<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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
WHITEHALL JEWELLERS, 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.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
N/A
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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<PAGE> 2
[WHITEHALL JEWELLERS, INC. LETTERHEAD]
May 10, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of Whitehall Jewellers, Inc., a Delaware corporation, to be held at
10:00 a.m. (Chicago time) on Tuesday, June 8, 1999 at The Standard Club, 320
South Plymouth Court, Chicago, Illinois 60604.
The formal notice of the meeting, Proxy Statement and 1998 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 self-addressed, 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 1999 Annual Meeting of Stockholders.
Sincerely,
/s/ Hugh M. Patinkin
--------------------------------
Hugh M. Patinkin
Chairman, Chief Executive Officer
and President
<PAGE> 3
WHITEHALL JEWELLERS, INC.
155 North Wacker Drive
Suite 500
Chicago, Illinois 60606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 1999
To the Stockholders of
WHITEHALL JEWELLERS, INC.
The 1999 Annual Meeting of Stockholders of Whitehall Jewellers, Inc. a
Delaware corporation (the "Company"), will be held at 10:00 a.m. (Chicago Time)
on Tuesday, June 8, 1999, at The Standard Club, 320 South Plymouth Court,
Chicago, Illinois, 60604 for the following purposes:
1. to elect two Class III directors;
2. to approve an amendment to 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 16,
1999, 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 self-addressed,
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 10, 1999.
By Order of the Board of Directors,
/s/ Hugh M. Patinkin
--------------------------------------
Hugh M. Patinkin
Chairman, Chief Executive Officer
and President
May 7, 1999
<PAGE> 4
WHITEHALL JEWELLERS, INC.
155 North Wacker Drive
Suite 500
Chicago, Illinois 60606
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 1999
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Whitehall Jewellers, Inc.,
a Delaware corporation (the "Company"), for use at the 1999 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at 10:00 a.m. (Chicago time) on
June 8, 1999, at The Standard Club, 320 South Plymouth Court, Chicago, Illinois,
60604.
The Board of Directors has fixed the close of business on April 16,
1999, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. On April 16, 1999, the Company
had outstanding (i) 9,622,143 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 complete,
sign, date and return the enclosed proxy card 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 10, 1999.
<PAGE> 5
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 III 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 amendment to the Company's 1997
Long-Term Incentive Plan described herein, (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 III directors and FOR approval of the amendment to
the Company's 1997 Long-Term Incentive Plan described herein. 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 voting power with respect to 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 III 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 III
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
amendment to the Company's 1997 Long-Term Incentive Plan described herein
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, two Class
III directors will be elected to serve until the annual meeting in the year
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<PAGE> 6
2002, or until their successors are elected and qualified. The nominees for
election as Class III 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.
NOMINEES
The following persons, if elected at the Annual Meeting, will serve as
Class III directors until the annual meeting in the year 2002, or until their
successors are elected and qualified.
CLASS III DIRECTORS - TERM SCHEDULED TO EXPIRE IN 2002
Mr. Matthew M. Patinkin, age 41, joined the Company in 1979 and has
served as Executive Vice President, Store Operations and as a director of the
Company since 1989.
Mr. Richard K. Berkowitz, age 57, has served as a director of the
Company since 1998. He retired from Arthur Andersen, L.L.P. in August 1998 after
serving 21 years as a partner. Prior to his retirement, Mr. Berkowitz served as
head of Arthur Andersen's tax division in Miami, Florida. Mr. Berkowitz also
serves on the Advisory Board of Security Plastics, Inc.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTES "FOR" THE NOMINEES FOR
CLASS III 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 2001
Mr. John R. Desjardins, age 48, joined the Company in 1979 and has
served as Executive Vice President, Finance & Administration and Secretary and
as a director of the Company since 1989. He also served as Treasurer of the
Company from 1989 through October 1998. Previously, he worked as a certified
public accountant with Deloitte & Touche L.L.P.
Mr. Jack A. Smith, age 63, has served as a director of the Company
since July 1996. Mr. Smith is the former Chairman of the Board 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 & Co. and Jefferson Stores. Mr. Smith serves on the Board of Directors of
Darden Restaurants, Inc., Beverages & More!, and National Wholesale Liq.
CLASS I DIRECTORS - TERM SCHEDULED TO EXPIRE IN 2000
Mr. Hugh M. Patinkin, age 48, 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.
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Mr. Norman J. Patinkin, age 71, has served as a director of the Company
since 1989. He recently retired as the Chief Executive Officer of United
Marketing Group, L.L.C. ("UMG"), but remains on the UMG Board of Directors. UMG
operates telemarketing services, motorclubs, travel clubs and direct response
merchandise programs for large corporations.
Mr. Daniel H. Levy, age 55, 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. Mr. Levy sits on the board of Donnkenny, Inc., a NASDAQ listed company.
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 four meetings during fiscal
1998. Each director attended all of the meetings during the time in which each
was a director in fiscal 1998.
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), Daniel H. Levy and Richard K. Berkowitz. The Audit
Committee held three meetings in fiscal 1998 which were attended by all members
of the committee serving at the time of the meeting.
The Compensation Committee, which currently consists of Messrs. Jack A.
Smith (Chairman), Norman J. Patinkin and Daniel H. Levy, 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 and other stock based awards). The
Compensation Committee held one meeting in fiscal 1998 which was attended by all
members of the committee. The Company's By-Laws require that the Compensation
Committee consists of non-employee directors.
COMPENSATION OF DIRECTORS
Non-employee directors receive compensation of $3,750 per fiscal
quarter with no separate per meeting or per committee meeting fee. 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.
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<PAGE> 8
Under the Company's 1998 Non-Employee Director Stock Option Plan, each
non-employee director of the Company may elect to receive nonqualified stock
options at the beginning of each fiscal quarter in lieu of receiving the
directors' fees described above. 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 at the end of the fiscal
quarter in which they are granted.
As permitted under the Company's 1997 Long-Term Incentive Plan, (the
"1997 Plan"), each non-employee director is and will be granted a restricted
stock award each year as of the Audit Certification Date (as defined below).
Such award entitles and will entitle each non-employee director to receive an
amount of restricted Common Stock equal to $10,000 divided by the fair market
value of such Common Stock on the applicable Audit Certification Date, rounded
down to the nearest whole share. The restriction period (i.e., the period in
which the Common Stock subject to the award may not be sold, transferred,
assigned, pledged, hypothecated or otherwise encumbered or disposed of) relating
to each such award is and will be one year from the date of grant. The "Audit
Certification Date" is the date each year on which the Company's independent
public accountants deliver an opinion to the Corporation as to its yearly audit
of the financial statements of the Company.
In addition, as permitted under the 1997 Plan, each non employee
director is and will be granted each year as of the Audit Certification Date, a
nonqualified option to purchase 350 shares of Common Stock, in the case of a
non-employee director who shall have served on the Board of Directors for less
than three years as of such date or 1,000 shares of Common Stock, in the case of
a non-employee director who shall have served on the Board of Directors for
three or more years as of such date. 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
applicable Audit Certification Date 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.
Pursuant to the terms of the Company's 1996 Long-Term Incentive Plan
(the "1996 Plan") and the 1997 Plan, Mr. N. Patinkin was granted a one-time
nonqualified option to purchase 10,000 shares of Common Stock upon the
consummation of the Company's Initial Public Offering on May 7, 1996. All of the
remaining non-employee directors who are currently directors were also granted a
one-time nonqualified option to purchase 10,000 shares of Common Stock when each
was first elected or began to serve as a non-employee director. Both of the
Company's long-term incentive plans have been amended to delete the provisions
which entitle each non-employee director to an automatic grant of a nonqualified
option to purchase 10,000 shares of Common Stock on the date on which s/he is
first elected or begins to serve as a non-employee director. However, each such
plan provides that non-employee directors may be granted stock based awards at
the discretion of the Compensation Committee (with the approval of the Board of
Directors) to advance the interests of the Company by attracting and retaining
well-qualified directors and the Company may grant such awards from time to time
for such purpose.
PROPOSAL 2
AMENDMENT TO THE 1997 LONG-TERM INCENTIVE PLAN
The Board of Directors of the Company approved the 1997 Plan on
February 24, 1997. The 1997 Plan was then submitted to and approved by the
Company's stockholders at the 1997 Annual Meeting. The Board of Directors
approved several amendments to the 1997 Plan as of April 20, 1999. One such
amendment (as described below) is being submitted for approval by the Company's
stockholders 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"),
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(ii) complying with certain rules and regulations of the Nasdaq Stock Market and
(iii) permitting future stock options, stock appreciation rights and certain
stock awards 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
proposed amendments to the 1997 Plan as well as a description of the 1997 Plan
incorporating the amendments and the proposed amendment to such plan.
Proposed Amendment to the 1997 Plan.
Increase in Available Shares of Common Stock. Initially, a total of
400,000 shares of Common Stock were reserved for issuance under the 1997 Plan,
subject to adjustment in the event of a stock split, stock dividend or other
changes in capital structure. The proposed amendment would increase the shares
of Common Stock available under the 1997 Plan by 600,000, subject to adjustment
as described above.
Description of the 1997 Plan, as amended
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 1,000,000 shares of Common Stock have
been reserved for issuance under the 1997 Plan, of which 100,000 shares have
been reserved for bonus stock awards and stock awards subject to a restriction
period or performance measures or both, subject to adjustment in the event of a
stock split, stock dividend or other changes in capital structure. As of January
31, 1999, 242,841 shares were subject to outstanding stock options. No awards
may be made under the 1997 Plan after ten years after its effective date. All
non-employee directors and approximately 1,000 employees are eligible to
participate in the 1997 Plan. The maximum number of shares of Common Stock with
respect to which options, SARs, bonus stock awards, stock awards subject to a
restriction period or performance measures or both, 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 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
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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.
Finally any grants of awards to non-employee directors must be approved
by the Board of Directors.
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) reduce
the minimum purchase price of a share of Common Stock subject to an option or
base price of an SAR, (ii) eliminate the restriction contained in the 1997 Plan
against repricing the exercise price or base price of any award granted under
the Plan without prior stockholder approval, 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 non-employee
directors may be granted nonqualified options to purchase shares of Common Stock
at the discretion of the Compensation Committee (subject to approval by the
Board of Directors) to advance the interests of the Company by attracting and
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.
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.
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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 (see "Performance Measures" below) for the applicable
restriction period or may require the holder to remain continuously employed by,
or in the service of, the Company for the applicable restriction period. The
terms of restricted stock and performance goals will be determined by the
Compensation Committee. With respect to the maximum amount of compensation that
can be paid to the Chief Executive Officer or the Company's four most highly
compensated officers in the form of restricted stock awards subject to
performance measures (in addition to the limit of 200,000 shares with respect to
which all awards may be granted to any of such employees), the 1997 Plan
provides that the fair market value of the number of shares of Common Stock
subject to performance measures that is granted to any one of such employees may
not exceed $2,000,000 (i) at the time of grant in the case of a stock award
subject to performance measures or (ii) in the case of a restricted stock award
subject to performance measures, on the earlier of the date on which the
performance measures are satisfied and the date the holder makes an election to
recognize income in respect of the restricted stock. 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 or
service 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 or service for any reason, the portion of a restricted stock award
which is then subject to a restriction period will be forfeited and canceled.
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.
Performance Measures. Performance measures that can be used by the
Compensation Committee in establishing performance goals for restricted stock
awards or performance share awards can be based on any of the following
criteria: 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.
Prohibition Against Repricing Awards. Under the 1997 Plan, the exercise
price or base price, as the case may be, of any award granted thereunder may not
be changed without stockholder approval.
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
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<PAGE> 12
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.
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
9
<PAGE> 13
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.
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 awards granted under the 1997 Plan during fiscal 1998 to
named executives, directors, employees or group:
Awards Granted Under
1997 Long-Term Incentive Plan
<TABLE>
<CAPTION>
Number of
Common Shares
Name and Position Dollar Value Underlying Options
- ----------------- ------------ ------------------
<S> <C> <C>
Executive Group
Hugh M. Patinkin (Chairman, Chief Executive Officer & President) -- --
John R. Desjardins (Executive Vice President, Finance & -- --
Administration and Secretary)
Matthew M. Patinkin (Executive Vice President, Store Operations) -- --
Manny A. Brown (Executive Vice President, Store Operations) -- --
Lynn D. Eisenheim (Executive Vice President, Merchandising) -- --
Executive Group -- --
Non-Executive Director Group -- 10,000
------
Non-Executive Officer Employee Group -- 93,870
------
TOTAL -- 103,870
-------
</TABLE>
No grants of awards were made under the 1997 Plan to any executive
officers during the fiscal year ended January 31, 1999. The grants of options to
non-employee directors and non-executive officer employees were made on various
dates throughout fiscal 1998. 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
16, 1999 was $15.875 per share.
10
<PAGE> 14
The above description of the 1997 Plan is qualified in its entirety by
reference to the Amended and Restated 1997 Plan, which is included as Annex A to
this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO
THE COMPANY'S 1997 LONG-TERM INCENTIVE PLAN.
EXECUTIVE OFFICERS
The following sets forth certain information with respect to the
executive officers of the Company who are not identified above under "Election
of Directors - Nominees" and "-- Other Directors."
Mr. Lynn D. Eisenheim, age 47, joined the Company in 1991 as its
Executive Vice President, Merchandising. He has 25 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.
Mr. Manny A. Brown, age 43, joined the Company in 1997 as its Executive
Vice President, Store Operations. Mr. Brown was employed from 1986 through 1997
by Foster Medical Corporation which later merged with HomedCo and was then
purchased by Apria Healthcare. Mr. Brown held various sales and operations
management positions with Apria Healthcare including Executive Vice President,
East Operations and Senior Vice President, Central Operations. Mr. Brown was
employed by FMC Corporation from 1980 through 1985 in various sales management
and marketing positions. Mr. Brown was employed by American Brands from 1978
through 1980 in various sales management positions.
11
<PAGE> 15
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, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
----------------------
YEAR SHARES
ENDED UNDERLYING
NAME AND PRINCIPAL POSITION JAN. 31 SALARY BONUS OPTIONS
---------------------------- ------- ------ ----- ----------------------
<S> <C> <C> <C> <C>
Hugh M. Patinkin 1999 $334,622 $175,000 --
Chairman, Chief Executive 1998 $294,462 $ 75,000 --
Officer and President 1997 $255,000 $127,500 312,835
John R. Desjardins 1999 $263,057 $137,500 --
Executive Vice President, 1998 $254,520 $ 64,350
Finance & Administration and 1997 $234,000 $117,000 169,766
Secretary
Matthew M. Patinkin 1999 $230,163 $117,500 --
Executive Vice President, 1998 $217,538 $ 55,000 --
Store Operations 1997 $200,000 $100,000 169,766
Manny A. Brown(1) 1999 $210,894 $107,500 --
Executive Vice President, 1998 $163,241 $ 50,000 100,000
Store Operations 1997 -- -- --
Lynn D. Eisenheim 1999 $180,700 $ 95,000 --
Executive Vice President, 1998 $174,031 $ 44,000 --
Merchandising 1997 $160,000 $ 80,000 32,173
</TABLE>
(1) Mr. Brown began his employment with the Company as an Executive Vice
President, Store Operations on March 17, 1997 and received no payments
from the Company prior to that date. Although Mr. Brown was given the
title of an executive officer upon commencement of his employment in
1997, he did not became an "executive officer" as defined by the rules
and regulations of the Securities and Exchange Commission until during
the fiscal year ended January 31, 1999.
12
<PAGE> 16
General Information Regarding Options. The following table shows
information regarding stock options held by the executive officers named in the
Summary Compensation Table.
OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Shares underlying unexercised Options Value of unexercised in the
Acquired as of Money Options as of
Name on Exercise Value Realized January 31, 1999 January 31, 1999 (1)
- ---- ----------- -------------- ---------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hugh M. Patinkin ---- ---- 156,418 156,417 $391,045 $391,043
John R. Desjardins ---- ---- 84,883 84,883 $212,207 $212,207
Matthew M. Patinkin ---- ---- 84,883 84,883 $212,207 $212,207
Manny A. Brown ---- ---- 25,000 75,000 $121,875 $365,625
Lynn D. Eisenheim ---- ---- 16,087 16,086 $ 40,218 $ 40,215
</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 $16.50, the closing price for the Common Stock
as of January 29, 1999, the last trading day in fiscal 1998, as
reported for Nasdaq National Market Issues in The Wall Street Journal.
EMPLOYMENT AGREEMENTS
The Company has entered into severance agreements with each of Hugh M.
Patinkin, Chairman, Chief Executive Officer and President; John R. Desjardins,
Executive Vice President, Finance & Administration and Secretary; Matthew M.
Patinkin, Executive Vice President, Store Operations; Manny A. Brown, 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, in the case of Messrs. H. Patinkin, Desjardins, M. Patinkin
and Eisenheim and dated March 17, 1997, in the case of Mr. Brown 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 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
13
<PAGE> 17
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.
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), Norman J.
Patinkin and Daniel H. Levy. Each member of the Compensation Committee is a
non-employee director who has not previously been an officer or employee of the
Company.
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), Norman J.
Patinkin and Daniel H. Levy. 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 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 made salary adjustments to the base salary
of the Chairman, Chief Executive Officer and President of the Company during
fiscal 1998. The Chairman, Chief Executive Officer and President 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 were
eligible to participate in the Company's Management Bonus Program during fiscal
1998. Under this bonus program, each executive officer was
14
<PAGE> 18
entitled to receive a bonus (not to exceed 100% of base salary) based on the net
income of the Company before extraordinary items. The fiscal 1998 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 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 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 officer
employees) 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 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.
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.
Compensation attributable to either stock awards subject to performance measures
or performance shares is "qualified performance-based compensation" if all of
the following requirements are satisfied: (i) the compensation is paid solely on
account of the attainment of one or more preestablished, objective performance
goals; (ii) the award is made by a compensation committee consisting solely of
two or more "outside directors;" (iii) the compensation committee certifies in
writing prior to payment of the compensation that the performance goals and
other material terms were in fact satisfied; and (iv) the material terms of the
performance goal under which the compensation is to be paid is disclosed to and
subsequently approved by the publicly held corporation's stockholders before any
compensation is paid. Such material terms include the employees eligible to
receive the compensation, a description of the business criteria on which the
performance goal is based and either the maximum amount of compensation that
could be paid to any employee or the formula used to calculate the amount of
compensation to be paid to the employee if the performance goal is attained.
15
<PAGE> 19
The Compensation Committee consists solely of "outside directors," as
defined for purposes of Section 162(m) of the Code. The employees eligible to
receive awards under the 1997 Plan, the business criteria on which the
performance goal may be based and the maximum compensation that can be paid if a
performance goal is attained is described under "Description of the 1997 Plan,
as amended." The Company is seeking stockholder approval of the 1997 Plan at the
Annual Meeting so that future stock options, SARs, stock awards subject to
performance measures and performance shares 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), Norman J. Patinkin and Daniel H. Levy.
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 traded
on the Nasdaq Stock Market under the symbol "MBJI" from May 2, 1996 until
January 20, 1999 when, because of a change to the Company's name, it began
trading under the symbol "WHJI." Accordingly, the performance graph included in
this Proxy Statement shows the period from May 2, 1996 through the last trading
day of the fiscal year which was January 29, 1999.
The following chart graphs the performance of the cumulative total
return to stockholders (stock price appreciation plus dividends) between May 2,
1996 and January 29, 1999 in comparison to The Nasdaq Composite Index and an
index (the "Jewelry Stores Peer Group Index" or "JSPGI") comprised of securities
of retail jewelry stores traded on The Nasdaq Stock Market, The New York Stock
Exchange and The American Stock Exchange. The jewelry store companies comprising
the JSPGI are identified for the Company by FactSet, a national investment
research service, as companies traded on The Nasdaq Stock Market, The New York
Stock Exchange and The American Stock Exchange who have listed their companies'
SIC code as 5944 - Jewelry Store. The following companies were added to or
deleted from the JSPGI for the year ended January 31, 1999 because they either
started or stopped being traded on the stock markets listed or they changed
their business in such a way so as to change their SIC code. The company added
to the JSPGI: Dallas Gold & Silver Exchange. Companies deleted from the JSPGI:
Barry's Jewelers, Inc., Kay Jewelers and Weisfields, Inc.
16
<PAGE> 20
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG WHITEHALL JEWELLERS, INC. (f/k/a MARKS BROS. JEWELERS, INC.),
THE NASDAQ COMPOSITE INDEX AND THE JEWELRY STORES PEER GROUP INDEX
[GRAPH]
<TABLE>
<CAPTION>
Whitehall The Jewelry Peer The NASDAQ
Jewellers, Inc. Group Index Composite Index
--------------- -------------- ---------------
<S> <C> <C> <C>
5/2/96 $100 $100 $100
7/31/96 98 95 92
10/31/96 111 103 104
1/31/97 51 93 117
4/30/97 53 101 107
7/31/97 61 113 135
10/31/97 77 114 135
1/30/98 83 113 137
4/30/98 86 151 159
7/31/98 88 142 159
10/30/98 59 104 150
1/29/99 79 152 213
</TABLE>
Assumes $100 invested on May 2, 1996 in the Company's Common Stock, The Nasdaq
Composite Index and The Jewelry Stores Peer Group Index. Cumulative total return
assumes reinvestment of dividends.
17
<PAGE> 21
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 16, 1999, 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.
<TABLE>
<CAPTION>
Amount of
Beneficial Percent
Name of Beneficial Owner(1) Ownership of Class(2)
---------- -----------
<S> <C> <C>
Wasatch Advisors, Inc.(3)
150 Social Hall Avenue
Salt Lake City, UT 84111.................................. 1,936,665 20.1%
The TCW Group, Inc.(4)
Robert Day
865 South Figueroa Street 9.2%
Los Angeles, CA 90017 ..................................... 881,800
Westport Asset Management, Inc.(5)
253 Riverside Avenue 5.6%
Westport, CT 06880 ....................................... 536,300
Capital Research and Management Company
SMALLCAP World Fund, Inc.(6)
333 South Hope Street 5.3%
Los Angeles, CA 90071 .................................... 510,000
9.0%
Hugh M. Patinkin* (7) ..................................... 887,213
5.6%
Matthew M. Patinkin * (8) ................................. 545,173
3.9%
John R. Desjardins* (9) ................................... 375,673
Lynn D. Eisenheim* (10) ................................... 73,907 **
Manny A. Brown* (11) ...................................... 50,500 **
Norman J. Patinkin* (12) .................................. 26,238 **
Jack A. Smith*(13) ........................................ 16,905 **
Daniel H. Levy*(14) + ..................................... 10,266 **
Richard K. Berkowitz (15) + ............................... 6,144 **
All executive officers and directors as a group (8 persons) 1,955,568 19.2%
</TABLE>
* The mailing address of each of these individuals is c/o the Company, 155
North Wacker Drive, Suite 500, Chicago, Illinois 60606.
18
<PAGE> 22
+ The mailing address for Mr. Norman Patinkin is c/o United Marketing Group,
L.L.C., 6001 North Clark Street, Chicago, IL 60660. The mailing address for
Mr. Smith is 2875 NE 191st Street, Suite 402, Aventura, FL 33180. The
mailing address for Mr. Levy is 3332 Sabal Cove Lane, Long Boat Key, FL
34228. The mailing address for Mr.
Berkowitz is 3782 El Prado Blvd., Coconut Grove, FL 33133.
** 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 9,622,143 shares of Common
Stock outstanding on April 16, 1999. 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) Based solely on information contained on a Schedule 13G, dated February 12,
1999, filed with the SEC.
(4) Based solely on information contained on a Schedule 13G, dated February 12,
1999, filed with the SEC. The TCW Group, Inc. (through certain of its
subsidiaries, Trust Company of the West, TCW Asset Management Company and
TCW Funds Management, Inc.) has shared voting and investment power with
respect to the reported shares. Trust Company of the West is a bank as
defined in Section 3(a)(6) of the Securities Exchange Act of 1934 and each
of TCW Asset Management Company and TCW Funds Management, Inc. is an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940. Robert Day is an individual who may be deemed to control the
TCW Group, Inc. Mr. Day's address is 200 Park Avenue, Suite 2200, New York,
New York 10166.
(5) Based solely on information contained on a Schedule 13G, dated February 16,
1999, filed with the SEC. Westport Asset Management, Inc., an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940, has shared voting and investment power with respect to the reported
shares, all of which are held in certain discretionary managed accounts.
Westport Asset Management, Inc. disclaims beneficial ownership of such
shares and disclaims the existence of a group.
(6) Based solely on information contained on a Schedule 13G, dated February 11,
1999, filed with the SEC. Capital Research and Management Company ("CRMC"),
an investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, has sole investment power with respect to the
reported shares and does not have any voting power with respect to such
shares. The Schedule 13G was furnished jointly by CRMC and SMALLCAP World
Fund, Inc., an investment company registered under the Investment Company
Act ("SWF"). SWF has sole voting power with respect to the reported shares
and does not have any investment power with respect to such shares.
(7) Includes 234,627 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this Proxy Statement. Includes 257,360 shares
beneficially owned by Hugh M. Patinkin, which shares are held by MJSB
Investment Partners, L.P., a Delaware limited partnership, U/A/D 10/28/97
of which Hugh H. Patinkin is the sole managing agent of the partnership.
Includes 36,451 shares held by Hugh M. Patinkin, Mark A. Patinkin, Matthew
M. Patinkin, Douglas M. Patinkin and Nicholas 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, Matthew M. Patinkin,
Douglas M. Patinkin and Nicholas M. Patinkin share voting and investment
power.
(8) Includes 127,325 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this Proxy Statement. Includes 123,472 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 Hugh M. Patinkin, Mark A. Patinkin, Matthew
M. Patinkin, Douglas M. Patinkin and Nicholas 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, Matthew M. Patinkin,
Douglas M. Patinkin and Nicholas M. Patinkin share voting and investment
power.
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<PAGE> 23
(9) Includes 127,325 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this Proxy Statement. Includes 28,832 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.
(10) Includes 24,131 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this Proxy Statement. 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.
(11) Includes 50,000 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this Proxy Statement. Includes 500 shares owned by Marcy
Brown, Mr. Brown's wife, in her self directed IRA account, with respect to
which shares Manny A. Brown disclaims beneficial ownership.
(12) Includes 15,639 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this Proxy Statement. Includes 599 shares of restricted
Common Stock which may not be sold or transferred until after March 11,
2000.
(13) Includes 12,306 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this Proxy Statement. Includes 599 shares of restricted
Common Stock which may not be sold or transferred until after March 11,
2000.
(14) Includes 6,667 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this Proxy Statement. Includes 599 shares of restricted
Common Stock which may not be sold or transferred until after March 11,
2000.
(15) Includes 2,545 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this Proxy Statement. Includes 599 shares of restricted
Common Stock which may not be sold or transferred until after March 11,
2000.
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 1998 all Section 16 filing
requirements applicable to its directors, executive officers and greater than
10% beneficial owners were complied with by such persons, except that due to
clerical and administrative difficulties, Mr. Levy failed to timely file a Form
4 to report the purchase of 1,000 shares of Common Stock.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company provides certain office services to Double P Corp. ("Double
P") and PDP LLC ("PDP"), 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. Messrs. H. Patinkin, Desjardins and M. Patinkin spend a limited amount of
time providing services to Double P and PDP. 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. The Company and Double P may conduct from time to
time such joint lease negotiations in the future.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of PricewaterhouseCoopers, LLP 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.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
The Company's By-Laws establish an advance notice procedure for
stockholder proposals to be brought before any annual meeting of stockholders,
including proposed nominations of persons for election to the Board of
Directors. Stockholders at the 1999 Annual Meeting of Stockholders may consider
a proposal or nomination brought by a stockholder of record on April 16, 1999
who is entitled to vote at the 1999 Annual Meeting and who has given the Company
timely written notice, in proper form, of the stockholder's proposal or
nomination. A stockholder proposal or nomination intended to be brought before
the 1999 Annual Meeting must have been received by the Company prior to February
4, 1999. The Company did not receive notice of any stockholder proposal or
nomination relating to the 1999 Annual Meeting. The 2000 Annual Meeting of
Stockholders is expected to be held on June 6, 2000. A stockholder proposal or
nomination intended to be brought before the 2000 Annual Meeting must be
received by the Company prior to February 10, 2000. All proposals and
nominations should be directed to Whitehall Jewellers, Inc., 155 North Wacker
Drive, Suite 500, Chicago, Illinois 60606, Attention: Secretary.
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 $4,000 plus reasonable
out-of-pocket expenses.
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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, 1999, 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 WHITEHALL JEWELLERS, INC., 155 NORTH WACKER
DRIVE, SUITE 500, CHICAGO, ILLINOIS 60606, TELEPHONE (312) 782-6800, ATTENTION:
JOHN R. DESJARDINS.
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, Chief Executive Officer
and President
ALL STOCKHOLDERS ARE URGED TO SIGN, DATE
AND MAIL THEIR PROXIES PROMPTLY.
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ANNEX A
WHITEHALL JEWELLERS, INC.
1997 LONG-TERM INCENTIVE PLAN, AS AMENDED
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1997 Long-Term Incentive
Plan (the "Plan") of Whitehall Jewellers, 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 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
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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.
"COMPANY" has the meaning specified in Section 1.1.
"DIRECTORS OPTIONS" shall have the meaning set forth in
Section 5.1.
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"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.
"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
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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 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.
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"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 shall require the approval of the Board.
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
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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, 1,000,000 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
purchase price per share of Common Stock shall be the price
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(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:
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(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 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
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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 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
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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 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
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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.
(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
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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 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
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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.
5.2 GRANTS OF STOCK OPTIONS. Each Non-Employee Director may be
granted Non-Statutory Stock Options in the discretion of the Committee (subject
to approval by the Board).
5.3 TERMINATION OF DIRECTORSHIP.
(a) Disability. Subject to Section 6.8, if the holder of an
option granted pursuant to 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 pursuant to 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 pursuant to 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 pursuant to 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 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 pursuant to 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
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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. 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 became 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.
This Plan, as amended to increase the available shares from
400,000 to 1,000,000, shall be submitted to the stockholders of the Company for
approval. Unless the Plan is approved, as so amended, 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
further awards may be made under the Plan to any director or officer of the
Company; provided that 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.
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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, (c) extend the term of this Plan or
(d) eliminate or have the effect of eliminating the provision set forth in
Section 6.12. 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; 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.
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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 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
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<PAGE> 42
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:
(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
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<PAGE> 43
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 prior to such Corporate Transaction, directly or
indirectly, 50% or more of the
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<PAGE> 44
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.
6.12 REPRICING AWARDS. The exercise price or base price, as
the case may be, of any award granted hereunder shall not be changed after the
date of grant of such award without 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 change to such exercise price or base price is considered
for approval.
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<PAGE> 45
WHITEHALL JEWELLERS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING, JUNE 8, 1999
P 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 1999 Annual Meeting of Stockholders of Whitehall Jewellers, Inc. (the
R "Company"), to be held at The Standard Club, 320 South Plymouth Court,
Chicago, Illinois, 60604 on Tuesday, June 8, 1999 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
O 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
X Meeting of Stockholders of the Company, (2) accompanying Proxy Statement,
and (3) Annual Report of the Company for the fiscal year ended January 31,
1999.
Y 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.
- ------------ ------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ------------ ------------
<PAGE> 46
May 10, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders to
be held at 10:00 a.m. Chicago time on Tuesday, June 8, 1999, 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 plan to attend the meeting,
please mark the appropriate box on the proxy.
Sincerely,
/s/ John R. Desjardins
----------------------
John R. Desjardins
Secretary
DETACH HERE
<TABLE>
<CAPTION>
[X] PLEASE MARK
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).
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Election of Directors: 2. Approval of the Amendment to the [ ] [ ] [ ]
Company's 1997 Long-Term Incentive
NOMINEES: Matthew M. Patinkin and Richard K. Berkowitz 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 both nominees except as noted above
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as name appears hereon. Joint owners
should each sign. Executors, administrators, trustees,
guardians or other fiduciaries should give full title as such.
If signing for a corporation, please sign the full corporate
name by a duly authorized officer.
Signature: Date: Signature: Date:
----------------------------- ----------------- ------------------------------------ -----------------
</TABLE>
