<PAGE>
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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
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) Rule 14a-12
CELESTIAL SEASONINGS, INC.
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF CELESTIAL SEASONINGS]
CELESTIAL SEASONINGS, INC.
4600 SLEEPYTIME DRIVE
BOULDER, COLORADO 80301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 12, 1998
To the Stockholders of Celestial Seasonings, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of
Stockholders (the "Meeting") of Celestial Seasonings, Inc., a Delaware
corporation (the "Company"), will be held on Thursday, February 12, 1998, at
2:30 p.m., (MST), at Celestial Seasonings, Inc., 4600 Sleepytime Drive,
Boulder, Colorado 80301, for the following purposes:
1) To elect three Class I directors to serve until the 2001 Annual
Meeting of Stockholders, and until their successors are duly
elected and qualified; and
2) To amend the Company's 1993 Long Term Incentive Plan in order to
increase to 625,000 the number of shares of common stock available
for issuance under the plan; and
3) To amend the Company's 1994 Non-Employee Director Compensation Plan
in order to make certain changes in the compensation of the
Company's non-employee directors; and
4) To ratify the appointment of Deloitte & Touche llp as the Company's
independent auditors for the year ending September 30, 1998; and
5) To transact such other business as may properly come before the
meeting or any adjournments thereof.
These matters are more fully described in the accompanying Proxy
Statement. The Board of Directors of the Company fixed the close of business
on December 19, 1997, as the record date for the determination of stockholders
entitled to notice of, and to vote at, the Meeting. Only holders of the
Company's common stock, $.01 par value per share, at the close of business on
the record date are entitled to notice of, and to vote at, the Meeting. A
complete list of stockholders entitled to vote at the Meeting will be
available during normal business hours for examination by any stockholder, for
purposes related to the Meeting, for a period of ten days prior to the
Meeting, at the Company's corporate offices located at 4600 Sleepytime Drive,
Boulder, Colorado 80301.
You are cordially invited to attend the Meeting. Whether or not
you plan to attend the Meeting in person, please complete, date and sign the
accompanying proxy card and return it promptly in the enclosed envelope to
ensure that your shares, regardless of the size of your holdings, are
represented and voted in accordance with your wishes. If you choose, you may
still vote in person at the Meeting even though you previously submitted your
proxy.
By order of the Board of Directors
Darrell F. Askey,
Vice President--Finance and Chief Financial
Officer
Boulder, Colorado
January 5, 1998
<PAGE>
[LOGO OF CELESTIAL SEASONINGS]
CELESTIAL SEASONINGS, INC.
4600 SLEEPYTIME DRIVE
BOULDER, COLORADO 80301
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 12, 1998
----------------
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy card are being furnished in
connection with the solicitation of proxies by and on behalf of the Board of
Directors (the "Board of Directors") of Celestial Seasonings, Inc., a Delaware
corporation, to be used at the 1998 Annual Meeting of Stockholders of the
Company to be held on Thursday, February 12, 1998, at 2:30 p.m. (MST), at
Celestial Seasonings, Inc., 4600 Sleepytime Drive, Boulder, Colorado 80301,
and at any adjournment or postponement thereof. This Proxy Statement and the
accompanying proxy card are first being mailed to the holders of the Company's
common stock, $.01 par value per share (the "Common Stock"), on or about
January 5, 1998.
Stockholders of the Company represented at the Meeting will consider and
vote upon (i) the election of three Class I directors, to serve until the 2001
annual meeting of stockholders, and until their successors are duly elected
and qualified, (ii) the amendment of the Company's 1993 Long Term Incentive
Plan (the "Incentive Plan") in order to increase to 625,000 the number of
shares of Common Stock available for issuance under the Plan, (iii) the
amendment of the Company's 1994 Non-Employee Director Compensation Plan (the
"Director Plan") to make certain changes in the compensation of the Company's
non-employee directors, (iv) the ratification of the appointment of Deloitte &
Touche llp as the Company's independent auditors for the year ending September
30, 1998, and (v) such other business as may properly come before the Meeting.
The Company is not aware of any other business to be presented for
consideration at the Meeting.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Common Stock at the close of business on
December 19, 1997 (the "Record Date") will be entitled to notice of, and to
vote at, the Meeting. As of the Record Date, there were 4,064,965 shares of
Common Stock outstanding. Each stockholder is entitled to one vote for each
share held on the Record Date on all matters which may come before the
Meeting. The presence, in person or by proxy, of the holders of a majority of
the shares of Common Stock entitled to vote at the Meeting is necessary to
constitute a quorum for the conduct of business at the Meeting.
Any proxy given pursuant to this solicitation is revocable at any time
prior to being voted at the Meeting. A written revocation must be mailed to
the Secretary of the Company and received prior to the Meeting. Any record
holder who attends the Meeting may vote in person, thereby revoking any
previously executed proxy. All shares represented by properly executed proxies
will, unless such proxies have previously been revoked, be voted at the
Meeting in accordance with the directions on the proxies. If no direction is
indicated, the shares will be voted in favor of the Board of Directors'
nominees for director, for amendment to the Incentive Plan, for amendment to
the Director Plan and for the ratification of Deloitte & Touche llp as
independent auditors as listed in this Proxy Statement. The persons named in
the proxies will have discretionary authority to vote all proxies with respect
to additional matters that are properly presented for action at the Meeting.
<PAGE>
This proxy solicitation is made by and on behalf of the Board of Directors.
Solicitation of proxies for use at the Meeting may be made in person or by
mail, telephone or telegram, by directors, officers and regular employees of
the Company. Such persons will receive no additional compensation for any
solicitation activities. The Company will request banks and brokers to solicit
their customers who beneficially own shares listed of record in names of
nominees, and will reimburse those banks and brokers for their reasonable out-
of-pocket expenses in connection with such solicitation. The Company will bear
all expenses of this Proxy Statement, the enclosed form of proxy, and of
soliciting proxies.
ELECTION OF DIRECTORS
At the Meeting, directors of the Company will be elected by a plurality of
the shares voting in the election of directors. Thus, the director candidates,
up to the number of directors to be elected, receiving the highest number of
votes will be elected. Abstentions and broker non-votes will have no effect on
the election of directors.
At the Meeting, stockholders will elect three Class I directors, who will
serve until the Company's 2001 annual meeting, or until the director's
respective successor has been elected and qualified or until the director's
earlier resignation or removal. The shares represented by the proxy card will
be voted in favor of the election of the persons named below unless
authorization to do so is withheld. In the event that any of the nominees
should be unavailable to serve as director, which is not presently
anticipated, it is the intention of the persons named in the proxy card to
select and cast the shares represented by proxies for the election of such
other person or persons as the Board of Directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES IDENTIFIED BELOW.
INFORMATION CONCERNING THE NOMINEES
Set forth below is the name of each nominee for election to the Board of
Directors, his or her age, his or her principal occupation for at least the
past five years, and the period during which he or she has served as a
director. Each nominee is currently a director of the Company.
Nominees for Class I directors (terms expiring in 2001)
Leonard Lieberman, 68, has served as a director of the Company since
1988. Mr. Lieberman is a retired Chairman, President and Chief Executive
Officer of Supermarkets General Corporation, one of the largest supermarket
companies in the United States and operator of Pathmark Supermarkets. Mr.
Lieberman is a director of Sonic Corporation, Republic New York Corporation
and La Petite Academy, Inc. and several privately-held companies
Marina Hahn, 40, has served as a director of the Company since 1994.
Currently, Ms. Hahn is Head, Corporate Advisory Group--East Coast for the
William Morris Agency, Inc. During 1996 she was a Marketing/Advertising
Consultant. During 1994 and 1995, Ms. Hahn was Vice President of
Advertising of Sony Electronics, Inc., a consumer electronics manufacturer.
From 1989 until joining Sony, she was the Director of Advertising of Pepsi-
Cola Company, a beverage company. From 1979 to 1989 she was employed by DDB
Needham Worldwide, Inc., an advertising agency.
Stephen B. Hughes, 43, has served as a director of the Company since
1997. He joined the Company in 1997 as President and Chief Executive
Officer. From 1992 until 1997 he held various positions including Executive
Vice President and General Manager of Marketing and Sales, and Executive
Vice President and General Manager, USA for Tropicana Dole Beverages North
America, a beverage company. Prior to Tropicana Dole, Mr. Hughes was
Executive Vice President and General Manager at Healthy Choice, a Division
of ConAgra, Inc., a diversified food products company, from 1988 until
1992.
2
<PAGE>
Incumbent Class II directors (terms expiring in 1999)
Ronald V. Davis, 50, has served as a director of the Company since 1993.
Mr. Davis is Chairman of Davis Capital, LLC, a private investment firm.
From 1992 to 1994 he was Chairman of Perrier Group of America, Inc.
("Perrier USA"), a leading beverage manufacturer and distributor, and from
1980 to 1992 he was President and Chief Executive Officer of Perrier USA.
John D. Howard, 45, has served as a director of the Company since 1988.
Since 1997, Mr. Howard has been a Senior Managing Director in the Merchant
Banking Division of Bear, Stearns & Co., Inc., an investment banking firm.
Mr. Howard is also Chief Executive Officer of Gryphon Capital Partners, a
private investment firm, a position he has held since 1996. From 1990 to
1996 he was Co-Chief Executive Officer of Vestar Capital Partners, Inc.
("Vestar"), a private investment firm. Prior to joining Vestar in 1990, he
had been, since 1985, a Senior Vice President of Wesray Capital
Corporation, a private investment firm. Mr. Howard is a director of Access
Beyond, Inc., Clark-Schwebel Inc., Dyersburg Fabrics, Inc., and National
Realty Trust.
Incumbent Class III directors (terms expiring in 2000)
Mo Siegel, 48, has served as a director of the Company since 1988 and as
Chairman of the Board since 1991. He founded the Company's predecessor in
1970 and was President and Chairman of the Board until 1986. From 1986
until 1990, Mr. Siegel was involved in private investments and not-for-
profit activities, and from 1990 until 1991 was a founder and chief
executive officer of Earth Wise, Inc., a marketer of environmentally
friendly cleaning products and trash bags. He served as Chief Executive
Officer of the Company from 1991 to 1997. Mr. Siegel also serves on the
Board of Directors of Corporate Express, Inc. and several privately-held
companies and foundations.
James P. Kelley, 43, has served as a director of the Company since 1988.
Mr. Kelley is a Managing Director of Vestar. Prior to the founding of
Vestar in 1988, he was a Vice President of The First Boston Corporation, an
investment banking firm. Mr. Kelley is Chairman of the Board of Directors
of La Petite Academy, Inc., and a director of the Westinghouse Air Brake
Company and Reid Plastics, Inc.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held four meetings during fiscal 1997. Each of the
directors attended at least 75% of the total number of such meetings and
committee meetings on which he or she served that were held during fiscal
1997.
The Board of Directors has established the following standing committees:
Compensation Committee. The principal responsibilities of the Compensation
Committee are to establish policies and periodically review matters involving
executive compensation, recommend changes in employee benefit programs, grant
stock options under the Incentive Plan, and provide counsel on key personnel
selection, effective succession planning and development programs for all
corporate officers. The current members of the Compensation Committee are
Messrs. Davis (Chairman), Howard and Lieberman.
Audit Committee. The principal responsibilities of the Audit Committee are
to review the plan, scope and results of the independent audit and report to
the Board of Directors on whether financial information is fairly presented
and whether generally accepted accounting principles are followed, monitor the
internal accounting and financial functions of the Company to assure quality
of staff and proper internal controls, and investigate conflicts of interest,
ethics and compliance with laws and regulations. The current members of the
Audit Committee are Ms. Hahn and Messrs. Kelley and Lieberman (Chairman).
3
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
persons who beneficially own greater than 10% of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "Commission").
Based solely upon its review of copies of the Section 16 reports the Company
has received and representations from certain reporting persons, the Company
believes that during its year ended September 30, 1997, all of its directors,
executive officers and greater than 10% beneficial owners were in compliance
with their filing requirements, although Mr. Hughes and Mr. Francis McGuinn's
initial Form 3 filings were late. Mr Hughes' Form 3 reported the initial grant
of options and restricted stock made in connection with his hiring, and Mr.
McGuinn's Form 3 reported the initial grant of options made in connection with
his hiring.
EXECUTIVE OFFICERS
Set forth below is certain information relating to the current executive
officers of the Company. Biographical information with respect to Mo Siegel
and Stephen B. Hughes is set forth under "Election of Directors" above.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Mo Siegel 48 Chairman of the Board
Stephen B. Hughes 43 Chief Executive Officer and President
Darrell F. Askey 41 Vice President--Finance and Chief Financial Officer
Marie A. Gambon 45 Vice President--Human Resources
</TABLE>
Mr. Askey has been the Vice President--Finance since December 1995 and was
promoted to Chief Financial Officer in September 1997. He joined the Company
in January 1994 as Corporate Controller. Prior to joining the Company, from
1991 to 1993 he was Director of Finance at Synergen, Inc., a biotechnology
company. Prior to his employment at Synergen, Mr. Askey served as Controller
from 1989 to 1991 for Cholestech, Inc., a medical diagnostics products
company. Prior to Cholestech, Mr. Askey served in various financial and
operating positions at Genentech, Inc., a biotechnology company, for eight
years. Mr. Askey began his career in 1979 with the General Tire Company, a
tire manufacturer and a division of GenCorp., Inc.
Ms. Gambon joined the Company as Vice President--Human Resources in March
1994. Prior to joining the Company, from 1992 to 1994 she was Executive
Director--Leadership and Learning of U.S. West, a telephone company. From 1991
to 1992 she was Director of the Leadership Center of U.S. West. Prior to her
employment with U.S. West, Ms. Gambon was employed by International Business
Machines, a computer hardware and software manufacturer, for 17 years.
4
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
During fiscal 1997, non-employee directors received an annual directors'
fee of $8,000, a fee of $2,000 for each meeting of the Board of Directors or
Board committee attended, and $500 for each special meeting attended, as well
as reimbursement for their costs of attending such meetings. The annual
directors' fee is paid in cash. Meeting fees are paid, at the election of the
director, in cash or Common Stock in accordance with the provisions of the
Director Plan. During 1997, all non-employee directors elected to receive
compensation for meeting fees in stock. Mr. Siegel, Chairman of the Board, and
Mr. Hughes, Chief Executive Officer, receive no annual or meeting fees for
services as directors.
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded by the Company to
its Chairman, Chief Executive Officer and its four other most highly
compensated executive officers for services rendered during the three years
ended September 30, 1997.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------ ------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER AWARD($) AWARDED (#) COMPENSATION(9)
------------------ ---- -------- ------- ------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mo Siegel
Chairman of the Board.. 1997 $212,000 $70,493 $ -- $ -- -- $8,945
1996 212,000 69,030 -- -- -- 8,541
1995 211,535 46,262 -- -- -- 8,196
Stephen B. Hughes
Chief Executive
Officer............... 1997(1) 69,495 40,054 11,540(4) 322,500(8) 215,000 --
John D. Hale
Senior Vice President
and Vice President--
Operations............ 1997(2) 173,000 46,801 5,000(5) -- -- 7,901
1996 141,000 49,336 5,000(5) -- -- 7,853
1995 131,750 23,712 5,000(5) -- 1,500 7,012
Darrell F. Askey
Vice President--Finance
and Chief Financial
Officer............... 1997 126,919 41,008 2,858(6) -- -- 6,911
1996 107,196 44,339 1,721(6) -- 12,052 5,376
Francis J. McGuinn
Vice President--Sales.. 1997 137,929 46,640 15,000(7) -- -- 7,521
1996(3) 73,731 50,533 8,477(7) -- 12,052 --
Marie A. Gambon
Vice President--Human
Resources............. 1997 109,754 31,928 -- -- -- 6,284
1996 104,990 22,325 -- -- -- 5,669
1995 100,052 12,205 -- -- -- 5,162
</TABLE>
- --------
(1) Mr. Hughes' employment with the Company commenced during the Company's
third quarter in 1997.
(2) Mr. Hale ceased to serve as an executive officer on September 30, 1997.
(3) Mr. McGuinn's employment with the Company commenced during the Company's
second quarter in 1996. He ceased to serve as an executive officer on
September 30, 1997.
(4) Consists of reimbursement of relocation expenses ($10,561) and benefits
related to the Company's provision of a leased car ($979).
(5) Consists of benefits in lieu of provision of a leased car.
(6) Consists of benefits related to the Company's provision of a leased car.
(7) Consists of reimbursement of relocation expenses.
(8) Consists of 15,000 shares granted on June 16, 1997, with a value of
$427,500 as of September 30, 1997. The shares vest over a five year
period as follows: 20% one year from date of grant and 1-2/3% per month
thereafter. The Company has not declared any dividends in the past;
however, if a dividend were declared Mr. Hughes has the right to receive
such dividend.
(9) Consists of Company contributions pursuant to the Company's 401(k)
defined contribution plan, Company contributions pursuant to the
Company's thrift retirement plan, Company contributions to fund purchases
of Common Stock for the officer's account under the Company's employee
stock ownership plan, and premiums paid by the Company for the officer's
personal term life insurance policy.
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted to
the executives named in the Summary Compensation Table above during the year
ended September 30, 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------- -------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/ SH) DATE 5% 10%
---- ----------- ------------ ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen B. Hughes....... 215,000 86.5% $21.50 June 16, 2007 $ 1,277,112 $ 2,822,082
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth information concerning option exercises
during the last fiscal year and outstanding options held as of September 30,
1997 by the executives named in the Summary Compensation Table above.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR- FISCAL YEAR-
END (#) END ($)
SHARES --------------- --------------------
ACQUIRED ON VALUE EXERCISABLE / EXERCISABLE /
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ------------ ------------ --------------- --------------------
<S> <C> <C> <C> <C>
Mo Siegel............... -- $ -- 110,913/ 3,057 $1,912,927/ 25,985
Stephen B. Hughes....... -- -- 0/215,000 0/1,505,000
John D. Hale............ -- -- 23,985/ 2,667 334,547/ 25,876
Darrell F. Askey........ -- -- 4,960/ 8,442 52,012/ 86,396
Francis J. McGuinn...... -- -- 3,816/ 8,236 24,327/ 52,505
Marie Gambon............ -- -- 2,750/ 2,250 36,438/ 29,813
</TABLE>
- --------
(1) Amounts are calculated as the difference between the fair market value of
the stock underlying the options ($28.50 per share on the last trading
day of the fiscal year) and the exercise price of the options. The
weighted average exercise price on the last trading day of the fiscal
year was $11.49 for Mr. Siegel's options, $21.50 for Mr. Hughes' options,
$14.98 for Mr. Hale's options, $18.17 for Mr. Askey's options, $22.13 for
Mr. McGuinn's options, and $15.25 for Ms. Gambon's options.
EMPLOYMENT AGREEMENTS
Mr. Siegel entered into an executive agreement with the Company, beginning
June 16, 1997, pursuant to which he is entitled to an annual salary of
$250,000 beginning in the Company's 1998 fiscal year. Commencing with the
Company's 1998 fiscal year, Mr. Siegel will not participate in a bonus
program. Mr. Siegel is entitled to participate in the Company's health and
welfare benefit plans, and other plans generally available to executive
officers and employees. The employment agreement provides for severance
compensation equal to two times annual salary of $250,000 if Mr. Siegel is
terminated by the Company without cause. Mr. Siegel also agreed to certain
standstill provisions and agreed not to compete with the Company for a period
of four years following termination of employment and agreed to customary
provisions regarding confidentiality and proprietary rights.
Mr. Hughes entered into an employment agreement with the Company, beginning
June 16, 1997, pursuant to which he is entitled to an annual base salary of
$295,000 during 1997 and $315,000 during 1998, and reviewed annually
thereafter. Mr. Hughes also is eligible to participate in a bonus program,
with a target bonus equal to 50% of his base salary and a maximum bonus equal
to 100% of his base salary. Mr. Hughes received nonqualified stock options to
purchase 215,000 shares of the Company's common stock and a grant of 15,000
restricted shares, all of which vest over a five year period. Mr. Hughes is
entitled to participate in the
6
<PAGE>
Company's health and welfare benefit plans, and other plans generally
available to executive officers and employees. In addition, Mr. Hughes
received reimbursement of certain relocation expenses when he joined the
Company, along with an interest free loan. See "Certain Relationships and
Related Transactions." The employment agreement is for a term of two years,
with automatic one year extensions thereafter. The employment agreement
provides for severance compensation equal to two times base salary if Mr.
Hughes is terminated by the Company without cause or if Mr. Hughes resigns for
good reason following a change in control of the Company. Mr. Hughes also
agreed not to compete with the Company for a period of two years following
termination of employment and agreed to customary provisions regarding
confidentiality and proprietary rights.
Messrs. Askey, Hale and McGuinn and Ms. Gambon have entered into
substantially similar employment agreements with the Company pursuant to which
the executive is entitled to an annual base salary, reviewed annually. The
executive also may receive a performance bonus each year with a target equal
to a percentage of his or her base salary. In addition, the executive is
entitled to participate in the Company's health and welfare benefit plans,
incentive stock option and bonus plans, and other plans generally available to
executive officers and employees. The employment agreements provide for
severance compensation equal to a maximum of nine months' base salary if the
executive is terminated by the Company without cause during the first year of
employment and six months' base salary if the executive is terminated by the
Company without cause thereafter. In addition, Messrs. Hale and McGuinn
received reimbursement of certain relocation expenses when they joined the
Company.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
members of the Committee, none of whom are employees or officers of the
Company, are Ronald Davis, Chairman, John Howard and Leonard Lieberman. The
Committee determines the compensation of all executive officers of the
Company, including compensation of the executives named in the Summary
Compensation Table. In reviewing the compensation of individual executive
officers the Committee considers individual performance, the recommendations
of the Chief Executive Officer, (other than with respect to his own
compensation), published compensation surveys, and current market conditions.
The Committee's determinations on compensation are reviewed with all non-
employee directors. During fiscal 1997 the Committee met three times.
Overall Policy
The Company's compensation programs are tied closely to Company
performance, which the Board of Directors believes contributes to increases in
shareholder value. The Company's compensation programs are aimed at enabling
the Company to attract and retain the best possible executive talent, and
rewarding those executives commensurate with their ability and performance and
the Company's performance.
At least once each year, the Committee conducts a comprehensive review of
the Company's executive compensation programs. The purpose of the review is to
assure that the Company's executive compensation programs remain competitive
and that the programs meet their objective of creation of shareholder value.
In its review, the Committee considers data provided by management and by a
leading compensation consulting group.
Compensation Programs
The Company's compensation programs consist of base salary, a short-term
cash incentive program (the "Annual Plan"), annual profit sharing (known in
the Company as "Gainsharing"), and a long-term incentive stock option program.
At the executive officer level, compensation includes a significant amount of
performance-based compensation (short-term and long-term incentive programs).
7
<PAGE>
Base Salary
Base salaries for executive officers are determined in the same manner as
that of other salaried employees. Salary guidelines are established by
comparing the responsibilities of the individual's position in relation to
similar positions in other manufacturing companies of comparable size and
lines of business in the Rocky Mountain region. Increases in individual
salaries are determined considering the person's performance against personal
objectives for the year, as well as the Company's performance against certain
corporate objectives.
Annual Incentive
The Company's officers are eligible to receive an annual cash incentive
award under the Annual Plan. In addition to the executive officers, 36 key
managers participated in the Annual Plan in 1997. Under the Annual Plan,
individual target bonuses are established based on position level.
Participants may receive the target bonus, or more or less than the target
bonus depending upon the Company's performance as compared to plan, and the
participants' performance against individual objectives established at the
start of the year. The 1997 Annual Plan for executive management had 75% of
their award tied to operating cash flow and case volume sales objectives, and
25% tied to three or more strategic objectives. Such strategic objectives were
specific to each executive manager.
Gainsharing
The Company believes that employee participation in profitability is a
cornerstone to increased productivity and a successful organization.
Therefore, each employee of the company receives a pro rata portion of a
profit sharing pool based on operating profit results as measured against the
annual plan. The pro rata amount paid to each employee is based on a formula
incorporating length of service and salary earned for the year. The salary
portion of the formula is subject to a ceiling substantially lower than the
annual salary of any of the executives named in the Summary Compensation
Table, resulting in payments being spread more evenly among all employees of
the Company. In 1997, the executive officers of the Company waived their
participation rights in order to increase the pool available to non-executive
employees.
Long-Term Incentive
The Company believes in the importance of stock ownership by management and
other employees. Consequently, the Company's long-term incentive plans are
stock-based. The primary long-term incentive vehicle is the Incentive Plan, in
which nearly all employees are eligible to participate. Participants are
considered for awards of stock options, based upon an assessment of job level,
performance, potential, past award history, and competitive practice. Stock
options for executive management become exercisable (vest) over a four or five
year period and have terms of from six to ten years.
Chief Executive Officer Compensation
In 1997, Mr. Siegel primarily acted as the Company's Chief Executive
Officer and President. In mid-June, Mr. Hughes was hired by Mr. Siegel and the
Board of Directors to assume the positions of Chief Executive Officer and
President. Mr. Siegel continues to act as the Company's Chairman.
In determining Mr. Siegel's compensation, the Committee considered
financial and non-financial performance, as well as how the Chief Executive
Officer's compensation compares to that of chief executive officers in
comparable companies.
The Company's key internal financial measurements are performance against
earnings before interest, taxes, depreciation and amortization ("EBITDA") and
earnings per share ("EPS") targets. For 1997, the Company's EBITDA increased
4.7%, and EPS increased 12.2%. Case volume, another measure of Company
performance, increased 2.4% in 1997.
8
<PAGE>
Other accomplishments of the Company in 1997 included the hiring of Mr.
Hughes, several new products including the launch of a new herbal supplements
line under the Celestial Herbal Extracts brand and elimination of the
Company's bank debt.
The Committee considered that Mr. Siegel's leadership was key in achieving
the Company's level of performance in 1997. In recognition of this
performance, the Committee approved an Annual Plan award of $70,167 for 1997.
This is an increase of 2.0% over his Annual Plan award for 1996.
Mr. Hughes' compensation was negotiated in connection with his recruitment
by the Company and the execution of his employment agreement. In connection
with the Board's recruiting process, the Board retained a nationally
recognized executive recruiting firm.
MEMBERS OF THE COMMITTEE
Ronald V. Davis, Chairman
John D. Howard
Leonard Lieberman
9
<PAGE>
PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total return*
for the Standard & Poor's Foods Index, the Standard & Poor's Beverage-Soft
Drink Index, the Wilshire 5000 Index, and the Company since the Company's
initial public offering on July 12, 1993.
[PERFORMANCE GRAPH APPEARS HERE]
* $100 invested July 12, 1993 in Common Stock at the initial public offering
price or in the index indicated, including reinvestment of dividends. All
other dates in the graph correspond with the last trading day of the Company's
fiscal periods.
Corresponding index values and Common Stock price values are given below:
<TABLE>
<CAPTION>
07/12/93 09/24/93 09/23/94 09/29/95 09/27/96 09/26/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Celestial Seasonings In-
dex $100.00 $153.75 $ 90.00 $ 90.00 $ 95.00 $142.50
S&P Foods Index $100.00 $100.22 $107.78 $137.08 $144.02 $187.01
S&P Bev.-S.D. Index $100.00 $102.47 $106.34 $157.71 $192.69 $248.00
Wilshire 5000 Index $100.00 $102.83 $102.66 $130.47 $151.77 $205.54
CELESTIAL SEASONINGS
CLOSING STOCK PRICE $ 20.00 $ 30.75 $ 18.00 $ 18.00 $ 19.00 $ 28.50
</TABLE>
10
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table and notes sets forth as of December 1, 1997 the
beneficial ownership, as defined by the regulations of the Commission, of
Common Stock held by (i) each person or group of persons known by the Company
to beneficially own more than five percent (5%) of the outstanding Common
Stock, (ii) each director and nominee for director of the Company, (iii) each
executive officer named in the Summary Compensation Table set forth under
"Compensation of Directors and Executive Officers" and (iv) all executive
officers and directors of the Company as a group. All information is taken
from or based upon ownership filings made by such persons with the Commission
or upon information provided by such persons to the Company. Unless otherwise
indicated, the stockholders listed below have sole voting and investment power
with respect to the shares reported as owned. Except as otherwise indicated,
the address of each person listed below is 4600 Sleepytime Drive, Boulder,
Colorado, 80301.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF CLASS
NAME/ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP BENEFICIALLY OWNED
-------------------------------- -------------------- ------------------
<S> <C> <C>
Gilchrist B. Berg (1)
225 Water Street, Suite 1987
Jacksonville, FL 32202......... 219,000 5.39%
The Capital Group Companies,
Inc. (2)
333 South Hope Street, 52nd
Floor
Los Angeles, CA 90071.......... 250,000 6.16
FMR Corp. (3)
82 Devonshire Street
Boston, MA 02109............... 311,000 7.66
Gabelli Funds, Inc. (4)
One Corporate Center
Rye, NY 10580.................. 531,300 13.08
Quaker Capital Management Co.
(5)
Abbott Bldg. 401 Wood Street
Pittsburgh, PA 15219........... 218,400 5.38
Southeastern Asset Management,
Inc. (6)
6075 Poplar Avenue, Suite 900
Memphis, TN 38119.............. 312,270 7.69
Mo Siegel (7)................... 494,403 11.85
Ronald V. Davis (8)............. 10,827 *
Marina Hahn (9)................. 3,420 *
John D. Howard.................. 40,631 1.00
Stephen B. Hughes (10).......... 16,000 *
James P. Kelley................. 26,927 *
Leonard Lieberman............... 2,296 *
Darrell F. Askey (11)........... 6,093 *
Marie Gambon (12)............... 3,913 *
John D. Hale (13)............... 30,938 *
Francis J. McGuinn (14)......... 4,218 *
All Officers and Directors as a
Group
(11 persons) (15).............. 639,666 15.10%
</TABLE>
--------
*Less than 1%
(1) According to a statement on Schedule 13D filed on April 18, 1997 with
the Commission.
(2) According to a statement on Schedule 13G filed on February 12, 1997 with
the Commission.
(3) According to an amendment to a statement on Schedule 13G filed on
February 10, 1997 with the Commission, FMR Corp. had sole voting power
over 108,900 shares and may be deemed to have beneficial ownership of
202,100 shares.
(4) According to an amendment to a statement on Schedule 13D filed on July
18, 1997 with the Commission, Gabelli Funds had sole voting power over
142,000 shares and may be deemed to have beneficial ownership of 389,300
shares.
(5) According to a statement on Schedule 13G filed on February 12, 1997 with
the Commission, Quaker Capital Management had sole voting power over
6,000 shares and may be deemed to have beneficial ownership of 212,400
shares.
(6) According to an amendment to a statement on Schedule 13G filed on
February 4, 1997 with the Commission, Southeastern Asset Management had
sole voting power over 76,270 shares and may be deemed to have
beneficial ownership of 236,000 shares.
(7) Includes 111,524 shares obtainable upon the exercise of presently
exercisable options and 286 shares held in Mr. Siegel's account in the
Company's employee stock ownership plan (the "ESOP").
(8) Includes 10,000 shares obtainable upon the exercise of presently
exercisable options.
(9) Includes 2,500 shares obtainable upon the exercise of presently
exercisable options.
(10) Includes 15,000 restricted shares.
(11) Includes 5,429 shares obtainable upon the exercise of presently
exercisable options and 42 shares held in Mr. Askey's account in the
ESOP.
(12) Includes 3,000 shares obtainable upon the exercise of presently
exercisable options and 41 shares held in Ms. Gambon's account in the
ESOP.
(13) Includes 24,445 shares obtainable upon the exercise of presently
exercisable options and 150 shares held in Mr. Hale's account in the
ESOP.
(14) Includes 4,218 shares obtainable upon the exercise of presently
exercisable options.
(15) Includes 161,116 shares obtainable upon the exercise of presently
exercisable options and 519 shares held in accounts in the ESOP.
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an Employment Agreement dated June 16, 1997 between the Company
and Stephen B. Hughes, the Company provided an interest free loan of up to
$1,500,000 to be used for the purchase of a home. The loan is payable upon the
earlier of the sale of Mr. Hughes' former home or 18 months after the purchase
of a new home. As of December 1, 1997 amounts due from Mr. Hughes totaled
$909,000.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Deloitte & Touche llp served as independent auditors of the
Company for the year ended September 30, 1997 and, upon recommendation of the
Audit Committee, the Board of Directors has appointed Deloitte & Touche llp to
serve for the year ending September 30, 1998. The Board of Directors is
requesting ratification by the stockholders of Deloitte & Touche llp's
appointment. Representatives of Deloitte & Touche llp are expected to attend
the Annual Meeting. They will have an opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions.
In the event this proposal is defeated, the vote will be considered as a
direction to the Board of Directors to select other auditors for the next
year. However, because of the difficulty and expense of making any
substitution of auditors after the beginning of a year, Deloitte & Touche
llp's appointment for the 1998 year will be permitted to stand unless the
Board of Directors finds other reasons for making a change.
Services to be performed by Deloitte & Touche llp for the 1998 year will
include, among other things, audit of annual financial statements, limited
reviews of quarterly financial information and consultations in connection
with various financial reporting, accounting and tax matters. Ratification of
Deloitte & Touche llp's appointment requires the affirmative vote of the
holders of a majority of the shares of Common Stock present at the Meeting, in
person or by proxy, and entitled to vote. In determining whether the proposal
has received a majority, abstentions will be counted and have the same effect
as a vote against the proposal and broker non-votes will not be considered as
present and entitled to vote and therefore will have no effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
12
<PAGE>
AMENDMENT OF CELESTIAL SEASONINGS, INC.
1993 LONG-TERM INCENTIVE PLAN
GENERAL
The Board of Directors recommends that the stockholders approve an
amendment to the Incentive Plan to increase the number of shares of Common
Stock permitted to be granted. The amendment would provide that a maximum of
625,000 shares of Common Stock be authorized for issuance under the Incentive
Plan. The following is a summary of the material features of the Incentive
Plan, which is attached as Exhibit A.
SUMMARY OF THE INCENTIVE PLAN
The Incentive Plan was initially approved by stockholders on July 12, 1993,
and an amendment to the Incentive Plan was approved by stockholders on
February 9, 1995. On August 15, 1996, the Board amended and restated the
Incentive Plan to adopt certain changes in connection with the Commission's
revision of rules under Section 16 of the Exchange Act. On December 8, 1997,
the Board of Directors amended the Incentive Plan, subject to approval of the
stockholders, to increase to 625,000 the number of shares of Common Stock
authorized for issuance.
The purpose of the Incentive Plan is to advance the interest of the Company
and its stockholders by providing incentives to certain key employees of the
Company and to certain other key individuals who perform services for the
Company, including those who contribute significantly to the strategic and
long-term performance objectives and growth of the Company (the
"Participants"). The Incentive Plan is administered by the Board of Directors
or, if the Board of Directors so designates, by a committee of the Board of
Directors that is comprised of not fewer than two directors. The Company's
Board of Directors has designated the Board's Compensation Committee to
administer the Incentive Plan. The Committee may delegate administrative
responsibilities with respect to Participants who are not subject to Section
16 of the Securities Exchange Act of 1934, as amended if so permitted by
applicable law. The Incentive Plan provides for the granting of stock options,
stock appreciation rights ("SARs"), restricted stock, performance grants and
other awards deemed by the Committee to be consistent with the purposes of the
Incentive Plan (collectively or individually, "Awards"). Such Awards may be
granted alone, or in conjunction with one or more other Awards, as determined
by the Committee.
As amended, a maximum of 625,000 shares of Common Stock will be authorized
to be issued under the Incentive Plan in connection with the grant of Awards,
subject to adjustments described below. Currently 225,000 shares of Common
Stock are authorized to be issued under the Incentive Plan. Common Stock
issued under the Incentive Plan may be either newly issued shares, treasury
shares, reacquired shares or any combination thereof. If any Common Stock
issued as restricted stock or otherwise subject to repurchase or forfeiture
rights are reacquired by the Company pursuant to such rights, or if any Award
is canceled, terminates or expires unexercised, the Common Stock which would
otherwise have been issuable pursuant to such Awards will be available for
issuance under new Awards.
The Committee has exclusive discretion (a) to select which key employees
and other key individuals performing services for the Company shall be
included as Participants and the Participants to whom Awards will be granted,
(b) to determine the type, size and terms of each Award, (c) to modify within
certain limits the terms of any Award, (d) to determine the time when Awards
will be granted, (e) to establish performance objectives, (f) to prescribe the
form of documents representing Awards under the Incentive Plan and (g) to make
all other determinations which it deems necessary or desirable in the
interpretation and administration of the Incentive Plan. The Committee has the
authority to administer and interpret the Incentive Plan, and its decisions
are final, conclusive and binding. The Company anticipates that approximately
40 key employees will be eligible to participate in the Incentive Plan.
13
<PAGE>
A Participant to whom an Award of a stock option, SAR, performance grant or
other Award is made has no rights as a stockholder with respect to any Common
Stock issuable pursuant to any such Award until the date of issuance of the
stock certificate for such shares.
Awards under the Incentive Plan
Stock Options. A stock option, which may be a nonqualified or an incentive
stock option, is the right to purchase a specified number of shares of Common
Stock at a price ("Option Price") fixed by the Committee. A stock option may
be granted either alone or in conjunction with one or more other Awards. The
Option Price for nonqualified options may be less than, equal to or greater
than the fair market value of the Common Stock, but will not be less than 50%
of the fair market value of the underlying shares of Common Stock on the date
of grant. In the case of incentive stock options, the Option Price may not be
less than the fair market value of the underlying shares of Common Stock on
the date of grant and, with respect to incentive stock options granted to
employees of the Company or any affiliate who own more than 10% of the voting
power of all classes of the stock of the Company or any affiliate ("Ten
Percent Employees"), not less than 110% of fair market value on the date of
the grant.
Stock options are not transferable during the Participant's lifetime,
provided that the Committee may grant Awards that are transferable, without
payment of consideration, to immediate family members and related parties.
Stock options will generally expire not later than ten years or, in the case
of incentive stock options granted to Ten Percent Employees, five years, after
the date on which they are granted. Stock options become exercisable at such
times and in such installments as the Committee determines. Payment of the
Option Price must be made in full at the time of exercise in cash, by
tendering to the Company shares of Common Stock, by a combination thereof or
by any other means that the Committee deems appropriate (including, without
limitation, the surrender of rights in one or more outstanding Awards).
No stock option may be exercised unless the grantee has been, at all times
during the period from the date of grant through the date of exercise,
employed by or performing services for the Company or one of its affiliates;
however, if a Participant dies, retires or is disabled, the Committee may
permit such exercise to be made during certain periods following the date the
Participant ceases to be employed by or performing services for the Company.
Stock Appreciation Rights. SARs are rights to receive (without payment to
the Company) cash, Common Stock, other property or any combination thereof,
based on the increase in the value of the Common Stock specified in the SAR.
An SAR may be granted alone, or a holder of a stock option or other Award may
be granted a related SAR. An SAR that is related to another Award is
exercisable only to the extent that the other Award is exercisable and then
only during such period or periods as the Committee determines.
An SAR is not transferable during the Participant's lifetime provided that
the Committee may grant Awards that are transferable, without payment of
consideration, to immediate family members and related parties. No SAR may be
exercised unless the grantee has been, at all times during the period from the
date of grant through the date of exercise, employed by or performing services
for the Company or one of its affiliates; however, if a Participant dies,
retires or is disabled, the Committee may permit such exercise to be made
during certain periods following the date the Participant ceases to be
employed by or performing services for the Company.
Upon exercise of an SAR, the holder must surrender the SAR and surrender
unexercised any related stock option or other Award. The holder receives in
exchange, at the election of the Committee, cash, shares of Common Stock,
other consideration, or any combination thereof, equal in value to (or, in the
discretion of the Committee, less than) the difference between (i) the
exercise price or Option Price per share and (ii) the fair market value per
share on the last business day next proceeding the date of exercise, times the
number of shares subject to the SAR or the stock option or other Award, or
portion thereof, being exercised.
14
<PAGE>
Restricted Stock. A restricted stock Award is an award of a number of
shares of Common Stock that are subject to certain restrictions (e.g., such
stock shall be issued but not delivered to the Participant, shall be
nontransferable except as otherwise determined by the Committee, and,
generally, shall be forfeited if the Participant's employment or performance
of services for the Company terminates). Such restrictions exist for a period
and in accordance with any other terms that may be specified by the Committee.
Prior to the expiration of the restrictions and the satisfaction of any
applicable terms, a Participant who has received a restricted stock Award has
the rights of ownership of the shares of Common Stock included therein,
including the right to vote and to receive dividends.
Performance Grants. At the time a performance grant is made, the Committee
establishes performance objectives during a specified period (the "Award
Period"). The final value, if any, of a performance grant is determined by the
degree to which the performance objectives have been achieved during the Award
Period, subject to adjustments that the Committee may approve based on
relevant factors. Performance objectives may be based on the performance of
the Participant, the Company, one or more of its subsidiaries or one or more
of their divisions or units, or any combination of thereof, as the Committee
determines. The Committee may, in its discretion, make adjustments in the
computation of any performance measure. The maximum value of an Award will be
established by the Committee and may be a fixed amount, an amount that varies
from time to time based on the value of the Common Stock, or an amount that is
determinable from other criteria specified by the Committee. Performance
grants may be issued in different classes or series, having different names,
terms and conditions.
Performance grants may be grants alone, or they may be granted in
conjunction with other Awards. If awarded in conjunction with an associated
Award, the number of performance grants may be reduced on an appropriate basis
to the extent that the associated Award is exercised by, paid to, or otherwise
received by, the Participant, as determined by the Committee.
The rights of a Participant in a performance grant will be provisional and
may be canceled or paid in whole or in part, as determined by the Committee,
if the Participant's continuous employment with or performance of services for
the Company and its affiliates terminates during the Award Period.
The Committee will generally determine the value of a performance grant as
promptly as practicable after the end of the Award Period or upon the earlier
termination of the Participant's employment or performance of services. The
Committee may, however, determine the value of the performance grant and pay
it out at any time during the Award Period. If the performance grant was not
in conjunction with an associated Award, the holder of the performance grant
will be paid the final value. If the performance grant has value and was
granted in conjunction with an associated Award, however, the Committee will
determine whether (a) to cancel the performance grant and permit the
Participant to retain the associated Award, (b) to cancel the associated Award
and pay out the value of the performance grant or (c) to pay out the value of
only a portion of the performance grant and to cancel the associated Award as
to an appropriate portion thereof.
Payment of an Award such as a performance grant may be made in cash, shares
of Common Stock or other consideration (for example, other Company securities
or property) or a combination thereof, and in accordance with terms set by the
Committee. Deferred payments may be made in installments with a return
calculated on the basis of one or more investment equivalents, as determined
by the Committee in its discretion.
Additional Information
Under the Incentive Plan, if any change in the outstanding shares of Common
Stock occurs by reason of a stock split, stock dividend, combination,
subdivision or exchange of shares, recapitalization, merger, consolidation,
reorganization or other extraordinary or unusual event, the Committee may
direct appropriate changes in the terms of any Award or the number of shares
of Common Stock available for Awards. Such changes may include the number or
kind of securities that may be issued, the number or kind of securities
subject to, or the Option Price under, any outstanding stock option, the
number or kind of securities which have been
15
<PAGE>
awarded as restricted stock or any repurchase option price relating thereto,
the number or value of performance grants, the number or value of any other
Award, or any measure of performance of any Award.
In addition, the Committee has the discretion to make appropriate changes
in some or all Awards, including replacement or exchanges of Awards and the
relinquishment of one Award for another Award, and to make appropriate upward
or downward adjustments in Awards (for example, based upon job changes or
transfers between units of the Company). Such changes may, under certain
circumstances, be without the consent of Award holders.
The Incentive Plan permits the Committee to determine whether it is
advisable for the Company or any affiliate to provide Participants with
financing or to assist Participants in obtaining financing from a bank or
other third party so as to permit the payment of taxes in respect of an Award
or to enable the Participant to acquire, exercise or realize the rights of an
Award. Such assistance may take any form and be on such terms as the Committee
considers appropriate including, without limitation, a direct loan, guaranty
of the obligation of the Participant or the maintenance by the Company or an
affiliate of deposits with a bank or third party.
The Committee may also determine to grant an Award in conjunction with
deferral of a Participant's compensation. In such case, the Committee may
provide that amounts be (a) forfeited to the Company and/or to other holders
of Awards under certain circumstances (including, without limitation, certain
types of termination of employment or performance of services), (b) subject to
increase or decrease in value based upon specified performance measures and/or
(c) credited with income equivalents until the date or dates of payment of the
Award.
The Committee may permit a Participant to elect to pay taxes required to be
withheld with respect to an Award in any appropriate manner (including,
without limitation, by the surrender to the Company of shares of Common Stock
owned by such person or that would otherwise be distributed, or have been
distributed, as the case may be, pursuant to such Award).
Generally, a Participant's right and interest under the Incentive Plan may
not be assigned or transferred in whole or in part, either directly or by
operation of law or otherwise (except in the event of a Participant's death),
including, without limitation, execution, levy, garnishment, attachment,
pledge, bankruptcy or in any other manner.
The expenses of the Incentive Plan are borne by the Company. The Incentive
Plan terminates upon the earlier of (i) the adoption of a resolution by the
Board terminating the Incentive Plan and (ii) July 6, 2003, unless extended
for up to an additional five years for the grant of Awards other than
incentive stock options by action of the Board of Directors of the Company.
The Board of Directors may amend the Incentive Plan at any time and from time
to time for any purpose consistent with the goals of the Incentive Plan.
However, if failure to obtain stockholder approval would adversely affect
compliance of the Incentive Plan with Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (or other applicable law or regulation) no
amendment shall be effective unless and until approved by stockholders.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal current federal income tax
consequences of transactions under the Incentive Plan. This summary does not
describe all federal tax consequences under the Incentive Plan, nor does it
describe state, local or foreign tax consequences.
Incentive Stock Options. No taxable income is realized by the optionee upon
the grant or exercise of an incentive stock option. However, the exercise of
an incentive stock option may result in alternative minimum tax liability for
the optionee. If no disposition of shares issued to an optionee pursuant to
the exercise of an incentive stock option is made by the optionee within two
years from the date of grant or within one year after the transfer of such
shares to the optionee, then upon sale of such shares, any amount realized in
excess of the exercise price
16
<PAGE>
will be taxed to the optionee as a long-term capital gain and any loss
sustained will be a long-term capital loss, and no deduction will be allowed
to the Company for federal income tax purposes.
If the shares of Common Stock acquired upon the exercise of an incentive
stock option are disposed of prior to the expiration of the two-year and one-
year holding periods described above, generally the optionee will realize
ordinary income in the year of disposition in an amount equal to the excess
(if any) of the fair market value of the shares at exercise (or, if less, the
amount realized on an arms'-length sale of such shares) over the exercise
price thereof, and the Company will be entitled to deduct such amount. Any
further gain realized will be taxed as short-term or long-term capital gain
and will not result in any deduction by the Company. Special rules may apply
where all or a portion of the exercise price of the incentive stock option is
paid by tendering shares of Common Stock.
If an incentive stock option is exercised at a time when it no longer
qualifies for the tax treatment described above, the option is treated as a
nonqualified stock option. Generally, an incentive stock option will not be
eligible for the tax treatment described above if it is exercised more than
three months following termination of employment (one year following
termination of employment by reason of permanent and total disability), except
in certain cases where the incentive stock option is exercised after the death
of an optionee.
Nonqualified Options. With respect to nonqualified stock options granted
under the Incentive Plan, no income is realized by the optionee at the time
the option is granted. Generally, at exercise, ordinary income is realized by
the optionee in an amount equal to the difference between the option price and
the fair market value of the shares on the date of exercise, and the Company
receives a tax deduction for the same amount, and at disposition, appreciation
or depreciation after the date of exercise is treated as either short-term or
long-term capital gain or loss, depending on how long the shares have been
held.
SARs. The grant of an SAR does not result in income for the grantee or in a
deduction for the Company. Upon the exercise of an SAR, the grantee generally
recognizes ordinary income and the Company is entitled to a deduction measured
by the fair market value of any amounts received by the grantee.
Restricted Stock. A recipient of restricted stock generally will be subject
to tax at ordinary income rates on the fair market value of the stock at the
time the stock is either transferable or is no longer subject to forfeiture,
less any amount paid for such stock. The Company is entitled to a
corresponding tax deduction for the amount of ordinary income recognized by
the recipient. However, a recipient who so elects under Section 83(b) of the
Internal Revenue Code within 30 days of the date of issuance of the restricted
stock will realize ordinary income on the date of issuance equal to the fair
market value of the shares of restricted stock at that time (measured as if
the shares were unrestricted and could be sold immediately), less any amount
paid for such stock. If the shares subject to such election are forfeited, the
recipient will not be entitled to any deduction, refund or loss for tax
purposes with respect to the forfeited shares. Upon sale of the shares after
the forfeiture period has expired, the appreciation or depreciation since the
shares became transferable or free from risk of forfeiture (or, if a Section
83(b) election was made, since the shares were issued) will be treated as
long-term or short-term capital gain or loss. The holding period to determine
whether the recipient has long-term or short-term capital gain or loss begins
when the restriction period expires (or upon earlier issuance of the shares,
if the recipient elected immediate recognition of income under Section 83(b)).
If restricted stock is received in connection with another award under the
Incentive Plan (for example, upon exercise of an option), the income and the
deduction, if any, associated with such award may be deferred in accordance
with the rules described above for restricted stock.
Performance Awards. The recipient of a performance award will generally be
subject to tax at ordinary income rates on any cash received and the fair
market value of any Common Stock issued under the award, and the Company will
generally be entitled to a deduction equal to the amount of ordinary income
realized by the recipient. Any cash received under a performance award will be
included in income at the time of receipt. The fair market value of any Common
Stock received will also generally be included in income (and a corresponding
deduction will generally be available to the Company) at the time of receipt.
The capital gain or loss holding
17
<PAGE>
period for any Common Stock distributed under a performance award will begin
when the recipient recognizes ordinary income in respect of that distribution.
PLAN BENEFITS
It is not possible to determine Awards that will be made to Participants
under the Incentive Plan. The amendment would not have resulted in any changes
in the number of Awards granted to date under the Incentive Plan, although,
had the amendment been in effect, the Committee may have determined to grant
165,000 stock options granted to Stephen B. Hughes in connection with his
hiring under the Incentive Plan rather than outside the Incentive Plan. The
amendment will increase the number of shares of Common Stock available to
Awards under the Incentive Plan in the future.
* * * * *
At the meeting, the amendment to the Incentive Plan requires the
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present and entitled to vote. In determining whether the proposal
has received a majority, abstentions will be counted and have the same effect
as a vote against the proposal, and broker non-votes will not be considered as
present and entitled to vote and therefore will have no effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE PROPOSAL TO APPROVE THE AMENDMENT TO THE INCENTIVE PLAN.
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AMENDMENT OF CELESTIAL SEASONINGS, INC.
1994 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
GENERAL
The Board of Directors recommends that stockholders approve amendment and
restatement of the Director Plan. The amendment would provide that each non-
employee director will receive an option to purchase 5,000 shares of Common
Stock on the date of the Meeting (reduced by any previous options received
under the Director Plan by such non-employee director). Non-employee directors
elected for the first time after 1998 would also receive an initial grant of
an option to purchase 5,000 shares; currently, newly elected non-employee
directors receive an initial grant of an option to purchase 2,500 shares under
the Director Plan. In addition, non-employee directors would receive an annual
grant, commencing in 1999, of an option to purchase 2,000 shares of Common
Stock and would be entitled to elect to receive their annual retainer (which
will increase from $8,000 to $10,000 per year in 1998) in shares of Common
Stock rather than cash. The amendment raises the aggregate limit on the number
of shares that any non-employee director could receive under the Director Plan
from 20,000 to 40,000. Finally, the amendment changes the amendment provision
in the Director Plan so as to require stockholder approval of future
amendments to the Director Plan only to the extent such approval is required
under provisions of the Internal Revenue Code, the Exchange Act, or the NASDAQ
National Market System or any stock exchange. Currently, the amendment
provision contains restrictions similar to rules of the Commission, which were
repealed in 1996, and which generally provided for stockholder approval of
amendments that materially changed benefits to participants. The following is
a summary of the Director Plan, as amended and restated, which is attached to
this proxy statement as Exhibit B.
SUMMARY OF THE DIRECTOR PLAN
The Director Plan was adopted by the Board on August 4, 1994, amended and
restated by the Board on October 20, 1994, approved by stockholders on
February 5, 1995, and amended and restated by the Board on August 15, 1996 and
December 29, 1997. The purpose of the Director Plan is to advance the
interests of the Company by providing an inducement to recruit as directors of
the Company highly qualified persons who are neither employees nor officers of
the Company and who have a variety of expertise and experience. In addition,
the Board believes the Director Plan creates incentives to retain non-employee
directors, and solidifies the common interests of the directors and
stockholders of the Company. The aggregate number of shares of Common Stock
authorized for issuance pursuant to the Director Plan is 75,000, subject to
adjustment in certain instances as described below. Only directors of the
Company who are not full-time employees of the Company or any of its
subsidiaries are eligible to participate in the Director Plan. Directors who
are currently eligible to participate in the Director Plan are Ms. Hahn and
Messrs. Davis, Howard, Kelley and Lieberman.
The Director Plan provides that eligible directors will automatically be
granted an option to purchase 5,000 shares of Common Stock as of February 12,
1998 (reduced by any options previously granted under the Director Plan). Non-
employee directors elected after 1998 will also receive an initial grant of an
option to purchase 5,000 shares. In addition, non-employee directors will
receive annual grants of an option to purchase 2,000 shares, commencing in
1999. The exercise price of the options will be equal to the last reported
sale price of a share of Common Stock as quoted on the NASDAQ National Market
System on the date of grant or, if there is no such sale, the last reported
sale price of a share of Common Stock as so reported on the nearest preceding
date upon which such sale took place.
Each option granted under the Director Plan becomes exercisable one year
after the date of the grant and expires on the tenth anniversary following the
date of grant. Options become fully exercisable upon the death or disability
of an optionee or upon an optionee's ceasing to be a director of the Company.
If an optionee ceases to be a director of the Company for any reason other
than death or disability, options must be exercised within three months after
the date the optionee ceases to be a director of the Company. If an optionee
ceases to be a director because of disability or death, options must be
exercised within three years after the date the optionee ceases to be a
director. If an optionee is removed from the Board for cause, any
unexercisable option terminates
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on the date such optionee is removed. Options granted under the Director Plan
are not intended to constitute "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended.
The Director Plan also provides that eligible directors receive an annual
retainer and a meeting fee for each regular and special meeting of the Board
attended. Under the Director Plan, eligible directors annually may elect to
receive the Board retainer and meeting fee in cash, in Common Stock or in a
combination thereof. The annual retainer will be $10,000 in 1998, and meeting
fees in 1998 will be $2,000 per Board meeting and $500 per committee or
telephone meeting and shall be paid in cash if no election to receive Common
Stock is made by an eligible director. If an eligible director elects to
receive all or any part of such fees in Common Stock in lieu of cash, the
number of shares issued to such director will be equal to the amount of such
fees divided by the last reported sale price of a share of Common Stock on the
date of the Company's annual meeting. No eligible director may receive more
than 40,000 shares of Common Stock under the Director Plan.
No shares of Common Stock may be issued in lieu of fees and options may be
granted under the Director Plan after August 4, 2004. Following such date, the
Director Plan will automatically terminate when all options granted under the
Director Plan have been exercised.
The number of shares of Common Stock available under the Director Plan and
the amount and exercise price of options granted thereunder, are subject to
adjustment in the event of any combination, merger, reorganization or similar
event affecting the Common Stock. If any option is terminated or is not
exercised for any reason, then any unpurchased shares reserved for issuance
thereunder shall not be charged against the 75,000 limitation on the number of
shares which may issued and such shares shall again be available for issuance
in lieu of meeting fees or upon exercise of options granted under the Director
Plan.
Directors who are not eligible to participate in the Director Plan serve as
administrators of the Director Plan. Mr. Siegel and Mr. Hughes are presently
the sole ineligible directors. The Board may amend, in any respect, suspend or
discontinue the Director Plan at any time, subject to stockholder approval if
required by the Internal Revenue Code, the Exchange Act, or applicable stock
exchange or NASDAQ requirements.
Under present accounting rules, the grant of options will not result in a
charge against earnings because the exercise price of the options will be
equal to the fair market value of the shares of Common Stock on the date of
grant. Retainers and meeting fees are charged against earnings by the Company
in the period incurred.
Optionees generally will not be subject to federal income taxation at the
time options are granted. Taxable income will be recognized by optionees upon
the exercise of an option in an amount equal to the difference between the
exercise price paid and the market value of the shares received at the time of
exercise. An optionee's basis in the shares received upon the exercise of an
option is equal to the exercise price paid, plus any income recognized. The
Company will be entitled to a tax deduction equal to the amount of income
recognized by optionees.
Retainers and meeting fees are recognized as taxable income by non-employee
directors receiving such fees in an amount equal to the sum of cash and market
value of the shares of Common Stock received. The Company is entitled to a tax
deduction equal to the amount of income recognized by such directors.
PLAN BENEFITS
It is not possible to determine awards that will be made to eligible
directors under the Director Plan. If the Director Plan, as proposed to be
amended, had been in effect in 1997, the non-employee directors as a group
would have received options to purchase 22,500 shares of Common Stock
(assuming that the initial grants described above were made in 1997) or 10,000
shares of Common Stock (assuming that the annual grants described above were
made in 1997). In each case, the options would have been exercisable at the
fair market value of the Common Stock on the date of grant. In addition, if
the Director Plan, as proposed to be amended, had been in effect in 1997, the
non-employees as a group would have received an aggregate annual retainer of
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$50,000 (in cash or shares of Common Stock) and aggregate meeting fees of
$23,500 (in cash or shares of Common Stock).
* * * * *
At the meeting, the amendment to the Director Plan requires the affirmative
vote of the holders of a majority of the shares of Common Stock present and
entitled to vote. In determining whether the proposal has received a majority,
abstentions will be counted and have the same effect as a vote against the
proposal, and broker non-votes will not be considered as present and entitled
to vote and therefore will have no effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE PROPOSAL TO AMEND THE DIRECTOR PLAN.
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STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual stockholder meetings, consistent with rules
adopted by the Commission. Such proposals must be received by the Company not
later than September 8, 1998 to be considered for inclusion in the proxy
statement and form of proxy relating to the 1999 Annual Meeting of
Stockholders. Any such proposals should be addressed to: Corporate Secretary,
Celestial Seasonings, Inc., 4600 Sleepytime Drive, Boulder, Colorado 80301.
ANNUAL REPORT TO STOCKHOLDERS
The 1997 Annual Report of the Company, as filed with the Commission, is
being mailed to the stockholders with this Proxy Statement. The Annual Report
is not to be considered part of the soliciting material.
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at the
Meeting except the matters set forth in the Notice and described in this Proxy
Statement. If any other matters properly come before the Meeting, the persons
designated as agents in the enclosed form of proxy will vote on such matters
in accordance with their best judgment.
Celestial Seasonings, Inc.
Boulder, Colorado
January 5, 1998
22
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EXHIBIT A
[LOGO OF CELESTIAL SEASONINGS]
CELESTIAL SEASONINGS, INC.
1993 LONG-TERM INCENTIVE PLAN
AS AMENDED DECEMBER 8, 1997
1. PURPOSE. The purpose of the 1993 Long-Term Incentive Plan (the "Plan")
is to advance the interests of Celestial Seasonings, Inc., a Delaware
corporation (the "Company") and its stockholders by providing incentives to
certain key employees of the Company and to certain other key individuals who
perform services for the Company, including those who contribute significantly
to the strategic and long-term performance objectives and growth of the
Company.
2. ADMINISTRATION. The Plan shall be administered solely by the Board of
Directors (the "Board") of the Company or, if the Board shall so designate, by
a committee of the Board that shall be comprised of not fewer than two
directors (the "Committee"); provided that if at any time Rule 16b-3 or any
successor rule ("Rule 16b-3") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), so permits without adversely affecting the
ability of awards under the Plan ("Awards") to comply with the conditions for
exemption from Section 16 of the Exchange Act (or any successor provision)
provided by Rule 16b-3, the Committee may delegate the administration of the
Plan in whole or in part, on such terms and conditions, and to such person or
persons as it may determine in its discretion. References to the Committee
hereunder shall include the Board where appropriate. The membership of the
Committee or such successor committee (i) shall consist of "non-employee
directors" (as defined in Rule 16b-3) and meet any other applicable
requirements so as to comply at all times with the applicable requirements of
Rule 16b-3, (ii) shall consist of "outside directors" (as defined in Treasury
Regulation (S) 1.162-27(e)(3)(i) or any successor rule) and meet any other
applicable requirements so as to comply at all times with the applicable
requirements of (S) 162(m) of the Internal Revenue Code of 1986, as amended,
or any successor statute, and (iii) shall meet any applicable requirements of
the NASDAQ National Market or any stock exchange on which the Company's common
stock is listed or quoted.
The Committee has all the powers vested in it by the terms of the Plan set
forth herein, such powers to include exclusive authority (except as may be
delegated as permitted herein) to select the employees and other key
individuals to be granted Awards under the Plan, to determine the type, size
and terms of the Award to be made to each individual selected, to modify the
terms of any Award that has been granted, to determine the time when Awards
will be granted, to establish performance objectives, to make any adjustments
necessary or desirable as a result of the granting of Awards to eligible
individuals located outside the United States and to prescribe the form of the
instruments embodying Awards made under the Plan. The Committee is authorized
to interpret the Plan and the Awards granted under the Plan, to establish,
amend and rescind any rules and regulations relating to the Plan, and to make
any other determinations which it deems necessary or desirable for the
administration of the Plan. The Committee (or its delegate as permitted
herein) may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect. Any decision
of the Committee (or its delegate as permitted herein) in the interpretation
and administration of the Plan, as described herein, shall lie within its sole
and absolute discretion and shall be final, conclusive and binding on all
parties concerned. The Committee may act only by a majority of its members in
office, except that the members thereof may authorize any one or more of their
members or any officer of the Company to execute and deliver documents or to
take any other ministerial action on behalf of the Committee with respect to
Awards made or to be made to Plan participants. No member of the Committee and
no officer of the Company shall be liable for anything done or omitted to be
done by him, by any other member of the Committee or by any officer of the
Company in connection with the
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performance of duties under the Plan, except for his own willful misconduct or
as expressly provided by statute. Determinations to be made by the Committee
under the Plan may be made by its delegates.
3. PARTICIPATION. Consistent with the purposes of the Plan, the Committee
shall have exclusive power (except as may be delegated as permitted herein) to
select the employees and other key individuals performing services for the
Company who may participate in the Plan and be granted Awards under the Plan.
Eligible individuals may be selected individually or by groups or categories,
as determined by the Committee in its discretion.
4. AWARDS UNDER THE PLAN.
(a) Types of Awards. Awards under the Plan may include, but need not be
limited to, one or more of the following types, either alone or in any
combination thereof: (i) "Stock Options," (ii) "Stock Appreciation Rights,"
(iii) "Restricted Stock," (iv) "Performance Grants" and (v) any other type of
Award deemed by the Committee in its discretion to be consistent with the
purposes of the Plan (including, but not limited to, Awards of or options or
similar rights granted with respect to unbundled stock units or components
thereof, and Awards to be made to participants who are foreign nationals or
are employed or performing services outside the United States). Stock Options,
which include "Nonqualified Stock Options" (which may be sold at a price
determined by the Committee ("Purchased Options") or awarded to participants)
and "Incentive Stock Options" or combinations thereof, are rights to purchase
common shares of the Company having a par value of $.01 per share and stock of
any other class into which such shares may thereafter be changed (the "Common
Shares"). Nonqualified Stock Options and Incentive Stock Options are subject
to the terms, conditions and restrictions specified in Paragraph 5. Stock
Appreciation Rights are rights to receive (without payment to the Company)
cash, Common Shares, other Company securities (which may include, but need not
be limited to, unbundled stock units or components thereof, debentures,
preferred stock, warrants, securities convertible into Common Shares or other
property ("Other Company Securities")) or property, or other forms of payment,
or any combination thereof, as determined by the Committee, based on the
increase in the value of the number of Common Shares specified in the Stock
Appreciation Right. Stock Appreciation Rights are subject to the terms,
conditions and restrictions specified in Paragraph 6. Shares of Restricted
Stock are Common Shares which are issued subject to certain restrictions
pursuant to Paragraph 7. Performance Grants are contingent awards subject to
the terms, conditions and restrictions described in Paragraph 8, pursuant to
which the participant may become entitled to receive cash, Common Shares,
Other Company Securities or property, or other forms of payment, or any
combination thereof, as determined by the Committee.
(b) Maximum Number of Shares that May be Issued. There may be issued under
the Plan (as Restricted Stock, in payment of Performance Grants, pursuant to
the exercise of Stock Options or Stock Appreciation Rights, or in payment of
or pursuant to the exercise of such other Awards as the Committee, in its
discretion, may determine) an aggregate of not more than 625,000 Common
Shares, subject to adjustment as provided in Paragraph 14. No eligible
individual may receive Awards under the Plan for more than 100,000 Common
Shares, subject to adjustment as provided in Paragraph 14. Common Shares
issued pursuant to the Plan may be either authorized but unissued shares,
treasury shares, reacquired shares, or any combination thereof. If any Common
Shares issued as Restricted Stock or otherwise subject to repurchase or
forfeiture rights are reacquired by the Company pursuant to such rights, or if
any Award is canceled, terminates or expires unexercised, any Common Shares
that would otherwise have been issuable pursuant thereto will be available for
issuance under new Awards.
(c) Rights with respect to Common Shares and Other Securities.
(i) Unless otherwise determined by the Committee in its discretion, a
participant to whom an Award of Restricted Stock has been made (and any
person succeeding to such a participant's rights pursuant to the Plan)
shall have, after issuance of a certificate for the number of Common
Shares awarded and prior to the expiration of the Restricted Period (as
hereinafter defined) or the earlier repurchase of such Common Shares as
herein provided, ownership of such Common Shares, including the right to
vote
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such Common Shares and to receive dividends or other distributions made
or paid with respect to such Common Shares (provided that such Common
Shares, and any new, additional or different shares, or Other Company
Securities or property, or other forms of consideration which the
participant may be entitled to receive with respect to such Common Shares
as a result of a stock split, stock dividend or any other change in the
corporation or capital structure of the Company, shall be subject to the
restrictions hereinafter described as determined by the Committee in its
discretion), subject, however, to the options, restrictions and
limitations imposed thereon pursuant to the Plan. Notwithstanding the
foregoing, a participant with whom an Award agreement is made to issue
Common Shares in the future, shall have no rights as a stockholder with
respect to Common Shares related to such agreement until issuance of a
certificate to him.
(ii) Unless otherwise determined by the Committee in its discretion, a
participant to whom a grant of Stock Options, Stock Appreciation Rights,
Performance Grants or any other Award is made (and any person succeeding
to such a participant's rights pursuant to the Plan) shall have no rights
as a stockholder with respect to any Common Shares or as a holder with
respect to other securities, if any, issuable pursuant to any such Award
until the date of the issuance of a stock certificate to him for such
Common Shares or other instrument of ownership, if any. Except as
provided in Paragraph 15, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and
whether in cash, securities, other property or other forms of
consideration, or any combination thereof) for which the record date is
prior to the date such stock certificate or other instrument of
ownership, if any, is issued.
5. STOCK OPTIONS. The Committee may sell Purchased Options or grant other
Stock Options either alone, or in conjunction with Stock Appreciation Rights,
Performance Grants or other Awards, either at the time of grant or by
amendment thereafter; provided that an Incentive Stock Option may be granted
only to an eligible employee of the Company or any parent or subsidiary
corporation. Each Stock Option (referred to herein as an "Option") granted or
sold under the Plan shall be evidenced by an instrument in such form as the
Committee shall prescribe from time to time in accordance with the Plan and
shall comply with the following terms and conditions, and with such other
terms and conditions, including, but not limited to, restrictions upon the
Option or the Common Shares issuable upon exercise thereof, as the Committee,
in its discretion, shall establish:
(a) The option price may be less than, equal to, or greater than, the
fair market value of the Common Shares subject to such Option at the time
the Option is granted, as determined by the Committee, but in no event
will such option price be less than 50% of the fair market value of the
underlying Common Shares at the time the Option is granted; provided,
however, that in the case of an Incentive Stock Option granted to such an
employee, the option price shall not be less than the fair market value
of the Common Shares subject to such Option at the time the Option is
granted, or if granted to such an employee who owns stock representing
more than ten percent of the voting power of all classes of stock of the
Company or any parent or subsidiary (a "Ten Percent Employee"), such
option price shall not be less than 110% of such fair market value at the
time the Option is granted; but in no event will such option price be
less than the par value of such Common Shares.
(b) The Committee shall determine the number of Common Shares to be
subject to each Option. The number of Common Shares subject to an
outstanding Option may be reduced on a share-for-share or other
appropriate basis, as determined by the Committee, to the extent that
Common Shares under such Option are used to calculate the cash, Common
Shares, Other Company Securities or property, or other forms of payment,
or any combination thereof, received pursuant to exercise of a Stock
Appreciation Right attached to such Option, or to the extent that any
other Award granted in conjunction with such Option is paid.
(c) No Option may be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or the laws of
descent and distribution, and shall be exercisable during the grantee's
lifetime only by him; provided, however, that the Committee may grant or
sell Nonqualified Stock Options that are transferable, without payment of
consideration, to immediate family members of the
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grantee or to trusts or partnerships for such family members and may
amend outstanding Options to provide for such transferability.
(d) The Option shall not be exercisable:
(i) in the case of any Incentive Stock Option granted to a Ten
Percent Employee, after the expiration of five years from the date
it is granted, and, in the case of any other Option, after the
expiration of ten years from the date it is granted. Any Option may
be exercised during such period only at such time or times and in
such installments as the Committee may establish;
(ii) unless payment in full is made for the shares being acquired
thereunder at the time of exercise; such payment shall be made in
such form (including, but not limited to, cash, Common Shares, or
the surrender of another outstanding Award under the Plan, or any
combination thereof) as the Committee may determine in its
discretion; and
(iii) unless grantee of the Option being exercised has been, at
all times during the period beginning with the date of the grant of
the Option and ending on the date of such exercise, employed by or
otherwise performing services for the Company, (or a corporation, or
a parent or subsidiary of a corporation, substituting or assuming
the Option in a transaction to which Section 424(a) of the Internal
Revenue Code of 1986, as amended, or any successor statutory
provision thereto (the "Code"), is applicable), except that:
(A) if such grantee shall cease such employment or
performance of services by reason of his disability as defined
in Paragraph 12 or early, normal or deferred retirement under
an approved retirement program of the Company (or such other
plan or arrangement as may be approved by the Committee, in its
discretion, for this purpose), the holder of any Option granted
to such grantee which has not expired and has not been fully
exercised, at any time within three years (or such period
determined by the Committee) after the date the grantee ceased
such employment or performance of services (but in no event
after the Option has expired), may exercise the Option with
respect to any shares as to which the holder could have
exercised the Option on the date the grantee ceased such
employment or performance of services, or with respect to such
greater number of shares as determined by the Committee; or
(B) if any grantee shall die, then the holder (including the
grantee's executors, administrators, heirs or distributees, as
the case may be) of any Option granted to such grantee which
has not expired and has not been fully exercised, may, at any
time within one year (or such other period determined by the
Committee) after the date of death (but in no event after the
Option has expired), exercise the Option with respect to any
shares as to which the holder could have exercised the Option
at the time of the grantee's death, or with respect to such
greater number of shares as determined by the Committee.
(e) In the case of an Incentive Stock Option, the amount of the
aggregate fair market value of Common Shares (determined at the time of
grant of the Option pursuant to subparagraph 5(a) of the Plan) with
respect to which incentive stock options are exercisable for the first
time by an employee during any calendar year (under all such plans of his
employer corporation and its parent and subsidiary corporations) shall
not exceed $100,000.
(f) It is the intent of the Company that Nonqualified Stock Options
granted under the Plan not be classified as Incentive Stock Options, that
the Incentive Stock Options granted under the Plan be consistent with and
contain or be deemed to contain all provisions required under Section 422
and the other appropriate provisions of the Code and any implementing
regulations (and any successor provisions thereof), and that any
ambiguities in construction shall be interpreted in order to effectuate
such intent.
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(g) A Purchased Option may contain such additional terms not
inconsistent with this Plan, including but not limited to the
circumstances under which the purchase price of such Purchased Option may
be returned to the holder of the Purchased Option, as the Committee may
determine in its sole discretion.
6. STOCK APPRECIATION RIGHTS. The Committee may grant Stock Appreciation
Rights either alone, or in conjunction with Stock Options, Performance Grants
or other Awards, either at the time of grant or by amendment thereafter. Each
Award of Stock Appreciation Rights granted under the Plan shall be evidenced
by an instrument in such form as the Committee shall prescribe from time to
time in accordance with the Plan and shall comply with the following terms and
conditions, and with such other terms and conditions, including, but not
limited to, restrictions upon the Award of Stock Appreciation Rights or the
Common Shares issuable upon exercise thereof, as the Committee, in its
discretion, shall establish:
(a) The Committee shall determine the number of Common Shares to be
subject to each Award of Stock Appreciation Rights. The number of Common
Shares subject to an outstanding Award of Stock Appreciation Rights may
be reduced on a share-for-share or other appropriate basis, as determined
by the Committee, to the extent that Common Shares under such Award of
Stock Appreciation Rights are used to calculate the cash, Common Shares,
Other Company Securities or property, or other forms of payment, or any
combination thereof, received pursuant to exercise of an Option attached
to such Award of Stock Appreciation Rights, or to the extent that any
other Award granted in conjunction with such Award of Stock Appreciation
Rights is paid.
(b) No Award of Stock Appreciation Rights may be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by
will or the laws of descent and distribution, and shall be exercisable
during the grantee's lifetime only by the grantee; provided, however,
that the Committee may grant Awards of Stock Appreciation Rights that are
transferable, without payment of consideration, to immediate family
members of the grantee or to trusts or partnerships for such family
members and may amend outstanding Awards to provide for such
transferability.
(c) The Award of Stock Appreciation Rights shall not be exercisable:
(i) in the case of any Award of Stock Appreciation Rights which
is attached to an Incentive Stock Option granted to a Ten Percent
Employee, after the expiration of five years from the date it is
granted, and, in the case of any other Award of Stock Appreciation
Rights, after the expiration of ten years from the date it is
granted. Any Award of Stock Appreciation Rights may be exercised
during such period only at such time or times and in such
installments as the Committee may establish;
(ii) unless the Option or other Award to which the Award of Stock
Appreciation Rights is attached is at the time exercisable; and
(iii) unless the grantee of the Award of Stock Appreciation
Rights being exercised has been, at all times during the period
beginning with the date of the grant thereof and ending on the date
of such exercise, employed by or otherwise performing services for
the Company, except that:
(A) if such grantee shall cease such employment or
performance of services by reason of his disability as defined
in Paragraph 12 or early, normal or deferred retirement under
an approved retirement program of the Company (or such other
plan or arrangement as may be approved by the Committee, in its
discretion, for this purpose), then the holder of any Award of
Stock Appreciation Rights granted to such grantee which has not
expired and has not been fully exercised, may, at any time
within three years (or such other period determined by the
Committee) after the date the grantee ceased such employment or
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performance of services (but in no event after the Award of
Stock Appreciation Rights has expired), exercise the Award of
Stock Appreciation Rights with respect to any shares as to
which the holder could have exercised the Award of Stock
Appreciation Rights on the date the grantee ceased such
employment or performance of services, or with respect to such
greater number of shares as determined by the Committee; or
(B) if any grantee shall die, the holder (including the
grantee's executors, administrators, heirs or distributees, as
the case may be) of any Award of Stock Appreciation Rights
granted to such grantee which has not expired and has not been
fully exercised may at any time within one year (or such other
period determined by the Committee) after the date of such
grantee's death (but in no event after the Award of Stock
Appreciation Rights has expired), exercise the Award of Stock
Appreciation Rights with respect to any shares as to which the
holder could have exercised the Award of Stock Appreciation
Rights at the time of such grantee's death, or with respect to
such greater number of shares as determined by the Committee.
(d) An Award of Stock Appreciation Rights shall entitle the holder to
exercise such Award or to surrender unexercised the Option (or other
Award) to which the Stock Appreciation Right is attached (or any portion
of such Option or other Award) to the Company and to receive from the
Company in exchange thereof, without payment to the Company, that number
of Common Shares having an aggregate value equal to (or, in the
discretion of the Committee, less than) the excess of the fair market
value of one share, at the time of such exercise, over the exercise price
(or Option Price, as the case may be), times the number of shares subject
to the Award or the Option (or other Award), or portion thereof, which is
so exercised or surrendered, as the case may be. The Committee shall be
entitled in its discretion to elect to settle the obligation arising out
of the exercise of a Stock Appreciation Right by the payment of cash or
Other Company Securities or property, or other forms of payment, or any
combination thereof, as determined by the Committee, equal to the
aggregate value of the Common Shares it would otherwise be obligated to
deliver. Any such election by the Committee shall be made as soon as
practicable after the receipt by the Committee of written notice of the
exercise of the Stock Appreciation Right. The value of a Common Share,
Other Company Securities or property, or other forms of payment
determined by the Committee for this purpose shall be the fair market
value thereof on the last business day next preceding the date of the
election to exercise the Stock Appreciation Right, unless the Committee,
in its discretion, determines otherwise.
(e) A Stock Appreciation Right may provide that it shall be deemed to
have been exercised at the close of business on the business day
preceding the expiration date of the Stock Appreciation Right or of the
related Option (or other Award), or such other date as specified by the
Committee, if at such time such Stock Appreciation Right has a positive
value. Such deemed exercise shall be settled or paid in the same manner
as a regular exercise thereof as provided in subparagraph 6(d) hereof.
(f) No fractional shares may be delivered under this Paragraph 6, but
in lieu thereof a cash or other adjustment shall be made as determined by
the Committee in its discretion.
7. RESTRICTED STOCK. Each Award of Restricted Stock under the Plan shall be
evidenced by an instrument in such form as the Committee shall prescribe from
time to time in accordance with the Plan and shall comply with the following
terms and conditions, and with such other terms and conditions as the
Committee, in its discretion, shall establish:
(a) The Committee shall determine the number of Common Shares to be
issued to a participant pursuant to the Award, and the extent, if any, to
which they shall be issued in exchange for cash, other consideration, or
both.
(b) Restricted Stock awarded to a participant in accordance with the
Award shall be subject to the following restrictions until the expiration
of such period as the Committee shall determine, from the
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date on which the Award is granted (the "Restricted Period"): (i) a
participant to whom an award of Restricted Stock is made shall be issued,
but shall not be entitled to, the delivery of a stock certificate; (ii)
the Restricted Stock shall not be transferable prior to the end of the
Restricted Period, provided that the Committee may award Restricted Stock
that is transferable, without payment of consideration, to immediate
family members of the grantee or to trusts or partnerships for such
family members and may amend outstanding awards of Restricted Stock to
provide for such transferability; (iii) the Restricted Stock shall be
forfeited and the stock certificate shall be returned to the Company and
all rights of the holder of such Restricted Stock to such shares and as a
shareholder shall terminate without further obligation on the part of the
Company if the participant's continuous employment or performance of
services for the Company shall terminate for any reason prior to the end
of the Restricted Period, except as otherwise provided in subparagraph
7(c), and (iv) such other restrictions as determined by the Committee in
its discretion.
(c) If a participant who has been in continuous employment or
continually performed services for the Company since the date on which a
Restricted Stock Award was granted to him shall, while in such employment
or performance of services, die, or terminate such employment or
performance of services by reason of disability as defined in Paragraph
12 or by reason of early, normal or deferred retirement under an approved
retirement program of the Company (or such other plan or arrangement as
may be approved by the Committee in its discretion, for this purpose) and
any of such events shall occur after the date on which the Award was
granted to him and prior to the end of the Restricted Period of such
Award, the Committee may determine to cancel any and all restrictions on
any or all of the Common Shares subject to such Award.
8. PERFORMANCE GRANTS. The Award of a Performance Grant to a participant
will entitle him to receive a specified amount determined by the Committee
(the "Actual Value"), if the terms and conditions specified in this Plan and
in the Award are satisfied. Each Award of a Performance Grant shall be subject
to the following terms and conditions, and to such other terms and conditions,
including but not limited to, restrictions upon any cash, Common Shares, Other
Company Securities or property, or other forms of payment, or any combination
thereof, issued in respect of the Performance Grant, as the Committee, in its
discretion, shall establish, and shall be embodied in an instrument in such
form and substance as is determined by the Committee:
(a) The Committee shall determine the value or range of values of a
Performance Grant to be awarded to each participant selected for an Award
and whether or not such a Performance Grant is granted in conjunction
with an Award of Options, Stock Appreciation Rights, Restricted Stock or
other Award, or any combination thereof, under the Plan (which may
include, but need not be limited to, deferred Awards) concurrently or
subsequently granted to the participant (the "Associated Award"). As
determined by the Committee, the maximum value of each Performance Grant
(the "Maximum Value") shall be: (i) an amount fixed by the Committee at
the time the Award is made or amended thereafter, (ii) an amount which
varies from time to time based in whole or in part on the then current
value of the Common Shares, Other Company Securities or property, or
other securities or property, or any combination thereof or (iii) an
amount that is determinable from criteria specified by the Committee.
Performance Grants may be issued in different classes or series having
different names, terms and conditions. In the case of a Performance Grant
awarded in conjunction with an Associated Award, the Performance Grant
may be reduced on an appropriate basis to the extent that the Associated
Award has been exercised, paid to or otherwise received by the
participant, as determined by the Committee.
(b) The award period ("Award Period") related to any Performance Grant
shall be a period determined by the Committee. At the time each Award is
made, the Committee shall establish performance objectives to be attained
within the Award Period as the means of determining the Actual Value of
such a Performance Grant. The performance objectives shall be based on
such measure or measures of performance, which may include, but need not
be limited to, the performance of the participant, the Company, one or
more of its subsidiaries or one or more of their divisions or units, or
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any combination of the foregoing, as the Committee shall determine, and
may be applied on an absolute basis or be relative to industry or other
indices, or any combination thereof. The Actual Value of a Performance
Grant shall be equal to its Maximum Value only if the performance
objectives are attained in full, but the Committee shall specify the
manner in which the Actual Value of Performance Grants shall be
determined if the performance objectives are met in part. Such
performance measures, the Actual Value or the Maximum Value, or any
combination thereof, may be adjusted in any manner by the Committee in
its discretion at any time and from time to time during or as soon as
practicable after the Award Period, if it determines that such
performance measures, the Actual Value or the Maximum Value, or any
combination thereof, are not appropriate under the circumstances.
(c) The rights of a participant in Performance Grants awarded to him
shall be provisional and may be canceled or paid in whole or in part, all
as determined by the Committee, if the participant's continuous
employment or performance of services for the Company shall terminate for
any reason prior to the end of the Award Period.
(d) The Committee shall determine whether the conditions of
subparagraph 8(b) or 8(c) hereof have been met and, if so, shall
ascertain the Actual Value of the Performance Grants. If the Performance
Grants have no Actual Value, the Award and such Performance Grants shall
be deemed to have been canceled and the Associated Award, if any, may be
canceled or permitted to continue in effect in accordance with its terms.
If the Performance Grants have any Actual Value and:
(i) were not awarded in conjunction with an Associated Award, the
Committee shall cause an amount equal to the Actual Value of the
Performance Grants earned by the participant to be paid to him or
his beneficiary as provided below; or
(ii) were awarded in conjunction with an Associated Award, the
Committee shall determine, in accordance with criteria specified by
the Committee (A) to cancel the Performance Grants, in which event
no amount in respect thereof shall be paid to the participant or his
beneficiary, and the Associated Award may be permitted to continue
in effect in accordance with its terms, (B) to pay the Actual Value
of the Performance Grants to the participant or his beneficiary as
provided below, in which event the Associated Award may be canceled
or (C) to pay to the participant or his beneficiary as provided
below, the Actual Value of only a portion of the Performance Grants,
in which event all or a portion of the Associated Award may be
permitted to continue in effect in accordance with its terms or be
canceled, as determined by the Committee.
Such determination by the Committee shall be made as promptly as
practicable following the end of the Award Period or upon the earlier
termination of employment or performance of services, or at such other time or
times as the Committee shall determine, and shall be made pursuant to criteria
specified by the Committee.
Payment of any amount in respect of the Performance Grants which the
Committee determines to pay as provided above shall be made by the Company as
promptly as practicable after the end of the Award Period or at such other
time or times as the Committee shall determine, and may be made in cash,
Common Shares, Other Company Securities or property, or other forms of
payment, or any combination thereof or in such other manner, as determined by
the Committee in its discretion. Notwithstanding anything in this Paragraph 8
to the contrary, the Committee may, in its discretion, determine and pay out
the Actual Value of the Performance Grants at any time during the Award
Period.
9. DEFERRAL OF COMPENSATION. The Committee shall determine whether or not
an Award shall be made in conjunction with deferral of the participant's
salary, bonus or other compensation, or any combination thereof, and whether
or not such deferred amounts may be:
(i) forfeited to the Company or to other participants or any
combination thereof, under certain circumstances (which may include, but
need not be limited to, certain types of termination of employment or
performance of services for the Company),
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(ii) subject to increase or decrease in value based upon the
attainment of or failure to attain, respectively, certain performance
measures, and/or
(iii) credited with income equivalents (which may include, but need
not be limited to, interest, dividends or other rates of return) until
the date or dates of payment of the Award, if any.
10. DEFERRED PAYMENT OF AWARDS. The Committee may specify that the payment
of all or any portion of cash, Common Shares, Other Company Securities or
property, or any other form of payment, or any combination thereof, under an
Award shall be deferred until a later date. Deferrals shall be for such
periods or until the occurrence of such events, and upon such terms, as the
Committee shall determine in its discretion. Deferred payments of Awards may
be made by undertaking to make payment in the future based upon the
performance of certain investment equivalents (which may include, but need not
be limited to, government securities, Common Shares, other securities,
property or consideration, or any combination thereof), together with such
additional amounts of income equivalents (which may be compounded and may
include, but need not be limited to, interest, dividends or other rates of
return or any combination thereof) as may accrue thereon until the date or
dates of payment, such investment equivalents and such additional amounts of
income equivalents to be determined by the Committee in its discretion.
11. AMENDMENT OR SUBSTITUTION OF AWARDS UNDER THE PLAN. The terms of any
outstanding Award under the Plan may be amended from time to time by the
Committee in its discretion in any manner that it deems appropriate
(including, but not limited to, acceleration of the date of exercise of any
Award and/or payments thereunder); provided that no such amendment shall
adversely affect in a material manner any right of a participant under the
Award without his written consent, unless the Committee determines in its
discretion that there have occurred or are about to occur significant changes
in the participant's position, duties or responsibilities, or significant
changes in economic, legislative, regulatory, tax, accounting or cost/benefit
conditions which are determined by the Committee in its discretion to have or
to be expected to have a substantial effect on the performance of the Company,
or any subsidiary, affiliate, division or department thereof, on the Plan or
on any Award under the Plan. The Committee may, in its discretion, permit
holders of Awards under the Plan to surrender outstanding Awards in order to
exercise or realize the rights under other Awards, or in exchange for the
grant of new Awards, or require holders of Awards to surrender outstanding
Awards as a condition precedent to the grant of new Awards under the Plan.
12. DISABILITY. For the purposes of this Plan, a participant shall be
deemed to have terminated his employment or performance of services for the
Company and its Affiliates by reason of disability if the Committee shall
determine that the physical or mental condition of such participant was such
at that time as would entitle him to payment of monthly disability benefits
under any Company disability plan, whether or not such participant was
eligible to participate in such plan.
13. TERMINATION OF A PARTICIPANT. For all purposes under the Plan, the
Committee shall determine whether a participant has terminated employment
with, or the performance of services for, the Company.
14. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding Common Shares of the Company by reason of any stock split,
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, reorganization, combination or exchange of
shares, a sale by the Company of all of its assets, any distribution to
stockholders other than a normal cash dividend, or other extraordinary or
unusual event, if the Committee shall determine, in its discretion, that such
change equitably requires an adjustment in the terms of any Award or the
number of Common Shares available for Awards, such adjustment may be made by
the Committee and shall be final, conclusive and binding for all purposes of
the Plan.
In the event of the proposed dissolution or liquidation of the Company, all
outstanding Awards shall terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Committee. In the event
of a proposed sale of all or substantially all of the assets of the Company,
or the merger of the Company with or into another corporation, all
restrictions on any outstanding Awards shall lapse and
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participants shall be entitled to the full benefit of all such Awards
immediately prior to the closing date of such sale or merger, unless otherwise
provided by the Committee.
15. DESIGNATION OF BENEFICIARY BY PARTICIPANT. A participant may name a
beneficiary to receive any payment to which he may be entitled in respect of
any Award under the Plan in the event of his death, on a written form to be
provided by and filed with the Committee, and in a manner determined by the
Committee in its discretion. The Committee reserves the right to review and
approve beneficiary designations. A participant may change his beneficiary
from time to time in the same manner, unless such participant has made an
irrevocable designation. Any designation of a beneficiary under the Plan (to
the extent it is valid and enforceable under applicable law) shall be
controlling over any other disposition, testamentary or otherwise, as
determined by the Committee in its discretion. If no designated beneficiary
survives the participant and is living on the date on which any amount becomes
payable to such a participant's beneficiary, such payment will be made to the
legal representatives of the participant's estate, and the term "beneficiary"
as used in the Plan shall be deemed to include such person or persons. If
there are any questions as to the legal right of any beneficiary to receive a
distribution under the Plan, the Committee in its discretion may determine
that the amount in question be paid to the legal representatives of the estate
of the participant, in which event the Company, the Board and the Committee
and the members thereof, will have no further liability to anyone with respect
to such amount.
16. FINANCIAL ASSISTANCE. If the Committee determines that such action is
advisable, the Company may assist any grantee of an Award in obtaining
financing from the Company (or under any program of the Company approved
pursuant to applicable law), or from a bank or other third party, on such
terms as are determined by the Committee, and in such amount as is required to
accomplish the purposes of the Plan, including, but not limited to, to permit
the exercise of an Award, the participation therein, and/or the payment of any
taxes in respect thereof. Such assistance may take any form that the Committee
deems appropriate, including, but not limited to, a direct loan from the
Company, a guarantee of the obligation by the Company, or the maintenance by
the Company of deposits with such bank or third party.
17. MISCELLANEOUS PROVISIONS.
(a) No employee or other person shall have any claim or right to be
granted an Award under the Plan. Determinations made by the Committee
under the Plan need not be uniform and may be made selectively among
eligible individuals under the plan, whether or not such eligible
individuals are similarly situated. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee or other person any
right to continue to be employed by or perform services for the Company,
and the right to terminate the employment of or performance of services
by any participants at any time and for any reason is specifically
reserved.
(b) No participant or other person shall have any right with respect
to the Plan, the Common Shares reserved for issuance under the Plan or in
any Award, contingent or otherwise, until written evidence of the Award
shall have been delivered to the recipient and all the terms, conditions
and provisions of the Plan and the Award applicable to such recipient
(and each person claiming under or through him) have been met.
(c) Except as may be approved by the Committee where such approval
shall not adversely affect compliance of the Plan with Rule 16b-3 under
the Exchange Act, a participant's rights and interest under the Plan may
not be assigned or transferred, hypothecated or encumbered in whole or in
part either directly or by operation of law or otherwise (except in the
event of a participant's death) including, but not by way of limitation,
execution, levy, garnishment, attachment, pledge, bankruptcy or in any
other manner; provided, however, that any Incentive Stock Option granted
pursuant to the Plan shall not be transferable other than by will or the
laws of descent and distribution and shall be exercisable during the
participant's lifetime only by him.
(d) No Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment shall be issued
hereunder with respect to any Award unless counsel for the Company shall
be satisfied that such issuance will be in compliance with applicable
federal, state, local and foreign legal, securities exchange and other
applicable requirements.
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(e) It is the intent of the Company that the Plan comply in all
respects with Rule 16b-3 under the Exchange Act, that any ambiguities or
inconsistencies in construction of the Plan be interpreted to give effect
to such intention and that if any provision of the Plan is found not to
be in compliance with Rule 16b-3, such provision shall be deemed null and
void to the extent required to permit the Plan to comply with Rule 16b-3.
(f) The Company shall have the right to deduct from any payment made
under the Plan any federal, state, local or foreign income or other taxes
required by law to be withheld with respect to such payment. It shall be
a condition to the obligation of the Company to issue Common Shares,
Other Company Securities or property, other securities or property, or
other forms of payment, or any combination thereof, upon exercise,
settlement or payment of any Award under the Plan, that the participant
(or any beneficiary or person entitled to act) pay to the Company, upon
its demand, such amount as may be required by the Company for the purpose
of satisfying any liability to withhold federal, state, local or foreign
income or other taxes. If the amount requested is not paid, the Company
may refuse to issue Common Shares, Other Company Securities or property,
other securities or property, or other forms of payment, or any
combination thereof. Notwithstanding anything in the Plan to the
contrary, the Committee may, in its discretion, permit an eligible
participant (or any beneficiary or person entitled to act) to elect to
pay a portion or all of the amount requested by the Company for such
taxes with respect to such Award, at such time and in such manner as the
Committee shall deem to be appropriate (including, but not limited to, by
authorizing the Company to withhold, or agreeing to surrender to the
Company on or about the date such tax liability is determinable, Common
Shares, Other Company Securities or property, other securities or
property, or other forms of payment, or any combination thereof, owned by
such person or a portion of such forms of payment that would otherwise be
distributed, or have been distributed, as the case may be, pursuant to
such Award to such person, having a fair market value equal to the amount
of such taxes).
(g) The expenses of the Plan shall be borne by the Company.
(h) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation
of assets to assure the payment of any Award under the Plan, and rights
to the payment of Awards shall be no greater than the rights of the
Company's general creditors.
(i) By accepting any Award or other benefit under the Plan, each
participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification of,
and consent to, any action taken under the Plan by the Company, the Board
or the Committee or its delegates.
(j) Fair market value in relation to Common Shares, Other Company
Securities or property, other securities or property or other forms of
payment of Awards under the Plan, or any combination thereof, as of any
specific time shall mean such value as determined by the Committee in
accordance with applicable law.
(k) The masculine pronoun includes the feminine and the singular
includes the plural wherever appropriate.
(l) The appropriate officers of the Company shall cause to be filed
any reports, returns or other information regarding Awards hereunder of
any Common Shares issued pursuant hereto as may be required by Section 13
or 15(d) of the Exchange Act (or any successor provision) or any other
applicable statute, rule or regulation.
(m) The validity, construction, interpretation, administration and
effect of the Plan, and of its rules and regulations, and rights relating
to the Plan and to Awards granted under the Plan, shall be governed by
the substantive laws, but not the choice of law rules, of the State of
Delaware.
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18. PLAN AMENDMENT OR SUSPENSION. The Plan may be amended or suspended in
whole or in part at any time from time to time by the Board, but no amendment
shall be effective unless and until the same is approved by stockholders of
the Company where the failure to obtain such approval would adversely affect
the compliance of the Plan with Rule 16b-3 under the Exchange Act and with
other applicable law. No amendment of the Plan shall adversely affect in a
material manner any right of any participant with respect to any Award
theretofore granted without such participant's written consent, except as
permitted under Paragraph 11.
19. PLAN TERMINATION. This Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) upon the adoption of a resolution of the Board terminating the
Plan; or
(b) July 6, 2003; provided, however, that the Board may, prior to such
date, extend the term of the Plan for an additional period of up to five
years for the grant of Awards other than Incentive Stock Options. No
termination of the Plan shall materially alter or impair any of the
rights or obligations of any person, without his consent, under any Award
theretofore granted under the Plan, except that subsequent to termination
of the Plan, the Committee may make amendments permitted under Paragraph
11.
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EXHIBIT B
[LOGO OF CELESTIAL SEASONINGS]
CELESTIAL SEASONINGS, INC.
1994 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
AS AMENDED AND RESTATED DECEMBER 29, 1997
1. PURPOSE. The purpose of the Amended and Restated 1994 Non-Employee
Director Compensation Plan is to advance the interests of the Company by
providing an inducement to obtain and retain the services of qualified persons
who are neither employees nor officers of the Company to serve as Directors
and to solidify the common interests of the Directors and Stockholders.
2. DEFINITIONS.
(a) "Annual Grant Date" shall mean the close of business on the date
preceding each annual meeting of the Company's stockholders, commencing
in 1999.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Company" shall mean Celestial Seasonings, Inc., a Delaware
corporation.
(e) "Director" shall mean any person serving as a member of the Board.
(f) "Disability" shall mean the condition of a Grantee who is unable
to engage in any substantial business activities by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to
last for a continuous period of nine (9) months or more.
(g) "Eligible Directors" shall mean those Directors eligible to
participate in the Plan pursuant to Section 4.
(h) "Fair Market Value" shall mean the last reported sale price of a
Share as quoted on the NASDAQ National Market System (or other exchange
on which the Shares are principally traded) on the relevant date for
valuation, or, if there is no such sale, the last reported sale price of
a Share as so reported on the nearest preceding date upon which such sale
took place.
(i) "Grantee" shall mean an Eligible Director who has been granted an
Option.
(j) "Ineligible Directors" shall mean those Directors who are not
Eligible Directors.
(k) "Initial Grant Date" shall mean (i) in the case of an Eligible
Director who is first elected as a Director after the Company's 1998
annual meeting of stockholders, the date of the Company's annual meeting
of stockholders at which such Director is first elected to the Board,
(ii) in the case of an Eligible Director who was first elected as a
Director on or prior to the Company's 1998 annual meeting of
stockholders, the date of the Company's 1998 annual meeting of
stockholders.
(l) "Meeting Fees" shall mean all fees paid for attendance at each
regular or special meeting of the Board or Board Committee attended by a
Director. Such fees shall be set by the Ineligible Directors.
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(m) "Option" shall mean an option to purchase Shares, granted pursuant
to the Plan and subject to the terms and conditions described in the
Plan.
(n) "Optionee" shall mean a person who holds an Option.
(o) "Plan" shall mean this Amended and Restated 1994 Non-Employee
Director Compensation Plan, as it may be amended from time to time
pursuant to Section 9.
(p) "Retainer" shall mean a retainer paid annually to Eligible
Directors, which amount shall be set by the Ineligible Directors.
(q) "Share" shall mean a share of the Company's common stock, $.01 par
value per share.
(r) "Subsidiary" shall mean a subsidiary corporation of the type
defined in Code Section 425(f).
3. ADMINISTRATION. The Plan shall be administered by the Ineligible
Directors. Subject to the provisions of the Plan, the Ineligible Directors
shall have the power to construe the Plan, to determine all questions arising
under the Plan and to adopt and amend any rules and regulations for the
administration of the Plan as they may deem desirable. Any interpretation,
determination or other action made or taken by the Ineligible Directors shall
be made or taken only upon the concurrence of a majority of the Ineligible
Directors and shall be final, binding and conclusive. Any action reduced to
writing and signed by all of the Ineligible Directors shall be as fully
effective as if it had been taken by a vote at a meeting of the Ineligible
Directors duly called and held. None of the Ineligible Directors shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options.
4. ELIGIBILITY. All Directors of the Company shall be Eligible Directors
unless they are full-time employees of the Company or any Subsidiary of the
Company.
5. SHARES SUBJECT TO THE PLAN.
(a) Shares. Awards granted under the Plan shall be made from the
Company's authorized but unissued Shares, or, if so determined by the
Ineligible Directors, treasury Shares.
(b) Aggregate Amount. A total of 75,000 Shares shall be authorized for
issuance or resale under the Plan (subject to adjustment under Section
10(c)). If any Option is terminated or is not exercised for any reason,
then any unpurchased Shares subject to such Option shall not be charged
against the limitation on Shares set forth in this Section 5(b) and such
Shares shall again be available for Options granted under the Plan.
(c) Limitation on Awards under the Plan. Notwithstanding any provision
of the Plan to the contrary, no Eligible Director may receive more than
40,000 Shares pursuant to the Plan.
6. RETAINER AND MEETING FEES. Each Eligible Director may elect to receive
all or any portion of any Retainer and Meeting Fees in cash, in Shares, or in
a combination thereof. Such election shall be irrevocable, made in writing and
delivered to the Company's Secretary on or prior to the close of business on
the date of the annual meeting of the Company's stockholders. If no such
election is received, Eligible Directors shall receive any Retainer and
Meeting Fees in cash.
(a) Cash Retainer and Meeting Fees. Retainers paid in cash shall be
paid to each Eligible Director elected at the annual meeting of the
Company's stockholders, and shall be paid on or as soon as practicable
after the annual meeting of the Company's stockholders. Meeting Fees paid
in cash shall be paid on or as soon as practicable after any regular or
special meeting attended by an Eligible Director.
(b) Shares in lieu of Cash Retainer and Meeting Fees. If an Eligible
Director elects to receive all or any part of any cash Retainer and/or
Meeting Fees in Shares, the number of Shares payable in lieu
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of cash shall be equal to the amount of such cash divided by the Fair
Market Value of a Share on the date preceding the annual meeting of the
Company's Stockholders. Certificates for Shares shall be delivered to
Eligible Directors as soon as practicable following the end of the one
year period commencing on the annual meeting of the Company's
Stockholders. Such certificates shall be registered in the name of the
Eligible Director, and all Shares so issued shall be fully paid and
nonassessable. The Company will pay any issuance or transfer taxes with
respect to the issuance of Shares. Any fractions of Shares otherwise
issuable under the Plan shall be paid in cash, or, if an Eligible
Director has elected to receive any Shares in lieu of cash Retainers or
Meeting Fees for the next year, the amount of such cash shall be added to
the Retainer and/or Meeting Fees to be issued in Shares during the next
year.
7. TERMS, CONDITIONS AND FORM OF OPTIONS. Each Option granted under the
Plan shall be evidenced by a written agreement in such form as the Ineligible
Directors shall from time to time approve, which agreement shall be executed
by a duly authorized officer of the Company and shall comply with and be
subject to the following terms and conditions:
(a) Option Grant Dates. Grants of Options shall be automatic and shall
be made as of the Initial Grant Date and the Annual Grant Date.
(b) Option Formula. Each Eligible Director shall receive an Option to
purchase 5,000 Shares, without further action by the Board, on the
Initial Grant Date, provided, however, that any Eligible Director who
received an Option pursuant to this Plan prior to the Initial Grant Date
shall receive an Option to purchase a number of Shares that, when added
to the number of Shares covered by the previous Option, equals 5,000
Shares. Each Eligible Director shall receive an Option to purchase 2,000
Shares, without further action by the Board, on each Annual Grant Date,
(c) Period of Options. Except as provided in Sections 7(g) and (h)
below, Options shall vest and become exercisable one year after the
applicable Initial or Annual Grant Date. Options shall terminate and
cease to be exercisable on the tenth anniversary of the date upon which
such Option was granted (subject to prior termination as provided in
Sections 7(g) and (h) below).
(d) Option Price. The exercise price of each Option granted on an
Annual Grant Date shall be equal to the Fair Market Value of a Share on
the Annual Grant Date. The exercise price of each Option granted on an
Initial Grant Date shall be equal to the Fair Market Value of a Share on
the day preceding the Initial Grant Date.
(e) Exercise of Options. Options may be exercised (in full or in part)
only by written notice of exercise delivered to the Company at its
principal executive office, accompanied by payment, in cash, Shares, the
surrender of another outstanding Option under the Plan, or any
combination thereof equal to the exercise price for the Shares obtainable
upon exercise of the Option. The Company shall have the right to deduct
from payments of any kind due to an Optionee, or require payment by the
Optionee, of federal, state or local taxes required to be withheld in
connection with any exercise of an Option.
(f) Options Non-Transferable. No Option shall be transferable other
than by will or by the laws of descent and distribution; provided,
however, that the Ineligible Directors may grant Options that are
transferable, without payment of consideration, to immediate family
members of the Grantee or to trusts or partnerships for such family
members and may amend outstanding Options to provide for such
transferability. No interest of any Optionee under an Option or the Plan
shall be subject to attachment, execution, garnishment, sequestration,
the laws of bankruptcy or any other legal or equitable process. During
the lifetime of the Grantee, Options shall be exercisable only by the
Grantee who received them or the Grantee's guardian or legal
representative or a permitted transferee.
(g) Death or Disability of Grantee. If a Grantee dies or terminates
performance of services as a Director because of Disability, any unvested
and unexercisable Option granted to such Grantee shall
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immediately and fully vest. Such Option, together with any other vested
and exercisable Options granted to such Grantee, may be exercised, at any
time, or from time to time, prior to the earlier of (i) the termination
of such Option in accordance with Section 7(c), or (ii) one year after
the date of such Grantee's death or termination of services as a
Director, at which date all then-outstanding and unexercised Options
granted to such Grantee shall terminate. In the case of death, an Option
may be exercised by the person or persons to whom the Optionee's rights
under the Option pass by will or applicable law, or if no such person has
such rights, by the Optionee's executors or administrators; provided that
such person(s) consent in writing to abide by and be subject to the terms
of the Plan and the Option and such writing is delivered to the Company.
(h) Ceasing to Serve as a Director other than for Death or Disability.
(i) If a Grantee's performance of services as a Director
terminates for any reason other than death, Disability or
termination of services as a Director for cause, any unvested and
unexercisable Option granted to such Grantee shall immediately and
fully vest. Such Option, together with any other vested and
exercisable Options granted to such Grantee, may be exercised, at
any time, or from time to time, prior to the earlier of (i) the
termination of such Option in accordance with Section 7(c) or (ii)
three months after the date of such Grantee's termination of
services as a Director, at which date all then-outstanding and
unexercised Options granted to such Grantee shall terminate.
(ii) If a Grantee's performance of services as a Director is
terminated for cause, any unvested and unexercisable Option granted
to such Grantee shall terminate as of the date of such termination
of services. All Options previously granted to such Grantee which
are, as of the date of such termination of services, vested and
exercisable, may be exercised at any time, or from time to time,
prior to the earlier of (i) the termination of such Option in
accordance with Section 7(c) or (ii) one month after the date of
such Grantee's termination of services as a Director, at which date
all then-outstanding and unexercised Options granted to such Grantee
shall terminate. For the purposes of the Plan and any Option
agreement, such Grantee's service shall be deemed to have terminated
on the earlier of (a) the date when such Grantee's service in fact
terminated or (b) the date when such Grantee received written notice
that his service is to terminate for cause.
(i) No Rights as Stockholder. No Optionee shall have any rights as a
stockholder with respect to any Shares subject to an Option prior to the
date of issuance to such Optionee of a certificate or certificates for
such Shares.
(j) Nonqualified Stock Options. Options shall not be incentive stock
options within the meaning of Code Section 422.
8. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant and
exercise of Options, and the obligation of the Company to issue Shares and to
transfer Shares upon exercise of Options shall be subject to all applicable
federal and state laws, rules and regulations, including those related to
disclosure of financial and other information to Optionees, and to any
approvals by any government or regulatory agency as may be required. The
Company shall not be required to issue or deliver any certificates for Shares
prior to (a) the listing of such Shares on any stock exchange or other market
on which the Shares may then be listed, where such listing is required under
the rules or regulations of such exchange or market, and (b) the compliance
with applicable federal and state securities laws and regulations relating to
the issuance and delivery of such certificates; provided, however, that the
Company shall make all reasonable efforts to so list such Shares and to comply
with such laws and regulations.
9. AMENDMENT AND DISCONTINUANCE. The Board may from time to time amend,
suspend or discontinue the Plan; provided, however, that, the Plan shall not
be amended without the consent of the stockholders of the Company to the
extent such consent is required under Rule 16b-3 under the Securities and
Exchange Act of
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<PAGE>
1934, as amended, Section 162(m) of the Code or any stock exchange or market
quotation system on which the Shares are then listed or quoted.
10. GENERAL PROVISIONS.
(a) Assignability. The rights and benefits under the Plan or any
Option shall not be assignable or transferable by an Eligible Director or
Optionee other than by will or by the laws of descent and distribution,
and during the lifetime of the Grantee, Options shall be exercisable only
by the Grantee who received them or the Grantee's guardian or legal
representative; provided, however, that the Ineligible Directors may
grant Options that are transferable, without payment of consideration, to
immediate family members of the Grantee or to trusts or partnerships for
such family members and may amend outstanding Options to provide for such
transferability.
(b) Termination of Plan. No Shares may be issued in lieu of Retainers
and Meeting Fees, and no Options may be granted under the Plan after
August 4, 2004 (or if such date is not a business day, on the next
succeeding business day). Following such date, the Plan shall
automatically terminate after all Options granted under the Plan have
been exercised or have terminated or expired.
(c) Adjustments in Event of Change in Shares. If any change in the
Shares by reason of any stock dividend, recapitalization, reorganization,
merger, consolidation, split-up, combination or exchange of Shares, or of
any similar change affecting the Shares, then the number and class of
Shares subject to outstanding Options or to be issued in lieu of
Retainers and Meeting Fees, the exercise price per Share, and any other
terms of the Plan or the Options which in the Ineligible Directors' sole
discretion require an equitable adjustment shall be appropriately
adjusted consistent with such change in such manner as the Ineligible
Directors may deem appropriate. Such adjustments may include a provision
permitting the Company to pay cash in lieu of fractional Shares.
(d) No Right to Continue as a Director. Neither the Plan, the granting
of an Option nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or
implied, that the Company will retain a Director for any period of time,
or at any particular rate of compensation.
(e) ERISA. The Plan is not an employee benefit plan which is subject
to the provisions of the Employee Retirement Income Security Act of 1974,
and the provisions of Code Section 401(a) are not applicable to the Plan.
(f) Effective Date of the Plan. The Plan took effect on August 4,
1994, subject to approval of the Company's stockholders which was granted
on February 9, 1995. The Plan was amended and restated by the Board on
August 15, 1996 and December 29, 1997, with the December 29, 1997
amendment and restatement subject to approval of the Company's
stockholders on February 12, 1998. This amended and restated version of
the Plan shall amend and supersede in its entirety previous versions of
the Plan, provided, however, that such amendment and restatement is not
intended to affect the validity of any of actions taken pursuant to
previous versions of the Plan.
(g) Governing Law. To the extent not superseded by federal law, the
Plan and all determinations made and actions taken pursuant hereto shall
be governed by the laws of the State of Delaware and construed
accordingly.
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<PAGE>
PROXY PROXY
CELESTIAL SEASONINGS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Mo Siegel, Stephen B. Hughes and Darrell F. Askey, or
any of them, the proxies and attorneys-in-fact for the undersigned, with full
power of substitution and revocation, to vote on behalf of the undersigned, at
the 1998 annual meeting of stockholders of Celestial Seasonings, Inc. (The
"Company") to be held at Celestial Seasonings, Inc., 4600 Sleepytime Drive,
Boulder, Colorado 80301 on Thursday, February 12, 1998 at 2:30 p.m. (MST), and
any adjournments thereof, all shares of the common stock, $.01 par value per
share, of the Company standing in the name of the undersigned or which the
undersigned may be entitled to vote as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4
PROPOSED BY THE COMPANY
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
(Continued and to be signed on reverse side.)
1. Election of Directors. Nominees:
Marina Hahn, Stephen B. Hughes and Leonard Lieberman
----------------------------------------------------
Nominee Exception
FOR ALL
(EXCEPT THOSE
FOR WITHHELD WRITTEN TO
ALL ALL THE LEFT)
[ ] [ ] [ ]
2. Amendment of the Celestial Seasonings, Inc. 1993 Long Term Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Amendment of the Celestial Seasonings, Inc. 1994 Non-Employee Director
Compensation Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Ratification of the appointment of Delotte & Touche LLP as the Company's
Independent auditors for the year ending September 30, 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
[ ] Yes, I am planning on attending the meeting.
The undersigned hereby revokes all previous proxies given by the undersigned to
vote at such meeting or adjournment or postponement thereof.
Dated:__________________________________
Signatures: ____________________________
________________________________________
Please sign exactly as name appears on the card. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned. If no direction is made, this proxy will be voted FOR items 1,
2, 3 and 4. The persons named as proxies on the reverse side of this card will
have discretionary authority to vote this proxy with respect to additional
matters that are properly presented at the meeting. Receipt of the Notice of
Annual Meeting of Stockholders and accompanying Proxy Statement is hereby
acknowledged.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED
ENVELOPE.
