SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[Amendment No.........]
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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|_| 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[TFF LOGO]
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
10 Edison Street East
Amityville, New York 11701
NOTICE OF ANNUAL AND SPECIAL MEETING OF STOCKHOLDERS
June 24, 1999
To the Stockholders of TECHNOLOGY FLAVORS & FRAGRANCES, INC.:
NOTICE IS HEREBY GIVEN that the annual and special meeting of stockholders
of Technology Flavors & Fragrances, Inc., a Delaware corporation (the
"Company"), will be held at the executive corporate offices of Fleet Bank, 330
Broad Hollow Road, Melville, New York 11747, on June 24, 1999, at 10:00 a.m.,
local time, or any adjournment or postponement thereof, for the following
purposes (the "Meeting"), 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 approve the adoption of the Company's 1999 Stock Option Plan, which
provides for the grant of options to purchase up to 1,000,000 shares of the
Company's common stock, par value $.01 per share, to employees, officers,
directors and other persons related to the Company .
III. To ratify the appointment by the Company's Board of Directors of
Ernst & Young LLP as independent auditors of the Company for the year ending
December 31, 1999, and to authorize the Board of Directors to fix their
remuneration.
IV. To transact such other business as may properly come before the
Meeting and any and all adjournments thereof.
Only stockholders of record at the close of business on May 21, 1999 shall
be entitled to notice of and to vote at the Meeting. A copy of the Company's
Annual Report for the year ended December 31, 1998 is enclosed.
The Board of Directors appreciates and welcomes stockholder 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 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 Meeting. The prompt return
of the proxy will be of assistance in preparing for the Meeting and your
cooperation in this respect will be greatly appreciated.
By Order of the Board of Directors
/s/ Joseph A. Gemmo
Joseph A. Gemmo
Secretary
Amityville, New York
May 27, 1999
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YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES,
PLEASE ATTEND THE MEETING OR COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY
TO THE COMPANY IN THE ENCLOSED ENVELOPE.
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<PAGE>
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
10 Edison Street East
Amityville, New York 11701
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Proxy Statement
For The
Annual and Special Meeting of Stockholders
To Be Held on June 24, 1999
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INTRODUCTION
This Proxy Statement and the accompanying proxy are being furnished to the
stockholders of Technology Flavors & Fragrances, Inc., a Delaware corporation
(the "Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company for use in voting at the Annual and Special Meeting of
Stockholders to be held at the executive corporate offices of Fleet Bank, 330
Broad Hollow Road, Melville, New York 11747, on June 24, 1999 at 10:00 a.m.
(together with any and all adjournments or postponements thereof, the "
Meeting"). This Notice of Meeting and Proxy Statement, together with the
accompanying proxy and Annual Report to Stockholders of the Company for the year
ended December 31, 1998 (including the financial statements contained therein),
are first being mailed or delivered to stockholders of the Company on or about
May 27, 1999.
At the Meeting, the holders of outstanding shares of common stock, par
value $.01 per share, of the Company (the "Common Stock") will be asked to
consider and vote upon (i) the election of five directors to serve for a term of
one year and until their respective successors are duly elected and qualified
("Proposal I"); (ii) to approve the adoption of the Company's 1999 Stock Option
Plan (the "1999 Option Plan"), which provides for the grant of options to
purchase up to 1,000,000 shares of Common Stock ("Proposal II"); (iii) the
appointment of Ernst & Young LLP as independent auditors of the Company for the
year ending December 31, 1999 ("Proposal III"); and (iv) such other proposals as
may properly be presented at the Meeting. Only stockholders of record as of the
close of business on May 21, 1999 (the "Record Date") will be entitled to notice
of, and to vote at, the Meeting. Each share of Common Stock entitles the holder
thereof to one vote on each proposal.
The Board of Directors knows of no other matters that are to be brought
before the Meeting other than as set forth in the Notice of Meeting. If any
other matters properly come before the Meeting, the persons named in the
enclosed form of proxy or their substitutes will vote in accordance with their
best judgment on such matters.
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 Meeting.
Approval of Proposal II requires the affirmative vote of a majority of the
shares of Common Stock represented in person or by proxy at the Meeting,
excluding the votes of holders of Common Stock beneficially owned by insiders of
the Company (and their associates) who may receive Common Stock in connection
with the 1999 Option Plan.
Approval of Proposal III requires the affirmative vote of holders
representing a majority of the shares of Common Stock represented in person or
by proxy at the Meeting.
The enclosed proxy provides that each stockholder may specify that his or
her shares be voted "for," "against" or "as abstaining from voting" with respect
to each proposal. If the enclosed proxy is properly executed and returned to the
Company, then your shares will be voted in accordance with the instructions
contained therein. If the enclosed proxy is signed and returned without specific
instructions, then your shares will be voted FOR Proposal I, Proposal II and
Proposal III and any other proposal to come before the Meeting.
<PAGE>
Proxies marked as "abstaining" will be treated as present for the purpose
of determining whether there is a quorum for the Meeting, but will not be
counted as voting for or against on any matter as to which such abstinence is
indicated. Thus, an abstaining vote in the election of directors will have no
legal effect on the outcome, however, an abstention as to any other matter will
have the same legal effect as a vote against such matter. Proxies returned by
brokers as "non-votes" on behalf of shares held in street name because
discretion has been withheld as to one or more matters on the agenda for the
Meeting will be treated as present for purposes of determining whether there is
a quorum for the Meeting if the broker is given discretion to vote on at least
one matter on the agenda.
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 at least 48 hours (excluding Saturdays, Sundays
and holidays) prior to commencement of the Meeting. Any stockholder who executes
and returns a proxy may revoke it at any time before it is voted at the Meeting
by: (i) delivering written notice of such revocation to the Company (attention:
Corporate Secretary) prior to the commencement of the Meeting; (ii) submitting a
duly executed proxy bearing a later date which relates to the same shares; or
(iii) attending and voting such shares at the Meeting. Mere attendance at the
Meeting will not, in and of itself, revoke an otherwise valid proxy.
A representative of Ernst & Young LLP, independent auditors of the
Company, is expected to attend the Meeting and be available to respond to
appropriate questions. Such representative will also be given the opportunity,
if desired, to make a statement to the stockholders.
Whether or not you attend the Meeting, your vote is important.
Accordingly, you are urged to sign and return the accompanying proxy regardless
of the number of shares you own. Shares can be voted at the Meeting only if the
holder is present or represented by proxy.
VOTING RIGHTS AND VOTING SECURITIES
Voting at the Meeting
The Board of Directors has fixed the close of business on May 21, 1999 as
the Record Date for the determination of stockholders entitled to notice of, and
to vote at, the Meeting. Only stockholders of record at the close of business on
the Record Date will be entitled to vote at the Meeting. As of May 21, 1999,
there were 12,449,623 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 on the Record Date will be entitled to one vote per
share, either in person or by proxy, on each matter presented at the Meeting.
The holders representing a majority of all of the outstanding shares of Common
Stock entitled to vote at the Meeting, in person or by proxy, will constitute a
quorum at the Meeting. The affirmative vote of holders representing a plurality
of the shares of Common Stock in person or by proxy at the Meeting is required
to approve Proposal I. The affirmative vote of the holders representing a
majority of the shares of Common Stock represented in person or by proxy at the
Meeting, excluding the votes of holders of Common Stock beneficially owned by
insiders of the Company (and their associates) who may receive Common Stock in
connection with the 1999 Option Plan, is required to approve Proposal II.
Approval of Proposal III requires the affirmative vote of holders representing a
majority of the shares represented in person or by proxy at the Meeting.
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of May 21, 1999
regarding the beneficial ownership of Common Stock by (A) each person known by
the Company to own beneficially more than five percent of the Common Stock, (B)
each director and director nominee of the Company, (C) each of the "Named
Executive Officers" (as defined below under the caption "Executive
Compensation--Summary Compensation Table"), and (D) all executive officers,
directors and director nominees of the Company as a group.
Percentage
Number of Shares Beneficially
Name Beneficially Owned Owned
- ---- ------------------ ------------
Philip Rosner**(2) ...................... 2,175,465(3) 17.5%
A. Gary Frumberg**(2) ................... 1,317,199 10.6%
Richard R. Higgins ...................... 929,500 7.5%
Stanley Altschuler ...................... 1,065,000(4) 8.2%
Richard E. Cooper ....................... 720,000(5) 5.5%
Sean Deson ** (2) ....................... 40,000(6) *
Bruce S. Foerster +(2) .................. 20,000(7) *
Werner F. Hiller **(2) .................. 30,000(7) *
Irwin D. Simon **(2) .................... 20,000(7) *
Ronald J. Dintemann (2) ................. 154,111(8) 1.2%
Harvey Farber (2) ....................... 41,600(9) *
Joseph A. Gemmo (2) ..................... 120,000(10) *
All directors, director nominees
and executive officers as a group
(9 persons) ............................ 3,918,375 30.9%
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* Less than 1%.
** Denotes director and nominee for election as director.
+ Denotes director who is not standing for re-election at the Meeting.
(1) As used in this table, a beneficial owner of a security includes any
person who, directly or indirectly, through contract, arrangement,
understanding, relationship or otherwise has or shares (i) the power to
vote, or direct the voting of, such security or (ii) investment power
which includes the power to dispose, or to direct the disposition of, such
security. In addition, a person is deemed to be the beneficial owner of a
security if that person has the right to acquire beneficial ownership of
such security within 60 days of the date shown above.
(2) The business address of each of Messrs. Rosner, Frumberg, Dintemann,
Farber and Gemmo is c/o Technology Flavors & Fragrances, Inc., 10 Edison
Street East, Amityville, New York 11701. The business address of Mr. Deson
is c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10172. The business address of Mr. Foerster is
c/o South Beach Capital Markets Advisory Corporation, 4045 Sheridan
Avenue, Suite 432, Miami Beach, Florida 33140. The business address of Mr.
Hiller is 55 Dugway, Watchung, New Jersey 07060. The business address of
Mr. Simon is c/o The Hain Food Group, Inc., 50 Charles Lindbergh
Boulevard, Uniondale, New York 11553.
(3) 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.
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(4) Includes 470,000 shares of Common Stock personally owned by Mr.
Altschuler. Also includes 595,000 shares of Common Stock issuable upon the
exercise of warrants (the "SGI Warrants") held by Strategic Growth
International, Inc. ("SGI"), of which Mr. Altschuler is a 50% stockholder.
See "--Note 5." Accordingly, Mr. Altschuler may be deemed to own the
595,000 shares of Common Stock underlying the SGI Warrants, which are
currently exercisable. Mr. Altschuler may therefore be deemed to
beneficially own an aggregate of 1,065,000 shares of Common Stock. Mr.
Altschuler has sole voting and dispositive power over the 470,000 shares
of Common Stock which he personally owns. Mr. Altschuler shares
dispositive power over the SGI Warrants and, upon the exercise of such
warrants, would share voting power over the shares of Common Stock
underlying such warrants. See "Executive Compensation--Consulting
Agreements."
(5) Includes 125,000 shares of Common Stock personally owned by Mr. Cooper.
Also includes 595,000 shares of Common Stock issuable upon the exercise of
the SGI Warrants by SGI, of which Mr. Cooper is a 50% stockholder. See
"--Note 4." Accordingly, Mr. Cooper may be deemed to own the 595,000
shares of Common Stock underlying the SGI Warrants, which are currently
exercisable. Mr. Cooper may therefore be deemed to beneficially own an
aggregate of 720,000 shares of Common Stock. Mr. Cooper has sole voting
and dispositive power over the 125,000 shares of Common Stock which he
personally owns. Mr. Cooper shares dispositive power over the SGI Warrants
and, upon exercise of such warrants, would share voting power over the
shares of Common Stock underlying such warrants. See "Executive
Compensation--Consulting Agreements."
(6) Includes ten-year options to purchase 40,000 shares of Common Stock that
have vested. Does not include ten-year options to purchase 160,000 shares
of Common Stock that have not yet vested. All of such options were granted
to Mr. Deson on June 29, 1998. Such options vest in equal increments over
a period of five years from the date of the grant.
(7) Includes ten-year options to purchase 20,000 shares of Common Stock that
have vested. Does not include ten-year options to purchase 80,000 shares
of Common Stock that have not yet vested. All of such options were granted
to each of Messrs. Foerster, Hiller and Simon on June 29, 1998. Such
options vest in equal increments over a period of five years from the date
of the grant.
(8) Includes ten-year options to purchase 85,000 shares of Common Stock
granted to Mr. Dintemann and excludes options to purchase an additional
35,000 shares that have not yet vested. Options to purchase 10,000 shares
of Common Stock will vest in each of the years 2000 through 2002 and
options to purchase 5,000 shares of Common Stock will vest in 2003.
(9) Includes ten-year options to purchase 27,500 shares of Common Stock
granted to Mr. Farber on January 23, 1996 and February 27, 1997 and
excludes options to purchase an additional 52,500 shares that have not yet
vested. Options to purchase 17,500 shares of Common Stock vest in year
2000, while options to purchase 15,000 shares of Common Stock will vest in
each of the years 2001 and 2002, and options to purchase 5,000 shares of
Common Stock will vest in 2003.
(10) Represents ten-year options to purchase 120,000 shares of Common Stock
granted to Mr. Gemmo and excludes options to purchase an additional 50,000
shares that have not yet vested. Such unvested options vest in equal
installments of 15,000 shares in each of years 2000 through 2002, and
options to purchase 5,000 shares of Common Stock will vest in 2003.
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<PAGE>
PROPOSAL I: ELECTION OF DIRECTORS
Directors of the Company are elected annually at the Company's annual
meeting of stockholders. Their respective terms of office continue until their
successors have been duly elected and qualified in accordance with the Company's
By-laws or their earlier resignation. The Company's Board of Directors currently
consists of six directors. In May 1999, the Board agreed to decrease the number
of members to serve on the Board after the Meeting from six to five. At the
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 nominees
(Messrs. Rosner, Frumberg, Deson, Hiller and Simon ) are currently members of
the Board of Directors, and Mr. Foerster will not stand for re-election.
The designated representatives named in the enclosed proxy intend to vote
for the election to the Board of Directors of each of the nominees listed below,
unless the proxy is marked to expressly indicate otherwise. Should any of such
nominees be unable or unwilling to accept such election (which the Board of
Directors does not anticipate), then the designated representatives named in the
enclosed proxy will vote for the election of such other persons as the Board of
Directors may recommend. Proxies cannot be voted for a greater number of persons
than the number of nominees named.
Vote Required
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 Meeting. The Board of Directors recommends that stockholders vote
FOR each of the five nominees listed below.
Information Concerning Director Nominees and Executive Officers
The following table sets forth information regarding the directors, the
director nominees and the executive officers of the Company as of May 25, 1999.
Mr. Bruce S. Foerster, who was elected as a director in June 1998, will not
stand for re-election.
<TABLE>
<CAPTION>
Name Age Positions with the Company
- ----------------------------- ----- --------------------------------------------------
<S> <C> <C>
Philip Rosner(1)(2).......... 63 Chairman of the Board of Directors and President
A. Gary Frumberg(1)(2)....... 65 Director and Executive Vice President
Joseph A. Gemmo.............. 53 Vice President, Chief Financial Officer, Secretary
and Treasurer
Harvey Farber................ 58 Senior Vice President--Flavor Division
Ronald J. Dintemann.......... 55 Vice President--Operations
Sean Deson(1)(2)............. 35 Director
Bruce S. Foerster(3)......... 58 Director
Werner F. Hiller(1)(2)....... 62 Director
Irwin D. Simon(1)(2)......... 39 Director
</TABLE>
- ----------
(1) Indicates director nominee.
(2) Indicates current member of the Board of Directors standing for
re-election.
(3) Indicates current member of the Board of Directors not standing for
re-election.
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<PAGE>
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 Chairman of the Board of Directors and
President of the Company since 1989. Mr. Rosner has been engaged in the flavor
and fragrance industry for over forty-five years. Prior to 1989, Mr. Rosner was
President of Globe Extracts, Inc., and for fifteen years before that, was
President of Felton Worldwide, Inc., both of which produced and marketed flavors
and fragrances.
A. Gary Frumberg has been a Director and an Executive Vice President of
the Company since 1989. Prior to 1989, Mr. Frumberg served as Vice
President--International Sales of Felton Worldwide, Inc.
Joseph A. Gemmo has been Vice President and Chief Financial Officer of the
Company since August 1996 and Secretary since June 1998. From January 1994 to
April 1996, Mr. Gemmo was the Chief Financial Officer of Bio- Botanica, Inc., a
developer and manufacturer of herbal extracts. From 1989 to 1994, Mr. Gemmo was
the Chief Financial Officer of General Aerospace Materials Corp.
Harvey Farber has been Senior Vice President--Flavor Division of the
Company since October 1997. From October 1995 through October 1997, Mr. Farber
was Senior Vice President--Flavor Development of the Company. Before Mr. Farber
joined the Company, he was the Vice President--Flavor Development at J.
Manheimer Inc. for twelve 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. for two years.
Sean Deson has been a director of the Company since June 1998. Mr. Deson
is currently a Senior Vice President of the Investment Banking Division of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"). Mr. Deson has
served in various capacities at DLJ since 1990, primarily as an advisor,
financier and investor. Mr. Deson also serves as a member of the Board of
Directors of SpecChem International Holdings, L.L.C., an international specialty
chemicals producer, and Versity.com, an internet community company.
Bruce S. Foerster has been a director of the Company since June 1998. Mr.
Foerster is currently the President of South Beach Capital Markets Advisory
Corporation, which he founded in January 1995 and which offers advice in capital
markets and corporate finance issues. From June 1992 to December 1994, Mr.
Foerster was a Managing Director in Equity Syndicate at Lehman Brothers and has
over twenty-six years of investment banking experience. Mr. Foerster is also a
director of Aurora Capital, Inc. On March 31, 1999, Mr. Foerster joined South
Beach Capital Markets Incorporated, a Miami, Florida investment bank, as a
founder and principal.
Werner F. Hiller has been a director of the Company since June 1998. Since
1996, Mr. Hiller has been a consultant to GS Companies ("ConAgra") and
previously served as the President of General Spice Companies, a division of
ConAgra, from 1990 to 1996. From 1965 to 1990, Mr. Hiller was the founder,
co-owner and Executive Vice President and Treasurer of General Spice Companies.
Irwin D. Simon has been a director of the Company since June 1998. Mr.
Simon has been the President and Chief Executive Officer of The Hain Food Group,
Inc., a natural and specialty foods company listed on Nasdaq, since 1993. Prior
to 1993, Mr. Simon spent fifteen years in various sales and marketing positions,
including Vice President of Marketing of Slim-Fast Foods Company, and Eastern
Regional Director of Haagen-Dazs Shops, a division of Grand Metropolitan, PLC.
All directors of the Company serve until the next annual meeting of
stockholders or until their respective successors are duly elected and
qualified. Officers serve at the discretion of the Board of Directors, subject
to rights, if any, under their contracts of employment. There are no family
relationships among the directors and executive officers of the Company. See
"--Director Compensation" and "Executive Compensation."
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<PAGE>
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 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 meetings of the Board of Directors but also through personal meetings
and other communications, including telephone contact with management and others
regarding matters of interest and concern to the Company.
During 1998, the Company's Board of Directors held four meetings and acted
by unanimous written consent four times. Each director attended at least 75% of
the Board meetings and committee meetings held during 1998.
Mr. Bruce S. Foerster, who was elected as a director in June 1998, will
not stand for re-election. In May 1999, the Board agreed to decrease the number
of members to serve on the Board after the Meeting from six to five.
Board Committees
The Company's Board of Directors has an Executive Committee, an Audit
Committee and a Compensation Committee. The members of these Committees are
appointed by the Board of Directors.
Executive Committee. The Executive Committee of the Board of Directors may
exercise, except when the Board of Directors is in session and to the extent
permitted by the General Corporation Law of the State of Delaware, all of the
powers of the Board of Directors in the management of the affairs of the
Company. The Executive Committee did not meet in 1998. The current members of
the Executive Committee are Messrs. Rosner, Deson, Foerster and Hiller.
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 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 met twice in 1999
in connection with matters relating to the Company's audited financial
statements for the year ended December 31, 1998. The members of the Audit
Committee in 1998 were Messrs. Deson and Foerster. A new Audit Committee will be
elected by the Board of Directors after the Meeting.
Compensation Committee. The Compensation Committee recommends to the Board
of Directors compensation of the Company's executive officers and other key
personnel, reviews new or existing employee compensation programs and
periodically reviews management perquisites and other benefits. The Compensation
Committee met once in 1999. The current members of the Compensation Committee
are Messrs. Hiller and Simon.
The Company has not established a nominating committee and/or a corporate
governance committee as recommended by the TSE Report (as defined herein),
however, the Company believes that the nomination of directors and other issues
normally considered by these committees can be effectively managed by the Board
of Directors due to its relatively small size, or by the Audit Committee, which
is composed substantially of "unrelated directors." See "--Statement of
Corporate Governance Practices."
Director Compensation
Each outside director of the Company is entitled to a $10,000 annual fee,
plus $500 for each formal meeting attended. Alternatively, an outside director
may, at his option and in lieu of such cash remuneration, elect to receive a
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non-qualified stock option grant for such earned fees. In addition, directors
are reimbursed for reasonable expenses actually incurred in connection with
attending each formal meeting of the Board of Directors or any committee
thereof. The Company's outside directors currently are Messrs. Deson, Foerster,
Hiller and Simon.
In connection with the election by the Company's stockholders on June 29,
1998 of Messrs. Foerster, Hiller and Simon to serve as directors of the Company,
each was granted non-qualified stock options to purchase 100,000 shares of
Common Stock. Mr. Deson, upon his election to serve as a director of the
Company, was granted non-qualified stock options to purchase 200,000 shares of
Common Stock. All of such options have an exercise price of $.9687 per share,
the market price of the Common Stock on the OTC Bulletin Board (the "Bulletin
Board") on the date of the grant. These options have a term of ten years and
vest in equal increments over a period of five years from the date of the grant.
All of such options are included as part of either the Company's 1993 or 1996
Option Plans.
Statement of Corporate Governance Practices
The Company's Common Stock is listed on the Toronto Stock Exchange (the
"TSE"). The by-laws of the TSE require listed companies 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 focuses on the importance of each company addressing the governance
issue in its own context and the receipt by the company's stockholders of an
explanation for each company's approach to governance. There is no requirement
for the Company to comply with the guidelines 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 organized under
the laws of the State of Delaware, and therefore is subject to that State's 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 the
principles of the TSE Report.
Unrelated Directors
Much of the discussion in the TSE Report focuses on the composition of a
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 interests of the company, other than an interest
arising from such director's status as a stockholder. The TSE Report also
focuses on the importance of having an appropriate portion of the board of
directors which is free from any interest or relationship with a "significant
shareholder" of the company (i.e., a shareholder controlling more than 50% of a
company's common stock). The Company does not have a "significant stockholder"
within the meaning of the TSE Report.
The Company believes that four of its six directors (i.e., Messrs. Deson,
Foerster, Hiller and Simon) and three of its director nominees (Messrs. Deson,
Hiller and Simon) are "unrelated" within the meaning of the TSE Report.
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 generally all material transactions are
presented by management for approval by the Board of Directors.
Response to Stockholders
Management is available to stockholders to respond to questions and
concerns on a prompt basis. The Board of Directors believes that the Company is
generally responsive to the inquiries of stockholders and others interested in
the Company.
8
<PAGE>
Expectations of Management
The Board of Directors works closely with members of management. The
Board's access to information relating to the operations of the Company, through
membership on the Board of several key members of management and, as necessary,
attendance by other members of management at the request of the Board, are
important elements to the effective and informed functioning of the 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 to finding means to deal with such opportunities and risks for the
benefit of the Company.
Advisory Committee
In June 1998, the Company established an Advisory Committee (the
"Committee") composed of three individuals with expertise in corporate finance
and the flavor and fragrance industry, including product development, sales and
regulatory affairs. Members of the Committee met with management and key
employees of the Company on an ad hoc basis during 1998. Committee members
assisted the Company in matters of corporate finance and in identifying product
development, sales and potential acquisition opportunities, reviewing with
management the progress of the Company's specific projects and recruiting and
evaluating the Company's staff.
In connection with their services as members of the Committee, the Company
granted to each Committee member options to purchase 100,000 shares of Common
Stock at an exercise price of $.9687 per share, the market price of the Common
Stock on the Bulletin Board on the date of the grant. In February 1999, the
Committee dissolved. The stock options granted to the members of the Advisory
Committee, all of which are unvested, will expire on May 28, 1999.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who beneficially own
more than 10% of the Company's Common Stock (collectively, the "Reporting
Persons") to file with the Securities and Exchange Commission (the "Commission")
(and, if such security is listed on a national securities exchange, with such
exchange) various reports as to ownership of such Common Stock. Such Reporting
Persons are required by Commission regulations to furnish the Company with
copies of all Section 16(a) reports they file. Based solely upon a review of
copies of Section 16(a) reports and representations received by the Company from
Reporting Persons, and without conducting any independent investigation of its
own, in 1998, all Forms 3,4 and 5 were timely filed with the Commission and each
exchange on which the Common Stock is traded, except as hereinafter set forth.
Each of Messrs. Deson, Foerster, Hiller and Simon failed to timely file reports
on Form 3 upon becoming directors of the Company, and did not timely report one
transaction on each of such reports on Form 3. In addition, Mr. Hiller failed to
timely report one transaction on Form 4.
9
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table sets forth the aggregate
compensation paid to or earned by the Company's Chairman of the Board of
Directors and President and the four most highly compensated executive officers
of the Company (other than the Chairman of the Board and President) whose total
annual salaries and bonuses exceeded $100,000 for the year ended December 31,
1998 (the "Named Executive Officers")
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------
Awards Payouts
Annual Annual ----------- ---------------
Compensation Compensation Securities
------------ ------------ Underlying All Other
Name and Principal Position Year Salary Bonus Option/SARs Compensation(1)
- --------------------------- ---- ------ ----- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Philip Rosner ...................... 1998 $225,930 $ -- -- $ 16,072
Chairman of the Board and 1997 225,962 -- -- 16,820
President 1996 235,000 -- 100,000(2) 17,216
A. Gary Frumberg ................... 1998 207,692 -- -- 15,820
Director and Executive Vice 1997 192,308 -- -- 17,761
President 1996 199,903 -- 100,000(2) 17,010
Harvey Farber ...................... 1998 172,415 -- -- 11,359
Senior Vice President-Flavor 1997 163,461 -- 75,000(3) 10,436
Division 1996 161,509 -- 10,000 8,429
Ronald J. Dintemann ................ 1998 140,192 -- -- 15,010
Vice President--Operations 1997 129,808 -- 25,000(4) 15,500
1996 134,085 -- 75,000(5) 22,580
Joseph A. Gemmo .................... 1998 135,000 -- -- 8,576
Vice President and Chief 1997 116,346 -- 150,000(6) 8,492
Financial Officer, Secretary 1996 43,125 -- -- 2,930
and Treasurer
</TABLE>
- ----------
(1) Represents Company reimbursed automobile expenses of such executive,
including business usage.
(2) Represents stock options granted in April 1994 under the Company's 1993
Stock Option Plan. The exercise prices of the options were reduced in
October 1995 by the Board of Directors and approved by the Company's
stockholders in October 1996. Such options expired unexercised on April 7,
1999. See "-1993 Stock Option Plan."
(3) Includes (a) 25,000 shares of Common stock granted to Mr. Farber as
additional compensation pursuant to his amended employment agreement, and
(b) 50,000 shares of Common Stock issuable to Mr. Farber pursuant to stock
options granted under the Company's 1996 Stock Option Plan. See
"-Employment Agreements."
(4) Represents 25,000 shares of Common Stock issuable to Mr. Dintemann
pursuant to stock options granted under the Company's 1996 Stock Option
Plan.
(5) Represents stock options granted in April 1994 under the Company's 1993
Stock Option Plan. The exercise price of such options was reduced in
October 1995 by the Board of Directors and approved by the Company's
stockholders in October 1996. See "-1993 Stock Option Plan."
(6) Represents 150,000 shares of Common Stock issuable to Mr. Gemmo pursuant
to stock options granted in August 1996 under the 1996 Stock Option Plan.
Of such options, options to purchase 100,000 shares were repriced from
$2.0625 to $1.31 on December 1, 1997, the current market price at the time
of repricing.
10
<PAGE>
Option Grants in 1998
The Board of Directors of the Company did not grant any stock options to
any of the Named Executive Officers during the year ended December 31, 1998.
Aggregate Option Exercises in 1998 and 1998 Year End Option Values
The following table provides certain information concerning each exercise
of stock options during the year ended December 31, 1998 by each of the Named
Executive Officers and the year-end value of unexercised options. The stock
options listed below were granted without tandem stock appreciation rights. The
Company has no freestanding stock appreciation rights outstanding.
<TABLE>
<CAPTION>
Number of Number of Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired on Value December 31, 1998 December 31, 1998 ($)
Name Exercise Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- ----------- ------------ ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Philip Rosner ........... -- -- 100,000/0 $--/--
A. Gary Frumberg ........ -- -- 100,000/0 --/--
Harvey Farber ........... -- -- 27,500/32,500 --/--
Ronald J. Dintemann ..... -- -- 80,000/20,000 --/--
Joseph A. Gemmo ......... -- -- 120,000/30,000 --/--
</TABLE>
(1) Value of unexercised "in-the-money" options is equal to the difference
between the closing price per share of the Common Stock on the TSE at
December 31, 1998 (U.S. $0.40) and the option price per share multiplied
by the number of shares subject to options. No options were "in-the-money"
at December 31, 1998.
Employment Agreements
In October 1995, the Company entered into a five-year employment agreement
with Mr. Rosner which provides that he will serve as the President of the
Company. The agreement provides for an annual base salary (adjustable in
accordance with the Consumer Price Index) of $235,000. Effective January 1998,
Mr. Rosner's annual base salary was increased by the Company to $244,400 per
year. During May 1998, Mr. Rosner voluntarily reduced his annual salary from
$244,400 to $200,000 for the remainder of 1998. The agreement contains, among
other things, customary termination and confidentiality provisions. See "Certain
Relationships and Related Transactions - Transactions with Directors and
Executive Officers."
In October 1995, the Company entered into a five-year employment agreement
with Mr. Frumberg which provides that he will serve as an Executive Vice
President of the Company. The agreement provides for an annual base salary
(adjustable in accordance with the Consumer Price Index ) of $200,000. Effective
January 1998, Mr. Frumberg's annual base salary was increased by the Company to
$208,000. The agreement contains, among other things, customary termination and
confidentiality provisions. See "Certain Relationships and Related Transactions
- - Transactions with Directors and Executive Officers."
In October 1995, the Company entered into a three-year employment
agreement with Mr. Farber to serve as the Senior Vice President--Flavor Division
of the Company. Pursuant to his employment agreement, Mr. Farber is entitled to
receive an annual base salary of $160,000. In addition, the employment agreement
provides that Mr. Farber may receive an annual bonus, payable at the sole
discretion of the Company. In December 1997, the employment agreement was
amended to provide that Mr. Farber will receive an annual base salary of
$176,800 commencing January 1998 for the balance of the term of the agreement.
Pursuant to such amendment, in 1997 the Company issued to Mr. Farber 25,000
shares of Common Stock as additional compensation. Mr. Farber's employment
agreement contains, among other things, customary termination and
confidentiality provisions. Mr. Farber's employment agreement expired
11
<PAGE>
in October 1998 and was not renewed, although Mr. Farber continues to be
employed by the Company in the same position and on substantially the same
terms.
In January 1996, the Company entered into a five-year employment agreement
with Ronald J. Dintemann to serve as Vice President--Operations of the Company.
Pursuant to his employment agreement, Mr. Dintemann is entitled to receive an
annual base salary (adjustable in accordance with the Consumer Price Index) of
$135,000. Effective January 1998, Mr. Dintemann's annual base salary was
increased by the Company to $140,400. Mr. Dintemann's employment agreement
contains, among other things, customary termination and confidentiality
provisions.
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 his employment
agreement, Mr. Gemmo is entitled to receive an annual base salary of $115,000.
Effective August 1997, Mr. Gemmo's annual base salary was increased by the
Company to $130,000. Effective January 1998, Mr. Gemmo's annual base salary was
increased by the Company to $135,200. In addition, pursuant to his employment
agreement, Mr. Gemmo received options to purchase 100,000 shares of Common Stock
on August 2, 1996. Mr. Gemmo's employment agreement also provides that Mr. Gemmo
may receive an annual bonus, payable at the sole discretion of the Company. On
December 1, 1997, the Company's Board of Directors authorized the Company to
reprice the options granted to Mr. Gemmo on August 2, 1996 to purchase 100,000
shares of Common Stock from $2.0625 to $1.31 per share, the market price of the
Common Stock at the time of repricing, and to pay Mr. Gemmo a minimum cash bonus
of $50,000 in the event the Company undergoes a "change of control."
1993 Stock Option Plan
In November 1993, the Company adopted, and the stockholders approved, the
1993 Stock Option Plan (the "1993 Option Plan") pursuant to which the Company
may grant options to its employees to purchase up to 500,000 shares of Common
Stock. The options granted under the 1993 Option Plan 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 prices of the Common Stock on the TSE on
the date of grant. Options granted to any person who beneficially owns ten
percent (10%) or more of the Common Stock may not be exercised after the fifth
anniversary of the date of the grant and must be granted at an exercise price
equal to 110% of the market price at the date of the grant.
On May 19, 1999, the Company's Board of Directors terminated the 1993
Option Plan. There are no more options available for grant under the 1993 Option
Plan. Termination of the 1993 Option Plan will not affect options that were
granted prior to the termination date.
1996 Stock Option Plan
In 1996, the Company's then existing Board of Directors adopted, and the
stockholders approved, the 1996 Stock Option Plan (the "1996 Option Plan").
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. This
number may be adjusted in certain events, such as a stock split, reorganization
or recapitalization. Employees (including officers and directors who are
employees) of the Company or its subsidiaries are eligible for the grant of
incentive options under the 1996 Option Plan. Directors who are not employees or
officers are not eligible to receive incentive stock options, but may receive
non-qualified options. Options may also be granted to other persons, provided
that such options shall be non-qualified options. In the event of incentive
options, the aggregate fair market value of the Common Stock with respect
12
<PAGE>
to which such options become first exercisable by the holder 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.
In the 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 Common Stock
on the date the option is granted and, if an optionee is a stockholder who
beneficially owns 10% or more of the outstanding Common Stock, the exercise
price of incentive options may not be less than 110% of the fair market value of
the Common Stock. 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.
The 1996 Option Plan will terminate automatically and no options may be
granted more than ten years after the date the 1996 Option Plan was approved by
the 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.
As of May 21, 1999, options to purchase an aggregate of 425,000 and
837,500 shares of Common Stock were outstanding under the 1993 and 1996 Option
Plans, respectively.
Consulting Agreements
In December 1998, the Company entered into a one-year consulting agreement
with IC Holdings III, LLC ("ICH") to provide investor relations services. Under
this agreement, the Company agreed to pay ICH a retainer fee of $5,000 per month
plus reasonable expenses and granted to ICH stock options to purchase 30,000
shares of the Company's Common Stock at an exercise price of $1.00 per share.
The market price of the Common Stock on the TSE on the date of the grant was
$0.50 per share. Under the stock option agreement entered into by the Company
and ICH in connection with the grant of such options, options to purchase 5,000
shares were exercisable immediately on the date of the grant, and options to
purchase the remaining 25,000 shares become exercisable in equal monthly amounts
over the period of the agreement. The options expire in 2003.
In October 1995, the Company entered into a one-year consulting agreement
with Strategic Growth International, Inc. ("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 "SGI Agreement"). Stanley Altschuler and Richard E. Cooper,
may be deemed to be beneficial owners of 8.2% and 5.5% of the Company's Common
Stock, respectively, and are each 50% stockholders of SGI. Under the SGI
Agreement, the Company paid SGI a retainer fee of $8,000 per month plus
reasonable expenses and issued to SGI warrants (the "SGI Warrants") to purchase
an aggregate of 600,000 shares of Common Stock at an initial exercise price of
$0.56, the market price of the Common Stock on the TSE on the date of issuance,
subject to adjustment in certain circumstances pursuant to the terms and
conditions set forth in that certain Warrant Agreement dated October 25, 1995,
as amended (the "Warrant Agreement"). The Warrant Agreement expires on October
24, 2000. See "Voting Rights and Voting Securities--Security Ownership of
Certain Beneficial Owners and Management."
In October 1996, the consulting agreement expired by its terms. The
Company continued to engage SGI for its services under the Consulting Agreement
pursuant to its terms on a month to month basis up until October 1997, at which
time the arrangement was terminated by the Company. In February 1998, SGI
commenced an action against the Company in the Supreme Court of the State of New
York, County of Nassau, seeking damages for the Company's alleged failure to
perform its obligations under the SGI Agreement. SGI sought damages in the
amount of $124,950. On October 26, 1998, SGI and the Company entered into a
settlement agreement for the full amount of the claim, based upon the extent to
which SGI exercises the SGI Warrants issued to SGI in connection with its
engagement by the Company.
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Principal Stockholders
None
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 which were outstanding as of
December 31, 1998 (collectively, the "Loans"). On March 15, 1999, the Loans were
amended to change the maturity date from December 31, 1999 to March 15, 2002. As
of May 17, 1999, the aggregate indebtedness owed to the Company pursuant to the
Loans was $277,928, including accrued interest thereon. The Loans are secured by
a portion of the shares of the Company's Common Stock owned by Messrs. Rosner
and Frumberg, and bear interest at a bank's prime rate and are due in
installments of principal and interest through March 15, 2002.
Table of Indebtedness of Directors
and Executive Officers of the Company
<TABLE>
<CAPTION>
Amount
Outstanding as of Amount
Involvement of December 31, Outstanding as of
Name and Principal Position Issuer 1998(1) May 17,1999(1)
--------------------------- ------ ------- --------------
<S> <C> <C> <C>
Philip Rosner, Chairman of the
Board and President ............ Lender $191,976 $197,810
A. Gary Frumberg, Director and
Executive Vice President ....... Lender $ 77,756 $ 80,118
</TABLE>
(1) Includes accrued interest.
PROPOSAL II: TO APPROVE THE ADOPTION OF THE 1999 STOCK OPTION PLAN
General
Subject to the approval of the Company's stockholders, on May 19, 1999 the
Board of Directors of the Company adopted the 1999 Stock Option Plan (the "1999
Option Plan"). The 1999 Option Plan is intended to help the Company attract,
retain and motivate key employees (including officers and directors) and other
persons related to the Company.
The 1999 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 Stockholder Approval Requirement
Stockholder approval of the 1999 Option Plan is required for options
granted under the plan to qualify as Incentive Options under Section 422 of the
Code. For this purpose, stockholders 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. Stockholder approval must
be obtained within twelve months after adoption of the plan by the Board of
Directors.
14
<PAGE>
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 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 1999 Option Plan to satisfy
the requirements to be "qualified performance-based compensation," it is
necessary to obtain stockholder approval of the class of employees eligible to
receive grants under the 1999 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 1999 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 1999 Option Plan summarizes the principal
features of the 1999 Option Plan and sets forth those matters as to which
stockholder approval is required as described above.
Any such options that are granted will not satisfy the "qualified
performance-based compensation" exception to Section 162(m) absent stockholder
approval of the business criteria to be used in making such grants.
Description of the 1999 Option Plan
The following is a summary of the principal features of the 1999 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 A to this
Proxy Statement.
Administration of the 1999 Option Plan
The 1999 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
Company's Board of Directors or the Committee is authorized to interpret the
1999 Option Plan, adopt and amend rules and regulations relating to the 1999
Option Plan, and determine the recipients form and terms of Options granted
under the 1999 Option Plan. All Options must be evidenced by a written
agreement.
Shares Available
Under the 1999 Option Plan, the maximum number of shares of Common Stock
available for grant may not exceed an aggregate of 1,000,000 shares. The maximum
number of shares may 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 Incentive Options
under the 1999 Option Plan. Directors who are not employees or officers are not
eligible to receive Incentive Options. Options may also be granted to other
persons, provided that such options will be Non-Qualified Options. 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.
15
<PAGE>
Exercise Price of Options
The Company will receive no monetary consideration for the grant of
Options under the 1999 Option Plan. In case of an Incentive Option, the exercise
price cannot be less than the fair market value (as defined in the 1999 Option
Plan) of the shares on the date the Option is granted, and if an optionee is a
stockholder 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
may 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 1999 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.
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 clause (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 1999 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
stockholders. If such stockholder 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 1999 Option Plan
The 1999 Option Plan will terminate automatically and no Options may be
granted after ten years have elapsed from the date the 1999 Option Plan was
approved by the Company's Board of Directors. The 1999 Option Plan may be
terminated at any prior time by the Board of Directors. Termination of the 1999
Option Plan will not affect Options that were granted prior to the termination
date.
16
<PAGE>
Amendments or Modifications
The 1999 Option Plan may be amended or modified from time to time by the
Company's Board of Directors, subject to any required regulatory approval.
However, if at any time the approval of the stockholders of the Company is
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 1999 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.
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, an "Insider"),
(ii) does not make a Section 83 election and (iii) receives shares upon the
exercise of a Non-Qualified Option, the
17
<PAGE>
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.
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 1999 Option Plan requires the approval of
holders representing a majority of shares represented in person or by proxy
entitled to vote at the Meeting, excluding votes of holders of Common Stock
beneficially owned by insiders of the Company (and their associates) who may
receive Common Stock in connection with the 1999 Option Plan. The Company
believes that the number of shares of common stock beneficially owned by such
insiders and their associates as at May 21, 1999 is approximately 3,586,000. For
the purposes hereof, the terms "insider" and "associate" have the respective
meanings ascribed thereto by the Securities Act (Ontario), except that the
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term "insider" does not include a person who falls within that definition solely
by virtue of being a director or senior officer of a subsidiary of the Company.
The Board of Directors believes that the proposal is in the best interests
of the Company and its stockholders and recommends that the stockholders vote
FOR the adoption of the 1999 Option Plan as set forth in this Proposal II.
PROPOSAL III: SELECTION OF INDEPENDENT AUDITORS
Ernst & Young LLP has acted as the independent auditors of the Company
since 1996, and has acted in such capacity in connection with the preparation of
the Company's audited consolidated financial statements for the year ended
December 31, 1998 and the report contained therein, which is included in the
Company's Annual Report to Stockholders accompanying this Proxy Statement. As
independent auditors for the Company, Ernst & Young LLP is 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.
In April 1999, the Board of Directors and the Audit Committee approved
management's appointment of Ernst & Young LLP as the Company's independent
auditors for the year ending December 31, 1999. The stockholders are being asked
to approve the appointment of Ernst & Young LLP as independent auditors for the
year ending December 31, 1999 and to authorize the Board of Directors to fix
their remuneration. A representative of Ernst & Young LLP is expected to be
present at the Meeting and available to respond to appropriate questions. Such
representative also will have the opportunity, if desired, to make a statement
to the stockholders.
Required Affirmative Vote
Approval of the appointment of Ernst & Young LLP as independent auditors
of the Company for the year ending December 31, 1999 requires the affirmative
vote of holders representing a majority of the shares of Common Stock
represented in person or by proxy at the Meeting. The Board of Directors
unanimously recommends that the stockholders vote FOR Proposal III.
YEAR 2000 STOCKHOLDER PROPOSALS
Stockholder proposals requested to be included in the Company's Proxy
Statement for the Year 2000 Annual Meeting of Stockholders must be received by
the Company at its principal executive offices, 10 Edison Street East,
Amityville, New York 11701 (Attn: Corporate Secretary), prior to January 26,
2000. The Board of Directors will review any stockholder proposals that are
received in accordance herewith and will determine whether such proposals meet
applicable criteria for inclusion in the Company's Proxy Statement for the year
2000 Annual Meeting.
Holders of common stock desiring to have proposals submitted for
consideration at any future meeting of stockholders should review the applicable
rules and regulations of the Commission with respect to submitting such
proposals.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for consideration at the Meeting. Should any other matters properly
come before the Meeting, the persons named in the accompanying proxy or their
substitutes will vote such proxies on behalf of the stockholders they represent
in accordancewith their best judgment.
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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 stockholders in connection with the 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 by the Company 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 stockholder, without charge, upon a
written request therefor, copies of the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1998. Any such request should be directed to
Technology Flavors & Fragrances, Inc., Attention: Joseph A. Gemmo, Vice
President and Chief Financial Officer, at 10 Edison Street East, Amityville, New
York 11701.
FOR THE BOARD OF DIRECTORS
/s/ Joseph A. Gemmo
Joseph A. Gemmo
Secretary
Amityville, New York
May 27, 1999
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Exhibit A
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
1999 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). The Plan is also designed to attract and retain other persons who
will provide services to the Company.
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 ("Non-Qualified Options").
(b) Administration. The Plan will be administered by the Board or by a
committee consisting of two or more directors appointed by the Board (the
"Committee"), 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.
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 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). Options may also be granted to other persons, provided
that such options shall be Non-Qualified Options. 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. Notwithstanding the foregoing, no
options will be granted to any person under this Plan if as a result of such
grant the number of shares of Common Stock of the Company reserved for issuance
to such person pursuant to (i) options granted under the Plan and (ii) any other
share compensation with the Company, exceeds 5% of the number of shares of
Common Stock of the Company then issued and outstanding.
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 canceled 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.
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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 and the requirements of The Toronto Stock Exchange (to the extent such
requirements are binding upon the Company) 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 or Non-Qualified 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 purposes of the
Plan shall mean the closing price of a share of the Common Stock on The Toronto
Stock Exchange (or, if such shares are not traded thereon, the principal
securities exchange 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.
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.
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.
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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 (to the extent such option is then exercisable) 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
determination 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) 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), to the
extent it is then exercisable, 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), to the
extent it is then exercisable, and
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(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), to the
extent it is then exercisable.
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 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 the requirements of The Toronto Stock
Exchange governing employee stock option and purchase plans or 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 under the Securities Exchange Act of 1934, as amended
("the Exchange Act") (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 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.
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15. Adjustment Provisions for Recapitalization, Reorganization 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 fail 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 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 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
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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.
(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, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board.
19. Amendment, Modification or Termination of the Plan
(a) Subject to the prior consent of the Toronto Stock Exchange (to the
extent it is required), 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.
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(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 requirements of The Toronto Stock Exchange
governing employee stock option and purchase plans (to the extent such
requirements are binding upon the Company) or 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 by (i) causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option, or (ii) 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, 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.
Subject to the prior consent of The Toronto Stock Exchange (to the extent
such consent is required), 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 the (i) 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 canceled options, or (ii) 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
7
<PAGE>
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.
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, rule, 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.
8
<PAGE>
PROXY
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
Solicited on Behalf of the Board of Directors
Annual and Special Meeting of Stockholders
June 24, 1999
The undersigned hereby appoints Philip Rosner and A. Gary Frumberg
(with full power to act without the other and with power to appoint his
substitute), 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 the Annual
and Special Meeting of Stockholders of the Company (the "Meeting") to be held at
the executive corporate offices of Fleet Bank, 330 Broad Hollow Road, Melville,
New York 11747, on June 24, 1999 at 10:00 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)
|_| AGAINST
|_| ABSTAINING
|_| WITHOUT AUTHORITY to vote for all
nominees listed below
PHILIP ROSNER, A. GARY FRUMBERG, SEAN DESON, WERNER F. HILLER and IRWIN D. SIMON
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line set forth below.)
- --------------------------------------------------------------------------------
II. To approve the adoption of the Company's 1999 Stock Option Plan.
|_| FOR |_| AGAINST |_| ABSTAINING |_| WITHOUT AUTHORITY TO VOTE
- --------------------------------------------------------------------------------
III. To ratify the appointment of Ernst & Young, LLP as independent auditors of
the Company for the year ending December 31, 1999, and to authorize the
Board of Directors to fix their remuneration.
|_| FOR |_| AGAINST |_| ABSTAINING |_| WITHOUT AUTHORITY TO VOTE
- --------------------------------------------------------------------------------
IV. In their discretion, to transact such other business as may properly come
before the Meeting and any and all adjournments thereof.
- --------------------------------------------------------------------------------
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 Proposals II and III.
If any amendments or variations to the matters referred to above or to any
other matters identified in the Notice of Meeting are proposed at the
Meeting or any adjournments thereof, or if any other matters which are not
now known to management should properly come before the 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.
<PAGE>
The undersigned hereby acknowledges receipt of the Notice of Annual and
Special Meeting of Stockholders to be held on June 24, 1999, the Proxy
Statement of the Company, dated May 27, 1999, the accompanying form of
Proxy and the Company's Annual Report to Stockholders for the year ended
December 31, 1998, each of which is enclosed herewith.
The undersigned hereby revokes any proxy to vote shares of Common Stock of
the Company heretofore delivered by the undersigned in connection with the
Meeting.
A STOCKHOLDER HAS THE RIGHT TO APPOINT A PERSON TO
REPRESENT HIM AND TO ATTEND AND ACT FOR HIM ON HIS
BEHALF AT THE ANNUAL AND 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 your full title. In the case of 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.
