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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. _______)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [ ]240.14a-11(c) or [ ]240.14a-12
GERALD STEVENS, INC.
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(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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February 7, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders of Gerald Stevens, Inc. to be held at 10:00 a.m. on Friday, March
9, 2001, at the Sheraton Fort Lauderdale, Airport Hotel, Salons 1 & 2, Fort
Lauderdale, Florida.
The accompanying Notice of Annual Meeting and Proxy Statement describe
the specific matters to be acted upon. In addition to these matters, we will
report on our progress and provide an opportunity for questions of general
interest to our stockholders.
Whether or not you plan to attend in person, it is important that your
shares be represented at the Annual Meeting. PLEASE SIGN, DATE AND RETURN YOUR
PROXY CARD IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE. The Board of Directors
unanimously recommends that stockholders vote FOR each of the matters on the
proxy card. Thank you.
Sincerely,
Steven R. Berrard
Chairman of the Board
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Gerald Stevens, Inc. will be held
at the Sheraton Fort Lauderdale, Airport Hotel, Salons 1 & 2, Fort Lauderdale,
Florida at 10:00 a.m. on Friday, March 9, 2001. At the Annual Meeting,
stockholders will vote on the following matters:
(1) the election of directors;
(2) the approval and adoption of the Gerald Stevens, Inc. 2001
Stock Incentive Plan;
(3) the approval of the selection of our independent accountants
for the 2001 fiscal year; and
(4) any other business that properly comes before the Annual
Meeting.
EVEN IF YOU PLAN TO ATTEND THE MEETING, WE REQUEST THAT YOU COMPLETE
AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE so that your shares will be represented and voted in accordance with
your instructions. Of course, if you attend the meeting, you may vote your
shares personally, even if you have already returned your signed proxy. You may
revoke your proxy at any time before the meeting either in writing or by
personal notification.
Only stockholders of record at the close of business on January 31,
2001 will be entitled to notice of and to vote at the meeting or any
adjournments or postponements of the meeting.
By order of the Board of Directors,
Jeffrey M. Mattson
Corporate Secretary
February 7, 2001
1800 Eller Drive, Suite 300, Fort Lauderdale, Florida 33316
Phone (954) 627-1000
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PROXY STATEMENT
TABLE OF CONTENTS
Record Date........................................................ 1
Proxy and Voting Procedures........................................ 1
Votes Required..................................................... 1
Solicitation Procedures............................................ 1
Item 1. Election of Directors.............................................. 1
Nominees........................................................ 1
Board Committees and Meetings................................... 3
Compensation.................................................... 4
Report of the Audit Committee................................... 6
Report of the Compensation Committee on Executive Compensation.. 7
Compensation Committee Interlocks and Insider Participation..... 9
Performance Comparison.......................................... 9
Security Ownership of Management and Others..................... 10
Compliance with Section 16(a) of the Exchange Act............... 11
Item 2. 2001 Stock Incentive Plan.......................................... 11
Item 3. Selection of Independent Accountants............................... 13
Other Matters ................................................................ 14
Proposals for 2001 Annual Meeting.................................. 14
Appendix A--Gerald Stevens, Inc. 2001 Stock Incentive Plan...................... A-1
Appendix B--Amended and Restated Audit Committee Charter........................ B-1
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PROXY STATEMENT
The Annual Meeting of Stockholders of Gerald Stevens, Inc. will be held
on March 9, 2001. We are furnishing this Proxy Statement in connection with the
solicitation of proxies to be used at the Annual Meeting and any adjournments.
Our mailing address is 1800 Eller Drive, Suite 300, Fort Lauderdale, Florida
33316. We mailed this Proxy Statement and the enclosed proxy to our stockholders
beginning on February 7, 2001.
RECORD DATE
Only stockholders of record at the close of business on January 31,
2001 are entitled to vote at the Annual Meeting and any adjournments. On the
record date, we had 9,838,404 shares of common stock outstanding. The common
stock is our only outstanding class of voting securities.
PROXY AND VOTING PROCEDURES
The enclosed proxy relates to all of the shares of our common stock
that the stockholder is entitled to vote on the close of business on January 31,
2001. The proxy enables a stockholder to vote on the proposals covered by this
Proxy Statement. The shares represented by each valid proxy received in a timely
manner will be voted in accordance with the choices indicated on the proxy. The
stockholder may revoke the proxy by written notice to Gerald Stevens, Inc. at
any time before the Annual Meeting, or at the Annual Meeting before it is voted.
A valid proxy will be voted FOR each of the proposals unless otherwise indicated
on the proxy.
VOTES REQUIRED
Under Florida law and our bylaws, the election of directors requires
the affirmative vote of a plurality of the votes cast by the shares entitled to
vote at the Annual Meeting, as long as a quorum is present. Under our bylaws,
the approval of the other matters to be voted on at the Annual Meeting requires
the affirmative vote of a majority of the votes cast on each such matter at the
Annual Meeting. Shares abstaining or withheld from voting, as well as "broker
non-votes," are counted as shares represented at the Annual Meeting in order to
determine a quorum. Such shares and non-votes are not voted for the election of
directors or for the other matters presented at the Annual Meeting. As such,
abstentions and votes withheld, as well as "broker non-votes," have no effect on
the vote with respect to the election of directors or other matters presented at
the meeting.
SOLICITATION PROCEDURES
Proxies will be solicited primarily by mail; however, our employees may
also solicit proxies in person or otherwise. We will not pay employees for these
services. We are requesting certain holders of record, including brokers,
custodians and nominees, to distribute proxy materials to beneficial owners and
to obtain the beneficial owners' instructions concerning the voting of proxies.
We will pay all costs of the proxy solicitation and will reimburse brokers and
other persons for the expenses they incur in sending proxy materials to
beneficial owners.
ITEM 1. ELECTION OF DIRECTORS
The nominees for our Board of Directors and their biographies are set
forth below. We anticipate that all nominees will be candidates when the
election is held. If for any reason any nominee is not a candidate at that time,
proxies will be voted for any substitute nominee that our board of directors
designates (except where a proxy withholds authority with respect to the
election of directors).
NOMINEES
STEVEN R. BERRARD has served as a member of our board of directors
since May 1999, and as Chairman of the Board since October 1999. In 1997, Mr.
Berrard co-founded New River Capital Partners, a private equity firm with an
investment strategy focused on branded specialty retail, e-commerce and
education, and he controls New River Capital's managing general partner. Mr.
Berrard served as Co-Chief Executive Officer of AutoNation, Inc. from October
1996 until September 1999. During
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his tenure, AutoNation became the world's largest automotive retailer with over
380 dealerships throughout the United States and also owned and operated the
Alamo Rent-A-Car and National Car Rental System businesses. From September 1994
through March 1996, Mr. Berrard served as President and Chief Executive Officer
of Blockbuster Entertainment Group, a division of Viacom Inc. and the world's
largest video store operator. From January 1993 to September 1994, Mr. Berrard
served as President and Chief Operating Officer of Blockbuster Entertainment
Corporation. Mr. Berrard joined Blockbuster in June 1987 as Senior Vice
President, Treasurer and Chief Financial Officer, and he became a director of
Blockbuster in May 1989. In addition, Mr. Berrard served as President and Chief
Executive Officer and as a director of Spelling Entertainment Group Inc., a
televised and filmed entertainment producer and distributor, from March 1993
through March 1996, and served as a director of Viacom from September 1994 until
March 1996. Mr. Berrard serves as a director of Birmingham Steel Corporation, a
steel producer, and of Boca Resorts, Inc., which owns and operates luxury
resorts, arena and entertainment facilities and a professional sports franchise.
JOHN G. HALL has served as our President and Chief Executive Officer
and as a Director since July 2000. Mr. Hall is also a partner in New River
Capital Partners, which he joined in December 1999. From 1993 to December 1999,
he was a principal of Allen & Company Incorporated where he provided growth
capital and investment banking services to public and private companies,
including Gerald Stevens and Gerald Stevens Retail, Inc. (Gerald Stevens Retail
merged into Gerald Stevens, formerly named Florafax International, Inc., in
April 1999.) Prior to joining Allen & Company, Mr. Hall was a Vice President of
Chemical Bank, where he specialized in restructurings and workouts from 1991
through 1993.
ANDREW W. WILLIAMS has served as President and Chief Operating Officer
of our Order Generation Division since July 2000 and as a member of our board of
directors since December 1988. Mr. Williams served as Chairman of the Board of
Directors from November 1992 until April 1999 and as Chief Executive Officer
from September 1994 until April 1999. Since 1978, Mr. Williams has been a
certified public accountant practicing principally in Vero Beach, Florida. He
has served as President and Director of Confidential Investment Services, Inc.,
a privately owned investment company, since April 1999.
ROBERT L. JOHNSON has served as a member of our board of directors
since October 1999. In 1980, Mr. Johnson founded BET Holdings, Inc., a
diversified media holding company that owns Black Entertainment Television. He
has served as BET's Chairman and Chief Executive Officer since March 1996, and
prior to that, also as its President. Mr. Johnson is also Chairman and President
of District Cablevision, Inc., a cable operator in the District of Columbia. He
is a director of U.S. Airways Group, Inc., Hilton Hotels Corp. and General
Mills, Inc.
RUTH M. OWADES has served as a member of our board of directors since
August 1999 following our acquisition of Calyx & Corolla, Inc. Ms. Owades
founded Calyx & Corolla in 1988 and has served as its Chief Executive Officer
since that time. Ms. Owades has served as a director of Providian Financial
Corp. from May 1998 until present and of J. Jill Group, Inc. from June 1997
until present.
KENNETH G. PUTTICK has served as a member of our board of directors
since January 1995. Mr. Puttick is President and owner of Tiffany Scott Cadillac
in Vero Beach, Florida. Mr. Puttick has been in the retail automobile business
since 1968. Mr. Puttick also has owned and operated several retail and real
estate businesses.
KENNETH R. ROYER has served as a member of our board of directors since
May 1999. Prior to joining Gerald Stevens Retail in October 1998, Mr. Royer was
a consultant in the floral industry. For over 40 years, Mr. Royer was Chairman
of the Board of Directors of Royer's Flowers, a privately owned floral retailer.
Royer's Flowers was founded in 1945, and by 1998, it had become one of the five
largest florists in the United States with 35 locations in central Pennsylvania.
Mr. Royer has served as Chairman of the Retail Council of the Society of
American Florists, and also has served as director of the Society of American
Florists. Mr. Royer also has served as Chairman of the American Florists
Marketing Council and as Treasurer of the American Florists Endowment. A regular
speaker at national florist conventions, Mr. Royer writes a regular column for
The Florist Review entitled "Royer on Retailing," and in 1998 he authored a book
on the floral industry entitled Retailing Flowers Profitably.
Kenneth Royer is the father of Gregory J. Royer, one of our executive
officers.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES FOR DIRECTOR.
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BOARD COMMITTEES AND MEETINGS
The Board of Directors has established an Audit Committee, Compensation
Committee and Executive Committee. The Board of Directors has not established a
Nominating Committee.
The functions of the Audit Committee include the following:
- Provide an avenue of communication between the auditors and
the Board of Directors.
- Review the qualifications and independence of the independent
auditors.
- Recommend the appointment of the independent auditors.
- Review significant risks and exposure facing the company and
the steps taken to minimize these risks.
- Review the scope of the annual audit and the annual audit
process.
- Consider and review significant findings and recommendations
of the auditors, together with management's responses.
- Review the annual audited and unaudited quarterly financial
statements.
- Report the activities of the audit committee to the Board of
Directors.
During our 2000 fiscal year ended August 31, 2000, the Audit Committee
members have been Mr. Williams, who serves as Chairman, and Messrs. Puttick and
Johnson. The Audit Committee met twice during the 2000 fiscal year. We have
included the 2000 Report of the Audit Committee on page 6 of this Proxy
Statement.
The functions of the Compensation Committee are to review the
compensation of officers and other management personnel and to make
recommendations concerning such compensation. The Compensation Committee also
administers our stock incentive plans, determining the recipients and terms of
stock incentives, and administers some of our employee benefit plans. Prior to
October 18, 1999, the Compensation Committee members were Messrs. Puttick and
Royer. From October 18, 1999 through February 29, 2000, the Compensation
Committee members were Messrs. Johnson, Royer and Thomas C. Byrne. Since
February 29, 2000, the Compensation Committee members were Mr. Johnson, who
serves as Chairman, and Messrs. Royer and Williams. Mr. Williams resigned from
the Compensation Committee on July 17, 2000, when he was hired as President and
Chief Operating Officer of our Order Generation Division. The Compensation
Committee met once during the 2000 fiscal year.
The Board of Directors formed the Executive Committee on October 18,
1999. The functions of the Executive Committee are to exercise all powers and
authority of the entire Board of Directors to the extent not restricted by
Florida law or by our charter or bylaws, except that the Executive Committee may
not (1) declare a dividend, (2) authorize the issuance of stock with a market
value greater than $10 million in any single transaction or series of related
transactions, or (3) appoint executive officers with a position of Senior Vice
President or more senior authority. The members of the Executive Committee were
Mr. Berrard, Gerald R. Geddis and Adam D. Phillips through July 17, 2000, and
Messrs. Berrard, Hall and Phillips from July 17, 2000 through the end of the
2000 fiscal year.
The Board of Directors held nine meetings in our 2000 fiscal year. Each
current director attended 75% or more of the 2000 fiscal year meetings of the
Board and the Board committees on which he or she served.
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COMPENSATION
Summary Compensation Table. The following Summary Compensation Table
contains information concerning the compensation of (a) Gerald R. Geddis, who
served as Chief Executive Officer through July 17, 2000; (b) John G. Hall, who
has served as Chief Executive Officer since July 17, 2000; and (c) our other
three executive officers who were serving as such at the end of our 2000 fiscal
year. Information that is not applicable or not required under the rules of the
Securities and Exchange Commission has been omitted from the Summary
Compensation Table.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
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NO. OF
SHARES
OTHER UNDERLYING ALL
NAME AND PRINCIPAL FISCAL ANNUAL OPTIONS OTHER
POSITION YEAR SALARY BONUS COMPENSATION GRANTED COMPENSATION
-------- ---- ------ ----- ------------ ------- ------------
Gerald R. Geddis (a) 2000 $150,000 $ 0 $ 0 20,000 $ 0
President of Retail 1999 50,000 0 0 0 0
Division and Former 1998 -- -- -- -- --
Chief Executive
Officer
John G. Hall (b) 2000 17,789 0 0 70,000 0
Chief Executive 1999 -- -- -- -- --
Officer, President 1998 -- -- -- -- --
and Director
Adam D. Phillips(c) 2000 132,692 0 0 8,000 1,471(f)
Senior Vice 1999 33,333 0 0 0 0
President, 1998 -- -- -- -- --
Chief Administrative
Officer, Secretary
and Director
Gregory J. Royer (c) 2000 154,615 10,000 0 17,000 64,401(g)
Senior Vice 1999 46,154 0 0 0 0
President and Chief 1998 -- -- -- -- --
Operating Officer of
Retail Division
Andrew W. Williams (d) 2000 16,154 0 0 50,000 50,000(h)
President and Chief 1999 81,729 53,818 3,200(e) 0 2,042(f)
Operating Officer of 1998 127,042 20,000 4,800(e) 0 2,856(f)
Order Generation
Division and Director
(a) Mr. Geddis became President and Chief Executive Officer on May 1, 1999
upon completion of the merger with Gerald Stevens Retail, and served in
those offices through July 17, 2000, at which time he became President
of the Retail Division. No information is provided for periods before
May 1, 1999, because Mr. Geddis was not employed by Gerald Stevens
before that date.
(b) Mr. Hall became President and Chief Executive Officer on July 17, 2000.
No information is provided for periods before July 17, 2000, because
Mr. Hall was not employed by Gerald Stevens before that date.
(c) Messrs. Phillips and Royer became senior vice presidents on May 1, 1999
upon completion of our merger with Gerald Stevens Retail. No
information is provided for periods before May 1, 1999, because Messrs.
Phillips and Royer were not employed by Gerald Stevens before that
date. Mr. Phillips resigned as an officer of Gerald Stevens in
September 2000.
(d) Mr. Williams served as President and Chief Executive Officer through
April 30, 1999. He was not an employee of Gerald Stevens from May 1,
1999 through July 17, 2000. On July 17, 2000, Mr. Williams became
President and Chief Operating Officer of the Order Generation Division.
(e) Represents payments made for a company-provided vehicle.
(f) Represents company-matching contributions under a 401(k) plan.
(g) Represents reimbursement of $63,745 in relocation expenses and $656 in
company-matching contributions under a 401(k) plan.
(h) Represents consulting fees paid for services from April 1, 2000 through
July 17, 2000.
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Stock Options. The following table contains information concerning
stock options granted in our 2000 fiscal year, including the potential
realizable value of each grant assuming that the market value of the common
stock were to appreciate from the date of grant to the expiration of the option
at annualized rates of (a) 5% and (b) 10%, in each case compounded annually over
the term of the option. The assumed rates of appreciation shown in the table
have been specified by the Securities and Exchange Commission for illustrative
purposes only and are not intended to predict future stock prices, which will
depend upon various factors, including market conditions and future performance
and prospects.
Options become exercisable at the time or times determined by the
Compensation Committee of our Board of Directors. The options shown below become
exercisable in four equal annual installments beginning one year after the date
of grant, except for the options that expire on May 25, 2010, which become
exercisable in four equal annual installments beginning on the date of grant.
All of the options shown below have purchase prices equal to the fair market
value of our common stock on the date of grant.
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FY 2000 GRANTS FOR OPTION TERM
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NO. OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO PURCHASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(A) FY 2000 ($/SHARE)(A) DATE 5% 10%
---- ---------- ------- ------------ ---- -------- ----------
Gerald R. Geddis 20,000 4.0% $ 7.50 8/2/10 $244,334 $ 389,061
John G. Hall 70,000 14.1% 6.25 7/6/10 712,641 1,134,762
Adam D. Phillips 8,000 1.6% 10.00 5/25/10 130,312 207,499
Gregory J. Royer 12,000 2.4% 10.00 5/25/10 195,467 311,249
5,000 1.0% 7.50 8/2/10 61,084 97,265
Andrew W. Williams 50,000 10.0% 6.25 7/6/10 509,030 810,545
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(a) As adjusted to give effect to the one-for-five reverse split of our
common stock on November 14, 2000.
The following table contains information concerning stock options
exercised in our 2000 fiscal year, including the "value realized" upon exercise
(the difference between the total purchase price of the options exercised and
the market value, on the date of exercise, of the shares acquired), and the
value of unexercised "in-the-money" options held on August 31, 2000 (the
difference between the aggregate purchase price of all such options held and the
market value of the shares covered by such options on August 31, 2000).
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OPTION EXERCISES IN FY 2000 AND OPTION VALUES AT 8/31/00 (A)
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NO. OF SHARES UNDERLYING VALUE OF UNEXERCISED
NO. OF SHARES UNEXERCISED OPTIONS ON IN-THE-MONEY OPTIONS ON
ACQUIRED ON VALUE 8/31/00 8/31/00
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------- -------- ------------------------- -------------------------
Gerald R. Geddis 0 $ 0 6,350 / 16,350 $0 / $0
John G. Hall 0 $ 0 0 / 70,000 $0 / $0
Adam D. Phillips 0 $ 0 8,075 / 24,225 $0 / $0
Gregory J. Royer 0 $ 0 6,682 / 19,032 $0 / $0
Andrew W. Williams 5,000 $136,625 0 / 50,000 $0 / $0
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(a) As adjusted to give effect to the one-for-five reverse split of our
common stock on November 14, 2000.
We have no long-term incentive plan, pension plan or other similar plan
as defined by the rules and regulations of the SEC except for our option plans.
Employment Agreements. We have employment agreements with Gregory
Royer, Ms. Owades and Wayne Moor, who was hired as our Senior Vice President and
Chief Financial Officer in October 2000. Mr. Moor's employment agreement
provides for an annual base salary of $225,000. In addition, Mr. Moor will be
eligible for an annual bonus of up to 20% of base salary, based on the
achievement of certain corporate goals and objectives. If Mr. Moor is terminated
"without cause" or if he elects to terminate employment for "good reason," in
each case as defined in the employment agreement, then he would be entitled to
continue to receive the base salary and bonus through the end of the employment
term, and all unvested stock options would automatically vest on the date of
termination and would be exercisable in full. He is also subject to
confidentiality obligations as well as to non-compete and non-solicitation
covenants during the term of employment and for two years thereafter. Mr. Moor's
employment agreement expires on October 23, 2002.
The employment agreements with Ms. Owades and Mr. Royer are on
substantially the same terms as Mr. Moor's employment agreement, except that (a)
the annual base salaries are $185,000 for Ms. Owades and $160,000 for Mr. Royer;
(b) the expiration dates are July 30, 2001 for Ms. Owades' agreement and March
31, 2002 for Mr. Royer's agreement; and (c) upon termination "without cause" or
for "good reason," the payments to Mr. Royer would consist of his base salary
(but not his bonus) through the shorter of the end of the employment term or one
year.
We have Confidentiality and Noncompete Agreements with Mr. Hall, Mr.
Williams and Thomas W. Hawkins, who was hired as our Senior Vice President and
Chief Administrative Officer in September 2000. These agreements provide for
confidentiality obligations and non-compete and non-solicitation covenants that
are similar to those contained in the employment agreements described above.
Directors' Compensation. Under the compensation program for nonemployee
directors, each nonemployee director receives (a) an annual retainer of $20,000;
(b) an additional $1,000 for each board meeting in excess of four meetings per
year; (c) $750 for each committee meeting attended (except that committee chairs
receive $1,000 per committee meeting); and (d) an annual grant of options to
purchase up to 2,500 shares of common stock at the fair market value of the
stock on the date of grant. The annual retainer and meeting fees may be paid in
cash or our common stock. Nonemployee directors are reimbursed for expenses they
incur in attending board of directors and committee meetings.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee operates under a written charter that is attached
to this Proxy Statement as Appendix B. The current members of the Audit
Committee are Messrs. Johnson and Williams and Mr. Kenneth Royer. Mr. Williams
is the Committee's Chair. Although our common stock does not currently trade on
the Nasdaq Stock Market, we have evaluated the independence of our Audit
Committee members using the NASD standards. Under these standards, Mr. Johnson
qualifies as
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independent. Mr. Williams is not considered independent because he is currently
one of our executive officers. Mr. Royer is not considered independent because
his son, Gregory Royer, is one of our executive officers and we lease five
properties for aggregate annual rental of approximately $260,000 from Mr.
Kenneth Royer and his wife. NASD standards permit one non-independent director
on the Audit Committee if the company's board of directors determines that
membership on the committee is required in the best interests of the company and
its stockholders. In the case of Mr. Williams, our Board of Directors believes
that his background in financial, business and accounting matters allows him to
provide valuable advice and counsel to the Audit Committee, and his membership
on the Audit Committee is in the best interests of Gerald Stevens and its
stockholders. In addition, our Board of Directors believes that it is in the
best interests of Gerald Stevens and its stockholders for Mr. Kenneth Royer to
be a member of the Audit Committee because of his extensive knowledge of retail
floral operations and their particular demands in the areas of accounting and
internal controls. Following the Annual Meeting, our newly elected Board of
Directors will meet to appoint members on its committees, at which time we
intend to comply with the NASD standard for no more than one non-independent
director on the Audit Committee.
The Audit Committee has reviewed and discussed with management the
audited financial statements as of and for the fiscal year ended August 31,
2000. The Audit Committee has discussed with Arthur Andersen LLP, our
independent auditors for the fiscal year ended August 31, 2000, the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as modified or supplemented, by the
Auditing Standards Board of the American Institute of Certified Public
Accountants. The Audit Committee has received and reviewed the written
disclosures and the letter from Arthur Andersen required by Independence
Standard No. 1, Independence Discussions with Audit Committees, as amended, by
the Independence Standards Board, and have discussed with Arthur Andersen the
independence of such auditors. The Audit Committee considered whether the
auditor's provision for non-audit services was compatible with independence.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the financial statements
referred to above be included in our Annual Report on Form 10-K for the year
ended August 31, 2000.
AUDIT COMMITTEE
Andrew W. Williams (Chair)
Robert L. Johnson
Kenneth R. Royer
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee approves compensation actions with respect
to our executive officers (including the Chief Executive Officer), other
officers who report to the Chief Executive Officer, and other key employees. The
Compensation Committee is intended to be composed of directors who are not
employees of Gerald Stevens and who have no consulting arrangements or
significant contractual or other relationships with Gerald Stevens. However, Mr.
Williams was appointed to the Compensation Committee during our 2000 fiscal
year, and we subsequently retained Mr. Williams as a consultant and later hired
Mr. Williams as President and Chief Operating Officer of our Order Generation
Division. Mr. Williams resigned from the Compensation Committee upon his hiring,
and he will not be a member of our Compensation Committee in the 2001 fiscal
year.
This Report describes our performance-based compensation philosophy and
executive compensation program, as approved by the Compensation Committee. In
particular, it discusses the compensation decisions and recommendations made by
the Compensation Committee in the 2000 fiscal year regarding Mr. Geddis, our
Chief Executive Officer through July 17, 2000, Mr. Hall, our President and Chief
Executive Officer since July 17, 2000, and the other executive officers named in
the Summary Compensation Table.
Executive Compensation Philosophy and Program Components. Our executive
compensation program is structured for us to compete effectively with other
firms in attracting, motivating and retaining executives of the caliber needed
to advance the short-term and long-term interests of the company. The components
of this program consist of base salary and annual bonus
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(both paid in cash) and stock options. These compensation components are
intended to (1) stimulate performance that benefits our stockholders by
increasing stockholder value, (2) reward such performance with competitive
levels of compensation, and (3) employ and retain key executives.
The following sections of this Report describe the compensation program
for executive officers in effect in our 2000 fiscal year and the matters
considered by the Compensation Committee and the Board in reaching their
compensation determinations.
Base Salary. Salaries of executive officers are generally eligible for
review once each year. The salaries are based on the executive officer's
responsibilities and salaries of executive officers at comparable companies. The
Compensation Committee believes that executive officers' base salaries in the
2000 fiscal year have been established consistent with these standards, except
that the Committee believes that the salaries of Messrs. Hall and Williams are
less than competitive rates for executive officers with comparable positions in
similarly sized public retail companies. Messrs. Hall and Williams accepted
these lower salaries upon their hiring, because they received stock option
grants that were significantly larger than the grants to other executive
officers in the 2000 fiscal year.
Annual Bonuses. We have established an annual bonus program under which
each of the executive officers may receive a cash bonus of up to 20% of such
individual's base salary, based on Gerald Stevens' financial performance, the
performance of the department or division for which the executive officer is
responsible, and the executive officer's individual performance. Bonuses in
excess of 20% of salary may be paid to reward exceptional performance. In the
2000 fiscal year, we paid bonuses at levels significantly less than the 20%
target, primarily as a result of Gerald Stevens' financial performance in the
1999 and 2000 fiscal years. Several executive officers received no bonus. We are
currently revising this program to tie the bonuses to specific financial targets
for the company and, if applicable, the division for which the executive officer
is responsible.
Stock Options. We periodically grant stock options to our executive
officers to align their long-term financial interests with the interests of our
stockholders and to focus their efforts on the long-term financial performance
of our business. The number of options granted to an individual generally is
based on the individual's position and ability to affect our performance. The
options generally vest in equal annual installments over a four-year period,
consistent with the objective of using options to provide long-term financial
benefits.
Compensation of the Chief Executive Officers. Mr. Geddis served as our
Chief Executive Officer through July 17, 2000. In the 2000 fiscal year, we
compensated Mr. Geddis in accordance with his employment agreement that was
originally entered into with Gerald Stevens Retail. Under this agreement, Mr.
Geddis was paid an annual base salary of $150,000. Gerald Stevens Retail paid
its executive officers annual base salaries of no greater than $150,000, which
it determined to be an appropriate salary for a chief executive officer of a
"start-up" floral and gift company. Like our other executive officers, Mr.
Geddis may receive a cash bonus of up to 20% of his base salary, based on Gerald
Stevens' financial performance and his personal performance. A bonus in excess
of 20% of salary may be paid to reward exceptional performance. Mr. Geddis
received no bonus in the 2000 fiscal year, primarily as a result of our
financial performance, and received options to purchase 20,000 shares (after
giving effect to a one-for-five reverse split of our common stock on November
14, 2000) of common stock to stimulate performance that benefits our
stockholders.
We hired Mr. Hall in the 2000 fiscal year at an annual salary of
$125,000 plus options to purchase 70,000 shares (after giving effect to a
one-for-five reverse split of our common stock on November 14, 2000) of common
stock. We believe that these options provide Mr. Hall with a significant
incentive to stimulate performance that benefits our stockholders. However, we
believe that Mr. Hall's base salary is less than competitive rates for chief
executive officers of similarly sized public retail companies. Mr. Hall is also
eligible to participate in our bonus program.
Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code prohibits us from deducting annual compensation in excess of $1
million paid to the executive officers named in the Summary Compensation Table
of the Proxy Statement, unless such compensation is performance-based and
satisfies certain other conditions. It is the Committee's view that:
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1. Base salaries and annual bonuses awarded under our annual bonus
program do not qualify as performance-based compensation and are therefore not
expected to be deductible.
2. Amounts that are reportable as ordinary income by an executive under
our stock option plans do qualify as performance-based compensation and are
therefore expected to be fully deductible.
COMPENSATION COMMITTEE
Robert L. Johnson (Chair)
Kenneth G. Puttick
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Johnson, Puttick and Williams served as members of the
Compensation Committee in our 2000 fiscal year. Mr. Williams has served as
President and Chief Operating Officer of our Order Generation Division since
July 2000, at which time he resigned from the Compensation Committee. Mr.
Williams served as our Chief Executive Officer from September 1994 until April
1999.
PERFORMANCE COMPARISON
The following graph and table compare the cumulative total stockholder
return on our common stock from August 31, 1995 through August 31, 2000 with the
Standard & Poor's SmallCap 600 Stock Index and the Specialty Retail SmallCap
Index (neither of which include Gerald Stevens, Inc.), using data supplied by
the Compustat Services unit of Standard & Poor's Corporation. Until April 30,
1999, our company was known as Florafax International, Inc. and our common stock
traded on the Nasdaq Small Cap Market under the symbol "FIIF." The comparisons
reflected in the graph and table are not intended to forecast the future
performance of our common stock and may not be indicative of such future
performance. The graph and table assume an investment of $100 in our common
stock and each index on August 31, 1995, as well as the reinvestment of
dividends.
(graph ommitted)
SPECIALTY RETAIL SMALLCAP
AUGUST 31, GERALD STEVENS, INC. S&P SMALLCAP 600 INDEX INDEX
- ---------- -------------------- ---------------------- -------------------------
1995 100.00 100.00 100.00
1996 344.24 113.29 94.19
1997 582.54 151.93 109.55
1998 783.90 124.13 103.41
1999 1,991.53 154.18 115.62
2000 153.59 197.64 109.51
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SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth the shares of our common stock
beneficially owned, directly or indirectly, on December 1, 2000, by (1) each
person that we know to beneficially own more than 5% of our outstanding common
stock, (2) each current director and nominee, (3) each of the executive officers
named in the Summary Compensation Table and (4) all directors, nominees and
executive officers as a group. The table also includes shares that the
individuals have the right to acquire within 60 days of December 1, 2000
pursuant to outstanding options. Unless otherwise indicated, the address of each
party is 1800 Eller Drive, Suite 300, Fort Lauderdale, Florida 33316, our
principal business address.
Shares of Common Stock
Beneficial Owner Beneficially Owned Percent
- --------------------------------------------------------- ---------------------- -------
New River Capital Partners, L.P. . . . . . . . . . . . . 1,478,303 15.0%
100 S.E. Third Avenue
Ft. Lauderdale, Florida 33394
Gerald R. Geddis (1). . . . . . . . . . . . . . . . . . . 596,751 6.0%
John G. Hall (2). . . . . . . . . . . . . . . . . . . . . 51,828 *
Adam D. Phillips (3). . . . . . . . . . . . . . . . . . . 105,600 1.1%
Gregory J. Royer (4). . . . . . . . . . . . . . . . . . . 133,074 1.4%
Andrew W. Williams (5). . . . . . . . . . . . . . . . . . 90,533 *
Steven R. Berrard (6) . . . . . . . . . . . . . . . . . . 1,505,104 15.3%
Robert L. Johnson (7) . . . . . . . . . . . . . . . . . . 125 *
Ruth M. Owades (8). . . . . . . . . . . . . . . . . . . . 73,295 *
231,000 2.3%
Kenneth G. Puttick (9). . . . . . . . . . . . . . . . . . 11,191 *
Kenneth R. Royer (10) . . . . . . . . . . . . . . . . . .
All Directors and Executive Officers as a Group (11). . . 2,822,340 28.3%
* Indicates less than 1%
(1) Includes 6,350 shares of our common stock issuable pursuant to options that
are exercisable within 60 days.
(2) Includes 40,000 shares of our common stock issuable pursuant to options
that are exercisable within 60 days and 6,179 shares of our common stock
issuable pursuant to warrants that are exercisable within 60 days.
(3) Includes 14,150 shares of our common stock issuable pursuant to options
that are exercisable within 60 days.
(4) Includes 7,357 shares of our common stock issuable pursuant to options that
are exercisable within 60 days.
(5) Includes 17,177 shares of our common stock held for the benefit of Mr.
Williams' children; 7,077 shares owned by Mr. Williams' wife; 432 shares
owned by Mr. Williams' son; 14,403 shares owned by Williams Family
Foundation, of which Mr. Williams is president and director; and 15,400
shares owned by Confidential Investment Services, Inc., of which Mr.
Williams is sole owner, president and director.
(6) Consists of 1,478,303 shares of our common stock owned by New River Capital
Partners, 24 shares owned by SRB Investments, Inc., and 26,778 shares
issuable pursuant to warrants that are exercisable within 60 days. Mr.
Berrard controls and beneficially owns his interests in New River Capital
Partners and SRB Investments indirectly through other entities; Mr. Berrard
disclaims beneficial ownership of these shares except to the extent of any
pecuniary interest.
(7) Consists of 125 shares of our common stock issuable pursuant to options
that are exercisable within 60 days.
(8) Includes 1,000 shares issuable pursuant to options that are exercisable
within 60 days, and 1,068 shares issuable pursuant to options owned by her
husband that are exercisable within 60 days.
(9) Includes 127,400 shares held by Puttick Enterprises, of which Mr. Puttick
is President, director and owner. Includes 12,000 shares of our common
stock issuable pursuant to options that are exercisable within 60 days.
(10) Includes 1,784 shares of our common stock issuable pursuant to options that
are exercisable within 60 days.
(11) Includes 110,384 shares of our common stock issuable pursuant to options
that are exercisable within 60 days and 41,196 shares issuable pursuant to
warrants that are exercisable within 60 days.
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under Section 16 of the Securities Exchange Act of 1934, our directors,
certain officers, and beneficial owners of more than 10% of our outstanding
common stock are required to file reports with the Securities and Exchange
Commission concerning their ownership of and transactions in our common stock;
such persons are also required to furnish us with copies of such reports. Based
solely upon the reports and related information furnished to us, we believe that
all such filing requirements were complied with in a timely manner during and
with respect to our 2000 fiscal year.
ITEM 2. 2001 STOCK INCENTIVE PLAN.
Adoption of the Plan. Our Board of Directors adopted the Gerald
Stevens, Inc. 2001 Stock Incentive Plan on January 31, 2001, subject to
stockholder approval at the Annual Meeting. The Plan provides for the grant of
stock options, restricted stock units, stock appreciation rights, phantom stock
and other awards that are valued in whole or in part by reference to our common
stock. Our employees, officers, directors, consultants and independent
contractors are eligible to participate in the Plan. On December 31, 2000, we
had approximately 6,100 eligible participants.
We believe that stock options and other stock-based awards are
important to attract, and to encourage the continued employment and service of
eligible participants. Stock options and other stock-based awards also align the
interests of the participants with those of our stockholders.
We have summarized the principal provisions of the Plan below. The
summary may not be complete and is qualified in its entirety by the terms of the
Plan, a copy of which is attached as Appendix A.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE 2001 STOCK INCENTIVE PLAN.
Administration of the Plan. The Plan is administered by the
Compensation Committee of our Board of Directors. The Compensation Committee is
authorized to determine, from time to time, the persons to whom awards or grants
will be made, and the term, exercise price, settlement terms, forfeiture
provisions and other terms and conditions of each award or grant. The
Compensation Committee has the power to establish and waive, in its discretion,
vesting and forfeiture provisions for awards or grants.
Grants. Incentives under the Plan may consist of incentive stock
options, non-qualified stock options, restricted stock units and any other
stock-based award, including stock appreciation rights, phantom stock and other
awards that are valued in whole or in part by reference to our common stock.
Shares issuable pursuant to options or awards that expire or are forfeited
become available to be granted again under the Plan.
Eligibility for Participation. Any of our employees, officers,
directors, consultants or independent contractors are eligible to become
participants that receive awards under the Plan.
Options, Term and Exercise Price. The exercise price of an option is
determined by the Compensation Committee on the date of grant. However, an
incentive stock option, or ISO, must have an exercise price per share equal to
or greater than the fair market value of our common stock on the date of grant.
An ISO granted to a person who owns more than 10% of the voting power of our
outstanding capital stock is required to have an exercise price of not less than
110% of the fair market value of our common stock on the date of grant. On
January 26, 2001, the fair market value of a share of our common stock was
$1.12.
The Compensation Committee determines the exercise period for each
option, not to exceed ten years from the date of grant, except that an ISO
granted to a person who owns more than 10% of the voting power of our
outstanding capital stock is required to have an exercise period of not greater
than five years.
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Transferability of Options. In general options are not transferable,
except by will or the laws of decent or distribution. However, the Compensation
Committee, in its sole discretion, may allow the transfer or assignment of a
non-qualified stock option.
Transferability of Restricted Stock Units. In general restricted stock
units are not transferable. However, the Compensation Committee, in its sole
discretion, may allow the transfer or assignment of a restricted stock unit.
Awards Under the Plan. Each award will be set forth in a separate
agreement that will indicate the type, terms and conditions of the award.
A non-qualified stock option, or NQSO, will provide for the right to
purchase our common stock at a specified price that may be less than fair market
value on the date of grant (but not less than par value), and usually will
become exercisable (in the discretion of the Compensation Committee) in one or
more installments after the grant date, subject to the participant's continued
employment with us. An NQSO may be granted for any term specified by the
Compensation Committee.
An ISO is designed to comply with certain restrictions contained in the
Internal Revenue Code. Among such restrictions, an ISO (1) must have an exercise
price not less than the fair market value of a share of Common Stock on the date
of grant, (2) may only be granted to employees, (3) must expire within a
specified period of time following the participant's termination of employment,
and (4) must be exercised within ten years after the date of grant. An ISO may
be subsequently modified to disqualify it for treatment as an ISO.
Restricted Stock Units may be granted and made subject to such
restrictions as may be determined by the Compensation Committee. We will
typically have the right to repurchase restricted stock units at fair market
value upon the participant's termination of employment with us. In general,
restricted stock units may not be sold, or otherwise transferred, until the
restrictions expire or are removed.
Amendment and Termination of the Plan. The Board may amend or terminate
the Plan at any time, provided that stockholder approval is required for any
amendment that requires stockholder approval in accordance with the regulations
issued under Section 16 of the Securities Exchange Act of 1934, and any
amendment that would impair the rights of a participant requires the
participant's consent. The Plan will terminate on January 31, 2011 unless
terminated earlier by our Board of Directors. Awards granted prior to January
31, 2011 may extend beyond that date.
Adjustment Provisions. If there is any change in our common stock as a
result of a stock dividend, recapitalization, stock split, or combination or
exchange of our common stock, or a merger, reorganization or consolidation of
Gerald Stevens or any other change in our capital structure made without the
receipt of consideration, then unless such event results in the termination of
all outstanding awards under the Plan, the number and class of shares available
for grants and the number and class of such shares covered by outstanding
awards, and the price per share or the applicable market value of such grants,
will be proportionately adjusted by the Compensation Committee to reflect any
increase or decrease in the number or kind of issued shares of our common stock.
Change in Control. In the event of a change in control of Gerald
Stevens, unless otherwise provided in an award agreement, the Compensation
Committee or our Board of Directors may provide on a case-by-case basis that
some or all options may become fully vested and immediately exercisable, and the
restrictions on any other outstanding awards would lapse making such awards
fully vested.
Federal Income Tax Consequences. Set forth below is a general
description of the federal income tax consequences of grants under the Plan.
Non-Qualified Stock Options. There are no federal income tax
consequences to participants or to Gerald Stevens upon the grant of an NQSO
under the Plan. Upon the exercise of an NQSO, a participant will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the shares at the time of exercise over the exercise price of the NQSO,
and Gerald Stevens generally will be entitled to a corresponding federal income
tax deduction.
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Upon the sale of shares acquired upon exercise of an NQSO, a participant will
have a capital gain or loss in an amount equal to the difference between the
amount realized upon the sale and the participant's adjusted tax basis in the
shares (the exercise price plus the amount of ordinary income recognized by the
participant upon exercise of the NQSO).
Incentive Stock Options. Participants will not be subject to federal
income taxation upon the grant or exercise of an ISO granted under the Plan, and
we will not be entitled to a federal income tax deduction by reason of such
grant or exercise. However, the amount by which the fair market value of the
shares at the time of exercise exceeds the exercise price (or the participant's
other tax basis in the shares) is subject to the alternative minimum tax
applicable to the participant. A sale of shares acquired upon exercise of an ISO
that occurs more than one year after the exercise or more than two years after
the grant of the ISO generally will result in the recognition of long-term
capital gain or loss in the amount of the difference between the amount realized
on the sale and the exercise price (or the participant's other tax basis in the
shares), and we will not be entitled to any tax deduction in connection with the
sale.
If the sale occurs within one year after the date of exercise of the
ISO or within two years after the date of grant (a "disqualifying disposition")
and is a transaction in which a loss, if sustained, would be recognized, the
participant generally will recognize ordinary compensation income equal to the
lesser of (i) the excess of the fair market value of the shares on the date of
exercise over the exercise price (or the participant's other tax basis in the
shares), or (ii) the excess of the amount realized on the sale of the shares
over the exercise price (or the participant's other tax basis in the shares). In
the case of a disqualifying disposition where a loss, if sustained, would not be
recognized, the participant will recognize ordinary income equal to the excess
of the fair market value of the shares on the date of exercise over the exercise
price (or the participant's other tax basis in the shares). Any amount realized
on a disqualifying disposition in excess of the amount treated as ordinary
compensation income (or any loss realized) will be a long-term or a short-term
capital gain (or loss), depending upon the length of time the shares were held.
We generally will be entitled to a tax deduction on a disqualifying disposition
in an amount equal to the ordinary compensation income recognized by the
participant.
Restricted Stock Units. A participant normally will not recognize
taxable income upon the award of a restricted stock unit, and we will not be
entitled to a deduction, until such stock is transferable by the participant or
no longer subject to a substantial risk of forfeiture for federal tax purposes,
whichever occurs earlier. When our common stock is either transferable or is no
longer subject to a substantial risk of forfeiture, the participant will
recognize ordinary compensation income in an amount equal to the fair market
value of our common stock at that time and we will be entitled to a deduction in
the same amount. A participant may, however, elect to recognize ordinary
compensation income in the year the restricted stock unit is awarded in an
amount equal to the fair market value of our common stock at that time,
determined without regard to the restrictions. In this event, we will be
entitled to a deduction in the same year. Any gain or loss recognized by the
participant upon subsequent disposition of our common stock will be capital gain
or loss. If, after making the election, any common stock subject to a restricted
stock grant is forfeited, or if the market value declines during the restriction
period, the participant will not be entitled to any tax deduction or tax refund.
ITEM 3. SELECTION OF INDEPENDENT ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors
has selected Arthur Andersen LLP to be the independent accountants of Gerald
Stevens and its consolidated subsidiaries for our 2001 fiscal year. Although the
submission of this matter for stockholder ratification at the Annual Meeting is
not required by law or our bylaws, the Board is nevertheless doing so to
determine the stockholders' views. If the selection is not ratified, the Board
will reconsider its selection of independent accountants.
Arthur Andersen LLP has acted as independent accountants of Gerald
Stevens and its consolidated subsidiaries since May 13, 1999. In addition,
during our 2000 fiscal year Arthur Andersen LLP consulted with Gerald Stevens on
various matters and performed services for us for fees and expenses as follows:
1. Audit and review fees - $415,000
2. Financial information systems design and implementation - $0
3. All other fees - $210,000
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A representative of Arthur Andersen LLP will attend the Annual Meeting,
will be available to answer questions and will have an opportunity to make a
statement if he wishes to do so. Members of the Audit Committee are also
expected to attend.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION
OF THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT ACCOUNTANTS.
OTHER MATTERS
We do not know of any other business that will be presented for
consideration at the Annual Meeting. However, if any other business should come
before the Annual Meeting, the persons named in the enclosed proxy (or their
substitutes) will have discretion to act in accordance with their best judgment.
PROPOSALS FOR 2002 ANNUAL MEETING
Any stockholder wishing to submit a proposal for inclusion in the Proxy
Statement for the 2002 Annual Meeting, pursuant to the stockholder proposal
rules of the SEC, should submit the proposal in writing to Secretary, Gerald
Stevens, Inc., 1800 Eller Drive, Suite 300, Fort Lauderdale, Florida 33316. We
must receive a proposal prior to October 10, 2001 in order to consider it for
inclusion in the 2002 Proxy Statement.
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APPENDIX A
GERALD STEVENS, INC.
2001 STOCK INCENTIVE PLAN
1. ESTABLISHMENT, EFFECTIVE DATE AND TERM
GERALD STEVENS, INC., a Florida corporation, hereby establishes the
"Gerald Stevens, Inc. 2001 Stock Incentive Plan." Subject to ratification within
twelve (12) months by an affirmative vote of a majority of the Common Stock,
either in person or by proxy, present and entitled to vote at the Annual
Meeting, the effective date of the Plan shall be January 31, 2001 (the
"Effective Date"), which is the date that the Plan was approved and adopted by
the Board of Directors of Gerald Stevens. Unless earlier terminated pursuant to
Section 12 hereof, the Plan shall terminate on the tenth anniversary of the
Effective Date.
2. PURPOSE
The purpose of the Plan is to advance the interests of Gerald Stevens
by allowing Gerald Stevens to attract, retain and motivate Eligible Individuals
by providing them with an opportunity to acquire or increase a proprietary
interest in Gerald Stevens which thereby will create a stronger incentive to
expend maximum effort for the growth and success of Gerald Stevens and its
subsidiaries.
3. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings
set forth below:
"Award" shall mean, individually or collectively, an Option, Restricted
Stock Unit or any other award granted pursuant to the Plan.
"Award Agreement" shall mean, individually or collectively, an Option
Agreement, Restricted Stock Unit Agreement or any other agreement entered into
pursuant to the Plan.
"Award Shares" shall mean shares of Common Stock issued pursuant to
an Award.
"Board" shall mean the Board of Directors of Gerald Stevens.
"Cause" shall mean (i) the conviction of Participant for a felony or
a crime involving moral turpitude or the plea of guilty or no lo contendre by
Participant to a charge of any such crime, (ii) Participant's theft or
embezzlement, or attempted theft or embezzlement, of money or property of the
Company, (iii) Participant's perpetration or attempted perpetration of fraud, or
Participant's participation in a fraud or an attempted fraud, on the Company or
Participant's unauthorized appropriation or attempted appropriation of any
tangible or intangible material assets or property of the Company, (iv)
Participant's dishonesty with respect to any matter concerning the Company or
(v) Participant's substantial failure or repeated failure to perform
Participant's duties hereunder in accordance with the reasonable directions of
the Company.; provided, however, that if the Participant and the Company have
entered into an employment agreement which defines "cause" for purposes of such
agreement, "cause" shall be defined in accordance with such agreement.
"Change in Control" shall be deemed to occur if any Person shall
acquire direct or indirect beneficial ownership (as defined by Rule 13(d)-3 of
the Exchange Act) of securities of an entity, pursuant to one or more
transactions, such that after consummation and as a result of such transaction,
such person has direct or indirect beneficial ownership of 50% or more of the
total combined voting power with respect to the election of directors of the
issued and outstanding securities of an entity.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the committee appointed by the Board to
administer the Plan pursuant to Section 5 of the Plan.
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"Company" shall mean Gerald Stevens and its subsidiaries whose
financial statements are consolidated with the financial statements of Gerald
Stevens in accordance with generally accepted accounting principles.
"Common Stock" shall mean the common stock of Gerald Stevens.
"Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code.
"Disability" shall mean "permanent and total disability" within the
meaning of Section 22(e)(3) of the Code.
"Eligible Individual" shall mean any employee, officer or director of
the Company or any consultant or independent contractor providing services to
the Company.
"Exercise Price" shall mean the purchase price of each share of Common
Stock subject to an Option.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean, on the business day immediately prior
to the date of determination: (i) the average closing price of the Common Stock
on all securities exchanges on which the Common Stock may at the time be listed,
or (ii) if there have been no sales on any exchange on any day, the average of
the highest bid and lowest asked prices on all such exchanges at the end of such
day, or (iii) if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, or (iv) if on the day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization. In the event that
the Common Stock is not publicly traded, Fair Market Value shall be determined
in good faith by the Committee.
"Gerald Stevens" shall mean Gerald Stevens, Inc.
"Incentive Stock Option" shall have the meaning set forth in Section
422 of the Code.
"Option" shall mean any stock option granted pursuant to Section 7 of
the Plan.
"Option Agreement" shall mean a written agreement entered into by
Gerald Stevens and a Participant which sets forth the terms and conditions of
the Option thereby granted.
"Participant" shall mean any Eligible Individual with an outstanding
Award.
"Person" shall mean any person, corporation, partnership, joint venture
or other entity or any group (as such term is defined for purposes of Section
13(d) of the Exchange Act), other than a parent or subsidiary of Gerald Stevens.
"Plan" shall mean the Gerald Stevens, Inc. 2001 Stock Incentive Plan.
"Reorganization" shall be deemed to occur if an entity is a party to a
merger, consolidation, reorganization, or other business combination with one or
more entities in which said entity is not the surviving entity, if such entity
disposes of substantially all of its assets, or if such entity is a party to a
spin-off, split-off, split-up or similar transaction; provided, however, that
the transaction shall not be a Reorganization if Gerald Stevens or any
subsidiary of Gerald Stevens is the surviving entity.
"Restricted Stock Unit" shall mean an Award granted pursuant to Section
8 of the Plan.
"Restricted Stock Unit Agreement" shall mean a written agreement
entered into by Gerald Stevens and a Participant which sets forth the terms and
conditions of the Restricted Stock Units thereby granted.
"Restriction Period" shall mean the period during which applicable
restrictions apply to Restricted Stock Units.
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"Section 424 Employee" shall mean an employee of Gerald Stevens or any
"subsidiary corporation" or "parent corporation" as defined in and in accordance
with Code Section 424. Such term shall also include employees of a corporation
issuing or assuming a stock option in a transaction to which Code Section 424(a)
applies.
4. ELIGIBILITY
Awards may be granted under the Plan to any Eligible Individual, as
determined by the Committee from time to time, on the basis of their importance
to the business of the Company. An individual may hold more than one Award,
subject to such restrictions as are provided herein.
5. ADMINISTRATION
(a) Committee. The Plan shall be administered by the Board or any
committee appointed by the Board consisting of not less than two (2) Directors.
The Committee shall have the full power and authority to take all actions, and
to make all determinations required or provided for under the Plan, any Award
granted or any Award Agreement entered into under the Plan and all such other
actions and determinations not inconsistent with the specific terms and
provisions of the Plan deemed by the Committee to be necessary or appropriate to
the administration of the Plan, any Award granted or any Award Agreement entered
into hereunder. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Award Agreement in the manner
and to the extent it shall deem expedient to carry the Plan into effect as it
may determine in its sole discretion. All such actions and determinations shall
be made by the affirmative vote of a majority of the members of the Committee
present at a meeting at which any issue relating to the Plan is properly raised
for consideration or without a meeting by written consent of the Committee
executed in accordance with Gerald Stevens' Articles of Incorporation and
Bylaws, and applicable law. The decisions of the Committee shall be final,
conclusive and binding with respect to the interpretation and administration of
the Plan and any Award granted under the Plan.
(b) No Liability. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan, any Award
granted or any Award Agreement entered into hereunder.
6. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
(a) Shares Subject to the Plan. The capital stock of Gerald Stevens
that may be issued pursuant to Awards granted under the Plan shall be shares of
Common Stock, which shares may be treasury shares or authorized but unissued
shares. The maximum number of shares of Common Stock that may be issued pursuant
to Awards granted under the Plan shall be 1,000,000 shares, subject to
adjustment as provided in Section 10 below. If any Option expires, terminates,
or is terminated or canceled for any reason prior to exercise in full, the
shares of Common Stock that were subject to the unexercised portion of such
Option shall become available for future Awards granted under the Plan as if
such Option had not been granted. If any Restricted Stock Unit or other award is
forfeited for any reason, the Common Stock subject to such Award shall be
available for future grants of Awards under the Plan as if such Awards had not
been granted.
(b) Maximum Awards. The maximum number of shares of Common Stock
subject to Options that may be granted during any calendar year under the Plan
to any Covered Employee shall be 250,000 shares.
7. OPTIONS
(a) Types of Options. Each Option granted under the Plan may be
designated by the Committee, in its sole discretion, either as (i) an Incentive
Stock Option or (ii) as a non-qualified stock option which is not intended to
meet the requirements of Section 422 of the Code. Options designated as
Incentive Stock Options that fail to continue to meet the requirements of
Section 422 of the Code shall be redesignated as non-qualified stock options
automatically on the date of such failure to continue to meet such requirements
without further action by the Committee. In the absence of any designation,
Options granted under the Plan will be deemed to be non-qualified stock options.
(b) Grant of Options. Subject to the terms and conditions of the Plan,
the Committee may, at any time and from time to time, prior to the date of
termination of the Plan, grant to such Eligible Individuals as the Committee may
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determine, Options to purchase such number of shares of Common Stock on such
terms and conditions as the Committee may determine. The date on which the
Committee approves the grant of an Option (or such later date as is specified by
the Committee) shall be considered the date on which such Option is granted.
(c) Limitation on Incentive Stock Options.
i. Section 424 Employees. Incentive Stock Options may only be
granted to Section 424 Employees. Subject to the terms and
conditions of this Plan and the Option Agreement (including
all vesting provisions and option periods), any and all
Incentive Stock Options which an employee fails to exercise
within 90 days after the date said employee ceases to be a
Section 424 Employee shall automatically be classified as
non-qualified Stock Options to the extent that said Options
have not otherwise been terminated.
ii. Fair Market Value. Subject to Section 7(c)(iii) below, an
Incentive Stock Option shall not be granted with an Exercise
Price less than one hundred percent (100%) of the Fair
Market Value of a share of Common Stock on the date the
Incentive Stock Option is granted. The Committee shall
determine Fair Market Value in accordance with the
provisions of Section 422 of the Code.
iii. Ten Percent Stockholder. Notwithstanding any other provision
of this Plan to the contrary, no individual may receive an
Incentive Stock Option under the Plan if such individual, at
the time the award is granted, owns (after application of
the rules contained in Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, unless
(i) the Exercise Price for each share of Common Stock
subject to such Incentive Stock Option is at least one
hundred ten percent (110%) of the Fair Market Value of a
share of Common Stock on the date of grant and (ii) such
Incentive Stock Option is not exercisable after the fifth
(5th) anniversary of the date of grant.
iv. Limitation on Grants. The aggregate Fair Market Value
(determined with respect to each Incentive Stock Option at
the time such Incentive Stock Option is granted) of the
shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an individual
during any calendar year (under this Plan or any other plan
of the Company) shall not exceed $100,000. If an Incentive
Stock Option is granted pursuant to which the aggregate Fair
Market Value of shares with respect to which it first
becomes exercisable in any calendar year by an individual
exceeds such $100,000 limitation, the portion of such Option
which is in excess of the $100,000 limitation, and any
Options issued subsequently in the same calendar year, shall
be treated as a non-qualified stock option pursuant to
Section 422(d)(1) of the Code. In the event that an
individual is eligible to participate in any other stock
option plan of the Company which is also intended to comply
with the provisions of Section 422 of the Code, such
$100,000 limitation shall apply to the aggregate number of
shares for which Incentive Stock Options may be granted
under this Plan and all such other plans.
(d) Option Agreement. All Options granted pursuant to the Plan shall
be evidenced by an Option Agreement, to be executed by Gerald Stevens and the
Participant, in such form or forms as the Committee shall determine. Option
Agreements may contain different provisions, provided, however, that all such
Option Agreements shall comply with all terms of the Plan.
(e) Exercise Price. The Exercise Price shall be fixed by the Committee
and stated in each Option Agreement.
(f) Option Period. Subject to the provisions of Sections 7 (c), (m),
(n) and (o), each Option granted under the Plan shall terminate and all rights
to purchase shares thereunder shall cease on the tenth (10th) anniversary of the
date such Option is granted, or on such date prior thereto as may be fixed by
the Committee and stated in the Option Agreement relating to such Option.
Notwithstanding the foregoing, the Committee may in its discretion, at any time
prior to the expiration or termination of any Option, extend the term of any
such Option for such additional period as the Committee in its discretion may
determine; provided, however, that in no event shall the aggregate option period
with respect to any Option, including the initial term of such Option and any
extensions thereof, exceed (10) years.
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(g) Vesting. Each Option Agreement will specify the vesting schedule
applicable to the Option granted thereunder. Notwithstanding the foregoing, the
Committee may in its discretion provide that any vesting requirement or other
such limitation on the exercise of an Option may be rescinded, modified or
waived by the Committee, in its sole discretion, at any time and from time to
time after the date of grant of such Option, so as to accelerate the time at
which the Option may be exercised.
(h) Exercise. An Option that is exercisable hereunder may be exercised
by delivery to Gerald Stevens on any business day, at its principal office,
addressed to the attention of the Stock Option Administrator, of written notice
of exercise, which notice shall specify the number of shares with respect to
which the Option is being exercised, and shall be accompanied by payment in full
of the Exercise Price of the shares for which the Option is being exercised, by
one or more of the methods provided below. The minimum number of shares of
Common Stock with respect to which an Option may be exercised, in whole or in
part, at any time shall be the lesser of one hundred (100) shares or the maximum
number of shares available for purchase under the Option at the time of
exercise.
(i) Payment. Payment of the Exercise Price for the shares of Common
Stock purchased pursuant to the exercise of an Option shall be made (i) in cash
or in cash equivalents; (ii) to the extent permitted by applicable law and
agreed to by the Committee in its sole and absolute discretion, through the
tender to Gerald Stevens of shares of Common Stock, which shares shall be
valued, for purposes of determining the extent to which the Exercise Price has
been paid thereby, at their Fair Market Value on the date of exercise; (iii) to
the extent permitted by applicable law and agreed to by the Committee in its
sole and absolute discretion, by delivering a written direction to Gerald
Stevens that the Option be exercised pursuant to a "cashless" exercise/sale
procedure (pursuant to which funds to pay for exercise of the Option are
delivered to Gerald Stevens by a broker upon receipt of stock certificates from
Gerald Stevens) or a "cashless" exercise/loan procedure (pursuant to which the
Participants would obtain a margin loan from a broker to fund the exercise)
through a licensed broker acceptable to Gerald Stevens whereby the stock
certificate or certificates for the shares of Common Stock for which the Option
is exercised will be delivered to such broker as the agent for the individual
exercising the Option and the broker will deliver to Gerald Stevens cash (or
cash equivalents acceptable to Gerald Stevens) equal to the Exercise Price for
the shares of Common Stock purchased pursuant to the exercise of the Option plus
the amount (if any) of federal and other taxes that Gerald Stevens may, in its
judgment, be required to withhold with respect to the exercise of the Option;
(iv) to the extent permitted by applicable law and agreed to by the Committee in
its sole and absolute discretion, by the delivery of a promissory note of the
Participant to Gerald Stevens on such terms as the Committee shall specify in
its sole and absolute discretion; or (v) by a combination of the methods
described in clauses (i), (ii), (iii) and (iv). Payment in full of the Exercise
Price need not accompany the written notice of exercise if the Option is
exercised pursuant to the "cashless" exercise/sale procedure described above. An
attempt to exercise any Option granted hereunder other than as set forth above
shall be invalid and of no force and effect.
(j) Issuance of Certificates. Promptly after the exercise of an Option,
the individual exercising the Option shall be entitled to the issuance of a
certificate or certificates evidencing his ownership of such shares of Common
Stock. An individual holding or exercising an Option shall have none of the
rights of a stockholder until the shares of Common Stock covered thereby are
fully paid and issued to him and, except as provided in Section 10 below, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date of such issuance.
(k) Use of Proceeds. The proceeds received by Gerald Stevens from the
sale of Common Stock pursuant to Options granted under the Plan shall constitute
general funds of Gerald Stevens.
(l) Transferability. No Incentive Stock Option shall be assignable or
transferable by the Participant to whom it is granted, other than by will or the
laws of descent and distribution. Unless otherwise permitted by the Committee in
its sole and absolute discretion, no non-qualified stock option shall be
assignable or transferable by the Participant to whom it is granted, other than
by will or the laws of descent and distribution. In the event the Committee
permits the assignment or transfer of a non-qualified stock option, such Option
shall be subject to the terms and conditions applicable to the Option
immediately before the transfer.
(m) Termination of Employment. Unless otherwise provided in an Option
Agreement, upon the termination of the employment or other service of a
Participant with the Company, other than by reason of Cause, resignation, death
or
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Disability, any Option granted to such Participant which has vested as of the
date upon which the termination occurs shall be exercisable for a period not to
exceed ninety (90) days after such termination. Upon such termination, the
Participant's unvested Options shall expire and the Participant shall have no
further right to purchase shares of Common Stock pursuant to such unvested
Option. Notwithstanding the provisions of this Section 7(m), the Committee may
provide, in its discretion, that following the termination of employment or
service of a Participant with the Company (for any reason), a Participant may
exercise an Option, in whole or in part, at any time subsequent to such
termination of employment or service and prior to termination of the Option
pursuant to Section 7(f) above, either subject to or without regard to any
vesting or other limitation on exercise imposed pursuant to Section 7(g) above.
Unless otherwise determined by the Committee, temporary absence from employment
or service because of illness, vacation, approved leaves of absence, military
service and transfer of employment shall not constitute a termination of
employment or service with the Company.
(n) Termination of Employment for Cause or Resignation. Upon
termination of the employment or other service of a Participant with the Company
for Cause or by Participant's resignation, any Option granted to the Participant
shall expire immediately and the Participant shall have no further right to
purchase shares of Common Stock pursuant to such Options. The Committee shall
determine whether Cause exists for purposes of this Plan.
(o) Termination of Employment by Death or Disability. Unless otherwise
provided in an Option Agreement, if a Participant terminates employment or
service with the Company by reason of death or Disability of such Participant,
the Participant or the Participant's estate, the devisee named in the
Participant's valid last will and testament or the Participant's heir at law who
inherits the Option (whichever is applicable) has the right, at any time within
a period not to exceed one (1) year after such termination and prior to the
termination of the Option pursuant to Section 7(f) above, to exercise, in whole
or in part, any vested portion of the Options held by the Participant on the
date the Participant's employment or service terminated. Unless otherwise
provided in an Option Agreement, if a Participant terminates employment or
service with the Company by reason of death or Disability, any unvested Options
shall terminate. Notwithstanding the provisions of this Section 7(o), the
Committee may provide, in its discretion, that following the termination of
employment or service of a Participant with the Company (for any reason), a
Participant may exercise an Option, in whole or in part, at any time subsequent
to such termination of employment or service and prior to termination of the
Option pursuant to Section 7(f) above, either subject to or without regard to
any vesting or other limitation on exercise imposed pursuant to Section 7(g)
above.
8. RESTRICTED STOCK UNITS
(a) Grant of Restricted Stock Units. Subject to the provisions of the
Plan, the Committee may, at any time and from time to time, prior to the date of
termination of the Plan, grant to such Eligible Individuals as the Committee may
determine, Restricted Stock Units. Each Restricted Stock Unit shall be
equivalent in value to one share of Common Stock. Each grant of Restricted Stock
Units shall satisfy the requirements as set forth in this Section 8.
(b) Restricted Stock Unit Agreement. All Restricted Stock Units granted
pursuant to the Plan shall be evidenced by a Restricted Stock Unit Agreement, to
be executed by Gerald Stevens and the Participant, in such form or forms as the
Committee shall determine. Each Restricted Stock Unit Agreement shall specify
the number of Restricted Stock Units awarded to the Participant, the applicable
Period of Restrictions and contain such provisions and restrictions (or no
restrictions) as the Committee shall deem appropriate on the date the Restricted
Stock Units are granted. Restricted Stock Unit Agreements may contain different
provisions; provided, however, that all such Restricted Stock Unit Agreements
must comply with all terms of the Plan.
(c) Restrictions. The Committee shall impose such restrictions (or no
restrictions) on any Restricted Stock Units granted pursuant to this Plan as it
may deem advisable including, without limitation, vesting restrictions,
restrictions based upon the achievement of specific company-wide performance
goals, divisional performance goals, individual performance goals and/or
restrictions under applicable federal or state securities laws.
(d) Payment. Upon expiration of the Restriction Period applicable to a
Restricted Stock Unit, the Participant shall, without payment on his part, be
entitled to receive payment in an amount equal to the aggregate Fair Market
Value of the shares
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of Common Stock covered by the Restricted Stock Units. Such payment shall be
made in the form of Common Stock equal to the number of Restricted Stock Units
with respect to which such payment is made.
(e) Dividend Equivalents. A Participant whose Restricted Stock Units
have not previously terminated shall be entitled to receive payment in an amount
equal to each cash dividend Gerald Stevens would have paid to such Participant
after the grant of such Restricted Stock Units and prior to the lapse of
restrictions relating thereto as if the Participant had been the owner of record
of the shares of Common Stock covered by such Restricted Stock Units on the
record date for the payment of such dividend and as if such Restricted Stock
Units were not subject to restrictions. Payments of such dividend equivalent
shall be made on the payment date of the cash dividend with respect to which it
is made, or as soon as practicable thereafter.
(f) Issuance of Common Stock Subject to Restrictions. The Committee
may in its sole discretion cause the shares of Common Stock underlying any
particular grant of Restricted Stock Units to be issued in the Participant's
name prior to lapse of restrictions thereon and treat such Common Stock as
outstanding for all purposes. In addition, as security for the return of such
Common Stock in the event of forfeiture, the Committee may require that the
shares of such Common Stock be pledged by the Participant to the Company, and
the certificates evidencing such Common Stock be retained by the Company until
the restrictions relating thereto lapse.
(g) Transferability. Unless otherwise permitted by the Committee in its
sole and absolute discretion, the Restricted Stock Unit granted under this Plan
may not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated until the end of the applicable Period of Restriction established
by the Committee and specified in the Restricted Stock Unit Agreement, or upon
earlier satisfaction of any other conditions, as specified by the Committee and
specified in the Restricted Stock Unit Agreement.
(h) Termination of Employment. Unless otherwise provided in a
Restricted Stock Unit Agreement, if the Participant's employment or service with
the Company terminates for any reason other than death or Disability during the
Period of Restriction, all Restricted Stock Units held by the Participant which
are still subject to the Period of Restriction shall be forfeited immediately;
provided, however, that in the event of a termination of the Participant's
employment, other than for Cause, the Committee, in its sole discretion, may
waive the automatic forfeiture of any or all such Restricted Stock Units.
(i) Termination of Employment by Death or Disability. Unless otherwise
provided in a Restricted Stock Unit Agreement, if a Participant's employment or
service with the Company terminates by reason of death or Disability, any
remaining Period of Restriction shall terminate and, except as otherwise
provided in this Section 8, the Participant shall receive payment in accordance
with Section 8(d).
9. OTHER STOCK-BASED AWARDS
Awards of shares of Common Stock, stock appreciation rights, phantom
stock and other awards that are valued in whole or in part by reference to, or
otherwise based on, Common Stock, may also be made, from time to time, to
Eligible Individuals as may be selected by the Committee. Such awards may be
made alone or in addition to or in connection with any Option, Restricted Stock
Unit or other award granted hereunder. The Committee may determine the terms and
conditions of any such award. Each award shall be evidenced by an agreement
between the Eligible Individual and the Company which shall specify the number
of shares of Common Stock subject to the award, any consideration therefor, any
vesting or performance requirements and such other terms and conditions as the
Committee shall determine.
10. RECAPITALIZATION, CHANGE IN CONTROL AND OTHER CORPORATE EVENTS
(a) Recapitalization. If the outstanding shares of Common Stock are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of Gerald Stevens by reason of any
recapitalization, or reclassification, stock split, reverse split, combination
of shares, exchange of shares, stock dividend or other distribution payable in
capital stock of Gerald Stevens or other increase or decrease in such shares
effected without receipt of consideration by Gerald Stevens occurring after the
Effective Date, a corresponding appropriate and proportionate adjustment shall
be made by the Committee (i) in the aggregate number and kind of shares of
Common Stock available under the Plan, (ii) in the number and kind of shares of
Common Stock issuable upon exercise or vesting of an outstanding Award
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or upon termination of the Restriction Period applicable to a Restricted Stock
Unit granted under the Plan, and (iii) in the Exercise Price per share of
outstanding Options granted under the Plan.
(b) Reorganization. Unless otherwise provided in an Award Agreement,
in the event of a Reorganization of Gerald Stevens, the Committee may in its
sole and absolute discretion, provide on a case-by-case basis that some or all
outstanding Awards may become immediately exercisable, vested or entitled to
payment. In the event of a Reorganization of Gerald Stevens the Committee may,
in its sole and absolute discretion, provide on a case-by-case basis that
Options shall terminate upon the Reorganization, provided however, that Optionee
shall have the right, immediately prior to the occurrence of such Reorganization
and during such reasonable period as the Committee in its sole discretion shall
determine and designate, to exercise any vested Option in whole or in part. In
the event that the Committee does not terminate an Option upon a Reorganization
of Gerald Stevens then each outstanding Option shall upon exercise thereafter
entitle the holder thereof to such number of shares of Common Stock or other
securities or property to which a holder of shares of Common Stock would have
been entitled upon such Reorganization.
(c) Change in Control. In the event of a Change in Control of Gerald
Stevens, the Committee may, in its sole and absolute discretion, provide, on a
case-by-case basis, that any or all outstanding Awards shall become immediately
exercisable, vested or entitled to payment. The Committee may, in its sole and
absolute discretion, provide on a case-by-case basis that Options shall
terminate, provided, however, that each Participant shall have the right for a
reasonable period, as the Committee in its sole discretion shall determine and
designate, to exercise any vested Option in whole or in part.
(d) Change in Status of Parent or Subsidiary. Unless otherwise provided
in an Award Agreement, in the event of a Change in Control or Reorganization of
a parent or subsidiary of Gerald Stevens, or in the event that a parent or
subsidiary ceases to be a "parent" or "subsidiary" as defined in Section 424 of
the Code, the Committee may, in its sole and absolute discretion, on a
case-by-case basis (i) provide that some or all outstanding Awards held by a
Participant employed by or performing service for such parent or subsidiary may
become immediately exercisable, vested or entitled to payment or (ii) treat the
Award as terminated, in which case the Participant shall no longer be entitled
to exercise or payment of the Award in accordance with the Plan, but only if
such Participant is not employed by Gerald Stevens or any parent or subsidiary
immediately after such event.
(e) Adjustments. Adjustments under this Section 10 related to stock or
securities of Gerald Stevens shall be made by the Committee whose determination
in that respect shall be final, binding, and conclusive. No fractional shares of
Common Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(f) No Limitations. The grant of an Award pursuant to the Plan shall
not affect or limit in any way the right or power of Gerald Stevens to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve or liquidate, or to sell
or transfer all or any part of its business or assets.
11. REQUIREMENTS OF LAW
(a) Violations of Law. The Company shall not be required to sell or
issue any shares of Common Stock under any Award if the sale or issuance of such
shares would constitute a violation by the individual holding the Award, the
Participant or the Company of any provisions of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. Any determination in this connection by the
Committee shall be final, binding, and conclusive. The Company shall not be
obligated to take any affirmative action in order to cause the exerciseability
or vesting of an Option, the exercise of an Option or the issuance of shares
pursuant to the exercise of an Option or expiration of a Restriction Period to
comply with any law or regulation of any governmental authority.
(b) Registration. At the time of any exercise of any Option or receipt
of Common Stock pursuant to an Award, the Company may, if it shall determine it
necessary or desirable for any reason, require the Participant (or Participant's
heirs, legatees or legal representative, as the case may be), as a condition to
the exercise or grant thereof, to deliver to the Company a written
representation of present intention to hold the shares for their own account as
an investment and not with a view to, or for sale in connection with, the
distribution of such shares, except in compliance with applicable federal and
state securities laws with respect thereto. In the event such representation is
required to be delivered, an appropriate legend may
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be placed upon each certificate delivered to the Participant (or Participant's
heirs, legatees or legal representative, as the case may be) upon his or her
exercise of part or all of the Option or receipt of Common Stock and a stop
transfer order may be placed with the transfer agent. Each Award shall also be
subject to the requirement that, if at any time the Company determines, in its
discretion, that the listing, registration or qualification of the shares
subject to the Award upon any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body is necessary
or desirable as a condition of, or in connection with, the issuance or purchase
of the shares thereunder, the Option may not be exercised in whole or in part
and the Common Stock may not be issued unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company in its sole discretion.
(c) Withholding. The Committee may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of any taxes
that the Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to withhold in
connection with the exercise of any Option or the grant of Common Stock pursuant
to an Award, including, but not limited to: (i) the withholding of delivery of
shares of Common Stock until the holder reimburses the Company for the amount
the Company is required to withhold with respect to such taxes, (ii) the
canceling of any number of shares of Common Stock issuable in an amount
sufficient to reimburse the Company for the amount it is required to so
withhold, (iii) withholding the amount due from any such person's wages or
compensation due to such person, or (iv) requiring the Participant to pay the
Company cash in the amount the Company is required to withhold with respect to
such taxes.
(d) Governing Law. This Plan shall be governed by, and construed and
enforced in accordance with, the laws of the State of Florida.
12. AMENDMENT AND TERMINATION OF THE PLAN
The Committee may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Common Stock as to which Awards have not
been granted; provided, however, that the approval by a majority of the votes
present and entitled to vote at a duly held meeting of the stockholders of
Gerald Stevens at which a quorum representing a majority of all outstanding
voting stock is, either in person or by proxy, present and voting on the
amendment, or by written consent in accordance with applicable state law and the
Articles of Incorporation and Bylaws of Gerald Stevens shall be required for any
amendment (i) that changes the requirements as to Eligible Individuals to
receive Awards under the Plan, (ii) that increases the maximum number of shares
of Common Stock in the aggregate that may subject to Awards that are granted
under the Plan (except as permitted under Section 10 hereof), or (iii) if
approval of such amendment is necessary to comply with federal or state law
(including without limitation Section 162(m) of the Code and Rule 16b-3 under
the Exchange Act) or with the rules of any stock exchange or automated quotation
system on which the Common Stock may be listed or traded. Except as permitted
under Section 10 hereof, no amendment, suspension or termination of the Plan
shall, without the consent of the holder of an Award, alter or impair rights or
obligations under any Award theretofore granted under the Plan.
13. GERALD STEVENS' RIGHT TO PURCHASE OPTION STOCK AND VESTED SHARES
Gerald Stevens shall have the right to repurchase any Award Shares
issued pursuant to an Award Agreement following the termination of the
employment or service of the holder of the Award Shares with the Company for any
reason. The price for repurchasing the Award Shares shall be paid in cash and
shall be equal to Fair Market Value. Should Gerald Stevens fail to exercise such
repurchase right within ninety (90) days following the later of (i) the Award
holder's termination of employment or service or (ii) the date the Common Stock
was issued, Gerald Stevens shall be deemed to have waived such right.
14. DISCLAIMER OF RIGHTS
No provision in the Plan, any Award granted or any Award Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of the Company or to interfere in
any way with the right and authority of the Company either to increase or
decrease the compensation of any individual, including any
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Participant, at any time, or to terminate any employment or other relationship
between any individual and the Company. A holder of an Award shall not be deemed
for any purpose to be a stockholder of Gerald Stevens with respect to such Award
except to the extent that such Award shall have been exercised with respect
thereto and, in addition, a stock certificate shall have been issued theretofore
and delivered to the holder, or except as expressly provided by the Committee in
writing. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 10 hereof.
15. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any
limitations upon the right and authority of the Committee to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Committee in its discretion determines
desirable, including, without limitation, the granting of stock options or stock
appreciation rights other than under the Plan.
16. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined
to be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
17. NOTICES
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to Gerald Stevens, to its principal place of business,
attention: Stock Option Administrator, and if to the Participant, to the address
of the Participant as appearing on the records of the Company.
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APPENDIX B
GERALD STEVENS, INC.
AMENDED AND RESTATED AUDIT COMMITTEE CHARTER
The Audit Committee is a committee of the board of directors. Its primary
function is to assist the board in fulfilling its oversight responsibilities by
reviewing the financial information which will be provided to the shareholders
and others, the systems of internal controls which management and the board of
directors have established, the independence and performance of the independent
auditors, and the audit process.
In meeting its responsibilities, the Audit Committee is expected to:
1. Provide an open avenue of communication between the internal auditors,
the independent auditor, and the board of directors.
2. Review the committee's charter annually.
3. Recommend to the board of directors the independent auditor to be
nominated, review the compensation of the independent auditor, and
review and approve the retention or discharge of the independent
auditor.
4. Review and concur in the appointment, replacement, reassignment, or
dismissal of the individual serving the Company in the capacity as
Director of Internal Audit or similar capacity.
5. Confirm and assure the objectivity and independence of the independent
auditor by:
a. Ensuring the independent auditor submits a formal written
statement regarding relationships and services that may affect
objectivity and independence.
b. Discussing any relevant matters with the independent auditors.
c. Recommending that the Board of Directors take appropriate action
to address the internal auditor's independence.
6. Inquire of management, the Director of Internal Audit, and the
independent auditor about significant risks or exposures and assess
the steps management has taken to minimize such risks to the company.
7. Consider, in consultation with the independent auditor and the
Director of Internal Audit, the audit scope and plan of the internal
auditors and the independent auditor.
8. Consider and review with the independent auditor and the Director of
Internal Audit any related significant findings and recommendations of
the independent auditor and Internal Audit together with management's
responses thereto.
9. Review with management and the independent auditor at the completion
of the annual examination:
a. The company's annual financial statements and related footnotes.
b. The independent auditor's audit of the financial statements and
its report thereon.
c. Any significant changes required in the independent auditor's
audit plan.
d. Any serious difficulties or disputes with management encountered
during the course of the audit.
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30
e. Other matters related to the conduct of the audit, which are to
be communicated to the committee under generally accepted
auditing standards.
f. Any restrictions on the scope of the independent auditor's work
or access to required information.
g. Any recommended major changes required in the planned scope of
the audit plan.
10. Consider and review with management and the Director of Internal
Audit:
a. Material findings during the year and management's responses
thereto.
b. Any significant difficulties encountered in the course of their
audits, including any restrictions on the scope of their work or
access to required information.
c. Any recommended major changes required in the planned scope of
their audit plan.
11. Review policies and procedures with respect to officers' expense
accounts and perquisites annually, including their use of corporate
assets, and consider having possible material areas of concern
reviewed by the Director of Internal Audit or the independent
accountant.
12. Review with General Counsel the results of the Company's compliance
with the policy on proper business practices.
13. Report committee actions to the board of directors with such
recommendations as the Audit Committee may deem appropriate.
14. The Audit Committee shall have the power to conduct or authorize
investigations into any matters within the committee's scope of
responsibilities. The committee shall be empowered to retain
independent counsel, accountants, or others to assist it in the
conduct of any investigation.
15. The Audit Committee shall meet at least four times per year prior to
each filing with the Securities and Exchange Commission of a quarterly
or annual report, or more frequently as circumstances require. The
committee may ask members of management or others to attend the
meetings and provide pertinent information as necessary.
16. The membership of the Audit Committee shall be comprised solely of
directors independent of management and free from any relationship
that in the opinion of the board of directors, would interfere with
the exercise of independent judgment as a committee member. A majority
of the Audit Committee shall be composed of directors who are not
former members of the Company's management. Audit Committee members
and the committee chairman shall be designated by the full board of
directors. The duties and responsibilities of a member of the Audit
Committee are in addition to those duties set out for a member of the
board of directors.
17. Review with management and the independent auditor the Company's
quarterly financial statements prior to the filing of its Form 10-Q.
18. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement.
19. Meet at least annually with the chief financial officer, the senior
internal auditing executive and the independent auditor in separate
executive sessions.
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31
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's Code of Conduct.
* * *
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32
REVOCABLE PROXY
GERALD STEVENS, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
MARCH 9, 2001
The undersigned appoints Thomas W. Hawkins and Jeffrey M. Mattson as
agents to vote all shares of Common Stock of Gerald Stevens, Inc. that the
undersigned is entitled to vote at the Annual Meeting of Stockholders, to be
held at the Sheraton Fort Lauderdale, Airport Hotel, Salons 1 & 2, Fort
Lauderdale, Florida, on Friday, March 9, 2001, at 10:00 a.m., Eastern Time, and
at any adjournments. As more fully described in the Proxy Statement for the
meeting, these persons (or their substitutes) are directed to vote as indicated
on this card and are authorized to vote in their discretion upon any other
business that properly comes before the meeting.
OUR BOARD OF DIRECTORS IS SOLICITING THIS PROXY.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSALS.
1. Election of directors:
For all nominees listed (except as marked to the contrary):
[ ] FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT
Steven R. Berrard Robert L. Johnson Kenneth G. Puttick Andrew W. Williams
John G. Hall Ruth M. Owades Kenneth R. Royer
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"For All Except" and write the nominee's name in the space below.
2. Approval of the 2001 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the selection of Arthur Andersen LLP as independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES
LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY IN THE BOX BELOW.
- ---------------------------------------
Date
- ---------------------------------------
Stockholder sign above
- ---------------------------------------
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage-paid envelope provided.
The above-signed stockholder acknowledges receipt from Gerald Stevens, Inc.,
prior to the execution of this proxy, of a notice of the meeting, a proxy
statement dated February 7, 2001 and the 2000 Annual Report to Stockholders.
Please sign exactly as your name appears on this card. When signing on behalf of
a corporation, estate, trust or another stockholder, please give such entity's
full name and your full title.
PLEASE ACT PROMPTLY.
SIGN, DATE & MAIL YOUR PROXY CARD TODAY.