SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Technology Flavors & Fragrances, Inc.
---------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
10 Edison Street, East
Amityville, New York 11701
------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
------------------------------
October 30, 1996
-----------------------------
To the Shareholders of
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of
shareholders of Technology Flavors & Fragrances, Inc. (the "Company") will be
held at the Melville Marriott, 1350 Old Walt Whitman Road, Melville, New York
11747, on October 30, 1996, at 11:00 a.m., local time, for the following
purposes, all as more fully described in the attached Proxy Statement:
I. To elect five directors to serve for a term of one year and until
their respective successors are duly elected and qualified.
II. To ratify the selection by the Company's Board of Directors of
Ernst & Young LLP, as independent accountants of the Company for the fiscal
year ending December 31, 1996, and to authorize the Board of Directors to
fix their remuneration.
III. To approve the adoption of the Company's 1996 Stock Option Plan,
which provides for the grant of options to purchase up to a maximum of
1,000,000 shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), to employees, officers or directors of the Company
(the "1996 Option Plan").
IV. To ratify the reduction of exercise prices of all outstanding
options granted under the Company's Incentive Stock Option Plan (the "1993
Option Plan") and the Non-Qualified Stock Option Grants dated April 8, 1994
(the "1994 Option Grants").
V. To ratify and approve the issuance to Strategic Growth
International, Inc., a consultant to the Company, of five-year warrants to
purchase 600,000 shares of Common Stock at U.S. $.56 per share, pursuant to
the terms set forth in the Warrant Agreement dated October 25, 1995.
<PAGE>
VI. To transact such other business as may properly come before the
Special Meeting and any and all adjournments thereof.
At the Special Meeting, the shareholders will also receive the audited
consolidated financial statements of the Company for the fiscal year ended
December 31, 1995 and the report of Coopers & Lybrand L.L.P. contained therein.
The Board of Directors has fixed the close of business on September 20,
1996 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the Special Meeting or any adjournment thereof.
A copy of the Company's Annual Report for the fiscal year ended
December 31, 1995 is enclosed.
The Board of Directors appreciates and welcomes shareholder participation
in the Company's affairs. You are earnestly requested to complete, sign, date
and return the accompanying form of proxy in the enclosed envelope provided for
that purpose (to which no postage need be affixed if mailed in the United
States) whether or not you expect to attend the Special Meeting in person. The
proxy is revocable by you at any time prior to its exercise and will not affect
your right to vote in person in the event you attend the Special Meeting. The
prompt return of the proxy will be of assistance in preparing for the Special
Meeting and your cooperation in this respect will be greatly appreciated.
By Order of the Board of Directors
Paul E. Hoffmann
Secretary
Amityville, New York
September 20, 1996
YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE.
-2-
<PAGE>
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
10 Edison Street, East
Amityville, New York 11701
__________________________
Proxy Statement
For The
Special Meeting of Shareholders
To Be Held on October 30, 1996
__________________________
INTRODUCTION
This Proxy Statement and the accompanying proxy are being furnished to
shareholders of Technology Flavors & Fragrances, Inc. (the "Company") in
connection with the solicitation of proxies by the Board of Directors for use in
voting at a Special Meeting of Shareholders to be held at the Melville Marriott,
1350 Old Walt Whitman Road, Melville, New York 11747, on October 30, 1996, at
11:00 a.m., and at any and all adjournments thereof (the "Special Meeting").
This Proxy Statement, the attached Notice of Special Meeting of Shareholders,
the accompanying proxy, and the Annual Report to Shareholders of the Company for
the fiscal year ended December 31, 1995, including the financial statements
contained therein, are first being mailed or delivered to shareholders of the
Company on or about September 20, 1996.
At the Special Meeting, shareholders of the Company as of the close of
business on September 20, 1996 (the "Record Date") will consider and vote upon
the following: (i) Proposal I to elect five directors to serve for a term of one
year and until their respective successors are duly elected and qualified; (ii)
Proposal II to ratify the selection by the Company's Board of Directors of Ernst
& Young LLP, as independent accountants of the Company for the fiscal year
ending December 31, 1996 and to authorize the Board of Directors to fix their
remuneration; (iii) Proposal III to approve the adoption of the Company's 1996
Stock Option Plan (the "1996 Option Plan"), which provides for the grant of
options to purchase up to a maximum of 1,000,000 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), to employees, officers or
directors of the Company; (iv) Proposal IV to ratify the reduction of exercise
prices of all outstanding options granted under the Company's Incentive Stock
Option Plan (the "1993 Option Plan") and the Non-Qualified Stock Option Grants
dated April 8, 1994 (the "1994 Option Grants"); and (v) Proposal V to ratify the
issuance to Strategic Growth International, Inc. ("SGI"), a consultant to the
Company, of five-year warrants to purchase 600,000 shares of Common Stock,
pursuant to the Warrant Agreement dated October 25, 1995 (the "Warrant
Agreement").
Approval of Proposal I requires the affirmative vote of a plurality of the
shares of Common Stock represented in person or by proxy at the Special Meeting.
Approval of Proposals II, IV and V require the affirmative vote of holders
of a majority of the shares of Common Stock represented in person or by proxy at
the Special Meeting on each proposal.
<PAGE>
Approval of Proposal III requires the affirmative vote of holders of a
majority of the outstanding shares of Common Stock.
The enclosed proxy provides that each shareholder may specify that his or
her shares be voted "for," "against" or "abstain" from voting with respect to
each of the proposals. If the enclosed proxy is properly executed, duly
returned to the Company in time for the Special Meeting and not revoked, your
shares will be voted in accordance with the instructions contained thereon.
Where a signed proxy is returned, but no specific instructions are indicated,
your shares will be voted FOR each of the proposals.
Proxies marked as abstaining will be treated as present for purposes of
determining a quorum for the Special Meeting, but will not be counted as voting
in respect of any matter as to which abstinence is indicated. Broker "non-
votes" (i.e., votes withheld by brokers on non-routine proposals in the absence
of instructions from beneficial owners) will not be counted as to the matters
for which a non-vote is indicated.
A proxy will not be valid unless the completed form of proxy is received by
the Company at its principal executive offices located at 10 Edison Street,
East, Amityville, New York 11701 not less than 48 hours (excluding Saturdays,
Sundays and holidays) before the time of holding the Special Meeting or any
adjournment thereof. Any shareholder who executes and returns a proxy may
revoke it in writing at any time prior to the Special Meeting, or any
adjournment thereof, or to the Chairman of the Special Meeting, or any
adjournment thereof, or in any other manner provided by law, including: (i)
filing written notice of such revocation with the Secretary of the Company at
the above address; (ii) submitting a duly executed proxy relating to the same
shares bearing a date later than any earlier proxy; or (iii) attending the
Special Meeting and voting in person (although attendance at the Special Meeting
will not in and of itself constitute revocation of a proxy).
Representatives of Ernst & Young LLP, independent accountants of the
Company, are expected to be present at the Special Meeting and available to
respond to appropriate questions. Such representatives also will have the
opportunity, should they so desire, to make any statements to the shareholders
which they deem appropriate.
Whether or not you attend the Special Meeting, your vote is important.
Accordingly, you are asked to sign and return the accompanying proxy regardless
of the number of shares you own. Shares can be voted at the Special Meeting
only if the holder is represented by proxy or is present.
VOTING RIGHTS AND VOTING SECURITIES
Voting at the Special Meeting
The Board of Directors has fixed the close of business on
September 20, 1996 as the Record Date for the determination of shareholders
entitled to notice of, and to vote at, the Special Meeting. Only shareholders
of record at the close of business on the Record Date will be entitled to vote
at the Special Meeting or any and all adjournments thereof. As of the Record
Date, there were 11,756,968 shares of Common Stock issued and outstanding. The
Common Stock is the only class of outstanding voting securities of the Company.
Each holder of Common Stock will be entitled to one vote per
-2-
<PAGE>
share, either in person or by proxy, on each matter presented to the
shareholders of the Company at the Special Meeting. The holders of a majority
of all of the outstanding shares of Common Stock entitled to vote at the Special
Meeting constitute a quorum at the Special Meeting. The affirmative vote of the
holders of a plurality of the shares of Common Stock represented in person or by
proxy at the Special Meeting is required to approve Proposal I. The affirmative
vote of the holders of a majority of the shares of Common Stock represented in
person or by proxy at the Special Meeting is required to approve Proposals II,
IV and V. The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required to approve Proposal III.
Security Ownership
The following table sets forth certain information as of August 20, 1996
regarding the beneficial ownership of Common Stock by (i) each person known by
the Company to own beneficially more than five percent of Common Stock,
(ii) each director of the Company, (iii) each of the named executive officers
(as defined herein), and (iv) all executive officers and directors of the
Company as a group (8 persons).
Percentage
Number of Shares Beneficially
Name Beneficially Owned(1) Owned
---- ------------------------ ------------
Philip Rosner(2) . . 2,425,465 shares(3)(4) 20.6%
A. Gary Frumberg(2) . 1,420,999 shares(3) 12.0%
Paul E. Hoffmann . . 140,893 shares (5) 1.2%
Sydney Stein . . . . 100,000 shares(6) *
Duncan Shirreff . . . 1,000 shares *
Richard R. Higgins(7)
931,500 shares 7.9%
All Directors and
Executive Officers
(8 persons)(8) . . . 5,188,068 shares 44.1%
____________________
* Less than 1%.
(1) Unless otherwise indicated, the nature of the beneficial ownership for all
shares of Common Stock is sole voting and investment power.
(2) The business address of Messrs. Rosner and Frumberg is 10 Edison Street,
East, Amityville, New York 11701.
(3) Includes five-year options to purchase 50,000 shares of Common Stock
granted on April 8, 1994 to Messrs. Rosner and Frumberg and excludes
options to purchase an additional 50,000 shares that have not yet vested.
See "-- Options Granted Under the 1993 Option Plan."
(4) Includes 36,438 shares of Common Stock owned by Mr. Rosner's wife. Mr.
Rosner disclaims beneficial ownership of the shares owned by his wife.
-3-
<PAGE>
(5) Includes ten-year options to purchase 37,500 shares of Common Stock granted
to Mr. Hoffmann on April 8, 1994 and excludes options to purchase an
additional 37,500 shares that have not yet vested. See "-- Options Granted
Under the 1993 Option Plan."
(6) Represents ten-year options to purchase 100,000 shares of Common Stock
granted to Mr. Stein on April 8, 1994.
(7) The business address of Mr. Higgins is 999 Tech Drive, Milford, Ohio 45150.
(8) Includes shares and options beneficially owned by Philip Rosner, A. Gary
Frumberg, Paul E. Hoffmann, Sydney Stein, Duncan Shirreff, Ronald J.
Dintemann, Richard Higgins and Harvey Farber within 60 days of August 20,
1996.
Escrow
In connection with the Company's initial public offering of 4,670,000
shares of Common Stock and pursuant to the requirements of the Ontario
Securities Act and the Toronto Stock Exchange ("TSE"), Messrs. Rosner and
Frumberg placed 2,157,077 and 1,427,999 shares of Common Stock, respectively, in
escrow with the Montreal Trust Company of Canada. While in escrow, the shares
may not be sold, transferred or pledged without the consent of the Ontario
Securities Commission except upon the death or bankruptcy of the shareholder.
Pursuant to the escrow agreement, 10% of the shares were released from escrow on
October 26, 1994 and 20% were released on October 26, 1995. In addition, 20% of
the escrowed shares will be released on each of October 26, 1996 and 1997 and
30% will be released on October 26, 1998.
Higgins' Restricted Shares
In December 1995, the Company acquired substantially all of the assets and
assumed the trade obligations and certain other liabilities of Seafla, Inc.
("Seafla"), a producer of dairy and savory flavors (the "Seafla Acquisition").
In December 1995, the Company also entered into an employment agreement with
Richard R. Higgins, Seafla's president, pursuant to which Mr. Higgins was
awarded 750,000 shares of restricted Common Stock. None of the shares issued to
Mr. Higgins may be sold in the United States or to a United States person until
December 7, 1998.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
The Securities and Exchange Commission (the "Commission") has comprehensive
rules relating to the reporting of securities transactions by directors,
officers and shareholders who beneficially own more than 10% of the Company's
Common Stock (collectively, the "Reporting Persons"). These rules are complex
and difficult to interpret. Based solely on a review of Section 16 reports
received by the Company from Reporting Persons, the Company believes that no
Reporting Person has failed to file a Section 16 report on a timely basis during
the most recent fiscal year, except for Messrs. Philip Rosner, A Gary Frumberg,
Paul Hoffmann, Richard Higgins, Ronald Dintemann, Duncan Shirreff, Sydney Stein,
and Harvey Farber, each of whom did not timely file their respective Form 3
reports in 1996.
-4-
<PAGE>
PROPOSAL I: ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of five directors. At
the Special Meeting, five directors are to be elected to serve for a term of one
year and until their respective successors are duly elected and qualified. All
of the nominees are currently members of the Board of Directors.
The persons named in the enclosed proxy intend to vote for the election of
the persons listed below, unless the proxy is marked to indicate that such
authorization is expressly withheld. Should any of the listed persons be unable
to accept nomination or election (which the Board of Directors does not
anticipate), it is the intention of the persons named in the enclosed proxy to
vote for the election of such persons as the Board of Directors may recommend.
Proxies cannot be voted for a greater number of persons than the number of
nominees named.
Required Affirmative Vote
Approval of Proposal I to elect five directors requires the affirmative
vote of a plurality of the shares of Common Stock represented in person or by
proxy at the Special Meeting. The Board of Directors recommends that the
shareholders vote FOR the election to the Board of Directors of each of the five
nominees identified below.
Information Concerning the Company's Board of Directors and Executive Officers
The following table sets forth certain information concerning the Company's
directors and executive officers, including the nominees to the Board of
Directors:
Name Age Positions with the Company
- ---- --- --------------------------
Philip Rosner . . 61 President, Chairman of the Board and Director
A. Gary Frumberg 62 Executive Vice-President and Director
Richard R. Higgins
57 Executive Vice-President and Director
Sydney Stein . . 60 Director
Duncan Shirreff . 44 Director
Paul E. Hoffmann 49 Secretary and Treasurer
Ronald J. 52 Vice President-Operations
Dintemann . . . .
Harvey Farber . . 55 Senior Vice President, Flavor Development
The business experience of each of the persons listed above for at least
the last five years is as follows:
Philip Rosner has been the President and Chairman of the Board of the
Company since its inception in 1989. Mr. Rosner has been engaged in the flavor
and fragrance industry for over 40 years. Before 1989, he was the President of
Globe Extracts, Inc. and, for 15 years before that, the President of Felton
Worldwide, Inc., both of which produced and marketed flavors and fragrances.
A. Gary Frumberg has been the Executive Vice-President of the Company since
1989. Prior to 1989, Mr. Frumberg served as Vice President - International
Sales of Felton Worldwide, Inc.
-5-
<PAGE>
Richard R. Higgins has been a Director of the Company since June 1996, and
an Executive Vice President of the Company and President of the Company's Seafla
Division since December 1995. Prior to that, Mr. Higgins was President of
Seafla, Inc. until that business was acquired by the Company in December 1995.
Sydney Stein has been a Director of the Company since 1993. Since March
1991, Mr. Stein has been Executive Vice President of Un Seul Prix, Inc., a
Montreal-based retail chain and, from March 1991 to May 1994, President of
Kasyco, Inc. a Montreal-based wholesaler.
Duncan Shirreff has been a Director of the Company since 1994. Since 1994,
Mr. Shirreff has been the Resident Director of the Toronto Branch of the
Canadian merchant banking firm of CM Oliver & Company Limited in charge of
corporate finance and European capital markets. From 1991 to 1994, he was an
independent financial consultant to various corporations. Prior to 1991,
Mr. Shirreff served as a Director of, and in senior executive capacities with,
Scotia McLeod, Inc., a Toronto merchant banking firm.
Paul E. Hoffmann has been the Secretary and Treasurer of the Company since
1990 and was a Director of the Company until 1996. Mr. Hoffmann is responsible
for financial and legal matters. Before he joined the Company, Mr. Hoffmann was
Vice President, Finance of Globe Extracts, Inc. for more than eight years.
Ronald J. Dintemann has been Vice President-Operations of the Company since
May 1989 after serving as Vice-President - Operations of Globe Extracts, Inc.
Harvey Farber has been Senior Vice President - Flavor Development of the
Company since October 1995 after serving as Vice President - Flavor Development
at J. Manheimer Inc. for the past twelve years.
All directors of the Company serve until the next annual meeting of
shareholders or until their successors are elected and qualified. Officers
serve at the discretion of the Board of Directors, subject to rights, if any,
under contracts of employment. There are no family relationships among the
directors and executive officers of the Company. See "-- Director Compensation"
and "-- Executive Compensation."
Meetings of the Board of Directors and Committees
The business affairs of the Company are managed under the direction of the
Board of Directors. Members of the Board of Directors are informed about the
Company's affairs through presentations, reports and documents distributed to
them, through operating and financial reports routinely presented at meetings of
the Board of Directors and committee meetings, and through other means. In
addition, directors of the Company discharge their duties throughout the year
not only by attending Board of Directors meetings but also through personal
meetings and other communications, including telephone contact, with management
and others regarding matters of interest and concern to the Company.
-6-
<PAGE>
During the year ended December 31, 1995, the Company's Board of Directors
held four formal meetings and acted by unanimous written consent in lieu of a
meeting, on three separate occasions. Each director attended at least 75% of
the Board meetings and any applicable committee meetings during 1995.
Board Committees
The Company's Board of Directors has an Audit Committee. The Company does
not have either a compensation or a nominating committee. The members of the
Audit Committee are appointed by the Board of Directors.
Audit Committee. The Audit Committee recommends to the Board of Directors
the firm to be selected each year as independent auditors of the Company's
financial statements and to perform services related to the completion of such
audit. The Audit Committee also has responsibility for (i) reviewing the scope
and results of the audit with the independent auditors, (ii) reviewing the
Company's financial condition and results of operations with management,
(iii) considering the adequacy of the internal accounting, bookkeeping and
control procedures of the Company, and (iv) reviewing any non-audit services and
special engagements to be performed by the independent auditors and considering
the effect of such performance on the auditors' independence. The Audit
Committee currently consists of Messrs. Rosner, Stein and Shirreff. The Audit
Committee was in session and met during each of the Company's four meetings of
its Board of Directors during 1995.
Although the Company has not established a nominating committee and/or a
corporate governance committee as recommended by the TSE Report (as defined
herein), the Company believes that the nomination of directors and other issues
normally considered by these committees can be effectively dealt with by the
Board of Directors due to its relatively small size, or by the Audit Committee
which is substantially composed of "unrelated directors." See "--Statement of
Corporate Governance Practices."
Statement of Corporate Governance Practices
The Company's Common Stock is listed on the TSE. The by-laws of the TSE
were recently amended to require companies listed on the TSE to disclose their
approach to corporate governance on an annual basis and within the context of
certain guidelines proposed in the December 1994 report issued by The Toronto
Stock Exchange Committee on Corporate Governance in Canada (the "TSE Report").
The report's focus is on the importance of each company addressing the
governance issue in its own context and the receipt by the Company's
shareholders of an explanation for each company's approach to governance. There
is no requirement for the Company to comply with the guidelines developed in the
TSE Report, and the report itself recognizes that each company should have the
flexibility to develop its own approach to corporate governance.
Of particular significance is the fact that the Company is a United States
company organized under the laws of the State of Delaware, and therefore is
subject to that State's well-developed laws and principles of corporate
governance. The Company is of the opinion that its approach to corporate
governance is in compliance with Delaware law, and therefore is also in
accordance with the
-7-
<PAGE>
fundamental principles upon which the TSE Report were based. Moreover, the
Company's Board of Directors has considered the guidelines in the TSE Report and
believes that the Company's approach to corporate governance is working
effectively for the Company and its shareholders. In particular, the Board of
Directors believes that many of the guidelines in the TSE Report are better
suited to larger companies and companies with securities that are more widely
held than those of the Company.
Unrelated Directors
Much of the discussion in the TSE Report focuses on the composition of the
Company's Board of Directors and, in particular, the number of "unrelated
directors." In the TSE Report, an "unrelated director" is a director who is
free from any interest and any business or other relationship which could, or
could reasonably be perceived to, materially interfere with that director's
ability to act with a view to the best interest of the Company, other than an
interest arising from shareholding. The TSE Report also focuses on the
importance of having an appropriate portion of the Board of Directors who are
free from any interest or relationship with a "significant shareholder" of the
Company (i.e., a shareholder controlling more than 50% of the Company's Common
Stock). The Company does not have a "significant shareholder" within the
meaning of the TSE Report.
The Company's Board of Directors has concluded that two (i.e.,
Messrs. Stein and Shirreff) of its five members are "unrelated" within the
meaning of the TSE Report. In addition, each "unrelated director" serves on the
Company's Audit Committee. While the number of unrelated directors is less than
the majority suggested by the TSE Report, the Company's Board of Directors
believes that the number is appropriate for the effective operation of the
Company. The Board of Directors believes that the presence of the
President/Chairman of the Board of Directors and the Executive Vice Presidents
on the Board of Directors is key to the effective corporate governance of the
Company. The knowledge that each of these directors brings to the Board of
Directors and the insight that each offers into his particular area of
responsibility within the Company have been instrumental in creating a Board of
Directors that functions effectively, and, in turn, in achieving successful
results for the Company's growth and development.
The Company's Board of Directors believes that its relationship with
management in supervising the management of the business and affairs of the
Company is appropriate, and that the focus of the TSE Report on a majority of
the Board being comprised of unrelated directors is neither necessary nor
desirable for the Company under its present circumstances. The significant
contributions of current management to the formation and continued growth of the
Company and the confidence which the Board of Directors understands the
Company's shareholders to have in management are factors supporting the Board of
Directors' opinion that additional independence is not required.
The Board of Directors has no formal policy setting out which specific
matters must be brought by the President and management to the Board of
Directors for approval, although there is a clear understanding between
management and the Board of Directors through historical practice and accepted
legal practice that all transactions or other matters of a material nature must
be presented by management for approval by the Board of Directors.
-8-
<PAGE>
Response to Shareholders
Management is available to shareholders to respond to questions and
concerns on a prompt basis. The Board of Directors believes that the Company's
communications with shareholders and others interested in the Company with
respect to addressing their inquiries about the Company are responsive and
effective.
Expectations of Management
The Board of Directors works closely with members of management. The Board
of Directors' access to information relating to the operations of the Company,
through membership on the Board of Directors of several key members of
management and, as necessary, attendance by other members of management at the
request of the Board of Directors, are key elements to the effective and
informed functioning of the Company's Board of Directors.
The Board of Directors expects the Company's management to take the
initiative in identifying opportunities and risks affecting the Company's
business and finding means to deal with such opportunities and risks for the
benefit of the Company. The Board of Directors is confident that the Company's
management responds ably to this expectation.
Director Compensation
Directors are reimbursed for reasonable expenses actually incurred in
connection with attending each meeting of the Board of Directors or any
committee thereof. In addition, each outside director of the Company is paid a
$10,000 annual fee plus $500 for each meeting attended.
Executive Compensation
The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company for the fiscal years ended December
31, 1993, 1994 and 1995 to (i) the Company's President, and (ii) the only other
executive officers of the Company other than the President whose total annual
salary and bonus and compensation exceeded $100,000 for the three years ended
December 31, 1995 (the "Named Executive Officers"):
-9-
<PAGE>
SUMMARY COMPENSATION TABLE(1)
Annual
------
Compensation Long-Term Compensation
------------ ----------------------
Awards Payouts
------ -------
Securities
Underlying All Other
Name and Principal Position Year Salary($) Options/SARs Compensation(2)
--------------------------- ---- --------- ------------ ------------
Philip Rosner 1995 200,000 -- 16,001
Chairman and President . 1994 236,634 100,000(3) 19,476
1993 135,000 -- 16,492
A. Gary Frumberg 1995 164,000 -- 12,305
Executive Vice President
1994 200,000 100,000(3) 12,181
1993 135,000 -- 12,322
Paul E. Hoffmann 1995 99,000 -- 11,171
Treasurer and Secretary 1994 100,152 75,000(3) 12,478
1993 98,365 -- 10,705
______________
(1) On August 2, 1996, the Company entered into a three-year employment
agreement with Joseph A. Gemmo to serve as the Company's Vice President and
Chief Financial Officer effective August 19, 1996. Pursuant to such
agreement, Mr. Gemmo is entitled to receive an annual salary of $115,000
and an option to purchase 100,000 shares of the Company's Common Stock.
(2) Represents Company reimbursed expenses of each executive with respect to an
automobile.
(3) On October 31, 1995, the Company's Board of Directors reduced the exercise
price of the options granted to Messrs. Rosner, Frumberg and Hoffmann. See
"Ratification of Reduction of Exercise Prices of All Outstanding Options --
Reduction of Exercise Prices".
Option Grants in Last Fiscal Year
There were no grants of stock options made to either the President or the
Named Executive Officers during the year ended December 31, 1995.
Aggregate Option Exercises in Fiscal 1995
and 1995 Fiscal Year-End Option Values
The following table provides certain information regarding stock option
ownership and exercises by the President and the Named Executive Officers, as
well as the number and assumed value of exercisable and unexercisable options
held by those persons at December 31, 1995.
-10-
<PAGE>
<TABLE><CAPTION>
Value of Unexercised
Number of Unexercised Options at In-the-Money Options at
Shares Acquired Value December 31, 1995 December 31, 1995($)
on Exercise(#) Realized($) (#) Exercisable/Unexercisable Exercisable/Unexercisable(1)
Name
----
<S> <C> <C> <C> <C>
Philip Rosner . -- -- 25,000 / 75,000 1,500 / 4,500
A. Gary Frumberg -- -- 25,000 / 75,000 1,500 / 4,500
Paul E. Hoffmann -- -- 18,750 / 56,250 2,250 / 6,750
</TABLE>
_________________
(1) Value of exercisable "in-the-money" options is equal to the difference
between the closing bid price per share of the Common Stock on the TSE at
December 29, 1995 (U.S. $.70) and the option exercise price per share (as
reduced by the Board of Directors on October 31, 1995, see "Ratification of
Reduction of Exercise Prices of All Outstanding Options -- Reduction of
Exercise Prices") multiplied by the number of shares subject to options.
Employment Agreements
On October 16, 1995, the Company entered into five-year employment
agreements with Messrs. Rosner, Frumberg and Hoffmann at annual salaries
(adjustable in accordance with the Consumer Price Index) of $235,000, $200,000
and $135,000, respectively. Each agreement contains, among other things,
customary termination and confidentiality provisions.
In December 1995, the Company entered into an employment agreement with Mr.
Higgins. Pursuant to the employment agreement, Mr. Higgins is entitled to
receive an annual salary of $150,000 plus an amount, each year, equal to 2% of
the Company's sales produced but not generated by the Seafla Division that year.
However, Mr. Higgins' annual compensation is not to exceed Mr. Rosner's annual
compensation or $200,000, whichever is higher. Pursuant to his employment
agreement, Mr. Higgins also received an aggregate of 750,000 shares of
restricted Common Stock. See "-- Higgins' Restricted Shares."
On August 2, 1996, the Company entered into a three-year employment
agreement with Joseph A. Gemmo to serve as the Company's Vice President and
Chief Financial Officer effective August 19, 1996. Pursuant to such agreement,
Mr. Gemmo is entitled to receive an annual salary of $115,000 and an option to
purchase 100,000 shares of the Company's Common Stock.
Limitation of Personal Liability and Indemnification
The General Corporation Law of Delaware permits a corporation through its
certificate of incorporation to eliminate the personal liability of its
directors to the corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director, with certain exceptions. The exceptions
include a breach of fiduciary duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law,
improper declarations of dividends and transactions from which the directors
derived an improper personal benefit. The Company's Certificate of
Incorporation, as amended, exonerates its directors from monetary liability to
the fullest extent
-11-
<PAGE>
permitted by this statutory provision but does not restrict the availability of
non-monetary and other equitable relief.
The Company's Certificate of Incorporation, as amended, and By-laws provide
that the Company shall indemnify its directors and officers to the fullest
extent permitted by Delaware law.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Principal Shareholders
On December 6, 1995, the Company acquired substantially all of the assets
and assumed the trade obligations and certain other liabilities of Seafla, Inc.
("Seafla"), a producer of dairy and savory flavors. In consideration therefor,
the Company paid $3,000,000 and issued a promissory note in the original
principal amount of $888,019, of which $177,604 is payable commencing on
January 1, 1997 and on each January 1 thereafter through 2001. The promissory
note bears interest at a rate of 12% per annum. Concurrently with the closing
of the acquisition, the Company entered into a five-year employment agreement
with Mr. Higgins, the President of Seafla, to be the President of the Company's
Seafla Division. The Company funded the cash portion of the Seafla purchase
price through bank borrowings of $3,500,000, with interest payable monthly at
one-and-one-half points above the bank's prime rate and principal is repayable
in 1998.
In connection with the Seafla Acquisition, the Company assumed the lease of
Seafla's 37,000 square foot facility in Milford, Ohio, with a term expiring in
2014. The owner of this facility is a partnership in which Mr. Higgins is a
partner. The annual rental paid by the Company in respect of this facility is
$192,000. In connection with the Seafla Acquisition, the Company obtained a
report of an independent appraisal firm which concluded that the rental paid by
the Company is at or very close to market value.
Transactions with Directors and Executive Officers
The following table sets forth certain information regarding loans made by
the Company to its directors and executive officers during the fiscal year ended
December 31, 1995 (collectively, the "Loans"). As of August 20, 1996, the
aggregate indebtedness owed to the Company pursuant to the Loans was $289,257,
including accrued interest thereon. The Loans are unsecured and bear interest
at a rate of 8% per annum. The repayment terms of the Loans are currently being
reviewed by the Company's Board of Directors.
-12-
<PAGE>
<TABLE><CAPTION>
TABLE OF INDEBTEDNESS OF DIRECTORS
AND EXECUTIVE OFFICERS OTHER THAN
UNDER SECURITIES PURCHASE PROGRAMS
Largest Amount Amount Outstanding
Name and Outstanding During as of
Principal Position Involvement ofIssuer Fiscal 1995(1) August 20, 1996(1)
------------------ -------------------- -------------- ------------------
<S> <C> <C> <C>
Philip Rosner Lender $ 173,938 $ 194,645
Chairman, President
and Director Nominee
A. Gary Frumberg Lender $ 76,168 $ 94,612
Executive Vice President
and Director Nominee
</TABLE>
- -------------------------------
(1) Includes accrued interest.
Other than as set forth in this Proxy Statement, no person who has been a
director or executive officer of the Company at any time since the beginning of
the last fiscal year, nor any proposed nominee for election as a director of the
Company, nor any associate or affiliate of any of the foregoing, has any
material interest, directly or indirectly, by way of beneficial ownership of
securities or otherwise, in any matter to be acted upon.
PROPOSAL II: SELECTION OF INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. has prepared the Company's audited consolidated
financial statements for the fiscal year ended December 31, 1995 and the report
contained therein, each of which is included in the Company's Annual Report
accompanying this Proxy Statement.
On June 5, 1996, the Company's Board of Directors approved (i) the
engagement of Ernst & Young LLP as the Company's independent accountants for the
fiscal year ending December 31, 1996 and (ii) the dismissal of Coopers & Lybrand
L.L.P., as auditors of the Company effective June 11, 1996. As independent
accountants for the Company, Ernst & Young LLP shall be responsible for auditing
the accounts of the Company and providing other audit and accounting services to
the Company in connection with filings with the Commission and the TSE. The
selection of Ernst & Young LLP was also approved by the Audit Committee on June
5, 1996.
Coopers & Lybrand L.L.P. previously served as the Company's independent
accountants since 1993. The reports of Coopers & Lybrand L.L.P. on the
Company's financial statements for the past two fiscal years did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope, or accounting principles.
In connection with the audits of the Company's financial statements for
each of the last two fiscal years ended December 31, 1995, and in the subsequent
interim period, there were no disagreements with Coopers & Lybrand L.L.P. on any
matters of accounting principles which, if not
-13-
<PAGE>
resolved to the satisfaction of Coopers & Lybrand L.L.P. would have caused
Coopers & Lybrand L.L.P. to make reference to the matter in their report. At
the Company's request, Coopers & Lybrand L.L.P. prepared a letter addressed to
the Commission stating that it agrees with the above statements. A copy of that
letter is attached hereto as Exhibit A.
Upon recommendation of the Audit Committee, the shareholders are being
asked to approve the selection of Ernst & Young LLP, as independent accountants
for the fiscal year ending December 31, 1996 and to authorize the Board of
Directors to fix their remuneration. Representatives of Ernst & Young LLP are
expected to be present at the Special Meeting and available to respond to
appropriate questions. Such representatives also will have the opportunity,
should they so desire, to make any statements to the shareholders which they
deem appropriate.
Required Affirmative Vote
Approval of the selection of Ernst & Young LLP, as independent accountants
of the Company for the fiscal year ending December 31, 1996, requires the
affirmative vote of the holders of a majority of the shares of Common Stock
represented in person or by proxy at the Special Meeting. The Board of
Directors unanimously recommends that the shareholders vote FOR Proposal II.
PROPOSAL III: TO APPROVE THE ADOPTION
OF THE 1996 OPTION PLAN
General
Subject to the approval of the Company's stockholders, in August 1996 the
Board of Directors of the Company adopted the 1996 Stock Option Plan (the "1996
Option Plan"). The 1996 Option Plan is intended to help the Company to attract,
retain and motivate key employees (including officers) of the Company.
The 1996 Option Plan provides for the grant of options ("Options") to
purchase Common Stock that are intended to qualify as incentive stock options
("Incentive Options") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") as well as options that do not so qualify ("Non-Qualified
Options").
Background of Shareholder Approval Requirement
Shareholder approval of the 1996 Option Plan is required for options
granted under the plan to qualify as Incentive Options under Section 422 of the
Code. For this purpose, shareholders must approve a plan that designates the
aggregate number of shares which may be issued under the plan and the class of
employees eligible to receive options under the plan. Shareholder approval must
be obtained within 12 months after adoption of the plan by the Board of
Directors.
Section 162(m) of the Code disallows a tax deduction for compensation in
excess of $1 million that is paid to certain employees of a corporation whose
common stock is subject to the registration
-14-
<PAGE>
requirements of Section 12 of the Securities Exchange Act of 1934, as amended,
(the "Exchange Act"). However, this limitation does not apply to "qualified
performance-based compensation." Pursuant to Treasury Regulation Section 1.162-
27 promulgated under Section 162(m) of the Code, in order for grants under the
1996 Option Plan to satisfy the requirements to be "qualified performance-based
compensation," it is necessary to obtain shareholder approval of the class of
employees eligible to receive grants under the 1996 Option Plan, the business
criteria to be used in making such grants, the maximum number of shares with
respect to which grants can be made to any one employee under the 1996 Option
Plan and the exercise price of any Options. Another requirement for "qualified
performance-based compensation" is that grants under the plan be made by a
compensation committee consisting solely of two or more "outside directors,"
within the meaning of Treasury Regulation Section 1.162-27(e)(3).
The following description of the 1996 Option Plan summarizes the principal
features of the 1996 Option Plan and sets forth those matters as to which
shareholder approval is required as described above. A vote in favor of
Proposal III shall be treated as the shareholder's approval of the 1996 Option
Plan and, specifically, the description below of the class of employees eligible
to receive grants, the maximum number of shares as to which grants can be made
to any one employee and the aggregate number of shares that can be issued in
each case under the 1996 Option Plan.
Any such options that are granted will not satisfy the "qualified
performance-based compensation" exception to Section 162(m) absent shareholder
approval of the business criteria to be used in making such grants.
Description of the 1996 Option Plan
The following is a summary of the principal features of the 1996 Option
Plan. This summary is qualified in its entirety by reference to the specific
provisions of the plan, the full text of which is set forth in Exhibit B to this
Proxy Statement.
Administration of the 1996 Option Plan
The 1996 Option Plan will be administered by the Board of Directors or by a
committee (the "Committee") which is appointed by the Board of Directors. The
Committee will consist of two non-employee members of the Company's Board of
Directors, neither of whom is eligible at any time for the grant of Options
under the 1996 Option Plan and each of whom is a "non-employee director" within
the meaning of Rule 16b-3 promulgated under the Exchange Act and an "outside
director" within the meaning of Treasury Regulation Section 1.162-27(e)(3). The
Company's Board of Directors or the Committee is authorized to interpret the
1996 Option Plan, adopt and amend rules and regulations relating to the 1996
Option Plan, and determine the recipients, form, and terms of Options granted
under the 1996 Option Plan. All Options must be evidenced by a written
agreement.
-15-
<PAGE>
Shares Available
Under the 1996 Option Plan, the maximum number of shares of Common Stock
that may be subject to Options may not exceed an aggregate of 1,000,000 shares.
The maximum number of shares will be adjusted in certain events, such as a stock
split, reorganization or recapitalization.
Eligibility
Employees (including officers and directors who are employees) of the
Company or its subsidiaries are eligible for the grant of Options under the 1996
Option Plan. Directors who are not employees or officers are not eligible to
participate. In the event of Incentive Options, the aggregate fair market value
(determined at the time the Option is granted) of the Common Stock with respect
to which Incentive Options become exercisable for the first time by the Option
holder (i.e., vest) during any calendar year cannot exceed $100,000. This limit
does not apply to Non-Qualified Options. To the extent an Option that otherwise
would be an Incentive Option exceeds this $100,000 threshold, it will be treated
as a Non-Qualified Option.
Exercise Price of Options
The Company will receive no monetary consideration for the grant of Options
under the 1996 Option Plan. In case of an Incentive Option, the exercise price
cannot be less than the fair market value (as defined in the 1996 Option Plan)
of the shares on the date the Option is granted, and if an optionee is a
shareholder who beneficially owns 10% or more of the outstanding Common Stock,
the exercise price of Incentive Options cannot be less than 110% of such fair
market value. The exercise price of Non-Qualified Options shall be determined
by the Company's Board of Directors or the Committee. The exercise price of
Options will be adjusted in certain events, such as a stock split,
reorganization or recapitalization.
Payment upon Exercise of Options
Payment for shares purchased by exercising an Option is to be made by cash
or check, or by any other means which the Board of Directors determines are
consistent with the purposes of the 1996 Option Plan and with applicable laws
and regulations.
Term of Options
The term of an Option cannot exceed ten years, and in the case of an
optionee who owns 10% or more of the outstanding Common Stock, cannot exceed
five years.
-16-
<PAGE>
Termination of Employment
Individual option agreements generally will provide that the Options will
expire upon termination of employment except that (i) in the case of termination
that is not for cause or otherwise attributable to a breach by the optionee of
an employment or confidentiality or non-disclosure agreement, the Option will be
exercisable for three months after termination to the same extent that it was
exercisable prior to termination, (ii) in the case of termination due to
disability, the Option will be exercisable for one year after termination (or
within such lesser period as may be specified in the applicable option
agreement) to the same extent that it was exercisable prior to termination and
(iii) in the case of death while in the employ of the Company or, within the
three month period referred to in (i), the Option will be exercisable for one
year after death (or within such lesser period as may be specified in the
applicable option agreement). After the death of an optionee, the Option is
exercisable by the legal representative of the optionee or by the person that
acquired the Option by reason of the death of the Optionee.
Non-Transferability of Options
Options are not transferable by the optionee except by will or by the laws
of descent and distribution. The disposition of shares acquired pursuant to the
exercise of an Option will be subject to any applicable restrictions on
transferability imposed by the Commission's regulations.
Effective Date
The 1996 Option Plan became effective when adopted by the Board of
Directors, but no Incentive Option granted under the plan shall become
exercisable unless and until the plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board of Director's adoption of the plan, no options
previously granted under the plan shall be deemed to be Incentive Options and no
Incentive Options shall be granted thereafter.
Duration of the 1996 Option Plan
The 1996 Option Plan will terminate automatically and no Options may be
granted after ten years have elapsed from the date the 1996 Option Plan was
approved by the Company's Board of Directors. The 1996 Option Plan may be
terminated at any prior time by the Board of Directors. Termination of the 1996
Option Plan will not affect Options that were granted prior to the termination
date.
Amendments or Modifications
The 1996 Option Plan may be amended or modified from time to time by the
Company's Board of Directors. However, if at any time the approval of the
shareholders of the Company is
-17-
<PAGE>
required under Section 422 of the Code or Rule 16b-3, the Board of Directors may
not effect such modification or amendment without such approval.
Certain Federal Income Tax Consequences
The following summary outlines certain federal income tax consequences of
the 1996 Option Plan to the Company and participants under present law.
Incentive Options
A participant will not recognize income for federal income tax purposes
upon the grant of an Incentive Option. A participant also will not be taxed on
the exercise of an Incentive Option, provided that the Common Stock acquired
upon exercise of the Incentive Option is not sold by the participant within two
years after the Option was granted and one year after the Option is exercised
(the "required holding period").
However, for alternative minimum tax ("AMT") purposes, the difference
between the exercise price of the Incentive Option and the fair market value of
the Common Stock acquired upon exercise is an item of tax preference in the year
the Incentive Option is exercised. The participant is required to include such
amount in AMT income in such year and to compute the tax basis of the shares so
acquired in the same manner as if a Non-Qualified Option had been exercised,
including the availability of a Section 83 election (discussed below). Whether
a participant will be liable for AMT in the year the Incentive Option is
exercised will depend on the participant's particular tax circumstances. AMT
paid in such year will be allowed as a credit to the extent regular tax exceeds
AMT in subsequent years.
On a sale, after the required holding period, of Common Stock that was
acquired by exercising an Incentive Option, the difference between the
participant's tax basis in the Common Stock and the amount received in the sale
is taxed as long-term capital gain or loss.
If Common Stock acquired upon the exercise of an Incentive Option is
disposed of by the participant during the required holding period (a
"disqualifying disposition"), the excess, if any, of (i) the amount realized on
such disposition (up to the fair market value of the Common Stock on the
exercise date) over (ii) the exercise price, will be taxed to the participant as
ordinary income. If a participant pays the exercise price of an Incentive
Option by delivering Common Stock that was previously acquired by exercising an
Incentive Option and such delivery occurs before the end of the required holding
period of such Common Stock, the participant is treated as making a disqualified
disposition of the Common Stock so delivered.
The Code puts a $100,000 limit on the value of stock subject to Incentive
Options that first become exercisable in any one year, based on the fair market
value of the underlying Common Stock on the date of grant. To the extent
Options exceed this limit, they are taxed as Non-Qualified Options.
-18-
<PAGE>
Non-Qualified Options
A participant who receives a Non-Qualified Option does not recognize
taxable income on the grant of the Option. Upon exercise of a Non-Qualified
Option, a participant generally has ordinary income in an amount equal to the
excess of the fair market value of the shares at the time of exercise over the
exercise price paid for the shares.
However, if the participant (i) is an officer or director of the Company or
the beneficial owner of more than 10% of the Company's equity securities (in
each case, within the meaning of Section 16 of the Exchange Act -- as so
defined, an "Insider"), (ii) does not make a Section 83 election and
(iii) receives shares upon the exercise of a Non-Qualified Option, the
recognition of income (and the determination of the amount of income) is
deferred until the earlier of (a) six months after the shares are acquired or
(b) the earliest date on which the Insider could sell the shares at a profit
without being subject to liability under Section 16(b) of the Exchange Act (six
months after the Non-Qualified Option is granted, in the case of an
"in-the-money" Option). If the participant makes a Section 83 election, income
is not deferred. Rather, income is recognized on the date of exercise of the
Non-Qualified Option in an amount equal to the excess of the fair market value
of the shares acquired upon exercise over the exercise price. A Section 83
election must be filed with the Internal Revenue Service within thirty (30) days
after an Option is exercised.
A participant's tax basis in shares received upon exercise of a
Non-Qualified Option is equal to the amount of ordinary income recognized on the
receipt of the shares plus the amount of cash, if any, paid upon exercise. The
holding period for the shares begins on the day after the shares are received
or, in the case of an Insider that has not made a Section 83 election, on the
day after the date on which income is recognized by the Insider on account of
the receipt of the shares.
If a participant exercises a Non-Qualified Option by delivering previously
held shares in payment of the exercise price, the participant does not recognize
gain or loss on the delivered shares, even if their fair market value is
different from the participant's tax basis in the shares. The exercise of the
Non-Qualified Option is taxed however, and the Company generally is entitled to
a deduction, in the same amount and at the same time as if the participant had
paid the exercise price in cash. Provided the participant receives a separate
identifiable stock certificate therefor, his tax basis in the number of shares
received that is equal to the number of shares surrendered on exercise will be
the same as his tax basis in the shares surrendered. His holding period for
such number of shares will include his holding period for the shares
surrendered. The participant's tax basis and holding period for the additional
shares received upon exercise will be the same as it would if the participant
had paid the exercise price in cash.
If a participant receives shares upon the exercise of a Non-Qualified
Option and thereafter disposes of the shares in a taxable transaction, the
difference between the amount realized on the disposition and the participant's
tax basis in the shares is taxed as capital gain or loss (provided the shares
are held as a capital asset on the date of disposition), which is long-term or
short-term depending on the participant's holding period for the shares.
-19-
<PAGE>
Deduction by the Company
The Company is not allowed a federal income tax deduction on the grant or
exercise of an Incentive Option or the disposition, after the required holding
period, of shares acquired by exercising an Incentive Option. On a
disqualifying disposition of such shares, the Company is allowed a federal
income tax deduction in an amount equal to the ordinary income recognized by the
participant as a result of the disqualifying disposition, provided that such
amount constitutes an ordinary and necessary business expense of the Company, is
reasonable in amount and is not disallowed by Section 162(m) of the Code
(discussed above).
The ordinary income recognized by an employee of the Company on account of
the exercise of a Non-Qualified Option is subject to both wage withholding and
employment taxes. A deduction for federal income tax purposes is allowed to the
Company in an amount equal to the amount of ordinary income taxable to the
participant, provided that such amount constitutes an ordinary and necessary
business expense of the Company, that such amount is reasonable, and that the
Company satisfies any tax reporting obligation that it has with respect to such
income.
Required Affirmative Vote
Approval of the adoption of the 1996 Option Plan requires the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock.
The Board of Directors believes that the proposal is in the best interests of
the Company and its shareholders and recommends that the shareholders vote FOR
the adoption of the 1996 Option Plan as set forth in this Proposal III.
PROPOSAL IV: RATIFICATION OF REDUCTION OF EXERCISE PRICES
OF ALL OUTSTANDING OPTIONS
Description of the 1993 Option Plan
In November 1993, the Company adopted the 1993 Option Plan permitting the
Company to issue options to its employees to purchase up to 500,000 shares of
Common Stock. The options may be exercised during the ten year period after
they are granted, at an exercise price equal to the mean between the high and
low selling price of the Company's Common Stock on the TSE on the date of grant.
Nevertheless, options granted to any person who beneficially owns ten percent
(10%) or more of the Common Stock may be exercised only until the fifth
anniversary of the date of the grant and may be exercised at a price equal to
110% of the market price at the date of the grant.
Options Granted Under the 1993 Option Plan
On April 8, 1994, the Company granted options to purchase an aggregate of
492,500 shares of Common Stock to 71 employees. Of such amount, ten-year
options were granted to purchase 289,500 shares of Common Stock to 66 employees
in the United States (including options for 75,000 shares to Mr. Hoffmann, the
Company's Secretary and Treasurer) at the exercise price of U.S.$1.38 and
ten-year options to purchase 3,000 shares of Common Stock were granted to three
employees in Canada at the
-20-
<PAGE>
equivalent exercise price of Cdn. $1.90. In addition, five-year options to
purchase 100,000 shares of Common Stock at an exercise price of U.S.$1.52 were
granted to each of Philip Rosner and A. Gary Frumberg, each of whom beneficially
own at least 10% of the Common Stock. In each instance, 25% of the options
become exercisable on each of the first four anniversaries of the grant date.
The options granted to Messrs. Rosner, Frumberg and Hoffmann constituted 56% of
the options granted to the Company's employees in 1994. As of August 20, 1996,
no options have been exercised by Messrs. Rosner, Frumberg or Hoffmann.
Description of Options Granted to Non-Employee Directors
On April 8, 1994, the Company granted ten-year options to purchase 100,000
shares of Common Stock at an exercise price of U.S. $1.38 to each of Seth H.
Dubin and Sydney Stein, both of whom were then directors, but not employees, of
the Company. The options were granted at the market price on the date of grant.
On November 14, 1994, Mr. Dubin resigned as a Director and exercised his
option in full before it expired at the reduced exercise price, subject to
approval by the Company's shareholders.
The Company believes that all of the foregoing options were granted in
accordance with the rules and policies of the TSE. In addition, the shares of
Common Stock underlying such options were accepted for listing by the TSE.
Reduction of Exercise Prices
On October 31, 1995, subject to the approval of the Company's shareholders,
the Board of Directors reduced the exercise prices of all outstanding options
granted under the 1993 Option Plan and the 1994 Option Grants from U.S. $1.38
per share to U.S. $.58 per share with respect to options granted to employees,
officers or directors of the Company who are not beneficial owners of 10% or
more of the Common Stock and from U.S. $1.52 per share to U.S. $.64 per share
with respect to options granted to employees, officers or directors who
beneficially own 10% or more of the Common Stock.
The Company's Board of Directors decided to reduce the exercise prices of
all outstanding options in order to bring the exercise prices more in line with
the prevailing selling prices of the Company's Common Stock. The reduced
exercise prices approved by the Company's Board of Directors were based on the
downward trend in the price of the Company's Common Stock during the three
quarterly periods immediately preceding its decision. In addition, the reduced
exercise prices are consistent with the average of the high and low selling
prices of the Company's Common Stock on the TSE during the quarterly period in
which such decision was made.
Pursuant to the rules and polices of the TSE, the shareholders are being
asked to ratify the reduction of the exercise prices of all outstanding options.
-21-
<PAGE>
Required Affirmative Vote
Approval of the reduction of the exercise prices of all outstanding options
requires the affirmative vote of the holders of a majority of the shares of
Common Stock represented in person or by proxy at the Special Meeting. The
Board of Directors unanimously recommends that the shareholders vote FOR
Proposal IV.
PROPOSAL V: APPROVAL AND RATIFICATION OF ISSUANCE OF FIVE-YEAR WARRANTS
Consulting Agreement
In October 1995, the Company entered into a one-year consulting agreement
with SGI, pursuant to which SGI, on behalf of the Company, agreed to (i) arrange
and conduct meetings with the professional investment community and investor
groups, (ii) develop and implement a comprehensive investor relations program,
and (iii) provide professional staff services to assist the Company in carrying
out its programs and objectives (the "Consulting Agreement"). Under the
Consulting Agreement, the Company pays SGI a retainer fee of $8,000 per month
plus reasonable expenses and issued to SGI warrants to purchase an aggregate of
600,000 shares of Common Stock at an initial exercise price of U.S. $.56, the
market price of the Common Stock on the TSE on the date of issuance (the
"Warrants").
Pursuant to the terms and conditions set forth in the Warrant Agreement
dated as of October 25, 1995 (the "Warrant Agreement"), the Company retained the
right to redeem all, but not part, of the Warrants upon not less than thirty
(30) days notice to the holder thereof, at a redemption price of one cent ($.01)
per Warrant, in the event that the average trading price on the TSE of the
Company's Common Stock equals or exceeds Cdn. $1.50 for 30 consecutive trading
days prior to the date of such notice. The Warrant Agreement expires on
October 24, 2000. A copy of the Warrant Certificate and the accompanying "Form
of Election to Purchase" are attached hereto as Exhibit C.
On April 24, 1996, the Company's Board of Directors ratified and approved
the issuance of the Warrants to SGI, as a portion of its compensation for the
consulting services rendered by it in accordance with the Consulting Agreement.
Pursuant to the terms of the Warrant Agreement, none of the Warrants may be
exercised until the granting thereof is approved by the shareholders of the
Company. Accordingly, the Board of Directors is seeking the shareholders
approval and ratification of the Warrants.
Required Affirmative Vote
Approval and ratification of the Warrants requires the affirmative vote of
the holders of a majority of the shares of Common Stock represented in person or
by proxy at the Special Meeting. The Board of Directors unanimously recommends
that the shareholders vote FOR Proposal V.
-22-
<PAGE>
1997 SHAREHOLDER PROPOSALS
In order for shareholder proposals for the 1997 Annual Meeting of
Shareholders to be eligible for inclusion in the Company's 1997 Proxy Statement,
they must be received by the Company at its principal executive offices, 10
Edison Street, East, Amityville, New York 11701 (Attn: Secretary), prior to
March 31, 1997. The Board of Directors will review any shareholder proposals
that are filed as required and will determine whether such proposals meet
applicable criteria for inclusion in the Company's 1997 Proxy Statement for the
Annual Meeting.
Holders of Common Stock desiring to have proposals submitted for
consideration at any future meeting of shareholders should consult with the
applicable rules and regulations of the Commission with respect to such
proposals.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for consideration at the Special Meeting. Should any other matters
properly come before the Special Meeting, it is the intention of the persons
named in the accompanying proxy to vote such proxy on behalf of the shareholders
they represent in accordance with their best judgment.
SOLICITATION OF PROXIES
Proxies are being solicited by and on behalf of the Board of Directors.
The Company will bear the costs of preparing and mailing the proxy materials to
its shareholders in connection with the Special Meeting. The Company will
solicit proxies by mail and the directors and certain officers and employees of
the Company may solicit proxies personally or by telephone or telegraph. These
persons will receive no additional compensation for such services but will be
reimbursed for reasonable out-of-pocket expenses. The Company also will request
brokers, dealers, banks and their nominees to solicit proxies from their
clients, where appropriate, and will reimburse them for reasonable out-of-pocket
expenses related thereto.
ADDITIONAL INFORMATION
The Company will make available to any shareholder, without charge, upon a
written request therefor, copies of the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1995 and any Quarterly Report on
Form 10-QSB filed thereafter. Any such request should be directed to Technology
Flavors & Fragrances, Inc., Attention: Paul E. Hoffmann, Secretary, at the
following address: 10 Edison Street, East, Amityville, New York 11701.
Paul E. Hoffmann
Secretary
Amityville, New York
September 20, 1996
-23-
<PAGE>
Exhibit A
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
1996 STOCK OPTION PLAN
1. Purpose
-------
The purpose of this plan (the "Plan") is to secure for TECHNOLOGY
FLAVORS & FRAGRANCES, INC. (the "Company") and its stockholders the benefits
arising from capital stock ownership by employees, officers and directors (who
are also either employees or officers) of the Company and its subsidiary
corporations who are expected to contribute to the Company's future growth and
success. Those provisions of the Plan which make express reference to Section
422 of the Internal Revenue Code of 1986, as amended or replaced from time to
time (the "Code"), shall apply only to Incentive Stock Options (as that term is
defined in the Plan).
2. Type of Options and Administration
----------------------------------
(a) Types of Options. Options granted pursuant to the Plan shall be
----------------
authorized by action of the Board of Directors (the "Board") of the Company (or
a committee designated by the Board) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the Code
or non-statutory options which are not intended to meet the requirements of
Section 422 of the Code.
(b) Administration. The Plan will be administered by the Board or by
--------------
a committee consisting of two or more directors each of whom shall be a "non-
employee director" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor rule ("Rule 16b-3") and an "outside director" within the meaning of
Treasury Regulation Section 1.162-27(e)(3) promulgated under Section 162(m) of
the Code (the "Committee") appointed by the Board, in each case whose
construction and interpretation of the terms and provisions of the Plan shall be
final and conclusive. If the Board determines to create a Committee to
administer the Plan, the delegation of powers to the Committee shall be
consistent with applicable laws or regulations (including, without limitation,
applicable state law and Rule 16b-3). The Board or Committee may in its sole
discretion grant options to purchase shares of the Company's Common Stock, $0.01
par value per share ("Common Stock"), and issue shares upon exercise of such
options as provided in the Plan. The Board or Committee shall have authority,
subject to the express provisions of the Plan, to construe the respective option
agreements and the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the respective
option agreements, which need not be identical; and to make all other
determinations in the judgment of the Board or Committee necessary or desirable
for the administration of the Plan. The Board or Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option agreement in the
<PAGE>
manner and to the extent it shall deem expedient to carry the Plan into effect
and it shall be the sole and final judge of such expediency. No director or
person acting pursuant to authority delegated by the Board shall be liable for
any action or determination under the Plan made in good faith.
3. Eligibility
-----------
Options may be granted to persons who are, at the time of grant,
employees, officers or directors (who are also either employees or officers) of
the Company or any subsidiaries of the Company as defined in Sections 424(e) and
424(f) of the Code, provided, that Incentive Stock Options may only be granted
--------
to individuals who are employees of the Company (within the meaning of Section
3401(c) of the Code). A person who has been granted an option may, if he or she
is otherwise eligible, be granted additional options if the Board or Committee
shall so determine.
4. Stock Subject to Plan
---------------------
The stock subject to options granted under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. Subject to adjustment as
provided in Section 15 below, the maximum number of shares of Common Stock of
the Company which may be issued and sold under the Plan is 1,000,000. If an
option granted under the Plan shall expire, terminate or is cancelled for any
reason without having been exercised in full, the unpurchased shares subject to
such option shall again be available for subsequent option grants under the
Plan.
5. Forms of Option Agreements
--------------------------
As a condition to the grant of an option under the Plan, each
recipient of an option shall execute an option agreement in such form not
inconsistent with the Plan as may be approved by the Board. Such option
agreements may differ among recipients.
6. Purchase Price
--------------
(a) General. The purchase price per share of stock issuable upon the
-------
exercise of an option shall be determined by the Board or the Committee at the
time of grant of such option, provided, however, that in the case of an
------- -------
Incentive Stock Option, the exercise price shall not be less than 100% of the
Fair Market Value (as hereinafter defined) of such stock at the time of grant of
such option, or less than 110% of such Fair Market Value in the case of options
described in Section 11(b). "Fair Market Value" of a share of Common Stock of
the Company as of a specified date for the purposes of the Plan shall mean the
closing price of a
2
<PAGE>
share of the Common Stock on the principal securities exchange (including The
Nasdaq SmallCap Market or The Nasdaq National Market) on which such shares are
traded on the day immediately preceding the date as of which Fair Market Value
is being determined, or on the next preceding date on which such shares are
traded if no shares were traded on such immediately preceding day, or if the
shares are not traded on a securities exchange, Fair Market Value shall be
deemed to be the average of the high bid and low asked prices of the shares in
the over-the-counter market on the day immediately preceding the date as of
which Fair Market Value is being determined or on the next preceding date on
which such high bid and low asked prices were recorded. If the shares are not
publicly traded, Fair Market Value of a share of Common Stock (including, in the
case of any repurchase of shares, any distributions with respect thereto which
would be repurchased with the shares) shall be determined in good faith by the
Board. In no case shall Fair Market Value be determined with regard to
restrictions other than restrictions which, by their terms, will never lapse.
(b) Payment of Purchase Price. Options granted under the Plan may
-------------------------
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
options, or by any other means which the Board determines are consistent with
the purpose of the Plan and with applicable laws and regulations (including,
without limitation, the provisions of Rule 16b-3 and Regulation T promulgated by
the Federal Reserve Board).
7. Exercise Option Period
----------------------
Subject to earlier termination as provided in the Plan, each option
and all rights thereunder shall expire on such date as determined by the Board
or the Committee and set forth in the applicable option agreement, provided,
--------
that such date shall not be later than ten (10) years after the date on which
the option is granted.
8. Exercise of Options
-------------------
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the option agreement evidencing such option, subject to the provisions
of the Plan. Subject to the requirements in the immediately preceding sentence,
if an option is not at the time of grant immediately exercisable, the Board may
(i) in the agreement evidencing such option, provide for the acceleration of the
exercise date or dates of the subject option upon the occurrence of specified
events, and/or (ii) at any time prior to the complete termination of an option,
accelerate the exercise date or dates of such option.
3
<PAGE>
9. Nontransferability of Options
-----------------------------
No option granted under this Plan shall be assignable or otherwise
transferable by the optionee, except by will or by the laws of descent and
distribution. An option may be exercised during the lifetime of the optionee
only by the optionee. In the event an optionee dies during his employment by
the Company or any of its subsidiaries, or during the three (3) month period
following the date of termination of such employment, his option shall
thereafter be exercisable within a period of one (1) year after the date of
death (or within such lesser period specified in the applicable option
agreement), by his executors or administrators to the full extent to which such
option was exercisable by the optionee at the time of his death during the
periods set forth in Section 10 or 11(d).
10. Effect of Termination of Employment or Other Relationship
---------------------------------------------------------
Except as provided in Section 11(d) with respect to Incentive Stock
Options and except as otherwise determined by the Board or Committee at the date
of grant of an option, and subject to the provisions of the Plan, an optionee
may exercise an option at any time within three (3) months following the
termination of the optionee's employment or other relationship with the Company
or within one (1) year if such termination was due to the death or disability of
the optionee but in no event later than the expiration date of the option. If
the termination of the optionee's employment is for cause or is otherwise
attributable to a breach by the optionee of an employment or confidentiality or
non-disclosure agreement, the option shall expire immediately upon such
termination. The Board shall have the power to determine what constitutes a
termination for cause or a breach of an employment or confidentiality or non-
disclosure agreement, whether an optionee has been terminated for cause or has
breached such an agreement, and the date upon which such termination for cause
or breach occurs. Any such determinations shall be final and conclusive and
binding upon the optionee.
11. Incentive Stock Options
-----------------------
Options granted under the Plan which are intended to be Incentive
Stock Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted under
-------------------
the Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock
---------------
Option is to be granted under the Plan is, at the time of the grant of such
option, the owner of stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (after taking into account the
attribution of stock ownership rules of Section 424(d)
4
<PAGE>
of the Code), then the following special provisions shall be applicable to the
Incentive Stock Option granted to such individual:
(i) the purchase price per share of the Common Stock subject to
such Incentive Stock Option shall not be less than 110% of the Fair Market
Value of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five (5) years
from the date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide,
-----------------
options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) which are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate Fair Market Value, as
of the respective date or dates of grant, of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive
----------------------------------------------
Stock Option may be exercised unless, at the time of such exercise, the optionee
is, and has been continuously since the date of grant of his or her option,
employed by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period
of three (3) months after the date the optionee ceases to be an employee of
the Company (or within such lesser period as may be specified in the
applicable option agreement), provided, that the agreement with respect to
--------
such option may designate a longer exercise period and that the exercise
after such three (3) month period shall be treated as the exercise of a
non-statutory option under the Plan,
(ii) if the optionee dies while in the employ of the Company, or
within three (3) months after the optionee ceases to be such an employee,
the Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of one (1) year after the date of death (or within such lesser
period as may be specified in the applicable option agreement), and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provisions thereto) while in
the employ of the Company, the Incentive Stock Option may be exercised
within the period of one (1) year after the date the optionee ceases to be
such an employee because of such disability (or within such lesser period
as may be specified in the applicable option agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any
5
<PAGE>
successor regulations). Notwithstanding the foregoing provisions, no Incentive
Stock Option may be exercised after its expiration date.
12. Additional Provisions
---------------------
(a) Additional Option Provisions. The Board or the Committee may, in
----------------------------
its sole discretion, include additional provisions in option agreements covering
options granted under the Plan, including without limitation, restrictions on
transfer, repurchase rights, rights of first refusal, commitments to pay cash
bonuses or to make, arrange for or guaranty loans or to transfer other property
to optionees upon exercise of options, or such other provisions as shall be
determined by the Board or the Committee, provided, that such additional
--------
provisions shall not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any Incentive Stock Option
granted under the Plan to fail to qualify as an Incentive Stock Option within
the meaning of Section 422 of the Code.
(b) Acceleration, Extension, Etc. The Board or the Committee may, in
----------------------------
its sole discretion (i) accelerate the date or dates on which all or any
particular option or options granted under the Plan may be exercised, or (ii)
extend the dates during which all, or any particular, option or options granted
under the Plan may be exercised, provided, however that no such extension shall
--------
be permitted if it would cause the Plan to fail to comply with Section 422 of
the Code or with Rule 16b-3 (if applicable to such option).
13. General Restrictions
--------------------
(a) Investment Representations. The Company may require any person
--------------------------
to whom an option is granted, as a condition of exercising such option or award,
to give written assurances in substance and form satisfactory to the Company to
the effect that such person is acquiring the Common Stock subject to the option
or award for his or her own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate in order to comply with
federal and applicable state securities laws, or with covenants or
representations made by the Company in connection with any public offering of
its Common Stock, including any "lock-up" or other restriction on
transferability.
(b) Compliance With Securities Law. Each option shall be subject to
------------------------------
the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares subject to such
option or award upon any securities exchange or automated quotation system or
under any state or federal law, or the consent or approval of any governmental
or regulatory body, or that the disclosure of non-public information or the
satisfaction of any other condition, is necessary as a condition of, or in
connection with the issuance or purchase of shares thereunder, such option or
award may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or
6
<PAGE>
approval or satisfaction of such condition shall have been effected or obtained
on conditions acceptable to the Board or the Committee. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition.
14. Rights as a Stockholder
-----------------------
The holder of an option shall have no rights as a stockholder with
respect to any shares covered by the option (including, without limitation, any
right to vote or to receive dividends or non-cash distributions with respect to
such shares) until the effective date of exercise of such option and then only
to the extent of the shares of Common Stock so purchased. No adjustment shall
be made for dividends or other rights for which the record date is prior to the
date of exercise.
15. Adjustment Provisions for Recapitalizations,
Reorganizations and Related Transactions
----------------------------------------
(a) Recapitalizations and Related Transactions. If, through or as a
------------------------------------------
result of any recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction (i) the outstanding shares of
Common Stock are increased, decreased or exchanged for a different number or
kind of shares or other securities of the Company, or (ii) additional shares or
new or different shares or other non-cash assets are distributed with respect to
such shares of Common Stock or other securities, an appropriate and
proportionate adjustment shall be made in (x) the maximum number and kind of
shares reserved for issuance under or otherwise referred to in the Plan, (y) the
number and kind of shares or other securities subject to any then-outstanding
options under the Plan, and (z) the price for each share subject to any then-
outstanding options under the Plan, without changing the aggregate purchase
price as to which such options remain exercisable. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 15 if such
adjustment (A) would cause the Plan to fall to comply with Section 422 of the
Code or with Rule 16b-3 (if applicable to such option), or (B) would be
considered as the adoption of a new plan requiring stockholder approval.
(b) Reorganization, Merger and Related Transactions. All outstanding
-----------------------------------------------
options under the Plan shall become fully exercisable for a period of sixty (60)
days following the occurrence of any Trigger Event (as defined below), whether
or not such options are then exercisable under the provisions of the applicable
agreements relating thereto. For purposes of the Plan, a "Trigger Event" is any
one of the following events:
(i) the date on which shares of Common Stock are first purchased
pursuant to a tender offer or exchange offer (other than such an offer by
the Company, any subsidiary of the Company, any employee benefit plan of
the Company or of any
7
<PAGE>
subsidiary of the Company or any entity holding shares or other securities
of the Company for or pursuant to the terms of such plan), whether or not
such offer is approved or opposed by the Company and regardless of the
number of shares purchased pursuant to such offer;
(ii) the date the Company acquires knowledge that any person or
group deemed a person under Section 13(d)-3 of the Exchange Act (other than
the Company, any subsidiary of the Company, any employee benefit plan of
the Company or of any subsidiary of the Company or any entity holding
shares of Common Stock or other securities of the Company for or pursuant
to the terms of any such plan or any individual or entity or group or
affiliate thereof which acquired its beneficial ownership interest prior to
the date the Plan was adopted by the Board), in a transaction or series of
transactions, has become the beneficial owner, directly or indirectly (with
beneficial ownership determined as provided in Rule 13d-3, or any successor
rule, under the Exchange Act), of securities of the Company entitling the
person or group to 30% or more of all votes (without consideration of the
rights of any class or stock to elect directors by a separate class vote)
to which all stockholders of the Company would be entitled in the election
of the Board were an election held on such date;
(iii) the date, during any period of two (2) consecutive years,
when individuals who at the beginning of such period constitute the Board
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the stockholders of the
Company, of each new director was approved by a vote of at least a majority
of the directors then still in office who were directors at the beginning
of such period; and
(iv) the date of approval by the stockholders of the Company of
an agreement (a "reorganization agreement") providing for:
(A) The merger or consolidation of the Company with another
corporation (x) where the stockholders of the Company, immediately
prior to the merger or consolidation, do not beneficially own,
immediately after the merger or consolidation, shares of the
corporation issuing cash or securities in the merger or consolidation
entitling such stockholders to 80% or more of all votes (without
consideration of the rights of any class of stock to elect directors
by a separate class vote) to which all stockholders of such
corporation would be entitled in the election of directors, or (y)
where the members of the Board, immediately prior to the merger or
consolidation, do not, immediately after the merger or consolidation,
constitute a majority of the Board of Directors of the corporation
issuing cash or securities in the merger or consolidation, or
(B) The sale or other disposition of all or substantially all
the assets of the Company.
8
<PAGE>
(c) Board Authority to Make Adjustments. Any adjustments under this
-----------------------------------
Section 15 will be made by the Board or the Committee, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, etc
---------------------------------------------------
(a) General. In the event of any sale, merger, transfer or
-------
acquisition of the Company or substantially all of the assets of the Company in
which the Company is not the surviving corporation, provided that after the
merger, transfer or acquisition the Company shall have requested the acquiring
or succeeding corporation (or an affiliate thereof) that equivalent options
shall be substituted and such successor corporation shall have refused or failed
to assume all options outstanding under the Plan or issue substantially
equivalent options, then any or all outstanding options under the Plan shall
accelerate and become exercisable in full immediately prior to such event. The
Board or Committee will notify holders of options under the Plan that any such
options shall be fully exercisable for a period of fifteen (15) days from the
date of such notice, and the options will terminate upon expiration of such
notice.
(b) Substitute Options. The Company may grant options under the Plan
------------------
in substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board considers appropriate in the circumstances.
17. No Special Employment Rights
----------------------------
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
18. Other Employee Benefits
-----------------------
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing,
9
<PAGE>
life insurance or salary continuation plan, except as otherwise specifically
determined by the Board.
19. Amendment, Modification or Termination of the Plan
--------------------------------------------------
(a) The Board may at any time modify, amend or terminate the Plan
provided, however, that if at any time the approval of the stockholders of the
- -------- -------
Company is required under Section 422 of the Code or any successor
provision with respect to Incentive Stock Options, or under Rule 16b-3, the
Board may not effect such modification or amendment without such approval.
(b) The modification, amendment or termination of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the optionee affected,
the Board or the Committee may amend or modify outstanding option agreements in
a manner not inconsistent with the Plan. The Board shall have the right to
amend or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code, and (ii) the terms and provisions
of the Plan and of any outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3.
20. Withholding
-----------
(a) The Company shall have the right to deduct from payments of any
kind otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option, or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a Fair
Market Value equal to such withholding obligation as of the date that the amount
of tax to be withheld is to be determined. An optionee who has made an election
pursuant to this Section 20(a) may only satisfy his or her withholding
obligation with shares of Common Stock which are not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements.
(b) The acceptance of shares of Common Stock upon exercise of an
Incentive Stock Option shall constitute an agreement by the optionee (i) to
notify the Company if any or all of such shares are disposed of by the optionee
within two (2) years from the date the option was granted or within one (1) year
from the date the shares were issued to the optionee pursuant to the exercise of
the option, and (ii) if required by law, to remit to the Company,
10
<PAGE>
at the time of and in the case of any such disposition, an amount sufficient to
satisfy the Company's federal, state and local withholding tax obligations with
respect to such disposition, whether or not, as to both (i) and (ii), the
optionee is in the employ of the Company at the time of such disposition.
21. Cancellation and New Grant of Options, Etc.
-------------------------------------------
The Board or the Committee shall have the authority to effect, at any
time and from time to time, with the consent of the affected optionees (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options, or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
22. Effective Date and Duration of the Plan
---------------------------------------
(a) Effective Date. The Plan shall become effective when adopted by
--------------
the Board, but no Incentive Stock Option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
stockholders. If such stockholder approval is not obtained within twelve (12)
months after the date of the Board's adoption of the Plan, no options previously
granted under the Plan shall be deemed to be Incentive Stock Options and no
Incentive Stock Options shall be granted thereafter. Amendments to the Plan not
requiring stockholder approval shall become effective when adopted by the Board
and amendments requiring stockholder approval (as provided in Section 19) shall
become effective when adopted by the Board, but no Incentive Stock Option
granted after the date of such amendment shall become exercisable (to the extent
that such amendment to the Plan was required to enable the Company to grant such
Incentive Stock Option to a particular optionee) unless and until such amendment
shall have been approved by the Company's stockholders. If such stockholder
approval is not obtained within twelve (12) months of the Board's adoption of
such amendment, any Incentive Stock Options granted on or after the date of such
amendment shall terminate to the extent that such amendment to the Plan was
required to enable the Company to grant such option to a particular optionee.
Subject to this limitation, options may be granted under the Plan at any time
after the effective date and before the date fixed for termination of the Plan.
(b) Termination. Unless sooner terminated by the Board, the Plan
-----------
shall terminate upon the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board. After termination of the
Plan, no further options may be granted under the Plan; provided however, that
----------------
such termination will not affect any options granted prior to termination of the
Plan.
11
<PAGE>
23. Provision for Foreign Participants
----------------------------------
The Board may, without amending the Plan, modify awards or options
granted to participants who are foreign nationals or employed outside the United
States to recognize differences in laws, rules, regulations or customs of such
foreign jurisdictions with respect to tax, securities, currency, employee
benefit or other matters.
24. Governing Law
-------------
The provisions of this Plan shall be governed and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws.
12
<PAGE>
Exhibit B
June 11, 1996
Securities and Exchange Commission
450 Fifth Street, N.W,
Washington, D.C. 20549
Gentlemen:
We have read the statements made by Technology Flavors and Fragrances, Inc.
(File No. 0-26682), (copy attached), which we understand will be filed with the
Commission, pursuant to Item 4 of Form 8-K, as part of the Company's Form 8-K
report for the month of June 1996. We agree with the statements concerning our
Firm in such Form 8-K.
Very truly yours,
COOPERS & LYBRAND L.L.P.
<PAGE>
Exhibit C
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER FEDERAL OR STATE
SECURITIES OR BLUE SKY LAWS, AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
THEREFROM. NO OFFER, SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION (COLLECTIVELY,
A "DISPOSAL") OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR THE SHARES OF
COMMON STOCK ISSUABLE UPON THE EXERCISE THEREOF MAY BE MADE UNLESS (I)
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS OR (II) TECHNOLOGY FLAVORS & FRAGRANCES, INC. RECEIVES A WRITTEN
OPINION OF UNITED STATES LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO IT
TO THE EFFECT THAT SUCH DISPOSAL IS EXEMPT FROM SUCH REGISTRATION REQUIREMENTS.
WARRANTS TO PURCHASE
COMMON STOCK OF TECHNOLOGY FLAVORS & FRAGRANCES, INC.
Initial Issuance on October 25, 1995
Void after 5:00 p.m. New York Time, October 24, 2000
THIS CERTIFIES THAT, for value received, Strategic Growth International, Inc.,
of 111 Great Neck Road, Suite 606, Great Neck, New York 11021-5402 is the
registered holder of warrants (the "Warrants") to purchase from Technology
Flavors & Fragrances, Inc., a Delaware corporation (the "Company"), at any time
or from time to time beginning on October 25, 1995 and ending at 5:00 p.m., New
York time, on October 24, 2000 (the "Expiration Date"), subject to the
conditions set forth herein, at the initial exercise price of U.S. $0.56 per
share (the "Initial Exercise Price"), subject to adjustment as set forth herein
(the "Exercise Price"), up to an aggregate of Six Hundred Thousand (600,000)
fully paid and non-assessable shares (the "Shares"), par value $U.S. $.01 per
share (the "Common Stock"), of the Company upon surrender of this certificate
(the "Certificate") and payment of the Exercise Price multiplied by the number
of Shares in respect of which Warrants are then being exercised (the "Purchase
Price") at the principal office of the Company presently located at 10 Edison
St. E, Amityville, New York 11701.
1. Exercise of Warrants
--------------------
(a) The exercise of any Warrants represented by this Certificate
is subject to the conditions set forth below in Section 4, "Compliance with
Securities Laws."
(b) Subject to compliance with all of the conditions set forth
herein, the Holder shall have the right to purchase from the Company the number
of Shares which the Holder may at the time be entitled to purchase pursuant
hereto, upon surrender of this Certificate to the Company at its principal
office, together with the form of election to purchase attached hereto duly
completed and signed, and upon payment to the Company of the
<PAGE>
Purchase Price; provided, that if the date of such purchase is not a day on
--------
which banking institutions in New York City are authorized or obligated to do
business (a "Business Day"), then such purchase shall take place before 5:00
p.m. New York time on the next following Business Day.
(c) No Warrant may be exercised after 5:00 p.m., New York time,
on the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be null and void and all further
rights in respect thereof under this Certificate shall thereupon cease.
(d) Payment of the Purchase Price shall be made in United States
dollars in cash, by wire transfer or by certified check or banker's draft
payable to the order of the Company, or any combination of the foregoing.
(e) The Warrants represented by this Certificate are exercisable
at the option of the Holder, in whole or in part (but not as to fractional
Shares). Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the Holder a new certificate
of like tenor representing the number of unexercised Warrants.
(f) Subject to compliance with all of the conditions set forth
herein, upon surrender of this Certificate to the Company at its principal
office, together with the form of election to purchase attached hereto duly
completed and signed, and upon payment of the Purchase Price, the Company shall
cause to be delivered promptly to or upon the written order of the Holder and in
such name or names as the Holder may designate, a certificate or certificates
for the number of whole Shares purchased upon the exercise of the Warrants.
2. Elimination of Fractional Interests. The Company shall not be
-----------------------------------
required to issue certificates representing fractions of Shares and shall not be
required to issue scrip in lieu of fractional interests. Any fraction equal to
or greater than one-half shall be rounded up to the next full share or Warrant,
as the case may be, and any fraction less than one-half shall be eliminated.
3. Payment of Taxes. The Company will pay all documentary stamp
----------------
taxes, if any, attributable to the issuance and delivery of the Shares upon the
exercise of the Warrants; provided, however, that the Company shall not be
-------- -------
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any Warrant or any Shares in any name
other than that of the Holder, which transfer taxes shall be paid by the Holder,
and until payment of such taxes, if any, the Company shall not be required to
issue such Shares.
-2-
<PAGE>
4. Compliance with Securities Laws.
-------------------------------
(a) The issuance of the Warrants and the Shares issuable
pursuant thereto (the "Securities") to the Holder has not been, and will not be,
registered under the Securities Act or any other domestic or foreign securities
or blue sky laws (the Securities Act and any such other applicable securities or
blue sky laws are hereinafter collectively referred to herein as the "Securities
Laws") in reliance upon exemptions from the registration requirements thereof.
The Holder is acquiring the Securities solely for its own account for investment
and not with a view to, or for offer or resale in connection with, a
distribution thereof in violation of any Securities Laws. The Securities shall
be held indefinitely by the Holder unless the sale or transfer thereof is
subsequently registered under applicable Securities Laws or an exemption from
such registration is available at the time of the proposed sale or transfer
thereof. The Company shall be under no obligation to file a registration
statement under the Securities Act covering the sale or transfer of the
Securities or otherwise to register the Securities for sale under applicable
Securities Law.
(b) Prior to any sale, transfer or other disposition of any of
the Securities, the Holder shall give at least three business days prior written
notice to the Company of its intention to effect such sale, transfer or other
disposition and to comply in all other respects with this Section 4(b). Each
such notice shall describe the manner and circumstances of the proposed transfer
in sufficient detail to enable counsel to render the opinions required herein,
and, if requested by the Company, shall be accompanied by an opinion of counsel
acceptable to the Company, addressed to the Company and satisfactory in form and
substance to the Company, stating that, in the opinion of such counsel, such
transfer will be a transaction exempt from registration under the Securities
Laws and that all necessary consents, approvals or authorizations to such
transfer have been obtained. Assuming the receipt by the Company of such
satisfactory opinion, the Holder shall thereupon be entitled to transfer such
Securities in accordance with the terms of the notice delivered by the Holder to
the Company. Each certificate or other document issued representing the
Securities shall bear an appropriate legend suitably conformed, unless, in the
opinion of the respective counsel for the Holder and the Company, such legend is
not required in order to aid in assuring compliance with applicable Securities
Laws.
(c) In addition to any specific restrictive legends that may be
required by applicable Securities Laws or agreements to which the Holder may be
a party, the Holder shall be bound by a restrictive legend which may be placed
on the certificates
-3-
<PAGE>
representing the Securities. The Company may place and instruct any transfer
agent for the Securities to place a stop transfer notation in the stock records
in respect of the certificates representing the Securities, provided that such
securities may be transferred upon compliance with the provisions of this
Section 4 and Section 5 below.
5. Transfer of Warrants.
--------------------
(a) Notwithstanding anything in this Certificate to the
contrary, the Warrants may not be transferred.
(b) Notwithstanding anything in this Certificate to the
contrary, no Shares issuable upon exercise of any of the Warrants shall be
transferable, except upon compliance by the Holder with (i) the provisions of
Sections 4 and 5 hereof, concerning such transfer as if the Holder were the
initial Holder, and (ii) any applicable provisions of the Securities Act and any
applicable state and foreign securities or blue sky laws. Any transfer not made
in such compliance shall be null and void, and given no effect hereunder.
6. Exchange and Replacement of Warrant Certificates; Loss or
---------------------------------------------------------
Mutilation of Warrant Certificates.
- ----------------------------------
(a) This Certificate is exchangeable without cost, upon the
surrender hereof by the Holder at the principal office of the Company, for new
certificates of like tenor and date representing in the aggregate the right to
purchase the same number of Shares in such denominations as shall be designated
by the Holder at the time of such surrender.
(b) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Certificate and, in case of such loss, theft or destruction, or indemnity and
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Certificate, if mutilated, the Company will make and deliver a new
certificate of like tenor, in lieu thereof.
7. Initial Exercise Price; Adjustment of Number of Shares.
------------------------------------------------------
(a) The Warrants initially are exercisable at the Initial
Exercise Price per Share, subject to adjustment from time to time as provided
herein. No adjustments will be made for cash dividends, if any, paid to
shareholders of record prior to the date on which the Warrants are exercised.
(b) The number of shares of Common Stock subject hereto and the
Purchase Price per share shall be proportionately adjusted for any increase or
decrease in the number of issued shares of the Common Stock resulting from the
subdivision or consolidation of shares, or the payment of a stock dividend after
-4-
<PAGE>
the date hereof, or other decrease or increase in the shares of Common Stock
outstanding effected without receipt of consideration by the Company; provided,
--------
however, that any Warrants to purchase fractional shares resulting from such
- -------
adjustments shall be eliminated.
(c) If the Company shall at any time merge or consolidate with
or into another corporation, the Holder shall thereafter receive, upon the
exercise thereof, the securities or property to which a holder of the number of
shares of Common Stock then deliverable upon the exercise of such Warrant would
have been entitled to receive upon such merger or consolidation, and the Company
shall take such steps in connection with such merger or consolidation as may be
necessary to assure that the provisions of this certificate shall thereafter be
applicable, as nearly as may be reasonable, in relation to any securities or
property thereafter deliverable upon the exercise of such Warrant. A sale of
all or substantially all of the assets of the Company for a consideration (apart
from the assumption of obligations) consisting primarily of securities shall be
deemed a merger or consolidation for the foregoing purposes. In the event of
the proposed dissolution, liquidation or reorganization of the Company, other
than pursuant to a merger or consolidation as referred to above, this Warrant
shall terminate as of a date to be fixed by the Board of Directors; provided
--------
that no less than 30 days' prior written notice of the date so fixed shall be
given to the Holder, and the Holder shall have the right, during the period of
thirty (30) days preceding such termination, to exercise its Warrants as to all
or any part of the shares covered thereby, including shares as to which such
Warrant would not otherwise be exercisable.
(d) Irrespective of any adjustments or changes in the number of
shares of Common Stock purchasable upon exercise of the Warrants, the Warrant
Certificates theretofore and thereafter issued shall, unless the Company shall
exercise its option to issue new Warrant Certificates pursuant to Section 1(e)
hereof, continue to express the Purchase Price per share and the number of
shares purchasable thereunder as the Purchase Price per share and the number of
shares purchasable thereunder were expressed in the Warrant Certificate when the
same were originally issued.
(e) No adjustment of the Purchase Price pursuant to this Section
7 shall be made if the amount of said adjustment shall be less than $.05;
provided, however, that in such case, any adjustment that would otherwise be
required then to be made shall be carried forward and shall be made at the time
of and together with the next subsequent adjustment that shall amount, together
with any adjustment so carried forward, to at least $.05.
(f) The Company may not amend the Expiration Date without the
prior approval of the Toronto Stock Exchange.
-5-
<PAGE>
8. Required Notices to Warrant Holders. Nothing contained in this
-----------------------------------
Certificate shall be construed as conferring upon the Holder the right to vote
or to consent or to receive notice as a shareholder in respect of any meetings
of shareholders for the election of directors or any other matter, or as having
any rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants or their exercise, any of the following
events shall occur:
(i) the Company shall issue any rights to subscribe for
shares of Common Stock or any other securities of the Company to all
of the shareholders of the Company; or
(ii) a dissolution, liquidation or winding-up of the Company
(other than in connection with a consolidation, merger or statutory
share exchange) or a sale of all or substantially all of its property,
assets and business as an entirety shall be approved by the Company's
Board of Directors; and
(iii) there shall be any reclassification or a change in the
kind of the outstanding shares of Common Stock into different
securities (other than a change in the number of outstanding shares or
a change in par value to no par value, or from no par value to par
value) or consolidation, merger or statutory share exchange of the
Company with another entity;
then, in any one or more of said events, the Company shall give written notice
of such event on or before the date the Company gives notice to its shareholders
of such event. Such notice shall specify the applicable record date or the date
of closing the transfer books, as the case may be, if any. Failure to give such
notice or any defect therein shall not affect the validity of any action taken
in connection with the event.
9. Redemption by the Company. At any time after December 31, 1996,
-------------------------
the Company may redeem all, but not part, of the Warrants upon not less than
thirty (30) days notice (given in the manner described in Section 13) to the
Holder (the "Redemption Notice"), at the redemption price of one cent ($0.01)
per Warrant, if the average trading price (the "Market Price") per share for
shares of the Company's Common Stock on the Toronto Stock Exchange for the
thirty consecutive trading days ending within thirty Business Days of the date
of such Redemption Notice equals or exceeds Cdn. $1.50. The Redemption Notice
shall specify the date on which the Warrants are to be redeemed (the "Redemption
Date"). If the Warrants are called for redemption, they may be exercised at any
time prior to 5:00 p.m. New York time on the business day immediately preceding
the date fixed for redemption in the Redemption Notice. After the Redemption
Date, no Warrant may be
-6-
<PAGE>
exercised and all outstanding Warrant Certificates must be surrendered by the
Holder thereof to the Company and the Holder shall have no further rights except
to receive, upon surrender of the Certificates evidencing the redeemed Warrants,
the redemption price for such Warrants.
10. Reservation and Listing of Securities.
-------------------------------------
(a) The Company covenants and agrees that at all times during
the period the Warrants are exercisable, the Company shall reserve and keep
available, free from preemptive rights, out of its authorized and unissued
shares of Common Stock or out of its authorized and issued shares of Common
Stock held in its treasury, solely for the purpose of issuance upon exercise of
the Warrants, such number of Shares as shall be issuable upon the exercise of
the Warrants.
(b) The Company covenants and agrees that, upon exercise of the
Warrants in accordance with their terms and payment of the Purchase Price, all
Shares issued or sold upon such exercise shall not be subject to the preemptive
rights of any shareholder and when issued and delivered in accordance with the
terms of the Warrants shall be duly and validly issued, fully paid and non-
assessable, and the Holder shall receive good and valid record title to such
Shares free and clear from any adverse claim (as defined in the applicable
Uniform Commercial Code), except such as have been created by the Holder.
11. Survival. All agreements, covenants, representations and
--------
warranties herein shall survive the execution and delivery of this Certificate
and any investigation at any time made by or on behalf of the party hereto and
the exercise, sale and purchase of the Warrants and the Shares (and any other
securities or properties) issuable on exercise hereof.
12. Registered Holder. The Company may deem and treat the registered
-----------------
Holder hereof as the absolute owner of this Certificate and the Warrants
represented hereby (notwithstanding any notation of ownership or other writing
hereon made by anyone), for the purpose of any exercise of the Warrants, of any
notice, and of any distribution to the Holder hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
13. Manner of Notices. All notices and other communications from the
-----------------
Company to the Holders of the Warrants represented by this Certificate shall be
in writing and shall be deemed to have been duly given if and when personally
delivered, two (2) business days after being sent by overnight courier or ten
(10) days after mailed by certified, registered or international recorded mail,
postage prepaid and return receipt requested, or when transmitted by telefax,
telex or telegraph and confirmed by
-7-
<PAGE>
sending a similar mailed writing, if to the Holder, to the last address of such
Holder as it shall appear on the books of the Company maintained at the
Company's principal office or to such other address as the Holder may have
specified to the Company in writing.
14. Headings. The headings contained herein are for convenience of
--------
reference only and are not part of this Certificate.
15. Governing Law. This Certificate shall be deemed to be a contract
-------------
made under the laws of the State of New York and for all purposes shall be
governed by, and construed in accordance with, the laws of said state, without
regard to the conflict of laws provisions thereof.
16. Regulatory and Shareholder Approval. This Certificate and the
-----------------------------------
issuance of Warrants hereunder are subject to approval by the TSE. If the TSE
grants approval but on terms different from those contained herein, this
Certificate shall be deemed amended accordingly. The Warrants cannot be
exercised until the granting thereof has been approved by the shareholders of
the Company.
-8-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed by its duly authorized officers.
Dated as of October 25, 1995
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
By: /s/ Philip Rosner
---------------------------------
Name: Philip Rosner
Title: Chairman of the Board
Attest:
/s/ Paul E. Hoffmann
- ----------------------------
Secretary
-9-
<PAGE>
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
FORM OF ELECTION TO PURCHASE
(To be executed by the registered Holder
if such Holder desires to exercise Warrants)
The undersigned registered Holder hereby irrevocably elect to exercise the right
of purchase represented by this Warrant Certificate for, and to purchase,
------
Shares hereunder, and herewith tenders in payment for such Shares
- ------------
cash, a wire transfer, a certified check or a banker's draft payable to the
order of Technology Flavors & Fragrances, Inc. in the amount of
---------------,
all in accordance with the terms hereof. The undersigned requests that a
certificate for such Shares be registered in the name of and delivered to:
(Please Print Name and Address)
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
and, if said number of Shares shall not be all of the Shares purchasable
hereunder, that a new Warrant Certificate for the balance remaining of the
Shares purchasable hereunder be registered in the name of the undersigned
Warrant Holder or his Assignee as below indicated and delivered to the address
stated below.
DATED:
------------------------------------------------------------
Name of Warrant Holder:
-------------------------------------------
(Please Print)
Address:
----------------------------------------------------------
- ------------------------------------------------------------------
Signature:
--------------------------------------------------------
Note: The above signature must correspond in all respects with the name
of the Holder as specified on the face of this Warrant
Certificate, without alteration of enlargement or any change
whatsoever, unless the Warrants represented by this Warrant
Certificate have been assigned.
-10-
<PAGE>
PROXY
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Philip Rosner and Paul E. Hoffmann (with
full power to act without the other and with power to appoint his substitute),
OR INSTEAD OF EITHER OF THE FOREGOING, ________________ as the undersigned's
proxy to vote all of the undersigned's shares of Common Stock of TECHNOLOGY
FLAVORS & FRAGRANCES, INC., a Delaware corporation (the "Company"), which the
undersigned would be entitled to vote at a Special Meeting of Shareholders of
the Company (the "Special Meeting") to be held at the Melville Marriott, 1350
Old Walt Whitman Road, Melville, New York 11747, on October 30, 1996 at 11:00
a.m., local time, and at any and all adjournments thereof, as follows:
I. ELECTION OF DIRECTORS [ ] FOR all nominees listed below (except as marked
to the contrary below)
[ ] WITHOUT AUTHORITY to vote for all nominees listed
below
PHILIP ROSNER, A. GARY FRUMBERG, RICHARD R. HIGGINS, SYDNEY STEIN, and DUNCAN
SHIRREFF
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line set forth below.)
- --------------------------------------------------------------------------------
II. Proposal to ratify the selection of Ernst & Young LLP, as independent
accountants of the Company for the fiscal year ending December 31,
1996, and to authorize the Board of Directors to fix their
remuneration.
[ ] FOR [ ] WITHOUT AUTHORITY TO VOTE
- --------------------------------------------------------------------------------
III. Proposal to approve the adoption of the 1996 Option Plan, as described
more fully in the Proxy Statement accompanying this Proxy.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- --------------------------------------------------------------------------------
IV. Proposal to ratify the reduction of the exercise prices of all
outstanding options under the 1993 Option Plan and the 1994 Option
Grants as described more fully in the Proxy Statement accompanying
this Proxy.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- --------------------------------------------------------------------------------
V. Proposal to ratify and approve the issuance to Strategic Growth
International, Inc. of five-year warrants to purchase 600,000 shares
of Common Stock, as described more fully in the Proxy Statement
accompanying this Proxy.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- --------------------------------------------------------------------------------
VI. In their discretion, to transact such other business as may properly
come before the Special Meeting and any and all adjournments thereof.
- --------------------------------------------------------------------------------
<PAGE>
The shares of Common Stock represented by this Proxy will be voted in accordance
with the foregoing instructions. In the absence of any instructions, such
shares will be voted FOR the election of all the nominees listed in Item I and
FOR the proposals in Items II, III, IV and V.
If any amendments or variations to the matters referred to above or to any other
matters identified in the Notice of Special Meeting are proposed at the Special
Meeting or any adjournments thereof, or if any other matters which are not now
known to management should properly come before the Special Meeting or any
adjournments thereof, this proxy confers discretionary authority on the person
voting the proxy to vote on such amendments or variations or such other matters
in accordance with the best judgment of such person.
The undersigned hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders to be held on October 30, 1996, the Proxy Statement of the Company,
dated September 20, 1996, the accompanying form of proxy, and the Company's
Annual Report for the fiscal year ended December 31, 1995, each of which has
been enclosed herewith.
The undersigned hereby revokes any proxy to vote shares of Common Stock of the
Company heretofore given by the undersigned.
A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON TO
REPRESENT HIM AND TO ATTEND AND ACT FOR HIM ON HIS
BEHALF AT THE SPECIAL MEETING OTHER THAN THE
NOMINEES DESIGNATED ABOVE AND MAY EXERCISE SUCH
RIGHT BY INSERTING THE NAME OF HIS NOMINEE IN THE
SPACE PROVIDED ABOVE FOR THAT PURPOSE.
Dated
-------------------------------------------
-------------------------------------------
Signature
-------------------------------------------
Signature, if held jointly
-------------------------------------------
Title (if applicable)
Please date, sign exactly as your name appears on
this Proxy and promptly return in the enclosed
envelope. In the case of joint ownership, each
joint owner must sign. When signing as guardian,
executor, administrator, attorney, trustee,
custodian, or in any other similar capacity,
please give full title. If a corporation, sign in
full corporate name by president or other
authorized officer, giving title, and affix
corporate seal. If a partnership, sign in
partnership name by an authorized person.
-2-
