<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THORN APPLE VALLEY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
[COMPANY NAME]
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
- --------------------------------------------------------------------------------
<PAGE> 2
THORN APPLE VALLEY, INC.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 28, 1996
To the Shareholders:
PLEASE TAKE NOTICE that the Annual Meeting of Shareholders of Thorn Apple
Valley, Inc. (the "Company") will be held at the Radisson Plaza Hotel, 1500 Town
Center, Southfield, Michigan on Monday, October 28, 1996 at 11:00 A.M., Eastern
Daylight Time, to consider and act upon the following matters:
(1) The election of seven directors to serve until the next Annual
Meeting of Shareholders and until their successors shall have been duly
elected and qualified.
(2) A proposal to approve a 1996 Employee Stock Option Plan.
(3) Such other business as may properly come before the meeting.
Only shareholders of record at the close of business on September 6, 1996
will be entitled to vote at the meeting.
Your attention is called to the attached proxy statement and accompanying
proxy. You are requested to sign and return the proxy in the enclosed envelope,
to which no postage need be affixed if mailed in the United States. If you
attend the meeting, you may withdraw your proxy and vote your own shares.
A copy of the Annual Report of the Company for the fiscal year ended May
31, 1996 accompanies this Notice.
By Order of the Board of Directors
RONALD D. RISHER
RONALD D. RISHER
Secretary
Southfield, Michigan
September 27, 1996
<PAGE> 3
THORN APPLE VALLEY, INC.
26999 CENTRAL PARK BOULEVARD, SUITE 300
SOUTHFIELD, MICHIGAN 48076
-------------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 28, 1996
GENERAL INFORMATION
The Annual Meeting of Shareholders of Thorn Apple Valley, Inc. (the
"Company") will be held at the Radisson Plaza Hotel, 1500 Town Center,
Southfield, Michigan on Monday, October 28, 1996, at 11:00 A.M., Eastern
Daylight Time, for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders. The approximate mailing date for this proxy statement
is September 27, 1996.
It is important that your shares be represented at the meeting. If you do
not intend to attend the meeting, please sign and date the enclosed proxy and
return it to the Company. The proxy is solicited by the Board of Directors of
the Company. The shares represented by valid proxies in the enclosed form will
be voted if received in time for the Annual Meeting. The expenses in connection
with the solicitation of proxies will be borne by the Company and may include
requests by mail and personal contact by the Company's directors, officers and
employees. The Company will reimburse brokers or other nominees for their
expenses in forwarding proxy materials to principals. Any person giving a proxy
has the power to revoke it at any time before it is voted.
VOTING RIGHTS AND PRINCIPAL HOLDERS OF SECURITIES
Only holders of record of shares of the Company's Common Stock, $0.10 par
value per share ("Common Stock"), at the close of business on September 6, 1996,
are entitled to notice of and to vote at the meeting and at any and all
adjournments or postponements thereof, each share having one vote. On the record
date, the Company had issued and outstanding 5,783,234 shares of Common Stock.
As of September 6, 1996, Henry S Dorfman was the beneficial owner of
2,141,295 shares (37.0%) of the Company's Common Stock. Included in the shares
beneficially owned by Henry S Dorfman are (a) 1,700,806 shares of the Company's
Common Stock held by the Dorfman Family Limited Partnership, which shares Henry
S Dorfman has the power to vote, and (b) 55,000 shares of the Company's Common
Stock held by the Henry S Dorfman and Mala Dorfman Foundation, which Henry S
Dorfman has the power to vote. Also included in the shares beneficially owned by
Henry S Dorfman are 287,196 shares of the Company's Common Stock that are
subject to a Shareholder Agreement, dated as of August l, 1988 (the "Shareholder
Agreement"), pursuant to which Henry S Dorfman has the sole power to vote such
shares; such shares are owned by Joel Dorfman, Henry S Dorfman's son. See pages
3-4 for additional information. On September 12, 1996, Mr. Henry S Dorfman
purchased an additional 279,883 shares of Common Stock from the Company thereby
increasing his holdings to 2,421,178 shares representing 39.9% of the Company's
Common Stock outstanding after giving effect to such transaction. See page 10
for additional information.
As of September 6, 1996, Joel Dorfman was the beneficial owner of 538,896
shares (8.9%) of the Company's Common Stock, which includes 287,196 shares which
Henry S Dorfman has the power to vote (see pages 3-4 for additional
information). As of September 6, 1996, Henry S Dorfman, together with members of
his family, directly or indirectly beneficially owned 2,392,995 shares (39.7%)
of the Company's outstanding Common Stock. The address of Henry S Dorfman and
Joel Dorfman is 26999 Central Park Boulevard, Suite 300, Southfield, Michigan
48076.
1
<PAGE> 4
As of September 6, 1996, Dimensional Fund Advisors Inc. ("Dimensional"), a
registered investment advisor, may be deemed to beneficially own 315,240 shares
(5.5%) of the Company's Common Stock, all of which shares were held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of which
Dimensional serves as investment manager. Dimensional disclaims beneficial
ownership of all such shares. The address of Dimensional is 1299 Ocean Avenue,
11th Floor, Santa Monica, California 90401.
As of September 6, 1996, Sanford C. Bernstein & Co., Inc. ("Sanford"), a
registered investment advisor, may be deemed to beneficially own 311,300 shares
(5.4%) of the Company's Common Stock, all of which shares are held in investment
advisory accounts of Sanford. Sanford has sole voting power over 239,000 of such
shares and shared voting power over 4,500 of such shares. Sanford has sole
investment power over all 311,300 shares. The address of Sanford is 767 Fifth
Avenue, New York, New York 10153.
As of September 6, 1996, Heartland Advisors, Inc. ("Heartland"), a
registered investment advisor, may be deemed to beneficially own 308,050 shares
(5.3%) of the Company's Common Stock, all of which shares are held in investment
advisory accounts of Heartland. Heartland has sole voting and/or investment
power over such shares. The address of Heartland is 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202.
Management does not know of any other person who beneficially owned, as of
September 6, 1996, more than 5% of the Company's Common Stock.
2
<PAGE> 5
I. ELECTION OF DIRECTORS
The Board of Directors proposes that the seven persons named below as
nominees be elected as directors of the Company to hold office until the next
annual meeting of shareholders and until their successors are duly elected and
qualified:
<TABLE>
<S> <C>
John C. Canepa Louis Glazier
Henry S Dorfman Moniek Milberger
Joel Dorfman Seymour Roberts
Burton D. Farbman
</TABLE>
The persons named in the accompanying proxy intend to vote all valid
proxies received by them for the election of these nominees. In case any nominee
is unable or declines to serve, which is not anticipated, it is intended that
the proxies be voted in accordance with the best judgment of the proxy holders.
Each of the foregoing nominees was elected to his present term at the 1995
Annual Meeting of Shareholders. The following table sets forth the name, age,
position with the Company, principal occupation, term of service and beneficial
ownership of Common Stock with respect to each nominee to serve as a director.
The information as to securities owned by each nominee has been furnished by
such nominee. The following table also sets forth the name and beneficial
ownership of Common Stock with respect to each executive officer of the Company
named in the Summary Compensation Table below and all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OF OUTSTANDING
COMMON STOCK COMMON STOCK
OF THE COMPANY OF THE COMPANY
POSITIONS AND OFFICES WITH BENEFICIALLY BENEFICIALLY
NAME AND YEAR FIRST COMPANY OWNED AS OF OWNED AS OF
BECAME A DIRECTOR AGE AND OTHER PRINCIPAL OCCUPATIONS SEPTEMBER 25, 1996 SEPTEMBER 25, 1996
- ---------------------------- --- --------------------------------------------------- ------------------
<S> <C> <C> <C> <C>
- -- NOMINEES FOR ELECTION AS DIRECTORS --
Henry S Dorfman (1959)...... 74 Chairman of the Board............ 2,421,178(1) 39.9%
Joel Dorfman (1978)......... 45 President and Chief Executive
Officer of the Company........... 538,896(2) 8.5%
Moniek Milberger (1959)..... 66 Certified Public Accountant and
Consultant to the Company,
Southfield, Michigan............. 650 *
John C. Canepa (1983)....... 66 Consulting Principal, Crowe
Chizek, Grand Rapids, Michigan... 0 *
Louis Glazier (1988)........ 47 Executive Vice President Finance
and Administration of the
Company.......................... 61,311(3) 1.0%
Burton D. Farbman (1988).... 53 President of The Farbman Group,
Southfield, Michigan............. 1,375 *
Seymour Roberts (1992)...... 62 Senior Vice President, Senior
Partner, N.W. Ayer & Partners,
Detroit, Michigan................ 300 *
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OF OUTSTANDING
COMMON STOCK COMMON STOCK
OF THE COMPANY OF THE COMPANY
BENEFICIALLY BENEFICIALLY
OWNED AS OF OWNED AS OF
NAME SEPTEMBER 25, 1996 SEPTEMBER 25, 1996
- ---------------------------- ------------------ ------------------
-- OTHER EXECUTIVE OFFICERS --
<S> <C> <C>
Keith Jahnke........................................................ 45,000(4) *
Edward Boan......................................................... 37,500(5) *
All directors and executive officers as a group (9 persons)......... 2,818,014(6) 43.8%
</TABLE>
- -------------------------
* Less than 1.0%
(1) Henry S Dorfman owns outright and has the sole voting and investment power
for 378,176 shares. Also included in the shares beneficially owned by Henry
S Dorfman are (a) 1,700,806 shares held by the Dorfman Family Limited
Partnership, which Henry S Dorfman has the power to vote, (b) 55,000 shares
held by the Henry S Dorfman and Mala Dorfman Foundation, which shares Henry
S Dorfman has the power to vote, and (c) 287,196 shares owned by his son,
Joel Dorfman, which shares are subject to the Shareholder Agreement,
pursuant to which Henry S Dorfman has the sole power to vote such shares.
Such 287,196 shares are also included in the shares indicated as shares
beneficially owned by Joel Dorfman.
(2) Joel Dorfman, the son of Henry S Dorfman, owns 287,196 shares, all of which
are subject to the Shareholder Agreement and which Henry S Dorfman has the
power to vote. In addition, within 60 days of September 25, 1996, Joel
Dorfman has the right to acquire 251,250 shares pursuant to the Company's
1982 Stock Option Plan and the Company's 1990 Employee Stock Option Plan
(collectively referred to as the "Company's Stock Option Plans"). Also
included in the number listed in the table above are 450 shares held in
custodial accounts for the benefit of Joel Dorfman's sons.
(3) Louis Glazier owns outright and has the sole voting and investment power for
15,724 shares. In addition, within 60 days of September 25, 1996, Mr.
Glazier has the right to acquire 45,000 shares pursuant to the Company's
Stock Option Plans. Also included in the number listed in the table above
are 307 shares owned by one of Mr. Glazier's daughters.
(4) Within 60 days of September 25, 1996, Keith Jahnke has the right to acquire
45,000 shares pursuant to the Company's Stock Option Plans.
(5) Within 60 days of September 25, 1996, Edward Boan has the right to acquire
37,500 shares pursuant to the Company's Stock Option Plans.
(6) Total includes 378,750 shares which such persons have the right to acquire
within 60 days of September 25, 1996 pursuant to the Company's Stock Option
Plans.
OTHER INFORMATION RELATING TO NOMINEES
The following is a brief account of the business experience during the past
five years of each nominee for election as a director of the Company:
Henry S Dorfman has served as Chairman of the Board of Directors since
1959. Mr. Dorfman also served as Chief Executive Officer of the Company from
1959 to July, 1995. Mr. Dorfman was a founder of the Company and, by virtue of
his relationship to the Company and stockholding interest, might be deemed to be
in "control" of the Company within the meaning of Rule 12b-2 of the Securities
Exchange Act of 1934.
Joel Dorfman has served as President of the Company since March, 1985 and
Chief Executive Officer of the Company since July, 1995. By virtue of his
relationship to the Company, Mr. Dorfman might be deemed to be in "control" of
the Company within the meaning of Rule 12b-2 of the Securities Exchange Act of
1934.
Moniek Milberger has been a Certified Public Accountant in private practice
since 1960 and serves as a consultant to the Company.
John C. Canepa has been a consulting principal of Crowe Chizek, a certified
public accounting and consulting firm, since November, 1995. From 1970 to
November, 1995, Mr. Canepa served as President and
4
<PAGE> 7
Chief Executive Officer of Old Kent Financial Corporation and Old Kent Bank and
Trust Company, Grand Rapids, Michigan.
Louis Glazier has been Executive Vice President Finance and Administration
of the Company since July, 1988.
Burton D. Farbman has been President of The Farbman Group, a real estate
development and management company, since 1987, and prior to that was President
of the Farbman Group in 1977.
Seymour Roberts has been a Senior Vice President and Senior Partner of N.W.
Ayer & Partners, an advertising agency, since February, 1992. From 1973 to 1991,
Mr. Roberts served as Executive Vice President and General Manager of W.B. Doner
& Company, an advertising agency.
During the fiscal year ended May 31, 1996 ("fiscal 1996"), the Board of
Directors held four meetings. Each of the incumbent directors listed above
attended at least 75% of the Board of Directors and committee meetings held
during the period in which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing Executive Committee. The members of the
Executive Committee are Henry S Dorfman, Joel Dorfman and John C. Canepa. The
Executive Committee meets on call as required between meetings of the Board of
Directors and has authority to take any action which is not specifically
prohibited by the Michigan Business Corporation Act. During fiscal 1996, the
Executive Committee did not have any meetings.
The Company has a standing Stock Option Committee. The members of the Stock
Option Committee are Henry S Dorfman, Moniek Milberger and Burton D. Farbman.
The duties of the Stock Option Committee include the administration and the
granting of stock options under the Company's stock option plans. During fiscal
1996, the Stock Option Committee held one meeting.
The Company has a standing Nominating Committee. The members of the
Nominating Committee are Joel Dorfman, Burton D. Farbman and John C. Canepa. The
Nominating Committee considers the performance of incumbent directors and
recommends to the shareholders nominees for election as directors. The
Nominating Committee will consider nominees for directors recommended by
shareholders. Such recommendations for the 1997 Annual Meeting of Shareholders
should be submitted to the Chairman of the Board at 26999 Central Park
Boulevard, Suite 300, Southfield, Michigan 48076, no later than May 23, 1997.
The Company has a standing Compensation Committee. The members of the
Compensation Committee are Joel Dorfman, John C. Canepa, Burton D. Farbman,
Moniek Milberger and Seymour Roberts. The duties of the Compensation Committee
include recommending to the entire Board of Directors of the Company the
compensation arrangements for senior management and directors of the Company and
approving transactions between the Company, on the one hand, and officers,
directors and shareholders of the Company, on the other hand. During fiscal 1996
the Compensation Committee held one meeting.
The Company has a standing Audit Committee. The members of the Audit
Committee are John C. Canepa, Burton D. Farbman, Moniek Milberger and Seymour
Roberts. The duties of the Audit Committee include overseeing the relationship
with the Company's independent accountants; nominating the Company's independent
accountants for approval by the entire Board of Directors of the Corporation;
reviewing with the independent accountants the scope, cost and results of the
auditing engagement; reviewing and approving fees for audit and non-audit
professional services provided by the independent accountants; reviewing reports
submitted by the independent accountants; and reviewing the adequacy of the
Company's system of internal accounting controls. During fiscal 1996, the Audit
Committee held two meetings.
The Company has an Executive Compensation Committee. The members of the
Executive Compensation Committee are Burton D. Farbman and Seymour Roberts. The
duties of the Executive Compensation Committee include administering the cash
bonus plan for participating executives ("Participants"); establishing
performance criteria for granting the annual cash bonus; insuring Participants
have met their stated performance goals and approving the annual cash bonus paid
to such Participants. During fiscal 1996, the Executive Compensation Committee
held one meeting.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
The following table sets forth information for each of the fiscal years
ended May 31, 1996, May 26, 1995 and May 27, 1994 concerning the compensation of
Joel Dorfman, the executive officer of the Company who performs the functions of
the chief executive officer, and each of the Company's other four most highly
compensated executive officers whose total annual salary and bonus exceeded
$100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- AWARDS
FISCAL OTHER ANNUAL ------------ ALL OTHER
YEAR SALARY BONUS(1) COMPENSATION OPTIONS COMPENSATION(2)
------ -------- -------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Joel Dorfman............... 1996 $600,000 $ -- $ 12,387(3) 40,000 $25,361(4)
President and Chief 1995 650,000 250,000 12,791(3) 40,000 31,062(4)
Executive Officer 1994 650,000 400,000 114,139(3)(5) 40,000 31,666(4)
Henry S Dorfman............ 1996 500,000 -- 19,262(3) -- 7,178(4)
Chairman of the Board 1995 550,000 175,000 32,573(3) -- 7,231(4)
1994 550,000 400,000 43,983(3) -- 6,524(4)
Louis Glazier.............. 1996 250,000 -- 13,103(3) 10,000 2,261(4)
Executive Vice 1995 175,000 137,500 198,366(3)(6) 10,000 1,961(4)
President Finance 1994 175,000 270,000 14,759(3) 10,000 1,911(4)
and Administration
Keith Jahnke............... 1996 250,000 -- 2,675(3) 10,000 1,000
Executive Vice President 1995 175,000 75,000 2,145(3) 10,000 700
Processed Meats 1994 175,000 150,000 155,250(3)(7) 10,000 650
Edward Boan................ 1996 250,000 -- 1,975(3) 10,000 1,000
Executive Vice President 1995 175,000 75,000 93,850(3)(8) 10,000 700
Pork and Human Resources 1994 175,000 150,000 1,975(3) 10,000 650
</TABLE>
- -------------------------
(1) Each bonus accrued in the fiscal year indicated and was paid in the
following fiscal year.
(2) Except as noted, consists only of the Company's 401(k) contributions.
(3) Includes amounts relating to use of company-owned automobiles and
reimbursement of business, entertainment and other expenses.
(4) Includes premiums paid by the Company for Joel Dorfman, Henry S Dorfman and
Louis Glazier in connection with split dollar life insurance policies
maintained by the Company on their lives in policy amounts (as of May 31,
1996) of $1,995,101, $178,000 and $100,000, respectively. Pursuant to this
arrangement, the Company pays the annual premiums on such policies, each of
which is owned by the spouse of the insured, and the Company has received a
collateral assignment of the policies and will recover the premiums
advanced, without interest, upon the death or termination of employment of
each insured. The aggregate premiums paid (and to be recovered by the
Company) for these policies on the lives of Joel Dorfman, Henry S Dorfman
and Louis Glazier as of May 31, 1996 were $332,623, $207,952 and $12,455,
respectively.
(5) Includes gain on exercise of stock options of $67,915.
(6) Includes gain on exercise of stock options of $196,500.
(7) Includes gain on exercise of stock options of $153,125.
(8) Includes gain on exercise of stock options of $91,875.
6
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended May 31, 1995 to each of the
executive officers of the Company named in the Summary Compensation Table above:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZED VALUE
------------------------------------------------------ AT ASSUMED ANNUAL RATES
PERCENTAGE OF OF STOCK PRICE
TOTAL OPTIONS APPRECIATION AT END OF
GRANTED TO PER SHARE TEN-YEAR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ------------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
- -------------------------- ---------- ------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joel Dorfman.............. 40,000 23.46 $ 17.00 10/26/05 $427,600 $1,083,745
Henry S Dorfman........... -- -- -- -- -- --
Louis Glazier............. 10,000 5.87 17.00 10/26/05 106,900 270,900
Keith Jahnke.............. 10,000 5.87 17.00 10/26/05 106,900 270,900
Edward Boan............... 10,000 5.87 17.00 10/26/05 106,900 270,900
</TABLE>
- -------------------------
(1) Each Option granted in fiscal 1996 is exercisable immediately.
COMPENSATION OF DIRECTORS
Under the Company's standard arrangements, each director who is not an
officer of the Company receives an annual director's fee in the amount of $5,000
and a fee of $500 for each meeting of the Board of Directors of the Company
which they attend. In addition, during fiscal 1996, Mr. Milberger received
$13,900 as compensation for consulting services rendered to the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended May 31, 1996, Joel Dorfman served as a member
of the Company's Compensation Committee. Joel Dorfman has been President of the
Company since March, 1985 and Chief Executive Officer since July, 1995.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General. The Compensation Committee's overall compensation policy
applicable to the Company's executive officers is to provide a compensation
program that is intended to attract and retain qualified executives for the
Company and to provide them with incentives to achieve Company goals and
increase shareholder value. The Compensation Committee implements this policy
through establishing salaries and bonuses. The Compensation Committee's current
policy is not to provide significant pension or other retirement benefits for
the Company's employees.
Salaries. The Compensation Committee's policy is to provide salaries that
are generally similar to those of similar executive officers in similar
companies. The Compensation Committee determines comparable salaries through
discussions with candidates for such positions, Company research and the
research of independent consultants concerning the salaries paid by the
Company's competitors.
Bonuses. Messrs. Henry S Dorfman, Joel Dorfman, Glazier, Jahnke and Boan
receive cash bonuses pursuant to the Company's Cash Bonus Plan, which was
approved by the shareholders at the 1994 Annual Meeting, and which is
administered by the Executive Compensation Committee. The Company's bonus
program (the "Executive Bonus Program") permits other executive officers, and
certain other participating employees, as selected by the Compensation Committee
in its sole discretion, to earn annual cash bonus awards. The Compensation
Committee's policy is to provide a major portion of each executive officer's
total compensation in the form of such bonuses to provide them with incentives
to achieve the Company's financial
7
<PAGE> 10
and operational goals and increase shareholder value. Bonuses are generally
determined as a percentage of the Company's pre-tax income in excess of
predetermined target levels which vary from year to year as established by the
Compensation Committee at the beginning of each fiscal year. As a result, the
compensation of the Company's executive officers is made dependant on the
Company's overall performance. Such bonuses are also intended to identify and
give priority to the Company's goals by tying compensation to the Company's
business plans. In addition to the foregoing, for employees who are not covered
by the Company's Cash Bonus Plan, the Compensation Committee takes into account
the participant's position, salary level and individual contributions to the
Company in determining a particular bonus award. Other participants in the
Executive Bonus Program are selected from among those employees of the Company
who the Compensation Committee believes have the capacity to contribute in a
substantial way to the successful performance of the Company. Bonuses are paid
following the end of the fiscal year for which the bonus is earned.
Stock Options. Stock options are awarded by the Stock Option Committee of
the Board of Directors. The Stock Option Committee's policy is to award stock
options to the Company's officers in amounts reflecting the participant's
position and ability to influence the Company's overall performance. Options are
intended to provide participants with an increased incentive to make
contributions to the long-term performance of growth of the Company, to join the
interests of participants with the interests of shareholders of the Company and
to attract and retain qualified employees. The Stock Option Committee's policy
has been to grant options with a term of ten-years to provide a long-term
incentive and to fix the exercise price of the options at the fair market values
of the underlying shares on the date of grant. As a result, such options will
only have value if the price of the underlying shares increases.
Fiscal 1996 Compensation Decisions Regarding Joel Dorfman. In accordance
with the Company's Cash Bonus Plan, the Executive Compensation Committee did not
approve a bonus for Joel Dorfman for fiscal 1996. Joel Dorfman did not
participate in the approval of his own compensation, but did participate in the
discussion of the Company's performance for fiscal 1996 and the determination of
bonuses for the other participants in the Executive Bonus Program.
By the Compensation Committee
JOEL DORFMAN
JOHN C. CANEPA
BARTON D. FARBMAN
MONIEK MILBERGER
SEYMOUR ROBERTS
8
<PAGE> 11
PERFORMANCE GRAPH
The following line graph compares for the fiscal years ended May 31, 1991,
May 29, 1992, May 28, 1993, May 27, 1994, May 26, 1995 and May 31, 1996 (i) the
yearly cumulative total shareholder return (i.e., the change in share price plus
the cumulative amount of dividends, assuming dividend reinvestment, divided by
the initial share price, expressed as a percentage) on the Company's Common
Stock, with (ii) the cumulative total return of the NASDAQ Market Index, and
with (iii) the cumulative total return on the common stock of the Media General
Meat Packing Index (assuming dividend reinvestment and weighted based on market
capitalization at the end of each year):
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THORN APPLE VALLEY, INC., NASDAQ MARKET INDEX AND MEAT PACKING INDEX
FISCAL YEAR END
<TABLE>
<CAPTION>
MEASUREMENT PERIOD THORN APPLE INDUSTRY IN-
(FISCAL YEAR COVERED) VALLEY INC. DEX BROAD MARKET
<S> <C> <C> <C>
1991 100 100 100
1992 89.38 88.85 106.46
1993 111.05 90.96 127.40
1994 140.62 107.04 139.71
1995 101.97 128.97 152.91
1996 79.08 162.39 215.84
</TABLE>
- -------------------------
* Total return assumes reinvestment of dividends.
TRANSACTIONS WITH MANAGEMENT
John C. Canepa, a director of the Company, was Chairman of the Board of Old
Kent Financial Corporation ("Old Kent"), Grand Rapids, Michigan during fiscal
1996. During such period, the Company paid $1,030,579 as interest and fees on
loans from Old Kent to the Company. The maximum outstanding borrowings by the
Company from Old Kent during fiscal 1996 were $23,675,000. On May 31, 1996,
$23,675,000 remained outstanding to Old Kent. The Company expects to continue to
have transactions with Old Kent in the ordinary course of business, including
loans and other services. In the opinion of management, the Company's commercial
dealings with Old Kent are on terms as favorable as those available from other
third-party banks.
During fiscal 1996, the Company paid $76,600 in interest to Henry S Dorfman
on funds borrowed from him. The maximum outstanding borrowings from Mr. Dorfman
during the fiscal year were $2,257,589. During fiscal 1996 interest on such
borrowings accrued at a floating rate per annum equal to approximately 1% below
the prevailing prime lending rate. On May 31, 1996, borrowings of $121,366
remained outstanding from Mr. Dorfman.
9
<PAGE> 12
The Company currently leases approximately 10,500 square feet of office
space at 18800 West Ten Mile Road, Southfield, Michigan on a month-to-month
basis for a monthly rental of $14,550. The owner and lessor of this building is
JEL Associates, in which Joel Dorfman and Louis Glazier own a controlling
interest. During fiscal 1996 the Company paid JEL Associates rent of $165,500.
In the opinion of management, the terms of this real estate lease were at least
as favorable to the Company as terms generally available to the Company from
independent parties at the time of such transactions.
The Company uses a freezer warehouse facility owned by Freezer Services of
Michigan, Inc., a corporation of which 75% of the stock is owned by Henry S
Dorfman. During fiscal 1996, the Company paid $2,076,000 to Freezer Services of
Michigan for storage charges, blast freezing and handling. Additionally, the
Company paid Freezer Services of Michigan $882,000 for rent during fiscal 1996
under a three-year lease that expired in 1994. The Company is currently
operating under a one-year lease extension that expires in January 1997. In the
opinion of management, the terms of the Company's dealings with Freezer Services
of Michigan were at least as favorable to the Company as generally available to
the Company from independent parties at the time of the transactions.
On September 12, 1996, as part of a restructuring of the Company's long
term and revolving debt facilities, Mr. Henry S Dorfman purchased 279,883 shares
of Common Stock of the Company for an aggregate amount of $3,000,345.70. The per
share purchase price of $10.72 was equal to the average closing prices of the
Company's Common Stock for the 20 trading days immediately preceding the date of
the purchase. Mr. Dorfman's purchase of such Common Stock from the Company was
approved by the Board of Directors of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the two fiscal years ended May 31, 1996 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that one
report, covering one transaction, was filed late by Louis Glazier, the Company's
Executive Vice President Finance and Administration. As of the date hereof, the
Company is not aware of any failure to file a required report.
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<PAGE> 13
II. 1996 EMPLOYEE STOCK OPTION PLAN
The Company's 1982 Stock Option Plan and the Company's 1990 Employee Stock
Option Plan (collectively, the "Stock Option Plans") were approved by the
Company's shareholders on July 18, 1982 and October 25, 1990, respectively, and
amendments to the 1982 Plan were approved by the Company's shareholders on
October 13, 1988. Under the Stock Option Plans, options to purchase an aggregate
of 700,000 shares of the Company's Common Stock were authorized for grant to
executive or management employees of the Company or its subsidiaries. As of
September 6 1996, only 213,000 shares remained reserved for grants under the
Stock Option Plans.
The Board of Directors will present to the meeting a proposal to approve
the adoption of a new stock option plan entitled the "1996 Employee Stock Option
Plan" (the "1996 Plan").
The Board of Directors believes that it will be advantageous to the Company
and its shareholders to institute a new stock option plan for its officers and
key employees. The purpose of 1996 Plan is to provide such employees with a
proprietary interest in the Company through the granting of options which will
increase the interest in the Company's welfare of those employees who share the
primary responsibility for the management, growth and protection of the business
of the Company, furnish incentive to such employees to continue their services
to the Company and provide a means by which the Company may attract and retain
persons of outstanding competence.
The 1996 Plan is substantially similar to the Stock Option Plans, which
were approved by the shareholders of the Company at the July 28, 1982 Annual
Meeting and the October 25, 1990 Annual Meeting. Amendments to the 1982 Plan
were approved by the shareholders on October 13, 1988. Under the 1996 Plan,
options to purchase Common Stock of the Company may be granted to present and
prospective employees of the Company or its subsidiaries up to an aggregate of
600,000 common shares. The Board of Directors approved the 1996 Plan on
September 25, 1996, subject to approval by the Company's shareholders.
The full text of the 1996 Plan is set forth in Appendix A to this Proxy
Statement. The major features of the 1996 Plan are summarized below, but this
summary is qualified in its entirety by reference to the actual text.
Capitalized terms not otherwise defined have the meanings given them in the 1996
Plan.
ADMINISTRATION
The 1996 Plan is administered by a Committee (the "Committee") of not less
than three individuals who are appointed by the Board of Directors and who are
not employees of the Company. No member of the Committee shall be eligible to
receive an option under the 1996 Plan. The Committee may from time to time grant
options to officers and other key employees of the Company and its subsidiaries.
The Committee may grant either "incentive stock options" ("Incentive Options")
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), or options that are not qualified under the Code
("Nonqualified Options"), or both types. Shares covered by cancelled or expired
options under the 1996 Plan are again available for option and sale thereunder.
Within the limitations contained in the 1996 Plan, the Committee determines
the persons eligible to participate in the 1996 Plan, the participants to whom
options are to be granted, the number of shares covered, the option exercise
price, and any other terms it deems appropriate.
PLAN PARTICIPANTS
The selection of persons who are eligible to participate in the 1996 Plan
is determined by the Committee. Participants must be officers or other key
employees of the Company or any majority owned subsidiary. Subject to the
maximum number of shares remaining, there is no maximum number of shares as to
which stock options may be granted under the 1996 Plan to any person, but there
are limitations on the maximum value of Incentive Options which may be
exercisable for the first time by any person in any calendar year (See "Grant
and Exercise of Stock Options"). The Company estimates that approximately 60
persons are currently eligible to participate in the 1996 Plan.
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<PAGE> 14
GRANT AND EXERCISE OF STOCK OPTIONS
Any option granted under the 1996 Plan will have an exercise price not less
than 100% of the fair market value of the shares on the date on which such
option is granted. With respect to an Incentive Option granted to an individual
who owns more than 10% of the total combined voting stock of the Company, or of
any parent or subsidiary of the Company, the exercise price of such option shall
not be less than 110% of the fair market value of the stock subject to such
option on the date such option is granted. Each option becomes exercisable only
after one year of continuous employment with the Company or a subsidiary unless
the Committee otherwise determines. At the time of the exercise of any option
granted pursuant to the 1996 Plan, the participant must pay the full option
price for all shares purchased in cash, or, with the consent of the Committee,
in Common Stock of the Company. No Incentive Option may be granted under the
1996 Plan to any one participant which would result in the aggregate fair market
value, determined as of the date the option is granted, of underlying stock with
respect to which Incentive Options are exercisable for the first time by such
participant in any calendar year under the 1996 Plan or under any other stock
plan maintained by the Company (or any parent or subsidiary of the Company)
exceeding $100,000. No stock option granted under the 1996 Plan may remain
outstanding for more than 10 years from the date of grant, except that, with
respect to an Incentive Option granted to a participant who, at the time of
grant, owns more than 10% of the total combined voting stock of all classes of
stock of the Company, or of any parent or subsidiary of the Company, such option
shall expire not more than five years after the date of grant. Upon the death,
disability, termination or retirement of a participant, any options outstanding,
to the extent then exercisable, may generally be exercised by the participant or
the participant's representative within one year after the date of death or
disability or within three months after the date of termination or retirement.
SEQUENTIAL EXERCISE
Successive stock options may be granted to the same participant whether or
not any stock option previously granted to such participant remains unexercised.
An option may be exercised even though stock options previously granted to such
participant remain unexercised.
NON-TRANSFERABILITY OF STOCK OPTIONS
No stock option granted under the 1996 Plan may be transferred by a
participant other than by will or by the laws of descent and distribution, and
such stock option is exercisable, during the lifetime of the participant, only
by the participant.
AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors may terminate or amend the 1996 Plan at any time;
provided, that without shareholder approval, the Board may not amend the 1996
Plan so as to increase the maximum number of shares in the aggregate which are
subject to the 1996 Plan, modify the requirements as to eligibility for
participation under the 1996 Plan or materially increase the benefits accruing
to the participants under the 1996 Plan and, without the consent of the holder,
the Board may not change the stock option price or alter any stock option which
has been previously granted under the 1996 Plan. In the event of a change in the
Common Stock through stock dividend, recapitalization, reorganization or the
like, the Committee is authorized to make appropriate adjustments, including
adjustments to the number and price of shares of Common Stock covered by each
option and the total number of shares subject to options under the 1996 Plan.
Unless sooner terminated by the Board of Directors, the 1996 Plan will
terminate on September 25, 2006. The termination of the 1996 Plan will not
affect the validity of any stock option outstanding on the date of termination.
STOCK APPRECIATION RIGHTS
The 1996 Plan provides that the optionee may, with the consent of the
Committee and in lieu of making the cash payment required to exercise the
option, elect to receive, in cash, in stock, or in any combination thereof, an
amount equal to the excess of the aggregate fair market value of the shares as
to which such
12
<PAGE> 15
election is being made over the aggregate option price of such shares (i.e.,
SARs). Under the 1996 Plan, SARs are subject to certain restrictions on their
exercise.
The number of shares as to which options may be granted under the 1996
Plan, and the number of shares subject to any options granted under the 1996
Plan, shall be reduced by the number of shares with respect to which any SARs
are exercised.
FEDERAL INCOME TAX CONSEQUENCES
The rules governing the tax treatment of options and stock acquired upon
the exercise of options are quite technical. Therefore, the description of tax
consequences set forth below is necessarily general in nature and does not
purport to be complete. Moreover, statutory provisions are subject to change, as
are their interpretations, and their application may vary in individual
circumstances. Finally, the tax consequences under applicable state and local
income tax laws may not be the same as under the federal income tax laws. The
federal income tax consequences of the grant and exercise of options and of SARs
under the 1996 Plan and the subsequent disposition of shares of Common Stock
acquired thereby may be summarized as set forth below.
Incentive Stock Options
Incentive Options granted pursuant to the 1996 Plan are intended to qualify
as "incentive stock options" within the meaning of Section 422A of the Code. If
a participant makes no disposition of the shares acquired pursuant to exercised
Incentive Options within one year after the issuance of the shares and within
two years from the grant of the Incentive Option, the participant will realize
no taxable income as a result of the grant or of the exercise of such option,
and any gain or loss subsequently realized upon the sale of stock acquired upon
exercise of the Incentive Option will be treated as long-term capital gain or
loss, as the case may be. The Company will not be entitled to a deduction for
federal income tax purposes with respect to either the grant of such Incentive
Options or the issuance of shares upon the exercise of Incentive Options if the
participant satisfies the requirements set forth above. Under current law,
long-term capital gains are taxed at the same rate as ordinary income.
If the shares received upon exercise of Incentive Options are disposed of
prior to the expiration of one year from the date of exercise or two years from
the date of grant of the Incentive Option, the participant will realize ordinary
income in the year in which the disqualifying disposition occurs, the amount of
which will generally be the lesser of (i) the excess of the market value of the
shares on the date of exercise over the option price, or (ii) the gain
recognized on such disposition. Such amount will ordinarily be deductible by the
Company for federal income tax purposes in the same year. In addition, the
excess, if any, of the amount realized on a disqualifying disposition over the
market value of the shares on the date of exercise will be treated as a capital
gain.
Nonqualified Options
A participant who is granted a Nonqualified Option (i.e., an option other
than an Incentive Option) generally will not realize any taxable income upon the
grant of the option. Upon exercise of the option, the amount by which the fair
market value of the shares at the time of exercise (or in some cases on the date
six months after the date of exercise) exceeds the option price, is treated as
compensation (ordinary income) received by the participant. The Company will
ordinarily be entitled to a corresponding tax deduction at the time that the
participant realizes compensation income. Upon subsequent disposition by sale of
any of the shares acquired, the participant recognizes a long-term or short-term
capital gain or loss equal to the difference between any amount realized and the
participant's basis in the shares.
Stock Appreciation Rights
Upon the exercise of SARs, the amount received by the optionee (in cash or
stock) generally will be compensation (ordinary income) to the optionee and
deductible by the Company. Upon subsequent
13
<PAGE> 16
disposition by sale of any shares acquired, the participant recognizes a
long-term or short-term capital gain or loss equal to the difference between any
amount realized and the participant's basis in the shares.
The proposal requires for its passage the affirmative vote of a majority of
the votes present in person or by proxy at the Annual Meeting. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED 1996 EMPLOYEE STOCK
OPTION PLAN.
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<PAGE> 17
III. OTHER MATTERS
INDEPENDENT PUBLIC ACCOUNTANT
Coopers & Lybrand L.L.P. is the independent auditor for the Company and its
subsidiaries and has reported on the consolidated financial statements included
in the Annual Report of the Company which accompanies this proxy statement. The
Company's independent auditor is appointed by the Board of Directors. The Board
of Directors has reappointed Coopers & Lybrand L.L.P. as independent auditor for
the fiscal year ending May 29, 1997.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting of Shareholders and will be available to respond to
appropriate questions and will have an opportunity to make a statement at the
meeting if they desire to do so.
OTHER PROPOSALS
Neither the Company nor its Board of Directors intends to bring before the
Annual Meeting any matters other than those set forth in the Notice of Annual
Meeting, and they have no present knowledge that any other matters will be
presented for action at the Meeting by others. However, if any other matters
properly come before such Meeting, it is the intention of the persons named in
the enclosed form of proxy to vote in accordance with their best judgment.
A shareholder proposal which is intended to be presented at the 1997 Annual
Meeting of Shareholders must be received by the Company at its principal
executive office, 26999 Central Park Boulevard, Suite 300, Southfield, Michigan
48076, by May 23, 1997.
By Order of the Board of Directors
RONALD D. RISHER
RONALD D. RISHER
Secretary
September 27, 1996
15
<PAGE> 18
APPENDIX A
THORN APPLE VALLEY, INC.
1996 EMPLOYEE STOCK OPTION PLAN
1. Definitions: As used herein, the following definitions shall apply:
(a) "Plan" shall mean this Thorn Apple Valley, Inc 1996 Employee Stock
Option Plan.
(b) "Committee" shall mean (i) a committee meeting the standards of
Rule 16b-3 of the Rules and Regulations under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or any similar successor rule,
appointed by the Board of Directors of the Corporation to administer the
Plan or, (ii) if no such committee is appointed, the Board of Directors of
the Corporation as a whole, provided that a majority of the members of the
Board are "disinterested persons" within the meaning of Rule 16b-3.
(c) "Corporation" shall mean Thorn Apple Valley, Inc, a Michigan
corporation, or any successor thereof.
(d) "Participant" shall mean any individual designated by the
Committee under Paragraph 6, for participation in the Plan.
(e) "Nonqualified Option" shall mean an option to purchase Common
Stock of the Corporation which meets the requirements set forth in the Plan
but does not meet the definition of an incentive stock option set forth in
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code").
(f) "Incentive Option" shall mean an option to purchase Common Stock
of the Corporation which meets the requirements set forth in the Plan and
also meets the definition of an incentive stock option set forth in Section
422A of the Code.
2. Purpose of Plan: The purpose of the Plan is to provide key employees
(including officers who are also key employees) of the Corporation and its
subsidiaries with an increased incentive to make significant and extraordinary
contributions to the long-term performance and growth of the Corporation and its
subsidiaries, to join the interests of key employees with the interests of the
shareholders of the Corporation, and to facilitate attracting and retaining key
employees of exceptional ability. For purposes of the Plan, a "subsidiary" is
any corporation in which the Corporation owns, directly or indirectly, stock
possessing more than fifty percent of the combined voting power of all classes
of stock.
3. Administration: The Plan shall be administered by the Committee. Subject
to the provisions of the Plan, the Committee shall determine, from those
eligible to be Participants under the Plan, the persons to be granted stock
options, the amount of stock to be optioned to each such person, and the terms
and conditions of any stock options. Subject to the provisions of the Plan, the
Committee is authorized to interpret the Plan, to promulgate, amend and rescind
rules and regulations relating to the Plan and to make all other determinations
necessary or advisable for its administration. Interpretation and construction
of any provision of the Plan by the Committee shall be final and conclusive.
Acts approved by a majority of the members present at any meeting at which a
quorum is present, or acts unanimously approved in writing by the Committee,
shall be the acts of the Committee.
4. Indemnification of Committee Members: In addition to such other rights
of indemnification as they may have, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Corporation) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Committee member has
acted in bad faith; provided, however, that within sixty
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<PAGE> 19
(60) days after receipt of notice of institution of any such action, suit or
proceeding a Committee member shall offer the Corporation in writing the
opportunity, at its own cost, to handle and defend the same.
5. Maximum Number of Shares Subject to Plan: The maximum number of shares
with respect to which stock options may be granted under the Plan shall be
600,000 shares in the aggregate of Common Stock of the Corporation, which may
consist in whole or in part of the authorized and unissued or reacquired Common
Stock of the Corporation. If a stock option expires or terminates for any reason
without having been fully exercised, the number of shares with respect to which
the stock option was not exercised at the time of its expiration or termination
shall again become available for the grant of stock options under the Plan,
unless the Plan shall have been terminated.
The number of shares subject to each outstanding stock option, the option
price with respect to outstanding stock options, and the aggregate number of
shares remaining available under the Plan shall be subject to such adjustment as
the Committee, in its discretion, deems appropriate to reflect such events as
stock dividends, stock splits, recapitalizations, mergers, consolidations or
reorganizations of or by the Corporation; provided, however, that no fractional
shares shall be issued pursuant to the Plan, no rights may be granted under the
Plan with respect to fractional shares, and any fractional shares resulting from
such adjustments shall be eliminated from any outstanding stock option.
6. Participants: The Committee shall determine and designate from time to
time, in its sole discretion, those key employees of the Corporation or any
subsidiary to receive stock options, who in the judgment of the Committee are or
will become responsible for the direction and financial success of the
Corporation or any subsidiary for the purposes of the Plan, key employees shall
include officers who are also key employees.
7. Written Agreement: Each stock option shall be evidenced by a written
agreement and shall contain such provisions as may be approved by the Committee.
Such agreements shall constitute binding contracts between the Corporation and
the Participant, and every Participant, upon acceptance of such agreement, shall
be bound by the terms and restrictions of the Plan and of such agreement. The
terms of each such agreement shall be in accordance with the Plan, but the
agreements may include such additional provisions and restrictions determined by
the Committee, provided that such additional provisions and restrictions are not
inconsistent with the terms of the Plan.
8. Allotment of Shares: The Committee shall determine and fix the number of
shares of stock with respect to which a participant may be granted stock
options; provided, however, that no Incentive Option may be granted under the
Plan to any one Participant which would result in the aggregate fair market
value, determined as of the date the option is granted, of underlying stock with
respect to which incentive stock options are exercisable for the first time by
such Participant during any calendar year under any plan maintained by the
corporation (or any parent or subsidiary corporation of the Corporation)
exceeding $100,000.
9. Stock Options: Subject to the terms of the Plan, the Committee may grant
to Participants either Incentive Options, Nonqualified Options or any
combination thereof. Each option granted under the Plan shall designate the
number of shares covered thereby, if any, with respect to which the option is an
Incentive Option, and the number of shares covered thereby, if any, with respect
to which the option is a Nonqualified Option.
10. Stock Option Price: Subject to the rules set forth in this Paragraph
10, at the time any stock option is granted, the Committee shall establish the
price per share for which the shares covered by the option may be purchased.
Such option price shall not be less than 100% of the fair market value of the
stock on the date on which such option is granted; provided, however, that with
respect to an Incentive Option granted to an employee who at the time of the
grant owns (after applying the attribution rules of Section 425(d) of the Code)
more than 10% of the total combined voting stock of the Corporation or of any
parent or subsidiary, the option price shall not be less than 110% of the fair
market value of the stock on the date such option is granted. Fair market value
of a share shall be determined by the Committee by taking the mean between the
highest and lowest quoted selling prices of the Corporation's Common Stock on
any exchange or other market on which the shares of Common Stock of the
Corporation shall be traded on such date. If no shares of the
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<PAGE> 20
Corporation's Common Stock shall be traded on such date, the fair market value
shall mean the average between the highest and lowest quoted selling prices on
the next preceding date on which any sales of the Corporation's Common Stock
shall have occurred.
11. Payment of Stock Option Price: To exercise in whole or in part any
stock option granted hereunder, payment of the option price in full, in cash or,
with the consent of the Committee, in Common Stock of the Corporation, shall be
made by the Participant for all shares so purchased. No Participant shall have
any of the rights of a shareholder of the Corporation under any stock option
until the actual issuance of shares to said Participant, and prior to such
issuance no adjustment shall be made for dividends, distributions or other
rights in respect of such shares, except as provided in Paragraph 5.
12. Granting and Exercise of Stock Options: Each stock option granted
hereunder shall be exercisable at any such time or times or in any such
installments as may be determined by the Committee at the time of the grant. In
addition, the aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which Incentive Options are exercisable
for the first time by a Participant during any calendar year shall not exceed
$100,000.
A Participant may exercise a stock option, if then exercisable, in whole or
in part by delivery to the Corporation of written notice of the exercise, in
such form as the Committee may prescribe, accompanied by (a) full payment for
the shares with respect to which the stock option is exercised, in cash or, in
the sole discretion of the Committee, in Common Stock of the Corporation or (b)
in the sole discretion of the Committee, irrevocable instructions to a
stockbroker to promptly deliver to the Corporation full payment for the shares
with respect to which the stock option is exercised from the proceeds of the
stock broker's sale of or loan against the shares. Except as provided in
Paragraph 16, stock options granted to a Participant may be exercised only while
the Participant is an employee of the Corporation or a subsidiary.
Successive stock options may be granted to the same Participant, whether or
not the stock option(s) previously granted to such Participant remain
unexercised. A Participant may exercise a stock option, if then exercisable,
notwithstanding that stock options previously granted to such Participant remain
unexercised.
13. Non-transferability of Stock Options: No stock option granted under the
Plan to a Participant shall be transferable by such Participant otherwise than
by will, or by the laws of descent and distribution, and stock options shall be
exercisable, during the lifetime of the Participant, only by the Participant.
14. Term of Stock Options: If not sooner terminated, each stock option
granted hereunder shall expire not more than ten (10) years from the date of the
granting thereof; provided, however, that with respect to an Incentive Option
granted to a Participant who, at the time of the grant, owns (after applying the
attribution rules of Section 425(d) of the Code) more than 10% of the total
combined voting stock of all classes of stock of the Corporation or of any
parent or subsidiary, such option shall expire not more than five (5) years
after the date of granting thereof.
15. Continuation of Employment: Each stock option granted hereunder shall
not be exercisable unless and until the Participant remains in the employ of the
Corporation or any subsidiary of the Corporation for one year following the date
of granting of such stock option, unless the Committee, in its discretion,
waives such requirement. The Committee may require, in its discretion, that any
Participant under the Plan to whom a stock option shall be granted shall agree
in writing as a condition of the granting of such stock option to remain in the
employ of the Corporation or a subsidiary for a longer designated minimum period
from the date of the granting of such stock option as shall be fixed by the
Committee.
16. Termination of Employment: No option granted hereunder may be exercised
after a Participant's termination of employment, unless such termination of
employment is due to the Participant's death or permanent disability, in which
event the option may be exercised for up to one year following the Participant's
termination of employment for such reason, or unless such termination of
employment is effected by the Corporation, in which event the option may be
exercised for up to three months following the Participant's termination of
employment for such reason, or unless such termination of employment is due to
the retirement of a Participant who is then 55 years of age or older and who
shall have been employed by the Corporation or a subsidiary for at least ten
(10) consecutive years, in which event any Incentive Option may be exercised for
up
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to three months following the Participant's termination of employment for such
reason and any Nonqualified Option may be exercised until the later of (a) three
months following such retirement or (b) the next following January 31. In no
event, however, shall a stock option be exercisable subsequent to its expiration
date and, furthermore, a stock option may only be exercised after termination of
a Participant's employment to the extent exercisable on the date of termination
of employment.
17. Investment Purpose: If the Committee in its discretion determines that
as a matter of law such procedure is or may be desirable, it may require a
Participant, upon any acquisition of stock hereunder and as a condition to the
Corporation's obligation to deliver certificates representing such shares, to
execute and deliver to the Corporation a written statement, in form satisfactory
to the Committee, representing and warranting that the Participant's acquisition
of shares of stock shall be for such person's own account, for investment and
not with a view to the resale or distribution thereof and that any subsequent
offer for sale or sale of any such shares shall be made either pursuant to (a) a
Registration Statement on an appropriate form under the Securities Act of 1933,
as amended (the "Securities Act"), which Registration Statement has become
effective and is current with respect to the shares being offered and sold, or
(b) a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption the Participant shall, prior to any offer
for sale or sale of such shares, obtain either the Corporation's approval or a
favorable written opinion from counsel for or approved by the Corporation as to
the availability of such exemption. The Corporation may endorse an appropriate
legend referring to the foregoing restriction upon the certificate or
certificates representing any shares issued or transferred to the Participant
under this Plan.
18. Rights to Continued Employment: Nothing contained in the Plan or in any
stock option granted pursuant to the Plan, nor any action taken by the Committee
hereunder, shall confer upon any Participant any right with respect to
continuation of employment with the Corporation or a subsidiary nor interfere in
any way with the right of the Corporation or a subsidiary to terminate such
person's employment at any time.
19. Withholding Payments: If upon the exercise of a Nonqualified Option or
upon a disqualifying disposition (within the meaning of Section 422A of the
Code) of shares acquired upon exercise of an Incentive Option, there shall be
payable by the Corporation or a subsidiary any amount for income tax
withholding, in the Committee's sole discretion, either the Corporation shall
appropriately reduce the amount of stock or cash to be paid to the Participant
or the Participant shall pay such amount to the Corporation or subsidiary to
reimburse it for such income tax withholding. The Committee may, in its sole
discretion, permit Participants to satisfy such withholding obligations in whole
or in part, by electing to have the amount of Common Stock delivered or
deliverable by the Corporation upon exercise of a stock option appropriately
reduced, or by electing to tender Common Stock back to the Corporation
subsequent to exercise of a stock option, to reimburse the Corporation or a
subsidiary for such income tax withholding, subject to such rules and
regulations as the Committee may adopt. The Committee may make such other
arrangements with respect to income tax withholding as it shall determine.
20. Effectiveness of Plan: The Plan shall be effective on the date the
Board of Directors of the Corporation adopts the Plan, provided that the
shareholders of the Corporation approve the Plan within twelve (12) months of
its adoption by the Board of Directors. Stock options may be granted prior to
shareholder approval of the Plan, but each such stock option grant shall be
subject to shareholder approval of the Plan. No stock option may be exercised
prior to shareholder approval.
21. Termination, Duration and Amendments of Plan: The Plan may be abandoned
or terminated at any time by the Board of Directors of the Corporation. Unless
sooner terminated, the Plan shall terminate on the date ten (10) years after its
adoption by the Board of Directors, and no stock options may be granted
thereafter. The termination of the Plan shall not affect the validity of any
stock option outstanding on the date of termination.
For the purpose of conforming to any changes in applicable law or
governmental regulations, or for any other lawful purpose, the Board of
Directors shall have the right, with or without approval of the shareholders of
the Corporation, to amend or revise the terms of the Plan at any time; provided,
however, that no such amendment or revision shall (a) increase the maximum
number of shares in the aggregate which are subject to the Plan (subject,
however, to the provisions of Paragraph 5), change the class of persons eligible
to be
A-4
<PAGE> 22
Participants under the Plan or materially increase the benefits accruing to
Participants under the Plan, without approval or ratification of the
shareholders of the Corporation; or (b) change the stock option price (except as
contemplated by Paragraph 5) or alter or impair any stock option which shall
have been previously granted under the Plan, without the consent of the holder
thereof.
22. Stock Appreciation Rights: Upon exercise of an option by a Participant,
the Committee may grant stock appreciation rights to such Participant in
conjunction with any stock options granted under the Plan. A stock appreciation
right granted in conjunction with a stock option shall be an alternative right
wherein the exercise of the stock option terminates the stock appreciation right
to the extent of the number of shares purchased upon exercise of the stock
option and, correspondingly, the exercise of the stock appreciation right
terminates the stock option to the extent of the number of shares with respect
to which the stock appreciation right is exercised; provided, however, that a
stock appreciation right may not be granted in conjunction with an Incentive
Option under circumstances in which the exercise of the stock appreciation right
affects the right to exercise the Incentive Option or vice versa, unless the
stock appreciation right, by its terms, meets all of the following requirements:
(a) The stock appreciation right will expire no later than the
Incentive Option;
(b) The stock appreciation right may be for no more than the
difference between the option price of the Incentive Option and the fair
market value of the shares subject to the Incentive Option at the time the
stock appreciation right is exercised;
(c) The stock appreciation right is transferable only when the
Incentive Option is transferable, and under the same conditions;
(d) The stock appreciation right may be exercised only when the
Incentive Option is eligible to be exercised; and
(e) The stock appreciation right may be exercised only when the fair
market value of the shares subject to the Incentive Option exceeds the
option price of the Incentive Option.
Upon exercise of a stock appreciation right, a participant shall be
entitled to receive, without payment to the Corporation (except for applicable
withholding taxes), an amount equal to the excess of or, in the sole discretion
of the Committee, a portion of the excess of (a) the then aggregate fair market
value of the number of shares with respect to which the Participant exercises
the stock appreciation right, over (b) the aggregate option price of such number
of shares. This amount shall be payable by the Corporation, in the sole
discretion of the Committee, in cash, in shares of Common Stock of the
Corporation or any combination thereof.
If a Participant who is granted a stock appreciation right is a person who
is regularly required to report his ownership and changes in ownership of Common
Stock of the Corporation to the Securities and Exchange Commission and is
subject to short-swing liability under the provisions of Section 16(b) of the
Exchange Act, then any election to exercise as well as any actual exercise of
his stock appreciation right shall be made only during the period beginning on
the third business day and ending on the twelfth business day following the
release for publication by the Corporation of quarterly or annual summary
statements of sales and earnings. Notwithstanding anything contained in the Plan
to the contrary, stock appreciation rights shall always be granted and exercised
in such a manner as to conform to the provisions of Rule 16b-3 (e), or any
replacement rule, adopted pursuant to the provisions of the Exchange Act.
As adopted by the Board of Directors on September 25, 1996.
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<PAGE> 23
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THORN APPLE VALLEY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THORN
APPLE VALLEY, INC.
The undersigned hereby appoints Henry S Dorfman and Louis Glazier,
and each of them, the proxies of the undersigned, with full power of
substitution, to vote all shares of Common Stock, $0.10 par value per
share, of Thorn Apple Valley, Inc. (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Shareholders
of the Company to be held on October 28, 1996 and at any and all
adjournments or postponements thereof:
<TABLE>
<S> <C> <C>
/ / WITHHOLD AUTHORITY
1. ELECTION OF / / FOR all nominees listed below to vote for all nominees listed
7 DIRECTORS (except as marked to the contrary below) below.
</TABLE>
(Instruction: To withhold authority to vote for any individual
nominee, mark the box next to the nominee's name below.)
<TABLE>
<S> <C> <C> <C>
/ / Henry S Dorfman / / John C. Canepa / / Louis Glazier / / Burton D. Farbman
/ / Seymour Roberts / / Joel Dorfman / / Moniek Milberger
</TABLE>
2. Proposal to adopt the Company's 1996 Stock Option Plan. / / FOR
/ / AGAINST / / ABSTAIN
IF NO CHOICE IS SPECIFIED, THE SHARES WILL BE VOTED FOR THE
ELECTION OF THE DIRECTORS NAMED ABOVE AND FOR PROPOSAL 2. EXCEPT AS
SPECIFIED TO THE CONTRARY ABOVE, THE UNDERSIGNED AUTHORIZES THE
PROXIES TO EXERCISE THEIR DISCRETION WITH RESPECT TO ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be Signed on Reverse Side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Proxy No. No. of Shares
<TABLE>
<S> <C> <C>
Dated: , 1996 (L.S.) (L.S.)
SIGNATURE SIGNATURE
</TABLE>
Please sign exactly as your name appears hereon. When signing as
attorney, executor, personal representative, administrator or
guardian, please give your full title as such. If shares are held in
the name of more than one person, each person must sign the Proxy. If
a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership
name by authorized person.
PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
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