<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
UNIVERSAL FOODS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
UNIVERSAL FOODS CORPORATION
433 East Michigan Street
Milwaukee, Wisconsin 53202
Notice of Annual Meeting
To Be Held January 27, 2000
To the Shareholders of
Universal Foods Corporation:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders
("Meeting") of Universal Foods Corporation, a Wisconsin corporation
("Company"), will be held at the Italian Community Center, 631 East Chicago
Street, Milwaukee, Wisconsin, on Thursday, January 27, 2000, at 2:00 p.m.,
Central Standard Time, for the following purposes:
1. To elect three directors of the Company as described in the
accompanying Proxy Statement.
2. To approve the Universal Foods Corporation 1999 Non-Employee Director
Stock Option Plan to provide for the annual grant of non-statutory stock
options to non-employee directors of the Company.
3. To approve an amendment to the Directors' Deferred Compensation Plan
which provides for deferral of director fees into Company stock.
4. To approve an amendment to the Management Incentive Plan for Elected
Officers to qualify the plan under Section 162(m) of the Internal Revenue
Code.
5. To ratify the appointment of Deloitte & Touche LLP, certified public
accountants, as the independent auditors of the Company for fiscal 2000.
6. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on December 3, 1999,
as the record date for the determination of shareholders entitled to notice
of, and to vote at, the Meeting and any adjournments thereof.
We encourage you to attend the Meeting and vote your shares in person.
However, whether or not you are able to attend the Meeting, please complete
the enclosed proxy and return it promptly using the envelope provided so that
your shares will be represented at the Meeting. You may revoke your proxy at
any time before it is actually voted by notice in writing to the undersigned
or by attending the Meeting and voting in person. Your attention is directed
to the attached proxy statement and accompanying proxy.
On Behalf of the Board of Directors
John L. Hammond
Secretary
Milwaukee, Wisconsin
December 17, 1999
<PAGE>
UNIVERSAL FOODS CORPORATION
433 East Michigan Street
Milwaukee, Wisconsin 53202
(414) 271-6755
PROXY STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS
to be held on
January 27, 2000
----------------
GENERAL
This proxy statement and accompanying proxy are first being furnished to
the shareholders of Universal Foods Corporation, a Wisconsin corporation
("Company"), beginning on or about December 17, 1999, in connection with the
solicitation by the Board of Directors of the Company ("Board") of proxies for
use at the Company's 2000 Annual Meeting of Shareholders to be held at the
Italian Community Center, 631 East Chicago Street, Milwaukee, Wisconsin, on
Thursday, January 27, 2000, at 2:00 p.m., Central Standard Time, and at any
adjournments thereof ("Meeting"), for the purposes set forth in the attached
Notice of Annual Meeting of Shareholders and in this proxy statement.
Accompanying this proxy statement are a Notice of Annual Meeting of
Shareholders and a form of proxy solicited by the Board for the Meeting. The
Annual Report to Shareholders, which also accompanies this proxy statement,
contains financial statements for the three years ended September 30, 1999,
and certain other information concerning the Company. The Annual Report and
financial statements are neither a part of this proxy statement nor
incorporated herein by reference.
Only holders of record of the Company's Common Stock ("Common Stock") as of
the close of business on December 3, 1999, are entitled to notice of, and to
vote at, the Meeting. On that date, the Company had 50,234,023 shares of
Common Stock outstanding, each of which is entitled to one vote for each
proposal submitted for shareholder consideration at the Meeting.
A proxy, in the enclosed form, which is properly executed, duly returned to
the Company or its authorized representatives or agents and not revoked will
be voted in accordance with the shareholder's instructions contained in the
proxy. If no instructions are indicated on the proxy, the shares represented
thereby will be voted as follows:
. FOR the Board's three nominees for director;
. FOR the approval of the Universal Foods Corporation 1999 Non-Employee
Director Stock Option Plan to provide for the annual grant of non-
statutory stock options to non-employee directors of the Company;
. FOR the approval of an amendment to the Directors' Deferred Compensation
Plan which provides for deferral of director fees into Common Stock;
. FOR approval of an amendment to the Management Incentive Plan for Elected
Officers to qualify the plan under Section 162(m) of the Internal Revenue
Code;
. FOR ratification of the Board's selection of Deloitte & Touche LLP as the
Company's independent auditors for fiscal 2000; and
. On such other matters that may properly come before the Meeting in
accordance with the best judgment of the individual proxies named in the
proxy.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by delivering written notice thereof to the Secretary. Any
shareholder attending the Meeting may vote in person whether or not the
<PAGE>
shareholder has previously filed a proxy. Presence at the Meeting by a
shareholder who has signed a proxy does not in itself revoke the proxy. The
shares represented by all properly executed proxies received prior to the
Meeting will be voted as directed by the shareholders.
The cost of soliciting proxies will be borne by the Company. Proxies may be
solicited by directors, officers or employees of the Company in person, by
telephone or by telegram. The Company will use the services of D.F. King &
Co., Inc., New York, New York, to aid in the solicitation of proxies. Their
charges will be $7,500 plus reasonable expenses. The Company will also
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their expenses in sending proxy materials to the beneficial owners.
ITEM 1.
ELECTION OF DIRECTORS
The Board of Directors consists of eleven members divided into three
classes of four, four and three directors each. One class is elected each year
to serve for a term of three years.
Three directors are to be elected at the Meeting. All of the nominees,
Messrs. Bergstrom, Hickey and Manning, are currently directors of the Company
and are being nominated for three-year terms expiring in 2003. The remaining
eight directors will continue to serve in accordance with their previous
elections.
It is intended that the persons named as proxies in the accompanying proxy
will vote FOR the election of the Board's three nominees. If any nominee
should become unable to serve as a director prior to the Meeting, the shares
represented by proxies otherwise voted in favor of the Board's three nominees
or which do not contain any instructions will be voted FOR the election of
such other person as the Board may recommend.
Under Wisconsin law, directors are elected by a plurality of the votes cast
by the shares entitled to vote in the election, assuming a quorum is present.
For this purpose, "plurality" means that the individuals receiving the largest
number of votes are elected as directors, up to the maximum number of
directors to be chosen at the election. Therefore, any shares of Common Stock
which are not voted on this matter at the Meeting (whether by abstention,
broker nonvote or otherwise) will have no effect on the election of directors
at the Meeting.
Pursuant to the Company's Bylaws, written notice of other qualifying
nominations by shareholders for election to the Board must have been received
by the Secretary no later than December 8, 1999. As no notice of any such
other nominations was received, no other nominations for election to the Board
of Directors may be made by shareholders at the Meeting.
Set forth below is certain information about the Board's nominees and the
eight continuing members.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL
NOMINEES. SHARES OF COMMON STOCK REPRESENTED AT THE MEETING
BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR ALL
NOMINEES.
2
<PAGE>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
For Three-Year Terms Expiring January, 2003
<TABLE>
<CAPTION>
Year First
Position with Company Elected
Name and Age or Other Occupation Director
-------------------- -------------------------------------- ----------
<S> <C> <C>
John F. Bergstrom Chairman and Chief Executive Officer 1994
C, E, N...........53 of Bergstrom Corporation, which owns
automotive dealerships and commercial
real estate; Director of Wisconsin
Energy Corporation, Wisconsin Electric
Co., Kimberly-Clark Corporation,
Midwest Express Airlines and Banta
Corp.
William V. Hickey President, Chief Operating Officer and 1997
C, E, F...........55 Director of Sealed Air Corporation, a
leading global manufacturer of a
complementary line of protective, food
and specialty packaging materials and
systems (1)
Kenneth P. Manning Chairman of the Board, President and 1989
E, S..............57 Chief Executive Officer of the
Company; Director of Badger Meter,
Inc. (2)
</TABLE>
- --------
A--Audit Committee F--Finance Committee
C--Compensation and Development Committee N--Nominating Committee
E--Executive Committee S--Scientific Advisory Committee
(1) Mr. Hickey served as Executive Vice President and Chief Operating Officer
of Sealed Air Corporation from 1994 to 1996 and as its Senior Vice
President--Finance and Chief Financial Officer from 1991 to 1994.
(2) Mr. Manning was elected Chief Executive Officer effective October 1, 1996,
and was elected Chairman effective April 30, 1997.
3
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Terms Expiring January, 2001
<TABLE>
<CAPTION>
Year First
Position with Company Elected
Name and Age or Other Occupation Director
------------------------ -------------------------------------- ----------
<S> <C> <C>
Michael E. Batten Chairman of the Board and Chief 1980
F, N ................ 59 Executive Officer of Twin Disc, Inc.,
a manufacturer of transmission
components; Director of Briggs &
Stratton Corporation and Simpson
Industries
[PHOTO OF MICHAEL E. BATTEN]
Dr. Fergus M. Clydesdale Professor and Head of the Department 1998
F, S ................ 62 of Food Science at the University of
Massachusetts--Amherst
[PHOTO OF DR. FERGUS M. CLYDESDALE
James A.D. Croft Chairman, Bartlodge, Limited since 1997
A, C ................ 62 1998; Director of Richard Ellis
Holdings Limited, Property and
Investment Consultants to 1998.
[PHOTO OF JAMES A.D. CROFT]
Essie Whitelaw Former President and Chief Operating 1993
C, N ................ 51 Officer of Blue Cross & Blue Shield
United of Wisconsin, a comprehensive
health insurer; Director of WICOR,
Inc. and Compcare
</TABLE>
[PHOTO OF ESSIE WHITELAW]
- --------
A--Audit Committee F--Finance Committee
C--Compensation and Development Committee N--Nominating Committee
E--Executive Committee S--Scientific Advisory Committee
4
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Terms Expiring January, 2002
<TABLE>
<CAPTION>
Year First
Position with Company Elected
Name and Age or Other Occupation Director
------------------------ -------------------------------------- ----------
<S> <C> <C>
Richard A. Abdoo Chairman, President and Chief 1999
A, N..................55 Executive Officer, Wisconsin Energy
Corp., a supplier of electric, gas and
real estate development services;
Director of Marshall & Ilsley Corp.
and United Wisconsin Services, Inc.
Alberto Fernandez Chief Executive Officer, Pyosa, S.A. 1999
A.....................53 de C.V., a Mexican chemical company
specializing in lead oxides, fine
chemicals and dyes (1)
James L. Forbes Chairman and Chief Executive Officer 1989
A, E, F...............67 of Badger Meter, Inc., a manufacturer
and marketer of flow measurement and
control products; Director of Blue
Cross & Blue Shield United of
Wisconsin, United Wisconsin Services,
Inc. and Journal Communications, Inc.
Dr. Carol I. Waslien Professor and Chair, Public Health 1981
Ghazaii Sciences, School of Public Health,
F, S..................59 University of Hawaii
</TABLE>
- --------
A--Audit Committee F--Finance Committee
C--Compensation and Development N--Nominating Committee
Committee S--Scientific Advisory Committee
E--Executive Committee
(1) In September, 1997, the Company acquired certain assets of the food color
business of Pyosa, S.A. de C.V., which is located in Monterrey, Mexico.
5
<PAGE>
Except as noted, all nominees and directors continuing in office have held
their current positions or otherwise have served in their respective positions
with the listed organizations for more than five years. No director, nominee
for director or executive officer had any material interest, direct or
indirect, in any business transaction of the Company or any subsidiary during
fiscal 1999, nor does any director, nominee or executive officer have any
material interest, direct or indirect, in any such proposed transaction.
The Board of Directors met five times during fiscal 1999, and each director
attended at least 75% of the meetings of the Board and the Board Committees on
which he or she served that were held during the period in which he or she was
a director.
Committees of The Board of Directors
The Executive Committee of the Board of Directors, which currently consists
of Messrs. Bergstrom, Forbes, Hickey and Manning, met once in fiscal 1999.
This Committee has the power and authority of the Board of Directors in
directing the management of the business and affairs of the Company in the
intervals between Board of Directors meetings, except to the extent limited by
law, and reports its actions at regular meetings of the Board.
The Audit Committee of the Board of Directors met twice during fiscal 1999.
Messrs. Abdoo, Croft, Fernandez and Forbes are the members of the Audit
Committee. This Committee, among other things: (i) recommends the engagement
of the independent auditors of the Company and approves their fee and the
scope and timing of their audit services; (ii) reviews the adequacy and
appropriateness of the Company's internal control structure and recommends
improvements thereto, including management's assessment of internal controls
and the internal audit function; (iii) reviews with the independent auditors
their reports on the consolidated financial statements of the Company and the
adequacy of the financial reporting process, including the selection of
accounting policies; and (iv) reviews the adequacy and appropriateness of the
various policies of the Company dealing with the principles governing
performance of corporate activities. These policies, which are set forth in
the Company's Code of Conduct, include antitrust compliance, conflict of
interest and business ethics.
Members of the Compensation and Development Committee of the Board of
Directors, which held three meetings during fiscal 1999, include Messrs.
Bergstrom, Croft, Hickey and Ms. Whitelaw. This Committee, among other things:
(i) reviews and approves all compensation programs for senior management of
the Company, including salary structure, base salary and short-term and long-
term incentive compensation plans, including stock options and non-qualified
fringe benefit programs; (ii) prepares reports for the annual proxy statement;
(iii) reviews and approves annual changes in each elected officer's
compensation including base salary and short-term and long-term incentive
awards, and approves all executive employment contracts; (iv) annually
recommends to the Board of Directors the election of Company officers; and (v)
annually reviews the performance of the Chief Executive Officer and reviews
and approves the Chief Executive Officer's management development and
succession plans for the Company.
The Finance Committee of the Board of Directors, consisting of Messrs.
Batten, Forbes and Hickey and Drs. Clydesdale and Waslien Ghazaii, held two
meetings during fiscal 1999. Among other things, this Committee reviews and
monitors the Company's financial planning and structure to ensure conformance
with the Company's requirements for growth and fiscally sound operation, and
also reviews and approves: (i) the Company's annual capital budget, long-term
financing plans, existing credit facilities and investments and commercial and
investment banking relationships; (ii) existing insurance programs, foreign
currency management and the stock repurchase program; and (iii) the financial
management and administrative operation of the Company's qualified and non-
qualified benefit plans.
The Nominating Committee of the Board of Directors, which consists of
Messrs. Abdoo, Batten, Bergstrom, and Ms. Whitelaw, met once during fiscal
1999. Among other functions, this Committee: (i) studies and makes
recommendations concerning the composition of the Board of Directors and its
committee structure and reviews the compensation of Board and Committee
members; (ii) recommends persons to be nominated by the Board of
6
<PAGE>
Directors for election as directors of the Company and to serve as proxies at
the annual meeting of shareholders; and (iii) considers nominees recommended
by shareholders. Recommendations by shareholders should be forwarded to the
Secretary of the Company and should identify the nominee by name and provide
detailed information concerning his or her qualifications. The Company's
Bylaws require that shareholders give advance notice and furnish certain
information to the Company in order to nominate a person for election as a
director. See the discussion under "Future Shareholder Proposals and
Nominations" on page 28.
The Scientific Advisory Committee of the Board of Directors, which consists
of Dr. Clydesdale, Dr. Waslien Ghazaii and Mr. Manning, met twice during
fiscal 1999. Among other functions, this Committee: (i) reviews the Company's
research and development programs with respect to the quality and scope of
work undertaken; (ii) advises the Company on maintaining product leadership
through technological innovation; and (iii) reports on new technological
trends and regulatory developments that would significantly affect the Company
and suggests possible new emphases with respect to its research programs and
new business opportunities.
Director Compensation and Benefits
Directors who are not employees of the Company received during fiscal 1999
an annual retainer of $22,000 and fees of $1,000 for each Board and Committee
meeting attended in addition to reimbursable expenses for such attendance.
Each Committee chairperson received an additional $1,000 annually for serving
in that capacity. Effective for fiscal 2000, the annual retainer was increased
to $24,000 and the fee paid to each Committee chairperson for serving in that
capacity was increased to $3,500. The increase in the annual retainer, which
is paid on a quarterly basis, will apply to the second, third and fourth
quarters of fiscal 2000, resulting in an increase for each such quarter of
approximately $667.
The first quarterly payment of the annual retainer is paid in Common Stock
pursuant to the Universal Foods Corporation Director Stock Grant Plan (the
"Stock Grant Plan") as approved by the shareholders on January 23, 1992. Under
the Stock Grant Plan, each non-employee director automatically receives an
award of Common Stock on October 1 of each year. The award consists of a
number of shares of Common Stock determined by dividing the value of the award
by the per share closing price of the Common Stock on the New York Stock
Exchange on October 1. The shares may not be sold or otherwise transferred for
a period of six months after the grant date, except in the event of death or
disability. The value of the award was $5,500 for fiscal 1999 and was paid on
October 1, 1998, as follows: 267 shares of Common Stock were awarded to each
of the following current non-employee directors: Messrs. Batten, Bergstrom,
Croft, Forbes and Hickey, Ms. Whitelaw, and Drs. Clydesdale and Waslien
Ghazaii. Such shares were transferred from the Company's treasury stock. If
the amendment to the Directors' Deferred Compensation Plan, as discussed below
and under Item 3 on page 22, is approved, the Stock Grant Plan will be
discontinued effective after the first quarter grant for fiscal 2000, which
was paid on October 1, 1999.
The Company has an unfunded retirement plan for non-employee directors who
have at least three years (one full term) of service with the Company as a
director. The plan provides a benefit equal to the annual retainer fee for
directors in effect at the time of the director's departure from the Board.
This benefit, payable only during the lifetime of the participant, continues
for a period equal to the amount of time the individual was an active
director. During the benefit period, the participant must be available to the
Chairman of the Board for consultation.
The Company has a Directors' Deferred Compensation Plan available to any
director who is entitled to compensation as a Board member. Under this plan,
the maximum amount that is eligible to be deferred is the total of all fees
paid to the director by reason of his or her membership on the Board or any
Committee thereof other than the portion of the annual retainer paid in Common
Stock. The fees deferred are credited to individual deferred compensation
accounts which bear interest at the rate of 8.0%. The amounts deferred
pursuant to this plan will be paid either: (i) in a lump sum on January 31 of
the calendar year following the year in which the director ceases to be a
director or on January 31 of any calendar year thereafter; or (ii) in five
equal consecutive
7
<PAGE>
annual installments commencing on January 31 of the first calendar year after
the director ceases to serve as a director. In the event of death, the balance
in a director's account will be paid in a lump sum to a designated beneficiary
or to the director's estate. In Item 3 on page 22 it is proposed that the
Directors' Deferred Compensation Plan be amended to allow directors
participating in the Directors' Deferred Compensation Plan to defer all or
part of their director fees and to provide for deferral in cash or Common
Stock.
PRINCIPAL SHAREHOLDERS
Management
The following table sets forth certain information as of November 30, 1999,
regarding the beneficial ownership of Common Stock by each of the executive
officers of the Company who is named in the Summary Compensation Table on page
12 ("named executive officers"), each director and nominee, and all of the
directors and executive officers of the Company as a group. Except as
otherwise indicated, all shares listed are owned with sole voting and
investment power.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial
Ownership and
Percent of
Name of Beneficial Owner Class (1)(2)
------------------------ -------------
<S> <C>
Richard A. Abdoo........................................... 459
Michael E. Batten.......................................... 4,108
John F. Bergstrom.......................................... 3,790
Dr. Fergus M. Clydesdale................................... 2,926
James A.D. Croft........................................... 1,596
Michael DuBois............................................. 10,047
Alberto Fernandez.......................................... 259
James L. Forbes............................................ 3,658
Michael Fung............................................... 159,433
Dr. Carol I. Waslien Ghazaii............................... 1,668
William V. Hickey.......................................... 2,796
Richard F. Hobbs........................................... 188,628
Kenneth P. Manning......................................... 548,940
R. Steven Martin........................................... 104,832
Essie Whitelaw............................................. 2,080
All directors and executive officers as a group (26
persons).................................................. 1,839,547
</TABLE>
- --------
(1) Except for Mr. Manning, who beneficially owns 1.08% of the Company's
Common Stock, no director or named executive officer beneficially owns 1%
or more of the Company's Common Stock. The beneficial ownership of all
directors and executive officers as a group represents 3.56% of the
outstanding Common Stock. In each case this percentage is based upon
50,266,523 shares of Common Stock outstanding as of November 30, 1999, and
the assumed exercise of that number of options which are included in the
total number of shares shown (see Note (2), below).
(2) Includes the following shares subject to stock options which are currently
exercisable or exercisable within 60 days of November 30, 1999: Mr.
DuBois--7,666 shares; Mr. Fung--117,332 shares; Mr. Hobbs--135,132 shares;
Mr. Manning--423,999 shares; Mr. Martin--77,541 shares; and all directors
and executive officers as a group--1,409,796 shares.
Other Beneficial Owners
The following table sets forth information regarding beneficial ownership
by those persons whom the Company believes to be beneficial owners of more
than 5% of the Common Stock of the Company as of
8
<PAGE>
November 30, 1999, based solely on review of filings made with the Securities
and Exchange Commission (except as noted in (4) below).
<TABLE>
<CAPTION>
Percent
Amount and of
Nature of Class
Name and Address of Beneficial Owner Ownership (1)
------------------------------------ ---------- -------
<S> <C> <C>
Morgan Stanley Dean Witter & Co. (2)................... 6,135,995 12.21%
Principal Mutual Life Ins. Co. (3)..................... 3,285,800 6.54%
Fidelity Management Trust Company (4).................. 3,489,433 6.94%
</TABLE>
- --------
(1) All percentages are based on 50,266,523 shares of Common Stock outstanding
as of November 30, 1999.
(2) Morgan Stanley Dean Witter & Co., 1585 Broadway, New York, New York 10036
("Morgan Stanley") and its subsidiary, Miller Anderson & Sherrerd, LLP, 1
Tower Bridge, Suite 1100, West Conshohocken, PA 19428 ("Miller Anderson"),
filed a joint Schedule 13G/A on February 5, 1999, which reported that
Morgan Stanley held shared voting power with respect to 5,239,955 shares
and shared dispositive power with respect to 6,135,995 shares, including
2,482,700 and 2,893,720 shares with respect to which Miller Anderson
reported shared voting power and shared dispositive power, respectively.
According to the Schedule 13G/A, Morgan Stanley and Miller Anderson are
investment advisors registered under Section 203 of the Investment
Advisors Act of 1940.
(3) Invista Capital Management, 699 Walnut, 1500 Hub Tower, Des Moines, IA
50309 ("Invista"), filed a Schedule 13G/A on February 16, 1999, which
reported on behalf of its parent holding company, Principal Mutual Life
Ins. Co., 711 High Street, Des Moines, IA 50392-0088 ("Principal"), that
Principal held shared voting power and shared dispositive power with
respect to 3,285,800 shares. According to the Schedule 13G/A, Invista is
an investment advisor registered under Section 203 of the Investment
Advisors Act of 1940.
(4) Fidelity Management Trust Company, 82 Devonshire Street, Boston,
Massachusetts 02109 ("Fidelity") is the Trustee of the Universal Foods
Retirement Employee Stock Ownership Plan ("ESOP"), which holds 2,195,446
shares, or 4.37% of the number of shares outstanding at November 30, 1999,
and is also Trustee of the Universal Foods Corporation Savings Plan
("Savings Plan") which holds 1,293,987 shares, or 2.57% of the number of
shares outstanding at November 30, 1999. Fidelity has advised the Company
that it disclaims beneficial ownership of the ESOP and Savings Plan
shares.
COMPENSATION AND DEVELOPMENT COMMITTEE REPORT
Introduction
This report describes the Company's executive compensation programs and the
basis on which fiscal year 1999 compensation was determined with respect to
the executive officers of the Company. The Committee is composed entirely of
independent non-employee directors and met three times during fiscal 1999. A
more complete description of the Committee functions is set forth under the
heading "Committees of the Board of Directors" on page 6.
Compensation Policy and Objectives
The Company has developed an overall compensation policy and specific
compensation plans that tie a significant portion of executive compensation to
the Company's success in meeting specified financial goals ("Program"). The
overall objectives of the Program are to attract and retain the best possible
executive talent, to motivate these executives to achieve the Company's
business strategy, to link executive and shareholder interests through equity-
based plans and to provide a program that recognizes individual contributions
and achievement.
Each year the Committee conducts a review of the Program. This review
includes a meeting with an independent compensation consultant assessing the
effectiveness of the Program and comparing it to a group of public
corporations that represent the Company's competition for executive talent.
The Committee approves the
9
<PAGE>
selection of comparator companies used for this analysis. The Committee
determines the compensation for the 16 elected officers including the five
most highly compensated Company executives. In reviewing individual
performance, the Committee takes into account the recommendations of Mr.
Manning. Key elements of the Company's Program are base salary, short-term
(annual) incentives and long-term incentives.
Base Salaries
Base salaries are initially determined by evaluating the responsibilities
of the position, the experience of the individual and the competitive
marketplace for executive talent, including a comparison with base salaries
for comparator positions at other companies. The base salary levels of the
Company's executives are targeted at the 50th percentile of the range of base
pay levels of similarly positioned executives in other companies. Base pay
levels are determined using regression analysis because of the difference in
size between the comparator companies and the Company. The Committee annually
reviews each executive's base salary. Adjustments are determined by evaluating
the financial performance of the Company, the performance of each executive
officer against job specifications, any new responsibilities and average
percentage pay increases provided by the comparator companies for similar
positions. In the case of executive officers with responsibility for a
particular business unit, such unit's financial results are also considered.
As reflected in the Summary Compensation Table on page 12, Mr. Manning's
base salary was increased in fiscal 1999 by $60,000 (12%). In determining Mr.
Manning's base salary, the Committee weighed the aforementioned criteria
equally.
Annual Bonuses
The Management Incentive Plans for elected officers ("Annual Plans")
promote the Company's pay-for-performance policy by providing annual cash
payments to executives based upon achieving overall Company or divisional
financial goals. The Annual Plans are subject to a target of 45% to 85% of
fiscal base salary depending on a participant's position in the Company. The
award is based on the achievement of a targeted Earnings Per Share level, and
in certain cases division sales operating profit, for the fiscal year, with
100% of the target award being paid upon achieving the targeted level.
Performance in excess of the targeted level allows for a payment of up to 150%
of the target award. Target bonus award levels approximate the 50th percentile
(adjusted for company size) of comparator companies' practices for each
executive position. For performance exceeding the targeted levels, the bonus
opportunities are tied to 75th percentile practices among comparator
companies. In fiscal 1999, Mr. Manning's bonus opportunity was 85% of his base
salary. As reflected in the Summary Compensation Table, his bonus award under
the Annual Plan was $600,831 or approximately 107.1% of his base salary. The
Company's Earnings Per Share level for fiscal 1999 exceeded the targeted
level.
Stock Awards and Long-Term Incentives
Under the Company's 1994 Employee Stock Plan and 1998 Stock Option Plan,
which were approved by the shareholders, restricted stock or stock options may
be granted to the Company's executive officers and other key employees. The
Committee makes annual decisions regarding appropriate stock-based grants for
each executive based on the following equally weighted factors. The Committee
considers the Company's financial performance, executives' levels of
responsibilities and predicted award values at the 50-75th percentile of long-
term incentive compensation practices for similar positions at other
companies. These factors determine the amount which may be represented by the
determined grant value of options and restricted stock. Generally, restricted
stock is only awarded to recognize a significant contribution to the Company's
performance. Restricted stock vests in five years. All outstanding options
have an exercise price equal to the market price on the date of grant and vest
in increments of one-third of the total grant on each of the first, second and
third anniversaries of the date of grant. This compensation approach is
designed to provide incentive to create shareholder value over the long-term,
since the full benefit of the compensation cannot be realized unless stock
price appreciation occurs over a number of years. In fiscal 1999, Mr. Manning
received options to purchase 75,000 shares at their fair
10
<PAGE>
market value on the date of grant and received 15,000 shares of restricted
stock. Messrs. DuBois, Fung, Hobbs and Martin received options to purchase
25,000, 37,500, 37,500 and 30,000 shares, respectively, and 2,000, 7,000,
5,000 and 4,000 shares of restricted stock, respectively.
Code Section 162(m)
Section 162(m) of the Internal Revenue Code limits the Company's income tax
deduction for compensation paid in any taxable year to certain executive
officers to $1,000,000 per individual, subject to several exceptions. The
Committee intends to continue to grant awards under the 1998 Stock Option Plan
that are designed to qualify for the performance-based compensation exception.
However, the Committee may grant such awards and the Company may enter into
compensation arrangements from time to time, which do not qualify for
deductibility under Section 162(m).
Compensation and Development Committee
John F. Bergstrom, Chairperson
James A.D. Croft
William V. Hickey
Essie Whitelaw
11
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information on the compensation of the Chief
Executive Officer and each of the other four most highly compensated executive
officers (collectively, the "named executive officers") of the Company as of
September 30, 1999.
<TABLE>
<CAPTION>
Annual Compensation Long-term
(1) Compensation
-------------------- ---------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Base Salary Bonus Awards ($) Options Compensation
Position Year ($) ($) (2) (3) (#) (4) ($) (5)
- ------------------ ---- ----------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth P. Manning....... 1999 $561,000 $600,831 $332,812 75,000 $111,458
Chairman, President and 1998 501,000 532,313 323,436 73,000 84,505
Chief Executive Officer 1997 431,000 322,776 120,563 76,000 68,140
Michael Fung............. 1999 306,000 250,614 155,312 37,500 53,756
Vice President and 1998 285,000 231,563 107,813 32,000 43,620
Chief Financial Officer 1997 264,000 151,193 80,375 40,000 37,013
R. Steven Martin......... 1999 265,000 217,035 88,750 30,000 43,481
Vice President and 1998 209,000 169,813 107,813 32,000 31,753
Group Executive 1997 165,478 108,531 80,375 40,000 23,973
Richard F. Hobbs......... 1999 250,000 204,750 110,937 37,500 44,191
Vice President--
Administration 1998 215,000 174,688 107,813 29,000 33,530
1997 195,000 103,077 80,375 34,000 29,160
Michael DuBois (6)....... 1999 242,500 178,950 44,375 25,000 31,199
President--Flavor 1998 122,915 69,490 -- 23,000 19,584
1997 -- -- -- -- --
</TABLE>
- --------
(1) Includes amounts deferred at the election of the named executive officer
under the Company's Executive Income Deferral Plan (see "Employment
Agreements and Other Arrangements") on page 14.
(2) Consists of awards under the Company's Management Incentive Plans.
(3) The amounts in the table reflect the market value on the date of award of
restricted shares of Common Stock ("Restricted Stock"). Total number and
value of shares of Restricted Stock held as of September 30, 1999 (based
on the $22.9375 per share closing price of the Common Stock on September
30, 1999) for each named executive officer are: Kenneth P. Manning--40,000
shares/$917,500; Michael Fung--18,000 shares/$412,875; R. Steven Martin--
13,000 shares/$298,187; Richard F. Hobbs--15,000 shares/$344,062 and
Michael DuBois--2,000 shares/$45,875. Dividends are paid on Restricted
Stock when paid on Common Stock.
(4) Awards for 1997 have been restated to reflect the Company's May 6, 1998
two-for-one stock split.
(5) Consists of Company contributions under certain benefit plans and other
arrangements for the five named executive officers. These contributions
are set forth in the following table. The Company's Retirement Employee
Stock Ownership Plan ("ESOP") and Savings Plan are tax-qualified plans
which are subject to government imposed annual limitations ($30,000 per
year for fiscal 1999) on contributions. The Company's Supplemental
Benefits Plan, a non-tax-qualified plan, replaces benefits which cannot be
provided by the tax-qualified ESOP and Savings Plan because of these
annual limitations. The amounts shown in the table below as contributed to
the ESOP and Savings Plan which exceed the applicable annual limits were
contributed to the Supplemental Benefits Plan. At the time the ESOP and
Savings Plan were adopted to replace the Company's former defined benefit
pension plan, the Transition Retirement Plan, also a tax-qualified plan,
was adopted to assure that affected employees would receive approximately
the same level of benefits through normal retirement age that they would
have received under the former defined benefit pension plan.
12
<PAGE>
(5)(continued)
The named executive officers do not participate in the Transition
Retirement Plan but a benefit equivalent to what they would have received
thereunder is contributed to the Supplemental Benefits Plan.
<TABLE>
<CAPTION>
Transition Plan
ESOP Savings Plan Benefit Equivalent
----------------------- ----------------------- --------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------- ------- ------- ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Manning............. $65,599 $49,427 $39,608 $43,732 $32,951 $26,405 $2,127 $2,127 $2,127
Mr. Fung................ 32,253 26,172 22,208 21,502 17,448 14,805 -- -- --
Mr. Martin.............. 26,089 19,052 14,383 17,392 12,701 9,589 -- -- --
Mr. Hobbs............... 25,481 19,085 16,463 16,987 12,723 10,975 1,722 1,722 1,722
Mr. DuBois.............. 18,719 5,875 -- 12,480 3,917 -- -- -- --
</TABLE>
(6)Mr. DuBois was first employed by the Company in May of 1998.
Stock Options
The following table sets forth information concerning the grant of stock
options under the Company's 1998 Stock Option Plan during fiscal 1999 to the
named executive officers.
<TABLE>
<CAPTION>
Percentage Potential Realizable Value
Number of of Total at Assumed Annual Rates of
Securities Options Stock Price Appreciation
Underlying Granted to for Ten-Year Option Term
Options Employees Exercise or (3)
Granted in Fiscal Base Price Expiration ---------------------------
Name (#) (1) 1999 ($/share) (2) Date 5% 10%
- ---- ---------- ---------- ------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth P. Manning...... 75,000 11.3% $22.1875 9/14/2009 $1,046,520 $2,652,087
Michael Fung............ 37,500 5.6% 22.1875 9/14/2009 523,260 1,326,044
R. Steven Martin........ 30,000 4.5% 22.1875 9/14/2009 418,608 1,060,835
Richard F. Hobbs........ 37,500 5.6% 22.1875 9/14/2009 523,260 1,326,044
Michael DuBois.......... 25,000 3.8% 22.1875 9/14/2009 348,840 884,029
All Shareholders (4).... -- -- -- -- $702,425,805 $1,780,084,903
</TABLE>
- --------
(1) The options reflected in the table were granted on September 14, 1999,
under the Company's 1998 Stock Option Plan (the "1998 Plan") and include
both incentive stock options under Section 422 of the Internal Revenue
Code and nonstatutory stock options. The exercise price of each option
granted was equal to 100% of the fair market value of the Common Stock on
the date of grant. The options granted vest in increments of one-third of
the total grant on each of the first, second and third anniversaries of
the grant date. The options are subject to early vesting in the event of
the individual's death, disability or retirement. Upon a "Change of
Control" of the Company (as defined in the 1998 Plan), all options then
outstanding will become immediately exercisable in full.
(2) The exercise price of options may be paid in cash or its equivalent, by
delivering previously issued shares of Common Stock, or any combination
thereof, or by electing to have the Company withhold shares of Common
Stock issuable upon exercise with a fair market value equal to the
exercise price.
(3) The option values presented were calculated based on a per-share price of
$22.1875 on the date of grant at assumed 5% and 10% annualized rates of
appreciation for the term of the grant. The actual value, if any, that an
individual may realize upon exercise will depend on the excess of the
market price of the Common Stock over the option exercise price on the
date the option is exercised. There is no assurance that the actual value
realized by an individual upon the exercise of an option will be at or
near the value estimated under the model described above.
(4) The potential realizable value for "All Shareholders" is determined on the
assumption that the price of the Company's Common Stock appreciated over
the term of the options from the $22.1875 per share market price as of the
date of grant at an annualized rate: (i) of 5% (which would result in a
value on September 14, 2009, of $36.141 per share); and (ii) 10% (which
would result in a value on September 14, 2009, of $57.549 per share). The
"All Shareholders" information is calculated based on 50,340,115 shares of
the Company's Common Stock outstanding as of September 30, 1999. Thus, for
comparative purposes, the total value of such Common Stock as of September
14, 1999, the date on which the options were granted, would be
$1,116,921,302.
13
<PAGE>
Aggregate Option Exercises in Fiscal 1999 And Fiscal Year-End Option Values
The following table sets forth information regarding the exercise of stock
options by each of the named executive officers during fiscal 1999 and the
fiscal year-end value of unexercised stock options held by such officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at End of In-the-Money Options at
Acquired Fiscal 1999 End of Fiscal 1999 (1)
on Value (#) ($)
Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth P. Manning...... 200 $ 800 423,999 149,001 $2,548,962 $195,209
Michael Fung............ 4,000 16,500 117,332 72,168 652,371 95,377
R. Steven Martin........ -- -- 99,732 64,668 532,833 89,752
Richard F. Hobbs........ 18,000 109,625 135,132 68,168 760,596 86,940
Michael DuBois.......... -- -- 7,666 40,334 10,541 39,834
</TABLE>
- --------
(1) The dollar values were calculated by determining the difference between
the fair market value of the underlying shares of Common Stock and the
various applicable exercise prices of the named executive officers'
outstanding "in-the-money" options at the end of fiscal 1999. At the end
of fiscal 1999, all options previously granted to the named executive
officers were "in-the-money," which means that their exercise price was
below fair market value. As provided by the Company's 1990 Employee Stock
Plan, 1994 Employee Stock Plan and the 1998 Plan, the fair market value of
the underlying shares of Common Stock on any date is equal to the price of
the Company's Common Stock as reported on the New York Stock Exchange. On
September 30, 1999, the closing price of the Common Stock as reported on
the New York Stock Exchange was $22.9375 per share.
Employment Agreements and Other Arrangements
Employment Agreement. The Company has an employment contract with Mr.
Manning dated November 11, 1999. The term of the agreement is for three years,
which is automatically extended annually for additional one-year periods,
except that in no event will the term of his employment extend beyond the
calendar month in which his 65th birthday occurs or he becomes disabled or
dies. During this employment period, the agreement provides for the payment of
base salary (subject to annual adjustment), plus bonus and customary fringe
benefits. The agreement can be terminated by the Board of Directors with or
without cause. If terminated without cause by the Board or for good reason by
Mr. Manning (as defined therein), certain termination benefits are payable to
Mr. Manning in an amount equal to three times the sum of his base salary then
in effect and his target bonus for the fiscal year in which such termination
occurred. Mr. Manning would also continue to receive certain fringe benefits
for three years. In the event of a change of control of the Company, Mr.
Manning's employment contract would be superseded by a Change of Control
Employment and Severance Agreement as described below, except that he would be
entitled to retain certain retirement and disability benefits under his
employment contract.
Change of Control Employment and Severance Agreements. The Company also has
Change of Control Employment and Severance Agreements with 16 executive
officers (including the named executive officers) who are part of the
executive officer group. Each of these agreements provides that in the event
of a "Change of Control," as defined in the respective agreement, the Company
will continue to employ the executive for a period of three years following
the date of such Change of Control. During this employment period, the
executive will receive as compensation a base salary, subject to annual
adjustment, bonus awards in accordance with past practice and all other
customary fringe benefits in effect as of the date of the Change of Control.
The agreements can be terminated upon 30 days' notice by the Company in the
event of the executive's disability. The agreements can also be terminated by
the Company for "cause" and by the executive for "good reason." If terminated
by the Company other than for cause or disability, or by the executive for
good reason, the Company will pay the executive an amount equal to the sum of
(i) accrued unpaid deferred compensation and vacation pay and (ii) three times
the executive's base salary plus the highest annual bonus for the last three
fiscal years. The executive
14
<PAGE>
will also be entitled to coverage under existing benefit plans for three years
and a payment equal to the vested amounts plus a payment equal to three
additional years of employer contributions under the Savings Plan, ESOP, and
Supplemental Benefits Plan (including the Transition Plan benefit equivalent
described in footnote (5) to the Summary Compensation Table on page 12). The
Savings Plan, ESOP and Supplemental Benefits Plan provide for full vesting of
all accounts upon the occurrence of a Change of Control. In addition, payments
under the Company's Supplemental Executive Retirement Plan, described below
("SERP"), are calculated based on an adjusted final salary reflecting three
additional years of salary increases consistent with past practice. If
terminated for cause, the Company will pay the executive his annual base
salary through termination. If the executive's employment is terminated by
reason of death or disability, the Company will pay certain accrued
obligations and other customary death or disability benefits. In all cases,
the Company will pay any excise taxes assessed against any payments made to
the executive.
SERP. The SERP provides a non-qualified supplemental executive retirement
benefit for selected officers and key employees. Generally, participants
contribute to the plan, in each year until death or retirement, an amount
equivalent to a term insurance premium applicable to a life insurance benefit
of three times the participant's base salary in effect on the date of
acceptance into the plan, unless all amounts were previously paid under a
predecessor plan. A pre-retirement survivor income benefit equal to 20%, 25%
or 30% of base salary payable for 15 or 20 years is available to designated
beneficiaries if the participant dies prior to retirement. At the time of
retirement, the participant may continue the survivor income benefit or elect
to receive a supplemental retirement income benefit equal to 20%, 25% or 30%
of base salary for 15 or 20 years or an actuarially equivalent joint and
survivor benefit. The benefit obligations under the SERP are funded under
Rabbi Trust B described below under "Funding Arrangements." The named
executive officers participate in the SERP. Under their respective agreements
under the SERP, each of the named executive officers is entitled to 20 years
of benefits, and the applicable percentages of pre-retirement survivor income
benefits and supplemental retirement income benefits for the named executive
officers are 30% for Messrs. Manning, Fung and Hobbs and 25% for the other
named executive officers.
Executive Income Deferral Plan. Under the Executive Income Deferral Plan,
executives of the Company (including the named executive officers) are
entitled to defer up to 25% of their annual salary. Amounts deferred earn
interest at a Company-guaranteed annual minimum rate and are payable upon
retirement over a 15 year period, unless the executive elects to receive an
actuarially equivalent joint and survivor benefit, reduced by up to 20%
depending upon the executive's age at retirement. The Company's obligations
under the Executive Income Deferral Plan are also funded by Rabbi Trust B.
Funding Arrangements. The Company has established three so-called "Rabbi
Trusts" by entering into trust agreements with a trustee to assure the
satisfaction of the obligations of the Company under various plans and
agreements to make deferred and other payments to certain of its past, present
and future executives and directors, including the named executive officers.
Rabbi Trust A requires the Company to deposit assets into ("fund") the Trust
in the event of a "Change of Control" (as defined therein) in an amount
sufficient to satisfy the Company's obligations to Mr. Manning, the other
named executive officers, and other executive officers under the Change of
Control Employment and Severance Agreements with those individuals (except to
the extent that those obligations consist of benefits covered by Rabbi Trust
B). Rabbi Trust A is currently not funded except with a nominal amount of
assets, and is currently revocable but will become irrevocable once it is
funded. The Board may elect to fund Rabbi Trust A in whole or in part prior to
the occurrence of a Change of Control. Rabbi Trust B was created to fund the
Company's obligations under various employee benefit plans, including three
plans in which the named executive officers participate: the SERP, the
Supplemental Benefits Plan, and the Executive Income Deferral Plan. The
Company makes annual contributions to Rabbi Trust B and it currently holds
approximately $13.0 million of assets. Rabbi Trust B is irrevocable. Rabbi
Trust C was created to assure that payments to non-employee directors under
the director retirement and Deferred Compensation plans described on page 7
under "Director Compensation and Benefits" will not be improperly withheld.
Rabbi Trust C is currently funded with a nominal amount, and is also funded
from time to time as payouts are made under these plans, although the Board
may elect to fund it at any time. Rabbi Trust C is irrevocable. Each of the
Rabbi
15
<PAGE>
Trusts will terminate upon the earlier of the exhaustion of the trust corpus
or the final payment to the directors or executives pursuant to the respective
plans and agreements covered thereby, and any remaining assets will be paid to
the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors to file initial reports of beneficial ownership (on
Form 3) and reports of changes in beneficial ownership (on either Form 4 or
Form 5) with the Securities and Exchange Commission ("SEC") and the New York
Stock Exchange. SEC regulations require officers and directors to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Company, and upon
certifications from reporting persons who did not file year-end reports on
Form 5 that no such reports were required, the Company believes that during
the fiscal year ended September 30, 1999, all its officers and directors
complied with Section 16(a) filing requirements.
16
<PAGE>
COMPANY STOCK PERFORMANCE
The following graph compares the cumulative annual change since September
30, 1994 of the total shareholder return on the Common Stock with: (i) the
total return on the Standard & Poor's 500 Food Index (the "S&P Food Index");
and (ii) the total return on the Standard & Poor's 500 Composite Index (the
"S&P Composite Index"), assuming that $100 was invested in each of the Common
Stock, the stocks comprising the S&P Food Index and the stocks comprising the
S&P Composite Index on September 30, 1994 and assuming that all dividends were
reinvested at the end of the month in which they were paid.
Comparison Of Five-Year Total Return
Among Universal Foods Corporation, the S&P Food Index and the S&P Composite
Index
[LINE GRAPH]
<TABLE>
<CAPTION>
September 30,
-----------------------------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Universal Foods Corporation................ $100 $121 $117 $149 $158 $178
S&P Food Index............................. 100 121 146 191 199 187
S&P Composite Index........................ 100 126 149 205 220 277
</TABLE>
17
<PAGE>
ITEM 2.
APPROVAL OF
1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The following summary of the Company's 1999 Non-Employee Director Stock
Option Plan (the "Director Option Plan") is qualified in its entirety by
reference to the full text of the Director Option Plan which is attached to
this Proxy Statement as Appendix A. Capitalized terms used in this summary are
defined in the Director Option Plan.
General
The purpose of the Director Option Plan is to advance the interests of the
Company by encouraging and providing for the acquisition of an equity interest
in the Company by Non-Employee Directors, and by enabling the Company to
attract and retain the services of directors upon whose judgment, interest and
special effort the successful conduct of its operations largely depends.
The Director Option Plan authorizes the granting of non-statutory options
to purchase shares of Common Stock ("Options") to Non-Employee Directors.
Available Shares
Up to 250,000 shares of Common Stock will be initially available for Awards
under the Director Option Plan. The aggregate number of shares of Common Stock
reserved and available for issuance is subject to adjustment in the event of
any stock dividend or split, recapitalization, merger, consolidation,
combination, spin-off, split-up, exchange of shares or other similar corporate
change which affects the total number of shares outstanding.
Administration
The Director Option Plan is administered by the Nominating Committee of the
Board of Directors ("Committee"). The Committee must consist of not less than
two directors who are appointed by the Board. Among other functions, the
Committee has the authority to establish rules for the administration of and
to interpret and implement the Director Option Plan. However, the Committee
has no discretion to determine the Participants to whom Awards will be
granted, to determine the number of shares covered by such Awards, or to set
the terms and conditions of Awards relating to vesting, exercise or expiration
of Awards. In the discretion of the Committee, the terms of Awards (except as
noted in the previous sentences) may differ from Participant to Participant.
Subject to the express terms of the Director Option Plan, determinations and
interpretations with respect thereto will be in the sole discretion of the
Committee, whose determinations and interpretations will be binding on all
parties.
Eligibility
Participants in the Director Option Plan shall include each member of the
Board who is a Non-Employee Director at the time Options are granted pursuant
to this plan. The term "Non-Employee Director" is defined in the Director
Option Plan with reference to Rule 16b-3 of the Exchange Act, and generally
includes directors that are neither officers nor employees of the Company and
are not involved in certain business or professional relationships with the
Company. As of the date of this Proxy Statement, all of the Directors of the
Company, other than Mr. Manning, are "Non-Employee Directors" under this
definition.
Effective Date
The Director Option Plan will become effective on the date it is approved
by the shareholders of the Company, which is expected to occur on the date of
the Meeting, January 27, 2000.
18
<PAGE>
Stock Options
Options granted under the Director Option Plan may only be non-statutory
stock options (i.e., options which do not qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code).
Formula for Determining Number of Options to be Granted. Under the Director
Option Plan, each Non-Employee Director who is a member of the Board
immediately following the Company's annual meeting of shareholders in January
of each year will be granted 2,000 Options on February 1 of that year
(beginning on February 1, 2000).
Exercise Price. The exercise price per share of Options granted under the
Director Option Plan will be the Fair Market Value of a share of Common Stock
on the date of grant. There will be no consideration received by the Company
from a Participant in exchange for the original grant of an Option.
Term. Each Option will expire on the 10th anniversary of the date of its
grant.
When Exercisable. Options will vest and become exercisable in three equal
annual installments beginning on the first anniversary of the date granted and
will remain exercisable until they expire as set forth above under "Term."
Except as set forth below under "Forfeiture," upon cessation of a
Participant's service as a Director, any Option which was not exercisable
immediately prior to such termination will become immediately exercisable and
will remain exercisable for a period of three years after such termination
(subject to the 10-year limitation on the term of any Option).
Manner of Exercise. Options may be exercised by payment as follows:
(a) in cash or its equivalent, including, in the discretion of the
Committee, a promissory note issued to the Company by the Participant (any
such note must: (i) be secured by the Common Stock issued; (ii) be for a
term of not more than 10 years; (iii) bear interest at a rate of not less
than the prime rate (as determined by the Committee) in effect on the date
the note is issued; and (iv) require at least annual payments of principal
and interest; the note may contain such other terms and conditions as the
Committee determines);
(b) tendering shares of Common Stock having a Fair Market Value at the
time of exercise equal to the total Option price;
(c) by any combination of (a) and (b), above; or
(d) by electing to have the Company withhold from the shares of Common
Stock otherwise issuable upon exercise of the Option that number of shares
of Common Stock having a Fair Market Value at the time of exercise plus
cash for any fractional share amounts, equal to the total Option price.
Adjustment of Outstanding Awards. In the event of any stock dividend or
split, recapitalization, merger, consolidation, combination, spin-off, split-
up, exchange of shares or other similar corporate change which affects the
total number of shares outstanding, the Committee shall make an appropriate
adjustment to change the number of options or the stated option price, or
both, under each outstanding Award.
Transferability. The Committee may, in its discretion, permit Options to be
transferable by the Participant: (i) to the Participant's spouse, or natural
or adoptive children or grandchildren ("Immediate Family Members"); (ii) to a
trust or trusts for the exclusive benefit of one or more Immediate Family
Members; or (iii) to a partnership in which all partners are Immediate Family
Members; provided, that there may be no consideration for any such transfer
and the transferee shall be expressly prohibited from any further transfer of
such Options other than by will or pursuant to the laws of descent and
distribution. Unless expressly so permitted, no Option may be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated, other
than by will or pursuant to the laws of descent and distribution, and all
Options granted to a Participant shall be exercisable during his lifetime only
by such Participant.
19
<PAGE>
Forfeiture. If a Participant's cessation of service is due to his or her
removal from the Board in accordance with the procedures set forth under the
Wisconsin Business Corporation Law or the Company's Bylaws, all of his or her
exercisable Options will remain exercisable for three months following such
termination (subject to the 10-year limitation on the term of any Option), and
all of his or her unexercisable Options will be immediately forfeited.
Change of Control. In the event of a "Change of Control" (as defined; see
"Change of Control," below), each outstanding Option shall immediately become
exercisable (regardless of whether the Option was previously exercisable).
Each Participant holding Options shall have the right, within 60 days after
the Change of Control, to receive, in exchange for the surrender of an Option
or portion thereof, an amount of cash equal to the highest of: (i) the
difference between the Fair Market Value of the Common Stock covered by the
Option on the date of the Change in Control and the Option exercise price;
(ii) the difference between the Fair Market Value of the Common Stock covered
by the Option on the date of surrender and the Option exercise price; or (iii)
the difference between the highest price per share of Common Stock paid in the
transaction giving rise to the Change of Control and the Option exercise price
multiplied by the number of shares of stock covered by the Option.
Change of Control Defined
A "Change of Control" of the Company means:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (A) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or
(B) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (1) any acquisition directly from the
Company, (2) any acquisition by the Company, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (4) any acquisition
pursuant to a transaction which complies with clauses (A), (B) and (C) of
subsection (iii) of this Section; or
(ii) individuals who, as of November 11, 1999, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to November 11, 1999 whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board; or
(iii) consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of the Company or the acquisition of assets of another entity (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including
without limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly
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or indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or the action of the Board, providing
for such Business Combination; or
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Amendment, Modification and Termination
The Board may at any time amend, alter, suspend, discontinue or terminate
the Director Option Plan (subject to shareholder approval if required by or
deemed by the Board to be desirable under applicable law, regulation, or
exchange listing requirement). Termination of the Director Option Plan shall
not: (i) affect the rights of Participants with respect to Awards previously
granted to them; (ii) amend the terms of the Director Option Plan regarding
who may participate and the amount, price and timing of the Options to be
issued more than once every six months, other than to comport with changes in
the Internal Revenue Code or the Employees Retirement Income Securities Act
(ERISA); or (iii) cause the Director Option Plan not to qualify for exemption
from Section 16(b) of the Exchange Act provided by Rule 16b-3 of the Exchange
Act, or any successor rule, and all unexpired Awards shall continue in force
and effect after termination of the Director Option Plan except as they may
lapse or be terminated by their own terms and conditions.
Certain Federal Income Tax Consequences
The grant of a stock option under the Director Option Plan will create no
income tax consequences to the Participant or the Company. A Participant who
is granted a non-statutory Option will generally recognize ordinary income at
the time of exercise of the Option in an amount equal to the excess of the
fair market value of the Common Stock at such time over the exercise price.
The Company will be entitled to a deduction in the same amount and at the same
time as ordinary income is recognized by the Participant. A subsequent
disposition of the Common Stock by the Participant will give rise to capital
gain or loss to the extent the amount realized from the sale differs from the
tax basis. This capital gain or loss will be a long-term capital gain or loss
if the Common Stock has been held for the required holding period under the
Internal Revenue Code.
Certain additional tax consequences may attach in the event a Participant
is permitted to pay the exercise price of an Option with an interest-bearing
promissory note, as described above; in particular, the Company may be
required to recognize taxable income with respect to any interest received on
such promissory note.
Withholding
The Company is entitled to withhold the amount of any tax attributable to
any amount payable or shares of Common Stock deliverable under the Director
Option Plan after giving the affected Participant notice as far in advance as
practicable, and the Company may defer making any such payment or delivery if
any such tax may be pending, unless and until indemnified to its satisfaction.
A Participant may elect to pay all or a portion of the federal, state and
local withholding taxes arising in connection with the exercise of an Option
by electing to: (i) have the Company withhold shares of Common Stock; (ii)
tender back shares of Common Stock received in connection with such benefit;
or (iii) deliver other previously owned shares of Common Stock, in each case
having a Fair Market Value equal to the amount to be withheld, up to the
amount of the Participant's estimated total federal, state and local tax
obligations associated with the transaction.
New Plan Benefits
As of the date of this Proxy Statement, no Options have been granted under
the Director Option Plan. If the shareholders approve the Director Option
Plan, assuming that all of the Board's nominees are elected by the
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<PAGE>
shareholders and, therefore, that all nominees and all of the directors
continuing in office are members of the Board immediately following the
Meeting, the following individuals (all of whom are Non-Employee Directors)
will be granted 2,000 Options on February 1, 2000: Richard A. Abdoo, Michael
E. Batten, John F. Bergstrom, Dr. Fergus M. Clydesdale, James A.D. Croft,
Alberto Fernandez, William V. Hickey, James L. Forbes, Dr. Carol I. Waslien
Ghazaii and Essie Whitelaw. All Non-Employee Directors as a group will be
issued a total of 20,000 Options on February 1, 2000. The dollar value of
these Options is not determinable because the dollar value depends upon the
future appreciation in the Fair Market Value of the Common Stock subject to
such Options between the date of grant and the date (or dates) of exercise.
Although it is generally expected that many, if not all, of the current Non-
Employee Directors will continue to serve on the Board in the future and
therefore continue to be granted 2,000 Options annually, the number of Options
that may be granted to any one Non-Employee Director in the future cannot be
determined on an individual basis; however, the maximum number of options that
could be issued in the future to any one Non-Employee Director would be 20,000
over the ten-year term of the Director Option Plan.
Vote Required
Assuming that a quorum is present, the Director Option Plan will be
approved if more shares are voted in favor of approval than are voted against
approval. Under Wisconsin law, any shares not voted at the Meeting with
respect to the Director Option Plan (whether as a result of abstention, broker
nonvote or otherwise) will have no impact on the vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
DIRECTOR OPTION PLAN. SHARES OF COMMON STOCK REPRESENTED AT
THE MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE
VOTED FOR THE DIRECTOR OPTION PLAN.
ITEM 3.
APPROVAL OF AMENDMENT TO
DIRECTORS' DEFERRED COMPENSATION PLAN
In 1984, the Company established a Directors' Deferred Compensation Plan
(the "Original Plan") to provide members of the Company's Board of Directors
(the "Board") with the ability to defer receipt of compensation for services
on the Board until after they resign or retire from the Board. The purpose of
the Original Plan was to assist the Company in attracting and retaining the
services of directors upon whose judgment, interest and special effort the
successful conduct of its operations largely depends.
On November 11, 1999, the Board adopted the Amended and Restated Directors'
Deferred Compensation Plan (hereinafter referred to as the "Restated Plan"),
thereby amending the Original Plan in certain respects. The Restated Plan was
adopted subject to shareholder approval at the Meeting.
The following summary, which is qualified in its entirety by reference to
the full text of the Restated Plan attached to this Proxy Statement as
Appendix B, describes the material features of the Restated Plan. Capitalized
terms used in this summary are defined in the Restated Plan.
Persons Eligible to Participate
Under the Restated Plan, only directors who are entitled to compensation
from the Company for services as a member of the Board or any committee
thereof ("Director Fees") are eligible to participate in the Restated Plan
("Eligible Directors"). As of the date of this Proxy Statement, all of the
directors of the Company (other than Mr. Manning, who is a full-time employee
of the Company and therefore not entitled to separate compensation for his
services on the Board) are Eligible Directors. For information regarding
compensation of directors, see "Director Compensation and Benefits" on page 7.
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<PAGE>
Compensation Which May Be Deferred
Under the Restated Plan, an Eligible Director may elect to defer all or a
portion of the Director Fees to which he or she may become entitled after the
date of election, which differs from the Original Plan in that, under the
Original Plan, an election could only be made with respect to 100% of an
Eligible Director's Director Fees. Under the Restated Plan, an election, once
made, may be changed by the Eligible Director at any time (subject to certain
limitations contained in the Restated Plan) with regard to future deferrals.
An Eligible Director may terminate his or her participation in the Restated
Plan at any time and is not thereby precluded from participating in the
Restated Plan at a later date.
Effect of Deferral
Under the Restated Plan, all deferred Director Fees are credited to an
account maintained by the Company for that Eligible Director ("Account") at
the same time and in the same amount as if such Director Fees had been payable
in cash. No part of an Eligible Director's Account may be distributed to the
Eligible Director until his or her service on the Board has terminated,
whether due to death, disability, resignation or retirement, or for any other
reason (a "Cessation of Service").
Nature of Account
An Eligible Director's Account is a general obligation of the Company and
the Company is not required to and does not intend to segregate any cash or
other assets to satisfy its obligation to pay deferred Director Fees to an
Eligible Director participating in the Restated Plan (although the Company has
established a trust to secure these obligations--see "Executive Compensation--
Employment Agreements and Other Arrangements--Funding Arrangements" on page
15). Until an Eligible Director's Account has been distributed in accordance
with the Restated Plan, the Eligible Director is and remains a general
creditor of the Company.
Deferrals Into Account; Subaccounts; Account Earnings
Under the Restated Plan, an Eligible Director may select one of two
"subaccounts" (a "Cash Subaccount" and a "Stock Subaccount") into which
Director Fees are deferred, or may elect to allocate the deferred Director
Fees between the two Subaccounts. The purpose of the Account, and the
Subaccounts, is solely as a device for the measurement and determination of
the amount of deferred compensation payable/distributable under the Restated
Plan. The creation of a Stock Subaccount and the ability to defer Director
Fees into Common Stock is the second material difference between the Original
Plan and the Restated Plan.
Cash Subaccount. If an Eligible Director elects to defer Director Fees into
the Cash Subaccount, the Cash Subaccount is credited with the dollar amount of
such Director Fees on the date they would otherwise be payable to the Eligible
Director. Amounts credited to the Cash Subaccount are credited with interest
at the rate of 8% per annum, credited (and compounded) quarterly. As of the
Effective Date, the balance in any Eligible Director's account under the
Original Plan will be credited to his or her Cash Subaccount under the
Restated Plan. Amounts in the Cash Subaccount will continue to earn interest
until all amounts in the Account are fully distributed in accordance with the
Restated Plan. Distributions from the Cash Subaccount will be made in cash.
Stock Subaccount. If an Eligible Director elects to defer Director Fees
into the Stock Subaccount, the Stock Subaccount is credited with that number
of shares of Company Common Stock that have a fair market value (as determined
under the Restated Plan) equal to the amount of the Director Fees deferred on
the date the Director Fees would otherwise be payable to the Eligible
Director. Fair market value is the closing price of the Common Stock on the
New York Stock Exchange on the date the Director Fees are payable. Each time
the Company declares a cash dividend payable with respect to its Common Stock,
the Company will determine the amount of dividends that would be payable with
respect to the shares credited to an Eligible Director's Stock Subaccount on
the record date for such dividend, and will (on the payment date of such
dividend) credit the Stock Subaccount with that number of shares of Common
Stock that have a fair market value equal to the amount of such
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<PAGE>
dividends. The Stock Subaccount will continue to be credited with shares upon
the payment of cash dividends by the Company until all the shares in the
Account are fully distributed in accordance with the Restated Plan.
Distributions from the Stock Subaccount will be made in-kind, meaning that a
certificate (or certificates) representing the number of shares of Common
Stock being distributed, will be issued. These certificate(s) may represent
newly-issued stock or stock held by the Company as Treasury Stock.
Timing of Account Distribution
An Eligible Director may elect, prior to his or her Cessation of Service,
to have the amount in his or her Account distributed in a single lump sum (on
January 31 of the calendar year after the Cessation of Service, or on January
31 of any year thereafter) or in five annual installments (beginning on
January 31 of the calendar year after the Cessation of Service). If no such
election is made, the Account will be distributed in a lump sum on January 31
of the calendar year after the Cessation of Service.
If an Eligible Director elects to have his or her Account distributed in
installments, the first installment will equal 1/5 of the dollar amount in the
Cash Subaccount and 1/5 of the number of shares in the Stock Subaccount
(rounded to the nearest whole share); the second installment will equal 1/4 of
such amounts, and so on, with the final (fifth) installment constituting the
entire balance remaining in the Cash Subaccount and all of the shares
remaining in the Stock Subaccount, with cash being paid in lieu of any
fractional share.
Effective Date
The Restated Plan will be effective as of the date that the shareholders of
the Company approve the Restated Plan, which is expected to occur on the date
of the Meeting, January 27, 2000, and Eligible Directors will be able to defer
Director Fees earned after that date under the Restated Plan.
Available Shares
Up to 200,000 shares of Common Stock will be initially reserved and
available for issuance under the Restated Plan. This number is subject to
adjustment in the event of any stock dividend or split, recapitalization,
merger, consolidation, combination, spin-off, split-up, exchange of shares or
other similar corporate change ("Change of Shares") which affects the total
number of shares outstanding.
Administration
The Restated Plan is administered by the Company.
Adjustment of Stock Credited to Stock Subaccount.
In the event of Change of Shares, the number of shares credited to any
Eligible Director's Stock Subaccount will automatically be adjusted
accordingly.
Amendment, Modification And Termination
The Board may at any time amend, alter, suspend, discontinue or terminate
the Restated Plan (subject to shareholder approval if required by or deemed by
the Board to be desirable under applicable law, regulation, or exchange
listing requirement). However, no amendment may permit amounts accumulated
pursuant to the Restated Plan, prior to such amendment, to be paid to an
Eligible Director prior to the time that he or she would otherwise be entitled
thereto.
Certain Federal Income Tax Consequences
Under the Internal Revenue Code and IRS regulations and published
positions, a plan such as the Restated Plan which defers the receipt of income
also permits the recipient (an Eligible Director) to defer the recognition
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<PAGE>
of income for federal income tax purposes until the amounts are distributed
pursuant to the plan, provided that: (i) the deferral election is made before
the income is earned; (ii) the plan is not funded and the recipient is no more
than a general creditor of the company; and (iii) the recipient cannot access
the amounts deferred until his or her term of service with the company is
terminated. The Company believes that the Restated Plan meets all of these
criteria and that an Eligible Director who participates in the Restated Plan
may defer recognition of his or her Director Fees as income until his or her
Account is distributed under the Restated Plan. The Company would not be
entitled to a deduction for any Director Fees deferred under the Restated Plan
until such amounts are distributed and the Eligible Director recognizes income
with respect to such amounts.
Transition
Under the terms of the Restated Plan, any Eligible Director participating
(that is, who had a balance in his or her account) in the Original Plan as of
the Effective Date is deemed to be a participant in the Restated Plan. The
balance of such Eligible Director's account under the Original Plan will be
credited to his or her Cash Subaccount under the Restated Plan.
New Plan Benefits
As of the date of this Proxy Statement, none of the current directors of
the Company participate in the Original Plan (the only Participant is a former
director who has elected to receive his deferred Director Fees in
installments). Accordingly, the amount of benefits payable under the Restated
Plan (assuming the shareholders approve the Restated Plan) is not
determinable. However, assuming that the Restated Plan had been in effect
throughout fiscal 1999 and that all of the Eligible Directors had elected to
defer all (100%) of their quarterly retainer, but disregarding the committee
and per-meeting fees paid (which vary from director to director), an Eligible
Director who elected to defer all of his or her Director Fees into the Cash
Subaccount would have had a Cash Subaccount balance at September 30, 1999 of
$23,122, and an Eligible Director who elected to defer all of his or her
Director Fees into the Stock Subaccount would have had a Stock Subaccount
balance of 982.89 shares at September 30, 1999, which shares would have had a
market value of $22,545 (based on the closing price of a share of Common Stock
on the New York Stock Exchange on September 30, 1999 of $22.9375).
Vote Required
Assuming that a quorum is present, the Restated Plan will be approved if
more shares are voted in favor of approval than are voted against approval.
Under Wisconsin law, any shares not voted at the Meeting with respect to the
Restated Plan (whether as a result of abstention, broker nonvote or otherwise)
will have no impact on the vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RESTATED PLAN. SHARES OF COMMON STOCK REPRESENTED AT THE
MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED
FOR THE RESTATED PLAN
ITEM 4.
APPROVAL OF AN AMENDMENT TO THE
MANAGEMENT INCENTIVE PLAN FOR ELECTED OFFICERS
The Company's Incentive Compensation Plan for Elected Corporate Officers
(the "Incentive Plan") was adopted by the Compensation and Development
Committee of the Board of Directors on November 11, 1999 to amend and restate
the Company's former Management Incentive Plan for Elected Corporate Officers,
including a change in the name of the plan.
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<PAGE>
Shareholder approval is required to qualify future compensation to be paid
under the Incentive Plan as "performance-based compensation" not subject to
the limitation on deductibility for income tax purposes of certain executive
compensation in excess of $1 million under Section 162(m) of the Internal
Revenue Code ("Section 162(m)").
The following summary of the Incentive Plan is qualified by reference to
the full text thereof, a copy of which is attached to this Proxy Statement as
Appendix C. Capitalized terms used in the following summary are defined in the
Incentive Plan.
Purpose of the Incentive Plan
The Incentive Plan is designed to promote the interests of shareholders by
providing annual financial incentives for the Company's elected corporate
officers, thereby promoting growth and financial success which motivates key
employees to attain and surpass performance goals, and enables the Company to
attract and retain employees of outstanding ability.
Effective Date
If it is approved by shareholders, which is expected to occur at the
Meeting on January 27, 2000, the Incentive Plan will become effective
beginning with the Company's 2000 fiscal year.
Administration
The Incentive Plan is administered by the Compensation and Development
Committee of the Board of Directors, which consists entirely of "outside
directors" as defined for purposes of Section 162(m). The Committee has full
authority to interpret the Incentive Plan and to establish rules for its
administration. Although the Committee has no discretion to increase any Bonus
Award above the Planned Amount, the Committee may, in its discretion, reduce
the amount of a Bonus Award under the Incentive Plan under certain
circumstances.
Eligibility for Awards
The officers who are entitled to receive Bonus Awards under the Incentive
Plan are the Chairman, President, Chief Executive Officer, Corporate Vice
Presidents, Secretary, Controller and Division Presidents. The current
eligible group consists of approximately sixteen persons.
Performance Goals
The Bonus Awards payable under the Incentive Plan for each fiscal year are
a function of the Company's achievement of certain levels of Earnings Per
Share for that year. Within the first 90 days of each fiscal year, the
Committee shall establish, in writing, Performance Goals consisting of a range
of Earnings Per Share targets for the fiscal year, coupled with specified
percentages of a Participant's Fiscal Year Salary to be paid as a Bonus Award
upon the Company's achievement of a particular Earnings Per Share target for
the year. Higher Earnings Per Share levels will result in Bonus Awards at
higher percentages of Participants' Fiscal Year Salaries. Once these
Performance Goals are established for a particular fiscal year, they may not
be varied during that fiscal year for any reason.
Limitations on Bonus Awards
Under the Incentive Plan, the maximum Bonus Award payable to any
Participant for any fiscal year may not exceed $1,500,000, regardless of the
level of Earnings Per Share that is achieved.
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<PAGE>
Amendment
The Board of Directors can amend, suspend or terminate the Incentive Plan,
but it may not do so in a manner which would alter the Performance Goals or
the method by which Bonus Awards are established for any fiscal year after
they have been established, and may not suspend or discontinue the Incentive
Plan once the Performance Goals for any particular fiscal year have been
established.
New Plan Benefits
Set forth in the table below is information relating to the maximum
incentive payments which could have been made to the named executive officers
for fiscal 1999 if the maximum Performance Goals established by the Committee
under the Incentive Plan (which maximum performance goals were not changed by
the amendment and restatement of the Management Incentive Plan) had been met.
The amount of the bonuses which were actually paid for fiscal 1999 are set
forth in the Summary Compensation Table on page 12.
<TABLE>
<CAPTION>
Name and Position Maximum Bonus Award
----------------- -------------------
<S> <C>
Kenneth P. Manning,
Chairman, President and Chief Executive Officer..... $ 715,275
Michael Fung,
Vice President and Chief Financial Officer.......... 298,350
R. Steven Martin,
Vice President and Group Executive.................. 258,375
Richard F. Hobbs,
Vice President--Administration...................... 243,750
Michael DuBois,
President--Flavor................................... 218,250
All directors and executive officers as a group (16
persons)............................................ 3,358,534
</TABLE>
Vote Required
Assuming that a quorum is present, the Incentive Plan will be approved if
more shares are voted in favor of approval than are voted against approval.
Under Wisconsin law, any shares not voted at the Meeting with respect to the
Incentive Plan (whether as a result of abstention, broker nonvote or
otherwise) will have no impact on the vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE INCENTIVE
PLAN. SHARES OF COMMON STOCK REPRESENTED AT THE MEETING BY EXECUTED BUT
UNMARKED PROXIES WILL BE VOTED FOR THE INCENTIVE PLAN
ITEM 5.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board, subject to
shareholder ratification, has selected Deloitte & Touche LLP, certified public
accountants, to audit the financial statements of the Company for the year
ending September 30, 2000. Deloitte & Touche LLP has been the independent
auditor of the Company for many years and has advised the Company that neither
the firm nor any of its partners have any direct or indirect material
financial interest in the Company.
Although not required by law to submit the appointment to a vote by
shareholders, the Board believes it appropriate, as a matter of policy, to
request that the shareholders ratify the appointment of Deloitte & Touche LLP
as independent auditors for fiscal 2000. Assuming that a quorum is present,
the selection of Deloitte & Touche LLP will be deemed to have been ratified if
more shares are voted in favor of ratification than are voted
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<PAGE>
against ratification. Under Wisconsin law, any shares of Common Stock which
are not voted on this matter at the Meeting (whether by abstention, broker
nonvote or otherwise) will have no effect on this matter. If the shareholders
should not so ratify, the Board will reconsider the appointment.
Representatives of Deloitte & Touche LLP are expected to be present at the
Meeting and will have an opportunity to make a statement if they desire to do
so and to respond to appropriate shareholder questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2000. SHARES OF
COMMON STOCK REPRESENTED AT THE MEETING BY EXECUTED BUT UNMARKED
PROXIES WILL BE VOTED FOR THE RATIFICATION OF SUCH SELECTION.
ITEM 6.
OTHER MATTERS
Company management knows of no business which will be presented for action
at the Meeting other than those items identified in the Notice of Annual
Meeting. Pursuant to the Company's Bylaws, written notice of any shareholder
proposals to be presented at the Meeting must have been received by the
Secretary no later than December 8, 1999. As no notice of any shareholder
proposals was received, no business may be brought before the Meeting by any
shareholders. If other matters are brought before the Meeting by the Board of
Directors, it is intended that proxies will be voted at the Meeting in
accordance with the judgment of the person or persons exercising the authority
conferred by such proxies.
FUTURE SHAREHOLDER PROPOSALS AND NOMINATIONS
The Company welcomes comments or suggestions from its shareholders. In the
event a shareholder desires to have a proposal formally considered at the
annual shareholders' meeting in January 2001 and included in the proxy
statement for that meeting, the proposal must be in writing and received by
the Secretary of the Company on or before August 19, 2000 and must otherwise
comply with the applicable rules of the Securities and Exchange Commission.
Under the Company's Bylaws, appropriate Shareholder proposals will be
presented at the 2001 annual meeting without inclusion in the proxy materials
if such proposals are received by the Company no later than December 6, 2000.
In addition, the Company's Bylaws establish procedures for shareholder
nominations for election of directors of the Company and bringing business
before any annual meeting of shareholders of the Company. Among other things,
to bring business before an annual meeting or to nominate a person for
election as a director at an annual meeting, a shareholder must give written
notice to the Secretary of the Company not less than 50 days (and, in the case
of nominations, not more than 90 days) prior to the third Thursday after the
first Friday in the month of January next following the last annual meeting
held. The notice must contain certain information about the proposed business
or the nominee and the shareholder making the proposal.
Any shareholder interested in making a nomination or proposal should
request a copy of the applicable Bylaw provisions from the Secretary of the
Company and send any such nomination or proposal to the Secretary of the
Company at the Company's executive offices at 433 East Michigan Street,
Milwaukee, Wisconsin, 53202.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS
ARE REQUESTED TO DATE, SIGN AND RETURN THE PROXY CARD AS SOON AS POSSIBLE. IF
YOUR SHARES ARE REGISTERED IN THE NAME OF A BROKER OR BANK, ONLY YOUR BROKER
OR BANK CAN SUBMIT THE PROXY CARD ON YOUR BEHALF. PLEASE CONTACT THE PERSON
RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT HIM OR HER TO SUBMIT THE PROXY CARD ON
YOUR BEHALF.
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UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER, ADDRESSED TO THE SECRETARY OF
THE COMPANY, THE COMPANY WILL PROVIDE TO SUCH SHAREHOLDER WITHOUT CHARGE A COPY
OF THE COMPANY'S 1999 ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION.
By Order of the Board of Directors
John L. Hammond
Secretary
December 17, 1999
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Appendix A
UNIVERSAL FOODS CORPORATION
1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Adopted November 11, 1999
Section 1. Establishment, Purpose and Effective Date of Plan.
1.1 Establishment. Universal Foods Corporation, a Wisconsin corporation,
hereby establishes the "UNIVERSAL FOODS CORPORATION 1999 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN" (the "Plan") which, provides for the grant of Stock Options
to Non-Employee Directors of the Company.
1.2 Purpose. The purpose of this Plan is to advance the interests of the
Company by encouraging and providing for the acquisition of an equity interest
in the Company by Non-Employee Directors, and by enabling the Company to
attract and retain the services of directors upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
1.3 Effective Date. This Plan shall become effective on the Effective Date.
Section 2. Definitions.
2.1 Definitions. Whenever used herein, the following terms shall have the
respective meanings set forth below:
(a) "Award" means any Option or any other benefit conferred under the
terms hereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Nominating Committee of the Board.
(e) "Company" means Universal Foods Corporation, a Wisconsin
corporation, and its subsidiaries.
(f) "Effective Date" means January 27, 2000, or such other date that
this Plan is approved by the shareholders of the Company at an annual or
special meeting thereof by a simple majority of the number of shares
represented at such meeting in person or by proxy.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" means the closing price of a share of Stock on
the date of the Award on the New York Stock Exchange as reported on the
composite list used by the Wall Street Journal for reporting stock prices,
or if no such sale shall have been made on that day, on the last preceding
day on which there was such a sale.
(i) "Non-Employee Director" means any individual who is a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act.
(j) "Option" means the right to purchase Stock at a stated price for a
specified period of time. No Options granted pursuant to this Plan are
intended to qualify as "incentive stock options" within the meaning of
Section 422(b) of the Code; all Options granted pursuant to this Plan are
therefore considered "non-statutory stock options."
(k) "Participant" means any individual who is granted Options pursuant
to this Plan.
(l) "Stock" means the Common Stock of the Company, par value of $0.10.
2.2 Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender when used in this Plan shall include the
feminine gender, the singular shall include the plural and the plural shall
include the singular.
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Section 3. Eligibility and Participation. Participants in this Plan shall
include each member of the Board who is a Non-Employee Director at the time
Options are granted pursuant to this Plan.
Section 4. Administration.
4.1 Administration. This Plan shall be administered by the Committee.
4.2 Powers and Authority of the Committee. The Committee, by majority
action thereof, shall have complete and sole authority to:
(a) interpret this Plan and apply its provisions, and prescribe, amend
and rescind rules, regulations, procedures, and forms relating to this
Plan;
(b) authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of this Plan;
(c) amend any outstanding agreement relating to any Award, subject to
applicable legal restrictions and to the consent of the Participant who
entered into such agreement; and
(d) make all other determinations and take all other actions deemed
necessary or advisable for the administration hereof and provide for
conditions and assurances deemed necessary or advisable to protect the
interests of the Company in connection herewith;
but only to the extent that any of the foregoing are not contrary to the
express provisions hereof. Determinations, interpretations or other actions
made or taken by the Committee pursuant to the provisions hereof shall be
final, binding and conclusive for all purposes and upon all persons. The
Committee's decisions need not be uniform and may be made selectively among
Participants, whether or not they are similarly situated.
Notwithstanding the foregoing, the Committee shall have no discretion or
authority to: (i) designate Participants to receive Awards; (ii) determine the
number of shares of Stock to be covered by Awards granted to Participants;
(iii) determine the terms and conditions of any Award granted to any
Participant relating to the vesting, exercise or expiration of Options over a
period of time; or (iv) prescribe the consideration for the grant of each
Award hereunder and determine the sufficiency of such consideration, which
matters shall be as hereinafter provided.
4.3 Composition of the Committee. The Committee shall consist of not less
than two members of the Board who shall be appointed by the Board.
Section 5. Stock Subject to Plan.
5.1 Number. The total number of shares of Stock reserved and available for
issuance under this Plan shall initially be two hundred fifty thousand
(250,000). The number of shares of Stock reserved and available for issuance
hereunder shall be subject to adjustment upon occurrence of any of the events
indicated in Subsection 5.3 hereof. The shares to be issued under this Plan
may consist, in whole or in part, of authorized but unissued Stock or treasury
Stock, not reserved for any other purpose.
5.2 Unused Stock. In the event any shares of Stock that are subject to an
Award cease to be subject to such Award (whether due to expiration,
cancellation, termination, forfeiture, or otherwise) without such shares of
Stock being issued or cash being paid to the Participant, then the shares of
Stock subject to such Award shall again become available for future Awards
hereunder.
5.3 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock that occurs, whether prior to or after the
Effective Date, by reason of a Stock dividend or split, recapitalization,
merger, consolidation, combination, spin-off, split-up, exchange of shares or
other similar corporate change, the aggregate number of shares of Stock
authorized for issuance hereunder as well as Stock subject to each outstanding
Award, and its stated Option or other price (as applicable), shall be
appropriately adjusted by the Committee, whose
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determination shall be conclusive; provided, however, that fractional shares
shall be rounded to the nearest whole share. In such event, the Committee
shall also have the discretion to make appropriate adjustments in the number
of shares of Stock authorized for issuance hereunder.
Section 6. Duration of Plan. This Plan shall remain in effect, subject to
the Board's right to earlier terminate this Plan pursuant to Section 12
hereof, until all shares of Stock subject to it shall have been purchased or
acquired pursuant to the provisions hereof. Notwithstanding the foregoing, no
Award may be granted hereunder on or after the tenth (10th) anniversary of the
Effective Date.
Section 7. Stock Options.
7.1 Grant of Options. Subject to the provisions of Sections 5 and 6 hereof,
on the 1st of February (or the next succeeding business day) following the day
of each annual meeting of shareholders of the Company, each person who was a
Non-Employee Director of the Company immediately following such annual meeting
shall automatically and without further action by the Board or the Committee
be granted an Option to purchase two thousand (2,000) shares of Stock on the
terms and conditions provided herein. Notwithstanding the foregoing, the
General Counsel of the Company may, in his or her discretion, delay any grant
under the Plan until any then existing material non-public information has
been disclosed publicly. The Committee shall have no discretion in determining
the number of Options granted to each Participant.
7.2 Type of Options. All Options granted pursuant to this Plan shall be
nonstatutory stock options.
7.3 Option Price. Options granted pursuant hereto shall have an Option
price that is equal to the Fair Market Value of the Stock on the date the
Option is granted.
7.4 Duration of Options. Each Option shall expire on the tenth (10th)
anniversary date of its grant, and shall not be exercisable thereafter.
7.5 Exercise of Options. Options granted hereunder shall vest and become
exercisable in three (3) equal annual installments beginning on the first
(1st) anniversary of the date of its grant.
7.6 Option Agreement. Each Option shall be evidenced by a written agreement
("Option Agreement") that shall specify the type of Option granted, the Option
price, the duration of the Option, the number of shares of Stock to which the
Option pertains, and such other terms and conditions as are provided herein.
No Participant shall have any rights hereunder until an Option Agreement has
been executed.
7.7 Payment. The Option price of any Option shall be payable to the Company
in full upon exercise:
(a) in cash or its equivalent, including, in the discretion of the
Committee, a promissory note issued to the Company by the Participant
(which note shall: (i) be secured by the Stock issued; (ii) be for a term
of not more than ten (10) years; (iii) bear interest at a rate of not less
than the prime rate (as determined by the Committee) in effect on the date
such promissory note is issued; (iv) require at least annual payments of
principal and interest; and (v) contain such other terms and conditions as
the Committee determines);
(b) by tendering shares of Stock having a Fair Market Value at the time
of exercise equal to the total Option price;
(c) by a combination of cash or its equivalent (as defined in clause (a)
above) and shares of Stock; or
(d) by electing to have the Company withhold from the shares of Stock
otherwise issuable upon exercise of the Option that number of shares of
Stock having a Fair Market Value at the time of exercise plus cash for any
fractional share amounts, equal to the total Option price.
The proceeds from such a payment shall be added to the general funds of the
Company and shall be used for general corporate purposes.
7.8 Restrictions on Stock Transferability. The Committee shall impose such
restrictions on any shares of Stock acquired pursuant to the exercise of an
Option as it may deem advisable, including, without limitation,
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restrictions under applicable Federal securities laws, under the requirements
of any stock exchange upon which such shares of Stock are then listed, and
under any blue sky or state securities laws applicable to such shares.
7.9 Transferability of Options. The Committee may, in its discretion, and
only by expressly so providing in the Option Agreement covering any Options
(which Option Agreement must be approved by the Committee), permit all or a
portion of Options to be granted to a Participant to be transferable by the
Participant: (a) to the Participant's spouse, or natural or adoptive children
or grandchildren ("Immediate Family Members"); (b) to a trust or trusts for
the exclusive benefit of one or more Immediate Family Members; or (c) to a
partnership in which all partners are Immediate Family Members; provided, that
there may be no consideration for any such transfer and the transferee shall
be expressly prohibited from any further transfer of such Options other than
by will or pursuant to the laws of descent and distribution. Following such
transfer, any Options so transferred shall be subject to the same terms and
conditions as were applicable immediately prior to such transfer, provided,
however, that for purposes of this Plan, the term "Participant" shall be
deemed to include such transferee. The circumstances under which any
transferred Option may be terminated, canceled, or forfeited (whether such
circumstances are set forth in this Plan or in the Option Agreement covering
such Options) shall be applied with respect to the transferor Participant to
which the Option was originally granted. Unless expressly so provided in the
Option Agreement covering an Option, no Option granted hereunder may be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated, other
than by will or pursuant to the laws of descent and distribution, and all
Options granted to a Participant hereunder shall be exercisable during his
lifetime only by such Participant.
Section 8. Cessation of Service.
8.1 Death, Disability or Retirement. Subject to the expiration provisions
of Section 7.4 hereof, upon cessation of service as a Non-Employee Director of
the Company due to death, disability, voluntary retirement or retirement
required under any mandatory policy of the Company then in effect, or for any
reason other than removal of the Participant from the Board as set forth in
Section 8.2 below:
(a) Any and all Options owed to the Non-Employee Director, but which
have not been granted as of the date of cessation of service shall be
promptly granted;
(b) All Options held by the Non-Employee Director that are exercisable
in accordance with the Option Agreement as of the date of cessation of
service shall remain exercisable until three (3) years following the date
of cessation of service; and
(c) The vesting of all Options not exercisable in accordance with the
Option Agreement immediately prior to such cessation of service shall be
immediately and automatically accelerated upon such cessation of service,
and such Options shall remain exercisable for three (3) years following the
date of cessation of service.
Notwithstanding the foregoing, in the event of a Change of Control as
defined in Section 11(b) below, then the provisions of Section 11(a) shall
apply to the Non-Employee Director's Options.
8.2 Removal. Subject to the expiration provisions of Section 7.4 hereof,
upon cessation of service as a Non-Employee Director of the Company due to
removal from the Board in accordance with the procedures set forth in Sections
180.0808 and 180.0809 of the Wisconsin Business Corporation Law or the
Company's Bylaws, as amended from time to time:
(a) Any and all Options owed to the Non-Employee Director, but which
have not been granted as of the date of cessation of service shall be
promptly granted;
(b) All Options held by the Non-Employee Director that are exercisable
in accordance with the Option Agreement as of the date of cessation of
service shall remain exercisable until three (3) months following the date
of cessation of service; and
(c) All Options not exercisable in accordance with the Option Agreement
immediately prior to such cessation of service shall be immediately and
automatically forfeited to the Company.
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Notwithstanding the foregoing, in the event of a Change of Control as
defined in Section 11(b) below, then the provisions of Section 11(a) shall
apply to the Non-Employee Director's Options.
Section 9. Beneficiary Designation. Each Participant may, from time to
time, name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit hereunder is to be paid in case of his death
before he receives any or all of such benefit. Each designation will revoke
all prior designations by the same Participant, shall be in a form prescribed
by the Committee and will be effective only when filed by the Participant in
writing with the Committee during his lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be
paid to his estate.
Section 10. Rights of Board Members. Nothing in this Plan, in any Option
granted under the Plan, or in any Option Agreement, shall interfere with or
limit in any way the rights of the shareholders of the Company or the Board to
elect and remove members of the Board at any time nor confer upon any
Participant any right to continue as a member of the Board.
Section 11. Change of Control.
(a) In the event of a "Change of Control" (as hereinafter defined), each
holder of an Option (A) shall have the right at any time thereafter to
exercise the Option in full whether or not the Option was previously
exercisable; and (B) shall have the right, exercisable by written notice to
the Company within sixty (60) days after the Change of Control, to receive,
in exchange for the surrender of an Option or any portion thereof to the
extent the Option is then exercisable in accordance with clause (A), the
highest of (1) an amount of cash equal to the difference between the Fair
Market Value of the Stock covered by the Option or portion thereof that is
so surrendered on the date of the Change of Control and the purchase price
of such Stock under the Option; (2) an amount of cash equal to the
difference between the highest price per share of Stock paid in the
transaction giving rise to the Change of Control and the Option price
multiplied by the number of shares of Stock covered by the Option; or (3)
an amount of cash equal to the difference between the Fair Market Value of
the Stock covered by the Option or portion thereof that is so surrendered,
calculated on the date of surrender, and the purchase price of such Stock
under the Option; provided that the right described in this clause (B)
shall be exercisable only if a positive amount would be payable to the
holder pursuant to the formula specified in this clause (B);
(b) A "Change of Control" of the Company means:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A) the
then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(i), the following acquisitions shall not constitute a Change of
Control: (1) any acquisition directly from the Company, (2) any
acquisition by the Company, (3) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (4) any acquisition pursuant
to a transaction which complies with clauses (A), (B) and (C) of
subsection (iii) of this Section; or
(ii) individuals who, as of November 11, 1999, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to November 11, 1999 whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
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(iii) consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company or the acquisition of assets of another
entity (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership immediately prior to such Business Combination of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any employee
benefit plan (or related trust) of the Company or of such corporation
resulting from such Business Combination) beneficially owns, directly
or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (C) at least a majority
of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or the action of
the Board, providing for such Business Combination; or
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Section 12. Amendment, Modification and Termination of Plan.
12.1 Amendments and Termination. The Board may at any time amend, alter,
suspend, discontinue or terminate this Plan, provided, however, that:
(a) no amendment or termination of this Plan may: (i) adversely affect
the rights of Participants with respect to Awards previously granted to
them, (ii) amend the terms of the Plan regarding who may participate and
the amount, price and timing of Options to be issued more than once every
six months, other than to comport with changes in the Internal Revenue
Code, the Employees Retirement Income Securities Act (ERISA), or the rules
thereunder, or (iii) cause the Plan not to qualify for exemption from
Section 16(b) of the Exchange Act provided by Rule 16b-3 of the Exchange
Act, or any successor rule; and
(b) stockholder approval of any amendment of this Plan shall be obtained
if otherwise required by (i) the Code or any rules promulgated thereunder
(to enable the Company to comply with the provisions of Section 162(m) of
the Code so that the Company can deduct compensation in excess of the
limitation set forth therein), (ii) the listing requirements of the
principal securities exchange or market on which the Stock is then traded
(in order to maintain the listing or quotation of the Stock thereon), or
(iii) Rule 16b-3 of the Exchange Act, or any successor rule, to qualify for
exemption from Section 16(b) of the Exchange Act.
12.2 Unexpired Awards. All unexpired Awards shall continue in force and
effect after termination of this Plan except as they may lapse or be
terminated by their own terms and conditions.
12.3 Waiver of Conditions. The Committee may, in whole or in part, waive
any conditions or other restrictions with respect to any Award granted
hereunder.
Section 13. Taxes. The Company shall be entitled to withhold the amount of
any tax attributable to any amount payable or shares of Stock deliverable
under this Plan after giving the person entitled to receive such amount or
shares of Stock notice as far in advance as practicable, and the Company may
defer making any such payment or delivery if any such tax may be pending
unless and until indemnified to its satisfaction. A Participant
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may elect to pay all or a portion of the federal, state and local withholding
taxes arising in connection with the exercise of an Option by electing to (i)
have the Company withhold shares of Stock, (ii) tender back shares of Stock
received in connection with such benefit, or (iii) deliver other previously
owned shares of Stock, having a Fair Market Value equal to the amount to be
withheld; provided, however, that the amount to be withheld shall not exceed
the Participant's estimated total federal, state and local tax obligations
associated with the transaction. The written election must be made on or
before the date as of which the amount of tax to be withheld is determined.
The Fair Market Value of fractional shares of Stock remaining after payment of
the withholding taxes shall be paid to the Participant in cash.
Section 14. Indemnification. Each person who is or shall have been a member
of the Committee or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit or proceeding to which he may be a party or in
which he may be involved by reason of any action taken or failure to act under
this Plan and against and from any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of any
judgment in any such action, suit or proceeding against him, provided,
however, that he shall give the Company an opportunity, at its own expense, to
handle and defend the same before he undertakes to handle and defend it on his
own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or Bylaws, as a matter of law,
or otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
Section 15. Miscellaneous. Any Award may also be subject to other
provisions (whether or not applicable to any Award made to any other
Participant) as the Committee determines appropriate, including, without
limitation, provisions for: (a) restrictions on resale or other disposition of
financed shares; and (b) compliance with federal or state securities laws and
stock exchange or market requirements.
Section 16. Requirements of Law.
16.1 Requirements of Law. The granting of Awards and the issuance of shares
of Stock upon the exercise of any Option shall be subject to all applicable
laws, rules and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required.
16.2 Governing Law. This Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the internal laws of the State of
Wisconsin.
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Appendix B
UNIVERSAL FOODS CORPORATION
AMENDED AND RESTATED
DIRECTORS' DEFERRED COMPENSATION PLAN
1. Establishment. Universal Foods Corporation (the "Company") hereby amends
and restates its deferred compensation plan for the benefit of the Board of
Directors of the Company (not including the subsidiaries of the Company) (the
"Board"), known as the "Universal Foods Corporation Directors' Deferred
Compensation Plan" (the "Plan"). The Plan, as so amended and restated, shall
hereinafter be referred to as the "Restated Plan." The Restated Plan shall be
administered by the Company.
2. Eligibility. Pursuant to the Restated Plan, any Director of the Company
entitled to "Director Fees" (that is, compensation from the Company by reason
of his/her being a member of the Board, or any committee thereof) ("Eligible
Director") may at any time (subject to Paragraph 7) elect to defer receipt of
all or a specified portion of such Director Fees and thereby become a
participant in the Restated Plan.
3. Initial Election. An Eligible Director's initial election to participate
in the Restated Plan ("Initial Election") shall be evidenced by a writing
filed with the Company as provided in Paragraph 5. Such Initial Election shall
be effective upon its receipt by the Company with respect to all Director Fees
earned by the Eligible Director after the date of such receipt, and the
deferral pursuant thereto shall continue until: (i) changed by a Subsequent
Election (as provided in Paragraph 5(b)); (ii) the Eligible Director files a
Subsequent Election terminating his/her participation in the Plan under
Paragraph 19; or (iii) the Eligible Director shall cease being a member of the
Board ("Cessation of Service"), whichever occurs first.
4. Director's Deferred Compensation Account. A Director's Deferred
Compensation Account (the "Account") shall be established for each Eligible
Director electing to participate in the Restated Plan. All Director Fees
deferred pursuant to Paragraph 3 shall be credited to the Account on the date
on which such fees otherwise would have been payable to a Director had they
not been deferred hereunder. Each Eligible Director's Account shall be
subdivided into a "Cash Subaccount" and a "Stock Subaccount."
5. Initial Election and Subsequent Elections.
(a) An Initial Election shall be in the form of Exhibit A hereto and
shall specify:
(i) the portion of the subsequent Director Fees payable to such
Eligible Director which the Eligible Director elects to have deferred
under the Restated Plan (the "Deferral Portion");
(ii) the allocation of the Deferral Portion between the Cash
Subaccount and the Stock Subaccount ("Plan Allocation");
(iii) the manner in which the Eligible Director wishes to have
amounts deferred under the Restated Plan distributed to him/her as
provided in Paragraph 10 ("Distribution Election"); and
(iv) the "Designation of Beneficiary" under Paragraph 13.
(b) Once an Initial Election has been filed with the Company, the terms
thereof (including the Deferral Portion and the Plan Allocation) shall
apply to all Director Fees payable during the remainder of the Company's
fiscal year in which such Initial Election is filed, and for all subsequent
Company fiscal years; provided, that an Eligible Director may at any time
and from time to time (subject to Paragraph 7) file a later-dated election
(such later-dated election being referred to herein as a "Subsequent
Election") to change any of the elections or directions contained in
his/her Initial Election or a previously-filed Subsequent Election, or to
terminate his/her participation in the Restated Plan.
6. Crediting Stock to Stock Subaccount. If, pursuant to an Initial Election
or Subsequent Election, an Eligible Director makes a Plan Allocation into the
Stock Subaccount, such Eligible Director's Stock Subaccount shall be credited
(at the same time as Director Fees would be payable to him/her) with that
number of shares
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(including any fractional share) of the Company's common stock, $0.10 par value
(including the associated Preferred Share Purchase Rights) ("Common Stock")
which have a market value equal to the amount of the Deferral Portion allocated
to his/her Stock Subaccount. For purposes of the Restated Plan, the market
value of a share of Common Stock as of any date on which Director Fees are
credited shall equal the closing sale price of a share of Common Stock on the
New York Stock Exchange on such date (or if no sale took place on such exchange
on such date, the closing sale price on such exchange on the most recent
preceding date on which a sale took place).
7. Times When Elections and Subsequent Elections May Be Made. An Eligible
Director may make an Election or Subsequent Election at any time and there
shall be no limitation on the number or frequency of Subsequent Elections,
except as follows:
(a) Prior to an Eligible Director's Cessation of Service, any (i)
initial Election or (ii) Subsequent Election which (A) changes the Plan
Allocation or (B) changes the Deferral Portion (unless the Eligible
Director has elected only the Cash Subaccount) may only be made and shall
only be effective at such time and upon such conditions as an Eligible
Director would be permitted to effect an open-market acquisition or
disposition of Common Stock under the provisions of the Company's Code of
Conduct covering acquisitions or dispositions of Common Stock by officers,
directors and employees of the Company, as such Code of Conduct may be
amended from time to time.
(b) After an Eligible Director's Cessation of Service, no further
Subsequent Elections may be made.
8. Earnings. Until the balance of an Eligible Director's Account has been
fully paid/distributed to him/her in accordance with Paragraph 9:
(a) The balance from time to time, accruing in the Cash Subaccount,
shall bear interest at the rate of 8% per annum. Such interest income shall
be credited to the Cash Subaccount on each March 31, June 30, September 30
and December 31 on which there is a balance in an Eligible Director's Cash
Subaccount.
(b) From time to time at such times as the Company pays a cash dividend
with respect to its Common Stock, the Stock Subaccount of each Eligible
Director who has shares of Common Stock credited to his/her Stock
Subaccount on the record date for such dividend shall be credited with
additional shares of Common Stock (including any fractional share) with a
market value (as determined under Paragraph 6) equal to the dividend per
share paid by the Company with respect to its Common Stock times the number
of shares in the Stock Subaccount on the record date for such dividend.
9. Nature of Account. The Account (and the Subaccounts) shall be utilized
solely as a device for the measurement and determination of the amount of
deferred compensation payable/distributable under the Restated Plan. The
Account shall not constitute or be treated as a trust fund of any kind.
Director Fees deferred hereunder and credited to a Director's Account shall at
all times, remain the property of the Company, and no Eligible Director shall
acquire any property interest in the Account, his/her right being limited to
receiving from the Company, deferred payments/distributions as calculated by
the Restated Plan, such right being further conditioned upon continued
compliance with the terms and conditions of the Restated Plan. The Company
shall be under no obligation to issue, or acquire, shares of Common Stock in
connection with the crediting of shares to the Stock Subaccount. Shares
credited to the Stock Subaccount shall have no voting rights or be entitled to
dividends or distributions of any kind except as provided in Paragraphs 8(b)
and 11 hereof. The right of an Eligible Director to receive benefits under the
Restated Plan is no greater than the right of any unsecured general creditor of
the Company.
10. Distribution of Director Fees Deferred Under the Restated Plan.
(a) An Eligible Director, prior to a Cessation of Service, shall elect
in his/her Initial Election (and may change such election at any time by
filing a Subsequent Election) to have his/her Account paid to him/her in
either of the following ways:
(i) in a lump sum on January 31 of the first calendar year after the
Eligible Director's Cessation of Service, or on January 31 of any
calendar year thereafter;
B-2
<PAGE>
(ii) in five (5) consecutive annual installments commencing on
January 31 of the first calendar year after the Eligible Director's
Cessation of Service.
If an Eligible Director makes no such written election, the balance in
his/her Account shall be paid in a lump sum on January 31 of the first
calendar year after the Eligible Director's Cessation of Service. In
the event of the death of an Eligible Director, the balance in his/her
Account shall be paid in a lump sum to the Eligible Director's
designated beneficiary (or to his/her estate in the absence of any
beneficiary designation), on January 31 of the first calendar year
following the date of death, provided however, that the Eligible
Director's designated beneficiary (or the executor or administrator of
his/her estate in the absence of any beneficiary designation), may file
a request with the Company that the balance of the Eligible Director's
Account plus any accrued, but uncredited interest thereon, be paid in a
lump sum on a date requested by such beneficiary, executor or
administrator.
(b) In the event that (i) an Eligible Director elects to have his/her
Account distributed to him/her in annual instalments, and (ii) at the time
of his/her Cessation of Service there are shares of Common Stock credited
to such Eligible Director's Stock Subaccount, each annual instalment shall
consist of: (A) the dollar amount in his/her Cash Subaccount (including
accruals of interest from time to time after such Cessation of Service
pursuant to Paragraph 8(a)) divided by the number of remaining instalments;
plus (B) the number of shares of Common Stock in his/her Stock Subaccount
(including any increases therein pursuant to crediting of dividends from
time to time after such Cessation of Service pursuant to Paragraph 8(b))
divided by the number of remaining instalments, rounded to the nearest
whole share.
(c) Distributions from the Stock Subaccount shall be made in-kind and
consist of one or more certificates representing the number of shares of
Common Stock then being distributed. Any shares so distributed may consist
of newly-issued shares, treasury shares, or a combination thereof. In the
case of any lump-sum distribution of Common Stock from an Eligible
Director's Stock Subaccount, and in the case of the final instalment
distribution of Common Stock from an Eligible Director's Stock Subaccount,
there remains any fractional share of Common Stock in such Stock
Subaccount, then cash shall be distributed in lieu of such fractional
share, determined with reference to the market value (as determined under
Paragraph 6) of a whole share of Common Stock on the date of such
distribution.
11. Change in Shares. In the event of any change in the outstanding shares
of Common Stock that occurs by reason of a stock dividend or split,
recapitalization, merger, consolidation, combination, spin-off, split-up,
exchange of shares or other similar corporate change, the number of shares of
Common Stock in each Stock Subaccount, and the maximum number of shares
issuable under the Restated Plan as provided in Paragraph 20, shall be
adjusted accordingly.
12. Disability. In the event of the disability of an Eligible Director, the
Nominating Committee of the Board of Directors may in its sole discretion make
any payment(s) from the Eligible Director's Account as deemed by such
Committee to be in his/her best interests. The fact of disability is to be
determined at the sole discretion of such Committee.
13. Designation of Beneficiary. An Eligible Director may designate one or
more beneficiaries who are to receive all of the funds/shares in the Eligible
Director's Account which remain unpaid/undistributed at the Eligible
Director's death. Such designation shall be effective by filing an Initial
Election at any time, and may be changed from time to time at any time by
filing a Subsequent Election. If no such designation is made by an Eligible
Director, any Account balance shall be paid/distributed to the Eligible
Director's estate.
14. Nonassignment. Neither an Eligible Director, nor his duly designated
beneficiary, shall have any right to assign, transfer or pledge or otherwise
convey the right to receive any amount of compensation which may be due
hereunder, and any such attempt at assignment, transfer, pledge or other
conveyance shall not be recognized by the Company.
B-3
<PAGE>
15. Amendment of the Restated Plan. This Restated Plan may be amended from
time to time by resolution of the Board of Directors of the Company, but no
such amendment shall permit amounts accumulated pursuant to the Restated Plan,
prior to the amendment, to be paid to an Eligible Director prior to the time
that he/she would otherwise be entitled thereto.
16. Termination of the Restated Plan. The Restated Plan will continue in
effect until termination by resolution of the Board of Directors of the
Company, but in the event of such termination, the amounts accumulated
pursuant to the Restated Plan, prior to termination, shall continue to be
subject to the provisions of the Restated Plan, as if the Restated Plan had
not been terminated.
17. Effective Date of the Restated Plan. The Restated Plan shall be
effective with respect to any compensation payable to a Director for services
as a Director following shareholder approval of the Restated Plan at an annual
or special meeting of the shareholders of the Company occurring after November
11, 1999.
18. Effect of Amendment and Restatement on Prior Participants. The
following provisions shall be applicable to any Eligible Director who
participated in the Plan prior to the Effective Date:
(a) Such Eligible Director's original participation election under the
Plan shall be deemed to be his/her "Initial Election" (as defined in
Paragraph 5(a)) under the Restated Plan and may thereafter (subject to
Paragraph 7) be changed by a Subsequent Election under Paragraph 5(b); and
(b) The amount in such Eligible Director's Account as of the Effective
Date shall be credited to the Cash Subacccount under the Restated Plan.
19. Termination of Participation. An Eligible Director who has previously
elected to participate in the Restated Plan may, at any time (without
restriction under Paragraph 7) file a Subsequent Election terminating his/her
participation in the Restated Plan. Such termination shall be effective with
respect to all Director Fees earned by the Eligible Director after the date of
receipt by the Company of such Subsequent Election, which fees shall then be
payable to such Eligible Director in accordance with Company policy but
otherwise than under the Restated Plan, and such Eligible Director shall only
be entitled to receive Director Fees previously deferred under the Restated
Plan as provided in Paragraph 10.
Notwithstanding the foregoing, an Eligible Director who so terminates
his/her participation in the Restated Plan shall be entitled to, with respect
to the balance in his/her Account as of the effectiveness of such termination,
change his/her Designation of Beneficiary, in each case on the terms and
conditions otherwise specified in the Plan. A termination of participation
pursuant to this Paragraph 19 shall not in any way preclude an Eligible
Director from thereafter filing an Initial Election and thereby re-elect to
participate in the Restated Plan.
20. Maximum Number of Shares. The maximum number of shares of Common Stock
that may be issued hereunder is 200,000, subject to adjustment as provided in
Paragraph 11.
B-4
<PAGE>
Exhibit A
to
Universal Foods Corporation
Amended and Restated Directors' Deferred Compensation Plan
Plan Election Form
Universal Foods Corporation
433 East Michigan Street
Milwaukee, WI 53202
Attention: John L. Hammond
Gentlemen:
I understand that as a director of Universal Foods Corporation (the
"Company") I am eligible to participate in the Universal Foods Corporation
Amended and Restated Directors' Deferred Compensation Plan, as amended and
restated (the "Restated Plan") a copy of which has been furnished to me.
This document constitutes:
ELECTION
[_]An Initial Election under Paragraph 5(a) of the Restated Plan.
By checking this box I hereby elect to participate in the Restated Plan,
and to be bound by the terms and conditions of the Restated Plan. I hereby
elect to defer receipt of the Director Fees to which I become entitled in
the future as set forth under "PLAN ELECTIONS" on page 2.
Complete all items under "PLAN ELECTIONS" on page 2 and sign and date this
form on page 3.
[_]A Subsequent Election under Paragraph 5(b) of the Restated Plan (in which
case this Subsequent Election amends and supersedes my Initial Election and
any prior Subsequent Elections I may have made). I hereby elect to defer
receipt of the Director Fees to which I become entitled in the future as
set forth under "PLAN ELECTIONS" on page 2.
Complete all items under "PLAN ELECTIONS" on page 2 (even if some of the
information has not changed) and sign and date this form on page 3.
OR
TERMINATION OF PARTICIPATION
[_]I hereby terminate my participation in the Restated Plan as provided in
Paragraph 19 of the Restated Plan.
Sign and date this form on page 3.
B-5
<PAGE>
PLAN ELECTIONS
A. Deferral Portion (Restated Plan Paragraph 5(a)(i)):
I hereby elect to defer (circle one)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
</TABLE>
of the Director Fees to which I become entitled in the future.
B. Plan Allocation (Restated Plan Paragraph 5(a)(ii)):
I hereby elect to allocate the amount deferred above as follows:
(circle one in each row; total must equal 100%)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Subaccount 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Stock Subaccount 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
</TABLE>
C. Distribution Election (Restated Plan Paragraph 10):
I hereby elect to have the balance in my Account paid to me in accordance
with the following payment election:
[_]In a lump sum on January 31 of the first calendar year after my Cessation
of Service (as defined in the Restated Plan), or on January 31 of any
calendar year thereafter to be designated by me before my Cessation of
Service (as defined in the Restated Plan).
[_]In five (5) consecutive annual installments commencing on January 31 of the
first calendar year after my Cessation of Service (as defined in the
Restated Plan).
I understand that if I do not elect any payment option the balance in my
Account will be paid in a lump sum on January 31 of the first calendar year
after my Cessation of Service (as defined in the Restated Plan).
D. Beneficiary Designation (Restated Plan Paragraph 13):
I hereby designate the following named beneficiaries to receive all the
funds in my Deferred Compensation Account which may remain unpaid at my death:
Percent (must
Name of Beneficiary Address Relationship total 100%)
- -----------------------------------------------------------
- -----------------------------------------------------------
(attach additional sheet if necessary)
If no beneficiary designation is made, I understand that the balance in my
Account will be paid to my estate.
B-6
<PAGE>
I understand that the elections and directions contained herein supersede
any prior elections and directions I may have made in the past and shall remain
effective until I file a Subsequent Election changing any of the elections or
directions contained herein or terminating my participation in the Restated
Plan.
Dated
Very truly yours,
-------------------------------------
Director
UNIVERSAL FOODS CORPORATION
By: _________________________________
Secretary
B-7
<PAGE>
Appendix C
UNIVERSAL FOODS CORPORATION
INCENTIVE COMPENSATION PLAN
FOR ELECTED CORPORATE OFFICERS
Adopted by the Compensation and Development Committee on November 11,
1999Approved by the Shareholders on , 2000
I. THE PLAN
The name of this Plan is the Universal Foods Corporation Incentive
Compensation Plan for Elected Corporate Officers. The purpose of this Plan is
to promote the interests of the shareholders and to provide incentive to the
Chairman, President, Chief Executive Officer, Corporate Vice Presidents,
Secretary, Treasurer, Controller and Division Presidents ("elected corporate
officers") of the Company for contributions to the profitability of the
Company. It is separate and distinct from the other Company incentive plans
currently in effect. It is intended that Bonus Awards paid under this Plan
constitute "qualified performance-based compensation" under Section 162(m) of
the Internal Revenue Code.
II. DEFINITIONS
In this Plan, the following terms used will have the following definitions:
A. "Board of Directors" means the Board of Directors of Universal Foods
Corporation.
B. "Bonus Award" means an award, either paid currently or paid on a
deferred basis, as the result of the operation of this Plan.
C. "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time.
D. "Committee" means the committee provided for in Section III.
E. "Company" means Universal Foods Corporation.
F. "Earnings Per Share" means the Company's consolidated, fully diluted
earnings per share for the fiscal year in question as reported on its
audited financial statements for such year. In the event of any dispute or
disagreement regarding the calculation of Earnings Per Share, the matter
will be submitted to the Independent Auditors, whose determination will be
final and binding on the parties.
G. "Fiscal Year Salary" of any Participant means the base pay earned by
such Participant during the period October 1 through September 30 of each
Company operating year, exclusive of any incentive compensation or
supplemental payments by the Company.
H. "Independent Auditors" means, with respect to any fiscal year, the
independent public accountants appointed by the Board of Directors to
certify to the Board of Directors the financial statements of the Company.
I. "Participant" means any elected corporate officer of the Company.
J. "Performance Goals" means the Earnings Per Share targets and related
percentages of the percent of Fiscal Year Salary which determine the amount
of any Bonus Award for any fiscal year, as established by the Committee
pursuant to Section IV.
K. "Plan" means this Incentive Compensation Plan.
L. "Regulations" means the final, temporary and/or proposed Treasury
Regulations promulgated under Section 162(m) of the Code and any other
Rulings or interpretative pronouncements promulgated by the Internal
Revenue Service with respect to Section 162(m) of the Code, as in effect
from time to time.
C-1
<PAGE>
III. COMMITTEE
A. The Board of Directors has appointed and shall continue to appoint and
keep in existence a Compensation and Development Committee composed of at
least three members of the Company's Board of Directors, each of whom
constitutes an "outside director" within the meaning of Section 162(m) of the
Code and the Regulations. This Committee shall be known as the "Committee" and
shall have full power and authority to interpret and administer the Plan in
accordance with its terms (provided that, except as provided in Sections V. B.
and VI. B. hereof, the Committee shall have no authority or discretion to
establish the amount of any Bonus Award in any amount other than the "Planned
Amount" (as hereinafter defined)).
B. The Board of Directors may, from time to time, remove members from the
Committee or add members thereto, and vacancies on the Committee, however
caused, shall be filled by action of the Board of Directors; provided, that no
person shall be appointed to the Committee who does not qualify as an "outside
director" (as defined in the preceding paragraph A).
IV. ESTABLISHMENT OF PERFORMANCE GOALS
A. Not later than the 90th day of each fiscal year of the Company, the
Committee shall establish and adopt Performance Goals for such fiscal year.
Such Performance Goals shall include: (a) a range of Earnings Per Share
targets for such fiscal year; (b) for each such Earnings Per Share target a
percentage of the percent of Fiscal Year Salary that is to be paid to a
Participant as a Bonus Award under this Plan if such Earnings Per Share target
is achieved; and (c) the respective percent of Fiscal Year Salary that may be
paid to a Participant as a Bonus Award under this Plan.
B. Once the Performance Goals have been established for any fiscal year in
accordance with the foregoing paragraph, they shall not be subject to
modification or adjustment for any reason.
V. PLAN PARTICIPATION; PARTIAL YEAR PARTICIPATION
A. Subject to Section VI. E. below, the persons entitled to participate in
this Plan for any fiscal year of the Company are those persons who, at any
time during such fiscal year, held a position as an elected corporate officer
of Company.
B. If any person serves as an elected corporate officer, and therefore is
eligible to be a Participant, for less than 100% of any fiscal year, then any
Bonus Award otherwise payable to such person hereunder for such fiscal year
shall nonetheless be payable in full (subject to Section VI. E. below), unless
the Committee in its discretion determines that the amount of such Bonus Award
should be reduced to reflect such officer's service for less than the entire
fiscal year, in which event the Bonus Award payable to such Participant shall
be reduced to the extent so determined by the Committee. The amount of such
reduction shall not be subject to the limitations on discretionary reductions
imposed under Section VI. B. below.
VI. DETERMINATION AND PAYMENT OF BONUS AWARDS
A. Subject to the following Paragraphs B, C and E. of this Section VI, the
amount of the Bonus Award payable to a Participant for any fiscal year under
this Plan shall be an amount equal to the percentage of the specified percent
of such Participant's Fiscal Year Salary for such fiscal year that corresponds
to the Earnings Per Share target achieved by the Company for such fiscal year,
as set out in the Performance Goals. The dollar amount of any Bonus Award
determined under this Paragraph A. is referred to herein as the "Planned
Amount."
B. The Committee may in its discretion reduce the Bonus Award for any
Participant or Participants for any fiscal year to an amount less than the
Planned Amount if the Committee, in its discretion, determines such reduction
to be appropriate, taking into consideration such factors as the Committee
deems appropriate. In no event, however, shall any Bonus Award be reduced
under this Section VI. B. to less than eighty percent (80%)
C-2
<PAGE>
of the Planned Amount. Discretionary reductions in Bonus Awards under this
Paragraph B. may be made in different amounts or percentages for different
Participants, and may be based on considerations unique to a particular
Participant and/or considerations affecting the Company or all Participants
generally. Under no circumstances shall the Committee have any discretion to
increase any Bonus Award to an amount greater than the Planned Amount.
C. Notwithstanding the Performance Goals and the Planned Amounts, in no
event shall any Bonus Award payable to any one Participant under this Plan for
any fiscal year exceed $1,500,000.
D. All Bonus Awards for any fiscal year shall be paid no later than thirty
(30) days after the Company files its Form 10-K with the Securities and
Exchange Commission for such year.
E. No Bonus Award for a fiscal year shall be paid to a Participant whose
employment with the Company terminates (regardless of the reason for or
circumstances of that termination) prior to the time that Bonus Awards for
such year are paid.
VII. SHAREHOLDER APPROVAL OF THE PLAN
This Plan shall become effective only after it has been submitted to and
approved by a separate vote of the shareholders of the Company, by the
affirmative vote of a majority of the votes cast thereon. Until such approval
has been obtained, no Participant shall be entitled to be paid any Bonus Award
hereunder. The particular Performance Goals established for any fiscal year
need not be approved by the shareholders. Once such shareholder approval is
obtained, no further shareholder approval shall be required in any subsequent
fiscal year until and unless required by the Code or the Regulations. If any
material term of the Plan is changed, such that reapproval by the shareholders
is required under the Code or the Regulations, then no Bonus Awards shall be
payable to any Participant hereunder until such reapproval has been duly
obtained.
VIII. SUCCESSORS AND ASSIGNS
A. If the Company sells, assigns or transfers all or substantially all of
its business and assets to any person, excluding affiliates of the Company, or
if the Company merges into or consolidates or otherwise combines with any
person which is a continuing or successor entity, then the Company shall
assign all of its right, title and interest in this Plan as of the date of
such event to the person which is the acquiring or successor corporation, and
such person(s) shall assume and perform from and after the date of such
assignment all of the terms, conditions and provisions imposed by this Plan
upon the Company.
B. In the case of such an assignment and assumption, all further rights, as
well as all other obligations of the Company under this Agreement, thenceforth
shall cease and terminate and thereafter the expression "the Company" wherever
used herein shall be deemed to mean such successor person(s).
IX. COORDINATION WITH CHANGE OF CONTROL EMPLOYMENT AND SEVERANCE AGREEMENTS
If any Participant is a party to a Change of Control Employment and
Severance Agreement with the Company ("Change of Control Agreement"), it is
the intent of the Company that, if such Change of Control Agreement becomes
effective as a result of a Change of Control (as defined therein) of the
Company, while the Participant continues to be employed by the Company under
Section 4 of the Change of Control Agreement such Participant shall not be
entitled to receive, for the same fiscal year, a Bonus Award under this Plan
as well as a bonus under Section 4(b)(ii) of his or her Change of Control
Agreement. Accordingly, for example, any Bonus Award payable to any such
Participant under this Plan with respect to the fiscal year in which a Change
of Control occurs shall be reduced by the amount of any bonus to which such
Participant is entitled, for or in respect of the same fiscal year, under
Section 4(b)(ii) of his or her Change of Control Agreement.
C-3
<PAGE>
X. PLAN AMENDMENTS, DISCONTINUANCE
The Board of Directors may amend, suspend or discontinue this Plan at any
time, provided that the Performance Goals and the method by which the amount
of Bonus Award is determined may not be altered for any fiscal year after the
Performance Goals for such year have been established; and provided further,
that the Plan may not be suspended or discontinued for any fiscal year after
the Performance Goals have been established for such year.
C-4
<PAGE>
UNIVERSAL FOODS CORPORATION
INCENTIVE COMPENSATION PLAN
FOR ELECTED CORPORATE OFFICERS
PERFORMANCE GOALS
Fiscal Year 1999-2000
<TABLE>
<CAPTION>
% of % of Fiscal Year
EPS Target Salary Payable as Bonus Award
- ------------------------------------------------------------
<S> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Title % of Fiscal Year Salary
- ----------------------------------------------------------------------
<S> <C>
Chairman, President, Chief Executive
Officer
- ----------------------------------------------------------------------
Vice President and Group Executive
- ----------------------------------------------------------------------
Vice President and Chief Financial Officer
- ----------------------------------------------------------------------
Vice President--Administration
- ----------------------------------------------------------------------
Division President
- ----------------------------------------------------------------------
Other Corporate Vice Presidents, Secretary,
Treasurer, Controller
</TABLE>
C-5
<PAGE>
[Logo]
UNIVERSAL FOODS CORPORATION
433 East Michigan Street
Milwaukee, Wisconsin 53202
Notice of Annual Meeting
To be Held January 27, 2000
December 1999
Dear Fellow Shareholder:
You are invited to attend the Annual Meeting of Shareholders of Universal Foods
Corporation. The meeting will be held on Thursday, January 27, 2000, at 2:00
p.m. at the Italian Community Center, 631 East Chicago Street, Milwaukee,
Wisconsin. Directions to the meeting and a map are provided on the reverse side
of this letter.
We hope that you will be able to join us at the meeting to review the year and
take a look at what the future holds for our company. In addition, the business
to be transacted is: (i) to elect three directors of the Company as described in
the accompanying Proxy Statement; (ii) to approve the Universal Foods
Corporation 1999 Non-Employee Director Stock Option Plan to provide for the
annual grant of non-statutory stock options to non-employee directors of the
Company; (iii) to approve an amendment to the Directors' Deferred Compensation
Plan which provides for deferral of director fees into Company stock; (iv) to
approve an amendment to the Management Incentive Plan for Elected Officers to
qualify the plan under Section 162(m) of the Internal Revenue Code; and (v) to
ratify the appointment of Deloitte & Touche LLP, certified public accountants,
as the independent auditors of the Company for fiscal 2000.
Whether or not you plan to attend, it is important that you exercise your right
to vote as a shareholder. Please indicate your vote on the proxy card below,
sign and date the card, detach it from this letter and return it promptly to
Corporate Election Services, Inc., our independent proxy tabulator, in the
envelope provided. Be assured that your votes are completely confidential.
We look forward to seeing you at the meeting. On behalf of the officers and
directors of Universal Foods Corporation, we want to thank you for your
continued support and confidence.
Sincerely,
/s/ Kenneth P. Manning
Kenneth P. Manning
Chairman, President and Chief Executive Officer
================================================================================
UNIVERSAL FOODS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 27, 2000
The undersigned constitutes and appoints KENNETH P. MANNING, and JOHN L.
HAMMOND, and each of them, with full power of substitution, the true and lawful
Proxies of the undersigned, to represent and vote, as designated below, all
shares of Common Stock of Universal Foods Corporation which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of such corporation to be
held at the Italian Community Center, 631 East Chicago Street, Milwaukee,
Wisconsin, on Thursday, January 27, 2000, 2:00 p.m. Central Standard Time, and
at any adjournment thereof:
1. Election of Directors [ ] FOR all nominees listed [ ] WITHHOLD authority
below (except as marked to vote for all
to the contrary below). nominees listed
below.
John F. Bergstrom, William V. Hickey, Kenneth P. Manning
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below).
----------------------------------------------------------
2. Proposal to approve the Universal Foods Corporation 1999 Non-Employee
Director Stock Option Plan to provide for the annual grant of non-statutory
stock options to non-employee directors of the Company.
[ ] For [ ] Against [ ] Abstain
3. Proposal to approve an amendment to the Directors' Deferred Compensation
Plan which provides for deferral of director fees into Company stock.
[ ] For [ ] Against [ ] Abstain
4. Proposal to approve an amendment to the Management Incentive Plan for
Elected Officers to qualify the plan under Section 162(m) of the Internal
Revenue Code.
[ ] For [ ] Against [ ] Abstain
5. Proposal to ratify the appointment of Deloitte & Touche LLP, certified
public accountants, as the independent auditors of the Company for fiscal
2000.
[ ] For [ ] Against [ ] Abstain
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES AND "FOR" ITEMS 2,
3, 4 AND 5.
================================================================================
<PAGE>
UNIVERSAL FOODS [AREA MAP OF SHAREHOLDERS' MEETING LOCATION AND PARKING]
CORPORATION
ANNUAL MEETING
OF SHAREHOLDERS
JANUARY 27, 2000
AT 2:00 P.M.
PLEASE FOLD HERE BEFORE DETACHING PROXY CARD
- -------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
"FOR" ALL NOMINEES LISTED IN ITEM 1 AND "FOR" ITEMS 2, 3, 4 AND 5.
The undersigned acknowledges
receipt of the Notice of said
Annual Meeting and the
accompanying Proxy Statement and
Annual Report.
Dated: _________________________
Signed _________________________
_________________________
(Please print name)
NOTE: Please sign exactly as your
name appears on your stock
certificate. Joint owners should
each sign personally. A
corporation should sign its full
corporate name by duly authorized
officers and affix its corporate
seal. When signing as attorney,
executor, administrator, trustee
or guardian, give full title as
such.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF UNIVERSAL FOODS
CORPORATION.
<PAGE>
UNIVERSAL FOODS [AREA MAP OF SHAREHOLDERS MEETING & PARKING]
CORPORATION
ANNUAL MEETING
OF SHAREHOLDERS
JANUARY 27, 2000 Convenient Free Parking
AT 2:00 P.M.
PLEASE FOLD HERE BEFORE DETACHING PROXY CARD
- -------------------------------------------------------------------------------
SAVINGS PLAN -- 401(k)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
"FOR" ALL NOMINEES LISTED IN ITEM 1 AND "FOR" ITEMS 2, 3, 4 AND 5.
The undersigned acknowledges
receipt of the Notice of said
Annual Meeting and the
accompanying Proxy Statement and
Annual Report.
Dated: _________________________
Signed _________________________
_________________________
(Please print name)
NOTE: Please sign exactly as your
name appears on your stock
certificate. Joint owners should
each sign personally. When signing
as attorney, executor,
administrator, trustee or
guardian, give full title as such.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF UNIVERSAL FOODS
CORPORATION.
<PAGE>
UNIVERSAL FOODS [AREA MAP OF SHAREHOLDERS MEETING & PARKING]
CORPORATION
ANNUAL MEETING
OF SHAREHOLDERS
JANUARY 27, 2000 Convenient Free Parking
AT 2:00 P.M.
PLEASE FOLD HERE BEFORE DETACHING PROXY CARD
- -------------------------------------------------------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
"FOR" ALL NOMINEES LISTED IN ITEM 1 AND "FOR" ITEMS 2, 3, 4 AND 5.
The undersigned acknowledges
receipt of the Notice of said
Annual Meeting and the
accompanying Proxy Statement and
Annual Report.
Dated: _________________________
Signed _________________________
_________________________
(Please print name)
NOTE: Please sign exactly as your
name appears on your stock
certificate. Joint owners should
each sign personally. When signing
as attorney, executor,
administrator, trustee or
guardian, give full title as such.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF UNIVERSAL FOODS
CORPORATION.
