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, as amended.
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box: |_|
Preliminary proxy statement |_|
Definitive proxy statement |X|
Definitive additional materials |_|
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12 |_|
1-800-FLOWERS.COM, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
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(2) Aggregate number of securities to which transactions applies:
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(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
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o Fee paid previously with preliminary materials:
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|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
1-800-FLOWERS.COM, INC.
1600 Stewart Avenue
Westbury, New York 11590
Notice of Annual Meeting of Stockholders
December 2, 200310, 2004
The Annual Meeting of Stockholders (the "Annual Meeting") of
1-800-FLOWERS.COM, Inc. (the "Company") will be held at 395 North Service Road,
Melville, NY 11747, Lower Level Media Center (the "Meeting Place"), on Tuesday,Friday,
December 2, 200310, 2004 at 9:00 a.m. eastern standard time or any adjournment thereof
for the following purposes, as more fully described in the Proxy Statement
accompanying this notice:
(1) To elect three Directors to serve until the 20062007
Annual Meeting or until their respective successors
shall have been duly elected and qualified;
(2) To approve the Section 16 Executive Officers Bonus Plan;
(3) To approve the 2003 Long Term Incentive and Share Award Plan;
(4) To ratify the selection of Ernst & Young LLP,
independent public accountants, as auditors of the
Company for the fiscal year ending June 27,
2004;July 3, 2005; and
(5)(3) To transact such other matters as may properly come
before the Annual Meeting.
Only stockholders of record at the close of business on October 8, 20032004
will be entitled to notice of, and to vote at, the Annual Meeting. A list of
stockholders eligible to vote at the Annual Meeting will be available for
inspection at the Annual Meeting, and for a period of ten days prior to the
Annual Meeting, during regular business hours at the Meeting Place.
All stockholders are cordially invited to attend the Annual Meeting in
person. Whether or not you expect to attend the Annual Meeting, your proxy vote
is important. To assure your representation at the Annual Meeting, please sign
and date the enclosed proxy card and return it promptly in the enclosed
envelope, which requires no additional postage if mailed in the United States.
You may revoke your proxy at any time prior to the Annual Meeting. If you attend
the Annual Meeting and vote by ballot, your proxy will be revoked automatically
and only your vote at the Annual Meeting will be counted.
By Order of the Board of Directors
/s/ Gerard M. Gallagher
Gerard M. Gallagher
Corporate Secretary
Westbury, New York
November 1, 20032004
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD
BE COMPLETED AND RETURNED PROMPTLY
1-800-FLOWERS.COM, INC.
PROXY STATEMENT
November 1, 20032004
This Proxy Statement is furnished to stockholders of record of
1-800-FLOWERS.COM, Inc. (the "Company") as of October 8, 20032004 (the "Record
Date") in connection with the solicitation of proxies by the Board of Directors
of the Company (the "Board of Directors" or the "Board") for use at the Annual
Meeting of Stockholders (the "Annual Meeting") which will be held at 395 North
Service Road, Melville, NY 11747, Lower Level Media Center (the "Meeting
Place"), on Tuesday,Friday, December 2, 200310, 2004 at 9:00 a.m. eastern standard time or any
adjournment thereof.
Shares cannot be voted at the Annual Meeting unless the owner is present in
person or by proxy. All properly executed and unrevoked proxies in the
accompanying form that are received in time for the Annual Meeting will be voted
at the Annual Meeting or any adjournment thereof in accordance with instructions
thereon, or if no instructions are given, will be voted "FOR" the election of
the named nominees as Directors of the Company, and "FOR" the approval of the
Section 16 Executive Officers Bonus Plan, and "FOR" approval of the 2003 Long
Term Incentive and Share Award Plan, and "FOR" the ratification of
Ernst & Young LLP, independent public accountants, as auditors of the Company
for the fiscal year ending June 27, 2004,July 3, 2005, and will be voted in accordance with
the discretion of the persons appointed as proxies with respect to other matters
which may properly come before the Annual Meeting. Any person giving a proxy may
revoke it by written notice to the Company at any time prior to the exercise of
the proxy. In addition, although mere attendance at the Annual Meeting will not
revoke the proxy, a stockholder who attends the Annual Meeting may withdraw his
or her proxy and vote in person. Abstentions and broker non-votes will be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting. Abstentions will be counted in
tabulations of the votes cast on each of the proposals presented at the Annual
Meeting, whereas broker non-votes will not be counted for purposes of
determining whether a proposal has been approved.
The Annual Report of the Company (which does not form a part of the proxy
solicitation materials) is being distributed concurrently herewith to
stockholders.
The mailing address of the principal executive office of the Company is 1600
Stewart Avenue, Westbury, New York 11590. ThisThe approximate date this Proxy
Statement and the accompanying form of proxy are being mailed to the
stockholders of the Company onis November 1, 2003.2004.
VOTING SECURITIES
The Company has two classes of voting securities issued and outstanding, its
Class A common stock, par value $0.01 per share (the "Class A Common Stock"),
and its Class B common stock, par value $0.01 per share (the "Class B Common
Stock", and with the Class A Common Stock, the "Common Stock"), which generally
vote together as a single class on all matters presented to the stockholders for
their vote or approval. At the Annual Meeting, each stockholder of record at the
close of business on October 8, 20032004 of Class A Common Stock will be entitled to
one vote for each share of Class A Common Stock owned on that date as to each
matter presented at the Annual Meeting and each stockholder of record at the
close of business on October 8, 20032004 of Class B Common Stock will be entitled to
ten votes for each share of Class B Common Stock owned on that date as to each
matter presented at the Annual Meeting. On October 8, 2003, 28,835,3512004, 29,129,574 shares of
Class A Common Stock and 36,963,85536,864,465 shares of Class B Common Stock were
outstanding. A list of stockholders eligible to vote at the Annual Meeting will
be available for inspection at the Annual Meeting, and for a period of ten days
prior to the Annual Meeting, during regular business hours at the Meeting Place.
2
PROPOSAL 1
ELECTION OF DIRECTORS
Unless otherwise directed, the persons appointed in the accompanying form of
proxy intend to vote at the Annual Meeting "FOR" the election of the nominees
named below as Class III Directors of the Company to serve until the 20062007 Annual
Meeting or until their successors are duly elected and qualified. If any nominee
is unable to be a candidate when the election takes place, the shares
represented by valid proxies will be voted in favor of the remaining nominees.
The Board of Directors does not currently anticipate that any of the nominees
will be unable to be a candidate for election.
Pursuant to the Company's Third Amended and Restated Certificate of
Incorporation, the Board of Directors has been divided into three classes,
denominated Class I, Class II and Class III, with members of each class holding
office for staggered three-year terms or until their respective successors are
duly elected and qualified. The Board of Directors currently consists of nineeight
members, three of whom are Class III Directors and each of whose terms expire at
the Annual Meeting. Each of such Class III Directors is a nominee for election.
The Class I Directors are Messrs. Walker, O'Connor and Calcano each of whose
terms expire at the 2003 Annual Meeting.
The Class II Directors are Messrs. Conefry and Elmore and Ms. Quinlan, each of
whose terms expire at the 2004 Annual Meeting. The Class III Directors are
Messrs. McCann, McCann and Minetti, whose terms expire at the 2005 Annual
Meeting. The Class I Directors are Messrs. Walker and O'Connor, each of whose
terms expire at the 2006 Annual Meeting. At each Annual Meeting, the successors
to the Directors whose terms have expired are elected to serve from the time of
their election and qualification until the third Annual Meeting following the
election or until a successor has been duly elected and qualified. The Company's
Third Amended and Restated Certificate of Incorporation authorizes the removal
of Directors under certain circumstances.
The affirmative vote of a plurality of the Company's outstanding Common Stock
present in person or by proxy at the Annual Meeting is required to elect the
nominees for Directors.
Information Regarding Nominees for Election as Directors (Class III Directors)
The following information with respect to the principal occupation or
employment, other affiliations and business experience of each of the three
nominees during the last five years has been furnished to the Company by such
nominee.
Jeffrey C. Walker, age 48, has been a Director of the Company since February
1995. Mr. Walker has been Managing Partner of JPMorgan Partners, the private
equity group of J.P. Morgan Chase & Co., since 1988, and a General Partner
thereof since 1984. He is also a Vice Chairman of J.P. Morgan Chase & Co. Mr.
Walker is a director of Axis Insurance and Doane PetCare, as well as, several
other private companies.
Kevin J. O'Connor, age 42, has been a Director of the Company since July 1999.
Mr. O'Connor co-founded DoubleClick, Inc., an Internet advertising network, and
has served as the Chairman of the Board of Directors since its inception in
January 1996. From December 1995 until January 1996, Mr. O'Connor served as
Chief Executive Officer of Internet Advertising Network, an Internet advertising
company, which he founded. From September 1994 to December 1995, Mr. O'Connor
served as director of Research for Digital Communications Associates, a data
communications company (now Attachmate Corporation), and from April 1992 to
September 1994, as its Chief Technical Officer and Vice President, Research.
Lawrence V. Calcano, age 40, has been a Director of the Company since August
1999. Mr. Calcano is a Managing Director and Co-Head of the High Technology
Group at Goldman, Sachs & Co., a worldwide investment banking firm. Prior to
this appointment in July 1999, Mr. Calcano managed the East Coast High
Technology Group for Goldman from April 1993. Mr. Calcano also serves on
Goldman's Firmwide Technology Operating Committee.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF MESSRS.
JEFFREY C. WALKER, KEVIN J. O'CONNOR AND LAWRENCE V. CALCANO AS CLASS I
DIRECTORS TO SERVE IN SUCH CAPACITY UNTIL THE 2006 ANNUAL MEETING.
Information Regarding Directors Who Are Not Nominees for Election at this Annual
Meeting
The following information with respect to the principal occupation or
employment, other affiliations and business experience during the last five
years of each Director who is not a nominee for election at this Annual Meeting
has been furnished to the Company by such Director.
James F. McCann, age 52, has served as the Company's Chairman of the Board and
Chief Executive Officer since inception. Mr. McCann has been in the floral
industry since 1976 when he opened his retail chain of flower shops in the New
York metropolitan area. Mr. McCann is a member of the board of directors of
Gateway, Boyd's Bears and GTECH, as well as the boards of Hofstra University and
Winthrop-University Hospital. James F. McCann is the brother of Christopher G.
McCann, a Director and the President of the Company.
Christopher G. McCann, age 42, has been the Company's President since September
2000 and prior to that was the Company's Senior Vice President. Mr. McCann has
been a Director of the Company since inception. Mr. McCann serves on the board
of directors of Neoware, Inc. and is a member of the Board of Trustees of Marist
College. Christopher G. McCann is the brother of James F. McCann, the Company's
Chairman of the Board and Chief Executive Officer.
T. Guy Minetti, age 52, has been a Director of the Company since December 1993
and became the Company's Vice Chairman in September 2000. Mr. Minetti serves on
the board of directors of American Sports Products Group Inc., a sporting goods
manufacturer that he co-founded in 1993 and Misonix, Inc., a medical device and
industrial product company. In March 1989, Mr. Minetti founded Bayberry
Advisors, an investment banking firm, and, prior thereto, Mr. Minetti was a
Managing Director at Kidder, Peabody & Company.
John J. Conefry, Jr., age 59,60, has been a Director of the Company since October
2002. Mr. Conefry is Vice Chairman of the Board of Directors of Astoria
Financial Corporation and its wholly-owned subsidiary Astoria Federal Savings.
He formerly served as the Chairman of the Board and CEO of Long Island Bancorp
and The Long Island Savings Bank from September 1993 until September 1998. Prior
thereto, Mr. Conefry was a Senior Vice President of Merrill Lynch, Pierce,
Fenner & Smith, Inc., where he served in various capacities, including, Chief
Financial Officer. Mr. Conefry was a partner in the public accounting firm of
Deloitte & Touche, LLP (formerly, Deloitte Haskins & Sells). Mr. Conefry serves
as a member of the Board of Trustees at Hofstra University, and on the boards of
St. Vincent's Services, and Wheel Chair Charities, Inc., among others.
Leonard J. Elmore, age 51,52, has been a Director of the Company since October
2002. Mr. Elmore is currently Senior Counsel with the law firm of LeBoeuf, Lamb,
Greene & MacRae, LLP in its New York City headquarters. Prior to his appointment
with LeBoeuf Lamb, Mr. Elmore served as the President of Test University, a
leading provider of web-based, customizedInternet delivered learning standardized test preparation and education
assessment solutions. Mr. Elmore also serves as the President of Pivot
Productions, Inc., a media production company specializing in marketing and
advertising. Prior to this appointment in 1999, Mr. Elmore practiced corporate
law as a Partner of the law firm Patton Boggs, LLP.solutions for pre-college
students.
Mary Lou Quinlan, age 50,51, has been a Director of the Company since May 2002. Ms.
Quinlan is the founder and Chief Executive Officer of Just Ask A Woman, a
strategic consultancy dedicated to marketing with women, since its inception in
1999. Prior to that, Ms. Quinlan served as President and Chief Executive Officer
of N.W. Ayer & Partners, a U.S. advertising firm, from 1994 through 1999, and in
executive positions at Avon Products and DDB Needham Worldwide. In 1995 the
Advertising Women of New York named Ms. Quinlan the Advertising Woman of the
Year, and in 1997 New York Women in Communications recognized her with the
Matrix Award. Ms. Quinlan also serves on the Board of Directors for her alma
mater, Saint Joseph's University in Philadelphia, and The Advertising Council.
3
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF MESSRS.
CONEFRY AND ELMORE AND MS. QUINLAN AS CLASS II DIRECTORS TO SERVE IN SUCH
CAPACITY UNTIL THE 2007 ANNUAL MEETING.
Information Regarding Directors Who Are Not Nominees for Election at this Annual
Meeting
The following information with respect to the principal occupation or
employment, other affiliations and business experience during the last five
years of each Director who is not a nominee for election at this Annual Meeting
has been furnished to the Company by such Director.
James F. McCann, age 53, has served as the Company's Chairman of the Board and
Chief Executive Officer since inception. Mr. McCann has been in the floral
industry since 1976 when he opened his retail chain of flower shops in the New
York metropolitan area. Mr. McCann is a member of the board of directors of
Boyd's Bears, GTECH and Willis Holdings Corp. as well as the boards of Hofstra
University and Winthrop-University Hospital. James F. McCann is the brother of
Christopher G. McCann, a Director and the President of the Company.
Christopher G. McCann, age 43, has been the Company's President since September
2000 and prior to that was the Company's Senior Vice President. Mr. McCann has
been a Director of the Company since inception. Mr. McCann serves on the board
of directors of Neoware, Inc. and is a member of the Board of Trustees of Marist
College. Christopher G. McCann is the brother of James F. McCann, the Company's
Chairman of the Board and Chief Executive Officer.
T. Guy Minetti, age 53, has been a Director of the Company since December 1993
and became the Company's Vice Chairman in September 2000. Mr. Minetti serves on
the board of directors of Misonix, Inc., a medical device and industrial product
company. In March 1989, Mr. Minetti founded Bayberry Advisors, an investment
banking firm, and, prior thereto, Mr. Minetti was a Managing Director at Kidder,
Peabody & Company.
Jeffrey C. Walker, age 49, has been a Director of the Company since February
1995. Mr. Walker has been Managing Partner of JPMorgan Partners, the private
equity group of J.P. Morgan Chase & Co., since 1988, and a General Partner
thereof since 1984. He is also a Vice Chairman of J.P. Morgan Chase & Co. Mr.
Walker is a director of Axis Insurance and Doane PetCare, as well as, several
other private companies.
Kevin J. O'Connor, age 43, has been a Director of the Company since July 1999.
Mr. O'Connor co-founded DoubleClick, Inc., a marketing technology company, and
has served as the Chairman of the Board of Directors since its inception in
January 1996. From December 1995 until January 1996, Mr. O'Connor served as
Chief Executive Officer of Internet Advertising Network, an Internet advertising
company, which he founded. From September 1994 to December 1995, Mr. O'Connor
served as director of Research for Digital Communications Associates, a data
communications company (now Attachmate Corporation), and from April 1992 to
September 1994, as its Chief Technical Officer and Vice President, Research.
Committees of the Board
Each of our directors, other than Messrs. McCann, McCann and Minetti, qualifies
as an "independent director" as defined under the published listing requirements
of The NASDAQ Stock Market. The NASDAQ independence definition includes a series
of objective tests. For example, an independent director may not be employed by
us and may not engage in certain types of business dealings with the Company. In
addition, as further required by NASDAQ rules, the Board has made a subjective
determination as to each independent director that no relationship exists which,
in the opinion of the Board, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. In making these
determinations, the Board reviewed and discussed information provided by the
directors and by the Company with regard to each director's business and
personal activities as they may relate to the Company and Company's management.
In addition, as required by NASDAQ rules, the Board determined that the members
of the Audit Committee each qualify as "independent" under special standards
established by NASDAQ and the U.S. Securities and Exchange Commission (the
"Commission") for members of audit committees.
4
The Audit Committee of the Board of Directors reports to the Board regarding the
appointment of the Company's independent public accountants, the scope and
results of its annual audits, compliance with accounting and financial policies
and management's procedures and policies relative to the adequacy of internal
accounting controls. The Company's Board of Directors adopted a written charter
for the Audit Committee in January 2000 and amended in August 2003 which
outlines the responsibilities of the Audit Committee and which charter was amended in August 2003. Attached is aCommittee. A current copy of Amended Charter as Annex "A". During Fiscal 2003, the
Audit Committee's
composition changed with Mr. Conefry being added to the Committee and being
designated Chairman in lieucharter of Mr. O'Connor. For the fiscal year ended June 29,
2003 ("Fiscal 2003") and as currently comprised, the Audit Committee consistsis available on our website located at
www.1800flowers.com under the Investor Relations section of the website. The
current members of the Audit Committee are Messrs. Conefry (Chairman) and
O'Connor, and Ms. Quinlan who are all independent Directors of the Company as
that term is defined by the rules and regulations of the National Association of
Securities Dealers (the "NASD").
Each member of the Audit Committee is "financially literate" as required by
NASDAQ rules. The Audit Committee also includes at least one member, John J.
Conefry, Jr. who was determined by the Board to meet the qualifications of an
"audit committee financial expert" in accordance with SEC rules and to meet the
qualifications of "financial sophistication" in accordance with NASDAQ rules.
Stockholders should understand that these designations related to our Audit
Committee members' experience and understanding with respect to certain
accounting and auditing matters do not impose upon any of them any duties,
obligations or liabilities that are greater that those generally imposed on a
member of the Audit Committee or of the Board.
The Compensation Committee of the Board of Directors reviews and makes
recommendations to the Board regarding the Company's compensation policies and
all forms of compensation to be provided to the Company's Section 16 Executive
Officers ("executive officersofficers") and Directors. The Compensation Committee
approves the compensation for the Company's executive officers. In addition, the Compensation Committeeofficers and administers
the Company's 1999 Stock2003 Long Term Incentive and Share Award Plan under which option
grants, stock appreciation rights, restricted awards and performance awards may
be made to Directors, officers, employees of, and consultants to, the Company
and its subsidiaries. In addition, the Compensation Committee administers the
Section 16 Executive Officers Bonus Plan under which annual bonus compensation
may be awarded. The Board of Directors has authorized a secondary committee of
the Compensation Committee (the "Secondary Committee"), which consists of Mr.
James F. McCann, to also review stock compensation optionsAwards for all of the Company's employees, other
than its executive officers. If approved by the Shareholders,
the Compensation Committee will be responsible for the administration of the
Company's 2003 Long Term Incentive and Stock Award Plan. The Company's Board of Directors adopted a written
charter for the Compensation Committee in June 2003 which outlines the
responsibilities of the Compensation Committee. Attached is aA current copy of the Charter as Annex "B".charter of
the Compensation Committee is available on our website located at
www.1800flowers.com under the Investor Relations section of the website. The
current members of the Compensation Committee are Mr. Walker (Chairman), Mr.
Conefry and Ms. Quinlan, who are all independent Directors of the Company as
that term is defined by the rules and regulations of the NASD.
The Nominating and Corporate Governance Committee identifies and evaluates
individuals qualified to become Board members and recommends to the Board
director nominees for election and re-election, develops and recommends to the
Board the corporate governance guidelines applicable to the Company and to
review and reassess the adequacy of corporate governance guidelines and
practices. The Company Board of Directors adopted a written charter for the
Nominating and Corporate Governance Committee in June 2003, which outlines the
responsibilities of the Committee. Attached is aA current copy of the Charter as Annex
"C".charter of the
Nominating and Corporate Governance Committee is available on our website
located at www.1800flowers.com under the Investor Relations section of the
website. The current members of the Nominating and Corporate Governance
Committee are Messrs. Elmore (Chairman), CalcanoO'Connor and O'ConnorConefry who are all
independent Directors of the Company as that term is defined by the rules and
regulations of the NASD.
Compensation Committee Interlocks and Insider Participation
No interlocking relationships exist between the Board of Directors or the
Compensation Committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past. No member of the Compensation Committee was an officer or employee of the
Company at any time during Fiscal 2003.2004.
5
Attendance at Board and Committee Meetings
During Fiscal 2003,2004, the Board of Directors held six (6)five (5) meetings and acted by
unanimous written consent on four (4)three (3) occasions. During Fiscal 2003,2004, each
Director attended at least 75% of the meetings of the Board of Directors.
The Audit Committee held five (5)six (6) meetings during Fiscal 20032004 and did not
act by unanimous written consent. The Compensation Committee, including its
Secondary Committee, held five (5)six (6) meetings in Fiscal 20032004 and acted by unanimous
written consent on two (2) occasions. The Nominating and Corporate Governance
Committee held three (3) meetings in Fiscal 2004 and did not act by unanimous
written consent. In addition, each of the Board of Directors except Ms. Quinlan attended
at least 75% of all meetings of each Committee of our Board on which such
Director serves. The NominatingMs. Quinlan, who sits on the Board of Directors as well as two
(2) committees of the Board attended 72% of the meetings. Due to a previously
matter outside the country, Ms. Quinlan was unavailable to attend a Board
meeting and Corporate Governancea Committee did not
meet in FYmeeting that were both held on December 2, 2003. Had Ms.
Quinlan been able to attend the December 2, 2003 as themeetings she would have
attended 83% of total Committee was only formed on June 26, 2003.and Board meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers and
Directors, and persons who own more than 10% of a registered class of our equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the Nasdaq Stock
Market. Officers, directors, and greater than 10% stockholders are required by
Commission regulations to furnish us with copies of all reports they file
pursuant to Section 16(a).
Based solely on a review of the copies of such reports furnished to us, we
believe that, since the Company's initial public offering, all Section 16(a)
filing requirements applicable to our officers, Directors and greater than 10%
stockholders have been satisfied.
Compensation of Directors
Cash Compensation. In order to provide some cash compensation to non-employee
Board members for all the time and effort that Board members expend on attending
Board meetings, reviewing materials furnished by the Company, and otherwise
rendering services to the Company as Directors, non-employee Board members
receivereceive: (a) an annual retainer in the amount of $12,500 payable on the date of
the Company's Annual Meeting, (b) $2,500 per personal attendance at a Board of
Directors Meeting or $1,000 per Board Meeting if attended telephonically, (c)
$2,500 for personal attendance at a Compensation Committee, Audit Committee
Meeting or Nominating and Corporate Governance Committee (excluding committee
meetings held on the same day as scheduled meetings of the Board of Directors)
and reimbursement for reasonable travel and lodging expenses associated with
attendance at any meeting.
In addition, Mr. Conefrythe Chairperson of the Company's Audit Committee receives $2,500$10,000
per year for his services as Audit
Committee Chairman.
Options. Pursuant toand the Company's 1999 Stock Incentive Plan, each individual
who first becomes a non-employee memberChairpersons of the other committees of the Board of Directors
automatically
is entitledreceive $5,000 per year for their respective services. The fees to an option grant for 10,000 fully vested options of Class A Common
Stock on the
date such individual joins the Board. In addition,respective Chairpersons are payable on the date of the Company's Annual Meeting.
Other Compensation. In addition to the cash compensation set forth above, each
Annual Meeting, eachof the non-employee Board member is entitled tomembers receive a grant of 10,000 stock options or, in
lieu thereof, the equivalent number of restricted shares based upon a fully vested option4 to purchase 5,000 shares of Class A Common Stock, provided
such individual has served1
ratio between options and restricted shares; which grant shall occur on the Board for at least six months.date
of the Annual Meeting.
Compensation information on James F. McCann and Christopher G. McCann, and T. Guy
Minetti, who are
Directors, as well as executive officers of the Company, is contained under the
section titled "Executive Compensation and Other Information."
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following individuals were serving as executive officers
of the Company and certain of its subsidiaries on October 8, 2003:2004:
6
Name Age Position with the Company
- ---- --- -------------------------
James F. McCann ....... . 52........... 53 Chairman of the Board and
Chief Executive Officer
Christopher G. McCann.... 42McCann...... 43 Director and President
T. Guy Minetti........... 52Minetti............. 53 Director and Vice Chairman
Peter G. Rice............ 58Rice.............. 59 President of The Plow & Hearth, Inc.
William E. Shea.......... 44Shea............ 45 Senior Vice President of Finance and
Administration, Treasurer, Chief Financial
Officer
Gerard M. Gallagher...... 50Gallagher........ 51 Senior Vice President, General Counsel,
Corporate Secretary
Thomas G. Hartnett....... 40Hartnett......... 41 Senior Vice President of Retail and Fulfillment
Monica L. Woo ............. 46 Senior Vice President of Marketing
Vincent J. McVeigh....... 43McVeigh......... 44 Senior Vice President
Enzo J. Micali........... 44Micali............. 45 Senior Vice President of Information Technology
Information Concerning Executive Officers Who Are Not Directors
Peter G. Rice, President of The Plow & Hearth, Inc., was co-founder of The Plow
& Hearth, Inc. and served as its President and Chairman of the Board since its
inception in November 1980. Mr. Rice was founder of Blue Ridge Mountain Sports,
a chain of retail backpacking/outdoor stores, and co-founder of Phoenix
Products, a manufacturer of kayaks. He is a member of the Catalog Council
Operating Committee of the Direct Marketing Association and a past director of
the New England Mail Order Association and of the U.S. Senate Productivity and
Quality Award Board for Virginia.
William E. Shea has been our Senior Vice President of Finance and Administration
and Chief Financial Officer since September 2000. Before holding his current
position, Mr. Shea was our Vice President of Finance and Corporate Controller
after joining us in April 1996. From 1980 until joining us, Mr. Shea was a
certified public accountant with Ernst & Young LLP.
Gerard M. Gallagher has been our Senior Vice President, General Counsel and
Corporate Secretary since August 1999 and has been providing legal services to
the Company since its inception. Mr. Gallagher is the founder and a managing
partner in the law firm Gallagher, Walker, Bianco and Plastaras, based in
Mineola, New York, specializing in corporate, litigation and intellectual
property matters since 1993. Mr. Gallagher is duly admitted to practice before
the New York State Courts and the United States District Courts of both the
Eastern District and Southern District of New York.
Thomas G. Hartnett has been our Senior Vice President of Retail and Fulfillment
since September 2000. Before holding this position, Mr. Hartnett held various
positions within the Company since joining the Company in 1991, including
Controller, Director of Store Operations, Vice President of Retail Operations
and, most recently, as Vice President of Strategic Development.
Monica L. Woo has been our Senior Vice President of Marketing, since January
2004. Prior to joining the Company, Ms. Woo had founded a successful consulting
practice focusing on growth strategies for such multi-national clients as
Deutsche Bank, Northwest Airlines and Campbell's Soup. Prior to that, Ms. Woo
was the President of Bacardi Global Brands, Inc., of Bacardi Limited. Before
holding this position, Ms. Woo had assumed a number of senior executive
positions in the financial services and consumer packaged goods sectors,
including the Global Marketing Director of Citibank On-line and the Citibank
Private Bank, and the Sr. Vice President, European Marketing Director of Diageo
PLC.
Vincent J. McVeigh has been our Senior Vice President since October 2000. Before
holding his current position with Corporate Partnerships, Mr. McVeigh held
various positions within the Company since joining the Company in 1991,
including Bloomnet Manager, Director of Call Center Operations and, most
recently, as Vice President of Merchandising.
7
Enzo J. Micali has been our Senior Vice President of Information Technology and
Chief Technology Officer since December 2000. Prior to joining the Company, Mr.
Micali served as Chief Technology Officer for InsLogic. Prior to joining
InsLogic, Mr. Micali spent 12 years in various technology management positions
with J.P. Morgan Chase & Co., formerly Chase Manhattan Bank.
Summary Compensation Table
The following table sets forth the annual and long-term compensation paid by the
Company during Fiscal 20032004 and the fiscal years ended June 29, 2003 and June 30,
2002 and July 1,
2001 ("Fiscal 2002"2003" and "Fiscal 2001"2002") to the Company's Chief Executive Officer
and the four highest compensated other executive officers of the Company whose
total compensation during Fiscal 20032004 exceeded $100,000 (collectively, the
"Named Executive Officers"):
Long-Term
Annual Compensation Compensation
------------------------------------- ---------------- --------------
Securities
Bonus
Other Annual Underlying All Other
Fiscal Salary ----------Bonus Compensation Options Compensation
Name and Principal Position Year ($) ($) ($)(1) (#)(2) ($)
- --------------------------- ------ ---------- ----------- ------------- ---------------- --------------
2004 $ 975,000 - -
James F. McCann................... 2003 $1,210,000 - 400,000
James F. McCann...................Chief Executive Officer 2002 $1,100,000 $80,000 300,000
Chief Executive Officer 2001 $1,000,000 $170,0002004 $ 465,850 - -
Christopher G. McCann............. 2003 $ 423,500 - 538,300
Christopher G. McCann.............President 2002 $ 385,000 $46,000 300,000
2004 $310,000 - -
Gerard M. Gallagher............... 2003 $290,000 - 120,400
Senior Vice President, 2001 $ 330,220 $89,000 433,700
2003 $300,000General 2002 $275,000 $33,000 138,000
Counsel, Secretary (3)
2004 $250,000 - 50,400
T. Guy Minetti.................... 2002 $300,000 $36,000 58,400
Vice Chairman 2001 $291,000 $77,000 333,700-
Peter G. Rice..................... 2003 $249,000 - 49,600
Peter G. Rice..................... 2002 $238,000 $34,000 40,400
President of The Plow & Hearth, 2001 $233,000 $52,000 117,9502002 $238,000 $34,000 40,400
Inc.
2004 $240,000 $49,500 -
Enzo J. Micali.................... 2003 $290,000 - 120,400
Gerard M. Gallagher............... 2002 $275,000 $33,000 138,000$226,700 $17,000 52,300
Senior Vice President, General 2001 $282,000 $70,000 110,900
Counsel, Secretary (3)Chief 2002 $218,000 $34,329 24,400
Technology Officer
- --------------------------------------------------------------------------
8
(1) Other compensation in the form of perquisites and other personal
benefits has been omitted as the aggregate amount of such perquisites
and other personal benefits constituted the lesser of $50,000 or 10% of
the total annual salary and bonus for the executive officer for such
year.
(2) The Company did not grant any stock appreciation rights or make any
long-term incentive plan payments to any Named Executive Officers in
Fiscal 2003,2004, Fiscal 20022003 or Fiscal 2001.2002.
(3) The compensation listed in the summary compensation table for Mr.
Gallagher for Fiscal 2004, Fiscal 2003 and Fiscal 2002 and Fiscal 2001 was paid by the
Company to the law firm of Gallagher, Walker, Bianco and Plastaras.
More information regarding Mr. Gallagher's affiliation with Gallagher,
Walker, Bianco and Plastaras may be found under the section titled
"Related Party Transactions".
Option Grants in Last Fiscal Year
The following table provides information with respect to theThere were no stock option grants made during Fiscal 2003or stock appreciation rights given to the
Named Executive Officers. No stock appreciation
rights were grantedOfficers during Fiscal 2003.
% of Total Potential Realizable
Number of Options Value at Assumed Rates
Securities Granted to Exercise of Stock Price
Underlying Employees Price Appreciation for
Options in Fiscal ($/Share) Expiration Option Term (4)
Name Granted (1) 2003 (2) (3) Date 5% 10%
_________________________________________________________________________________________________________________
James F. McCann 200,000 (a) 6.6% $6.42 9/23/2012 $807,500 $2,046,365
200,000 (b) 6.6% $6.70 3/24/2013 $842,720 $2,135,615
___________ _____ __________ ___________
400,000 13.2% $1,650,220 $4,181,980
Christopher G. McCann 250,000 (a) 8.2% $6.42 9/23/2012 $1,009,376 $2,557,956
38,300 (b) 1.3% $6.42 9/23/2012 $154,636 $391,879
250,000 (b) 8.2% $6.70 3/24/2013 $1,053,399 $2,669,519
___________ _____ __________ __________
538,300 17.7% $2,217,411 $5,619,354
T. Guy Minetti 30,000 (a) 1.0% $6.42 9/23/2012 $121,125 $306,955
20,400 (b) 0.7% $6.42 9/23/2012 $82,365 $208,729
___________ _____ _________ _________
50,400 1.7% $203,490 $515,684
Peter G. Rice 25,000 (a) 0.8% $6.42 9/23/2012 $100,938 $255,796
12,300 (b) 0.4% $6.42 9/23/2012 $49,661 $125,851
12,300 (b) 0.4% $6.70 3/24/2013 $51,827 $131,340
___________ _____ ________ _________
49,600 1.6% $202,426 $512,987
Gerard M. Gallagher 75,000 (a) 2.5% $6.42 9/23/2012 $302,813 $767,387
20,400 (b) 0.7% $6.42 9/23/2012 $82,365 $208,729
25,000 (b) 0.8% $6.70 3/24/2013 $105,340 $266,952
___________ _____ _________ _________
120,400 4.0% $490,518 $1,243,068
Total 1,158,700 38.2%
(1) The options listed in the table become exercisable as follows: (a) at a rate
of 100% upon the completion of the fourth year of service following the grant
date; and (b) at a rate of 40% after the completion of two years of service
following the grant date, and 20% at the completion of each year of service
thereafter. Each option, has a maximum term of ten years, subject to earlier
termination in the event of the optionee's cessation of employment with the
Company pursuant to the terms of the Company's 1999 Stock Incentive Plan.
(2) Based on an aggregate 3,036,705 options granted in Fiscal 2003.
(3) The exercise price may be paid in cash, by surrendering shares owned by the
optionee for a sufficient period of time or through a cashless exercise
procedure.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can be no
assurance provided to any executive officer or any other holder of the Company's
securities that the actual stock price appreciation over the 10-year option term
will be at the assumed 5% and 10% levels. Unless the market price of the Common
Stock appreciates over the option term, no value will be realized from the
option grants made to the executive officers.2004.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth the number of options exercised during Fiscal
20032004 and the number and value of unexercised options held by each of the named
executive officersNamed
Executive Officers at June 29, 2003.27, 2004.
Value
Shares RealizedValue Number of Securities Underlying Value of Unexercised In-The-
Acquired on ($)(1)Realized Unexercised Options at Fiscal Value of Unexercised In-The-Money
Exercise (#) Year-End (#)Money Options at Fiscal Year
Exercise (#) ($)(1) Year-End (#) End ($)(2)
____________ ____________ ________________________________ __________________________________------------ ---------- --------------------------------- -------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
________________________________ __________________________________- ---- --------------- ----------------- ---------------- --------------
James F. McCann............McCann.......... - $0 108,000 672,000 - $ 672,000184,000 596,000 - $796,000
Christopher G. McCann...... 59,425 $283,457 827,655 1,188,920 $3,134,203 $2,427,809
T. Guy Minetti............. - $0 338,960 246,540 $1,242,679 $ 735,542McCann.... 50,000 $402,500 1,024,595 941,980 $3,597,459 $2,099,286
Gerard M. Gallagher...... 7,000 $66,617 255,140 267,160 $639,056 $536,881
Peter G. Rice..............Rice............ 5,788 $38,769 185,142 144,520 $583,282 $414,791
Enzo J. Micali........... 17,160 $120,450 9,760 101,260 - $0 129,510 205,940 $ 385,978 $ 562,010
Gerard M. Gallagher........ - $0 192,760 336,540 $ 472,598 $ 646,951$275,367
- -------------------------------------------------------------------------------
(1) Amounts calculated by subtracting the exercise price of the options
from the market value of the underlying Class A Common Stock using the
closing selling price as reported on the Nasdaq National Market on the
date of exercise of these options.
(2) Amounts calculated by subtracting the exercise price of the options
from the market value of the underlying Class A Common Stock using the
closing selling price of $8.24$8.55 as reported on the Nasdaq National
Market for the last trading day of Fiscal 2003.2004.
Employment Agreements
Mr. James F. McCann's employment agreement became effective as of July 1, 1999.
The agreement provides for a five year term, and on each anniversary of the
agreement, the term is extended for one additional year. Mr. McCann is eligible
to participate in the Company's stock incentive plans, other bonus or benefits
plans, and is entitled to health and life insurance coverage for himself and his
dependents. The agreement provides for an annual base salary with provisions
allowing for annual increases. Mr. McCann's annual salary for Fiscal 20032004 was
$1,210,000.$975,000. Upon termination without good cause or resignation for good reason,
including a change of control, Mr. McCann is entitled to severance pay in the
amount of $2,500,000, plus the base salary otherwise payable to him for the
balance of the then current employment term and any base salary, bonuses,
vacation and unreimbursed expenses accrued but unpaid as of the termination
date, and health and life insurance coverage for himself and his dependents for
the balance of the then current employment term. Upon termination due to death,
or for good cause or a voluntary resignation, Mr. McCann is not entitled to any
compensation from the Company, except for the payment of any base salary,
bonuses, benefits or unreimbursed expenses accrued but unpaid as of the date of
termination. The Compensation Committee has recommended that Mr. McCann receive,
and Mr. McCann has accepted, a base salary of $975,000 for Fiscal 20042005 in order
to enable the Company to comply with Section 162(m) of the IRS Code of 1986
("Section 162(m)") as amended, which was enacted into law in 1993.
9
Mr. Christopher G. McCann's employment agreement became effective as of July 1,
1999. The agreement provides for a five year term, and on each anniversary of
the agreement, the term is extended for one additional year. Mr. McCann is
eligible to participate in the Company's stock incentive plans, other bonus or
benefits plans, and is entitled to health and life insurance coverage for
himself and his dependents. The agreement provides for an annual base salary
with provisions allowing for annual increases. Mr. McCann's annual salary for
Fiscal 20032004 was $423,500.$465,850. Upon termination without good cause or resignation for
good reason, including a change of control, Mr. McCann is entitled to severance
pay in the amount of $500,000, plus the base salary otherwise payable to him for
the balance of the then current employment term and any base salary, bonuses,
vacation and unreimbursed expenses accrued but unpaid as of the termination
date, and health and life insurance coverage for himself and his dependents for
the balance of the then current employment term. Upon termination due to death,
or for good cause, or a voluntary resignation, Mr. McCann is not entitled to any
compensation from the Company, except for the payment of any base salary,
bonuses, benefits or unreimbursed expenses accrued but unpaid as of the date of
such termination.
Mr. Peter G. Rice's employment agreement with The Plow & Hearth, Inc. became
effective as of April 3, 1998 and has been automatically renewed through April
3, 2004.2005. The agreement contains automatic one-year renewals unless prior notice
of termination is given. Mr. Rice's annual salary for Fiscal 20032004 was $249,000$250,000
and he was eligible to participate in the Company's stock incentive plans. Upon
termination without cause, Mr. Rice is entitled to an amount equal to his salary
through the end of the term of the agreement, any amounts earned, accrued or
owing but not yet paid as of the date of the termination and other benefits, if
any, as are payable to or for the benefit of Mr. Rice as of the date of his
termination until the end of the term of the agreement.
Under their employment agreements, Messrs. James F. McCann and Christopher G.
McCann are each restricted from participating in a competitive floral products
business for a period of one year after a voluntary resignation or termination
for good cause. Mr. Rice has agreed not to compete with the Company or solicit
its clients or employees during his term of employment and for two years
immediately following his termination. Each of these executives is also bound by
confidentiality provisions, which prohibit the executive from, among other
things, disseminating or using confidential information about the Company in any
way that would be adverse to the Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee advises the Board of Directors on issues
concerning the Company's compensation philosophy, the compensation of executive
officers and other individuals compensated by the Company, and sets the
compensation for the executive officers. The Compensation Committee is
responsible for the administration of the Company's 1999 Stock2003 Long Term Incentive and
Share Award Plan under which option
grants, stock options, share appreciation rights,
restricted shares, restricted share units, performance shares, performance
units, divided equivalents, and other share-based awards and performance awards("Awards") may be made
to Directors, consultants, executive officers and employees of the Company and
its subsidiaries. In addition, the Compensation Committee administers the
Section 16 Executive Officers Bonus Plan under which annual bonus compensation
may be awarded. The Board of Directors has authorized a secondary committeeSecondary Committee of
the Compensation Committee to also review stock compensation optionsAwards for all of the Company's
employees other than its executive officers. If approved by the
Shareholders, the Compensation Committee will be responsible for the
administration of the Company's 2003 Long Term Incentive and Stock Award Plan.
The Compensation Committee believes that the compensation programs for the
Company's executive officers should reflect the Company's performance and the
value created for the Company's stockholders. In addition, the compensation
programs should support the short-term and long-term strategic goals and values
of the Company and should reward individual contribution to the Company's
success. The Company is engaged in a very competitive industry, and the
Company's success depends upon its ability to attract and retain qualified
executives through the competitive compensation packages it offers to such
individuals.
General Compensation Policy. The fundamental policy of the Compensation
Committee is to provide the Company's executive officers with competitive
compensation opportunities based upon their contribution to the development and
10
financial success of the Company and their personal performance. It is the
Compensation Committee's philosophy that a portion of each executive officer's
compensation should be contingent upon the Company's performance, as well as,
upon such executive officer's own level of performance. Accordingly, the
compensation package for each executive officer should be comprised of two
elements: (i) base salary and bonus which reflects experience and individual and
Company performance and is designed to be competitive with salary levels in the
industry (the bonus component for certain executive officers are tied solely to
Company performance), and (ii) long-term stock-based incentive awardsAwards which strengthen the
mutuality of interests between the executive officers and the Company's
stockholders.
Factors. The principal factors which the Compensation Committee considers in
reviewing the components of each executive officer's compensation package are
summarized below. The Compensation Committee may, however, in its discretion
apply other factors with respect to executive compensation for future years.
o Base Salary. The suggested base salary for each executive officer is
determined on the basis of the following factors: experience, personal
performance, the salary levels in effect for comparable positions within and
outside the industry and internal base salary comparability considerations. The
weight given to each of these factors shall differ from individual to individual
as the Compensation Committee deems appropriate and subject to any applicable
employment agreements.
o Bonus. The bonus in Fiscal 2004 for Messrs. McCann, McCann, Minetti,
Gallagher, Shea, and Shea isMs. Woo was determined solely by the Company's financial
performance. For Fiscal 2005, it is anticipated that their bonus will be based
upon a combination of primarily the Company's financial performance, as well as,
their individual performances. With regard to other executive officers,
consideration is also given to performance of the specific areas of the Company
under the executive officer's direct control and to such executive officers own
level of performance. This balance supports the accomplishment of the Company's
overall financial objectives and rewards the individual contributions of our
executive officers.
o Long-Term Incentive Compensation. Long-term incentives are provided
primarily
through grants of Awards, which in Fiscal 2004 was in the form of stock options.
In the near future, it is anticipated that long term incentives will be provided
through a combination of grants of stock options and/or restricted stock. The
grants are designed to align the interests of each executive officer with those
of the stockholders and provide each individual with a significant incentive to
manage the Company from the perspective of an owner with an equity stake in the
Company.
Each stock option grant allows the individual to acquire shares of the Company's
Common Stock at a fixed price per share over a specified period of time. Each
option generally becomes exercisable in installments over a fixed period,
contingent upon the executive officer's continued employment with the Company.
Accordingly, the option grant will provide a return to the executive officer
only if the executive officer remains employed by the Company during the vesting
period, and then only if the market price of the underlying shares appreciates.
The numberEach restricted share grant allows the individual to acquire shares of shares subject to eachthe
Company's Common Stock over a specified period of time without payment. As in
the case of the option grant, the restricted share grant will provide a return
to the executive officer only if the executive officer remains employed by the
Company during the vesting period.
The grant of an Award is set at a level intended to create a meaningful
opportunity for stock ownershipincentive based on the executive officer's current position with the Company,
the base salary associated with that position, the size of comparable awards
made to individuals in similar positions within the industry, the individual's
potential for increased responsibility and promotion over the optionapplicable term of
the Award and the individual's personal performance in recent periods. The
Compensation Committee also intends to consider the number of unvested optionsAwards held by the
executive officer in order to maintain an appropriate level of equity incentive for
that individual. However, the Compensation Committee may use its discretion in
awarding optionsgranting Awards to the Company's executive officers.
In the future, it is anticipated that the long-term incentives will be provided
through a combination of grants of stock options and/or restricted stock.
CEO Compensation. In July 1999, the Board of Directors approved the Employment
Agreement between the Company and James F. McCann, its Chairman of the Board and
Chief Executive Officer, which established his initial base annual salary and
eligibility to participate in the Company's stock incentive plans and other
bonus or benefits plans, and which is discussed in further detail under
"Employment Agreements". The Board determined it to be in the best interests of
the Company to enter into the Employment Agreement with Mr. McCann as of such
date and believes that the agreement with Mr. McCann and the compensation paid
thereunder for Fiscal 20032004 was fair and reasonable. In determining the total
compensation for Mr. McCann, and that such compensation was fair and reasonable
in Fiscal 2003,2004, a number of factors were taken into account. These factors
11
included: the key role Mr. McCann has performed with the Company from its
inception; the benefit to the Company in assuring the retention of his services;
the performance of the Company compared to its budgeted performance during Fiscal 2003;2004; the competitive market
conditions for executive compensation; and the objective evaluation of Mr.
McCann's performance of his duties as Chairman of the Board and Chief Executive
Officer.
Compliance with Internal Revenue Code Section 162(m). As a result of Section
162(m) of the Internal Revenue Code of 1986 ("Section 162(m)"), as amended,
which was enacted into law in 1993, the Company will not be allowed a federal
income tax deduction for compensation paid to certain executive officers, to the
extent that compensation exceeds $1 million per officer in any one year. This
limitation will apply to all compensation paid to the covered executive
officers, which is not considered to be performance based. Compensation which
qualifies as performance-based compensation will not have to be taken into
account for purposes of this limitation. The 1999 Stock Incentive Plan, and
the proposed 2003 Long Term Incentive and StockShare
Award Plan and the Section 16 Executive Officers Bonus Plan contain certain
provisions which are intended to ensure that any compensation deemed paid in
connection with the exercisegranting of stock options granted under that plan with an
exercise price equal to the market price of the option shares on the grant dateAwards or bonus compensation will qualify as
performance-based compensation.
The Compensation Committee does not expect that the non-performance based
compensation to be paid to any of the Company's executive officers for Fiscal
20032004 will be subject to the deduction limitations of Section 162(m). The
Compensation Committee has recommended that Mr. McCann receive, and Mr. McCann
has accepted, a base salary of $975,000 for Fiscal 20042005 in order to enable the
Company to comply with Section 162(m). Further, in accordance with issued
Treasury Regulations relating to the $1 million limitation, the Committee may in
the future determine to restructure one or more components of the compensation
paid to the executive officers so as to qualify those components as
performance-based compensation that will not be subject to the $1 million
limitation.
THE COMPENSATION COMMITTEE
Jeffrey C. Walker, Chairman
Mary Lou Quinlan
John J. Conefry, Jr
12
Audit Committee Report
September 3, 2003
To the Board of Directors
of 1-800-flowers.com, Inc. (the "Company"):
OurWe, the members of the Audit Committee, has reviewed and discussed with managementassist the audited
financialsBoard of Directors in
its oversight of the Company's financial accounting, reporting and controls. We
also evaluate the performance and independence of the Company's independent
registered public accounting firm. We operate under a written charter that both
the Board and we have approved. A current copy of the Audit Committee charter
can be found on the Company's website located at www.1800flowers.com under the
Investor Relations section of the website. We would like to remind our
stockholders that, although the Board has determined that each of us meets
NASDAQ's regulatory requirements for financial literacy and that John J.
Conefry, Jr., is an "audit committee financial expert," and is financially
sophisticated under NASDAQ requirements, we are not professionally engaged in
the practice of auditing or accounting and are not technical experts in auditing
or accounting.
The Company management is responsible for the year ended June 29, 2003 (the "Audited
Financial Statements"). In addition, we have discussed withpreparation, presentation and
integrity of the Company's financial statements, including setting the
accounting and financial reporting principles and designing the Company's system
of internal controls over financial reporting. The Company's independent
registered public accounting firm, Ernst & Young LLP, is responsible for
performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards and issuing a report on
the consolidated financial statements. We oversee the processes.
We reviewed and discussed the audited financial statements for the fiscal
year ended June 27, 2004 with management and the independent auditingregistered public
accounting firm. We also discussed with the independent registered public
accounting firm for the Company, the matters required to be discussed by Codification of StatementsStatement on Auditing
Standards No. 61.
The Committee also has61, Communications with Audit Committees, as amended. We received the
written disclosures and the letter from Ernst & Young LLPthe independent registered public
accounting firm required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and we
have discussed such independence
with that firm its independence from the Company. We also have
discussed with management of the Company and the auditing firm such other
matters and reviewed such assurances from them as we deemed appropriate.Ernst & Young.
Based on the foregoing review andreports, discussions and relying thereon,review described in this report, and
subject to the limitations on our role and responsibilities referred to in this
report and in the charter, we have recommended to the Company's Board of Directors that the
inclusion of the Audited
Financial Statementsaudited financial statements be included in the Company's Annual Report for the year ended June 29,
2003 on Form
10-K.10-K for fiscal 2004. We also selected Ernst & Young LLP as our independent
registered public accounting firm for fiscal 2005.
Audit Committee
John J. Conefry, Jr., Chairman
Kevin J. O'Connor
Mary Lou Quinlan
13
Stock Performance Graph
The following graph compares the percentage change in the cumulative total
stockholder return on the Company's common stock during the period from the
Company's initial public offering on August 3, 1999, through June 29, 2003,27, 2004, with
the cumulative total returns of the Russell 2000 and Nasdaq Non-Financial
indices. The comparison assumes $100 was invested on the close of business of
August 3, 1999 in each of the foregoing indices, and assumes dividends, if any
were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Cumulative Total Return
--------------------------------------------------------------------------------------------
8/3/99 6/00 6/01 6/02 6/03 6/04
1-800-FLOWERS.COM, INC. 100.00 28.18 81.59 61.36 46.13 44.75
RUSSELL 2000 100.00 119.83 120.51 110.15 108.34 144.49
NASDAQ NON-FINANCIAL 100.00 159.92 81.50 52.00 58.71 78.25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial ownership
of the Company's Class A Common Stock and Class B Common Stock, as of October 8,
2003,2004, for (i) each person known by the Company to beneficially own more than 5%
of each class; (ii) each Director; (iii) each Named Executive Officer; and (iv)
all of the Company's executive officers and Directors as a group. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting or investment power with respect to the
securities. Unless otherwise indicated, the address for those listed below is
c/o 1-800-FLOWERS.COM, Inc., 1600 Stewart Avenue, Westbury, New York 11590.
Except as indicated by footnote, and subject to applicable community property
laws, the persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them. The
number of shares of common stock outstanding used in calculating the percentage
for each listed person includes the shares of common stock underlying options
held by such persons that are exercisable within 60 days of October 8, 2003,2004, but
excludes shares of common stock underlying options held by any other person.
Percentage of beneficial ownership is based on 28,835,35129,129,574 shares of Class A
Common Stock and 36,963,85536,864,465 shares of Class B Common Stock outstanding as of
October 8, 2003.2004.
Shares % of Shares
Beneficially Owned Beneficially Owned
- ----------------------------------------------------------------------------------------------------------------------------- --------------------
Name and Address of Beneficial Owner** A Shares B Shares A Shares B Shares
- ---------------------------------------------------------------------------------------------------------------------------------------- -------- --------- --------- --------
Owner**
- -------
James F. McCann(1)......................... 153,800 36,001,105 0.5%..................... 204,000 35,920,905 0.7% 97.4%
- ----------------------------------------------------------------------------------------------------------
Christopher G. McCann(2)................... 974,395 3,202,763 3.3% 8.6%
- ----------------------------------------------------------------------------------------------------------............... 883,542 3,152,763 2.9% 8.5%
T. Guy Minetti(3).......................... 462,900 20,000...................... 464,480 - 1.6% 0.1%
- ----------------------------------------------------------------------------------------------------------
Peter G. Rice (4).......................... 194,985...................... 225,992 - 0.7%0.8% -
- ----------------------------------------------------------------------------------------------------------
Gerard M. Gallagher(5)..................... 235,890 12,000 0.8%................. 301,430 5,000 1.0% -
- ----------------------------------------------------------------------------------------------------------
Jeffrey C. Walker(6)....................... 3,931,589................... 3,604,711 - 13.6%12.4% -
- ----------------------------------------------------------------------------------------------------------
John J. Conefry, Jr. (7) .................. 10,000.............. 15,000 - 0.1% - -
- ----------------------------------------------------------------------------------------------------------
Kevin J. O'Connor(8)....................... 108,500................... 113,500 - 0.4% -
- ----------------------------------------------------------------------------------------------------------
Lawrence V. Calcano(9)..................... 50,000 - 0.2% -
- ----------------------------------------------------------------------------------------------------------14
Leonard J. Elmore (10) .................... 10,000(9) ................. 15,000 - 0.1% - -
- ----------------------------------------------------------------------------------------------------------
Mary Lou Quinlan (11) ..................... 16,000(10) ................. 21,000 - 0.1% -
Enzo J. Micali (11) 34,260 - ----------------------------------------------------------------------------------------------------------0.1% -
J.P. Morgan Partners (SBIC), LLC (12)...... 3,931,589.. 3,604,711 - 13.6%12.4% -
- ----------------------------------------------------------------------------------------------------------
All directors and executive officers as a 6,581,339 37,212,320 21.0%6,364,175 37,075,120 20.0% 99.7%
group (15 persons)(13)..................
- ----------------------------------------------------------------------------------------------------------
___________- -----------
- - Indicates less than 1%0.1%.
** Unless otherwise specified, the address of the beneficial owner is c/o
1-800-FLOWERS.COM, Inc., 1600 Stewart Avenue, Westbury, NY 11590.
(1) Includes (a) 128,000204,000 shares of Class A Common Stock that may be
acquired within 60 days of October 8, 20032004 through the exercise of
stock options, (b) 5,875,000 shares of Class B Common Stock held by
limited partnerships, of which Mr. McCann is a limited partner and does
not exercise control and of which he disclaims beneficial ownership,
and (c) 58,548 shares of Class B Common Stock held by The McCann Charitable
Foundation, Inc., of which Mr. McCann is a Director and the President.President;
and (d) 2,700,000 shares of Class B Common Stock held by two Grantor
Retained Annuity Trusts of which Mr. McCann is the Trustee.
(2) Includes (a) 974,395883,542 shares of Class A Common Stock that may be
acquired within 60 days of October 8, 20032004 through the exercise of
stock options, (b) 2,000,000 shares of Class B Common Stock held by a
limited partnership, of which Mr. McCann is a general partner and
exercises control, (c) 293,575243,575 shares of Class B Common Stock that may
be acquired within 60 days of October 8, 20032004 through the exercise of
stock options, and (d) 58,548 shares of Class B Common Stock held by
The McCann Charitable Foundation, Inc., of which Mr. McCann is a
Director and Treasurer.
(3) Includes (a) 453,300464,480 shares of Class A Common Stock that may be acquired
within 60 days of October 8, 2003 through the exercise of stock options
and (b) 20,000 shares of Class B Common Stock that may be acquired within
60 days of October 8, 20032004 through the exercise of stock
options.
(4) Includes (a) 7501,005 shares of Class A Common Stock held by Mr. Rice's
wife, of which he disclaims beneficial ownership, (b) 163,350217,652 shares of
Class A Common Stock that may be acquired within 60 days of October 8,
20032004 through the exercise of stock options, and (c) 6,9856,835 shares of
Class A Common Stock, held by Mr. Rice's wife, that may be acquired
within 60 days of October 8, 20032004 through the exercise of stock
options, of which he disclaims beneficial ownership. Mr. Rice's address
is c/o The Plow & Hearth, Inc., State Road 230 West, Madison, VA 22727.
(5) Includes (a) 222,540288,080 shares of Class A Common Stock that may be
acquired within 60 days of October 8, 20032004 through the exercise of
stock options, and (b) 12,0005,000 shares of Class B Common Stock that may be
acquired within 60 days of October 8, 20032004 through the exercise of
stock options.
(6) The general partner of J.P. Morgan Partners (SBIC), LLC is J.P. Morgan
Partners (BHCA), L.P. Mr. Walker disclaims beneficial ownership of all
shares owned by J.P. Morgan Partners (SBIC), LLC. Mr. Walker's address
is c/o J.P. Morgan Partners (SBIC), LLC, 1221 Avenue of the Americas,
39th Floor, New York, New York 10020. Includes 35,00040,000 shares of Class A
Common Stock that may be acquired within 60 days of October 8, 20032004
through the exercise of stock options.
15
(7) Includes 10,00015,000 shares of Class A Common Stock that may be acquired
within 60 days of October 8, 20032004 through the exercise of stock
options. Mr. Conefry's address is c/o Astoria Federal Savings, One
Astoria Federal Plaza, Lake Success, New York 11042
(8) Includes 45,00050,000 shares of Class A Common Stock that may be acquired
within 60 days of October 8, 20032004 through the exercise of stock
options. Mr. O'Connor's address is c/o DoubleClick, Inc., 41 Madison
Ave., 32nd Floor, New York, New York, 10010.
(9) Includes 45,000 shares of Class A Common Stock that may be acquired
within 60 days of October 8, 2003 through the exercise of stock options.
Mr. Calcano's address is c/o Goldman Sachs & Co., 85 Broad Street, New
York, New York 10004.
(10) Includes 10,000 shares of Class A Common Stock that may be acquired
within 60 days of October 8, 2003 through the exercise of stock options.
Mr. Elmore's address is c/o TestU, 254 West 31st Street, New York, New
York 1000.
(11) Includes 15,000 shares of Class A Common Stock that may be acquired
within 60 days of October 8, 20032004 through the exercise of stock
options. Mr. Elmore's address is c/o LeBoeuf, Lamb, Greene & MacRae,
LLP, 125 West 55th Street, New York, New York 10019-5389.
(10) Includes 20,000 shares of Class A Common Stock that may be acquired
within 60 days of October 8, 2004 through the exercise of stock
options. Ms. Quinlan's address is c/o Just Ask A Woman, 670 Broadway
Suite 301,New York, NY 10012
(11) Includes 34,260 shares of Class A Common Stock that may be acquired
within 60 days of October 8, 2004 through the exercise of stock
options.
(12) The address of J.P. Morgan Partners (SBIC), LLC is 1221 Avenue of the
Americas, 39th Floor, New York, New York 10020.
(13) Includes (a) 2,513,4502,711,709 shares of Class A Common Stock that may be
acquired within 60 days of October 8, 20032004 through the exercise of
stock options, and (b) 360,575283,575 shares of Class B Common Stock issuable
upon the exercise of currently exercisable stock options and options
which vest within 60 days.
RELATED PARTY TRANSACTIONS
Certain Business Relationships with Directors and officers
In Fiscal 20032004 the Company and its subsidiaries paid $21,000$379,407 to Abacus, a
wholly owned subsidiary of DoubleClick, Inc. for marketing and advertising
services. Kevin J. O'Connor, one of the Company's Directors, serves as Chairman
of the Board of DoubleClick, Inc.
The Company pays Gallagher, Walker, Bianco and Plastaras, a law firm in which
our Senior Vice President and General Counsel, Gerard M. Gallagher, is a
partner, a fee for Mr. Gallagher's services to the Company. The Company, with
the approval of the Board, also pays Gallagher, Walker fees for services
rendered by other members of the firm on the Company's behalf. The fees paid in
Fiscal 20032004 by the Company to the firm for services provided by Mr. Gallagher
are set forth under the section titled "Summary Compensation Table," and for
legal services provided by other members of the firm in the sum of $354,698,$351,472,
inclusive of disbursements; which fees the Company believes are fair and
reasonable.
The Company maintains life insurance for each of its executive officers, except
Mr. Gallagher, in the amount of $50,000 and also maintains a directors' and
officers' insurance policy.
General
The Company has a policy providing that all material transactions between it and
its officers, Directors and other affiliates must be on fair terms and be
approved by either a majority of the disinterested members of the Board or the
stockholders.
16
PROPOSAL 2
SECTION 16 EXECUTIVE OFFICERS BONUS PLAN
General
The Company's Board of Directors has adopted the Section 16 Executive Officers
Bonus Plan pursuant to which Section 16 executive officers of the Company may be
entitled to receive annual bonus compensation contingent upon the attainment of
certain performance goals.
In order to qualify under the performance-based compensation exception under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
and thereby avoid potential nondeductibility of bonus compensation paid to
certain executive officers, the material terms of the Section 16 Executive
Officers Bonus Plan (including the class of eligible participants, the
performance criteria contemplated by the plan and the maximum amount payable
under the plan) must be approved by the stockholders. Accordingly, the Section
16 Executive Officers Bonus Plan is being submitted for approval by
stockholders.
A copy of the Section 16 Executive Officers Bonus Plan is attached as Annex "D"
hereto. The material features of the Section 16 Executive Officers Bonus Plan
are described below, but this description is only a summary and is qualified in
its entirety by reference to the actual text of the Section 16 Executive
Officers Bonus Plan.
Purpose
The purpose of the Section 16 Executive Officers Bonus Plan is to provide
Section 16 executives of the Company with an opportunity to earn annual bonus
compensation as an incentive and reward for their leadership, ability and
exceptional services.
Administration
The Section 16 Executive Officers Bonus Plan will be administered by a committee
of the Board of Directors of the Company consisting of not less than two persons
who, to the extent required to satisfy the exception for performance based
compensation under Section 162(m) of the Code, will be "outside directors"
within the meaning of such section.
Subject to the express provisions of the Section 16 Executive Officers Bonus
Plan, the committee of outside directors has the authority to (i) establish
performance goals for the granting of annual bonuses for each plan year, (ii)
determine the Section 16 executives to whom annual bonus awards are to be made
for each plan year, (iii) determine whether the performance goals for any plan
year have been achieved, (iv) authorize payment of annual bonuses under the
Section 16 Executive Officers Bonus Plan, (v) adopt, alter and repeal such
administrative rules, guidelines and practices governing the Section 16
Executive Officers Bonus Plan as it deems advisable, and (vi) interpret the
terms and provisions of the Section 16 Executive Officers Bonus Plan.
Determination of Awards
The amount of any annual bonus granted to a Section 16 executive for any plan
year will be an amount not greater than $1.5 million, which amount will be
determined based on the achievement of one or more performance goals established
by the committee of outside directors with respect to such executive.
Performance goals may vary from executive to executive and shall be based upon
such one or more of the following performance criteria as the committee of
outside directors may deem appropriate: appreciation in stock value, total
stockholder return, earnings per share, earnings per share growth, operating
income, net income, pro forma net income, return on equity, return on designated
assets, return on capital, economic value added, earnings, earnings before
interest, taxes, depreciation and amortization, revenues, revenue growth,
expenses, operating profit margin, operating cash flow, gross profit margin or
net profit margin. The performance goals may be determined by reference to the
performance of the Company, or of a subsidiary or affiliate, or of a division or
unit of any of the foregoing. Not later than the day immediately preceding the
first day of the plan year (or a later date as may be permitted pursuant to
Section 162(m) of the Code), the committee of outside directors will establish
(i) the Section 16 executives who will be eligible for an annual bonus for such
plan year, (ii) the performance goals for such plan year, and (iii) the
corresponding annual bonus amounts payable under the Section 16 Executive
Officers Bonus Plan upon achievement of the performance goals.
Payment of Award
An annual bonus (if any) to any Section 16 executive for a plan year will be
paid after the end of the plan year, provided, however, that the committee of
outside directors shall have first certified in writing (i) that a performance
goal with respect to the executive for such fiscal year was satisfied and the
level of the goal attained, and (ii) the amount of each executive's annual
bonus. The Committee, unless it determines otherwise, shall have the discretion
to decrease the amount otherwise payable under an award. If an executive dies
after the end of a plan year but before receiving payment of any annual bonus,
the amount will be paid to a designated beneficiary or, if no beneficiary has
been designated, to the executive's estate. Notwithstanding the foregoing, the
committee of outside directors may determine by separate employment agreement
with any executive or otherwise, that all or a portion of an executive's annual
bonus for a plan year will be payable to such executive upon his death,
disability, or termination of employment, or upon a change of control of the
Company, during the plan year.
Non-Transferability
No annual bonuses or rights under the Section 16 Executive Officers Bonus Plan
may be transferred or assigned other than by will or by the laws of descent and
distribution.
Amendments and Termination
The Board of Directors may terminate the Section 16 Executive Officers Bonus
Plan and may amend it from time to time; provided, however, that no termination
or amendment of the Section 16 Executive Officers Bonus plan will adversely
affect the rights of an executive or a beneficiary to a previously certified
annual bonus. Amendments to the Section 16 Executive Officers Bonus Plan may be
made without stockholder approval except as required to satisfy Section 162(m)
of the Code.
Certain Federal Income Tax Consequences
The following is a summary of certain Federal income tax aspects with respect to
the Section 16 Executive Officers Bonus Plan based upon the laws in effect on
the date hereof.
Upon payment of an annual bonus to an executive for any plan year pursuant to
the Section 16 Executive Officers Bonus Plan, such executive will recognize
ordinary income in the amount of such annual bonus on the date the compensation
is paid.
The Company will generally be entitled to a deduction in the amount taxable as
ordinary income to an executive, subject to the limitation imposed by Section
162(m) of the Code. The Company intends that compensation paid to an executive
pursuant to the Section 16 Executive Officers Bonus Plan will generally qualify
as "performance-based compensation" under Section 162(m) of the Code and,
consequently, should generally not be subject to the $1 million deduction limit
thereunder.
The foregoing is based upon Federal income tax laws and regulations as presently
in effect and does not purport to be a complete description of the Federal
income tax aspects of the Section 16 Executive Officers Bonus Plan. Also, the
state and local tax consequences to an executive and the Company may vary,
depending upon the laws of the various states and localities and the individual
circumstances of the executive.
New Plan Benefits
The amount of benefits payable in the future under the Section 16 Executive
Officers Bonus Plan is not currently determinable and, as of the date hereof,
the Company has paid no bonuses under this plan.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE SECTION 16 EXECUTIVE
OFFICERS BONUS PLAN
Proposal 3
2003 LONG TERM INCENTIVE AND SHARE AWARD PLAN
The Board of Directors has adopted the 2003 Long Term Incentive and Share Award
Plan (the "Plan"), subject to shareholder approval. We now ask the shareholders
to approve the adoption of the Plan. The following summary of the Plan is
qualified in its entirety by reference to the Plan, which is attached as Annex
"E" to this Proxy Statement.
The Plan will give us continuity and flexibility in offering long term incentive
compensation to attract, retain and motivate employees, consultants and
directors. The Plan provides for awards using up to 7,500,000 shares, which is
approximately the amount of shares currently available for issuance under the
Company's 1999 Stock Incentive Plan. Following approval of the Plan, the Company
will not issue further awards under its 1999 Stock Incentive Plan.
General. The Plan is intended to provide incentives to attract, retain and
motivate employees, consultants and directors in order to achieve the Company's
long-term growth and profitability objectives. The Plan will provide for the
grant to eligible employees, consultants and directors of stock options, share
appreciation rights ("SARs"), restricted shares, restricted share units,
performance shares, performance units, dividend equivalents, and other
share-based awards (collectively the "Awards"). An aggregate of 7,500,000 shares
of Common Stock have been reserved for issuance under the Plan. In addition,
during a calendar year (i) the maximum number of shares with respect to which
options and SARs may be granted to an eligible participant under the Plan will
be 1,000,000 shares, and (ii) the maximum number of shares with respect to which
Awards intended to qualify as performance-based compensation other than options
and SARs may be granted to an eligible participant under the Plan will be
500,000 shares. These share amounts are subject to anti-dilution adjustments in
the event of certain changes in the Company's capital structure, as described
below. Shares issued pursuant to the Plan will be either authorized but unissued
shares or treasury shares.
Eligibility and Administration. Officers and other employees of, and consultants
to, the Company and its Subsidiaries and Affiliates and Directors of the Company
will be eligible to be granted Awards under the Plan. The Plan will be
administered by the Compensation Committee or such other Board committee (or the
entire Board) as may be designated by the Board (the "Committee"). Unless
otherwise determined by the Board, the Committee will consist of two or more
members of the Board who are nonemployee directors within the meaning of Rule
16b-3 of the Securities Exchange Act of 1934 (the "Exchange Act") and "outside
directors" within the meaning of Section162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). The Committee will determine which eligible
employees, consultants and directors receive Awards, the types of Awards to be
received and the terms and conditions thereof. The Committee will have authority
to waive conditions relating to an Award or accelerate vesting of Awards.
Approximately 2,500 persons are currently eligible to participate in the Plan.
The Chief Executive Officer shall have the power and authority to make Awards
under the Plan to employees and consultants not subject to Section 16 of the
Exchange Act, subject to limitations imposed by the Committee.
Except for certain antidilution adjustments, unless the approval of shareholders
of the Company is obtained, options and SARs issued under the Plan will not be
amended to lower their exercise price and options and SARs issued under the Plan
will not be exchanged for other Options or SARs with lower exercise prices.
Awards. Incentive stock options ("ISOs") intended to qualify for special tax
treatment in accordance with the Code and nonqualified stock options not
intended to qualify for special tax treatment under the Code may be granted for
such number of shares of Common Stock as the Committee determines. The Committee
will be authorized to set the terms relating to an option, including exercise
price and the time and method of exercise. However, the exercise price of
options will not be less than the fair market value of the shares on the date of
grant, and the term will not be longer than ten years from the date of grant of
the options.
A SAR will entitle the holder thereof to receive with respect to each share
subject thereto, an amount equal to the excess of the fair market value of one
share of Common Stock on the date of exercise (or, if the Committee so
determines, at any time during a specified period before or after the date of
exercise) over the exercise price of the SAR set by the Committee as of the date
of grant. However, the exercise price of the SARs will not be less than the fair
market value of the shares on the date of grant, and the term will not be longer
than ten years from the date of grant of the SARs. Payment with respect to SARs
may be made in cash or shares of Common Stock as determined by the Committee.
Awards of restricted shares will be subject to such restrictions on
transferability and other restrictions, if any, as the Committee may impose.
Such restrictions will lapse under circumstances as the Committee may determine,
including based upon a specified period of continued employment or upon the
achievement of performance criteria referred to below. Except as otherwise
determined by the Committee, eligible employees granted restricted shares will
have all of the rights of a stockholder, including the right to vote restricted
shares and receive dividends thereon, and unvested restricted shares will be
forfeited upon termination of employment during the applicable restriction
period.
A restricted share unit will entitle the holder thereof to receive shares of
Common Stock or cash at the end of a specified deferral period. Restricted share
units will also be subject to such restrictions as the Committee may impose.
Such restrictions will lapse under circumstances as the Committee may determine,
including based upon a specified period of continued employment or upon the
achievement of performance criteria referred to below. Except as otherwise
determined by the Committee, restricted share units subject to restriction will
be forfeited upon termination of employment during any applicable restriction
period.
Performance shares and performance units will provide for future issuance of
shares or payment of cash, respectively, to the recipient upon the attainment of
corporate performance goals established by the Committee over specified
performance periods. Except as otherwise determined by the Committee,
performance shares and performance units will be forfeited upon termination of
employment during any applicable performance period. Prior to payment of
performance shares or performance units, the Committee will certify that the
performance objectives were satisfied. Performance objectives may vary from
person to person and will be based upon one or more of the following performance
criteria as the Committee may deem appropriate: appreciation in value of the
shares; total shareholder return; earnings per share; earnings per share growth;
operating income; net income; pro forma net income; return on equity; return on
designated assets; return on capital; economic value added; earnings; earnings
before interest, depreciation and amortization; revenues; revenue growth;
expenses; operating profit margin; operating cash flow; gross profit margin; net
profit margin; or any of the above criteria as compared to the performance of a
published or special index deemed applicable by the Committee, including, but
not limited to, the Standard & Poor's 500 Stock Index. The Committee may revise
performance objectives if significant events occur during the performance period
which the Committee expects to have a substantial effect on such objectives.
The Committee may also grant dividend equivalent rights and it is authorized,
subject to limitations under applicable law, to grant such other Awards that may
be denominated in, valued in, or otherwise based on, shares of Common Stock, as
deemed by the Committee to be consistent with the purposes of the Plan.
Nontransferability. Unless otherwise set forth by the Committee in an Award
agreement, Awards (except for vested shares) will generally not be transferable
by the participant other than by will or the laws of descent and distribution
and will be exercisable during the lifetime of the participant only by such
participant or his or her guardian or legal representative.
Change of Control. In the event of a change of control (as defined in the Plan),
all Awards granted under the Plan then outstanding but not then exercisable (or
subject to restrictions) shall become immediately exercisable, all restrictions
shall lapse, and any performance criteria shall be deemed satisfied, unless
otherwise provided in the applicable Award agreement.
Capital Structure Changes. If the Committee determines that any dividend in
shares, recapitalization, share split, reorganization, merger, consolidation,
spin-off, repurchase, share exchange, or other similar corporate transaction or
event affects the Common Stock such that an adjustment is appropriate in order
to prevent dilution or enlargement of the rights of eligible participants under
the Plan, then the Committee shall make such equitable changes or adjustments as
it deems appropriate, including adjustments to (i) the number and kind of shares
which may thereafter be issued under the Plan, (ii) the number and kind of
shares, other securities or other consideration issued or issuable in respect of
outstanding Awards, and (iii) the exercise price, grant price or purchase price
relating to any Award.
Amendment and Termination. The Plan may be amended, suspended or terminated by
the Board of Directors at any time, in whole or in part. However, any amendment
for which stockholder approval is required under the rules of any stock exchange
or automated quotation system on which the Common Stock may then be listed or
quoted will not be effective until such stockholder approval has been obtained.
In addition, no amendment, suspension, or termination of the Plan may materially
and adversely affect the rights of a participant under any Award theretofore
granted to him or her without the consent of the affected participant. The
Committee may waive any conditions or rights, amend any terms, or amend, suspend
or terminate, any Award granted, provided that, without participant consent,
such amendment, suspension or termination may not materially and adversely
affect the rights of such participant under any Award previously granted to him
or her.
Effective Date and Term. The Plan is effective as of December 3, 2003, subject
to shareholder approval. Unless earlier terminated, the Plan will expire on
December 2, 2013, and no further awards may be granted thereunder after such
date.
Market Value. The per share closing price of the Common Stock on October 8, 2003
was $9.16.
Federal Income Tax Consequences. The following is a summary of the federal
income tax consequences of the Plan, based upon current provisions of the Code,
the Treasury regulations promulgated thereunder and administrative and judicial
interpretation thereof, and does not address the consequences under any state,
local or foreign tax laws.
Stock Options
In general, the grant of an option will not be a taxable event to the recipient
and it will not result in a deduction to the Company. The tax consequences
associated with the exercise of an option and the subsequent disposition of
shares of Common Stock acquired on the exercise of such option depend on whether
the option is a nonqualified stock option or an ISO.
Upon the exercise of a nonqualified stock option, the participant will recognize
ordinary taxable income equal to the excess of the fair market value of the
shares of Common Stock received upon exercise over the exercise price. The
Company will generally be able to claim a deduction in an equivalent amount. Any
gain or loss upon a subsequent sale or exchange of the shares of Common Stock
will be capital gain or loss, long-term or short-term, depending on the holding
period for the shares of Common Stock.
Generally, a participant will not recognize ordinary taxable income at the time
of exercise of an ISO and no deduction will be available to the Company,
provided the option is exercised while the participant is an employee or within
three months following termination of employment (longer, in the case of
disability or death). If an ISO granted under the Plan is exercised after these
periods, the exercise will be treated for federal income tax purposes as the
exercise of a nonqualified stock option. Also, an ISO granted under the Plan
will be treated as a nonqualified stock option to the extent it (together with
other ISOs granted to the participant by the Company) first becomes exercisable
in any calendar year for shares of Common Stock having a fair market value,
determined as of the date of grant, in excess of $100,000.
If shares of Common Stock acquired upon exercise of an ISO are sold or exchanged
more than one year after the date of exercise and more than two years after the
date of grant of the option, any gain or loss will be long-term capital gain or
loss. If shares of Common Stock acquired upon exercise of an ISO are disposed of
prior to the expiration of these one-year or two-year holding periods (a
"Disqualifying Disposition"), the participant will recognize ordinary income at
the time of disposition, and the Company will generally be entitled to a
deduction, in an amount equal to the excess of the fair market value of the
shares of Common Stock at the date of exercise over the exercise price. Any
additional gain will be treated as capital gain, long-term or short-term,
depending on how long the shares of Common Stock have been held. Where shares of
Common Stock are sold or exchanged in a Disqualifying Disposition (other than
certain related party transactions) for an amount less than their fair market
value at the date of exercise, any ordinary income recognized in connection with
the Disqualifying Disposition will be limited to the amount of gain, if any,
recognized in the sale or exchange, and any loss will be a long-term or
short-term capital loss, depending on how long the shares of Common Stock have
been held.
If an option is exercised through the use of shares of Common Stock previously
owned by the participant, such exercise generally will not be considered a
taxable disposition of the previously owned shares and, thus, no gain or loss
will be recognized with respect to such previously owned shares upon such
exercise. The amount of any built-in gain on the previously owned shares
generally will not be recognized until the new shares acquired on the option
exercise are disposed of in a sale or other taxable transaction.
Although the exercise of an ISO as described above would not produce ordinary
taxable income to the participant, it would result in an increase in the
participant's alternative minimum taxable income and may result in an
alternative minimum tax liability.
Restricted Stock
A participant who receives shares of restricted stock will generally recognize
ordinary income at the time that they "vest", i.e., when they are not subject to
a substantial risk of forfeiture. The amount of ordinary income so recognized
will generally be the fair market value of the Common Stock at the time the
shares vest, less the amount, if any, paid for the stock. This amount is
generally deductible for federal income tax purposes by the Company. Dividends
paid with respect to Common Stock that is nonvested will be ordinary
compensation income to the participant (and generally deductible by the
Company). Any gain or loss upon a subsequent sale or exchange of the shares of
Common Stock, measured by the difference between the sale price and the fair
market value on the date the shares vest, will be capital gain or loss,
long-term or short-term, depending on the holding period for the shares of
Common Stock. The holding period for this purpose will begin on the date
following the date the shares vest.
In lieu of the treatment described above, a participant may elect immediate
recognition of income under Section 83(b) of the Code. In such event, the
participant will recognize as income the fair market value of the restricted
stock at the time of grant (determined without regard to any restrictions other
than restrictions which by their terms will never lapse), and the Company will
generally be entitled to a corresponding deduction. Dividends paid with respect
to shares as to which a proper Section 83(b) election has been made will not be
deductible to the Company. If a Section 83(b) election is made and the
restricted stock is subsequently forfeited, the participant will not be entitled
to any offsetting tax deduction.
SARs and Other Awards
With respect to SARs, restricted share units, performance shares, performance
units, dividend equivalents and other Awards under the Plan not described above,
generally, when a participant receives payment with respect to any such Award
granted to him or her under the Plan, the amount of cash and the fair market
value of any other property received will be ordinary income to such participant
and will be allowed as a deduction for federal income tax purposes to the
Company.
Payment of Withholding Taxes
The Company may withhold, or require a participant to remit to it, an amount
sufficient to satisfy any federal, state or local withholding tax requirements
associated with Awards under the Plan.
Deductibility Limit on Compensation in Excess of $1 Million
Section 162(m) of the Code generally limits the deductible amount of annual
compensation paid (including, unless an exception applies, compensation
otherwise deductible in connection with Awards granted under the Plan) by a
public company to each "covered employee" (i.e., the chief executive officer and
four other most highly compensated executive officers of the Company) to no more
than $1 million. The Company currently intends to structure stock options and
other Awards granted under the Plan to certain of the covered employees to
comply with an exception to nondeductibility under Section 162(m) of the Code.
See "Compensation Committee Report on Executive Compensation" on page 11.
New Plan Benefits. No benefits have been received or allocated to any employee,
consultant or director under the Plan, and therefore a "New Plan Benefits" table
has not been included. Equity Compensation Plan Information
The following table gives information about the Company's common stock that may
be issued upon the exercise of options under all of the Company's equity
compensation plans as of June 29, 2003. The table includes the
1-800-FLOWERS,INC. 1997 Stock Option Plan and the 1-800-FLOWERS.COM, Inc. 1999
Stock Incentive Plan.
Plan Category Number of Weighted-average Number of
securities to exercise securities
be issued upon price of remaining
exercise of outstanding available for
outstanding options future issuance
options under equity
compensation
plans (excluding
securities
reflected in
column (a))
----------------------------------------------------------------------------------------------
(a) (b) (c)
Equity compensation plans 10,001,345 $8.28 7,639,930
approved by security holders
Equity compensation plans not
approved by security holders
- - -
_____________ __________ __________
Total 10,001,345 $8.28 7,639,930
THE BOARD RECOMMENTDS A VOTE "FOR" THE APPROVAL OF THE 2003 LONG TERM INCENTIVE
AND SHARE AWARD PLAN
PROPOSAL 4
INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors appointed
Ernst & Young LLP ("E&Y"), independent public accountants and auditors of the
Company since 1993, as auditors of the Company to serve for the year ending June
27, 2004July
3, 2005 (the "Fiscal 2004"2005"), subject to the ratification of such appointment by
the stockholders at the Annual Meeting.
17
AUDIT FEES
The aggregate fees for professional services rendered for (i) the audit of the
Company's annual financial statements set forth in the Company's Annual Report
on Form 10-K for the fiscal year ended June 29, 200327, 2004 ("Fiscal 2003"2004"), and (ii)
the review of the Company's quarterly financial statements set forth in the
Company's Quarterly Report on Form 10-Q were approximately $171,000.$219,500 and were
$171,000 for Fiscal 2003.
AUDIT RELATED FEES
TheIn Fiscal 2004, the aggregate fees for audit related services amount to $66,000$68,000
and consist of audit and assurance services related to the Company's benefit
plan and separate financial statements for its franchise operations and were
$66,000 for Fiscal 2003.
TAX FEES
TheIn Fiscal 2004, the aggregate fees for tax services amount to $90,000$34,540 and
consist of professional services rendered by Ernst & Young LLP for tax
compliance, tax advice and tax planning.planning were $90,000 for Fiscal 2003.
ALL OTHER FEES
Consists of other fees not reported in the above categories. In Fiscal 2004 the
fees were $22,036 for services rendered in connection with Sarbanes-Oxley Act of
2002 and were $0 for Fiscal 2003.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
E&Y did not render professional services relating to financial information
systems design and implementation for Fiscal 2004 and Fiscal 2003.
The affirmative vote of a plurality of the Company's outstanding Common Stock
present in person or by proxy is required to ratify the appointment of the
auditors. Unless otherwise instructed, the proxy holders will vote the proxies
received by them "FOR" the ratification of E&Y to serve as the Company's
auditors for Fiscal 2004.2005. A representative of E&Y will attend the Annual Meeting
with the opportunity to make a statement if he or she so desires and will also
be available to answer inquiries.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION AND APROVALAPPROVAL OF THE
SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS
FOR FISCAL 2004.2005.
OTHER MATTERS
Management knows of no matters that are to be presented for action at the
meeting other than those set forth above. If any other matters properly come
before the meeting, the persons named in the enclosed form of proxy will vote
the shares represented by proxies in their discretion on such matters.
Proxies will be solicited by mail and may also be solicited in person or by
telephone by some regular employees of the Company. The Company may also
consider the engagement of a proxy solicitation firm. Costs of the solicitation
will be borne by the Company.
STOCKHOLDER PROPOSALS
In accordance with regulations issued by the Securities and Exchange Commission
by certified mail-return receipt requested, stockholder proposals intended for
presentation at the 20042005 Annual Meeting of Stockholders must be delivered to the
Secretary of the Company at the principal executive office of the Company by
18
July 1, 20042005 if such proposals are to be considered for inclusion in the
Company's Proxy Statement for the 20042005 Annual Meeting of Stockholders. If a
stockholder desires to bring business before the 20042005 Annual Meeting which is
not the subject of a proposal timely submitted for inclusion in the Proxy
Statement, written notice of such business must be received by September 14,
2004.2005.
ANNUAL REPORT ON FORM 10-K
The Company will provide without charge to each beneficial holder of its Common
Stock on the Record Date who did not receive a copy of the Company's Annual
Report for the fiscal year ended June 29, 2003,27, 2004, on the written request of such
person, a copy of the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission. Any such request should be made in writing
to the Secretary of the Company at the address set forth on the first page of
this Proxy Statement.
By Order of the Board of Directors
/s/ James F. McCann
James F. McCann
Chairman of the Board
and Chief Executive Officer
Westbury, New York
November 1, 20032004
19
(Form of Proxy)
1-800-FLOWERS.COM, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - December 2, 200310, 2004
(This Proxy is solicited by the Board of Directors of the Company)
The undersigned stockholder of 1-800-FLOWERS.COM, Inc. hereby appoints James F.
McCann, Chairman of the Board and Chief Executive Officer, and Gerard M.
Gallagher, Senior Vice President, General Counsel, or any one of them, with full
power of substitution in each, as proxies to vote the shares of stock, in
accordance with the undersigned's specifications, which the undersigned could
vote if personally present at the Annual Meeting of Stockholders of
1-800-FLOWERS.COM, Inc. to be held at 395 North Service Road, Melville, NY
11747, Lower Level Media Center (the "Meeting Place"), on Tuesday,Friday, December 2,
200310,
2004 at 9:00 a.m. eastern standard time or any adjournment thereof.
1. ELECTION OF DIRECTORS (for terms as described in the Proxy Statement)
FOR all nominees below WITHHOLD AUTHORITY
|_| (except as marked to the contrary) |_| to vote for all nominees below
Jeffrey C. Walker, KevinJohn J. O'ConnorConefry, Jr., Leonard J. Elmore and Lawrence V. CalcanoMary Lou Quinlan
INSTRUCTION: To withhold authority to vote for an individual nominee, write
the nominee's name in the space provided below.
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
2. TO APPROVE THE SECTION 16 EXECUTIVE OFFICERS BONUS PLAN
FOR AGAINST ABSTAIN WITH RESPECT TO
|_| |_| |_|
3. TO APPROVE THE 2003 LONG TERM INCENTIVE AND SHARE AWARD PLAN
FOR AGAINST ABSTAIN WITH RESPECT TO
|_| |_| |_|
4. RATIFICATION OF INDEPENDENT AUDITORS
FOR AGAINST ABSTAIN WITH RESPECT TO
|_| |_| |_|
proposal to ratify the selection of Ernst & Young LLP, independent
public accountants, as auditors of the Company for the fiscal year
ending June 27, 2004July 3, 2005 as described in the Proxy Statement.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE ELECTION
OF THE PERSONS NOMINATED BY THE BOARD OF DIRECTORS AS DIRECTORS, "FOR"
THE APPROVAL OF
THE SECTION 16 EXECUTIVE OFFICERS BONUS PLAN, "FOR" THE APPROVAL OF THE 2003
LONG TERM INCENTIVE AND SHARE AWARD PLAN, "FOR" RATIFICATION OF ERNST & YOUNG, LLP, INDEPENDENT PUBLIC ACCOUNTANTS AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 27, 2004,JULY 3,
2005, AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES AS TO OTHER
MATTERS WHICH PROPERLY COME BEFORE THE ANNUAL MEETING.
All of the proposals set forth are proposals of the Company. None of
the proposals is related to or conditioned upon approval of any other
proposal.
Please date and sign exactly as your name appears on the envelope in which this
material was mailed. If shares are held jointly, each stockholder should sign.
Executors, administrators, trustees, etc. should use full title and, if more
than one, all should sign. If the stockholder is a corporation, please sign full
corporate name by an authorized officer. If the stockholder is a partnership,
please sign full partnership name by an authorized person.
______________________________
______________________________20
---------------------------------------
Signature(s) of Stockholder
Dated:____________________
Annex "A"
1-800-FLOWERS.COM, INC.
AUDIT COMMITTEE CHARTER
Organization
The Audit Committee (the "Committee") of the Board of Directors (the "Board")
shall be comprised of at least three directors. The members of the Committee
shall meet the independence requirements of the Nasdaq National Market, Inc.
Members of the Committee must be able to read and understand fundamental
financial statements, including the Company's balance sheet, income statement
and cash flow statement, and have the ability to understand key business and
financial risks and related controls and control processes. At least one
director must be a committee expert with education and employment experience as
a principal financial officer, principal accounting officer, controller, public
accountant or auditor or experience in one or more positions that involve the
performance of similar functions; experience actively supervising a principal
financial officer, principal accounting officer, controller, public accountant,
auditor or performing similar functions; experience overseeing or assessing the
performance of companies or public accountants with respect to the preparation,
auditing or evaluation of financial statements; or other relevant experience.
Statement of Policy
The Committee shall provide assistance to the directors in fulfilling their
responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting, reporting practices of the Company,
and the quality and integrity of financial reports of the Company. In so doing,
it is the responsibility of the Committee to maintain free and open
communication between the directors, the independent auditors, the internal
auditors, and the financial management of the Company.
Responsibilities
In carrying out its responsibilities, the Committee believe its policies and
procedures should remain flexible in order to best react to changing conditions
and to ensure to the directors and shareholders that the corporate accounting
and reporting practices of the Company are in accordance with all requirements
and are the highest quality.
In carrying out these responsibilities, the Committee will:
o Obtain the full board of directors' approval of this Charter and review and
reassess this Charter as conditions dictate (at least annually).
o Discuss with management and the independent auditor, as appropriate, earnings
press releases and financial information and earnings guidance provided to
analysts and to rating agencies.
o Select the independent auditors to audit the financial statements of the
Company and its divisions and subsidiaries and approve the independent auditor's
compensation.
o Have a clear understanding with the independent auditors that they are
ultimately accountable to the board of directors and the Committee, as the
shareholders' representatives, who have the ultimate authority in deciding to
engage, evaluate, and if appropriate, terminate their services.
o Meet with the independent auditors and financial management of the Company to
review the scope of the proposed audit and timely quarterly reviews for the
current year and the procedures to be utilized, and at the conclusion thereof
review such audit or review, including any comments or recommendations of the
independent auditors.
o Pre-approve all audit services and permitted non-audit services (including the
fees and terms thereof) to be performed for the Company by the independent
auditor. The Committee may delegate authority to pre-approve audit services,
other than the audit of the Company's annual financial statements, and permitted
non-audit services to one or more members, provided that decisions made pursuant
to such delegated authority shall be presented to the full committee at its next
scheduled meeting.
o Discuss with the internal auditors, if applicable, and the independent
auditors the overall scope and plans for the respective audits, including the
adequacy of staffing and compensation. The Committee shall discuss with
management, the internal auditors, if any, and the independent auditors the
adequacy and effectiveness of the accounting and financial controls, including
the Company's policies and procedures to assess, monitor, and manage business
risk, and legal and ethical compliance programs (e.g. Company's Code of Ethics).
o Review reports received from regulators and other legal and regulatory matters
that may have a material effect on the financial statements or related Company
compliance policies.
o Review the internal controls of the Company, the proposed audit plans for the
coming year, and the coordination of such plans with the independent auditors.
o Inquire of management and the independent auditors about significant risks or
exposures and assesses the steps management has taken to minimize such risks to
the Company.
o Review the interim financial statements and the disclosures under Management's
Discussion and Analysis of Financial Condition and Results of Operations with
management and the independent auditors prior to the filing of the Company's
Quarterly Report on Form 10-Q. The Committee shall also discuss the results of
the quarterly review and any other matters required to be communicated to the
Committee by the independent auditors under generally accepted auditing
standards. The Chair of the Committee may represent the entire Committee for
purposes of this review.
o Review the financial statements contained in the annual report to shareholders
with management and the independent auditors to determine that the independent
auditors are satisfied with the disclosure and content of the financial
statements to be presented to the shareholders. Review with financial management
and the independent auditors the results of their timely analysis of significant
financial reporting issues and practices, including changes in, or adoptions of,
accounting principles and disclosure practices, and discuss any other matters
required to be communicated to the committee by the auditors. Also review with
financial management and the independent auditors their judgments about the
quality, not just acceptability, of accounting principles and the clarity of the
financial disclosure practices used or proposed to be used, and particularly,
the reasonableness of significant judgements and estimates , and other
significant decisions made in preparing the financial statements.
o Provide sufficient opportunity for the independent auditors to meet with the
members of the Committee without members of management present. Among the items
to be discussed in these meetings are the independent auditors' evaluation of
the Company's financial, accounting, and auditing personnel, and the cooperation
that the independent auditors received during the course of audit.
o Review accounting and financial human resources within the Company.
o Report the results of the annual audit to the board of directors. If requested
by the board, invite the independent auditors to attend the full board of
directors meeting to assist in reporting the results of the annual audit or to
answer other directors' questions (alternatively, the other directors,
particularly the other independent directors, may be invited to attend the
Committee meeting during which the results of the annual audit are reviewed).
o On an annual basis, obtain from the independent auditors a written
communication delineating all relationships and professional services as
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. In addition, review with the independent
auditors the nature and scope of any disclosed relationships or professional
services and take, or recommend that the board of directors take, appropriate
action to ensure the continuing independence of the auditors.
o Review the report of the Committee in the annual report to shareholders and
disclosing whether or not the committee had reviewed and discussed with
management and the independent auditors the financial statements and the quality
of accounting principles and significant judgments affecting the financial
statements. In addition, disclose the committee's conclusion on the fairness of
presentation of the financial statements in conformity with GAAP based on those
discussions.
o Submit the minutes of all meetings of the Committee to, or discuss the matters
discussed at each committee meeting with, the board of directors.
o Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel or other auditors for this
purpose if, in its judgment, that is appropriate, and receive funding for these
services as necessary.
o Review the Company's disclosure in the proxy statement for its annual meeting
of shareholders that describes that the Committee has satisfied its
responsibilities under this Charter for the prior year. In addition, include a
copy of this Charter in the annual report to shareholders or the proxy statement
at least triennially or the year after any significant amendment to the Charter.
o The Committee shall have authority to retain such outside counsel, experts and
other advisors as the Committee may deem appropriate in its sole discretion. The
Committee shall have sole authority to approve related fees and retention terms.
This Charter replaces, in its entirety, the Audit Committee Charter approved by
the Board of Directors on January 25, 2000.
August 7, 2003
Annex "B"
1-800 FLOWERS.COM, INC.
COMPENSATION COMMITTEE CHARTER
June 26, 2003
Purpose
The Compensation Committee (the "Committee"), in its capacity as a committee of
the Board of Directors (the "Board"), has overall responsibility for approving
and evaluating officer compensation plans, policies and programs and employee
benefit programs of the Company.
The Committee is also responsible for producing an annual report on executive
compensation for inclusion in the Company's proxy statement in accordance with
applicable rules and regulations.
Committee Membership/ Meetings
The members of the Committee shall be appointed annually by the Board on the
recommendation of the Nominating & Corporate Governance Committee. The Committee
shall consist of no fewer than three members. The members of the Committee shall
meet the independence requirements of the Nasdaq National Market, Inc. The
Committee shall meet at such times as it deems necessary or appropriate to carry
out its responsibilities. The members of the Committee may be replaced by the
Board.
Committee Authority and Responsibilities
1. The Committee shall review the overall compensation structuring of the
Company to determine that it establishes appropriate incentives for officers and
employees at all levels. All incentives, while industry-dependent and different
for different categories of officers and employees, should further the Company's
long-term strategic plan and should be consistent with the culture of the
Company and the overall goal of enhancing enduring shareholder value.
2. The Committee shall annually review, approve and recommend to the Board, for
the CEO and the senior executives of the Company (a) the annual base salary
level, (b) the annual incentive opportunity level, (c) the long-term opportunity
level, (d) new and amendments to existing employment agreements, severance
arrangements and change in control agreements/provisions, in each case as, when
and if appropriate, and (e) any special or supplemental benefits.
3. The Committee shall annually review and make recommendations to the Board
with respect to the compensation of all non-executive officers and other key
employees.
4. The Committee shall annually review and make recommendations to the Board
with respect to incentive-compensation plans and equity-based plans and make
grants thereunder pursuant to delegated authority.
5. The Committee shall review and make recommendations to the Board with respect
to all employee benefit and related programs adopted by the Company.
6. The Committee shall annually review and approve corporate goals and
objectives relevant to CEO compensation, evaluate the CEO's performance in light
of those goals and objectives, and set the CEO's compensation levels based on
this evaluation. In determining the long-term incentive component of CEO
compensation, the Committee will consider the Company's performance and relative
shareholder return, the value of similar incentive awards to CEOs at comparable
companies, and the awards given to the CEO in past years.
7. The Committee shall have the authority to engage independent or outside
counsel, accountants or other advisors, in each case of its choice and as it
determines to be necessary or appropriate. In particular, the Committee shall
have the sole authority to retain and terminate any compensation consultant to
be used to assist in the evaluation of the CEO or senior executive compensation
and shall have sole authority to approve the consultant's fees and other
retention terms.
8. The Committee may form and delegate authority to subcommittees when
appropriate.
9. The Committee shall make regular reports to the Board.
10. The Committee shall review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for approval.
11. The Committee shall perform such other duties and carry out such other
responsibilities as may be assigned to the Committee by the Board from time to
time or as designated in plan documents.
Annex "C"
1-800 FLOWERS.COM, INC.
NOMINATING & CORPORATE GOVERNANCE
COMMITTEE CHARTER
June 26, 2003
Purpose
The Nominating & Corporate Governance Committee (the "Committee"), in its
capacity as a committee of the Board of Directors (the "Board"), shall (1)
assist the Board by identifying and evaluating individuals qualified to become
Board members and recommend to the Board the director nominees for election or
reelection as Directors by the Shareholders at the annual meetings of
shareholders and candidates to fill any vacancies on the Board that may occur
from time to time; (2) develop and recommend to the Board the corporate
governance guidelines applicable to the Company; (3) lead the Board in its
annual review of the Board's performance; (4) recommend to the Board director
nominees for each committee or the Board; and (5) fulfill the responsibilities
set forth below and perform such other responsibilities as may be delegated to
the Committee by the Board from time to time.
Committee Membership
The Committee shall consist of no fewer than three members. The members of the
Committee shall meet the independence requirements of the Nasdaq National
Market, Inc.
The members of the Committee will be appointed by, and may be replaced by, the
Board.
Committee Authority and Responsibilities
1. The Committee shall have the sole authority to retain and terminate any
search firm to be used to identify director candidates and shall have sole
authority to approve the search firm's fees and other retention terms. The
Committee shall have the authority to engage independent or outside counsel,
accountants or other advisors, in each case of its choice and as it determines
to be necessary or appropriate.
2. The Committee shall, periodically as the Committee finds reasonably
appropriate, seek individuals qualified to become board members for
recommendation to the Board and shall evaluate prospective nominees for the
Board and the committees of the Board identified by the Committee, other members
of the Board or management and shall review the Board's committee structure and
composition generally.
3. The Committee shall identify and recommend to the Board (1) the director
nominees for the annual meeting of shareholders and to fulfill vacancies on the
Board that may occur from time to time and (2) members of the Board to serve on
the various committees of the Board.
4. The Committee shall be responsible for oversight of the evaluation of the
Board, including its size, composition and compensation. The Committee will
determine whether an individual is "independent" as provided by the Nasdaq
National Market.
5. The Committee shall review and assess the management succession plan for the
Chief Executive Officer position and other members of executive management and
annually review with the Board.
6. The Committee shall review and reassess the adequacy of corporate governance
guidelines and practices of the Company and recommend any proposed changes to
the Board for approval.
7. The Committee shall, on behalf of the Board, review letters from shareholders
concerning the Company's annual general meeting and governance process and make
recommendations to the Board in respect thereof.
8. The Committee may form and delegate authority to subcommittees when
appropriate.
9. The Committee shall make reports to the Board after each meeting of the
Committee.
10 The Committee shall review and reassess the adequacy of this Charter annually
and recommend any proposed changes to the Board for approval.
Annex "D"
1-800-FLOWERS.COM, Inc.
SECTION 16 EXECUTIVE OFFICERS BONUS PLAN
SECTION 1. Purpose.
1-800-FLOWERS.COM, Inc (the "Company") hereby establishes, subject to
shareholder approval, this Section 16 Executive Officers Bonus Plan (the "Plan")
in order to provide the Company's Section 16 executive officers with an
opportunity to earn annual bonus compensation, contingent on the achievement of
certain performance goals, as an incentive and reward for their leadership,
ability and exceptional services.
SECTION 2. Definitions.
2.1. "Award" means the amount of cash bonus compensation to which an Eligible
Employee is entitled for each Plan Year as determined by the Committee pursuant
to Section 4 and 5 of the Plan.
2.2. "Code" means the Internal Revenue Code of 1986, as amended, including
applicable regulations thereunder.
2.3. "Committee" means the Compensation Committee of the Company's Board of
Directors (the "Board") consisting of not less than two persons who, to the
extent required to satisfy the exception for performance-based compensation
under Section 162(m) of the Code are "outside directors" within the meaning of
such section. The members of the Committee shall serve at the pleasure of the
Board.
2.4. "Determination Date" means the day immediately preceding the first
day of a Plan Year or such later date by which the Committee may establish
performance goals for a Plan Year without causing an Award to be treated as
other than performance-based compensation within the meaning of Section 162(m)
of the Code.
2.5. "Eligible Employee" means any Section 16 executive officer of the Company.
2.6. "Plan Year" means the Company's fiscal year or such other period
established by the Committee.
SECTION 3. Administration.
The Plan shall be administered by the Committee. The Committee shall have the
authority to establish performance goals for the awarding of Awards for each
Plan Year, to determine the Eligible Employees to whom Awards are to be made for
each Plan Year; to determine whether performance goals for each Plan Year have
been achieved; to authorize payment of Awards under the Plan; to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
Plan as it shall deem advisable; and to interpret the terms and provisions of
the Plan. All determinations made by the Committee with respect to the Plan and
Awards thereunder shall be final and binding on all persons, including the
Company and all Eligible Employees.
SECTION 4. Determination of Awards.
The amount of an Award for any Plan Year shall be an amount not greater than
$1,500,000, which amount shall be determined based on the achievement of one or
more performance goals established by the Committee with respect to such
Eligible Employee. Performance goals may vary from Eligible Employee to Eligible
Employee and shall be based upon such one or more of the following performance
criteria as the Committee may deem appropriate: appreciation in share value;
total shareholder return; earnings per share; earnings per share growth;
operating income; net income; pro forma net income; return on equity; return on
designated assets; return on capital; economic value added; earnings; earnings
before interest, taxes, depreciation and amortization; revenues; revenue growth;
expenses; operating profit margin; operating cash flow; gross profit margin or
net profit margin. The performance goals may be determined by reference to the
performance of the Company, or of a subsidiary or affiliate, or of a division or
unit of any of the foregoing. No later than the Determination Date, the
Committee shall establish (i) the Eligible Employees who shall be eligible for
an Award for such Plan Year, (ii) the performance goals for such Plan Year and
(iii) the corresponding Award amounts payable under the Plan upon achievement of
such performance goals.
SECTION 5. Payment of Award.
An Award (if any) to any Eligible Employee for a Plan Year shall be paid after
the end of the Plan Year, provided, however, that the Committee shall have first
certified in writing (i) that a performance goal with respect to such Eligible
Employee for such Plan Year was satisfied and the level of such goal attained,
and (ii) the amount of each such Eligible Employee's Award. The Committee,
unless it determines otherwise, shall have the discretion to decrease the amount
otherwise payable under an Award. If an Eligible Employee dies after the end of
a Plan Year but before receiving payment of any Award, the amount of such Award
shall be paid to a designated beneficiary or, if no beneficiary has been
designated, to the Eligible Employee's estate, in the form of a lump sum payment
in cash as soon as practicable after the Award for the Plan Year has been
determined and certified in accordance with this Section 5. Notwithstanding the
foregoing, the Committee may determine, by separate employment agreement with
any Eligible Employee or otherwise, that all or a portion of an Award for a Plan
Year shall be payable to the Eligible Employee upon the Eligible Employee's
death, disability or termination of employment with the Company, or upon a
change of control of the Company, during the Plan Year.
SECTION 6. Non-transferability.
No Award or rights under this Plan may be transferred or assigned other than by
will or by the laws of descent and distribution.
SECTION 7. Amendments and Termination.
The Board may terminate the Plan at any time and may amend it from time to time,
provided, however, that no termination or amendment of the Plan shall adversely
affect the rights of an Eligible Employee or a beneficiary to a previously
certified Award. Amendments to the Plan may be made without shareholder approval
except as required to satisfy Section 162(m) of the Code.
SECTION 8. General Provisions.
8.1. Nothing set forth in this Plan shall prevent the Board from adopting other
or additional compensation arrangements. Neither the adoption of the Plan or any
Award hereunder shall confer upon an Eligible Employee any right to continued
employment.
8.2. No member of the Board of the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination or interpretation taken or made
with respect to the Plan, and all members of the Board or the Committee and all
officers or employees or the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
SECTION 9. Effective Date of Plan.
The Plan shall become effective as of June 30,2003, subject to approval by the
shareholders of the Company.
Annex "E"
1-800-FLOWERS.COM, INC.
2003 LONG TERM INCENTIVE AND SHARE AWARD PLAN
1. Purposes.
The purposes of the 2003 Long Term Incentive and Share Award Plan are to advance
the interests of 1-800-Flowers.com, Inc. and its shareholders by providing a
means to attract, retain, and motivate employees, consultants and directors of
the Company upon whose judgment, initiative and efforts the continued success,
growth and development of the Company is dependent.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means any entity other than the Company and its Subsidiaries
that is designated by the Board or the Committee as a participating employer
under the Plan; provided, however, that the Company directly or indirectly owns
at least 20% of the combined voting power of all classes of stock of such entity
or at least 20% of the ownership interests in such entity.
(b) "Award" means any Option, SAR, Restricted Share, Restricted Share Unit,
Performance Share, Performance Unit, Dividend Equivalent, or Other Share-Based
Award granted to an Eligible Person under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other instrument
or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which have been
designated by an Eligible Person in his or her most recent written beneficiary
designation filed with the Company to receive the benefits specified under this
Plan upon the death of the Eligible Person, or, if there is no designated
Beneficiary or surviving designated Beneficiary, then the person, persons, trust
or trusts entitled by will or the laws of descent and distribution to receive
such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(g) "Committee" means the Compensation Committee of the Board, or such other
Board committee (which may include the entire Board) as may be designated by the
Board to administer the Plan; provided, however, that, unless otherwise
determined by the Board, the Committee shall consist of two or more directors of
the Company, each of whom is a "non-employee director" within the meaning of
Rule 16b-3 under the Exchange Act, to the extent applicable, and each of whom is
an "outside director" within the meaning of Section 162(m) of the Code, to the
extent applicable; provided, further, that the mere fact that the Committee
shall fail to qualify under either of the foregoing requirements shall not
invalidate any Award made by the Committee which Award is otherwise validly made
under the Plan.
(h) "Company" means 1-800-Flowers.com, Inc., a corporation organized under the
laws of Delaware, or any successor corporation.
(i) "Director" means a member of the Board who is not an employee of the
Company, a Subsidiary or an Affiliate.
(j) "Dividend Equivalent" means a right, granted under Section 5(g), to receive
cash, Shares, or other property equal in value to dividends paid with respect to
a specified number of Shares. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award, and may be paid
currently or on a deferred basis.
(k) "Eligible Person" means (i) an employee or consultant of the Company, a
Subsidiary or an Affiliate, including any director who is an employee, or (ii) a
Director. Notwithstanding any provisions of this Plan to the contrary, an Award
may be granted to an employee or consultant in connection with his or her hiring
or retention prior to the date the employee or consultant first performs
services for the Company, a Subsidiary or an Affiliate; provided, however, that
any such Award shall not become vested prior to the date the employee or
consultant first performs such services.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time. References to any provision of the Exchange Act shall be deemed to
include successor provisions thereto and regulations thereunder.
(m) "Fair Market Value" means, with respect to Shares or other property, the
fair market value of such Shares or other property determined by such methods or
procedures as shall be established from time to time by the Committee. If the
Shares are listed on any established stock exchange or a national market system,
unless otherwise determined by the Committee in good faith, the Fair Market
Value of Shares shall mean the closing price per Share on the date in question
(or, if the Shares were not traded on that day, the next preceding day that the
Shares were traded) on the principal exchange or market system on which the
Shares are traded, as such prices are officially quoted on such exchange.
(n) "ISO" means any Option intended to be and designated as an incentive stock
option within the meaning of Section 422 of the Code.
(o) "NQSO" means any Option that is not an ISO.
(p) "Option" means a right, granted under Section 5(b), to purchase Shares.
(q) "Other Share-Based Award" means a right, granted under Section 5(h), that
relates to or is valued by reference to Shares.
(r) "Participant" means an Eligible Person who has been granted an Award under
the Plan.
(s) "Performance Share" means a performance share granted under Section 5(f).
(t) "Performance Unit" means a performance unit granted under Section 5(f).
(u) "Plan" means this 2003 Long Term Incentive and Share Award Plan.
(v) "Restricted Shares" means an Award of Shares under Section 5(d) that may be
subject to certain restrictions and to a risk of forfeiture.
(w) "Restricted Share Unit" means a right, granted under Section 5(e), to
receive Shares or cash at the end of a specified deferral period.
(x) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and applicable
to the Plan and Participants, promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act.
(y) "SAR" or "Share Appreciation Right" means the right, granted under Section
5(c), to be paid an amount measured by the difference between the exercise price
of the right and the Fair Market Value of Shares on the date of exercise of the
right, with payment to be made in cash, Shares, or property as specified in the
Award or determined by the Committee.
(z) "Shares" means common stock, $.01 par value per share, of the Company.
(aa) "Subsidiary" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the corporations
(other than the last corporation in the unbroken chain) owns shares possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in the chain.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the Committee,
and the Committee shall have full and final authority to take the following
actions, in each case subject to and consistent with the provisions of the Plan:
(i) to select Eligible Persons to whom Awards may be granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be granted to each Eligible
Person;
(iv) to determine the type and number of Awards to be granted, the number of
Shares to which an Award may relate, the terms and conditions of any Award
granted under the Plan (including, but not limited to, any exercise price, grant
price, or purchase price, any restriction or condition, any schedule for lapse
of restrictions or conditions relating to transferability or forfeiture,
exercisability, or settlement of an Award, and waiver or accelerations thereof,
and waivers of performance conditions relating to an Award, based in each case
on such considerations as the Committee shall determine), and all other matters
to be determined in connection with an Award;
(v) to determine whether, to what extent, and under what circumstances an Award
may be settled, or the exercise price of an Award may be paid, in cash, Shares,
other Awards, or other property, or an Award may be canceled, forfeited,
exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what circumstances cash,
Shares, other Awards, or other property payable with respect to an Award will be
deferred either automatically, at the election of the Committee, or at the
election of the Eligible Person;
(vii) to prescribe the form of each Award Agreement, which need not be identical
for each Eligible Person;
(viii) to adopt, amend, suspend, waive, and rescind such rules and regulations
and appoint such agents as the Committee may deem necessary or advisable to
administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any inconsistency
in the Plan and to construe and interpret the Plan and any Award, rules and
regulations, Award Agreement, or other instrument hereunder;
(x) to accelerate the exercisability or vesting of all or any portion of any
Award or to extend the period during which an Award is exercisable;
(xi) to determine whether uncertificated Shares may be used in satisfying Awards
and otherwise in connection with the Plan; and
(xii) to make all other decisions and determinations as may be required under
the terms of the Plan or as the Committee may deem necessary or advisable for
the administration of the Plan.
(b) Manner of Exercise of Committee Authority. The Committee shall have sole
discretion in exercising its authority under the Plan. Any action of the
Committee with respect to the Plan shall be final, conclusive, and binding on
all persons, including the Company, Subsidiaries, Affiliates, Eligible Persons,
any person claiming any rights under the Plan from or through any Eligible
Person, and shareholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee. The Committee may delegate
to other members of the Board or officers or managers of the Company or any
Subsidiary or Affiliate the authority, subject to such terms as the Committee
shall determine, to perform administrative functions. Notwithstanding any
provision of the Plan to the contrary, the Chief Executive Officer of the
Company ("CEO") shall have the power and authority, subject to the terms and
conditions of the Plan, to make awards under the Plan to employees or
consultants who are not officers or directors of the Company for purposes of
Section 16(b) of the Exchange Act; provided, however, that the authority of the
CEO to make such awards shall be subject to limitations as may be imposed from
time to time by the Committee; provided further, however, that the resolution so
authorizing the CEO to make the awards shall specify the total number of rights
or options that the CEO may so award.
(c) Limitation of Liability. Each member of the Committee shall be entitled to,
in good faith, rely or act upon any report or other information furnished to him
or her by any officer or other employee of the Company or any Subsidiary or
Affiliate, the Company's independent certified public accountants, or other
professional retained by the Company to assist in the administration of the
Plan. No member of the Committee, and no officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and any officer or employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.
(d) Limitation on Committee's Discretion. Anything in this Plan to the contrary
notwithstanding, in the case of any Award which is intended to qualify as
"performance-based compensation" within the meaning of Section 162(m)(4)(C) of
the Code, if the Award Agreement so provides, the Committee shall have no
discretion to increase the amount of compensation payable under the Award to the
extent such an increase would cause the Award to lose its qualification as such
performance-based compensation.
(e) No Option or SAR Repricing Without Shareholder Approval. Except as provided
in the first sentence of Section 4(c) hereof relating to certain antidilution
adjustments, unless the approval of shareholders of the Company is obtained,
Options and SARs issued under the Plan shall not be amended to lower their
exercise price and Options and SARs issued under the Plan will not be exchanged
for other Options or SARs with lower exercise prices.
4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 4(c) hereof, the total number
of Shares reserved for issuance in connection with Awards under the Plan shall
be 7,500,000. No Award may be granted if the number of Shares to which such
Award relates, when added to the number of Shares previously issued under the
Plan and the number of Shares subject to Options outstanding under the Plan,
exceeds the number of Shares reserved under the applicable provisions of the
preceding sentence. If any Awards are forfeited, canceled, terminated, exchanged
or surrendered or such Award is settled in cash or otherwise terminates without
a distribution of Shares to the Participant, any Shares counted against the
number of Shares reserved and available under the Plan with respect to such
Award shall, to the extent of any such forfeiture, settlement, termination,
cancellation, exchange or surrender, again be available for Awards under the
Plan. Upon the exercise of any Award granted in tandem with any other Awards,
such related Awards shall be canceled to the extent of the number of Shares as
to which the Award is exercised.
(b) Subject to adjustment as provided in Section 4(c) hereof, the maximum number
of Shares (i) with respect to which Options or SARs may be granted during a
calendar year to any Eligible Person under this Plan shall be 1,000,000 Shares,
and (ii) with respect to Performance Shares, Performance Units, Restricted
Shares or Restricted Share Units intended to qualify as performance-based
compensation within the meaning of Section 162(m)(4)(C) of the Code shall be the
equivalent of 500,000 Shares during a calendar year to any Eligible Person under
this Plan.
(c) In the event that the Committee shall determine that any dividend in Shares,
recapitalization, Share split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Shares such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Eligible Persons under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems appropriate and, in such manner as
it may deem equitable, adjust any or all of (i) the number and kind of shares
which may thereafter be issued under the Plan, (ii) the number and kind of
shares, other securities or other consideration issued or issuable in respect of
outstanding Awards, and (iii) the exercise price, grant price, or purchase price
relating to any Award; provided, however, in each case that, with respect to
ISOs, such adjustment shall be made in accordance with Section 424(a) of the
Code, unless the Committee determines otherwise. In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria
and performance objectives, if any, included in, Awards in recognition of
unusual or non-recurring events (including, without limitation, events described
in the preceding sentence) affecting the Company or any Subsidiary or Affiliate
or the financial statements of the Company or any Subsidiary or Affiliate, or in
response to changes in applicable laws, regulations, or accounting principles;
provided, however, that, if an Award Agreement specifically so provides, the
Committee shall not have discretion to increase the amount of compensation
payable under the Award to the extent such an increase would cause the Award to
lose its qualification as performance-based compensation for purposes of Section
162(m)(4)(C) of the Code and the regulations thereunder.
(d) Any Shares distributed pursuant to an Award may consist, in whole or in
part, of authorized and unissued Shares or treasury Shares including Shares
acquired by purchase in the open market or in private transactions.
5. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set forth in this
Section 5. In addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter (subject to Section 8(d)), such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall determine, including terms regarding forfeiture of
Awards or continued exercisability of Awards in the event of termination of
service by the Eligible Person.
(b) Options. The Committee is authorized to grant Options, which may be NQSOs or
ISOs, to Eligible Persons on the following terms and conditions:
(i) Exercise Price. The exercise price per Share purchasable under an Option
shall be determined by the Committee; provided, however, that the exercise price
per Share of an Option shall not be less than the Fair Market Value of a Share
on the date of grant of the Option. The Committee may, without limitation, set
an exercise price that is based upon achievement of performance criteria if
deemed appropriate by the Committee.
(ii) Option Term. The term of each Option shall be determined by the Committee;
provided, however, that such term shall not be longer than ten years from the
date of grant of the Option.
(iii) Time and Method of Exercise. The Committee shall determine at the date of
grant or thereafter the time or times at which an Option may be exercised in
whole or in part (including, without limitation, upon achievement of performance
criteria if deemed appropriate by the Committee), the methods by which such
exercise price may be paid or deemed to be paid (including, without limitation,
broker-assisted exercise arrangements), the form of such payment (including,
without limitation, cash, Shares, notes or other property), and the methods by
which Shares will be delivered or deemed to be delivered to Eligible Persons;
provided, however, that in no event may any portion of the exercise price be
paid with Shares acquired either under an Award granted pursuant to this Plan,
upon exercise of a stock option granted under another Company plan or as a stock
bonus or other stock award granted under another Company plan unless, in any
such case, the Shares were acquired and vested more than six months in advance
of the date of exercise.
(iv) ISOs. The terms of any ISO granted under the Plan shall comply in all
respects with the provisions of Section 422 of the Code, including but not
limited to the requirement that the ISO shall be granted within ten years from
the earlier of the date of adoption or shareholder approval of the Plan. ISOs
may only be granted to employees of the Company or a Subsidiary or to employees
of an entity that is treated as the Company or a Subsidiary under the Code.
(c) SARs. The Committee is authorized to grant SARs (Share Appreciation Rights)
to Eligible Persons on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Eligible Person to whom it is
granted a right to receive with respect to each Share subject thereto, upon
exercise thereof, the excess of (1) the Fair Market Value of one Share on the
date of exercise (or, if the Committee shall so determine in the case of any
such right, the Fair Market Value of one Share at any time during a specified
period before or after the date of exercise) over (2) the exercise price per
Share of the SAR as determined by the Committee as of the date of grant of the
SAR (which shall not be less than the Fair Market Value per Share on the date of
grant of the SAR and, in the case of a SAR granted in tandem with an Option,
shall be equal to the exercise price of the underlying Option).
(ii) Other Terms. The Committee shall determine, at the time of grant or
thereafter, the time or times at which a SAR may be exercised in whole or in
part (which shall not be more than ten years after the date of grant of the
SAR), the method of exercise, method of settlement, form of consideration
payable in settlement, method by which Shares will be delivered or deemed to be
delivered to Eligible Persons, whether or not a SAR shall be in tandem with any
other Award, and any other terms and conditions of any SAR. Unless the Committee
determines otherwise, a SAR (1) granted in tandem with an NQSO may be granted at
the time of grant of the related NQSO or at any time thereafter and (2) granted
in tandem with an ISO may only be granted at the time of grant of the related
ISO.
(d) Restricted Shares. The Committee is authorized to grant Restricted Shares to
Eligible Persons on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Shares shall be subject to such
restrictions on transferability and other restrictions, if any, as the Committee
may impose at the date of grant or thereafter, which restrictions may lapse
separately or in combination at such times, under such circumstances (including,
without limitation, upon achievement of performance criteria if deemed
appropriate by the Committee), in such installments, or otherwise, as the
Committee may determine. Except to the extent restricted under the Award
Agreement relating to the Restricted Shares, an Eligible Person granted
Restricted Shares shall have all of the rights of a shareholder including,
without limitation, the right to vote Restricted Shares and the right to receive
dividends thereon. If the lapse of restrictions is conditioned on the
achievement of performance criteria, the Committee shall select the criterion or
criteria from the list of criteria set forth in Section 5(f)(i). The Committee
must certify in writing prior to the lapse of restrictions conditioned on
achievement of performance criteria that such performance criteria were in fact
satisfied.
(ii) Forfeiture. Except as otherwise determined by the Committee, at the date of
grant or thereafter, upon termination of service during the applicable
restriction period, Restricted Shares and any accrued but unpaid dividends or
Dividend Equivalents that are at that time subject to restrictions shall be
forfeited; provided, however, that the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Restricted Shares will be
waived in whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part the
forfeiture of Restricted Shares.
(iii) Certificates for Shares. Restricted Shares granted under the Plan may be
evidenced in such manner as the Committee shall determine. If certificates
representing Restricted Shares are registered in the name of the Eligible
Person, such certificates shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Shares, and
the Company shall retain physical possession of the certificate.
(iv) Dividends. Dividends paid on Restricted Shares shall be either paid at the
dividend payment date, or deferred for payment to such date as determined by the
Committee, in cash or in unrestricted Shares having a Fair Market Value equal to
the amount of such dividends. Shares distributed in connection with a Share
split or dividend in Shares, and other property distributed as a dividend, shall
be subject to restrictions and a risk of forfeiture to the same extent as the
Restricted Shares with respect to which such Shares or other property has been
distributed.
(e) Restricted Share Units. The Committee is authorized to grant Restricted
Share Units to Eligible Persons, subject to the following terms and conditions:
(i) Award and Restrictions. Delivery of Shares or cash, as the case may be, will
occur upon expiration of the deferral period specified for Restricted Share
Units by the Committee (or, if permitted by the Committee, as elected by the
Eligible Person). In addition, Restricted Share Units shall be subject to such
restrictions as the Committee may impose, if any (including, without limitation,
the achievement of performance criteria if deemed appropriate by the Committee),
at the date of grant or thereafter, which restrictions may lapse at the
expiration of the deferral period or at earlier or later specified times,
separately or in combination, in installments or otherwise, as the Committee may
determine. If the lapse of restrictions is conditioned on the achievement of
performance criteria, the Committee shall select the criterion or criteria from
the list of criteria set forth in Section 5(f)(i). The Committee must certify in
writing prior to the lapse of restrictions conditioned on the achievement of
performance criteria that such performance criteria were in fact satisfied.
(ii) Forfeiture. Except as otherwise determined by the Committee at date of
grant or thereafter, upon termination of service (as determined under criteria
established by the Committee) during the applicable deferral period or portion
thereof to which forfeiture conditions apply (as provided in the Award Agreement
evidencing the Restricted Share Units), or upon failure to satisfy any other
conditions precedent to the delivery of Shares or cash to which such Restricted
Share Units relate, all Restricted Share Units that are at that time subject to
deferral or restriction shall be forfeited; provided, however, that the
Committee may provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or forfeiture conditions
relating to Restricted Share Units will be waived in whole or in part in the
event of termination resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Restricted Share Units.
(f) Performance Shares and Performance Units. The Committee is authorized to
grant Performance Shares or Performance Units or both to Eligible Persons on the
following terms and conditions:
(i) Performance Period. The Committee shall determine a performance period (the
"Performance Period") of one or more years or other periods and shall determine
the performance objectives for grants of Performance Shares and Performance
Units. Performance objectives may vary from Eligible Person to Eligible Person
and shall be based upon one or more of the following performance criteria as the
Committee may deem appropriate: appreciation in value of the Shares; total
shareholder return; earnings per share; earnings per share growth; operating
income; net income; pro forma net income; return on equity; return on designated
assets; return on capital; economic value added; earnings; earnings before
interest, depreciation and amortization; revenues; revenue growth; expenses;
operating profit margin; operating cash flow; gross profit margin; net profit
margin; or any of the above criteria as compared to the performance of a
published or special index deemed applicable by the Committee, including, but
not limited to, the Standard & Poor's 500 Stock Index. The performance
objectives may be determined by reference to the performance of the Company, or
of a Subsidiary or Affiliate, or of a division or unit of any of the foregoing.
Performance Periods may overlap and Eligible Persons may participate
simultaneously with respect to Performance Shares and Performance Units for
which different Performance Periods are prescribed.
(ii) Award Value. At the beginning of a Performance Period, the Committee shall
determine for each Eligible Person or group of Eligible Persons with respect to
that Performance Period the range of number of Shares, if any, in the case of
Performance Shares, and the range of dollar values, if any, in the case of
Performance Units, which may be fixed or may vary in accordance with such
performance or other criteria specified by the Committee, which shall be paid to
an Eligible Person as an Award if the relevant measure of Company performance
for the Performance Period is met. The Committee must certify in writing that
the applicable performance criteria were satisfied prior to payment under any
Performance Shares or Performance Units.
(iii) Significant Events. If during the course of a Performance Period there
shall occur significant events as determined by the Committee which the
Committee expects to have a substantial effect on a performance objective during
such period, the Committee may revise such objective; provided, however, that,
if an Award Agreement so provides, the Committee shall not have any discretion
to increase the amount of compensation payable under the Award to the extent
such an increase would cause the Award to lose its qualification as
performance-based compensation for purposes of Section 162(m)(4)(C) of the Code
and the regulations thereunder.
(iv) Forfeiture. Except as otherwise determined by the Committee, at the date of
grant or thereafter, upon termination of service during the applicable
Performance Period, Performance Shares and Performance Units for which the
Performance Period was prescribed shall be forfeited; provided, however, that
the Committee may provide, by rule or regulation or in any Award Agreement, or
may determine in an individual case, that restrictions or forfeiture conditions
relating to Performance Shares and Performance Units will be waived in whole or
in part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part the forfeiture of
Performance Shares and Performance Units.
(v) Payment. Each Performance Share or Performance Unit may be paid in whole
Shares, or cash, or a combination of Shares and cash either as a lump sum
payment or in installments, all as the Committee shall determine, at the time of
grant of the Performance Share or Performance Unit or otherwise, commencing as
soon as practicable after the end of the relevant Performance Period. The
Committee must certify in writing prior to the payment of any Performance Share
or Performance Unit that the performance objectives and any other material terms
were in fact satisfied.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to Eligible Persons. The Committee may provide, at the date of grant
or thereafter, that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Shares, or
other investment vehicles as the Committee may specify; provided, however, that
Dividend Equivalents (other than freestanding Dividend Equivalents) shall be
subject to all conditions and restrictions of the underlying Awards to which
they relate.
(h) Other Share-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Eligible Persons such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Shares, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without limitation,
unrestricted shares awarded purely as a "bonus" and not subject to any
restrictions or conditions, other rights convertible or exchangeable into
Shares, purchase rights for Shares, Awards with value and payment contingent
upon performance of the Company or any other factors designated by the
Committee, and Awards valued by reference to the performance of specified
Subsidiaries or Affiliates. The Committee shall determine the terms and
conditions of such Awards at date of grant or thereafter. Shares delivered
pursuant to an Award in the nature of a purchase right granted under this
Section 5(h) shall be purchased for such consideration, paid for at such times,
by such methods, and in such forms, including, without limitation, cash, Shares,
notes or other property, as the Committee shall determine. Cash awards, as an
element of or supplement to any other Award under the Plan, shall also be
authorized pursuant to this Section 5(h).
6. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards granted under
the Plan may, in the discretion of the Committee, be granted to Eligible Persons
either alone or in addition to, in tandem with, or in exchange or substitution
for, any other Award granted under the Plan or any award granted under any other
plan or agreement of the Company, any Subsidiary or Affiliate, or any business
entity to be acquired by the Company or a Subsidiary or Affiliate, or any other
right of an Eligible Person to receive payment from the Company or any
Subsidiary or Affiliate. Awards may be granted in addition to or in tandem with
such other Awards or awards, and may be granted either as of the same time as or
a different time from the grant of such other Awards or awards. Subject to the
provisions of Section 3(e) hereof prohibiting Option and SAR repricing without
shareholder approval, the per Share exercise price of any Option, grant price of
any SAR, or purchase price of any other Award conferring a right to purchase
Shares which is granted, in connection with the substitution of awards granted
under any other plan or agreement of the Company or any Subsidiary or Affiliate
or any business entity to be acquired by the Company or any Subsidiary or
Affiliate, shall be determined by the Committee, in its discretion.
(b) Term of Awards. The term of each Award granted to an Eligible Person shall
be for such period as may be determined by the Committee; provided, however,
that in no event shall the term of any Option or SAR exceed a period of ten
years from the date of its grant.
(c) Form of Payment Under Awards. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a Subsidiary
or Affiliate upon the grant, maturation, or exercise of an Award may be made in
such forms as the Committee shall determine at the date of grant or thereafter,
including, without limitation, cash, Shares, notes or other property, and may be
made in a single payment or transfer, in installments, or on a deferred basis.
The Committee may make rules relating to installment or deferred payments with
respect to Awards, including the rate of interest to be credited with respect to
such payments, and the Committee may require deferral of payment under an Award
if, in the sole judgment of the Committee, it may be necessary in order to avoid
nondeductibility of the payment under Section 162(m) of the Code.
(d) Nontransferability. Unless otherwise set forth by the Committee in an Award
Agreement, Awards shall not be transferable by an Eligible Person except by will
or the laws of descent and distribution (except pursuant to a Beneficiary
designation) and shall be exercisable during the lifetime of an Eligible Person
only by such Eligible Person or his guardian or legal representative. An
Eligible Person's rights under the Plan may not be pledged, mortgaged,
hypothecated, or otherwise encumbered, and shall not be subject to claims of the
Eligible Person's creditors.
(e) Noncompetition. The Committee may, by way of the Award Agreements or
otherwise, establish such other terms, conditions, restrictions and/or
limitations, if any, of any Award, provided they are not inconsistent with the
Plan, including, without limitation, the requirement that the Participant not
engage in competition with the Company.
7. Change of Control Provisions.
(a) Acceleration of Exercisability and Lapse of Restrictions. Unless otherwise
provided by the Committee at the time of the Award grant, in the event of a
Change of Control, (i) all outstanding Awards pursuant to which the Participant
may have rights the exercise of which is restricted or limited, shall become
fully exercisable immediately prior to the time of the Change of Control so that
the Shares subject to the Award will be entitled to participate in the Change of
Control transaction, and (ii) unless the right to lapse of restrictions or
limitations is waived or deferred by a Participant prior to such lapse, all
restrictions or limitations (including risks of forfeiture and deferrals) on
outstanding Awards subject to restrictions or limitations under the Plan shall
lapse, and all performance criteria and other conditions to payment of Awards
under which payments of cash, Shares or other property are subject to conditions
shall be deemed to be achieved or fulfilled and shall be waived by the Company
immediately prior to the time of the Change of Control so that the Shares
subject to the Award will be entitled to participate in the Change of Control
transaction.
(b) Definition of Change of Control. For purposes of this Section 7, "Change of
Control" shall mean:
(i) a merger, consolidation or reorganization approved by the Company's
stockholders, unless securities representing more than fifty percent (50%) of
the total combined voting power of the voting securities of the successor
corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Company's outstanding voting securities immediately prior
to such transaction;
(ii) any stockholder-approved transfer or other disposition of all of
substantially all of the Company's assets; or
(iii) the acquisition after the Effective Date, directly or indirectly, by any
person or related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of
the Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities.
8. General Provisions.
(a) Compliance with Legal and Trading Requirements. The Plan, the granting and
exercising of Awards thereunder, and the other obligations of the Company under
the Plan and any Award Agreement, shall be subject to all applicable federal,
state and foreign laws, rules and regulations, and to such approvals by any
regulatory or governmental agency as may be required. The Company, in its
discretion, may postpone the issuance or delivery of Shares under any Award
until completion of such stock exchange or market system listing or registration
or qualification of such Shares or other required action under any state or
federal law, rule or regulation as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Shares in compliance with applicable laws, rules and regulations. No
provisions of the Plan shall be interpreted or construed to obligate the Company
to register any Shares under federal, state or foreign law. The Shares issued
under the Plan may be subject to such other restrictions on transfer as
determined by the Committee.
(b) No Right to Continued Employment or Service. Neither the Plan nor any action
taken thereunder shall be construed as giving any employee, consultant or
director the right to be retained in the employ or service of the Company or any
of its Subsidiaries or Affiliates, nor shall it interfere in any way with the
right of the Company or any of its Subsidiaries or Affiliates to terminate any
employee's, consultant's or director's employment or service at any time.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Shares, or any payroll or other payment to an
Eligible Person, amounts of withholding and other taxes due in connection with
any transaction involving an Award, and to take such other action as the
Committee may deem advisable to enable the Company and Eligible Persons to
satisfy obligations for the payment of withholding taxes and other tax
obligations relating to any Award. This authority shall include authority to
withhold or receive Shares or other property and to make cash payments in
respect thereof in satisfaction of an Eligible Person's tax obligations;
provided, however, that the amount of tax withholding to be satisfied by
withholding Shares shall be limited to the minimum amount of taxes, including
employment taxes, required to be withheld under applicable Federal, state and
local law.
(d) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of shareholders of the Company or
Participants, except that (i) any such amendment or alteration as it applies to
ISOs shall be subject to the approval of the Company's shareholders to the
extent such shareholder approval is required under Section 422 of the Code, and
(ii) any such amendment or alternation shall be subject to the approval of the
Company's shareholders to the extent such shareholder approval is required under
the rules of any stock exchange or automated quotation system on which the
Shares may then be listed or quoted; provided, however, that, without the
consent of an affected Participant, no amendment, alteration, suspension,
discontinuation, or termination of the Plan may materially and adversely affect
the rights of such Participant under any Award theretofore granted to him or
her. The Committee may waive any conditions or rights under, amend any terms of,
or amend, alter, suspend, discontinue or terminate, any Award theretofore
granted, prospectively or retrospectively; provided, however, that, without the
consent of a Participant, no amendment, alteration, suspension, discontinuation
or termination of any Award may materially and adversely affect the rights of
such Participant under any Award theretofore granted to him or her.
(e) No Rights to Awards; No Shareholder Rights. No Eligible Person or employee
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Eligible Persons and employees. No
Award shall confer on any Eligible Person any of the rights of a shareholder of
the Company unless and until Shares are duly issued or transferred to the
Eligible Person in accordance with the terms of the Award.
(f) Unfunded Status of Awards. The Plan is intended to constitute an "unfunded"
plan for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award
shall give any such Participant any rights that are greater than those of a
general creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under the Plan to deliver cash, Shares, other Awards, or
other property pursuant to any Award, which trusts or other arrangements shall
be consistent with the "unfunded" status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant.
(g) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board
nor its submission to the shareholders of the Company for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of options and other awards otherwise than under the
Plan, and such arrangements may be either applicable generally or only in
specific cases.
(h) Not Compensation for Benefit Plans. No Award payable under this Plan shall
be deemed salary or compensation for the purpose of computing benefits under any
benefit plan or other arrangement of the Company for the benefit of its
employees, consultants or directors unless the Company shall determine
otherwise.
(i) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether cash,
other Awards, or other property shall be issued or paid in lieu of such
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction, and effect of the Plan, any rules
and regulations relating to the Plan, and any Award Agreement shall be
determined in accordance with the laws of New York without giving effect to
principles of conflict of laws thereof.
(k) Effective Date; Plan Termination. The Plan shall become effective as of
December 3, 2003 (the "Effective Date"), subject to approval by the shareholders
of the Company. The Plan shall terminate as to future awards on the date which
is ten (10) years after the Effective Date.
(l) Titles and Headings. The titles and headings of the sections in the Plan are
for convenience of reference only. In the event of any conflict, the text of the
Plan, rather than such titles or headings, shall control.