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Vector Group Ltd.
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VECTOR GROUP LTD.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Vector Group Ltd.:
The Annual Meeting of Stockholders of Vector Group Ltd., a Delaware corporation (the Company), will be held at The Hyatt Regency Miami, 400 S.E. Second Avenue, Miami, Florida 33131 on Monday, May 24, 2004 at 1:00 p.m. local time, and at any postponement or adjournment thereof, for the following purposes:
1. To elect seven directors to hold office until the next annual meeting of stockholders and until their successors are elected and qualified. | |
2. To approve the Vector Group Ltd. Amended and Restated 1999 Long-Term Incentive Plan. | |
3. To transact such other business as properly may come before the meeting or any adjournments or postponements of the meeting. |
Every holder of record of Common Stock of the Company at the close of business on April 19, 2004 is entitled to notice of the meeting and any adjournments or postponements thereof and to vote, in person or by proxy, one vote for each share of Common Stock held by such holder. A list of stockholders entitled to vote at the meeting will be available to any stockholder for any purpose germane to the meeting during ordinary business hours from May 14, 2004 to May 24, 2004, at the headquarters of the Company located at 100 S.E. Second Street, 32nd Floor, Miami, Florida 33131. A proxy statement, form of proxy and the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2003 are enclosed herewith.
By Order of the Board of Directors, | |
|
|
BENNETT S. LEBOW | |
Chairman of the Board of Directors |
Miami, Florida
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
VECTOR GROUP LTD.
PROXY STATEMENT
INTRODUCTION
The enclosed proxy is solicited on behalf of the board of directors of Vector Group Ltd., a Delaware corporation (the Company). The proxy is solicited for use at the annual meeting of stockholders to be held at The Hyatt Regency Miami, 400 S.E. Second Avenue, Miami, Florida 33131 on Monday, May 24, 2004, at 1:00 p.m. local time, and at any postponement or adjournment. The Companys principal executive offices are located at 100 S.E. Second Street, 32nd Floor, Miami, Florida 33131, and its telephone number is (305) 579-8000.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Every holder of record of common stock of the Company at the close of business on April 19, 2004 is entitled to notice of the meeting and any adjournments or postponements and to vote, in person or by proxy, one vote for each share of Common Stock held by such holder. At the record date, the Company had outstanding 39,112,553 shares of Common Stock. This proxy statement, accompanying notice and proxy and the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2003 are first being mailed to stockholders on or about April 23, 2004.
Any stockholder giving a proxy has the power to revoke the proxy prior to its exercise. A proxy can be revoked by an instrument of revocation delivered at or prior to the annual meeting to the secretary of the Company, by a duly executed proxy bearing a date or time later than the date or time of the proxy being revoked, or at the annual meeting if the stockholder is present and elects to vote in person. Mere attendance at the annual meeting will not serve to revoke a proxy. Abstentions and shares held of record by a broker or its nominee that are voted on any matter are included in determining the number of votes present for quorum purposes. Broker shares that are not voted on any matter will not be included in determining whether a quorum is present.
All proxies received and not revoked will be voted as directed. If no directions are specified, such proxies will be voted FOR the election of the boards nominees and FOR the approval of the Vector Group Ltd. Amended and Restated 1999 Long-Term Incentive Plan. The nominees receiving a plurality of the votes cast will be elected as directors. The affirmative vote of the majority of votes cast with respect to the Long-Term Incentive Plan proposal will be necessary for approval assuming that the total vote cast represents a majority in interest of all securities entitled to vote on the proposal. For this purpose, abstentions are, but broker shares that are not voted are not, treated as votes cast.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the record date, the beneficial ownership of the Companys Common Stock, the only class of voting securities, by:
| each person known to the Company to own beneficially more than five percent of the Common Stock; | |
| each of the Companys directors and nominees; | |
| each of the Companys named executive officers (as such term is defined in the Summary Compensation Table below); and | |
| all directors and executive officers as a group. |
Unless otherwise indicated, each person possesses
sole voting and investment power with respect to the shares
indicated as beneficially owned, and the business address of
each person is 100 S.E. Second Street, Miami, Florida 33131.
Name and Address of
Number of
Percent of
Beneficial Owner
Shares
Class
16,042,077
35.8
%
8,757,098
21.9
%
767 Fifth Avenue
New York, NY 10153
2,630,648
6.5
%
2,329,210
5.9
%
Orchard Capital Corporation
10960 Wilshire Boulevard
Los Angeles, CA 90024
45,410
(*
)
Aegis Capital Corp.
70 East Sunrise Highway
Valley Stream, NY 11581
46,499
(*
)
182 Gannet Court
Manhasset, NY 11030
32,719
(*
)
28 Old Church Lane
South Salem, NY 10590
311,490
(*
)
98,568
(*
)
241,428
(*
)
Liggett Vector Brands Inc.
One Park Drive
Research Triangle Park, NC 27709
19,448,839
41.5
%
(*) | The percentage of shares beneficially owned does not exceed 1% of the Common Stock. | |
(1) | Includes 10,009,577 shares of Common Stock held by LeBow Gamma Limited Partnership, a Nevada limited partnership, 349,556 shares held by LeBow Alpha LLLP, a Delaware limited liability limited partnership, 90,171 shares held by The Bennett and Geraldine LeBow Foundation, Inc., a Florida notforprofit corporation, 2,393,028 shares acquirable by LeBow Gamma Limited Partnership, as assignee of Mr. LeBow, upon exercise of currently exercisable options to purchase Common Stock, and 3,199,745 shares acquirable by LeBow Epsilon Investments Trust, as assignee of Mr. LeBow, upon exercise of currently exercisable options. Mr. LeBow indirectly exercises sole voting power and sole dispositive power over the shares of Common Stock held or acquirable by the partnerships and trust. The shares held by LeBow Alpha LLLP are pledged to US Clearing Corp. to secure a margin loan to Mr. LeBow. LeBow Holdings, Inc., a Nevada corporation, is the general partner of LeBow Alpha LLLP and is the sole stockholder of LeBow Gamma, Inc., a Nevada corporation, which is the general partner of LeBow Gamma Limited Partnership. Mr. LeBow is a director, officer and sole shareholder of LeBow Holdings, Inc., a director and officer of LeBow Gamma, Inc. and the sole trustee of LeBow Epsilon Investments Trust. Mr. LeBow and family members serve as directors and executive officers of the foundation, and Mr. LeBow possesses shared voting power and shared dispositive power with the other directors of the foundation with respect to the foundations shares of Common Stock. |
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(2) | Based upon a Form 4, filed by the named entities on November 22, 2002. Barberry Corp. is the general partner of High River Limited Partnership and is wholly owned by Mr. Icahn. Includes 737,735 shares of Common Stock issuable upon conversion of the Companys convertible notes. | |
(3) | Includes 1,095,351 shares of Common Stock held by Lorber Epsilon 1999 Limited Partnership, a Delaware limited partnership, and 1,535,297 shares acquirable by Mr. Lorber upon exercise of currently exercisable options to purchase Common Stock. Mr. Lorber exercises sole voting power and sole dispositive power over the shares of Common Stock held by the partnership and by himself. Lorber Epsilon 1999 LLC, a Delaware limited liability company, is the general partner of Lorber Epsilon 1999 Limited Partnership. Lorber Alpha II Limited Partnership, a Nevada limited partnership, is the sole member of, and Mr. Lorber is the manager of, Lorber Epsilon 1999 LLC. Lorber Alpha II, Inc., a Nevada corporation, is the general partner of Lorber Alpha II Limited Partnership. Mr. Lorber is a director, officer and controlling shareholder of Lorber Alpha II, Inc. Mr. Lorber disclaims beneficial ownership of 10,803 shares of Common Stock held by Lorber Charitable Fund. Lorber Charitable Fund is a New York not-for-profit corporation, of which family members of Mr. Lorber serve as directors and executive officers. | |
(4) | The named individual is a director of the Company. | |
(5) | Based upon Amendment No. 6 to Schedule 13D dated April 15, 1998, filed by the named individual. | |
(6) | Includes 12,154 shares issuable upon exercise of currently exercisable options to purchase Common Stock. | |
(7) | The named individual is an executive officer of the Company. | |
(8) | Includes 241,490 shares issuable upon exercise of currently exercisable options to purchase Common Stock. | |
(9) | Represents shares issuable upon exercise of currently exercisable options to purchase Common Stock. |
(10) | The named individual is an executive officer of the Companys subsidiaries Liggett Vector Brands Inc. and Liggett Group Inc. |
In addition, by virtue of his controlling interest in the Company, Mr. LeBow may be deemed to own beneficially the securities of the Companys subsidiaries, including VGR Holding Inc., Liggett Group, Vector Tobacco Inc. and New Valley Corporation. The disclosure of this information should not be construed as an admission that Mr. LeBow is the beneficial owner of any securities of the Companys subsidiaries under Rule 13d-3 of the Securities Exchange Act of 1934 or for any other purpose, and beneficial ownership is expressly disclaimed. None of the Companys other directors or executive officers beneficially owns any equity securities of any of the Companys subsidiaries, except for Mr. Lorber and his affiliates who own 720,037 common shares of New Valley and 36,112 warrants to purchase New Valley common shares and hold options to acquire 65,333 New Valley common shares and 584,000 warrants.
NOMINATION AND ELECTION OF DIRECTORS
The by-laws of the Company provide, among other things, that the board, from time to time, shall determine the number of directors of the Company. The size of the board is presently set at seven. The present term of office of all directors will expire at the annual meeting. Seven directors are to be elected at the annual meeting to serve until the next annual meeting of stockholders and until their respective successors are duly elected and qualified.
It is intended that proxies received will be voted FOR election of the nominees named below unless marked to the contrary. In the event any such person is unable or unwilling to serve as a director, proxies may be voted for substitute nominees designated by the present board. The board has no reason to believe that any of the persons named below will be unable or unwilling to serve as a director if elected.
The board recommends that stockholders vote FOR election of the nominees named below.
3
Information with Respect to Nominees
The following table sets forth certain
information, as of the record date, with respect to each of the
nominees. Each nominee is a citizen of the United States.
Name and Address
Age
Principal Occupation
66
Chairman of the Board and Chief Executive
Vector Group Ltd.
Officer
100 S.E. Second Street
Miami, FL 33131
55
President and Chief Operating Officer
Vector Group Ltd.
100 S.E. Second Street
Miami, FL 33131
51
President and Chief Executive Officer,
Liggett Vector Brands Inc.
Liggett Group Inc. and Liggett Vector
One Park Drive
Brands Inc.
Research Triangle Park, NC 27709
61
Money Manager, Gagnon Securities LLC
Gagnon Securities LLC
1370 Avenue of the Americas
New York, NY 10022
51
Chairman and Chief Executive Officer,
Aegis Capital Corp.
Aegis Capital Corp.
70 E. Sunrise Highway
Valley Stream, NY 11581
63
Chairman of the Board and President,
182 Gannet Court
Newsote, Inc.
Manhasset, NY 11030
57
Private Investor
28 Old Church Lane
South Salem, NY 10590
Each director is elected annually and serves until the next annual meeting of stockholders and until his successor is duly elected and qualified.
Business Experience of Nominees
Bennett S. LeBow has been Chairman of the Board and Chief Executive Officer of the Company since June 1990 and has been a director of the Company since October 1986. Since November 1990, he has been Chairman of the Board and Chief Executive Officer of VGR Holding Inc., a wholly-owned subsidiary of the Company, which directly or indirectly holds the Companys equity interests in several private and public companies. Mr. LeBow has served as President and Chief Executive Officer of Vector Tobacco Inc., a subsidiary of the Company engaged in the development and marketing of low nicotine and nicotine-free cigarette products and the development of reduced risk cigarette products, since January 2001 and as a director since October 1999. Mr. LeBow has been Chairman of the Board of New Valley Corporation, a majority-owned subsidiary of the Company engaged in the real estate business and seeking to acquire additional operating companies, since January 1988 and Chief Executive Officer since November 1994.
Howard M. Lorber has been President, Chief Operating Officer and a director of the Company and VGR Holding since January 2001. Since November 1994, Mr. Lorber has served as President and Chief Operating Officer of New Valley, where he also serves as a director. Mr. Lorber has been Chairman of the Board of Directors of Hallman & Lorber Assoc. Inc., consultants and actuaries of qualified pension and profit sharing plans, and various of its affiliates since 1975; a stockholder and a registered representative of Aegis Capital Corp., a broker-dealer and a member firm of the National Association of Securities Dealers, since 1984; Chairman of the Board of Directors since 1987 and Chief Executive Officer since November 1993 of Nathans
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Ronald J. Bernstein has been a director of the Company and VGR Holding since March 2004. Mr. Bernstein has served as President and Chief Executive Officer of Liggett since September 1, 2000 and of Liggett Vector Brands since March 2002. From July 1996 to December 1999, Mr. Bernstein served as General Director and, from December 1999 to September 2000, as Chairman of Liggett-Ducat Ltd., the Companys former Russian tobacco business sold in 2000. Prior to that time, Mr. Bernstein served in various positions with Liggett commencing in 1991, including Executive Vice President and Chief Financial Officer.
Henry C. Beinstein has been a director of the Company and VGR Holding since March 2004. Mr. Beinstein has served as a money manager and registered representative at Gagnon Securities LLC, a broker-dealer, since September 2002. He retired in August 2002 as the Executive Director of Schulte Roth & Zabel LLP, a New York-based law firm, a position he had held since August 1997. Before that, Mr. Beinstein had served as the Managing Director of Milbank, Tweed, Hadley & McCloy LLP, a New York-based law firm, commencing November 1995. Mr. Beinstein was the Executive Director of Proskauer Rose LLP, a New York-based law firm, from April 1985 through October 1995. Mr. Beinstein is a certified public accountant in New York and New Jersey and prior to joining Proskauer was a partner and National Director of Finance and Administration at Coopers & Lybrand. Mr. Beinstein has been a director of Ladenburg Thalmann Financial Services since May 2001 and a director of New Valley since November 1994.
Robert J. Eide has been a director of the Company and VGR Holding since November 1993. Mr. Eide has been the Chairman and Chief Executive Officer of Aegis Capital Corp., a registered broker-dealer, since 1984. Mr. Eide also serves as a director of Nathans Famous, Inc., a restaurant chain, and Ladenburg Thalmann Financial Services.
Jeffrey S. Podell has been a director of the Company and VGR Holding since November 1993. Mr. Podell has been the Chairman of the Board and President of Newsote, Inc., a privately-held holding company, since 1989.
Jean E. Sharpe has been a director of the Company and VGR Holding since May 1998. Ms. Sharpe is a private investor and has engaged in various philanthropic activities since her retirement in September 1993 as Executive Vice President and Secretary of the Company and as an officer of various of its subsidiaries. Ms. Sharpe previously served as a director of the Company from July 1990 until September 1993.
Board of Directors and Committees
The board of directors, which held five meetings in 2003, currently has seven members. The board has determined that all four of the Companys non-employee directors have no material relationship with the Company and meet the New York Stock Exchange listing standards for independence. Mr. Eide is an officer and stockholder of Aegis Capital Corp. which performs brokerage services for New Valley. See Compensation Committee Interlocks and Insider Participation. In making the determination that this relationship is not material and does not prevent Mr. Eide from being an independent director, the board took into account that the fees paid to Aegis are comparable to those paid to other brokerage firms for similar services and the amounts involved are insignificant to both New Valley and Aegis. Each director attended at least 75% of the aggregate number of meetings of the board and of each committee of which the director was a member held during such period. To ensure free and open discussion and communication among the non-employee directors of the board, the non-employee directors will meet in executive sessions periodically, with no members of management present. The chair of the corporate governance and nominating committee will preside at the executive sessions.
The board of directors has four committees established in accordance with the Companys bylaws: the executive committee, audit committee, compensation committee, and corporate governance and nominating
5
The executive committee, whose members are Messrs. LeBow, chairman, Lorber and Eide, did not meet in 2003. The executive committee exercises, in the intervals between meetings of the board, all the powers of the board in the management and affairs of the Company, except for matters expressly reserved by law for board action.
The audit committee, whose members are currently Messrs. Beinstein, chairman, Eide and Podell and Ms. Sharpe, met six times in 2003. The committee is governed by a written charter, a copy of which is attached as Appendix A to this proxy statement. The audit committee oversees the Companys financial statements, system of internal controls, and auditing, accounting and financial reporting processes; appoints, compensates, evaluates and, where appropriate, replaces the Companys independent accountants; reviews annually the audit committee charter; and reviews and pre-approves audit and permissible non-audit services. See Audit Committee Report. Each of the members of the audit committee is financially literate, as required of audit committee members by the New York Stock Exchange. The board of directors has determined that Mr. Beinstein is an audit committee financial expert as defined by the rules of the Securities and Exchange Commission.
The compensation committee, whose members are currently Messrs. Eide, chairman, Beinstein and Podell, met four times in 2003. The committee is governed by a written charter. The compensation committee reviews, approves and administers management compensation and executive compensation plans. The compensation committee also administers the Companys 1998 and 1999 Long-Term Incentive Plans. See Compensation Committee Report on Executive Compensation.
The corporate governance and nominating committee, whose members are Ms. Sharpe, chair, and Messrs. Eide and Beinstein, was formed in March 2004. The committee is governed by a written charter. This committee assists the board of directors in identifying individuals qualified to become board members and recommends to the board the nominees for election as directors at the next annual meeting of shareholders, develops and recommends to the board the corporate governance guidelines applicable to the Company, and oversees the evaluation of the board and management. In recommending candidates for the board, the committee shall take into consideration the following criteria established by the board in the Companys corporate governance guidelines:
| personal qualities and characteristics, accomplishments and reputation in the business community; | |
| current knowledge and contacts in the communities in which the Company does business and in the Companys industry or other industries relevant to the Companys business; | |
| ability and willingness to commit adequate time to board and committee matters; | |
| the fit of the individuals skills and personality with those of other directors and potential directors in building a board that is effective, collegial and responsive to the needs of the Company; and | |
| diversity of viewpoints, background, experience and other demographics. |
The committee shall also consider such other factors as it deems appropriate, including judgment, skill, diversity, experience with businesses and other organizations of comparable size, the interplay of the candidates experience with the experience of other board members, and the extent to which the candidate would be a desirable addition to the board and any committees of the board. The committee will consider nominees recommended by stockholders, which nominations should be submitted by directing an appropriate letter and resume to the secretary of the Company. If the Company were to receive recommendations of candidates from the Companys stockholders, the committee would consider such recommendations in the same manner as all other candidates.
6
Corporate Governance Materials
The Companys corporate governance guidelines, code of business conduct and ethics and the charters of the Companys audit committee, compensation committee, and corporate governance and nominating committee are all available in the investor relations section of the Companys website (www.vectorgroupltd.com).
Executive Compensation
The following table sets forth information
concerning compensation awarded to, earned by or paid during the
past three years to those persons who were, at December 31,
2003, the Companys Chief Executive Officer and the other
four most highly compensated executive officers (collectively,
the named executive officers):
Summary Compensation Table(1)
Long-Term
Annual Compensation
Compensation
Other
Securities
All
Annual
Underlying
Other
Name and Principal Position
Year
Salary($)
Bonus($)
Compensation($)
Options(#)
Compensation($)
2003
3,739,501
(2)
1,913,450
(3)
217,492
(4)
6,000
(5)
2002
3,739,501
(2)
1,043,700
(3)
66,975
(4)
305,970
(5)
2001
3,739,501
(2)
1,043,700
(3)
68,101
(4)
551,250
505,858
(5)
2003
2,325,777
(7)
1,500,000
(7)
190,718
(4)
2002
2,257,082
(7)
2,000,000
(7)
149,905
(4)
2001
2,219,725
(7)
500,000
(7)
159,759
(4)
275,625
2003
750,000
6,000
(9)
2002
750,000
6,000
(9)
2001
750,000
2003
375,000
6,000
(9)
2002
375,000
6,000
(9)
2001
375,000
2003
650,000
6,000
(9)
2002
650,000
6,000
(9)
2001
650,000
650,000
262,500
5,100
(9)
Liggett Vector Brands and Liggett Group
(1) | Unless otherwise stated, the aggregate value of perquisites and other personal benefits received by the named executive officers are not reflected because the amounts were below the reporting requirements established by SEC rules. | |
(2) | Includes salary paid by New Valley of $2,000,000 per year. | |
(3) | Includes payments equal to 10% of Mr. LeBows base salary from the Company ($173,950 in each of 2003, 2002 and 2001) in lieu of certain other executive benefits and a special bonus of $863,500 in 2003, the proceeds of which were used by Mr. LeBow to repay to the Company its interest of $863,500 under his split-dollar insurance agreements. | |
(4) | Includes for Mr. LeBow $127,492 in 2003 for personal use of corporate aircraft and an allowance paid by New Valley to an entity affiliated with him for lodging and related business expenses of $90,000, $59,503 and $68,101 for 2003, 2002 and 2001, respectively. Includes for Mr. Lorber $41,281 in 2003 for personal use of corporate aircraft, an allowance paid by New Valley for lodging and related business expenses of $90,000 for 2003, 2002 and 2001 and an automobile allowance paid by New Valley of $59,437 for 2003, $41,973 for 2002 and $49,514 for 2001. | |
(5) | Represents $6,000 of 401(k) plan contributions for 2003 and 2002 and premiums paid in 2002 and 2001 by the Company under collateral assignment split-dollar insurance agreements covering the life of Mr. LeBow entered into by the Company in 1998 and 1999. Effective August 2002, no further |
7
premiums have been paid by the Company under the split-dollar insurance agreements. On December 31, 2003, Mr. LeBow repaid to the Company its interest of $863,500 in the split-dollar arrangements. |
(6) | Effective January 17, 2001, Mr. Lorber was appointed President and Chief Operating Officer of the Company. Mr. Lorber had previously served as a consultant to the Company and Liggett Group and as President and Chief Operating Officer of New Valley, a position he continues to hold. | |
(7) | Includes salary of $1,822,587 and bonus of $1,500,000 paid by New Valley for 2003, salary of $1,769,004 and bonus of $2,000,000 paid by New Valley for 2002 and salary of $1,739,725 and bonus of $500,000 paid by New Valley for 2001. | |
(8) | The table reflects 100% of Mr. Lampens salary and bonus, all of which are paid by New Valley. Of Mr. Lampens salary from New Valley, $187,500 per year has been reimbursed to New Valley by the Company. | |
(9) | Represents 401(k) plan contributions. |
(10) | The table reflects 100% of Mr. Bells salary, all of which are paid by the Company. Of Mr. Bells salary from the Company, $187,500 in 2003, 2002 and 2001 have been reimbursed to the Company by New Valley. |
(11) | Mr. Bernstein has served as President and Chief Executive Officer of Liggett Group since September 2000 and of Liggett Vector Brands since March 2002. |
The following table sets forth certain
information concerning option exercises during 2003 by the named
executive officers and the status of their options as of
December 31, 2003.
Aggregated Option Exercises During Last Fiscal
Year
Number of Securities
Underlying Unexercised
Value of Unexercised
Number of
Value
Options at
In-The-Money Options
Shares
Realized
December 31, 2003
at December 31, 2003*
Acquired on
Upon
Name
Exercise
Exercise
Exercisable
Unexercisable
Exercisable
Unexercisable
5,592,773
$
34,295,496
1,535,297
$
7,739,109
100,000
$
1,243,000
241,490
$
1,927,267
126,568
$
1,035,839
258,828
320,673
$
873,641
$
524,188
* | Calculated using the closing price of $16.32 per share on December 31, 2003 less the option exercise price. |
8
Equity Compensation Plan Information
The following table summarizes information about
the options, warrants and rights and other equity compensation
under the Companys equity plans as of December 31,
2003.
Number of securities remaining
Number of securities to
available for future issuance
be issued upon exercise
Weighted-average exercise
under equity compensation
of outstanding options,
price of outstanding
plans (excluding securities
warrants and rights
options, warrants and rights
reflected in column (a))
Plan Category
(a)
(b)
(c)
9,417,034
$
12.50
2,596,738
222,195
$
5.54
9,639,229
$
12.34
2,596,738
(1) | Includes options to purchase shares of the Companys Common Stock under the following stockholder-approved plans: 1998 Long-Term Incentive Plan and 1999 Long-Term Incentive Plan. |
(2) | Includes (i) options for 36,462 shares of Common Stock at an exercise price of $13.78 granted in December 1999 to the Companys three outside directors, which vested over three years; and (ii) options for 185,733 shares of Common Stock granted at an exercise price of $3.92 in 1997 and 1998 to employees of the Company, which vested in equal annual installments through January 1, 2003. |
Compensation of Directors
Outside directors of the Company receive $7,000 per annum as compensation for serving as director, $2,500 ($5,000 for the chair) per annum for each committee membership, $1,000 per meeting for each board meeting attended, and $500 per meeting for each committee meeting attended. In addition, each outside director of VGR Holding receives $28,000 per annum as compensation for serving as director, $500 per meeting for each board meeting attended, and $500 for each committee meeting attended. Each director is reimbursed for reasonable out-of-pocket expenses incurred in serving on the board of the Company and/or VGR Holding. The Company also makes available health and dental insurance coverage to its directors.
Subject to approval of the Amended and Restated 1999 Long-Term Incentive Plan by the Companys stockholders at the annual meeting, the Company will grant 10,000 restricted shares of Common Stock to each of the four outside directors of the Company. The stock grant will vest in three equal annual installments commencing on the first anniversary of the date of grant based on continued service as a director, subject to earlier vesting upon death, disability or the occurrence of a change-of-control.
Employment Agreements
Bennett S. LeBow is a party to an employment agreement with the Company dated February 21, 1992, as amended July 20, 1998. The agreement has a one-year term with automatic renewals for additional one-year terms unless notice of non-renewal is given by either party six months prior to the termination date. As of January 1, 2004, Mr. LeBows annual base salary from the Company was $1,739,501. He was also paid an annual bonus for 2003 of $869,750 and an annual payment equal to 10% of his base salary in lieu of certain other executive benefits such as club memberships, company-paid automobiles and other similar perquisites. During 2003, Mr. LeBow received, in addition to the amounts provided for in his agreement, a special bonus of $863,500, the proceeds of which were used by Mr. LeBow to repay to the Company its interest of $863,500 under his split-dollar insurance agreements. Following termination of his employment without cause, he would continue to receive his then current base salary and bonus for 24 months. Following termination of his employment within two years of a change-of-control or in connection with similar events, he would receive a lump sum payment equal to 2.99 times his then current base salary and bonus.
9
Mr. LeBow is a party to an employment agreement with New Valley dated as of June 1, 1995, as amended effective as of January 1, 1996. The agreement had an initial term of three years effective as of January 18, 1995, with an automatic one year extension on each anniversary of the effective date unless notice of non-extension is given by either party within the 60-day period before such anniversary date. As of January 1, 2004, Mr. LeBows annual base salary from New Valley was $2,000,000. Following termination of his employment without cause, he would continue to receive his base salary for a period of 36 months commencing with the next anniversary of the effective date following the termination notice. Following termination of his employment within two years of a change-of-control, he would receive a lump sum payment equal to 2.99 times his then current base salary.
Howard M. Lorber is a party to an employment agreement with the Company dated January 17, 2001. The agreement has an initial term of three years from January 17, 2001, with an automatic one-year extension on each anniversary of the effective date unless notice of non-extension is given by either party within 60 days before this date. As of January 1, 2004, Mr. Lorbers annual base salary was $519,349. Mr. Lorbers salary is subject to an annual cost of living adjustment. In addition, the Board must periodically review this base salary and may increase but not decrease it from time to time in its sole discretion. The Board may also award an annual bonus to Mr. Lorber in its sole discretion. Following termination of his employment without cause, he would continue to receive his base salary for a period of 36 months commencing with the next anniversary of the effective date following the termination notice. Following termination of his employment within two years of a change-of-control, he would receive a lump sum payment equal to 2.99 times the sum of his then current base salary and the bonus amounts earned by him for the twelve-month period ending with the last day of the month immediately before the month in which the termination occurs.
Mr. Lorber is a party to an employment agreement with New Valley dated June 1, 1995, as amended effective as of January 1, 1996. The agreement has an initial term of three years effective as of January 18, 1995, with an automatic one-year extension on each anniversary of the effective date unless notice of non-extension is given by either party within 60 days before this date. As of January 1, 2004, Mr. Lorbers annual base salary was $1,882,341. Mr. Lorbers salary is subject to an annual cost of living adjustment. In addition, the New Valley board must periodically review this base salary and may increase but not decrease it from time to time in its sole discretion. New Valleys board of directors may also award an annual bonus to Mr. Lorber in its sole discretion. The New Valley board awarded Mr. Lorber a bonus of $1,500,000 for 2003. Following termination of his employment without cause, he would continue to receive his base salary for a period of 36 months commencing with the next anniversary of the effective date following the termination notice. Following termination of his employment within two years of a change-of-control, he would receive a lump sum payment equal to 2.99 times the sum of his then current base salary and the bonus amounts earned by him for the twelve-month period ending with the last day of the month immediately before the month in which the termination occurs.
Richard J. Lampen is a party to an employment agreement with New Valley dated September 22, 1995. The agreement had an initial term of two and a quarter years from October 1, 1995 with automatic renewals after the initial term for additional one-year terms unless notice of non-renewal is given by either party within the 90-day period prior to the termination date. As of January 1, 2003, his annual base salary was $750,000. In addition, the New Valley board of directors may award an annual bonus to Mr. Lampen in its sole discretion. The New Valley board may increase but not decrease Mr. Lampens base salary from time to time in its sole discretion. Following termination of his employment without cause, Mr. Lampen would receive severance pay in a lump sum equal to the amount of his base salary he would have received if he was employed for one year after termination of his employment term.
Marc N. Bell is a party to an employment agreement with the Company dated April 15, 1994. The agreement had an initial term of two years from April 15, 1994 with automatic renewals after the initial term for additional one-year terms unless notice of non-renewal is given by either party within the 60-day period prior to the termination date. As of January 1, 2004, his annual base salary was $375,000. In addition, the board of directors may award an annual bonus to Mr. Bell in its sole discretion. The board may increase but not decrease Mr. Bells base salary from time to time in its sole discretion. Following termination of his
10
Ronald J. Bernstein, President and Chief Executive Officer of Liggett, is a party to an employment agreement with Liggett dated September 1, 2000. As of January 1, 2004, Mr. Bernsteins annual salary was $750,000. Bonus payments are at the sole discretion of the board of Liggett. In case of termination, Mr. Bernstein is covered by Liggetts executive termination policy which provides for 24 months of termination pay at the current salary of the executive, if a senior executive officers employment is terminated without cause.
Compensation Committee Interlocks and Insider Participation
During 2003, Mr. Eide served as a member of the Companys compensation committee. Mr. Eide is a stockholder, and serves as the Chairman and Chief Executive Officer, of Aegis Capital Corp., a registered broker-dealer, that has performed services for New Valley since before January 1, 2003. During 2003, Aegis received commissions and other income in the aggregate amount of approximately $48,000 from New Valley. Aegis has continued to provide services to New Valley in 2004.
Defined Benefit or Actuarial Plan Disclosure
Liggett sponsors the Retirement Plan For Salaried Non-Bargaining Unit Employees of Liggett, which is a noncontributory, defined benefit plan. Each salaried employee of the participating companies becomes a participant on the first day of the month following one year of employment with 1,000 hours of service and the attainment of age 21. A participant becomes vested as to benefits on the earlier of his attainment of age 65, or upon completion of five years of service. Benefits become payable on a participants normal retirement date, age 65, or, at the participants election, at his early retirement after he has attained age 55 and completed ten years of service. A participants annual benefit at normal retirement date is equal to the sum of: (A) the product of: (1) the sum of: (a) 1.4% of the participants average annual earnings during the five-year period from January 1, 1986 through December 31, 1990 not in excess of $19,500 and (b) 1.7% of his average annual earnings during such five-year period in excess of $19,500 and (2) the number of his years of credited service prior to January 1, 1991; (B) 1.55% of his annual earnings during each such year after December 31, 1990, not in excess of $16,500; and (C) 1.85% of his annual earnings during such year in excess of $16,500. The maximum years of credited service is 35. If an employee was hired prior to January 1, 1983, there is no reduction for early retirement. If hired on or after January 1, 1983, there is a reduction for early retirement equal to 3% per year for the number of years prior to age 65 (age 62 if the participant has at least 20 years of service) that the participant retires. The plan also provides benefits to disabled participants and to surviving spouses of participants who die before retirement. Benefits are paid in the form of a single life annuity, with optional actuarially equivalent forms of annuity available. Payment of benefits is made beginning on the first day of the month immediately following retirement. As of December 31, 1993, the accrual of benefits under the plan was frozen.
As of December 31, 2003, none of the named executive officers was eligible to receive any benefits under the retirement plan, except for Mr. Bernstein who is entitled to a monthly benefit of $372 at age 65.
Under some circumstances, the amount of retirement benefits payable under the retirement plan to some employees may be limited by the federal tax laws. Any benefit lost due to such a limitation will be made up by Liggett through a non-qualified supplemental retirement benefit plan. Liggett has accrued, but not funded, amounts to pay benefits under this supplemental plan.
Effective January 1, 2002, the Company adopted a Supplemental Executive Retirement Plan (SERP). The SERP is a defined benefit plan pursuant to which the Company will pay supplemental pension benefits to certain key employees, including the named executive officers. The SERP is intended to be unfunded for tax purposes, and payments under the SERP will be made out of the general assets of the Company.
Under the SERP, the projected annual benefit payable to a participant at his normal retirement date is a predetermined amount set by the Companys board of directors ($2,524,163 for Mr. LeBow, $1,051,875 for
11
Benefits under the SERP are generally payable in the form of a joint and survivor annuity (in the case of a married participant) or a single life annuity (in the case of an unmarried participant), with either such form of distribution representing the actuarial equivalent of the benefits due the participant. A participant may also request that his benefits be paid in a lump sum, but the Company may approve or disapprove such request in its discretion.
Compensation Committee Report on Executive Compensation
Compensation arrangements for the Companys executive officers are usually negotiated on an individual basis between Mr. LeBow and each executive. The Companys executive compensation philosophy is:
| to base managements pay, in part, on achievement of the Companys goals; | |
| to provide incentives to enhance stockholder value; | |
| to provide competitive levels of compensation; | |
| to recognize individual initiative and achievement; and | |
| to assist the Company in attracting talented executives to a challenging and demanding environment and to retain such executives for the benefit of the Company and its subsidiaries. |
Compensation arrangements for the Companys executive officers are determined initially by evaluating the responsibilities of the position held and the experience of the individual, and by reference to the competitive marketplace for management talent. Annual salary adjustments are determined by evaluating the competitive marketplace, the performance of the Company, the performance of the executive, and any increased responsibilities assumed by the executive. Bonus arrangements of certain executive officers are fixed by contract and are not contingent. The Company, from time to time, considers the payment of discretionary bonuses to its executive officers. Bonuses are determined based, first, upon the level of achievement by the Company of its goals and, second, upon the level of personal achievement by such executive officers.
The compensation package of Mr. LeBow was negotiated and approved by the independent members of the board of directors of the Company in February 1992. The compensation of Mr. LeBow is set forth in an employment agreement between Mr. LeBow and the Company. See Employment Agreements, above. During 2003, Mr. LeBow received, in addition to the amounts provided for in his agreement, a special bonus of $863,500, the proceeds of which were used by Mr. LeBow to repay to the Company its interest of $863,500 under his split-dollar insurance agreements.
The compensation package of Mr. Lorber was negotiated and approved by the board of directors of the Company in January 2001 when Mr. Lorber was elected President and Chief Operating Officer of the Company. At that time, Mr. Lorbers base salary from the Company was established at the same level as the consulting payments he had previously received from the Company and Liggett, subject to an annual cost of living adjustment. See Employment Agreements, above.
12
The compensation package of Mr. Bernstein, as President and Chief Executive Officer of Liggett, was negotiated and approved by the board of directors of Liggett in September 2000. See Employment Agreements, above. Effective January 1, 2004, Mr. Bernsteins base salary was increased from $650,000 to $750,000 to reflect the scope of his responsibilities, as the President and Chief Executive Officer of Liggett Vector Brands Inc. and Liggett Group Inc., for the management of the Companys cigarette business.
During 2003, the compensation committee adopted a corporate aircraft policy which permits personal use of corporate aircraft by Messrs. LeBow and Lorber subject to annual limits of $200,000 and $100,000, respectively. The value of the personal usage will be calculated using the applicable standard industry fare level formula established by the Internal Revenue Service, and Messrs. LeBow and Lorber will pay income tax on such value.
In 1993, Section 162(m) was added to the Internal Revenue Code of 1986. This section generally provides that no publicly held company may deduct compensation in excess of $1,000,000 paid in any taxable year to its chief executive officer or any of its four other highest paid officers unless:
| the compensation is payable solely on account of the attainment of performance goals; | |
| the performance goals are determined by a compensation committee of two or more outside directors; | |
| the material terms under which compensation is to be paid are disclosed to and approved by the stockholders of the Company; and | |
| the compensation committee certifies that the performance goals were met. |
This limitation is applicable to the cash compensation paid by the Company to Mr. LeBow and the other named executives officers in 2003.
The foregoing information is provided by the compensation committee of the Company.
Robert J. Eide, Chairman | |
Jeffrey S. Podell |
Audit Committee Report
The audit committee report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
Management is responsible for the Companys internal controls and the financial reporting process. PricewaterhouseCoopers LLP, the Companys independent auditors, are responsible for performing an audit of the Companys financial statements in accordance with generally accepted auditing standards and for expressing an opinion on those financial statements based on their audit. The audit committee reviews these processes on behalf of the board of directors. In this context, the committee has reviewed and discussed the audited financial statements contained in the 2003 Annual Report on Form 10-K with the Companys management and its independent auditors.
The committee has discussed with the independent auditors the matters required to be discussed by the Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended.
The committee has received the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as amended, and has discussed with the independent auditors their independence. The committee has also considered whether the provision of the services described under the caption Audit Fees and Non-Audit Fees is compatible with maintaining the independence of the independent auditors.
13
Based on the review and discussions referred to above, the committee recommended to the board of directors that the audited financial statements be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission.
This report is submitted by the audit committee of the Company.
Henry C. Beinstein, Chairman | |
Robert J. Eide | |
Jeffrey S. Podell | |
Jean E. Sharpe |
Audit and Non-Audit Fees
The audit committee reviews and approves audit and permissible non-audit services performed by PricewaterhouseCoopers LLP, as well as the fees charged by PricewaterhouseCoopers LLP for such services. In accordance with Section 10A(i) of the Securities Exchange Act, before PricewaterhouseCoopers LLP is engaged to render audit or non-audit services, the engagement is approved by the audit committee. All of the services provided and fees charged by PricewaterhouseCoopers LLP in 2003 were pre-approved by the audit committee.
Audit Fees. The aggregate fees billed by PricewaterhouseCoopers LLP for professional services for the audit of the annual financial statements of the Company and its consolidated subsidiaries and the reviews of the financial statements included in the Companys quarterly reports on Form 10-Q for the years ended December 31, 2003 and 2002 were $702,800 and $673,450, respectively, net of expenses.
Audit-Related Fees. The aggregate fees billed by PricewaterhouseCoopers LLP for professional services for audit-related fees for the years ended December 31, 2003 and 2002 were $50,000 and $45,000, respectively, net of expenses. These amounts include employee benefit plan audits and attest services in 2003 and 2002 and internal control consultations related to Sarbanes-Oxley Section 404 compliance in 2003.
Tax Fees. The aggregate fees billed by PricewaterhouseCoopers LLP for professional services for tax services for the years ended December 31, 2003 and 2002, were $130,929 and $169,286, respectively, net of expenses. The services were primarily for state tax advice.
All Other Fees. Aggregate fees billed for all other services rendered by PricewaterhouseCoopers LLP for the years ended December 31, 2003 and 2002, were $0 and $89,653, respectively, net of expenses. These other fees were primarily for human resource services.
14
Performance Graph
The following graph compares the total annual
return of the Companys Common Stock, the S&P 500
Index, the S&P MidCap 400 Index and the AMEX Tobacco Index
for the five years ended December 31, 2003. The graph
assumes that $100 was invested on December 31, 1998 in the
Common Stock and each of the indices, and that all cash
dividends and distributions were reinvested. Information for the
Companys Common Stock includes the value of the
December 20, 2001 distribution to the Companys
stockholders of shares of Ladenburg Thalmann Financial Services
common stock and assumes such stock was held by the stockholders
until December 31, 2003.
Certain Relationships and Related
Transactions
In 1995, the Company and New Valley entered into
an expense sharing agreement pursuant to which lease, legal,
support and administrative expenses are allocated to the entity
incurring the expense. The Company was reimbursed net amounts of
approximately $480,000 in 2003 under this agreement. The
arrangement with New Valley has continued in 2004.
In connection with the Companys convertible
note offering in July 2001, the placement agent for the
offering required that Bennett S. LeBow, the principal
stockholder and Chairman of the Company, grant the placement
agent the right, in its sole discretion, to borrow up to
3,472,875 shares of Common Stock from the principal stockholder
or any entity affiliated with him during the three-year period
ending June 29, 2004 and that he agree not to dispose of
such shares during the three-year period, subject to limited
exceptions. In consideration for the principal stockholder
agreeing to lend his shares in order to facilitate the
Companys offering and accepting the resulting liquidity
risk, the Company agreed to pay him or an affiliate designated
by him an annual fee, payable on a quarterly basis at his
election in cash or shares of Common Stock, equal to 1% of the
aggregate market value of 3,472,875 shares of Common Stock. For
the year ended December 31, 2003, the Company paid an
entity affiliated with Mr. LeBow an aggregate of $498,000
in cash under this agreement.
15
As of the record date, High River Limited
Partnership, an investment entity owned by Carl C. Icahn, was
the beneficial owner of 21.9% of the Common Stock. High River
owns $20,000,000 of the Companys 6.25% convertible notes
due 2008, convertible into 737,735 shares of Common Stock on the
record date. High River received interest payments on the notes
of $1,250,000 during 2003.
Various executive officers and directors of the
Company and New Valley serve as members of the Board of
Directors of Ladenburg Thalmann Financial Services Inc., which
is indebted to New Valley. For additional information concerning
these borrowings, see note 21 to the Companys consolidated
financial statements in the accompanying 2003 annual report to
stockholders, which note should be deemed part of this proxy
statement.
Howard M. Lorber, the President and a director of
the Company, is Chairman of Hallman & Lorber. During 2002,
Mr. Lorber and Hallman & Lorber and its affiliates
received ordinary and customary insurance commissions
aggregating approximately $541,000 on various insurance policies
issued for the Company and its subsidiaries and investees.
Mr. Lorber and Hallman & Lorber and its affiliates have
continued to provide services to the Company in 2004.
See also Compensation Committee Interlocks
and Insider Participation.
APPROVAL OF VECTOR GROUP LTD. AMENDED AND
RESTATED
The board has approved and the Company has
adopted, subject to stockholder approval, the Vector Group Ltd.
Amended and Restated 1999 Long-Term Incentive Plan. A general
description of the basic features of the plan is set forth
below. This description is qualified in its entirety by
reference to the full text of the plan which is attached as
Appendix B to this proxy statement.
Purpose
The purpose of the plan is to promote the
interests of the Company, its subsidiaries and its stockholders
by enabling the Company to attract, retain and motivate
officers, employees, directors and consultants and to align the
interests of those individuals and the Companys
stockholders. To do this, the plan offers equity-based
opportunities to provide such persons with a proprietary
interest in maximizing the growth, profitability and overall
success of the Company and its subsidiaries.
Number of Shares
The maximum number of shares of Common Stock as
to which awards may be granted under the plan will increase from
6,077,531 shares to 8,500,000 shares. Stock options for
approximately 3,853,000 shares have been awarded and are
currently outstanding under the 1999 plan prior to its amendment
and restatement. Approximately 396,000 shares are currently
available for award under the Vector Group Ltd. 1998 Long-Term
Incentive Plan. During any calendar year, no individual may be
granted stock options under the plan to acquire more than
1,825,000 shares of Common Stock. In addition, during the term
of the plan, no individual participant may receive awards of
stock options, stock appreciation rights and/or restricted
shares in excess of 4,250,000 shares. These limits are subject
to proportional adjustment to reflect stock changes, such as
stock dividends and stock splits.
If any awards expire or terminate unexercised,
the shares of Common Stock allocable to the unexercised or
terminated portion will again be available for awards under the
plan, subject to limitations.
Administration
The administration, interpretation and operation
of the plan will be vested in a committee of the board. Members
of the committee will serve at the pleasure of the board, which
may at any time remove or add members to it. The day-to-day
administration of the plan may be carried out by officers and
employees of the
16
Eligibility
All officers, employees, directors and
consultants of the Company and its subsidiaries are eligible to
receive awards under the plan; the Company and its subsidiaries
currently have approximately 1,100 employees. Awards under the
plan will be made by the committee. Awards will be made pursuant
to individual award agreements between the Company and each
participant.
Awards Under the Plan
Introduction.
Awards
under the plan may consist of stock options, stock appreciation
rights or restricted shares, each of which is described below.
All awards will be evidenced by an agreement approved by the
committee. In the discretion of the committee, an eligible
employee may receive awards from one or more of the categories
described below, and more than one award may be granted to an
eligible employee. In the event of any change in the outstanding
shares of Common Stock of the Company by reason of certain stock
changes, including without limitation stock dividends and stock
splits, the terms of awards and number of shares of any
outstanding award may be equitably adjusted by the board in its
sole discretion. Except as set forth below under Planned
2004 Stock Awards under the Plan, no determination has
been made as to future awards which may be granted under the
plan, although it is anticipated that future recipients of
awards may include current executive officers and directors of
the Company and its subsidiaries.
Stock Options and Stock Appreciation
Rights.
A stock option is an award
that entitles a participant to purchase shares of Common Stock
at a price fixed at the time the option is granted. Stock
options granted under the plan may be in the form of incentive
stock options which qualify for special tax treatment or
non-qualified stock options, and may be granted alone or in
addition to other awards under the plan, or in tandem with stock
appreciation rights (SARs).
SARs entitle a participant to receive, upon
exercise, cash, restricted shares or unrestricted shares of
Common Stock, or any combination thereof, as provided in the
relevant award agreement, with a value equal to the difference
between
multiplied by the number of shares of Common
Stock for which the SAR has been exercised.
No SAR may be exercised until six months after
its grant or prior to the exercisability of the stock option
with which it is granted in tandem, whichever is later.
The exercise price and other terms and conditions
of options will be determined by the committee at the time of
grant, and in the case of incentive stock options, the exercise
price will not be less than the fair market value of the Common
Stock on the date of the grant. No term of any incentive stock
options may exceed ten years after grant. An option or SAR grant
under the plan does not provide an optionee any rights as a
shareholder. These rights will accrue only as to shares actually
purchased through the exercise of an option or the settlement of
an SAR.
The committee may cancel
out-of-the-money stock options granted under the
plan or the 1998 plan and reissue either immediately or after
the passage of time (e.g., 6 months and a day) options to
the holders of such cancelled options with such terms and
conditions and exercise prices as the committee determines.
An option or SAR grant under the plan may, if
determined by the committee, include the payment of dividend
equivalents. Under such an award, the participant would receive
a payment equal to the amount of any dividend or other
distribution that would have been paid on the shares covered by
the award had the covered shares been issued and outstanding on
the dividend record date.
17
Exercise of an option or an SAR will result in
the cancellation of the related option or SAR to the extent of
the number of shares in respect of which such option or SAR has
been exercised. Unless otherwise determined by the committee or
provided in the relevant award agreement, stock options shall
become exercisable over a three-year period from the date of
grant with 33 1/3% vesting on each anniversary of the grant
in that time period.
Payment for shares issuable on exercise of an
option may be made either in cash or, if permitted by the
committee, by tendering a fully-secured promissory note or
shares of Common Stock owned by a participant for at least six
months with a fair market value at the date of exercise equal to
the portion of the exercise price not paid in cash. The
committee may also allow participants to simultaneously exercise
stock options and sell the acquired shares of Common Stock under
a cashless exercise arrangement.
Restricted Share
Awards.
Restricted share awards are
grants of Common Stock made to a participant subject to
conditions established by the committee in the relevant award
agreement. The restricted shares become unrestricted only in
accordance with the conditions and vesting schedule, if any,
provided in the relevant award agreement, but in no event may
restricted shares vest before six months after the date of
grant. A participant may not sell or otherwise dispose of
restricted stock until the conditions imposed by the committee
have been satisfied. Restricted share awards under the plan may
be granted alone or in addition to other awards under the plan.
Restricted shares that vest will be reissued as unrestricted
Common Stock.
Each participant who receives a grant of
restricted shares will have the right to receive all dividends
and vote or execute proxies for such shares. Any stock dividends
will be treated as additional restricted shares.
Forfeiture Upon Termination
Unless otherwise provided in the relevant award
agreement or in a participants then-effective employment
agreement, if a participants employment is terminated for
any reason, any unexercisable option or SAR will be forfeited
and canceled by the Company. The participants right to
exercise any then-exercisable option or SAR will terminate
90 days after the date of termination, but not beyond the
stated term of the stock option or SAR. However, the committee
may, to the extent options and/or SARs were exercisable on the
date of termination, extend these periods, but not beyond the
stated term of such option and/or SAR. If a participant dies,
becomes totally disabled or retires, he or she or his or her
estate or other legal representative, to the extent these
options or SARs are exercisable immediately before the date of
death, total disability or retirement, will be entitled to
exercise any stock options or SARs for one year, but not beyond
the stated term of the option or SAR.
If a participants employment is terminated
for any reason other than death, total disability or retirement
before satisfaction and/or lapse of the restrictions, terms and
conditions, applicable to any grant of restricted shares, such
restricted shares will be immediately forfeited. However, the
committee may, in its sole discretion, determine within
90 days after termination that all or a portion of the
restricted shares should not be forfeited. In the case of death,
total disability or retirement, the participant or his or her
estate or other legal representatives will become 100% vested in
any restricted shares as of the date of termination.
Amendment, Suspension or Termination of the
Plan
The board of directors may suspend or terminate
the plan at any time and may amend the plan at any time as it
deems advisable to insure that awards conform to or otherwise
reflect changes in applicable law or regulations, or otherwise
as it may deem in the best interests of the Company or any
subsidiary. No amendment, suspension or termination by the board
of directors shall materially adversely affect the rights of any
award, without the consent of the grantee, or make any change
that would disqualify the plan from the benefits or entitlements
to deductions provided under Sections 422 and 162(m) of the
Internal Revenue Code.
Federal Income Tax Consequences of the
Plan
Incentive Stock
Options.
Stock options granted under
the plan may be incentive stock options (within the meaning of
Section 422 of the Code) or non-qualified stock options.
Upon the grant of an incentive stock
18
Upon the subsequent disposition of shares
acquired upon the exercise of an incentive stock option, the
federal income tax consequences will depend upon when the
disposition occurs and the type of disposition. If the shares
are disposed of after the second anniversary of the date of
grant of the option and after the end of the one-year period
beginning on the day after the shares are issued to the
optionee, any gain or loss realized upon the disposition will be
long-term capital gain or loss, and the Company will not be
entitled to any income tax deduction in respect of the option or
its exercise. For purposes of determining the amount of the gain
or loss, the optionees tax basis in the shares will be the
option price.
Generally, if the shares are disposed of within
these periods, the excess of the amount realized up to the fair
market value of the shares on the exercise date over the option
price will be compensation taxable to the optionee as ordinary
income. In this case, the Company will be entitled to a
deduction, subject to the provisions of Section 162(m) of
the Code discussed below under the caption Limits on
Deductions, equal to the amount of ordinary income
realized by the optionee.
If an optionee has not remained an employee of
the Company during the period beginning with the grant of an
incentive stock option and ending on the day three months (one
year if the optionee becomes disabled) before the date the
option is exercised, the exercise of the option will be treated
as the exercise of a non-qualified stock option with the tax
consequences described below.
Non-Qualified Stock
Options.
Upon the grant of a
non-qualified stock option, an optionee will not recognize any
income. At the time a nonqualified option is exercised, the
optionee will recognize compensation taxable as ordinary income,
and the Company will be entitled to a deduction, subject to the
provisions of Section 162(m) of the Code discussed below
under the caption Limits on Deductions, in an amount
equal to the difference between the fair market value on the
exercise date of the shares acquired and the option price. Upon
a subsequent disposition of the shares, the optionee will
recognize long-or short-term capital gain or loss, depending
upon the holding period of the shares. For purposes of
determining the amount of the gain or loss, the optionees
tax basis in the shares will be the fair market value of the
shares on the exercise date.
If an optionee elects to tender shares of Common
Stock in partial or full payment of the option price for shares
to be acquired through the exercise of an option, generally the
optionee will not recognize any gain or loss on such tendered
shares. However, if the shares tendered were previously acquired
upon exercise of an incentive stock option, and exercise occurs
within two years after the date of grant of the option or one
year after the tendered shares were acquired, the tender will be
a taxable disposition with the tax consequences described above
under the caption Incentive Stock Options for
taxable dispositions within two years after the date of grant of
the option or within one year after shares are acquired upon the
exercise of an incentive stock option.
If the optionee tenders shares upon an exercise
of an option that would result in the receipt of compensation by
the optionee, the optionee will recognize compensation taxable
as ordinary income. In this case, the Company will be entitled
to a deduction, subject to the provisions of Section 162(m)
of the Code discussed below under the caption Limits on
Deductions, in an amount equal only to the fair market
value of the number of shares received by the optionee upon
exercise in excess of the number of tendered shares, less any
cash paid by the optionee.
Stock Appreciation
Rights.
Generally, upon the grant of a
stock appreciation right, an optionee will not realize any
income. At the time a stock appreciation right is exercised, an
optionee will realize compensation taxable as ordinary income,
and the Company will be entitled to a deduction, in an amount
equal to any cash
19
Restricted Stock.
An
employee will not realize any income upon an award of restricted
stock. At the time the terms and conditions applicable to a
share of restricted stock are satisfied, an employee will
realize compensation taxable as ordinary income, and the Company
will be entitled to a deduction, equal to the then fair market
value of the shares of unrestricted Common Stock received by the
employee. The employees tax basis for any such shares of
Common Stock would be their fair market value on the date such
terms and conditions are satisfied.
An employee who receives an award of shares of
restricted stock may irrevocably elect under Section 83(b)
of the Code to report compensation taxable as ordinary income,
and the Company will be entitled to a corresponding deduction,
in an amount equal to the fair market value of the shares
determined without regard to any restrictions on the date of the
transfer of the shares to the employee upon such award. This
election must be made by the employee not later than
30 days after the date of such award. If an election is
made, no income would be recognized by the employee and the
Company will not be entitled to a corresponding deduction at the
time the applicable terms and conditions are satisfied. The
employees tax basis for the shares of restricted stock
received would be the fair market value of the restricted stock
determined without regard to any restrictions thereon on the
date of the award. If an employee makes this election and
subsequently all or part of the award is forfeited, the employee
will not be entitled to a deduction as a result of the
forfeiture.
Limits on
Deductions.
Under Section 162(m)
of the Code, the amount of compensation paid to the chief
executive officer and the four other most highly paid executive
officers of the Company in the year for which a deduction is
claimed by the Company (including its subsidiaries) is limited
to $1,000,000 per person in any year. However, compensation
which is performance-based will be excluded for purposes of
calculating the amount of compensation subject to this
limitation. The ability of the Company to claim a deduction for
compensation paid to any other executive officer or employee is
not affected by this provision.
The Company has structured the plan so that
compensation for which the Company may claim a deduction in
connection with the exercise of non-qualified stock options and
related SARs and the disposition by an optionee of shares
acquired upon the exercise of incentive stock options may be
performance-based within the meaning of Section 162(m).
However, the Companys deduction for any payments to
holders of options equal to the amount of any dividends or
similar distributions with respect to the shares of the Common
Stock underlying the unexercised portion of the options will be
subject to the limitations on deductibility under
Section 162(m). Because the restricted share awards under
the plan are not deemed to be performance-based under
Section 162(m), amounts for which the Company may claim a
deduction upon the lapse of any restrictions on such restricted
share awards will be subject to the limitations on deductibility
under Section 162(m).
The recognition by an employee of compensation
income with respect to a grant or an award under the plan will
be subject to withholding for federal income and employment tax
purposes. If an employee, to the extent permitted by the terms
of a grant or award, uses shares of Common Stock to satisfy the
federal income and employment tax withholding obligation, or any
similar withholding obligation for state and local tax
obligations, the employee will recognize a capital gain or loss,
short-term or long-term, depending on the tax basis and holding
period for the shares.
Amended and Restated Plan Benefits
As described above, the committee in its
discretion will select the participants who receive awards and
the size and type of those awards, if the plan is approved by
stockholders. It is, therefore, not possible to predict the
awards that will be made to particular individuals or groups in
the future under the plan. No stock options were awarded in
fiscal 2003 to the Companys Chief Executive Officer or any
of the other named
20
Planned 2004 Stock Awards Under the
Plan
Subject to approval of the plan by stockholders,
the Company will grant 10,000 restricted shares of Common Stock
to each of the four outside directors of the Company
(Messrs. Beinstein, Eide and Podell and Ms. Sharpe).
The stock grant will vest in three equal annual installments
commencing on the first anniversary of the date of grant based
on continued service as a director, subject to earlier vesting
upon death, disability or the occurrence of a change-of-control.
The Company also plans, subject to stockholder
approval of the plan, to offer approximately six employees (who
are not executive officers of the Company) the opportunity to
have their out-of-money stock options cancelled,
with replacement options to be issued six months and a day later
at the then fair market value of the Common Stock and subject to
such terms and conditions as the committee may determine. These
employees hold approximately 266,000 options with exercise
prices ranging from $25.44 to $35.76 per share.
At the record date, the total number of
outstanding shares of Common Stock was 39,112,553 shares. The
closing price of the Common Stock on April 19, 2004 on The
New York Stock Exchange was $17.00 per share.
Effective Date
The plan became effective on April 16, 2004,
the date of its adoption by the board of directors, subject to
stockholder approval. The plan will terminate on
December 31, 2013, except with respect to awards then
outstanding. Thereafter no further awards will be granted under
the plan unless the plan is extended by the board of directors.
Approval of the Plan
To become effective, the plan must be approved by
the affirmative vote of a majority of the votes cast at the
annual meeting on this proposal by the holders of the shares of
Common Stock entitled to vote, assuming a majority of votes is
cast.
The board recommends a vote
FOR
approval
of the plan.
RELATIONSHIP WITH INDEPENDENT
ACCOUNTANTS
PricewaterhouseCoopers LLP has been the
independent accountants for the Company since December 1986
and will serve in that capacity for the 2004 fiscal year unless
the audit committee deems it advisable to make a substitution.
It is expected that one or more representatives of such firm
will attend the annual meeting and be available to respond to
any questions. These representatives will be given an
opportunity to make statements at the annual meeting if they
desire.
MISCELLANEOUS
Annual Report
The Company has mailed, with this proxy
statement, a copy of the annual report to each stockholder as of
the record date. If a stockholder requires an additional copy of
the annual report, the Company will provide one, without charge,
on the written request of any such stockholder addressed to the
Companys secretary at Vector Group Ltd., 100 S.E. Second
Street, 32nd Floor, Miami, Florida 33131.
21
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Exchange Act requires
directors and executive officers of the Company, as well as
persons who own more than 10% of a registered class of the
Companys equity securities, to file reports of initial
beneficial ownership and changes in beneficial ownership on
Forms 3, 4 and 5 with the SEC. These persons are also required
by SEC regulations to furnish the Company with copies of all
reports that they file.
To the Companys knowledge, based solely on
review of the copies of such reports furnished to the Company
and representations that no other reports were required, during
and with respect to the fiscal year ended December 31,
2003, all reporting persons have timely complied with all filing
requirements applicable to them.
Stockholder Communications
Any stockholder wishing to communicate with any
of the Companys directors regarding the Company may write
to the director, c/o the Companys secretary at Vector
Group Ltd., 100 S.E. Second Street, 32ndFloor, Miami, Florida
33131. The secretary will forward these communications directly
to the director(s) in question. The independent directors of the
Board review and approve the stockholders communication
process periodically to ensure effective communication with
stockholders.
Although the Company does not have a policy with
regard to Board members attendance at the annual meeting
of stockholders, all of the directors are invited to attend such
meeting. Two of the Companys directors were in attendance
at the Companys 2003 annual meeting.
Stockholder Proposals for the 2005 Annual
Meeting
Proposals of stockholders intended to be
presented at the 2005 annual meeting of stockholders of the
Company and included in the Companys proxy statement for
that meeting pursuant to Rule 14a-8 of the Exchange Act
must be received by the Company at its principal executive
offices, 100 S.E. Second Street, 32nd Floor, Miami, Florida
33131, Attention: Marc N. Bell, Secretary, on or before
December 23, 2004 in order to be eligible for inclusion in
the Companys proxy statement relating to that meeting.
Notice of a stockholder proposal submitted outside the processes
of Rule 14a-8 will be considered untimely unless submitted
by March 9, 2005.
Other Matters
All information in this proxy statement
concerning the Common Stock has been adjusted to give effect to
the 5% stock dividends paid to the stockholders of the Company
on September 30, 1999, September 28, 2000,
September 28, 2001, September 27, 2002 and
September 29, 2003.
The cost of this solicitation of proxies will be
borne by the Company. In addition to the use of the mails, some
of the directors, officers and regular employees of the Company
may, without additional compensation, solicit proxies personally
or by telephone. The Company will reimburse brokerage houses,
banks and other custodians, nominees and fiduciaries for
customary and reasonable expenses incurred in forwarding
soliciting material to the beneficial owners of Common Stock.
The board knows of no other matters which will be
presented at the annual meeting. If, however, any other matter
is properly presented at the annual meeting, the proxy solicited
by this proxy statement will be voted in accordance with the
judgment of the person or persons holding such proxy.
Dated: April 21, 2004
22
Appendix A
Vector Group Ltd.
AUDIT COMMITTEE CHARTER
Purpose of Committee
The purpose of the Audit Committee (the
Committee) of the Board of Directors (the
Board) of Vector Group Ltd. (the
Company) is provide assistance to the Board in
fulfilling its responsibility relating to oversight of corporate
accounting, reporting practices of the Company, the quality and
integrity of the financial reports of the Company, the
Companys compliance with legal and regulatory
requirements, the qualifications and independence of the
Companys independent auditors and the performance of the
Companys independent auditors and internal audit function.
In so doing, the Committee shall maintain free and open means of
communication between the directors, the independent auditors,
the internal auditor and the financial management of the Company.
Committee Membership
The Committee shall be composed of at least three
directors who are independent of the management of the Company
and are free of any relationship that, in the opinion of the
Board, would interfere with their exercise of independent
judgment as Committee members.
All members of the Committee shall have a working
familiarity with basic finance and accounting practices and
shall meet the independence, experience and expertise
requirements of the New York Stock Exchange and other applicable
laws and regulations (including SEC Rule 10A-3). At least
one member of the Committee shall have accounting or related
financial management expertise as defined by the Securities and
Exchange Commission (the SEC) or, in the business
judgment of the Board, be capable of serving the functions
expected of such an audit committee financial expert.
Members of the Committee shall be appointed by
the Board, and shall serve at the pleasure of the Board and for
such term or terms as the Board may determine.
The Committee members shall not simultaneously
serve on the audit committees of more than two other public
companies unless the Board determines that such simultaneous
service would not impair the ability of such director to serve
on the Committee, and discloses this determination in the
Companys annual proxy statement.
Committee Structure and Operations
The Board shall designate one member of the
Committee as its Chair. The Committee shall meet in person or
telephonically with management at least four times a year at a
time and place determined by the Committee Chair, with further
meetings to occur, or actions to be taken by written consent,
when deemed necessary or desirable by the Committee or its Chair.
As part of its objective to foster open
communication, the entire Committee shall meet at least annually
with management, the internal auditor and the independent
auditors at the conclusion of the annual audit in separate
executive sessions. Among the items to be discussed with the
independent auditors is their evaluation of the Companys
financial, accounting and auditing personnel and the cooperation
that the independent auditors received during the course of the
audit.
The Committee shall meet with the independent
auditors and management quarterly, prior to the release of
earnings and the filing of the Form 10-K and Form 10-Q.
A-1
Committee Responsibilities
The Committee shall have the ultimate authority
and responsibility to directly appoint, retain, compensate,
evaluate and terminate the independent auditors (subject, if
applicable, to stockholder ratification). The Committee shall
approve in advance all audit engagement fees and terms and all
non-audit engagements of the independent auditors. The Committee
shall consult with management, but shall not delegate these
responsibilities. The independent auditors shall report directly
to the Committee.
In carrying out its responsibilities, the
Committee believes its policies and procedures should remain
flexible, in order to best react to changing conditions and to
help ensure to the directors and stockholders that the corporate
accounting and reporting practices of the Company are in
accordance with all requirements and are of high quality.
The Committee, to the extent it deems
appropriate, shall:
Financial
Statement and Disclosure Matters
Internal
Controls
A-2
Independent
Auditors
Internal
Audit
A-3
Other
Delegation to Subcommittee
The Committee may, in its discretion, delegate
all or a portion of its responsibilities to a subcommittee of
the Committee. The Committee may, in its discretion, delegate to
one or more of its members the authority to pre-approve any
audit or non-audit services to be performed by the independent
auditors, provided that any such approvals are presented to the
Committee at its next scheduled meeting.
Performance Evaluation
The Committee shall prepare and review with the
Board an annual performance evaluation of the Committee, which
evaluation shall compare the performance of the Committee with
the requirements of this charter. The performance evaluation
shall also recommend to the Board any improvements to the
Committees charter deemed necessary or desirable by the
Committee. The performance evaluation by the Committee shall be
conducted in such manner as the Committee deems appropriate. The
report to the Board may take the form of an oral report by the
Chair of the Committee or any other member of the Committee
designated by the Committee to make this report.
Resources and Authority of the
Committee
The Audit Committee shall have the resources and
authority appropriate to discharge its responsibilities,
including the authority to select, retain, terminate and approve
the fees and other retention terms of special or independent
counsel, accountants or other experts and advisors, as it deems
necessary or appropriate to carry out its duties, without
seeking approval of the Board or management. The Company shall
provide appropriate funding, as determined by the Committee, for
payment of compensation to the independent auditors and to any
advisors employed by the Committee and for payment of the
administrative expenses of the Committee.
Limitation of Committees Role
While the Committee has the responsibilities and
powers set forth in this charter, it is not the duty of the
Committee to plan or conduct audits or to determine that the
Companys financial statements and disclosures are complete
and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations.
These are the responsibilities of management and the independent
auditors.
A-4
Appendix B
VECTOR GROUP LTD.
AMENDED AND RESTATED
* * * * *
1.
Purpose.
The purpose of the
Amended and Restated 1999 Long-Term Incentive Plan (the
Plan) is to further and promote the interests of
Vector Group Ltd. (the Company), its Subsidiaries
and its shareholders by enabling the Company and its
Subsidiaries to attract, retain and motivate officers,
employees, directors and consultants or those who will become
officers, employees, directors or consultants, and to align the
interests of those individuals and the Companys
shareholders. To do this, the Plan offers equity-based
opportunities providing such officers, employees, directors and
consultants with a proprietary interest in maximizing the
growth, profitability and overall success of the Company and its
Subsidiaries.
2.
Definitions.
For purposes of the
Plan, the following terms shall have the meanings set forth
below:
B-1
3.
Administration
.
B-2
4.
Term of Plan/Common Stock Subject to
Plan.
5.
Eligibility.
Individuals eligible
for Awards under the Plan shall consist of all officers,
employees, directors and consultants, or those who will become
such officers, employees, directors or consultants, of the
Company and/or its Subsidiaries who are responsible for the
management, growth and protection of the business of the Company
and/or its Subsidiaries or whose performance or contribution, in
the sole discretion of the Committee, benefits or will benefit
the Company.
6.
Stock Options.
B-3
B-4
7.
Stock Appreciation Rights.
8.
Restricted Shares.
B-5
Such stock certificate evidencing such shares
shall, in the sole discretion of the Committee, be deposited
with and held in custody by the Company until the restrictions
thereon shall have lapsed and all of the terms and conditions
applicable to such grant shall have been satisfied.
9.
Deferral Elections/Tax
Reimbursements/Other Provisions.
B-6
10.
Dividend Equivalents.
In addition
to the provisions of Section 8.5 of the Plan, Awards of
Stock Options and/or Stock Appreciation Rights, may, in the sole
discretion of the Committee and if provided for in the relevant
Award Agreement, earn dividend equivalents. In respect of any
such Award which is outstanding on a dividend record date for
Common Stock, the Participant shall be credited with an amount
equal to the amount of cash or stock dividends that would have
been paid on the shares of Common Stock covered by such Award
had such covered shares been issued and outstanding on such
dividend record date. The Committee shall establish such rules
and procedures governing the crediting of such dividend
equivalents, including, without limitation, the amount, the
timing, form of payment and payment contingencies and/or
restrictions of such dividend equivalents, as it deems
appropriate or necessary.
11.
Termination of Employment.
B-7
12.
Non-transferability of Awards.
Unless otherwise provided in the Award Agreement, no Award under
the Plan or any Award Agreement, and no rights or interests
herein or therein, shall or may be assigned, transferred, sold,
exchanged, encumbered, pledged, or otherwise hypothecated or
disposed of by a Participant or any beneficiary(ies) of any
Participant, except by testamentary disposition by the
Participant or the laws of intestate succession. No such
interest shall be subject to execution, attachment or similar
legal process, including, without limitation, seizure for the
payment of the Participants debts, judgements, alimony or
separate maintenance. Unless otherwise provided in the Award
Agreement, during the lifetime of a Participant, Stock Options
and Stock Appreciation Rights are exercisable only by the
Participant.
13.
Changes in Capitalization and Other
Matters.
B-8
14.
Amendment, Suspension and
Termination.
15.
Miscellaneous.
B-9
B-10
B-11
VECTOR GROUP LTD.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE 2004 ANNUAL MEETING OF
The undersigned stockholder of Vector Group Ltd. (the Company) hereby
constitutes and appoints each of Marc N. Bell and Joselynn D. Van Siclen
attorney and proxy of the undersigned, with power of substitution, to attend,
vote and act for the undersigned at the 2004 Annual Meeting of Stockholders of
the Company, a Delaware corporation, to be held at The Hyatt Regency Miami, 400
S.E. Second Avenue, Miami, Florida 33131 on Monday, May 24, 2004 at 1:00 p.m.
local time, and at any adjournments or postponements thereof, with respect to
the following on the reverse side of this proxy card and, in their discretion,
on such other matters as may properly come before the meeting and at any
adjournments or postponements thereof.
(Continued and to be signed on the reverse side.)
The Board of Directors recommends a vote FOR all nominees in Item 1 and FOR the
approval of Item 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
Nominees: Bennett S. LeBow, Howard M. Lorber, Ronald J. Bernstein, Henry
C. Beinstein, Robert J. Eide, Jeffrey S. Podell and Jean E. Sharpe.
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to
withhold, as shown
here:
x
Item 2. Proposal to approve Vector Group Ltd. Amended and Restated 1999
Long-Term Incentive Plan
The shares represented by this proxy will be voted in the manner directed
by the undersigned stockholder. If not otherwise directed, this proxy will be
voted FOR the election of the nominees and FOR approval of the Amended and
Restated 1999 Long-Term Incentive Plan.
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
o
Signature of Stockholder
Date
Signature of Stockholder
Date
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such.
If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
12/98
12/99
12/00
12/01
12/02
12/03
100
67
81
188
77
127
100
121
110
97
76
97
100
115
135
134
114
155
100
65
112
149
142
189
the fair market value on the exercise date of the
shares with respect to which an SAR is exercised and
the fair market value of such shares on the date
the SAR was granted,
By Order of the Board of Directors,
BENNETT S. LEBOW
Chairman of the Board of Directors
1.
Review and discuss the annual audited financial
statements, including disclosures made in managements
discussion and analysis of financial condition and results of
operations, with management and the independent auditors to
determine that the independent auditors are satisfied with the
disclosure and content of the financial statements and
managements discussion and analysis to be presented to the
stockholders. Any significant changes in the Companys
selection or application of accounting principles should be
reviewed. The Committee shall then recommend to the Board
whether the audited financial statements should be included in
the Companys Form 10-K.
2.
Review and discuss with management and the
independent auditors the Companys quarterly financial
statements prior to the filing of its Form 10-Q, including
the results of the independent auditors review of the
quarterly financial statements.
3.
Discuss with management and the independent
auditors prior to the filing of the Form 10-K and
Form 10-Q significant financial reporting issues and
judgments made in connection with the preparation of the
Companys financial statements, including analyses of the
effects of alternative methods within generally accepted
accounting principles on the financial statements.
4.
Discuss with management and the independent
auditors all significant deficiencies in the design or operation
of internal controls which could adversely affect the
Companys ability to record, process, summarize and report
financial data, and any fraud, whether or not material, that
involves management or other employees who have a significant
role in the Companys internal controls.
5.
Discuss with management and the independent
auditors the Companys significant financial risks or
exposures and consider the steps management has taken to monitor
and control such risks to the Company.
6.
Review, with the Companys counsel, any
legal matters that would reasonably be expected to have a
significant impact on the Companys financial statements.
7.
Review, with management and the independent
auditors, the effect of regulatory and accounting initiatives,
as well as off-balance sheet structures, on the financial
statements of the Company.
8.
Discuss generally the Companys earnings
press releases, including the type and presentation of
information to be included, as well as the financial information
and any earnings guidance provided to analysts in quarterly
conference calls and to rating agencies.
1.
Consider with the independent auditors and
financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the
Company, and elicit any recommendations for the improvement of
such internal control procedures or particular areas where new
or more detailed controls or procedures are desirable. These
controls shall provide reasonable assurance of the
integrity of financial information and assurance
that the Companys reported financial results are presented
fairly in conformity with generally accepted accounting
principles. Particular emphasis should be given to the adequacy
of such internal controls to expose any payments, transactions
or procedures that are illegal or otherwise improper. The
Committee should consider and review any related significant
findings and recommendations of the independent auditors and
managements responses thereto.
1.
Arrange to have the independent auditors report
directly to the Committee.
2.
Review the independent auditors proposed
audit scope and approach.
3.
Obtain a formal written statement on a periodic
basis from the independent auditors delineating all
relationships the independent auditors have with the Company.
The Committee shall review and discuss with the independent
auditors any disclosed relationships or services that would
reasonably be expected to impact the objectivity and
independence of the independent auditors and take appropriate
action to satisfy itself of the independence of the independent
auditors.
4.
Obtain assurance from the independent auditors
that if they detect or become aware of any illegal action that
the Committee is adequately informed and obtain a report if the
independent auditors have reached specific conclusions with
respect to such illegal acts.
5.
Review with the independent auditors any
difficulties the auditors encountered in the course of their
audit work.
6.
Resolve any disagreements between management and
the independent auditors including any restrictions on the scope
of activities or access to requested information.
7.
Discuss written communications between the
independent auditors and management, such as any management
letter or schedule of unadjusted differences.
8.
Review annually the qualifications, performance
and independence of the independent auditors, particularly the
lead partner of the independent auditors team.
9.
Obtain and review annually a report by the
independent auditors describing the firms internal quality
control procedures, any material issues raised by the most
recent internal quality-control review, or peer review, of the
firm or by any inquiry or investigation by governmental or
professional authorities within the preceding five years in
respect to one or more independent audits by the firm and any
steps taken to deal with any such issues, and all relationships
between the independent auditors and the Company.
10.
Ensure the rotation of the audit partners as
required by law and consider whether there should be a regular
rotation of the audit firm itself.
11.
Establish hiring policies for employees or former
employees of the independent auditors.
1.
Review and consult with management regarding the
appointment and replacement of the internal auditor. The Company
may outsource the internal audit function to a firm other than
the independent auditors approved by the Committee.
2.
Review annually internal audit objectives,
resources and effectiveness, its objectivity and status within
the Company, and its annual audit plan, including its
coordination with the examination performed by the independent
auditors. Determine that no unjustified restrictions or
limitations which impact or impair the scope of the internal
auditor or the internal auditors access to required
information.
3.
Review significant internal audit findings
reported during the year and their respective impact on internal
controls, the control environment and the overall efficiency and
effectiveness of the Companys operations.
1.
Establish procedures for the receipt, retention
and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters,
and the confidential, anonymous submission by the Companys
employees of concerns regarding questionable accounting or
auditing matters.
2.
Review and reassess the adequacy of the
Committees charter annually.
3.
Submit the minutes of all meetings of the
Committee to, or discuss the matters discussed at each Committee
meeting with, the Board.
4.
Prepare a report for inclusion in the
Companys annual proxy statement that describes the
Committees composition and responsibilities and how they
were discharged as required by the rules of the SEC.
2.1
Award
means an award
or grant made to a Participant under Sections 6, 7 and/or 8 of
the Plan.
2.2
Award Agreement
means
the agreement executed by a Participant pursuant to
Sections 3.2 and 15.6 of the Plan in connection with the
granting of an Award.
2.3
Board
means the Board
of Directors of the Company, as constituted from time to time.
2.4
Code
means the
Internal Revenue Code of 1986, as in effect and as amended from
time to time, or any successor statute thereto, together with
any rules, regulations and interpretations promulgated
thereunder or with respect thereto.
2.5
Committee
means the
committee of the Board established to administer the Plan, as
described in Section 3 of the Plan.
2.6
Common Stock
means
the Common Stock, par value $.10 per share, of the Company or
any security of the Company issued by the Company in
substitution or exchange therefor.
2.7
Company
means Vector
Group Ltd., a Delaware corporation, or any successor corporation
to Vector Group Ltd.
2.8
Disability
means
disability as defined in the Participants Award Agreement
or then effective employment agreement, or if the
Participants Award Agreement does not define disability,
or if the Participant is not then a party to an effective
employment agreement with the Company which defines disability,
Disability means disability as determined by the
Committee in accordance with standards and procedures similar to
those under the Companys long-term disability plan, if
any. Subject to the first sentence of this Section 2.8, at
any time that the Company does not maintain a long-term
disability plan, Disability shall mean any physical
or mental disability which is determined to be total and
permanent by a physician selected in good faith by the Company.
2.9
Exchange Act
means
the Securities Exchange Act of 1934, as in effect and as amended
from time to time, or any successor statute thereto, together
with any rules, regulations and interpretations promulgated
thereunder or with respect thereto.
2.10
Fair Market Value
means on, or with respect to, any given date(s), the closing
price of the Common Stock, as reported on the consolidated
transaction reporting system for the New York Stock Exchange for
such date(s) or, if the Common Stock was not traded on such
date(s), on the next preceding day or days on which the Common
Stock was traded. If at any time the Common Stock is not
traded on such exchange, the Fair Market Value of
a share of the Common Stock shall be determined in good faith by
the Board.
2.11
Incentive Stock
Option
means any stock option granted pursuant to the
provisions of Section 6 of the Plan (and the relevant Award
Agreement) that is intended to be (and is specifically
designated as) an incentive stock option within the
meaning of Section 422 of the Code.
2.12
Non-Qualified Stock
Option
means any stock option granted pursuant to the
provisions of Section 6 of the Plan (and the relevant Award
Agreement) that is not (and is specifically designated as not
being) an Incentive Stock Option.
2.13
Participant
means
any individual who is selected from time to time under
Section 5 to receive an Award under the Plan.
2.14
Plan
means the
Vector Group Ltd. Amended and Restated 1999 Long-Term Incentive
Plan, as set forth herein and as in effect and as amended from
time to time (together with any rules and regulations
promulgated by the Committee with respect thereto).
2.15
Restricted Shares
means the restricted shares of Common Stock granted pursuant to
the provisions of Section 8 of the Plan and the relevant
Award Agreement.
2.16
Retirement
means the
voluntary retirement by the Participant from active employment
with the Company and its Subsidiaries on or after the attainment
of (i) age 65, or (ii) 60, with the consent of the
Board.
2.17
Stock Appreciation
Right
means an Award described in Section 7.2 of
the Plan and granted pursuant to the provisions of
Section 7 of the Plan.
2.18
Subsidiary(ies)
means any corporation (other than the Company) in an unbroken
chain of corporations, including and beginning with the Company,
if each of such corporations, other than the last corporation in
the unbroken chain, owns, directly or indirectly, more than
fifty percent (50%) of the voting stock in one of the other
corporations in such chain, or any subsidiary of the
Company as defined in Rule 405 under the Securities Act of
1933, as amended.
3.1
The Committee.
The Plan shall be
administered by the Committee. The Committee shall be appointed
from time to time by the Board and shall be comprised of not
less than two (2) of the then members of the Board who are
Outside Directors (within the meaning of Code
Section 162(m) and the regulations promulgated thereunder)
of the Company. Consistent with the Bylaws of the Company,
members of the Committee shall serve at the pleasure of the
Board and the Board, subject to the immediately preceding
sentence, may at any time and from time to time remove members
from, or add members to, the Committee.
3.2
Plan Administration and Plan.
The
Committee is authorized to construe and interpret the Plan and
to promulgate, amend and rescind rules and regulations relating
to the implementation, administration and maintenance of the
Plan. Subject to the terms and conditions of the Plan, the
Committee shall make all determinations necessary or advisable
for the implementation, administration and maintenance of the
Plan including, without limitation, (a) selecting the
Plans Participants, (b) making Awards in such amounts
and form as the Committee shall determine, (c) imposing
such restrictions, terms and conditions upon such Awards as the
Committee shall deem appropriate, and (d) correcting any
technical defect(s) or technical omission(s), or reconciling any
technical inconsistency(ies), in the Plan and/or any Award
Agreement. The Committee may designate persons other than
members of the Committee to carry out the day-to-day ministerial
administration of the Plan under such conditions and limitations
as it may prescribe, except that the Committee shall not
delegate its authority with regard to the selection for
participation in the Plan and/or the granting of any Awards to
Participants. The Committees determinations under the Plan
need not be uniform and may be made selectively among
Participants, whether or not such Participants are similarly
situated. Any determina-
tion, decision or action of the Committee in
connection with the construction, interpretation,
administration, implementation or maintenance of the Plan shall
be final, conclusive and binding upon all Participants and any
person(s) claiming under or through any Participants. The
Company shall effect the granting of Awards under the Plan, in
accordance with the determinations made by the Committee, by
execution of written agreements and/or other instruments in such
form as is approved by the Committee.
3.3
Liability Limitation.
Neither the
Board nor the Committee, nor any member of either, shall be
liable for any act, omission, interpretation, construction or
determination made in good faith in connection with the Plan (or
any Award Agreement), and the members of the Board and the
Committee shall be entitled to indemnification and reimbursement
by the Company in respect of any claim, loss, damage or expense
(including, without limitation, attorneys fees) arising or
resulting therefrom to the fullest extent permitted by law
and/or under any directors and officers liability insurance
coverage which may be in effect from time to time.
4.1
Term.
The Plan shall terminate on
December 31, 2013, except with respect to Awards then
outstanding. After such date no further Awards shall be granted
under the Plan.
4.2
Common Stock.
The maximum number
of shares of Common Stock in respect of which Awards may be
granted or paid out under the Plan, subject to adjustment as
provided in Section 13.2 of the Plan, shall not exceed
8,500,000 shares. In the event of a change in the Common Stock
of the Company that is limited to a change in the designation
thereof to Capital Stock or other similar
designation, or to a change in the par value thereof, or from
par value to no par value, without increase or decrease in the
number of issued shares, the shares resulting from any such
change shall be deemed to be the Common Stock for purposes of
the Plan. Common Stock which may be issued under the Plan may be
either authorized and unissued shares or issued shares which
have been reacquired by the Company (in the open-market or in
private transactions) and which are being held as treasury
shares. No fractional shares of Common Stock shall be issued
under the Plan.
4.3
Computation of Available Shares.
For the purpose of computing the total number of shares of
Common Stock available for Awards under the Plan, there shall be
counted against the limitations set forth in Section 4.2 of
the Plan the maximum number of shares of Common Stock
potentially subject to issuance upon exercise or settlement of
Awards granted under Sections 6 and 7 of the Plan, and the
number of shares of Common Stock issued under grants of
Restricted Shares pursuant to Section 8 of the Plan, in
each case determined as of the date on which such Awards are
granted. If any Awards expire unexercised or are forfeited,
surrendered, cancelled, terminated or settled in cash in lieu of
Common Stock, the shares of Common Stock which were theretofore
subject (or potentially subject) to such Awards shall again be
available for Awards under the Plan to the extent of such
expiration, forfeiture, surrender, cancellation, termination or
settlement of such Awards.
6.1
Terms and Conditions.
Stock
options granted under the Plan shall be in respect of Common
Stock and may be in the form of Incentive Stock Options or
Non-Qualified Stock Options (sometimes referred to collectively
herein as the Stock Option(s)). Such Stock Options
shall be subject to the terms and conditions set forth in this
Section 6 and any additional terms and conditions, not
inconsistent with the express terms and provisions of the Plan,
as the Committee shall set forth in the relevant Award Agreement.
6.2
Grant.
Stock Options may be
granted under the Plan in such form as the Committee may from
time to time approve. Stock Options may be granted alone or in
addition to other Awards under the Plan or in tandem with Stock
Appreciation Rights. Special provisions shall apply to Incentive
Stock Options granted to any employee who owns (within the
meaning of Section 422(b)(6) of the Code) more than ten
percent (10%) of the total combined voting power of all classes
of stock of the Company or its parent corporation or any
subsidiary of the Company, within the meaning of
Sections 424(e) and (f) of the Code (a 10%
Shareholder).
6.3
Exercise Price.
The exercise
price per share of Common Stock subject to a Stock Option shall
be determined by the Committee, including, without limitation, a
determination based on a formula determined by the Committee;
provided, however,
that the exercise price of an
Incentive Stock Option shall not be less than one hundred
percent (100%) of the Fair Market Value of the Common Stock on
the date of the grant of such Incentive Stock Option;
provided, further, however,
that, in the case of a 10%
Shareholder, the exercise price of an Incentive Stock Option
shall not be less than one hundred ten percent (110%) of the
Fair Market Value of the Common Stock on the date of grant.
6.4
Term.
The term of each Stock
Option shall be such period of time as is fixed by the
Committee;
provided, however
, that the term of any
Incentive Stock Option shall not exceed ten (10) years
(five (5) years, in the case of a 10% Shareholder) after
the date immediately preceding the date on which the Incentive
Stock Option is granted.
6.5
Method of Exercise.
A Stock
Option may be exercised, in whole or in part, by giving written
notice of exercise to the Secretary of the Company, or the
Secretarys designee, specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full
of the exercise price in cash, by certified check, bank draft or
money order payable to the order of the Company or, if permitted
by the Committee (in its sole discretion) and applicable law, by
delivery of, alone or in conjunction with a partial cash or
instrument payment, (a) a fully-secured promissory note or
notes, (b) shares of Common Stock already owned by the
Participant for at least six (6) months, or (c) some
other form of payment acceptable to the Committee. The Committee
may also permit Participants (either on a selective or group
basis) to simultaneously exercise Stock Options and sell the
shares of Common Stock thereby acquired, pursuant to a
cashless exercise arrangement or program, selected
by and approved of in all respects in advance by the Committee.
Payment instruments shall be received by the Company subject to
collection. The proceeds received by the Company upon exercise
of any Stock Option may be used by the Company for general
corporate purposes. Any portion of a Stock Option that is
exercised may not be exercised again.
6.6
Exercisability.
In respect of any
Stock Option granted under the Plan, unless otherwise provided
in the Award Agreement or in the Participants employment
agreement in respect of any such Stock Option, such Stock Option
shall become exercisable as to the aggregate number of shares of
Common Stock underlying such Stock Option, as determined on the
date of grant, as follows:
33%, on the first anniversary of the date of
grant of the Stock Option, provided the Participant is then
employed by the Company and/or one of its Subsidiaries;
66%, on the second anniversary of the date of
grant of the Stock Option, provided the Participant is then
employed by the Company and/or one of its Subsidiaries; and
100%, on the third anniversary of the date of
grant of the Stock Option, provided the Participant is then
employed by the Company and/or one of its Subsidiaries.
6.7
Tandem Grants.
If Non-Qualified
Stock Options and Stock Appreciation Rights are granted in
tandem, as designated in the relevant Award Agreements, the
right of a Participant to exercise any such tandem Stock Option
shall terminate to the extent that the shares of Common Stock
subject to such Stock Option are used to calculate amounts or
shares receivable upon the exercise of the related tandem Stock
Appreciation Right.
6.8
Repricings Permitted.
The Committee may, at any time, in its sole discretion, cancel
out-of-the-money stock options granted under the
Plan or under the Vector Group Ltd. 1998 Long-Term Incentive
Plan, and reissue either immediately or after the passage of
time (e.g., 6 months and a day) options to the holders of
such cancelled options with such terms and conditions and
exercise prices as the Committee determines.
7.1
Terms and Conditions.
The grant
of Stock Appreciation Rights under the Plan shall be subject to
the terms and conditions set forth in this Section 7 and any
additional terms and conditions, not inconsistent with the
express terms and provisions of the Plan, as the Committee shall
set forth in the relevant Award Agreement.
7.2
Stock Appreciation Rights.
A
Stock Appreciation Right is an Award granted with respect to a
specified number of shares of Common Stock entitling a
Participant to receive an amount equal to the excess of the Fair
Market Value of a share of Common Stock on the date of exercise
over the Fair Market Value of a share of Common Stock on the
date of grant of the Stock Appreciation Right, multiplied by the
number of shares of Common Stock with respect to which the Stock
Appreciation Right shall have been exercised.
7.3
Grant.
A Stock Appreciation Right
may be granted in addition to any other Award under the Plan or
in tandem with or independent of a Non-Qualified Stock Option.
7.4
Date of Exercisability.
Unless
otherwise provided in the Participants employment
agreement or the Award Agreement in respect of any Stock
Appreciation Right, a Stock Appreciation Right may be exercised
by a Participant, in accordance with and subject to all of the
procedures established by the Committee, in whole or in part at
any time and from time to time during its specified term.
Notwithstanding the preceding sentence, in no event shall a
Stock Appreciation Right be exercisable prior to the date which
is six (6) months after the date on which the Stock
Appreciation Right was granted or prior to the exercisability of
any Non-Qualified Stock Option with which it is granted in
tandem. The Committee may also provide, as set forth in the
relevant Award Agreement and without limitation, that some Stock
Appreciation Rights shall be automatically exercised and settled
on one or more fixed dates specified therein by the Committee.
7.5
Form of Payment.
Upon exercise of
a Stock Appreciation Right, payment may be made in cash, in
Restricted Shares or in shares of unrestricted Common Stock, or
in any combination thereof, as the Committee, in its sole
discretion, shall determine and provide in the relevant Award
Agreement.
7.6
Tandem Grant.
The right of a
Participant to exercise a tandem Stock Appreciation Right shall
terminate to the extent such Participant exercises the
Non-Qualified Stock Option to which such Stock Appreciation
Right is related.
8.1
Terms and Conditions.
Grants of
Restricted Shares shall be subject to the terms and conditions
set forth in this Section 8 and any additional terms and
conditions, not inconsistent with the express terms and
provisions of the Plan, as the Committee shall set forth in the
relevant Award Agreement. Restricted Shares may be granted alone
or in addition to any other Awards under the Plan. Subject to
the terms of the Plan, the Committee shall determine the number
of Restricted Shares to be granted to a Participant and the
Committee may provide or impose different terms and conditions
on any particular Restricted Share grant made to any
Participant. With respect to each Participant receiving an Award
of Restricted Shares, there shall be issued a stock certificate
(or certificates) in respect of such Restricted Shares. Such
stock certificate(s) shall be registered in the name of such
Participant, shall be accompanied by a stock power duly executed
by such Participant, and shall bear, among other required
legends, the following legend:
The transferability of this certificate and
the shares of stock represented hereby are subject to the terms
and conditions (including, without limitation, forfeiture
events) contained in the
Vector Group Ltd. Amended and Restated 1999
Long-Term Incentive Plan and an Award Agreement entered into
between the registered owner hereof and Vector Group Ltd. Copies
of such Plan and Award Agreement are on file in the office of
the Secretary of Vector Group Ltd., 100 S.E. Second Street,
Miami Florida 33131. Vector Group Ltd. will furnish to the
recordholder of the certificate, without charge and upon written
request at its principal place of business, a copy of such Plan
and Award Agreement. Vector Group Ltd. reserves the right to
refuse to record the transfer of this certificate until all such
restrictions are satisfied, all such terms are complied with and
all such conditions are satisfied.
8.2
Restricted Share Grants.
A grant
of Restricted Shares is an Award of shares of Common Stock
granted to a Participant, subject to such restrictions, terms
and conditions as the Committee deems appropriate, including,
without limitation, (a) restrictions on the sale,
assignment, transfer, hypothecation or other disposition of such
shares, (b) the requirement that the Participant deposit
such shares with the Company while such shares are subject to
such restrictions, and (c) the requirement that such shares
be forfeited upon termination of employment for specified
reasons within a specified period of time or for other reasons
(including, without limitation, the failure to achieve
designated performance goals).
8.3
Restriction Period.
In accordance
with Sections 8.1 and 8.2 of the Plan and unless otherwise
determined by the Committee (in its sole discretion) at any time
and from time to time, Restricted Shares shall only become
unrestricted and vested in the Participant in accordance with
such vesting schedule relating to such Restricted Shares, if
any, as the Committee may establish in the relevant Award
Agreement (the Restriction Period). Notwithstanding
the preceding sentence, in no event shall the Restriction Period
be less than six (6) months after the date of grant. During
the Restriction Period, such stock shall be and remain unvested
and a Participant may not sell, assign, transfer, pledge,
encumber or otherwise dispose of or hypothecate such Award. Upon
satisfaction of the vesting schedule and any other applicable
restrictions, terms and conditions, the Participant shall be
entitled to receive payment of the Restricted Shares or a
portion thereof, as the case may be, as provided in
Section 8.4 of the Plan.
8.4
Payment of Restricted Share
Grants.
After the satisfaction and/or lapse of the
restrictions, terms and conditions established by the Committee
in respect of a grant of Restricted Shares, a new certificate,
without the legend set forth in Section 8.1 of the Plan,
for the number of shares of Common Stock which are no longer
subject to such restrictions, terms and conditions shall, as
soon as practicable thereafter, be delivered to the Participant.
8.5
Shareholder Rights.
A Participant
shall have, with respect to the shares of Common Stock
underlying a grant of Restricted Shares, all of the rights of a
shareholder of such stock (except as such rights are limited or
restricted under the Plan or in the relevant Award Agreement).
Any stock dividends paid in respect of unvested Restricted
Shares shall be treated as additional Restricted Shares and
shall be subject to the same restrictions and other terms and
conditions that apply to the unvested Restricted Shares in
respect of which such stock dividends are issued.
9.1
Deferrals.
The Committee may
permit a Participant to elect to defer receipt of any payment of
cash or any delivery of shares of Common Stock that would
otherwise be due to such Participant by virtue of the exercise,
earn out or settlement of any Award made under the Plan. If any
such election is permitted, the Committee shall establish rules
and procedures for such deferrals, including, without
limitation, the payment or crediting of reasonable interest on
such deferred amounts credited in cash, and the payment or
crediting of dividend equivalents in respect of deferrals
credited in units of Common Stock. The Committee may also
provide in the relevant Award Agreement for a tax reimbursement
cash payment to be made by the Company in favor of any
Participant in connection with the tax consequences resulting
from the grant, exercise, settlement, or earn out of any Award
made under the Plan.
9.2
Maximum Yearly Awards.
The
maximum annual Common Stock amounts in this Section 9.2 are
subject to adjustment under Section 13.2 and are subject to
the Plan maximum under Section 4.2. Each individual
Participant may not receive in any calendar year Awards of Stock
Options or Stock Appreciation Rights exceeding 1,825,000
underlying shares of Common Stock. In addition, during the Term
of the Plan, each individual Participant may not receive Awards
of Stock Options, Stock Appreciation Rights and/or Restricted
Shares exceeding one-half of the maximum number of shares of
Common Stock in respect of which Awards may be granted or paid
out under the Plan as provided in Section 4.2.
11.1
General.
Except as is otherwise
provided (a) in the relevant Award Agreement as determined
by the Committee (in its sole discretion), or (b) in the
Participants then effective employment agreement, if any,
the following terms and conditions shall apply as appropriate
and as not inconsistent with the terms and conditions, if any,
contained in such Award Agreement and/or such employment
agreement:
11.1.1
Options/SARs.
If a
Participants employment with the Company terminates for
any reason any then unexercisable Stock Options and/or Stock
Appreciation Rights shall be forfeited and cancelled by the
Company. Except as otherwise provided in this
Section 11.1.1, if a Participants employment with the
Company and its Subsidiaries terminates for any reason, such
Participants rights, if any, to exercise any then
exercisable Stock Options and/or Stock Appreciation Rights, if
any, shall terminate ninety (90) days after the date of
such termination (but not beyond the stated term of any such
Stock Option and/or Stock Appreciation Right as determined under
Sections 6.4 and 7.4) and thereafter such Stock Options or
Stock Appreciation Rights shall be forfeited and cancelled by
the Company. The Committee, in its sole discretion, may
determine that any such Participants Stock Options and/or
Stock Appreciation Rights, if any, to the extent exercisable
immediately prior to any termination of employment (other than a
termination due to death, Retirement or Disability), may remain
exercisable for an additional specified time period after such
ninety (90) day period expires (subject to any other
applicable terms and provisions of the Plan and the relevant
Award Agreement), but not beyond the stated term of any such
Stock Option and/or Stock Appreciation Right. If any termination
of employment is due to death, Retirement or Disability, a
Participant (and such Participants estate, designated
beneficiary or other legal representative, as the case may be
and as determined by the Committee) shall have the right, to the
extent exercisable immediately prior to any such termination, to
exercise such Stock Options and/or Stock Appreciation Rights, if
any, at any time within the one (1) year period following
such termination due to death, Retirement or Disability (but not
beyond the term of any such Stock Option and/or Stock
Appreciation Right as determined under Sections 6.4 and
7.4).
11.1.2
Restricted Shares.
If a
Participants employment with the Company and its
Subsidiaries terminates for any reason (other than due to
Disability, Retirement or death) prior to the satisfaction
and/or lapse of the restrictions, terms and conditions
applicable to a grant of Restricted Shares, such Restricted
Shares shall immediately be cancelled and the Participant (and
such Participants estate, designated beneficiary or other
legal representative) shall forfeit any rights or interests in
and with respect to any such Restricted Shares. Notwithstanding
anything to the
contrary in this Section 11, the Committee,
in its sole discretion, may determine, prior to or within ninety
(90) days after the date of such termination, that all or a
portion of any such Participants Restricted Shares shall
not be so cancelled and forfeited. If the Participants
employment terminates due to death, Disability or Retirement,
the Participant shall become 100% vested in any such
Participants restricted Shares as of the date of any such
termination.
13.1
No Corporate Action Restriction.
The existence of the Plan, any Award Agreement and/or the Awards
granted hereunder shall not limit, affect or restrict in any way
the right or power of the Board or the shareholders of the
Company to make or authorize (a) any adjustment,
recapitalization, reorganization or other change in the
Companys or any Subsidiarys capital structure or its
business, (b) any merger, consolidation or change in the
ownership of the Company or any Subsidiary, (c) any issue
of bonds, debentures, capital, preferred or prior preference
stocks ahead of or affecting the Companys or any
Subsidiarys capital stock or the rights thereof,
(d) any dissolution or liquidation of the Company or any
Subsidiary, (e) any sale or transfer of all or any part of
the Companys or any Subsidiarys assets or business,
or (f) any other corporate act or proceeding by the Company
or any Subsidiary. No Participant, beneficiary or any other
person shall have any claim against any member of the Board or
the Committee, the Company or any Subsidiary, or any employees,
officers or agents of the Company or any subsidiary, as a result
of any such action.
13.2
Recapitalization Adjustments.
In
the event of any change in capitalization affecting the Common
Stock of the Company, including, without limitation, a stock
dividend or other distribution, stock split, reverse stock
split, recapitalization, consolidation, subdivision, split-up,
spin-off, split-off, combination or exchange of shares or other
form of reorganization or recapitalization, or any other change
affecting the Common Stock, the Board shall authorize and make
such proportionate adjustments, if any, as the Board deems
appropriate to reflect such change, including, without
limitation, with respect to the aggregate number of shares of
the Common Stock for which Awards in respect thereof may be
granted under the Plan, the maximum number of shares of the
Common Stock which may be granted or awarded to any Participant,
the number of shares of the Common Stock covered by each
outstanding Award, and the exercise price or other price per
share of Common Stock in respect of outstanding Awards.
13.3
Certain Mergers.
13.3.1 If the Company enters into or is
involved in any merger, reorganization or other business
combination with any person or entity (such merger,
reorganization or other business combination to be referred to
herein as a Merger Event) and as a result of any
such Merger Event the Company will be or is the surviving
corporation, a Participant shall be entitled, as of the date of
the execution of the agreement evidencing the Merger Event (the
Execution Date) and with respect to both exercisable
and unexercisable Stock Options and/or Stock Appreciation Rights
(but only to the extent not previously exercised), to receive
substitute stock options and/or stock appreciation rights in
respect of the shares of the surviving corporation on such terms
and conditions, as to the number of shares, pricing and
otherwise, which shall substantially preserve the value, rights
and benefits of any affected Stock Options or Stock Appreciation
Rights granted hereunder as of the date of the consummation of
the Merger Event. Notwithstanding anything to the contrary in
this Section 13.3, if any Merger Event occurs, the Company
shall have the right, but not the obligation, to pay to each
affected Participant an amount in cash or certified check equal
to the excess of the Fair Market Value of the Common Stock
underlying any
affected unexercised Stock Options or Stock
Appreciation Rights as of the Execution Date (whether then
exercisable or not) over the aggregate exercise price of such
unexercised Stock Options and/or Stock Appreciation Rights, as
the case may be.
13.3.2 If, in the case of a Merger Event in
which the Company will not be, or is not, the surviving
corporation, and the Company determines not to make the cash or
certified check payment described in Section 13.3.1 of the
Plan, the Company shall compel and obligate, as a condition of
the consummation of the Merger Event, the surviving or resulting
corporation and/or the other party to the Merger Event, as
necessary, or any parent, subsidiary or acquiring corporation
thereof, to grant, with respect to both exercisable and
unexercisable Stock Options and/or Stock Appreciation Rights
(but only to the extent not previously exercised), substitute
stock options or stock appreciation rights in respect of the
shares of common or other capital stock of such surviving or
resulting corporation on such terms and conditions, as to the
number of shares, pricing and otherwise, which shall
substantially preserve the value, rights and benefits of any
affected Stock Options and/or Stock Appreciation Rights
previously granted hereunder as of the date of the consummation
of the Merger Event.
13.3.3 Upon receipt by any affected
Participant of any such cash, certified check, or substitute
stock options or stock appreciation rights as a result of any
such Merger Event, such Participants affected Stock
Options and/or Stock Appreciation Rights for which such cash,
certified check or substitute awards was received shall be
thereupon cancelled without the need for obtaining the consent
of any such affected Participant.
13.3.4 The foregoing adjustments and the
manner of application of the foregoing provisions, including,
without limitation, the issuance of any substitute stock options
and/or stock appreciation rights, shall be determined in good
faith by the Committee in its sole discretion. Any such
adjustment may provide for the elimination of fractional shares.
14.1
In General.
The Board may
suspend or terminate the Plan (or any portion thereof) at any
time and may amend the Plan at any time and from time to time in
such respects as the Board may deem advisable to insure that any
and all Awards conform to or otherwise reflect any change in
applicable laws or regulations, or to permit the Company or the
Participants to benefit from any change in applicable laws or
regulations, or in any other respect the Board may deem to be in
the best interests of the Company or any Subsidiary. No such
amendment, suspension or termination shall (x) materially
adversely effect the rights of any Participant under any
outstanding Stock Options, Stock Appreciation Rights or
Restricted Share grants, without the consent of such
Participant, or (y) make any change that would disqualify
the Plan, or any other plan of the Company or any Subsidiary
intended to be so qualified, from the benefits provided under
Section 422 of the Code, or any successor provisions
thereto.
14.2
Award Agreement Modifications.
The Committee may (in its sole discretion) amend or modify at
any time and from time to time the terms and provisions of any
outstanding Stock Options, Stock Appreciation Rights or
Restricted Share grants, in any manner to the extent that the
Committee under the Plan or any Award Agreement could have
initially determined the restrictions, terms and provisions of
such Stock Options, Stock Appreciation Rights and/or Restricted
Share grants, including, without limitation, changing or
accelerating (a) the date or dates as of which such Stock
Options or Stock Appreciation Rights shall become exercisable,
or (b) the date or dates as of which such Restricted Share
grants shall become vested. No such amendment or modification
shall, however, materially adversely affect the rights of any
Participant under any such Award without the consent of such
Participant.
15.1
Tax Withholding.
The Company
shall have the right to deduct from any payment or settlement
under the Plan, including, without limitation, the exercise of
any Stock Option or Stock Appreciation Right, or the delivery,
transfer or vesting of any Common Stock or Restricted Shares,
any federal, state, local or other taxes of any kind which the
Committee, in its sole discretion, deems
necessary to be withheld to comply with the Code
and/or any other applicable law, rule or regulation. If the
Committee, in its sole discretion, permits shares of Common
Stock to be used to satisfy any such tax withholding, such
Common Stock shall be valued based on the Fair Market Value of
such stock as of the date the tax withholding is required to be
made, such date to be determined by the Committee. The Committee
may establish rules limiting the use of Common Stock to meet
withholding requirements by Participants who are subject to
Section 16 of the Exchange Act.
15.2
No Right to Employment.
Neither
the adoption of the Plan, the granting of any Award nor the
execution of any Award Agreement shall confer upon any employee
of the Company or any Subsidiary any right to continued
employment with the Company or any Subsidiary, as the case may
be, nor shall it interfere in any way with the right, if any, of
the Company or any Subsidiary to terminate the employment of any
employee at any time for any reason.
15.3
Unfunded Plan.
The Plan shall be
unfunded and the Company shall not be required to segregate any
assets in connection with any Awards under the Plan. Any
liability of the Company to any person with respect to any Award
under the Plan or any Award Agreement shall be based solely upon
the contractual obligations that may be created as a result of
the Plan or any such Award or Award Agreement. No such
obligation of the Company shall be deemed to be secured by any
pledge of, encumbrance on, or other interest in, any property or
asset of the Company or any Subsidiary. Nothing contained in the
Plan or any Award Agreement shall be construed as creating in
respect of any Participant (or beneficiary thereof or any other
person) any equity or other interest of any kind in any assets
of the Company or any Subsidiary or creating a trust of any kind
or a fiduciary relationship of any kind between the Company, any
Subsidiary and/or any such Participant, any beneficiary thereof
or any other person.
15.4
Other Company Benefit and
Compensation Programs.
Payments and other benefits received
by a Participant under an Award made pursuant to the Plan shall
not be deemed a part of a Participants compensation for
purposes of the determination of benefits under any other
employee welfare or benefit plans or arrangements, if any,
provided by the Company or any Subsidiary unless expressly
provided in such other plans or arrangements, or except where
the Board expressly determines in writing that inclusion of an
Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that
an Award has been made in lieu of a portion of competitive
annual base salary or other cash compensation. Awards under the
Plan may be made in addition to, in combination with, or as
alternatives to, grants, awards or payments under any other
plans or arrangements of the Company or its Subsidiaries. The
existence of the Plan notwithstanding, the Company or any
Subsidiary may adopt such other compensation plans or programs
and additional compensation arrangements as it deems necessary
to attract, retain and motivate employees.
15.5
Listing, Registration and Other
Legal Compliance.
No Awards or shares of the Common Stock
shall be required to be issued or granted under the Plan unless
legal counsel for the Company shall be satisfied that such
issuance or grant will be in compliance with all applicable
federal and state securities laws and regulations and any other
applicable laws or regulations. The Committee may require, as a
condition of any payment or share issuance, that certain
agreements, undertakings, representations, certificates and/or
information, as the Committee may deem necessary or advisable,
be executed or provided to the Company to assure compliance with
all such applicable laws or regulations. Certificates for shares
of the Restricted Shares and/or Common Stock delivered under the
Plan may be subject to such stock-transfer orders and such other
restrictions as the Committee may deem advisable under the
rules, regulations or other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common
Stock is then listed, and any applicable federal or state
securities law. In addition, if, at any time specified herein
(or in any Award Agreement or otherwise) for (a) the making
of any Award, or the making of any determination, (b) the
issuance or other distribution of Restricted Shares and/or
Common Stock, or (c) the payment of amounts to or through a
Participant with respect to any Award, any law, rule, regulation
or other requirement of any governmental authority or agency
shall require either the Company, any Subsidiary or any
Participant (or any estate, designated beneficiary or other
legal representative thereof) to take any action in connection
with any such determination, any such
shares to be issued or distributed, any such
payment or the making of any such determination, as the case may
be, shall be deferred until such required action is taken. With
respect to persons subject to Section 16 of the Exchange
Act, transactions under the Plan are intended to comply with all
applicable conditions of SEC Rule 16b-3. To the extent any
provision of the Plan or any action by the administrators of the
Plan fails to so comply with such rule, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by
the Committee.
15.6
Award Agreements.
Each
Participant receiving an Award under the Plan shall enter into
an Award Agreement with the Company in a form specified by the
Committee. Each such Participant shall agree to the
restrictions, terms and conditions of the Award set forth
therein and in the Plan.
15.7
Designation of Beneficiary.
Each
Participant to whom an Award has been made under the Plan may
designate a beneficiary or beneficiaries to exercise any option
or to receive any payment which under the terms of the Plan and
the relevant Award Agreement may become exercisable or payable
on or after the Participants death. At any time, and from
time to time, any such designation may be changed or cancelled
by the Participant without the consent of any such beneficiary.
Any such designation, change or cancellation must be on a form
provided for that purpose by the Committee and shall not be
effective until received by the Committee. If no beneficiary has
been designated by a deceased Participant, or if the designated
beneficiaries have predeceased the Participant, the beneficiary
shall be the Participants estate. If the Participant
designates more than one beneficiary, any payments under the
Plan to such beneficiaries shall be made in equal shares unless
the Participant has expressly designated otherwise, in which
case the payments shall be made in the shares designated by the
Participant.
15.8
Leaves of Absence/ Transfers.
The Committee shall have the power to promulgate rules and
regulations and to make determinations, as it deems appropriate,
under the Plan in respect of any leave of absence from the
Company or any Subsidiary granted to a Participant. Without
limiting the generality of the foregoing, the Committee may
determine whether any such leave of absence shall be treated as
if the Participant has terminated employment with the Company or
any such Subsidiary. If a Participant transfers within the
Company, or to or from any Subsidiary, such Participant shall
not be deemed to have terminated employment as a result of such
transfers.
15.9
Loans.
Subject to applicable
law, the Committee may provide, pursuant to Plan rules, for the
Company or any Subsidiary to make loans to Participants to
finance the exercise price of any Stock Options, as well as the
withholding obligation under Section 15.1 of the Plan
and/or the estimated or actual taxes payable by the Participant
as a result of the exercise of such Stock Option and the
Committee may prescribe the terms and conditions of any such
loan.
15.10
Governing Law.
The Plan and all
actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of Delaware, without
reference to the principles of conflict of laws thereof. Any
titles and headings herein are for reference purposes only, and
shall in no way limit, define or otherwise affect the meaning,
construction or interpretation of any provisions of the Plan.
15.11
Effective Date.
The Plan shall
be effective upon its adoption by the Board on April 16,
2004, subject to the approval of the Plan by the Companys
shareholders in accordance with Sections 162(m) and 422 of
the Code.
STOCKHOLDERS OF VECTOR GROUP LTD.
Item 1.
Election of Directors:
FOR ALL NOMINEES
o
WITHHOLD AUTHORITY FOR ALL NOMINEES
o
FOR ALL EXCEPT (See instructions below)
o