<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
TWINLAB CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
TWINLAB(R) LOGO
APRIL 6, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Twinlab Corporation to be held at 12:00 noon on Tuesday, May 9, 2000, at the
Media Center located at 150 Motor Parkway, Hauppauge, New York.
We hope that you will attend in person. If you plan to do so, please
indicate in the space provided on the enclosed proxy. Whether you plan to attend
the Annual Meeting or not, we urge you to sign, date and return the enclosed
proxy as soon as possible in the postage-paid envelope provided. This will
ensure representation of your shares in the event that you are unable to attend
the Annual Meeting.
The matters expected to be acted upon at the Annual Meeting are described
in detail in the attached Notice of Annual Meeting and Proxy Statement.
The Directors and Officers of the Company look forward to meeting with you.
Sincerely,
/s/ ROSS BLECHMAN
ROSS BLECHMAN
Chairman of the Board
<PAGE> 3
TWINLAB CORPORATION
150 MOTOR PARKWAY
HAUPPAUGE, NEW YORK 11788
(631) 467-3140
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2000
To the Holders of Our Common Stock:
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of TWINLAB
CORPORATION (the "Company") will be held at the Media Center located at 150
Motor Parkway, Hauppauge, New York, on May 9, 2000 at 12:00 noon, local time,
for the following purposes:
1. To elect ten directors to the Board of Directors.
2. To approve the Twinlab Corporation Management Incentive Bonus Plan.
3. To approve the Twinlab Corporation 2000 Stock Incentive Plan.
4. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the Company for the fiscal year ending December 31, 2000.
5. To transact such other business as may properly come before the Annual
Meeting. Management is presently aware of no other business to come
before the Annual Meeting.
The Board of Directors has fixed the close of business on March 17, 2000,
as the record date for the determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting or any adjournments thereof. Shares
of Common Stock can be voted at the Annual Meeting only if the holder is present
at the Annual Meeting in person or by valid proxy. A copy of the Company's 1999
Annual Report to Stockholders is being mailed with this Notice and Proxy
Statement on or about April 6, 2000 to all stockholders of record on the record
date.
By Order of the Board of Directors,
/s/ Neil Blechman
NEIL BLECHMAN
Secretary
Hauppauge, New York
April 6, 2000
IMPORTANT
Stockholders are requested to DATE, SIGN and MAIL the enclosed proxy.
A postage paid envelope is provided for mailing.
<PAGE> 4
TWINLAB CORPORATION
150 MOTOR PARKWAY
HAUPPAUGE, NEW YORK 11788
(631) 467-3140
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2000
This proxy statement (the "Proxy Statement") is furnished by the board of
directors (the "Board of Directors" or the "Board") of TWINLAB CORPORATION, a
Delaware corporation (the "Company" or "Twin"), in connection with the Company's
annual meeting of stockholders (the "Annual Meeting") to be held on May 9, 2000.
The proxy materials are being mailed on or about April 6, 2000 to the Company's
common stockholders (the "Stockholders") of record at the close of business on
March 17, 2000 (the "Record Date"). As of the Record Date, there were 28,645,687
shares of the Company's common stock, $1.00 par value per share (the "Common
Stock"), issued and outstanding. Each holder of shares of Common Stock issued
and outstanding on the Record Date is entitled to one vote for each such share
held on each matter of business to be considered at the Annual Meeting. The
holders of a majority of the voting power of the issued and outstanding Common
Stock entitled to vote, present in person or represented by proxy, shall
constitute a quorum at the Annual Meeting.
The enclosed proxy is solicited by the Board of Directors of the Company. A
person giving the enclosed proxy has the power to revoke it at any time before
it is exercised by (i) attending the Annual Meeting and voting in person, (ii)
duly executing and delivering a proxy bearing a later date, or (iii) sending a
written notice of revocation to the Company's Secretary. The Company will bear
the cost of the solicitation of proxies, including the charges and expenses of
brokerage firms and others who forward solicitation material to beneficial
owners of Common Stock. In addition to the solicitation of proxies by mail, the
Company may solicit proxies by personal interview, telephone, telegraph or
telefacsimile. The Company has also retained ADP Proxy Services, Inc. to aid in
the distribution of the proxy materials at an estimated cost not to exceed
$2,000 plus reimbursement of reasonable out-of-pocket expenses.
If the enclosed proxy is properly executed and returned to the Company in
time to be voted at the Annual Meeting, it will be voted as specified on the
proxy, unless it is properly revoked prior thereto. Votes cast in person or by
proxy at the Annual Meeting will be tabulated by the inspectors of election
appointed for the Annual Meeting. If no specification is made on the proxy as to
the proposal, the shares represented by the proxy will be voted (i) FOR the
election of the nominees for directors named herein, (ii) FOR the approval of
the Twinlab Corporation Management Incentive Bonus Plan; (iii) FOR the approval
of the Twinlab Corporation 2000 Stock Incentive Plan; (iv) FOR the ratification
of the appointment of Deloitte & Touche LLP as the Company's independent
auditors; and (v) with respect to any other matters that may properly come
before the Annual Meeting, at the discretion of the proxy holders.
Election as a director requires a plurality of the votes eligible to be
cast by the Common Stock present in person or represented by proxy at the Annual
Meeting and entitled to vote on the subject matter. For the other proposals to
be voted upon at the Annual Meeting, the affirmative vote of a majority of the
votes eligible to be cast by the Common Stock present in person or represented
by proxy at the Annual Meeting and entitled to vote on the matter is required.
The inspectors of election will treat abstentions and broker non-votes
(i.e., shares held by brokers or nominees that the broker or nominee does not
have discretionary power to vote on a particular matter and as to which
instructions have not been received from the beneficial owners or persons
entitled to vote) as shares that are present and entitled to vote for purposes
of determining a quorum. With regard to the election of directors,
<PAGE> 5
votes may be cast in favor of or withheld; votes that are withheld shall be
excluded entirely from the vote and will have no effect. Abstentions may be
specified on proposals other than the election of directors and will be counted
as present for purposes of the item on which the abstention is noted. Therefore,
such abstentions will have the effect of a negative vote. The inspectors of
election will treat broker non-votes as shares that are unvoted and not present
on such proposals, thus having no effect on the outcome of such proposals.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's By-laws provide that the number of directors shall be fixed
from time to time by resolution duly adopted by the Board of Directors, but in
no event shall such number of directors be less than eight. The Company's
directors hold office until their successors are duly elected and qualified or
until their earlier death, disqualification, resignation or removal.
At the Annual Meeting, ten individuals will be elected as directors whose
terms will expire upon the due election and qualification of their successors at
the 2001 Annual Meeting of Stockholders. All of the Company's current directors
have been nominated for re-election at the Annual Meeting. The shares
represented by the enclosed proxy will be voted in favor of the persons
nominated, unless a vote is withheld from any or all of the individual nominees.
While management has no reason to believe that the nominees will not be
available as candidates, should such a situation arise, proxies may be voted for
the election of such other persons as the holders of the proxies may, in their
discretion, determine.
Directors are elected by a plurality of the votes cast at the Annual
Meeting either in person or by proxy. Votes that are withheld will be excluded
entirely from the vote and will have no effect.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
EACH OF THE NOMINEES.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The following table provides certain information as of March 31, 2000,
about each of the Company's nominees for director. Brian Blechman, Dean
Blechman, Neil Blechman, Ross Blechman and Steve Blechman are brothers (the
"Blechman Brothers").
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITIONS WITH THE COMPANY SINCE
- ---- --- -------------------------- --------
<S> <C> <C> <C>
Ross Blechman........................ 46 Chairman of the Board, Chief Executive 1996
Officer, President and Director
Brian Blechman....................... 49 Executive Vice President, Treasurer and 1996
Director
Dean Blechman........................ 42 Executive Vice President and Director 1996
Neil Blechman........................ 49 Executive Vice President, Secretary and 1996
Director
Steve Blechman....................... 46 Executive Vice President and Director 1996
Stephen L. Welling................... 45 President of Retail Sales 1997
John G. Danhakl(1)(2)(3)............. 43 Director 1996
Jonathan D. Sokoloff(1)(3)........... 42 Director 1996
Robert S. Apatoff(2)................. 41 Director 1999
William U. Westerfield(2)............ 68 Director 1999
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Stock Option Committee.
2
<PAGE> 6
The business experience, principal occupation, employment and certain other
information concerning each nominee is set forth below.
Ross Blechman became Chairman of the Board, Chief Executive Officer,
President and Director of the Company on May 7, 1996. Mr. Blechman joined Twin
Laboratories, Inc. in 1974 and served as Vice President, Operations prior to May
7, 1996. Mr. Blechman is Chairman of the Board, President, Chief Executive
Officer and a Director of Twin, and an executive officer and director of various
subsidiaries of Twin.
Brian Blechman became an Executive Vice President, Treasurer and Director
of the Company on May 7, 1996. Mr. Blechman joined Twin Laboratories, Inc. in
1972 and served as Vice President, Purchasing & Quality Control prior to May 7,
1996. He is responsible for purchasing, plant operations, quality control, human
resources and real estate matters. Mr. Blechman is an Executive Vice President
and a Director of Twin, and an executive officer and director of various
subsidiaries of Twin.
Dean Blechman became an Executive Vice President and Director of the
Company on May 7, 1996. Mr. Blechman joined Twin Laboratories, Inc. 1979 and
served as Vice President, Sales prior to May 7, 1996. He is responsible for
sales and distribution. Mr. Blechman is an Executive Vice President and a
Director of Twin, and an executive officer and director of various subsidiaries
of Twin.
Neil Blechman became an Executive Vice President, Secretary and Director of
the Company on May 7, 1996. Mr. Blechman joined Twin Laboratories, Inc. in 1972
and served as Vice President, Marketing & Advertising prior to May 7, 1996. He
is responsible for marketing and advertising activities, promotional programs,
merchandising strategies, packaging, trade shows and public relations. Mr.
Blechman is an Executive Vice President and a Director of Twin, and an executive
officer and director of various subsidiaries of Twin.
Steve Blechman became an Executive Vice President and Director of the
Company on May 7, 1996. Mr. Blechman joined Twin Laboratories, Inc. in 1974 and
served as Vice President, Product Development & Marketing prior to May 7, 1996.
He is involved in product development, marketing, public relations and the
operations of Advanced Research Press, Inc., a wholly-owned subsidiary of the
Company ("ARP"). Mr. Blechman is an Executive Vice President and a Director of
Twin, and an executive officer and director of various subsidiaries of Twin.
Stephen L. Welling became President of Retail Sales of the Company on
February 11, 2000. Mr. Welling was previously President of the Health and
Natural Food Store Division of Twin Laboratories, Inc. from March 3, 1999 to
February 11, 2000 and prior thereto, he was President of the Nature's Herb's
division of Twin Laboratories, Inc. from May 7, 1996 to March 3, 1999. Mr.
Welling joined Natur-Pharma Inc. in 1977 as the controller and served as
President of Natur-Pharma Inc. prior to May 7, 1996. Prior to his promotion to
President, Mr. Welling served as Vice President of Operations of Natur-Pharma
Inc. with responsibility for manufacturing, personnel, quality management, legal
affairs and finance. Mr. Welling was elected to the Board of Directors of the
Company on September 16, 1997. Mr. Welling is also a director of the National
Nutritional Foods Association, a leading trade organization of the industry's
retailers, distributors, suppliers and manufacturers.
John G. Danhakl became a Director of the Company on May 7, 1996. He has
been an executive officer and an equity owner of Leonard Green & Partners, L.P.
("LGP"), a merchant banking firm which manages Green Equity Investors II, L.P.
("GEI"), since 1995. Mr. Danhakl had previously been a Managing Director at
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and had been with
DLJ since 1990. Prior to joining DLJ, Mr. Danhakl was a Vice President at Drexel
Burnham Lambert Incorporated ("Drexel"). Mr. Danhakl is also a director of The
Arden Group and several private companies.
Jonathan D. Sokoloff became a Director of the Company on May 7, 1996. He
has been an executive officer and equity owner of LGP since its formation in
1994 and has been a partner of Leonard Green & Associates, L.P., a merchant
banking firm affiliated with LGP, since 1990. Mr. Sokoloff had previously been a
managing director at Drexel. Mr. Sokoloff is also a director of Rite Aid
Corporation, Gart Sports Company and several private companies.
3
<PAGE> 7
Robert S. Apatoff became a Director of the Company on July 23, 1999. Mr.
Apatoff is currently senior vice president of corporate marketing for Aetna,
Inc. ("Aetna"). Prior to joining Aetna, Mr. Apatoff was senior vice-president of
marketing services for LA Gear, Inc. ("LA GEAR"), from 1992 to 1995. Prior to
joining LA GEAR, Mr. Apatoff was vice president of marketing for Reebok,
International, Ltd. ("Reebok") from 1989 to 1992. Prior to joining Reebok, Mr.
Apatoff was manager of national promotions and marketing communications for
Anheuser-Busch, Inc., from 1983 to 1989. Mr. Apatoff is also a director of
Kidsports Foundation and Starlight Foundation.
William U. Westerfield became a Director of the Company on July 23, 1999.
Mr. Westerfield joined the Company's Board having over 40 years of financial
consulting experience. Mr. Westerfield currently acts as a consultant on
retainer for PricewaterhouseCoopers (formerly Price Waterhouse LLP). Mr.
Westerfield served as audit partner for PricewaterhouseCoopers from 1965 until
his retirement in 1992. He joined PricewaterhouseCoopers in 1956. Mr.
Westerfield is also a director and chairman of the audit committee of Gymboree
Corporation and chairman of the audit committee of World Duty Free America, a
subsidiary of BAA plc.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has an Audit Committee, Compensation
Committee and Stock Option Committee. In 1999, the Board of Directors met five
times and acted by unanimous written consent on seven occasions. In addition,
the Compensation Committee met three times, the Audit Committee met four times,
and the Stock Option Committee met once and acted by unanimous written consent
on three occasions.
The Audit Committee reviews the adequacy of internal controls, the results
and scope of annual audits and other services provided by the Company's
independent auditors. In 1999, the Audit Committee was comprised of Brian
Blechman, William U. Westerfield, John G. Danhakl, Robert S. Apatoff and
Jonathan D. Sokoloff. Effective July 23, 1999, Mr. Sokoloff resigned from the
Audit Committee and Messrs. Westerfield and Apatoff were appointed to the Audit
Committee. Effective February 10, 2000, Mr. Blechman resigned from the Audit
Committee. The Board of Directors adopted a written charter for the Audit
Committee on February 10, 2000.
The Compensation Committee establishes salaries, bonuses and other forms of
compensation for executives of the Company and such other employees of the
Company as assigned thereto by the Board. In 1999, the Compensation Committee
was comprised of Ross Blechman, John G. Danhakl, and Jonathan D. Sokoloff.
Effective February 10, 2000, Mr. Blechman resigned from the Compensation
Committee.
The Stock Option Committee was created by the Board of Directors on June
17, 1999. The Stock Option Committee supervises and administers the Company's
stock option plans and makes determinations with respect to the grant of
options. During the period in which the Stock Option Committee existed in 1999,
it was comprised of Ross Blechman, Jonathan D. Sokoloff and John G. Danhakl.
Effective February 10, 2000, Mr. Blechman resigned from the Stock Option
Committee.
The Company does not have a nominating committee. The functions customarily
performed by a nominating committee are performed by the Board of Directors as a
whole. Any stockholder who wishes to make a nomination at an annual or special
meeting for the election of directors must do so in compliance with the
applicable procedures set forth in the Company's By-laws. The Company will
furnish copies of such By-law provisions upon written request to the General
Counsel's Office at the Company's principal executive offices, 150 Motor
Parkway, Hauppauge, New York 11788.
During the period in which each person served as a director, each director
attended at least 75% of the aggregate number of meetings of the Board of
Directors and the committees of the Board on which such person served.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no compensation for
serving on the Board of Directors. The Company has adopted a program with
respect to the compensation payable to non-employee directors. Pursuant to this
program, each non-employee director of the Company is paid an annual retainer as
4
<PAGE> 8
described below and a fee of $1,000 for each meeting of the Board of Directors
or any committee thereof he attends. Each committee chairman receives $1,500 for
each committee meeting he attends. The annual retainer is comprised of $15,000
cash, restricted stock valued at $5,000 and options to purchase 2,500 shares of
Common Stock. The restricted stock and stock options will be issued under the
Twinlab Corporation 1999 Stock Incentive Plan for Outside Directors. Pursuant to
the Twinlab Corporation Deferred Compensation Plan for Outside Directors,
non-employee directors can elect each year to defer receipt of any part or all
of the cash portion of the retainer and convert such deferred compensation into
shares of "Phantom Stock" based on the fair market value of the Company's Common
Stock. Each share of Phantom Stock entitles the participant to receive in cash
the value of a share of Common Stock when he ceases to be a director. In
addition, non-employee directors are reimbursed for their out-of-pocket expenses
in attending Board meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1999, the Company's Compensation Committee consisted of Ross Blechman,
John G. Danhakl, and Jonathan D. Sokoloff. In addition to being a director and
executive officer of the Company, Mr. Blechman is also Chairman of the Board,
President, Chief Executive Officer and Director of Twin, and an executive
officer and director of various subsidiaries of Twin. Messrs. Sokoloff and
Danhakl are also directors of Twin. See "Certain Relationships and Related
Transactions" for a description of certain transactions involving the Company
and the members of the Compensation Committee. Effective February 10, 2000, Mr.
Blechman resigned from the Compensation Committee.
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 ten percent of the Company's Common Stock to report their ownership of
and transactions in the Company's Common Stock to the Securities and Exchange
Commission and The Nasdaq National Stock Market. Copies of these reports are
also required to be supplied to the Company. The Company believes, based solely
on a review of the copies of such reports received by the Company, that all
applicable Section 16(a) reporting requirements were complied with during 1999.
INFORMATION CONCERNING EXECUTIVE OFFICERS
The executive officers of the Company as of the date of this Proxy
Statement, together with information regarding the business experience of such
officers, are identified below. Information regarding the business experience of
Messrs. Brian Blechman, Dean Blechman, Neil Blechman, Ross Blechman, Steve
Blechman and Stephen L. Welling (collectively with John Bolt, the "Senior
Executive Officers") is set forth above under the heading "Information
Concerning Directors and Nominees." Each executive officer is elected annually
by the Board of Directors of the Company and serves until the next regular
annual meeting of the Board and until his or her successor is duly elected and
qualified, or until his or her earlier death, disqualification, resignation or
removal.
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Ross Blechman..................... Chairman of the Board, Chief Executive Officer and President
Brian Blechman.................... Executive Vice President and Treasurer
Dean Blechman..................... Executive Vice President
Neil Blechman..................... Executive Vice President and Secretary
Steve Blechman.................... Executive Vice President
John Bolt......................... Chief Financial Officer
Stephen L. Welling................ President of Retail Sales
</TABLE>
John Bolt became the Chief Financial Officer of the Company in August 1999.
Mr. Bolt is responsible for financial management and the Company's Management
Information Systems department. Mr. Bolt previously worked for 15 years at the
Kellogg Company ("Kellogg"). From 1995 to December 1998, Mr. Bolt served as Vice
President, Treasurer of Kellogg, and from 1993 to 1995 he served as Director of
Financial Planning of Kellogg.
5
<PAGE> 9
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth compensation
earned, whether paid or deferred, by the Company's Chief Executive Officer and
its other four most highly compensated executive officers (collectively, the
"Named Executive Officers") for services rendered in all capacities to the
Company during the years ended December 31, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------
ALL OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL OCCUPATION YEAR SALARY($) BONUS($)(A) COMPENSATION($)(B) COMPENSATION($)(C)
- ----------------------------- ---- --------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Ross Blechman............. 1999 $426,948 $ 0 $30,844 $1,365
Chairman of the Board, 1998 428,305 300,200 31,462 1,365
President and Chief 1997 412,869 224,680 32,693 1,365
Executive Officer
Brian Blechman............ 1999 $426,948 $ 0 $42,212 $1,660
Executive Vice President 1998 428,305 300,200 22,275 1,660
and Treasurer 1997 412,869 224,680 24,102 1,660
Dean Blechman............. 1999 $426,948 $ 0 $25,088 $1,073
Executive Vice President 1998 428,305 300,200 23,162 1,073
1997 412,869 224,680 23,746 1,073
Neil Blechman............. 1999 $426,948 $ 0 $36,074 $1,660
Executive Vice President 1998 428,305 300,200 25,709 1,660
and Secretary 1997 412,869 224,680 28,520 1,660
Steve Blechman............ 1999 $426,948 $ 0 $28,698 $1,365
Executive Vice President 1998 428,305 300,200 31,462 1,365
1997 412,869 224,680 25,784 1,365
</TABLE>
- ---------------
(a) A description of the Company's bonus arrangements is contained below under
the heading "Report of the Compensation Committee of the Board of Directors
on Executive Compensation."
(b) For fiscal year 1997, includes for each of the Blechman Brothers (i) payment
of premiums for executive medical insurance policies; (ii) matching
contributions under Twin's 401(k) plan; (iii) automobile allowances; and
(iv) payment of premiums for Twin's cafeteria benefits program and Twin's
successor cafeteria benefits program. For fiscal years 1998 and 1999,
includes for each of the Blechman Brothers (i) payment of premiums for
executive medical insurance policies; (ii) matching contributions under
Twin's 401(k) plan; (iii) automobile allowances; and (iv) payment of
premiums for Twin's cafeteria benefits program and Twin's successor
cafeteria benefits program.
(c) For fiscal years 1997, 1998 and 1999, represents the payment of premiums for
term life insurance policies for each of the Blechman Brothers.
EMPLOYMENT AGREEMENTS
As of January 1, 2000, the Company entered into employment agreements (the
"Blechman Employment Agreements") with each of the Blechman Brothers (each an
"Executive"), other than Brian Blechman, who is continuing to serve as an
Executive Vice President. The Blechman Employment Agreements supercede, in all
respects, the employment agreements entered into between the Blechman Brothers
and the Company dated May 7, 1996 and any amendments thereto. The Blechman
Employment Agreements provide for each Executive to be employed for a term of
three years, renewable automatically for successive additional two-year periods
at the end of the initial three-year term and at the end of each successive
two-year renewal term, unless either party provides written notice to the other
of a decision not to renew. Neil Blechman, Steve Blechman and Dean Blechman,
each an Executive Vice President, will receive a base salary of $450,000, and
Ross Blechman, the Chief Executive Officer, President and Chairman of the Board,
will receive a base salary of $550,000 for the first year of the Blechman
Employment Agreements. Thereafter, the base salary of each Executive will be
reviewed and may be increased at the discretion of the Compensation Committee of
the
6
<PAGE> 10
Board of Directors. In addition to the base salary, each Executive will receive
other benefits and perquisites, and will be eligible to receive a bonus each
year in accordance with the performance criteria established from time to time
by the Compensation Committee of the Board of Directors. In the event an
Executive is terminated for any reason other than for cause, resignation,
retirement or death (as defined in the Blechman Employment Agreements), the
Company will be obligated to pay the Executive (1) severance pay, commencing on
the date of termination and continuing for the balance of the term of such
Executive's Blechman Employment Agreement, equal to the base salary rate being
paid immediately preceding termination, and (2) the targeted bonus for the
calendar year at issue on a pro rated basis through the last day of employment
for such calendar year. During the Executive's employment and for a period of
two years thereafter, each Executive has agreed not to directly or indirectly be
associated with any Competing Business (as defined therein) or take part in any
solicitation activities (as provided therein). In consideration for each
Executive's agreement not to compete, the Company has agreed to pay each
Executive additional consideration for a period of twenty-four months after the
last day of his employment, consisting of the base salary being paid immediately
preceding the termination of employment. The Blechman Employment Agreements
provide that if within two years after a Change of Control (as defined therein),
the Executive is terminated without cause or resigns for Other Reasons (as
defined therein), the Executive will be entitled to receive severance payments
equal to three times his then current base salary as well as an amount equal to
three times his Target Bonus (as provided therein). In addition, the Company
will be obligated to provide coverage under COBRA and will make amendments to
stock option agreements covering options granted to the Executive to provide for
an acceleration of the vesting of such options. In the event the Company makes a
payment or distribution (a "Payment") to or for the benefit of an Executive
pursuant to the terms of the Blechman Employment Agreements or stock option
agreement (including the value of accelerated vesting of the stock options) that
is subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code, the Company will reimburse the Executive for the excise tax imposed for
such Payment in an amount up to twenty percent of such Payment.
On March 9, 2000, the Company entered into a Confidentiality,
Non-competition and Employment-at-will Agreement with Brian Blechman (the "Brian
Blechman Agreement"). The Brian Blechman Agreement provides that during Mr.
Blechman's employment and for a period of two years thereafter, Mr. Blechman
will not directly or indirectly be associated with any Competing Business (as
defined therein) or take part in any solicitation activities (as provided
therein). In consideration for Mr. Blechman's agreement not to compete, the
Company has agreed to pay Mr. Blechman consideration for a period of twelve
months after the last day of his employment, consisting of the base salary being
paid immediately preceding the termination of his employment.
On May 7, 1999, the Company entered into an employment agreement with
Stephen L. Welling to serve as President of the Health and Natural Food Store
division of Twin (the "Division") or any similar capacity as requested by the
Board of Directors (the "Welling Employment Agreement"). The Welling Employment
Agreement provides that Mr. Welling will be employed as an executive of the
Company for a term of three years, renewable automatically for successive
additional two-year periods at the end of the initial three-year term and at the
end of each successive two-year renewal term, unless either party provides
written notice to the other of a decision not to renew. The Welling Employment
Agreement provides for a base salary at an annual rate of $265,000 (as adjusted
for inflation). In addition to the base salary, Mr. Welling will receive other
benefits and perquisites, and will be eligible to receive a cash bonus each year
of up to 100% of his base salary for the relevant calendar year. The Welling
Employment Agreement also provides that Mr. Welling will be granted options to
purchase 50,000 shares of the Company's common stock. During the term of Mr.
Welling's employment and for a period of twelve months thereafter, Mr. Welling
has agreed not to directly or indirectly be associated with any Competing
Business (as defined therein) or take part in any solicitation activities (as
provided therein). In the event Mr. Welling is terminated for any reason other
than for cause, resignation for good reason, retirement, death or disability (as
those terms are defined in the Welling Employment Agreement), the Company will
be obligated to pay Mr. Welling (1) severance pay, commencing on the date of
termination and continuing until the last day of the twelfth month following
termination, equal to the base salary rate being paid immediately preceding
termination, and (2) his bonus for the calendar year at issue on a pro rated
basis through the last day of his employment for such calendar year.
7
<PAGE> 11
The Welling Employment Agreement provides that if within one year after a Change
of Control (as defined therein), Mr. Welling's is terminated without cause or
resigns for Good Reason (as defined therein), Mr. Welling will be entitled to
receive severance payments equal to one year of his then current base salary. In
addition, the Company will be obligated to provide all benefits coverage
received by Mr. Welling or his dependents for one year thereafter. In addition,
the Company will be obligated to provide for acceleration of the vesting of
stock options granted to Mr. Welling (unless the Board of Directors determines
otherwise in accordance with the Welling Employment Agreement).
On May 7, 1996, Twin entered into consulting agreements with each of David
and Jean Blechman, the parents of the Blechman Brothers and the founders of Twin
(together, the "Consultants") (each a "Consulting Agreement"). The Consulting
Agreement provides that the relevant individual be engaged as an independent
consultant to the Company, Twin and ARP for a term of five years. As
consideration for such consulting services, Twin is obligated to pay the
individual an annual consulting fee of $100,000, in addition to certain limited
perquisites and benefits.
In May 1996, the Company and Twin entered into non-competition agreements
with each of the Blechman Brothers and the Consultants (each a "Non-Competition
Agreement"). The term of the Non-Competition Agreement of each of the Blechman
Brothers and of each of the Consultants is five years. The Non-Competition
Agreement generally prevents the individual from participating in any manner in
the management, operation or ownership of any entity which is engaged in similar
lines of business to those of the Company.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
Scope of Committee's Work. The Compensation Committee reviews and approves
the compensation of executives of the Company and such other employees of the
Company as assigned thereto by the Board and makes recommendations to the Board
with respect to standards for setting compensation levels. In 1999, the
Compensation Committee consisted of Ross Blechman, John G. Danhakl, and Jonathan
D. Sokoloff. Effective February 10, 2000, Mr. Blechman resigned from the
Compensation Committee. The Compensation Committee adopted the Report on
Executive Compensation set forth below.
The Board of Directors of the Company created a Stock Option Committee in
June 1999. The Stock Option Committee supervises and administers the Company's
stock option plans and makes determinations with respect to the grant of stock
options.
Report on Executive Compensation. The Company's executive compensation for
fiscal 1999 consisted of two primary components: base salary and eligibility to
receive a bonus. The level of each Named Executive Officer's base salary and
bonus was established in such officer's employment agreement, which agreements
were entered into in May 1996 (the "Old Employment Agreements"). Mr. Welling's
base salary was established in the Welling Employment Agreement, and Mr. Bolt's
base salary and a substantial portion of his bonus was established pursuant to
arrangements entered into between Twin and Mr. Bolt in connection with Mr.
Bolt's employment by the Company. See "Employment Agreements."
The salary and bonus components of the Company's executive compensation are
together designed to facilitate fulfillment of the following compensation
objectives: (i) retaining competent management; (ii) rewarding management for
the attainment of short and long term accomplishments; (iii) aligning the
interests of management with those of the Company's stockholders; and (iv)
relating executive compensation to the achievement of Company goals and the
Company's financial performance.
Base Salary. The base salary of each of the Senior Executive Officers in
fiscal 1999 was paid in accordance with the terms of their respective employment
agreements or arrangements.
Bonuses. The Compensation Committee believes that the awarding of annual
bonuses provides an incentive and reward for short-term financial success and
long-term Company growth. The bonus component of the Old Employment Agreements
was intended to link compensation in significant part to the Company's financial
performance and the attainment of Company goals. The bonus for fiscal year 1999
entitled to be earned by each of the Named Executive Officers, is calculated in
accordance with a formula set forth in the relevant officer's employment
agreement and entitles such individual to a bonus calculated as a percentage of
base salary based on annual increases in EBITDA realized by Twin. None of the
Named Executive Officers
8
<PAGE> 12
were entitled to receive a bonus in 1999 pursuant to the terms of the Old
Employment Agreements. Messrs. Welling and Bolt (to the extent not established
as set forth above) received discretionary bonuses based upon merit review and
their levels of responsibility. Bonuses for the Senior Executive Officers and
other officers in respect of fiscal year 2000 will be determined in accordance
with the Twinlab Corporation Management Incentive Bonus Plan if approved by the
stockholders at the Annual Meeting. See "Proposal No. 2 -- Approval of the
Twinlab Corporation Management Incentive Bonus Plan."
Stock Incentive Plans. The Twinlab Corporation 1996 Stock Incentive Plan
(the "1996 Plan") provides for the issuance of a total of up to 400,000
authorized and unissued shares of the Company's Common Stock as awards in the
form of (i) incentive stock options, (ii) nonqualified stock options, (iii)
stock appreciation rights, (iv) restricted stock and (v) performance shares. No
individuals who are directors of the Company (including the Blechman Brothers)
are eligible to receive awards under the Plan. Prior to the consummation of the
Company's initial public offering in 1996 (the "IPO"), Stephen L. Welling was
awarded 8,000 nonqualified stock options under the 1996 Plan, such options
having an exercise price equal to $12.00, the IPO price.
The Twinlab Corporation 1998 Stock Incentive Plan (the "1998 Plan")
provides for the issuance of a total of up to 1,642,712 authorized and unissued
shares of the Company's Common Stock in the form of: (i) incentive stock
options, (ii) non-qualified stock options, (iii) stock appreciation rights, (iv)
restricted stock, (v) restricted stock units, (vi) dividend equivalent rights
and (vii) other stock based awards. Awards may be made to such officers and
other employees of the Company and its subsidiaries (including employees who are
directors and prospective employees who become employees), and to such
consultants to the Company and its subsidiaries as the Compensation Committee
shall in its discretion select. In 1999, certain employees of the Company were
awarded nonqualified stock options to purchase an aggregate of 895,000 shares of
Common Stock at exercise prices ranging from $8.00 to $9.19 per share. Such
options become exercisable over five years from the date of grant at the rate of
20% of the grant each year.
The Twinlab Corporation 1999 Stock Incentive Plan for Outside Directors
(the "1999 Plan") provides for the grant of up 65,000 shares of the Company's
Common Stock in the form of (i) nonqualified stock options and (ii) restricted
shares of Common Stock. Awards are granted each year as of the day following the
date of the Company's annual meeting to all eligible participants in the 1999
Plan, which includes members of the Board of Directors of the Company who are
not employees of the Company or its subsidiaries. In 1999, eligible directors of
the Company were awarded nonqualified stock options to purchase an aggregate of
5,000 shares of Common Stock at an exercise price of $8.625 per share. Such
options become exercisable over three years from the date of grant at the rate
of 33 1/3% of the grant each year. In addition, eligible directors of the
Company were awarded 1,184 restricted shares of Common Stock.
The Twinlab Corporation Management Incentive Bonus Plan, and the Twinlab
Corporation 2000 Stock Incentive Plan, if approved by the stockholders at the
Annual Meeting, will be administered by the Compensation Committee and the Stock
Option Committee, respectively.
Profit Sharing Plan. Prior to July 1, 1996, Twin sponsored an employee
profit sharing and savings plan (the "Twin Plan") and Natur-Pharma Inc.
sponsored an Employee Savings and Investment Plan (the "NP Plan"), which covered
all of Twin's and Natur-Pharma Inc.'s eligible employees, respectively.
Executive officers of Twin and Natur-Pharma Inc. participated in the Twin Plan
and NP Plan, respectively, on the same terms as other employees. Effective July
1, 1996, the Twin Plan was amended and restated and merged with the NP Plan to
form the Twin Laboratories Inc. 401(k) Plan (the "401(k) Plan"). Eligible
employees, including executive officers of the Company and Twin, may contribute
up to 15% of their annual compensation to the 401(k) Plan, subject to certain
limitations, and Twin will match 50% of such contributions.
Compensation of the Chief Executive Officer. The compensation package of
Mr. Ross Blechman, the Company's President and Chief Executive Officer, like
that of the other Senior Executive Officers, primarily consists of base salary
and bonus components. The levels of base salary and bonus, as well as the
factors considered in determining such levels in 1999, were established by Mr.
Blechman's Old Employment Agreement.
9
<PAGE> 13
In 1999, Ross Blechman earned a base salary of $426,948 and did not receive
a bonus pursuant to his Old Employment Agreement. In addition, Mr. Blechman
received certain other customary perquisites and benefits. As of March 17, 2000
Ross Blechman beneficially owned 1,670,097 shares, or 5.8%, of the Company's
Common Stock. See "Security Ownership of Certain Beneficial Owners and
Management."
As of January 1, 2000, the Company and Mr. Blechman entered into a new
employment agreement. See "Executive Compensation -- Employment Agreements." In
establishing the terms of Mr. Blechman's employment agreement, the Compensation
Committee took into account both the position and expertise of Mr. Blechman, as
well as the Compensation Committee's understanding of competitive compensation
for similarly situated executives (which understanding was obtained with the
assistance of an independent compensation consultant). Mr. Blechman's bonus in
respect of fiscal year 2000 will be determined in accordance with the Twinlab
Corporation Management Incentive Bonus Plan if approved by the stockholders at
the Annual Meeting. See "Proposal No. 2 -- Approval of the Twinlab Corporation
Management Incentive Bonus Plan."
John G. Danhakl
Jonathan D. Sokoloff
10
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following graph depicts the cumulative total return on the Company's
Common Stock compared to the cumulative total return for the Nasdaq
Composite -- U.S. and the Nasdaq Health Index. The graph assumes an investment
of $100 on November 15, 1996, when the Company's stock was first traded in a
public market. Reinvestment of dividends is assumed in all cases.
<TABLE>
<CAPTION>
TWINLAB CORPORATION NASDAQ HEALTH INDEX NASDAQ COMPOSITE - U.S.
------------------- ------------------- -----------------------
<S> <C> <C> <C>
Nov 15 96 100.00 100.00 100.00
Dec 96 101.06 102.78 102.55
Mar 97 112.50 95.97 96.98
Jun 97 200.00 107.83 114.75
Sept 97 170.63 117.31 134.16
Dec 97 206.25 105.45 125.64
Mar 98 337.50 115.70 147.05
Jun 98 364.06 105.05 151.08
Sept 98 213.54 78.90 136.33
Dec 98 109.38 89.39 177.16
Mar 99 79.21 80.03 198.56
Jun 99 71.61 99.79 217.27
Sept 99 73.95 73.92 222.54
Dec 99 66.14 72.87 327.87
</TABLE>
The comparisons in the table and on the graph above are required by the
Securities and Exchange Commission and are not intended to forecast or be
indicative of possible future performance of the Company's Common Stock.
11
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information, as of March 17, 2000,
concerning the Common Stock of the Company beneficially owned (i) by each
director and nominee of the Company, (ii) by the Named Executive Officers and
all executive officers and directors as a group, and (iii) by each stockholder
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock. Unless otherwise indicated in the footnotes to the
table, the beneficial owners named have, to the knowledge of the Company, sole
voting and dispositive power with respect to the shares beneficially owned,
subject to community property laws where applicable.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(A) OUTSTANDING(A)
- ------------------------------------ ---------- --------------
<S> <C> <C>
Green Equity Investors II, L.P.............................. 4,879,999 17.0%
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
John G. Danhakl(b).......................................... 4,879,999 17.0%
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
Jonathan D. Sokoloff(b)..................................... 4,879,999 17.0%
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
Brian Blechman.............................................. 1,659,246 5.8%
c/o Twin Laboratories Inc.
150 Motor Parkway
Hauppauge, NY 11788
Dean Blechman(c)............................................ 1,660,080 5.8%
c/o Twin Laboratories Inc.
150 Motor Parkway
Hauppauge, NY 11788
Neil Blechman(d)............................................ 1,660,497 5.8%
c/o Twin Laboratories Inc.
150 Motor Parkway
Hauppauge, NY 11788
Ross Blechman(e)............................................ 1,670,097 5.8%
c/o Twin Laboratories Inc.
150 Motor Parkway
Hauppauge, NY 11788
Steve Blechman(c)........................................... 1,660,080 5.8%
c/o Twin Laboratories Inc.
150 Motor Parkway
Hauppauge, NY 11788
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(A) OUTSTANDING(A)
- ------------------------------------ ---------- --------------
<S> <C> <C>
Robert S. Apatoff........................................... 0 *
c/o Twin Laboratories Inc.
150 Motor Parkway
Hauppauge, NY 11788
William U. Westerfield...................................... 0 *
c/o Twin Laboratories Inc.
150 Motor Parkway
Hauppauge, NY 11788
Stephen L. Welling(f)....................................... 31,970 *
c/o Twin Laboratories Inc.
150 Motor Parkway
Hauppauge, NY 11788
All executive officers and directors as a group (10 13,221,969 46.1%
persons)(g)...............................................
</TABLE>
- ---------------
(a) Does not include an aggregate of 1,563,050 shares of Common Stock issuable
upon the exercise of outstanding stock options with a weighted average
price of $11.07 per share.
(b) The shares shown as beneficially owned by Messrs. Danhakl and Sokoloff
include 4,879,999 shares owned of record by GEI. GEI is a Delaware limited
partnership managed by LGP, which is an affiliate of the general partner of
GEI. Each of Leonard I. Green, Jonathan D. Sokoloff, John G. Danhakl, Peter
J. Nolan and Gregory J. Annick, either directly (whether through ownership
interest or position) or through one or more intermediaries, may be deemed
to control LGP and such general partner. LGP and such general partner may be
deemed to control the voting and disposition of the shares of Common Stock
of the Company owned by GEI. As such, Messrs. Sokoloff and Danhakl may be
deemed to have shared voting and investment power with respect to all shares
held by GEI. However, such individuals disclaim beneficial ownership of the
securities held by GEI except to the extent of their respective pecuniary
interests therein.
(c) The shares shown as beneficially owned by each of Dean Blechman and Steve
Blechman each include 834 shares of Common Stock beneficially owned by each
of their minor children. Dean Blechman and Steve Blechman disclaim
beneficial ownership of such shares.
(d) The shares shown as beneficially owned by Neil Blechman include 1,251 shares
of Common Stock owned by his minor children. Neil Blechman disclaims
beneficial ownership of such shares.
(e) The shares shown as beneficially owned by Ross Blechman include 10,851
shares of Common Stock owned by his minor children. Ross Blechman disclaims
beneficial ownership of such shares.
(f) The shares shown as beneficially owned by Mr. Welling include 13,000 shares
subject to options exercisable within 60 days.
(g) Includes the shares referred to in Notes (b), (c), (d), (e) and (f) above.
* Less than 1%.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has employment agreements and arrangements with each of the
Senior Executive Officers other than Brian Blechman. The Company also has a
Confidentiality, Non-competition and Employment-at-will Agreement with Brian
Blechman and consulting agreements with each of the Consultants. See "Executive
Compensation."
13
<PAGE> 17
PROPOSAL NO. 2
APPROVAL OF THE TWINLAB CORPORATION MANAGEMENT
INCENTIVE BONUS PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Twinlab Corporation Management Incentive Bonus Plan (the "Bonus Plan"). The
adoption of the Bonus Plan is part of a broader program adopted with respect to
incentive compensation payable to employees of the Company, which also includes
the Company's recently adopted Twinlab Corporation 2000 Stock Incentive Plan
(the "Stock Plan"), described in this Proxy Statement under the caption
"Proposal No. 3 -- Approval of the Twinlab Corporation 2000 Stock Incentive
Plan." The following summary of the main features of the Bonus Plan is qualified
by reference to the complete text of the Bonus Plan, which is set forth in
Appendix A hereto.
GENERAL
The purpose of the Bonus Plan is to motivate the key employees of the
Company and its subsidiaries to focus on the achievement of corporate,
department/division and individual objectives, to clearly align expectations
with financial rewards, to provide a systematic plan for establishing definitive
performance goals and to provide a strong financial incentive for the
achievement of such goals, and to continue to attract, motivate and retain high
performing executives on a competitive basis, while seeking to preserve for the
benefit of the Company, to the extent practicable, a tax deduction for payments
of incentive "performance-based" compensation to such executives within the
meaning of Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended
(the "Code") and accompanying regulations.
ADMINISTRATION
The Bonus Plan shall be administered by the Compensation Committee of the
Board of Directors of the Company (the "Compensation Committee"), which shall be
comprised of two or more individuals appointed by the Board of Directors, all of
whom are "non-employee directors" (as defined in Section 162(m) of the Code),
and "outside directors" (as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended). The Compensation Committee is
authorized to determine all questions of interpretation and application of the
Bonus Plan. The determinations of the Compensation Committee are made in its
sole discretion and are final and binding on all participants.
ELIGIBILITY
Bonuses under the Bonus Plan may be granted to those key employees of the
Company who are employed at grade 12 or above (including officers of the
Company, whether or not they are directors of the Company) as the Compensation
Committee shall select from time to time. The granting of a Bonus (as defined
therein) is discretionary, and the Company cannot now determine the number or
dollar value of Bonuses that shall be granted in the future to any particular
person or group. However, the Compensation Committee has determined, subject to
stockholder approval of the Bonus Plan, the range of amounts of potential Bonus
payments to be granted to eligible participants for fiscal year 2000 and the
performance criteria that must be achieved in order to obtain such Bonus
payments. These potential Bonus payments are discussed below in more detail
under the heading "Year 2000 Bonuses."
AWARDS
General. Under the Bonus Plan, eligible participants shall be granted a
Bonus, which entitles them to receive a cash award upon the achievement of
specific, objective, pre-established goals relating to the Company or the
individual ("Performance Goals") during a specific period (a "Measurement
Period"). The Compensation Committee shall (i) determine the key employees to
whom Bonuses should be granted, (ii) determine the amount of each such Bonus and
(iii) establish the Performance Goals with respect to each such Bonus. The
Compensation Committee may delegate to one or more duly authorized officers of
the Company some or all of its authority described in the previous sentence,
provided, however, that no such authority may be delegated with respect to any
individual that the Compensation Committee reasonably
14
<PAGE> 18
expects to be a "covered person" within the meaning of Section 162(m) of the
Code as of the date a Bonus is paid (hereinafter "Section 162(m) Covered
Person"). Section 162(m) of the Code is discussed below under the heading "Right
to Defer -- Section 162(m)." Each Bonus shall be evidenced by an agreement (the
"Bonus Agreement"), setting forth the applicable Performance Goal that must be
achieved, the amount of the Bonus to be received by the participant for each
level of achievement of the Performance Goal, and such other terms and
conditions as the Compensation Committee, in its sole discretion, shall
determine.
Amount of Bonus/Target Amount. The amount of a Bonus shall be expressed as
a Target Amount, i.e., the amount to be paid upon 100% achievement of the
Performance Goal. The Target Amount may be an absolute amount or it may be based
upon a percentage of compensation (as the Compensation Committee may define
compensation, but excluding any severance payments) or such other objective
formula as the Compensation Committee may determine. If a Performance Goal with
respect to a Bonus is composed of both a Corporate Goal and a
Functional/Individual Goal (as those terms are described below under the heading
"Performance Goal"), the Compensation Committee shall establish a separate
Target Amount for each of the Corporate Goal and the Functional/Individual Goal.
Performance Goal. A Performance Goal shall be a target level of
achievement during a Measurement Period, and achievement of the Performance Goal
shall be measured as a percentage of this target. A participant shall receive a
bonus payment for 80% or greater achievement of the Performance Goal. A
Performance Goal may include both "Corporate Goals" and "Functional/Individual
Goals." However, a Performance Goal established for a Section 162(m) Covered
Person (as discussed below under the heading "Right to Defer -- Section 162(m)")
may include only a Corporate Goal.
Corporate Goals refer to the performance of the Company and shall be based,
in each case on a Company wide basis, on one or more of (i) Earnings per Share,
(ii) EBITDA, (iii) Economic Profit (as each such term is defined in the Bonus
Plan), (iv) growth in revenue, (v) achievement of cost targets, (vi) costs of
production or (vii) any combination of such criteria.
Functional/Individual Goals refer to a participant's individual performance
and shall be based on relevant financial, operational and individual performance
objectives.
Both Corporate Goals and Functional/Individual Goals may be expressed
either as an absolute target or as the actual levels measured, as applicable,
against (i) the Company's Budget (as defined in the Bonus Plan) for the
Measurement Period, (ii) the past performance of the Company (including one or
more divisions or departments) (iii) the past performance of the individual, or
(iv) the current or past performance of other companies. In the case of
earnings-based measures, a Performance Goal may employ comparisons to capital,
stockholders' equity and shares outstanding. Except as otherwise provided in the
Bonus Plan, the measures used in Performance Goals set under the Bonus Plan
shall be determined in accordance with generally accepted accounting principles
("GAAP") and in a manner consistent with the methods used in the Company's
annual and quarterly reports on Forms 10-K and 10-Q. However, unless otherwise
determined by the Compensation Committee consistent with the requirements of
Section 162(m)(4)(C) and the regulations thereunder, the determinations related
to Performance Goals shall disregard certain items of gain, loss or expense
relating to special, unusual or non-recurring items, events or circumstances,
including the disposal of a business or discontinued operations, the operations
of any business acquired by the Company and changes in accounting principles or
applicable law or regulations.
Computation of Bonus Amount. If the achievement of a participant's
Performance Goal is at least 80%, he or she shall receive a bonus payment.
Unless otherwise provided in the applicable Bonus Agreement, the Bonus shall be
payable as follows:
(a) If the achievement of the Performance Goal is 100%, the Bonus payment
shall be equal to the Target Amount.
(b) For each whole percentage point that the achievement of the Performance
Goal is less than 100%, the Bonus payment shall be equal to the Target
Amount, reduced by 3 1/2%. However, if the achievement of the
Performance Goal is less than 80%, no Bonus payment shall be made.
15
<PAGE> 19
(c) For each whole percentage point that the achievement of the Performance
Goal exceeds 100%, the Bonus payment shall be equal to the Target
Amount, increased by 5%. In no event, however, shall a Bonus payment
exceed 200% of the Target Amount.
(d) All payments shall be rounded up to the nearest $1.00.
Maximum Amount of Bonuses. The maximum Bonus payable to a participant
during a year shall in no event exceed $1,500,000.
Payment of Bonuses. As soon as reasonably practicable following the end of
a Measurement Period, but in no event later than March 15, the Compensation
Committee shall certify in writing (in accordance with applicable regulations
under Section 162(m) of the Code) the level of achievement of each Performance
Goal established by the Compensation Committee with respect to such Measurement
Period. Participants who are entitled to Bonus payments pursuant to such
certification shall receive such payments as soon as practicable following such
certification in accordance with the terms of their Bonus Agreements, unless the
Compensation Committee, in its sole discretion, determines to reduce the payment
to be made.
Bonus payments shall be made from the general funds of the Company and no
special or separate fund shall be established or other segregation of assets
made to assure payment. No participant or other person shall have under any
circumstances any interest in any particular property or assets of the Company.
YEAR 2000 BONUSES
Subject to stockholder approval of the Bonus Plan, the Compensation
Committee has established performance criteria and the range of amounts of
Bonuses to be granted to eligible participants for fiscal year 2000, under which
the participants have the potential to obtain cash bonus payments provided that
certain specified Performance Goals are achieved. As discussed above, if the
applicable Performance Goals are not sufficiently satisfied during fiscal 2000,
no payments will be made, and the maximum amounts will be received only if the
target Performance Goals for fiscal 2000 are exceeded by 20%. The chart below
reflects the range of Bonus payments that may be received under these Bonus
awards. Since it is not possible to determine at this time whether and to what
extent the Performance Goals will be achieved during fiscal 2000, the precise
bonus payment amounts (if any) cannot be determined at this time. However, if
the Corporate Goal component (which for fiscal year 2000 is based upon the
achievement of a level of Earnings per Share) of the Performance Goals
established for these Bonus awards were applied to the Company's performance in
1999, the Corporate Goal would not have been achieved at all. The
Functional/Individual Goals, which are unique to each participant, might have
been achieved to varying extents if applied to participants' performance in
1999. This means that if these Bonus awards and Performance Goals had been
established for fiscal year 1999, the individuals named in the table below
(whose Performance Goals in respect of fiscal 2000 are comprised solely of the
Corporate Goal) would not have received any bonus payments, and the other
participants would not have received any payments based on the Corporate Goal
portion of their Performance Goals, although they might have received payments
based on the Functional/Individual Goal portion of their Performance Goals.
16
<PAGE> 20
NEW PLAN BENEFITS
MANAGEMENT INCENTIVE BONUS PLAN
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($)(1)
- ----------------- -------------------
<S> <C>
Ross Blechman............................................... $0 - $1,100,000
Chairman of the Board, President and Chief Executive
Officer
Neil Blechman............................................... $0 - $ 675,000
Executive Vice President and Director
Steve Blechman.............................................. $0 - $ 675,000
Executive Vice President and Director
Dean Blechman............................................... $0 - $ 675,000
Executive Vice President and Director
Brian Blechman.............................................. $0 - $ 675,000
Executive Vice President and Director
Executive Group............................................. $0 - $4,371,900
Non-Executive Director Group................................ $0
Non-Executive Officer Employee Group........................ $0 - $2,993,611
</TABLE>
- ---------------
(1) The actual dollar amounts are computed as a percentage of salary at the end
of the year, and would be affected by any change in the participant's salary
during the year.
OPTIONS
Certain participants, as determined by the Compensation Committee in its
sole discretion and set forth in the applicable Bonus Agreements, may elect to
forego payment of any whole percentage between 10% to 100% of their Bonus up to
a maximum of $100,000, and instead receive an option ("Option") to purchase
Common Stock. Such an election must be made at least five months prior to the
end of the Measurement Period and shall be irrevocable. The number of shares of
Common Stock under such Option, unless determined otherwise by the Compensation
Committee, shall be equal to the quotient of (i) the dollar amount of the Bonus
or the portion thereof which the participant has elected to forego, divided by
(ii) the value (as of the date the Option is granted) of an Option to purchase
one share of Common Stock, determined by utilizing the Black Scholes Option
Pricing Model. Options shall be granted on the date on which the Bonus would
otherwise be paid in cash, shall have an exercise price-per-share equal to the
fair market value (as defined in the Stock Plan) of a share of Common Stock as
of the date of the grant and shall be fully vested as of the grant date. Options
shall be granted under, and subject to the terms of, the Stock Plan. If a
participant makes such an election to receive an Option and the Stock Option
Committee determines not to grant him or her an Option under the Stock Plan,
then such determination of the Stock Option Committee shall be deemed to be the
unilateral revocation by the Company of such participant's election and such
participant shall receive payment of his or her entire Bonus in cash as if such
election had not been made.
TERMINATION OF EMPLOYMENT
Unless otherwise provided in an employment agreement then in effect between
a participant and the Company, the following rules apply if a participant's
employment with the Company terminates prior to the payment of a Bonus:
1. If a participant's employment terminates during a Measurement Period due
to the participant's death, Disability or Retirement (as such terms are
defined in the Stock Plan), the Compensation Committee, in its sole
discretion, may grant such participant (or the representative of the
participant's estate) an equitably prorated portion of the Bonus which
otherwise would have been earned by such participant. In such an event,
any election made by such participant to receive an Option in lieu of
such Bonus payment shall be null and void.
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2. If a participant's employment terminates during a Measurement Period for
any reason other than as set forth above, any Bonus (and, if applicable,
the Option with which all or a portion of such Bonus is to be replaced)
applicable to such Measurement Period shall be forfeited.
3. If a participant is entitled to a Bonus with respect to a Measurement
Period and his or her employment terminates for any reason other than
for Cause (as defined in the Stock Plan) following the end of the
Measurement Period but prior to the actual payment of the Bonus, such
Bonus shall be paid to him or her or, if applicable, to the
representative of his or her estate. In such an event, any election made
by such participant to receive an Option in lieu of such Bonus payment
shall be null and void.
RIGHT TO DEFER -- SECTION 162(M)
In general, Section 162(m) of the Code (the "Million-Dollar Limit")
provides that, subject to certain exceptions, remuneration in excess of $1
million that is paid to a Section 162(m) Covered Person of a publicly held
corporation (generally, the corporation's Chief Executive Officer and its four
most highly compensated employees other than the Chief Executive Officer) shall
not be deductible by the corporation. Bonuses under the Bonus Plan generally
shall be eligible for an exception to the Million-Dollar Limit applicable to
certain qualified "performance-based compensation." However, if and to the
extent that the Compensation Committee determines that a Bonus payment to a
Section 162(m) Covered Person shall not qualify for this (or any other)
exception to the Million-Dollar Limit and that the Company's Federal tax
deduction in respect of such payment may be limited, the Compensation Committee
may delay such payment as provided below. In such a case, the Compensation
Committee shall credit the amount of the delayed payment to a book account,
which shall be adjusted to reflect gains and losses that would have resulted
from the investment of such amount in any investment vehicle or vehicles
selected by the Compensation Committee. Part or all of the amount credited to
the participant's book account hereunder shall be paid to the participant at
such time or times as shall be determined by the Compensation Committee, if and
to the extent the Compensation Committee determines that the Company's deduction
for any such payment shall not be reduced by the Million-Dollar Limit.
Notwithstanding the foregoing, the entire balance credited to the participant's
book account shall be paid to the participant within 90 days after the
participant ceases to be a Section 162(m) Covered Person. The participant shall
have no rights in respect of such book account and the amount credited thereto
shall not be transferable by the participant other than by will or laws of
descent and distribution. Any such book account shall represent only an
unfunded, unsecured promise by the Company to pay the amount credited to the
book account to the participant in the future.
TRANSFERABILITY OF BONUSES
The right of a participant or of any other person to any payment under the
Bonus Plan shall not be assigned, transferred, pledged or encumbered in any
manner and any attempted assignment, transfer, pledge or encumbrance shall be
null and void and of no force or effect.
AMENDMENT AND TERMINATION
The Board of Directors has the right to terminate, modify or amend the
Bonus Plan from time to time, but, without prior approval of the Company's
stockholders, no such modification or amendment shall (i) cause amounts payable
under the Bonus Plan to fail to qualify for the "performance-based compensation"
exemption from the limitations of Section 162(m) of the Code (as provided in
Section 162(m)(4)(C) of the Code); (ii) alter the business criteria on which the
Performance Goals may be based; (iii) increase the maximum amount of any Bonus
that may be awarded or (iv) materially modify the requirements regarding
eligibility for participation in the Bonus Plan.
If the Bonus Plan is terminated, outstanding Bonuses shall be treated as
follows:
1. If the Bonus Plan is terminated during a Measurement Period, any Bonus
(and, if applicable, the Option with which all or a portion of such
Bonus is to be replaced) applicable to such Measurement Period shall be
forfeited.
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2. If the Bonus Plan is terminated following the end of a Measurement
Period but prior to payment of any Bonus applicable to such Measurement
Period, any Bonus (and, if applicable, the Option with which all or a
portion of such Bonus is to be replaced) applicable to such Measurement
Period shall be paid as if the Bonus Plan had not terminated.
SUMMARY OF FEDERAL TAX CONSEQUENCES
The following is a description of the principal federal income tax
consequences of Bonuses under the Bonus Plan based on present federal tax laws.
Federal tax laws may change from time to time and any legislation that may be
enacted in the future by the United States Congress may significantly affect the
federal income tax consequences described below. No representation is or can be
made regarding whether any such legislation shall or may be enacted and/or the
impact of any such legislation. The description below does not purport to be a
complete description of the tax consequences associated with Bonuses under the
Bonus Plan applicable to any particular award recipient. Differences in each
individual's financial situation may cause federal, state and local tax
consequences of awards to vary.
There are no tax consequences to either the Company or a participant from
the award of a Bonus until the actual cash payment is made. Upon the payment of
a Bonus in cash, the participant shall be deemed to have received compensation
taxable as ordinary income in the amount of the cash received. The Company shall
be entitled to a deduction in an amount equal to the amount of ordinary income
recognized by the participant. An Option with which all or a portion of a
participant's Bonus is replaced will be granted under the Stock Plan, and the
tax consequences of the Options are discussed below under the caption "Proposal
No. 3 -- Approval of the Twinlab Corporation 2000 Stock Incentive
Plan -- Summary of Federal Tax Consequences."
Deduction Limit under Section 162(m) of the Code. As discussed above under
the heading "Right to Defer -- Section 162(m)," the Million-Dollar Limit
established in Section 162(m) of the Code limits the ability of a publicly held
corporation to receive a tax deduction for remuneration in excess of $1 million
that is paid to Section 162(m) Covered Persons. However (also as discussed
above), Bonus payments under the Bonus Plan either shall be eligible for an
exception to the Million-Dollar Limit or, if not, can be deferred until such
time as the Million-Dollar Limit is not applicable to such payments. As a
result, it would appear that the Company's tax deduction for such amounts would
be preserved.
Withholding of Taxes. Whenever a participant is required to recognize
compensation income taxable as ordinary income in connection with the payment of
a Bonus, the Company may be obligated to withhold amounts for the payment of
federal, state and local taxes. The Company may withhold an amount in cash
sufficient to satisfy its withholding obligations.
Other Tax Matters. Tax consequences different from or in addition to those
described above may result in the event of the payment of a Bonus after the
termination of a participant's employment by reason of death. In addition,
various state laws may provide for tax consequences that vary significantly from
those described above.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required to approve the Twinlab Corporation Management Incentive Bonus Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE TWINLAB CORPORATION MANAGEMENT INCENTIVE BONUS PLAN.
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PROPOSAL NO. 3
APPROVAL OF THE TWINLAB CORPORATION 2000 STOCK INCENTIVE PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Twinlab Corporation 2000 Stock Incentive Plan (the "Stock Plan"). The adoption
of the Stock Plan is part of a broader program adopted with respect to incentive
compensation payable to employees of the Company, which also includes the
Twinlab Corporation Management Incentive Bonus Plan (the "Bonus Plan"),
described in this Proxy Statement under the caption "Proposal No. 2 -- Approval
of the Twinlab Corporation Management Incentive Bonus Plan." The following
summary of the principal features of the Stock Plan is qualified by reference to
the complete text of the Stock Plan, which is set forth in Appendix B hereto.
GENERAL
The purpose of the Stock Plan is to provide for officers, other employees
of, and consultants to the Company and its subsidiaries an incentive (a) to
enter into and remain in the service of the Company or its subsidiaries, (b) to
enhance the long-term performance of the Company and its subsidiaries, and (c)
to acquire a proprietary interest in the success of the Company and its
subsidiaries, and to provide certain "performance-based compensation" within the
meaning of Section 162(m)(4)(C) of the Code.
The Stock Plan provides for the granting of Incentive Awards (as defined
below) with respect to up to an aggregate of 4,500,000 shares of Common Stock,
subject to adjustment in the event of certain capital changes as described
below. During any calendar year, no participant in the Stock Plan shall receive
Incentive Awards with respect to more than 1,000,000 shares of Common Stock.
Shares issued under the Stock Plan may be newly issued shares or treasury
shares, at the discretion of the Stock Option Committee. As of April 3, 2000,
the market value of a share of Common Stock was $7.125.
ADMINISTRATION
The Stock Plan shall be administered by the Stock Option Committee, which
shall be comprised of two or more individuals appointed by the Board of
Directors, all of whom are "non-employee directors" (as defined in Section
162(m) of the Code), and "outside directors" (as defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended). The Stock
Option Committee has full authority (i) to administer the Stock Plan, including
authority to interpret and construe any provision of the Stock Plan and the
terms of any Incentive Award issued under the Stock Plan, (ii) to adopt such
rules and regulations for administering the Stock Plan as it may deem necessary
or appropriate and (iii) to delegate such administrative responsibilities as it
deems appropriate, provided, however, that the Stock Option Committee shall
retain the responsibility to designate the Incentive Award recipients and the
amount and type of such Incentive Awards. Decisions of the Stock Option
Committee shall be final and binding on all parties. The Stock Option
Committee's determinations under the Stock Plan may, but need not, be uniform
and may be made on a participant-by-participant basis (whether or not two or
more participants are similarly situated).
ELIGIBILITY
Incentive Awards may be granted to (i) officers and salaried employees of
the Company and its subsidiaries (including employees who are also directors and
prospective salaried employees conditioned on their becoming salaried
employees), (ii) such consultants to the Company and its subsidiaries as the
Stock Option Committee shall select in its discretion, and (iii) any other key
persons, as determined by the Stock Option Committee in its sole discretion. In
addition, an employee who is entitled to receive stock options in lieu of a
bonus under the terms of either the Bonus Plan or an employment agreement with
the Company, shall be eligible to participate in the Stock Plan. For purposes of
this paragraph, an employee means an individual who is (or is expected to be)
classified as an employee of the Company for purposes of the Company's payroll.
The granting of Incentive Awards is discretionary, and the Company cannot now
determine the number or type of Incentive Awards that will be granted in the
future to any particular person or group.
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AWARDS
The Stock Plan provides for the grant of (i) stock options not intended to
qualify as incentive stock options within the meaning of Section 422 of the Code
("NQOs"), (ii) stock options that are intended to qualify as incentive stock
options within the meaning of Section 422 of the Code ("ISOs"), (iii) limited
stock appreciation rights ("LSARs"), (iv) tandem stock appreciation rights
("Tandem SARs"), (v) stand-alone stock appreciation rights ("Stand-Alone SARs"),
(vi) shares of restricted stock, (vii) shares of phantom stock, (viii) stock
bonuses, (ix) cash bonuses, (x) dividend equivalent rights ("DERs") and (xi)
other types of stock-based awards (collectively, "Incentive Awards") in such
amounts and subject to such terms and conditions, as the Stock Option Committee
shall in its discretion determine. Each Incentive Award shall be evidenced by an
"Award Agreement" containing such terms as the Stock Option Committee shall
determine.
Non-Qualified Stock Options. The exercise price-per-share of each NQO
shall be determined by the Stock Option Committee on the date of grant, but
shall not be less than that required by law. Unless provided otherwise in an
Award Agreement, an NQO first shall become exercisable with respect to 1/3 of
the shares of Common Stock subject to the NQO on each of the first three
anniversaries of the date of grant. Each NQO shall be exercisable in whole or in
part (but a partial exercise must have an aggregate exercise price of at least
$1,000) for a term, not to exceed ten years, established by the Stock Option
Committee on the date of grant. The exercise price shall be paid in cash or,
unless provided otherwise in the applicable Award Agreement, in shares of Common
Stock valued at their fair market value on the date of exercise or by means of a
"cashless exercise" in which some or all of the shares to be granted upon the
exercise are sold to provide the exercise price, or, at the discretion of the
Stock Option Committee, by such other provision as the Stock Option Committee
may from time to time prescribe.
In the event of a "Termination of Employment" for any reason other than
"Retirement," "Cause," "Disability" (as each such term is defined in the Stock
Plan) or death, unless otherwise determined by the Stock Option Committee and
included in an Award Agreement: (i) NQOs, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until the
expiration of 90 days after such termination (or, if earlier, the expiration of
their term) and (ii) NQOs, to the extent that they were not exercisable at the
time of such termination, shall expire at the close of business on the date of
such termination. In the event of a participant's Termination of Employment by
reason of Retirement or Disability, (i) NQOs, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until the
expiration of three years after such termination and (ii) NQOs, to the extent
that they were not exercisable at the time of such termination, shall expire at
the close of business on the date of such termination. In the event of a
participant's Termination of Employment by reason of death, (i) NQOs, to the
extent that they were exercisable at the time of such termination, shall remain
exercisable until the expiration of one year after such termination and (ii)
NQOs, to the extent that they were not exercisable at the time of such
termination, shall expire at the close of business on the date of such
termination. In the event of the Termination of Employment of a participant for
Cause, all NQOs held by such participant shall terminate immediately as of the
commencement of business of the effective date of such termination.
In the event of a "Change in Control" of the Company (as defined in the
Stock Plan), all NQOs shall become immediately exercisable and shall remain
exercisable until the later of (i) 5 years from the date on which the Change in
Control occurred and (ii) the date such option would expire, terminate or be
cancelled pursuant to the terms of the Stock Plan but for the Change in Control.
Incentive Stock Options. Generally, ISOs are options that may provide to a
participant certain federal income tax benefits that are not available with
NQOs, provided that a participant holds the shares acquired upon exercise of an
ISO for at least two years after the date the ISO is granted and at least one
year after the exercise date. The rules for ISOs under the Stock Plan are the
same as with respect to NQOs, except as follows:
1. The exercise price-per-share of each ISO granted under the Stock Plan
must not be less than the fair market value of a share of Common Stock
on the date on which such ISO is granted.
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2. An ISO granted to any individual who owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of
the Company is subject to the following additional limitations: (i) the
exercise price-per-share of the ISO must be at least 110% of the fair
market value of a share of Common Stock at the time any such ISO is
granted and (ii) the ISO cannot be exercisable after the expiration of
five years from the grant date.
3. The aggregate fair market value of shares of Common Stock with respect
to which ISOs are exercisable for the first time by a participant during
any calendar year (determined on the grant date) under the Stock Plan or
any other plan of the Company or its subsidiaries may not exceed
$100,000.
4. In the event of a participant's Termination of Employment, ISOs granted
to the participant are exercisable to the same extent as described above
with respect to NQOs. However, in the event of a Termination of
Employment by reason of Retirement or Disability, an option granted as
an ISO may be treated for tax purposes as an NQO rather than an ISO to
the extent it is exercised more than three months (in the case of
Retirement) or one year (in the case of Disability) after the
Termination of Employment.
5. In the event of the occurrence of a Change in Control of the Company,
outstanding ISOs shall be treated in the same manner as outstanding
NQOs. However, if a participant terminates employment with the Company
after the occurrence of a Change in Control, an option granted as an ISO
may be treated for tax purposes as an NQO rather than an ISO to the
extent it is exercised more than three months after such termination (in
the case of a Termination of Employment other than by reason of
Disability) or one year after such termination (in the case of a
Termination of Employment by reason of Disability).
Reload Options. In certain circumstances, the Stock Option Committee may
include in any agreement evidencing an option (the "Original Option") a
provision that a "reload option" shall be granted to any participant who
delivers shares of Common Stock in partial or full payment of the exercise price
of the Original Option. The reload option shall relate to a number of shares of
Common Stock equal to the number of shares of Common Stock delivered, and shall
have an exercise price-per-share equal to the fair market value of a share of
Common Stock on the date of the exercise of the Original Option.
Bonus Options. Certain participants in the Bonus Plan may be entitled to
elect to receive stock options under the Stock Plan in lieu of all or part of a
Bonus to which they would be entitled under the Bonus Plan. Similarly, certain
employees may be entitled under an employment agreement with the Company to
receive stock options under the Stock Plan in lieu of all or part of a bonus
payment under such an employment agreement. The Stock Option Committee may grant
"Bonus Options" under the Stock Plan to such individuals. A Bonus Option can be
either a NQO or an ISO, and shall be subject to the same terms as all NQOs and
ISOs, except as described below.
The number of shares of Common Stock subject to each Bonus Option, unless
determined otherwise by the Stock Option Committee, shall be equal to the
quotient of (i) the amount of the cash award to which the individual would have
been entitled under the Bonus Plan or the bonus provisions of an employment
agreement, as applicable, absent his or her election to receive a Bonus Option
divided by (ii) the value of an option to purchase one share of Common Stock,
determined based on the Black Scholes Option Pricing Model, as of the day the
Bonus Option is granted. Any such determination shall be made by the Stock
Option Committee, whose determination shall be final, binding and conclusive.
The exercise price-per-share of any Bonus Option shall be the fair market
value of a share of Common Stock on the date such Bonus Option is granted. Each
Bonus Option shall be exercisable in full as of the date on which such Bonus
Option is granted, and shall remain exercisable until the expiration of ten
years from the date such Bonus Option was granted; provided, however, that each
Bonus Option shall be subject to earlier termination, expiration or cancellation
as provided in the Stock Plan.
Limited Stock Appreciation Rights. Each NQO and ISO granted under the
Stock Plan may include an LSAR with respect to a number of shares less than or
equal to the number of shares subject to the related option. The exercise of an
LSAR with respect to a number of shares causes the cancellation of the option
with
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which it is included with respect to an equal number of shares. The exercise (or
expiration, cancellation or termination other than by reason of this paragraph)
of an option with respect to a number of shares causes the cancellation of the
LSAR included with it with respect to an equal number of shares.
In general, LSARs are exercisable only during the sixty-day period
immediately following a Change in Control and only to the extent that their
related options are exercisable. The exercise of an LSAR included with a NQO
with respect to a number of shares entitles the participant to an amount in
cash, for each such share, equal to the excess of (i) the greater of (A) the
highest price-per-share of Common Stock paid in connection with the Change in
Control in connection with which the LSAR became exercisable and (B) the highest
fair market value of a share of Common Stock on the date of such Change in
Control over (ii) the exercise price of the related NQO. The exercise of an LSAR
included with an ISO with respect to a number of shares entitles the participant
to an amount in cash, for each such share, equal to the excess of (i) the fair
market value of a share of Common Stock on the date of exercise over (ii) the
exercise price of the related ISO.
Tandem Stock Appreciation Rights. The Stock Option Committee may grant, in
connection with any NQO or ISO, a Tandem SAR with respect to a number of shares
of Common Stock less than or equal to the number of shares subject to the
related option. The exercise of a Tandem SAR with respect to a number of shares
causes the cancellation of its related option with respect to an equal number of
shares. The exercise of an option with respect to a number of shares causes the
cancellation of its related Tandem SAR to the extent that the number of shares
subject to the option after its exercise is less than the number of shares
subject to the Tandem SAR.
A Tandem SAR is exercisable at the same time and to the same extent as its
related option. The exercise of a Tandem SAR with respect to a number of shares
entitles the participant to an amount in cash, for each such share, equal to the
excess of (i) the fair market value of a share of Common Stock on the date of
exercise over (ii) the exercise price of the related option.
Stand-Alone Stock Appreciation Rights. The Stock Option Committee may
grant Stand-Alone SARs, which are stock appreciation rights that are not related
to any option. The exercise price of each Stand-Alone SAR granted under the
Stock Plan shall be such price as the Stock Option Committee shall determine on
the date on which such Stand-Alone SAR is granted. A Stand-Alone SAR shall be
exercisable for a term, not to exceed ten years, established by the Stock Option
Committee on the date on which such Stand-Alone SAR is granted. The exercise of
a Stand-Alone SAR with respect to a number of shares entitles the participant to
an amount in cash, for each such share, equal to the excess of (i) the fair
market value of a share of Common Stock on the date of exercise over (ii) the
exercise price of the Stand-Alone SAR.
In the event of a "Termination of Employment" for any reason other than
"Retirement," "Cause," "Disability" or death, unless otherwise determined by the
Stock Option Committee and included in an applicable Award Agreement pursuant to
which a Stand-Alone SAR is granted: (i) Stand-Alone SARs, to the extent that
they were exercisable at the time of such termination, shall remain exercisable
until the expiration of 90 days after such termination (or, if earlier, the
expiration of their term) and (ii) Stand-Alone SARs, to the extent that they
were not exercisable at the time of such termination, shall expire at the close
of business on the date of such termination. In the event of a participant's
Termination of Employment by reason of Retirement or Disability, (i) Stand-Alone
SARs, to the extent that they were exercisable at the time of such termination,
shall remain exercisable until the expiration of three years after such
termination and (ii) Stand-Alone SARs, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination. In the event of a participant's
Termination of Employment by reason of death, (i) Stand-Alone SARs, to the
extent that they were exercisable at the time of such termination, shall remain
exercisable until the expiration of one year after such termination and (ii)
Stand-Alone SARs, to the extent that they were not exercisable at the time of
such termination, shall expire at the close of business on the date of such
termination. In the event of the Termination of Employment of a participant for
Cause, all Stand-Alone SARs held by such participant shall terminate immediately
as of the commencement of business on the effective date of such termination.
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In the event of a "Change in Control" of the Company (as defined in the
Stock Plan), all Stand-Alone SARs shall become immediately exercisable and shall
remain exercisable until the later of (i) 5 years from the date on which the
Change in Control occurred and (ii) the date such Option would expire, terminate
or be cancelled pursuant to the terms of the Stock Plan but for the Change in
Control.
Restricted Stock. A grant of shares of restricted stock represents the
promise of the Company to issue shares of Common Stock on a predetermined date
(the "issue date") to a participant, provided the participant is continuously
employed by the Company until the issue date. Prior to the vesting of the
shares, the shares are not transferable by the participant and are forfeitable.
Vesting of the shares occurs on a second predetermined date (the "vesting date")
if the participant has been continuously employed by the Company until that
date. The Stock Option Committee may, at the time shares of restricted stock are
granted, impose additional conditions to the vesting of the shares, such as, for
example, the achievement of specified performance goals. The agreement
evidencing the grant of restricted stock may provide for the vesting of a
portion, or all, of the shares of restricted stock upon a participant's
Termination of Employment other than for Cause prior to the vesting date. In the
absence of such a provision, all unvested shares of restricted stock are
forfeited upon a participant's Termination of Employment for any reason.
In the event of the occurrence of a Change in Control of the Company, all
shares of restricted stock that have not been issued (or forfeited)
automatically are issued and all shares of restricted stock that have not yet
been vested (or forfeited), automatically vest.
Phantom Stock. A grant of a share of phantom stock represents the right to
receive, within 30 days after the vesting date, a lump sum cash payment equal to
the fair market value of a share of Common Stock as of the vesting date plus the
aggregate amount of cash dividends paid with respect to such share of Common
Stock, the record date of which was between the date of the grant and the
vesting date. Shares of phantom stock are subject to the same vesting
requirements as are shares of restricted stock. In the event of the occurrence
of a Change in Control of the Company, all shares of phantom stock which have
not vested, or have not been canceled or forfeited, automatically vest.
Stock Bonuses. Bonuses payable in Common Stock may be granted by the Stock
Option Committee and may be payable at such times and subject to such conditions
as the Stock Option Committee may determine.
Cash Bonuses. In connection with a grant of either shares of restricted
stock or a stock bonus, the Stock Option Committee may grant a cash "tax bonus,"
payable when a participant is required to recognize income for federal income
tax purposes with respect to such shares. The tax bonus may not be greater than
the value of the shares of restricted stock or stock bonus at the time the
income from the grant of shares of restricted stock or a stock bonus is required
to be recognized.
Dividend Equivalent Rights. The Stock Option Committee may, in its
discretion, grant with respect to any Incentive Award other than phantom stock a
Dividend Equivalent Right ("DER") entitling a participant to receive amounts
equal to the ordinary dividends that would have been paid during the time such
Incentive Award is outstanding and, in the case of Options and SARs, unexercised
and in the case of restricted stock or stock bonuses, prior to the issue date
for the related shares of Common Stock covered by such Incentive Award if such
shares were then outstanding. DERs may be payable in cash, in shares of Common
Stock or in any other form.
Other Incentive Awards. The Stock Option Committee may grant other types
of stock-based awards in such amounts and subject to such terms and conditions
as the Stock Option Committee shall in its discretion determine.
TRANSFERABILITY OF INCENTIVE AWARDS
Incentive Awards granted under the Stock Plan are exercisable during a
participant's lifetime only by the participant and are not transferable by the
participant, other than by will or the laws of descent and distribution.
Notwithstanding the previous sentence, the Stock Option Committee may provide in
the agreement evidencing a grant of an NQO, LSAR, Tandem SAR or Stand-Alone SAR
that a participant may
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transfer such Incentive Award to certain family members, trusts for the benefit
of such family members or other parties. Under Section 422 of the Code, an ISO
is not transferable other than by will or the laws of descent and distribution.
CERTAIN CORPORATE CHANGES
The Stock Plan provides for an adjustment in the number of shares of Common
Stock available to be issued under the Stock Plan and the number of shares of
Common Stock subject to Incentive Awards upon a change in capitalization of the
Company, a stock dividend or split, a merger or combination of shares and
certain other similar events.
AMENDMENT AND TERMINATION
The Board of Directors may suspend, discontinue, revise or amend the Stock
Plan at any time and in any respect, subject to stockholder approval to the
extent necessary to comply with applicable law and stock exchange listing
requirements. No amendment to the Stock Plan may reduce any Incentive Award
previously granted to a participant without the participant's prior written
consent. No individual who is eligible to participate in the Stock Plan shall
participate in any decision to amend or terminate the Stock Plan.
LIMITATIONS IMPOSED BY SECTION 162(M)
Prior to a Change in Control of the Company, if and to the extent that the
Stock Option Committee determines the Company's federal tax deduction in respect
of an Incentive Award may be limited as a result of Section 162(m) of the Code,
the Stock Option Committee may delay payments to a participant with respect to
NQOs, ISOs, Tandem SARs, Stand-Alone SARs or DERs or require a participant to
surrender to the Stock Option Committee any certificates with respect to
restricted stock and stock bonuses and agreements with respect to phantom stock
in order to cancel such awards (and any related cash bonuses or DERs) and, in
exchange for such cancellation, credit to an account on the books and records of
the Company a cash amount equal to the fair market value of the shares of Common
Stock subject to such awards (a "Book Account"). The amounts credited to such
Book Account shall be paid to the participant within thirty days after the
earlier to occur of (i) the date the compensation paid to the participant no
longer is subject to the deduction limitation under Section 162(m) of the Code
and (ii) a Change in Control of the Company.
FORFEITURE OF GAIN FROM AWARDS IN CERTAIN EVENTS
If at any time within one year after the date on which a participant
exercises an option (including any LSAR or Tandem-SAR related thereto),
Stand-Alone SAR, or Dividend Equivalent Right, or on which Restricted Stock
vests, or which is the vesting date of Phantom Stock, or on which a Stock Bonus
or a Cash Bonus was granted to a participant, or on which income is realized by
a participant in connection with any other stock-based award (each of which
events is a "realization event"), the Stock Option Committee determines in its
discretion that the Company has been materially harmed by the participant,
whether such harm (a) results in the participant's termination or deemed
termination of employment for Cause or (b) results from any activity of the
participant determined by the Stock Option Committee to be in competition with
any activity of the Company, or otherwise inimical, contrary or harmful to the
interests of the Company (including, but not limited to, accepting employment
with or serving as a consultant, adviser or in any other capacity to an entity
that is in competition with or acting against the interests of the Company),
then any gain realized by the participant from the realization event shall be
paid by the participant to the Company upon notice from the Company. Such gain
shall be determined as of the date of the realization event, without regard to
any subsequent change in the fair market value of a share of Common Stock. The
Company shall have the right to offset such gain against any amounts otherwise
owed to the participant by the Company (whether as wages, vacation pay, or
pursuant to any benefit plan or other compensatory arrangement).
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SUMMARY OF FEDERAL TAX CONSEQUENCES
The following is a description of the principal federal income tax
consequences of Incentive Awards under the Stock Plan based on present federal
tax laws. Federal tax laws may change from time to time and any legislation that
may be enacted in the future by the United States Congress may significantly
affect the federal income tax consequences described below. No representation is
or can be made regarding whether any such legislation shall or may be enacted
and/or the impact of any such legislation. The description below does not
purport to be a complete description of the tax consequences associated with
Incentive Awards under the Stock Plan applicable to any particular award
recipient. Differences in each individual's financial situation may cause
federal, state and local tax consequences of awards to vary.
Non-Qualified Stock Options. In general, an optionee shall not be deemed
to receive any income at the time an NQO is granted, nor shall the Company be
entitled to a federal tax deduction at that time.
When an optionee exercises an NQO, the optionee shall recognize ordinary
compensation income equal to the excess of (a) the fair market value of the
Common Stock received as a result of the exercise of the option on the exercise
date over (b) the option exercise price, and the Company shall be entitled to a
tax deduction in that amount. The shares acquired by the optionee upon exercise
of the NQO shall have a tax basis equal to the fair market value of the shares
on the exercise date. Upon any subsequent sale of the Common Stock received on
exercise of the NQO, the optionee shall recognize a capital gain (or loss) in an
amount equal to the difference between the amount realized on the sale and such
tax basis. Any such gain (or loss) shall be characterized as long-term capital
gain (or loss) if the shares have been held for more than one year; otherwise,
the gain (or loss) shall be characterized as a short-term capital gain (or
loss). An optionee's holding period for federal income tax purposes for such
shares shall commence on the date following the date of exercise. Short-term
capital gain is subject to tax at the same rate as is ordinary income. Under
current law, the rate at which net long-term capital gain shall be taxed shall
vary depending on the optionee's holding period and the date the optionee
disposes of the shares. The Code currently provides that, in general, the net
long-term capital gain resulting from the sale of shares held for more than 12
months shall be subject to tax at a maximum rate of 20% (10% for individuals in
the 15% tax bracket). The Code currently provides that net long-term capital
gain resulting from dispositions after December 31, 2000 of shares held for more
than 5 years may be subject to a reduced rate.
If all or any part of the exercise price of an NQO is paid by the optionee
with shares of Common Stock (including, based upon proposed regulations under
the Code, shares previously acquired upon exercise of an ISO), no gain or loss
shall be recognized by the optionee on the shares surrendered in payment. The
number of shares received on such exercise of the NQO equal to the number of
shares surrendered shall have the same tax basis and holding period, for
purposes of determining whether subsequent dispositions result in long-term or
short-term capital gain or loss and the applicable tax rates, as the basis and
holding period of the shares surrendered. The balance of the shares received on
such exercise shall be treated for federal income tax purposes as described in
the preceding paragraphs as though issued upon the exercise of the NQO for an
exercise price equal to the consideration, if any, paid by the optionee in cash.
The optionee's compensation taxable as ordinary income upon such exercise, and
the Company's deduction, shall not be affected by whether the exercise price is
paid in cash or in shares of Common Stock.
Incentive Stock Options. In general, an optionee shall not be deemed to
receive any income at the time an ISO is granted or exercised if the optionee
does not dispose of the shares acquired on exercise of the ISO within two years
after the grant of the ISO and one year after the exercise of the ISO (discussed
more fully in the next paragraph). In such a case, the gain (if any) on a
subsequent sale (the excess of the amount received over the exercise price) or
loss (if any) on a subsequent sale (the excess of the exercise price over the
amount received) shall be a long-term capital gain or loss and shall be subject
to tax based on the holding period of the shares, as described in the discussion
of NQOs above. However, for purposes of computing the "alternative minimum tax"
applicable to an optionee, the optionee shall include in the optionee's
alternative minimum taxable income the amount the optionee would have included
in income if the ISO were an NQO. Such amount may be subject to an alternative
minimum tax of 26% or 28%. Similarly, for purposes of making
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alternative minimum tax calculations, the optionee's basis in the stock received
on the exercise of an ISO shall be determined as if the ISO were an NQO.
If an optionee sells the shares acquired on exercise of an ISO within two
years after the date of grant of the ISO or within one year after the exercise
of the ISO, the disposition is a "disqualifying disposition," and the optionee
shall recognize income in the year of the disqualifying disposition equal to the
excess of the amount received for the shares over the exercise price. Of that
income, the portion equal to the excess of the fair market value of the shares
at the time the ISO was exercised over the exercise price shall be treated as
compensation to the optionee, taxable as ordinary income, and the balance (if
any) shall be long- or short-term capital gain depending on whether the shares
were sold more than one year after the ISO was exercised. The federal tax rate
applicable to any long-term capital gain shall depend upon the holding period of
the shares, as described above. If the optionee sells the shares in a
disqualifying disposition at a price that is below the exercise price, the loss
shall be a short-term capital loss if the optionee has held the shares for one
year or less and otherwise shall be a long-term capital loss.
If an optionee uses shares acquired upon the exercise of an ISO to exercise
an ISO, and the sale of the shares so surrendered for cash on the date of
surrender would be a disqualifying disposition of such shares, the use of such
shares to exercise an ISO also would constitute a disqualifying disposition. In
such a case, proposed regulations under the Code appear to provide that the tax
consequences described above with respect to disqualifying dispositions would
apply, except that no capital gain would be recognized with respect to such
disqualifying disposition. In addition, the basis of the surrendered shares
would be allocated to the shares acquired upon exercise of the ISO, and the
holding period of the shares so acquired would be determined, in a manner
prescribed in proposed regulations under the Code.
The Company is not entitled to a deduction as a result of the grant or
exercise of an ISO. If the optionee has compensation taxable as ordinary income
as a result of a disqualifying disposition, the Company shall be entitled to a
deduction in an amount equal to the compensation income resulting from the
disqualifying disposition in the taxable year of the Company in which the
disqualifying disposition occurs.
Stock Appreciation Rights. A recipient of a stock appreciation right,
whether a LSAR, a Tandem SAR or a Stand-Alone SAR, shall not be deemed to
receive any income at the time a stock appreciation right is granted, nor shall
the Company be entitled to a deduction at that time. However, when a stock
appreciation right is exercised, the recipient shall be deemed to have received
compensation taxable as ordinary income in an amount equal to the amount of cash
or fair market value of Common Stock or other property received. The Company
shall be entitled to a deduction in an amount equal to the amount of ordinary
income recognized by the recipient.
Restricted Stock. A grant of restricted shares of Common Stock shall not
result in income for the recipient or a tax deduction for the Company until such
time as the shares are no longer subject to a substantial risk of forfeiture or
restrictions on transferability (unless, as described below, the recipient
elects otherwise under Section 83(b) of the Code within 30 days of the date of
grant). Upon lapse or release of such restrictions, the recipient generally
shall include in gross income an amount equal to the fair market value of the
shares less any amount paid for them, and the Company shall be entitled to a tax
deduction in the same amount. The recipient's tax basis in the shares shall
equal the income so recognized plus the amount paid for the shares. Any gain or
loss upon a subsequent disposition of the shares shall be long-term capital gain
or loss if the shares are held for more than one year and otherwise shall be
short-term capital gain or loss. The federal tax rate applicable to any
long-term capital gain shall depend upon the holding period of the shares, as
described above.
Pursuant to Section 83(b) of the Code, the recipient of an award of
restricted stock may, within 30 days of receipt of the award, elect to be taxed
at ordinary income tax rates on the fair market value at the time of award of
the Common Stock comprising the award. If the election is made, the recipient
shall acquire a tax basis in the shares equal to the ordinary income recognized
by the recipient at the time of award plus any amount paid for the shares, and
the Company shall be entitled to a deduction in an amount equal to the amount of
ordinary income recognized by the recipient. No income shall be recognized upon
lapse or release of the restrictions. Any gain or loss upon a subsequent
disposition of the shares shall be long-term capital gain
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or loss if the shares are held for more than one year and otherwise shall be
short-term capital gain or loss. The federal tax rate applicable to any
long-term capital gain shall depend upon the holding period of the shares. In
the event of a forfeiture of the shares with respect to which a recipient
previously made a Section 83(b) election, the recipient shall not be entitled to
a loss deduction.
Phantom Stock. A participant shall not be deemed to receive any income at
the time that shares of phantom stock are granted, nor shall the Company be
entitled to a deduction at that time. However, when shares of phantom stock
vest, the participant shall be deemed to have received compensation taxable as
ordinary income in the amount of the cash received. The Company shall be
entitled to a deduction in an amount equal to the amount of ordinary income
recognized by the participant.
Stock Bonuses. In general, upon the receipt of a stock bonus, a
participant shall be deemed to have received compensation taxable as ordinary
income in an amount equal to the fair market value of the stock at the time it
is received. The Company shall be entitled to a deduction in an amount equal to
the amount of ordinary income recognized by the participant.
Upon any sale of shares of Common Stock received as a stock bonus, any gain
(the excess of the amount received over the fair market value of the shares on
the date ordinary income was recognized) or loss (the excess of the fair market
value of the shares on the date ordinary income was recognized over the amount
received) shall be a long-term capital gain or loss if the sale occurs more than
one year after such date of recognition and otherwise shall be a short-term
capital gain or loss.
Cash Bonuses. Upon the receipt of a cash bonus, a participant shall be
deemed to have received compensation taxable as ordinary income in the amount of
the cash received. The Company shall be entitled to a deduction in an amount
equal to the amount of ordinary income recognized by the participant.
Dividend Equivalent Rights. The grant of dividend equivalent rights shall
not result in income to the recipient or in a tax deduction for the Company.
When any amount is paid or distributed to the recipient in respect of a dividend
equivalent right, the recipient will recognize ordinary income equal to the fair
market value of any property distributed and/or the amount of any cash
distributed, and the Company will be entitled to a tax deduction in the same
amount at such time.
Deduction Limit under Section 162(m) of the Code. In general, the
Million-Dollar Limit under Section 162(m) of the Code provides that, subject to
certain exceptions, remuneration in excess of $1 million that is paid to certain
"covered employees" of a publicly held corporation (generally, the corporation's
Chief Executive Officer and its four most highly compensated employees other
than the Chief Executive Officer) shall not be deductible by the corporation.
Grants of NQOs, ISOs, Tandem SARs, LSARs and Stand-Alone SARs generally shall be
eligible for an exception to the Million-Dollar Limit applicable to certain
qualified "performance-based compensation." However, without meeting certain
other requirements, it would not appear that other Incentive Awards would be
exempt from the Million-Dollar Limit. Thus, if and to the extent such other
Incentive Awards constitute taxable income to a covered employee in a year and
such covered employee's income subject to the Million Dollar Limit exceeds $1
million, the Company would not be entitled to a deduction for such excess. The
Stock Plan permits the Stock Option Committee, prior to a Change in Control, to
defer payments to covered employees that otherwise might count against the
Million Dollar Limit until a year in which such individuals are no longer
covered employees as described above regarding limitations imposed by Section
162(m). As a result, it would appear that the Company's deduction for such
amounts would be preserved.
Withholding of Taxes. Whenever a participant is required to recognize
compensation income taxable as ordinary income in connection with an Incentive
Award, the Company may be obligated to withhold amounts for the payment of
federal, state and local taxes. The Company may withhold (i) an amount in cash
sufficient to satisfy its withholding obligations (when the income is recognized
through the receipt of cash) or (ii) a number of shares, the fair market value
of which is sufficient to satisfy such withholding requirements. Additionally,
when the income is recognized through the receipt of stock, the Company may
require that the participant remit to the Company an amount in cash sufficient
to satisfy the Company's withholding obligations. At the election of the
participant and subject to the approval of the Stock Option Committee, the
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participant may satisfy any such withholding obligations by remitting to the
Company shares of Common Stock with a fair market value sufficient to satisfy
the withholding obligations.
Other Tax Matters. Tax consequences different from or in addition to those
described above may result in the event of an exercise of an option after the
termination of a participant's employment by reason of death. In addition,
various state laws may provide for tax consequences that vary significantly from
those described above.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required to approve the Twinlab Corporation 2000 Stock Incentive Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE TWINLAB CORPORATION 2000 STOCK INCENTIVE PLAN.
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PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP as independent
auditors to audit the financial statements of the Company for the fiscal year
ending December 31, 2000, subject to ratification by the stockholders at the
Annual Meeting. If the stockholders reject the appointment, the Board of
Directors will reconsider its selection. If the stockholders ratify the
appointment, the Board of Directors, in its sole discretion, may still direct
the appointment of new independent auditors at any time during the year if the
Board of Directors believes that such a change would be in the best interests of
the Company.
Deloitte & Touche LLP has audited the Company's consolidated financial
statements since 1992. The Company has been advised that a representative of
Deloitte & Touche LLP shall be present at the Annual Meeting, shall have the
opportunity to make a statement, and is expected to be available to respond to
appropriate questions.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required to ratify the Board's appointment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
PROPOSALS BY STOCKHOLDERS
Any stockholder proposal which is intended to be presented at the Company's
2001 Annual Meeting of Stockholders must be received at the Company's principal
executive offices, 150 Motor Parkway, Hauppauge, NY 11788, Attention: Secretary,
by no later than December 4, 2000, if such proposal is to be considered for
inclusion in the Company's proxy statement and form of proxy relating to such
meeting, which meeting the Company expects will be held in or about May, 2001.
Any such proposals must comply in all respects with the rules and regulations of
the Securities and Exchange Commission. Stockholders of the Company who intend
to bring business before the meeting must also comply with the applicable
procedures set forth in the Company's By-laws. The Company will furnish copies
of such By-law provisions upon written request to the General Counsel's Office
at the aforementioned address.
1999 ANNUAL REPORT AND FORM 10-K
A COPY OF THE 1999 ANNUAL REPORT TO STOCKHOLDERS ACCOMPANIES THIS PROXY
STATEMENT. THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, CONTAINS
DETAILED INFORMATION CONCERNING THE COMPANY AND ITS OPERATIONS WHICH IS NOT
INCLUDED IN THE 1999 ANNUAL REPORT. THE COMPANY SHALL PROVIDE TO ANY STOCKHOLDER
A COPY OF THE FORM 10-K, WITHOUT CHARGE, UPON WRITTEN REQUEST TO: TWINLAB
CORPORATION, 150 MOTOR PARKWAY, HAUPPAUGE, NY 11788, ATTENTION: INVESTOR
RELATIONS.
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OTHER BUSINESS
The Annual Meeting is being held for the purposes set forth in the Notice
which accompanies this Proxy Statement. The Board is not presently aware of
business to be transacted at the Annual Meeting other than as set forth in the
Notice.
By Order of the Board of Directors,
[/s/ ROSS BLECHMAN]
ROSS BLECHMAN
Chairman of the Board
Hauppauge, New York
April 6, 2000
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APPENDIX A
TWINLAB CORPORATION
MANAGEMENT INCENTIVE BONUS PLAN
1. PURPOSE
The purpose of the Twinlab Corporation Management Incentive Bonus Plan is
to motivate the key employees of Twinlab Corporation and its affiliated
companies to focus on the achievement of corporate, department/division and
individual objectives, to clearly align expectations with financial rewards, to
provide a systematic plan for establishing definitive performance goals and to
provide a strong financial incentive for the achievement of such goals, and to
continue to attract, motivate and retain high performing executives on a
competitive basis, while seeking to preserve for the benefit of the Company, to
the extent practicable, a tax deduction for payments of incentive compensation
to such executives through payment of qualified "performance-based" compensation
within the meaning of sec.162(m)(4)(C) of the Code.
2. DEFINITIONS
(a) "Affiliate" shall mean an entity (whether or not incorporated)
controlling, controlled by or under common control with the Company.
(b) "Black Scholes Option Pricing Model" shall mean the model developed by
Fischer Black and Myron Scholes to determine the value of a stock option.
(c) "Board of Directors" shall mean the Board of Directors of Twinlab
Corporation.
(d) "Bonus" shall mean an award payable in cash to a Participant upon
achievement of the related Performance Goal.
(e) "Bonus Agreement" shall mean a written agreement evidencing the grant
of a Bonus subject to the achievement of a specified Performance Goal.
(f) "Budget" shall mean the financial targets for the Company for a
Measurement Period, as agreed upon by the Board of Directors prior to the
establishment by the Committee of the Performance Goal to be measured by
reference to such financial targets.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Committee" shall mean the Compensation Committee of the Board of
Directors, which shall at all times consist of 2 or more persons, all of whom
are "outside directors" within the meaning of section 162(m) of the Code.
(i) "Company" shall mean Twinlab Corporation, or any successor thereto, and
its Affiliates.
(j) "EBITDA" shall mean earnings before interest, tax, depreciation and
amortization.
(k) "Economic Profit" shall mean earnings before tax, less the cost of the
underlying invested capital.
(l) "Measurement Period" shall mean a period of one fiscal year, unless a
shorter period is otherwise provided for in a Bonus Agreement.
(m) "Participant" shall mean an employee of the Company who is eligible to
participate in the Plan.
(n) "Performance Goal" shall mean the objective goal, based on one or more
criteria relating to the performance of the Company or the Participant, that
must be achieved in order for a Participant to receive the Bonus payable to him
under the Plan.
(o) "Plan" shall mean this Twinlab Corporation Management Incentive Bonus
Plan.
(p) "Stock Plan" shall mean the Twinlab Corporation 2000 Stock Incentive
Plan.
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(q) "Target Amount" shall mean the Bonus amount that will be paid to a
Participant for 100% achievement of the Performance Goal.
3. ELIGIBILITY
Bonuses under the Plan may be granted to those key employees of the Company
who are employed at grade 12 or above (including officers of the Company,
whether or not they are directors of the Company) as the Committee shall select
from time to time.
4. ADMINISTRATION
The Plan shall be administered by the Committee in accordance with its
terms. Any action by the Committee that would be violative of Section 162(m) of
the Code ("Section 162(m)") shall be void. The Committee shall (i) determine the
key employees to whom Bonuses should be granted, (ii) determine the Target
Amount with respect to each such Bonus, which amount may be based upon a
percentage of compensation (as defined by the Committee, but excluding any
severance payments) or such other objective formula as the Committee may
determine, and (iii) establish the Performance Goals with respect to each such
Bonus. If a Performance Goal with respect to a Bonus is composed of both a
Corporate Goal and a Functional/Individual Goal (as set forth in Section 5
hereto), the Committee shall establish a separate Target Amount for each of the
Corporate Goal and the Functional/Individual Goal. The Committee may delegate
some or all of its authority under clauses (i), (ii) or (iii) above to one or
more duly authorized officers of the Company, provided, however, that no such
authority may be delegated with respect to any individual that the Committee
reasonably expects to be a "covered person" within the meaning of section 162(m)
of the Code as of the date a Bonus is paid. Each Bonus shall be evidenced by a
Bonus Agreement setting forth the applicable Performance Goal that must be
achieved, the amount of the Bonus to be received by the Participant for each
level of achievement of the Performance Goal, and such other terms and
conditions as the Committee, in its sole discretion, shall determine.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees, which fees shall be paid as incurred) or liability
(including any sum paid in settlement of a claim with the approval of the
Committee) arising out of or in connection with any action, omission or
determination relating to the Plan, unless, in each case, such action, omission
or determination was taken or made by such member, director or employee in bad
faith and without reasonable belief that it was in the best interests of the
Company.
5. PERFORMANCE GOALS
A Performance Goal may be composed of a Corporate Goal and/or a
Functional/Individual Goal, in the sole discretion of the Committee, provided,
however, that a Performance Goal established for any Participant whom the
Committee reasonably expects to be a "covered employee" within the meaning of
section 162(m) of the Code as of the date the Bonus is paid shall be composed
solely of a Corporate Goal. A Performance Goal shall be a target level of
achievement during a Measurement Period, and the achievement of the Performance
Goal shall be stated in terms of a percentage of the Performance Goal.
(a) Corporate Goals
Corporate Goals refer to the performance of the Company and shall be based
on one or more of (i) Earnings per Share, (ii) EBITDA, (iii) Economic Profit,
(iv) growth in revenue, (v) achievement of cost targets, (vi) cost of production
or (vii) any combination of such criteria.
(b) Functional/Individual Goals
Functional/Individual Goals refer to the Participant's individual
performance and shall be based on relevant financial, operational and individual
performance objectives.
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(c) General
Both Corporate Goals and Functional/Individual Goals may be expressed
either as an absolute target or as the actual levels measured, as applicable,
against (i) the Company's Budget for the Measurement Period, (ii) the past
performance of the Company (including one or more divisions) (iii) the past
performance of the individual, or (iv) the current or past performance of other
companies. In the case of earnings-based measures, a Performance Goal may employ
comparisons to capital, stockholders' equity and shares outstanding.
Except as otherwise provided herein, the measures used in Performance Goals
set under the Plan shall be determined in accordance with generally accepted
accounting principles ("GAAP") and in a manner consistent with the methods used
in the Company's regular reports on Forms 10-K and 10-Q, without regard to any
of the following, unless otherwise determined by the Committee consistent with
the requirements of section 162(m)(4)(C) and the regulations thereunder:
(1) all items of gain, loss or expense for the fiscal year that are
related to special, unusual or non-recurring items, events or circumstances
affecting the Company or the financial statements of the Company;
(2) all items of gain, loss or expense for the fiscal year that are
related to (i) the disposal of a business or discontinued operations or
(ii) the operations of any business acquired by Company during the fiscal
year; and
(3) all items of gain, loss or expense for the fiscal year that are
related to changes in accounting principles or to changes in applicable law
or regulations.
To the extent any objective performance goals are expressed using any
earnings or sales-based measures that require deviations from GAAP, such
deviations shall be at the discretion of the Committee.
6. CALCULATION OF AWARDS
Unless otherwise provided in the applicable Bonus Agreement, the Bonus will
be payable as follows:
(a) If the achievement of the Performance Goal is 100%, the Bonus
payment will be the Target Amount.
(b) For each whole percentage point that the achievement of the
Performance Goal is less than 100%, the Bonus payment will be the Target
Amount, reduced by 3 1/2%. However, if the achievement of the Performance
Goal is less than 80%, no Bonus payment will be made.
(c) For each whole percentage point that the achievement of the
Performance Goal exceeds 100%, the Bonus payment will be the Target Amount,
increased by 5%. In no event, however, shall a Bonus payment exceed 200% of
the Target Amount.
(d) All payments shall be rounded up to the nearest $1.00.
7. MAXIMUM AMOUNT OF BONUS AWARDS
The maximum Bonus payable to a Participant during a year shall in no event
exceed $1,500,000.
8. PAYMENT OF AWARDS
As soon as reasonably practicable following the end of a Measurement
Period, but in no event later than March 15, the Committee shall certify in
writing (in accordance with applicable regulations under section 162(m) of the
Code) the level of achievement of each Performance Goal established by the
Committee with respect to such Measurement Period. Participants who are entitled
to Bonus payments pursuant to such certification shall receive such payments as
soon as practicable following such certification in accordance with the terms of
the Bonus Agreement, unless the Committee, in its sole discretion, determines to
reduce the payment to be made.
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9. REPLACEMENT BY OPTIONS
Certain Participants, as determined by the Committee and set forth in the
applicable Bonus Agreement, may elect to forego payment of any whole percentage
between 10% to 100% of his or her Bonus up to a maximum of $100,000, and instead
to receive an option ("Option") to purchase common stock of the Company
("Company Stock") under the Stock Plan. Such an election must be made at least
five months prior to the end of the Measurement Period and shall be irrevocable.
The number of shares of Company Stock under such Option, unless determined
otherwise by the Committee, shall be equal to quotient of (i) the dollar amount
of the Bonus or the portion thereof which the Participant has elected to forego,
divided by (ii) the value of an Option to purchase one share of Company Stock
determined by utilizing the Black Scholes Option Pricing Model, determined as of
the date the Option is granted. Options will be granted on the date on which the
Bonus would otherwise be paid in cash, will have an exercise price-per-share
equal to the fair market value (as defined in the Stock Plan) of a share of
Company Stock as of the day of the grant and will at all times be fully vested.
Options will be subject to the terms of the Stock Plan. If a Participant makes
an election under this Section 9, and the Stock Option Committee determines not
to grant a Bonus Option under the Stock Plan, then such determination of the
Stock Option Committee shall be deemed to be the unilateral revocation of such
Participant's election and such Participant shall receive payment of his entire
Bonus in cash as if such election had not been made.
10. TERMINATION OF EMPLOYMENT
(a) Unless otherwise provided in an employment agreement then in
effect between a Participant and the Company, if a Participant's employment
with the Company terminates during a Measurement Period due to the
Participant's death, Disability or Retirement (as such terms are defined in
the Stock Plan), the Committee, in its sole discretion, may grant such
Participant (or the representative of the Participant's estate) an
equitably prorated portion of the Bonus which otherwise would have been
earned by such Participant. In such an event, any election made by such
Participant under Section 9 hereto with respect to such Bonus payment shall
be null and void.
(b) Unless otherwise provided in an employment agreement then in
effect between a Participant and the Company, if a Participant's employment
with the Company terminates during a Measurement Period for any reason
other than as set forth in Section 10(a), any Bonus (and, if applicable,
the Option with which all or a portion of such Bonus is to be replaced)
applicable to such Measurement Period shall be forfeited.
(c) Unless otherwise provided in an employment agreement then in
effect between a Participant and the Company, if a Participant is entitled
to a Bonus with respect to a Measurement Period and that Participant's
employment with the Company terminates for any reason other than for Cause
(as defined in the Stock Plan) following the end of the Measurement Period
but prior to the actual payment of the Bonus, such Bonus shall be paid to
such Participant or, if applicable, to the representative of such
Participant's estate. In such an event, any election made by such
Participant under Section 9 hereto with respect to such Bonus payment shall
be null and void.
11. AMENDMENT AND TERMINATION
The Board of Directors shall have the right to terminate, modify or amend
the Plan from time to time but, without prior approval of the Company's
stockholders, no such modification or amendment shall (i) cause amounts payable
under the Plan to fail to qualify for the exemption from the limitations of
sec.162(m) of the Code provided in sec.162(m)(4)(C) of the Code; (ii) alter the
business criteria on which the Performance Goals may be based; (iii) increase
the maximum amount of any Bonus that may be awarded or (iv) materially modify
the requirements regarding eligibility for participation in the Plan. In the
event that the Plan is terminated during a Measurement Period, any Bonus (and,
if applicable, the Option with which all or a portion of such Bonus is to be
replaced) applicable to such Measurement Period shall be forfeited. In the event
that the Plan is terminated following the end of a Measurement Period but prior
to payment of any Bonus applicable to such Measurement Period, any Bonus (and,
if applicable, the Option with which all or a
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portion of such Bonus is to be replaced) applicable to such Measurement Period
shall be paid as if the Plan had not terminated.
12. PAYMENT OUT OF GENERAL ASSETS
Bonus payments shall be made from the general funds of the Company and no
special or separate fund shall be established or other segregation of assets
made to assure payment. No participant or other person shall have under any
circumstances any interest in any particular property or assets of the Company.
13. RIGHT TO DEFER
Notwithstanding any other provision hereunder, if and to the extent that
the Committee determines that the Company's Federal tax deduction in respect of
a payment hereunder may be limited as a result of section 162(m) of the Code,
the Committee may delay such payment as provided below. In the event the
Committee determines to delay the payment of a bonus or any portion thereof
hereunder, the Committee shall credit the amount of the payment so delayed to a
book account. The amount so credited to the book account shall be adjusted to
reflect gains and losses that would have resulted from the investment of such
amount in any investment vehicle or vehicles selected by the Committee. Part or
all of the amount credited to the Participant's account hereunder shall be paid
to the Participant at such time or times as shall be determined by the
Committee, if and to the extent the Committee determines that the Company's
deduction for any such payment will not be reduced by section 162(m) of the
Code. Notwithstanding the foregoing, the entire balance credited to the
Participant's book account shall be paid to the Participant within 90 days after
the Participant ceases to be a "covered employee" within the meaning of section
162(m) of the Code. The Participant shall have no rights in respect of such book
account and the amount credited thereto shall not be transferrable by the
Participant other than by will or laws of descent and distribution; any book
account created hereunder shall represent only an unfunded, unsecured promise by
the Company to pay the amount credited thereto to the Participant in the future.
14. NON-ASSIGNABILITY
The right of a Participant or of any other person to any payment under the
Plan shall not be assigned, transferred, pledged or encumbered in any manner and
any attempted assignment, transfer, pledge or encumbrance shall be null and void
and of no force or effect.
15. TAX WITHHOLDING
All amounts required to be paid under the Plan shall be subject to any
required Federal, state, local and other applicable withholdings or deductions.
16. NO OTHER RIGHTS
Neither the establishment of this Plan nor the payment of any Bonus
hereunder nor any action of the Company or the Committee with respect to this
Plan shall be held or construed to confer upon any Participant any legal right
to be continued in the employ of the Company or to receive any particular rate
of cash Compensation other than pursuant to the terms of this Plan and the
determination of the Committee, and the Company expressly reserves the right to
discharge any Participant whenever the interest of the Company may so permit or
require without liability to the Company, the Board of Directors or the
Committee, except as to any rights which may be expressly conferred upon a
Participant under this Plan.
The adoption of this Plan shall not affect any other compensation plans in
effect for the Company, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for the
Participants in this Plan.
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17. GOVERNING LAW
The Plan shall be governed by and construed in accordance with the laws of
the State of New York, without regard to its principles of conflict of laws.
18. EFFECTIVE DATE
This Plan shall be effective as of January 1, 2000, subject to approval by
the stockholders of the Company. In no event may any payments under the Plan be
made before stockholder approval has been obtained.
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APPENDIX B
TWINLAB CORPORATION
2000 STOCK INCENTIVE PLAN
1. PURPOSE OF THE PLAN
The purpose of the Twinlab Corporation 2000 Stock Incentive Plan is to
provide for officers, other employees of, and consultants to, Twinlab
Corporation (the "Company") and its subsidiaries an incentive (a) to enter into
and remain in the service of the Company or a subsidiary, (b) to enhance the
long-term performance of the Company and its subsidiaries, and (c) to acquire a
proprietary interest in the success of the Company and its subsidiaries, and (d)
to provide certain "performance-based compensation" within the meaning of
Section 162(m)(4)(C) of the Code.
2. DEFINITIONS
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Affiliate" shall mean an entity (whether or not incorporated),
controlling, controlled by or under common control with the Company.
(b) "Award Agreement" shall mean an agreement, in such form and
including such terms as the Committee in its sole discretion shall
determine, evidencing an Incentive Award.
(c) "Black Scholes Option Pricing Model" shall mean the model
developed by Fischer Black and Myron Scholes to determine the value of a
stock option.
(d) "Board of Directors" shall mean the Board of Directors of Twinlab
Corporation.
(e) "Bonus Option" shall mean an Option (whether an Incentive Stock
Option or a Non-Qualified Stock Option) that is granted pursuant to Section
7 hereof.
(f) "Bonus Plan" shall mean the Twinlab Corporation Management
Incentive Bonus Plan.
(g) "Cash Bonus" shall mean an award of a bonus payable in cash
pursuant to Section 14 hereof.
(h) "Cause" shall have the meaning set forth in any employment
agreement between the Participant and the Company in effect as of the date
the event giving rise to cause occurred. In the absence of such an
employment agreement provision, "Cause" shall mean: (a) the Participant's
conviction of any crime (whether or not involving the Company) constituting
a felony in the jurisdiction involved; (b) conduct of the Participant
related to the Participant's employment for which either criminal or civil
penalties against the Participant or the Company may be sought; (c)
material violation of the Company's policies, including, without
limitation, those relating to sexual harassment, the disclosure or misuse
of confidential information, or those set forth in Company manuals or
statements of policy; (d) serious neglect or misconduct in the performance
of the Participant's duties for the Company or willful or repeated failure
or refusal to perform such duties.
Any rights the Company may have hereunder in respect of the events
giving rise to Cause shall be in addition to the rights the Company may
have under any other agreement with a Participant or at law or in equity.
Any determination of whether a Participant's employment is (or is deemed to
have been) terminated for Cause shall be made by the Committee in its sole
discretion, which determination shall be final and binding on all parties.
If, subsequent to a Participant's termination of employment (whether
voluntary or involuntary) without Cause, it is discovered that the
Participant's employment could have been terminated for Cause, such
Participant's employment shall be deemed to have been terminated for Cause.
A Participant's termination of employment for Cause shall be effective as
of the date of the occurrence of the event giving rise to Cause, regardless
of when the determination of Cause is made.
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(i) "Change in Control" shall mean the occurrence of any one of the
following:
(i) any person, including a group or entity, becoming the
beneficial owner of, or acquiring the power to direct the exercise of
voting power with respect to, directly or indirectly, securities which
represent fifty percent (50%) or more of the combined voting power of
the Company's outstanding securities thereafter; or
(ii) the Incumbent Directors ceasing at any time to constitute a
majority of the Board of Directors of the Company; or
(iii) the stockholders of the Company approving a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company immediately prior to the merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving or parent entity) 50% or more of the
combined voting power of the voting securities of any new company or
surviving or parent entity outstanding immediately after such merger or
consolidation; or
(iv) the stockholders of the Company approving an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
For purposes of this provision, "Incumbent Director" shall mean any member
of the Board of Directors serving at January 1, 2000, or one elected
thereafter if nominated by at least two-thirds of the then Incumbent
Directors.
(j) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(k) "Committee" shall mean the Stock Option Committee of the Board of
Directors; provided, however, that the Committee shall at all times consist
of two or more persons, all of whom are "non-employee directors" within the
meaning of Rule 16b-3 under the Exchange Act and "outside directors" within
the meaning of Section 162(m) of the Code.
(l) "Company" shall mean Twinlab Corporation or any successor thereto.
References to the Company also shall include the Company's Affiliates
unless the context clearly indicates otherwise.
(m) "Company Stock" shall mean the common stock of the Company.
(n) "Disability" shall mean a disability described in Section
422(c)(6) of the Code. The existence of a Disability shall be determined by
the Committee in its absolute discretion.
(o) "Discretionary Option" shall mean an Option (whether an Incentive
Stock Option or a Non-Qualified Stock Option) that is granted by the
Committee pursuant to Section 6 hereof.
(p) "Dividend Equivalent Right" shall mean an Incentive Award granted
pursuant to Section 15 hereof of a right to receive an amount equivalent to
the ordinary cash dividends paid in respect to some or all of the shares of
Company stock underlying an Incentive Award.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(r) "Fair Market Value" shall mean, with respect to a share of Company
Stock on an applicable date:
(i) If the principal market for the Common Stock (the "Market") is
a national securities exchange or the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") National Market, the last
sale price or, if no reported sales take place on the applicable date,
the average of the high bid and low asked price of Common Stock as
reported for such Market on such date or, if no such quotation is made
on such date, on the next preceding day on which there were quotations,
provided that such quotations shall have been made within the ten (10)
business days preceding the applicable date;
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(ii) If the Market is the NASDAQ National List, the NASDAQ
Supplemental List or another market, the average of the high bid and low
asked price for Common Stock on the applicable date, or, if no such
quotations shall have been made on such date, on the next preceding day
on which there were quotations, provided that such quotations shall have
been made within the ten (10) business days preceding the applicable
date; or,
(iii) In the event that neither paragraph (i) nor (ii) shall apply,
the Fair Market Value of a share of Common Stock on any day shall be
determined in good faith by the Committee in a manner consistently
applied.
(s) "Immediate Family Members" shall mean a Participant's spouse,
children and grandchildren.
(t) "Incentive Award" shall mean an Option, LSAR, Tandem SAR,
Stand-Alone SAR, Dividend Equivalent Right, share of Restricted Stock,
share of Phantom Stock, Stock Bonus, Cash Bonus or other equity-based award
granted pursuant to the terms of the Plan.
(u) "Incentive Stock Option" shall mean an Option that is an
"incentive stock option" within the meaning of Section 422 of the Code and
that is identified as an Incentive Stock Option in the agreement by which
it is evidenced.
(v) "Issue Date" shall mean the date established by the Committee on
which certificates representing shares of Restricted Stock shall be issued
by the Company pursuant to the terms of Section 11(d) hereof.
(w) "LSAR" shall mean a limited stock appreciation right that is
granted pursuant to the provisions of Section 8 hereof and that relates to
an Option. Each LSAR shall be exercisable only upon the occurrence of a
Change in Control and only in the alternative to the exercise of its
related Option.
(x) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.
(y) "Option" shall mean an option to purchase shares of Company Stock
granted pursuant to Section 6 and Section 7 hereof.
(z) "Participant" shall mean an employee of the Company who is
eligible to participate in the Plan and to whom an Incentive Award is
granted pursuant to the Plan, and, upon his or her death, the employee's
successors, heirs, executors and administrators, as the case may be.
(aa) "Person" shall mean a "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act.
(bb) "Phantom Stock" shall mean the right to receive in cash the Fair
Market Value of a share of Company Stock, which right is granted pursuant
to Section 12 hereof and subject to the terms and conditions contained
therein.
(cc) "Plan" shall mean this Twinlab Corporation 2000 Stock Incentive
Plan, as it may be amended from time to time.
(dd) "Retirement" means termination of employment from the Company by
a Participant whose age and years of service together equal 65.
(ee) "Reload Option" shall mean an Option granted to a Participant in
accordance with Section 6 hereof upon the exercise of an Option.
(ff) "Restricted Stock" shall mean a share of Company Stock that is
granted pursuant to the terms of Section 11 hereof and that is subject to
the restrictions set forth in Section 11(c) hereof for so long as such
restrictions continue to apply to such share.
(gg) "SAR" shall mean a Tandem SAR or Stand-Alone SAR.
(hh) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
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(ii) "Stand-Alone SAR" shall mean a stock appreciation right granted
pursuant to Section 10 hereof that is not related to any Option.
(jj) "Stock Bonus" shall mean a grant of a bonus payable in shares of
Company Stock pursuant to Section 13 hereof.
(kk) "Tandem SAR" shall mean a stock appreciation right granted
pursuant to Section 9 hereof that is related to an Option. Each Tandem SAR
shall be exercisable only to the extent its related Option is exercisable
and only in the alternative to the exercise of its related Option.
(ll) "Vesting Date" shall mean the date established by the Committee
on which a share of Restricted Stock or Phantom Stock may vest.
3. STOCK SUBJECT TO THE PLAN
(a) Plan Limit
Subject to adjustment as provided in Section 18 hereof, the Committee may
grant Incentive Awards hereunder with respect to shares of Company Stock that in
the aggregate do not exceed 4,500,000 shares. The grant of an LSAR, Tandem SAR
or Dividend Equivalent Right shall not reduce the number of shares of Company
Stock with respect to which Incentive Awards may be granted pursuant to the
Plan. Incentive Awards granted under the Plan shall count against the foregoing
limits at the time they are granted but shall again become available for grant
under the Plan as follows:
(i) To the extent that any Options, together with any related rights
granted under the Plan, terminate, expire or are canceled without having
been exercised (including a cancellation resulting from the exercise of a
related LSAR or Tandem SAR) the shares covered by such Options shall again
be available for grant under the Plan.
(ii) To the extent that any Stand-Alone SARs terminate, expire or are
canceled without having been exercised, the shares covered by such
Stand-Alone SARs shall again be available for grant under the Plan.
(iii) To the extent any shares of Restricted Stock or Phantom Stock,
or any shares of Company Stock granted as a Stock Bonus are forfeited or
canceled for any reason, such shares (together with any related Cash
Bonuses) shall again be available for grant under the Plan.
Shares of Company Stock issued under the Plan may be either newly issued
shares or treasury shares, at the discretion of the Committee.
(b) Individual Limit
Subject to adjustment as provided in Section 18 hereof, during any calendar
year, the Committee shall not grant any one Participant Incentive Awards
hereunder with respect to more than 1,000,000 shares of Company Stock, which
limit shall include any shares represented by an Incentive Award that has been
cancelled. Such Incentive Awards may be made up entirely of any one type of
Incentive Award or any combination of types of Incentive Awards available under
the Plan, in the Committee's sole discretion. The grant of an LSAR, Tandem SAR
or Dividend Equivalent Right shall not reduce the number of shares of Company
Stock with respect to which Incentive Awards may be granted to any Participant
pursuant to the Plan.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall from
time to time designate the individuals who shall be granted Incentive Awards and
the amount and type of such Incentive Awards.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Incentive Award issued under it, and to adopt such rules and regulations for
administering the Plan as it may deem necessary or appropriate, and to delegate
such
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administrative responsibilities as it deems appropriate, provided, however, that
the Committee shall retain the responsibility to designate the Incentive Award
recipients and the amount and type of such Incentive Awards. Decisions of the
Committee shall be final and binding on all parties. The Committee's
determinations under the Plan may, but need not, be uniform and may be made on a
Participant-by-Participant basis (whether or not two or more Participants are
similarly situated).
The Committee may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Option or Stand-Alone SAR granted
under the Plan becomes exercisable or otherwise adjust any of the terms of such
Option or Stand-Alone SAR (except that no such adjustment shall, without the
consent of a Participant, reduce the Participant's rights under any previously
granted and outstanding Incentive Award unless the Committee determines that
such adjustment is necessary or appropriate to prevent such Incentive Award from
constituting "applicable employee remuneration" within the meaning of Section
162(m) of the Code), (ii) accelerate the Vesting Date or Issue Date, or waive
any condition imposed hereunder, with respect to any share of Restricted Stock
granted under the Plan or otherwise adjust any of the terms of such Restricted
Stock and (iii) accelerate the Vesting Date or waive any condition imposed
hereunder, with respect to any share of Phantom Stock granted under the Plan or
otherwise adjust any of the terms of such Phantom Stock.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Committee in its absolute discretion, subject to applicable
law.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best interests of
the Company.
5. ELIGIBILITY
The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be (i) officers and salaried employees of the Company and its
subsidiaries (including employees who are also directors and prospective
salaried employees conditioned on their becoming salaried employees), (ii) such
consultants to the Company and its subsidiaries as the Committee shall select in
its discretion, (iii) any participant in the Bonus Plan who makes an irrevocable
election under the Bonus Plan to forego his or her award under the Bonus Plan
and to receive a Bonus Option in lieu thereof, (iv) any employee who makes an
irrevocable election under the employment agreement then in effect between the
employee and the Company to forego part or all of the bonus payments under such
employment agreement and to receive in lieu thereof a Bonus Option hereunder and
(v) any other key persons, as determined by the Committee in its sole
discretion. For purposes of the preceding sentence, an employee means an
individual who is (or is expected to be) classified as an employees of the
Company for purposes of the Company's payroll.
6. OPTIONS
The Committee may grant Discretionary Options and Bonus Options pursuant to
the Plan. Each Option shall be evidenced by an Award Agreement in such form and
including such terms as the Committee shall from time to time approve. Except as
provided in Section 7 hereof, Options shall comply with and be subject to the
following terms and conditions:
(a) Identification of Options
Each Option granted under the Plan shall be clearly identified in the
applicable Award Agreement as either an Incentive Stock Option or as a
Non-Qualified Stock Option and as either a Discretionary Option or a
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Bonus Option. In the absence of such identification, an Option shall be deemed
to be a Non-Qualified Stock Option and a Discretionary Option.
(b) Exercise Price
The exercise price-per-share of any Non-Qualified Stock Option granted
under the Plan shall be such price as the Committee shall determine (which may
be equal to, less than or greater than the then Fair Market Value of a share of
Company Stock) on the date on which such Non-Qualified Stock Option is granted;
provided, that such price may not be less than the minimum price required by
law. Subject to Paragraph (d) of this Section 6, the exercise price-per-share of
any Incentive Stock Option granted under the Plan shall be not less than 100% of
the Fair Market Value of a share of Company Stock on the date on which such
Incentive Stock Option is granted (except as permitted in connection with the
assumption or issuance of Options in a transaction to which Section 424(a) of
the Code applies) and, to the extent any compensation payable in respect of an
Option is intended to qualify as performance-based compensation under Section
162(m)(4)(C) of the Code, the exercise price-per-share of such Option shall be
not less than 100% of the Fair Market Value of a share of Company Stock on the
date on which such Option is granted.
(c) Term and Exercise of Options
(1) Unless otherwise provided in the applicable Award Agreement and
subject to Section 6(g) hereof, each Discretionary Option shall first be
exercisable with respect to a number of shares of Company Stock as close as
possible to 1/3 of the shares of Company Stock subject to such
Discretionary Option on each of the first, second and third anniversaries
of the date such Discretionary Option is granted, and shall remain
exercisable until the expiration of ten years from the date such
Discretionary Option was granted; provided, however, that each
Discretionary Option shall be subject to earlier termination, expiration or
cancellation as provided in the Plan. Each Bonus Option shall be
exercisable immediately on the date such Bonus Option is granted.
(2) Each Option shall be exercisable in whole or in part; provided,
however, that no partial exercise of an Option shall be for an aggregate
exercise price of less than $1,000 unless such partial exercise represents
the entire unexercised portion of the Option or the entire portion of the
Option that is then exercisable. The partial exercise of an Option shall
not cause the expiration, termination or cancellation of the remaining
portion thereof. Upon the partial exercise of an Option, the Award
Agreement evidencing such Option and any related LSARs and Tandem SARs
shall be returned to the Participant exercising such Option together with
the delivery of the certificates described in Section 6(c)(5) hereof.
(3) An Option shall be exercised by delivering notice to the Company's
principal office, to the attention of its Secretary, no less than five
business days in advance of the effective date of the proposed exercise.
Such notice shall be accompanied by the Award Agreement or Agreements
evidencing the Option and any related LSARs and Tandem SARs, shall specify
the number of shares of Company Stock with respect to which the Option is
being exercised and the effective date of the proposed exercise and shall
be signed by the Participant. The Participant may withdraw such notice at
any time prior to the close of business on the business day immediately
preceding the effective date of the proposed exercise, in which case such
Award Agreement or Agreements shall be returned to him. Payment for shares
of Company Stock purchased upon the exercise of an Option shall be made on
the effective date of such exercise either:
(i) in cash, by certified check, bank cashier's check or wire
transfer; or
(ii) unless provided otherwise in the applicable Award Agreement,
in shares of Company Stock owned by the Participant (which, if acquired
pursuant to the exercise of a stock option, were acquired at least six
months prior to the option exercise date) and valued at their Fair
Market Value on the effective date of such exercise, or partly in shares
of Company Stock with the balance in cash, by certified check, bank
cashier's check or wire transfer; or
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(iii) unless provided otherwise in the applicable Award Agreement,
pursuant to procedures adopted by the Committee whereby the Participant,
by a properly written notice, shall direct (A) an immediate market sale
or margin loan respecting all or a part of the shares of Company Stock
to which the Participant is entitled upon exercise pursuant to an
extension of credit by the Company to the Participant of the exercise
price, (B) the delivery of the shares of Company Stock from the Company
directly to the brokerage firm, and (C) the delivery of the exercise
price from the sale or margin loan proceeds from the brokerage firm
directly to the Company.
(iv) at the discretion of the Committee and to the extent permitted
by law, by such other provision as the Committee may from time to time
prescribe.
Any payment in shares of Company Stock shall be effected by the delivery of
such shares to the Secretary of the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank, together with any other
documents and evidences as the Secretary of the Company shall require from
time to time.
(4) The Company may, in the sole discretion of the Committee, make
loans to individual Participants in such amounts and on such terms as may
be approved by the Committee, for the purpose of financing the exercise of
a Discretionary Option or the payment of any federal, state or local tax
incurred with respect to the exercise of a Discretionary Option, provided
that any such loan shall be made with full recourse to such Participant,
shall be secured by the Company Stock received by such Participant upon
exercise, and shall bear an interest rate sufficient to avoid imputed
income under applicable provisions of the Code.
(5) Certificates for shares of Company Stock purchased upon the
exercise of an Option shall be issued in the name of the Participant or his
or her beneficiary (or permitted transferee), as the case may be, and
delivered to the Participant or his or her beneficiary (or permitted
transferee), as the case may be, as soon as practicable following the
effective date on which the Option is exercised.
(6) Except as otherwise provided in an applicable Award Agreement,
during the lifetime of a Participant each Option granted to a Participant
shall be exercisable only by the Participant and no Option shall be
assignable or transferable otherwise than by will or by the laws of descent
and distribution. The Committee may, in any applicable agreement evidencing
an Option (other than, to the extent inconsistent with the requirements of
Section 422 of the Code, an Incentive Stock Option), permit a Participant
to transfer all or some of the Options to (i) the Participant's Immediate
Family Members, or (ii) a trust or trusts for the exclusive benefit of such
Immediate Family Members. Following any such transfer, any transferred
Options shall continue to be subject to the same terms and conditions as
were applicable immediately prior to the transfer.
(d) Limitations on Grant of Incentive Stock Options
(1) To the extent that the aggregate Fair Market Value (determined as
of the time the option is granted) of the stock with respect to which
Incentive Stock Options granted under this Plan and all other plans of the
Company (and any plans of any "subsidiary corporation" or "parent
corporation" of the Company within the meaning of Section 424 of the Code)
are first exercisable by any employee during any calendar year shall exceed
the maximum limit (currently, $100,000), if any, imposed from time to time
under section 422 of the Code, such options shall be treated as
Non-Qualified Stock Options. In such an event, the determination of which
Options shall remain Incentive Stock Options and which shall be treated as
Non-Qualified Stock Options shall be based on the order in which such
Options were granted, with the excess over the first $100,000 granted
deemed to be Non-Qualified Stock Options. All other terms and provisions of
such Options that are deemed to be Non-Qualified Stock Options shall remain
unchanged.
(2) No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns stock possessing more
than ten percent of the total combined voting power of all classes of stock
of the Company or any of its "subsidiary corporations" or "parent
corporations" (within
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the meaning of Section 424 of the Code), unless (i) the exercise price of
such Incentive Stock Option is at least one hundred ten percent (110%) of
the Fair Market Value of a share of Company Stock at the time such
Incentive Stock Option is granted and (ii) such Incentive Stock Option is
not exercisable after the expiration of five years from the date such
Incentive Stock Option is granted.
(e) Grants of Reload Options
If provided in the applicable Award Agreement, an additional option (the
"Reload Option") shall be granted to any Participant who, pursuant to Section
6(c)(3)(ii), delivers shares of Common Stock in partial or full payment of the
exercise price of an Option (the "Original Option"). The Reload Option shall be
for a number of shares of Common Stock equal to the number thus delivered, shall
have an exercise price equal to the Fair Market Value of a share of Common Stock
on the date of exercise of the Original Option, and shall have an expiration
date no later than the expiration date of the Original Option. A Reload Option
only may be granted if the exercise price-per-share of the Original Option is no
less than the Fair Market Value of a share of Company Stock on its date of
grant.
(f) Effect of Termination of Employment
(1) Unless otherwise provided in an applicable Award Agreement, in the
event that the employment of a Participant with the Company shall terminate
for any reason other than Retirement, Cause, Disability or death (i)
Options granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until
the expiration of 90 days after such termination, on which date they shall
expire, and (ii) Options granted to such Participant, to the extent that
they were not exercisable at the time of such termination, shall expire at
the close of business on the date of such termination; provided, however,
that no Option shall be exercisable after the expiration of its term.
(2) Unless otherwise provided in an applicable Award Agreement, in the
event that the employment of a Participant with the Company shall terminate
on account of the death of the Participant (i) Options granted to such
Participant, to the extent that they were exercisable at the time of such
termination, shall remain exercisable (pursuant to Section 25 hereof) until
the expiration of one year after such termination, on which date they shall
expire, and (ii) Options granted to such Participant, to the extent that
they were not exercisable at the time of such termination, shall expire at
the close of business on the date of such termination; provided, however,
that no Option shall be exercisable after the expiration of its term.
(3) Unless otherwise provided in an applicable Award Agreement, in the
event that the employment of a Participant with the Company shall terminate
on account of the Disability or Retirement of the Participant (i) Options
granted to such Participant, to the extent that they were exercisable at
the time of such termination, shall remain exercisable until the expiration
of three years after such termination, on which date they shall expire, and
(ii) Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination; provided, however, that no Option
shall be exercisable after the expiration of its term, and provided,
further, that any such exercise that occurs more than 90 days after such
termination in the case of Retirement or more than one year after such
termination in the case of Disability shall be deemed to be the exercise of
a Non-Qualified Stock Option.
(4) In the event of the termination of a Participant's employment for
Cause, all outstanding Options granted to such Participant shall expire at
the commencement of business on the effective date of such termination (or
deemed termination in accordance with Section 2(h)).
(g) Effect of Change in Control
Upon the occurrence of a Change in Control, each Discretionary Option
outstanding at such time shall become fully and immediately exercisable and each
Option outstanding at such time shall remain exercisable until the later of (i)
5 years from the date on which the Change in Control occurred and (ii) the date
such
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Option would expire, terminate or, be cancelled pursuant to the terms of the
Plan but for the Change in Control.
7. BONUS OPTIONS
The Committee may grant a Bonus Option to (i) any participant in the Bonus
Plan who makes an irrevocable election under Section 9 of the Bonus Plan to
convert his or her award under the Bonus Plan (or any designated portion
thereof) into a Bonus Option under this Plan and (ii) any employee of the
Company who makes an election under an employment agreement then in effect
between such employee and the Company to convert part of any bonus payment under
such employment agreement into a Bonus Option under this Plan. Except as set
forth in the provisions of this Section 7, a Bonus Option shall be subject to
the same terms as Discretionary Options under this Plan.
(a) Amount of Shares Under Bonus Option
The number of shares of Company Stock subject to each Bonus Option, unless
determined otherwise by the Committee, shall be equal to the quotient of (i) the
amount of the cash award to which the individual would have been entitled under
the Bonus Plan or the bonus provisions of an employment agreement, as
applicable, absent his or her election to have that amount paid in the form of a
Bonus Option divided by (ii) the value of an Option to purchase one share of
Company Stock, determined based on the Black Scholes Option Pricing Model, as of
the day the Bonus Option is granted. Any such determination shall be made by the
Committee, whose determination shall be final, binding and conclusive.
(b) Identification of Options
Each Bonus Option granted under the Plan shall be clearly identified in the
agreement evidencing such Bonus Option as either an Incentive Stock Option or as
a Non-Qualified Stock Option.
(c) Exercise Price
The exercise price-per-share of any Bonus Option shall be the Fair Market
Value of a share of Company Stock on the date such Bonus Option is granted.
(d) Term and Exercise of Bonus Options
Each Bonus Option shall be exercisable in full as of the date on which such
Bonus Option is granted, and shall remain exercisable until the expiration of
ten years from the date such Bonus Option was granted; provided, however, that
each Bonus Option shall be subject to earlier termination, expiration or
cancellation as provided in the Plan.
8. LIMITED SARS
The Committee may grant in connection with any Discretionary Option granted
hereunder one or more LSARs relating to a number of shares of Company Stock less
than or equal to the number of shares of Company Stock subject to the related
Option. An LSAR may be granted at the same time as, or, in the case of a
Non-Qualified Stock Option, subsequent to the time that, its related
Discretionary Option is granted. Each LSAR shall be evidenced by an agreement in
such form as the Committee shall from time to time approve. Each LSAR granted
hereunder shall be subject to the following terms and conditions:
(a) Benefit Upon Exercise
(1) The exercise of an LSAR relating to a Non-Qualified Stock Option
with respect to any number of shares of Company Stock shall entitle the
Participant to a cash payment, for each such share, equal to the excess of
(i) the greater of (A) the highest price-per-share of Company Stock paid in
the Change in Control in connection with which such LSAR became exercisable
and (B) the Fair Market Value of a share of Company Stock on the date of
such Change in Control over (ii) the exercise price of the related
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Discretionary Option. Such payment shall be made as soon as practicable,
but in no event later than the expiration of five business days after the
effective date of such exercise.
(2) The exercise of an LSAR relating to an Incentive Stock Option with
respect to any number of shares of Company Stock shall entitle the
Participant to a cash payment, for each such share, equal to the excess of
(i) the Fair Market Value of a share of Company Stock on the effective date
of such exercise over (ii) the exercise price of the related Discretionary
Option. Such payment shall be made as soon as practicable, but in no event
later than the expiration of five business days, after the effective date
of such exercise.
(b) Term and Exercise of LSARs
(1) An LSAR shall be exercisable only during the period commencing on
the first day following the occurrence of a Change in Control and
terminating on the expiration of sixty days after such date.
Notwithstanding anything else herein, an LSAR relating to an Incentive
Stock Option may be exercised with respect to a share of Company Stock only
if the Fair Market Value of such share on the effective date of such
exercise exceeds the exercise price relating to such share. Notwithstanding
anything else herein, an LSAR may be exercised only if and to the extent
that the Discretionary Option to which it relates is exercisable.
(2) The exercise of an LSAR with respect to a number of shares of
Company Stock shall cause the immediate and automatic cancellation of the
Option to which it relates with respect to an equal number of shares. The
exercise of a Discretionary Option, or the cancellation, termination or
expiration of an Option (other than pursuant to this Paragraph (2)), with
respect to a number of shares of Company Stock, shall cause the
cancellation of the LSAR related to it with respect to an equal number of
shares.
(3) Each LSAR shall be exercisable in whole or in part; provided, that
no partial exercise of an LSAR shall be for an aggregate exercise price of
less than $1,000. The partial exercise of an LSAR shall not cause the
expiration, termination or cancellation of the remaining portion thereof.
Upon the partial exercise of an LSAR, the agreement evidencing the LSAR,
the related Discretionary Option and any Tandem SARs related to such
Option, marked with such notations as the Committee may deem appropriate to
evidence such partial exercise, shall be returned to the Participant
exercising such LSAR together with the payment described in Paragraph
8(a)(1) or (2) hereof, as applicable.
(4) Except as otherwise provided in an applicable agreement evidencing
an LSAR, during the lifetime of a Participant, each LSAR granted to a
Participant shall be exercisable only by the Participant and no LSAR shall
be assignable or transferable otherwise than by will or by the laws of
descent and distribution. The Committee may, in any applicable agreement
evidencing an LSAR, permit a Participant to transfer all or some of the
LSAR to (i) the Participant's Immediate Family Members or (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members.
Following any such transfer, any transferred LSARs shall continue to be
subject to the same terms and conditions as were applicable immediately
prior to the transfer.
(5) An LSAR shall be exercised by delivering notice to the Company's
principal office, to the attention of its Secretary, no less than five
business days in advance of the effective date of the proposed exercise.
Such notice shall be accompanied by the applicable agreement evidencing the
LSAR, the related Discretionary Option and any Tandem SARs relating to such
Discretionary Option, shall specify the number of shares of Company Stock
with respect to which the LSAR is being exercised and the effective date of
the proposed exercise and shall be signed by the Participant. The
Participant may withdraw such notice at any time prior to the close of
business on the business day immediately preceding the effective date of
the proposed exercise, in which case such agreement shall be returned to
him.
9. TANDEM SARS
The Committee may grant in connection with any Discretionary Option granted
hereunder one or more Tandem SARs relating to a number of shares of Company
Stock less than or equal to the number of shares of
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Company Stock subject to the related Discretionary Option. A Tandem SAR may be
granted at the same time as, or subsequent to the time that, its related
Discretionary Option is granted. Each Tandem SAR shall be evidenced by an
agreement in such form as the Committee shall from time to time approve. Tandem
SARs shall comply with and be subject to the following terms and conditions:
(a) Benefit Upon Exercise
The exercise of a Tandem SAR with respect to any number of shares of
Company Stock shall entitle a Participant to a cash payment, for each such
share, equal to the excess of (i) the Fair Market Value of a share of Company
Stock on the effective date of such exercise over (ii) the exercise price of the
related Discretionary Option. Such payment shall be made as soon as practicable,
but in no event later than the expiration of five business days, after the
effective date of such exercise.
(b) Term and Exercise of Tandem SAR
(1) A Tandem SAR shall be exercisable at the same time and to the same
extent (on a proportional basis, with any fractional amount being rounded
down to the immediately preceding whole number) as its related
Discretionary Option. Notwithstanding the first sentence of this Section
9(b)(1), (i) a Tandem SAR shall not be exercisable at any time that an LSAR
related to the Discretionary Option to which the Tandem SAR is related is
exercisable and (ii) a Tandem SAR relating to an Incentive Stock Option may
be exercised with respect to a share of Company Stock only if the Fair
Market Value of such share on the effective date of such exercise exceeds
the exercise price relating to such share.
(2) The exercise of a Tandem SAR with respect to a number of shares of
Company Stock shall cause the immediate and automatic cancellation of its
related Discretionary Option with respect to an equal number of shares. The
exercise of a Discretionary Option, or the cancellation, termination or
expiration of a Discretionary Option (other than pursuant to this Section
9(b)(2)), with respect to a number of shares of Company Stock shall cause
the automatic and immediate cancellation of its related Tandem SARs to the
extent that the number of shares of Company Stock subject to such
Discretionary Option after such exercise, cancellation, termination or
expiration is less than the number of shares subject to such Tandem SARs.
Such Tandem SARs shall be canceled in the order in which they became
exercisable.
(3) Each Tandem SAR shall be exercisable in whole or in part;
provided, however, that no partial exercise of a Tandem SAR shall be for an
aggregate exercise price of less than $1,000. The partial exercise of a
Tandem SAR shall not cause the expiration, termination or cancellation of
the remaining portion thereof. Upon the partial exercise of a Tandem SAR,
the Award Agreement evidencing such Tandem SAR, its related Option and LSAR
shall be returned to the Participant exercising such Tandem SAR together
with the payment described in Section 9(a) hereof.
(4) Except as otherwise provided in an applicable Award Agreement,
during the lifetime of a Participant, each Tandem SAR granted to a
Participant shall be exercisable only by the Participant and no Tandem SAR
shall be assignable or transferable otherwise than by will or by the laws
of descent and distribution. The Committee may, in any applicable Award
Agreement evidencing a Tandem SAR, permit a Participant to transfer all or
some of the Tandem SAR to (i) the Participant's Immediate Family Members,
or (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members. Following any such transfer, any transferred Tandem SARs
shall continue to be subject to the same terms and conditions as were
applicable immediately prior to the transfer.
(5) A Tandem SAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no less than
five business days in advance of the effective date of the proposed
exercise. Such notice shall be accompanied by the applicable Award
Agreement evidencing the Tandem SAR, its related Discretionary Option and
LSARs related to such Discretionary Option, shall specify the number of
shares of Company Stock with respect to which the Tandem SAR is being
exercised and the effective date of the proposed exercise and shall be
signed by the Participant. The Participant may
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withdraw such notice at any time prior to the close of business on the
business day immediately preceding the effective date of the proposed
exercise, in which case such agreement shall be returned to him.
10. STAND-ALONE SARS
The Committee may grant Stand-Alone SARs pursuant to the Plan, which
Stand-Alone SARs shall be evidenced by Award Agreements in such form as the
Committee shall from time to time approve. Stand-Alone SARs shall comply with
and be subject to the following terms and conditions:
(a) Exercise Price
The exercise price of any Stand-Alone SAR granted under the Plan shall be
determined by the Committee at the time of the grant of such Stand-Alone SAR.
(b) Benefit Upon Exercise
(1) The exercise of a Stand-Alone SAR with respect to any number of
shares of Company Stock shall entitle a Participant to a cash payment, for
each such share, equal to the excess of (i) the Fair Market Value of a
share of Company Stock on the exercise date over (ii) the exercise price of
the Stand-Alone SAR.
(2) All payments under this Section 10(b) shall be made as soon as
practicable, but in no event later than five business days, after the
effective date of the exercise of the Stand-Alone SAR.
(c) Term and Exercise of Stand-Alone SARs
(1) Each Stand-Alone SAR shall be exercisable on such date or dates,
during such period and for such number of shares of Company Stock as shall
be determined by the Committee and set forth in the agreement evidencing
such Stand-Alone SAR; provided, however, that no Stand-Alone SAR shall be
exercisable after the expiration of ten years from the date such
Stand-Alone SAR was granted; and, provided, further, that each Stand-Alone
SAR shall be subject to earlier termination, expiration or cancellation as
provided in the Plan.
(2) Each Stand-Alone SAR may be exercised in whole or in part;
provided, however, that no partial exercise of a Stand-Alone SAR shall be
for an aggregate exercise price of less than $1,000. The partial exercise
of a Stand-Alone SAR shall not cause the expiration, termination or
cancellation of the remaining portion thereof. Upon the partial exercise of
a Stand-Alone SAR, the Award Agreement evidencing such Stand-Alone SAR,
marked with such notations as the Committee may deem appropriate to
evidence such partial exercise, shall be returned to the Participant
exercising such Stand-Alone SAR, together with the payment described in
Section 10(b)(1) or 10(b)(2) hereof.
(3) A Stand-Alone SAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no less than
five business days in advance of the effective date of the proposed
exercise. Such notice shall be accompanied by the applicable Award
Agreement evidencing the Stand-Alone SAR, shall specify the number of
shares of Company Stock with respect to which the Stand-Alone SAR is being
exercised and the effective date of the proposed exercise, and shall be
signed by the Participant. The Participant may withdraw such notice at any
time prior to the close of business on the business day immediately
preceding the effective date of the proposed exercise, in which case the
Award Agreement evidencing the Stand-Alone SAR shall be returned to him.
(4) Except as otherwise provided in an applicable Award Agreement,
during the lifetime of a Participant, each Stand-Alone SAR granted to a
Participant shall be exercisable only by the Participant and no Stand-Alone
SAR shall be assignable or transferable otherwise than by will or by the
laws of descent and distribution. The Committee may, in any applicable
Award Agreement evidencing a Stand-Alone SAR, permit a Participant to
transfer all or some of the Stand-Alone SAR to (i) the Participant's
Immediate Family Members, or (ii) a trust or trusts for the exclusive
benefit of such Immediate Family
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Members. Following any such transfer, any transferred Stand-Alone SARs
shall continue to be subject to the same terms and conditions as were
applicable immediately prior to the transfer.
(d) Effect of Termination of Employment
(1) Unless otherwise provided in an applicable Award Agreement, in the
event that the employment of a Participant with the Company shall terminate
for any reason other than Retirement, Cause, Disability or death (i)
Stand-Alone SARs granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until
the expiration of 90 days after such termination, on which date they shall
expire, and (ii) Stand-Alone SARs granted to such Participant, to the
extent that they were not exercisable at the time of such termination,
shall expire at the close of business on the date of such termination;
provided, however, that no Stand-Alone SAR shall be exercisable after the
expiration of its term.
(2) Unless otherwise provided in an applicable Award Agreement, in the
event that the employment of a Participant with the Company shall terminate
on account of the death of the Participant (i) Stand-Alone SARs granted to
such Participant, to the extent that they were exercisable at the time of
such termination, shall remain exercisable until the expiration of one year
after such termination, on which date they shall expire, and (ii)
Stand-Alone SARs granted to such Participant, to the extent that they were
not exercisable at the time of such termination, shall expire at the close
of business on the date of such termination; provided, however, that no
Stand-Alone SAR shall be exercisable after the expiration of its term.
(3) Unless otherwise provided in an applicable Award Agreement, in the
event that the employment of a Participant with the Company shall terminate
on account of the Retirement or Disability of the Participant (i)
Stand-Alone SARs granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until
the expiration of three years after such termination, on which date they
shall expire, and (ii) Stand-Alone SARs granted to such Participant, to the
extent that they were not exercisable at the time of such termination,
shall expire at the close of business on the date of such termination;
provided, however, that no Stand-Alone SAR shall be exercisable after the
expiration of its term.
(4) In the event of the termination of a Participant's employment for
Cause, all outstanding Stand-Alone SARs granted to such Participant shall
expire at the commencement of business on the effective date of such
termination.
(e) Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control, any Stand-Alone SAR granted
under the Plan and outstanding at such time shall become fully and immediately
exercisable and shall remain exercisable until its expiration, termination or
cancellation pursuant to the terms of the Plan.
11. RESTRICTED STOCK
The Committee may grant shares of Restricted Stock pursuant to the Plan.
Each grant of shares of Restricted Stock shall be evidenced by an Award
Agreement in such form and containing such terms and conditions and subject to
such agreements or understandings as the Committee shall from time to time
approve. Each grant of shares of Restricted Stock shall comply with and be
subject to the following terms and conditions:
(a) Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the Committee shall
establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with
respect to such shares. The Committee may divide such shares into classes and
assign a different Issue Date and/or Vesting Date for each class. Except as
provided in Sections 11(c) and 11(f) hereof, upon the occurrence of the Issue
Date with respect to a share of Restricted
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Stock, a share of Restricted Stock shall be issued in accordance with the
provisions of Section 11(d) hereof. Provided that all conditions to the vesting
of a share of Restricted Stock imposed pursuant to Section 11(b) hereof are
satisfied, and except as provided in Sections 11(c) and 11(f) hereof, upon the
occurrence of the Vesting Date with respect to a share of Restricted Stock, such
share shall vest and the restrictions of Section 11(c) hereof shall cease to
apply to such share.
(b) Conditions to Vesting
At the time of the grant of shares of Restricted Stock, the Committee may
impose such restrictions or conditions, not inconsistent with the provisions
hereof, to the vesting of such shares as it, in its absolute discretion, deems
appropriate. By way of example and not by way of limitation, the Committee may
require, as a condition to the vesting of any class or classes of shares of
Restricted Stock, that the Participant or the Company achieve such performance
criteria as the Committee may specify at the time of the grant of such shares.
(c) Restrictions on Transfer Prior to Vesting
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the transferee with
any interest or right in or with respect to such share, but immediately upon any
attempt to transfer such rights, such share, and all of the rights related
thereto, shall be forfeited by the Participant and the transfer shall be of no
force or effect.
(d) Issuance of Certificates
(1) Except as provided in Sections 11(c) or 11(f) hereof, reasonably
promptly after the Issue Date with respect to shares of Restricted Stock,
the Company shall cause to be issued a stock certificate, registered in the
name of the Participant to whom such shares were granted, evidencing such
shares; provided, that the Company shall not cause to be issued such a
stock certificate unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear
the following legend:
The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including forfeiture provisions and
restrictions against transfer) contained in the Twinlab
Corporation 2000 Stock Incentive Plan and an Agreement entered
into between the registered owner of such shares and Twinlab
Corporation. A copy of the Plan and Agreement is on file in
the office of the Secretary of Twinlab Corporation, 150 Motor
Parkway, Hauppauge, New York 10004.
Such legend shall not be removed from the certificate evidencing such
shares until such shares vest pursuant to the terms hereof.
(2) Each certificate issued pursuant to Section 11(d)(1) hereof,
together with the stock powers relating to the shares of Restricted Stock
evidenced by such certificate, shall be deposited by the Company with a
custodian designated by the Company (which custodian may be the Company).
The Company shall cause such custodian to issue to the Participant a
receipt evidencing the certificates held by it which are registered in the
name of the Participant.
(e) Consequences Upon Vesting
Upon the vesting of a share of Restricted Stock pursuant to the terms
hereof, the restrictions of Section 11(c) hereof shall cease to apply to such
share. Reasonably promptly after a share of Restricted Stock vests pursuant to
the terms hereof, the Company shall cause to be issued and delivered to the
Participant to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Section 11(d)(1) hereof, together with
any other property of the Participant held by the custodian pursuant to Section
18(b) hereof.
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(f) Effect of Termination of Employment
(1) In the event that the employment of a Participant with the Company
shall terminate for any reason (other than a termination that is, or is
deemed to have been, for Cause) prior to the vesting of shares of
Restricted Stock granted to such Participant, a proportion of such shares,
to the extent not forfeited or canceled on or prior to such termination
pursuant to any provision hereof, shall vest on the date of such
termination. The proportion referred to in the preceding sentence shall
initially be determined by the Committee at the time of the grant of such
shares of Restricted Stock and may be based on the achievement of any
conditions imposed by the Committee with respect to such shares pursuant to
Section 11(b). Such proportion may be equal to zero. In the absence of any
such provision in an agreement evidencing an award of Restricted Stock, the
termination of a Participant's employment with the Company for any reason
(including death or Disability) shall cause the immediate forfeiture of all
shares of Restricted Stock that have not vested as of the date of such
termination.
(2) In the event a Participant's employment is or is deemed to have
been terminated for Cause, all shares of Restricted Stock granted to such
Participant that have not vested as of the effective date of such
termination immediately shall be forfeited.
(g) Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of Restricted Stock
which have not theretofore vested (including those with respect to which the
Issue Date has not yet occurred), or been canceled or forfeited pursuant to any
provision hereof, immediately shall vest.
12. PHANTOM STOCK
The Committee may grant shares of Phantom Stock pursuant to the Plan. Each
grant of shares of Phantom Stock shall be evidenced by an agreement in such form
as the Committee shall from time to time approve. Each grant of shares of
Phantom Stock shall comply with and be subject to the following terms and
conditions:
(a) Vesting Date
At the time of the grant of shares of Phantom Stock, the Committee shall
establish a Vesting Date or Vesting Dates with respect to such shares. The
Committee may divide such shares into classes and assign a different Vesting
Date for each class. Provided that all conditions to the vesting of a share of
Phantom Stock imposed pursuant to Section 12(c) hereof are satisfied, and except
as provided in Section 12(d) hereof, upon the occurrence of the Vesting Date
with respect to a share of Phantom Stock, such share shall vest.
(b) Benefit Upon Vesting
Upon the vesting of a share of Phantom Stock, a Participant shall be
entitled to receive, within 30 days after the date on which such share vests, an
amount in cash in a lump sum equal to the sum of (i) the Fair Market Value of a
share of Company Stock on the date on which such share of Phantom Stock vests
and (ii) the aggregate amount of cash dividends paid with respect to a share of
Company Stock the record date for which occurs during the period commencing on
the date on which the share of Phantom Stock was granted and terminating on the
date on which such share vests.
(c) Conditions to Vesting
At the time of the grant of shares of Phantom Stock, the Committee may
impose such restrictions or conditions, not inconsistent with the provisions
hereof, to the vesting of such shares as it, in its absolute discretion, deems
appropriate. By way of example and not by way of limitation, the Committee may
require, as a condition to the vesting of any class or classes of shares of
Phantom Stock, that the Participant or the Company achieve such performance
criteria as the Committee may specify at the time of the grant of such shares of
Phantom Stock.
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(d) Effect of Termination of Employment
(1) In the event that the employment of a Participant with the Company
shall terminate for any reason (other than a termination that is, or is
deemed to have been, for Cause) prior to the vesting of shares of Phantom
Stock granted to such Participant, a proportion of such shares, to the
extent not forfeited or canceled on or prior to such termination pursuant
to any provision hereof, shall vest on the date of such termination. The
proportion referred to in the preceding sentence initially shall be
determined by the Committee at the time of the grant of such shares of
Phantom Stock and may be based on the achievement of any conditions imposed
by the Committee with respect to such shares pursuant to Section 12(c).
Such proportion may be equal to zero. In the absence of any such provision
in an agreement evidencing an award of Phantom Stock, the termination of a
Participant's employment with the Company for any reason (including death
or Disability) shall cause the immediate forfeiture of all shares of
Phantom Stock that have not vested as of the date of such termination.
(2) In the event a Participant's employment is or is deemed to have
been terminated for Cause, all shares of Phantom Stock granted to such
Participant which have not vested as of the date of such termination
immediately shall be forfeited.
(e) Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of Phantom Stock
which have not theretofore vested, or been canceled or forfeited pursuant to any
provision hereof, immediately shall vest.
13. STOCK BONUSES
The Committee may grant Stock Bonuses in such amounts as it shall determine
from time to time. A Stock Bonus shall be paid at such time (including a future
date selected by the Committee at the time of grant) and subject to such
conditions as the Committee shall determine at the time of the grant of such
Stock Bonus. By way of example and not by way of limitation, the Committee may
require, as a condition to the payment of a Stock Bonus, that the Participant or
the Company achieve such performance criteria as the Committee may specify at
the time of the grant. Certificates for shares of Company Stock granted as a
Stock Bonus shall be issued in the name of the Participant to whom such grant
was made and delivered to such Participant as soon as practicable after the date
on which such Stock Bonus is required to be paid. Prior to the date on which a
Stock Bonus awarded hereunder is required to be paid, such award shall
constitute an unfunded, unsecured promise by the Company to distribute Company
Stock in the future.
14. CASH BONUSES
The Committee may, in its absolute discretion, in connection with any grant
of Restricted Stock or Stock Bonus or at any time thereafter, grant a cash
bonus, payable promptly after the date on which the Participant is required to
recognize income for federal income tax purposes in connection with such grant
of Restricted Stock or Stock Bonus, in such amounts as the Committee shall
determine from time to time; provided, however, that in no event shall the
amount of a Cash Bonus exceed the Fair Market Value of the related shares of
Restricted Stock or Stock Bonus on such date. A Cash Bonus shall be subject to
such conditions as the Committee shall determine at the time of the grant of
such Cash Bonus.
15. GRANT OF DIVIDEND EQUIVALENT RIGHTS
The Committee may, in its absolute discretion, in connection with any
Incentive Award (other than an award of shares of Phantom Stock), grant a
Dividend Equivalent Right entitling the Participant to receive amounts equal to
the ordinary dividends that would be paid on the shares of Company Stock covered
by such Incentive Award if such shares then were outstanding, during the time
such Incentive Award is outstanding and (a) in the case of Options and SARs,
during the time such Options or SARs are unexercised or (b) in the case of
Restricted Stock and Stock Bonuses, prior to the issue date for the related
shares of Company Stock. The Committee shall determine whether any Dividend
Equivalent Rights shall be payable in cash, in shares of Company Stock or in
another form, whether they shall be conditioned upon the exercise of any related
Option
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or SAR, the time or times at which they shall be made, and such other terms and
conditions as the Committee shall deem appropriate. No Dividend Equivalent Right
shall be conditioned on the exercise of any Option or SAR if and to the extent
such Dividend Equivalent Right would cause the compensation payable as a result
of the related Option or SAR not to constitute performance-based compensation
under Section 162(m)(4)(C) of the Code.
16. OTHER EQUITY-BASED AWARDS
The Committee may grant other types of equity-based awards in such amounts
and subject to such terms and conditions, as the Committee shall in its
discretion determine, subject to the provisions of the Plan. Such Incentive
Awards may entail the transfer of actual shares of Company Stock to
Participants, or payment in cash or otherwise of amounts based on the value of
shares of Company Stock.
17. RIGHT OF RECAPTURE
If at any time within one year after the date on which a Participant
exercises an Option (including any LSAR or Tandem-SAR related thereto),
Stand-Alone SAR, or Dividend Equivalent Right, or on which Restricted Stock
vests, or which is the vesting date of Phantom Stock, or on which a Stock Bonus
or a Cash Bonus was granted to a Participant, or on which income is realized by
a Participant in connection with any other stock-based award (each of which
events is a "realization event"), the Committee determines in its discretion
that the Company has been materially harmed by the Participant, whether such
harm (a) results in the Participant's termination or deemed termination of
employment for Cause or (b) results from any activity of the Participant
determined by the Committee to be in competition with any activity of the
Company, or otherwise inimical, contrary or harmful to the interests of the
Company (including, but not limited to, accepting employment with or serving as
a consultant, adviser or in any other capacity to an entity that is in
competition with or acting against the interests of the Company), then any gain
realized by the participant from the realization event shall be paid by the
Participant to the Company upon notice from the Company. Such gain shall be
determined as of the date of the realization event, without regard to any
subsequent change in the Fair Market Value of a share of Common Stock. The
Company shall have the right to offset such gain against any amounts otherwise
owed to the participant by the Company (whether as wages, vacation pay, or
pursuant to any benefit plan or other compensatory arrangement).
18. ADJUSTMENT UPON CHANGES IN COMPANY STOCK
(a) Shares Available for Grants
Subject to any required action by the stockholders of the Company, in the
event of any change in the number of shares of Company Stock outstanding by
reason of any stock dividend or split, reverse stock split, recapitalization,
merger, consolidation, combination or exchange of shares or similar corporate
change, the maximum number of shares of Company Stock with respect to which the
Committee may grant Incentive Awards under Section 3 hereof shall be
appropriately adjusted by the Committee. In the event of any change in the
number of shares of Company Stock outstanding by reason of any other event or
transaction, the Committee may, but need not, make such adjustments in the
number and class of shares of Company Stock with respect to which Incentive
Awards may be granted under Section 3 hereof as the Committee may deem
appropriate. Any such adjustment pursuant to this Section 18(a) shall be made by
the Committee, whose determination shall be final, binding and conclusive.
(b) Outstanding Restricted Stock and Phantom Stock
Unless the Committee in its absolute discretion otherwise determines, any
securities or other property (including dividends paid in cash) received by a
Participant with respect to a share of Restricted Stock, the Issue Date with
respect to which occurs prior to such event, but which has not vested as of the
date of such event, as a result of any dividend, stock split, reverse stock
split, recapitalization, merger, consolidation, combination, exchange of shares
or otherwise will not vest until such share of Restricted Stock vests, and shall
be promptly deposited with the custodian designated pursuant to Section 11(d)(2)
hereof.
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The Committee may, in its absolute discretion, adjust any grant of shares
of Restricted Stock, the Issue Date with respect to which has not occurred as of
the date of the occurrence of any of the following events, or any grant of
shares of Phantom Stock, to reflect any dividend, stock split, reverse stock
split, recapitalization, merger, consolidation, combination, exchange of shares
or similar corporate change as the Committee may deem appropriate to prevent the
enlargement or dilution of rights of Participants under the grant.
(c) Outstanding Options, LSARs, Tandem SARs, Stand-Alone SARs and Dividend
Equivalent Rights -- Increase or Decrease in Issued Shares Without
Consideration
Subject to any required action by the stockholders of the Company, in the
event of any increase or decrease in the number of issued shares of Company
Stock resulting from a subdivision or consolidation of shares of Company Stock
or the payment of a stock dividend (but only on the shares of Company Stock), or
any other increase or decrease in the number of such shares effected without
receipt of consideration by the Company, the Committee shall proportionally
adjust the number of shares of Company Stock subject to each outstanding Option,
LSAR, Tandem SAR and Stand-Alone SAR, and the exercise price-per-share of
Company Stock of each such Option, LSAR, Tandem SAR and Stand-Alone SAR and the
number of any related Dividend Equivalent Rights. Any such adjustment pursuant
to this Section 18(c) shall be made by the Committee, whose determination shall
be final, binding and conclusive.
(d) Outstanding Options, LSARs Tandem SARs, and Stand-Alone SARs and Dividend
Equivalent Rights -- Certain Mergers
Subject to any required action by the stockholders of the Company, in the
event that the Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which the holders
of shares of Company Stock receive securities of another corporation), each
Option, LSAR, Tandem SAR, Stand-Alone SAR and Dividend Equivalent Right
outstanding on the date of such merger or consolidation shall pertain to and
apply to the securities which a holder of the number of shares of Company Stock
subject to such Option, LSAR, Tandem SAR, Stand-Alone SAR or Dividend Equivalent
Right would have received in such merger or consolidation.
(e) Outstanding Options, LSARs, Tandem SARs, Stand-Alone SARs and Dividend
Equivalent Rights -- Certain Other Transactions
In the event of (1) a dissolution or liquidation of the Company, (2) a sale
of all or substantially all of the Company's assets, (3) a merger or
consolidation involving the Company in which the Company is not the surviving
corporation or (4) a merger or consolidation involving the Company in which the
Company is the surviving corporation but the holders of shares of Company Stock
receive securities of another corporation and/or other property, including cash,
the Committee shall, in its absolute discretion, have the power to:
(i) cancel, effective immediately prior to the occurrence of such
event, each Option (including each LSAR, Tandem-SAR and Dividend
Equivalent Rights -- related thereto) and Stand-Alone SAR (including
each Dividend Equivalent Right related thereto) outstanding immediately
prior to such event (whether or not then exercisable), and, in full
consideration of such cancellation, pay to the Participant to whom such
Option or Stand-Alone SAR was granted an amount in cash, for each share
of Company Stock subject to such Option or Stand-Alone SAR,
respectively, equal to the excess of (A) the value, as determined by the
Committee in its absolute discretion, of the property (including cash)
received by the holder of a share of Company Stock as a result of such
event over (B) the exercise price of such Option or Stand-Alone SAR; or
(ii) provide for the exchange of each Option (including any related
LSAR, Tandem SAR or Dividend Equivalent Rights and Stand-Alone SAR
(including each Dividend Equivalent Right related thereto) outstanding
immediately prior to such event (whether or not then exercisable) for an
option on or stock appreciation right with respect to, as appropriate,
some or all of the property which a holder of the number of shares of
Company Stock subject to such Option or Stand-Alone SAR would have
received in such transaction and, incident thereto, make an equitable
adjustment as
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determined by the Committee in its absolute discretion in the exercise
price of the option or stock appreciation right, or the number of shares
or amount of property subject to the option or stock appreciation right
or, if appropriate, provide for a cash payment to the Participant to
whom such Option or Stand-Alone SAR was granted in partial consideration
for the exchange of the Option or Stand-Alone SAR.
(f) Outstanding Options, LSARs, Tandem SARs, and Dividend Equivalent
Rights -- and Stand-Alone SARs Other Changes
In the event of any change in the capitalization of the Company or a
corporate change other than those specifically referred to in Sections 11(b),
(c) or (d) hereof, the Committee may, in its absolute discretion, make such
adjustments in the number and class of shares subject to Options, LSARs, Tandem
SARs, Stand-Alone SARs and Dividend Equivalent Rights outstanding on the date on
which such change occurs and in the per-share exercise price of each such
Option, LSAR, Tandem SAR and Stand-Alone SAR as the Committee may consider
appropriate to prevent dilution or enlargement of rights. In addition, if and to
the extent the Committee determines it is appropriate, the Committee may elect
to cancel each Option (including each LSAR, Tandem-SAR or Dividend Equivalent
Right related thereto) and Stand-Alone SAR (including each Dividend Equivalent
Right related thereto) outstanding immediately prior to such event (whether or
not then exercisable), and, in full consideration of such cancellation, pay to
the Participant to whom such Option or Stand-Alone SAR was granted an amount in
cash, for each share of Company Stock subject to such Option or Stand-Alone SAR,
respectively, equal to the excess of (A) the Fair Market Value of Company Stock
on the date of such cancellation over (B) the exercise price of such Option or
Stand-Alone SAR.
(g) Effect of Loss of Affiliate Status
If an entity ceases to be an Affiliate because the Company sells its
interest in such entity to another party or parties, such event shall constitute
a termination of employment from the Company and its Affiliates by Participants
employed by such entity as of the date it ceases to be an Affiliate. The
Committee may, but need not, adjust the provisions of the Plan related to the
expiration of any Incentive Awards not yet exercisable at termination of
employment, as it considers appropriate in connection with the specific event
resulting in loss of Affiliate status.
(h) No Other Rights
Except as expressly provided in the Plan, no Participant shall have any
rights by reason of any subdivision or consolidation of shares of stock of any
class, the payment of any dividend, any increase or decrease in the number of
shares of stock of any class or any dissolution, liquidation, merger or
consolidation of the Company or any other corporation. Except as expressly
provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Company Stock subject to an Incentive Award or the exercise
price of any Option, LSAR, Tandem SAR or Stand-Alone SAR.
19. RIGHTS AS A STOCKHOLDER
No person shall have any rights as a stockholder with respect to any shares
of Company Stock covered by or relating to any Incentive Award granted pursuant
to this Plan until the date that the Participant becomes the registered owner of
such shares. Except as otherwise expressly provided in Section 18 hereof, no
adjustment to any Incentive Award shall be made for dividends or other rights
for which the record date occurs prior to the date such stock certificate is
issued.
20. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD
Nothing contained in the Plan or any Incentive Award shall confer upon any
Participant 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, subject to
the terms of any separate employment agreement to the contrary, at any time to
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terminate such employment or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Incentive
Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time nor preclude
the Committee from making subsequent grants to such Participant or any other
Participant or other person.
21. SECURITIES MATTERS
(a) The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of any interests in the Plan or
any shares of Company Stock to be issued hereunder or to effect similar
compliance under any state laws. Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued or
delivered any certificates evidencing shares of Company Stock pursuant to
the Plan unless and until the Company is advised by its counsel that the
issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authority and the requirements
of any securities exchange on which shares of Company Stock are traded. The
Committee may require, as a condition of the issuance and delivery of
certificates evidencing shares of Company Stock pursuant to the terms
hereof, that the recipient of such shares make such covenants, agreements
and representations, and that such certificates bear such legends, as the
Committee, in its sole discretion, deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall be effective
only at such time as counsel to the Company shall have determined that the
issuance and delivery of shares of Company Stock pursuant to such exercise
is in compliance with all applicable laws, regulations of governmental
authority and the requirements of any securities exchange on which shares
of Company Stock are traded. The Committee may, in its sole discretion,
defer the effectiveness of any exercise of an Option granted hereunder in
order to allow the issuance of shares of Company Stock pursuant thereto to
be made pursuant to registration or an exemption from registration or other
methods for compliance available under federal or state securities laws.
The Committee shall inform the Participant in writing of its decision to
defer the effectiveness of the exercise of an Option granted hereunder.
During the period that the effectiveness of the exercise of an Option has
been deferred, the Participant may, by written notice, withdraw such
exercise and obtain a refund of any amount paid with respect thereto.
22. WITHHOLDING TAXES
(a) Cash Remittance
Whenever shares of Company Stock are to be issued upon the exercise of an
Option, the Company shall have the right to require the Participant to remit to
the Company, in cash, an amount sufficient to satisfy the federal, state and
local withholding tax requirements, if any, attributable to such exercise,
occurrence or payment prior to the delivery of any certificate or certificates
for such shares. In addition, upon the exercise of an LSAR, Tandem SAR or
Stand-Alone SAR, the grant of a Cash Bonus or the making of a payment with
respect to a share of Phantom Stock or a Dividend Equivalent Right, the Company
shall have the right to withhold from any cash payment required to be made
pursuant thereto an amount sufficient to satisfy the federal, state and local
withholding tax requirements, if any, attributable to such exercise or grant.
(b) Stock Remittance
At the election of the Participant, subject to the approval of the
Committee, when shares of Company Stock are to be issued upon the exercise of an
Option, the occurrence of the Issue Date or the Vesting Date with respect to a
share of Restricted Stock or the grant of a Stock Bonus, or a payment in
connection with a Dividend Equivalent Right, in lieu of the remittance required
by Section 22(a) hereof, the Participant may tender to the Company a number of
shares of Company Stock, the Fair Market Value of which at the tender date the
Committee determines to be sufficient to satisfy the federal, state and local
withholding tax requirements, if any, attributable to such exercise, occurrence,
grant or payment and not greater than the
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Participant's estimated total federal, state and local tax obligations
associated with such exercise, occurrence, grant or payment.
(c) Stock Withholding
The Company shall have the right, when shares of Company Stock are to be
issued upon the exercise of an Option, the occurrence of the Issue Date or the
Vesting Date with respect to a share of Restricted Stock or the grant of a Stock
Bonus, or a payment in connection with a Dividend Equivalent Right, in lieu of
requiring the remittance required by Section 22(a) hereof, to withhold a number
of such shares, the Fair Market Value of which at the exercise date the
Committee determines to be sufficient to satisfy the federal, state and local
withholding tax requirements, if any, attributable to such exercise, occurrence,
grant or payment and is not greater than the Participant's estimated total
federal, state and local tax obligations associated with such exercise,
occurrence, grant or payment.
23. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors may, at any time, suspend or discontinue the Plan or
revise or amend it in any respect whatsoever; provided, however, that if and to
the extent required under Section 422 of the Code (if and to the extent that the
Board of Directors deems it appropriate to comply with Section 422) and if and
to the extent required to treat some or all of the Incentive Awards as
"performance-based compensation" within the meaning of Section 162(m) of the
Code (if and to the extent that the Board of Directors deems it appropriate to
meet such requirements), no amendment shall be effective without the approval of
the stockholders of the Company, that (i) except as provided in Section 16
hereof, increases the number of shares of Company Stock with respect to which
Incentive Awards may be issued under the Plan, (ii) modifies the class of
individuals eligible to participate in the Plan or (iii) materially increases
the benefits accruing to individuals pursuant to the Plan. Nothing herein shall
restrict the Committee's ability to exercise its discretionary authority
hereunder pursuant to Section 4 hereof, which discretion may be exercised
without amendment to the Plan. No action under this Section 23 may, without the
consent of a Participant, reduce the Participant's rights under any previously
granted and outstanding Incentive Award except to the extent that the Board of
Directors determines that such amendment is necessary or appropriate to prevent
such Incentive Awards from constituting "applicable employee remuneration"
within the meaning of Section 162(m) of the Code.
24. NO OBLIGATION TO EXERCISE
The grant to a Participant of an Option, LSAR, Tandem SAR or Stand-Alone
SAR shall impose no obligation upon such Participant to exercise such Option,
LSAR, Tandem SAR or Stand-Alone SAR.
25. TRANSFERS UPON DEATH
Upon the death of a Participant, outstanding Incentive Awards granted to
such Participant may be exercised only by the executors or administrators of the
Participant's estate or by any person or persons who shall have acquired such
right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Incentive Award,
or the right to exercise any Incentive Award, shall be effective to bind the
Company unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may
deem necessary to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the Incentive
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgments made by the Participant in connection with the grant of
the Incentive Award. In the event that at any time any doubt exists as to the
right of any person to exercise or receive a payment under an Incentive Award,
the Committee shall be entitled, in its discretion, to delay such exercise or
payment until it is satisfied that such right has been confirmed (which may, but
need not be, by order of a court of competent jurisdiction), or to permit such
exercise or make payment only upon receipt of a bond or similar indemnification
(in such amount and in such form as is satisfactory to the Committee). Except as
provided in this Section 25 or otherwise provided in the Plan or any applicable
Award Agreement with respect to transfers to Immediate Family Members or trusts
for the benefit of Immediate Family Members, no Incentive Award
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shall be transferable, and Incentive Awards shall be exercisable only by a
Participant during the Participant's lifetime.
26. EXPENSES AND RECEIPTS
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.
27. LIMITATIONS IMPOSED BY SECTION 162(M)
Notwithstanding any other provision hereunder, prior to a Change in
Control, if and to the extent that the Committee determines the Company's
federal tax deduction in respect of an Incentive Award may be limited as a
result of Section 162(m) of the Code, the Committee may take the following
actions:
(a) With respect to Options, Tandem SARs, Stand-Alone SARs or Dividend
Equivalent Rights, the Committee may delay the payment in respect of such
Options, Tandem SARs, Stand-Alone SARs or Dividend Equivalent Rights until
a date that is within 30 days after the earlier to occur of (i) the date
that compensation paid to the Participant no longer is subject to the
deduction limitation under Section 162(m) of the Code and (ii) the
occurrence of a Change in Control. In the event that a Participant
exercises an Option, Tandem SAR or Stand-Alone SAR or would receive a
payment in respect of a Dividend Equivalent Right at a time when the
Participant is a "covered employee," and the Committee determines to delay
the payment in respect of such any Incentive Award, the Committee shall
credit cash or, in the case of an amount payable in Company Stock, the Fair
Market Value of the Company Stock, payable to the Participant to a book
account. The Participant shall have no rights in respect of such book
account and the amount credited thereto shall not be transferable by the
Participant other than by will or laws of descent and distribution. The
Committee may credit additional amounts to such book account as it may
determine in its sole discretion. Any book account created hereunder shall
represent only an unfunded unsecured promise by the Company to pay the
amount credited thereto to the Participant in the future.
(b) With respect to Restricted Stock, Phantom Stock and Stock Bonuses,
the Committee may require the Participant to surrender to the Committee any
certificates with respect to Restricted Stock and Stock Bonuses and
agreements with respect to Phantom Stock, in order to cancel the awards of
such Restricted Stock, Phantom Stock and Stock Bonuses (and any related
Cash Bonuses or Dividend Equivalent Rights). In exchange for such
cancellation, the Committee shall credit to a book account a cash amount
equal to the Fair Market Value of the shares of Company Stock subject to
such awards. The amount credited to the book account shall be paid to the
Participant within 30 days after the earlier to occur of (i) the date that
compensation paid to the Participant no longer is subject to the deduction
limitation under Section 162(m) of the Code and (ii) the occurrence of a
Change in Control. The Participant shall have no rights in respect of such
book account and the amount credited thereto shall not be transferable by
the Participant other than by will or laws of descent and distribution. The
Committee may credit additional amounts to such book account as it may
determine in its sole discretion. Any book account created hereunder shall
represent only an unfunded unsecured promise by the Company to pay the
amount credited thereto to the Participant in the future.
28. FAILURE TO COMPLY
In addition to the remedies of the Company elsewhere provided for herein, a
failure by a Participant (or beneficiary or permitted transferee) to comply with
any of the terms and conditions of the Plan or the agreement executed by such
Participant (or beneficiary or permitted transferee) evidencing an Incentive
Award, unless such failure is remedied by such Participant (or beneficiary or
permitted transferee) within ten days after having been notified of such failure
by the Committee, shall be grounds for the cancellation and forfeiture of such
Incentive Award, in whole or in part, as the Committee, in its absolute
discretion, may determine.
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29. EFFECTIVE DATE OF PLAN
The Plan was adopted by the Board of Directors on February 18, 2000,
subject to approval by the stockholders of the Company. Incentive Awards may be
granted under the Plan at any time prior to the receipt of such stockholder
approval; provided, however, that each such grant shall be subject to such
approval. Without limitation on the foregoing, no Option, LSAR, Tandem SAR or
Stand-Alone SAR may be exercised prior to the receipt of such approval, no share
certificate shall be issued pursuant to a grant of Restricted Stock or Stock
Bonus prior to the receipt of such approval and no Cash Bonus or payment with
respect to a Dividend Equivalent Right or share of Phantom Stock shall be paid
prior to the receipt of such approval. If the Plan is not so approved on or
before February 18, 2001, then the Plan and all Incentive Awards then
outstanding under the Plan shall forthwith automatically terminate and be of no
force or effect.
30. TERM OF THE PLAN
The right to grant Incentive Awards under the Plan will terminate upon the
expiration of 10 years after the date the Plan was adopted.
31. APPLICABLE LAW
Except to the extent preempted by any applicable federal law, the Plan will
be construed and administered in accordance with the laws of the State of New
York, without reference to the principles of conflicts of law.
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TWINLAB CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of TWINLAB CORPORATION (the "Company")
hereby appoints Brian Blechman and Neil Blechman, and each of them, proxies of
the undersigned, with full power of substitution to each, to vote all shares of
the Company which the undersigned is entitled to vote at the Company's Annual
Meeting to be held at the Media Center located at 150 Motor Parkway, Hauppauge,
New York, on the 9th of May, 2000, at 12:00 noon, local time, and at any
adjournments thereof, hereby ratifying all that said proxies or their
substitutes may do by virtue hereof, and the undersigned authorizes and
instructs said proxies or their substitutes to vote as follows:
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS: To elect the nominees listed below to the Board
of Directors;
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY
(except as marked to the contrary below) |_| to vote for all nominees listed below |_|
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.) BRIAN
BLECHMAN, DEAN BLECHMAN, NEIL BLECHMAN, ROSS BLECHMAN, STEVE BLECHMAN,
STEPHEN L. WELLING, JOHN G. DANHAKL, JONATHAN D. SOKOLOFF, WILLIAM U.
WESTERFIELD AND ROBERT S. APATOFF.
2. APPROVAL OF THE TWINLAB CORPORATION MANAGEMENT INCENTIVE BONUS PLAN;
|_| FOR |_| AGAINST |_| ABSTAIN
3. APPROVAL OF THE TWINLAB CORPORATION 2000 STOCK INCENTIVE PLAN;
|_| FOR |_| AGAINST |_| ABSTAIN
4. APPROVAL OF AUDITORS: To ratify the appointment of Deloitte & Touche
LLP as independent auditors for the Company for the fiscal year ending
December 31, 2000;
|_| FOR |_| AGAINST |_| ABSTAIN
</TABLE>
and in their discretion, upon any other matters that may properly come before
the meeting or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED UNDER
"ELECTION OF DIRECTORS" AND FOR PROPOSALS 2, 3 AND 4.
THIS PROXY WHEN PROPERLY EXECUTED SHALL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IN THE ABSENCE OF DIRECTION, THIS PROXY
SHALL BE VOTED FOR ALL NOMINEES LISTED UNDER "ELECTION OF DIRECTORS" AND FOR
PROPOSALS 2, 3 AND 4.
(Continued and to be dated and signed on the other side.)
<PAGE> 65
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Receipt of the Notice of Annual Meeting and of the Proxy Statement and Annual
Report of the Company accompanying the same is hereby acknowledged.
Dated:___________________________, 2000
_______________________________________
(SIGNATURE OF STOCKHOLDER)
_______________________________________
(SIGNATURE OF STOCKHOLDER)
Please sign exactly as your name(s)
appears on your stock certificate. If
signing as attorney, executor,
administrator, trustee or guardian,
please indicate the capacity in which
signing. When signing as joint tenants,
all parties to the joint tenancy must
sign. When the proxy is given by a
corporation, it should be signed by an
authorized officer.
I plan to attend the Annual Meeting in person: |_| Yes |_| No
