<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
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TCBY Enterprises, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
TCBY Enterprises, 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:
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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):
-------------------------------------------------------------------------
(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>
TCBY ENTERPRISES, INC.
425 WEST CAPITOL AVENUE
LITTLE ROCK, ARKANSAS 72201
February 24, 1997
Notice of Annual Meeting of Stockholders
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of TCBY
Enterprises, Inc. will be held at the State House Convention Center, 1
Statehouse Plaza, Little Rock, Arkansas, on Thursday, April 17, 1997, at 10:00
a.m., Little Rock time, to consider the following proposals:
1.the election of eight directors;
2.the amendment of the 1992 Employee Stock Option Plan;
3.a stockholder's proposal to engage an investment banker; and
4.the transaction of such other business as may properly come before the
meeting.
By order of the Board of
Directors,
WILLIAM P. CREASMAN
Secretary
----------------
Proxy Statement
Only stockholders of record at the close of business on February 24, 1997,
will be entitled to notice of and to vote at the meeting. The Company had
outstanding 27,063,345 shares of common stock (inclusive of treasury stock) as
of the close of business on January 31, 1997. There are no other outstanding
voting securities. Each stockholder is entitled to one vote per share for the
election of directors, as well as on other matters. The accompanying proxy
form is solicited on behalf of the Board of Directors. If the proxy form is
signed and returned, the shares represented thereby will be voted, and it is
intended that they will be voted for the nominees named herein, except to the
extent authority to vote is withheld. The stockholder may revoke the proxy at
any time prior to the voting thereof by giving written notice of such
revocation to the Company, by executing and duly delivering a subsequent
proxy, or by attending the meeting and voting in person. In addition to the
use of the mails, proxies may be solicited by directors, officers, or regular
employees of the Company and its subsidiaries in person, by telegraph, or by
telephone. Broker non-votes are not relevant to the proposal to elect
directors but will be counted for quorum purposes. Abstentions and broker non-
votes will be counted as votes against the proposal to approve the Amendment
to the 1992 Employee Stock Option Plan and the stockholder proposal.
Under Delaware law and the Company's By-laws, if a quorum is present at the
meeting (a) the nominees for election of directors at the meeting who receive
the greatest number of votes cast for the election of directors at the meeting
by the shares present in person or by proxy and entitled to vote shall be
elected directors and (b) the proposal to amend the 1992 Employee Stock Option
Plan and the stockholder proposal must each be approved by the affirmative
vote of the majority of shares present in person or by proxy and entitled to
vote on each such matter if such matter is to be approved.
The Company knows of no matter to be brought before the meeting other than
that referred to in the accompanying notice of annual meeting. If, however,
any other matters properly come before the meeting, the proxy solicited hereby
confers discretionary authority to the proxies to vote in their sole
discretion with respect to such matters, as well as other matters incident to
the conduct of the meeting.
1
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of January 31, 1997, with respect to each
person who is known to the Company to be the beneficial owner of more than 5%
of the outstanding shares of common stock of the Company, the name and address
of such owner, the number of shares of common stock beneficially owned, the
nature of such ownership, and the percentage such shares comprised of the
outstanding shares of common stock of the Company:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT*
OF BENEFICIAL OWNER(A) OF BENEFICIAL OWNERSHIP OF CLASS
---------------------- ----------------------- --------
<S> <C> <C>
Frank D. Hickingbotham(b) ............... 9,836,374 40.2%
c/o TCBY Enterprises, Inc.
425 West Capitol Avenue
Little Rock, Arklansas 72201
</TABLE>
- - --------
* Percentages are based upon 24,450,876 shares outstanding and entitled to
vote (excluding 2,612,469 shares the Company holds as treasury stock which
is not entitled to vote) on January 31, 1997.
(a) The Company is relying on reports filed under Section 13 of the Securities
Exchange Act of 1934, as amended, for purposes of determining ownership of
more than 5% of its common stock by any person or group.
(b) See the table and footnote (a) under "Nominees for Election as Directors."
[THIS SPACE LEFT BLANK INTENTIONALLY]
2
<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS;
SECURITY OWNERSHIP OF MANAGEMENT
Eight persons are nominated for election as directors to hold office until
the annual meeting of stockholders in 1998 and until their respective
successors are elected and qualified. The following table sets forth certain
information as of January 31, 1997 with respect to the positions held and
beneficial ownership of the Company's Common Stock by its directors, nominees
for election as directors and certain named executive officers:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION,
NAME OF
ORGANIZATION IN WHICH
OCCUPATION IS OUTSTANDING COMMON
CARRIED ON, OFFICES AND FIRST BECAME A STOCK OF COMPANY
POSITIONS, DIRECTOR OF THE BENEFICIALLY
IF ANY, HELD WITH THE COMPANY OR OF A OWNED AT
NAME COMPANY, AND AGE PREDECESSOR JANUARY 31, 1997(A)
---- ----------------------- --------------- -------------------
<C> <S> <C> <C>
Frank D. Hickingbotham.... Chairman of the Board 1970 9,917,360
and Chief Executive
Officer of the Company;
Age 60(b)
Herren C. Hickingbotham... President and Chief 1982 600,510
Operating Officer of the
Company; Age 38(b)
William H. Bowen.......... Dean, School of Law, 1993 *
University of Arkansas
at Little Rock; Age
73(b)
Daniel R. Grant........... President Emeritus, 1989 *
Ouachita Baptist
University; Age 73
F. Todd Hickingbotham..... President of Riverport 1990 549,278
Equipment and
Distribution Company, a
subsidiary of the
Company; Age 33
Don O. Kirkpatrick........ President and Chief 1993 *
Executive Officer,
Quality Foods, Inc.
(foodservice
distribution); Age 59
Marvin D. Loyd............ Dentist; Age 64 1984 *
Hugh H. Pollard........... Chief Executive Officer 1984 338,000
of Brooks-Pollard Co.,
Inc. (a marketing
consulting firm);
Age 56(b)
<CAPTION>
NAMED EXECUTIVES
----------------
<C> <S> <C> <C>
James M. Sahene........... President and Chief N/A *
Operating Officer, TCBY
Systems, Inc., a
subsidiary of the
Company; Age 36
William P. Creasman....... Senior Vice President, N/A *
General Counsel and
Secretary of the
Company; Age 44
Jim H. Fink............... Executive Vice President N/A *
of the Company; Age 39
</TABLE>
- - --------
* Denotes ownership of less than 1% of the outstanding common stock of the
Company.
(a) Includes shares, if any, held by spouse; held in joint tenancy with
spouse; held by or for the benefit of nominee or one or more members of
nominee's immediate family; held by a charitable foundation of which the
nominee is the trustee; credited to nominee's account in the Company's
employee or non-employee director stock option plans; with respect to
which the nominee has or shares voting or investment powers; subject to
employee stock options which were exercisable on January 31, 1997 (592,868
shares) or which have or will become exercisable within 60 days
thereafter; or in which the nominee otherwise has a beneficial interest.
All directors and officers as a group beneficially own an aggregate of
11,815,500 shares (48.3% of all outstanding shares, excluding shares the
Company holds as treasury stock).
(b) Also a member of the Executive Committee of the Board of Directors of the
Company.
Frank D. Hickingbotham is the father of Herren C. Hickingbotham and F. Todd
Hickingbotham. No other family relationships exist among any of the above
named individuals. Frank D. Hickingbotham is also a director of First
Commercial Corporation, a bank holding company.
3
<PAGE>
Mr. Bowen served as Chairman and Chief Executive Officer of First Commercial
Corporation, a bank holding company, from 1984 to 1991, and currently remains
a director of that company. From September 1991 to December 1992, Mr. Bowen
served as Chief of Staff to former Arkansas Governor Bill Clinton. Mr. Bowen
served as President and Chief Executive Officer of Healthsource Arkansas
Ventures, Inc., from September, 1993 to July, 1995, and is currently a member
of its board of directors. Mr. Bowen began his current service as Dean of the
School of Law for the University of Arkansas at Little Rock in July, 1995.
Except as set forth above each of the foregoing nominees has served the
nominee's respective company in the capacity set forth or in various
administrative or executive positions with such company, its parents or
subsidiaries for at least five years.
BOARD OF DIRECTORS
The Board of Directors of the Company held meetings or acted by written
consent five (5) times during the fiscal year ended November 30, 1996. All of
the Company's incumbent director nominees attended each of these meetings
except for Dr. Daniel Grant who missed one meeting. The Board of Directors has
standing compensation and audit committees; it does not have a standing
nominating committee. Directors who are not officers of the Company or any
subsidiary of the Company are paid $1,000 for each day of attendance at Board
meetings, are reimbursed for expenses of attending Board meetings, and were
paid additional fees of $10,000 for fiscal 1996. In 1992, the Company's
stockholders approved the adoption of the 1992 Nonemployee Director Stock
Option Plan ("Director Plan") pursuant to which each director of the Company
who was not otherwise an employee of the Company or any subsidiary on April 1,
1992 ("Effective Date") automatically was granted options to purchase shares
of the Company's common stock on such date; the number of options for shares
granted was determined by multiplying one plus the number of whole years of
continuous service on the Board during the period commencing on March 31, 1985
through March 30, 1991 times 4,000. Each director elected to the Board after
the Effective Date shall upon such election automatically be granted an option
to purchase 4,000 shares. Additionally, on each succeeding April 1 following
the Effective Date, each director shall automatically be granted an option to
purchase 4,000 shares of common stock; provided however, that such option
grants shall only be made to those directors who (i) are not otherwise
employees of the Company or any subsidiary on the date of grant; (ii) were not
employees of the Company or any subsidiary at any time during the period
commencing on the date of the last annual meeting through the date of grant
(the "Eligibility Period"); (iii) served on the Board for the entire
Eligibility Period; and (iv) attended at least 50% of the meetings of the
Board during the Eligibility Period. As of January 31, 1997, none of these
options had been exercised. In fiscal 1996, 4,000 options were granted under
this plan to each of the five non-employee directors now nominated for
election. Outstanding options terminate three months after a director's
service ends, except in case of the death or permanent disability of such
director. The exercise price of all options under this plan is equal to the
fair market value of the common stock of the Company as of the close of
trading on the date of the grant.
The Compensation Committee, which during fiscal 1996 consisted of Dr. Grant,
Mr. Bowen and Dr. Loyd, considers, approves, and reports to the Board of
Directors the compensation to be paid to the officers of the Company,
determines the amounts of grants under the Company's stock option plans, and
makes recommendations to the Board with respect to the Company's compensation
policies. The Compensation Committee held 3 meetings during fiscal 1996.
The Audit Committee, which during fiscal 1996 consisted of Dr. Loyd, Dr.
Grant and Mr. Kirkpatrick, recommends independent public accountants for
appointment by the Board of Directors as auditors of the Company and its
subsidiaries, reviews and makes recommendations to the Board with respect to
the scope of the annual audit of the Company and its subsidiaries, reviews
recommendations made by the auditors with respect to the accounting methods
used and the adequacy of the Company's internal control structure, advises the
Board with respect to such recommendations, and approves non-audit services.
The Audit Committee held 1 meeting in fiscal 1996.
4
<PAGE>
AMENDMENT OF 1992 EMPLOYEE STOCK OPTION PLAN
At the Annual Meeting of Stockholders on April 14, 1992, the Stockholders of
the Company approved the 1992 Employee Stock Option Plan of TCBY Enterprises,
Inc. (the "Plan"). The Plan provides for up to one million (1,000,000) shares
to be made available to key employees of the Company and its subsidiaries who
render those types of services which tend to contribute materially to the
success of the Company and its subsidiaries. The Plan is administered by the
Compensation Committee of the Board of Directors, and at the April 12, 1995,
and April 17, 1996, Annual Meetings of Stockholders, the Stockholders of the
Company authorized at each meeting an additional five hundred thousand
(500,000) unissued shares for grant under the terms and conditions of the
Plan. Stockholders have thus authorized two million (2,000,000) shares for
grant under the Plan since its adoption in 1992. In keeping with the
Compensation Committee's philosophy regarding incentive compensation (see
section entitled "BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION," below), an additional one million (1,000,000) unissued shares
are deemed necessary and are therefore requested to be authorized for grant
under the terms and conditions of the Plan. No other amendment is requested.
Approval of this Plan amendment requires the affirmative vote of a majority of
shares of the Company's common stock present, in person or by proxy, at the
Annual Meeting.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL TO AMEND THE PLAN AS STATED.
The following is a brief summary of the Plan: The Plan now provides for the
granting of options to purchase up to two million shares of the Company's
common stock. The Plan is administered by the Board's Compensation Committee
whose members are "non-employee directors" within the meaning of federal
securities laws.
The number and kind of shares subject to the Plan would be appropriately
adjusted in the event of any change in the capital structure of the Company.
Further, the Plan specifically provides that if the Company adopts a dual
class of capital stock whereby one class of stock would have voting rights
superior to another, then unexercised options would automatically convert to
options to acquire the lesser voting stock in number and with such exercise
price as determined by the Board's Compensation Committee to be in proportion
to the original option grant. Stockholders would have no preemptive rights
with regard to shares allotted to the Plan.
Participants are selected by the Compensation Committee itself upon the
recommendation of management. The Compensation Committee determines the number
of shares to be optioned to any individual under the Plan. Options vest and
become exercisable in the manner and within the periods specified by the
Compensation Committee.
The Board of Directors is able to suspend, terminate, or amend the Plan. The
Board is not required to obtain Stockholder approval of any amendment to the
Plan except where such approval is necessary to assure the Plan's continued
qualification under Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), under New York Stock Exchange Rules, or under
the Internal Revenue Code of 1986, as amended (the "Code").
The Plan enables the Company to grant either "incentive stock options"
(within the meaning of the Code) or options that are not intended to be
"incentive stock options." No options can be granted under the Plan later than
April 14, 2002. Any options granted under the Plan must have an exercise
period of no more than ten years. No option shall be assignable or
transferable by the optionee except by will or by the laws of descent and
distribution, and each option is exercisable during the lifetime of an
optionee only by such optionee and at death by his heirs, executors, or
administrators. The Plan provides that upon termination of employment of the
optionee for a cause other than death, disability, or retirement, the rights
to exercise the option which have accrued at the date of termination cease,
whether or not accrued at the date of termination, unless the Compensation
Committee otherwise specifies. In the event of termination of employment due
to death, full disability, or retirement, the period of time following the
date of such termination in which a subject option may be exercised is three
months for "incentive stock options."
5
<PAGE>
The exercise price per share for each option is and will be not less than
the fair market value on the date of grant, determined as prescribed by the
Code. It is provided that payment for the portion exercised may be made only
in whole at the time of exercise of the option in cash or in the Company's
common stock (whether or not owned prior to the exercise date) valued at its
fair market value on the exercise date. Proceeds received from optioned shares
will be used for general corporate purposes.
The aggregate fair market value (determined as of the time such option is
granted) of the common stock for which any employee may have incentive stock
options vest in any calendar year may not exceed $100,000.
No determination has been made with respect to future recipients of options
under the Plan and it is not possible to specify the names or positions of the
persons to whom options may be granted, or the number of shares, within the
limitations of the Plan, to be covered by such options.
Under currently applicable provisions of the Code, as amended, an optionee
will not be deemed to receive any income for Federal tax purposes upon the
grant of any option under the Plan, nor will the Company be entitled to a tax
deduction at that time. Upon the exercise of a non-incentive option, the
optionee will be deemed to have received ordinary income in an amount equal to
the difference between the option price and the market price of the shares on
the exercise date. The Company will be allowed an income tax deduction equal
to the excess of market value of the shares on the date of exercise over the
cost of such shares to the optionee. Upon the exercise of an incentive stock
option, there is no income recognized by the optionee at the time of exercise.
If the stock is held at least one year following the exercise date and at
least two years from the date of grant of the option, the optionee will
realize a capital gain or loss upon sale, measured as the difference between
exercise price and the sale price. If both of these holding period
requirements are not satisfied, ordinary income tax treatment will apply to
the amount of gain at sale or exercise, whichever is less. If the actual gain
exceeds the amount of ordinary income, the excess will be considered short-
term or long-term capital gain depending on how long the shares are actually
held. No income tax deduction will be allowed the Company with respect to
shares purchased by an optionee upon the exercise of an incentive stock
option, provided such shares are held for the required periods as described
above. Under the Code, as amended, an option will generally be disqualified
from receiving incentive stock option treatment if it is exercised more than
three months following termination of employment. However, if the optionee is
disabled, such statutory treatment is available for one year following
termination. If the optionee dies while employed by the Company or within
three months thereafter, the statutory time limit is waived altogether. In no
event do these statutory provisions extend the rights to exercise an option
beyond those provided by its terms.
STOCKHOLDER PROPOSAL TO ENGAGE INVESTMENT BANKER
The following was submitted by Mr. William Steiner, 4 Radcliff Drive, Great
Neck, New York 11024 (who is record owner of 800 shares of Common Stock) for
consideration by the stockholders of the Company:
"Sale or Merger of Company
"Resolved: that the shareholders of the Company recommend and deem it
desirable and in their best interest that the board of directors
immediately engage the services of a nationally recognized investment
banker to explore all alternatives to enhance the value of the Company.
These alternative {sic} should include, but not be limited to, the possible
sale, merger or other transaction involving the Company{.}
"Supporting Statement
"In support of the above resolution, the proponent believes that in view of
the unacceptable performance of the Company over the past five years, the
deplorable stock price, and in my opinion, ineffective management, the
board of directors should take immediate action to engage the services of
an investment banker to explore all alternatives to enhance the value of
the Company{.}
6
<PAGE>
"I am the founder of the Investors Rights Association of America and it is
my opinion that the value of the Company can be enhanced if the above
resolution is carried out and the shareholders would at long last be able
to salvage meaningful monetary rewards for their patience and long
suffering.
"Nell Minow, a highly acclaimed corporate governance specialist, and
principal of the LENS Fund, which specializes in increasing the value of
under-performing companies, has stated:
" "Companies can only justify asking investors to take the risk of
investing in equities by delivering a competitive rate of return on the
invested capital. When a company's management and board cannot meet
that goal, they owe it to their investors to submit themselves to an
independent evaluation by an outside firm, to insure that all options
are objectively evaluated.
" "If a company's performance lags over a sustained period, it is time
for the shareholders to send a message of no confidence to the board,
reminding them that they have to hold management--and themselves--to a
higher standard.'
"I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION{.}"
The foregoing is the verbatim submission of Mr. Steiner. All statements
therein are his and neither the management of the Company nor the Board of
Directors have verified their accuracy.
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
The Board of Directors believes that this proposal would not serve the
Company's best interests and recommends a vote AGAINST it.
In June of 1995, the Company engaged Stephens, Inc., a nationally-recognized
investment banking firm, to explore the Company's various strategic
alternatives with the intention of maximizing stockholder value. Between June,
1995, and December, 1995, the Company's Board of Directors held numerous
meetings at which each of the principal strategic alternatives identified by
Stephens were explored in detail.
As a result of this process the Company, on December 1, 1995, announced that
its engagement of Stephens had resulted in a determination by the Board of
Directors to (a) authorize the repurchase of up to 3 million shares of
outstanding TCBY Common Stock (as of November 30, 1996, 1,037,700 shares had
been repurchased, and this number has increased by approximately 200,000 since
that date), (b) franchise or close Company-owned "TCBY" stores (all but one
Company-owned store was franchised or closed in 1996), (c) sell the Carlin
Manufacturing subsidiary (efforts are still underway to divest this business),
(d) restructure its organization (operating expenses were reduced 64% in
fiscal 1996), and (e) consider alternative methods for the distribution of its
retail hard-pack products (the numbers of targeted customers and markets were
reduced in 1996, with resulting efficiencies which contributed positively to
earnings). The Company's management and Board of Directors believe that the
implementation of the foregoing have had positive results on the operations of
the Company in fiscal 1996 and contributed directly to the improved
performance of the Company in fiscal 1996 (earnings per share of $0.26) over
fiscal 1995 (loss per share of $0.83).
The process, concluded in November, 1995, of exploring all strategic options
was expensive, distractive, and time consuming. The Company's management and
Board of Directors agree that, in light of these recent actions, duplication
of these efforts and expenses, which would be required by Mr. Steiner's
proposal, so soon after the conclusion of an identical process would not be in
the best interest of stockholders.
ACCORDINGLY, THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT
STOCKHOLDERS VOTE AGAINST THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED AGAINST THE
RESOLUTION UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
7
<PAGE>
REMUNERATION
The following table shows the cash compensation paid by the Company, and its
subsidiaries, as well as certain other compensation paid or accrued, during
the fiscal years indicated, to each of the most highly compensated executive
officers of the Company and its subsidiaries, in all capacities in which they
served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- -------------------
STOCK
OTHER ANNUAL OPTION ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARDS PAYOUTS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($)(A) (IN SHARES) ($) ($)(B)
------------------ ---- ---------- --------- ------------ ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank D. Hickingbotham.. 1996 356,598 85,000 57,295(c) 50,000 -- 5,207
Chairman and CEO 1995 398,915 30,000 -- 48,486 -- 5,077
1994 412,692 68,475 -- 20,000 -- 5,077
Herren C. Hickingbotham. 1996 283,006 82,500 -- 100,000 -- 4,817
President and Chief
Operating 1995 251,598 30,000 -- 33,680 4,925(d) 4,687
Officer 1994 242,221 40,095 -- 32,000 -- 4,687
James M. Sahene......... 1996 170,257 35,200 -- 100,000 -- 4,817
President and Chief
Operating 1995 148,846 20,000 -- 22,500 -- 4,687
Officer--TCBY Systems,
Inc. 1994 133,615 17,500 -- 39,000 -- 4,675
William P. Creasman..... 1996 158,997 27,620 -- 50,000 -- 2,820
Senior Vice President, 1995 149,374 15,044 -- 18,999 -- 2,581
General Counsel and
Secretary 1994 143,715 14,420 -- 13,000 -- 2,488
Jim H. Fink............. 1996 153,716 25,784 -- 100,000 -- 4,425
Executive Vice President 1995 137,192 14,044 -- 22,000 -- 3,975
1994 113,290 11,500 -- 13,000 -- 3,230
</TABLE>
- - --------
(a) Amounts not in excess of the lesser of $50,000 or 10% of salary and bonus
are not listed.
(b) Represents amounts contributed as matching contributions under the
Company's 401(k) Plan and life insurance premiums paid by the Company.
(c) Represents $17,250 paid for tax and accounting services, $26,963 for
personal use of corporate aircraft, and the balance in automobile usage
and membership dues.
(d) Represents estimated net gain on exercise of 3,468 options to purchase
TCBY Common Stock at a price of $3.83 in 1995 (which otherwise would have
expired).
[THIS SPACE LEFT BLANK INTENTIONALLY]
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows all individual grants of stock options to the
named executive officers of the Company during the fiscal year ended November
30, 1996:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
GRANTED TO STOCK
OPTIONS EMPLOYEES EXERCISE PRICE APPRECIATION
GRANTED IN FISCAL PRICE EXPIRATION FOR
NAME (#)(A) 1996 ($/SHARE)(B) DATE OPTION TERM
---- ------- ---------- ------------ ---------- ------------------
10%($)(C) 5%($)(C)
--------- --------
<S> <C> <C> <C> <C> <C> <C>
Frank D. Hickingbotham.. 50,000 10.00% $4.8125 04/17/2006 $151,594 $382,594
Herren C. Hickingbotham. 50,000 17.24% 4.25 03/15/2006 133,875 337,875
50,000 10.00% 4.8125 04/17/2006 151,594 382,594
James M. Sahene......... 50,000 17.24% 4.25 03/15/2006 133,875 337,875
50,000 10.00% 4.8125 04/17/2006 151,594 382,594
William P. Creasman..... 25,000 8.62% 4.25 03/15/2006 66,938 168,938
25,000 5.00% 4.8125 04/17/2006 75,797 191,297
Jim H. Fink............. 50,000 17.24% 4.25 03/15/2006 133,875 337,875
50,000 10.00% 4.8125 04/17/2006 151,594 382,594
</TABLE>
- - --------
(a) The options become exercisable in 4 equal annual installments (see
"Compensation Elements," below) beginning one year after the date of grant
assuming continued employment with the Company or its subsidiaries.
(b) The exercise price reflects the fair market value of the Company's Common
Stock on the date of grant. Currently, the exercise price may be paid in
cash or in shares of the Company's Common Stock having a fair market value
on the date of exercise equal to the aggregate option price. Any
obligation to pay federal or state withholding taxes must be paid in cash.
(c) As required by rules of the Securities and Exchange Commission, potential
values stated are based on the prescribed assumption that the Company's
Common Stock will appreciate in value from the date of grant to the end of
the option term (ten years from the date of grant) at annualized rates of
5% and 10% (total appreciation of 63% and 159%), respectively, and
therefore are not intended to forecast possible future appreciation, if
any, in the price of the Company's Common Stock.
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table provides information concerning unexercised options held
by the named executive officers as of the fiscal year end of the Company,
November 30, 1996:
<TABLE>
<CAPTION>
NUMBER NUMBER
NAME(A) EXERCISABLE VALUE(B) UNEXERCISABLE VALUE(B)
------- ----------- -------- ------------- --------
<S> <C> <C> <C> <C>
Frank D. Hickingbotham.............. 56,743 $-0- 89,243 $-0-
Herren C. Hickingbotham............. 68,625 -0- 137,090 -0-
James M. Sahene..................... 51,678 -0- 134,500 -0-
William P. Creasman................. 37,920 -0- 69,250 -0-
Jim H. Fink......................... 35,905 -0- 121,250 -0-
</TABLE>
- - --------
(a) For options exercised by any named executive during fiscal 1996, see
Summary Compensation Table.
(b) This represents the aggregate of the increases, if any, from the grant
prices to the closing price of common stock of the Company on December 2,
1996 ($4.25).
9
<PAGE>
EMPLOYMENT ARRANGEMENTS
Currently there are no employment agreements between any executive officer
of the Company and the Company.
Messrs. Herren Hickingbotham, Sahene, Creasman, and Fink each, as well as
certain other officers of the Company, have entered into change of control
agreements with the Company in which a multiple (2.99; other officers have the
same or lower multiple) of the average of the immediately preceding five
year's annual includable compensation will be paid to them upon an involuntary
termination of employment for either (i) a one year period following a change
of control of the Company or (ii) a voluntary termination of employment
between the 90th day following up to the anniversary date of a change of
control. "Change of control" is defined in the agreements. Any payments under
these agreements are expressly limited by so called "safe harbor" provisions
of Section 280G of the Internal Revenue Code of 1986 and the regulations
promulgated thereunder.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. At fiscal 1996 year end, the
Compensation Committee was comprised of Dr. Daniel R. Grant, Mr. William H.
Bowen, and Marvin D. Loyd, all of whom are nonemployee directors of the
Company. The Compensation Committee establishes policies relating to the
compensation of executive officers, approves management's recommendations on
executive compensation amounts, and oversees the administration of the
Company's employee benefit plans.
Set forth below is the Compensation Committee's report which describes the
components of the Company's executive compensation program for fiscal 1996 and
the underlying policies upon which compensation determinations were based.
COMPENSATION POLICIES
The goal of the Company's compensation policy is to ensure that executive
compensation is related to and supports the Company's overall objective of
enhancing shareholder value. To achieve this goal the following objectives
have been adopted by the Compensation Committee as guidelines for compensation
decisions:
. Provide a competitive compensation package that enables the Company to
attract and retain key executives;
.Relate compensation to past and anticipated individual and Company
performance; and
.Align employees' interests with the interests of shareholders by
encouraging executive stock ownership.
COMPENSATION ELEMENTS
The Committee believes that the above objectives are obtained by combining
cash and equity based compensation. For fiscal 1996, the Company's
compensation program consisted of (i) base salary, adjusted from the prior
year; (ii) performance-based bonuses based upon the Company's performance;
(iii) stock option grants under the Company's 1992 Employee Stock Option Plan,
and (iv) matching contributions under the Company's deferred compensation
plan.
BASE SALARY. Executives' base salary levels are reviewed annually to
determine whether they are near the median range of persons holding comparable
positions at companies engaging in similar businesses of similar size and
complexity and whether they fairly compensate executives for past and
anticipated efforts. Various salary studies reviewed by the Compensation
Committee indicate that the executive officers of the Company generally are
paid at or below the median salary of all executives performing similar
functions at companies engaged in similar businesses of similar size.
Individual salaries are based upon past and anticipated individual
performance, level and scope of responsibility, and experience within a
competitive salary range in line with the
10
<PAGE>
pay practices of similarly situated companies. Base salaries for executives
increased moderately during fiscal 1996, as was the case in fiscal 1995 and
fiscal 1994. This occurred despite increased responsibilities for most members
of management as the effect of Company staff reductions continued during this
period. The Compensation Committee believes that such salaries were
competitive within a range that the Committee believes to be reasonable and
necessary to accomplish the Company's compensation objectives.
CASH BONUSES. In prior fiscal years the Compensation Committee determined
whether to award bonuses to executive officers based upon their individual
performances and the performance of the Company. For fiscal 1994, 1995, and
1996 the Compensation Committee adopted the Company's general bonus program
for all executive and other officers of the Company. Bonus participation was
set at a percentage of base salary for each full-time employee of the Company
by the Company's internal salary administration committee, and in the case of
executives and officers by the Compensation Committee; the percentage assigned
to the position was determined in all cases based upon the relative value to
the Company of the work to be performed by the employee holding such position.
In fiscal years prior to 1994 the bonus participation assigned was attainable
in four equal parts by each employee: (i) individual performance, as
determined by the employee's immediate supervisor or Compensation Committee,
in the case of the executive officers of the Company; (ii) departmental or
group performance, as determined with reference to the financial plan for that
department or group established and approved prior to commencement of the
fiscal year; (iii) subsidiary or division performance, also as determined with
reference to the financial plan for that subsidiary or division established
prior to commencement of the fiscal year; and (iv) overall Company
performance, also as determined with reference to the financial plan for the
Company. In fiscal 1994 the general bonus program was modified (a) by deleting
the fourth component (overall Company performance) for every full-time
employee and then evenly reallocating the total bonus percentage among the
remaining three components of the plan and (b) by rewriting the plan for
executive officers to base half of an officer's bonus on the third element of
the plan (subsidiary or division performance) and half on the fourth element
of the plan (overall Company performance). For fiscal 1995, the same general
bonus program continued as it did in fiscal 1994, but for executive officers
half of an officer's bonus was based on subsidiary or division performance and
half was granted in the beginning of the fiscal year in the form of stock
option grants in amounts determined by the Compensation Committee; for these
options, vesting occurs over a two-year period in equal installments as
opposed to over a four-year period normally granted for stock options. For
fiscal 1996 bonus participation for employees in general was attainable in
only two parts: (a) 50% was dependent upon the employee's departmental or
group performance, as determined with reference to the financial plan for that
department or group established and approved prior to commencement of the
fiscal year, and (b) 50% was dependent upon the overall Company performance,
also determined with reference to the financial plan for the Company.
Executive officers of the Company had their bonus participation made
attainable, and completely dependent upon, the Company's meeting or exceeding
the financial plan of the Company for fiscal 1996. For fiscal 1994, the
Company failed to achieve its goal as set in its financial plan, so executive
officers' eligibility for bonus payments was limited to fifty percent (50%)
conditioned upon an executive officer's subsidiary or division performance.
Subsidiary and division performance goals were met for fiscal 1995 only
partially in some cases. For fiscal 1996 the Company met its overall financial
plan goal of $0.26 earnings per share, and full bonus payments were made for
executive officers accordingly.
STOCK OPTIONS. The Compensation Committee strongly believes that the
interests of shareholders and executives become more closely aligned when such
executives are provided an opportunity to acquire a proprietary interest in
the Company through ownership of the Company's common stock. Accordingly, key
employees of the Company, including executive officers, as part of their
overall compensation package, are eligible for participation in the Company's
Employee Stock Option Plan, whereby they are granted options to purchase
shares of the Company's Common Stock in the future at a price specified at
time of grant. Stock options are granted at no less than fair market value on
the date of grant, and are exercisable in four annual installments beginning
one year after the date of grant. Because no benefit is received unless the
Company's stock price performs favorably, awards under the stock option plan
are intended to provide incentives for executive officers to enhance long-term
corporate performance, as reflected in stock price appreciation, thereby
increasing shareholder value. Individual stock option grants are determined
after considering a number of factors such as
11
<PAGE>
individual performance, Company performance, and the relative mix of cash and
non-cash compensation. During fiscal 1996, options to purchase a total of
612,000 shares were granted to executive officers at prices of $4.25 and
$4.8125 per share.
DEFERRED COMPENSATION. The Company has adopted a broad-based pre-tax savings
plan (the "401(k) Plan") to provide a means for eligible employees to defer a
portion of their compensation and encourage savings to provide additional
financial security for the future. While the Compensation Committee considers
this to be an important element of its employees' compensation package,
Company contributions under the 401(k) Plan are fixed in accordance with
employee contributions and therefore are not directly tied to individual or
corporate performance.
CEO COMPENSATION
Mr. Frank D. Hickingbotham has been Chairman and Chief Executive Officer of
the Company since its inception. As with other executive officers, Mr.
Hickingbotham's compensation package has been designed to encourage short and
long-term performance in line with the stockholder interests. The Compensation
Committee believes that Mr. Hickingbotham's base salary is reflective of his
position and responsibility, and various salary surveys reviewed by the
Compensation Committee indicate that he is paid comparably to chief executive
officers of companies of similar size. Mr. Hickingbotham's 1996 salary was
determined based upon the factors considered in determining the base salary
for all executives.
In accordance with the Company's overall policy with regard to and treatment
of cash bonuses in fiscal 1996, Mr. Hickingbotham received a bonus of $85,000.
In keeping with the Company's goal of linking executive compensation to the
creation of shareholder value, in fiscal 1996 Mr. Hickingbotham was granted
stock options to purchase 50,000 shares of the Company's Common Stock. In
granting such options, the Compensation Committee considered Mr.
Hickingbotham's level and scope of responsibility, contributions to the
Company, and the extent to which such options were being granted in lieu of
other cash-based compensation.
SUMMARY
The Compensation Committee believes that the combination of base salary and
bonuses based upon individual and corporate performance in conjunction with
equity based compensation linking executives interests with the interests of
the Company's shareholders, provides a competitive program which reflects the
Company's compensation policies described above. The Committee further
believes that these policies are specifically reflected in fiscal 1996
compensation levels.
COMPENSATION COMMITTEE:
Daniel R. Grant, William H. Bowen, Marvin D. Loyd
12
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the Dow Jones Equity Market Index and Dow Jones Consumer
Cyclical Sector Entertainment & Leisure-Restaurants Index for the last five
years beginning November 30, 1991 and ending November 30, 1996. The graph
assumes that the value of the investment in the Company's Common Stock and each
index was $100 at November 30, 1991 and that all dividends, if any, were
reinvested.
The performance graph in this space has a vertical axis indicating Dollars
and is numbered in units of 50 from 50 to 350; the horizontal axis indicates
dates of each November 30 from 1991 to 1996. The three lines appearing in the
graph represent the performance of TCBY Enterprises, Inc., common stock, the Dow
Jones Consumer Cyclical Sector Entertainment & Leisure-Restaurants Index, and
the Dow Jones Equity Market Index; each of the three lines start at a value of
$100 on November 30, 1991. The TCBY Enterprises, Inc. line moves to $90 on
11/30/92, $125 on 11/30/93, $120 on 11/30/94, $99 on 11/30/95, and $100 on
11/30/96. The Dow Jones Consumer Cyclical Sector Entertainment &
Leisure-Restaurants Index line moves up to $142 on 11/30/92, $166 on 11/30/93,
$154 on 11/30/94, $222 on 11/30/95, and $318 on 11/30/96. The Dow Jones Equity
Market Index line moves to $119 on 11/30/92, $131 on 11/30/93, $132 on 11/30/94,
$182 on 11/30/95, and $324 on 11/30/96.
CERTAIN TRANSACTIONS
The Company in fiscal 1996 engaged Brooks-Pollard Co., Inc., a marketing
consulting firm of which Mr. Hugh H. Pollard is Chief Executive Officer, to
advise and assist the Company in its public relations efforts. The Company paid
to Brooks-Pollard Co., Inc. approximately $75,000 primarily for consultation
services in fiscal 1996.
The Company's health plans administrator, Spradley & Coker, Inc., was
acquired by Healthsource Arkansas Ventures, Inc., in 1993. Mr. William H. Bowen
was President and Chief Executive Officer of the acquiring company and served
in such capacity until July, 1995, and is currently a member of its board of
directors. In fiscal 1996, the Company paid fees of approximately $57,000 to
Spradley & Coker.
The Company contracts with Quality Foods, Inc., of which Mr. Don O.
Kirkpatrick is President and Chief Executive Officer, for certain foodservice
distribution, primarily within the State of Arkansas in connection with
deliveries to accounts of TCBY Systems, Inc. The value of goods handled by
Quality Foods for TCBY Systems, Inc. was approximately $437,000 in fiscal 1996,
and Quality Foods, Inc. derived fees therefrom consistent with industry
standards.
13
<PAGE>
During fiscal 1996, the Company used the services of First Commercial Bank,
which is owned by First Commercial Corporation, on the Board of Directors of
which currently serve Mr. William H. Bowen and Mr. Frank D. Hickingbotham; the
Company has had and continues to have a banking relationship primarily
involving depository accounts and other normal and customary commercial
accounts with First Commercial Bank.
On October 2, 1995, 15 Company-owned TCBY stores were sold or otherwise
divested to three separate franchisee groups each comprised of an individual
and a corporation; the corporations in each transaction are owned indirectly
by Mr. F. Todd Hickingbotham. In the aggregate the franchisee groups paid the
Company $1,065,000 by way of promissory notes; the Company paid the three
franchise groups an aggregate of $130,000 in fiscal 1996 as fees for managing
underperforming stores over the course of operating agreements entered into in
connection with the sales transaction. The sales prices were determined by
multiplying cash flow for each store by a weighted factor which was itself
dependent upon the historic performance of the store, and management fees were
determined with reference to historic and anticipated cash flow deficits and
fixed so as to place each such store in a break even position for the
remaining term of that store's lease for its premises. The person determining
the sales price or management fee to be paid for each store pursuant to these
principles was Mr. Gene H. Whisenhunt, Executive Vice President and Chief
Financial Officer of the Company. Mr. F. Todd Hickingbotham's corporations
continue to be current on their notes, franchise agreements, and assigned
leases. One of Mr. F. Todd Hickingbotham's companies currently leases office
space located at an office building (the Company's former headquarters) owned
by the Company and leased to various businesses not affiliated with the
Company; the lease to Mr. F. Todd Hickingbotham's corporation is at market
rates and comparable to rates paid by other tenants not affiliated with the
Company.
AUDITORS
Representatives of Ernst & Young LLP, the Company's auditors, are expected
to be present at the meeting and will be available to respond to questions and
may make a statement if they so desire.
STOCKHOLDER PROPOSALS FOR NEXT MEETING
Any proposal which a stockholder intends to present at the annual meeting of
stockholders in 1998 must be received by the Company by October 28, 1997, in
order to be eligible for inclusion in the proxy statement and proxy form
relating to such meeting.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Solicitations
may be made by officers, directors, and employees of the Company personally or
by mail, telephone, telegraph, or other similar means of communication;
provided that solicitation by such persons is made on a part time basis and no
special compensation, other than actual expenses incurred, will be paid.
IMPORTANT
All stockholders are cordially invited to attend the meeting in person. If
you cannot be present at the meeting, please sign and date the enclosed Proxy
and mail it PROMPTLY in the enclosed self-addressed envelope. No postage need
be affixed if mailed in the United States.
14
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
---------------------------
TCBY ENTERPRISES, INC.
---------------------------
RECORD DATE SHARES:
Please be sure to sign and date -------------
this Proxy. | Date |
- - ------------------------------------------------
| |
| |
- - --Stockholder sign here----Co-owner sign here---
1. The election as directors of all nominees listed (except as marked to the
contrary below).
With- For All
William H. Bowen, Daniel R. Grant, For Hold Except
F. Todd Hickingbotham, Frank D. Hickingbotham, --- --- ---
Herren C. Hickingbotham, Don O. Kirkpatrick, | | | | | |
Marvin D. Loyd, Hugh H. Pollard | | | | | |
--- --- ---
INSTRUCTION: To withhold your vote from any individual nominee, mark the "For
All Except" box and strike a line through that nominee's name in the list above.
2. The amendment of the 1992 employee stock option For Against Abstain
plan (increasing authorized shares by 1,000,000). --- --- ---
| | | | | |
| | | | | |
--- --- ---
--- --- ---
3. Stockholder Proposal to engage investment banker. | | | | | |
| | | | | |
--- --- ---
4. To transact such other business as may properly come before the meeting.
Mark box at right if an address change or comment has been noted ---
on the reverse side of this card | |
| |
---
DETACH CARD DETACH CARD
<PAGE>
TCBY ENTERPRISES, INC.
The undersigned hereby appoints FRANK D. HICKINGBOTHAM, HERREN C. HICKINGBOTHAM
and GENE H. WHISENHUNT, and each of them, proxies with power of substitution and
revocation, acting by majority of those present and voting, or if only one is
present and voting then that one, to vote the shares of stock of TCBY
ENTERPRISES, INC. which the undersigned is entitled to vote, at the annual
meeting of stockholders to be held in Little Rock, Arkansas, on Thursday, April
17, 1997 at 10:00 a.m., Little Rock time, and at any adjournment thereof, with
all the powers the undersigned would possess if present.
"THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TCBY
ENTERPRISES, INC. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL
1 and AGAINST PROPOSALS 2 and 3."
The undersigned hereby revokes any proxy or proxies heretofore given to vote
such shares and appoints the aforementioned proxies to vote as set forth at said
meeting or at any adjournment thereof.
- - --------------------------------------------------------------------------------
| PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY USING THE ENCLOSED|
| ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. |
|------------------------------------------------------------------------------|
| Please sign exactly as name appears on this proxy including, where proper, |
| official position or representative capacity. |
- - --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- - ----------------------------------- --------------------------------
- - ----------------------------------- --------------------------------
- - ----------------------------------- --------------------------------
<PAGE>
EXHIBIT 1
1992 EMPLOYEE STOCK OPTION PLAN
OF
TCBY ENTERPRISES, INC.
1. Establishment, Continuation and Purpose. The purpose of this Plan is to
---------------------------------------
further the growth and development of TCBY Enterprises, Inc. and any subsidiary
corporations, as hereinafter defined (referred to, unless the context otherwise
requires, as the "Company"), by granting to certain key employees of the Company
and any subsidiary corporations, as an incentive and encouragement to stock
ownership, options to purchase shares of common stock of the Company, par value
$.1O (the "Common Stock"), and thereby obtain a proprietary interest in the
enterprise and a more direct stake in its continuing welfare.
2. Administration.
--------------
a. The Plan shall be administered by the Compensation Committee of the
Board of Directors (the "Committee") consisting of not less than two directors
of the Company to be appointed by the Board of Directors. The Board of Directors
may from time to time remove members from, or add members to, the Committee with
or without cause. Vacancies of the Committee, however caused, shall be filled by
the Board of Directors. Each member of the Committee shall be a "disinterested
person" within the meaning of Rule 16b-3 (or any successor rule or regulation)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Committee shall select one or its members as chairman and shall hold
meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum and acts of the Committee at which a quorum
is present, or acts reduced to or approved in writing by all the members of the
Committee, shall be the valid acts of the Committee.
b. The Committee shall report to the Board of Directors the names of
employees granted options, the number of shares covered by each option, and the
terms and conditions of each such option.
c. Except as provided in subparagraph (d) of this paragraph 2, the
Committee shall have the sole authority, in its absolute discretion, to adopt,
amend and rescind such rules and regulations as, in its opinion, may be
advisable in the administration of the Plan; and to construe and interpret the
Plan, the rules and regulations, and the instruments evidencing options granted
under the Plan and to make all other determinations deemed necessary or
advisable for the administration of the Plan. All decisions, determinations,
and interpretations of the Committee shall be binding on all holders of options.
d. Any or all powers and functions of the Committee may at any time and
from time to time be exercised by the Board of Directors; provided, however,
that, no exercise of this authority shall occur unless all members of the Board
of Directors are "disinterested persons" within the meaning of Rule 16b-3 (or
any successor rule or regulation) promulgated under the Exchange Act.
e. No member or former member of the Committee of the Board of Directors
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted hereunder.
3. Grant of Options. Options to purchase shares of Common Stock shall be
----------------
granted on behalf of the Company by the Committee from time to time and within
the limits of the Plan. The Committee shall determine the key employees of the
Company and of any subsidiary corporation to whom options are to be granted
("Participant"), the number of shares to be optioned to each, and the option
price, as well as the option period, the vesting schedule with respect to such
option, and the number of shares that may be exercised during the option period.
Options granted under the Plan may be either nonstatutory options or
<PAGE>
incentive stock options. The Committee, at the time each option is granted,
shall designate such option as either a nonstatutory stock option or an
incentive stock option. Any incentive stock option granted under the Plan must
be exercisable within ten (10) years of the date it is granted.
With respect to incentive stock options, the aggregate fair market value
(as determined at the time the option is granted) of the stock with respect to
which options granted herein are exercisable for the first time by any
Participant during any calendar year (under all plans of the Company and it
subsidiaries) shall not exceed One Hundred Thousand Dollars ($100,000.00).
4. Shares Subject to the Plan. The Shares which may be optioned shall be
--------------------------
authorized and unissued shares of Common Stock not exceeding in the aggregate
One Million (1,000,000) shares.
5. Participants. All key employees of the Company and any subsidiary
------------
corporations of the Company shall be eligible to receive options and thereby
become Participants in the Plan. In granting options, the Committee may include
or exclude previous Participants in the Plan. As used herein, the terms
"subsidiary corporation" and "parent corporation" shall mean a "subsidiary
corporation" or "parent corporation" as defined in Section 424 of the Code.
6. Key Employee. For purposes of this Plan, a "key employee" shall mean
------------
one or more employees of the Company or its subsidiaries, including officers
(whether or not they are directors) who render those types of services which
tend to contribute materially to the success of the Company or a subsidiary or
which reasonably may be anticipated to contribute materially to the future
success of the Company or a subsidiary. A person shall not be deemed to have
terminated employment with the Company or any subsidiary corporation for
purposes of this Plan, solely by reason of transfer of the employee from the
Company to a subsidiary corporation, from a subsidiary corporation to the
Company or from one subsidiary corporation to another.
7. Option Price. The price at which shares may from time to time be
------------
optioned shall be not less than the fair market value at the time the option is
granted. The fair market value shall be determined in accordance with paragraph
13.
8. Option Period. The period for exercising an option (the "Exercise
-------------
Period") shall be such period of time as may be designated by the Committee at
the time of grant, and except that, unless the Committee shall determine
otherwise at the time or making the grant of an option:
(a) If a Participant retires during the Exercise Period, such option
shall be exercisable by him only during the three (3) months following his
retirement, but in no event after the expiration of the Exercise Period.
(b) If a Participant dies during the Exercise Period or terminates his
employment due to total disability, such option shall be exercisable by the
Participant or the executors, administrators, legatees or distributees of
his estate only during the twelve (12) months following his death or
disability, but in no event after the expiration of the Exercise Period.
(c) If a Participant ceases to be an employee of the Company for any
cause other than retirement, disability or death, such option shall
terminate as of a date three (3) months following the date of the cessation
of his employment.
At the time of grant of any option, the Committee shall have the power and
authority in any specific instance to extend the period during which
nonstatutory options may continue to vest and to be exercisable by the
Participant. Specifically, without limiting the generality of the foregoing, the
Committee shall have the authority to provide that an option may immediately
vest upon disability, death or retirement of an optionee
-2-
<PAGE>
and may remain exercisable for such period of time as the Committee may
determine. Unless the Committee shall otherwise determine at the time of making
a specific option grant, to the extent that an option is exercisable in
installments, a Participant's vested right to exercise any portion of an option
shall be fixed, determined and limited to that portion of the option which was
fully exercisable as of the date of termination of employment.
9. Exercise of Option. Subject to paragraphs 8 and 17, an option may be
------------------
exercised at any time and from time to time during the Exercise Period.
10. Holding Period. All Participants under the Plan who are otherwise
--------------
subject to the requirements of Section 16 of the Exchange Act, shall be subject
to a six month holding period from the date of grant of an option under the Plan
to the date of sale of the shares subject to the option. This provision shall
not act to limit the ability of any Participant to exercise an option pursuant
to the terms of the Plan.
11. Payment for Shares. An option shall be considered exercised on the
------------------
date a Participant delivers to the Company an irrevocable notice of exercise
upon the form provided by the Company and full payment for such shares. Full
payment for shares purchased, together with the amount of any federal or state
withholding due in respect of the sale and issue thereof, shall be made in such
form of property (whether cash, securities or other consideration) as may be
acceptable to the Committee. A Participant shall have none of the rights of a
stockholder until certificates for the shares purchased are issued. In lieu of
cash, a Participant may, with the consent of the Committee, pay for the shares
purchased with shares of Common Stock having a fair market value on the date
upon which the Participant exercises his option equal to the option price, or
with a combination of cash and shares of Common Stock equal to the aggregate
option price. Any obligation to pay federal or state withholding must be
satisfied in cash.
12. Fair Market Value. For purposes of determining the fair market value
-----------------
of the Common Stock, the following rules shall apply:
(i) If the Common Stock is not at the time listed or admitted to
trading on a stock exchange, the fair market value shall be the mean
between the lowest reported bid price and highest reported asked price of
the Common Stock on the date in question in the over-the-counter market, as
such prices are reported in a publication of general circulation selected
by the Company and regularly reporting the market price of Common Stock in
such market;
(ii) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, then the fair market value shall be the mean between
the lowest and highest reported sale prices of the Common Stock on the date
in question on the principal exchange on which the Common Stock is then
listed or admitted to trading. If no reported sale of Common Stock takes
place on the date in question on the principal exchange, then the reported
closing asked price of the Common Stock on such date on the principal
exchange shall be determinative of fair market value; or
(iii) If the Common Stock is not listed or admitted to trading on any
stock exchange or traded in the over-the-counter market, the fair market
value shall be as determined in good faith by the Committee.
13. Nonassignability. Each option by its terms shall not be transferable
----------------
otherwise than by will or the laws of descent and distribution, and shall be
exercisable, during a Participant's lifetime, only by the Participant.
-3-
<PAGE>
14. Conditions to Exercise of Options. The Committee may, in its
---------------------------------
discretion, require as conditions to the exercise of options and the issuance of
shares thereunder either (a) that a registration statement under the Securities
Act of 1933, as amended, with respect to the options and the shares to be issued
on the exercise thereof, containing such current information as is required by
the Rules and Regulations under said Act, shall have become, and continue to be,
effective, or (b) that the Participant (i) shall have represented, warranted and
agreed, in form and substance satisfactory to the Company, both that he is
acquiring the option and, at the time of exercising the option, that he is
acquiring the shares for his own account, for investment and not with a view to
or in connection with any distribution, (ii) shall have agreed to restrictions
on transfer, in form and substance satisfactory to the Company, and (iii) shall
have agreed to an endorsement which makes appropriate reference to such
representations, warranties, agreements and restrictions both on the option and
on the certificate representing the shares.
15. Conditions to Effectiveness of the Plan. No option shall be granted or
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exercised if the grant of the option, or the exercise and the issuance of shares
pursuant thereto, would be contrary to law or the regulations of any duly
constituted authority having jurisdiction.
16. Alteration, Termination, Discontinuance, Suspension, or Amendment.
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The Plan shall terminate ten years after the date upon which it is approved by
stockholders and no option shall be granted under the Plan after such date.
Except as provided below in this paragraph 16, the Committee may alter,
terminate, discontinue, suspend or amend the Plan. The Committee may not,
however, without shareholder approval except as provided below in paragraph 18,
(i) increase the maximum number of shares in the aggregate that may be offered
for sale under options, (ii) change the manner of determining the option price,
(iii) increase the benefits accruing to Participants under the Plan, or (iv)
modify the requirements as to eligibility for participation in the Plan or,
without the consent of the Participant, change, alter or impair any option
previously granted to him under the Plan, except as provided in paragraph 18.
The maximum duration of any option granted under this Plan is ten years from the
date of grant, although options may be granted for a lesser duration.
17. Effect of Changes in Common Stock. If the Company shall combine,
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subdivide or reclassify the shares of Common Stock which have been or may be
subject to the Plan, or shall declare thereon any dividend payable in shares of
Common Stock, or shall reclassify or take any other action of a similar nature
affecting the Common Stock, then the number and class of shares of Common Stock
which may thereafter be optioned (in the aggregate and to any Participant) shall
be adjusted accordingly and, in the case of each option outstanding at the time
of any such action, the number and class of shares which may thereafter be
purchased pursuant to such option and the option price per share shall be
adjusted to such extent as may be determined by the Committee to be necessary to
preserve unimpaired the rights of the Participant, and each and every such
determination shall be conclusive and binding upon such Participant.
18. Reorganization. In case of any one or more reclassifications, change
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of terms of or exchanges of outstanding shares of Common Stock or other stock
(other than as provided in paragraph 17), or consolidations of the Company with,
or mergers of the Company into other corporations, or other recapitalizations or
reorganizations (other than transactions in which the Company continues to exist
and which do not result in any reclassifications, change of terms of or exchange
of outstanding shares of the Company), or in case of any one or more sales or
conveyances to another corporation of the property of the Company as an
entirety, or substantially as an entirety, any and all of which are hereinafter
in this paragraph called "Reorganization," the holder of each option then or
thereafter outstanding shall have the right, upon any subsequent exercise
thereof, to acquire the same kind and amount of securities and property which
such holder would then hold if such holder had exercised such option immediately
before the first of any such Reorganizations, and continue to hold all
securities and property which came to such holder as a result of that and
subsequent Reorganizations, less all securities and property surrendered or
canceled pursuant to any of same, the adjustment rights in paragraph 17 and this
paragraph 18 being continuing and cumulative, notwithstanding any such
reorganization, upon 30 days' written notice to the holders of outstanding
options,
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<PAGE>
the exercise period may be terminated and all outstanding options then
exercisable must be exercised within such 30 day period.
Notwithstanding any of the foregoing to the contrary, in the event of any
recapitalization of the Company involving the establishment of voting and non-
voting shares of stock, this option shall be amended and automatically, without
the action of any person, to provide that it shall be exercisable into shares of
non-voting stock only. If this option is so amended, the Compensation Committee
is authorized to make appropriate adjustments as to the maximum number of shares
of non-voting stock and the price per share of non-voting stock subject to this
option as shall be deemed necessary by the Committee, in its sole discretion, to
prevent dilution or enlargement of the option granted hereunder. The
determination of the Compensation Committee as to such adjustments shall be
conclusive.
19. Termination and New Grant Options. The Committee shall have the
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authority to effect, at any time and from time to time, with the consent of the
affected holders, the termination of any or all outstanding options under the
Plan and to grant in substitution therefor new options under the Plan covering
the same or different numbers of shares of Common Stock. The option price of
substituted options shall be determined by the Committee subject to the
requirements of paragraph 7.
20. Automatic Acceleration of Vested Rights. In the discretion of the
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Committee, it may provide at the time of grant of any option that the vesting of
such option may accelerate upon such event as the Committee may determine in its
discretion.
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