<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Celebrity, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] 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:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
CELEBRITY, INC.
4520 OLD TROUP ROAD
P. O. BOX 6666
TYLER, TEXAS 75711
October 27, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting (the "Meeting") of
shareholders of Celebrity, Inc. (the "Company") to be held at the offices of
Star Wholesale Florist, Inc., 8223 N. Stemmons Freeway, Dallas, Texas, on
Monday, November 16, 1998, at 8:30 a.m. local time. The attached Notice of
Annual Meeting and Proxy Statement fully describe the formal business to be
transacted at the Meeting, which includes (i) the election of directors of the
Company, (ii) the amendment of the Company's Amended and Restated 1992 Stock
Option Plan (the "Option Plan") to increase the number of shares of Common Stock
authorized for issuance thereunder from 500,000 to 1,000,000, and (iii) the
ratification of the selection of PricewaterhouseCoopers LLP as independent
public accountants. We have also enclosed a copy of the Company's Annual Report
for the fiscal year ended June 30, 1998.
The Company's Board of Directors believes that favorable votes for each
person nominated to serve as a director of the Company, for the increase in the
number of shares authorized for issuance under the Option Plan and for
ratification of the selection of PricewaterhouseCoopers LLP as independent
public accountants are in the best interests of the Company and its shareholders
and unanimously recommends a vote "FOR" each nominee and "FOR" the increase and
the ratification. Accordingly, we urge you to review the accompanying material
carefully and to return the enclosed Proxy promptly. If you attend the Meeting,
you may vote in person even if you have previously mailed a Proxy.
Directors and officers of the Company will attend the meeting and will
respond to questions that are appropriate for discussion at the Meeting. I hope
you will be able to attend.
Sincerely,
/s/ ROBERT H. PATTERSON, JR.
Robert H. Patterson, Jr.
Chairman of the Board
<PAGE> 3
CELEBRITY, INC.
4520 OLD TROUP ROAD
P. O. BOX 6666
TYLER, TEXAS 75711
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held November 16, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Celebrity, Inc., a Texas corporation (the "Company" or
"Celebrity"), will be held at the offices of Star Wholesale Florist, Inc., 8223
N. Stemmons Freeway, Dallas, Texas, on Monday, November 16, 1998, at 8:30 a.m.
local time. A Proxy and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the following purposes:
(1) To elect five members of the Board of Directors for the term of office
stated in the Proxy Statement.
(2) To amend the Company's Amended and Restated 1992 Stock Option Plan to
increase the number of shares of Common Stock authorized for issuance
thereunder from 500,000 to 1,000,000.
(3) To consider and ratify the selection of PricewaterhouseCoopers LLP as
the Company's independent public accountants.
(4) To transact any other business that may properly come before the
Meeting and any adjournments thereof.
The close of business on October 14, 1998, has been fixed as the record
date for determining shareholders entitled to notice of and to vote at the
Meeting and any adjournments thereof. For a period of at least ten days prior to
the Meeting, a complete list of shareholders entitled to vote at the Meeting
will be open to the examination of any shareholder during ordinary business
hours at the offices of the Company at 4520 Old Troup Road, Tyler, Texas.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING IN PERSON ARE
URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
/s/ ROBERT H. PATTERSON, JR.
Robert H. Patterson, Jr.
Chairman of the Board, President
and Chief Executive Officer
Tyler, Texas
October 27, 1998
<PAGE> 4
CELEBRITY, INC.
4520 OLD TROUP ROAD
P. O. BOX 6666
TYLER, TEXAS 75711
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 16, 1998
This Proxy Statement is being first mailed on October 27, 1998, to
shareholders of Celebrity, Inc., a Texas corporation (the "Company" or
"Celebrity"), by the Board of Directors to solicit proxies (the "Proxies") for
use at the Annual Meeting of Shareholders (the "Meeting") of the Company to be
held at the offices of Star Wholesale Florist, Inc., 8223 N. Stemmons Freeway,
Dallas, Texas, on Monday, November 16, 1998, at 8:30 a.m., local time, and at
such other times and places to which the Meeting may be adjourned.
The purpose of the Meeting is to consider and act upon the following:
(i) the election of five directors for the terms stated below;
(ii) the amendment of the Company's Amended and Restated 1992 Stock Option
Plan (the "Option Plan") to increase the number of shares of common
stock, par value $.01 per share, of the Company (the "Common Stock")
authorized for issuance thereunder from 500,000 to 1,000,000;
(iii) the ratification of the selection of PricewaterhouseCoopers LLP as
the Company's independent public accountants; and
(iv) such other matters as may properly come before the Meeting and any
adjournments thereof.
All shares represented by valid Proxies, unless the shareholder otherwise
specifies, will be voted as follows:
(i) FOR the election of the five persons named under "Election of
Directors" as nominees for election as directors of the Company for
the terms stated below;
(ii) FOR the amendment of the Option Plan to increase the number of shares
of Common Stock authorized for issuance thereunder from 500,000 to
1,000,000;
(iii) FOR the ratification of the selection of PricewaterhouseCoopers LLP
as the Company's independent public accountants; and
(iv) at the discretion of the proxyholders (the "Proxyholders") with regard
to any other matter that may properly come before the Meeting and any
adjournments thereof.
Any shareholder executing a Proxy retains the right to revoke it at any
time prior to exercise at the Meeting. A Proxy may be revoked by delivery of
written notice of revocation to the Secretary of the Company, by execution and
delivery of a later Proxy or by voting in person at the Meeting. Unless revoked,
all shares represented by properly executed Proxies will be voted as specified
therein.
RECORD DATE AND VOTING SECURITIES
The record date for determining the shareholders of the Company entitled to
notice of and to vote at the Meeting and any adjournments thereof was the close
of business on October 14, 1998 (the "Record Date"), at which time the Company
had issued and outstanding approximately 6,282,755 shares of Common Stock. The
shares of Common Stock constitute the only outstanding voting securities of the
Company entitled to be voted at the Meeting.
<PAGE> 5
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of
one-third of the Common Stock issued and outstanding and entitled to vote
thereat is necessary to constitute a quorum to transact business. In deciding
all questions and other matters, a holder of Common Stock on the Record Date
will be entitled to cast one vote for each share of Common Stock then registered
in such holder's name.
Election of the director nominees named in Proposal No. 1, or any of them,
requires the affirmative vote of the holders of a plurality of the shares of
Common Stock present or represented at the Meeting and entitled to vote thereon.
A Proxy cannot be voted for more than five director nominees. Votes may be cast
in favor of or withheld with respect to any of the director nominees. Votes that
are withheld will be counted for quorum purposes, but will be excluded entirely
from the tabulation of votes in respect of the proposal and, therefore, will not
otherwise affect the outcome of the vote on the proposal.
Approval of Proposal Nos. 2 and 3 requires the affirmative vote of the
holders of a majority of the shares of Common Stock present or represented at
the Meeting and entitled to vote thereon that are actually voted. Abstentions on
the proposal may be specified and will be counted toward a quorum, but will be
excluded entirely from the tabulation for the proposal. As a result, abstentions
will not otherwise affect the outcome of the vote on the proposal.
Shares referred to as "broker non-votes" (shares held by brokers or
nominees as to which they have no discretionary authority to vote on a
particular matter and have received no instructions from the beneficial owners
or persons entitled to vote thereon), if any, are counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. However, for purposes of determining the outcome of any matter requiring
discretionary authority to vote, broker non-votes will be treated as not present
and not entitled to vote with respect to that matter (even though those shares
are considered present and entitled to vote for quorum purposes and may be
entitled to vote on other matters). Because the Company believes that brokers or
nominees will have discretionary authority to vote on each of Proposal No. 1,
Proposal No. 2 and Proposal No. 3, the Company believes that there will be no
broker non-votes on such proposals.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
There are five directors to be elected for terms expiring at the Company's
Annual Meeting of Shareholders in 1999 or until their successors have been
elected and qualified. It is intended that the names of the persons indicated in
the following table will be placed in nomination and that the persons named in
the Proxy (the "Proxyholders") will vote for their election. Each of the
nominees has indicated willingness to serve as a member of the Board of
Directors if elected; however, if any nominee becomes unavailable for election
to the Board of Directors for any reason not presently known or contemplated,
the Proxyholders will have discretionary authority to vote the Proxy for any
nominee who is substituted for the nominee who becomes unavailable.
The nominees are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert H. Patterson, Jr........... 47 Chairman of the Board, President and Chief
Executive Officer
Richard Yuen...................... 54 Managing Director of Celebrity Exports
International Limited and Director
B. D. Hunter(1)(2)................ 68 Director
C. A. Langner(1)(2)............... 73 Director
Valerie Anne Mars(1)(2)........... 39 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
2
<PAGE> 6
Robert H. Patterson, Jr. has served as Chairman of the Board of Directors
of Celebrity since 1989, as Chief Executive Officer since July 1995, as
President from 1978 to July 1995 and since September 1997, and as a director
since 1974.
Richard Yuen has served as Managing Director of Celebrity Exports
International Limited, the Company's Hong Kong subsidiary ("Celebrity Hong
Kong"), since 1984 and as a director of Celebrity since December 1992.
B. D. Hunter has served as a director of Celebrity since April 1993. Mr.
Hunter is the founder and Chairman of Huntco Inc., an intermediate steel
processor. Mr. Hunter is also the founder and Chairman of Huntco Enterprises
Inc., which operates nursing homes and other businesses. Mr. Hunter also serves
on the boards of directors of Service Corporation International, Cash America
International, Inc. and Mercantile Bank of St. Louis N.A.
C. A. Langner has served as a director of Celebrity since December 1992.
Mr. Langner was Administrative Manager of the Producing Department of Exxon
Corporation from 1983 to 1986. Mr. Langner has been engaged in the management of
his personal investments since 1986.
Valerie Anne Mars has served as a director of Celebrity since September
1995. Ms. Mars has been the General Manager of Master Foods, Czech Republic and
Republic of Slovakia, a unit of Mars, Inc., in Prague, Czech Republic, since
August 1996. From 1994 to August 1996, Ms. Mars was a project consultant with
M&M/Mars. From 1990 to 1994, Ms. Mars was engaged in the management of her
personal investments.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH NOMINEE
FOR THE BOARD OF DIRECTORS.
BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a regularly scheduled basis to review significant
developments affecting the Company and to act on matters requiring Board
approval. It also holds special meetings and acts by unanimous written consent
when important matters require Board action between scheduled meetings. The
Board of Directors met four times and acted four times by unanimous written
consent during fiscal 1998. During fiscal 1998, each member of the Board
participated in at least 75% of all Board and applicable committee meetings held
during the period for which he or she was a director, except that Mr. Yuen did
not participate in two Board meetings.
The Board of Directors established audit and compensation committees to
devote attention to specific subjects and to assist it in the discharge of its
responsibilities. The functions of those committees, their current members and
the number of meetings held and actions taken by written consent during fiscal
1998 are described below.
Audit Committee. The Audit Committee recommends to the Board of Directors
the appointment of the firm selected to be independent public accountants for
the Company and monitors the performance of such firm; reviews and approves the
scope of the annual audit and evaluates with the independent public accountants
the Company's annual audit and annual consolidated financial statements; reviews
with management the status of internal accounting controls; evaluates problem
areas having a potential financial impact on the Company that may be brought to
its attention by management, the independent public accountants or the Board of
Directors; and evaluates annual public financial reporting documents of the
Company. Messrs. Langner (Chairman) and Hunter and Ms. Mars are the members of
the Audit Committee. The Audit Committee met three times during fiscal 1998.
Compensation Committee. The Compensation Committee approves all major
decisions with regard to executive compensation, establishes and monitors the
compensation policies of the Company and administers the Option Plan and 1993
Employee Stock Purchase Plan (as amended to date, the "Purchase Plan"). The
Compensation Committee has the power to determine from time to time the
individuals to whom options will be granted, and offers to purchase stock will
be made, under the plans. Messrs. Hunter (Chairman) and
3
<PAGE> 7
Langner and Ms. Mars are the members of the Compensation Committee. The
Compensation Committee met three times and acted once by unanimous written
consent during fiscal 1998.
The Company does not have a nominating committee. The functions customarily
attributable to a nominating committee are performed by the Board of Directors
as a whole.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of Common Stock as of the Record Date by (i) each person known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) the Company's Named Officers (as
defined under "Management Compensation -- Summary Compensation Table") and (iv)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL BENEFICIAL PERCENT
OWNER OR GROUP(1) OWNERSHIP(2) OF CLASS
------------------ ------------ --------
<S> <C> <C>
Robert H. Patterson, Jr..................................... 3,172,000 50.3%
Richard Yuen................................................ 145,150 2.3%
B. D. Hunter................................................ 25,000 *
C. A. Langner............................................... 20,000 *
Valerie Anne Mars........................................... 13,500 *
David J. Huffman............................................ 56,000 *
Clifford C. Condict......................................... 91,187 1.5%
Roger D. Craft.............................................. 18,000 *
Lynn Skillen................................................ 0 --
Directors and executive officers as a group (11
persons)(3)............................................... 3,548,237 55.0%
</TABLE>
- ---------------
* Less than 1%
(1) "Beneficial owner" means generally any person who, directly or indirectly,
has or shares voting power or investment power with respect to a security.
All information with respect to the beneficial ownership of any shareholder
has been furnished by such shareholder and the Company believes that, except
as otherwise indicated, each shareholder has sole voting and investment
power with respect to shares listed as beneficially owned by such
shareholder.
(2) Includes shares of Common Stock issuable upon exercise of options that are
exercisable on the Record Date or within 60 days thereafter by Patterson,
Yuen, Hunter, Langner, Mars, Huffman, Condict, Craft and all directors and
executive officers as a group, with such shares numbering 24,000, 36,000,
15,000, 11,000, 11,000, 35,000, 23,000, 13,000 and 173,400 shares,
respectively.
(3) Includes 5,400 shares of Common Stock held by Laura Lockhart, of which 3,400
shares are issuable upon exercise of options that are exercisable on the
Record Date or within 60 days thereafter; and 2,000 shares held by Sherri L.
Goodman, all of which are issuable upon exercise of options that are
exercisable on the Record Date or within 60 days thereafter.
4
<PAGE> 8
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table contains information concerning the compensation earned
by, awarded to or paid to (i) the Chief Executive Officer of the Company during
fiscal 1998 and (ii) each of the most highly compensated executive officers of
the Company at the end of fiscal 1998 other than the Chief Executive Officer
whose total annual salary and bonus exceeded $100,000, based on salary and bonus
earned during fiscal 1998 (collectively, the "Named Officers"), in each case for
services rendered to the Company during fiscal years 1996 through 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
------------------- OPTIONS/ ALL OTHER
NAME AND FISCAL SALARY BONUS SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#)(1) ($)
------------------ ------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert H. Patterson, Jr. ........... 1998 296,700 0 25,000(6) 9,168(2)(3)
Chairman of the Board, 1997 290,000 0 55,000 6,155(2)(3)
President and Chief 1996 290,000 0 0 203,788(4)
Executive Officer
Richard Yuen........................ 1998 262,700 0 25,000(6) 0
Director and Managing 1997 284,200 0 15,000 0
Director of Celebrity 1996 258,000 0 0 0
Exports International Limited(5)
David J. Huffman.................... 1998 159,600 0 50,000(6) 3,990(2)
Executive Vice 1997 150,000 0 40,000 2,281(2)
President -- Sales & Marketing 1996 150,000 0 0 4,356
Clifford C. Condict................. 1998 97,500 0 20,000(6) 2,805(2)
Vice President -- Merchandising 1997 90,000 15,000 15,000 1,358(2)
1996 90,000 0 0 3,063
Roger D. Craft...................... 1998 97,500 0 10,000(6) 2,805(2)
Vice President -- Star 1997 90,000 15,000 15,000 1,370(2)
Operations 1996 90,000 0 0 3,063
Lynn Skillen........................ 1998 44,700(7) 0 125,000(6) 0
Vice President -- Finance and
Chief Financial Officer
</TABLE>
- ---------------
(1) Options to acquire shares of Common Stock under the Option Plan.
(2) In fiscal 1997, the Company paid $4,020, $2,281, $1,358 and $1,370, and in
fiscal 1998, the Company paid $4,800, $3,990, $2,805 and $2,805, as matching
contributions for Messrs. Patterson, Huffman, Condict and Craft,
respectively, pursuant to the Company's tax-qualified profit-sharing plan
with a cash or deferred arrangement under Section 401(k) of the Internal
Revenue Code of 1986 (the "Code").
(3) In fiscal 1997 and 1998, the Company also paid $2,135 and $4,368,
respectively, for long-term disability insurance and a medical reimbursement
plan for Mr. Patterson.
(4) In fiscal 1996, the Company discontinued certain arrangements pursuant to
which it paid the premiums on, and held ownership of, two insurance policies
on Mr. Patterson's life. The ownership of the policies, which had an
aggregate cash surrender value of $198,418, was then transferred to Mr.
Patterson, resulting in additional compensation to Mr. Patterson equivalent
to such aggregate cash surrender value.
(5) All compensation for Mr. Yuen's services is paid to Golden Pool Limited, a
British Virgin Islands company wholly owned by a trust, the beneficiaries of
which are Richard Yuen and his family.
(6) Includes options granted contingent upon the approval by the shareholders of
the Company of the amendment to the Option Plan as described in Proposal No.
2 in this Proxy Statement.
(7) Mr. Skillen joined the Company in March 1998, and his annual salary has been
set at $155,000.
5
<PAGE> 9
OPTION GRANTS DURING FISCAL 1998
The following options were granted under the Option Plan to the Named
Officers set forth below during fiscal 1998:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
---------------------------------------------------------- -----------------------
NUMBER OF % OF TOTAL
OPTIONS/ OPTIONS/ SARS
SARS GRANTED TO EXERCISE OR EXPIRATION
NAME GRANTED(2)(3) EMPLOYEES(2) BASE PRICE(4) DATE 5% 10%
---- ------------- ------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Patterson,
Jr. .................. 25,000(5) 6.9% $1.31 6/25/03 $ 9,046 $ 19,994
Richard Yuen............ 25,000(5) 6.9% $1.19 6/25/08 $ 18,710 $ 47,414
David J. Huffman........ 50,000(5) 13.9% $1.19 6/25/08 $ 37,419 $ 94,828
Clifford C. Condict..... 20,000(5) 5.6% $1.19 6/25/08 $ 14,968 $ 37,931
Roger D. Craft.......... 20,000(5) 5.6% $1.19 6/25/08 $ 7,484 $ 18,966
Lynn Skillen............ 100,000 27.8% $1.9375 3/9/08 $121,848 $308,788
25,000(5) 6.9% $1.19 6/25/08 $ 18,710 $ 47,414
</TABLE>
- ---------------
(1) The potential realizable values shown in the table illustrate values that
might be realized upon exercise of the options immediately prior to the
expiration of their terms, based on the difference between the appreciated
value of the Common Stock over the term of the options (assuming the
specified compounded rates of appreciation) and the exercise price of the
options. These amounts do not take into account provisions of certain
options providing for termination of the option following termination of
employment, nontransferability or vesting over periods of up to five years.
(2) The Company has not granted any stock appreciation rights ("SARs").
(3) All options have ten-year terms, except for Mr. Patterson's options, which
have five-year terms. The options granted on June 26, 1998 become
exercisable with respect to 20% of the shares covered thereby annually
beginning on the first anniversary of the date of grant, except for Mr.
Patterson's options, which become exercisable with 25% of the shares covered
thereby annually beginning on the first anniversary of the date of the
grant. With respect to the options granted on June 26, 1998, in the event of
certain mergers or reorganizations or a Change of Control (as hereinafter
defined) or threatened Change of Control of the Company, any unexercisable
portion of the options will become immediately exercisable, but only after a
period of one year after the date of such grant. The term "Change of
Control" refers to the acquisition of ten percent or more of the voting
securities of the Company by any person or by persons acting as a group
within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (unless such acquisition has been
approved by a two-thirds vote of the full Board of Directors of the
Company). Any unexercised portion of other options granted pursuant to the
Option Plan, including those granted to Mr. Skillen on March 9, 1998 will
become immediately exercisable upon a Change of Control.
(4) The option exercise price may be paid (i) in cash, (ii) in shares of Common
Stock, if permitted by the Compensation Committee, (iii) by certified or
cashier's check, (iv) by cash or certified or cashier's check for the par
value of the shares for which the option is exercised plus a promissory note
for the balance of the purchase price or (v) by delivery of a copy of
irrevocable instructions from the optionholder to a broker or dealer to sell
certain of the shares of Common Stock purchased upon exercise of the option
or to pledge them as collateral for a loan and promptly deliver to the
Company the amount of sale or loan proceeds necessary to pay such purchase
price. The exercise price was equal to the fair market value of the Common
Stock on the date of grant, except for Mr. Patterson's options, the exercise
price of which was equal to 110% of the fair market value of the Common
Stock on the date of grant.
(5) The grant of these options is contingent upon the approval by the
shareholders of the Company of the amendment to the Option Plan as described
in Proposal No. 2 in this Proxy Statement.
6
<PAGE> 10
OPTION EXERCISES DURING FISCAL 1998
AND FISCAL YEAR END OPTION VALUES
The following table provides information related to options exercised by
the Named Officers during fiscal 1998 and the number and value of options held
at fiscal year end. The Company does not have any outstanding stock appreciation
rights.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS/SARS AT OPTIONS/SARS
SHARES FISCAL YEAR END(1) AT FISCAL YEAR END($)(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Patterson,
Jr. ..................... 0 0 24,000 71,000 0 0
Richard Yuen............... 0 0 36,000 39,000 0 0
David J. Huffman........... 0 0 35,000 83,000 0 0
Clifford C. Condict........ 0 0 23,000 32,000 0 0
Roger D. Craft............. 0 0 13,000 22,000 0 0
Lynn Skillen............... 0 0 0 125,000 0 0
</TABLE>
- ---------------
(1) Value is calculated based on the difference between the option exercise
price and the closing price of the Common Stock on the date of exercise
multiplied by the number of shares to which the exercise relates.
(2) At fiscal year end, none of the Named Officers held in-the-money options.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are entitled to receive an
annual fee of $10,000, plus $500 for each meeting of the Board of Directors they
attend. The members of the Audit and Compensation Committees do not receive
separate compensation for their attendance at committee meetings. In addition,
pursuant to the terms of the Option Plan, nonemployee directors automatically
receive grants of nonqualified stock options to purchase 5,000 shares of Common
Stock upon their initial election to the Board of Directors and automatically
receive grants of nonqualified stock options to purchase 2,000 shares of Common
Stock in each year they are reelected to the Board of Directors. The options are
fully exercisable upon the date of grant at a price equal to the closing sale
price of the Common Stock reported by the NASDAQ SmallCap Market on the date of
grant. Each of Messrs. Langner and Hunter and Ms. Mars received options to
purchase 2,000 shares of Common Stock upon reelection to the Board of Directors
in December 1999. Such options are exercisable at a price of $1.38 per share.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The base salary for top executive officers and annual incentive
compensation for all executive officers for fiscal 1998 were approved by the
Compensation Committee, consisting of B. D. Hunter, C. A. Langner and Valerie
Anne Mars, all of whom are nonemployee directors. The Compensation Committee
received from the Chief Executive Officer recommendations regarding base
salaries and incentive compensation for the top executive officers. The Chief
Executive Officer set the compensation for lower level executive officers.
The objectives of the Company's executive compensation program are to:
Support the achievement of desired Company performance.
Provide competitive compensation that will attract and retain superior
talent and reward performance.
Align the executive officers' interests with those of the shareholders
by placing a portion of their pay at risk because it is dependent upon
corporate performance.
7
<PAGE> 11
To achieve the above objectives, the Company's executive compensation
policies integrate annual base compensation with bonuses based on overall
corporate performance and individual initiatives and performance. The
measurement of corporate performance and the award of bonuses are based
primarily upon the achievement of Company performance goals that are reviewed
and approved annually by the Compensation Committee. Accordingly, in years in
which these performance goals are achieved or exceeded, executive compensation
will tend to be higher than in years in which the Company's performance is below
expectations. Annual cash compensation, together with the payment of long-term
equity-based incentive compensation through stock options, is designed to
attract and retain qualified executives and to ensure that such executives have
a continuing stake in the long-term success of the Company.
The executive compensation program is designed to provide an overall level
of compensation that is competitive with that offered by companies of comparable
size and complexity. The actual compensation levels of the Company's executive
officers may be greater or less than average compensation levels in other
companies based upon annual and long-term overall Company performance as well as
individual performance. The Compensation Committee uses its discretion to set
executive compensation at levels warranted in its judgment by external, internal
and individual circumstances.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of base
salary, annual cash incentive compensation, long-term incentive compensation in
the form of stock options and various other benefits.
Base Salary. In fiscal 1998 base salary levels for the Company's executive
officers, including the Chief Executive Officer, were competitively set relative
to comparable companies. In determining salaries, the Compensation Committee
took into account individual experience and performance and specific issues
particular to the Company.
Annual Incentive Compensation. The Company maintains incentive compensation
plans for its executive officers. These incentive compensation plans are based
on performance goals that are established each fiscal year and are based on the
Company's sales and profitability. Cash bonuses, payable after the close of the
fiscal year, are based on the extent to which these goals have been met. The
amounts of these incentive bonuses, if any, are reflected in the summary
compensation table above.
The Company's 1998 Employee Bonus Plan (the "Bonus Plan") established
potential bonuses for executive officers of the Company. The potential bonuses
were based on the consolidated per share earnings of the Company for fiscal 1998
after accruals for income taxes, bonus plans and Company contributions to the
Company's 401(k) Plan, excluding extraordinary items ("Earnings Per Share").
Potential bonuses ranged from $10,000 to $165,000, depending upon Earnings Per
Share and the identity of the individual receiving the bonus. Because a minimum
Earnings Per Share of $.55 was required to have been achieved for fiscal 1998
for bonuses to be distributed under the Bonus Plan, no bonuses were earned under
the Bonus Plan for fiscal 1998.
Option Plan. The Option Plan has been the Company's long-term incentive
plan for executive officers since 1992. The objectives of the Option Plan are to
align executive and shareholder long-term interests by creating a strong and
direct link between executive compensation and shareholder return, and to enable
executives to develop and maintain a significant long-term ownership position in
the Common Stock.
On June 26, 1998, the Compensation Committee of the Board of Directors
considered stock option grants to each of the officers of the Company,
contingent upon the approval by the shareholders of the Company of the amendment
to the Option Plan as described in Proposal No. 2 in this Proxy Statement. Each
officer received stock options that were based on his or her responsibilities
and relative position in the Company. The stock options granted to each officer
in fiscal 1998 were granted with an exercise price equal to the fair market
value of the Common Stock at the date of grant, except for Mr. Patterson's
options, the exercise price of which was equal to 110% of the fair market value
of the Common Stock on the date of grant. Twenty percent of the stock options
granted in fiscal 1998 vest annually commencing on the first anniversary of the
date of
8
<PAGE> 12
grant, except for Mr. Patterson's options, which becomes exercisable with
twenty-five percent of the shares covered thereby annually beginning on the
first anniversary of the date of the grant.
Purchase Plan. Executive officers are encouraged to increase their
ownership of Common Stock, thus increasing the alignment of their interests with
shareholder interests, by participating in the Purchase Plan. Up to 300,000
shares of Common Stock may be sold under the Purchase Plan, which was
established in 1993, pursuant to offers to employees selected by the
Compensation Committee from among all employees of the Company and its
wholly-owned subsidiaries. The Compensation Committee has discretion as to the
timing and duration of such offers to allow employees to purchase Common Stock
under the Purchase Plan. The price of such Common Stock is the fair market value
of the stock when the offer is made. Employees may purchase shares with a
promissory note providing for repayment through payroll deductions. No employees
were offered the opportunity to purchase shares under the Purchase Plan during
fiscal 1998.
401(k) Plan. The Company maintains a tax-qualified profit sharing plan with
a cash or deferred arrangement (the "401(k) Plan") under section 401(k) of the
Code. All of the Company's employees, except those who are neither citizens nor
residents of the U.S., are eligible to participate in the 401(k) Plan beginning
on July 1 or January 1 following their completion of one full year of service
with the Company. Plan participants may defer up to 15% of their compensation,
subject to limits imposed by the Code, including a Code provision that limits
deferrals to an indexed amount, which was $9,500 in 1997 and $10,000 in 1998.
The 401(k) Plan provides that the Company, in its discretion, may make matching
contributions with respect to elective deferral contributions by plan
participants. In April 1997, the Board of Directors approved an amendment
allowing for a matching contribution of $1.00 per $1.00 of employee
contributions, up to three percent of each employee's compensation. The
Company's matching contribution may be made, in the Company's discretion, in
Common Stock or in cash. A participant's interest in Company matching
contribution amounts is full, vested and nonforfeitable following the completion
of six years of service by the participant. The Company's aggregate matching
contribution to the 401(k) Plan for fiscal 1998 was approximately $129,000.
Robert H. Patterson, Jr. is the trustee of the 401(k) Plan trust. Each
participant has the right to direct the investment of his or her own account
balance in the 401(k) Plan.
Benefits. The Company provided medical benefits to its Chief Executive
Officer pursuant to a medical reimbursement plan. See "Management
Compensation -- Summary Compensation Table -- Note (3)."
The Company has no policy for maintaining executive compensation within the
$1,000,000 deduction limitation of Section 162(m) of the Code because it is very
unlikely that limitation will be a factor for executives of the Company.
This report of the Compensation Committee on executive compensation is
submitted by the current members of the Committee as noted below:
B. D. Hunter
C. A. Langner
Valerie Anne Mars
9
<PAGE> 13
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on Common
Stock with the stocks comprising a peer group index consisting of Helen of Troy
Corporation, Craftmade International, Inc., Catalina Lighting, Inc., Handleman
Company and Fossil, Inc. (collectively, the "Peer Group") and the cumulative
total return on the stocks comprising the Russell 2000 Index over the periods
indicated.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG CELEBRITY, INC., THE PEER GROUP AND THE RUSSELL 2000 INDEX(1)(2)
<TABLE>
<CAPTION>
Measurement Period Celebrity,
(Fiscal Year Covered) Inc. Peer Group Russell 2000
<S> <C> <C> <C>
June 30, 1993 100 100 100
June 30, 1994 45 98 104
June 30, 1995 89 102 125
June 30, 1996 58 96 155
June 30, 1997 40 130 181
June 30, 1998 15 173 215
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
JUNE 30, 1993 JUNE 30, 1994 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1998
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Celebrity, Inc. $100 $ 45 $ 89 $ 58 $ 40 $ 15
Peer Group $100 $ 98 $102 $ 96 $130 $173
Russell 2000 $100 $104 $125 $155 $181 $215
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Based upon $100 invested on June 30, 1993 in the Common Stock, the Peer
Group or in the Russell 2000 Index, including in each case reinvestment of
dividends.
(2) Fiscal year ending June 30.
CERTAIN TRANSACTIONS
The Company leases distribution center space at 4501 Old Troup Road, Tyler,
Texas, from Robert H. Patterson, Jr., President and Chief Executive Officer of
the Company, and the trust under the will of the late father of Robert H.
Patterson, Jr., R. Harold Patterson, Sr. (the "Patterson Trust"). Mr. Patterson
and the Patterson Trust each own 50% of the property. During fiscal 1998, the
Company paid $10,000 per month to lease the property on a month-to-month basis.
Management believes the terms of the lease are no less favorable to the Company
than could be obtained from an unaffiliated third party.
The Company paid Golden Pool Limited, a British Virgin Islands company
wholly owned by a trust, the beneficiaries of which are Mr. Yuen and his family,
a fee of approximately $262,700 for management and consulting services provided
by Mr. Yuen in fiscal 1998.
Robert H. Patterson, Jr., David J. Huffman and Clifford C. Condict each
borrowed $109,800 from the Company in November 1993. The proceeds of these loans
were used to pay the fair market value of shares of Common Stock (other than the
par value of the shares, which was paid in cash by the purchasing executive
10
<PAGE> 14
officer) purchased by the executive officers under the Purchase Plan. Each loan
is secured by the Common Stock purchased with the proceeds of the loan. As of
the Record Date, the outstanding balances of the loans to Messrs. Patterson,
Huffman and Condict were $90,804, $97,984 and $103,354, respectively.
In September 1997, Celebrity borrowed $500,000 from RHP Management, LLC
("RHP"), an entity controlled by Robert H. Patterson, Jr. In February 1998, the
parties amended the promissory note to extend the repayment date to September
30, 1999, subject to repayment restrictions under the Company's credit facility.
The principal amount outstanding accrues interest at a fluctuating rate per
annum equal to the prime rate of a reference bank plus 1.5% per annum. The
proceeds from this loan were used to pay certain intercompany accounts payable
to Celebrity Hong Kong.
In July 1998, the Company borrowed an additional $500,000 from RHP, which
principal amount outstanding accrues interest at 10% per annum. The proceeds of
this loan were for seasonal working capital needs. The loan is expected to be
repaid during fiscal 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission (the "SEC"). Directors, officers and greater
than 10% beneficial owners are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it with respect to fiscal 1998,
or written representations from certain reporting persons, the Company believes
that all filing requirements under Section 16(a) of the Exchange Act applicable
to its directors, officers and greater than 10% beneficial owners have been
satisfied.
PROPOSAL NO. 2
AMENDMENT TO OPTION PLAN
The Board of Directors and the Compensation Committee (referred to
collectively as the "Board of Directors" with respect to this proposal)
unanimously approved an amendment to the Option Plan, subject to approval by the
shareholders of the Company, (i) to increase the number of shares of Common
Stock issuable pursuant to the Option Plan from 500,000 to 1,000,000.
DESCRIPTION OF OPTION PLAN
The Option Plan provides solely for the grant of options to acquire shares
of Common Stock to employees, nonemployee directors and advisors
("Participants") of the Company or a subsidiary thereof (referred to
collectively as the "Company" with respect to this proposal), all of which were
eligible for participation in the Option Plan at the Record Date. The Option
Plan currently provides for the grant of options to purchase 500,000 shares of
Common Stock. As of the Record Date, options to purchase 447,400 shares of
Common Stock (excluding options to purchase shares of Common Stock that had been
canceled, as well as the June 26, 1998 grant described below) had been granted
under the Option Plan, of which options to purchase 4,000 shares of Common Stock
had been exercised, options to purchase 443,400 shares of Common Stock remained
outstanding and had not yet been exercised and options to purchase 52,600 shares
of Common Stock remained available for grant. Effective June 26, 1998 options to
purchase an additional 240,000 shares of Common Stock, at an exercise price of
$1.19 per share, where granted to 15 employees of the Company (the "June 26th
Grant"), contingent upon the approval by the shareholders of the Company of the
amendment to the Option Plan described herein.
Under the Option Plan, options may be granted in the form of "incentive
stock options" as defined in Section 422 of the Code, or nonqualified stock
options. The options generally become exercisable with respect to one-fifth of
the shares purchasable thereunder on each of the first five anniversaries of the
date of the option grant. The options generally expire within 10 years after the
date of grant, except as follows. If a Participant
11
<PAGE> 15
ceases to be employed by the Company because the participant is terminated for
"cause" (as defined in the Option Plan), any options held by the Participant
will automatically expire. If a Participant's employment by the Company is
terminated for any reason other than for cause or due to death, such
Participant's option will be exercisable (to the extent exercisable on the date
of termination of the Participant's employment by the Company) at any time
within three months after the Participant ceases to be an employee or 12 months
after termination on account of retirement in the case of a nonqualified stock
option, unless by its terms the option expires earlier. If a Participant dies or
becomes disabled within the meaning of Section 22(e)(3) of the Code while
employed by the Company, or within three months after ceasing to be an employee,
such Participant's option will be exercisable at any time within 12 months after
the date of death or disability, unless by its terms the option expires earlier.
If a nonemployee Participant's association with the Company is terminated for
cause, any options held by such Participant will automatically expire. The
Compensation Committee does not have the authority to extend the term of any
option beyond its original term. In the event of certain mergers and
reorganizations involving the Company or upon the occurrence of a Change of
Control (as defined in the Option Plan) or threatened Change of Control of the
Company, all outstanding options will become immediately exercisable with
respect to the full number of shares purchasable under such options, except that
the options granted pursuant to the June 26th Grant shall not become immediately
exercisable upon a Change of Control for a period of one year after the date of
grant.
Incentive stock options may not be transferred or assigned other than by
will or the laws of descent and distribution and may be exercised during the
lifetime of the Participant only by the Participant or by the Participant's
legally authorized representative. With respect to nonqualified stock options
granted to any Participant who is not subject to the reporting requirements of
Section 16 of the Exchange Act, the Compensation Committee may, in its sole
discretion, provide for the transferability of nonqualified stock options as it
deems appropriate. A nonqualified stock option granted to a Participant who is
subject to the reporting requirements of Section 16 of the Exchange Act (a
"Reporting Participant") may not be transferred or assigned other than (i) by
will or the laws of descent and distribution, (ii) pursuant to the terms of a
qualified domestic relations order; as defined by the Code or Title I of ERISA,
or the rules thereunder and (iii) as set forth in the next sentence. The
Compensation Committee may, in its sole discretion, provide that nonqualified
stock options granted to a Reporting Participant, other than Automatic Grants
(as herein defined) to nonemployee directors, may be transferred to members of
the Reporting Participant's immediate family, trusts for the benefit of such
immediate family members and partnerships in which such immediate family members
are the only partners; provided that there cannot be any consideration for the
transfer.
The Compensation Committee, composed of two or more nonemployee directors
of the Company, has the authority to fix the terms and number of options to be
granted and the persons to receive the options. The exercise price of each
incentive or nonqualified stock option granted under the Option Plan may not be
less than 100% of the fair market value of the Common Stock on the date of grant
(or 110% in the case of incentive stock options granted to employees owning more
than 10% of the Common Stock).
The exercise price of an option may be paid in cash, by certified or
cashier's check, by shares of Common Stock, if permitted by the Compensation
Committee, by a promissory note for the total purchase price of the shares of
Common Stock being purchased (minus the par value of the shares being purchased,
which must be paid for in cash or by certified or cashier's check), which note
shall contain such terms and provisions as the Compensation Committee may
approve, including without limitation the right to repay the note partially or
wholly with Common Stock, or by delivery of a copy of irrevocable instructions
from the Participant to a broker or dealer, reasonably acceptable to the
Company, to sell certain of the shares of Common Stock purchased upon exercise
of the option or to pledge them as collateral for a loan and promptly deliver to
the Company the amount of sale or loan proceeds necessary to pay such purchase
price.
Under the Option Plan, each nonemployee director currently receives a grant
to purchase 5,000 shares of common stock upon his or her initial election to the
Board of Directors, as well as an annual automatic grant of options (the
"Automatic Grant") to purchase 2,000 shares of Common Stock, which is the only
type of options nonemployee directors are eligible to receive under the Option
Plan.
12
<PAGE> 16
DESCRIPTION OF PROPOSED AMENDMENT
Increase in Shares. The Compensation Committee and the Board of Directors
have unanimously approved an amendment to the Option Plan, subject to approval
by the shareholders of the Company, to increase the number of shares of Common
Stock issuable pursuant to the Option Plan from 500,000 to 1,000,000.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
Summary of Certain Federal Income Tax Consequences Relating to Incentive
Stock Options. No taxable income is realized by a Participant and no tax
deduction is available to the Company upon either the grant or exercise of an
incentive stock option. If a Participant holds the shares acquired upon the
exercise of an incentive stock option for more than one year after the issuance
of the shares upon exercise of the incentive stock option and more than two
years after the date of the grant of the incentive stock option (the "holding
period"), the difference between the exercise price and the amount realized upon
the sale of the shares will be treated as a long-term capital gain or loss and
no deduction will be available to the Company. If the shares are transferred
before the expiration of the holding period, the Participant will realize
ordinary income and the Company will be entitled to a deduction on the portion
of the gain, if any, equal to the difference between the incentive stock option
exercise price and the fair market value of the shares on the date of exercise
or, if less, the difference between the amount realized on the disposition and
the adjusted basis of the stock; provided that the deduction will not be allowed
if such amount exceeds the annual $1,000,000 limitation on the deduction that an
employer may claim for compensation of certain executives pursuant to Section
162(m) of the Code (the "Deduction Limitation") and does not satisfy an
exception to the Deduction Limitation. Any further gain or loss from an arm's
length sale or exchange will be taxable as a long-term or short-term capital
gain or loss depending upon the holding period before disposition. Certain
special rules apply if an incentive stock option is exercised by tendering
stock. The difference between the incentive stock option exercise price and the
fair market value, at the time of exercise, of the Common Stock acquired upon
the exercise of an incentive stock option may give rise to alternative minimum
taxable income subject to an alternative minimum tax.
Summary of Certain Federal Income Tax Consequences Relating to Nonqualified
Stock Options. No taxable income generally is realized by the Participant upon
the grant of a nonqualified stock option, and no deduction generally is then
available to the Company. Upon exercise of a nonqualified stock option, the
excess of the fair market value of the shares on the date of exercise over the
exercise price will be taxable to the Participant as ordinary income. This
amount will also be deductible by the Company unless the amount exceeds the
Deduction Limitation and does not satisfy an exception to the Deduction
Limitation. The tax basis of shares acquired by the Participant will be the fair
market value on the date of exercise. When a Participant disposes of shares
acquired upon exercise of a nonqualified stock option, any amount realized in
excess of the fair market value of the shares on the date of exercise generally
will be treated as a long-term or short-term capital gain, depending on the
holding period of the shares. The holding period commences upon exercise of the
nonqualified stock option. If the amount received is less than such fair market
value, the loss will be treated as a long-term or short-term capital loss,
depending on the holding period of the shares. The exercise of a nonqualified
stock option will not trigger the alternative minimum tax consequences
applicable to incentive stock options.
ISSUANCE OF OPTIONS UNDER THE OPTION PLAN
The following table sets forth certain information regarding options
granted under the Option Plan from its inception through the Record Date to (i)
the Company's Chief Executive Officer, (ii) each of the Company's four other
most highly compensated executive officers for fiscal 1998 individually, (iii)
all current
13
<PAGE> 17
executive officers as a group, (iv) all current directors who are not executive
officers as a group, (v) each nominee for election as a director, and (vi) all
employees, excluding executive officers, as a group.
<TABLE>
<CAPTION>
AGGREGATE AMOUNT
OF COMMON STOCK
SUBJECT TO OPTIONS
GRANTED UNDER
THE OPTION PLAN
GRANTED FROM
INCEPTION THROUGH
NAME OF INDIVIDUAL OR GROUP THE RECORD DATE(1)
--------------------------- ------------------
<S> <C>
Robert H. Patterson, Jr..................................... 95,000
Richard Yuen................................................ 75,000
David J. Huffman............................................ 118,000
Clifford C. Condict......................................... 55,000
Roger D. Craft.............................................. 35,000
Lynn Skillen................................................ 125,000
B. D. Hunter................................................ 15,000
C. A. Langner............................................... 15,000
Valerie Anne Mars........................................... 11,000
All current executive officers as a group................... 557,000
All current directors who are not executive officers as a
group..................................................... 41,000
All employees, excluding executive officers, as of the
Record Date, as a group................................... 89,400
</TABLE>
- ---------------
(1) Includes options granted contingent upon approval by the shareholders of the
Company of the amendment to the Option Plan as described in this Proposal
No. 2.
VOTE REQUIRED
Approval of the amendment to the Option Plan requires the affirmative vote
of a majority of the shares of Common Stock present or represented at the
Meeting and entitled to vote thereon that are actually voted. If approved by the
shareholders of the Company, the amendment will be effective as of June 26,
1998. Unless otherwise instructed or restricted, it is the intent of the persons
named in the Proxy to vote all Proxies "FOR" the adoption of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE OPTION
PLAN.
PROPOSAL NO. 3
INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee and subject to ratification
by the shareholders of the Company at the Meeting, the Board of Directors of the
Company has selected PricewaterhouseCoopers LLP to audit the consolidated
financial statements of the Company and its subsidiaries for the fiscal year
ending June 30, 1999. PricewaterhouseCoopers LLP has served the Company in this
capacity since 1991. Representatives of PricewaterhouseCoopers LLP are expected
to be present at the Meeting, will have the opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP.
14
<PAGE> 18
SHAREHOLDER PROPOSALS
Shareholders of the Company may submit proposals on matters appropriate for
shareholder action at subsequent annual meetings of the Company consistent with
Rule 14a-8 promulgated under the Exchange Act. For such proposals to be
considered for inclusion in the Proxy Statement and Proxy relating to the 1999
Annual Meeting of Shareholders, such proposals must be received by the Company
not later than July 17, 1999. Such proposals should be directed to Celebrity,
Inc., P. O. Box 6666, Tyler, Texas 75711, Attention: Secretary.
OTHER BUSINESS
The Board of Directors knows of no matter other than those described herein
that will be presented for consideration at the Meeting. However, should any
other matters properly come before the Meeting and any adjournments thereof, it
is the intention of the persons named in the accompanying Proxy to vote in
accordance with their best judgment in the interest of the Company.
MISCELLANEOUS
All costs incurred in the solicitation of Proxies will be borne by the
Company. In addition to the solicitation by mail, officers and employees of the
Company may solicit Proxies by telephone, telegram or personally, without
additional compensation. The Company may also make arrangements with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of shares of Common Stock held
of record by such persons, and the Company may reimburse such brokerage houses
and other custodians, nominees and fiduciaries for their out-of-pocket expenses
incurred in connection therewith.
Accompanying this Proxy Statement is a copy of the Company's Annual Report
for the fiscal year ended June 30, 1998.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, BUT NOT INCLUDING EXHIBITS,
WILL BE FURNISHED AT NO CHARGE TO EACH PERSON TO WHOM A PROXY STATEMENT IS
DELIVERED UPON THE WRITTEN REQUEST OF SUCH PERSON ADDRESSED TO CELEBRITY, INC.,
ATTN: ROBERT H. PATTERSON, JR., CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
P.O. BOX 6666, TYLER, TEXAS 75711.
By Order of the Board of Directors
/s/ LYNN SKILLEN
Lynn Skillen
Secretary
Tyler, Texas
October 27, 1998
15
<PAGE> 19
APPENDIX A
CELEBRITY, INC. AS AMENDED THROUGH
NOVEMBER 16, 1998
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
ARTICLE 1
THE PLAN
1.1 NAME. This plan will be known as the "Celebrity, Inc. 1992 Stock
Option Plan."
1.2 PURPOSE. The purpose of the Plan is to promote the growth and
general prosperity of the Company by permitting the Company to grant to its
Employees, Nonemployee Directors and advisors Options to purchase Common Stock
of the Company. The Plan is designed to help the Company and its subsidiaries
and affiliates attract and retain superior personnel for positions of
substantial responsibility and to provide Employees, Nonemployee Directors and
advisors with an additional incentive to contribute to the success of the
Company. The Company intends that Incentive Stock Options granted pursuant to
Article 3 will qualify as "incentive stock options" within the meaning of
Section 422 of the Code. Any Option granted pursuant to Article 4 will be
clearly and specifically designated as not being an incentive stock option as
defined in Section 422 of the Code.
With respect to Reporting Optionees, transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent that any provision of the Plan
or action by the Committee fails to so comply, it will be deemed null and void,
to the extent permitted by law and deemed advisable by the Committee.
1.3 EFFECTIVE DATE. The Plan became effective upon the Effective Date.
<PAGE> 20
1.4 ELIGIBILITY TO PARTICIPATE. Any Employee, Nonemployee Director or
advisor is eligible to participate in the Plan; provided that Incentive Stock
Options may be granted only to persons who are Employees. The Committee may
grant Options in accordance with such determinations as the Committee from time
to time in its sole discretion may make. Nonemployee Directors will receive
Options as provided in Section 4.5.
1.5 SHARES SUBJECT TO THE PLAN. The Plan Shares subject to the Plan
will be shares of Common Stock.
1.6 MAXIMUM NUMBER OF PLAN SHARES. Subject to adjustment pursuant to
the provisions of Section 5.2, and subject to any additional restrictions
elsewhere in the Plan, the number of Plan Shares that may be issued and sold
hereunder will not exceed 1,000,000 shares. Plan Shares may be either authorized
and unissued shares or shares issued and thereafter acquired by the Company.
1.7 OPTIONS GRANTED UNDER PLAN. Plan Shares with respect to which an
Option has been exercised will not again be available for grant hereunder. If
Options terminate for any reason without being wholly exercised, new Options may
be granted hereunder covering the number of Plan Shares to which such Option
termination relates.
1.8 CONDITIONS PRECEDENT. The Company will not issue or deliver any
Option Agreement or any certificate for Plan Shares pursuant to the Plan prior
to fulfillment of all of the following conditions:
(a) The admission of the Plan Shares to listing on all stock
exchanges on which the Common Stock is then listed, unless the
Committee determines in its sole discretion that such listing is
neither necessary nor advisable;
2
<PAGE> 21
(b) The completion of any registration or other qualification
of the sale of the Plan Shares under any federal or state law or under
the rulings or regulations of the Securities and Exchange Commission or
any other governmental regulatory body that the Committee in its sole
discretion deems necessary or advisable; and
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency that the Committee in its sole
discretion determines to be necessary or advisable.
1.9 RESERVATION OF SHARES OF COMMON STOCK. During the term of the Plan,
the Company will at all times reserve and keep available such number of shares
of Common Stock as may be necessary to satisfy the requirements of the Plan as
to the number of Plan Shares. In addition, the Company will from time to time,
as is necessary to accomplish the purposes of the Plan, use its best efforts to
obtain from any regulatory agency having jurisdiction any requisite authority
necessary to issue Plan Shares hereunder. The inability of the Company to obtain
from any regulatory agency having jurisdiction the authority deemed by the
Company's counsel to be necessary for the lawful issuance of any Plan Shares
will relieve the Company of any liability in respect of the nonissuance of Plan
Shares as to which the requisite authority has not been obtained.
1.10 TAX WITHHOLDING.
(a) Condition Precedent. The issuance, delivery or exercise of
any Options under the Plan is subject to the condition that if at any
time the Committee determines, in its discretion, that the satisfaction
of withholding tax or other withholding liabilities under any federal,
state or local law is necessary or desirable as a condition of, or in
connection with, the issuance, delivery or exercise of the
3
<PAGE> 22
Options, then the issuance, delivery or exercise of the Options will
not be effective unless the withholding has been effected or obtained
in a manner acceptable to the Committee.
(b) Manner of Satisfying Withholding Obligation.
(i) When an Optionee, other than a Reporting
Optionee, is required to pay to the Company an amount required
to be withheld under applicable income tax laws in connection
with the exercise of an Option, the Optionee may satisfy the
withholding obligation, in whole or in part, by electing to
(x) have the Company withhold a portion of the Plan Shares
acquired upon the exercise of the Option and having a Fair
Market Value on the date the amount of tax to be withheld is
to be determined (the "Tax Date") equal to the amount required
to be withheld or (y) deliver to the Company shares of Common
Stock already owned by-the Optionee and having a Fair Market
Value on the Tax Date equal to the amount required to be
withheld.
(ii) When a Reporting Optionee is required to pay to
the Company an amount required to be withheld under applicable
income tax laws in connection with the exercise of an Option,
the withholding obligation may be satisfied, at the option of
the Committee, by the Company withholding a portion of the
Plan Shares acquired upon the exercise of the Option (provided
that at least six months has elapsed between the grant of such
Option and the exercise involving tax withholding) having a
Fair Market Value on the Tax Date equal to the amount required
to be withheld.
(c) Notice of Disposition of Stock Acquired Pursuant to
Incentive Stock Options. The Company may require as a condition to the
issuance of Plan Shares covered by any Incentive Stock Option that the
party exercising such Option give a written representation to the
Company, which is satisfactory in form and substance to its counsel and
upon which the
4
<PAGE> 23
Company may reasonably rely, that he will report to the Company any
disposition of such shares prior to the expiration of the holding
periods specified by Section 422(a)(1) of the Code. If and to the
extent that the realization of income in such a disposition imposes
upon the Company federal, state or local withholding tax requirements,
or any such withholding is required to secure for the Company an
otherwise available tax deduction, the Company will have the right to
require that the recipient remit to the Company an amount sufficient
to satisfy those requirements; and the Company may require as a
condition to the issuance of Plan Shares covered by an Incentive Stock
Option that the party exercising such Option give a satisfactory
written representation promising to make such a remittance.
1.11 EXERCISE OF OPTIONS.
(a) Method of Exercise. Each Option will be exercisable in
accordance with the terms of the Option Agreement pursuant to which the
Option was granted. No Option may be exercised for a fraction of a Plan
Share.
(b) Payment of Purchase Price. The purchase price of any Plan
Shares purchased will be paid at the time of exercise of the Option
either (i) in cash, (ii) by certified or cashier's check, (iii) by
shares of Common Stock, if permitted by the Committee, (iv) by cash or
certified or cashier's check for the par value of the Plan Shares plus
a promissory note for the balance of the purchase price, which note
will contain such terms and provisions as the Committee may approve,
including without limitation the right to repay the note partially or
wholly with Common Stock or (v) by delivery of a copy of irrevocable
instructions from the Optionee to a broker or dealer, reasonably
acceptable to the Company, to sell certain of the Plan Shares purchased
upon exercise of the Option or to pledge them as collateral for a loan
and promptly deliver to the Company the amount of sale or loan proceeds
necessary to pay
5
<PAGE> 24
such purchase price. If any portion of the purchase price or a note
given at the time of exercise is paid in shares of Common Stock, those
shares will be valued at the then Fair Market Value.
1.12 ACCELERATION OF RIGHT OF EXERCISE OF OPTIONS. Notwithstanding the
provisions of any Option Agreement regarding the time for exercise of an Option,
the following provisions will apply:
(a) Mergers and Reorganizations. If the Company or its
shareholders enter into an agreement to dispose of all or substantially
all of the assets of the Company by means of a sale, merger or other
reorganization, liquidation or otherwise in a transaction in which the
Company is not the surviving corporation, any Option will become
immediately exercisable with respect to the full number of shares
subject to that Option during the period commencing as of the date of
the agreement to dispose of all or substantially all of the assets of
the Company and ending when the disposition of assets contemplated by
that agreement is consummated or the Option is otherwise terminated in
accordance with its provisions or the provisions of the Article
pursuant to which it was granted, whichever occurs first; provided that
no Option will be immediately exercisable under this Section on account
of any agreement of merger or other reorganization when the
shareholders of the Company immediately before the consummation of the
transaction will own at least fifty percent of the total combined
voting power of all classes of stock entitled to vote of the surviving
entity immediately after the consummation of the transaction. The
Option will not become immediately exercisable if the transaction
contemplated in the agreement is a merger or reorganization in which
the Company will survive.
6
<PAGE> 25
(b) Change in Control. In the event of a change in control or
threatened change in control of the Company, all Options granted prior
to the change in control or threatened change in control will become
immediately exercisable. Notwithstanding the foregoing, this Section
shall not apply to Options granted as of June 26, 1998 until one year
after the date of such grant. The term "change in control" for purposes
of this Section refers to the acquisition of ten percent or more of the
voting securities of the Company by any person or by persons acting as
a group within the meaning of Section 13(d)(3) of the Exchange Act
(other than an acquisition by a person or group meeting the
requirements of clauses (i) and (ii) of Rule 13d-l(b)(1) promulgated
under the Exchange Act); provided that no change in control or
threatened change in control will be deemed to have occurred if prior
to the acquisition of, or offer to acquire, ten percent or more of the
voting securities of the Company, the full Board has adopted by not
less than two-thirds vote a resolution specifically approving such
acquisition or offer. The term "person" for purposes of this Section
refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. Whether a change in control is threatened
will be determined solely by the Committee.
1.13 WRITTEN NOTICE REQUIRED. Any Option will be deemed to be exercised
for purposes of the Plan when written notice of exercise has been received by
the Company at its principal office from the person entitled to exercise the
Option and payment for the Plan Shares with respect to which the Option is
exercised has been received by the Company in accordance with Section 1.11.
1.14 COMPLIANCE WITH SECURITIES LAWS. Plan Shares will not be issued
with respect to any Option unless the exercise of the Option and the issuance
and delivery of the Plan Shares complies with all relevant provisions of federal
and state law, including without limitation the Securities Act, the rules and
regulations promulgated thereunder and the requirements of any stock
7
<PAGE> 26
exchange upon which the Plan Shares may then be listed, and will be further
subject to the approval of counsel for the Company with respect to such
compliance. The Committee may also require an Optionee to furnish evidence
satisfactory to the Company, including without limitation a written and signed
representation letter and consent to be bound by any transfer restrictions
imposed by law, legend, condition or otherwise, that the Plan Shares are being
acquired only for investment and without any present intention to sell or
distribute the shares in violation of any federal or state law, rule or
regulation. Further, each Optionee will consent to the imposition of a legend on
the certificate representing the Plan Shares issued upon the exercise of the
Option restricting their transferability as required by law or by this Section.
1.15 EMPLOYMENT OF OPTIONEE; EXPIRATION OF OPTIONS UPON TERMINATION OF
EMPLOYMENT. Nothing in the Plan or in any Option granted hereunder will confer
upon any Optionee any right to continued employment by the Company or any of its
subsidiaries or affiliates or limit in any way the right of the Company or any
subsidiary or affiliate at any time to terminate or alter the terms of that
employment. The provisions of Sections 1.16, 1.18 and 1.19 relating to the
timing of expiration of Options upon termination of an Optionee's employment
will apply only to Optionees who are Employees. Unless otherwise specifically
provided herein, upon termination of an Optionee's employment or association
with the Company, the Optionee's Options will remain exercisable in accordance
with the terms of his Option Agreement.
1.16 OPTION UPON TERMINATION OF EMPLOYMENT. If an Optionee ceases to be
employed by the Company or any of its subsidiaries or affiliates for any reason
other than for cause, retirement, disability or death, his Option may be
exercised (to the extent exercisable on the date of termination of employment)
at any time within three months after the date of termination of employment,
unless either the Option Agreement or the Article pursuant to which it was
issued otherwise provides for
8
<PAGE> 27
earlier termination. If an Optionee ceases to be employed by the Company or any
of its subsidiaries or affiliates because the Optionee has retired under a
qualified retirement plan of the Company, as determined by the Committee, his
Option will be exercisable (to the extent exercisable on the effective date of
such retirement) at any time within 12 months (three months in the case of
Incentive Stock Options) after the effective date of such retirement unless by
its terms the Option expires sooner.
1.17 TERMINATION OF EMPLOYMENT OR ASSOCIATION FOR CAUSE; DISCOVERY OF
PREVIOUS WRONGDOING. If an Optionee ceases to be employed by the Company or any
of its subsidiaries or affiliates because the Optionee is terminated for cause,
the Optionee's Option will automatically expire. If a Director of the Company is
removed for cause or a consultant or other Optionee who is not an employee of
the Company has his relationship with the Company terminated for cause, any
Option held by that Optionee will automatically expire. For purposes of this
Section, "cause" will mean an act or acts involving a felony, fraud, willful
misconduct, the commission of any act that causes or reasonably may be expected
to cause substantial injury to the Company or other good cause. The term "other
good cause" as used in this Section will include, but will not be limited to,
habitual impertinence, a pattern of conduct that tends to hold the Company up to
ridicule in the community, conduct disloyal to the Company, conviction of any
crime of moral turpitude and substantial dependence, as judged by the Committee,
on alcohol or any controlled substance. "Controlled substance" means a drug,
immediate precursor or other substance listed in Schedules I-V or Penalty Groups
1-4 of the Texas Controlled Substances Act, as amended, or a drug, immediate
precursor or other substance listed in Schedules I-V of the Federal
Comprehensive Drug Abuse Prevention and Control Act of 1970, as amended. If any
facts that would constitute cause for termination or removal of an Optionee are
discovered after the Optionee's relationship with the Company has ended, any
Options then held by the Optionee may be immediately terminated by the
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<PAGE> 28
Committee. Notwithstanding the foregoing, if an Optionee is an Employee employed
pursuant to a written employment agreement or is a consultant retained pursuant
to a written agreement, the Optionee's relationship with- the Company will be
deemed terminated for "cause" for purposes of the Plan only if the Optionee is
considered under the circumstances to have been terminated for cause for
purposes of such written agreement.
1.18 OPTION UPON DISABILITY OF OPTIONEE. If an Optionee becomes
disabled within the meaning of Section 22(e)(3) of the Code while employed by
the Company or any of its subsidiaries or affiliates, [and the Optionee's
employment shall consequently terminate,] his Option will become fully
exercisable and will expire 12 months after the date of such termination, unless
either the Option Agreement or the Article under which it was issued otherwise
provides for earlier termination.
1.19 OPTION UPON DEATH OF OPTIONEE. Except as otherwise limited by the
Committee at the time of the grant of an Option, if an Optionee dies while
employed by the Company or any of its subsidiaries or affiliates, or within
three months after ceasing to be an Employee, his Option will become fully
exercisable and will expire 12 months after the date of death, unless by its
terms it expires sooner.
1.20 TRANSFERABILITY OF OPTIONS.
(a) Optionees Other Than Reporting Optionees. Unless the
Committee otherwise provides in any Option Agreement, Nonqualified
Stock Options granted hereunder to Optionees who are not Reporting
Optionees may be transferred to members of the Optionee's immediate
family, trusts for the benefit of such immediate family members and
partnerships in which such immediate family members are the only
partners, provided that there cannot be any consideration for the
transfer. Incentive Stock Options may not be transferred or assigned
other than by will or the laws of descent and distribution and may be
exercised
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<PAGE> 29
during the lifetime of the Optionee only by the Optionee or by the
Optionee's legally authorized representative, and each Option
Agreement will so provide. The designation by an Optionee of a
beneficiary will not constitute a transfer of the Option.
(b) Reporting Optionees. Except as may be specified by the
Committee in accordance with the following paragraph, an Option granted
to a Reporting Optionee may not be transferred or assigned other than
(i) by will or the laws of descent and distribution or (ii) with
respect to Nonqualified Stock Options, pursuant to the terms of a
qualified domestic relations order as defined by the Code or Title I of
ERISA, or the rules thereunder, and such Option may be exercised during
the lifetime of a Reporting Optionee only by such Optionee or by such
Optionee's legally authorized representative, and each Option Agreement
will so provide. The designation by a Reporting Optionee of a
beneficiary will not constitute a transfer of the Option.
The Committee may, in its discretion, provide in any Option
Agreement (or in an amendment to any existing Option Agreement) that
Nonqualified Stock Options granted hereunder to a Reporting Optionee,
other than Nondiscretionary Options, may be transferred to members of
the Reporting Optionee's immediate family, trusts for the benefit of
such immediate family members and partnerships in which such immediate
family members are the only partners, provided that there cannot be any
consideration for the transfer.
1.21 INFORMATION TO OPTIONEES. The Company will furnish to each
Optionee copies of annual reports, proxy statements and all other reports sent
to the Company's shareholders. Upon written request, the Company will furnish to
each Optionee a copy of its most recent Annual Report on Form 10-K and each
quarterly report to shareholders issued since the end of the Company's most
recent fiscal year.
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ARTICLE 2
ADMINISTRATION
2.1 COMMITTEE. The Plan will be administered by a Committee of not
fewer than two members, who will be Nonemployee Directors. No member of the
Committee will be eligible to receive Options under the Plan except as expressly
provided in Section 4.5, and each such member will be a Disinterested Person.
Subject to the provisions of the Plan, the Committee will have the sole
discretion and authority to determine the Employees and advisors to whom and the
time or times at which Options may be granted and the number of Plan Shares
subject to each Option.
2.2 APPOINTMENT OF COMMITTEE. The Committee will be appointed by the
Board and will consist solely of Nonemployee Directors; provided that the Board
may remove any Committee member, with or without cause.
2.3 MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. A majority of the members
of the Committee will constitute a quorum, and any action taken by a majority
present at a meeting at which a quorum is present or any action taken without a
meeting evidenced by a writing executed by all members of the Committee will
constitute the action of the Committee. Meetings of the Committee may take place
by telephone conference call.
2.4 COMPANY ASSISTANCE. The Company will supply full and timely
information to the Committee on all matters relating to Employees, their
employment, retirement, disability, death or other termination of employment,
and such other pertinent facts as the Committee may require. The Company will
furnish the Committee with such clerical and other assistance as is necessary to
the performance of its duties.
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ARTICLE 3
INCENTIVE STOCK OPTIONS
3.1 OPTION TERMS AND CONDITIONS. The terms and conditions of Options
granted under this Article may differ from one another as the Committee may, in
its discretion, determine, as long as all Options granted under this Article
satisfy the requirements of this Article.
3.2 DURATION OF OPTIONS. Each Option granted under this Article will
expire on the date determined by the Committee, but in no event will any Option
granted under this Article expire earlier than one year or later than ten years
after the date on which the Option is granted. In addition, each Option will be
subject to early termination as provided elsewhere in the Plan.
3.3 PURCHASE PRICE. The purchase price for Plan Shares acquired
pursuant to the exercise, in whole or in part, of any Option granted under this
Article will not be less than the Fair Market Value of the Plan Shares at the
time of the grant of the Option.
3.4 MAXIMUM AMOUNT OF OPTIONS FIRST EXERCISABLE IN ANY CALENDAR YEAR.
The maximum aggregate Fair Market Value of Plan Shares (determined at the time
the Option is granted) with respect to which Options issued under this Article
are exercisable for the first time by any Employee during any calendar year
under all incentive stock option plans of the Company and its subsidiaries and
affiliates will not exceed $100,000. Any Option granted under the Plan and first
exercisable in excess of the foregoing limitations will be considered granted
under Article 4 and will be clearly and specifically designated as not being an
Incentive Stock Option.
3.5 REQUIREMENTS AS TO CERTAIN OPTIONS. In the event of the grant of
any Option to an individual who, at the time the Option is granted, owns shares
of stock possessing more than ten percent of the total combined voting power of
all classes of stock of the Company or any of its subsidiaries or affiliates
within the meaning of Section 422 of the Code, the purchase price for the
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<PAGE> 32
Plan Shares subject to that Option must be at least 110% of the Fair Market
Value of those Plan Shares at the time the Option is granted, and the Option
must not be exercisable after the expiration of five years from the date of its
grant.
3.6 INDIVIDUAL OPTION AGREEMENTS. Each Employee receiving Options under
this Article will be required to enter into a written Option Agreement with the
Company as a precondition to receiving an Option under this Article. In such
Option Agreement, the Employee will agree to be bound by the terms and
conditions of the Plan and such other matters as the Committee deems
appropriate.
ARTICLE 4
NONQUALIFIED STOCK OPTIONS
4.1 OPTION TERMS AND CONDITIONS. Subject to Section 4.5, the terms and
conditions of Options granted under this Article may differ from one another as
the Committee may, in its discretion, determine, as long as all Options granted
under this Article satisfy the requirements of this Article.
4.2 DURATION OF OPTIONS. Subject to Section 4.5, each Option granted
under this Article and all rights thereunder will expire on the date determined
by the Committee, but in no event will any Option granted under this Article
expire later than ten years after the date on which the Option is granted. In
addition, each Option will be subject to early termination as provided elsewhere
in the Plan.
4.3 PURCHASE PRICE. The purchase price for Plan Shares acquired
pursuant to the exercise, in whole or in part, of any Option granted under this
Article will not be less than the Fair Market Value of the Plan Shares at the
time of the grant of the Option.
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<PAGE> 33
4.4 INDIVIDUAL OPTION AGREEMENTS. Each Employee receiving Options under
this Article will be required to enter into a written Option Agreement with the
Company as a precondition to receiving an Option under this Article. In such
Option Agreement, the Employee will agree to be bound by the terms and
conditions of the Plan and such other matters as the Committee deems
appropriate.
4.5 OPTION GRANTS TO NONEMPLOYEE DIRECTORS. Immediately and
automatically upon initial election to the Board of Directors, each Nonemployee
Director will receive a Nonqualified Stock Option to purchase 5,000 shares of
Common Stock. In addition, each Nonemployee Director will receive a Nonqualified
Stock Option to purchase 2,000 shares of Common Stock on the date of each annual
meeting of shareholders of the Company subsequent to his initial election as a
director. The purchase price for Plan Shares acquired pursuant to the exercise,
in whole or in part, of any Option received by Nonemployee Directors will be the
Fair Market Value of the Plan Shares on the date of grant. Each such Option will
be fully exercisable on the date of grant of such Option. Each such Option will
expire on the day prior to the tenth anniversary of the date of grant of such
Option.
ARTICLE 5
TERMINATION, AMENDMENT AND ADJUSTMENT
5.1 TERMINATION AND AMENDMENT. The Plan will terminate on August 30,
2002. No Options will be granted under the Plan after that date of termination.
Subject to the limitations contained in this Section, the Committee may at any
time amend or revise the terms of the Plan, including the form and substance of
the Option Agreements to be used in connection herewith; provided that, without
shareholder approval, no amendment or revision may (i) increase the maximum
aggregate number of Plan Shares, except as permitted under Section 5.2, (ii)
change the minimum
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<PAGE> 34
purchase price for shares under Article 3 or Article 4, (iii) increase the
maximum term established under the Plan for any Option or (iv) permit the
granting of an Option to anyone other than as provided in the Plan; and provided
further that, without shareholder approval, no amendment to the Plan will be
effective that materially increases the benefits accruing to Optionees,
materially increases the number of securities that may be issued under the Plan
or otherwise materially modifies the requirements as to eligibility for
participation in the Plan, all within the meaning of Rule 16b-3 promulgated
under the Exchange Act; and provided further that Section 4.5 may not be amended
more than once in any six-month period, other than to comport with changes in
the Code or ERISA, or the rules thereunder. No amendment, suspension or
termination of the Plan may, without the consent of the Optionee who has
received an Option hereunder, alter or impair any of that Optionee's rights or
obligations under any Option granted under the Plan prior to that amendment,
suspension or termination.
5.2 ADJUSTMENT. If the outstanding Common Stock is increased,
decreased, changed into, or exchanged for a different number or kind of shares
or securities through merger, consolidation, combination, exchange of shares,
other reorganization, recapitalization, reclassification, stock dividend, stock
split or reverse stock split, an appropriate and proportionate adjustment will
be made in the maximum number and kind of Plan Shares as to which Options may be
granted under the Plan. A corresponding adjustment will be made in the number or
kind of shares allocated to and purchasable under unexercised Options or
portions thereof granted prior to any such change. Any such adjustment in
outstanding Options will be made without change in the aggregate purchase price
applicable to the unexercised portion of the Option, but with a corresponding
adjustment in the price for each share purchasable under the Option. The
foregoing adjustments and the manner of
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<PAGE> 35
application of the foregoing provisions will be determined solely by the
Committee, and any such adjustment may provide for the elimination of fractional
share interests.
ARTICLE 6
MISCELLANEOUS
6.1 OTHER COMPENSATION PLANS. The adoption of the Plan will not affect
any other stock option or incentive or other compensation plans in effect for
the Company or any of its subsidiaries or affiliates, nor will the Plan preclude
the Company or any of its subsidiaries or affiliates from establishing any other
forms of incentive or other compensation for Employees.
6.2 PLAN BINDING ON SUCCESSORS. The Plan will be binding upon the
successors and assigns of the Company and any of its subsidiaries or affiliates
that adopt the Plan.
6.3 NUMBER AND GENDER. Whenever used herein, nouns in the singular
include the plural where appropriate, and masculine pronouns include the
feminine gender.
6.4 HEADINGS. Headings of articles and sections hereof are inserted for
convenience of reference and constitute no part of the Plan.
ARTICLE 7
DEFINITIONS
As used herein with initial capital letters, the following terms have
the meanings hereinafter set forth unless the context clearly indicates to the
contrary:
7.1 "Board" means the Board of Directors of the Company.
7.2 "Code" means the Internal Revenue Code of 1986.
7.3 "Committee" means the Committee appointed in accordance with
Section 2.2.
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7.4 "Common Stock" means the Common Stock, par value $.01 per share, of
the Company or, in the event that the outstanding shares of such Common Stock
are hereafter changed into or exchanged for shares of a different stock or
security of the Company or some other corporation, such other stock or security.
7.5 "Company" means Celebrity, Inc., a Texas corporation.
7.6 "Disinterested Person" means an individual who is a "disinterested
person" within the meaning of Rule 16b-3 promulgated under the Exchange Act.
7.7 "Effective Date" means August 31, 1992 (the date of the Plan's
adoption by the Board and approval by the sole shareholder of the Company).
7.8 "Employee(s)" means full-time, compensated employee(s) of the
Company or of any of its subsidiaries or affiliates that adopt the Plan.
7.9 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
7.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
7.11 "Fair Market Value" means such value as will be determined by the
Committee on the basis of such factors as it deems appropriate; provided that if
the Common Stock is traded on a national securities exchange or transactions in
the Common Stock are quoted on the NASDAQ National Market System, such value
will be determined by the Committee on the basis of the last reported sale price
for the Common Stock on the date for which such determination is relevant, as
reported on the national securities exchange or the NASDAQ National Market
System, as the case may be. If the Common Stock is not listed and traded upon a
recognized securities exchange or on the NASDAQ National Market System, the
Committee will make a determination of Fair Market Value on the basis of the
closing bid and asked quotations for such stock on the date for which such
determination is relevant (as reported by a recognized stock quotation service)
or, in the event that
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<PAGE> 37
there are no bids or asked quotations on the date for which such determination
is relevant, then on the basis of the average of the closing bid and asked
quotations on the date nearest preceding the date for which such determination
is relevant for which such bid and asked quotations were available.
7.12 "Incentive Stock Option" means an Option granted under Article 3.
7.13 "Nonemployee Director" means any director of the Company who is
not an officer or Employee.
7.14 "Nonqualified Stock Option" means an Option granted under
Article 4.
7.15 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
7.16 "Optionee" means an Employee, Nonemployee Director or advisor to
whom an Option has been granted hereunder.
7.17 "Option Agreement" means an agreement between the Company and an
Optionee with respect to one or more Options.
7.18 "Plan" means the Celebrity, Inv. 1992 Stock Option Plan, as
amended from time to time, the terms of which are set forth herein.
7.19 "Plan Shares" means shares of Common Stock issuable pursuant to
the Plan.
7.20 "Reporting Optionee" means an Optionee who is subject to the
reporting requirements of Section 16 of the Exchange Act.
7.21 "Securities Act" means the Securities Act of 1933, as amended.
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CELEBRITY, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Robert H. Patterson, Jr. and Lynn Skillen, or
either of them, with full power of substitution, as Proxies to vote, as
designated below, all shares of Common Stock of Celebrity, Inc., a Texas
corporation (the "Company"), owned by the undersigned on October 14, 1998, at
the annual meeting of shareholders to be held at 8223 N. Stemmons Freeway,
Dallas, Texas, on November 16, 1998, at 8:30 a.m., local time, and at any
adjournments thereof, upon such business as may properly come before the
meeting, including the following:
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
<TABLE>
<S> <C> <C>
WITHHOLD
AUTHORITY
FOR all nominees listed to vote for
below (except as indicated all nominees
1. Election of Directors to the contrary below) listed
Robert H. Patterson, Jr., [ ] [ ]
B.D. Hunter, C. A. Langner, -------------------------------------
Valerie Anne Mars and (INSTRUCTION: to withhold authority
Richard Yuen to vote for any individual nominee,
write that nominee's name in the
space provided above.)
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Amending the Company's Amended and Restated 1992 Stock
Option Plan to increase the number of shares of Common Stock [ ] [ ] [ ]
authorized for issuance thereunder from 500,000 to 1,000,000.
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
3. Ratification of the selection of PricewaterhouseCoopers LLP
as the Company's independent public accountants for the fiscal [ ] [ ] [ ]
year ending June 30, 1999.
4. In their discretion, the proxies are authorized to vote upon
such other business or matters as may properly come before
the meeting or any adjournment thereof.
</TABLE>
(CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE)
<PAGE> 39
CELEBRITY, INC.
THIS PROXY, WHEN DULY EXECUTED AND RETURNED, WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO SPECIFIC DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF ALL NOMINEES NAMED IN PROPOSAL NO. 1, FOR THE APPROVAL OF PROPOSAL
NO. 2 AND PROPOSAL NO. 3, AND IN THE DISCRETION OF THE PROXYHOLDERS ON ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF.
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change and note below.
Dated: , 1998
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Signature
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(Signature if held jointly)
IMPORTANT: PLEASE SIGN EXACTLY AS YOUR
NAME APPEARS TO THE LEFT. WHEN SIGNING ON
BEHALF OF A CORPORATION, PARTNERSHIP,
ESTATE, TRUST, OR IN OTHER REPRESENTATIVE
CAPACITY, PLEASE SIGN NAME AND TITLE. IF
EXECUTED BY A CORPORATION, THE PROXY
SHOULD BE SIGNED BY A DULY AUTHORIZED
OFFICER. IF EXECUTED BY A PARTNERSHIP,
PLEASE SIGN IN THE PARTNERSHIP NAME BY AN
AUTHORIZED PERSON. FOR JOINT ACCOUNTS,
EACH JOINT OWNER MUST SIGN.
THIS PROXY MAY BE REVOKED PRIOR TO THE
EXERCISE OF THE POWERS CONFERRED
BY THE PROXY.
