SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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 ss.240.14a-11(c) or ss.240.14a-12
FINLAY ENTERPRISES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
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<PAGE>
[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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N/A
(4) Date Filed:
N/A
<PAGE>
F I N L A Y E N T E R P R I S E S, I N C.
529 FIFTH AVENUE
NEW YORK, NEW YORK 10017
-----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 22, 1999
-----------------------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
Finlay Enterprises, Inc. (the "Company") will be held on June 22, 1999 at 10:00
a.m. (local time) at the Cornell Club, 6 East 44th Street, New York, New York,
for the following purposes:
1. To elect three members to the Board of Directors to serve until the
expiration of their respective terms of office and until their successors are
duly elected and qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed May 7, 1999 as the record date for
the determination of the stockholders entitled to notice of and to vote at such
meeting or any adjournment thereof, and only stockholders of record at the close
of business on that date are entitled to notice of and to vote at such meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
JANUARY 30, 1999 IS ENCLOSED HEREWITH.
You are cordially invited to attend the meeting. Whether or not you
plan to attend, you are urged to complete, date and sign the enclosed proxy and
return it promptly. If you receive more than one form of proxy, it is an
indication that your shares are registered in more than one account, and each
such proxy must be completed and returned if you wish to vote all of your shares
eligible to be voted at the meeting.
By Order of the Board of Directors.
Bonni G. Davis
SECRETARY
Dated: May 25, 1999
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YOUR VOTE IS IMPORTANT.
THE ATTACHED PROXY STATEMENT SHOULD BE READ CAREFULLY. STOCKHOLDERS
ARE URGED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED
POSTAGE PAID ENVELOPE. NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS
VOTED BY GIVING WRITTEN NOTICE TO THE COMPANY. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE IN PERSON THOUGH YOU HAVE PREVIOUSLY
SENT IN YOUR PROXY.
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F I N L A Y E N T E R P R I S E S, I N C.
529 FIFTH AVENUE
NEW YORK, NEW YORK 10017
------------------------
P R O X Y S T A T E M E N T
------------------------
The enclosed proxy is solicited on behalf of the Board of Directors of
Finlay Enterprises, Inc. (the "Company") pursuant to this proxy statement (to be
mailed on or about May 25, 1999) for use at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at the time and place shown in the attached
Notice of Annual Meeting. Shares represented by properly executed proxies, if
returned in time, will be voted at the Annual Meeting as specified or, if not
otherwise specified, in favor of the election as directors of the nominees named
herein. Such proxies are revocable at any time before they are exercised by
written notice to the Secretary of the Company or by your requesting the return
of the proxy at the Annual Meeting. Any later dated proxies would revoke proxies
submitted earlier.
RECORD DATE
The record date for the determination of holders of common stock, par
value $.01 per share, of the Company ("Common Stock") who are entitled to notice
of and to vote at the Annual Meeting is May 7, 1999 (the "Record Date").
VOTING SECURITIES
As of the Record Date, 10,410,353 shares of Common Stock of the
Company were outstanding. Holders of record of Common Stock as of such date will
be entitled to one vote for each share held. A majority of all shares of Common
Stock issued, outstanding and entitled to vote at the Annual Meeting, present in
person or represented by proxy, shall constitute a quorum. Abstentions and
broker non-votes are considered present for purposes of determining whether the
quorum requirement is met. A broker non-vote occurs when a nominee holds shares
for a beneficial owner but cannot vote on a proposal because the nominee does
not have discretionary voting power and has not received instructions from the
beneficial owner as to how to vote the shares.
With respect to the matters to come before the shareholders at the
Annual Meeting, the election of directors shall be determined by a plurality of
the voting power present in person or represented by proxy at the Annual Meeting
and entitled to vote thereon, and only shares that are voted in favor of a
particular nominee will be counted towards such nominee's achievement of a
plurality. Shares present at the Annual Meeting that are not voted for a
particular nominee, shares present by proxy where the stockholder properly
withholds authority to vote for such nominee, and broker non-votes will not be
counted towards such nominee's achievement of a plurality.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
5% STOCKHOLDERS
The following table sets forth information as to each person who, to
the knowledge of the Company, was the beneficial owner as of the Record Date of
more than 5% of the issued and outstanding Common Stock of the Company.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
-----------------------
NUMBER PERCENTAGE
NAME OF SHARES OF CLASS
- ---- --------- --------
Thomas H. Lee(2)............................... 984,340 9.5%
Becker Capital Management, Inc.(3)............. 853,600 8.2%
Mellon Bank Corporation(4)..................... 748,320 7.2%
Rohit M. Desai(5).............................. 704,412 6.8%
David B. Cornstein(6).......................... 635,439 6.1%
FMR Corp(7).................................... 565,000 5.4%
Neuberger Berman, LLC(8)....................... 534,400 5.1%
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(1) Based on 10,410,353 shares issued and outstanding on the Record Date.
Except as noted below, each beneficial owner has sole voting power and
sole investment power, subject (in the case of Messrs. Lee, Desai and
Cornstein) to the terms of the Amended and Restated Stockholders'
Agreement dated as of March 6, 1995, as amended (the "Stockholders'
Agreement"), by and among the Company and certain securityholders of
the Company. See "Certain Transactions - Stockholders' Agreement."
(2) Includes 884,455 shares of Common Stock held of record by Thomas H.
Lee Equity Partners, L.P., the general partner of which is THL Equity
Advisors Limited Partnership, a Massachusetts limited partnership of
which Mr. Lee is a general partner, and 99,885 shares of Common Stock
held of record by the 1989 Thomas H. Lee Nominee Trust, 979 shares of
which are subject to options granted to others. Mr. Lee's address is
c/o Thomas H. Lee Company, L.L.C., 590 Madison Avenue, New York, New
York 10022.
(3) According to a Schedule 13G dated February 10, 1999 filed with the
Securities and Exchange Commission (the "Commission") by Becker
Capital Management, Inc., a registered investment advisor ("Becker"),
the indicated number of shares is owned by advisory clients of Becker.
Becker has sole voting and dispositive powers with respect to all of
such shares, but disclaims beneficial ownership thereof. The address
for Becker Capital Management, Inc. is 1211 SW Fifth Avenue, Suite
2185, Portland, Oregon 97204.
(4) According to a Schedule 13G dated February 4, 1999 filed with the
Commission by Mellon Bank Corporation ("Mellon Bank"), (i) Mellon Bank
has sole power to vote 679,920 shares and to dispose of 685,120
shares, and shared power to vote none of such shares and to dispose of
63,200 shares, and (ii) each of Boston Group Holdings, Inc. and The
Boston Company, Inc. has sole power to vote 494,250 shares and to
dispose of 499,450 shares and shared power to vote none of such shares
and to dispose of 63,200 shares. According to such Schedule 13G,
Boston Group Holdings, Inc. is a subsidiary of Mellon Bank and is also
the parent holding company of The Boston Company, Inc. All of the
shares reported in the Schedule 13G are beneficially owned by Mellon
Bank and direct or indirect subsidiaries, including Boston Group
Holdings, Inc. and The Boston Company, Inc., in their various
fiduciary capacities. The address for Mellon Bank Corporation is One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
(5) Includes 704,412 shares of Common Stock held of record by
Equity-Linked Investors-II ("ELI-II"). ELI-II is a limited
partnership, the general partner of which is Rohit M. Desai
Associates-II. As general partner, Rohit M. Desai Associates- II has
the power to vote and dispose of these securities. Rohit M. Desai is
the managing general partner of Rohit M. Desai Associates-II. Mr.
Desai is also the sole stockholder, chairman of the board and
president of Desai Capital Management Incorporated ("DCMI"), which
acts as an investment advisor to ELI-II. Under the investment advisory
agreements between DCMI and ELI-II, decisions as to the voting or
disposition of these securities may be made by DCMI. DCMI and Mr.
Desai disclaim beneficial ownership of the securities. The address of
Mr. Desai and ELI-II is c/o Desai Capital Management Incorporated, 540
Madison Avenue, New York, New York 10022.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
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<PAGE>
(6) Includes options to acquire 66,667 shares of Common Stock granted in
1995 having an exercise price of $14.00 per share. The address of Mr.
Cornstein is c/o the Company, 529 Fifth Avenue, New York, New York
10017.
(7) These shares represent shares reported as beneficially owned by FMR
Corp. in a joint filing on a Schedule 13G dated February 1, 1999 filed
with the Commission by FMR Corp., Edward C. Johnson 3d and Abigail P.
Johnson. According to said Schedule 13G, members of the Edward C.
Johnson 3d family and trusts for their benefit are the predominant
owners of Class B shares of common stock of FMR Corp., representing
approximately 49% of the voting power of FMR Corp. Mr. Johnson 3d owns
12.0% and Abigail Johnson owns 24.5% of the aggregate outstanding
voting stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR Corp. and
Abigail P. Johnson is a Director of FMR Corp. The Johnson family group
and all other Class B shareholders have entered into a shareholders'
voting agreement under which all Class B shares will be voted in
accordance with the majority vote of Class B shares. Accordingly,
through their ownership of voting common stock and the execution of
the shareholders' voting agreement, members of the Johnson family may
be deemed, under the Investment Company Act of 1940, to form a
controlling group with respect to FMR Corp. The Schedule 13G further
states that Fidelity Management & Research Company ("Fidelity"), a
wholly-owned subsidiary of FMR Corp. and a registered investment
adviser, is the beneficial owner of the 565,000 shares which are the
subject of the Schedule 13G as a result of its acting as investment
adviser to Fidelity Low-Priced Stock Fund (the "Fund"), a registered
investment company which owns all of such 565,000 shares. Each of
Edward C. Johnson 3d (as Chairman of FMR Corp.), FMR Corp. (through
its control of Fidelity) and the Fund has sole power to dispose of the
565,000 shares owned by the Fund. Neither FMR Corp. nor Edward C.
Johnson 3d has the sole power to vote or direct the voting of the
shares owned directly by the Fund, which power resides with the Fund's
Board of Trustees. Fidelity carries out the voting of the shares under
written guidelines established by the Fund's Board of Trustees. The
address for FMR Corp., Fidelity and the Fund is 82 Devonshire Street,
Boston, Massachusetts 02109.
(8) According to a Schedule 13G dated February 10, 1999 filed with the
Commission by Neuberger Berman, LLC ("Neuberger Berman"), Neuberger
Berman is deemed to be a beneficial owner of the indicated number of
shares since it has shared power to make decisions whether to retain
or dispose of, and in some cases the sole power to vote, such shares,
which are held by many unrelated clients. Neuberger Berman does not,
however, have any economic interest in the securities of those
clients. The clients are the actual owners of the securities and have
the sole right to receive and the power to direct the receipt of
dividends from or proceeds from the sale of such securities. Neuberger
Berman has sole power to vote or direct the voting of 414,500 shares,
shared power to vote or direct the voting of none of such shares, sole
power to dispose of or direct the disposition of none of such shares,
and shared power to dispose of or direct the disposition of 534,400
shares. Principals of Neuberger Berman own 17,200 shares in their own
personal securities accounts. Neuberger Berman disclaims beneficial
ownership of these shares since these shares were purchased with each
principal's personal funds and each principal has exclusive
dispositive and voting power over the shares held in such principal's
respective accounts. The address of Neuberger Berman, LLC is 605 Third
Avenue, New York, New York 10158-3698.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of the Record Date by (i) each of
the Company's directors and nominees for director (other than Messrs. Lee, Desai
and Cornstein, information with respect to each of whom is presented above),
(ii) the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company or Finlay Fine Jewelry
Corporation, a wholly-owned subsidiary of the Company ("Finlay Jewelry" and,
together with the Company and all predecessor companies, "Finlay"), listed in
the Summary Compensation Table and (iii) all directors and executive officers as
a group. The Company owns all of the issued and outstanding capital stock of
Finlay Jewelry.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
----------------------
NUMBER PERCENTAGE
NAME OF SHARES OF CLASS
- ---- --------- --------
Arthur E. Reiner(2)(3)........................... 79,279 *
Norman S. Matthews(4)............................ 68,000 *
Leslie A. Philip(2)(5)........................... 41,333 *
Joseph M. Melvin(2)(6)........................... 22,000 *
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<PAGE>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
------------------------
NUMBER PERCENTAGE
NAME OF SHARES OF CLASS
- ---- --------- --------
Warren C. Smith, Jr.(7)................................ 12,590 *
Barry D. Scheckner(2)(8)............................... 11,760 *
Hanne M. Merriman(9)................................... 5,000 *
James Martin Kaplan(2)................................. 4,000 *
Michael Goldstein(10).................................. -- --
All directors and executive officers
as a group (12 persons)(11).......................... 2,568,153 24.1%
- ------------------
*Less than one percent.
(1) Based on 10,410,353 shares issued and outstanding on the Record Date.
The persons named in the table have sole voting and investment power
with respect to all shares of Common Stock subject to the terms of the
Stockholders' Agreement.
(2) The address of Messrs. Reiner, Kaplan, Melvin and Scheckner and Ms.
Philip is c/o the Company, 529 Fifth Avenue, New York, New York 10017.
(3) Includes options to acquire 34,632 shares of Common Stock granted in
1995 having an exercise price of $14.00 per share.
(4) Includes options to acquire an aggregate of 68,000 shares of Common
Stock having exercise prices ranging from $11.16 to $16.50 per share.
Mr. Matthews' address is 650 Madison Avenue, New York, New York 10022.
(5) Includes options to acquire an aggregate of 41,333 shares of Common
Stock having exercise prices ranging from $11.19 to $23.1875 per
share.
(6) Includes options to acquire an aggregate of 22,000 shares of Common
Stock having exercise prices ranging from $14.875 to $24.3125 per
share.
(7) Mr. Smith's address is c/o Thomas H. Lee Company, 75 State Street,
Boston, Massachusetts 02109.
(8) Includes options to acquire an aggregate of 11,760 shares of Common
Stock having exercise prices ranging from $7.23 to $24.3125 per share.
(9) Includes options to acquire 5,000 shares of Common Stock granted in
1997 having an exercise price of $21.3125 per share. Ms. Merriman's
address is c/o Hanne Merriman Associates, 3201 New Mexico Avenue,
N.W., Washington, D.C.
20016.
(10) Does not include an aggregate of 2,000 shares of Common Stock acquired
by Mr. Goldstein subsequent to the Record Date. The address of Mr.
Goldstein is c/o Toys "R" Us, Inc., 461 From Road, Paramus, New Jersey
07652.
(11) Includes options to acquire an aggregate of 249,392 shares of Common
Stock having exercise prices ranging from $7.23 to $24.3125 per share.
The Company's fiscal year ends on the Saturday closest to January 31.
References herein to 1995, 1996, 1997 and 1998 relate to the fiscal years ended
on February 3, 1996, February 1, 1997, January 31, 1998 and January 30, 1999,
respectively.
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<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Commission and to furnish the Company with copies of such reports. Based solely
on its review of the copies of such forms furnished to the Company by such
reporting persons and on the written representations from such reporting persons
that no reports on Form 5 were required, the Company believes that during fiscal
1998 all of the reporting persons complied with their Section 16(a) filing
obligations.
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation of the Company divides the
Board of Directors into three classes, with the directors of each class to be
elected at every third annual meeting of stockholders. The certificate further
provides that the number of directors which shall constitute the full Board of
Directors may be fixed by the Board of Directors from time to time and that
vacancies occurring between annual meetings may be filled only by the Board of
Directors, with the directors so chosen to serve until the next annual meeting.
In May 1999, the Board of Directors increased the size of the Board from eight
to nine members and elected Michael Goldstein to serve as a director of the
Company. The Board of Directors has nominated Rohit M. Desai, Michael Goldstein
and Thomas H. Lee for the three-year term in the class whose term expires in
2002. The nominees are presently serving as directors of the Company and have
expressed their willingness to continue to serve as such. If, for any reason not
presently known, any of said nominees is not available for election, the proxies
will be voted for substitute nominees, if any. See "Certain Transactions --
Stockholders' Agreement."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR election as directors for
the three-year term in the class whose term expires in 2002 the nominees
identified above.
INFORMATION REGARDING DIRECTORS
Information regarding each of the nominees is set forth below:
YEAR OF ANNUAL
MEETING AT
DIRECTOR WHICH TERM
NAME PRINCIPAL OCCUPATION AGE SINCE WILL EXPIRE
- ---- -------------------- --- ----- -----------
Rohit M. Desai Chairman and President of 60 1993 2002
Desai Capital Management
Incorporated
Michael Goldstein Chairman of the Board 57 1999 2002
of Toys "R" Us, Inc.
Thomas H. Lee President of Thomas H. 55 1993 2002
Lee Company
The following persons will continue to serve as directors after the meeting:
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<PAGE>
YEAR OF ANNUAL
MEETING AT
DIRECTOR WHICH TERM
NAME PRINCIPAL OCCUPATION AGE SINCE WILL EXPIRE
- ---- -------------------- --- ----- -----------
David B. Cornstein Chairman Emeritus of the 60 1988 2000
Company and Principal,
Pinnacle Advisors Limited
James Martin Kaplan Partner, Tenzer Greenblatt 54 1988 2000
LLP, attorneys-at-law
Arthur E. Reiner Chairman of the Board, 58 1995 2000
President and Chief
Executive Officer of the
Company and Chairman
and Chief Executive
Officer of Finlay Jewelry
Norman S. Matthews Retail Consultant 66 1993 2001
Hanne M. Merriman Principal, Hanne Merriman 57 1997 2001
Associates
Warren C. Smith, Jr. Managing Director of 42 1993 2001
Thomas H. Lee Company
DIRECTORS. Messrs. Desai, Lee, Matthews and Smith and Ms. Merriman
have each been engaged in the principal occupation identified above for more
than the past five years. Mr. Desai is also a director of The Rouse Company,
Sunglass Hut International, Incorporated and Independence Community Bank Corp.
Mr. Lee is also a director of First Security Services Corporation, Livent, Inc.,
Miller Import Corporation, Safelite Glass Corporation and Vail Resorts, Inc. Mr.
Matthews is also a director of Toys "R" Us, Inc., The Progressive Corporation,
Lechters, Inc., Eye Care Centers of America, Inc. and Sunoco, Inc. Mr. Smith is
also a director of Rayovac Corporation, Eye Care Centers of America, Inc. and
Just For Feet, Inc. Ms. Merriman is also a director of US Airways Group, Inc.,
Ameren Corp., Central Illinois Public Service Company, State Farm Mutual
Automobile Insurance Company, The Rouse Company, Ann Taylor Stores Corporation
and T. Rowe Price Mutual Funds and is a member of the National Women's Forum and
a director of the Children's Hospital Foundation (part of the Children's
National Medical Center). Since February 1998, Mr. Goldstein has been Chairman
of the Board of Toys "R" Us, Inc., where he was Vice Chairman of the Board and
Chief Executive Officer from February 1994 to February 1998. Mr. Goldstein is
also a director of Houghton Mifflin Company. Mr. Cornstein is a director of
TeleHubLink Corporation. Mr. Kaplan joined the law firm of Tenzer Greenblatt LLP
in 1998 and, from 1977 to 1998, was a partner with the law firm of Zimet,
Haines, Friedman & Kaplan. Mr. Reiner is a director of Loehmann's, Inc.
EXECUTIVE OFFICERS. Mr. Reiner, Joseph M. Melvin (Executive Vice
President and Chief Operating Officer of the Company and President and Chief
Operating Officer of Finlay Jewelry), Leslie A. Philip (Executive Vice President
and Chief Merchandising Officer of the Company and Finlay Jewelry) and Barry D.
Scheckner (Senior Vice President and Chief Financial Officer of the Company and
Finlay Jewelry) are the executive officers of the Company. Mr. Melvin, age 48,
was appointed as Executive Vice President and Chief Operating Officer of the
Company and President and Chief Operating Officer of Finlay Jewelry on May 1,
1997. From September 1975 to March 1997, Mr. Melvin served in various positions
with The May Department Stores Company ("May Department Stores"), including,
from 1990 to March 1997, as Chairman of the Board and Chief Operating Officer of
Filene's (a division of May Department Stores). Ms. Philip, age 52, has served
as Executive Vice President and Chief Merchandising Officer of the Company and
Finlay Jewelry since May 1997. From May 1995 to May 1997, Ms. Philip was
Executive Vice President - Merchandising and Sales Promotion of Finlay Jewelry.
From 1993 to
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<PAGE>
May 1995, Ms. Philip was Senior Vice President - Advertising and Sales Promotion
of R.H. Macy & Co., Inc., and from 1988 to 1993, Ms. Philip was Senior Vice
President - Merchandise - Fine Jewelry at Macy's. Mr. Scheckner, age 49, has
served as Senior Vice President and Chief Financial Officer of Finlay Jewelry
since December 1988 and Senior Vice President and Chief Financial Officer of the
Company since September 1992.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit, Compensation, Nominating
and Executive Committees. No director who serves on the Compensation Committee
is an officer or employee of the Company or any of its subsidiaries.
The Audit Committee reviews the preparations for and scope of the
audit of the Company's annual financial statements, reviews drafts of such
statements, makes recommendations as to the engagement and fees of the
independent auditors and monitors the functioning of the Company's accounting
and internal control systems by meeting with representatives of management, the
independent auditors and the Company's internal auditors. The Committee has
direct access to the independent auditors, the internal auditors and counsel to
the Company, and it performs such other duties relating to the financial
statements of the Company and other matters as the Board of Directors may assign
from time to time. The Audit Committee met twice during fiscal 1998. The current
members of the Audit Committee are Ms. Merriman, its Chairman, and Messrs.
Goldstein, Kaplan, Reiner and Smith.
The Compensation Committee supervises and makes recommendations with
respect to employee compensation levels and all benefit plans involving
employees of the Company. It also approves, upon the recommendation of the
Chairman of the Board of Directors and President or other appropriate officer,
the terms of employment of all officers of the Company (except the Chairman of
the Board and President) and recommends the terms of employment of the Chairman
of the Board and President to the Board of Directors for approval. The
Compensation Committee also administers the Company's 1993 Long Term Incentive
Plan, as amended (the "1993 Plan"), and the 1997 Long Term Incentive Plan, as
amended (the "1997 Plan"), including the grant of options and stock appreciation
rights thereunder. The Compensation Committee met six times during fiscal 1998.
The current members of the Compensation Committee are Mr. Lee, its Chairman, and
Messrs. Desai and Matthews.
The Nominating Committee was established in fiscal 1998 to provide
recommendations to the Board of Directors regarding nominees for director and
membership on Board committees. The Nominating Committee will consider nominees
recommended by stockholders. Prior to the formation of the Nominating Committee,
the functions of such Committee were performed by the full Board of Directors.
The Nominating Committee met once during fiscal 1998. The current members of the
Nominating Committee are Mr. Reiner, its Chairman, and Messrs.
Desai and Lee.
The Executive Committee has all the powers of the Board of Directors
in the management of the business and affairs of the Company, except as such
powers are limited by the Delaware General Corporation Law. The Executive
Committee met once during fiscal 1998. The current members of the Executive
Committee are Mr. Lee, its Chairman, and Messrs. Cornstein, Desai, Kaplan,
Matthews and Reiner.
The Board of Directors met six times during fiscal 1998. With the
exception of Mr. Desai, who attended four of the six meetings of the Board of
Directors, no director attended fewer than 75% of the total number of meetings
of the Board of Directors and all committees thereof which he was eligible to
attend.
DIRECTORS' COMPENSATION
Directors who are employees receive no additional compensation for
serving as members of the Board. Messrs. Lee, Desai, Smith and Kaplan receive no
compensation for serving as directors of the Company. For a discussion of
certain fees paid to affiliates of Messrs. Lee and Desai, see "-- Compensation
Committee Interlocks and Insider Participation." For serving as a director of
the Company, Messrs. Goldstein and Matthews and Ms. Merriman each receive
aggregate compensation at the rate of $20,000 per year. Each of Mr. Goldstein
and Ms. Merriman also receives a fee of $1,000 for each regular and special
meeting attended and a fee of $500 for each
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<PAGE>
committee meeting attended. On May 18, 1999, Mr. Goldstein was granted options
to purchase 5,000 shares of Common Stock at a price of $13.4375 per share, all
of which options will vest on the first anniversary of the date of grant. Mr.
Matthews has been granted, from July 1993 through March 1999, options to
purchase an aggregate of 100,000 shares of Common Stock having exercise prices
ranging from $8.50 to $16.50 per share. Mr. Matthews' options are subject to
various vesting periods of up to five years. Ms. Merriman was granted, effective
as of December 3, 1997, options to purchase 5,000 shares of Common Stock at a
price of $21.3125 per share and, on March 1, 1999, was granted options to
purchase 5,000 shares of Common Stock at a price of $8.50 per share. All of Ms.
Merriman's options vest on the first anniversary of the date of grant. A company
as to which Mr. Cornstein is a principal receives compensation from Finlay
pursuant to a consulting agreement. See information under the caption "Executive
Compensation--Employment and Other Agreements and Change of Control
Arrangements."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is presently comprised of Rohit M. Desai,
Thomas H. Lee and Norman S. Matthews. All decisions with respect to executive
compensation of both the Company and Finlay Jewelry and all decisions with
respect to benefit plans involving employees of both the Company and Finlay
Jewelry are currently made by the Compensation Committee. None of the present
Compensation Committee members were, at any time, an officer or employee of the
Company or any of its subsidiaries.
In connection with a series of transactions which recapitalized the
Company in May 1993 (the "1993 Recapitalization"), the Company, an affiliate of
Thomas H. Lee Company (together with its affiliate transferees, the "Lee
Investors"), partnerships managed by DCMI (collectively, the "Desai Investors"),
certain members of management of the Company (the "Management Stockholders") and
certain other stockholders entered into (i) a registration rights agreement (the
"Registration Rights Agreement"), which grants certain registration rights to
the Lee Investors, the Desai Investors and the Management Stockholders, and (ii)
the Stockholders' Agreement, which granted certain rights to, and imposed
certain restrictions on the rights of, the Lee Investors, the Desai Investors,
the Management Stockholders and certain other stockholders with respect to the
Common Stock and corporate governance of the Company. The Stockholders'
Agreement was amended and restated in connection with the Company's April 1995
initial public offering (the "Initial Public Offering"). See "Certain
Transactions."
The Company and Finlay Jewelry have entered into management agreements
with each of Thomas H. Lee Company (the "Lee Management Agreement") and DCMI
(the "Desai Management Agreement" and, together with the Lee Management
Agreement, the "Management Agreements"), affiliates of Mr. Lee and Mr. Desai,
respectively. Pursuant to the Management Agreements, Thomas H. Lee Capital LLC
(as assignee of Thomas H. Lee Company) and DCMI receive $180,000 and $60,000 per
year plus expenses, respectively, for consulting and management advisory
services rendered to the Company and Finlay Jewelry. Each of the Management
Agreements, which terminate in May 2000, will be automatically renewable on an
annual basis unless any party thereto serves notice of termination at least 90
days prior to the renewal date. Each of the Management Agreements contains
provisions entitling the managing company to indemnification under certain
circumstances for losses incurred in the course of service to the Company or
Finlay Jewelry.
Mr. Matthews receives compensation at the rate of $20,000 per year for
his services as a director. For a discussion of certain options granted to Mr.
Matthews, see "--Directors' Compensation."
Any future transactions between the Company and/or Finlay Jewelry and
the officers, directors and affiliates thereof will be on terms no less
favorable to the Company and Finlay Jewelry than can be obtained from
unaffiliated third parties, and any material transactions with such persons will
be approved by a majority of the disinterested directors of the Company or
Finlay Jewelry, as the case may be.
- 8 -
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the
compensation in fiscal years 1998, 1997 and 1996 of Finlay's Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company or Finlay Jewelry, including the Company's former Chairman
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------------- ------------------------
Number of
Restricted Securities
NAME AND PRINCIPAL Other Annual Stock Underlying All Other
POSITION YEAR SALARY BONUSES COMPENSATION (1) AWARDS TIONS/SARS (2) COMPENSATION (3)
---------- ---- ------ ------- ---------------- ------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arthur E. Reiner 1998 $ 750,000 $ - $17,642 -- -- $428,016(4)
Chairman, President 1997 750,000 271,425 17,706 -- 300,000 28,481
and Chief Executive Officer 1996 700,000 253,750 -- -- -- 27,495
of the Company and Chairman
and Chief Executive Officer
of Finlay Jewelry
DAVID B. CORNSTEIN 1998 $ 600,000 $ - $42,686 -- -- $ 52,144
Chairman Emeritus and 1997 600,000 137,300 42,840 -- -- 52,609
former Chairman of the 1996 600,000 137,500 42,977 -- -- 51,623
Company
JOSEPH M. MELVIN (5) 1998 $ 367,100 $ 85,000 -- -- 30,000 $387,241(6)
Executive Vice President and 1997 263,200 120,000 -- -- 50,000 154,314(6)
Chief Operating Officer of the 1996 -- - -- -- -- --
Company and President and
Chief Operating Officer of
Finlay Jewelry
LESLIE A. PHILIP 1998 $ 376,700 $110,000 -- -- 30,000 $ 9,626
Executive Vice President and 1997 350,500 127,000 -- -- 46,667 10,091
Chief Merchandising Officer 1996 320,000 116,000 -- -- -- 8,730
of the Company and Finlay
Jewelry
BARRY D. SCHECKNER 1998 $ 311,700 $ 50,000 -- -- 20,000 $ 8,919
Senior Vice President and 1997 300,500 109,000 -- -- 13,000 9,384
Chief Financial Officer of the 1996 300,000 109,000 -- -- -- 8,398
Company and Finlay Jewelry
</TABLE>
(1) Represents tax equalization payments made in connection with life insurance
premiums paid by Finlay on behalf of the Named Executive Officers.
(2) See "-- Option/SAR Grants in 1998".
(3) Includes for each Named Executive Officer the sum of the following amounts
earned in 1998, 1997 and 1996 for such Named Executive Officer:
<TABLE>
<CAPTION>
LIFE RETIREMENT MEDICAL
INSURANCE (A) BENEFITS (B) BENEFITS (C)
------------ ------------ ------------
<S> <C> <C> <C> <C>
Arthur E. Reiner.............. 1998 $ 20,176 $ 5,200 $ 2,640
1997 20,176 5,575 2,730
1996 20,176 5,375 1,944
</TABLE>
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
- 9 -
<PAGE>
<TABLE>
<CAPTION>
LIFE RETIREMENT MEDICAL
INSURANCE (a) BENEFITS (b) BENEFITS (c)
------------ ------------ ------------
<S> <C> <C> <C> <C>
David B. Cornstein........................... 1998 $ 44,304 $ 5,200 $ 2,640
1997 44,304 5,575 2,730
1996 44,304 5,375 1,944
Joseph M. Melvin............................. 1998 $ 1,079 $ 5,035 $ 2,640
1997 540 -- 2,048
1996 -- -- --
Leslie A. Philip............................. 1998 $ 1,786 $ 5,200 $ 2,640
1997 1,786 5,575 2,730
1996 1,786 5,000 1,944
Barry D. Scheckner........................... 1998 $ 1,079 $ 5,200 $ 2,640
1997 1,079 5,575 2,730
1996 1,079 5,375 1,944
</TABLE>
(a) Insurance premiums paid by Finlay with respect to life
insurance for the benefit of the Named Executive Officer.
(b) The dollar amount of all matching contributions and profit
sharing contributions under Finlay's 401(k) profit sharing
plan allocated to the account of the Named Executive Officer.
(c) The insurance premiums paid in respect of the Named Executive
Officer under Finlay's Executive Medical Benefits Plan.
(4) In addition to the other compensation set forth in Note 3 above,
Finlay made a payment to Mr. Reiner in an aggregate amount of
$400,000, consisting of (i) the reimbursement of Mr. Reiner for the
interest paid in respect of the loan made by the Company to him in
1995 for the purpose of his purchase of shares of Common Stock of the
Company upon the commencement of his employment with Finlay and (ii) a
special bonus of $125,000 in connection with the Company's April 1998
public offering of Common Stock and certain related transactions. See
"Certain Transactions -- The 1998 Offering."
(5) Mr. Melvin commenced employment with Finlay on May 1, 1997 and the
salary above for 1997 reflects only compensation for the period from
May 1, 1997 through January 31, 1998. Mr. Melvin's annual salary for
1997 was at the rate of $350,000.
(6) In addition to the other compensation set forth in Note 3 above, Mr.
Melvin received $378,487 and $151,726 in 1998 and 1997, respectively,
for reimbursement of relocation expenses.
Mr. Reiner was named Chairman of the Company effective February 1,
1999 and, from January 1995 to such date, served as Vice Chairman of the
Company. Mr. Reiner has also served as President and Chief Executive Officer of
the Company since January 30, 1996 and as Chairman of the Board and Chief
Executive Officer of Finlay Jewelry since January 3, 1995. Mr. Cornstein retired
from day-to-day involvement with the Company effective January 31, 1999 and
continues as the Chairman Emeritus of the Company and is a Principal of Pinnacle
Advisors Limited, which has served as a consultant to Finlay since February
1999. For a discussion of the employment and other arrangements with Messrs.
Reiner and Cornstein, see "-- Employment and Other Agreements and Change of
Control Arrangements".
LONG TERM INCENTIVE PLANS
The Company currently has two long-term incentive plans, for which it
has reserved a total of 1,582,596 shares of Common Stock for issuance in
connection with awards. Of this total, 732,596 shares of Common Stock have been
reserved for issuance under the 1993 Plan, of which 153,744 shares have been
issued to date in
- 10 -
<PAGE>
connection with exercises of options granted under the 1993 Plan and 563,718
shares are reserved for issuance upon exercise of currently outstanding options.
The remaining 15,134 shares of Common Stock are available for future grants
under the 1993 Plan. The 1997 Plan, which is intended as a successor to the 1993
Plan, is similar to the 1993 Plan and provides for the grant of the same types
of awards as are available under the 1993 Plan (the 1997 Plan, together with the
1993 Plan, being collectively referred to herein as the "Incentive Plans"). The
maximum number of shares of Common Stock available for issuance under the 1997
Plan is 850,000. Of this total, 2,600 shares have been issued to date in
connection with exercises of options granted under the 1997 Plan and 571,782
shares are reserved for issuance upon exercise of currently outstanding options.
The remaining 275,618 shares of Common Stock are available for future grants
under the 1997 Plan. See "--Option/SAR Grants in 1998".
The Incentive Plans permit the Company to grant to key employees of
the Company and its subsidiaries, consultants and certain other persons and
directors of the Company, the following: (i) stock options; (ii) stock
appreciation rights in tandem with stock options; (iii) limited stock
appreciation rights in tandem with stock options; (iv) restricted or
nonrestricted stock awards subject to such terms and conditions as the
Compensation Committee shall determine; (v) performance units which are based
upon attainment of performance goals during a period of not less than two nor
more than five years and which may be settled in cash or in Common Stock in the
discretion of the Company's Compensation Committee; or (vi) any combination of
the foregoing. The 1997 Plan provides, however, that no participant may be
granted, during any fiscal year, options or other awards relating to more than
175,000 shares of Common Stock.
Under the Incentive Plans, the Company may grant stock options which
are either "incentive stock options" ("Incentive Options") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
non-incentive stock options ("Non-incentive Options"). Incentive Options are
designed to result in beneficial tax treatment to the optionee, but no tax
deduction for the Company. Nonincentive Options will not give the optionee the
tax benefits of Incentive Options, but generally will entitle the Company to a
tax deduction when and to the extent income is recognized by the optionee.
The Incentive Plans are administered by the Compensation Committee of
the Company's Board of Directors which, pursuant to the Incentive Plans,
consists of at least two directors. Subject to the provisions of the Incentive
Plans, the Compensation Committee has sole discretion (i) to select the
individuals to participate in the Incentive Plans, (ii) to determine the form
and substance of grants made under the Incentive Plans to each participant, and
the conditions and restrictions, if any, subject to which grants are made, (iii)
to interpret the Incentive Plans and (iv) to adopt, amend or rescind rules and
regulations for carrying out the Incentive Plans as it may deem appropriate.
The Incentive Plans provide that the per share exercise price of an
option granted under the plans shall be determined by the Compensation
Committee. The exercise price of an Incentive Option may not, however, be less
than 100% of the fair market value of the Common Stock on the date the option is
granted and the duration of an Incentive Option may not exceed ten years from
the date of grant. In addition, an Incentive Option that is granted to an
employee who, at the time the option is granted, owns stock possessing more than
10% of the total combined voting power of all classes of capital stock of the
"employer corporation" (as used in the Code) or any parent or subsidiary thereof
shall have a per share exercise price which is at least 110% of the fair market
value of the Common Stock on the date the option is granted and the duration of
any such option may not exceed five years from the date of grant. Options
granted under the Incentive Plans become exercisable at such time or times as
the Compensation Committee may determine at the time the option is granted.
Options are nontransferable (except by will or intestacy on the death of the
optionee) and during a participant's lifetime are exercisable only by the
participant.
In making grants to employees under the Incentive Plans, the Company
has on occasion utilized a uniform Agreement and Certificate of Option (the
"Option Agreement"), under which the Company grants ten-year options, subject to
various vesting periods of up to five years. The Option Agreement contains
transfer and certain other restrictions and provides that options not vested may
expire, or shares acquired upon exercise of options may be
- 11 -
<PAGE>
repurchased at their exercise price, in the event of termination of employment
under certain circumstances. In addition, the Option Agreement provides that (i)
if an optionee's employment is terminated for "Cause" (as defined in the Option
Agreement), such optionee's options will terminate immediately, (ii) if an
optionee's employment is terminated due to death, "Disability" or "Retirement"
(each as defined in the Incentive Plans), such optionee's options become fully
vested and exercisable for a period of 21 days following such termination and
(iii) if an optionee's employment is terminated for any other reason, such
optionee's options remain exercisable to the extent vested for a period of 21
days following such termination.
The Incentive Plans may be amended or terminated by the Board at any
time, but no such termination or amendment may, without the consent of a
participant, adversely affect the participant's rights with respect to
previously granted awards. Under the 1993 Plan, the approval of the Company's
stockholders is required for any amendment (i) to increase the maximum number of
shares subject to awards under the 1993 Plan, (ii) to change the class of
persons eligible to participate and/or receive incentive stock options under the
1993 Plan, (iii) to change the requirements for serving on the Compensation
Committee or (iv) to increase materially the benefits accruing to participants
under the 1993 Plan. Under the 1997 Plan, the approval of the Company's
stockholders is required to amend the 1997 Plan if the Compensation Committee
determines that such approval would be necessary to retain the benefits of Rule
16b-3 under the Exchange Act (with respect to participants who are subject to
Section 16 thereof), Section 162(m) of the Code (with respect to "covered
employees" within the meaning of Section 162(m) of the Code) or Section 422 of
the Code (with respect to Incentive Options), or if stockholder approval is
otherwise required by federal or state law or regulation or the rules of any
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
the proposed amendment for stockholder approval.
Subject to certain limitations set forth in the Incentive Plans, if
the Compensation Committee determines that any corporate transaction or event
affects the shares of Common Stock (or other securities or property subject to
an award under the Incentive Plans) such that an adjustment is determined by the
Compensation Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Incentive Plans, then the Compensation Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and type of shares
(or other securities or property) with respect to which awards may be granted
under the Incentive Plans, (ii) the number and type of shares (or other
securities or property) subject to outstanding awards under the Incentive Plans
or (iii) the grant or exercise price with respect to any awards under the
Incentive Plans or, if deemed appropriate, make provision for a cash payment to
the holder of an outstanding award in consideration for the cancellation of such
award (which, in the case of an option, will be equal to the positive
difference, if any, between the Market Value (as defined in the Incentive Plans)
of the shares covered by such option, as determined immediately prior to such
corporate transaction or event, and the exercise price per share of such
option).
OPTION/SAR GRANTS IN FISCAL 1998
In 1998, the Company granted options to purchase a total of 201,067
shares of Common Stock, of which options to purchase 30,000, 30,000 and 20,000
shares were granted to Mr. Melvin, Ms. Philip and Mr. Scheckner, respectively,
at exercise prices ranging from $8.25 to $24.3125 per share. All of these
options were granted under the 1997 Plan. Such options include 10,000 options
granted in June 1998 to each of Mr. Melvin and Mr. Scheckner, which options vest
and become exercisable in equal installments on each of the first five
anniversaries of the date of grant. The balance of the options granted to Mr.
Melvin and Mr. Scheckner, and all of the options granted to Ms. Philip, were
granted in December 1998 and vest and become exercisable 50% on December 1, 2000
and 50% on December 1, 2001.
The following table provides information related to the options
granted to the Named Executive Officers during 1998. No stock appreciation
rights were issued by the Company in 1998.
- 12 -
<PAGE>
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM ($)
OPTIONS/SARS EMPLOYEES IN BASE PRICE ------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) EXPIRATION DATE(S) 5% 10%
- ----------------------------------- ------------- ----------- ------------------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
Arthur E. Reiner...... -- -- -- -- -- --
David B. Cornstein.... -- -- -- -- -- --
Joseph M. Melvin...... 30,000 14.9 8.25 & 24.3125 6/22/08 & 12/1/08 256,668 650,446
Leslie A. Philip...... 30,000 14.9 8.25 12/1/08 155,651 394,451
Barry D. Scheckner.... 20,000 9.9 8.25 & 24.3125 6/22/08 & 12/1/08 204,784 518,962
</TABLE>
CERTAIN INFORMATION CONCERNING STOCK OPTIONS/SARS
The following table sets forth certain information with respect to
stock options exercised in fiscal 1998 as well as the value of stock options at
the fiscal year end. No stock appreciation rights were exercised during fiscal
1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1998 AND FISCAL YEAR-END OPTION/SAR VALUE
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
SHARES AT YEAR-END YEAR-END ($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
------ ----------- -------- ------------- -----------------
<S> <C> <C> <C> <C>
Arthur E. Reiner.................... -- -- 34,632 / 334,631 -- / --
David B. Cornstein.................. -- -- 53,333 / 13,333 -- / --
Joseph M. Melvin.................... -- -- 10,000 / 70,000 -- / $55,000
Leslie A. Philip.................... -- -- 29,333 / 80,667 -- / $82,500
Barry D. Scheckner.................. 18,200 $253,573 6,880 / 29,920 $9,048 / $27,500
</TABLE>
(1) The value of Unexercised In-the-Money Options/SARs represents the aggregate
amount of the excess of $11.00, the closing price for a share of Common Stock at
year end, over the relevant exercise price of all "in-the-money" options.
EMPLOYMENT AND OTHER AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Finlay has entered into an employment agreement with Arthur E. Reiner
to employ Mr. Reiner as President and Chief Executive Officer of the Company for
a term expiring on January 31, 2001. On February 1, 1999, Mr. Reiner became
Chairman of the Company. Pursuant to the employment agreement, Mr. Reiner
receives an annual base salary of $750,000, subject to increases at the
discretion of the Board of Directors of the Company. In addition to his annual
base salary, Mr. Reiner is entitled to an annual bonus payment based on a target
incentive amount equal to one-half of his base salary for the applicable year
(the "Incentive Amount"). The payment of the bonus in respect of a particular
year will be based on the achievement by Finlay of certain financial performance
criteria based on EBITA-FIFO (the "Target Level"), with 20% of the Incentive
Amount payable if 90% of the Target Level is achieved, increasing incrementally
on a pro rata basis to 80% of the Incentive Amount payable if 100% of the Target
Level is achieved, increasing further incrementally on a pro rata basis to 160%
of the Incentive Amount payable if 140% of the Target Level is achieved, and if
over 140% of the Target Level is achieved, the annual bonus payment shall equal
160% of the Incentive Amount plus 1% of the Incentive Amount for each percentage
point by which Finlay's measured performance exceeds 140% of the Target Level.
Notwithstanding the foregoing, with respect to 1996 and 1997, pursuant to the
terms of his employment agreement, Mr. Reiner received bonuses in the amounts
- 13 -
<PAGE>
of $253,750 and $271,425, respectively. No bonus was paid to Mr. Reiner in 1998
pursuant to the terms of his employment agreement.
Under the agreement, Mr. Reiner received in January 1995 options under
the 1993 Plan to purchase 69,263 shares of Common Stock at an exercise price of
$14.00 per share. Of those options, one-half were time-based and one-half
performance-accelerated, vesting in ten years subject to accelerated vesting
upon achievement of specified performance goals. All of the time-based options
are vested. To date, none of the performance-accelerated options have vested.
In the event of Mr. Reiner's termination of employment either by the
Company for "Cause" (as defined in the agreement), by Mr. Reiner for any reason
(other than "Good Reason", as defined in the agreement) or as a result of Mr.
Reiner's death or Disability (as defined in the agreement), all the
performance-accelerated options shall terminate. In the event of Mr. Reiner's
termination of employment either by the Company without "Cause" or by Mr. Reiner
for "Good Reason," all the performance-accelerated options shall thereupon
become fully exercisable. In addition, in the event of a "Change of Control" (as
defined in the agreement), the performance-accelerated options will vest to the
extent (a) the "Enterprise Value" of the Company (as defined in the agreement)
exceeds certain established "Enterprise Value" targets set forth in the
agreement with respect to the fiscal year in which the "Change of Control"
occurs or (b) the "Change of Control" represents a per share of Common Stock
transaction price in excess of 130% of the fair market value per share of Common
Stock determined immediately prior to the public announcement of such "Change of
Control."
Upon the commencement of his employment, Mr. Reiner purchased 138,525
shares of Common Stock (the "Purchased Shares") at a purchase price of $7.23 per
share. The aggregate purchase price of the Purchased Shares was paid in the form
of a note issued by Mr. Reiner to the Company, the repayment of which was
secured by the Purchased Shares and certain proceeds received by Mr. Reiner upon
disposition of the Purchased Shares or upon any distribution paid on or with
respect to the Purchased Shares. On April 24, 1998, in connection with the sale
by Mr. Reiner of 100,000 of the Purchased Shares, Mr. Reiner repaid the
outstanding balance of the note. Mr. Reiner was subsequently reimbursed for the
interest paid by him in respect of such note. In the event Mr. Reiner's
employment is terminated under certain circumstances, the remaining Purchased
Shares (together with vested options and shares issued upon exercise of vested
options ("Option Shares")) are subject to certain call rights. In the event the
Company does not exercise its call rights, the rights may be exercised by the
Lee Investors and the Desai Investors, pro rata based on their respective
ownership of Common Stock. The remaining Purchased Shares and Option Shares are
subject to certain restrictions on transfer and registration rights set forth in
Mr. Reiner's employment agreement and are subject to the Stockholders' Agreement
and the Registration Rights Agreement, other than the provisions thereof
relating to restrictions on transfer. See "Certain Transactions -- Stockholders'
Agreement" and "Certain Transactions -- Registration Rights Agreement."
Under Mr. Reiner's agreement, subject to certain specified
limitations, Finlay is required to maintain life insurance on the life of Mr.
Reiner in the amount of $5.0 million, payable to his beneficiaries, and to
provide Mr. Reiner with catastrophic health insurance. In addition, Finlay is
required to reimburse Mr. Reiner for any income taxes owed by him as a result of
the premiums paid by Finlay with respect to such life insurance. The employment
agreement also provides for Mr. Reiner to receive an annual allowance for
business use of an automobile of up to $15,000.
Mr. Reiner's agreement provides that if his employment is terminated
prior to a "Change of Control" either by the Company without "Cause" or by Mr.
Reiner for "Good Reason," Mr. Reiner will continue to receive his base salary
for the balance of the term and bonus compensation (calculated as though 110% of
the Target Level were achieved) as if such termination had not occurred. In the
event he is terminated without "Cause" and coincident with or following a
"Change of Control," Mr. Reiner shall be entitled to a lump sum payment equal to
299% of his "base amount" (as defined in Section 280G(b)(3) of the Code). In the
event that Mr. Reiner voluntarily terminates his employment within one year
following a "Change of Control" in connection with which the acquirer did not
expressly assume Mr. Reiner's agreement and extend its term for an additional
three years or otherwise offer Mr.
- 14 -
<PAGE>
Reiner a contract on terms no less favorable than those provided under the
existing agreement providing for a term of at least three years, or if he
terminates his employment following a "Change of Control" for "Good Reason," he
will be entitled to a payment equal to 299% of the "base amount." In the event
that Mr. Reiner is terminated for "Cause" or if he voluntarily terminates his
employment without "Good Reason" prior to the occurrence of a "Change of
Control," he shall be entitled to receive his base salary through the date of
termination and any bonus earned with respect to a previously completed fiscal
year which remains unpaid. Payments made to Mr. Reiner upon termination of
employment are subject to certain restrictions in the event that such payments
constitute "parachute payments" under Section 280G(b)(2) of the Code. In
addition, Mr. Reiner is required to mitigate certain payments made to him under
the agreement under certain limited circumstances.
Under Mr. Reiner's agreement, a "Change of Control" occurs when (i) a
person or group other than certain of the Company's existing stockholders and
certain related parties becomes the beneficial owner of 50% or more of the
aggregate voting power of the Company, (ii) during any period of two consecutive
calendar years, there are certain changes in the composition of the Company's
Board of Directors or (iii) there is a sale of all or substantially all of the
Company's assets.
A portion of any payments which may be made upon a "Change of Control"
may be deemed an "excess parachute payment" within the meaning of the Code, in
which event the portion will not be a deductible expense for tax purposes for
the Company.
On March 5, 1997, Mr. Reiner received options under the 1993 Plan to
purchase an aggregate of 139,719 shares of Common Stock at an exercise price of
$14.00 per share. Such options vest and become exercisable on January 2, 2001 so
long as Mr. Reiner remains employed by the Company on such date; provided,
however, that such options are subject to early vesting and early termination
under certain circumstances and are subject to various conditions. The Company
has also granted to Mr. Reiner an additional 160,281 options under the 1997
Plan, which options have an exercise price of $13.875 per share and are subject
to similar terms and conditions regarding vesting and termination.
Effective May 26, 1993, Mr. Cornstein entered into an employment
agreement with Finlay, which agreement expired on January 31, 1999, providing
for his employment as President and Chief Executive Officer, and his appointment
as Chairman of the Board of the Company. Under his employment agreement, Mr.
Cornstein was entitled to an annual salary of $600,000 plus bonus. Pursuant to
Mr. Cornstein's employment agreement, Finlay was required to maintain insurance
on the life of Mr. Cornstein, payable to his beneficiaries, and Mr. Cornstein
was entitled to reimbursement for income tax liability resulting from Finlay's
payment of premiums. On March 30, 1995, Mr. Cornstein received options under the
1993 Plan to purchase an aggregate of 66,667 shares of Common Stock at an
exercise price of $14.00 per share, all of which options have vested.
On January 30, 1996, Mr. Reiner was appointed President and Chief
Executive Officer of the Company. On February 1, 1999, Mr. Reiner was named
Chairman of the Company and Mr. Cornstein became Chairman Emeritus of the
Company. On February 1, 1999, Finlay and Pinnacle Advisors Limited, a company as
to which Mr. Cornstein is a principal ("Pinnacle"), entered into a two year
consulting agreement pursuant to which Pinnacle was engaged to provide
consulting services and it was agreed that, if available, Mr. Cornstein will
attempt to act for Pinnacle in the performance of services thereunder. The
consulting agreement provides that Pinnacle shall receive compensation in the
amount of $225,000 per year.
On May 1, 1997, the Company appointed Mr. Melvin to serve as Executive
Vice President and Chief Operating Officer of the Company and President and
Chief Operating Officer of Finlay Jewelry. The Company has agreed to pay to Mr.
Melvin an annual base salary of at least $350,000 as well as an annual bonus
based on the achievement of certain targets. In addition, Mr. Melvin was paid a
$25,000 bonus upon his joining the Company and, in July 1997, received from
Finlay a $295,000 non-interest-bearing loan, which was repaid in full on July
16, 1998. On May 1, 1997, Finlay granted to Mr. Melvin options under the 1997
Plan to purchase 50,000 shares of Common Stock at an exercise price per share
equal to $14.875, vesting in equal installments on each of the first five
- 15 -
<PAGE>
anniversaries of the respective grant dates. Mr. Melvin is also eligible for
benefits that are available to other senior executives of Finlay, including
reimbursement of moving and relocation expenses. If Mr. Melvin's employment is
terminated by Finlay without cause (not including death or disability) or his
title is changed to a lesser title, he is entitled to receive a lump sum payment
equal to one year's base salary. On February 22, 1999, Finlay agreed with Mr.
Melvin that in the event he continues to be employed by Finlay or an affiliate
on February 1, 2001, Finlay shall pay to Mr. Melvin a special bonus of $125,000,
and in the event he continues to be so employed on February 1, 2002, Finlay
shall pay to him an additional special bonus of $75,000.
On February 22, 1999, Finlay agreed with Ms. Leslie Philip, the
Executive Vice President and Chief Merchandising Officer of the Company and
Finlay Jewelry, that in the event she continues to be employed by Finlay or an
affiliate on February 1, 2001, Finlay shall pay to Ms. Philip a special bonus of
$200,000 and in the event she continues to be so employed on February 1, 2002,
Finlay shall pay to her an additional special bonus of $150,000.
INDEMNIFICATION AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS
Finlay has entered into indemnification agreements with each of its
directors and certain of its executive officers. For a complete description of
these agreements, see "Certain Transactions -- Certain Other Transactions."
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee consists of Thomas H. Lee, Rohit M. Desai
and Norman S. Matthews, each of whom is a non-employee member of the Board of
Directors. The Committee met six times in the fiscal year ended January 30, 1999
to afford the members the opportunity to consider all compensation related
matters. For purposes hereof, the Compensation Committee will be referred to
herein as the "Committee."
GENERAL. The Company's executive compensation policies are intended to
provide competitive levels of compensation in order to attract and retain
qualified executives and to provide incentives to its senior management to
enhance profitability and stockholder returns. The Committee believes such
objectives are best achieved by having a substantial portion of an executive
officer's cash compensation tied to annual earnings of the Company or the
relevant business unit and by providing long-term incentives through the use of
stock options. The Committee also believes in rewarding exceptional performance
and contributions to the development of the Company's business.
To achieve these objectives and to retain the services of senior
management for an extended period, the Company has entered into employment
agreements with certain of its executive officers. The terms of each employment
agreement are more particularly described under the heading "Employment and
Other Agreements and Change of Control Arrangements." These agreements provide
for a competitive base salary plus a cash bonus which is based on the annual
financial performance of the Company. By calculating a major component of the
executive's cash compensation on the basis of annual financial performance, the
Committee seeks to encourage the senior executive to achieve maximum
profitability. The Committee also reviews the performance of each executive
officer on an annual basis and may approve additional compensation or waive
requirements of the executive's employment contract to reward an exceptional
individual effort or performance.
The Committee believes that stock-based compensation arrangements are
beneficial in aligning the interests of management and the Company's
shareholders over the long-term. The principal vehicle for awarding stock-based
compensation is the 1997 Plan. Under the 1997 Plan, the Committee is authorized
to grant to key employees stock options as well as other stock-based awards,
including restricted stock grants, stock appreciation rights and
performance-based stock awards. Of the 850,000 shares of Common Stock available
for issuance under the 1997 Plan, 2,600 of such shares have been issued to date
in connection with exercises of options granted under the 1997 Plan and 571,782
of such shares are reserved for issuance upon exercise of currently outstanding
options. Accordingly, as of the date hereof, only 275,618 shares of Common Stock
are available for future grants under the 1997 Plan. The number of options
granted to each executive officer under the 1997 Plan (and, prior thereto, under
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<PAGE>
the 1993 Plan) generally depended on the executive's performance, the
performance of the Company or the executive's business unit, the level of his
responsibility, the extent of other forms of compensation payable to him, the
terms of his employment agreement, if applicable, and the number of options
previously granted to him. In fiscal 1998, the Committee awarded options under
the 1997 Plan to purchase an aggregate of 201,067 shares of the Company's Common
Stock. All options granted by the Committee were issued with an exercise price
equal to the fair market value of a share of Common Stock on the date of grant,
generally vest over a period of up to five years from the date of grant and are
generally exercisable until the expiration of ten years from the date of grant;
provided, however, that such options are generally subject to early termination
under certain circumstances and are generally subject to various conditions.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. On January 30, 1996,
pursuant to the terms of his employment agreement, Mr. Reiner was elected Chief
Executive Officer of the Company. His compensation will continue to be governed
by the terms of his employment agreement described above. In addition, the
Company made a payment to Mr. Reiner for 1998 in an aggregate amount of
$400,000, consisting of (i) the reimbursement of Mr. Reiner for the interest
paid in respect of the loan made by the Company to him in 1995 for the purpose
of his purchase of shares of Common Stock of the Company upon the commencement
of his employment with Finlay and (ii) a special bonus of $125,000 in connection
with the Company's April 1998 public offering of Common Stock and certain
related transactions. See "Certain Transactions -- The 1998 Offering."
COMPENSATION DEDUCTION LIMITATION. Section 162(m) of the Code limits
to $1 million per year the federal income tax deduction available to a public
company for compensation paid to its chief executive officer and its four other
highest paid executive officers, unless that compensation qualifies for certain
"performance-based" exceptions provided for in that section of the Code. The
Committee will consider ways to maximize the deductibility of executive
compensation, while retaining the discretion the Committee deems necessary to
compensate executive officers in a manner commensurate with performance and the
competitive environment for executive talent.
Submitted by the Compensation Committee of the Board of Directors:
Thomas H. Lee, Rohit M. Desai and Norman S. Matthews.
- 17 -
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph charts, on an annual basis, the total
stockholders' return over a period from April 6, 1995 to January 30, 1999 with
respect to an investment in the Company's Common Stock as compared to the Nasdaq
Stock Market, the Dow Jones Retailers (Specialty) Index and the S&P Retail
(Department Stores) Index. The S&P Retail (Department Stores) Index has been
added as an additional line in the following line graph in order to provide a
basis for comparing the performance of the Company, which operates through its
leased fine jewelry departments located in major department stores, against the
performance of the department stores retail sector of the S&P 500. The Company
has paid no dividends with respect to its Common Stock during the period.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG FINLAY ENTERPRISES, INC., THE NASDAQ STOCK MARKET U.S. INDEX,
THE DOW JONES RETAILERS (SPECIALTY) INDEX AND THE S&P RETAIL
(DEPARTMENT STORES) INDEX
This following represents a graph in the printed piece
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
4/6, 2/3, 2/1, 1/31, 1/30,
1995 1996 1997 1998 1999
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Finlay Enterprises Inc. 100.00 78.57 105.36 164.29 78.57
Nasdaq Stock Market (U.S.) 100.00 132.48 171.83 203.03 317.04
Dow Jones Retailers 100.00 105.27 124.93 189.19 329.18
(Specialty)
S&P Retail (Department 100.00 112.82 121.21 158.97 157.20
Stores)
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
APRIL 6, FEBRUARY 3, FEBRUARY 1, JANUARY 31, JANUARY 30,
1995 1996 1997 1998 1999
-------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Finlay Enterprises Inc. FNLY 100.00 78.57 105.36 164.29 78.57
Nasdaq Stock Market (U.S.) INAS 100.00 132.48 171.83 203.03 317.04
Dow Jones Retailers IRTS 100.00 105.27 124.93 189.19 329.18
(Specialty)
S&P Retail (Department RSD 100.00 112.82 121.21 158.97 157.20
Stores)
</TABLE>
* Assumes $100 invested on April 6, 1995 in stock or index, with reinvestment of
all dividends.
- 18 -
<PAGE>
CERTAIN TRANSACTIONS
STOCKHOLDERS' AGREEMENT
The Lee Investors, the Desai Investors, the Management Stockholders,
all employees holding options to purchase Common Stock, certain private
investors and the Company are parties to the Stockholders' Agreement, which sets
forth certain rights and obligations of the parties with respect to the Common
Stock and corporate governance of the Company. Any employees of Finlay not
parties to the Stockholders' Agreement, as amended, who have received or in the
future receive options to purchase Common Stock in connection with their
employment have also been required or will also be required, as the case may be,
to become parties to the Stockholders' Agreement.
The Stockholders' Agreement provides that the parties thereto must
vote their shares in favor of certain directors who are nominated by the Lee
Investors, the Desai Investors, Mr. Cornstein and Mr. Reiner. Notwithstanding
the foregoing, the right of various persons to designate directors will be
reduced or eliminated at such time as they own less than certain specified
percentages of the shares of Common Stock then outstanding or in certain cases
are no longer an employee of the Company. The designees of the Lee Investors
currently serving on the Board of Directors are Messrs. Lee and Smith; the
designee of the Desai Investors is Mr. Desai; the designees of Mr. Cornstein are
Messrs. Cornstein and Kaplan; and Mr. Reiner is his own designee. The
Stockholders' Agreement also provides for an Executive Committee to consist of
at least five directors, including, under certain conditions, designees of Mr.
Lee, the Desai Investors and Mr. Cornstein. When a stockholder or group of
stockholders loses the right to designate a director, such director is to be
designated instead by a majority of the directors of the Company. The Executive
Committee of the Company's Board consists at present of Messrs. Lee, Desai,
Matthews, Cornstein, Kaplan and Reiner.
In addition, the Stockholders' Agreement provides that the parties
thereto have (i) certain "come along" rights allowing them to participate in
private sales of Common Stock by parties selling at least a majority of the
outstanding shares of Common Stock and (ii) certain "take along" rights allowing
parties who are selling at least a majority of the outstanding shares of Common
Stock to require the other parties to the Stockholders' Agreement to sell all or
a portion of their shares of Common Stock to the same purchaser in the same
transaction on the same terms.
REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement grants certain registration rights
to the Lee Investors, the Desai Investors, certain other investors and certain
Management Stockholders. Lee Investors and Desai Investors who together hold at
least 15% of the outstanding "Registrable Securities" (as defined in the
Registration Rights Agreement) are entitled to request jointly, and the Company
shall be obligated to effect, up to three registrations of "Registrable
Securities." The Lee Investors and Desai Investors may demand registration
without the other under certain circumstances. The Registration Rights Agreement
also provides that stockholders who are parties thereto (other than the Lee
Investors and the Desai Investors) holding in the aggregate at least 20% of the
"Registrable Securities" then outstanding will have the right on one occasion to
require the Company to file a registration statement with the Commission
covering all or a portion of their "Registrable Securities" in certain
circumstances. In addition, under the Registration Rights Agreement, if the
Company proposes to register shares of Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), either for its own account or for the
account of others (other than a registration statement relating solely to
employee benefit plans), then each party to the Registration Rights Agreement
will have the right, subject to certain restrictions and priorities, to request
that the Company register its shares of Common Stock in connection with such
registration. Under the Registration Rights Agreement, the holders of
"Registrable Securities," on the one hand, and the Company, on the other, agree
to indemnify each other for certain liabilities, including liabilities under the
Securities Act, in connection with any registration of shares subject to the
Registration Rights Agreement.
- 19 -
<PAGE>
THE 1997 OFFERING
On October 21, 1997, the Company completed a public offering (the
"1997 Offering") of 3,450,000 shares of Common Stock at a price of $19.00 per
share, of which 2,196,971 shares were issued and sold by the Company and
1,253,029 shares were sold by certain non-management selling stockholders. In
connection with the 1997 Offering, Messrs. Lee, Desai and Matthews sold 410,325
shares, 953,029 shares and 5,722 shares, respectively.
THE 1998 OFFERING
On April 24, 1998, the Company completed a public offering (the "1998
Offering") of 1,800,000 shares of Common Stock at a price of $27.50 per share,
of which 567,310 shares were sold by the Company and 1,232,690 shares were sold
by certain selling stockholders. In connection with the 1998 Offering, Messrs.
Lee, Reiner, Smith and Scheckner sold 1,071,921 shares, 100,000 shares, 13,055
shares and 20,200 shares, respectively. A portion of the proceeds received by
Mr. Reiner from the sale of such shares was used by him to repay the outstanding
balance of a note issued by Mr. Reiner to the Company. Mr. Reiner was
subsequently reimbursed for the interest paid by him in respect of such note.
See "Executive Compensation -- Employment and Other Agreements and Change of
Control Arrangements."
CERTAIN OTHER TRANSACTIONS
Finlay has entered into indemnification agreements with each of
Finlay's directors and certain executive officers. The indemnification
agreements require, among other things, that Finlay indemnify its directors and
executive officers against certain liabilities and associated expenses arising
from their service as directors and executive officers of Finlay and reimburse
certain related legal and other expenses. In the event of a Change of Control
(as defined therein), Finlay 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. Finlay
will also cover each director and certain executive officers under a directors
and officers liability policy maintained by Finlay in such amounts as the Board
of Directors of the Company finds reasonable. Although the indemnification
agreements offer coverage similar to the provisions in the Restated Certificate
of Incorporation and the Delaware General Corporation Law, they provide greater
assurance to directors and 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.
For information relating to certain transactions involving members of
management or others, see "Executive Compensation -- Compensation Committee
Interlocks and Insider Participation" and "Executive Compensation -- Employment
and Other Agreements and Change of Control Arrangements."
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the next annual
meeting of stockholders, to be held in 1999, must be received by the Company at
529 Fifth Avenue, New York, New York 10017, Attention: Secretary by January 22,
2000 to be included in the proxy statement and form of proxy relating to that
meeting.
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<PAGE>
AUDITORS
Representatives of Arthur Andersen LLP are expected to attend the
Annual Meeting and, while they are not expected to make a statement, they will
have an opportunity to do so if they desire. They will also be available to
answer appropriate questions.
OTHER INFORMATION
The cost of soliciting proxies will be borne by the Company. Following
the original mailing of proxy soliciting material, regular employees of the
Company may solicit proxies by mail, telephone, telegraph and personal
interview. Arrangements have been made with brokerage houses and other
custodians, nominees and fiduciaries which are record holders of the Company's
stock to forward proxy soliciting material and annual reports to the beneficial
owners of such stock, and the Company will reimburse such record holders for
their reasonable expenses incurred in providing such services. As of the date of
this Proxy Statement, the Company has not retained the services of a proxy
solicitor to assist in the solicitation of proxies; however, the Company may
determine prior to the date of the annual meeting to retain a proxy solicitor,
in which case the Company anticipates that the cost of doing so will not exceed
$5,000.
A copy of the Company's annual report for the fiscal year ended
January 30, 1999 is enclosed.
The Board of Directors is aware of no other matters that are to be
presented to stockholders for formal action at the Annual Meeting. If, however,
any other matters properly come before the Annual Meeting or any adjournment
thereof, it is the intention of the persons named in the enclosed form of proxy
to vote such proxy in accordance with their judgment on such matters.
By Order of the Board of Directors.
Bonni G. Davis
SECRETARY
Dated: New York, New York
May 25, 1999
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<PAGE>
[FRONT]
PROXY FINLAY ENTERPRISES, INC.
PROXY SOLICITED BY
THE BOARD OF DIRECTORS OF FINLAY ENTERPRISES, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS-JUNE 22, 1999
The undersigned hereby appoints Arthur E. Reiner, Joseph M. Melvin and
Leslie A. Philip, and each of them, with power of substitution and
resubstitution to each, as the proxies and attorneys of the undersigned to vote,
as designated below, all shares of common stock which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
Finlay Enterprises, Inc. to be held at the Cornell Club, 6 East 44th Street, New
York, New York at 10:00 a.m. (local time) on June 22, 1999, and at any
adjournment thereof.
1. Election of Directors:
[ ] FOR all nominees listed below [ ] WITHHOLD APPROVAL
(except as marked to to vote for all
the contrary below) nominees
Rohit M. Desai, Michael Goldstein and Thomas H. Lee
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
- --------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
If no direction is given, this proxy will be voted FOR the election of the
nominees set forth in Proposal No. 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ELECTION OF THE NOMINEES SET FORTH IN PROPOSAL NO. 1
TO BE VALID, THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE
<PAGE>
Please sign exactly as name appears
at left. When shares are held by
joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give your full title as
such. If a corporation, please sign
in full corporate name by president
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated:
----------------------------
-----------------------------------
Signature
-----------------------------------
Signature
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS.
