<PAGE>
As filed with the Securities and Exchange Commission on November 25, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FINLAY ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3492802
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
521 Fifth Avenue, New York, New York 10175
(Address of Principal Executive Offices) (Zip Code)
Finlay Enterprises, Inc. 1997 Long Term Incentive Plan
(Full title of the plan)
Bonni G. Davis, Esq.
Secretary and Corporate Counsel
Finlay Enterprises, Inc.
521 Fifth Avenue
New York, New York 10175
(Name and address of agent for service)
(212) 808-2060
(Telephone number, including area code, of agent for service)
Copy to:
James Martin Kaplan, Esq.
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
(212) 486-1700
----------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed maximum Proposed maximum
Title of securities to be Amount to be offering aggregate offering Amount of
registered registered(1) price per share(2) price(2) registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 350,000 shares $14.910776 $5,218,772 $1,581.45
$.01 per share
====================================================================================================================================
</TABLE>
(1) In addition, pursuant to Rule 416 under the Securities Act of 1933, as
amended, this Registration Statement also covers an indeterminate number
of shares which may be issued as a result of anti-dilution provisions
contained in the 1997 Long Term Incentive Plan (the "Plan").
(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(h) under the Securities Act of 1933, as
follows: (i) in the case of 35,185 shares underlying awards that
remained available for grant under the Plan on the date of filing of
this Registration Statement, based on the average of the high and low
prices of the registrant's Common Stock reported on the Nasdaq National
Market on November 19, 1997, which was $22.4375, and (ii) in the case of
314,815 shares underlying awards outstanding under the Plan on the date
of filing of this Registration Statement, based on the aggregate
exercise price of $4,429,308.14, the aggregate price at which the awards
may be exercised, which averages $14.0696 per share.
<PAGE>
PART II
Item 3. Incorporation of Certain Documents by Reference
The following documents filed with the Securities and Exchange Commission
(the "Commission") are incorporated into this registration statement by
reference:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
February 1, 1997;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended May 3, 1997;
(c) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 2, 1997;
(d) All other reports filed by the Registrant pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since February 1, 1997; and
(e) The description of the Registrant's Common Stock, par value $.01 per
share, contained in Amendment No. 1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333- 34949), as filed with the
Commission on September 23, 1997.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold shall be deemed
to be incorporated by reference in this registration statement and to be a part
hereof from the date of filing of such documents.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
The legality of the securities being offered hereunder has been passed
upon by the law firm of Zimet, Haines, Friedman & Kaplan. James Martin Kaplan, a
member of such firm, is a director of the Registrant.
Item 6. Indemnification of Directors and Officers
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a provision in the certificate of incorporation of each corporation
organized thereunder, eliminating or limiting, with certain exceptions, the
personal liability of a director of the corporation or its stockholders for
monetary damages for certain breaches of fiduciary duty as a director. The
Restated Certificate of Incorporation of the Registrant eliminates the personal
liability of directors to the fullest extent permitted by the DGCL.
Section 145 of the DGCL ("Section 145"), in summary, empowers a Delaware
corporation, within certain limitations, to indemnify its officers, directors,
employees and agents against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by them
in connection with any suit or proceeding other than by or on behalf of the
corporation, if they acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interest of the corporation, and, with respect
to a criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful.
With respect to actions by or on behalf of the corporation, Section 145
permits a corporation to indemnify its officers, directors, employees and agents
against expenses (including attorneys' fees) actually and reasonably
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<PAGE>
incurred in connection with the defense or settlement of such action or suit,
provided such person meets the standard of conduct described in the preceding
paragraph, except that no indemnification is permitted in respect of any claim
where such person has been found liable to the corporation, unless the Court of
Chancery or the court in which such action or suit was brought approves such
indemnification and determines that such person is fairly and reasonably
entitled to be indemnified.
The Restated Certificate of Incorporation of the Registrant provides for
the indemnification of officers and directors and certain other parties
("Indemnitees") of the Registrant to the fullest extent permitted under Delaware
law; provided, that except in the case of proceedings to enforce rights to
indemnification, the Registrant shall indemnify such Indemnitee in connection
with a proceeding initiated by such Indemnitee only if such proceeding was
authorized by the Board of Directors of the Registrant.
The Registrant maintains liability insurance covering its directors,
officers, employees and agents with respect to certain liabilities, not
including liabilities under the Securities Act, which they may incur in
connection with their serving as such directors, officers, employees or agents.
The Registrant has entered into indemnification agreements with each of
its directors and executive officers. The indemnification agreements require,
among other things, that the Registrant indemnify its directors and executive
officers against certain liabilities and associated expenses arising from their
service as directors and executive officers of the Registrant and reimburse
certain related legal and other expenses. In the event of a Change in Control
(as defined therein), the Registrant will, upon request by an indemnitee under
the agreements, create and fund a trust for the benefit of such indemnitee
sufficient to satisfy reasonably anticipated claims for indemnification.
Although the indemnification agreements offer coverage similar to the provisions
in the Restated Certificate of Incorporation, they provide greater assurance to
directors and executive officers that indemnification will be available because,
as contracts, they cannot be modified unilaterally in the future by the Board of
Directors or by the stockholders to eliminate the rights they provide.
The Registrant has also entered into employment agreements with certain of
its executive officers which contain provisions entitling the executive to
indemnification for losses incurred in the course of service to the Registrant
under certain circumstances.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
EXHIBIT DESCRIPTION
4.1 Finlay Enterprises, Inc. 1997 Long Term Incentive Plan (the "Plan"),
filed herewith.
4.2 Form of agreement for employees relating to stock options granted
under the Plan, filed herewith.
4.3 Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 to the Registrant's Annual Report on Form
10-K for the fiscal year ended January 28, 1995).
4.4 Amended and Restated By-laws of the Registrant (incorporated by
reference to Exhibit 3.2 to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-88938)).
5.1 Opinion of Zimet, Haines, Friedman & Kaplan, filed herewith.
23.1 Consent of Arthur Andersen LLP, filed herewith.
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<PAGE>
23.2 Consent of Zimet, Haines, Friedman & Kaplan, set forth in the opinion
thereof filed herewith as Exhibit 5.1.
Item 9. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling persons in connection with the securities being
-4-
<PAGE>
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on this 25th day of
November, 1997.
FINLAY ENTERPRISES, INC.
By /s/ Arthur E. Reiner
---------------------------------------
Arthur E. Reiner
President, Chief Executive Officer and
Vice Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints each of Arthur E. Reiner and Barry D.
Scheckner, each with full authority to act without the others, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this registration statement, and
to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the date indicated.
Name Title Date
---- ----- ----
/s/ David B. Cornstein Chairman of the Board and November 25, 1997
- -------------------------- Director
David B. Cornstein
/s/ Arthur E. Reiner President, Chief Executive November 25, 1997
- -------------------------- Officer, Vice Chairman and
Arthur E. Reiner Director (Principal Executive
Officer)
/s/ Barry D. Scheckner Senior Vice President and Chief November 25, 1997
- -------------------------- Financial Officer (Principal
Barry D. Scheckner Financial Officer)
/s/ Bruce E. Zurlnick Treasurer (Principal Accounting November 25, 1997
- -------------------------- Officer)
Bruce E. Zurlnick
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<PAGE>
/s/ Norman S. Matthews Director November 25, 1997
- --------------------------
Norman S. Matthews
/s/ James Martin Kaplan Director November 25, 1997
- --------------------------
James Martin Kaplan
/s/ Rohit M. Desai Director November 25, 1997
- --------------------------
Rohit M. Desai
/s/ Thomas H. Lee Director November 25, 1997
- --------------------------
Thomas H. Lee
/s/ Warren C. Smith, Jr. Director November 25, 1997
- --------------------------
Warren C. Smith, Jr.
-7-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
<S> <C>
4.1 Finlay Enterprises, Inc. 1997 Long Term Incentive Plan (the
"Plan"), filed herewith.
4.2 Form of agreement for employees relating to stock options
granted under the Plan, filed herewith.
4.3 Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
January 28, 1995).
4.4 Amended and Restated By-laws of the Registrant
(incorporated by reference to Exhibit 3.2 to the Registrant's
Registration Statement on Form S-1 (Registration No. 33-
88938)).
5.1 Opinion of Zimet, Haines, Friedman & Kaplan, filed
herewith.
23.1 Consent of Arthur Andersen LLP, filed herewith.
23.2 Consent of Zimet, Haines, Friedman & Kaplan, set forth in the
opinion thereof filed herewith as Exhibit 5.1.
</TABLE>
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<PAGE>
FINLAY ENTERPRISES, INC.
1997 LONG TERM INCENTIVE PLAN
1. Purpose of the Plan
The purpose of the 1997 Long Term Incentive Plan is to promote the
interests of Finlay Enterprises, Inc. (the "Corporation") and its stockholders
by providing an incentive and reward for executive officers, directors, key
employees, consultants and other persons who are in a position to contribute
substantially to the progress and success of the Corporation and its
subsidiaries and thereby encourage such persons to seek such results; to closely
align the interests of such employees and other persons with the interests of
stockholders of the Corporation by linking rewards hereunder to stock
performance; to retain in the Corporation and its subsidiaries the benefits of
the services of such persons; and to attract to the service of the Corporation
and its subsidiaries new executive officers, directors, key employees,
consultants and other such persons of high quality.
2. Definitions
Unless otherwise required by the context, the terms used in this Plan shall
have the meanings ascribed to such terms in this Section 2.
"Award" shall mean an award granted under the Plan in one of the forms
provided in Section 6.
"Beneficiary," as applied to a participant, shall mean a person or entity
(including a trust or the estate of the participant) designated in writing by
the participant on such forms as the Committee may prescribe to receive benefits
under the Plan in the event of the death of the participant; provided, however,
that if, at the death of a participant, there shall not be any living person or
entity in existence so designated, the term "beneficiary" shall mean the legal
representative of the participant's estate.
"Board" or "Board of Directors" shall mean the Board of Directors of the
Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to include
regulations and proposed regulations thereunder and successor provisions and
regulations thereto.
"Committee" shall mean the Compensation Committee of the Board of
Directors, and/or any other committee or subcommittee the Board may appoint to
administer the Plan as provided herein. A Committee composed solely of two or
more members of the Board who meet (i) the definition of "outside director"
under Section 162(m) of the Code, (ii) the definition of "non-employee director"
under Section 16 of the Exchange Act and (iii) any similar or successor laws
hereinafter enacted, shall administer the Plan with respect to participants who
are Covered Employees or who are subject to Section 16 of the Exchange Act at
the time of the relevant Committee action; provided, however, that if, at any
time, no Committee shall be in office, then the functions of the Committee
specified in this Plan shall be exercised by the Board or by any other committee
appointed by the Board.
"Common Stock" shall mean the Common Stock of the Corporation, $.01 par
value, or such other class of shares or other securities as may be applicable
pursuant to the provisions of Section 8.
"Covered Employee" shall mean any employee of the Corporation or any of its
Subsidiaries who is deemed to be a "covered employee" within the meaning of
Section 162(m) of the Code.
<PAGE>
"Detrimental Activity" shall mean any activity by a participant or former
participant in the Plan that is determined by the Executive Committee of the
Corporation in its sole discretion to be deleterious to the interests of the
Corporation or any Subsidiary.
"Disability" shall mean the permanent and total disability as defined by
Section 22(e)(3) of the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
References to any provision of the Exchange Act shall be deemed to include the
rules and regulations thereunder and successor provisions and rules and
regulations thereto.
"Incentive Stock Option" shall mean any stock option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422 of
the Code.
"Limited Stock Appreciation Right" shall mean a right granted pursuant to
paragraph 6.6 to receive cash based on the increase in Market Value of the
shares of Common Stock subject to such right in the limited circumstances set
forth therein.
"Market Value," as applied to any date, shall mean the mean between the
highest and lowest sale prices of the Common Stock as reported on the principal
national securities exchange or National Association of Securities Dealers
Automated Quotation/National Market System ("NASDAQ/NMS"), as the case may be,
on which such stock is listed and traded for such date or, if there is no such
sale on that date, then on the last preceding date on which such a sale was
reported. If the Common Stock is not quoted or listed on an exchange or on
NASDAQ/NMS, or representative quotes are not otherwise available, the Market
Value shall mean the amount determined by the Committee to be the fair market
value based upon a good faith attempt to value the Common Stock accurately and
computed in accordance with applicable regulations of the Internal Revenue
Service.
"Non-Employee Director" shall mean a member of the Board who is not an
employee of the Corporation or any of its Subsidiaries.
"Nonqualified Stock Option" shall mean an Option that is not an Incentive
Stock Option.
"Option" or "Stock Option" shall mean an option to purchase shares of
Common Stock granted pursuant to paragraph 6.3.
"Performance Unit" shall mean a contingent right granted pursuant to
paragraph 6.5 to receive an award, payable either in cash or in Common Stock, if
specific goals prescribed by the Committee are attained.
"Plan" shall mean the 1997 Long Term Incentive Plan of the Corporation set
forth herein, as such may be amended and supplemented from time to time.
"Restricted Stock" shall mean shares of Common Stock issued or transferred
subject to restrictions precluding a sale or other disposition for a period of
time (other than as specifically may be permitted) and requiring as a condition
to retention compliance with any other terms and conditions that may be imposed
by the Committee.
"Retirement" shall mean the termination of the participant's employment
with the Corporation and its Subsidiaries for retirement purposes if such
termination occurs on or after his normal retirement date as defined under the
Corporation's Retirement Income Plan.
2
<PAGE>
"Rule 16b-3," as applied on a specific date, shall mean Rule 16b-3 of the
General Rules and Regulations under the Exchange Act as then in effect or any
other provision that may have replaced such Rule and be then in effect.
"Stock Appreciation Right" shall mean a right granted pursuant to paragraph
6.4 to receive cash or Common Stock based on the increase in Market Value of the
shares of Common Stock subject to such right.
"Stock Award" shall mean a form of Award granted pursuant to paragraph 6.2.
"Subsidiary" shall mean a corporation or other form of business association
of which shares (or other ownership interests) having 50% or more of the voting
power are owned or controlled, directly or indirectly, by the Corporation.
"Year" shall mean the Corporation's then applicable fiscal year.
3. Scope of the Plan; Eligibility
3.1. The Plan shall apply to the Corporation and Subsidiaries other than
those specifically excluded by the Board of Directors.
3.2. Awards may be made or granted, subject to applicable law, to executive
officers, directors, key employees, consultants and other persons who are deemed
to render significant services to the Corporation or its Subsidiaries and/or who
are deemed to have the potential to contribute to the future success of the
Corporation. The term "employees" shall include officers who are employees of
the Corporation or of a Subsidiary, as well as other employees of the
Corporation and its Subsidiaries. No Incentive Stock Option shall be granted to
any person who is not an employee of the Corporation or a "subsidiary" (as
defined in Section 424 of the Code) at the time of grant.
4. Administration
4.1. The Plan shall be administered by the Committee. Subject to the
express provisions of the Plan, the Committee shall have the full power to
interpret and administer the Plan, including, but without limiting the
generality of the foregoing, determining who shall be participants in the Plan,
the amount to be awarded to each participant and the form, manner of payment,
conditions, time and terms of payment of Awards. The interpretation by the
Committee of the terms and provisions of the Plan and the administration
thereof, as well as all actions taken by the Committee, shall be final, binding
and conclusive on the Corporation, its stockholders, Subsidiaries, all
participants and employees, and upon their respective Beneficiaries, successors
and assigns, and upon all other persons claiming under or through any of them.
4.2. The Committee may adopt such rules and regulations, not inconsistent
with the provisions of the Plan, as it deems necessary to determine
participation in the Plan, the form and distribution of benefits thereunder and
the proper administration of the Plan, and may amend or revoke any such rule or
regulation.
4.3. Unless authority is specifically reserved to the Board of Directors
under the terms of the Plan, the Corporation's Certificate of Incorporation or
By-laws, or applicable law, the Committee shall have sole discretion in
exercising authority under the Plan. The Committee shall select one of its
members as its chairman and shall hold meetings at such times and places as it
shall deem advisable. Any action of the Committee shall be taken with the
approval of a majority of its members present and voting at a meeting duly
called and held at which a quorum is present. A majority of the Committee's
members shall constitute a quorum. Any action may be taken by a written
instrument signed by all members of the Committee and such action shall be fully
as effective as if taken by a majority of the members at a meeting duly called
and held. The
3
<PAGE>
Committee may delegate to officers or managers of the Corporation or any
Subsidiary of the Corporation the authority, subject to such terms as the
Committee shall determine, to perform administrative functions and, with respect
to participants not subject to Section 16 of the Exchange Act, to perform such
other functions as the Committee may determine, to the extent permitted under
Rule 16b-3 and applicable law.
4.4. Each member of the Committee shall be entitled to rely or act in good
faith upon any report or other information furnished to him by any officer or
other employee of the Corporation or any Subsidiary, the Corporation's
independent certified public accountants, or any executive compensation
consultant, legal counsel or other professional retained by the Corporation to
assist in the administration of the Plan. No member of the Committee, nor any
officer or employee of the Corporation or a Subsidiary acting on behalf of the
Committee, shall be personally liable for any action, determination or
interpretation taken or omitted to be taken or made in good faith with respect
to the Plan, and such persons shall, to the extent permitted by law, be fully
indemnified and protected by the Corporation with respect to any such action,
determination or interpretation.
5. Shares Subject to the Plan.
5.1. Subject to adjustment as provided in Section 8 hereof, the total
number of shares of Common Stock reserved for delivery to participants in
connection with Awards under the Plan shall be 350,000. If any shares of Common
Stock subject to an Award at or after the effective date of the Plan are
forfeited or such Award is settled in cash or otherwise terminates or is settled
without delivery of shares of Common Stock to the participant, such number of
shares shall be available for new Awards under the Plan.
5.2. No Award (including an Award that may only be settled in cash) may be
granted if the number of shares of Common Stock to which such Award relates,
when added to the number of shares previously delivered under the Plan and the
number of shares to which other then-outstanding Awards relate, exceeds the
number of shares of Common Stock deemed available under this Section 5. The
Committee may adopt procedures for the counting of shares under this Section 5
to ensure appropriate counting, avoid double counting (in the case of tandem or
substitute Awards), and provide for adjustments in any case in which the number
of shares actually delivered differs from the number of shares previously
counted in connection with an Award. Any shares of Common Stock delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
6. Terms of Awards
6.1. Grants of Awards. Awards may be granted, in whole or in part, in one
or more following forms:
(a) A Stock Award in accordance with paragraph 6.2;
(b) An Option, in accordance with paragraph 6.3;
(c) A Stock Appreciation Right, in accordance with paragraph 6.4.
(d) A Performance Unit in accordance with paragraph 6.5.
(e) A Limited Stock Appreciation Right in accordance with paragraph
6.6.
6.2. Stock Awards. Awards granted as Stock Awards shall be in the form of
an issuance of (i) shares of Restricted Stock or (ii) shares which are not
subject to any restrictions on sale or disposition. Such Stock Awards shall
contain such terms and conditions as the Committee shall determine, including,
with respect to a Stock Award of Restricted Stock, provisions relating to
forfeiture of all or any part of the Restricted
4
<PAGE>
Stock upon termination of employment prior to expiration of a designated period
of time or upon the occurrence of other events; provided, however, that upon the
issuance of shares pursuant to a Stock Award of Restricted Stock, the
participant shall, with respect to such shares, be and become a stockholder of
the Corporation entitled to receive dividends, to vote and to exercise all other
rights of a stockholder except to the extent otherwise specifically provided in
the Stock Award. The certificate for any shares of Common Stock issued or
transferred as Restricted Stock shall either be deposited in escrow or carry an
appropriate legend as the Committee shall determine.
6.3. Options. Awards granted as Options shall be subject to the following
provisions:
(a) Options granted shall be either Incentive Stock Options or
Nonqualified Stock Options, as the Committee shall specify at the time the
Option is granted.
(b) The price at which shares of Common Stock covered by each Option
may be purchased pursuant thereto shall be determined in each case by the
Committee, but shall not be less than the par value of such shares or, with
respect to Incentive Stock Options, not less than 100% of the Market Value
of the Common Stock on the date the Option is granted. Notwithstanding the
foregoing, in the case of an Incentive Stock Option granted to a
participant who (applying the rules of Section 424(d) of the Code) owns
stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the employer corporation (or a "parent" or
"subsidiary" of such corporation within the meaning of Section 424 of the
Code) (a "Ten-Percent Stockholder"), the exercise price per share shall not
be less than one hundred and ten percent (110%) of the Market Value of the
Common Stock on the date on which the Option is granted.
(c) Each Option shall expire at such time as the Committee may
determine at the time such Option is granted, but not later, in the case of
Incentive Stock Options, than ten years (or, in the case of Incentive Stock
Options granted to a Ten-Percent Stockholder, not later than five years)
from the date such Option is granted. The term of any Nonqualified Stock
Option may, with the consent of the holder of the Option, be extended by
the Committee at any time prior to the expiration of the Option without
further consideration to the Corporation and, except to the extent
otherwise provided in the Code, such extension shall not be deemed the
grant of a new or additional Option for any purpose under the Plan or
otherwise.
(d) Each Option shall first become exercisable at such time or times
as the Committee may determine at the time such Option is granted, except
that:
(i) In the event the employment of a participant is terminated by
reason of Retirement, death or Disability, all unexercised Options
shall thereupon, subject to the other provisions below of this
paragraph 6.3, become exercisable for the period provided in
connection with such termination in paragraph (e); and
(ii) Options granted shall not be affected by any change in the
nature of the participant's employment so long as he continues to be
employed by the Corporation or a Subsidiary. Approved leaves of
absence shall not be considered a termination or interruption of
full-time employment for any purpose of the Plan.
(e) The Committee shall determine and set forth in each option
agreement governing an Option granted under the Plan rules that specify the
period, if any, after termination of employment during which an Option
shall be exercisable, provided that in the case of an Incentive Stock
Option, such Option shall in no event be exercisable more than ten years
(or, in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder, five years) after the date of grant.
(f) Subject to the provisions of paragraphs 6.3(c), (d) and (e),
Options may be exercised, in part or in whole, at any time or from time to
time during the term of the Option.
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<PAGE>
(g) An Option shall be considered exercised under the Plan on the date
written notice is mailed to the Secretary of the Corporation, postage
prepaid, or delivered in person to the Secretary, advising of the exercise
of a particular Option and transmitting payment of the Option price for the
shares involved, plus any withholding tax required under any federal, state
and local statutes; provided, however, that this provision shall not
preclude exercise of an Option by any other proper legal method.
(h) Options are not transferable other than by will or by the laws of
descent and distribution, and during a participant's lifetime are
exercisable only by him.
(i) The Committee may place such conditions on the exercise of Options
and on the transferability of shares received on exercise of an Option, in
addition to those contained herein, as it shall deem appropriate.
(j) No shares shall be issued or transferred upon exercise of an
Option until full payment of the exercise price therefor has been made.
Such exercise price may be paid (i) in cash, (ii) to the extent authorized
by the Committee, in whole shares of Common Stock owned by the participant
prior to exercising the Option, (iii) to the extent authorized by the
Committee, by having the Corporation withhold a number of shares from the
exercise having a Market Value equal to the exercise price, (iv) by
delivery of any other property acceptable to the Corporation or (v) by any
combination thereof. Notwithstanding the preceding sentence, the
Corporation and the participant may agree upon any other reasonable manner
of providing for payment of the exercise price of the Option. For the
purpose of such payment, the sum of the Market Value of the shares of
Common Stock and any such other property on the date of exercise plus any
cash payment shall not be less than the option price of the shares to be
issued or transferred. Payments of the exercise price of an Option that are
made in the form of Common Stock (which shall be valued at Market Value)
may be made by (i) delivery of stock certificates in negotiable form or
(ii) unless otherwise determined by the Committee, delivery of the
participant's representation that, on the date of exercise, he owns the
requisite number of shares and, unless such shares are registered in the
participant's name as verified by the records of the Corporation's transfer
agent, a representation executed by the participant's brokerage firm or
other entity in whose name such shares are registered that on the date of
exercise the participant beneficially owns the requisite number of shares
("Certificateless Exercise"). Delivery of such a representation pursuant to
a Certificateless Exercise shall be treated as the delivery of the
specified number of shares of Common Stock; provided, however, that the
number of shares issued to the participant upon exercise of the Option
shall be reduced by the number of shares specified in the representation.
6.4. Stock Appreciation Rights. Awards granted as Stock Appreciation Rights
shall be the subject of the following provisions:
(a) Stock Appreciation Rights may be granted only in connection with
an Option (the "Related Option"), either at the time of the grant of such
Option or at any time thereafter during the term of the Option.
(b) Each Stock Appreciation Right shall provide that the holder
thereof may exercise the same by surrendering the Related Option or any
portion thereof, to the extent unexercised, and upon such exercise and
surrender shall be entitled to receive other cash or shares of Common Stock
in the amount determined pursuant to clause (ii) of paragraph 6.4(c). Such
Option shall, to the extent so surrendered, thereupon cease to be
exercisable.
(c) Stock Appreciation Rights shall be further subject to the
following terms and conditions and to such other terms and conditions, not
inconsistent with the Plan, as the Committee shall from time to time
approve:
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<PAGE>
(i) Stock Appreciation Rights shall be exercisable at such time
or times and to the extent, but only to the extent, that the Related
Option shall be exercisable.
(ii) Upon exercise of Stock Appreciation Rights, the holder
thereof shall receive, at the option of the Corporation, either (i)
cash in an amount equal to the excess of the Market Value of a share
of Common Stock on the date of such exercise over the exercise price
per share of Common Stock subject to the Related Option multiplied by
the number of shares of Common Stock in respect of which the Stock
Appreciation Rights are exercised (the "Settlement Amount") or (ii)
such number of shares of Common Stock as shall be determined by
dividing the Settlement Amount by the Market Value of a share of
Common Stock on the date of exercise of the Stock Appreciation Rights.
(d) To the extent that Stock Appreciation Rights shall be exercised,
the Related Option shall be deemed to have been exercised for the purpose
of the maximum limitation set forth in paragraph 5.1.
(e) Stock Appreciation Rights may be exercised by the form of notice
provided for the exercise of an Option under paragraph 6.3(g).
(f) Any provision of this Section 6 to the contrary notwithstanding,
no payment or exercise of Stock Appreciation Rights by a participant
subject to the Exchange Act shall be made other than in compliance with
Rule 16b-3.
(g) Stock Appreciation Rights are not transferable other than by will
or the laws of descent and distribution, and during a participant's
lifetime are exercisable only by him.
6.5. Performance Units. Awards granted as Performance Units shall be
subject to the following provisions:
(a) The performance period for the attainment of the performance goal
shall be a cycle of not less than two nor more than five fiscal years of
the Corporation, as determined by the Committee. The Committee may
establish more than one cycle for any particular Performance Unit.
(b) The Committee shall establish a dollar value for each Performance
Unit, the principal and minimum performance goals to be attained in respect
of the Performance Unit, the various percentages of the Performance Unit
value to be paid out upon the attainment, in whole or in part, of the
performance goals and such other Performance Unit terms, conditions and
restrictions as the Committee deems appropriate. The business criteria used
by the Committee in establishing such performance goals shall include (i)
return on equity, (ii) operating income, (iii) earnings and (iv) return on
invested capital, and any such performance goals may be modified by the
Committee during the course of a performance cycle to take into account
changes in conditions that occur. Notwithstanding the foregoing, in the
case of a Performance Unit granted to a Covered Employee, no business
criteria other than those enumerated herein may be used in establishing the
performance goal for such Performance Unit, and no such performance goal
may be modified by the Committee during the course of a performance cycle
except in accordance with Section 162(m) of the Code. As soon as
practicable after the termination of the performance period, the Committee
shall determine what, if any, payment is due on the Performance Unit in
accordance with the terms thereof.
(c) In the event of a participant's Retirement prior to the expiration
of the performance cycle established for any Performance Units he may have
been awarded, such units shall, to the extent that they are not fully
vested at the time of Retirement, thereupon become fully vested and be
payable on expiration of the performance cycle; provided, however, that the
percentage of the Performance Unit to be paid out upon the attainment of
the performance goals shall be reduced by multiplying that amount by a
fraction,
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<PAGE>
the numerator of which is the number of months remaining in the performance
cycle following the date of Retirement and the denominator of which is the
total number of months in the performance cycle. If a participant's
employment with the Corporation and its Subsidiaries shall be terminated
for any other reason prior to the expiration of the performance cycle
established for any Performance Units he has been awarded, such units shall
be canceled automatically unless the Committee, in its sole discretion, and
subject to limitations as it may deem advisable, determines to make full or
partial payment with respect to such Performance Units, whether at the time
of termination, at the expiration of the performance cycle or otherwise.
Without limiting the generality of the foregoing, any unpaid portion of a
Performance Unit otherwise payable to a terminated participant shall be
forfeited if such participant at any time engages in Detrimental Activity.
Notwithstanding the foregoing, in the case of Performance Units granted to
Covered Employees, this paragraph 6.5(c) shall not be given effect if, as a
result thereof, such Performance Units shall lose the protection afforded
by Section 162(m) of the Code.
(d) Payment of Performance Units shall be made, at the discretion of
the Committee, either in cash in the amount of the dollar value of the
Performance Units awarded or in Common Stock having a Market Value at the
time such award is paid equal to such dollar amount. Payments made in the
form of Common Stock shall be charged against the maximum limitations for
shares of Common Stock provided in paragraph 5.1.
(e) Performance Units are not transferable other than by will or by
the laws of descent and distribution and during a participant's lifetime
payments in respect thereof shall be made only to the participant.
6.6. Limited Stock Appreciation Rights.
Awards granted as Limited Stock Appreciation Rights shall be subject to the
following provisions:
(a) A Limited Stock Appreciation Right may be granted only in
connection with a Related Option, either at the time of the grant of such
Option or at any time thereafter during the term of such Option.
(b) Unless otherwise determined by the Committee, a Limited Stock
Appreciation Right may be exercised only during the period (i) beginning on
the first day following a Change of Control and (ii) ending on the
thirtieth day (or such other date specified by the Committee at the time of
grant of the Limited Stock Appreciation Right) following such date (such
period herein referred to as the "Limited Rights Exercise Period"). Each
Limited Stock Appreciation Right shall be exercisable during the Limited
Rights Exercise Period only to the extent the Related Option is then
exercisable, and in no event after termination of the Related Option.
Limited Stock Appreciation Rights granted under the Plan shall be
exercisable in whole or in part in the manner provided for exercise of
Stock Appreciation Rights pursuant to paragraph 6.4.
(c) Upon the exercise of Limited Stock Appreciation Rights, the holder
shall receive in cash an amount equal to the excess of the Market Value on
the date of exercise of each share of Common Stock with respect to which
such Limited Stock Appreciation Rights shall have been exercised over the
exercise price per share of Common Stock subject to the Related Option,
multiplied by the number of shares of Common Stock in respect of which the
Limited Stock Appreciation Rights are exercised.
(d) To the extent that Limited Stock Appreciation Rights shall be
exercised, the Related Option shall be deemed to have been exercised for
the purpose of the maximum limitation set forth in paragraph 5.1.
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<PAGE>
(e) For purposes of this Section 6.6, a "Change in Control" shall be
deemed to have occurred if:
(i) the stockholders of the Corporation shall have approved (A)
any consolidation or merger of the Corporation in which the
Corporation is not the continuing or surviving corporation or pursuant
to which shares of Common Stock would be converted into cash,
securities or other property, other than a merger of the Corporation
in which the holders of Common Stock immediately prior to the merger
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the
Corporation, or (C) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation;
(ii) any person (as such term is defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act), corporation or other entity (other than
the Corporation or any employee benefit plan sponsored by the
Corporation or any Subsidiary) (A) shall have purchased any Common
Stock (or securities convertible into the Common Stock) for cash,
securities, or any other consideration pursuant to a tender offer,
without the prior consent of the Board of Directors, or (B) shall have
become the "beneficial owner" (as such term is defined in Rule 13d- 3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing fifteen percent (15%) or more of the issued
and outstanding Common Stock; or
(iii) individuals who on the date of the adoption of the Plan
constituted the entire Board shall have ceased for any reason to
constitute a majority unless the election, or the nomination for
election by the Corporation's stockholders, of each new director was
approved by a vote of at least a majority of the directors then still
in office.
7. Limit on Awards.
7.1. Notwithstanding any provision contained herein, the aggregate Market
Value of the shares of Common Stock with respect to which Incentive Stock
Options are first exercisable by any employee during any calendar year (under
all stock option plans of the employee's employer corporation and its "parent"
and "subsidiary" corporation within the meaning of Section 424 of the Code)
shall not exceed $100,000.
7.2. Notwithstanding any provision contained herein, no participant may be
granted under the Plan, during any Year, Options or other Awards relating to
more than 175,000 shares of Common Stock, subject to adjustment in accordance
with Section 8 hereof. With respect to an Award that may be settled in cash, no
participant may be paid in respect of any fiscal year an amount that exceeds the
greater of the Market Value of the number of shares of Common Stock set forth in
the preceding sentence at the date of grant or at the date of settlement of the
Award, provided that this limitation is separate from and not affected by the
number of Awards granted during such fiscal year subject to the limitation in
the preceding sentence.
8. Adjustments.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, shares of Common Stock or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase or share exchange, or other
similar corporate transaction or event, affects the shares of Common Stock such
that an adjustment is appropriate in order to prevent dilution or enlargement of
the rights of participants under the Plan, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of (i) the number and kind of
shares which may thereafter be delivered in connection with Awards, (ii) the
number and kind of shares that may be delivered or deliverable in respect of
outstanding Awards, (iii) the number of shares with respect to which Awards may
be
9
<PAGE>
granted to a given participant and (iv) the exercise price, grant price, or
purchase price relating to any Award or, if deemed appropriate, make provision
for a cash payment with respect to any outstanding Award; provided, however,
that, with respect to Incentive Stock Options, no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code or previously issued Incentive Stock Options to
lose their status as such and, with respect to Awards granted to Covered
Employees, no such adjustment shall be authorized to the extent that such
adjustment would cause such Award to lose the benefits of Section 162(m) of the
Code.
9. General Provisions.
9.1. Compliance With Legal and Exchange Requirements. The Corporation shall
not be obligated to deliver shares of Common Stock upon the exercise or
settlement of any Award or take other actions under the Plan until the
Corporation shall have determined that applicable federal and state laws, rules
and regulations have been complied with and such approvals of any regulatory or
governmental agency have been obtained and contractual obligations to which the
Award may be subject have been satisfied. The Corporation, in its discretion,
may postpone the issuance or delivery of shares of Common Stock under any Award
until completion of such listing or registration or qualification of such shares
or other required action under any federal or state law, rule or regulation as
the Corporation may consider appropriate, and may require any participant to
make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of shares under the
Plan.
9.2. Awards Granted to Foreign Participants. Awards granted to a
participant who is subject to the laws of a country other than the United States
of America may contain terms and conditions inconsistent with the provisions of
the Plan (except those necessary to retain the benefits of Section 162(m) or
Section 422 of the Code), or may be granted under such supplemental documents,
as required under such laws.
9.3. No Right to Continued Employment. Neither the Plan nor any action
taken hereunder shall be construed as creating any contract of employment
between the Corporation or any of its Subsidiaries and any employee or otherwise
giving any employee the right to be retained in the employ of the Corporation or
any of its Subsidiaries, nor shall it interfere in any way with the right of the
Corporation or any of its Subsidiaries to terminate any employee's employment at
any time.
9.4. Withholding Taxes. In the event that the Corporation or any of its
Subsidiaries shall be required to withhold any amounts by reason of any federal,
state, or local tax law, rule or regulation by reason of the grant to or
exercise by a participant of any Award, the participant shall make available to
the Corporation or its Subsidiaries, promptly when required, sufficient funds to
meet the Corporation's or Subsidiary's requirement of such withholding, and the
Corporation shall be entitled to take such steps as the Committee may deem
advisable in order to have such funds available to the Corporation or its
Subsidiary at the required time or times. This Committee authority shall include
authority to deduct and withhold such required amounts from any other cash
payment or payments to be made by the Corporation or its Subsidiaries (including
from payroll) to such participant or to withhold or receive shares of Common
Stock or other property, on a mandatory basis or at the election of the
participant, and to make cash payments in respect thereof in satisfaction of a
participant's tax obligations (which may include mandatory withholding
obligations and obligations of the participant in excess of such mandatory
obligations relating to an Award).
9.5. Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of stockholders or participants, except that
any such action shall be subject to the approval of the Corporation's
stockholders if the Committee determines that such approval would be necessary
to retain the benefits of Rule 16b-3 (with respect to participants who are
subject to Section 16 of the Exchange Act), Section 162(m) of the Code (with
respect to Covered Employees) or Section 422 of the Code (with respect to
Incentive Stock Options) or if such stockholder approval is required by any
federal or state law or regulation or the rules of any stock
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<PAGE>
exchange or automated quotation system on which the Common Stock may then be
listed or quoted or if the Board of Directors otherwise determines to submit any
such action to stockholder approval; provided, however, that, without the
consent of an affected participant, no amendment, alteration, suspension,
discontinuation or termination of the Plan may materially impair the rights of
such participant under any Award theretofore granted to him. The Committee may
waive any conditions or rights under, or amend, alter, suspend, discontinue or
terminate, any Award theretofore granted and any Award agreement relating
thereto; provided, however, that, without the consent of an affected
participant, no such amendment, alteration, suspension, discontinuation or
termination of any Award may materially impair the rights of such participant
under such Award.
9.6. No Rights to Awards; No Stockholder Rights. Nothing contained in the
Plan shall be deemed to give any person eligible to receive an Award hereunder,
or any heir, distributee, executor, administrator or personal representative of
any such person, any interest or title to any specific property of the
Corporation or any of its Subsidiaries, or any other right against the
Corporation or any of its Subsidiaries other than as set forth in the Plan.
Neither the establishment of the Plan nor any other action taken now or at any
time with regard thereto shall be construed as giving any person whatsoever any
legal or equitable right against the Corporation unless such right shall be
specifically provided for in the Plan. There is no obligation for uniformity of
treatment of participants and employees under the Plan. Except as otherwise
provided in Section 6.2 with respect to Restricted Stock, no Award shall confer
on any participant any of the rights of a stockholder of the Corporation unless
and until shares of Common Stock are duly issued or transferred and delivered to
the participant in accordance with the terms of the Award.
9.7. Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such participant any rights that are
greater than those of a general creditor of the Corporation.
9.8. Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Corporation for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.
9.9. Binding Effect. The provisions of the Plan shall be binding upon the
heirs, distributees, executors, administrators and personal representatives of
any person participating under the Plan. A person claiming any rights under the
Plan as a beneficiary or otherwise through a participant shall be subject to all
of the terms and conditions of the Plan and any additional terms and conditions
as may be imposed by the Committee.
9.10. No Fractional Shares. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
9.11. Compliance with Code Section 162(m). In the event it is determined by
the Committee prior to the grant of an Award to a Covered Employee that such
Award shall constitute "qualified performance-based compensation" within the
meaning of Code Section 162(m) of the Code, then, unless otherwise determined by
the Committee, if any provision of the Plan or any Award agreement relating to
such an Award granted to a Covered Employee does not comply or is inconsistent
with the requirements of Section 162(m) of the Code or the regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements, and no provision shall be deemed to
confer upon the Committee or any other person discretion to increase the amount
of compensation otherwise payable to a Covered Employee in connection with any
such Award upon attainment of the performance objectives to which such Award is
subject.
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<PAGE>
9.12. Governing Law. The Plan and all related documents shall be governed
by, and construed in accordance with, the laws of the State of Delaware (except
to the extent provisions of federal law may be applicable). If any provision
hereof shall be held by a court of competent jurisdiction to be invalid and
unenforceable, the remaining provisions of the Plan shall continue to be fully
effective.
9.13. Headings. Headings are given to the sections of the Plan solely as a
convenience to facilitate reference and neither such headings or numbering or
paragraphing shall be deemed in any way material or relevant to the construction
of the Plan or any provision thereof.
9.14. Terminology. In order to shorten and improve the understandability of
the Plan document by eliminating the repeated use of the phrase "his or her",
any masculine terminology herein shall also include the feminine.
9.15. Effective Date; Plan Termination. The Plan shall become effective as
of March 6, 1997; provided, however, that the Plan shall have been approved by
the affirmative votes of the holders of a majority of voting securities present
in person or represented by proxy and entitled to vote at the June 19, 1997
annual meeting of the Corporation's stockholders, or any adjournment thereof, in
accordance with applicable provisions of the Delaware General Corporation Law.
Any Awards granted under the Plan prior to such approval of stockholders shall
not be effective unless stockholder approval is obtained, and, if stockholders
fail to approve the Plan as specified hereunder, any previously granted Award
shall be forfeited and cancelled. Unless earlier terminated under Section 9.5
hereto, the Plan shall terminate on and no further Awards may be granted under
the Plan after March 5, 2007.
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AGREEMENT AND CERTIFICATE OF OPTION
PURSUANT TO THE LONG TERM INCENTIVE PLAN OF
FINLAY ENTERPRISES, INC.
-------------------------------------------
Agreement and Certificate of Option (this "Agreement") dated __________
(the "Date of Grant"), between FINLAY ENTERPRISES, INC. (the "Corporation") and
__________ (the "Grantee"):
1. The Option.
(a) Subject to the provisions of Section 4 hereof, the Corporation hereby
grants to the Grantee, a stock option (the "Option") to purchase, on the terms
and conditions herein set forth, up to shares of the Corporation's fully paid,
non-assessable shares of Common Stock, par value $0.01 per share (the "Shares"),
at the option price set forth in Section 2 below.
(b) The Option is granted pursuant to the Corporation's 1997 Long Term
Incentive Plan (the "Plan"), a copy of which is delivered herewith by the
Corporation and receipt thereof is acknowledged by the Grantee. The Option is
subject in its entirety to all of the applicable provisions of the Plan which
are incorporated herein by reference, and any conflict between the terms of this
Agreement and those of the Plan shall be resolved in favor of the terms of the
Plan. The Option is a "Non-Statutory Option" as that term is defined in the
Plan.
2. Exercise Price.
The purchase price of the Shares shall be $ per Share (the "Exercise
Price").
3. Exercise of Option.
(a) Except as otherwise provided in the Plan and this Agreement, the Option
is exercisable over a period of ten (10) years from the date hereof (the "Option
Period") in accordance with the following schedule (the portion of the Option
exercisable in accordance with such schedule being referred to herein as
"Vested"):
<PAGE>
Percent of Shares Subject
Date to Option Purchasable
---- ---------------------
Commencing on the first anniversary
of the Date of Grant until (but not
including) the second anniversary
of the Date of Grant ....................................... 20%
Commencing on the second anniversary
of the Date of Grant until (but not
including) the third anniversary
of the Date of Grant ....................................... 40%
Commencing on the third anniversary
of the Date of Grant until (but not
including) the fourth anniversary
of the Date of Grant ....................................... 60%
Commencing on the fourth anniversary
of the Date of Grant until (but not
including) the fifth anniversary
of the Date of Grant ....................................... 80%
Commencing on the fifth anniversary
of the Date of Grant until (but not
including) the tenth anniversary
of the Date of Grant ....................................... 100%
Subject to the terms hereof, the Option may be exercised from time to time
during the Option Period as to the total number of Shares allowable under this
Section 3, or any lesser amount thereof, as long as the Grantee is employed by
the Corporation. For purposes of this Agreement, employment by the Corporation
or any Subsidiary (as defined in the Plan) shall be deemed to be employment by
the Corporation.
(b) In the event that the Grantee's employment is terminated other than by
reason of Retirement, death or Disability (as such terms are defined in the
Plan), (1) any portion of the Option not yet Vested shall thereupon expire and
terminate and (2) any portion of the Option that has Vested may be exercised
during the period ending twenty-one (21) days following such termination, after
which period any unexercised portion of the Option shall expire and terminate;
provided, however, that in the event that the Grantee's employment is terminated
for Cause (as hereinafter defined), the Option or any unexercised portion
thereof shall be permanently cancelled and terminated.
- 2 -
<PAGE>
(c) In the event that the Grantee's employment is terminated by reason of
Retirement, death or Disability, the entire Option (or any unexercised portion
thereof) shall thereupon be deemed Vested and may be exercised during the period
ending twenty-one (21) days following such termination, after which period any
unexercised portion of the Option shall expire and terminate.
(d) If this Option shall extend to one hundred (100) or more Shares, then
this Option may not be exercised for less than one hundred (100) Shares at any
one time, and if this Option shall extend to less than one hundred (100) Shares,
then this Option must be exercised for all such Shares at one time.
(e) The number of Shares to which the Grantee shall be entitled and the
Exercise Price shall be equitably adjusted to account for any relevant changes
in capitalization or classification, including, by way of example, but not by
way of limitation, split-ups or stock dividends. Nothing contained herein shall
be deemed to require the Corporation to issue any fractional Shares, and any
fractional Shares issuable upon exercise of the Option may, at the discretion of
the Corporation, be settled in cash or otherwise.
(f) At such time as the Grantee desires to exercise the Option granted
hereby, in whole or in part, the Grantee shall provide to the Corporation an
Exercise Form in the form of Annex A hereto. The Grantee's signature at the
place provided on said Exercise Form will evidence the Grantee's election to
purchase Shares of Common Stock pursuant to the terms and subject to the
conditions and limitations contained in the Plan, in this Agreement and in said
Exercise Form. The Option shall be considered exercised (in full or part, as the
case may be) on the date such Exercise Form is mailed to the Secretary of the
Corporation, postage prepaid, or delivered in person to the Secretary, together
with payment of the Exercise Price for the Shares to be purchased plus any
withholding tax required under any federal, state and local statutes.
(g) The Exercise Price shall be paid in full at the time of purchase of the
Shares, in cash or by check or in a manner otherwise approved by the
Corporation. If the Option is exercised in accordance with the provisions of the
Plan and this Agreement, then the Corporation shall deliver to the Grantee
certificates representing the number of Shares in respect of which the Option is
being exercised which Shares shall be registered in the Grantee's name.
- 3 -
<PAGE>
4. Stockholders' and Registration Rights Agreements; Additional
Repurchase Provisions.
(a) It is a condition to the grant of the Option that the Grantee execute
and deliver to the Corporation, simultaneously with the execution and delivery
of this Agreement by the Grantee, counterparts of the Amended and Restated
Stockholders' Agreement dated as of March 6, 1995 and the Registration Rights
Agreement, dated as of May 26, 1993 (respectively the "Stockholders' Agreement"
and the "Registration Rights Agreement"), by and among the Corporation, David B.
Cornstein, Arthur E. Reiner and certain other parties. Upon the Grantee's
execution and delivery of such agreements, the Grantee will be deemed to be a
"Management Holder" under the Stockholders' Agreement and a "Management
Stockholder" under the Registration Rights Agreement, and as such the Grantee
will be subject, in addition to the provisions of this Agreement, to all of the
terms, conditions and obligations of such agreements, including, without
limitation, restrictions on the transferability of the Option and any Shares
purchased upon exercise thereof. Two copies of each of such agreements are
enclosed herewith. Capitalized terms used but not otherwise defined herein are
used as defined in the Stockholders' Agreement.
(b) Notwithstanding anything to the contrary contained herein or in the
Stockholders' Agreement, in the event that the Grantee's employment is
terminated for Cause, the Corporation shall have the right, exercisable by
written notice within twenty-one (21) days of such termination of employment, to
repurchase from the Grantee (and any of Grantee's Permitted Transferees, if
applicable), any and all Shares theretofore purchased by the Grantee hereunder
at a price per Share equal tothe Exercise price in respect of such Shares. For
purposes of this Agreement, termination for "Cause" shall mean termination by
reason of the Grantee's fraud, dishonesty or commission of a crime, whether or
not in the course of his or her employment.
5. Transferability of Option and Shares.
(a) The Option is not transferable other than by will or by the laws of
descent and distribution and during a Grantee's lifetime is exercisable only by
the Grantee. Any assignment in violation of this Section 5(a) shall be void and
of no force or effect.
(b) The transferability of the Option and the Shares is limited by the
terms of the Stockholders' Agreement and the Registration Rights Agreement and
by applicable law.
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<PAGE>
(c) Without limiting the generality of the foregoing, no purported sale,
assignment or other transfer of the Shares shall be effective unless and until
the transferee of the Shares so transferred executes and delivers to the
Corporation its agreement, in form and substance satisfactory to the
Corporation, to be bound by the provisions of this Agreement.
6. Covenants of the Grantee.
The Grantee's exercise of the Option shall be subject to the Grantee
acknowledging and agreeing to the following at the time of such exercise:
(a) The Shares have not been registered under the Securities Act of
1993, as amended (the "Act"), or the securities or "Blue Sky" laws of any
state and may not be sold or otherwise disposed of, except in compliance
with the Act and any applicable Blue Sky laws.
(b) The Shares are being acquired by the Grantee for the Grantee's
benefit and account for investment purposes and not with a view to or for
resale in connection with a public offering and distribution thereof.
(c) The Shares will not be sold, hypothecated, transferred or
otherwise disposed of by the Grantee in any manner, directly or indirectly,
(i) without registration thereof under the Act and any applicable Blue Sky
laws unless an exemption from such registration is available and, if the
Corporation so requests, the Grantee causes counsel satisfactory to the
Corporation to deliver to the Corporation a reasoned written opinion of
such counsel in form and substance satisfactory to the Corporation; or (ii)
in violation of any law; or (iii) in violation of the Stockholders'
Agreement or the Registration Rights Agreement.
(d) The certificate or certificates representing the Shares shall have
an appropriate legend referring to the terms of this Option.
(e) The Grantee acknowledges that, in the event of termination of his
or her employment with the Corporation, his or her rights to exercise this
Option are restricted as set forth in Section 3 above.
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<PAGE>
7. General Provisions.
This Agreement is subject in all respects to the terms and conditions of
the Plan, which terms and conditions the Grantee is deemed to accept and consent
to by the Grantee's acceptance of the Option. Nothing contained in this
Agreement shall confer upon any employee any right to continue in the employ of
the Corporation or shall in any way affect the right and power of the
Corporation to dismiss or otherwise terminate the employment of the employee at
any time for any reason with or without cause. This Agreement shall be governed
and construed in accordance with the laws of the State of New York applicable to
contracts entered into and to be performed wholly with such State.
If the foregoing is in accordance with the Grantee's understanding and
accepted and agreed to by the Grantee, the Grantee may so confirm by signing and
returning the duplicate of this Agreement delivered for that purpose, as well as
one copy of the enclosed Stockholders' Agreement and Registration Rights
Agreement.
FINLAY ENTERPRISES, INC.
By
------------------------------
Arthur E. Reiner
Vice Chairman
The foregoing is in accordance with my understanding and is hereby accepted
and agreed.
GRANTEE
--------------------------------
[Name]
--------------------------------
Date:
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<PAGE>
[Letterhead of Zimet, Haines, Friedman & Kaplan]
November 25, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D. C. 20549-1004
Re: Finlay Enterprises, Inc.
------------------------
Ladies and Gentlemen:
We have acted as counsel to Finlay Enterprises, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing of a
Registration Statement on Form S-8 (the "Registration Statement") relating to
the registration under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, of 350,000 shares of Common Stock, par value $.01 per
share, of the Company (the "Option Shares") issuable upon exercise of options
("Options") granted or to be granted under the Company's 1997 Long Term
Incentive Plan (the "Plan").
In connection with this opinion, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the Restated
Certificate of Incorporation of the Company, the Amended and Restated By-Laws of
the Company, the minutes and other records of the proceedings of the Board of
Directors and of the stockholders of the Company, the Plan and such other
documents, corporate and public records, agreements, and certificates of
officers of the Company and of public and other officials, and we have
considered such questions of law, as we have deemed necessary as a basis for the
opinions hereinafter expressed. In such examination we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals and the conformity to original documents of all documents
submitted to us as certified or photostatic copies. As to any facts material to
this opinion, we have relied upon
<PAGE>
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statements and representations of officers and other representatives of the
Company.
Based on and subject to the foregoing, we hereby advise you that, in our
opinion, (i) the issuance and sale of the Option Shares upon exercise of any
Options in accordance with the terms and subject to the conditions set forth in
the agreements pursuant to which the Options were or will be granted (the
"Option Agreements") have been duly authorized and (ii) when the consideration
for any such Option Shares shall have been received by the Company and the
Option Shares are issued pursuant to such Options in accordance with the terms
and subject to the conditions set forth in the respective Option Agreements,
such Option Shares will be validly issued, fully paid and nonassessable.
We are lawyers admitted to practice only in the State of New York. Although
none of the members of this firm is admitted to the bar of the State of
Delaware, in rendering this opinion we have considered the General Corporation
Law of such State. Accordingly, the foregoing opinion is limited solely to the
effect of the laws of New York and of the United States of America, and the
General Corporation Law of the State of Delaware.
Please be advised that James Martin Kaplan, a partner of this firm, is a
shareholder and director of the Company.
We hereby consent to the reference to our firm in the Registration
Statement.
Very truly yours,
ZIMET, HAINES, FRIEDMAN & KAPLAN
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-8 of our report dated
March 18, 1997 included in Finlay Enterprises, Inc.'s Annual Report on Form 10-K
for the fiscal year ended February 1, 1997 and to all references to our Firm
included in this Registration Statement on Form S-8.
/s/ Arthur Andersen LLP
- -----------------------
New York, New York
November 25, 1997
