time, for the following purposes:
1. to elect three Class I directors;
2. to approve the Company's 1997 Long-Term Incentive Plan; and
3. to transact such other business as may properly come before the Annual
Meeting of Stockholders or any adjournments thereof.
The Board of Directors has fixed the close of business on April 25, 1997 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting of Stockholders.
Your attention is directed to the accompanying Proxy Statement. Whether or
not you plan to attend the meeting in person, you are urged to complete, sign,
date and return the enclosed proxy card in the enclosed, postage prepaid
envelope. If you attend the meeting and wish to vote in person, you may withdraw
your proxy and vote your shares personally.
This Notice of Annual Meeting of Stockholders is first being sent to
stockholders on or about May 7, 1997.
By Order of the Board of Directors,
/s/ Hugh M. Patinkin
------------------------
Hugh M. Patinkin
Chairman, President and
Chief Executive Officer
May 6, 1997
<PAGE>
MARKS BROS. JEWELERS, INC.
155 North Wacker Drive
Suite 500
Chicago, Illinois 60606
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 5, 1997
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Marks Bros. Jewelers, Inc., a Delaware
corporation (the "Company"), for use at the 1997 Annual Meeting of Stockholders
(the "Annual Meeting") to be held at 10:00 a.m. (Chicago time) on June 5, 1997,
at The Standard Club, 320 South Plymouth Court, Chicago, Illinois 60604.
The Board of Directors has fixed the close of business on April 25, 1997 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting. On April 15, 1997, the Company had outstanding
(i) 10,064,443 shares of Common Stock, par value $.001 per share ("Common
Stock") and (ii) 101.298 shares of Class B Common Stock, par value $1.00 per
share ("Class B Common Stock"). A list of stockholders of record entitled to
vote at the Annual Meeting will be available for inspection by any stockholder,
for any purpose germane to the meeting, during normal business hours, for a
period of 10 days prior to the meeting, at the office of the Company located at
155 North Wacker Drive, Suite 500, Chicago, Illinois.
Whether or not you plan to attend the Annual Meeting, please sign, date and
mail your proxy in the enclosed self addressed postage prepaid envelope. The
proxies will vote your shares according to your instructions. If you return a
properly signed and dated proxy card but do not mark a choice on one or more
items, your shares will be voted in accordance with the recommendation of the
Board of Directors as set forth in this Proxy Statement. The proxy card gives
authority to the proxies to vote your shares in their discretion on any other
matter properly presented at the Annual Meeting.
You may revoke your proxy at any time prior to voting at the Annual Meeting
by delivering written notice to the Secretary of the Company, by submitting a
subsequently dated proxy or by attending the Annual Meeting and voting in person
at the Annual Meeting.
This Proxy Statement is first being sent or given to stockholders on or
about May 7, 1997.
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VOTING INFORMATION
Each holder of outstanding shares of Common Stock is entitled to one vote
for each share of Common Stock held in such holder's name with respect to all
matters on which holders of Common Stock are entitled to vote at the Annual
Meeting. Each holder of outstanding shares of Class B Common Stock is entitled
to 35.4208 votes for each share of Class B Common Stock held in such holder's
name with respect to all matters on which holders of Class B Common Stock are
entitled to vote at the Annual Meeting. Except as otherwise required by law, the
holders of shares of Common Stock and Class B Common Stock (collectively, the
"Holders") shall vote together and not as separate classes. A Holder may, with
respect to the election of the Class I directors, vote FOR the election of the
director nominees or WITHHOLD authority to vote for such director nominees. A
Holder may, with respect to the approval of the Company's 1997 Long-Term
Incentive Plan, (i) vote FOR approval, (ii) vote AGAINST approval or (iii)
ABSTAIN from voting on the proposal. All properly executed and unrevoked proxies
received in the accompanying form in time for the Annual Meeting will be voted
in the manner directed therein. If no direction is made on a proxy, such proxy
will be voted FOR the election of the named director nominees to serve as Class
I directors and FOR approval of the Company's 1997 Long-Term Incentive Plan. The
proxy card gives authority to the proxies to vote your shares in their
discretion on any other matter properly presented at the Annual Meeting. If a
proxy indicates that all or a portion of the votes represented by such proxy are
not being voted with respect to a particular matter, such non-votes will not be
considered present and entitled to vote on such matter, although such votes may
be considered present and entitled to vote on other matters and will count for
purposes of determining the presence of a quorum. A quorum will be present if a
majority of the shares of Common Stock and Class B Common Stock combined are
represented in person or by proxy at the Annual Meeting.
The election of the Class I directors requires the affirmative vote of a
plurality of votes cast by the Holders present in person or represented by proxy
and entitled to vote on such matter at the Annual Meeting. Accordingly, if a
quorum is present at the Annual Meeting, the persons receiving the greatest
number of votes by the Holders will be elected to serve as the Class I
directors. Since the election of directors requires only the affirmative vote of
a plurality of the votes cast by the Holders present in person or represented by
proxy and entitled to vote with respect to such matter, withholding authority to
vote for a nominee and non-votes with respect to the election of directors will
not affect the outcome of the election of directors.
Assuming a quorum is present at the Annual Meeting, the approval of the
Company's 1997 Long-Term Incentive Plan requires the affirmative vote of a
majority of the votes cast by the Holders present in person or represented by
proxy and entitled to vote on such matter at the Annual Meeting. A vote to
abstain from voting on such proposal will be treated as a vote against such
proposal. Non-votes with respect to such proposal will not affect the
determination of whether such proposal is approved.
PROPOSAL 1
ELECTION OF DIRECTORS
The business of the Company is managed under the direction of the Company's
Board of Directors. The Board of Directors is presently composed of seven
directors, divided into three classes. At the Annual Meeting, three Class I
directors will be elected to serve until the annual meeting in the year 2000, or
until their successors are elected and qualified. The nominees for election as
Class I directors are identified below. In the event the nominees who have
expressed an intention to serve if elected, fail to stand for election, the
persons named in the proxy presently intend to vote for a substitute nominee
designated by the Board of Directors.
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Nominees
The following persons, if elected at the Annual Meeting, will serve as
Class I directors until the annual meeting in the year 2000, or until their
successors are elected and qualified.
CLASS I DIRECTORS - TERM SCHEDULED TO EXPIRE IN 2000
Mr. Hugh M. Patinkin, age 46, has served as President and Chief Executive
Officer of the Company since 1989 and was elected its Chairman in February 1996.
He has served as a director from 1979 to 1988 and from 1989 to the present. He
joined the Company as its Assistant Secretary in 1979. Prior thereto he
practiced law with the firm of Sidley & Austin.
Mr. Norman J. Patinkin, age 70, has served as a director of the Company
since 1989. He is the Chief Executive Officer of the Hi-Tech Group Inc., which
operates telemarketing services, motorclubs, travel clubs and direct response
merchandise programs for large corporations.
Mr. Daniel H. Levy, age 53, has served as a director of the Company since
January 7, 1997 (and had served as a director from March 1996 until May 1996).
Mr. Levy served as Chairman and Chief Executive Officer of Best Products Co.
Inc., a large discount retailer of jewelry and brand name hardline merchandise,
from April 1996 until January 1997, which Company filed a petition for
bankruptcy under Chapter 11 of the Bankruptcy Code in the Eastern District of
Virginia on September 24, 1996. Prior to such time, Mr. Levy was a Principal for
LBK Consulting from 1994 until 1996. Mr. Levy served as Chairman and Chief
Executive Officer of Conran's during 1993. Prior to such time, Mr. Levy was Vice
Chairman and Chief Operating Officer for Montgomery Ward & Co. from 1991 until
1993.
The Board of Directors of the Company recommends votes "FOR" the nominees for
Class I directors.
Other Directors
The following persons are currently directors of the Company whose terms
will continue after the Annual Meeting.
CLASS II DIRECTORS- TERM SCHEDULED TO EXPIRE IN 1998
Mr. John R. Desjardins, age 46, joined the Company in 1979 and has served
as Executive Vice President, Finance & Administration, Treasurer and Secretary
and as a director of the Company since 1989. Previously, he worked as a
certified public accountant with Deloitte & Touche L.L.P.
Mr. Jack A. Smith, age 61, has served as a director of the Company since
July 1996. Mr. Smith is Chairman of the Board and Chief Executive Officer of The
Sports Authority, Inc., a national sporting goods chain, which he founded in
1987. Prior to founding The Sports Authority, Mr. Smith served as Chief
Operating Officer of Herman's Sporting Goods and held various executive
management positions with major national retailers, including Sears & Roebuck,
Montgomery Ward and Jefferson Stores. Mr. Smith serves on the Board of Directors
of Darden Restaurants, Inc.
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CLASS III DIRECTORS - TERM SCHEDULED TO EXPIRE IN 1999
Mr. Matthew M. Patinkin, age 39, joined the Company in 1979 and has served
as Executive Vice President, Store Operations and as a director of the Company
since 1989.
Mr. Rodney L. Goldstein, age 45, has served as a director of the Company
since 1989 and served as Chairman from 1989 to February 1996. Mr. Goldstein is
the Managing Partner of Frontenac Company, a private equity investment
management partnership which he joined in 1981. Mr. Goldstein serves on the
Board of Directors of Eagle River Interactive, Inc. and Platinum Entertainment,
Inc., as well as a number of privately-held companies.
Messrs. Hugh M. Patinkin and Matthew M. Patinkin are brothers. Mr. Norman
J. Patinkin is a first cousin, once removed, of Messrs. Hugh and Matthew
Patinkin.
Meetings and Committees
The Board of Directors of the Company held five meetings during fiscal
1996. Each director attended at least 75% of the meetings during the time in
which each was a director in fiscal 1996.
The Board of Directors does not presently have a formal nominating
committee.
The Audit Committee recommends the firm to be appointed as independent
accountants to audit financial statements and to perform services related to the
audit, reviews the scope and results of the audit with the independent
accountants, reviews with management and the independent accountants the
Company's year-end operating results and considers the adequacy of the internal
accounting procedures. The Audit Committee currently consists of Messrs. Norman
J. Patinkin (Chairman), Rodney L. Goldstein and Daniel H. Levy. The Audit
Committee held one meeting in fiscal 1996 which was attended by all members of
the committee.
The Compensation Committee, which currently consists of Messrs. Jack A.
Smith (Chairman), Rodney L. Goldstein and Norman J. Patinkin, reviews and
recommends the compensation arrangements for all officers, approves such
arrangements for other senior level employees, and administers and takes such
other action as may be required in connection with certain compensation and
incentive plans of the Company (including the grant of stock options). The
Compensation Committee did not hold any meetings in fiscal 1996. The Company's
By-Laws require that the Compensation Committee consists of non-employee
directors.
Compensation of Directors
Non-employee directors receive compensation of $6,250 per fiscal quarter
and $500 per meeting of a committee thereof. Directors who are officers or
employees of the Company receive no compensation for serving as directors. All
directors are reimbursed for out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors and meetings of committees of
the Board of Directors.
Under the Company's 1996 Long-Term Incentive Plan (the "1996 Plan"), upon
the consummation of the Company's Initial Public Offering on May 7, 1996 (the
"Initial Public Offering"), each non-employee director who is currently a
director (other than Mr. Goldstein) was granted a nonqualified option to
purchase 10,000 shares of Common Stock at the public offering price. In
addition, on the date on which a person is first elected or begins to serve as a
non-employee director, each such non-employee director will be granted a
nonqualified option to purchase 10,000 shares of Common Stock under either the
Company's 1996 Plan or
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<PAGE>
the Company's 1997 Long-Term Incentive Plan. Finally, both of the Company's
long-term incentive plans provide that non-employee directors may be granted
nonqualified options to purchase shares of Common Stock at the discretion of the
Compensation Committee to advance the interests of the Company by retaining
well-qualified directors. The per share exercise price of all such options is or
will be equal to the fair market value of the Common Stock on the date of grant
and such options vest or will vest with respect to one-third of the options on
the first, second and third anniversaries of the date of grant.
Messrs. N. Patinkin, Smith, Levy and Goldstein were each granted
nonqualified options to purchase 10,000 shares of Common Stock, at exercise
prices of $10.25, $10.25, $10.125 and $9.375, respectively, per share, which
options have expiration dates of May 2, 2006, July 12, 2006, January 7, 2007 and
January 17, 2007, respectively.
PROPOSAL 2
1997 LONG-TERM INCENTIVE PLAN
The Board of Directors of the Company approved the Marks Bros. Jewelers,
Inc. 1997 Long-Term Incentive Plan (the "1997 Plan") on February 24, 1997. The
1997 Plan is being submitted for approval by the Company's stockholders at the
Annual Meeting for the purpose of (i) qualifying certain grants of options as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) complying with certain rules
and regulations of the Nasdaq Stock Market and (iii) permitting future stock
options and stock appreciation rights granted under the 1997 Plan to qualify as
"qualified performance-based" compensation under Section 162(m) of the Code. See
"Executive Officer Compensation Report by the Compensation Committee" below for
a discussion of Section 162(m) of the Code. The following is a description of
the 1997 Plan.
Description of the 1997 Plan
General. Under the 1997 Plan, the Company may grant incentive stock options
or nonqualified options, stock appreciation rights ("SARs"), bonus stock awards
which are vested upon grant, stock awards which may be subject to a restriction
period or specified performance measures or both, and performance shares, as
described below. A total of 400,000 shares of Common Stock have been reserved
for issuance under the 1997 Plan, of which 100,000 shares are available for
stock awards, subject to adjustment in the event of a stock split, stock
dividend or other changes in capital structure. No awards may be made under the
1997 Plan after ten years after its effective date. All non-employee directors
and approximately 50 employees are eligible to participate in the 1997 Plan. The
maximum number of shares of Common Stock with respect to which options or SARs,
stock awards or performance share awards, or a combination thereof, may be
granted during any calendar year to any participant in the 1997 Plan is 200,000,
subject to adjustment in the event of a stock split, stock dividend or other
change in capital structure.
Purposes. The purposes of the 1997 Plan are to align the interests of the
Company's stockholders and the recipients of awards under the 1997 Plan by
increasing the proprietary interest of such recipients in the Company's growth
and success and to advance the interests of the Company by attracting and
retaining non-employee directors, officers and other key employees and to
motivate such persons to act in the long-term best interests of the Company's
stockholders.
Administration. The 1997 Plan is currently administered by the Compensation
Committee. Subject to the terms of the 1997 Plan, the Compensation Committee is
authorized to select eligible non-employee
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directors, officers and other key employees for participation in the 1997 Plan
and to determine the form, amount and timing of each award to such persons and,
if applicable, the number of shares of Common Stock, the number of SARs and the
number of performance shares subject to the awards granted thereunder, the
exercise price or base price associated with the award, the time and conditions
of exercise, and all other terms and conditions of such award.
The Compensation Committee may delegate some or all of its power and
authority under the 1997 Plan to the Chief Executive Officer or other executive
officer of the Company as it deems appropriate; provided, however, that the
Compensation Committee may not delegate its power and authority with regard to
the selection for participation in the 1997 Plan of an officer or other person
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or decisions concerning the timing, pricing or amount of an
award to such an officer or other person, and no delegation may be made with
respect to the grant of an award to a "covered employee" within the meaning of
Section 162(m) of the Code.
Effective Date, Termination and Amendment. The 1997 Plan became effective
on February 24, 1997 and will terminate ten years thereafter, unless terminated
earlier by the Board of Directors. The Board of Directors generally may amend
the 1997 Plan at any time except that, without the approval of the stockholders
of the Company, no amendment may, among other things, (i) increase the number of
shares of Common Stock available under the 1997 Plan, (ii) reduce the minimum
purchase price of a share of Common Stock subject to an option or base price of
an SAR or (iii) extend the term of the 1997 Plan.
Employee Stock Options. Options granted to employees under the 1997 Plan
may be incentive stock options or nonqualified options. The purchase price of
shares of Common Stock purchasable upon exercise of an option will be determined
by the Compensation Committee at the time of grant, but may not be less than
100% of the fair market value of such shares of Common Stock on the date of
grant. The aggregate fair market value (determined as of the date the option is
granted) of the stock with respect to which incentive stock options are
exercisable for the first time by the optionee in any calendar year (under the
1997 Plan and any other incentive stock option plan of the Company) may not
exceed $100,000. Incentive stock options granted under the 1997 Plan may not be
exercised after ten years from the date of grant. In the case of any eligible
employee who owns or is deemed to own stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, the exercise
price of any incentive stock options granted under the 1997 Plan may not be less
than 110% of the fair market value of the Common Stock on the date of grant, and
the exercise period may not exceed five years from the date of grant. Options
granted under the 1997 Plan are not transferable by the optionee other than by
will or under the laws of descent and distribution except that, if the optionee
dies prior to exercising his option, the estate of the deceased optionee may
exercise all options in full until the expiration of one year from the date of
death or, if earlier, the termination of the option.
Non-Employee Director Options. The 1997 Plan provides for the automatic
grants of stock options to non-employee directors. On the date on which a person
is first elected or begins to serve as a non-employee director, each such
non-employee director will be granted a nonqualified option under the 1997 Plan
to purchase 10,000 shares of Common Stock provided, however, that no such grant
will be made to the extent an automatic option grant is being or has been made
to such non-employee director as of or with respect to such date pursuant to
another incentive compensation plan of the Company. In addition, non-employee
directors may be granted nonqualified options to purchase shares of Common Stock
at the discretion of the Compensation Committee to advance the interests of the
Company by retaining well qualified directors. The per share exercise price of
such options will be equal to the fair market value of the Common Stock on the
date of grant of such option.
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Stock Appreciation Rights. SARs granted under the 1997 Plan may be granted
in tandem with, or by reference to, an option or may be free-standing SARs. The
period for the exercise of an SAR and the base price of an SAR will be
determined by the Compensation Committee, but the base price may not be less
than 100% of the fair market value of a share of Common Stock on the date of
grant of such SAR. The exercise of an SAR entitles the holder thereof to receive
(subject to withholding taxes) shares of Common Stock (which may be restricted
stock), cash or a combination thereof with a value equal to the difference
between the fair market value of the Common Stock on the exercise date and the
base price of the SAR.
Bonus Stock and Restricted Stock Awards. The 1997 Plan provides for the
grant of bonus stock awards, which are vested upon grant. The 1997 Plan also
provides for stock awards which may be subject to a restriction period
("restricted stock"). An award of restricted stock may be subject to specified
performance measures for the applicable restriction period or may require the
holder to remain continuously employed by the Company for the applicable
restriction period. The terms of restricted stock and performance goals will be
determined by the Compensation Committee. Unless otherwise specified in the
agreement with respect to a particular restricted stock award, the holder of a
restricted stock award will have all the rights as a stockholder of the Company,
including, but not limited to, voting rights and the right to receive dividends.
Shares of restricted stock will be non-transferable and subject to forfeiture if
the holder does not remain continuously in the employment of the Company during
the restriction period or, if the restricted stock is subject to performance
measures, if such performance measures are not attained during the restriction
period. Subject to the change in control provisions of the 1997 Plan and unless
otherwise specified in the agreement with respect to a particular restricted
stock award, in the event of a termination of employment for any reason, the
portion of a restricted stock award which is then subject to a restriction
period will be forfeited and canceled. At the present time, no bonus stock
awards or restricted stock awards have been granted.
Performance Share Awards. The 1997 Plan also provides for the grant of
performance shares. Each performance share is a right, contingent upon the
attainment of performance measures within a specified performance period, to
receive one share of Common Stock, which may be restricted stock, or the fair
market value of such performance share in cash. The terms of performance share
awards and performance goals will be determined by the Compensation Committee.
Performance shares will be non-transferable and subject to forfeiture if the
specified performance measures are not attained during the applicable
performance period. Subject to the change in control provisions of the 1997 Plan
and unless otherwise specified in the agreement with respect to a particular
performance share award, in the event of termination of employment for any
reason, the portion of a performance share award which is then subject to a
performance period will generally be forfeited and canceled. At the present
time, no performance shares have been awarded.
Change in Control. In the event of certain acquisitions of 50% or more of
the Common Stock, a change in the majority of the Board of Directors (subject to
certain exceptions), the approval by stockholders of a reorganization, merger or
consolidation (unless the Company's stockholders receive 50% or more of the
stock and combined voting power of the surviving company) or the approval by
stockholders of a complete liquidation or dissolution, all options will become
immediately exercisable and all awards will be "cashed-out" by the Company,
except, in the case of a merger or similar transaction in which the stockholders
receive publicly traded common stock, outstanding awards will be substituted for
similar rights to acquire a proportionate number of shares of common stock
received in the merger or similar transaction.
Federal Income Tax Consequences
The following is a brief summary of the U.S. federal income tax
consequences of awards made under the 1997 Plan.
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Stock Options. A participant will not recognize any income upon the grant
of a stock option, and the Company will not be allowed a deduction for federal
income tax purposes at that time. A participant will recognize compensation
taxable as ordinary income (and subject to income tax withholding) upon exercise
of a nonqualified stock option equal to the excess of the fair market value
(determined as of the date of exercise) of the shares purchased over their
exercise price, and the Company will be entitled to a corresponding deduction. A
participant will not recognize income (except for purposes of the alternative
minimum tax) upon exercise of an incentive stock option. If the shares acquired
by exercise of an incentive stock option are held for the longer of two years
from the date the option was granted or one year from the date the shares were
transferred, any gain or loss arising from a subsequent disposition of such
shares will be taxed as long-term capital gain or loss, and the Company will not
be entitled to any deduction. If, however, such shares are disposed of within
the above-described period, then in the year of such disposition the participant
generally will recognize compensation taxable as ordinary income equal to the
excess of the lesser of (i) the amount realized upon such disposition and (ii)
the fair market value of such shares on the date of exercise over the exercise
price, and the Company will be entitled to a corresponding deduction.
SARs. A participant will not recognize any taxable income upon the grant of
the SARs, and the Company will not be allowed a deduction for federal income tax
purposes at that time. A participant will recognize compensation taxable as
ordinary income (and subject to income tax withholding) upon exercise of an SAR
equal to the fair market value (determined as of the date of exercise) of any
shares delivered and the amount of cash paid by the Company upon such exercise,
and the Company will be entitled to a corresponding deduction.
Bonus Stock. A participant will recognize compensation taxable as ordinary
income (and subject to income tax withholding) in respect of awards of shares of
bonus stock at the time such shares are transferred in an amount equal to the
then fair market value of such shares and the Company will be entitled to a
corresponding deduction, except to the extent the limit of Section 162(m) of the
Code applies.
Restricted Stock. A participant will not recognize taxable income at the
time of the grant of shares of restricted stock, and the Company will not be
entitled to a tax deduction at such time, unless the participant makes an
election to be taxed at the time restricted stock is granted. If such election
is made, the participant will recognize taxable income equal to the excess of
the fair market value of the shares on the date of grant over the amount, if
any, paid for such shares. If such election is not made, the participant will
recognize taxable income at the time the restrictions lapse in an amount equal
to the excess of the fair market value of the shares at such time over the
amount, if any, paid for such shares. The amount of ordinary income recognized
by a participant by making the above-described election or upon the lapse of the
restrictions is deductible by the Company as compensation expense, except to the
extent the limit of Section 162(m) of the Code applies. The Company is permitted
to take such deduction in the Company's taxable year in which ends the taxable
year in which the employee recognizes the taxable income. In addition, a
participant receiving dividends with respect to restricted stock for which the
above-described election has not been made and prior to the time the
restrictions lapse will recognize taxable compensation (subject to income tax
withholding), rather than dividend income, in an amount equal to the dividends
paid, and the Company will be entitled to a corresponding deduction, except to
the extent the limit of Section 162(m) of the Code applies.
Performance Shares. A participant will not recognize taxable income upon
the grant of performance shares and the Company will not be entitled to a tax
deduction at such time. Upon the settlement of performance shares, the
participant will recognize compensation taxable as ordinary income (and subject
to income tax withholding) in an amount equal to the fair market value of any
shares delivered and any cash paid by the Company, and the Company will be
entitled to a corresponding deduction, except to the extent the limit of Section
162(m) of the Code applies.
-8-
<PAGE>
See "Executive Officer Compensation Report by the Compensation Committee"
for a description of Section 162(m) of the Code.
The following table specifies the number of shares of Common Stock which
are subject to options granted under the 1997 Plan to named executives,
directors, employees or group:
Awards Granted Under
1997 Long-Term Incentive Plan
<TABLE>
<CAPTION>
Number of
Name and Principal Position Dollar Value Common Shares
--------------------------- ------------ -------------
<S> <C> <C>
Options
Executive Group
Hugh M. Patinkin (Chairman, President & CEO) -- --
John R. Desjardins (Executive Vice President, Finance & -- --
Administration, Treasurer and Secretary)
Matthew M. Patinkin (Executive Vice President, -- --
Store Operations)
Lynn D. Eisenheim (Executive Vice President, -- --
Merchandising)
Executive Group -- --
-------
Non-Executive Director Group -- --
-------
Non-Executive Employee Group -- 141,952
-------
TOTAL -- 141,952
=======
</TABLE>
No grants of awards were made under the 1997 Plan during the fiscal year
ended January 31, 1997, and no grants have since been made to any executive
officers or non-employee directors. The grants of options which, subject to the
approval by the stockholders will be incentive stock option grants, to certain
employees of the Company were made on February 24, 1997, March 17, 1997, March
19, 1997, April 7, 1997 and April 29, 1997. Since the option exercise price is
equal to the fair market value of the shares of Common Stock as of the date of
grant, no dollar value was assigned to the options for purposes of the above
table. Based on closing price of the Common Stock, as reported for Nasdaq
National Market Issues in The Wall Street Journal, the market value of the
Common Stock on April 15, 1997 was $11.75 per share.
The above description of the 1997 Plan is qualified in its entirety by
reference to the 1997 Plan, which is included as Annex A to this Proxy
Statement.
The Board of Directors recommends a vote "FOR" the approval of the Company's
1997 Long-Term Incentive Plan.
EXECUTIVE OFFICERS
The following sets forth certain information with respect to the executive
officer of the Company who is not identified above under "Election of Directors
- - Nominees" and "-- Other Directors."
Mr. Lynn D. Eisenheim, age 45, joined the Company in 1991 as its Executive
Vice President, Merchandising. He has 23 years of experience in the jewelry
business having served with Zale Corporation (where he served as Executive Vice
President, Merchandising immediately prior to joining the Company) and Service
Merchandise Co.
-9-
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
Summary Compensation. The following summary compensation table sets forth
certain information concerning compensation for services rendered in all
capacities awarded to, earned by or paid to the Company's Chief Executive
Officer and the other named executive officers during the years ended January
31, 1997, 1996 and 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
-------------------- ----------------------
Year Restricted Shares
ended Stock Underlying
Name and Principal Position Jan. 31 Salary Bonus Awards(1) Options
--------------------------- ------- ------ ----- --------- -------
<S> <C> <C> <C> <C> <C>
Hugh M. Patinkin 1997 $255,000 $127,500 $ -- 312,835
Chairman, President and 1996 $255,000 $191,250 $223,576 228,337
Chief Executive Officer 1995 $255,000 $127,500 $ -- --
John R. Desjardins 1997 $234,000 $117,000 $ -- 169,766
Executive Vice President, 1996 $234,000 $175,500 $128,001 154,603
Finance & Administration, 1995 $234,000 $117,000 $ --
Treasurer and Secretary
Matthew M. Patinkin 1997 $200,000 $100,000 $ -- 169,766
Executive Vice President, 1996 $200,000 $150,000 $102,401 124,634
Store Operations 1995 $200,000 $100,000 $ --
Lynn D. Eisenheim 1997 $160,000 $ 80,000 $ -- 32,173
Executive Vice President, 1996 $160,000 $120,000 $ -- 69,040
Merchandising 1995 $160,000 $ 80,000 $ --
</TABLE>
- ----------
(1) Represents restricted stock awards (which are the only restricted shares
held by such executive officers) which became no longer subject to
forfeiture upon the consummation of the Initial Public Offering. The value
is calculated by multiplying an assumed fair market value at January 31,
1996, utilizing an independent appraisal at September 28, 1995 (the date of
award) by the number of restricted shares awarded. Dividends will be
payable on the shares if and to the extent paid on shares of Common Stock
generally.
General Information Regarding Options. The following tables show
information regarding stock options held by the executive officers named in the
Summary Compensation Table.
-10-
<PAGE>
Option Grants in Fiscal 1996
<TABLE>
<CAPTION>
Number of
Securities % of Total Grant
Underlying Options Date
Options Granted to Exercise Expiration Present
Name Granted(1) Employees Price Date Value (2)
---- ---------- --------- ----- ---- ---------
<S> <C> <C> <C> <C> <C>
Hugh M. Patinkin ...... 312,835 43.3% $14.00 05/07/06 $2,343,124
John R. Desjardins .... 169,766 23.5% $14.00 05/07/06 $1,271,547
Matthew M. Patinkin ... 169,766 23.5% $14.00 05/07/06 $1,271,547
Lynn D. Eisenheim ..... 32,173 4.5% $14.00 05/07/06 $ 240,976
</TABLE>
- ----------
(1) The stock options for the named executive officers vest with respect to 25%
of the options on the first, second, third and fourth anniversaries of the
date of grant, and are exercisable until the tenth anniversary of the date
of grant.
(2) Option values computed using the Black-Scholes pricing formula. See Note 16
to section entitled "Notes to Financial Statements" in the Company's 1996
Annual Report for the assumptions used in determining the option values.
Option Exercises in Fiscal 1996 and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Options as of Option Value as of
Shares January 31, 1997 January 31, 1997 (1)
Acquired Value --------------------------- ----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hugh M. Patinkin.............. 208,800 $2,188,644 97,745 234,627 $190,681 --
John R. Desjardins............ 144,615 $2,667,905 52,429 127,325 $ 98,382 --
Matthew M. Patinkin........... 108,900 $1,458,278 58,175 127,325 $153,564 --
Lynn D. Eisenheim............. 52,497 $ 772,514 24,586 24,130 $162,949 --
</TABLE>
- ----------
(1) Represents the aggregate dollar value of in-the-money, unexercised options
held at the end of the year, based on the difference between the exercise
price and $10.75, the closing price for the Common Stock as of January 31,
1997, the last trading day in fiscal 1996, as reported for Nasdaq National
Market Issues in The Wall Street Journal.
(2) As of January 31, 1997, the closing price for the Common Stock of the
Company was less than the exercise price of each of the unexercisable
options.
Employment Agreements
The Company has entered into severance agreements with each of Hugh M.
Patinkin, Chairman, President and Chief Executive Officer, John R. Desjardins,
Executive Vice President, Finance & Administration, Treasurer and Secretary,
Matthew M. Patinkin, Executive Vice President, Store Operations and Lynn D.
Eisenheim, Executive Vice President, Merchandising, as described below.
Employment Agreements with Named Executive Officers. The agreements, dated
May 7, 1996, provide for certain payments after a "change of control." A "change
of control" is defined under the agreements to include (i) an acquisition by a
third party (excluding certain affiliates of the Company) of beneficial
ownership of at least 25% of the outstanding shares of Common Stock, (ii) a
change in a majority of the incumbent Board
-11-
<PAGE>
of Directors and (iii) merger, consolidation or sale of substantially all of the
Company's assets if the Company's stockholders do not continue to own at least
60% of the equity of the surviving or resulting entity. Pursuant to these
agreements such employees will receive certain payments and benefits if they
terminate employment voluntarily six months after a "change of control," or
earlier if they terminate for "good reason," as defined in such agreements (such
as certain changes in duties, titles, compensation, benefits or work locations)
or if they are terminated by the Company after a change of control, other than
for "cause," as so defined. The severance agreements also provide for certain
payments absent a change of control if they terminate employment for "good
reason" or if they are terminated by the Company, other than for "cause". Their
payment will equal 2.5 times (1.5 times if a change of control has not occurred)
their highest salary plus bonus over the five years preceding the change of
control, together with continuation of health and other insurance benefits for
30 months (18 months if a change of control has not occurred). The severance
agreements also provide for payment of bonus for any partial year worked at
termination of employment equal to the higher of (x) the employee's average
bonus for the immediately preceding two years and (y) 50% of the maximum bonus
the employee could have earned in the year employment terminates, pro rated for
the portion of the year completed. To the extent any payments to any of the four
senior executives under these agreements would constitute an "excess parachute
payment" under Section 280G(b)(1) of the Code, such payments will be "grossed
up" for any excise tax payable under such section, so that the amount retained
after paying all federal income taxes due would be the same as such person would
have retained if such section had not been applicable.
Management Bonus Plan
The Chief Executive Officer and each of the other executive officers named
in the Summary Compensation Table above are eligible to participate in the
Company's Management Bonus Plan. Under this bonus program, each executive
officer is entitled to receive a bonus (not to exceed 100% of base salary )
based on specified levels of earnings per share of Common Stock. Awards are
determined by the Compensation Committee.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
All compensation decisions for the Chief Executive Officer and each of the
other executive officers named in the Summary Compensation Table are currently
made by the Compensation Committee of the Board of Directors. The Compensation
Committee consists of Messrs. Jack A. Smith (Chairman), Rodney L. Goldstein and
Norman J. Patinkin. Each member of the Compensation Committee is a non-employee
director who has not previously been an officer or employee of the Company.
Prior to the Company's Initial Public Offering, Mr. Hugh M. Patinkin served
as a member of the Compensation Committee of the Board of Directors. Mr. H.
Patinkin has not participated in decisions regarding his own compensation and he
did not participate in decisions relating to the approval of the 1995 Executive
Incentive Stock Option Plan (the "1995 Executive ISO Plan") which plan was
adopted while he served on the Compensation Committee.
Executive Officer Compensation Report by the Compensation Committee
This report is submitted by the Compensation Committee of the Board of
Directors.
All compensation decisions for the Chief Executive Officer and each of the
other executive officers named in the Summary Compensation Table are currently
made by the Compensation Committee of the Board of Directors. The Compensation
Committee consists of Messrs. Jack A. Smith (Chairman), Rodney L.
-12-
<PAGE>
Goldstein and Norman J. Patinkin. Each member of the Compensation Committee is a
non-employee director who has not previously been an officer or employee of the
Company.
Executive compensation consists of both annual and long-term compensation.
Annual compensation consists of a base salary and bonus. Long-term compensation
is generally provided through the 1995 Executive ISO Plan, the 1995 Incentive
Stock Option Plan (the "1995 ISO Plan"), the 1996 Plan and the 1997 Plan.
The Compensation Committee's approach to annual base salary is to offer
competitive salaries in comparison with market practices. The base salary of
each officer is set at a level considered to be appropriate in the judgment of
the Compensation Committee based on an assessment of the particular
responsibilities and performance of such officer taking into account the
performance of the Company, other comparable companies, the retail jewelry
industry, the economy in general and such other factors as the Compensation
Committee may deem relevant. The comparable companies considered by the
Compensation Committee may include companies included in the peer group index
discussed below and/or other companies in the sole discretion of the
Compensation Committee. No specific measures of Company performance or other
factors are considered determinative in the base salary decisions of the
Compensation Committee. Instead, substantial judgment is used and all of the
facts and circumstances are taken into consideration by the Compensation
Committee in its executive compensation decisions.
The Compensation Committee did not make salary adjustments to the base
salary of the Chairman, President and Chief Executive Officer of the Company
during fiscal 1996. The Chairman, President and Chief Executive Officer received
a performance bonus under the Company's Management Bonus Plan and a car
allowance during such time.
In addition to base salary, the Chief Executive Officer and each of the
other executive officers named in the Summary Compensation Table above are
eligible to participate in the Company's Management Bonus Plan. Under this bonus
program each executive officer is entitled to receive a bonus based on specified
levels of earnings per share of Common Stock. During fiscal 1996, the bonuses
were based on specified levels of earnings before interest and taxes. The fiscal
1996 bonuses approved by the Compensation Committee for the Chief Executive
Officer and the other named executive officers are reported above under "Summary
Compensation Table."
The executive officers are eligible to participate in the 1996 Plan and the
1997 Plan. Each of Hugh M. Patinkin, John R. Desjardins and Matthew M. Patinkin
are eligible to participate in the Company's 1995 Executive ISO Plan and Lynn D.
Eisenheim is eligible to participate in the Company's 1995 ISO Plan. Each of the
1995 Executive ISO Plan, the 1995 ISO Plan, the 1996 Plan and the 1997 Plan is
administered by the Compensation Committee. Subject to certain restrictions the
Chief Executive Officer of the Company also has the power to grant options under
the 1995 ISO Plan, the 1996 Plan and the 1997 Plan. Subject to the terms of such
plans, the Compensation Committee (and the Chief Executive Officer with respect
to non-executive officers) is authorized to select eligible directors, officers
and other key employees for participation in the plans and to determine the
number of shares of Common Stock subject to the awards granted thereunder, the
exercise price, if any, the time and conditions of exercise, and all other terms
and conditions of such awards. The purposes of such plans are to align the
interests of the Company's stockholders and the recipients of grants under such
plans by increasing the proprietary interest of such recipients in the Company's
growth and success and to advance the interests of the Company by attracting and
retaining officers and other key employees. The terms and the size of the option
grants to each executive officer will vary from individual to individual in the
discretion of the Compensation Committee. No specific factors are considered
determinative in the grants of options to executive officers by the Compensation
Committee. Instead, all of the facts and circumstances are
-13-
<PAGE>
taken into consideration by the Compensation Committee in its executive
compensation decisions. Grants of options are based on the judgment of the
members of the Compensation Committee considering the total mix of information.
In connection with the Company's Initial Public Offering, the Compensation
Committee granted options to purchase an aggregate of 684,540 shares of Common
Stock to the executive officers named in the Summary Compensation Table. See
"Option Grants in Fiscal 1996" above. Each of the options has an exercise price
equal to the Initial Public Offering price of $14.00 per share, has a ten-year
term and will become exercisable with respect to 25% of the shares of Common
Stock subject to the option on each of the first four anniversaries of the
option's date of grant.
Section 162(m) of the Code. Section 162(m) of the Code generally limits to
$1 million the amount that a publicly held corporation is allowed each year to
deduct for the compensation paid to each of the corporation's chief executive
officer and the corporation's four most highly compensated officers other than
the chief executive officer, subject to certain exceptions. One such exception
is "qualified performance-based" compensation. Compensation attributable to a
stock option or a stock appreciation right is "qualified performance-based
compensation" if all of the following conditions are satisfied: (i) the grant or
award is made by a compensation committee consisting solely of two or more
"outside directors;" (ii) the plan under which the option or right is granted
states the maximum number of shares with respect to which options or rights may
be granted during a specified period to any individual; (iii) under the terms of
the option or right, the amount of compensation the employee could receive is
based solely upon an increase in the value of the stock after the date of grant
or award; and (iv) the material terms of the plan under which the option or
right is granted are disclosed to the publicly held corporation's stockholders
and approved by them before any compensation under the plan is paid. The
Compensation Committee consists solely of "outside directors," as defined for
purposes of Section 162(m) of the Code. The Company is seeking stockholder
approval of the 1997 Plan at the Annual Meeting so that future stock options and
SARs granted under the 1997 Plan will qualify as performance-based compensation
within the meaning of Section 162(m) of the Code. Due to these and other
reasons, the Company does not believe that the $1 million deduction limitation
should have any effect on the Company in the near future. If the $1 million
deduction limitation is expected to have any effect on the Company in the
future, the Company will consider ways to maximize the deductibility of
executive compensation, while retaining the discretion the Company deems
necessary to compensate executive officers in a manner commensurate with
performance and the competitive environment for executive talent.
By the Compensation Committee of the Board of Directors: Jack A. Smith
(Chairman), Rodney L. Goldstein and Norman J. Patinkin.
Performance Graph
The rules of the Securities and Exchange Commission ("SEC") require each
public company to include a performance graph comparing the cumulative total
stockholder return on such company's common stock for the five preceding fiscal
years, or such shorter period as the registrant's class of securities has been
registered with the SEC, with the cumulative total returns of a broad equity
market index and a peer group or similar index. The Common Stock began trading
on the Nasdaq Stock Market under the symbol "MBJI" on May 2, 1996. Accordingly,
the performance graph included in this Proxy Statement shows the period from May
2, 1996 through January 31, 1997.
The following chart graphs the performance of the cumulative total return
to stockholders (stock price appreciation plus dividends) between May 2, 1996
and January 31, 1997 in comparison to The Nasdaq Composite Index and an index
(the "Jewelry Stores Peer Group Index") comprised of securities of retail
jewelry stores traded on The Nasdaq Stock Market, The New York Stock Exchange
and The American Stock Exchange.
-14-
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
Among Marks Bros. Jewelers, Inc.,
The Nasdaq Composite Index and The Jewelry Stores Peer Group Index
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
5/02/96 7/31/96 10/31/96 1/31/97
------- ------- -------- -------
Marks Bros. Jewelers, Inc. ............. $100 $ 98 $111 $ 51
The Nasdaq Composite Index ............. $100 $101 $103 $117
The Jewelry Stores Peer Group Index .... $100 $ 94 $102 $ 93
Assumes $100 invested on May 2, 1996 in Marks Bros. Jewelers, Inc. Common
Stock, The Nasdaq Composite Index and The Jewelry Stores Peer Group Index.
Cumulative total return assumes reinvestment of dividends.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 15, 1997, by (i) each person
who is known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii) each of the
executive officers named in the Summary Compensation Table and (iv) all
directors and executive officers of the Company as a group.
Amount of
Beneficial Percent
Name of Beneficial Owner(1) Ownership of Class(2)
--------------------------- --------- -----------
Frontenac Venture V Limited Partnership(3)
135 S. LaSalle Street
Chicago, IL 60603 ............................. 712,247 7.1%
The TCW Group, Inc. and its affiliates(4)
865 South Figueroa Street
Los Angeles, CA 90017 .......................... 674,400 6.7%
Putnam Investments, Inc.(5)
One Post Office Square
Boston, MA 02109 ............................... 668,810 6.6%
Hugh M. Patinkin* (6) .......................... 780,794 7.7%
Matthew M. Patinkin * (7) ...................... 460,289 4.5%
John R. Desjardins* (8) ........................ 290,789 2.9%
Lynn D. Eisenheim* (9) ......................... 57,819 **
Rodney L. Goldstein + (3) ...................... 715,247 7.1%
-15-
<PAGE>
Amount of
Beneficial Percent
Name of Beneficial Owner(1) Ownership of Class(2)
--------------------------- --------- -----------
Jack A. Smith + ................................ -- --
Norman J. Patinkin (10) ........................ 3,333 **
Daniel H. Levy + ............................... -- --
U.S. Trust Company of California, N.A.,
as trustee for the ESOP Trust,
1300 Eye Street, N.W., Suite 1080 East
Washington, D.C. 20005 (11) .................. 569,712 5.7%
All executive officers and directors
as a group (8 persons) ....................... 2,271,820 22.0%
- ----------
* The mailing address of each of these individuals is c/o the Company, 155
North Wacker Drive, Suite 500, Chicago, Illinois 60606.
+ The mailing address for Mr. Goldstein is c/o Frontenac Company, 135 S.
LaSalle Street, Chicago, IL 60603. The mailing address for Mr. Smith is c/o
The Sports Authority 3383 North State Road 7, Ft. Lauderdale, FL 33319. The
mailing address for Mr. Levy is 3332 Sabal Cove Lane, Long Boat Key, FL
34228.
** Less than 1%.
(1) Except as set forth in the footnotes to this table, the persons named in
the table above have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
(2) Applicable percentage of ownership is based on 10,064,443 shares of Common
Stock outstanding on April 15, 1997. Where indicated in the footnotes to
this table, also includes Common Stock issuable pursuant to stock options
exercisable within 60 days of the filing of this Proxy Statement.
(3) Rodney L. Goldstein is a general partner of Frontenac Company, which is the
general partner of Frontenac Venture V Limited Partnership, and
accordingly, may be attributed beneficial ownership of the shares owned by
Frontenac Venture V Limited Partnership. Mr. Goldstein disclaims beneficial
ownership of such 712,247 shares beyond his ownership interests in
Frontenac Company. Mr. Goldstein serves as Director of the Company as
nominee of Frontenac Venture V Limited Partnership.
(4) Based solely on information contained on a Schedule 13G, dated February 12,
1997, filed with the SEC. Trust Company of the West, TCW Asset Management
Company and TCW Funds Management, Inc., affiliates of The TCW Group, Inc.,
have sole voting and investment power with respect to an aggregate of
674,400 shares of Common Stock of the Company. The TCW Group, Inc. and its
affiliates disclaim beneficial ownership of these shares.
(5) Based solely on information contained on a Schedule 13G, dated January 30,
1997, filed with the SEC. Putnam Investment Management, Inc., a
wholly-owned subsidiary of Putnam Investments, Inc., serves as an
investment adviser to the Putnam family of mutual funds with shared
investment power (with the mutual funds' trustees) with respect to 379,700
shares of the Company's Common Stock held by the mutual funds. The mutual
funds' trustees have sole voting power over these shares. The Putnam
Advisory Company, Inc., a wholly-owned subsidiary of Putnam Investments,
Inc., serves as an investment adviser to certain institutional clients with
shared investment power (with the institutional investors) with respect to
289,110 shares of the Company's Common Stock held by the institutional
investors. The Putnam Advisory Company, Inc. shares voting power with the
institutional investors with respect to 238,210 of these shares and the
institutional investors have sole voting power over the remaining 50,900
shares. Putnam Investments, Inc. disclaims beneficial ownership of all of
the shares of Common Stock held by its wholly-owned subsidiaries. Putnam
Investments, Inc. is a wholly-owned subsidiary of Marsh & McLennan
Companies, Inc. Marsh & McLennan Companies, Inc. disclaims beneficial
ownership of any shares of Common Stock of the Company.
-16-
<PAGE>
(6) Includes 97,745 shares of Common Stock issuable pursuant to presently
exercisable stock options. Includes 212,035 shares beneficially owned by
Hugh M. Patinkin, which shares are held by Sheila C. Patinkin and Robert
Bergman, as Trustees of the Hugh M. Patinkin 1994 Family Trust U/A/D
11/18/94. Sheila C. Patinkin and Robert Bergman have shared investment
power with respect to such shares. Includes 23,376 shares held by Hugh M.
Patinkin and Sheila C. Patinkin, as Trustees of various trusts for the
benefit of their children. Includes 11,120 shares held by Hugh M. Patinkin,
Sheila C. Patinkin and Harold Patinkin, as Trustees of various trusts for
the benefit of the children of Hugh M. Patinkin and Sheila C. Patinkin, all
of which such shares are subject to shared voting and investment power by
Hugh M. Patinkin, Sheila C. Patinkin and Harold Patinkin. Includes 36,451
shares held by Hugh M. Patinkin, Mark A. Patinkin and Matthew M. Patinkin,
as Trustees of the Patinkin 1994 Grandchildren's Trust U/A/D 11/18/94, with
respect to which shares Hugh M. Patinkin, Mark A. Patinkin and Matthew M.
Patinkin share voting and investment power.
(7) Includes 58,175 shares of Common Stock issuable pursuant to presently
exercisable stock options. Includes 119,835 shares beneficially owned by
Matthew M. Patinkin, which shares are held by Robin J. Patinkin and Debra
Soffer, as Trustees of the Matthew M. Patinkin 1994 Family Trust U/A/D
12/19/94. Robin J. Patinkin and Debra Soffer have shared investment power
with respect to such shares. Includes 16,646 shares held by Matthew M.
Patinkin and Robin J. Patinkin, as Trustees of various trusts for the
benefit of their children. Includes 8,854 shares held by Robin J. Patinkin,
as Trustee of various trusts for the benefit of the children of Matthew M.
Patinkin and Robin J. Patinkin, with respect to which shares Matthew M.
Patinkin disclaims beneficial ownership because Robin J. Patinkin has sole
voting and investment power with respect to such shares. Includes 36,451
shares held by Matthew M. Patinkin, Hugh M. Patinkin and Mark A. Patinkin,
as Trustees of the Patinkin 1994 Grandchildren's Trust U/A/D 11/18/94, with
respect to which shares Matthew M. Patinkin, Hugh M. Patinkin and Mark A.
Patinkin share voting power.
(8) Includes 52,429 shares of Common Stock issuable pursuant to presently
exercisable stock options. Includes 24,832 shares beneficially owned by
John R. Desjardins, which shares are held by Cheryl Desjardins and Stephen
Kendig, as Trustees of the John R. Desjardins 1995 Family Trust U/A/D
12/28/95. Cheryl Desjardins and Stephen Kendig have shared investment power
with respect to such shares. Shares beneficially owned by Mr. Desjardins
include shares allocated to his account in the ESOP(8,293 shares), as to
which he shares voting power with the ESOP. The ESOP has sole investment
power with respect to such shares.
(9) Includes 24,586 shares of Common Stock issuable pursuant to presently
exercisable stock options. Shares beneficially owned by Mr. Eisenheim
include shares allocated to his account in the ESOP (2,233 shares) as to
which he shares voting power with the ESOP. The ESOP has sole investment
power with respect to such shares.
(10) Includes 3,333 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(11) The participants in the ESOP have shared voting power with respect to the
shares held by the ESOP.
Section 16 Reports
Section 16(a) of the Exchange Act and the rules and regulations thereunder
require the Company's directors and executive officers and persons who are
deemed to own more than ten percent of the Common Stock (collectively, the
"Reporting Persons"), to file certain reports ("Section 16 Reports") with the
SEC with respect to their beneficial ownership of Common Stock. The Reporting
Persons are also required to furnish the Company with copies of all Section 16
Reports they file.
Based solely on a review of the forms it has received and on written
representations from certain Reporting Persons that no such forms were required
for them, the Company believes that during fiscal 1996 all Section 16 filing
requirements applicable to its directors, executive officers and greater than
10% beneficial owners were complied with by such persons except with respect to
the following: Mr. N. Patinkin inadvertently failed to timely file his Form 3
Initial Statement of Beneficial Ownership of Securities. Further, due to
clerical and administrative difficulties, Mr. Desjardins failed to timely file
the exercise of options to purchase shares of Common Stock of the Company on
Form 4 and Mr. M. Patinkin failed to timely file the sale of shares of Common
Stock of the Company on Form 4.
-17-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has from time to time purchased some jewelry merchandise from
MBM Co., an entity owned by a brother of Messrs. Hugh and Matthew Patinkin. The
Company purchased $57,000 worth of merchandise from MBM Co. during the fiscal
year ended January 31, 1997. The Company believes that the prices paid in these
purchases were as favorable to the Company as those generally available from
third parties.
The Company provides certain office services to Double P Corp. ("Double P")
and Clark Foods Corp., which own and operate primarily mall-based snack food
stores, and in which Messrs. H. Patinkin, Desjardins and M. Patinkin own a
majority equity interest. For these services, Double P pays the Company $300 per
month. Mr. H. Patinkin spends a limited amount of time providing services to
Double P and Clark Foods Corp. In two cases the Company and Double P have
negotiated jointly with a landlord with respect to spaces offered by a landlord
and then divided and separately leased portions of the space offered. Since the
Company's Initial Public Offering, the Company's policy has required that the
terms of any such leases must be approved by a majority of the Company's outside
directors.
In 1988, the Company established the Employee Stock Ownership Trust (the
"ESOP") to acquire from certain stockholders shares of the Company's Class B
Common Stock for the benefit of employees. The ESOP subsequently borrowed $70
million (the "ESOP Debt") from the Company for the purpose of acquiring 27,000
shares of Class B Common Stock (the "Class B Shares") from such stockholders.
The group of stockholders from whom the ESOP acquired shares included Hugh M.
Patinkin and Matthew M. Patinkin, who are affiliates of the Company. The vast
majority of the proceeds from such sale were paid to persons who are not
currently affiliates of the Company.
Concurrently with the consummation of the Company's Initial Public Offering
and the Recapitalization in May 1996, (i) the ESOP transferred to the Company
8,206 shares of Class B Common Stock in exchange for the elimination of the ESOP
Debt totaling approximately $33 million at January 31, 1996, (ii) the ESOP
consented to the cancellation of the dividend preference ($17.1 million) with
respect to the shares of Class B Common Stock allocated to the accounts of ESOP
participants in exchange for the transfer from the Company of 216,263 shares of
Common Stock, (iii) each share of Class B Common Stock owned by the ESOP was
exchanged for approximately 35.4 shares of Common Stock, (iv) all shares of
Common Stock held by the ESOP were allocated to each individual participant's
accounts, (v) the Company obligations to make contributions to the ESOP were
eliminated, and (vi) the Company's obligation to purchase shares of Common Stock
distributed by the ESOP to participants was eliminated for so long as the shares
of Common Stock remain actively traded on a national quotation service or a
national stock exchange. After giving effect to the restructuring of the ESOP
and the sale of Common Stock by the ESOP in a secondary offering, 8,293 shares
and 2,233 shares of Common Stock were allocated to the ESOP accounts of John R.
Desjardins and Lynn D. Eisenheim, respectively, who are the only directors or
executive officers who participate in the ESOP.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Coopers & Lybrand L.L.P. who served as the Company's
independent public accountants for the last fiscal year, are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
and to respond to appropriate questions raised by stockholders at the Annual
Meeting or submitted in writing prior thereto.
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STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In order to be considered for inclusion in the Company's proxy materials
for the 1998 Annual Meeting of Stockholders, any stockholder proposal must be
addressed to Marks Bros. Jewelers, Inc., 155 North Wacker Drive, Suite 500,
Chicago, Illinois 60606, Attention: Secretary, and must be received no later
than January 31, 1998.
EXPENSES OF SOLICITATION
Your proxy is solicited by the Board of Directors and its agents and the
cost of solicitation will be paid by the Company. Officers, directors and
regular employees of the Company, acting on its behalf, may also solicit proxies
by telephone, facsimile transmission or personal interview. The Company will, at
its expense, request brokers and other custodians, nominees and fiduciaries to
forward proxy soliciting material to the beneficial owners of shares of record
by such persons. The Company has retained Corporate Investor Communications,
Inc. to aid in the solicitation of proxies for a fee of $3,000 plus reasonable
out-of-pocket expenses.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JANUARY 31, 1997, INCLUDING THE FINANCIAL STATEMENTS
AND THE SCHEDULES THERETO, UPON THE WRITTEN REQUEST OF ANY STOCKHOLDER AS OF THE
RECORD DATE, AND WILL PROVIDE COPIES OF THE EXHIBITS TO THE REPORT UPON PAYMENT
OF A REASONABLE FEE THAT WILL NOT EXCEED THE COMPANY'S REASONABLE EXPENSES
INCURRED IN CONNECTION THEREWITH. REQUESTS FOR SUCH MATERIALS SHOULD BE DIRECTED
TO MARKS BROS. JEWELERS, INC., 155 NORTH WACKER DRIVE, SUITE 500, CHICAGO,
ILLINOIS 60606, TELEPHONE (312) 782-6800, ATTENTION: JOHN R. DESJARDINS.
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OTHER BUSINESS
It is not anticipated that any matter will be considered by the
stockholders other than those set forth above, but if other matters are properly
brought before the Annual Meeting, the persons named in the proxy will vote in
accordance with their best judgment.
By order of the Board of Directors,
/s/ HUGH M. PATINKIN
--------------------------
HUGH M. PATINKIN
Chairman, President and
Chief Executive Officer
ALL STOCKHOLDERS ARE URGED TO SIGN, DATE
AND MAIL THEIR PROXIES PROMPTLY.
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ANNEX A
MARKS BROS. JEWELERS, INC.
1997 LONG-TERM INCENTIVE PLAN
I. INTRODUCTION
1.1 Purposes. The purposes of the 1997 Long-Term Incentive Plan (the
"Plan") of Marks Bros. Jewelers, Inc. (the "Company"), and its subsidiaries from
time to time (individually a "Subsidiary" and collectively the "Subsidiaries"),
are (a) to align the interests of the Company's stockholders and the recipients
of awards under this Plan by increasing the proprietary interest of such
recipients in the Company's growth and success, (b) to advance the interests of
the Company by attracting and retaining officers and other key employees, and
well-qualified persons who are not officers or employees of the Company
("non-employee directors") for service as directors of the Company and (c) to
motivate such employees and non-employee directors to act in the long-term best
interests of the Company's stockholders. For purposes of this Plan, references
to employment by the Company shall also mean employment by a Subsidiary.
1.2 Certain Definitions.
"Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2, as in effect on the effective date of this Plan, under
the Exchange Act; provided, however, that no director or officer of the Company
shall be deemed an Affiliate or Associate of any other director or officer of
the Company solely as a result of his or her being a director or officer of the
Company.
"Agreement" shall mean the written agreement evidencing an award hereunder
between the Company and the recipient of such award.
"Beneficial Owner" (including the terms "Beneficially Own" and "Beneficial
Ownership"), when used with respect to any Person, shall be deemed to include
any securities which:
(a) such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly (determined as provided in Rule 13d-3,
as in effect on the effective date of this Plan, under the Exchange Act);
(b) such Person or any of such Person's Affiliates or Associates, directly
or indirectly, has:
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time or upon the satisfaction of
any conditions, or both) pursuant to any written or oral agreement,
arrangement or understanding (other than customary agreements with and
among underwriters and selling group members with respect to a bona fide
public offering of securities), upon the exercise of any options, warrants,
rights or conversion or exchange privileges or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
Beneficially Own securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any
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of such Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange; or
(ii) the right to vote pursuant to any written or oral agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to Beneficially Own, any security
otherwise subject to this item (ii) if such agreement, arrangement or
understanding to vote (1) arises solely from a revocable proxy or consent
given to such Person or any of such Person's Affiliates or Associates in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations under the Exchange
Act and (2) is not also then reportable by such Person on Schedule 13D (or
any comparable or successor report then in effect) under the Exchange Act;
or
(iii) the right to dispose of pursuant to any written or oral
agreement, arrangement or understanding (other than customary agreements
with and among underwriters and selling group members with respect to a
bona fide public offering of securities); or
(c) are beneficially owned, directly or indirectly, by any other Person
with which such Person or any of such Person's Affiliates or Associates has any
written or oral agreement, arrangement or understanding (other than customary
agreements with and among underwriters and selling group members with respect to
a bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to item (ii)
of subparagraph (b) of the first paragraph of this definition) or disposing of
any securities of the Company.
Notwithstanding the first paragraph of this definition, no director or
officer of the Company shall be deemed to be the "Beneficial Owner" of, or to
"Beneficially Own," shares of Common Stock or other securities of the Company
beneficially owned by any other director or officer of the Company solely as a
result of his or her being a director or officer of the Company.
"Board" shall mean the Board of Directors of the Company.
"Bonus Stock" shall mean shares of Common Stock which are not subject to a
Restriction Period or Performance Measures.
"Bonus Stock Award" shall mean an award of Bonus Stock under this Plan.
"Cause" shall mean commission of a felony involving moral turpitude or any
material breach of any statutory or common law duty to the Company or a
Subsidiary involving wilful malfeasance.
"Change in Control" shall have the meaning set forth in Section 6.8(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Committee designated by the Board, consisting of
two or more members of the Board, each of whom shall be (a) a "Non-Employee
Director" within the meaning of Rule 16b-3 under the Exchange Act and (b) an
"outside director" within the meaning of Section 162(m) of the Code, subject to
any transition rules applicable to the definition of outside director.
"Common Stock" shall mean the common stock, $.001 par value, of the
Company.
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"Company" has the meaning specified in Section 1.1.
"Directors Options" shall have the meaning set forth in Section 5.1.
"Disability" shall mean the inability for a continuous period of at least
six months of the holder of an award to perform substantially such holder's
duties and responsibilities, as determined solely by the Committee.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exempt Person" shall mean each of Hugh M. Patinkin, John R. Desjardins,
Matthew M. Patinkin and each Affiliate thereof.
"Fair Market Value" shall mean the average of the high and low transaction
prices of a share of Common Stock as reported in the National Association of
Securities Dealers Automated Quotation National Market System on the date as of
which such value is being determined, or, if the Common Stock is listed on a
national securities exchange, the average of the high and low transaction prices
of a share of Common Stock on the principal national stock exchange on which the
Common Stock is traded on the date as of which such value is being determined,
or, if there shall be no reported transactions for such date, on the next
preceding date for which transactions were reported; provided, however, that if
Fair Market Value for any date cannot be so determined, Fair Market Value shall
be determined by the Committee by whatever means or method as the Committee, in
the good faith exercise of its discretion, shall at such time deem appropriate.
"Free-Standing SAR" shall mean an SAR which is not issued in tandem with,
or by reference to, an option, which entitles the holder thereof to receive,
upon exercise, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of such SARs which are exercised.
"Incentive Stock Option" shall mean an option to purchase shares of Common
Stock that meets the requirements of Section 422 of the Code, or any successor
provision, which is intended by the Committee to constitute an Incentive Stock
Option.
"Incumbent Board" shall have the meaning set forth in Section 6.8(b)(ii)
hereof.
"Mature Shares" shall mean shares of Common Stock for which the holder
thereof has good title, free and clear of all liens and encumbrances and which
such holder either (a) has held for at least six months or (b) has purchased on
the open market.
"Non-Employee Director" shall mean any director of the Company who is not
an officer or employee of the Company or any Subsidiary (except in the
definition of Committee, in which case "Non-Employee Director" shall have the
meaning set forth in Rule 16b-3 under the Exchange Act).
"Non-Statutory Stock Option" shall mean a stock option which is not an
Incentive Stock Option.
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"Performance Measures" shall mean the criteria and objectives, established
by the Committee, which shall be satisfied or met (a) as a condition to the
exercisability of all or a portion of an option or SAR or (b) during the
applicable Restriction Period or Performance Period as a condition to the
holder's receipt, in the case of a Restricted Stock Award, of the shares of
Common Stock subject to such award, or, in the case of a Performance Share
Award, of payment with respect to such award. Such criteria and objectives may
include one or more of the following: the attainment by a share of Common Stock
of a specified Fair Market Value for a specified period of time, earnings per
share, return to stockholders (including dividends), return on equity, earnings
of the Company, revenues, market share, cash flows or cost reduction goals, or
any combination of the foregoing. If the Committee desires that compensation
payable pursuant to any award subject to Performance Measures be "qualified
performance-based compensation" within the meaning of section 162(m) of the
Code, the Performance Measures shall be established by the Committee no later
than the end of the first quarter of the Performance Period or Restriction
Period, as applicable (or such other time designated by the Internal Revenue
Service).
"Performance Period" shall mean any period designated by the Committee
during which the Performance Measures applicable to a Performance Share Award
shall be measured.
"Performance Share" shall mean a right, contingent upon the attainment of
specified Performance Measures within a specified Performance Period, to receive
one share of Common Stock, which may be Restricted Stock, or in lieu thereof,
the Fair Market Value of such Performance Share in cash.
"Performance Share Award" shall mean an award of Performance Shares under
this Plan.
"Permanent and Total Disability" shall have the meaning set forth in
Section 22(e)(3) of the Code or any successor thereto.
"Person" shall mean any individual, firm, corporation, partnership or other
entity, and shall include any successor (by merger or otherwise) of any of the
forgoing.
"Restricted Stock" shall mean shares of Common Stock which are subject to a
Restriction Period.
"Restricted Stock Award" shall mean an award of Restricted Stock under this
Plan.
"Restriction Period" shall mean any period designated by the Committee
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.
"SAR" shall mean a stock appreciation right which may be a Free-Standing
SAR or a Tandem SAR.
"Stock Award" shall mean a Restricted Stock Award or a Bonus Stock Award.
"Tandem SAR" shall mean an SAR which is granted in tandem with, or by
reference to, an option (including a Non-Statutory Stock Option granted prior to
the date of grant of the SAR), which entitles the holder thereof to receive,
upon exercise of such SAR and surrender for cancellation of all or a portion of
such option, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date
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of exercise over the base price of such SAR, multiplied by the number of shares
of Common Stock subject to such option, or portion thereof, which is
surrendered.
"Tax Date" shall have the meaning set forth in Section 6.5.
"Ten Percent Holder" shall have the meaning set forth in Section 2.1(a).
1.3 Administration. This Plan shall be administered by the Committee.
Subject to Section 6.1, any one or a combination of the following awards may be
made under this Plan to eligible persons: (a) options to purchase shares of
Common Stock in the form of Incentive Stock Options or Non-Statutory Stock
Options, (b) in the form of Tandem SARs or Free-Standing SARs, (c) Stock Awards
in the form of Restricted Stock or Bonus Stock and (d) Performance Shares. The
Committee shall, subject to the terms of this Plan, select eligible persons for
participation in this Plan and determine the form, amount and timing of each
award to such persons and, if applicable, the number of shares of Common Stock,
the number of SARs and the number of Performance Shares subject to such an
award, the exercise price or base price associated with the award, the time and
conditions of exercise or settlement of the award and all other terms and
conditions of the award, including, without limitation, the form of the
Agreement evidencing the award. The Committee shall, subject to the terms of
this Plan, interpret this Plan and the application thereof, establish rules and
regulations it deems necessary or desirable for the administration of this Plan
and may impose, incidental to the grant of an award, conditions with respect to
the award, such as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions shall be conclusive and
binding on all parties.
The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or other executive officer of the Company as the
Committee deems appropriate; provided, however, that the Committee may not
delegate its power and authority with regard to (a) the grant of an award under
this Plan to any person who is a "covered employee" within the meaning of
Section 162(m) of the Code or who, in the Committee's judgment, is likely to be
a covered employee at any time during the period an award hereunder to such
employee would be outstanding or (b) the selection for participation in this
Plan of an officer or other person subject to Section 16 of the Exchange Act or
decisions concerning the timing, pricing or amount of an award to such an
officer or other person.
No member of the Board of Directors or Committee, and neither the Chief
Executive Officer nor any other executive officer to whom the Committee
delegates any of its power and authority hereunder, shall be liable for any act,
omission, interpretation, construction or determination made in connection with
this Plan in good faith, and the members of the Board of Directors and the
Committee and the President and Chief Executive Officer or other executive
officer shall be entitled to indemnification and reimbursement by the Company in
respect of any claim, loss, damage or expense (including attorneys' fees)
arising therefrom to the full extent permitted by law, except as otherwise may
be provided in the Company's Certificate of Incorporation and/or By-laws, as the
same may be amended or restated from time to time, and under any directors' and
officers' liability insurance that may be in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (a) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (b) acts approved in
writing by a majority of the members of the Committee without a meeting.
Notwithstanding anything to the contrary herein, any grant of awards to a
Non-Employee Director (not including awards under Article V) shall require the
approval of the Board.
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1.4 Eligibility. Participants in this Plan shall consist of such directors,
officers or other key employees of the Company and its Subsidiaries as the
Committee, in its sole discretion, may select from time to time. The Committee's
selection of a person to participate in this Plan at any time shall not require
the Committee to select such person to participate in this Plan at any other
time. Non-Employee Directors shall also be eligible to participate in this Plan
in accordance with Article V.
1.5 Shares Available. Subject to adjustment as provided in Sections 6.7 and
6.8, 400,000 shares of Common Stock shall be available under this Plan, reduced
by the sum of the aggregate number of shares of Common Stock (a) that are issued
upon the grant of a Stock Award and (b) which become subject to outstanding
options, including Directors' Options, outstanding Free-Standing SARs and
outstanding Performance Shares. To the extent that shares of Common Stock
subject to an outstanding option (other than in connection with the exercise of
a Tandem SAR), Free-Standing SAR or Performance Share are not issued or
delivered by reason of the expiration, termination, cancellation or forfeiture
of such award or by reason of the delivery or withholding of shares of Common
Stock to pay all or a portion of the exercise price of an award, if any, or to
satisfy all or a portion of the tax withholding obligations relating to an
award, then such shares of Common Stock shall again be available under this
Plan.
Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which options or SARs, Stock Awards or Performance Share Awards, or a
combination thereof may be granted during any calendar year to any person shall
be 200,000 subject to adjustment as provided in Section 6.7.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 Stock Options. The Committee may, in its discretion, grant options to
purchase shares of Common Stock to such eligible persons as may be selected by
the Committee. Each option, or portion thereof, that is not an Incentive Stock
Option, shall be a Non-Statutory Stock Option. Each Incentive Stock Option shall
be granted within ten years of the effective date of this Plan. To the extent
that the aggregate Fair Market Value (determined as of the date of grant) of
shares of Common Stock with respect to which options designated as Incentive
Stock Options are exercisable for the first time by a participant during any
calendar year (under this Plan or any other plan of the Company, or any parent
or Subsidiary) exceeds the amount (currently $100,000) established by the Code,
such options shall constitute Non-Statutory Stock Options.
Options shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. To the extent required, the number
of shares of Common Stock subject to an option shall be determined by the
Committee. The purchase price per share of Common Stock purchasable upon
exercise of the option shall be determined by the Committee; provided, however,
that the purchase price per share of Common Stock purchasable upon exercise of
an Option shall not be less than 100% of the Fair Market Value of a share of
Common Stock on the date of grant of such option; provided further, that if an
Incentive Stock Option shall be granted to any person who, at the time such
option is granted, owns capital stock possessing more than ten percent of the
total combined voting power of all classes of capital stock of the Company (or
of any parent or Subsidiary) (a "Ten Percent Holder"), the
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purchase price per share of Common Stock shall be the price (currently 110% of
Fair Market Value) required by the Code in order to constitute an Incentive
Stock Option.
(b) Option Period and Exercisability. The period during which an option may
be exercised shall be determined by the Committee; provided, however, that no
Incentive Stock Option shall be exercised later than ten years after its date of
grant; provided further, that if an Incentive Stock Option shall be granted to a
Ten Percent Holder, such option shall not be exercised later than five years
after its date of grant. The Committee may, in its discretion, establish
Performance Measures which shall be satisfied or met as a condition to the grant
of an option or to the exercisability of all or a portion of an option. The
Committee shall determine whether an option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any time. An
exercisable option, or portion thereof, may be exercised only with respect to
whole shares of Common Stock, except that if the remaining option then
exercisable is for less than a whole share, such remaining amount may be
exercised.
(c) Method of Exercise. An option may be exercised (i) by giving written
notice to the Company specifying the number of whole shares of Common Stock to
be purchased and accompanied by payment therefor in full (or arrangement made
for such payment to the Company's satisfaction) either (1) in cash, (2) by
delivery of Mature Shares having a Fair Market Value, determined as of the date
of exercise, equal to the aggregate purchase price payable by reason of such
exercise, (3) by authorizing the Company to withhold whole shares of Common
Stock which would otherwise be delivered upon exercise of the option having a
Fair Market Value, determined as of the date of exercise, equal to the aggregate
purchase price payable by reason of such exercise, (4) in cash by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (5) a combination of (1), (2) and (3), in each
case to the extent set forth in the Agreement relating to the option, (ii) if
applicable, by surrendering to the Company any Tandem SARs which are canceled by
reason of the exercise of the option and (iii) by executing such documents as
the Company may reasonably request. The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (2)-(5). Any fraction of a
share of Common Stock which would be required to pay such purchase price shall
be disregarded and the remaining amount due shall be paid in cash by the
optionee. No certificate representing Common Stock shall be delivered until the
full purchase price therefor has been paid.
(d) Additional Options. The Committee shall have the authority to include
in any Agreement relating to an option a provision entitling the optionee to an
additional option in the event such optionee exercises the option represented by
such option agreement, in whole or in part, by delivering previously owned whole
shares of Common Stock in payment of the purchase price in accordance with this
Plan and such Agreement. Any such additional option shall be for a number of
shares of Common Stock equal to the number of delivered shares, shall have a
purchase price determined by the Committee in accordance with this Plan, shall
be exercisable on the terms and subject to the conditions set forth in the
Agreement relating to such additional option.
2.2 Stock Appreciation Rights. The Committee may, in its discretion, grant
SARs to such eligible persons as may be selected by the Committee. The Agreement
relating to an SAR shall specify whether the SAR is a Tandem SAR or a
Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:
(a) Number of SARs and Base Price. The number of SARs subject to an award
shall be determined by the Committee. Any Tandem SAR related to an Incentive
Stock Option shall be granted at the
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same time that such Incentive Stock Option is granted. The base price of a
Tandem SAR shall be the purchase price per share of Common Stock of the related
option. The base price of a Free-Standing SAR shall be determined by the
Committee; provided, however, that such base price shall not be less than 100%
of the Fair Market Value of a share of Common Stock on the date of grant of such
SAR.
(b) Exercise Period and Exercisability. The Agreement relating to an award
of SARs shall specify whether such award may be settled in shares of Common
Stock (including shares of Restricted Stock) or cash or a combination thereof.
The period for the exercise of an SAR shall be determined by the Committee;
provided, however, that no Tandem SAR shall be exercised later than the
expiration, cancellation, forfeiture or other termination of the related option.
The Committee may, in its discretion, establish Performance Measures which shall
be satisfied or met as a condition to the exercisability of an SAR. The
Committee shall determine whether an SAR may be exercised in cumulative or
non-cumulative installments and in part or in full at any time. An exercisable
SAR, or portion thereof, may be exercised, in the case of a Tandem SAR, only
with respect to whole shares of Common Stock and, in the case of a Free-Standing
SAR, only with respect to a whole number of SARs. If an SAR is exercised for
shares of Restricted Stock, a certificate or certificates representing such
Restricted Stock shall be issued in accordance with Section 3.2(c) and the
holder of such Restricted Stock shall have such rights of a stockholder of the
Company as determined pursuant to Section 3.2(d). Prior to the exercise of an
SAR for shares of Common Stock, including Restricted Stock, the holder of such
SAR shall have no rights as a stockholder of the Company with respect to the
shares of Common Stock subject to such SAR.
(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving written
notice to the Company specifying the number of whole SARs which are being
exercised, (ii) by surrendering to the Company any options which are canceled by
reason of the exercise of the Tandem SAR and (iii) by executing such documents
as the Company may reasonably request. A Free-Standing SAR may be exercised (i)
by giving written notice to the Company specifying the whole number (or if the
remaining SAR then exercisable is for less then one whole share, such remaining
amount) of SARs which are being exercised and (ii) by executing such documents
as the Company may reasonably request.
2.3 Termination of Employment or Service with the Company.
(a) Disability. Subject to paragraph (f) below and Section 6.8, and unless
otherwise specified in the Agreement relating to an option or SAR, as the case
may be, if the employment or service with the Company of the holder of an option
or SAR terminates by reason of Disability, each option and SAR held by such
holder shall be exercisable only to the extent that such option or SAR, as the
case may be, is exercisable on the effective date of such holder's termination
of employment or service and may thereafter be exercised by such holder (or such
holder's legal representative or similar person) until and including the
earliest to occur of (i) the date which is three months (or such other period as
set forth in the Agreement relating to such option or SAR) after the effective
date of such holder's termination of employment or service and (ii) the
expiration date of the term of such option or SAR.
(b) Retirement. Subject to paragraph (f) below and Section 6.8, and unless
otherwise specified in the Agreement relating to an option or SAR, as the case
may be, if the employment or service with the Company of the holder of an option
or SAR terminates by reason of retirement on or after age 65 with the consent of
the Company, each option and SAR held by such holder shall be exercisable only
to the extent that such option or SAR, as the case may be, is exercisable on the
effective date of such holder's termination of employment or service and may
thereafter be exercised by such holder (or such holder's legal representative or
similar person) until and including the earliest to occur of (i) the date which
is six months (or such other
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period as set forth in the Agreement relating to such option or SAR) after the
effective date of such holder's termination of employment or service and (ii)
the expiration date of the term of such option or SAR.
(c) Death. Subject to paragraph (f) below and Section 6.8, and unless
otherwise specified in the Agreement relating to an option or SAR, as the case
may be, if the employment or service with the Company of the holder of an option
or SAR terminates by reason of death, each option and SAR held by such holder
shall be exercisable only to the extent that such option or SAR, as the case may
be, is exercisable on the date of such holder's death, and may thereafter be
exercised by such holder's executor, administrator, legal representative,
beneficiary or similar person, as the case may be, until and including the
earliest to occur of (i) the date which is one year (or such other period as set
forth in the Agreement relating to such option or SAR) after the date of death
and (ii) the expiration date of the term of such option or SAR.
(d) Other Termination. If the employment or service with the Company of the
holder of an option or SAR is terminated by the Company for Cause, each option
and SAR held by such holder shall terminate automatically on the effective date
of such holder's termination of employment or service.
Subject to paragraph (f) below and Section 6.8, and unless specified in the
Agreement relating to an option or SAR, as the case may be, if the employment or
service with the Company of the holder of an option or SAR terminates for any
reason other than Disability, retirement on or after age 65 with the consent of
the Company, death or Cause, each option and SAR held by such holder shall be
exercisable only to the extent that such option or SAR is exercisable on the
effective date of such holder's termination of employment or service and may
thereafter be exercised by such holder (or such holder's legal representative or
similar person) until and including the earliest to occur of (i) the date which
is three months (or such other period as set forth in the Agreement relating to
such option or SAR) after the effective date of such holder's termination of
employment or service and (ii) the expiration date of the term of such option or
SAR.
(e) Death Following Termination of Employment or Service. Subject to
paragraph (f) below and Section 6.8, and unless otherwise specified in the
Agreement relating to an option or SAR, as the case may be, if the holder of an
option or SAR dies during the three-month period following termination of
employment or service by reason of Disability, or if the holder of an option or
SAR dies during the three-month period following termination of employment or
service by reason of retirement on or after age 65 with the consent of the
Company, or if the holder of an option or SAR dies during the three-month period
following termination of employment or service for any reason other than
Disability or retirement on or after age 65 with the consent of the Company (or,
in each case, such other period as set forth in the Agreement relating to such
option or SAR), each option and SAR held by such holder shall be fully
exercisable and may thereafter be exercised by the holder's executor,
administrator, legal representative, beneficiary or similar person, as the case
may be, until and including the earliest to occur of (i) the date which is one
year (or such other period as set forth in the Agreement relating to such option
or SAR) after the date of death and (ii) the expiration date of the term of such
option or SAR.
(f) Termination of Employment or Service - Incentive Stock Options. Subject
to Section 6.8 and unless otherwise specified in the Agreement relating to the
option, if the employment or service with the Company of a holder of an
incentive stock option terminates by reason of Permanent and Total Disability
(as defined in Section 22(e)(3) of the Code), each incentive stock option held
by such optionee shall be exercisable only to the extent that such option is
exercisable on the effective date of such optionee's termination of employment
or service by reason of Permanent and Total Disability, and may thereafter be
exercised by such optionee (or such optionee's legal representative or similar
person) until and including the earliest to occur of (i) the date which is three
months (or such other period no longer than one year as set forth in the
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Agreement relating to such option) after the effective date of such optionee's
termination of employment or service by reason of Permanent and Total Disability
and (ii) the expiration date of the term of such option.
Subject to Section 6.8 and unless otherwise specified in the Agreement
relating to the option, if the employment or service with the Company of a
holder of an Incentive Stock Option terminates by reason of death, each
Incentive Stock Option held by such optionee shall be exercisable only to the
extent that such option is exercisable on the date of such optionee's death and
may thereafter be exercised by such optionee's executor, administrator, legal
representative, beneficiary or similar person until and including the earliest
to occur of (i) the date which is one year (or such shorter period as set forth
in the Agreement relating to such option)after the date of death and (ii) the
expiration date of the term of such option.
If the employment or service with the Company of the optionee of an
Incentive Stock Option is terminated by the Company for Cause, each Incentive
Stock Option held by such optionee shall terminate automatically on the
effective date of such optionee's termination of employment or service.
If the employment or service with the Company of a holder of an Incentive
Stock Option terminates for any reason other than Permanent and Total
Disability, death or Cause, each Incentive Stock Option held by such optionee
shall be exercisable only to the extent such option is exercisable on the
effective date of such optionee's termination of employment or service, and may
thereafter be exercised by such holder (or such holder's legal representative or
similar person) until and including the earliest to occur of (i) the date which
is three months after the effective date of such optionee's termination of
employment or service and (ii) the expiration date of the term of such option.
If the holder of an Incentive Stock Option dies during the three-month
period following termination of employment or service by reason of Permanent and
Total Disability (or such shorter period as set forth in the Agreement relating
to such option), or if the holder of an Incentive Stock Option dies during the
three-month period following termination of employment or service for any reason
other than Permanent and Total Disability, death or Cause, each Incentive Stock
Option held by such optionee shall be exercisable only to the extent such option
is exercisable on the date of the optionee's death and may thereafter be
exercised by the optionee's executor, administrator, legal representative,
beneficiary or similar person until and including the earliest to occur of (i)
the date which is one year (or such shorter period as set forth in the Agreement
relating to such option) after the date of death and (ii) the expiration date of
the term of such option.
III. STOCK AWARDS
3.1 Stock Awards. The Committee may, in its discretion, grant Stock Awards
to such eligible persons as may be selected by the Committee. Subject to
adjustment as provided in Sections 6.7 and 6.8 of this Plan, the aggregate
number of shares of Common Stock available under this Plan pursuant to all Stock
Awards shall not exceed 100,000 of the aggregate number of shares of Common
Stock available under this Plan. The Agreement relating to a Stock Award shall
specify whether the Stock Award is a Restricted Stock Award or Bonus Stock
Award.
3.2 Terms of Stock Awards. Stock Awards shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable.
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(a) Number of Shares and Other Terms. The number of shares of Common Stock
subject to a Restricted Stock Award or Bonus Stock Award and the Performance
Measures (if any) and Restriction Period applicable to a Restricted Stock Award
shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted Stock
Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if specified Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains continuously in the employment or service of
the Company during the specified Restricted Period and for the forfeiture of the
shares of Common Stock subject to such award (x) if specified Performance
Measures are not satisfied or met during the specified Restriction Period or (y)
if the holder of such award does not remain continuously in the employment or
service of the Company during the specified Restriction Period.
Bonus Stock Awards shall not be subject to any Performance Measures or
Restriction Periods.
(c) Share Certificates. During the Restriction Period, a certificate or
certificates representing a Restricted Stock Award shall be registered in the
holder's name and may bear a legend, in addition to any legend which may be
required pursuant to Section 6.6, indicating that the ownership of the shares of
Common Stock represented by such certificate is subject to the restrictions,
terms and conditions of this Plan and the Agreement relating to the Restricted
Stock Award. All such certificates shall be deposited with the Company, together
with stock powers or other instruments of assignment (including a power of
attorney), each endorsed in blank with a guarantee of signature if deemed
necessary or appropriate, which would permit transfer to the Company of all or a
portion of the shares of Common Stock subject to the Restricted Stock Award in
the event such award is forfeited in whole or in part. Upon termination of any
applicable Restriction Period (and the satisfaction or attainment of applicable
Performance Measures), or upon the grant of a Bonus Stock Award, in each case
subject to the Company's right to require payment of any taxes in accordance
with Section 6.5, a certificate or certificates evidencing ownership of the
requisite number of shares of Common Stock shall be delivered to the holder of
such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise set
forth in the Agreement relating to a Restricted Stock Award, and subject to the
terms and conditions of a Restricted Stock Award, the holder of such award shall
have all rights as a stockholder of the Company, including, but not limited to,
voting rights, the right to receive dividends and the right to participate in
any capital adjustment applicable to all holders of Common Stock; provided,
however, that a distribution with respect to shares of Common Stock, other than
a distribution in cash, shall be deposited with the Company and shall be subject
to the same restrictions as the shares of Common Stock with respect to which
such distribution was made.
(e) Awards to Certain Executive Officers. Notwithstanding any other
provision of this Article III, and only to the extent necessary to ensure the
deductibility of the award to the Company, the Fair Market Value of the number
of shares of Common Stock subject to a Stock Award granted to a "covered
employee" within the meaning of Section 162(m) of the Code shall not exceed
$2,000,000 (i) at the time of grant in the case of a Stock Award granted upon
the attainment of Performance Measures or (ii) in the case of a Restricted Stock
Award with Performance measures which shall be satisfied or met as a condition
to the holder's receipt of the shares of Common Stock subject to such award, on
the earlier of (x) the date on which the Performance Measures are satisfied or
met and (y) the date the holder makes an election under Section 83(b) of the
Code.
3.3 Termination of Employment or Service. Subject to Section 6.8 and unless
otherwise set forth in the Agreement relating to a Restricted Stock Award, if
the employment or service with the Company of the holder of such award
terminates, the portion of such award which is subject to a
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Restriction Period shall terminate as of the effective date of such holder's
termination of employment or service shall be forfeited and such portion shall
be canceled by the Company.
IV. PERFORMANCE SHARE AWARDS
4.1 Performance Share Awards. The Committee may, in its discretion, grant
Performance Share Awards to such eligible persons as may be selected by the
Committee.
4.2 Terms of Performance Share Awards. Performance Share Awards shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable.
(a) Number of Performance Shares and Performance Measures. The number of
Performance Shares subject to any award and the Performance Measures and
Performance Period applicable to such award shall be determined by the
Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance Share
Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award, if specified Performance Measures are satisfied or met during the
specified Performance Period, and for the forfeiture of such award, if specified
Performance Measures are not satisfied or met during the specified Performance
Period.
(c) Settlement of Vested Performance Share Awards. The Agreement relating
to a Performance Share Award (i) shall specify whether such award may be settled
in shares of Common Stock (including shares of Restricted Stock) or cash or a
combination thereof and (ii) may specify whether the holder thereof shall be
entitled to receive, on a current or deferred basis, dividend equivalents, and,
if determined by the Committee, interest on any deferred dividend equivalents,
with respect to the number of shares of Common Stock subject to such award. If a
Performance Share Award is settled in shares of Restricted Stock, a certificate
or certificates representing such Restricted Stock shall be issued in accordance
with Section 3.2(c) and the holder of such Restricted Stock shall have such
rights of a stockholder of the Company as determined pursuant to Section 3.2(d).
Prior to the settlement of a Performance Share Award in shares of Common Stock,
including Restricted Stock, the holder of such award shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject to
such award.
4.3 Termination of Employment or Service. Subject to Section 6.8 and unless
otherwise set forth in the Agreement relating to a Performance Share Award, if
the employment or service with the Company of the holder of such award
terminates, the portion of such award which is subject to a Performance Period
on the effective date of such holder's termination of employment or service
shall be forfeited and such portion shall be canceled by the Company.
V. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
5.1 Eligibility. Each Non-Employee Director shall be granted options to
purchase shares of Common Stock in accordance with this Article V (collectively
"Directors Options"). All options granted under this Article V shall constitute
Non-Statutory Stock Options.
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5.2 Grants of Stock Options. Each Non-Employee Director shall be granted
Non- Statutory Stock Options as follows:
(a) Time of Grant. On the date on which a person is first elected or begins
to serve as a Non-Employee Director (other than by reason of termination of
employment) he or she shall be granted an option to purchase 10,000 shares of
Common Stock at a purchase price per share equal to the Fair Market Value of a
share of Common Stock on the date of grant of such option; provided, however,
that no such grant will be made to the extent an automatic option grant is being
or has been made to such Non-Employee Director as of or with respect to such
date pursuant to another incentive compensation plan of the Company.
(b) Option Period and Exercisability. Except as otherwise provided herein,
each option granted under this Article V shall not be exercisable during the
first year following its date of grant. Thereafter, such option may be
exercised: (i) on or after the first anniversary of its date of grant, for up to
one-third of the shares of Common Stock subject to such option on its date of
grant, (ii) on or after the second anniversary of its date of grant, for up to
an additional one-third (two-thirds on a cumulative basis) of the shares of
Common Stock subject to such option on its date of grant, and (iii) on or after
the third anniversary of its date of grant, for up to the remaining one-third
(all shares on a cumulative basis) of the shares of Common Stock subject to such
option on its date of grant. Each option granted under this Article V shall
expire ten years after its date of grant. An exercisable option, or portion
thereof, may be exercised in whole or in part only with respect to whole shares
of Common Stock. Options granted under this Article V shall be exercisable in
accordance with Section 2.1(c).
5.3 Termination of Directorship.
(a) Disability. Subject to Section 6.8, if the holder of an option granted
under this Article V ceases to be a director of the Company by reason of
Disability, each such option held by such holder shall be exercisable only to
the extent that such option is exercisable on the effective date of such
holder's ceasing to be a director and may thereafter be exercised by such holder
(or such holder's guardian, legal representative or similar person) until the
earliest to occur of the (i) date which is three months after the effective date
of such holder's ceasing to be a director and (ii) the expiration date of the
term of such option.
(b) Retirement. Subject to Section 6.8, if the holder of an option granted
under this Article V ceases to be a director of the Company on or after age 65,
each such option held by such holder shall be exercisable only to the extent
that such option is exercisable on the effective date of such holder's ceasing
to be a director and may thereafter be exercised by such holder (or such
holder's legal representative or similar person) until the earliest to occur of
the (i) date which is three months after the effective date of such holder's
ceasing to be a director and (ii) the expiration date of the term of such
option.
(c) Death. Subject to Section 6.8, if the holder of an option granted under
this Article V ceases to be a director of the Company by reason of death, each
such option held by such holder shall be fully exercisable and may thereafter be
exercised by such holder's executor, administrator, legal representative,
beneficiary or similar person, as the case may be, until the earliest to occur
of the (i) date which is one year after the date of death and (ii) the
expiration date of the term of such option.
(d) Other Termination. Subject to Section 6.8, if the holder of an option
granted under this Article V ceases to be a director of the Company for any
reason other than Disability, retirement on or after age 65 or death, each such
option held by such holder shall be exercisable only to the extent such option
is exercisable on the effective date of such holder's ceasing to be a director
and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until the earliest to occur of the (i) date
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which is three months after the effective date of such holder's ceasing to be a
director and (ii) the expiration date of the term of such option.
(e) Death Following Termination of Directorship. Subject to Section 6.8, if
the holder of an option granted under this Article V dies during the three-month
period following such holder's ceasing to be a director of the Company by reason
of Disability, or if such a holder dies during the three-month period following
such holder's ceasing to be a director of the Company on or after age 65, or if
such a holder dies during the three-month period following such holder's ceasing
to be a director for any reason other than by reason of Disability or retirement
on or after age 65, each such option held by such holder shall be exercisable
only to the extent that such option is exercisable on the date of the holder's
death and may thereafter be exercised by the holder's executor, administrator,
legal representative, beneficiary or similar person, as the case may be, until
the earliest to occur of the (i) date one year after the date of death and (ii)
the expiration date of the term of such option.
5.4 Directors Options. Each Directors Option shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable:
(a) Option Period and Exercisability. Directors Options shall become
exercisable as provided in Section 5.2(b). If at any time prior to the time that
a Directors Option becomes exercisable, a Non-Employee Director shall no longer
be a member of the Board, such Directors Option shall become void and of no
further force or effect.
(b) Purchase Price. The purchase price for the shares of Common Stock
subject to any Directors Option shall be equal to 100% of the Fair Market Value
of a share of Common Stock on the date of grant of such Directors Option. Such
Directors Options shall be exercisable in accordance with Section 2.1(c).
(c) Restrictions on Transfer. Directors Options shall be subject to the
transfer restrictions and other provisions of Section 6.4.
(d) Expiration. Each Directors Option which has become exercisable pursuant
to Section 5.4(a), to the extent not theretofore exercised, shall expire on the
first to occur of (i) the date which is three months after the first date on
which the Non-Employee Director shall no longer be a member of the Board or the
Board of Directors of a Subsidiary and (ii) the tenth anniversary of the date of
grant of such option; provided, however, that if the Non-Employee Director shall
die within such three-month period following the date on which he shall have
ceased to serve as such a director, such option may be exercised at any time
within the one-year period following the date of death to the extent not
theretofore exercised (but in no event later than the tenth anniversary of the
date of grant).
VI. GENERAL
6.1 Effective Date and Term of Plan; Submission to Stockholders. This Plan
is effective immediately upon its approval by the Board. This Plan shall
terminate ten years after its effective date unless terminated earlier by the
Board. Termination of this Plan shall not affect the terms or conditions of any
award granted prior to termination. Awards hereunder may be made at any time
prior to the termination of this Plan, provided that no award may be made later
than ten years after the effective date of this Plan.
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This Plan shall be submitted to the stockholders of the Company for
approval. Unless the Plan is approved by the affirmative vote of a majority of
the voting power of the shares of capital stock of the Company represented at a
meeting in which the Plan is considered for approval, no awards may be made
under the Plan to any director or officer of the Company; provided that (a)
awards with respect to not more than 25,000 shares of Common Stock in the
aggregate may be granted to directors or officers of the Company and (b) in
addition, awards may be made to a person not previously employed by the Company
as an inducement essential to such person's entering into an employment contract
with the Company.
6.2 Amendments. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation including Section 162(m) of the Code; provided, however, that
no amendment shall be made without stockholder approval if such amendment would
(a) reduce the minimum purchase price in the case of an option or the base price
in the case of an SAR, (b) effect any change inconsistent with Section 422 of
the Code or (c) extend the term of this Plan. No amendment may impair the rights
of a holder of an outstanding award without the consent of such holder.
6.3 Agreement. Each award under this Plan shall be evidenced by an
Agreement setting forth the terms and conditions applicable to such award. No
award shall be valid until an Agreement is executed by the Company and the
recipient of such award and, upon execution by each party and delivery of the
Agreement to the Company, such award shall be effective as of the effective date
set forth in the Agreement.
6.4 Non-Transferability of Stock Options, SARs and Performance Shares. No
option, SAR or Performance Share shall be transferable other than (i) by will,
the laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company or (ii) as otherwise set forth in the
Agreement relating to such award. Each option, SAR or Performance Share may be
exercised or settled during the participant's lifetime only by the holder or the
holder's legal representative or similar person. Except as permitted by the
second preceding sentence, no option, SAR or Performance Share may be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of any option, SAR or
Performance Share, such award and all rights thereunder shall immediately become
null and void.
6.5 Tax Withholding. The Company shall have the right to require, prior to
the issuance or delivery of any shares of Common Stock or the payment of any
cash pursuant to an award made hereunder, payment by the holder of such award of
any Federal, state, local or other taxes which may be required to be withheld or
paid in connection with such award. An Agreement may provide that (i) the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of
the date the obligation to withhold or pay taxes arises in connection with an
award (the "Tax Date"), or withhold an amount of cash which would otherwise be
payable to a holder, in the amount necessary to satisfy any such obligation or
(ii) the holder may satisfy any such obligation by any of the following means:
(1) a cash payment to the Company, (2) delivery to the Company of Mature Shares
having an aggregate Fair Market Value, determined as of the Tax Date, equal to
the amount necessary to satisfy any such obligation, (3) authorizing the Company
to withhold whole shares of Common Stock which would otherwise be delivered
having an aggregate Fair Market Value, determined as of the Tax Date, or
withhold an amount of cash which would otherwise be payable to a holder, equal
to the amount necessary to satisfy any such obligation, (4) in the case of the
exercise of an option, a cash payment by a broker-dealer acceptable to the
Company to whom the optionee has submitted an irrevocable notice of exercise or
(5) any combination of (1), (2) and (3), in each case to the extent set forth in
the Agreement relating to the award;
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provided, however, that the Committee shall have sole discretion to disapprove
of an election pursuant to any of clauses (2)-(5). An Agreement may provide for
shares of Common Stock to be delivered or withheld having an aggregate Fair
Market Value in excess of the minimum amount required to be withheld. Any
fraction of a share of Common Stock which would be required to satisfy such an
obligation shall be disregarded and the remaining amount due shall be paid in
cash by the holder.
6.6 Restrictions on Shares. Each award made hereunder shall be subject to
the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any award made hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
6.7 Adjustment. Except as provided in Section 6.8, in the event of any
stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off or other
similar change in capitalization or event, or any distribution to holders of
Common Stock other than a regular cash dividend, the number and class of
securities available under this Plan, the number and class of securities subject
to each outstanding option and the purchase price per security, the number of
securities subject to each option to be granted to Non-Employee Directors
pursuant to Article V, the terms of each outstanding SAR, the number and class
of securities subject to each outstanding Stock Award, and the terms of each
outstanding Performance Share shall be appropriately adjusted by the Committee,
such adjustments to be made in the case of outstanding options and SARs without
an increase in the aggregate purchase price or base price. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
If any such adjustment would result in a fractional security being (a) available
under this Plan, such fractional security shall be disregarded, or (b) subject
to an award under this Plan, the Company shall pay the holder of such award, in
connection with the first vesting, exercise or settlement of such award, in
whole or in part, occurring after such adjustment, an amount in cash determined
by multiplying (i) the fraction of such security (rounded to the nearest
hundredth) by (ii) the excess, if any, of (1) the Fair Market Value on the
vesting, exercise or settlement date over (2) the exercise or base price, if
any, of such award.
6.8 Change in Control.
(a) (i) Notwithstanding any provision in this Plan or any Agreement,
in the event of a Change in Control pursuant to Section (b)(iii) or (iv)
below, (1) all outstanding options and SARS shall immediately become
exercisable in full, (2) the Restriction Period applicable to any
outstanding Restricted Stock Award shall lapse, (3) the Performance Period
applicable to any outstanding Performance Share shall lapse and (4) the
Performance Measures applicable to any outstanding Restricted Stock Award
(if any) and to any outstanding Performance Share shall be deemed to be
satisfied at the maximum level. If, in connection with such Change in
Control, holders of Common Stock receive solely shares of common stock that
are registered under Section 12 of the Exchange Act, there shall be
substituted for each share of Common Stock available under this Plan,
whether or not then subject to an outstanding award, the number and class
of shares into which each outstanding share of Common Stock shall be
converted pursuant to such Change in Control. If, in connection with such
Change in Control, holders of Common Stock receive solely cash and shares
of common stock that
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are registered under Section 12 of the Exchange Act, each outstanding award
shall be surrendered to and canceled by the Company, and the holder shall
receive, within ten days of the occurrence of such Change in Control, a
proportionate amount of cash in the manner provided in Section (a)(ii)
below, and there shall be substituted for the award surrendered a similar
award reflecting a proportionate number of the class of shares into which
each outstanding share of Common Stock shall be converted to such Change in
Control. In the event of any such substitution, the proportion of cash and
common stock, the purchase price per share in the case of an option and the
base price in the case of an SAR, and any other terms of outstanding awards
shall be appropriately adjusted by the Committee, such adjustments to be
made in the case of outstanding options and SARs without an increase in the
aggregate purchase price or base price; provided, that the proportion of
cash and common stock substituted for outstanding awards shall reflect the
approximate proportion of cash and common stock received by holders of
Common Stock in such Change in Control. If, in connection with a Change in
Control, holders of Common Stock receive any portion of the consideration
in a form other than cash or shares of common stock that are registered
under Section 12 of the Exchange Act, each share of Common Stock available
under this Plan, whether or not then subject to an outstanding award, shall
be substituted or surrendered for such proportion of common stock, cash or
other consideration as shall be determined by the Committee pursuant to
Section 6.7.
(ii) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control pursuant to Section (b)(i) or (ii) below,
or in the event of a Change in Control pursuant to Section (b)(iii) or (iv)
below in connection with which the holders of Common Stock receive cash,
each outstanding award shall be surrendered to the Company by the holder
thereof, and each such award shall immediately be canceled by the Company,
and the holder shall receive, within ten days of the occurrence of a Change
in Control pursuant to Section (b)(i) or (ii) below or within ten days of
the approval of the stockholders of the Company contemplated by Section
(b)(iii) or (iv) below, a cash payment from the Company in an amount equal
to (1) in the case of an option, the number of shares of Common Stock then
subject to such option, multiplied by the excess, if any, of the greater of
(A) the highest per share price offered to stockholders of the Company in
any transaction whereby the Change in Control takes place or (B) the Fair
Market Value of a share of Common Stock on the date of occurrence of the
Change in Control, over the purchase price per share of Common Stock
subject to the option; (2) in the case of a Free-Standing SAR, the number
of shares of Common Stock then subject to such SAR, multiplied by the
excess, if any, of the greater of (A) the highest per share price offered
to stockholders of the Company in any transaction whereby the Change in
Control takes place or (B) the Fair Market Value of a share of Common Stock
on the date of occurrence of the Change in Control, over the base price of
the SAR; and (3) in the case of a Restricted Stock Award or Performance
Share Award, the number of shares of Common Stock or the number of
Performance Shares, as the case may be, then subject to such award,
multiplied by the greater of (A) the highest per share price offered to
stockholders of the Company in any transaction whereby the Change in
Control takes place or (B) the Fair Market Value of a share of Common Stock
on the date of occurrence of the Change in Control. In the event of a
Change in Control, each Tandem SAR shall be surrendered by the holder
thereof and shall be canceled simultaneously with the cancellation of the
related option. Except as may be provided in an agreement relating to an
award, the Company may, but is not required to, cooperate with any person
who is subject to Section 16 of the Exchange Act to assure that any cash
payment in accordance with the foregoing to such person is made in
compliance with Section 16 and the rules and regulations thereunder.
(b) "Change in Control" shall mean:
A-17
<PAGE>
(i) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act, of Beneficial Ownership of 25% or more of either (1)
the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (2) the combined voting power of the
then outstanding securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
excluding, however, the following: (A) any acquisition directly from the
Company (excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege unless the security being so
exercised, converted or exchanged was acquired directly from the Company),
(B) any acquisition by the Company, (C) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company, (D) any acquisition by an Exempt
Person or (E) any acquisition by any corporation pursuant to a transaction
which complies with clauses (1), (2) and (3) of subsection (iii) of this
Section 6.8(b); provided further, that for purposes of clause (2), if any
Person (other than an Exempt Person, the Company or any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company) shall become the Beneficial Owner of
50% or more of the Outstanding Company Common Stock or 50% or more of the
Outstanding Company Voting Securities by reason of an acquisition by the
Company, and such Person shall, after such acquisition by the Company,
become the Beneficial Owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding Company Voting
Securities and such Beneficial Ownership is publicly announced, such
additional Beneficial Ownership shall constitute a Change in Control;
(ii) individuals who, as of the effective date hereof, constitute the
Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; provided that any individual
who becomes a director of the Company subsequent to the effective date
hereof whose election, or nomination for election by the Company's
stockholders, was approved by the vote of at least a majority of the
directors then comprising the Incumbent Board shall be deemed a member of
the Incumbent Board; and provided further, that any individual who was
initially elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any
Person other than the Board shall not be deemed a member of the Incumbent
Board;
(iii) approval by the stockholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate Transaction");
excluding, however, a Corporate Transaction pursuant to which (1) all or
substantially all of the individuals or entities who are the Beneficial
Owners, respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will Beneficially Own, directly or indirectly, more than 50%
of, respectively, the outstanding shares of common stock, and the combined
voting power of the outstanding securities of such corporation entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or indirectly) in substantially the same proportions relative to each other
as their Beneficial Ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (2) no Person (other than an
Exempt Person; the Company; any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company; the corporation resulting from such Corporate Transaction; and any
Person which Beneficially Owned, immediately
A-18
<PAGE>
prior to such Corporate Transaction, directly or indirectly, 50% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) will Beneficially Own, directly or
indirectly, 50% or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding securities of such corporation
entitled to vote generally in the election of directors and (3) individuals
who were members of the Incumbent Board will constitute at least a majority
of the members of the board of directors of the corporation resulting from
such Corporate Transaction; or
(iv) approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.
Notwithstanding anything to the contrary herein, no Change of Control shall
be deemed to have taken place as a result of the issuance of shares of Common
Stock by the Company or the sale of shares of Common Stock by its stockholders
in connection with the Company's initial public offering.
6.9 No Right of Participation or Employment/Service. No person shall have
any right to participate in this Plan. Neither this Plan nor any award made
hereunder shall confer upon any person any right to continued employment or
service by the Company, any Subsidiary or any affiliate of the Company or affect
in any manner the right of the Company, any Subsidiary or any affiliate of the
Company to terminate the employment or service of any person at any time without
liability hereunder.
6.10 Rights as Stockholder. No person shall have any right as a stockholder
of the Company with respect to any shares of Common Stock or other equity
security of the Company which is subject to an award hereunder unless and until
such person becomes a stockholder of record with respect to such shares of
Common Stock or equity security.
6.11 Governing Law. This Plan, each award hereunder and the related
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.
A-19
<PAGE>
DETACH HERE
PROXY
MARKS BROS. JEWELERS, INC.
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting, June 5, 1997
The undersigned hereby appoints Hugh M. Patinkin and John R. Desjardins,
and each of them, as proxies, each with the power of substitution, and hereby
authorizes them to vote all shares of Common Stock and/or Class B Common Stock
which the undersigned is entitled to vote at the 1997 Annual Meeting of
Stockholders of Marks Bros. Jewelers, Inc. (the "Company"), to be held at The
Standard Club, 320 South Plymouth Court, Chicago, Illinois 60604 on Thursday,
June 5, 1997 at 10:00 a.m. Chicago time, and at any adjournments or
postponements thereof (1) as hereinafter specified upon the proposals listed on
the reverse side and as more particularly described in the Company's Proxy
Statement and (2) in their discretion upon such other matters as may properly
come before the meeting.
The undersigned hereby acknowledges receipt of: (1) Notice of Annual
Meeting of Stockholders of the Company, (2) accompanying Proxy Statement, and
(3) Annual Report of the Company for the fiscal year ended January 31, 1997.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY
BE REPRESENTED AT THE MEETING.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
--------------------
SEE REVERSE
SIDE
--------------------
<PAGE>
May 6, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders to
be held at 10:00 a.m. Chicago time on Thursday, June 5, 1997, at The Standard
Club, 320 South Plymouth Court, Chicago, IL 60604. Detailed information as to
the business to be transacted at the meeting is contained in the accompanying
Notice of Annual Meeting and Proxy Statement.
Regardless of whether you plan to attend the meeting, it is important that your
shares be voted. Accordingly, we ask that you sign and return your proxy as soon
as possible in the envelope provided. If you do plan to attend the meeting,
please mark the appropriate box on the proxy.
Sincerely,
/s/ John R. Desjardins
----------------------
John R. Desjardins
Secretary
DETACH HERE
Please mark
|x| votes as in
this example.
The Board of Directors recommends a vote FOR the nominees in proposal 1 and FOR
proposal 2. The shares represented by this proxy will be voted as directed by
the undersigned. If no direction is given with respect to the election of any
director or any proposal specified below, this proxy will be voted for such
election of director(s) and for such proposal(s).
FOR AGAINST ABSTAIN
1. Election of Directors 2. Adoption of the
Nominees: Hugh M. Patinkin, Marks Bros. | | | | | |
Norman J. Patinkin and Jewelers, Inc.
Daniel H. Levy 1997 Long-Term
Incentive Plan.
FOR WITHHELD
| | | |
3. In their discretion, the proxies are
authorized to vote upon any other business
that may properly come before the meeting.
| | _______________________
For all nominees except
as noted above
MARK HERE MARK HERE
FOR ADDRESS | | IF YOU PLAN | |
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Please sign exactly as name appears hereon.
Joint owners should each sign. Executives,
administrators, trustees, guardians or other
fiduciaries should give full title as such. If
signing for a corporation, please sign in full
corporate name by a duly authorized officer.
Signature: _____________ Date: ________ Signature: _____________ Date: ________
