U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
[ ] Preliminary Proxy Statement [ ] Confidential For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e) (2))
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
VACU-DRY COMPANY
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Consent Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total Fee Paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a) (2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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VACU-DRY COMPANY
100 Stony Point Road, Suite 200
Santa Rosa, California 95401
--------------------------
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS AND PROXY STATEMENT
November 22, 1999
---------------------------
To the Shareholders of Vacu-dry Company:
Notice is hereby given that the Annual Meeting of the Shareholders of
Vacu-dry Company (the "Company") will be held on Monday, November 22, 1999 at
9:00 a.m., at the Sheraton Hotel located at 625 El Camino Real, Palo Alto,
California for the following purposes:
1. To amend Article ONE of the Articles of Incorporation to change the name
of the Company.
2. To amend Article TWO of the Articles of Incorporation pertaining to the
corporate purposes and powers of the Company.
3. To amend the By-Laws to provide for a change in the authorized number of
directors.
4. To elect four directors to serve until the 2000 Annual Meeting of
Shareholders or until their respective successors are elected and
qualified.
5. To amend the Company's 1996 Stock Option Plan to increase the shares
available for issuance under the Plan by an aggregate of 185,000 shares
to 275,000 shares.
6. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on October 27, 1999,
as the record date for determining which Shareholders will be entitled to
receive notice of, and to vote at, the meeting or any adjournment thereof.
By Order of the Board of Directors,
William Burgess
Secretary
Santa Rosa, California
November 1, 1999
- -------------------------------------------------------------------------------
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU
ARE URGED TO VOTE, SIGN, AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE
ENCLOSED FOR THAT PURPOSE.
- -------------------------------------------------------------------------------
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VACU-DRY COMPANY
100 Stony Point Road, Suite 200
Santa Rosa, California 95401
--------------------------
PROXY STATEMENT
For Annual Meeting of
Shareholders November
22, 1999, at 9:00 a.m.
GENERAL
This Proxy Statement is furnished by the Board of Directors of Vacu-dry
Company (the "Company") to solicit Shareholder Proxies to be voted at the Annual
Meeting of Shareholders to be held on Monday, November 22, 1999, at 9:00 a.m.,
at the Sheraton Hotel located at 625 El Camino Real, Palo Alto, California, and
at any adjournment thereof. Any Shareholder giving a Proxy may revoke it any
time before it is voted by filing with the Secretary of the Company either a
written revocation or another duly executed Proxy bearing a later date. Proxies
may also be revoked by any Shareholder present at the meeting who expresses a
desire to vote his or her shares in person. This mailing of Proxy Statements and
Proxy cards commenced approximately November 2, 1999.
VOTING
The Board of Directors has fixed the close of business on October 27,
1999 as the Record Date for the determination of Shareholders entitled to
receive notice of, and to vote at, the Annual Meeting or any adjournment
thereof. As of October 11, 1999, 1,520,087 shares of common stock were
outstanding, and no shares of any other class of stock were outstanding.
In all actions taken by Company Shareholders, other than the election
of Directors, each Shareholder is entitled to one vote for each share held on
the record date. In the election of Directors, however, Shareholders have
cumulative voting rights, which means that each Shareholder is entitled to a
number of votes equal to the number of his or her shares multiplied by the
number of Directors to be elected (four). A Shareholder may cast all of his or
her votes for a single candidate, or may distribute votes among as many
candidates as he or she may see fit. No Shareholder may cumulate votes for a
candidate, however, unless the name(s) of the candidate(s) have been placed in
nomination prior to the voting and the Shareholder has given notice at the
Meeting, prior to the voting, of the intention to cumulate votes. If one
Shareholder has already given such a notice, all Shareholders may cumulate their
votes for candidates in nomination without further notice.
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this statement has
the power to revoke such proxy at any time before its exercise. The proxy may be
revoked by filing with the Secretary of the Company at the Company's principal
executive office an instrument of revocation or a duly executed proxy bearing a
later date, or by filing written notice of revocation with the secretary of the
meeting prior to the voting of the proxy or by voting the shares subject to the
proxy by written ballot.
SOLICITATION
The Company will bear the entire cost of solicitation, including
preparation, assembly, printing, and mailing of this Proxy Statement, the Proxy
card, and any additional material furnished to Shareholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their
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names which are beneficially owned by others to forward to such beneficial
owners. In addition, the Company may reimburse such persons for their costs of
forwarding the solicitation material to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram, or
personal solicitation by directors, officers, or employees of the Company. No
additional compensation will be paid for any such services. Except as described
above, the Company does not intend to solicit proxies other than by mail. The
Company has also retained the firm of D. F. King to assist in the solicitation
of proxies at a cost of approximately $5,000 plus reasonable out-of-pocket
expenses.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of Shareholders that are intended to be presented at the
Company's 2000 Annual Meeting of Shareholders must be received by the Company no
later than June 1, 2000 in order to be included in the proxy statement and proxy
relating to that meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
A beneficial owner of a security includes any person who directly or
indirectly has or shares voting power and/or investment power with respect to
such security. Voting power is the power to vote or direct the voting of
securities, and investment power is the power to dispose of or direct the
disposition of securities. The following tables, based in part upon information
supplied by officers, directors and principal Shareholders, set forth certain
information regarding the ownership of the Company's voting securities as of
September 30, 1999 by (i) all those known by the Company to be beneficial owners
of more than five percent of any class of the Company's voting securities; (ii)
each director; (iii) each Named Executive Officer; and (iv) all executive
officers and directors of the Company as a group. Unless otherwise indicated,
each of the Shareholders has sole voting and investment power with respect to
the shares beneficially owned, subject to community property laws where
applicable.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS(A)
Name and Address Amount of Direct Common Percent
of Beneficial Owner Stock Beneficial Ownership of Class(b)
- ----------------------- -------------------------- ------------
Craig R. Stapleton(c) 325,516 21.4%
135 East Putnam Avenue
Greenwich, CT 06830
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(a) Security ownership information for beneficial owners is taken from
statements filed with the Securities and Exchange Commission pursuant to
Sections 13(d), (f) and (g) and information made known to the Company.
(b) As of October 11, 1999, 1,520,087 shares of Common Stock were issued and
outstanding.
(c) Includes 190,466 shares owned by Mr. Stapleton or trusts for the benefit
of Mr. Stapleton, 45,150 shares as trustee of a trust of which Mr.
Stapleton is a residual beneficiary, 29,400 shares as trustee of a trust
for the benefit of his children and certain other relatives and to which
Mr. Stapleton disclaims any beneficial interest, and 60,500 shares owned
by Mr. Stapleton's wife and children to which Mr. Stapleton disclaims any
beneficial interest.
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below presents the security ownership of the Company's
Directors, Named Executive Officers and all directors and executive officers as
a group as of September 30, 1999.
Amount of Common Shares
Name of Beneficial Owner Beneficially Owned(a) Percent of Class(b)
- ----------------------- ----------------------- ------------------
Gary L. Hess 122,428(c) 8.1%
Edward Koplovsky 37,866 2.5%
Roger S. Mertz 49,266(d) 3.2%
Fredric Selinger 2,000 *
Craig R. Stapleton 325,516(e) 21.4%
Donal Sugrue 28,790(f) 1.9%
All directors and executive 565,866 37.2%
officers as a
group (7 persons)
-------------------------------------------------------
* Does not exceed 1% of the referenced class of securities.
(a) Shares listed in this column include all shares held by the named
individuals and all directors and executive officers as a group in their
own names and in street name and also includes all shares allocated to
the accounts of the named individuals and all directors and executive
officers as a group under the Company's Employee Stock Purchase Plan.
(b) Calculation based on 1,520,087 shares of Common Stock outstanding as of
October 11, 1999.
(c) Includes 30,004 shares owned directly and 89,474 vested stock options.
Also includes 2,950 shares owned by Mr. Hess' wife in trust to which Mr.
Hess disclaims any beneficial interest.
(d) Includes 6,000 shares held by Mr. Mertz as trustee and to which Mr. Mertz
disclaims any beneficial interest.
(e) Includes 190,466 shares owned by Mr. Stapleton or trusts for the benefit
of Mr. Stapleton, 45,150 shares as trustee of a trust of which Mr.
Stapleton is a residual beneficiary, 29,400 shares as trustee of a trust
for the benefit of his children and certain other relatives and to which
Mr. Stapleton disclaims any beneficial interest, and 60,500 shares owned
by Mr. Stapleton's wife and children to which Mr. Stapleton disclaims any
beneficial interest.
(f) Includes 28,790 shares held by the Sugrue 1992 Family Trust, of which Mr.
Sugrue is a trustee.
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PROPOSAL 1
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
TO CHANGE THE COMPANY'S NAME TO SONOMAWEST HOLDINGS, INC.
The Directors of the Company are recommending that the Company's
Articles of Incorporation be amended to change the Company's name from Vacu-dry
Company to SonomaWest Holdings, Inc. As part of the July 30, 1999 $12,000,000
sale of assets related to its product lines of processed apple products, the
Company sold to Tree Top, Inc. the trade name, trademark rights, and goodwill of
"Vacu-dry." The Board of Directors recommends the new name because they believe
better describes the Company's business.
The change of the Company's name will not affect, in any way, the
validity or transferability of currently outstanding stock certificates, nor
will the Company's shareholders be required to surrender or exchange any stock
certificates that they currently hold. In addition, the Company has requested
that Nasdaq allow the Company to use the stock symbol "SWHI". The approval of
Proposal 1 requires the affirmative vote of a majority of the outstanding shares
entitled to vote.
The shareholders are asked to approve to the following resolution:
"RESOLVED, that Article ONE of the Articles of Incorporation be amended
to read as follows:
ONE: Name. The name of the corporation is SonomaWest Holdings, Inc."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AMENDING THE ARTICLES TO CHANGE
THE COMPANY'S NAME.
PROPOSAL 2
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
TO BROADEN CORPORATE PURPOSE
On October 11, 1999, the Board of Directors unanimously adopted a
resolution declaring it advisable to amend Article TWO of the Company's Articles
of Incorporation and to submit the amendment to the Shareholders for approval at
the Annual Meeting.
The current purpose and powers clause of the Articles, which has not
been amended since the original Articles were filed in 1946, contains sixteen
subparagraphs. Since 1946, custom, usage and the laws of the State of California
have changed. Under current California law, this specific enumeration of
business functions is no longer necessary, and a brief statement of business
purposes suffices. The Amendment would not restrict the Company's current
operations, would be consistent with those operations, and would generally
permit any kind of corporate activity so long as it is lawful. The approval of
Proposal 2 requires the affirmative vote of a majority of the outstanding shares
entitled to vote.
The Shareholders are asked to approve the following resolution:
"RESOLVED, that Article TWO of the Articles of Incorporation be amended
to read as follows:
TWO: The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AMENDING THE ARTICLES TO BROADEN
THE CORPORATE PURPOSE.
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PROPOSAL 3
AMENDMENT TO THE BY-LAWS CHANGING NUMBER OF DIRECTORS
PROPOSAL
The shareholders are being requested to consider and act upon a
proposal to amend Article II, Section 2.2 of the Company's By-Laws, which
currently provides for a variable authorized number of Directors between five
(5) and nine (9). The Company deems it advisable to make the Board of Directors
more immediately responsive to the stockholder's interest and has determined
that it can operate most efficiently with a minimum of four (4) Directors. The
Company will present at the Annual Meeting a proposal for the adoption by
Shareholders of an amendment to its By-Laws to provide for a minimum of four (4)
and a maximum of seven (7) authorized Directors. The exact number of Directors,
within the stated minimum and maximum, shall be fixed at four (4) until amended
by the Board of Directors.
Shareholder approval of this item will allow the Company to pursue the
efficient management of its operations. The approval of Proposal 3 requires the
affirmative vote of a majority of the outstanding shares entitled to vote. If
the proposal fails to obtain the required number of votes, there will be one
vacancy on the Board of Directors, and the Board's Proxy holders intend to
nominate and vote for such other person as they believe will best serve the
interests of the Company. The text of Article II, Section 2.2 as proposed to be
amended is as follows:
SECTION 2.2 NUMBER OF DIRECTORS. The authorized number of Directors of
the corporation shall be not less than four (4) nor more than seven (7)
until changed by an amendment of the Articles of this section duly
adopted by the Shareholders. The exact number of Directors shall be
fixed, within the limits specified, by the Board or the Shareholders in
the same manner provided for in these By-Laws. The exact number of
Directors shall be fixed at four (4) until changed by the Board as
provided for in these By-Laws. No reduction of the authorized number of
Directors shall have the effect of removing any Director before that
Director's term of office expires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AMENDING THE BY-LAWS CHANGING THE
NUMBER OF DIRECTORS.
PROPOSAL 4
ELECTION OF DIRECTORS
At the Annual Meeting, four Directors are to be elected by the
Shareholders to serve until the next Annual Meeting or until the election and
qualification of their successors. The Board's proxy holders (named on the
enclosed Proxy card) intend to vote all shares for which Proxies are granted to
elect the following four nominees selected by the Company's Board of Directors,
and intend to vote such shares cumulatively if necessary to elect some or all of
such nominees.
If any of the Board's nominees refuses or is unable to serve as a
Director (which is not now anticipated), the Board's Proxy holders intend to
nominate and vote for such other person(s) as they believe will best serve the
interests of the Company. Any Shareholder may nominate a candidate for Director
from the floor at the Meeting. Such nominee must consent to serve, if elected,
prior to voting on his or her name. The Board of Directors has no reason to
believe that any substitute nominee or nominees will be required.
The four nominees for Director who receive the most affirmative votes
will be elected Directors. Votes against a candidate and votes withheld shall
have no effect on the election result, though applicable securities laws and
regulations may require that the number of such votes subsequently be disclosed
to the Company's Shareholders under certain circumstances.
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MANAGEMENT RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR DIRECTOR NAMED BELOW
NOMINEES
The table below indicates the respective nominee's position with the
Company, age, and year in which he first became a Director.
Name, Position and Background Age Director Since
- ----------------------------- --- --------------
GARY L. HESS, President, Chief Executive and 47 1996
Financial Officer and Director. Mr. Hess was
elected President and Chief Executive Officer of
the Company on May 1, 1996 and Chief Financial
Officer on June 14, 1999. Prior thereto he was a
Senior Vice President of Dole Food Company, Inc.
(fresh and processed fruit) (1993-1996); President
of Cadence Enterprises, Inc. (water conservation
products) and The Marketing Partnership 1992-1993;
and Director of Marketing, E. & J. Gallo Winery
(wine and distilled spirits) (1987-1992).
ROGER S. MERTZ, Director. Mr. Mertz is an 55 1993
attorney-at-law. He is a partner of the California
law firm of Allen, Matkins, Leck, Gamble & Mallory
LLP. Prior to October 1999, Mr. Mertz was a member
of the San Francisco, California law firm of
Severson & Werson.
FREDRIC SELINGER, Director. Mr. Selinger is Senior 60 1999
Managing Director of Corporate Finance of Sutter
Securities, Incorporated (private investment
banking and consulting). Prior to March 1995, Mr.
Selinger was Managing Director of Jackson Square
Capital Corp. (private investment banking and
consulting).
CRAIG R. STAPLETON, Director. Mr. Stapleton is 54 1995
President of Marsh & McLennan Real Estate
Advisors, Inc. (real estate management). Mr.
Stapleton is a director of Allegheny Properties,
Inc. (real estate investments); a director of T.B.
Woods, Incorporated (industrial power transmission
products); and a director of Cornerstone
Properties (real estate investments).
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PROPOSAL 5
AMENDMENT TO THE 1996 STOCK OPTION PLAN
At the Annual Meeting, the Company's shareholders are being asked to
approve an amendment to the 1996 Stock Option Plan (the "Option Plan") to
increase the number of shares of common stock reserved for issuance under the
Option Plan by 185,000 shares, to an aggregate of 275,000 shares. The Board
adopted the amendment, subject to shareholder approval at the Annual Meeting.
Set forth below is a summary of the principal features of the Option Plan. The
summary, however, does not purport to be a complete description of all the
provisions of the Option Plan. Any shareholder of the Company who wishes to
obtain a copy of the actual plan document may do so upon written request to the
Secretary at the Company's principal offices at 100 Stony Point Road, Suite 200,
Santa Rosa, California 95401.
The Company's 1996 Stock Option Plan, which was approved by the
Shareholders at the 1996 Annual Meeting, is intended to advance the interests of
the Company by inducing persons of outstanding ability and potential to join and
remain with the Company by enabling them to acquire proprietary interest in the
Company. The Option Plan was adopted for the principal purpose of assisting the
Company in recruiting a new President and Chief Executive Officer of the
Company. Mr. Gary L. Hess, who was appointed the Company's President and Chief
Executive Officer on May 1, 1996, was granted 89,474 of the 90,000 shares
originally authorized under the Plan. In fiscal 1999, the Option Plan was
amended to increase the options authorized to 275,000. 122,500 options were
granted under the Plan in Fiscal 1999. As of September 30, 1999, options to
purchase 211,174 of the 275,000 authorized shares have been issued under the
Option Plan.
GENERAL
The Plan provides for the granting of two types of options: "incentive
stock options" and "nonqualified stock options." The incentive stock options
only are intended to qualify as "incentive stock options" as defined in Section
422 of the Internal Revenue Code of 1986, as amended. The Plan is not qualified
under Section 401(a) of the Internal Revenue Code nor is it subject to the
provisions of ERISA.
ELIGIBILITY
Options may be granted under the Plan to all key employees, including
officers and directors, and to non-employee consultants of the Company; provided
however that incentive stock options may only be granted to employees, and not
to any non-employee consultants.
ADMINISTRATION
Administration of the Plan is by a Stock Option Plan Committee
comprised of at least three members of the Board, each of whom must be
disinterested as defined in the regulations under the Securities Exchange Act of
1934. Under the Plan, the Committee has the power, subject to the provisions of
the Plan, to do the following: grant options; determine the option price and
term of each option, the persons to whom and the time or times at which options
shall be granted, and the number of shares to be subject to each option;
interpret the Plan; prescribe rules and regulations relating to the Plan; and
make all other determinations deemed necessary or advisable for the
administration of the Plan. Members of the Committee will receive no
compensation for their services in connection with the administration of the
Plan.
OPTION TERMS
The maximum term of each option is ten years except that, in the case
of a participant who owns stock possessing more than ten percent of the voting
rights of the Company's outstanding capital stock (a "10% Holder"), the maximum
term of an incentive stock option is five years. Options granted under the Plan
are not transferable other than by will or the laws of descent and distribution,
and during an optionee's life are exercisable
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only by the optionee. Options granted under the Plan generally terminate three
months after the optionee ceases to be employed by the Company, a parent or
subsidiary, except if termination is due to the employee's permanent and total
disability, in which event the option may be exercised within a year of
termination. In the event of the employee's death, the employee's estate has 12
months to exercise the option.
EXERCISE PRICE
The exercise price of all nonstatutory stock options granted under the
Plan must be at least equal to 85% of the fair market value of the underlying
stock on the grant date, or 110% of fair market value in the case of a 10%
Holder. The exercise price of all incentive stock options granted under the Plan
must be at least equal to the fair market value of the underlying stock on grant
date, or 110% of fair market value in the case of a 10% Holder. With respect to
incentive stock options, the aggregate fair market value (determined at the time
of grant) of stock which becomes exercisable for the first time in any year
cannot exceed $100,000. The Plan permits the exercise of options for cash or
stock, other consideration acceptable to the Committee, or pursuant to a
deferred payment arrangement.
CHANGES IN STOCK AND EFFECT OF CERTAIN CORPORATE EVENTS
If there is any change in the Common Stock subject to the Plan or
subject to any option granted under the Plan, whether through merger,
consolidation, reorganization, recapitalization, dividend or otherwise, the Plan
provides that an appropriate adjustment be made by the Committee to the
aggregate number of shares subject to the Plan and the number of shares and the
price per share of stock subject to the outstanding options.
In the event of dissolution, liquidation or specified types of merger
of the Company, the options granted under the Plan terminate unless the
surviving entity assumes the outstanding options or substitutes similar options.
AMENDMENT AND TERMINATION
The Board of Directors may amend or terminate the Plan at any time,
except that any amendment which would (i) materially increase the benefits
accruing to participants, or (ii) materially modify the eligibility requirements
will only be effective if approved by the Company's shareholders within 12
months before or after adoption. Unless terminated earlier, the Plan will
terminate on March 15, 2006.
FEDERAL INCOME TAX CONSEQUENCES
Incentive stock options granted under the Plan are intended to be
eligible for the favorable income tax treatment accorded incentive stock options
under Section 422 of the Internal Revenue Code. Nonqualified stock options
granted under the Plan are subject to federal income tax treatment pursuant to
rules governing options that are not incentive stock options.
INCENTIVE STOCK OPTIONS. There are generally no federal income tax
consequences to the optionee by reason of the grant or exercise of an incentive
stock option. The exercise of an incentive stock option may increase the
optionee's alternative minimum tax liability, if any, however.
If an optionee holds stock acquired through exercise of an incentive
stock option for more than two years from the date on which the option is
granted and more than one year from the date on which the shares are transferred
to the optionee upon exercise of the option, any gain or loss on a disposition
of such stock will be capital gain or loss. Any capital gain or loss realized by
an optionee on a qualifying or disqualifying (see below) disposition of stock
acquired through exercise of an incentive stock option will be long-term or
short-term depending on whether the stock was held for more than one year.
Generally, if the optionee disposes of the stock before the expiration of either
of the holding periods described above (a "disqualifying disposition"), at the
time of disposition the optionee will realize taxable ordinary income equal to
the lesser of (i) the excess of the stock's fair market value on the date of
exercise over the optionee's adjusted basis in the stock, or (ii) the optionee's
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actual gain, if any, on the purchase and sale. Any additional gain or any loss
upon the disqualifying disposition will be capital gain or loss. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
There are no federal income tax consequences to the Company by reason
of the grant or exercise of an incentive stock option. To the extent the
optionee recognizes ordinary income by reason of a disqualifying disposition,
the Company will be entitled (subject to the requirement of reasonableness and,
perhaps, in the future, the satisfaction of its withholding obligation) to a
corresponding business expense deduction in the tax year in which the
disposition occurs.
NONQUALIFIED STOCK OPTIONS. There are normally no tax consequences to
the optionee or the Company by reason of the grant of a nonqualified stock
option. Upon exercise of a nonqualified stock option, the optionee normally
recognizes ordinary income in an amount by which the fair market value of the
stock on the date of exercise exceeds the exercise price. Generally with respect
to employees, the Company is required to withhold from wages an amount based on
the ordinary income realized by the exercise. Subject to the reasonableness
requirement and the satisfaction of its withholding obligation, the Company will
be entitled to a business expense deduction in the amount of the taxable
ordinary income recognized by the optionee.
Upon disposition of the stock, the optionee will recognize a capital
gain or loss equal to the difference between the selling price and the sum of
the amount paid for such shares plus any amount recognized as ordinary income
upon exercise of the option. Such gain or loss will be long or short-term
depending on whether the stock was held for more than one year. Slightly
different rules apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
There are no tax consequences to the Company by reason of the
disposition of stock acquired upon exercise of a nonqualified option.
USE OF PROCEEDS
All proceeds from the sale of shares pursuant to options granted under
the Plan constitute general funds of the Company.
INDEMNIFICATION OF COMMITTEE
Under the terms of the Plan, members of the Committee are entitled to
be indemnified by the Company against costs and expenses reasonably incurred in
connection with any action or proceeding brought by reason of their action or
failure to act under or in connection with the Plan or any rights granted
thereunder.
PLAN BENEFITS
The Company cannot currently determine the number of shares subject to
options that may be granted in the future to executive officers, directors and
employees under the Option Plan. The following table sets forth information with
respect to the stock options granted from July 1, 1998 to June 30, 1999 to the
Named Executive Officers, all current executive officers as a group and all
employees and consultants as a group under the Option Plan. No additional
options were granted to the Named Executive Officers after June 30, 1999 and
prior to the date of this Proxy Statement.
PLAN BENEFITS TABLE
Name Options Granted Dollar Value ($)
- ---- --------------- ----------------
Gary L. Hess -0- -0-
All current executive officers as a group 20,000 160,000
(2 persons)
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All current directors (other than executive -0- -0-
officers) as a group (4 persons)
All employees and consultants (including all 122,500 980,000
current officers who are not executive
officers) as a group (52 persons)
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO THE OPTION
PLAN AS DESCRIBED ABOVE.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Executive officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal year 1999
all filing requirements applicable to its executive officers, directors, and
greater than ten-percent beneficial owners were complied with except that Mr.
Stapleton filed late one Form 4, reporting one transaction untimely, and Mr.
Hess filed late two Forms 4, reporting two transactions untimely.
BOARD COMMITTEES AND MEETINGS
The Board of Directors met five times during the fiscal year ending
June 30, 1999. The Company's Board of Directors has authorized two standing
committees.
COMPENSATION AND RETIREMENT PLAN COMMITTEE. The functions of the
Compensation and Retirement Plan Committee are to develop and recommend to the
full Board compensation arrangements, including bonuses, stock options, and
stock appreciation rights, for Executive Officers and other key employees; to
advise the chief executive officer on policy matters concerning officers'
compensation, to direct the management of the Company's Retirement, Savings and
Profit Sharing Plan and to administer the 1996 Stock Option Plan. The members of
the committee are Messrs. Stapleton (Chairman), Koplovsky and Selinger, The
Compensation and Retirement Plan Committee held one meeting during the fiscal
year.
AUDIT COMMITTEE. The function of the audit committee is to recommend to
the full Board the accounting firm to be retained as the Company's independent
auditors and the price to be paid to the firm, and to consult with the auditors
regarding the plan of audit, the results of the audit and the audit report, and
the adequacy of internal accounting controls. The members of the committee are
Messrs. Mertz (Chairman), Selinger and Stapleton. The Audit Committee held one
meeting during the fiscal year.
The full Board acts as the nominating committee for the Directors of
the Company.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION OF NAMED EXECUTIVES
The Summary Compensation Table shows certain compensation information
for the Chief Executive Officer and the Company's most highly paid executive
officers (collectively referred to as the "Named Executive Officers").
Compensation data for other executive officers is not presented in the charts
because aggregate compensation for any such executive officer did not exceed
$100,000 for services rendered in all capacities during fiscal year 1999.
Compensation data is shown for the fiscal years ended June 30, 1999, 1998 and
1997. This information includes the dollar value of base salaries, bonus awards,
the number of SARs granted, and certain other compensation, if any, whether paid
or deferred.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE(a)
====================================================================================================================
Long Term
Compensation All Other
Annual Compensation Awards Compensation
Name and Principal Position Year Salary($) Bonus($) Options/SARs (#) ($)
- --------------------------- ---- --------- -------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
Gary L. Hess(b) 1999 178,670 -0- -0- 19,268(c)
President, Chief Executive 1998 160,000 80,000 -0- 18,178(d)
Officer and Chief
Financial Officer 1997 150,000 47,500 -0- 10,789(e)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Amounts shown include cash and non-cash compensation earned with respect
to the year shown above.
(b) Mr. Hess was appointed President and Chief Executive Officer on May 1,
1996, and Chief Financial Officer on June 14, 1999.
(c) All other Compensation includes $11,640 contributed by the Company with
respect to Mr. Hess to the Company's 401(k) plan, a Life Insurance
payment of $428, which is calculated as compensation by multiplying the
portion of benefit payable to Mr. Hess' estate by the premium paid in the
fiscal year, and a $7,200 car allowance.
(d) The Company contributed $10,764 with respect to the 401(k) plan, $214 for
a life insurance benefit, and a $7,200 car allowance.
(e) Includes $3,375 contributed by the Company with respect to the Company's
401(k) plan, a Life Insurance payment of $214, and a $7,200 car
allowance.
INCENTIVE AND REMUNERATION PLANS
STOCK APPRECIATION RIGHTS PLAN. In 1985, the Shareholders of the
Company approved the adoption of a Stock Appreciation Rights Plan (the "SAR
Plan"). The SAR Plan was adopted to reward participants for past services and to
encourage them to remain in the Company's service by offering participants an
opportunity to participate in any appreciation in the market value of the
Company's Common Stock.
EMPLOYEE BONUS PLAN. The Company maintains a Bonus Plan as an incentive
to key employees of the Company. The bonus an employee receives is dependent on
individual performance and level of responsibility as well as the achievement by
the Company of a threshold level of return on shareholders' equity. In fiscal
1999, $135,285 in bonuses were earned under the plan.
STOCK PARTICIPATION AND OPTION PLANS
1994 EMPLOYEE STOCK PURCHASE PLAN. In 1994, the Shareholders approved
the adoption of the 1994 Employee Stock Purchase plan (the "Plan"). All
employees, including executive officers, may purchase shares of the Company's
Common Stock at a discount of 15% from the market price of the shares. The
maximum aggregate number of shares to be offered under the Plan is 100,000
shares of the Company's Common Stock. As
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of June 30, 1999, 58,942 shares of the Company's Common Stock have been issued
under the Plan.
1996 STOCK OPTION PLAN. See the discussion of the Option Plan contained
in Proposal 5.
COMPENSATION OF DIRECTORS
Outside Directors receive $300 per month for serving as Directors, $600
for each Board meeting attended, $400 for each telephone call Board meeting
($200 if less than 30 minutes), and $400 for each committee meeting attended.
Directors' fees paid by the Company during fiscal year 1999 totaled $35,700.
Executive Officers of the Company who also serve on the Board of Directors are
not specifically compensated for duties as directors.
The San Francisco law firm of Severson & Werson, of which Mr. Mertz was
a member, served as the Company's legal counsel during fiscal 1999.
Sutter Securities Incorporated, of which Mr. Selinger is Senior
Managing Director of Corporate Finance, served as a financial advisor and
rendered a fairness opinion to the Company in connection with its July 1999 sale
of asssets to Tree Top, Inc. for which it received a fee of $50,000.
EMPLOYMENT CONTRACTS
The Company entered into an Employment Agreement with Mr. Hess dated
March 14, 1996, pursuant to which Mr. Hess is employed by the Company as its
President, Chief Executive and Financial Officer. Under the agreement, Mr. Hess
is entitled to an annual base salary of $150,000, subject to annual review, an
incentive bonus during the first year of $75,000, one-half of which is at the
discretion of the Compensation Committee of the Board of Directors and one-half
of which is based on the Company achieving pre-tax return equal to at least a
12% return on adjusted shareholders' equity and other requirements as may be
agreed. Mr. Hess was granted an option to purchase 89,474 shares of the
Company's common stock at $5.00 per share, the fair market value of a share of
the Company's common stock on May 1, 1996. The options were granted pursuant to
the Company's 1996 Stock Option Plan. Under the agreement Mr. Hess serves at
will. In addition, Mr. Hess is entitled to the reimbursement of relocation
expenses, temporary living expense, an automobile allowance and certain other
fringe benefits. On June 20, 1999, the Company and Mr. Hess amended the
Employment Agreement such that in the event of termination of his employment by
the Company prior to June 17, 2002, for any reason other than cause or other
than upon resignation, Mr. Hess is entitled to continued salary at the minimum
base salary provided above for that number of months which remain between the
date of termination and June 17, 2002, but not less than six.
CONSULTING AGREEMENT BETWEEN MR. HESS AND TREE TOP, INC.
As part of the Company's asset sale of its apple product lines to Tree
Top, Inc., Mr. Hess entered into a three-year consulting and non-competition
agreement with Tree Top as of June 17, 1999. The consulting agreement provides
for payments to Mr. Hess in the amount of $833 per month in return for
consulting and advisory services concerning the product lines sold to Tree Top.
It is estimated that Mr. Hess' consulting services will average 5 hours per
month, and in no event will exceed 10 hours per month. During the term of the
agreement, Mr. Hess has agreed not to directly or indirectly, own, manage,
control, participate in, perform services for or otherwise carry on a business
competitive with the apple product lines anywhere in the world.
COMPENSATION AND RETIREMENT PLAN COMMITTEE REPORT
This report is provided by the Compensation and Retirement Plan
Committee of the Board of Directors (the "Committee") to assist stockholders in
understanding the Committee's objectives and procedures in establishing the
compensation of Vacu-dry Company's Chief Executive Officer and other executive
officers. The Committee, made up of non-employee Directors, is responsible for
establishing and administering the Company's executive compensation program.
None of the members of the Committee is eligible to receive awards under the
Company's incentive compensation programs.
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Vacu-dry's executive compensation program is designed to motivate,
reward, and retain the management talent needed to achieve its business
objectives and maintain its competitiveness in the food processing industry. It
does this by utilizing competitive base salaries that recognize a philosophy of
career continuity and by rewarding exceptional performance and accomplishments
that contribute to the Company's success.
COMPENSATION PHILOSOPHY AND OBJECTIVE
The philosophical basis of the compensation program is to pay for
performance and the level of responsibility of an individual's position. The
Committee finds greatest value in executives who possess the ability to
implement the Company's business plans as well as to react to unanticipated
external factors that can have a significant impact on corporate performance.
Compensation decisions for all executives, including the Named Executive
Officers, are based on the same criteria. These include quantitative factors
that reflect improvements in the Company's short and long-term financial
performance, as well as qualitative factors which reflect the strength of the
Company over the long term, such as demonstrated leadership skills and the
ability to deal quickly and effectively with difficulties which sometimes arise.
The Committee believes that compensation of Vacu-dry's key executives
should:
1. Link rewards to business results and stockholder returns;
2. Encourage creation of stockholder value and achievement of strategic
objectives;
3. Maintain an appropriate balance between base salary and short-and
long-term incentive opportunity;
4. Attract and retain, on a long-term basis, highly qualified executive
personnel; and
5. Provide total compensation opportunity that is competitive with that
provided by competitors in the food processing industry, taking into
account relative company size and performance as well as individual
responsibilities and performance.
KEY ELEMENTS OF EXECUTIVE COMPENSATION
Vacu-dry's executive compensation program consists of three elements: Base
Salary, Short-Term Incentives and Long-Term Incentives. Payout of short-term
incentives depends on corporate performance. Payout of the long-term incentives
depends on performance of Vacu-dry stock.
BASE SALARY. A competitive base salary is crucial to support the
philosophy of management development and career orientation of executives.
Salaries are targeted to pay level with the Company's competitors and companies
having similar capitalization, revenues, etc. Executive salaries are reviewed
annually. Assessment of an individual's relative performance is made annually
based on a number of quantitative factors such as stock price, earnings and
revenues, as well as qualitative factors which include initiative, business
judgment, technical expertise, and management skills. In 1995, the Company
implemented a salary freeze in response to reduced sales and profits which
lasted until fiscal 1997.
SHORT-TERM INCENTIVE. Short-term awards to executives are made in cash
to recognize contributions to the Company's business during the past year. The
Company maintains a Bonus Plan as an incentive for executive officers of the
Company. The bonus an executive receives is dependent on individual performance
and level of responsibility.
LONG-TERM INCENTIVE. Long-term incentive awards provided by
shareholder-approved compensation programs are designed to develop and maintain
strong management through share appreciation awards. The Company's 1985 Stock
Appreciation Rights Plan creates incentives for executives and other key
employees by providing them with an opportunity to indirectly participate in the
appreciation in the market value of the Company's common stock.
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In 1993, the directors approved the adoption of the 1994 Employee Stock Purchase
Plan (the "Plan"). All employees, including executive officers, may purchase
shares of the Company's Common Stock at a discount of 85% of the market value on
the first or last business day of the quarterly offering period, whichever is
lower. The plan became effective January 1, 1994.
1999 CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Hess' base salary for fiscal 1999 was $178,670. Mr. Hess earned no
bonuses during the fiscal year ending June 30, 1999. Mr. Hess received a total
of $11,640 as a contribution to the Company's 401(k) plan and Profit Sharing
Plan. The Committee believes Mr. Hess' total compensation package is appropriate
for Mr. Hess' level of responsibility and is well within competitive practice.
The Committee also believes the compensation is appropriate to the Company's
financial performance during the year.
Compensation Committee:
Craig R. Stapleton, Chairman
Edward Koplovsky
Fredric Selinger
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SHARE INVESTMENT PERFORMANCE
The following graphs compare the total return performance of the
Company for the periods indicated with the performance of the NASDAQ Market
Index and the performance of a Peer Index comprised of companies having the same
Standard Industrial Classification ("SIC") number as the Company. The Company's
shares are traded over-the-counter on the NASDAQ National Market under the
symbol "VDRY". The Peer Index includes the publicly traded stocks of Ampal
American Israel Corp., Chiquita Brands International Inc., H.J. Heinz Co.,
Odwalla Inc., Seneca Foods Corp. Class B, J.M. Smucker Co. Class A, Unimark
Group, Inc., and Vacu-dry Company. Prior years' Peer Index included Stokely USA,
Inc. In January, 1998, Chiquita Brands International, Inc. acquired by merger
Stokely USA, Inc., which ceased trading on the NASDAQ National Market.
Consequently, the Company substituted Chiquita Brands International, Inc. into
its Peer Index in place of Stokely USA, Inc. beginning in the fiscal year ended
June 30, 1998. The NASDAQ Index includes only shares of companies traded on the
NASDAQ National Market System or over-the-counter, which have been publicly
traded continuously since June 30, 1992. The total return indices reflect
reinvested dividends and are weighted on a market capitalization basis at the
time of each reported data point.
PERFORMANCE GRAPH
[GRAPHIC]
Year (June 30) 1994 1995 1996 1997 1998 1999
- -------------- ----- ----- ---- ---- ---- ----
Vacu-dry Company 100 51 58 49 82 107
NASDAQ Stock Market 100 133 171 208 274 393
Peer Index 100 141 149 221 272 246
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<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent certified public accountants are chosen by
the Board of Directors based on the recommendation of its audit committee. The
independent certified public accountants for the Company's fiscal year ended
June 30, 1999, were Arthur Andersen LLP. Arthur Andersen LLP has been
recommended by the audit committee and selected by the Board for the current
fiscal year. Representatives of that firm will be present at the Annual Meeting,
and will have the opportunity to make a statement and to respond to appropriate
questions.
AVAILABILITY OF ADDITIONAL INFORMATION
The Company's Annual Report to Shareholders is being mailed with the
Proxy Statement to Shareholders who were holders of record on October 27, 1999.
OTHER MATTERS AND SHAREHOLDERS' PROPOSALS
The Board of Directors presently knows of no other matter that may come
before the Annual Meeting. If any other matters should properly come before the
Meeting, however, the Board's proxy holders intend to vote on such matters in
accordance with their best judgment.
By Order of the Board of Directors,
William Burgess
Secretary
Dated: October 31, 1999
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APPENDIX A
VACU-DRY COMPANY
1996 STOCK OPTION PLAN
(as amended)
1. PURPOSE AND SCOPE. The purposes of this Plan are to induce persons
of outstanding ability and potential to join and remain with Vacu-dry Company
(the "Company"), to provide an incentive for such employees as well as for
non-employee consultants to expand and improve the profits and prosperity of the
Company by enabling such persons to acquire proprietary interests in the
Company, and to attract and retain key personnel through the grant of Options to
purchase shares of the Company's common stock. Unless otherwise stated herein,
the term "Option" includes both Incentive Stock Options and Non-qualified Stock
Options.
2. DEFINITIONS. Each term set forth in this Section 2 shall have the
meaning set forth opposite such term for purposes of this Plan unless the
context otherwise requires, and for the purposes of such definitions, the
singular shall include the plural and the plural shall include the singular:
(a) "Affiliate" shall mean any parent corporation or subsidiary
corporation of the Company as those terms are defined in Sections 424(e) and (f)
respectively of the Internal Revenue Code of 1986, as amended.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Committee" shall have the meaning set forth in Section 3
hereof.
(d) "Company" shall mean Vacu-dry Company, a California
corporation.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) "Fair Market Value" for a share of Stock means the price that
the Board or the Committee acting in good faith determines, through any
reasonable valuation method (including but not limited to reference to prices
existing in any established market in which the Stock is traded), to be the
price at which a share of Stock might change hands between a willing buyer and a
willing seller, neither being under any compulsion to buy or to sell and both
having reasonable knowledge of the relevant facts.
(g) "Option" shall mean a right to purchase Stock granted pursuant
to the Plan.
(h) "Option Price" shall mean the purchase price for Stock under
an Option, as determined in Sections 7 - "Incentive Stock Options" - and 8 -
"Non-Incentive Stock Options" - below.
(i) "Participant" shall mean an employee or non-employee
consultant to the Company to whom an Option is granted under the Plan.
(j) "Plan" shall mean this Vacu-dry Company 1996 Stock Option
Plan.
(k) "Stock" shall mean the no par value common stock of the
Company.
(l) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
3. ADMINISTRATION. The Plan shall be administered (i) with respect to
individuals who receive options under the Plan and who are or become subject to
the reporting requirements and short-swing liability provision of Section 16 of
the Securities Exchange Act of 1934, as amended (the "1934 Act") ("Reporting
Persons") by a committee consisting of at least two members of the Board of
Directors of the Company (the
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"Board"), each of whom is a non-employee director (as such term is defined under
Rule 16b-3 of the 1934 Act) (the "Reporting Persons Committee") and (ii) with
respect to all individuals who receive Options under the Plan and who are not
Reporting Persons, by a committee which consists of at least two members of the
Board ("Stock Option Committee"). For purposes of this Plan, references to the
"Committee" shall mean the Reporting Persons Committee, the Stock Option
Committee, or both, as the context may require. The Committee shall have full
authority in its discretion, subject to and not inconsistent with the express
provisions of the Plan, to grant Options, to determine the Option Price and term
of each Option, the persons to whom, and the time or times at which, Options
shall be granted and the number of shares of Stock to be covered by each Option;
to interpret the Plan; to prescribe, amend, and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the option
agreements (which need not be identical) entered into in connection with the
grant of Options under the Plan; to unilaterally modify outstanding Options in
any respect that is not adverse to the Participants, including the right to
accelerate the exercisability of Options, and to waive minor conditions and
requirements; and to make all other determinations deemed necessary or advisable
for the administration of the Plan. The Board may delegate to one or more of
their members, or to one or more agents, such administrative duties as it may
deem advisable, and the Board or any person to whom it has delegated duties as
aforesaid may employ one or more persons to render advice with respect to any
responsibility the Board or such person may have under the Plan. The Board may
employ attorneys, consultants, accountants, or other persons, and the Board
shall be entitled to rely upon the advice, opinions, or valuations of such
persons. All actions taken and all interpretations and determinations made by
the Board in good faith shall be final and binding upon all Participants, the
Company, and all other interested persons. No member of the Board shall be
personally liable for any action, determination, or interpretation made in good
faith with respect to the Plan; and all members of the Board shall be fully
protected by the Company in respect of any such action, determination, or
interpretation.
4. SHARES SUBJECT TO THE PLAN. Subject to adjustment under the
provisions of Section 14 - "Effect of Change in Stock Subject to Plan" - of the
Plan, the maximum number of shares of Stock that may be optioned or sold under
the Plan is Two Hundred Seventy Five Thousand (275,000). Such shares may be
authorized but unissued shares of Stock of the Company, or issued shares of
Stock reacquired by the Company, or shares purchased in the open market
expressly for use under the Plan. If for any reason any shares of Stock as to
which an Option has been granted cease to be subject to purchase thereunder,
then (unless the Plan shall have been terminated) such shares shall become
available for subsequent awards under this Plan in the discretion of the Board.
The Company shall, at all times while the Plan is in force, reserve such number
of common shares as will be sufficient to satisfy the requirements of all
outstanding Options granted under the Plan.
5. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING OPTIONS.
(a) Incentive Stock Options may be granted to any regular full-
time employee (including officers and directors) of either the Company or any
Affiliate of the Company.
(b) Non-qualified Stock Options may be granted to: (i) any regular
full-time employee (including officers and directors) of either the Company or
any Affiliate of the Company; and (ii) any non-employee consultant of the
Company, provided that bona fide services shall be rendered by such consultants
and such services must not be in connection with the offer or sale of securities
in a capital-raising transaction.
(c) In determining to whom options shall be granted and the number
of shares of Stock to be covered by each Option, the Board shall take into
account the nature of the participants' duties, their present and potential
contributions to the success of the Company, and such other factors as it shall
deem relevant in connection with accomplishing the purposes of the Plan. The
Board shall also determine the time(s) of grant, the type and term of Option
granted, and the time(s) of exercise, in whole or part. A Participant who has
been granted an Option under the Plan may be granted new Options, which may be
in addition to prior Options granted under the Plan or may be in exchange for
the surrender and cancellation of prior Options having a higher or lower option
price and containing such other terms as the Board may deem appropriate.
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6. TERMS AND CONDITIONS OF OPTIONS.
(a) GENERAL. Options granted pursuant to the Plan shall be
authorized by the Board and shall be evidenced by agreements ("Option
Agreements") in such form as the Board from time to time shall approve. Such
Option Agreements shall comply with and be subject to the following general
terms and conditions, and shall also comply with and be subject to the
provisions of Section 7 relating to Incentive Stock Options or Section 8
relating to Non-qualified Stock Options, as applicable, as well as such other
terms and conditions as set forth in this Plan and as the Board may deem
desirable, not inconsistent with the Plan.
(b) EMPLOYMENT AGREEMENT. The Committee may, in its discretion,
include in any Option granted under the Plan a condition that the Participant
shall agree to remain in the employ of, and/or to render services to, the
Company for a period of time (specified in the Option Agreement) following the
date the Option is granted. No such Option Agreement shall impose upon the
Company any obligation to employ and/or retain the Participant for any period of
time.
(c) MANNER OF EXERCISE. A Participant may exercise an Option by
giving written notice of such exercise to the Company at its principal office,
attention to the Secretary, and paying the Option Price either (i) in cash in
full at the time of exercise, or (ii) in the discretion of the Board:
(i) by delivery of other previously outstanding common stock
of the Company,
(ii) by an approved deferred payment schedule or other
arrangement, which arrangement shall be contained in writing in the Option
Agreement, in which event an interest rate will be stated which is not less than
the rate then specified which will prevent any imputation of higher interest
under Section 483 of the Code, or
(iii) any other form of legal consideration acceptable to the
Committee at the time of grant or exercise.
(d) TIME OF EXERCISE. Promptly after the exercise of an Option and
the payment of the Option Price, either in full or pursuant to the approved
payment schedule, the Participant shall be entitled to the issuance of a stock
certificate evidencing ownership of the appropriate number of shares of Stock. A
Participant shall have none of the rights of a shareholder until shares are
issued to him/her, and no adjustment will be made for dividends or other rights
for which the record date has occurred prior to the date such stock certificate
is issued.
(e) NUMBER OF SHARES. Each Option shall state the total number of
shares of Stock to which it pertains.
(f) OPTION PERIOD, VESTING, AND LIMITATIONS ON EXERCISE. The Board
may, in its discretion, provide that an Option may not be exercised in whole or
part for any period(s) of time specified in the Option Agreement.
7. INCENTIVE STOCK OPTIONS. The Board may grant Incentive Stock Options
("ISOs") which meet the requirements of Section 422 of the Code, as amended from
time to time.
(a) ISOs may be granted only to employees of the Company or its
Affiliates.
(b) Each ISO granted under the Plan must be granted within 10
years from the date the Plan is adopted or is approved by the shareholders of
the Company, whichever is earlier.
(c) The purchase price shall not be less than the Fair Market
Value of the common shares at the time of grant, except that the purchase price
shall be 110% of the Fair Market Value at such time in the case
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of any person who owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or its Affiliates at the
time of grant.
(d) No ISO granted under the Plan shall be exercisable more than
10 years from the date of grant, except that in the case of any person who owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or its Affiliates at the time of grant, no ISO shall be
exercisable more than five years from the date of grant.
(e) To the extent that the aggregate Fair Market Value of Stock
(determined at the time of grant) with respect to which ISOs are exercisable for
the first time by any individual during any calendar year under all plans of the
Company and its subsidiaries exceeds $100,000, such Options shall be treated as
non-qualified stock Options, but only to the extent of such excess. Should it be
determined that an entire Option or any portion thereof does not qualify for
treatment as an ISO by reason of exceeding such maximum, or for any other
reason, such Option or portion shall be considered a non-qualified stock Option.
8. NON-QUALIFIED STOCK OPTIONS. The Board may grant Non-qualified Stock
Options ("NSOs") under the Plan in addition to or in lieu of Incentive Stock
Options. NSOs are not intended to meet the requirements of Section 422 of the
Code, and shall be subject to the following terms and conditions:
(a) NSOs may be granted to any eligible Participant.
(b) The purchase price of the shares shall be determined by the
Board in its absolute discretion, but in no event shall such purchase price be
less than 85% of the Fair Market Value of the shares at the time of grant. In
the case of any person who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or its Affiliates
at the time of grant, the price shall be 110% of the Fair Market Value,
determined at the time of grant.
(c) NSOs shall not be exercisable more than ten years from the
date of grant.
9. TRANSFERABILITY. Options granted under this Plan shall not be
transferable other than by will or by the laws of descent and distribution, and
during a Participant's life shall be exercisable only by such Participant.
Options granted under this Plan shall not be subject to execution, attachment or
other process. In the event of (i) any attempt by a Participant to alienate,
assign, pledge, hypothecate or otherwise dispose of an Option granted pursuant
to the Plan, except as provided for herein; or (ii) the levy of any attachment,
execution or similar process upon the rights or interest hereby conferred, the
Company may terminate the Option by notice to the Participant and it shall
thereupon become null and void.
10. TERMINATION OF EMPLOYMENT. Options held by employees, including
directors, shall terminate three months after termination of employment with the
Company or Affiliate, unless:
(a) If termination is due to employee's permanent and total
disability within the meaning of Section 22(e)(3) of the Code, the Option may be
exercised at any time within one year following termination.
(b) The Option Agreement by its terms specifies whether it shall
terminate later than three (3) months after termination of employment. If the
Option may be exercised later than three months following termination, any
portion exercised beyond three months shall be a non-qualified stock option.
This paragraph shall not be construed to extend the term of any Option nor to
permit anyone to exercise the Option after expiration of its term.
(c) Options granted under this Plan shall not be affected by any
change of duties or position of the Participant so long as Participant continues
to be a regular, full-time employee of the Company. Any Option, or any rules and
regulations relating to the Plan, may contain such provisions as the Board shall
approve with reference to the determination of the date employment terminates.
Nothing in the Plan or in any
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Option granted pursuant to the Plan shall confer upon any Participant any right
to continue in the employ of the Company or shall interfere in any way with the
right of the Company to terminate such employment at its will at any time.
(d) Notwithstanding any other provisions set forth in this Section
10 or in the Plan, if the Participant shall: (i) commit any act of malfeasance
or wrongdoing affecting the Company or any Affiliate; (ii) breach any covenant
not to compete, or employment contract, with the Company or any Affiliate; or
(iii) engage in any conduct that would warrant the Participant's discharge for
cause (excluding general dissatisfaction with the performance of the
Participant's duties, but including any act of disloyalty or any conduct clearly
tending to bring discredit upon the Company or any Affiliate), any unexercised
portion of the Option shall immediately terminate and be void.
11. RIGHTS IN THE EVENT OF DEATH. If an employee dies during the term
of this Option, his/her legal representative or representatives, or the person
or persons entitled to do so under the employee's last will and testament or
under applicable intestate laws, shall have the right to exercise this Option,
but only for the number of shares as to which the employee was entitled to
exercise this Option on the date of his death, and such right shall expire and
this Option shall terminate twelve (12) months after the date of Grantee's death
or on the expiration date of this Option, whichever date is sooner. In all other
respects, this option shall terminate upon such death.
12. LEAVES OF ABSENCE. For purposes of the Plan, an employee on approved
leave of absence from the Company shall be considered as currently employed for
90 days following beginning the leave or for so long as his/her right to
reemployment is guaranteed by statute or contract, whichever is longer.
13. EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN. In the event that
outstanding common shares are hereafter changed by reason of reorganization,
consolidation, recapitalization, reclassification, stock split, combination of
shares, stock dividends and the like, the Board shall make adjustments as it
deems appropriate in the number and/or kind of shares or securities for which
Options may thereafter be granted under the Plan and for which Options then
outstanding under this Plan may thereafter be exercised. Any such adjustment in
outstanding Options shall be made without changing the aggregate exercise price
applicable to the unexercised portions of such Options. Such adjustments shall
be made by or under authority of the Company's Board whose determinations as to
what adjustments shall be made, and the extent thereof, shall be final, binding
and conclusive.
14. CORPORATE REORGANIZATIONS. Following the merger of one or more
corporations into the Company, or any consolidation of the Company and one or
more corporations in which the Company is the surviving corporation, the
exercise of Options under this Plan shall apply to the surviving corporation.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which the
outstanding securities of the class then subject to Options hereunder are
changed into or exchanged for cash or property or securities not of the
Company's issue, or upon a sale of substantially all of the property of the
Company to, or the acquisition of stock representing more than eighty percent
(80%) of the voting power of the stock of the Company then outstanding by
another corporation or person, the Plan shall terminate, and all Options
theretofore granted hereunder shall terminate, unless provision be made in
writing in connection with such transaction for the continuance of the Plan
and/or for the assumption of Options theretofore granted, or the substitution
for such Options of Options covering the stock of a successor employer
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices, in which event the Plan and Options
theretofore granted shall continue in the manner and under the terms so
provided. If the Plan and unexercised Options shall terminate pursuant to the
foregoing sentence, all persons entitled to exercise any unexercised portions of
Options then outstanding shall have the right, at such time prior to the
consummation of the transaction causing such termination, as the Company shall
designate, to exercise the unexercised portions of their Options, including the
portions thereof which would, but for this paragraph entitled "Corporate
Reorganizations," not yet be exercisable.
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<PAGE>
15. AGREEMENT AND REPRESENTATION OF EMPLOYEES.
(a) ACQUIRING STOCK FOR INVESTMENT PURPOSES. As a condition to the
exercise of any Option, the Company may require the person exercising such
Option to represent and warrant at the time of such exercise that any shares of
Stock acquired at exercise are being acquired only for investment and without
any present intention to sell or distribute such shares if, in the opinion of
Company's counsel, such representation is required or desirable under the
Securities Act of 1933 or any other applicable law, regulation, or rule of any
governmental agency.
(b) WITHHOLDING. With respect to the exercise of any Option
granted under this Plan, each Participant shall fully and completely consent to
whatever the Board directs to satisfy the federal and state tax withholding
requirements, if any, which the Board in its discretion deems applicable to such
exercise.
(c) DELIVERY. The Company is not obligated to deliver any common
shares until there has been qualification under or compliance with all state or
federal laws, rules and regulations deemed appropriate by the Company. The
Company will use all reasonable efforts to obtain such qualification and
compliance.
16. FINANCIAL ASSISTANCE. The Company is vested with authority under the
Plan to assist, within the Company's discretion, any employee to whom an Option
is granted hereunder (including any director or officer of the Company or any of
its Affiliates who is also an employee) in the payment of the purchase price
payable on exercise of that Option by lending the amount of such purchase price
to such employee on such terms and at such rates of interest and upon such
security (or unsecured) as shall have been authorized by or under authority of
the Board.
17. AMENDMENT AND TERMINATION OF PLAN. The Board, by resolution, may
terminate, amend, or revise the Plan with respect to any shares as to which
Options have not been granted; provided however, that any amendment that would:
(i) materially increase the benefits accruing to Participants; or (ii)
materially modify the requirements as to eligibility for participation in the
Plan, shall be subject to shareholder approval within 12 months before or after
adoption. It is expressly contemplated that the Board may amend the Plan in any
respect necessary to provide employees with the maximum benefits available under
and/or to satisfy the requirements of or amendments to Section 422 of the Code.
No termination, modification or amendment of the Plan may however, alter
or impair the rights conferred by an Option previously granted in any respect
that is adverse to the Participant without the consent of the Participant to
whom the Option was previously granted.
Unless sooner terminated, the Plan shall remain in effect for a period of
ten years from the date of the Plan's adoption by the Board.
18. USE OF PROCEEDS. The proceeds from the sale of shares pursuant to
Options granted under the Plan shall constitute general funds of the Company.
19. EFFECTIVE DATE OF PLAN. The Effective Date of the Plan is March 15,
1996, the date it was adopted by the Board. The Effective Date of this
restatement and amendment is February 11, 1999.
20. INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have and subject to limitations of applicable law,
the members of the Committee shall be indemnified by the Company against all
costs and expenses reasonably incurred by them in connection with any action,
suit or proceeding to which they or any of them may be a party by reason of any
action taken or failure to act under or in connection with the Plan or any
rights granted thereunder and against all amounts paid to them in settlement
thereof or paid by them in satisfaction of a judgment of any such action, suit
or proceeding, the Board or Committee member or members shall notify the Company
in writing, giving the Company an opportunity at its own cost to defend the same
before such Committee member or members undertake to defend the same on their
own behalf.
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<PAGE>
21. INFORMATION REQUIREMENTS. The Company shall provide each Participant
with annual financial statements.
22. GOVERNING LAW. The Plan shall be governed by, and all questions
arising hereunder, shall be determined in accordance with the laws of State of
California as such laws are applied to agreements between California residents
entered into and to be performed entirely within California.
Date of Board Adoption: April 15, 1996
Date of Shareholder Approval: October 30, 1996
Date of Board Adoption of Restatement and Amendment: February 11, 1999
A-7
<PAGE>
VACU-DRY COMPANY
100 Stony Point Road, Suite 200
Santa Rosa, California 95401
PROXY
This Proxy is solicited on behalf of the Board of Directors. The
undersigned hereby appoints Gary L. Hess and Roger S. Mertz, or either of them,
with full power of substitution, as Proxies of the undersigned to attend the
Annual Meeting of Shareholders of Vacu-dry Company to be held on Wednesday,
November 17, 1999, and any adjournment thereof, and to vote the number of shares
the undersigned would be entitled to vote if personally present as indicated
below.
1. Proposal to amend Article ONE of the Company's Articles of Incorporation
to change the name of the Company to SonomaWest Holdings, Inc.
[ ] FOR approving the amendment [ ] AGAINST approving the amendment
to the Articles to the Articles
2. Proposal to amend Article TWO of the Company's Articles of Incorporation
to broaden the Company's corporate purpose.
[ ] FOR approving the amendment [ ] AGAINST approving the amendment
to the Articles to the Articles
3. Proposal to amend Section 2.2 of the Company's By-Laws to change the
number of directors.
[ ] FOR approving the amendment [ ] AGAINST approving the amendment
to the By-Laws to the By-Laws
4. Election of Directors.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
(Instructions: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.)
Gary L. Hess; Roger S. Mertz; Frederic Selinger; Craig R. Stapleton
5. Proposal to amend the Company's 1996 Stock Option Plan to increase the
shares available for issuance under the Plan by an aggregate of 185,000
shares, to 275,000 shares.
[] FOR approving the amendment [ ] AGAINST approving the amendment
to the Stock Option Plan to the Stock Option Plan
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3, 4 and 5.
<PAGE>
The undersigned hereby acknowledge receipt of (a) Notice of Annual Meeting
of Shareholders to be held November 22, 1999, (b) the accompanying Proxy
Statement, and (c) the annual report of the Company for the fiscal year ended
June 30, 1999.
Please sign exactly as shares are registered. When shares are held by
joint tenants, both should sign. When signed as attorneys, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
Dated: ______________________, 1999 _____________________________
Signature
______________________________
Signature (if held jointly)
