<PAGE>
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 Only
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11 (c) or sec.240.14a-12
BALANCE BAR COMPANY
(Name of Registrant as Specified in Its Charter)
BALANCE BAR COMPANY
(Name of Person (s) Filing Proxy Statement)
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:
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>
[LOGO OF BALANCE BAR COMPANY]
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1999
_____________
NOTICE AND PROXY STATEMENT
<PAGE>
BALANCE BAR COMPANY
1015 MARK AVENUE
CARPINTERIA, CALIFORNIA 93013
(805) 566-0234
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1999
-----------
The Annual Meeting of Stockholders of Balance Bar Company will be held on
Friday, May 14, 1999 at 10:00 a.m., at the Radisson Hotel, 1111 East Cabrillo
Boulevard, Santa Barbara, California.
We are holding this meeting:
1. To elect two Class I Directors to the Board of Directors with terms
expiring at the 2002 Annual Meeting of Stockholders.
2. To ratify the selection by the Board of Directors of Arthur Andersen
LLP as the Company's independent auditors for 1999.
3. To transact such other business as may properly come before the
meeting.
Stockholders on March 18, 1999 are entitled to vote at the meeting. A list
of stockholders on that date will be available at the Company for ten days
before the meeting.
All stockholders are cordially invited to attend the meeting.
Stockholders are urged to mark, sign and return promptly the accompanying
proxy in the enclosed envelope.
By Order of the Board of Directors
/s/ Richard G. Lamb
Richard G. Lamb
Secretary
Carpinteria, California
April 5, 1999
<PAGE>
BALANCE BAR COMPANY
1015 MARK AVENUE
CARPINTERIA, CALIFORNIA 93013
(805) 566-0234
__________
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 14, 1999
This Proxy Statement is furnished by the Board of Directors of Balance Bar
Company for use at the Annual Meeting of Stockholders on Friday, May 14, 1999 at
10:00 a.m., at the Radisson Hotel, 1111 East Cabrillo Boulevard, Santa Barbara,
California (the meeting).
The representation in person or by proxy by at least a majority of the
outstanding shares of the Company's common stock entitled to vote at the meeting
is necessary to constitute a quorum for the meeting. An affirmative vote by the
holders of a majority of the shares of the Company's common stock is required
for the approval of the proposals presented to the Company's stockholders at the
meeting.
If you do not vote, or if a broker holding your shares in "street" or
"nominee" name indicates to us that you have not voted and the broker or nominee
does not have the discretionary authority to vote, your shares will not be
counted as present or represented at the meeting.
All proxies will be voted in accordance with the instructions contained in
the proxy and if no choice is specified, a proxy will be voted in favor of a
proposal unless it constitutes a broker non-vote. A stockholder may revoke any
proxy at any time before it is exercised, by written request to Richard G. Lamb,
Secretary of the Company. A stockholder attending the meeting may also revoke a
proxy.
Only holders of common stock on March 18, 1999 will be entitled to vote at
the meeting. On March 18, 1999, 11,786,386 shares of common stock, $0.01 par
value per share, were outstanding. Each stockholder may cast one vote for each
share registered in his name on the record date.
The Company's Annual Report for the year ended December 31, 1998 was mailed
to the stockholders with the mailing of this Notice and Proxy Statement on or
about April 5, 1999.
<PAGE>
Stock Ownership
The following table sets forth the beneficial ownership of the Company's common
stock as of March 1, 1999 by:
1. Persons owning more than 5% of the Company's common stock;
2. Each director of the Company;
3. Each of the executive officers named in the Executive Compensation
table on Page 8; and
4. All directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Beneficial Shares
Name of Beneficial Owner (1) Ownership (2) Outstanding (2)
- -------------------------------------------------- ------------- ---------------
<S> <C> <C>
Thomas R. Davidson (3)................................... 4,822,602 40.9%
James A. Wolfe (4)....................................... 852,750 7.1
Richard G. Lamb (5)...................................... 1,340,180 11.1
Thomas J. Flahie (6)..................................... 87,800 *
Patrick J. Lee (7)....................................... 134,000 1.1
Adelle M. Demko (8)...................................... 40,625 *
Barry D. Goss (9)........................................ 138,841 1.2
John Hale (10)........................................... 29,600 *
Dennis Ryan McCarthy (11)................................ 114,176 1.0
George F. Raymond (12)................................... 26,900 *
All directors and executive officers as a group
(10 persons) (13)...................................... 7,587,474 58.0
</TABLE>
________________________________
* Less than 1%.
2
<PAGE>
(1) The address of all such persons is c/o the Company, 1015 Mark Avenue,
Carpinteria, California, 93013.
(2) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission ("SEC") and generally includes voting or
investment power with respect to securities. Shares of common stock
issuable on exercise of stock options within 60 days of March 1, 1999, are
deemed beneficially owned and outstanding. Except as indicated by footnote,
and subject to community property laws where applicable, the persons and
entities named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them.
(3) Includes 15,000 shares of common stock that are issuable upon exercise of
stock options. Includes 2,520,000 shares of common stock held by the
Davidson Family Limited Partnership. Mr. Davidson disclaims beneficial
ownership of 1,890,000 of these shares, reflecting the limited partner
interests held by his children in the limited partnership.
(4) Includes 281,598 shares of common stock that are issuable upon exercise of
stock options. Includes 571,152 shares of common stock that are held
jointly by Mr. Wolfe and his wife, Marcia H. Wolfe.
(5) Includes 625,288 shares of common stock that are issuable upon exercise of
stock options. Includes 633,550 shares of common stock that are held by The
Lamb Revocable Trust, a revocable grantor trust of which Mr. Lamb and his
wife, Peggy O. Lamb, are the trustees. Includes 81,342 shares of common
stock that are held by the Lamb's minor children. The Lambs disclaim
beneficial ownership of the shares held by their minor children.
(6) Includes 64,000 shares of common stock that are issuable upon exercise of
stock options.
(7) Includes 70,000 shares of common stock that are issuable upon exercise of
stock options.
(8) Includes 30,000 shares of common stock that are issuable upon exercise of
stock options. Includes 150 shares of common stock that are held by Ms.
Demko's minor child. Ms. Demko disclaims beneficial ownership of the shares
held by her minor child.
(9) Includes 104,400 shares of common stock that are issuable upon exercise of
stock options. Includes 4,000 shares of common stock held by the Goss Joint
Venture. Mr. Goss disclaims beneficial ownership of 2,725 of these shares,
reflecting the joint venture interests held by Mr. Goss' father and two
sisters.
(10) Includes 24,600 shares of common stock that are issuable upon exercise of
stock options.
(11) Includes 57,000 shares of common stock that are issuable upon exercise of
stock options.
(12) Includes 24,600 shares of common stock that are issuable upon exercise of
stock options.
(13) The total for all directors and executive officers as a group includes
1,296,486 shares of common stock that are issuable upon exercise of stock
options.
3
<PAGE>
ELECTION OF DIRECTORS
PROPOSAL NO. 1
The Company's Board of Directors is divided into three classes, with
members of each class holding office for staggered three-year terms. Currently
the three classes consist of two directors whose terms expire at the 1999 Annual
Meeting of Stockholders and three directors whose terms expire at each of the
2000 and 2001 Annual Meeting of Stockholders. At each Annual Meeting of
Stockholders, a class of directors is elected for a term of three years or until
their successors are chosen and qualified. The two Class I directors will be
nominated for election to serve until the 2002 Annual Meeting of Stockholders.
The Board of Directors has fixed the number of directors at eight and has
designated as Class I director nominees Barry D. Goss and Dennis Ryan McCarthy.
Each of the nominees is currently a Class I director of the Company.
The persons named in the proxy will vote to elect Barry D. Goss and Dennis
Ryan McCarthy as Class I directors, unless authority to vote for the election is
withheld by marking the proxy to that effect, or the proxy is marked with the
names of directors as to whom authority to vote is withheld. If a nominee
becomes unavailable, the person acting under the proxy may vote the proxy for
the election of a substitute. The Board of Directors believes that both
nominees are available.
Set forth below is certain information furnished to the Company by each
director of the Company. Information regarding the number of shares of the
Company's common stock beneficially owned by each of them, directly or
indirectly, as of March 1, 1999, appears on page 2:
Nominees for Election as Class I Directors -
Terms Expiring at the 2002 Annual Stockholders Meeting
<TABLE>
<CAPTION>
Year First
Became
Name and Principal Occupation or Employment Age Director
- ---------------------------------------------------- ------- ------------
<S> <C> <C>
Barry D. Goss, Director 59 1993
Dennis Ryan McCarthy, Consultant 48 1993
</TABLE>
Class II Directors -
Terms Expiring at the 2000 Annual Stockholders Meeting
<TABLE>
<CAPTION>
Year First
Became
Name and Principal Occupation or Employment Age Director
- ---------------------------------------------------- ------- ------------
<S> <C> <C>
John Hale, Executive Vice President and
Chief Operating Officer of Doctors' Choice, LLC 49 1997
George F. Raymond, Director 62 1997
James A. Wolfe, Chief Executive Officer and
President of the Company 57 1993
</TABLE>
4
<PAGE>
Class III Directors -
Terms Expiring at the 2001 Annual Stockholders Meeting
<TABLE>
<CAPTION>
Year First
Became
Name and Principal Occupation or Employment Age Director
- -------------------------------------------------------- ------- ------------
<S> <C> <C>
Thomas R. Davidson, Chairman of the Board of Directors 59 1992
Adelle M. Demko, Consultant 52 1997
Richard G. Lamb, Executive Vice President of the Company 52 1992
</TABLE>
Thomas R. Davidson co-founded the Company in February 1992 and has served as
Chairman since that time. He served as Chief Executive Officer from February
1992 until January 1994 and as Secretary from February 1992 to July 1997. He co-
founded and serves as Chairman of Datatel, Inc., a provider of software and
services to colleges and universities; co-founded and served as a Director of
National Information Systems, a computer hardware sales company, until its sale
in 1994; co-founded and served as a Director of V-Mark, a systems software
company; and co-founded and served as Chairman of Envision Medical Corporation,
a medical equipment manufacturer, until its sale in 1996.
James A. Wolfe has served as Chief Executive Officer since December 1995 and
as President since November 1997. From December 1995 to December 1996, he was a
consultant to the Company. From January 1985 to December 1995, he was a self-
employed business consultant with clients such as Cadbury Schweppes, Welch's,
Quaker Oats and Celestial Seasonings. Prior to that time, he was an executive
with 7-Up Foods, Coca-Cola USA and Welch's.
Richard G. Lamb co-founded the Company in February 1992 and has served as
Executive Vice President since November 1997 and as Secretary since July 1997.
He served as Executive Vice President and Chief Operating Officer from February
1992 until January 1994, and as President from January 1994 to November 1997.
Prior to joining the Company, Mr. Lamb was the co-founder and President of
Windsurfing Hawaii, Inc., a sporting goods manufacturing company and prior to
that served as Vice President, International Operations, for Windsurfing
International, Inc., a sporting goods manufacturing company.
Adelle M. Demko has been a management consultant and board advisor to various
companies from 1994 to the present. In July 1992 she joined Earthshell Container
Corporation and served as its President and Chief Operating Officer. In
September 1989 she founded Demko Baer & Associates, a financial consulting and
database firm, and served as principal from 1989 to 1992. From 1986 to 1989 she
was an investment banker at Wedbush Morgan Securities and a Limited Partner of
Wedbush Capital Partners, an equity buyout fund. Prior to that she was a
financial and strategy consultant at Xerox Corporation and a corporate and
business attorney in New York City. Ms. Demko serves as a director of Planet
Earth Science and as a member of the Advisory Board of Beam Technologies and
Excelta Corporation.
Barry D. Goss has been the President and Chief Executive Officer of
Intelligent Solutions Inc. since 1995. From 1989 to September 1994 Mr. Goss was
the Vice President and Chief Information Officer at Applied Magnetics
Corporation, a manufacturer of magnetic recording heads for the computer
industry.
5
<PAGE>
John Hale has been Executive Vice President and Chief Operating Officer for
Doctor's Choice, LLC, a subsidiary of Age Wave, LLC, a health and nutrition
solutions business targeted to the mature adult population since November 1997.
From May 1992 to November 1997, he was Senior Vice President of Operations at
Celestial Seasonings, Inc., a specialty tea company. Prior to that, he has held
various executive positions at Frito Lay, Inc. from June 1987 through May 1992
and The Quaker Oats Company from November 1973 through June 1987.
Dennis Ryan McCarthy served as Vice President of Finance of the Company from
February 1993 to May 1994. From 1982 to the present, Mr. McCarthy has served as
a consultant on financial, investment banking and valuation issues for various
companies. Prior to that, he was the Secretary-Treasurer of The Newhall Land and
Farming Company, a company engaged in agriculture, real estate development and
management, recreation and energy.
George F. Raymond, a Certified Public Accountant, founded Automatic Business
Centers, a payroll processing service in 1972 and served as its President and
Chairman from 1972 until 1989. Since 1987, Mr. Raymond served as a director of
BMC Software, a computer software company. Mr. Raymond also serves as a director
of DocuCorp International, a data imaging software company and Atlantic Data
Services, Inc., a software systems development company.
Board of Director Committees
The Board of Directors of the Company has an Audit Committee, Compensation
Committee and Corporate Development Committee.
The Audit Committee makes recommendations concerning the engagement of
independent public accountants, reviews the plan and results of the audit
engagement with the independent public accountants, approves professional
services provided by the independent public accountants, reviews the
independence of the independent public accountants, considers the range of audit
and non-audit fees, and reviews the adequacy of the Company's internal
accounting controls. The Audit Committee is currently comprised of Adelle Demko
(Chairperson), George Raymond and Dennis Ryan McCarthy. The Audit Committee
held two meetings in 1998.
The Compensation Committee reviews and approves the compensation and benefits
for the Company's executive officers, and administers the Company's stock
incentive plans and the Company's management incentive plans. The Compensation
Committee is currently comprised of John Hale (Chairperson), Thomas Davidson,
Barry Goss and Dennis Ryan McCarthy. The Compensation Committee held five
meetings in 1998.
The Corporate Development Committee oversees the strategic plan for the
Company's corporate growth and development, reviews financing alternatives,
considers potential acquisitions of companies, and makes recommendations
concerning the corporate structure of the Company. The Corporate Development
Committee is currently comprised of Thomas Davidson (Chairperson), Adelle Demko,
George Raymond and James Wolfe. The Corporate Development Committee held two
meetings in 1998.
6
<PAGE>
Director Compensation
The Company did not pay its directors who are employees of the Company for
their services as directors in 1998. For services rendered through the
consummation of the initial public offering of common stock in June 1998, the
Company paid non-employee directors cash compensation of $1,500 per meeting.
After the initial public offering in June 1998, non-employee directors received
a non-qualified stock option to purchase 6,000 shares of common stock and cash
compensation of $1,500 per meeting for all meetings in excess of the four
regular Board of Director meetings. In addition, on April 7, 1998, all non-
employee directors received a non-qualified stock option to purchase 9,000
shares of common stock, at an exercise price of $10.00 per share, except for Ms.
Demko who received a non-qualified stock option to purchase 24,000 shares of
common stock, at an exercise price of $10.00 per share. The Company also
reimbursed reasonable out-of-pocket expenses.
Under the 1998 Performance Award Plan, each non-employee director is
automatically granted a nonqualified stock option to purchase 6,000 shares of
common stock when the person takes office, at an exercise price equal to the
market price of the common stock at the close of trading on that date (or, with
respect to the Company's current directors, on the tenth trading day after
completion of the initial public offering). In addition, on the day of the
annual stockholders meeting beginning in 1999, non-employee directors will be
granted a nonqualified stock option to purchase 6,000 shares of common stock at
an exercise price equal to the market price of the common stock at the close of
trading on that date. Non-employee directors may also be granted discretionary
awards. All automatically granted non-employee director stock options will have
a 10-year term and will be immediately exercisable. If a non-employee
director's services are terminated for any reason, any exercisable stock options
will remain exercisable for twelve months after such termination of service or
until the expiration of the option term, whichever occurs first.
Pursuant to the 1998 Performance Award Plan, each non-employee director was
granted a non-qualified stock option to purchase 6,000 shares of common stock on
June 16, 1998 at an exercise price of $11.75 per share.
Compensation and Other Information
Concerning Executive Officers
Executive Officers
In addition to the incumbent directors, as to whom information is furnished
on pages 5 and 6, the executive officers of the Company also include the
following:
Thomas J. Flahie joined the Company in February 1998 and has served as Senior
Vice President of Finance and Administration since that time. From December 1978
to February 1998, he held various positions with Andersen Worldwide, an
international accounting and consulting firm. He was a partner with Andersen
Worldwide for the last seven years. Mr. Flahie is a Certified Public
Accountant.
7
<PAGE>
Patrick J. Lee joined the Company in January 1997 and served as Senior Vice
President of Sales through November 1998 and as Senior Vice President of Sales
and Marketing since that time. From October 1995 to December 1996, he was the
Western Division Manager of PowerBar, Inc. (formerly Power Food, Inc.) where he
directed sales and marketing activities for the Western United States. From 1988
to 1994, he worked for Dial Corporation where he served as District Sales
Manager in 1994, Trade Marketing Manager from 1993 to 1994 and as Key Account
Executive from 1990 to 1993.
Executive Compensation
The following table sets forth the annual and long-term compensation for
the years ended December 31, 1998, 1997 and 1996 paid or accrued by the Company
to the Company's Chief Executive Officer and the Company's other executive
officers who earned more than $100,000 in 1998.
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
---------------------
Number of
Name and Other Annual Stock Options All Other
Principal Position Year Salary Bonus/(1)/ Compensation/(2)/ Granted/(3)/ Compensation/(2)/
- ----------------------------- --------- ---------- ---------- ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
James A. Wolfe 1998 $150,000 $158,000 $ - 80,000 $ 6,441
Chief Executive Officer 1997 124,333 74,733 - - 4,827
and President 1996 (4) 115,333 - - 876,798 -
Richard G. Lamb 1998 $127,500 $ 84,150 $ - - $ 7,420
Executive Vice President 1997 107,500 37,625 - - 4,024
1996 89,250 - - 787,428 -
Thomas J. Flahie 1998 (5) $101,385 $73,831 $ - 240,000 $53,000
Senior Vice President
of Finance and Administration
Patrick J. Lee 1998 (6) $119,250 $81,550 $ - 120,000 $12,534
Senior Vice President 1997 91,750 27,525 - - 3,300
of Sales and Marketing 1996 (7) - - - 120,000 7,431
</TABLE>
________________________________
(1) The bonus amounts were earned by these individuals under the Company's
incentive programs. See "Incentive Programs" for information on such
programs.
(2) Other annual compensation was less than $50,000 or 10% of the total salary
and bonus reported. All other compensation consists of the Company match of
employee 401(k) plan contributions and the payments described in (5), (6)
and (7).
(3) These numbers represent options to purchase shares of the Company's common
stock. See "Option Grants in 1998" for information on such options.
(4) The Company entered into a management consulting agreement with Mr. Wolfe
in December 1995. In 1996, the Company paid Mr. Wolfe $115,333 pursuant to
this agreement and reimbursed his out-of-pocket expenses. Mr. Wolfe became
an employee on January 1, 1997.
8
<PAGE>
(5) Mr. Flahie joined the Company in February 1998. The Company paid Mr. Flahie
$50,000 for relocation reimbursements and other costs in connection with
joining the Company.
(6) Mr. Lee was reimbursed $6,822 in 1998 for the purchase of a club membership
and related income taxes due on the payment.
(7) Mr. Lee joined the Company in January 1997. In connection with Mr. Lee
joining the Company, Mr. Lee received 120,000 options to purchase common
stock in November 1996 and the Company paid Mr. Lee $7,431 for relocation
reimbursements and other costs in connection with joining the Company.
Option Grants in 1998
The following table sets forth grants of stock options during 1998 to the
executive officers reflected in the Executive Compensation table above:
<TABLE>
<CAPTION>
Number of Percentage of
Securities Total Options
Underlying Granted to Exercise Market
Options Employees in Price Price Expiration 0% 5% 10%
Name Granted/(1)/ 1998 Per Share/(1)/ Per Share/(1)/ Date Value/(2)/ Value/(2)/ Value/(2)/
- ----------------- ------------ --------------- -------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James A. Wolfe 80,000 9% $ 15.25 $15.25 7/24/08 $ - $767,251 $1,944,366
Richard G. Lamb - - - - - - - -
Thomas J. Flahie 240,000 28 1.67, 5.50 5.50 1/30/08 460,000 540,849 1,370,618
Patrick J. Lee 120,000 14 5.50 5.50 1/30/08 - 415,070 1,051,870
</TABLE>
______________________________
(1) Incentive and non-qualified stock options were granted in 1998 pursuant to
the Company's stock option plans. In addition, 1,000 of Mr. Flahie's
options were granted outside of the Company's stock option plans. The
exercise price of the options was equal to the fair market value on the
date of the grant, except for 120,000 options granted to Mr. Flahie at
$1.67 per share, when the fair market value was $5.50. Prior to the
Company's initial public offering of common stock, the Board of Directors
estimated the fair market value of the options.
(2) In accordance with the rules of the Securities and Exchange Commission, the
amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 0%,
5% and 10% compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Company's common
stock, the optionholder's continued employment through the option period,
and the date on which the options are exercised.
Option Exercises and Year-End Values
The following table sets forth information with respect to options to
purchase the Company's common stock including the number of unexercised options
outstanding on
9
<PAGE>
December 31, 1998 and the value of such unexercised options on December 31,
1998, for the executive officers reflected in the Executive Compensation table
above:
<TABLE>
<CAPTION>
Number of Securities Underlying
Shares Unexercised Options at Value of Unexercised Options at
Acquired December 31, 1998 December 31, 1998(1)
on Value -------------------------------- --------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ------------ ----------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James A. Wolfe 613,044 $4,621,720 281,598 80,000 $2,980,646 $ -
Richard G. Lamb 187,428 2,827,039 660,000 - 6,990,000 -
Thomas J. Flahie - - - 240,000 - 1,720,000
Patrick J. Lee 56,100 712,938 30,000 150,000 310,000 940,000
</TABLE>
(1) Value is based on the difference between the option exercise price and the
fair market value at December 31, 1998 ($10.75 per share -- the closing
sale price on the Nasdaq National Market) multiplied by the number of
shares underlying the option).
Certain Relationships and Related Transactions
Thomas Davidson and the Davidson Family Limited Partnership, an affiliate of
Mr. Davidson (collectively "Davidson") entered into a registration rights
agreement with the Company in April 1998. Under the terms of the agreement,
Davidson has the right to require the Company to file registration statements to
sell shares of common stock held by Davidson on two separate occasions. If the
Company proposes to sell any of its securities, Davidson is entitled, subject to
certain limitations and exceptions, to include shares of common stock therein.
All fees, costs and expenses of any such registration will be borne by Davidson
in proportion to the number of shares of common stock sold by Davidson in the
registered offering.
During 1998, the Company paid $13,166 to Adelle Demko, a director of the
Company, in connection with special consulting services related to the initial
public offering of common stock.
Incentive Programs
In January 1998, the Compensation Committee adopted the Company's 1998
Employee Incentive Program for all employees. Under the program, cash bonuses
were awarded based upon individual and Company target sales and profit goals set
for 1998. For all sales personnel other than the Senior Vice President of Sales
and Marketing, these goals include both regional and overall Company targets.
For all other employees, these goals include only overall Company targets. To be
eligible, the employee must be employed by July 1, 1998 and must also be an
employee on December 31, 1998. The Company set target bonuses for each level of
employee at a specified percentage of an eligible employee's salary. Bonuses
range from 5% to 40% of an employee's salary, depending upon level of seniority.
In addition to the 1998 Employee Incentive Program, the Company pays bonuses
based on exceptional employee performance. Bonuses to the Company's officers
are granted by the Compensation Committee. All other bonuses are granted by the
Company's Chief Executive Officer.
10
<PAGE>
401 (k) Plan
The Company sponsors a retirement savings plan (the "401(k) Plan") that
permits participation by all employees over age 21 with at least 3 months of
service. Employees can elect to contribute up to 15% of total eligible
compensation into the 401(k) Plan. Contributions were limited to $10,000 in
1998. The 401(k) Plan provides that the Company may make matching contributions
up to 100% of the first 5% of elective contributions.
Board Compensation Committee Report
on Executive Compensation
The Compensation Committee is responsible for establishing the compensation
of the Company's executive officers and administering and granting stock options
and other awards to the Company's executive officers. The Committee has
furnished this report concerning compensation of the executive officers for
1998.
The compensation of the executive officers in 1998 consisted of base
salary, stock option awards and annual incentive cash awards under the Company's
1998 Employee Incentive Program.
Base Salary
At the beginning of each year the Committee establishes the base salaries
of the Chief Executive Officer ("CEO") and the Company's other executive
officers. The base salaries of these executive officers are based on, among
other things, general salary information on companies of similar size, and the
Committee believes such salary levels are approximately in the mid-range for
such companies. The executive officers' salaries are also based on the
responsibilities, experience, and individual performance of each officer, taking
into account the past and expected future contributions to the Company of such
officer. In addition, the Committee also considers the per-share earnings of
the Company, the Company's growth in net earnings and sales over the years, the
market valuation of the Company's common stock, and current economic and
business conditions in determining the base salaries of the executive officers.
Stock Options
In order to align the interests of the Company's executive officers towards
the enhancement of corporate value, and to further motivate the Company's
executive officers to concentrate on the long-term growth of the Company, the
Company in 1998 granted options to purchase the Company's stock to the CEO and
two of the three other executive officers. Such stock options were not granted
pursuant to any formula. No options were granted to the Executive Vice
President, who concurred with the Committee that the long-term interests of the
Company's stockholders would best be served by providing additional stock
options to the Company's other executive officers and employees in order to
further increase their incentive to contribute to the Company and assist the
Company to achieve its strategic goals.
Incentive Cash Awards
At the beginning of the year, the Committee established the 1998 Employee
Incentive Program to encourage each employee to exceed Company target sales and
profit goals set for 1998. The mix of base salary and possible cash incentive
compensation was considered prior to
11
<PAGE>
the adoption of the 1998 Employee Incentive Program. In addition, the Committee
paid the CEO and certain other executive officers a bonus based upon exceptional
employee performance in 1998.
Section 162 (m) of the Internal Revenue Code
Section 162 (m) of the Internal Revenue Code of 1986 limits a Company's
ability to take a deduction for federal tax purposes for certain compensation
paid to its executive officers. The Company believes that all compensation
payable to executive officers during 1998 will be deductible by the Company for
federal income tax purposes. The Committee's general policy with respect to
compensation to be paid to executive officers is to structure compensation
payments to executive officers so as to be deductible under Section 162 (m).
Submitted by the Compensation Committee of the Board of Directors:
John Hale (Chairman)
Thomas Davidson
Barry Goss
Dennis Ryan McCarthy
Stock Performance Graph
The following graph compares the total stockholder return on the Company's
common stock since the Company's initial public offering of common stock with
the cumulative total return on the Russell 2000 Index and the Standard & Poor's
Foods Index ("S&P Foods Index). The comparison assumes that the value of the
investment in the Company's common stock and in each index was $100 on June 2,
1998 (the date the Company's stock began trading) and that all dividends were
reinvested.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
6/2/98 6/30/98 9/30/98 12/31/98
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Balance Bar Company $100.00 $ 116.75 $ 96.45 $ 87.31
Russell 2000 Index $100.00 $ 101.71 $ 80.85 $ 93.83
S&P Foods Index $100.00 $ 98.45 $ 86.20 $ 97.98
</TABLE>
12
<PAGE>
Note: The stock price performance shown on the graph above is not
necessarily indicative of future price performance. Information used in the
graph was obtained from FactSet Research Systems, 1999, a source believed to be
reliable, but the Company is not responsible for any errors or omissions in such
information.
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who beneficially own more
than ten percent of the Company's common stock, to file initial reports of
ownership and report changes in ownership with the SEC. Executive officers,
directors and greater than ten percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16 (a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations from the Company's
executive officers and directors that no other reports are required, during 1998
all Section 16 (a) filing requirements applicable to the executive officers,
directors and greater than ten percent beneficial owners were complied with.
INFORMATION REGARDING THE COMPANY'S AUDITORS
PROPOSAL NO. 2
Arthur Andersen LLP was the Company's auditor for 1998, and the Board of
Directors has selected them as auditors for 1999, subject to ratification by the
stockholders. Unless otherwise directed by the stockholders, proxies will be
voted for a resolution ratifying the appointment by the Board of Directors of
Arthur Andersen LLP as independent auditors for 1999.
A representative of Arthur Andersen LLP is expected to attend the meeting,
will have the opportunity to make a statement if he or she desires to do so and
will be available to respond to appropriate questions from stockholders.
Other Matters
Management does not know of any other matters that may come before the
meeting. However, if any other matters are properly presented to the meeting,
it is the intention of the persons named in the accompanying proxy to vote, or
otherwise to act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone and
personal interviews. Brokers, custodians and fiduciaries will be requested to
forward proxy soliciting material to the owners of stock held in their names and
the Company will reimburse them for their out-of-pocket expenses.
13
<PAGE>
Deadline for Submission of Stockholder Proposals
Stockholder proposals intended to be presented at the 2000 Annual Meeting
of Stockholders must be received by the Company at its principal executive
offices not later than December 15, 1999 for inclusion in the proxy statement
for that meeting.
By Order of the Board of Directors
/s/ Richard G. Lamb
Richard G. Lamb
Secretary
Dated: April 5, 1999
14
<PAGE>
PROXY PROXY
- ----- -----
BALANCE BAR COMPANY
(Solicited on behalf of the Board of Directors)
The undersigned holder of common stock of Balance Bar Company, revoking all
proxies heretofore given, hereby constitutes and appoints James A. Wolfe and
Richard G. Lamb, and each of them Proxies, with full power of substitution, for
and in the name, place and stead of the undersigned, to vote all of the
undersigned's shares of the said stock, according to the number of votes and
with all the powers the undersigned would possess if personally present, at the
Annual Meeting of Stockholders of Balance Bar Company, to be held at the
Radisson Hotel, 1111 East Cabrillo Boulevard, Santa Barbara, California, Friday
May 14, 1999, at 10:00 a.m., local time, and at any adjournments or
postponements thereof.
The undersigned hereby acknowledges receipt of the Notice of Meeting and
Proxy Statement relating to the meeting and hereby revokes any proxy or proxies
heretofore given.
Each properly executed Proxy will be voted in accordance with the
specifications made on the reverse side of this Proxy and in the discretion of
the Proxies on any other matter which may properly come before the meeting.
Where no choice is specified, this Proxy will be voted FOR all listed nominees
to serve as directors and FOR proposal 2.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
BALANCE BAR COMPANY
May 14, 1999
Please Detach and Mail in the Envelope Provided
<TABLE>
<S> <C>
A [X] Please mark your
votes as in this
example.
FOR all nominees WITHHOLD THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MATTERS (1)
listed at AUTHORITY AND (2) LISTED BELOW, TO COME BEFORE THE ANNUAL MEETING.
right (except as to vote for
marked to the all nominees
contrary below). at right. FOR AGAINST ABSTAIN
1. Election of two [_] [_] Nominees: Barry D. Goss 2. To ratify the appointment of [_] [_] [_]
(2) directors, to serve until the 2002 Dennis Ryan McCarthy Arthur Andersen LLP as independent auditors
Annual Meeting of Stockholders of the company for the year 1999.
FOR, except withheld from the following nominee(s): 3. Upon any and all other business that may properly
____________________________________________________ come before the Annual Meeting.
This Proxy, which is solicited on behalf of the Board
of Directors, will be voted FOR the matters described
in paragraphs (1) and (2) unless the shareholder
specifies otherwise, (in which case it will be voted
as specified).
SIGNATURE _______________________________ DATED ___________, 1999 SIGNATURE _____________________________ DATED ___________, 1999
NOTE: Please sign exactly as name or names appear hereon. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If a corporation, please sign in full corporate name by president or other authorized officer.
If a partnership name by authorized partner.
</TABLE>
<PAGE>
Please Detach and Mail in the Envelope Provided
<TABLE>
<S> <C>
A [X] Please mark your
votes as in this
example.
FOR all nominees WITHHOLD THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MATTERS (1)
listed at AUTHORITY AND (2) LISTED BELOW, TO COME BEFORE THE ANNUAL MEETING.
right (except as to vote for
marked to the all nominees
contrary below). at right. FOR AGAINST ABSTAIN
1. Election of two [_] [_] Nominees: Barry D. Goss 2. To ratify the appointment of [_] [_] [_]
(2) directors, to serve until the 2002 Dennis Ryan McCarthy Arthur Andersen LLP as independent auditors
Annual Meeting of Stockholders of the company for the year 1999.
FOR, except withheld from the following nominee(s): 3. Upon any and all other business that may properly
____________________________________________________ come before the Annual Meeting.
This Proxy, which is solicited on behalf of the Board
of Directors, will be voted FOR the matters described
in paragraphs (1) and (2) unless the shareholder
specifies otherwise, (in which case it will be voted
as specified).
SIGNATURE _______________________________ DATED ___________, 1999 SIGNATURE _____________________________ DATED ___________, 1999
NOTE: Please sign exactly as name or names appear hereon. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If a corporation, please sign in full corporate name by president or other authorized officer.
If a partnership name by authorized partner.
</TABLE>
