SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-11(c) or Rule 14a-12
Vector Group Ltd.
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(Name of Registrant as Specified In Its Charter)
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VECTOR GROUP LTD.
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 17, 2002
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 Friday, May 17, 2002 at 11:00 a.m. local
time, and at any postponement or adjournment thereof, for the following
purposes:
1. To elect five directors to hold office until the next annual
meeting of stockholders and until their successors are elected and
qualified.
2. 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 10, 2002 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 7, 2002
to May 17, 2002, 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 Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001 are enclosed herewith.
By Order of the Board of Directors,
/s/ Bennett S. LeBow
-----------------------------------
BENNETT S. LEBOW
Chairman of the Board of Directors
Miami, Florida
April 15, 2002
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.
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
---------------------
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 Friday, May 17,
2002, at 11:00 a.m. local time, and at any postponement or adjournment. The
Company's 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 10, 2002 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 33,257,284 shares of Common Stock. This proxy statement,
accompanying notice and proxy and the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2001 are first being mailed to stockholders
on or about April 17, 2002.
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
board's nominees. The nominees receiving a plurality of the votes cast will be
elected as directors. The affirmative vote of the majority of votes present and
entitled to vote on the matter at the meeting will be necessary for approval of
any other matters to be considered at the annual meeting. With respect to the
election of directors, shares as to which authority is withheld and broker
shares that are not voted will not be included in determining the number of
votes cast. With respect to other matters, abstentions and broker shares that
are not voted are not treated as present and entitled to vote on the matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the record date, the beneficial
ownership of the Company's 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 Company's directors and nominees;
- each of the Company's 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.
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS
------------------------------------ ---------- ----------
Bennett S. LeBow(1)(5)(7)................................... 12,463,343 35.2%
High River Limited Partnership(2)........................... 6,775,825 20.0%
Barberry Corp.
Carl C. Icahn
767 Fifth Avenue
New York, NY 10153
Richard S. Ressler(3)....................................... 2,112,663 6.4%
Orchard Capital Corporation
10960 Wilshire Boulevard
Los Angeles, CA 90024
Howard M. Lorber(4)(5)(7)................................... 1,702,763 4.9%
Robert J. Eide(5)(6)........................................ 37,515 (*)
Aegis Capital Corp.
70 East Sunrise Highway
Valley Stream, NY 11581
Jeffrey S. Podell(5)(6)..................................... 38,502 (*)
182 Gannet Court
Manhasset, NY 11030
Jean E. Sharpe(5)(6)........................................ 26,926 (*)
462 Haines Road
Mt. Kisco, NY 10549
Richard J. Lampen(7)(8)..................................... 149,329 (*)
Marc N. Bell(7)(8).......................................... 59,677 (*)
Ronald J. Bernstein(9)...................................... -- --
Liggett Group Inc.
100 Maple Lane
Mebane, NC 27302
All directors and executive officers as a group (8
persons).................................................. 14,478,055 38.8%
---------------
(*) The percentage of shares beneficially owned does not exceed 1% of the Common
Stock.
(1) Includes 9,555,173 shares of the Common Stock held by LeBow Gamma Limited
Partnership, a Nevada limited partnership, 317,059 shares held by LeBow
Alpha LLLP, a Delaware limited liability limited partnership, 420,564 shares
held by The Bennett and Geraldine LeBow Foundation, Inc., a Florida not-
for-profit corporation, and 2,170,547 shares acquirable by LeBow Epsilon
2001 Limited Partnership, a Delaware limited partnership, as assignee of Mr.
LeBow, upon exercise of currently exercisable options to purchase Common
Stock. Mr. LeBow indirectly exercises sole voting power and sole dispositive
power over the shares of Common Stock held or acquirable by the
partnerships. Of the shares held by LeBow Alpha LLLP, 317,059 shares 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. LeBow
Epsilon 2001 LLC, a Delaware limited liability company, is the general
partner of LeBow Epsilon 2001 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 member
2
and manager of LeBow Epsilon 2001 LLC. 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 foundation's shares of Common Stock.
(2) Based upon Amendment No. 1 to Schedule 13D dated October 7, 1998, filed by
the named entities. Barberry Corp. is the general partner of High River
Limited Partnership and is wholly owned by Mr. Icahn. Includes 601,323
shares of Common Stock issuable upon conversion of the Company's convertible
notes.
(3) Based upon Amendment No. 6 to Schedule 13D dated April 15, 1998, filed by
the named individual.
(4) Includes 14,561 shares of Common Stock held by the Lorber Charitable Fund, a
New York not-for-profit corporation, and 1,688,202 shares acquirable by
Lorber Epsilon Investments Trust, as assignee of Mr. Lorber, upon exercise
of currently exercisable options to purchase Common Stock. Mr. Lorber is the
sole trustee of Lorber Epsilon Investments Trust and indirectly exercises
sole voting power and sole dispositive power over the shares of Common Stock
acquirable by the trust. Mr. Lorber and family members serve as directors
and executive officers of the charitable fund, and Mr. Lorber possesses
shared voting power and shared dispositive power with the other directors of
the fund with respect to the fund's shares of Common Stock.
(5) The named individual is a director of the Company.
(6) Includes 7,350 shares issuable upon exercise of currently exercisable
options to purchase Common Stock.
(7) The named individual is an executive officer of the Company.
(8) Represents shares issuable upon exercise of currently exercisable options to
purchase Common Stock.
(9) The named individual is an executive officer of the Company's subsidiary
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 Company's
subsidiaries, including VGR Holding Inc., Liggett 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 Company's
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
Company's other directors or executive officers beneficially owns any equity
securities of any of the Company's 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 five. The present term of office of all
directors will expire at the annual meeting. Five 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
---------------- --- --------------------
Bennett S. LeBow...................... 64 Chairman of the Board and Chief
Executive
Vector Group Ltd. Officer
100 S.E. Second Street
Miami, FL 33131
Howard M. Lorber...................... 53 President and Chief Operating Officer
Vector Group Ltd.
100 S.E. Second Street
Miami, FL 33131
Robert J. Eide........................ 49 Chairman and Treasurer, Aegis
Aegis Capital Corp. Capital Corp.
70 E. Sunrise Highway
Valley Stream, NY 11581
Jeffrey S. Podell..................... 61 Chairman of the Board and President,
182 Gannet Court Newsote, Inc.
Manhasset, NY 11030
Jean E. Sharpe........................ 55 Private Investor
462 Haines Road
Mt. Kisco, NY 10549
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 Company's 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 reduced carcinogen and nicotine-free cigarette
products, since January 2001 and as a director since October 1999. Mr. LeBow has
been a director of Liggett, a subsidiary of the Company engaged in the
manufacture and sale of cigarettes in the United States, since June 1990, and a
director of Ladenburg Thalmann Financial Services Inc. since May 2001. Mr. LeBow
has been Chairman of the Board of New Valley, a majority-owned subsidiary of the
Company currently 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 and Chief Operating Officer 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 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 Nathan's
Famous, Inc., a chain of fast food restaurants; a consultant to the Company and
Liggett from January 1994 to January 2001; a director and member of the Audit
Committee of United Capital Corp., a real estate investment and diversified
manufacturing company, since May 1991; a director and member of the Audit
Committee of Prime Hospitality Corp., a company doing business in the lodging
industry, since May 1994; and the Chairman of the Board of Ladenburg Thalmann
Financial Services since May 2001.
4
Robert J. Eide has been a director of the Company and VGR Holding since
November 1993. Mr. Eide has been the Chairman and Treasurer of Aegis Capital
Corp., a registered broker-dealer, since 1984. Mr. Eide also serves as a
director of Nathan's Famous, Inc., a restaurant chain.
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
During 2001, the board held eight meetings. During 2001, the executive
committee (currently composed of Messrs. Eide and LeBow) did not meet, while the
compensation committee (currently composed of Messrs. Eide and Podell) met once
and the audit committee (currently composed of Messrs. Eide and Podell and Ms.
Sharpe) met four times. Each director attended at least 75% of the aggregate
number of meetings of the board and of each committee of which he was a member
held during such period. The Company does not have a nominating committee.
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.
The audit committee reviews the services to be performed by the Company's
independent accountants, makes recommendations regarding the engagement of the
independent accountants and reviews the quarterly and year-end financial
statements of the Company with management and the independent accountants. See
"Audit Committee Report."
The compensation committee reviews, approves and administers management
compensation and executive compensation plans. The compensation committee also
administers the Company's 1998 and 1999 Long-Term Incentive Plans.
5
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, 2001, the Company's 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 ($) OPTIONS (#) COMPENSATION ($)
--------------------------- ---- ---------- --------- ---------------- ----------- ----------------
Bennett S. LeBow............ 2001 3,739,501(2) 1,043,700(3) 68,101(4) 525,000 505,858(5)
Chairman of the Board 2000 3,527,282(2) 916,369(3) 67,085(4) -- 530,560(5)
and Chief Executive 1999 3,739,501(2) 1,043,700(3) 56,946(4) 1,653,750 477,000(5)
Officer
Howard M. Lorber(6)......... 2001 2,219,725(7) 500,000(7) 90,000(4) 262,500
President and Chief
Operating Officer
Richard J. Lampen(8)........ 2001 750,000 -- -- --
Executive Vice President 2000 750,000 -- -- --
1999 750,000 -- -- 110,250
Marc N. Bell(9)............. 2001 375,000 -- -- --
Vice President, General 2000 300,000 100,000 -- --
Counsel and Secretary 1999 300,000 -- -- 55,125
Ronald J. Bernstein(10)..... 2001 650,000 650,000 -- 250,000 --
President and Chief 2000 533,333 81,958 62,423(11) 275,625 4,000,000(12)
Executive Officer of
Liggett
---------------
(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. LeBow's base salary from the Company
($173,950 in 2001, $152,728 in 2000 and $173,950 in 1999) in lieu of
certain other executive benefits.
(4) Represents an allowance paid by New Valley to an entity affiliated with Mr.
LeBow and to Mr. Lorber for lodging and related business expenses.
(5) Represents premiums paid by the Company under collateral assignment
split-dollar insurance agreements covering the life of Mr. LeBow entered
into by the Company commencing in December 1998. For a period of ten years,
the Company will advance the amount of the annual premiums on the policies,
less the maximum permitted borrowings under the policies. Upon surrender of
the policies or payment of the death benefits, the Company is entitled to
repayment of all premiums paid by it.
(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 its Liggett and as President and Chief
Operating Officer of New Valley, a position he continues to hold.
(7) Includes salary of $1,739,725 and bonus of $500,000 paid by New Valley.
(8) The table reflects 100% of Mr. Lampen's salary and bonus, all of which are
paid by New Valley. Of Mr. Lampen's salary from New Valley, $187,500 per
year has been reimbursed to New Valley by the Company.
(9) The table reflects 100% of Mr. Bell's salary and bonus, all of which are
paid by the Company. Of Mr. Bell's salary and bonus from the Company,
$187,500 in 2001, $150,000 in 2000 and $150,000 in 1999 have been
reimbursed to the Company by New Valley.
6
(10) Effective September 1, 2000, Mr. Bernstein was appointed President and
Chief Executive Officer of Liggett. Previously Mr. Bernstein had served as
President of Western Tobacco Investments LLC which held the Company's
ownership interests in Liggett-Ducat Ltd.
(11) Represents automobile allowance, relocation expense and group term life
insurance provided to Mr. Bernstein.
(12) Represents a commission paid to Mr. Bernstein in connection with the sale
of Western Tobacco Investments equal to one-percent of the aggregate sales
price.
The following table sets forth all grants of stock options to the named
executive officers during 2001.
STOCK OPTION GRANTS IN 2001
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT
OPTIONS EMPLOYEES IN PRICE EXPIRATION DATE PRESENT
NAME GRANTED (#) 2001 ($/SHARE) DATE VALUE ($)(3)
---- ----------- ------------- --------- ---------- ------------
Bennett S. LeBow.................... 525,000(1) 30.0% $18.21 1/22/11 $6,394,500
Howard M. Lorber.................... 262,500(1) 15.0% $18.21 1/22/11 $3,197,250
Ronald J. Bernstein................. 250,000(2) 14.3% $38.40 9/21/11 $3,620,000
---------------
(1) Represents options to purchase shares of Common Stock granted at fair market
value on January 22, 2001. Common stock dividend equivalents will be paid
currently with respect to each share underlying the unexercised portion of
the option. Subject to earlier vesting upon death or disability, the options
vest and become exercisable on November 4, 2003.
(2) Represents options to purchase shares of Common Stock granted at fair market
value on September 21, 2001. The options vest and become exercisable as to
25% of the shares on each of the second through fifth anniversaries of the
date of grant.
(3) The estimated present value at grant date of options granted during 2001 has
been calculated using the Black-Scholes option pricing model, based upon the
following assumptions: volatility of 48.79% for Messrs. LeBow and Lorber and
53.61% for Mr. Bernstein, a risk-free rate of 5.236% for Messrs. LeBow and
Lorber and 4.691% for Mr. Bernstein, an expected life of 10 years, a
dividend rate of 0% for Messrs. LeBow and Lorber and 4.17% for Mr.
Bernstein, and no forfeiture. The approach used in developing the
assumptions upon which the Black-Scholes valuation was done is consistent
with the requirements of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation".
The following table sets forth certain information concerning option
exercises during 2001 by the named executive officers and the status of their
options as of December 31, 2001.
AGGREGATED OPTION EXERCISES DURING LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF SHARES REALIZED OPTIONS AT DECEMBER 31, 2001 OPTIONS AT DECEMBER 31, 2001*
ACQUIRED ON UPON ---------------------------- ------------------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- ---------- ----------- ------------- ------------ --------------
Bennett S. LeBow..... -- -- 2,170,547 2,902,265 $53,004,758 $38,859,188
Howard M. Lorber..... -- -- 1,688,202 1,151,391 $50,460,841 $20,404,220
Richard J. Lampen.... 51,365 $1,887,502 99,166 210,577 $ 2,829,206 $ 4,940,542
Marc N. Bell......... 17,500 $ 646,275 40,383 74,419 $ 1,152,127 $ 1,589,564
Ronald J.
Bernstein.......... -- -- -0- 525,625 -- $ 5,493,206
7
---------------
* Calculated using the closing price of $32.85 per share on December 31, 2001
less the option exercise price.
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 membership
on each of the audit and compensation committees, $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.
In June 2001, each outside director of the Company received an award of
10,500 shares of Common Stock for services as a director. Subject to earlier
vesting upon a change of control (as defined), the shares vest in three equal
annual installments commencing on the first anniversary of the date of grant.
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, 2002, Mr. LeBow's annual base salary from the Company was
$1,739,501. He is also entitled to an annual bonus for 2002 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. 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.
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, 2002, Mr. LeBow's 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, 2002, Mr. Lorber's annual base
salary was $480,000. Mr. Lorber's 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. The agreement has an initial term of three years effective as of
January 18, 1995, with an automatic one-year extension on
8
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, 2002, Mr.
Lorber's annual base salary was $1,773,726. Mr. Lorber's 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. The Board awarded Mr. Lorber a bonus of $500,000 for
2001. 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, 2002,
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. Lampen's 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, 2002, 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. Bell's base salary from time to time in its sole discretion.
Following termination of his employment without cause, Mr. Bell 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.
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, 2002, Mr. Bernstein's annual salary was $650,000. Bonus payments are
at the sole discretion of the board of Liggett. Liggett paid Mr. Bernstein a
bonus of $650,000 for 2001. In case of termination, Mr. Bernstein is covered by
Liggett's executive termination policy which provides for 24 months of
termination pay at the current salary of an executive, if a senior executive
officer's employment is terminated without cause.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2001, Messrs. Eide and Podell were members of the Company's
compensation committee. Messrs. Eide and Podell serve as directors of VGR
Holding.
Mr. LeBow is Chairman of the Board and Chief Executive Officer of New
Valley and VGR Holding. The Board of New Valley does not have a separate
compensation committee and acts on compensation matters as a committee of the
whole. Mr. Lorber, an executive officer and director of the Company and VGR
Holding, and Mr. Lampen, an executive officer of the Company and VGR Holding,
are executive officers and directors of New Valley.
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 participant's normal retirement
date,
9
age 65, or, at the participant's election, at his early retirement after he has
attained age 55 and completed ten years of service. A participant's 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 participant's 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, 2001, none of the named executive officers was eligible
to receive any benefits under the retirement plan.
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 pension benefits to certain key employees, including
Messrs. LeBow, Lorber and Bernstein. 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 Company's board
of directors ($2,524,163 for Mr. LeBow, $1,051,875 for Mr. Lorber and $438,750
for Mr. Bernstein). Normal retirement date is defined as the January 1 following
the attainment by the participant of the later of age 60 or the completion of 8
years of service following January 1, 2002 for the Company or a subsidiary. In
the case of a participant who becomes disabled prior to his normal retirement
date or whose service is terminated without cause, the participant's benefit
consists of a fractional portion of the full projected retirement benefit to
which he would have been entitled had he remained employed through his normal
retirement date, as actuarially discounted back to the date of payment. A
participant who dies while working for the Company or a subsidiary (and before
becoming disabled or attaining his normal retirement date) will be paid an
actuarially discounted equivalent of his projected retirement benefit;
conversely, a participant who retires beyond his normal retirement date will
receive an actuarially increased equivalent of his projected retirement benefit.
No participant whose employment is terminated upon his own volition, or for any
reason other than death, disability or attainment of normal (or late) retirement
will be entitled to any benefits under the SERP.
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.
10
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation arrangements for the Company's executive officers are usually
negotiated on an individual basis between Mr. LeBow and each executive. The
Company's executive compensation philosophy is:
- to base management's pay, in part, on achievement of the Company's 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 Company's 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 in February 1992. The compensation of Mr. LeBow
is set forth in an employment agreement between Mr. LeBow and the Company and
until September 2000 was restricted by the VGR Holding notes indenture. See
"Employment Agreements", above.
The compensation package of Mr. Lorber was negotiated and approved by the
Board of Directors of the Company on January 2001 when Mr. Lorber was elected
President and Chief Operating Officer of the Company. At that time, Mr. Lorber's
base salary from the Company was established at the same level as the consulting
payments he had previously received from the Company and Liggett. See
"Employment Agreements", above.
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.
In 1993, Section 162(m) was added to the Internal Revenue Code of 1986.
This section generally provides that no publicly held company shall be permitted
to deduct compensation in excess of $1 million 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 2001.
The foregoing information is provided by the compensation committee of the
Company.
Robert J. Eide, Chairman
Jeffrey S. Podell
11
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.
Composition and Independence. The audit committee of the board of
directors is composed of three independent directors, as defined by New York
Stock Exchange rules. The members of the audit committee are Robert J. Eide,
Chairman, Jeffrey S. Podell and Jean E. Sharpe.
Responsibilities. The responsibilities of the audit committee include,
among other things, reviewing the services performed and to be performed by the
Company's independent accountants, making recommendations regarding the
engagement of the independent accountants and reviewing the quarterly and
year-end financial statements of the Company with management and the independent
accountants. The audit committee operates under a written charter adopted by the
board of directors.
Review with Management and Independent Accountants. In connection with the
December 31, 2001 financial statements, the audit committee met and held
discussions with management and the independent accountants. Management
represented to the audit committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles, and the audit committee reviewed and discussed the consolidated
financial statements with management and the independent accountants.
The audit committee discussed with the independent accountants the matters
required by Statement on Auditing Standards No. 61, received the written
disclosures and letter from the independent accountants required by Independence
Standards Board Statement No. 1, and discussed with the independent accountants,
PricewaterhouseCoopers LLP, the firm's independence.
Based upon its review of the financial statements, its discussions with
management and the independent accountants, and the report of the independent
accountants to the audit committee, the audit committee recommended to the board
of directors that the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001
filed with the Securities and Exchange Commission.
This report is submitted by the audit committee of the Company.
Robert J. Eide, Chairman
Jeffrey S. Podell
Jean E. Sharpe
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 Company's quarterly reports on Form 10-Q for the last
fiscal year were $598,580.
Financial Information Systems Design and Implementation Fees. There were
no fees billed by PricewaterhouseCoopers LLP to the Company for financial
information systems design and implementation.
All Other Fees. Aggregate fees billed for all other services rendered by
PricewaterhouseCoopers LLP for the last fiscal year were $387,210. The audit
committee has considered whether PricewaterhouseCoopers LLP's independence is
compatible with rendering the non-audit services during the last fiscal year.
PERFORMANCE GRAPH
The following graph compares the total annual return of the Company's
Common Stock, the S&P 500 Index, the S&P MidCap 400 Index and the S&P Tobacco
Index for the five years ended December 31, 2001. The graph assumes that $100
was invested on December 31, 1996 in the Common Stock and each of the
12
indices, and that all cash dividends and distributions were reinvested.
Information for the Company's Common Stock includes the value of the December
20, 2001 distribution to the Company's stockholders of shares of Ladenburg
Thalmann Financial Services Inc. common stock and assumes the stock was held by
such stockholders until December 31, 2001.
(PERFORMANCE GRAPH)
-------------------------------------------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
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Vector Group Ltd. 100 185 539 361 437 1,015
S&P 500 100 133 171 208 189 166
S&P MidCap 100 132 157 180 212 211
S&P Tobacco 100 124 150 73 144 161
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, the Company and New Valley entered into an expense sharing
agreement pursuant to which lease, legal and administrative expenses are
allocated to the entity incurring the expense. The Company was reimbursed
$482,000 in 2001 under this agreement.
In connection with the Company's convertible note offering in July 2002,
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 3,150,000 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 Company's 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 3,150,000 shares of Common Stock.
For the six months ended December 31, 2001, the Company paid an entity
affiliated with Mr. LeBow an aggregate of $593,854 in cash under this agreement.
As of the record date, High River Limited Partnership, an investment entity
owned by Carl C. Icahn, was the beneficial owner of 20.0% of the Common Stock.
On May 31, 2001, the Company sold 1,721,311 shares of Common Stock to High River
for $50 million at a price of $29.05 per share, pursuant to a stock purchase
agreement dated May 16, 2001. The closing price per share of the Common Stock on
the New York Stock Exchange on May 16, 2001 was $31.65. High River agreed,
subject to various limitations, on behalf of itself,
13
its affiliates and its donees not to sell these shares in the public market for
a period of a year from the closing of the purchase.
High River purchased $20 million of the Company's 6.25% convertible notes
due 2008 as part of the Company's private offering of notes in July 2001. As of
the record date, the notes are convertible into 601,323 shares of Common Stock.
High River received interest payments on the notes of $625,000 during 2001.
See also "Compensation Committee Interlocks and Insider Participation."
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 2002 fiscal
year unless the board 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
Company's secretary at Vector Group Ltd., 100 S.E. Second Street, 32nd Floor,
Miami, Florida 33131.
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 Company's equity securities, to file reports of initial beneficial
ownership and changes in beneficial ownership on Forms 3, 4 and 5 with the SEC
and The New York Stock Exchange. These persons are also required by SEC
regulations to furnish the Company with copies of all reports that they file.
To the Company's 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, 2001,
all reporting persons have timely complied with all filing requirements
applicable to them.
STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2003 annual
meeting of stockholders of the Company 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 16, 2002 in order to be eligible for inclusion
in the Company's 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 3, 2003.
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 and on September 28,
2001.
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,
14
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.
By Order of the Board of Directors,
/s/ Bennett S. LeBow
-----------------------------------
BENNETT S. LEBOW
Chairman of the Board of Directors
Dated: April 15, 2002
15
VECTOR GROUP LTD.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE 2002 ANNUAL MEETING OF
STOCKHOLDERS OF VECTOR GROUP LTD.
The undersigned stockholder of Vector Group Ltd. (the "Company") hereby
constitutes and appoints each of Joselynn D. Van Siclen and Marc N. Bell,
attorney and proxy of the undersigned, with power of substitution, to attend,
vote and act for the undersigned at the 2002 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 Friday, May 17, 2002, at 11:00 a.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.
(TO BE CONTINUED AND SIGNED ON THE REVERSE SIDE)
[x] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE.
Item 1. Election of Directors:
FOR all nominees named at right (except as indicated to the
contrary) [ ]
WITHHOLD AUTHORITY to vote for all nominees named at right [ ]
Nominees: Robert J. Eide, Bennett S. LeBow, Howard M. Lorber,
Jeffrey S. Podell and Jean E. Sharpe
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the line provided
below.)
-------------------------------------------------------------------------------
If not otherwise directed, this proxy will be voted FOR the election of
the nominees.
The Board of Directors recommends a vote FOR all nominees in Item 1.
PLEASE DATE, SIGN AND MAIL AT ONCE IN THE ENCLOSED POSTPAID ENVELOPE.
Signature ________________ Date _______ Signature ________________ Date ________
IF HELD JOINTLY
NOTE: Please sign exactly as your name appears hereon. If signing as attorney,
administrator, trustee, guardian or the like, please give full title as such. If
signing for a corporation, please give your title.