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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CELESTIAL SEASONING, INC
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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[LOGO OF CELESTIAL SEASONINGS]
Celestial Seasonings, Inc.
4600 Sleepytime Drive
Boulder, Colorado 80301
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held February 10, 2000
----------------
To the Stockholders of Celestial Seasonings, Inc.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Meeting") of Celestial Seasonings, Inc., a Delaware corporation (the
"Company"), will be held on Thursday, February 10, 2000, at 2:30 p.m., (MST),
at Celestial Seasonings, Inc., 4600 Sleepytime Drive, Boulder, Colorado 80301,
for the following purposes:
1) To elect two Class III directors to serve until the 2003 Annual
Meeting of Stockholders, and until their successors are duly elected
and qualified; and
2) To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the year ending September 30, 2000; and
3) 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
17, 1999, 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
David I. Rosenthal,
-------------------------
Senior Director of Finance
Boulder, Colorado
January 10, 2000
<PAGE>
[LOGO OF CELESTIAL SEASONINGS]
Celestial Seasonings, Inc.
4600 Sleepytime Drive
Boulder, Colorado 80301
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
February 10, 2000
----------------
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 2000 Annual Meeting of Stockholders of the
Company to be held on Thursday, February 10, 2000, 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 10, 2000.
Stockholders of the Company represented at the Meeting will consider and
vote upon (i) the election of two Class III directors, to serve until the 2003
annual meeting of stockholders, and until their successors are duly elected
and qualified, (ii) the ratification of the appointment of Deloitte & Touche
LLP as the Company's independent auditors for the year ending September 30,
2000, and (iii) such other business as may properly come before the Meeting
and as to which notice has not been received by the Company on or prior to
January 24, 2000. 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 17, 1999 (the "Record Date"), will be entitled to notice of, and to
vote at, the Meeting. As of the Record Date, there were 8,361,940 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, 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.
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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, stockholders will elect two Class III directors, who will
serve until the Company's 2003 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 nominees listed 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.
Directors of the Company are elected by a plurality of the shares voting in
the election of directors. Thus, the two nominees receiving the highest number
of votes will be elected. Abstentions and broker non-votes will have no effect
on the election of directors.
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 age, his principal occupation for at least the past five years,
and the period during which he has served as a director. Each nominee is
currently a director of the Company.
Nominees for Class III directors (terms expiring in 2003)
James P. Kelley, 45, has served as a director of the Company since 1988.
Mr. Kelley is a Managing Director of Vestar Capital Partners, Inc.
("Vestar"), a private investment firm. 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 a director of the Westinghouse Air
Brake Company and Reid Plastics, Inc.
Mo Siegel, 50, has served as a director of the Company since 1988 and as
Chairman of the Board since 1991. He founded Celestial Seasonings 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
products. He served as Chief Executive Officer of the Company from 1991 to
1997. Mr. Siegel also serves on the Board of Directors of Wild Oats
Markets, Inc., and several privately-held companies and foundations.
Incumbent Class I directors (terms expiring in 2001)
Marina Hahn, 42, has served as a director of the Company since 1994.
Currently, Ms. Hahn is Executive Vice President of J. Walter Thompson
Company, an advertising agency. From 1996 to 1998 she was Head of the
Corporate Advisory Group for the William Morris Agency, Inc. From 1993 to
1995, Ms. Hahn was Vice President, Advertising for Sony Electronics, Inc.,
a consumer electronics manufacturer. From 1989 until joining Sony, she was
the Director of Advertising for the Pepsi-Cola Company, a beverage company.
From 1979 to 1989, she was employed by DDB Needham Worldwide, Inc., an
advertising agency.
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Stephen B. Hughes, 45, 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.
Leonard Lieberman, 71, 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, Nice-Pak Products, Inc., and several privately-held companies.
Incumbent Class II directors (terms expiring in 2002)
Ronald V. Davis, 53, 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., a
leading beverage manufacturer and distributor, and from 1980 to 1992 he was
President and Chief Executive Officer of Perrier America.
John D. Howard, 47, has served as a director of the Company since 1988.
Since 1997, Mr. Howard has been a Senior Managing Director of Bear Stearns
& Co., Inc., an investment banking firm and head of Merchant Banking at
Bear Stearns. From 1990 to 1996 he was Co-Chief Executive Officer of
Vestar. 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 Safety-First Corporation, Dyersburg Fabrics,
Inc., M.S.S. Delaware and Nice-Pak Products, Inc.
Gregg A. Ostrander, 46, has served as a director of the Company since
1998. Mr. Ostrander is Chief Executive Officer of Michael Foods, Inc., a
food processor, a position he has held since 1994. During 1993, he was
Chief Operating Officer of Michael Foods. Mr. Ostrander was President of
Swift-Eckrich Prepared Foods, a division of Con-Agra, Inc., a diversified
food products company, from 1990 to 1993. From 1985 to 1990, Mr. Ostrander
held the positions of Vice President--Marketing and Senior Vice President--
Marketing at Armour Swift-Eckrich, Inc. Mr. Ostrander is a director of
Arctic Cat, Inc. and Michael Foods, Inc.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held four meetings during fiscal 1999. 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
1999.
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 1993 Long-Term Incentive Plan ("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, Lieberman and
Ostrander.
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
3
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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).
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, 1999, all of its directors,
executive officers and greater than 10% beneficial owners were in compliance
with their filing requirements.
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 50 Chairman of the Board
Stephen B. Hughes 45 Chief Executive Officer and President
Kerin Franklin 34 Vice President--Research & Development
Walter Freese 46 General Manager--Celestial Seasonings Brand
Marie A. Gambon 46 Vice President--Human Resources
David I. Rosenthal 45 Senior Director of Finance
</TABLE>
Ms. Franklin has been the Vice President--Research & Development since
April 1999. She joined the Company as Product Development Manager in November
1992. In August 1993 she was promoted to Senior Food Scientist, in February
1997 she was promoted to Director of Product Development, and in June 1998 she
was promoted to Senior Director of Research and Development. Prior to joining
Celestial, Ms. Franklin worked for several years as a product development
consultant, while pursuing her Master's Degree in Food Science and Human
Nutrition. Ms. Franklin has been working in the area of Product Development
for 10 years and holds several patents for functional foods and supplements.
Mr. Freese has been General Manager--Celestial Seasonings Brand since
September 1999. He joined the Company as Senior Director, Wellness Products in
March 1998, progressing to Vice President, Wellness Products in March 1999 and
Vice President/General Manager, Direct Business Channels in August 1999. Prior
to joining the Company, Mr. Freese was Group Vice President with Spectra
Marketing Systems, a marketing consulting firm, from 1996 to 1998. He served
as Vice President, Marketing for Casual Corner Group, a specialty retailer,
from 1993 to 1996. Mr. Freese has also held senior marketing positions with
leading packaged goods marketers, Kraft/General Foods and Nestle.
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.
Mr. Rosenthal joined the Company on August 10, 1999 as Senior Director of
Finance. Prior to joining Celestial Seasonings, he was the Chief Financial
Officer of Hauser, Inc., a manufacturer of natural extract products, from June
1994 to July 1999. Before 1994, Mr. Rosenthal held senior financial management
positions in public and private high technology companies, including Tandem
Computers, Inc. and Octel Communications Corporation.
4
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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation of Directors
During fiscal 1999, non-employee directors received an annual fee of
$10,000 for serving as a director, a fee of $2,000 for each meeting of the
Board of Directors or Board committee attended, and $500 for each special
meeting attended, as well as reimbursement for their costs of attending such
meetings. The annual directors' fee is paid in cash. Meeting fees are paid, at
the election of the director, in cash or Common Stock in accordance with the
provisions of the Director Plan. During 1999, all non-employee directors
elected to receive compensation for meeting fees in stock. In addition, in
1999 non-employee directors received an option to purchase 4,000 shares of
Common Stock. Mr. Ostrander received an initial grant of an option to purchase
10,000 shares in 1999. Mr. Siegel, Chairman of the Board, and Mr. Hughes,
Chief Executive Officer, receive no annual fees, meeting fees or option grants
for services as directors.
Executive Compensation
The following table sets forth the compensation awarded by the Company to
its Chairman, Chief Executive Officer and its four other most highly
compensated executive officers for services rendered during the three years
ended September 30, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term Compensation
-------------------------
Securities
Restricted Underlying
Name and Stock Options All Other
Principal Position Year Salary Bonus Other Award ($) Awarded (#) Compensation(11)
------------------ ---- -------- -------- ------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mo Siegel
Chairman of the Board.. 1999 $258,462 $ -- $ -- $ -- -- $ 7,748
1998 248,482 -- -- -- -- 9,437
1997 212,000 70,493 -- -- -- 8,945
Stephen B. Hughes
President and Chief
Executive Officer..... 1999 336,422 -- -- -- -- 12,222
1998 309,000 157,936 42,336(5) -- -- 7,224
1997(1) 69,495 40,054 11,540(5) 322,500(10) 430,000 --
Darrell F. Askey
Vice President--Finance
and Chief Financial
Officer............... 1999(2) 169,639 50,414 4,403(6) -- 15,000 5,090
1998 144,406 54,256 3,542(6) -- 20,000 8,341
1997 126,919 41,008 2,858(6) -- -- 6,911
William Atchinson
General Manager--
Supplements........... 1999(3) 181,939 5,404 56,567(7) -- 15,000 4,645
1998(3) 126,153 60,025 31,886(7) -- 30,000 1,054
Kerin Franklin
Vice President--
Research and
Development........... 1999 99,536 30,906 5,504(8) -- 15,000 6,809
1998 85,827 19,940 -- -- 5,000 5,391
1997 51,948 13,977 -- -- 2,700 3,882
Marie A. Gambon
Vice President--Human
Resources............. 1999 124,518 45,511 6,115(8) -- 15,000 7,715
1998 115,510 43,403 -- -- 20,000 7,359
1997 109,754 31,928 -- -- -- 6,284
Blake Waltrip
General Manager--
Beverages............. 1999(4) 142,316 -- 6,231(6) -- 15,000 7,579
1998(4) 79,323 30,610 59,290(9) -- 18,000 --
</TABLE>
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(1) Mr. Hughes' employment with the Company commenced during the Company's
third quarter in 1997.
(2) Mr. Askey ceased to serve as an executive officer on August 25, 1999.
(3) Mr. Atchinson's employment with the Company commenced during the
Company's first quarter in 1998. He ceased to serve as an executive
officer on September 3, 1999.
(4) Mr. Waltrip's employment with the Company commenced during the Company's
second quarter in 1998. He ceased to serve as an executive officer on
October 22, 1999.
(5) Consists of reimbursement of relocation expenses (1998--$37,515; 1997--
$10,561) and benefits related to the Company's provision of a leased car
(1998--$4,821; 1997--$979).
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(6) Consists of benefits related to the Company's provision of a leased car.
(7) Consists of reimbursement of relocation expenses.
(8) Consists of benefits in lieu of provision of a leased car.
(9) Consists of reimbursement of relocation expenses.
(10) Consists of 30,000 shares granted on June 16, 1997, with a value of
$577,500 as of September 30, 1998. The shares vest over a five year
period as follows: 20% one year from date of grant and 1 2/3% per month
thereafter. The Company has not declared any dividends in the past;
however, if a dividend were declared Mr. Hughes has the right to receive
such dividend.
(11) Consists of Company contributions pursuant to the Company's 401(k)
defined contribution plan, Company contributions pursuant to the
Company's thrift retirement plan, Company contributions to fund purchases
of Common Stock for the officer's account under the Company's employee
stock ownership plan, and premiums paid by the Company for the officer's
personal term life insurance policy and long term disability policy.
Option Grants in Last Fiscal Year
The following table sets forth information concerning options granted to
the executives named in the Summary Compensation Table above during the year
ended September 30, 1999.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
------------------------------------------------------ ------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price
Name Granted (#) Fiscal Year ($ / Sh) Expiration Date 5% 10%
---- ----------- ------------ ----------- ----------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Darrell F. Askey........ 15,000 5.9% $19.63 November 11, 2008 $ 81,330 $ 179,718
William Atchinson....... 15,000 5.9% $19.63 November 11, 2008 $ 81,330 $ 179,718
Kerin Franklin.......... 15,000 5.9% $19.63 November 11, 2008 $ 81,330 $ 179,718
Marie Gambon............ 15,000 5.9% $19.63 November 11, 2008 $ 81,330 $ 179,718
Blake Waltrip........... 15,000 5.9% $19.63 November 11, 2008 $ 81,330 $ 179,718
</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 the value of outstanding options held as of
September 30, 1999 by the executives named in the Summary Compensation Table
above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<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............... -- $ -- 227,940 / 0 $3,076,611 / 0
Stephen B. Hughes....... -- -- 193,500 / 236,500 1,644,750 / 2,010,250
Darrell F. Askey........ 22,520 184,834 0 / 0 0 / 0
William Atchinson....... -- -- 14,999 / 0 58,121 / 0
Kerin Franklin.......... -- -- 2,663 / 20,037 8,320 / 12,936
Marie Gambon............ -- -- 15,833 / 29,167 113,208 / 11,792
Blake Waltrip........... -- -- 5,700 / 27,300 24,225 / 52,275
</TABLE>
- --------
(1) Amounts are calculated as the difference between the fair market value of
the stock underlying the options ($19.75 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
$5.74 for Mr. Siegel's options, $10.75 for Mr. Hughes' options, $15.38 for
Mr. Atchinson's options, $18.56 for Ms. Franklin's options, $16.60 for Ms.
Gambon's options and $17.10 for Mr. Waltrip's options.
6
<PAGE>
Employment Agreements
Pursuant to Mr. Siegel's executive agreement with the Company, he is
entitled to an annual salary of $250,000 and is not eligible to 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 the executive is
terminated by the Company without cause. Mr. Siegel also agreed not to compete
with the Company for a period of four years following termination of his
employment and agreed to customary provisions regarding confidentiality and
proprietary rights.
When Mr. Hughes was hired by the Company on June 16, 1997, he entered into
an employment agreement with the Company, under which he received an annual
base salary of $295,000 during 1997 and $315,000 during 1998. The agreement
provides for an annual review of his base salary. In 1999, Mr. Hughes received
an annual base salary of $327,600. Mr. Hughes 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. The bonus is dependent upon
the Company achieving targeted financial and operating results. Mr. Hughes
received at the time of his employment nonqualified stock options to purchase
430,000 shares of the Company's common stock and a grant of 30,000 restricted
shares, all of which vest ratably over a five year period. Mr. Hughes is
entitled to participate in the 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 expired June
16, 1999, and by the terms of the agreement, automatically renewed for one
year. The employment agreement provides for severance compensation equal to
two times base salary if Mr. Hughes' employment 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 his employment and agreed
to customary provisions regarding confidentiality and proprietary rights.
Messrs. Askey and Atchinson 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, Mr. Atchinson received reimbursement of
certain relocation and temporary living expenses when he joined the Company.
Messrs. Askey and Atchinson both voluntarily resigned from the Company prior
to September 30, 1999.
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, who are neither employees nor officers of the
Company, are Ronald Davis, Chairman, John Howard, Leonard Lieberman and Gregg
Ostrander. 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, contribution to the
achievement of corporate objectives, 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 and approved by all non-employee
directors. Action with respect to the Chief Executive Officer's base salary is
reviewed and approved by the non-employee directors of the Board after
recommendation by the Compensation Committee. During fiscal 1999, the
Committee met once.
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Overall Policy
The Company's compensation programs are tied directly 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.
Each year, the Committee requires 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 one or more leading
compensation consulting groups.
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).
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 both within and outside 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,
approximately 70 key employees participated in the Annual Plan in 1999. 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 1999 Annual Plan for executive management had 90% of
their award tied to earnings per share and operating cash flow objectives and
10% tied to 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 cash flow 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 compensation earned for the year.
The compensation 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 1999, 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 because compensation linked to stock price performance helps
focus their attention on long-term creation of shareholder value.
Consequently, the Company's long-term incentive plans are stock-based. The
primary long-
8
<PAGE>
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, 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. Under this plan, approximately 252,000 options were issued to
approximately 60 employees in 1999. Options generally were, and historically
have been, granted at fair market value at the date of the grant.
Chief Executive Officer Compensation
In 1999, Mr. Hughes served as the Company's Chief Executive Officer and
President. In determining Mr. Hughes' 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. In 1999, the Company incurred non-
recurring charges of $9.1 million related to the cessation of production and
distribution of its 30 count dietary supplements product line. As a result of
these non-recurring charges, compared to the prior year, the Company's EBITDA
decreased 52%, and EPS decreased 64%. Revenue growth, another measure of
Company performance, increased 7.5% in 1999 after giving effect to the non-
recurring charge.
Based on these financial results, Mr. Hughes recommended to the Committee
that management personnel receive 100% bonus payout in recognition of the pre-
writeoff operating performance, and that he not receive an award under the
Annual Plan for the fiscal year ending September 30, 1999, due to the post
write-off reported results. The Committee adopted Mr. Hughes' recommendation.
MEMBERS OF THE COMMITTEE
Ronald V. Davis, Chairman
John D. Howard
Leonard Lieberman
Gregg A. Ostrander
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, The Russell 2000 Index and the Company
since the Company's initial public offering on July 12, 1993.
[LOGO OF CELESTIAL SEASONINGS 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 09/25/98 09/24/99
--------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Celestial Seasonings Index $ 100.00 $ 153.75 $ 90.00 $ 90.00 $ 95.00 $ 142.50 $ 179.40 $ 192.50
S&P Foods Index $ 100.00 $ 100.22 $ 107.78 $ 137.08 $ 144.02 $ 187.01 $ 201.14 $ 184.76
S&P Bev.-S.D. Index $ 100.00 $ 102.47 $ 106.34 $ 157.71 $ 192.69 $ 248.00 $ 219.10 $ 206.81
Wilshire 5000 Index $ 100.00 $ 102.83 $ 102.66 $ 130.47 $ 151.77 $ 205.54 $ 215.17 $ 262.36
Celestial Seasonings
Initial Public Offering Price
(7/12/93) or Closing Stock
Price(1) $ 10.00 $ 15.38 $ 9.00 $ 9.00 $ 9.50 $ 14.25 $ 17.94 $19.25
S&P Foods Index $ 802.03 $ 803.80 $ 864.44 $1,099.46 $1,155.12 $1,499.85 $1,613.23 $ 1,481.80
S&P Bev.-S.D. Index $1,463.81 $1,499.92 $1,556.55 $2,308.60 $2,820.63 $3,630.23 $3,207.23 $ 3,027.34
Wilshire 5000 Index $4,450.38 $4,576.47 $4,568.98 $5,806.63 $6,754.33 $9,147.19 $9,575.98 $11,675.90
</TABLE>
- --------
(1) The Company declared a two-for-one stock split effected in the form of a
100% common stock dividend during September 1998. All closing prices for
the Company's common stock are adjusted for the stock dividend.
10
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table and notes set forth as of December 1, 1999 the
beneficial ownership, as defined by the regulations of the United States
Securities and Exchange Commission ("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>
The Capital Group Companies,
Inc.(1)
333 South Hope Street, 52nd
Floor
Los Angeles, CA 90071 .......... 530,000 6.32%
Essex Investment Management(2)
125 High Street
South Boston, MA 02110.......... 1,121,015 13.38
FMR Corp.(3)
82 Devonshire Street
Boston, MA 02109 ............... 1,006,520 12.01
Gabelli Funds, Inc.(4)
One Corporate Center
Rye, NY 10580 .................. 1,412,000 16.85
Mo Siegel(5)..................... 471,584 5.63
Ronald V. Davis(6)............... 32,652 *
Marina Hahn(7)................... 12,166 *
John D. Howard(7)................ 92,214 1.1
Stephen B. Hughes(8)............. 253,379 3.02
James P. Kelley(7)............... 37,832 *
Leonard Lieberman(7)............. 15,617 *
Gregg A. Ostrander............... 132 *
William Atchinson(9)............. 18,400 *
Kerin Franklin(10)............... 3,057 *
Marie Gambon(11)................. 21,704 *
Blake Waltrip(12)................ 5,700 *
All Officers and Directors as a
Group (12 persons)(13).......... 964,437 11.51%
</TABLE>
- -------
*Less than 1%
(1) According to a statement on Schedule 13G filed on February 8, 1999, with
the Commission.
(2) According to an amendment to a statement on Schedule 13G filed on April
12, 1999, with the Commission, Essex Investment had sole voting power
over 687,070 shares and may be deemed to have beneficial ownership of an
additional 433,945 shares.
(3) According to an amendment to a statement on Schedule 13G filed on May 10,
1999, with the Commission, FMR Corp. had sole voting power over 324,700
shares. Fidelity Management & Research Company, a wholly-owned subsidiary
of FMR Corp. and an investment adviser registered under Section 203 of
the Investment Advisers Act of 1940, is the beneficial owner of 668,020
shares as a result of acting as investment adviser to various investment
companies that own the shares. Power to vote those shares is held by the
Board of Trustees of the funds which own the shares. Fidelity Management
Trust Company, a wholly-owned subsidiary of FMR Corp. is the beneficial
owner of 279,800 shares as a result of its serving as investment manager
of certain institutional accounts. Mr. Edward C. Johnson 3d and Abigail
Johnson, through a shareholders' voting agreement with respect to FMR
Corp., and together with certain other Johnson family members, may be
deemed, under the Investment Company Act of 1940, to form a controlling
group with respect to FMR Corp. Fidelity International Limited, a
Bermudan joint stock company, is the beneficial owner of 58,700 shares.
Fidelity International Limited was a majority-owned subsidiary of
Fidelity Management & Research Company until June 30, 1980, when its
shares were distributed, as a dividend, to the shareholders of FMR Corp.
(4) According to an amendment to a statement on Schedule 13D filed on October
12, 1999, with the Commission.
(5) Includes 227,940 shares obtainable upon the exercise of presently
exercisable options and 649 shares held in Mr. Siegel's account in the
Company's employee stock ownership plan (the "ESOP").
(6) Includes 30,000 shares obtainable upon the exercise of presently
exercisable options.
(7) Includes 10,000 shares obtainable upon the exercise of presently
exercisable options.
(8) Includes 30,000 restricted shares and 207,833 shares obtainable upon the
exercise of presently exercisable options.
(9) Includes 15,000 shares obtainable upon the exercise of presently
exercisable options.
(10) Includes 2,663 shares obtainable upon the exercise of presently
exercisable options and 226 shares held in Ms. Franklin's account in the
ESOP.
(11) Includes 20,000 shares obtainable upon the exercise of presently
exercisable options and 194 shares held in Ms. Gambon's account in the
ESOP.
(12) Includes 5,700 shares obtainable upon the exercise of presently
exercisable options.
(13) Includes 549,136 shares obtainable upon the exercise of presently
exercisable options and 1,072 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
approximately $910,000 to be used for the purchase of a home. The loan was
payable upon the earlier of the sale of Mr. Hughes' former home or 18 months
after the purchase of a new home. During April 1998 all amounts due from Mr.
Hughes were paid to the Company in full.
During 1999, Mr. Hughes and his wife borrowed approximately $3.0 million,
from a bank, in connection with the purchase and construction of certain real
estate. The interest rate on this loan is equal to the banks prime rate. The
Company guaranteed the repayment of up to $1.0 million of the loan, plus all
interest, lender's costs, expenses and attorney's fees incurred in connection
with any future collection of the loan. The guaranty will terminate when the
loan has been repaid in full, which under the terms of the loan is expected to
occur by the summer of 2001.
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, 1999, and, upon recommendation of the
Audit Committee, the Board of Directors has appointed Deloitte & Touche LLP to
serve for the year ending September 30, 2000. 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 by the
Board of Directors in selecting 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 2000 year
will stand unless the Board of Directors finds other reasons for making a
change.
Services to be performed by Deloitte & Touche LLP for the 2000 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 voting. 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 voting 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>
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 14, 2000 to be considered in the proxy statement and form
of proxy relating to the 2001 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 1999 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 judgement.
Celestial Seasonings, Inc.
Boulder, Colorado
January 10, 2000
13
<PAGE>
CELESTIAL SEASONINGS, INC.
Proxy Solicited on Behalf of The Board of Directors
The undersigned appoints Mo Siegel, Stephen B. Hughes and David I.
Rosenthal, 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 2000 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 10, 2000 at 2:30
p.m. (MST), and any adjournments thereof, all shares of the common stock, $.01
per 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 AND 2
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 the reverse side.)
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
For All
(Except those
1. Election of Directors. For Withhold written to 2. Ratification of the For Against Abstain
Nominees: James P. Kelley and Mo Siegel All All the left appointment of [ ] [ ] [ ]
[ ] [ ] [ ] Deloitte & Touche LLP
---------------------------------------- as the Company's
Nominee Exception Independent auditors
for the year ending
September 30, 2000
Yes, I am planning on
attending the meeting [ ]
</TABLE>
<TABLE>
<S> <C>
Then undersigned hereby revokes all previous
proxies given by the undersigned to vote at such
meeting or adjournment or postponement thereof.
Dated_____________________________
Signature_______________________________________
------------------------------------------------
Please sign exactly as name appears on the card.
This proxy when properly executed will be voted in the manner directed When shares are held by joint tenants, both
herein by the undersigned. If no direction is made, this proxy will be voted should sign. When signing as attorney, executor,
FOR items 1 and 2. The persons named as proxies on the reverse side of this administrator or guardian, please give full title
card will have discretionary authority to vote this proxy with respect to as such. If a corporation, please sign in full
additional matters that are properly presented at the meeting. Receipt of corporate name by president or other authorized
the Notice of Annual Meeting of Stockholders and accompanying Proxy officer. If a partnership, please sign in
Statement is hereby acknowledged partnership name by authorized person.
</TABLE>
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE
