<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[x] Definitive Proxy Statement Commission Only (as
[ ] Definitive Additional Materials permitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HEALTHY PLANET PRODUCTS, INC.
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
HEALTHY PLANET PRODUCTS, INC.
1700 Corporate Circle
Petaluma, California 94954
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 21, 1999
To the Stockholders of
HEALTHY PLANET PRODUCTS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of HEALTHY
PLANET PRODUCTS, INC. (the "Company") will be held at the Company's offices
located at 1700 Corporate Circle, Petaluma, California, 94954 on July 21, 1999
at 10:00 a.m., California time, for the following purposes:
(1) To elect two (2) Class 3 Directors to serve for a term of three
(3) years and until a successor has been duly elected and qualified;
(2) To consider and act on a proposal authorizing the adoption of
the 1999 Incentive Compensation Plan as set forth in Appendix A; and
(3) To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
The close of business on May 28, 1999 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournment thereof.
Enclosed is a Proxy Statement, a Proxy and a self-addressed envelope in
which to return the Proxy. You are cordially invited to attend the Annual
Meeting. Whether or not you plan to attend, please complete, date and sign the
accompanying Proxy and return it promptly in the enclosed envelope to assure
that your shares are represented at the Annual Meeting. If you do attend, you
may revoke any prior Proxy and vote your shares in person if you wish to do so.
Any prior Proxy will automatically be revoked if you execute the accompanying
Proxy or if you notify the Secretary of the Company, in writing, prior to the
Annual Meeting of Stockholders.
By Order of the Board of Directors
/s/ MICHAEL G. ZYBALA,
Secretary
Dated: June 8, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE>
HEALTHY PLANET PRODUCTS, INC.
1700 CORPORATE CIRCLE
PETALUMA, CALIFORNIA 94954
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 21, 1999
This Proxy Statement and the accompanying form of Proxy have been mailed
on or about June 8, 1999 to the holders of the Common Stock and Series D
Preferred Stock of record on May 28, 1999 of HEALTHY PLANET PRODUCTS, INC., a
Delaware corporation (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held 1700 Corporate Circle,
Petaluma, California, 94954 on July 21, 1999 and at any adjournment thereof.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
On May 28, 1999 (the "Record Date") there were 3,834,584 shares of Common
Stock, par value $.01 per share, issued and outstanding and 31,335 shares of
Series D Preferred Stock, par value $.10 per share, issued and outstanding. Only
holders of Common Stock and Series D Preferred Stock of record at the close of
business on the Record Date are entitled to receive notice of, and to vote at,
the Annual Meeting. Each share of Common Stock and Series D Preferred Stock
entitles the holder thereof to one vote on each matter submitted to
stockholders. The Common Stock and the Series D Preferred Stock vote together as
a single class. Voting is on a non-cumulative basis. All votes shall be
tabulated by the inspector of elections appointed for the Annual Meeting, who
shall separately tabulate affirmative and negative votes, abstentions, and
broker non-votes. The presence, in person or by proxy, of a majority of shares
entitled to vote will constitute a quorum for the meeting. Votes withheld from
director nominees and abstentions will be counted in determining whether a
quorum has been reached. Broker-dealer non-votes are not counted for quorum
purposes.
Shares of the Company's Common Stock and Series D Preferred Stock
represented by a properly executed Proxy in the accompanying form will, unless
contrary instructions are specified in the Proxy, be voted (i) FOR the election
of the two (2) nominees identified on the Proxy for Class 3 Director to serve
for a term of three (3) years, and (ii) FOR the proposal to adopt the Company's
1999 Incentive Compensation Plan as set forth in Appendix A. The Proxy also
provides that the persons authorized thereunder may, in the absence of
instructions to the contrary, vote or act in accordance with their judgment on
any other matters properly presented for action at the Annual Meeting or any
adjournment thereof.
Any Proxy may be revoked at any time before it is voted. A stockholder may
revoke the Proxy by notifying the Secretary of the Company either in writing
prior to the Annual Meeting or in person at the Annual Meeting, by submitting a
Proxy bearing a later date or by voting in person at the Annual Meeting. The
affirmative vote of the holders of a plurality of the shares of Common Stock
present or represented at the Annual Meeting is required for election of
Directors, with the two persons receiving the highest vote totals to be elected
as Directors of the Company. Accordingly, abstentions and broker non-votes will
not affect the outcome of the election of Directors. The affirmative vote of the
holders of a majority of the shares of Common Stock present or represented at
the Annual Meeting is required for the adoption of the 1999 Incentive
Compensation Plan. Abstentions will be treated as shares that are present and
entitled to vote for purposes of determining the number of shares present and
entitled to vote with respect to any particular matter, but will not be counted
as a vote in favor of such matter. Accordingly, an abstention from voting on a
matter has the same legal effect as a vote against the matter (except with
respect to election of Directors). Broker non-votes will not be considered as
present and entitled to vote with respect to any matter so indicated on the
proxy. Accordingly, a broker non-vote on a matter has no effect on the voting on
such matter.
<PAGE>
The Company will bear the cost of the solicitation of Proxies by the Board
of Directors. The Board of Directors may use the services of its executive
officers and certain Directors to solicit Proxies from stockholders in person
and by mail, telegram and telephone. Arrangements may also be made with brokers,
fiduciaries, custodians, and nominees to send Proxies, proxy statements and
other material to the beneficial owners of the Common Stock and Series D
Preferred Stock held of record by such persons, and the Company may reimburse
them for reasonable out-of-pocket expenses incurred by them in so doing.
The Annual Report to Stockholders for the fiscal year ended December 31,
1998, including financial statements, accompanies this Proxy Statement. The
Annual Report to Stockholders is not deemed to be part of the Company's proxy
solicitation materials.
The principal executive offices of the Company are located at 1700
Corporate Circle, Petaluma, California 94954; the Company's telephone number
is (707) 778-2280.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Moss Adams, Certified
Public Accountants, as independent accountants of the Company for the fiscal
year ending December 31, 1999. Stockholders are not being asked to approve such
selection because such approval is not required. The audit services provided by
Moss Adams consist of examination of financial statements, services relative to
filings with the Securities and Exchange Commission, and consultation in regard
to various accounting matters. Representatives of Moss Adams are expected to be
present at the Annual Meeting, will have the opportunity to make a statement if
they so desire, and will be available to respond to appropriate questions.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The securities entitled to vote at the meeting are the Company's Common
Stock, $.01 par value, and the Company's Series D Preferred Stock, $.10 par
value. There were 3,834,584 shares of Common Stock and 31,335 shares of Series D
Preferred Stock outstanding on the Record Date. Each share of Common Stock
entitles its holder to one vote on each matter submitted to stockholders. Each
share of Series D Preferred Stock entitles its holder to one vote on each matter
submitted to stockholders. The Common Stock and Series D Preferred Stock vote
together as a single class. Voting of the shares of Common Stock and Series D
Preferred Stock is on a non-cumulative basis.
The following table sets forth certain information as of May 28, 1999 with
respect to the ownership of Common Stock by (i) the persons (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), known by the Company to be the
beneficial owner of more than five percent of any class of the Company's voting
securities, (ii) each Director and each executive officer of the Company, and
(iii) all Directors and executive officers as a group. Except to the extent
indicated in the footnotes to the following table, each of the individuals
listed below possesses sole voting power with respect to the shares listed
opposite such individual's name.
2
<PAGE>
AMOUNT AND NATURE
BENEFICIAL OWNERSHIP
AND PERCENTAGE
--------------------------------------
NAME AND ADDRESS OF NUMBER OF
BENEFICIAL OWNER SHARES PERCENTAGE
- ------------------------------------ -------------- --------------------
Bruce A. Wilson 155,600(1) 3.9%
1700 Corporate Circle
Petaluma, CA 94954
John V. Winfield 2,122,844(2) 46.9%
2121 Avenue of the Stars
Los Angeles, CA 90067
The InterGroup Corporation 1,305,073(3) 31.0%
2121 Avenue of the Stars
Los Angeles, CA 90067
Michael G. Jesselson 548,713(4) 14.3%
1301 Avenue of the Americas
New York, NY 10019
Lucy Lang 548,713(4) 14.3%
1301 Avenue of the Americas
New York, NY 10019
Erica Jesselson 546,213(4) 14.2%
1301 Avenue of the Americas
New York, NY 10019
Benjamin J. Jesselson 546,213(4) 14.2%
1301 Avenue of the Americas
New York, NY 10019
K T Holdings, Inc. 292,260(5) 7.1%
21947 Plummer Street
Chatsworth, CA 91311
Grace & White Inc. 238,700(6) 6.2%
515 Madison Avenue
New York, NY 10022
Starr Securities, Inc. 191,048(7) 4.9%
19 Rector Street
New York, NY 10006
Paul Bluhdorn 181,256(8) 4.7%
P.O. Box 7854
Burbank, CA 91510
M. Scott Foster 102,500(9) 2.6%
1700 Corporate Circle
Petaluma, CA 94954
Yvette Bluhdorn 71,738(10) 1.9%
P.O. Box 7854
Burbank, CA 91510
3
<PAGE>
AMOUNT AND NATURE
BENEFICIAL OWNERSHIP
AND PERCENTAGE
--------------------------------------
NAME AND ADDRESS OF NUMBER OF
BENEFICIAL OWNER SHARES PERCENTAGE
- ------------------------------------ -------------- --------------------
Mark S. Siegel 70,062(11) 1.8%
P.O. Box 7854
Burbank, CA 91510
Ricky Williams 55,000(12) 1.4%
1700 Corporate Circle
Petaluma, CA 94954
Daniel R. Coleman 15,000(13) *
500 108th Avenue, NE
Bellevue, WA 98004
Michael G. Zybala 5,000(14) *
11315 Rancho Bernardo Road,
Suite 129
San Diego, CA 92127
William J. Nance 5,000(14) *
ABC Entertainment Center
2040 Avenue of the Stars
Los Angeles, CA 90067
Robert W. Sweitzer, Ph.D. 5,000(14) *
The Claremont Graduate School
925 N. Dartmouth Avenue
Claremont, CA 91711
All Officers and Directors as a Group
(8 persons in number) 2,465,944 50.7%
* Less than one percent (1%)
(1) Includes 102,500 vested and presently exercisable options and 53,100
restricted shares subject to vesting at the rate of 4,000 shares per year
on December 31st in each year.
(2) Based upon information contained in an amendment to a Schedule 13D dated
March 22, 1999 (the "Winfield 13D"), on behalf of Mr. Winfield, The
InterGroup Corporation ("InterGroup") and Santa Fe Financial Corporation
("Santa Fe"), and corporate records of the Company. Includes (i) 502,800
shares of Common Stock and warrants to purchase 304,971 shares of Common
Stock owned by Mr. Winfield; (ii) 841,800 shares of Common Stock and
warrants to purchase 363,224 shares of Common Stock owned by InterGroup and
as to which Mr. Winfield has shared voting and dispositive power; (iii)
89,100 shares of Common Stock and warrants to purchase 10,949 shares of
Common Stock owned by Santa Fe and as to which Mr. Winfield has shared
voting and dispositive power; and (iv) options to purchase 10,000 shares of
Common Stock granted to Mr. Winfield pursuant to the Company's Non-Employee
Director Plan. As of November 30, 1998, Mr. Winfield owned 44.0% of
InterGroup, per a proxy dated December 11, 1998. As of March 31, 1999,
InterGroup controls 52.2% of Santa Fe. Mr. Winfield is the Chairman and CEO
of both Santa Fe and InterGroup.
4
<PAGE>
(3) Based upon information contained in the Winfield 13D and corporate records
of the Company. Includes (i) 841,800 shares of Common Stock and 363,224
warrants owned by InterGroup and (ii) 89,100 shares of Common Stock and
10,949 warrants owned by Santa Fe.
(4) Ludwig Jesselson died on April 3, 1993. Michael G. Jesselson, Lucy Lang,
Erica Jesselson and Benjamin J. Jesselson are the four executors
(collectively, the "Executors") of the Estate of Mr. Jesselson (the
"Estate") and, as such, retain authority with regard to the disposition of
the shares. The information on the Executors' and the Estate's beneficial
ownership is based on information contained in an amendment to a Schedule
13G dated February 9, 1999 (the "Jesselson 13G"), filed on behalf of
Michael Jesselson, Lucy Lang, Erica Jesselson, Benjamin J. Jesselson, a
trust created under the will of Ludwig Jesselson f/b/o Erica Jesselson, and
the Estate of Ludwig Jesselson, and corporate records of the Company.
It includes 546,213 shares of Common Stock owned by a trust f/b/o Erica
Jesselson created under the will of Ludwig Jesselson. Each of the
Executors is a trustee of the trust f/b/o Erica Jesselson and, as such,
are deemed to be the beneficial owners of the 546,213 shares. Michael
Jesselson and Ms. Lang are trustees of a trust f/b/o Maya Jesselson, which
trust acquired 2,500 shares of Common Stock in the open market in March,
1999 and, as such, are deemed to be the beneficial owners of such 2,500
shares.
(5) Includes warrants to purchase 292,260 shares of Common Stock.
(6) Based upon information contained in an amendment to a Schedule 13G dated
February 9, 1999, filed on behalf of Grace & White Inc. ("Grace").
According to the amended Schedule 13G, Grace is a registered investment
advisor with sole voting power and sole dispositive power over 12,900 and
238,700 shares, respectively.
(7) Based upon: (i) information contained in an amendment to a Schedule 13D
dated March 3, 1992 filed on behalf of Starr Securities, Inc. and its
stockholders as members of a group (the "Starr 13D"); and (ii) records of
the company indicating a transfer by Starr of 12,500 warrants included in
the Starr 13D. The beneficial ownership includes 131,048 shares of Common
Stock owned of record by Starr and 60,000 warrants which vested and became
exercisable on November 4, 1996. According to the Starr 13D, Starr is a
registered broker-dealer and the share ownership reported therein does not
include shares held by Starr in its trading account.
(8) Based on information contained in an amendment to a Schedule 13D dated
January 27, 1993 (the "Bluhdorn 13D"), filed on behalf of Paul Bluhdorn,
Yvette Bluhdorn and Mark Siegel. It includes 31,250 shares of the Company's
Common Stock owned by Mr. Bluhdorn, and 150,006 shares of Common Stock
issued in February, 1998 upon conversion of 150,006 shares of series D
preferred stock owned by Mr. Bluhdorn. It does not include shares of Common
Stock owned by Ms. Bluhdorn or Mr. Siegel, as to which shares of Common
Stock Mr. Bluhdorn disclaims beneficial ownership.
(9) Includes 102,500 vested and presently exercisable options.
(10) Based on information contained in the Bluhdorn 13D and corporate records of
the Company. Does not include shares of Common Stock owned by Mr. Bluhdorn
and Mr. Siegel as to which shares of Common Stock Ms. Bluhdorn disclaims
beneficial ownership.
(11) Based on information contained in the Bluhdorn 13D and corporate records of
the Company.
(12) Includes 55,000 vested and presently exercisable options.
(13) Includes 15,000 vested and presently exercisable options.
(14) Includes 5,000 vested and presently exercisable options.
5
<PAGE>
CERTAIN REPORTS
No person who, during the fiscal year ended December 31, 1998, was a
Director, officer or beneficial owner of more than ten percent of the Company's
Common Stock (which is the only class of securities of the Company registered
under Section 12 of the Exchange Act) (a "Reporting Person") failed to file, on
a timely basis, reports required by Section 16 of the Exchange Act during the
most recent fiscal year or prior years. The foregoing is based solely upon a
review by the Company of Forms 3 and 4 during the most recent fiscal year as
furnished to the Company under Rule 16a-3(d) under the Exchange Act, and Forms 5
and amendments thereto furnished to the Company with respect to its most recent
fiscal year, and any representation received by the Company from any reporting
person that no Form 5 is required.
PROPOSAL I. ELECTION OF DIRECTORS
GENERAL
The Company's Certificate of Incorporation classifies the Board of
Directors into three classes. The following table sets forth the persons who
currently serve as Directors, the class of Directors in which they serve and the
year in which their current term expires.
DIRECTOR CLASS TERM EXPIRES
Bruce A. Wilson 1 2001
William J. Nance 1 2001
Michael G. Zybala 2 2000
Daniel R. Coleman 2 2000
John V. Winfield 3 1999
Robert W. Sweitzer 3 1999
The Board of Directors has nominated two (2) persons, John V. Winfield and
Robert W. Sweitzer, for election as Class 3 Directors to the Board of Directors
for terms expiring at the Annual Meeting in the year 2002. Stockholders will be
voting for two (2) Directors with terms of three (3) years. The affirmative vote
of a plurality of the outstanding shares of Common Stock and Series D Preferred
Shares entitled to vote thereon, voting together as a single class at the Annual
Meeting, is required to elect the Directors. Accordingly, abstentions and broker
non-votes will not affect the outcome of the election of Directors. Abstentions
and broker non-votes will, however, be considered as votes represented at the
Annual Meeting for quorum purposes. All proxies received by the Board of
Directors will be voted for the election of Messrs. Winfield and Sweitzer as
Class 3 Directors if no direction to the contrary is given. In the event that
any nominee is unable to serve, the proxy solicited hereby may be voted, in the
discretion of the proxies, for the election of another person in his stead. The
Board of Directors knows of no reason to anticipate that this will occur. No
family relationship exists between any nominee for election as a Director.
Set forth below is a certain biographical information regarding Messrs.
Winfield and Sweitzer.
John V. Winfield, age 52, elected Chairman of the Board on August 5, 1998,
was first elected a Class 3 Director on September 29, 1997 in connection with a
private transaction in which he and a company with which he is affiliated
purchased an aggregate of 300,000 shares of the Company's Common Stock and
300,000 Common Stock Purchase Warrants for an aggregate of $975,000. In
connection with this transaction, the Company has agreed to use its best efforts
to cause Mr. Winfield to be elected as a Director through the year 2000. Mr.
Winfield is the Chairman of the Board, President and Chief Executive Officer of
The InterGroup Corporation ("InterGroup"), having first been appointed as such
in 1987. InterGroup is a public company traded on the NASDAQ Stock Market
(INTG). Mr. Winfield also presently serves as Chairman and Chief Executive
Officer of Santa Fe Financial Corporation (SFEF) and Portsmouth Square, Inc.
(PRSI), both public companies.
6
<PAGE>
Robert W. Sweitzer, Ph.D., age 54, was elected a Class 3 Director on
August 5, 1998. He has, for the last five years, been on the faculty of the
Peter F. Drucker Graduate Management Center at the Claremont Graduate School. In
addition, he has served as a consultant to business and industry in the areas of
strategic planning, marketing and franchise distribution.
Set forth below is information regarding the Company's Directors whose
terms do not expire at the Annual Meeting.
Bruce A. Wilson, age 47, joined the Company as Vice-President of
Operations on October 15, 1987, and has been President of the Company, Chief
Financial and Chief Operating Officer since January 28, 1988, and a Director
since January 28, 1988. In August, 1994, Mr. Wilson assumed the added
position of Chief Executive Officer. Mr. Wilson served as Chairman from 1987
through 1998. From 1985 to 1987, Mr. Wilson was employed by Russ Berrie and
Company Inc. as General Manager of its Russ West Division, a company whose
business is impulse gifts. Prior thereto, Mr. Wilson was employed by
Richardson Vicks Inc. in various capacities, the last of which was from 1983
to 1984 as Executive Assistant to the Executive Vice-President at Vidal
Sassoon, Inc.
William J. Nance, age 55, was elected as a Class I Director in August,
1998. Mr. Nance is Founder and has been, for the past five years, President
of Century Plaza Printers, Inc. He is a certified public accountant and
private consultant. Mr. Nance is also Treasurer and Director of The
InterGroup Corporation and a Director of Santa Fe Financial Corporation and
Portsmouth Square, Inc., each of which is a public company.
Michael G. Zybala, Esq., age 47, was elected as a Class 2 Director in June
1998. Since 1993, Mr. Zybala has been General Counsel for Santa Fe Financial
Corporation and Portsmouth Square, Inc. He has also served as Vice President and
Secretary of those entities since February 1998. In January, 1999, Mr, Zybala
was appointed Vice President Operations of InterGroup.
Daniel R. Coleman, age 42, was first elected as a Director of the Company
on August 29, 1996. He has, for the last five years, been a general partner in
three limited partnerships that invest in United States equity securities. He
also serves as President of Clyde Hill Research, a consulting firm to investment
managers.
Class 1 Directors will serve for a term expiring at the 2001 Annual
Meeting of Stockholders and Class 2 Directors will serve for a term expiring at
the 2000 Annual Meeting of Stockholders and in each case, until their successors
are duly elected and qualified. At each subsequent Annual Meeting of
Stockholders, one class of Directors will be elected for a term of three (3)
years and until their successors are duly elected and qualified.
BOARD MEETINGS, COMMITTEES AND COMPENSATION
During the fiscal year ended December 31, 1998, three (3) meetings of the
Board of Directors were held and action was taken on three (3) occasions by
unanimous written consent of the Board of Directors in lieu of meeting. Each
Director of the Company participated in every action taken by unanimous consent
in lieu of a meeting during the year. Each incumbent Director of the Company
attended at least 75% of all meetings of the Board and any committee on which
such Director served which were held during the year. The Audit Committee is
currently comprised of Messrs. Nance, Sweitzer and Coleman. The Compensation
Committee currently consists of Messrs. Nance, Sweitzer and Winfield. The
Executive Committee currently consists of Messrs. Winfield, Wilson and Nance.
During the fiscal year ended December 31, 1998, no matters were brought before
the Audit Committee and it did not hold any meetings. During the fiscal year
ended December 31, 1998, the Compensation Committee and the Executive Committee
held one (1) and two (2) meetings, respectively.
7
<PAGE>
Directors who are employees of the Company do not receive compensation for
serving as a Director. Each non-employee Director receives an annual Director's
fee of $6,000. In addition, each non-employee Director receives an initial grant
of options to purchase 5,000 shares of the Company's Common Stock and 5,000
options on each anniversary date of service as a Director. All options to be
issued to non-employee Directors will be exercisable at the fair market value
for the Company's Common Stock on the date of grant. No additional fee or
compensation was paid during fiscal year 1998 to any Director for serving in
such capacity or for attending any meetings.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" MESSRS. WINFIELD
AND SWEITZER AS THE NOMINEES FOR CLASS 3 DIRECTOR.
EXECUTIVE COMPENSATION AND RELATED MATTERS
SUMMARY COMPENSATION
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid or accrued by the Company during the years ended December
31, 1998, 1997 and 1996, to the Chief Executive Officer and each of the named
executive Officers of the Company.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Annual Compensation Awards
------------------------ -------------------------------
No. of Securities
Other Annual Restricted Underlying
Annual Stock Options/SARs
Name and Principal Position Year Salary Bonus Comp. Award(s) Granted
- --------------------------- ---- -------- ---------- ------------ ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Wilson
President, Chief
Executive, Chief
Operating and 1998 $150,000 - $17,676(2) $2,750(3) -
Chief Financial 1997 $150,000 - $23,526(2) $14,500(3) -
Officer 1996 $150,000 $19,867(1) $23,720(2) $15,000(3) -
Ricky Williams 1998 $90,000 - $9,738(4) - -
Vice President of 1997 $90,000 - $9,670(4) - -
Operations 1996 $88,600 $ 9,000 $5,642(4) - -
M. Scott Foster 1998 $100,000 - $24,825(5) - -
Vice-President of 1997 $100,000 - $24,825(5) - -
Sales and Marketing 1996 $100,000 $11,411 $24,825(5) - -
</TABLE>
(1) Mr. Wilson commenced serving as Chief Executive Officer in August, 1994. Mr.
Wilson receives an incentive bonus based upon the Company's net pre-tax
profit before interest expense for each calendar year during the term. The
amount of incentive bonus ranges from 8% of the first $100,000 of net
pre-tax profit to 3% of the net pre-tax profit in excess of $250,000.
(2) Includes: (i) for 1998, an automobile allowance of $12,000, the payment of
premiums on a term life insurance policy of $4,026 and the payment of taxes
on 4,000 shares of restricted Common Stock which vested on December 31, 1998
of $1,650; (ii) for 1997, an automobile allowance of $12,000, the payment of
premiums on a term life insurance policy of $2,826 and the payment of taxes
on 4,000 shares of restricted Common Stock which vested on December 31, 1997
of $8,700; and (iii) for 1996, an automobile allowance of $12,000, the
payment of premiums on a term life insurance policy of $2,720 and the
payment of taxes on 4,000 shares of restricted Common Stock which vested on
December 31, 1996 of $9,000.
(3) In April, 1991, Mr. Wilson was granted 60,000 restricted shares vesting at
the rate of 4,000 shares per year on December 31 of each year, over a 15
year period subject to certain accelerations. As of
8
<PAGE>
December 31, 1998, an aggregate of 32,000 shares have vested. Amounts
reported under this column represent the fair market value, without giving
effect to the diminution in value attributable to the restriction of such
stock, of 4,000 shares of the Company's Common Stock which have vested each
year, as valued on December 31 of each year. See "Other Annual
Compensation", with respect to the cash payment for taxes attributable to
these shares. As of December 31, 1998, the aggregate restricted stock
holdings of Mr. Wilson consisted of 52,000 shares valued at $35,750, the
market value of these shares as of December 31, 1998, without giving effect
to the diminution in value attributable to the restriction of such stock.
(4) Includes: (i) for 1998, an automobile allowance of $9,000 and the payment of
premiums on a term life insurance policy of $738; (ii) for 1997, an
automobile allowance of $9,000 and the payment of premiums on a term life
insurance policy of $670; and (iii) for 1996, an automobile allowance of
$5,040 and payment of premiums on a term life insurance policy of $601.
(5) Mr. Foster has served as Vice-President of Sales since 1993. He is currently
employed by the Company on an at will basis. The information set forth above
includes: (i) for 1998, an expense allowance of $24,000 and the payment of
premiums on a term life insurance policy of $825; (ii) for 1997, an expense
allowance of $24,000 and the payment of premiums on a term life insurance
policy of $825; and (iii) for 1996, an expense allowance of $24,000 and the
payment of premiums on a term life insurance policy of $825.
STOCK OPTIONS/SAR GRANTS
No stock option grants or Stock Appreciation Rights ("SARs") were made
during the year ended December 31, 1998 to any of the named executive Officers
of the Company.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table contains information with respect to the named
executive Officers concerning options held as of the year ended December
31,1998.
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised In-
Acquired on Valued Options/SARs as of the-Money Options/SARs
Name Exercise (#) Realized ($) December 31, 1998 at December 31, 1998(1)
- --------------- ----------- ------------ ------------------------- -------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Wilson - $ - 102,500/ - $ - / -
Ricky Williams - $ - 55,000/ - $ - / -
M. Scott Foster - $ - 102,500/ - $ - / -
</TABLE>
(1) Based upon the average closing bid and asked prices of the Company's Common
Stock on December 31, 1998 ($.69 per share), less the exercise price for the
aggregate number of shares subject to the options, none of the Options/SARs
are in-the-money.
EMPLOYMENT AGREEMENTS
On May 15, 1995, the Company entered into Amended and Restated
Employment Agreements with its President, Chief Executive, Chief Operating
and Chief Financial Officer, Mr. Bruce A. Wilson.
Mr. Wilson's Employment Agreement, as amended and restated, extends the
term of Mr. Wilson's employment through December 31, 1999. Mr. Wilson continues
to be employed as President, Chief Executive, Chief Operating and Chief
Financial Officer of the Company, and is to receive a base salary (the
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<PAGE>
"Base Salary") for the calendar year commencing January 1, 1995 of $125,000 per
annum, of which $20,000 is to be paid in a single lump sum on the 15th day of
January, 1995 and the remainder of $105,000 is to be paid over the course of the
year pursuant to the Company's regular payroll periods; for the calendar years
1996 and 1997, the amount of Base Salary is increased to $150,000 per annum, of
which $30,000 is to be paid in a single lump sum on January 15th of each year
and the remainder of $120,000 is to be paid over the course of the year pursuant
to the Company's regular payroll periods; for the calendar years 1998 and 1999,
the amount of Base Salary is increased to $160,000 per annum, of which $40,000
is to be paid in a single lump sum on January 15th of each year and the
remainder of $120,000 is to be paid over the course of the year pursuant to the
Company's regular payroll periods. Mr. Wilson is to further receive, for each
year of the term, an incentive bonus based upon the Company's net pre-tax profit
before interest expense for each calendar year, which incentive bonus ranges
from 8% of the first $100,000 of net pre-tax profit to 3% of the net pre-tax
profit in excess of $250,000. Mr. Wilson is to receive an automobile allowance
of $ 1,000 per month, a policy of term life insurance in the amount of $500,000
payable to a beneficiary designated by him, and long-term disability insurance.
In the event Mr. Wilson is terminated without cause, he is to receive a
severance benefit of 24 months Base Salary if terminated after December 31,
1997, or the remaining amount of Base Salary if terminated prior to December
31,1997. In the event of a Change in Control in the Company (as defined) and,
following such Change in Control, there is a change in the composition of a
majority of the Directors comprising the entire Board of Directors immediately
prior to the Change in Control, Mr. Wilson may elect, within six months
following the change in the composition of the Board of Directors following the
Change in Control, to terminate his employment with the Company and, in such
case, he is to receive a special severance payment in the form of the Company
paying to Mr. Wilson, with respect to all options granted to him prior to May
15, 1995, the differential between the strike price of Mr. Wilson's options plus
$3.20 and the average of the closing price of the Company's Common Stock for the
10 days preceding the effective date of termination.
In connection with the amendment and restatement of his Employment
Agreement, all options granted to Mr. Wilson prior to December 31, 1999 have
been re-designated as non-incentive stock options and, to the extent such
options become vested and are presently exercisable, may be exercised through
December 31, 1999. Options granted to Mr. Wilson in accordance with an option
grant dated November 4, 1993 continue to be subject to the vesting schedule
contained in the original grant, of which 24,000 options vested on December 31,
1996. Such vesting is subject to an acceleration of vesting in the event of a
Change in Control of the Company, as defined.
In April, 1991, Mr. Wilson was granted 60,000 restricted shares under the
Company's 1991 Senior Management Incentive Plan. These restricted shares are to
vest at the rate of 4,000 shares per year over a 15 year period, subject to
acceleration of vesting in certain circumstances. Except in the event of
acceleration, each year, upon the vesting of each 4,000 shares, the Company is
to pay to Mr. Wilson a cash bonus equal to 60% of the market value of the vested
shares, for the principal purpose of offsetting taxes attributable to the
vesting of the shares. The grant of restricted shares to Mr. Wilson was in
furtherance of the desire of the Board of Directors to have Mr. Wilson have a
significant stock interest in the Company which would recognize his past
performance and incentivize his continued efforts to maximize the value of the
Company for all stockholders. As of December 31, 1998, an aggregate of 32,000
restricted shares were vested. In the event of certain Change in Control
transactions, all then unvested restricted shares become immediately vested.
On December 31, 1998, the Company entered into a new at will employment
agreement with Mr. Foster, pursuant to which Mr. Foster's employment as
Vice-President of Sales and Marketing has been continued. During the
continuation of his employment he is to be compensated at the rate of $100,000
per annum. He is entitled to receive health insurance and life insurance
benefits, reimbursement for actual expenses and a 2,000 per month automobile
allowance. In addition to his Base Salary he is to receive an Incentive Bonus of
2% on net sales on initial orders to new accounts effected by him, a 5%
quarterly commission on personal net sales on orders to his existing personal
accounts on shipments in excess of $125,000, a 2% commission on net sales of the
Company's regional managers in excess of $120,000 annual
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<PAGE>
sales or $30,000 quarterly sales and a 2% commission on net sales of the Company
in excess of 110% of the Company's prior years net sales, paid quarterly and
adjusted annually.
On September 8, 1997, the Company extended and modified the Employment
Agreement of Mr. Ricky Williams, Vice President of Operations. Mr. Williams'
Employment Agreement was extended through December 31, 2000. During the extended
term, Mr. Williams' base salary of $90,000 is increased by $5,000 in each year
of the extended term provided that the Company has achieved a net pre-tax profit
for the immediately preceding year. Mr. Williams is entitled to elect to receive
up to 10% of each year's base salary in January in each year, with the remainder
being paid to him over the course of the year pursuant to the Company's regular
payroll policies. During the continuation of his employment, Mr. Williams is to
receive an automobile allowance of $750 per month and is to be provided with
life insurance in the amount of $250,000. In connection with his original
Employment Agreement, Mr. Williams was granted options to purchase 30,000 shares
of the Company's Common Stock at an exercise price of $4.75 per share. All of
such options are vested and are exercisable through December 31, 2000. On
November 4, 1993, Mr. Williams was granted options to purchase 30,000 shares of
the Company's Common Stock at an exercise price of $6.625 per share, exercisable
through December 31, 2000, and vesting in equal increments on December 31st of
each year of the term of his Agreement, as extended, commencing December 31,
1994.
SENIOR MANAGEMENT INCENTIVE PLAN
Upon and subject to the adoption of the 1999 Incentive Compensation Plan
as proposed under Proposal II, the Company's 1991 Senior Management Incentive
Plan (sometimes referred to as the "Plan" or the "Management Plan") will be
terminated.
The Management Plan currently provides for the issuance of up to 465,000
shares of the Company's Common Stock in connection with the issuance of stock
options and other stock purchase rights to executive Officers, key employees and
consultants. The Management Plan expires by its terms in 2001. To date, options
to acquire a total of 265,000 shares remain outstanding. In addition, 60,000
restricted shares have been issued under the Plan, of which 32,000 restricted
shares have vested. A total of 465,000 shares of Common Stock are currently
reserved for issuance under the Management Plan. No shares of Common Stock
remain available for issuance under the Management Plan. It is anticipated that
awards made under the Management Plan will be subject to vesting periods,
subject to the discretion of the Administrator of the Board.
The Management Plan is intended to attract and retain key executive
management personnel whose performance is expected to have a substantial impact
on the Company's long-term profit and growth potential by encouraging and
assisting those persons to acquire equity in the Company. It is contemplated
that only those executive management employees (generally the Chairman of the
Board, Vice-Chairman, Chief Executive Officer, Chief Operating Officer,
President and Vice-Presidents of the Company) who perform services of special
importance to the Company, will be eligible to participate under the Management
Plan, although other full time employees of the Company are eligible to
participate under the Plan.
Directors who are not otherwise employed by the Company will not be
eligible for participation in the Management Plan.
The Management Plan provides for four types of awards: stock options,
incentive stock rights, stock appreciation rights (including limited stock
appreciation rights) and restricted stock purchase agreements, as described
below.
Stock Options. Options granted under the Management Plan may be either
incentive stock options ("ISOs") or options which do not qualify as ISOs
("non-ISOs"). ISOs may be granted at an option price of not less than 100% of
the fair market value of the Common Stock on the date of grant, except that an
ISO granted to any person who owns capital stock representing more than 10% of
the total combined voting power of all classes of Common Stock of the Company
("10% stockholder") must be granted at an exercise price
11
<PAGE>
of at least 110% of the fair market value of the Common Stock on the date of the
grant. The exercise price of the non-ISOs may not be less than 65% of the fair
market value of the Common Stock on the date of grant. ISOs granted to persons
other than 10% stockholders may be exercisable for a period of up to ten years
from the date of grant; ISOs granted to 10% stockholders may be exercisable for
a period of up to five years from the date of grant. No individual may be
granted ISOs that become exercisable in any calendar year for Common Stock
having a fair market value at the time of grant in excess of $100,000. Non-ISOs
may be exercisable for a period of up to 13 years from the date of grant.
Upon termination of employment or consulting services, an optionee will be
entitled to exercise the vested portion of an option for a period of up to three
months after the date of termination, except that if the reason for termination
was a discharge for cause, the option shall expire immediately, and if the
reason for termination was for death or permanent disability of the optionee,
the vested portion of the option shall remain exercisable for a period of twelve
months thereafter.
Incentive Stock Rights. Incentive stock rights consist of incentive stock
units equivalent to one share of Common Stock in consideration for services
performed for the Company. If the employment or consulting services of the
holder with the Company terminate prior to the end of the incentive period
relating to the units awarded, the rights shall thereupon be null and void,
except that if termination is caused by death or permanent disability, the
holder or his/her heirs, as the case may be, shall be entitled to receive a pro
rata portion of the shares represented by the units, based upon that portion of
the incentive period which shall have elapsed prior to the death or disability.
Stock Appreciation Rights (SARs). SARs may be granted to recipients of
options under the Management Plan. SARs may be granted simultaneously with, or
subsequent to, the grant of a related option and may be exercised to the extent
that the related option is exercisable, except that no general SAR (as
hereinafter defined) may be exercised within a period of six months of the date
of grant of such SAR and no SAR granted with respect to an ISO may be exercised
unless the fair market value of the Common Stock on the date of exercise exceeds
the exercise price of the ISO. A holder may be granted general SARs ("general
SARs") or limited SARs ("limited SARs"), or both. General SARs permit the holder
thereof to receive an amount (in cash, shares of Common Stock or a combination
of both) equal to the number of SARs exercised multiplied by the excess of the
fair market value of the Common Stock on the exercise date over the exercise
price of the related option. Limited SARs are similar to general SARs, except
that, unless the Administrator determines otherwise, they may be exercised only
during a prescribed period following the occurrence of one or more of the
following "Change of Control" transactions: (i) the approval of the Board of
Directors of a consolidation or merger in which the Company is not the surviving
corporation, the sale of all or substantially all the assets of the Company, or
the liquidation or dissolution of the Company; (ii) the commencement of a tender
or exchange offer for the Company's Common Stock (or securities convertible into
Common Stock) without the prior consent of the Board; (iii) the acquisition of
beneficial ownership by any person or other entity (other than the Company or
any employee benefit plan sponsored by the Company) of securities of the Company
representing 25% or more of the voting power of the Company's outstanding
securities; or (iv) if during any period of two years or less, individuals who
at the beginning of such period constitute the entire Board cease to constitute
a majority of the Board, unless the election, or the nomination for election, of
each new Director is approved by at least a majority of the Directors then still
in office.
The exercise of any portion of either the related option or the tandem
SARs will cause a corresponding reduction in the number of shares remaining
subject to the option or the tandem SARs, thus maintaining a balance between
outstanding options and SARs.
Restricted Stock Purchase Agreements. Restricted stock purchase agreements
provide for the sale by the Company of shares of Common Stock at prices to be
determined by the Board, which shares shall be subject to restrictions on
disposition for a stated period during which the purchaser must continue
employment with the Company in order to retain the shares. Payment can be made
in cash, a promissory note or a combination of both. If termination of
employment occurs for any reason within six months after the date of purchase,
or for any reason other than death or by retirement with the consent of the
Company after the six-
12
<PAGE>
month period but prior to the time that the restrictions on disposition lapse,
the Company shall have the option to reacquire the shares at the original
purchase price.
Upon expiration of the applicable restricted period and the satisfaction
of any other applicable conditions, all or part of the restricted shares and any
dividends or other distributions not distributed to the holder (the "retained
distributions") thereon will become vested. Any restricted shares and any
retained distributions thereon which do not so vest will be forfeited to the
Company. If prior to the expiration of the restricted period a holder is
terminated without cause or because of a total disability (in each case as
defined in the Management Plan), or dies, then, unless otherwise determined by
the Administrator at the time of the grant, the restricted period applicable to
each award of restricted shares will thereupon be deemed to have expired. Unless
the Administrator determines otherwise, if a holder's employment terminates
prior to the expiration of the applicable restricted period for any reason other
than as set forth above, all restricted shares and any retained distributions
thereon will be forfeited.
Accelerating of the vesting of the awards made under the provisions of the
Management Plan shall occur on the first day following the occurrence of any of
the following: (a) the approval by the stockholders of the Company of an
Approved Transaction; (b) a Control Purchase; or (c) a Board Change. An
"Approved Transaction" is defined as (A) any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation or
pursuant to which shares of Common Stock would be converted into cash,
securities or other property other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (B) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (C) the adoption of any plan or proposal for
the liquidation or dissolution of the Company.
A "Control Purchase" is defined as circumstances in which any person (as
such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act),
corporation or other entity (other than the Company or any employee benefit plan
sponsored by the Company) (A) shall purchase any Common Stock of the Company (or
securities convertible into the Company's Common Stock) for cash, securities or
any other consideration pursuant to a tender offer or exchange offer, without
the prior consent of the Board of Directors, or (B) shall become the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the then outstanding securities of
the Company ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of Directors (calculated
as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire
the Company's securities).
A "Board Change" is defined as circumstances in which, during any period
of two consecutive years or less, individuals who at the beginning of such
period constitute the entire Board shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new Director was approved by a vote of at least
a majority of the Directors then still in office.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
13
<PAGE>
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Upon and subject to the adoption of the 1999 Incentive Compensation Plan
as proposed under Proposal II, the Company's Non-Employee Director Stock Option
Plan (the "Director Plan") will be terminated.
At the Annual Meeting held on August 11, 1995, the Board of Directors
presented for approval of the Stockholders the Director Plan, which approval was
granted. The Director Plan provides for issuance of a maximum of 75,000 shares
of Common Stock upon the exercise of stock options granted under the Director
Plan. Options may be granted under the Director Plan until August 11, 2005 to
(i) non-employee Directors as defined and (ii) members of any advisory board
established by the Company who are not full time employees of the Company or any
of its subsidiaries. The Director Plan provides that each non-employee Director
will automatically be granted an option to purchase 5,000 shares of the
Company's Common Stock upon joining the Board of Directors (or, for those
persons who are Directors on the date of approval of the Director Plan by the
Stockholders, on such date), and options to purchase 3,000 shares on each
anniversary of the initial date of service or date of approval, as the case may
be.
Under the terms of the Director Plan, the sum of the number of shares to
be received upon any grant multiplied by the fair market value of each share at
the time of the grant may not exceed $75,000. All awards shall be reduced to the
extent that they exceed such amount. The exercise price for options granted
under the Director Plan shall be 100% of the fair market value of the Common
Stock on the date of grant (or if there is no closing price for such date of
grant, then the last preceding business day on which there was a closing price).
The "fair market value" shall mean (i) the closing price of a share of Common
Stock on the American Stock Exchange ("AMEX") or other national securities
exchange; or (ii) if the Company's Common Stock is not listed for trading on the
AMEX or other national securities exchange, then the closing bid price of a
share of Common Stock on the Nasdaq National Market System or Nasdaq SmallCap
Market (together referred to as "NASDAQ"); or (iii) in the event the Common
Stock is not traded on either the AMEX or the NASDAQ, the fair market value
shall be the price of the Common Stock as reported by the National Quotation
Bureau, Inc., or a market maker of the Company's Common Stock; or (iv) if the
Common Stock is not quoted by any of the above, by the Board of Directors acting
in good faith. Until otherwise provided in the Director Plan, the exercise price
of options granted under the Director Plan must be paid at the time of exercise,
either in cash, by delivery of shares of Common Stock of the Company or by a
combination of each. The term of each option is five (5) years from the date of
grant, unless terminated sooner as provided in the Director Plan. The Director
Plan is administered by a committee of the Board of Directors composed of not
fewer than two persons who are Officers of the Company (the "Committee"). The
Committee has no discretion to determine which non-employee Director will
receive options or the number of shares subject to the option, the term of the
option or the exercisability of the option. However, the Committee will make all
determinations of the interpretation of the Director Plan. Options granted under
the Director Plan do not qualify for incentive stock option treatment.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning the respective employment agreements of Bruce
A. Wilson, Ricky Williams and M. Scott Foster see "Employment
Agreements."
For information concerning the issuance of 60,000 restricted shares to Mr.
Bruce A. Wilson, see "Executive Compensation and Related Matters."
On September 29, 1997, the Company completed a transaction with John
Winfield and InterGroup Corporation ("InterGroup"), an affiliate of Mr.
Winfield. Pursuant to the transaction, the Company sold 150,000 shares of its
Common Stock to Mr. Winfield for an aggregate of $487,500 and sold 150,000
shares of its Common Stock to InterGroup for an aggregate of $487,500. As part
of the transaction, Mr. Winfield and InterGroup were each issued warrants to
purchase 150,000 shares each of the Company's Common Stock, of which one-third
of such warrants are exercisable at $4.00 per share, one-third at $4.25 per
share, and one-third at $4.50 per share, subject to adjustment under certain
circumstances. As a result of a rights offering made to all shareholders of the
Company, and the anti-dilution provisions contained in the warrants, each of
these warrants to purchase 150,000 shares of Common Stock was adjusted to
represent an aggregate of 214,572 shares of Common Stock, of which 70,908 are
exercisable at $2.04 per share, 71,544 at $2.13 per share, and 72,120 at $2.21
per share. The warrants are exercisable commencing September 29, 1997 and
may be exercised through September 29, 2002. Mr. Winfield and InterGroup were
each accorded certain demand and piggyback registration rights. In connection
with the transaction, Mr. Winfield was elected a Class 3 Director and the
Company agreed to use its best efforts to cause Mr. Winfield to be elected as a
Director through September 29, 2000. As of August 5, 1998, Mr. Winfield has
served as the Chairman of the Board of Directors of the Company.
On March 16, 1999, the Company completed a rights offering which commenced
on February 22, 1999. Mr. Winfield, InterGroup and Santa Fe Financial
Corporation ("Santa Fe"), a subsidiary of InterGroup, agreed to exercise all of
their respective basic rights in the rights offering. In exchange for this
commitment, the Company issued to Mr. Winfield, InterGroup and Santa Fe
additional warrants to purchase an aggregate of 250,000 shares of Common Stock
at an exercise price of $1.1875 per share, distributed pro rata according to
their ownership percentage before the rights offering, as follows: 90,399 to Mr.
Winfield, 148,652 to InterGroup and 10,949 to Santa Fe. The warrants are
exercisable commencing February 22, 1999 and may be exercised through February
22, 2004. Mr. Winfield, InterGroup and Santa Fe were each accorded certain
demand and piggyback registration rights. The Company did not offer warrants to
any other stockholders in connection with the rights offering.
II. PROPOSED ADOPTION OF 1999 INCENTIVE COMPENSATION PLAN
The Board of Directors adopted, subject to shareholder approval, the 1999
Incentive Compensation Plan (the "1999 Incentive Plan") for use in connection
with the issuance of stock, options and other stock purchase rights to executive
officers, key employees, directors and other persons who render significant
services to the Company and its subsidiaries.
The adoption of the 1999 Incentive Plan was prompted by the Company's
desire to provide the Board with sufficient flexibility regarding the forms of
incentive compensation which the Company will have at its disposal in rewarding
executive officers, key employees, directors and consultants who render
significant services to the Company. In adopting the 1999 Incentive Plan, it was
determined that the existing 1991 Senior Management Plan, as amended, and the
Non-Employee Director Plan, were outdated and did not afford sufficient
flexibility in fashioning incentive compensation for those individuals to whom
the Company would look as contributing to the growth of the Company. The Board
of Directors intends to offer key personnel equity ownership in the Company
through the grant of stock options and other rights pursuant to the 1999
Incentive Plan to enable the Company to attract and retain qualified personnel
without unnecessarily depleting the Company's cash reserves. Management believes
that, to implement the anticipated expansion of the Company's operations over
the next several years, the Company will be faced with an increasing demand for
additional qualified personnel. In order to attract and retain such personnel,
the Company will
15
<PAGE>
require a wide array of compensation alternatives. The 1999 Incentive Plan is
designed to augment the Company's existing compensation programs and is intended
to enable the Company to offer executives, key employees, directors and
consultants a personal interest in the Company's growth and success through
awards of either shares of Common Stock or rights to acquire shares of Common
Stock. In the event the 1999 Incentive Plan is adopted, the Company's 1991
Senior Management Incentive Plan and Non-Employee Director Plan will be
terminated.
The 1999 Incentive Plan is intended to attract, retain, and reward
high-quality executives, employees, directors and other persons who provide
services to the Company and/or its subsidiaries, enabling such persons to
acquire or increase a proprietary interest in the Company to strengthen the
mutuality of interests between such persons and the Company's shareholders, and
providing such persons with annual and long-term performance incentives to
expend their maximum efforts in the creation of shareholder value. The 1999
Incentive Plan is also intended to qualify certain compensation awarded
thereunder for tax deductibility under Section 162(m) of the Internal Revenue
Code of 1986, as amended from time to time, including regulations thereunder and
successor provisions and regulations thereto (the "Code") to the extent deemed
appropriate by the Committee (as hereafter defined) of the Board of Directors of
the Company. It is contemplated that each executive officer (generally the
Chairman of the Board, Vice-Chairman, Chief Executive Officer, Chief Operating
Officer, President and Vice Presidents of the Company), other officers,
employees and other persons who perform services of special importance to the
Company, including directors of the Company, will be eligible to participate
under the 1999 Incentive Plan. An employee on a leave of absence may be
considered as still in the employ for purposes of eligibility under the 1999
Incentive Plan. A total of 400,000 shares of Common Stock will be reserved for
issuance under the 1999 Incentive Plan. It is anticipated that awards made under
the 1999 Incentive Plan will be subject to three-year vesting periods, although
the vesting periods are subject to the discretion of the Committee.
Except to the extent that the Board elects to administer the 1999
Incentive Plan, it is anticipated that it will be administered by a committee of
two or more directors (each of whom shall be a non employee director and an
outside director, except as otherwise provided in the 1999 Incentive Plan)
designated by the Board of Directors (the Board or such committee, as the case
may be, are referred to herein as the "Committee"). Subject to the specific
provisions of the 1999 Incentive Plan, the Committee will have the discretion to
determine the recipients of the awards, the nature of the awards to be granted,
the dates such awards will be granted, the terms and conditions of awards and
the interpretation of the 1999 Incentive Plan. At any time that a member of the
Committee is not both a non-employee and an outside director, any action of the
Committee relating to an award granted or to be granted to a holder who is then
subject to Section 16 of the Exchange Act in respect of the Company, or relating
to an award intended by the Committee to qualify as "performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder, may be taken either (i) by a subcommittee, designated by the
Committee, composed solely of two or more non-employee and outside directors, or
(ii) by the Committee but with each such member who is not both a non-employee
and an outside director abstaining or recusing himself or herself from such
action, subject to the specific provisions set forth in the 1999 Incentive Plan.
As of the date hereof, the Company has not yet determined who will serve on such
auxiliary committee, if one is required.
Generally, the 1999 Incentive Plan may be amended by action of the Board
of Directors, except that any amendment or alteration to the 1999 Incentive Plan
shall be subject to the approval of the Company's shareholders not later than
the annual meeting next following such Board action if such shareholder approval
is required by any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Common Stock may then be
listed or quoted. The Committee may waive any conditions or rights under, or
amend, alter, suspend, discontinue or terminate any award theretofore granted
and any award agreement relating thereto, except as otherwise provided in the
1999 Incentive Plan.
As more particularly set forth in the 1999 Incentive Plan, at any time,
awards granted thereunder may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other award granted thereunder or any award granted under another plan
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of the Company, any subsidiary, or any business entity to be acquired by the
Company or a subsidiary, or any other right of a holder to receive payment from
the Company. If an award is granted in substitution or exchange for another
award, the Committee shall require the surrender of such other award in
consideration for the grant of the new award. In addition, awards may be granted
in lieu of cash compensation. The term of each award shall be for such period as
may be determined by the Committee; provided that in no event shall the term of
any option or SAR exceed a period of ten years (or such shorter term as may be
required in respect of an ISO under Code Section 422).
Subject to the terms of the 1999 Incentive Plan and any applicable award
agreement, payments to be made by the Company or a subsidiary upon the exercise
of an option or other award or settlement of an award may be made in such forms
as the Committee shall determine, including, without limitation, cash, Common
Stock, other awards or other property, and may be made in a single payment or
transfer, in Installments, or on a deferred basis. The settlement of any award
may be accelerated, and cash paid in lieu of Common Stock in connection with
such settlement, in the discretion of the Committee or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee or permitted at the election
of the holder on terms and conditions established by the Committee. Payments may
include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Common Stock.
The 1999 Incentive Plan generally provides that, unless the Committee
determines otherwise, each option or right granted thereunder will become
exercisable in full upon certain "change of control" events as described
therein. If any change is made in the stock subject to the 1999 Incentive Plan,
or subject to any right or option granted thereunder (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Committee will make appropriate adjustments to the classes, number of shares and
price per share of stock subject to outstanding rights or options.
In general, the Committee may impose on any award (subject to the
provisions of the 1999 Incentive Plan), such additional terms and conditions not
inconsistent with the provisions of the 1999 Incentive Plan as the Committee
shall determine, including terms requiring forfeiture of awards in the event of
termination of employment of the holder and terms permitting a holder to make
elections relating to his or her award. The Committee shall retain full power
and discretion to accelerate, waive or modify, at any time, any term or
condition of an award that is not mandatory under the 1999 Incentive Plan;
provided, however, that the Committee shall not have any discretion to
accelerate, waive or modify any term or condition of an award that is intended
to qualify as "performance-based compensation" for purposes of Code Section
162(m) if such discretion would cause the award not to so quality. Except in
cases in which the Committee is authorized to require other forms of
consideration under the 1999 Incentive Plan, or to the extent other forms of
consideration must by paid to satisfy the requirements of state law, no
consideration other than services may be required for the grant (but not the
exercise) of any award. The 1999 Incentive Plan provides several types of
awards: stock options, stock appreciation rights (including limited stock
appreciation rights), restricted stock, restricted stock units or RSUs, bonus
stock and awards in lieu of obligations, dividend equivalents, annual incentive
and performance awards, and other stock-based awards, as further described
below.
Stock Options. Options granted under the 1999 Incentive Plan may be either
incentive stock options ("ISOs") or options which do not qualify as ISOs. The
Committee shall determine the exercise price of stock purchasable under an
option, provided that such exercise price shall be not less than the fair market
value of a share of stock on the date of grant of such option except as
otherwise provided in the 1999 Incentive Plan. The Committee shall determine the
times at or circumstances under which an option may be exercised in whole or in
part (including based on achievement of performance goals and/or future service
requirements), the methods by which such exercise price may be paid or deemed to
be paid, the form of such payment, including, without limitation, cash, stock,
other awards or awards granted under other plans of the Company or any
subsidiary, or other property (including notes or other contractual obligations
of holders
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to make payment on a deferred basis), and the methods by or forms in which stock
will be delivered or deemed to be delivered to holders. In no event may an
option remain exercisable more than ten years following the date of grant.
The terms of any ISO granted under the 1999 Incentive Plan shall comply in
all respects with the provisions of Code Section 422.
Stock Appreciation Rights. SARs maybe granted to recipients of options
under the 1999 Incentive Plan. An SAR shall confer a right to receive, upon
exercise thereof, the excess of (A) the fair market value of one share of Common
Stock on the date of exercise (or, in the case of a "Limited SAR," the fair
market value determined by reference to the Change in Control Price, as defined
under Section 9(c) hereof) over (B) the grant price of the SAR as determined by
the Committee provided that such grant price shall not be less than the fair
market value of a share of Common Stock on the date of grant of such SAR except
as provided under Section 7(a) hereof. The Committee shall determine at the date
of grant or thereafter, the time or times at which and the circumstances under
which a SAR may be exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the method of
exercise, method of settlement, form of consideration payable in settlement,
method by or forms in which Common Stock will be delivered or deemed to be
delivered to holders, whether or not an SAR shall be in tandem or in combination
with any other award, and any other terms and conditions of any SAR. Limited
SARs that may only be exercised in connection with a Change in Control or other
event as specified by the Committee may be granted on such terms as the
Committee may determine. SARs and Limited SARs may be either freestanding or in
tandem with other awards.
Restricted Stock. Restricted shares awarded under the 1999 Incentive Plan
will be subject to such restrictions on transferability, risk of forfeiture and
other restrictions as are imposed by the Committee, which restrictions may lapse
separately or in combination at such times, under such circumstances (including
based on achievement of performance goals and/or future service requirements),
in such installments or otherwise, as the Committee may determine at the date of
grant or thereafter. Except to the extent restricted under the terms of the 1999
Incentive Plan and any award agreement relating to the restricted stock, a
holder granted restricted stock shall have all of the rights of a shareholder,
including the right to vote the restricted stock and the right to receive
dividends thereon (subject to any mandatory reinvestment or other requirement
imposed by the Committee). During the restricted period applicable to the
restricted stock, subject to provisions of the 1999 Incentive Plan, the
restricted stock may not be sold, transferred, pledged, hypothecated, margined
or otherwise encumbered by the holder.
Restricted stock granted under the 1999 Incentive Plan shall be evidenced
in the manner determined by the Committee. The Committee may require that
certificates representing restricted stock, if any, registered in the name of a
holder bear a legend, that the Company retain physical possession of the
certificates, and that the holder deliver a stock power to the Company, endorsed
in blank, relating to the restricted stock. As a condition to the grant of an
award of restricted stock, the Committee may require or permit a holder to elect
that any cash dividends paid on a share of restricted stock be automatically
reinvested in additional shares of restricted stock or applied to the purchase
of additional awards under the 1999 Incentive Plan. Unless otherwise determined
by the Committee, stock distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be subject to
restrictions and a dak of forfeiture to the same extent as the restricted stock
with respect to which such stock or other property has been distributed. Except
as otherwise determined by the Committee, upon termination of employment during
the applicable restriction period, restricted stock that is at that time subject
to restrictions shall be forfeited and reacquired by the Company.
Restricted Stock Units. The 1999 Incentive Plan also provides for the
award of Restricted Stock Units ("RSUs"). These are rights to receive Common
Stock, cash or a combination thereof at the end of a specified deferral period.
The satisfaction of an RSU award occurs on the expiration of the deferral period
specified for such RSU by the Committee. RSUs may be satisfied by the delivery
of stock, cash equal to the fair market value of the specified number of shares
of Common Stock covered by the RSUs, or a combination thereof, as determined by
the Committee. Except as otherwise determined by the Committee,
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upon termination of employment during the applicable deferral period or portion
thereof to which forfeiture conditions apply (as provided in the award agreement
evidencing the RSUs), all RSUs that are at that time subject to deferral (other
than a deferral at the election of the Holder) shall be forfeited; provided that
the Committee may waive such restriction or forfeiture condition in whole or in
part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part the forfeiture of RSUs.
Unless otherwise determined by the Committee at date of grant, Dividend
Equivalents (as defined herein) on the specified number of shares of Common
Stock covered by an award of RSUs shall be either (A) paid with respect to such
RSUs at the dividend payment date in cash or in shares of unrestricted Common
Stock having a fair market value equal to the amount of such dividends, or (B)
deferred with respect to such RSUs and the amount or value thereof automatically
deemed reinvested in additional RSUs, other awards or other investment vehicles,
as the Committee shall determine or permit the Holder to elect.
Bonus Stock and Awards in Lieu of Obligations. The Committee is also
authorized to grant Common Stock as a bonus, or to grant Common Stock or other
awards in lieu of obligations to pay cash or deliver other property under the
1999 Incentive Plan, provided that, in the case of holders subject to Section 16
of the Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Common
Stock or other awards are exempt from liability under Section 16(b) of the
Exchange Act. Common Stock or awards granted thereunder shall be subject to such
other terms as determined by the Committee.
Dividend Equivalents. The 1999 Incentive Plan also authorizes the
Committee to grant Dividend Equivalents to a Holder, entitling the holder to
receive cash, Common Stock, other awards, or other property equal in value to
dividends paid with respect to a specified number of shares of Common Stock, or
other periodic payments ("Dividend Equivalents"). Dividend Equivalents may be
awarded on a freestanding basis or in connection with another award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Common
Stock, awards, or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may specify.
Annual Incentive and Performance Awards. Under the 1999 Incentive Plan,
the Committee is authorized to make Annual Incentive Awards and Performance
Awards payable in cash, shares of Common Stock, or other awards, on terms and
conditions established by the Committee, subject to certain conditions. The
right of a holder to exercise or receive a grant or settlement of any award, and
the timing thereof, may be subject to such performance conditions as may be
specified by the Committee. It is the intent of the Company that Performance
Awards and Annual Incentive Awards granted to persons who are designated by the
Committee as likely to be "covered employees" within the meaning of Code Section
162(m) and regulations thereunder (including Regulation 1.162-27 and successor
regulations thereto) shall, if so designated by the Committee, constitute
"performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder.
Performance Awards. In determining a Performance Award, the Committee may
use such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions, and may exercise its
discretion to reduce or increase the amounts payable under any award subject to
performance conditions, except as limited in the case of a Performance Award or
Annual Incentive Award intended to qualify under Code Section 162(m). If the
Committee determines that a Performance Award should qualify as "performance-
based compensation" for purposes of Code Section 162(m), the grant, exercise
and/or settlement of such Performance Award shall be contingent upon achievement
of preestablished performance goals and other terms set forth in the 1999
Incentive Plan. The Committee may establish a Performance Award pool, which
shall be an unfunded pool, for purposes of measuring performance of the Company
in connection with Performance Awards. The amount of such Performance Award pool
shall be based upon the achievement of a performance goal or goals based on one
or more of the business criteria set forth in the 1999 Incentive Plan during the
given performance period, as specified by the Committee in accordance with the
1999 Incentive Plan. The Committee may specify the amount of the Performance
Award pool as a percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount which need not
bear a strictly mathematical relationship to such business criteria.
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Annual Awards. The Committee may establish an Annual Incentive Award pool,
which shall be an unfunded pool, for purposes of measuring performance of the
Company in connection with Annual Incentive Awards. The amount of such Annual
Incentive Award pool shall be based upon the achievement of a performance goal
or goals based on one or more of the business criteria set forth in the 1999
Incentive Plan during the given performance period, as specified by the
Committee in accordance therewith. The Committee may specify the amount of the
Annual Incentive Award pool as a percentage of any of such business criteria, a
percentage thereof in excess of a threshold amount, or as another amount which
need not bear a strictly mathematical relationship to such business criteria.
The Committee shall determine potential recipients of Annual Incentive
Awards, and the amounts potentially payable thereunder, for each fiscal year,
not later than the end of the 90th day of each such fiscal year, or at such
other date as may be required or permitted in the case of awards intended to be
"performance-based compensation" under Code Section 162(m). In the case of
individual Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria in the
given performance year, as specified by the Committee; in other cases, such
amounts shall be based on such criteria as shall be established by the
Committee. In all cases, the maximum Annual Incentive Award of any holder shall
be subject to the limitations set forth in the 1999 Incentive Plan.
After the end of each fiscal year, the Committee shall determine the
amount, if any, of (A) the Annual Incentive Award pool, and the maximum amount
of potential Annual Incentive Award payable to each holder in the Annual
Incentive Award pool, or (B) the amount of potential Annual Incentive Award
otherwise payable to each holder. The Committee may, in its discretion,
determine that the amount payable to any holder as a final Annual Incentive
Award shall be increased or reduced from the amount of his or her potential
Annual Incentive Award, except in the case of an Annual Incentive Award intended
to qualify under Code Section 162(m). The Committee shall specify the
circumstances in which an Annual Incentive Award shall be paid or forfeited in
the event of termination of employment by the holder prior to the end of a
fiscal year or settlement of such Annual Incentive Award.
Other Stock-Based Awards . The 1999 Incentive Plan also authorizes the
Committee, subject to limitations under applicable law, to grant to holders such
other awards that may be denominated or payable in, valued in whole or in part
by reference to, or otherwise based on, or related to, Common Stock, as deemed
by the Committee to be consistent with the purposes of the 1999 Incentive Plan,
including, without limitation, convertible or exchangeable debt securities,
other rights convertible or exchangeable into Common Stock, purchase rights for
Common Stock, awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee, and awards valued by
reference to the book value of Common Stock or the value of securities of or the
performance of specified subsidiaries. The Committee shall determine the terms
and conditions of such awards. Common Stock delivered pursuant to an award in
the nature of a purchase right granted shall be purchased for such
consideration, paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Common Stock, other awards, or other
property, as the Committee shall determine. Cash awards, as an element of or
supplement to any other award under the 1999 Incentive Plan, may also be
granted.
Options Granted Automatically to Non-Employee Directors. Directors who
are not otherwise employed by the Company are eligible for participation in the
1999 Incentive Plan. Each non-employee director will receive a non-employee
director annual option to purchase 5,000 shares of the company's common stock at
the close of business on the last trading day of each July. The exercise price
per share of stock purchasable upon exercise of a non-employee director annual
option will be equal to 100% of the fair market value of a share of stock on the
date of grant of the option. Each non-employee director annual option will
become exercisable in three equal installments after each of the first, second
and third anniversaries of the date of grant. Unless otherwise provided in the
1999 Incentive Plan, the exercise price must be paid in full either in cash, by
delivery of shares of Common Stock of the Company or by a combination of cash
and shares. A non-employee director annual option will expire at the earlier of
(a) ten
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years after the date of grant or (b) three months after the date the holder
ceases to serve as a director of the company for any reason.
It is the intent of the Company that the grant of any awards to or other
transaction by a holder who is subject to Section 16 of the Exchange Act shall
be exempt from Section 16 pursuant to an applicable exemption (except for
transactions acknowledged in writing to be non-exempt by such holder).
Accordingly, if any provision of the 1999 Incentive Plan or any award agreement
does not comply with the requirements of Rule 16b-3 as then applicable to any
such transaction, such, provision shall be construed or deemed amended to the
extent necessary to conform to the applicable requirements of Rule 16b-3 so that
such holder shall avoid liability under Section 16(b).
No award or other right or interest granted under the 1999 Incentive Plan
shall be pledged, hypothecated or otherwise encumbered or subject to any lien,
obligation or liability of the holder thereof to any party (other than the
Company or a subsidiary), or assigned or transferred by such holder otherwise
than by will or the laws of descent and distribution or to a beneficiary upon
the death of a holder, and such awards or rights that may be exercisable shall
be exercised during the lifetime of the holder only by the holder or his or her
guardian or legal representative, except that awards and other rights (other
than ISOs and SARs in tandem therewith) may be transferred to one or more
beneficiaries or other transferees during the lifetime of the holder, and may be
exercised by such transferees in accordance with the terms of such award, but
only if and to the extent such transfers are permitted by the Committee pursuant
to the express terms of an award agreement (subject to any terms and conditions
which the Committee may impose thereon). A beneficiary, transferee, or other
person claiming any rights under the 1999 Incentive Plan from or through any
holder shall be subject to all terms and conditions of the 1999 Incentive Plan
and any award agreement applicable to such holder, except as otherwise
determined by the Committee, and to any additional terms and conditions deemed
necessary or appropriate by the Committee.
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock and Series D Preferred Stock issued and outstanding on
the record date, voting together as a single class, is required for the adoption
of the 1999 Incentive Plan. The Directors and officers of the Company and other
principal shareholders owning of record, beneficially, directly and indirectly,
an aggregate of approximately 729,800 shares of the Company's Common Stock and
Series D Preferred Stock constituting approximately 18.8% of such shares
outstanding on the record date, have agreed to vote in favor of approval of this
proposal.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. II TO BE IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE "FOR"
APPROVAL THEREOF.
FINANCIAL INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL
BE FURNISHED WITHOUT THE ACCOMPANYING EXHIBITS TO STOCKHOLDERS WITHOUT CHARGE
UPON WRITTEN REQUEST THEREFOR SENT TO MICHAEL G. ZYBALA, SECRETARY, HEALTHY
PLANET PRODUCTS, INC., 1700 CORPORATE CIRCLE, PETALUMA, CALIFORNIA 94954. Each
such request must set forth a good faith representation that as of May 28, 1999
the person making the request was the beneficial owner of Common Shares or
shares of Series D Preferred Stock entitled to vote at the 1999 Annual Meeting
of Stockholders.
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OTHER BUSINESS
As of the date of this Proxy Statement, the foregoing is the only business
which the Board of Directors intends to present, and it is not aware of any
other matters which may come before the Annual Meeting. If any other matter or
matters are properly brought before the Annual Meeting, or any adjournments
thereof, it is the intention of the persons named in the accompanying form of
Proxy to vote the Proxy on such matters in accordance with their judgment.
STOCKHOLDER PROPOSALS FOR 2000 MEETING
Proposals of Stockholders intended to be presented at the Company's 2000
Annual Meeting of Stockholders must be received by the Company on or prior to
February 8, 2000 to be eligible for inclusion in the Company's proxy statement
and form of proxy to be used in connection with the 2000 Annual Meeting of
Stockholders.
By Order of the Board of Directors
/s/ MICHAEL G. ZYBALA,
Secretary
Dated: June 8, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND
RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED
IF IT IS MAILED IN THE UNITED STATES OF AMERICA.
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APPENDIX A
HEALTHY PLANET PRODUCTS, INC.
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1999 INCENTIVE COMPENSATION PLAN
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<PAGE>
TABLE OF CONTENTS
PAGE
1. Purpose................................................................1
2. Definitions............................................................1
3. Administration.........................................................4
(a) Authority of the Committee.......................................4
(b) Manner of Exercise of Committee Authority........................4
(c) Limitation of Liability..........................................5
4. Stock Subject to Plan..................................................5
(a) Overall Number of Shares Available for Delivery..................5
(b) Application of Limitation to Grants of Awards....................5
(c) Availability of Shares Not Delivered under Awards................5
5. Eligibility; Per-Person Award Limitations..............................6
6. Specific Terms of Awards...............................................6
(a) General..........................................................6
(b) Options..........................................................6
(c) Stock Appreciation Rights........................................7
(d) Restricted Stock.................................................7
(e) RSUs.............................................................8
(f) Bonus Stock and Awards in Lieu of Obligations....................9
(g) Dividend Equivalents.............................................9
(h) Annual Incentive and Performance Awards..........................9
(i) Other Stock-Based Awards........................................10
7. Certain Provisions Applicable to Awards...............................10
(a) Stand-Alone, Additional, Tandem, and Substitute Awards..........10
(b) Term of Awards..................................................10
(c) Form and Timing of Payment under Awards; Deferrals..............10
(d) Exemptions from Section 16(b) Liability.........................11
8. Performance and Annual Incentive Awards...............................11
(a) Performance Conditions..........................................11
(b) Performance Awards Granted to Designated Covered Employees......11
(c) Annual Incentive Awards Granted to Designated Covered Employees.13
(d) Written Determinations..........................................14
(e) Status of Section 8(b) and Section 8(c) Awards under Code
Section 162(m)..................................................14
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9. Change in Control.....................................................15
(a) Effect of "Change In Control."..................................15
(b) Definition of "Change in Control."..............................15
(c) Definition of "Change in Control Price."........................17
10. Options Granted Automatically to Non-Employee Directors...............17
(a) Annual Option Grants............................................17
(b) Number of Shares Subject to Automatic Option Grants.............17
(c) Other Non-Employee Director Annual Option Terms.................17
(d) Method of Exercise..............................................17
(e) Availability of Shares..........................................18
11. General Provisions....................................................18
(a) Compliance with Legal and Other Requirements....................18
(b) Limits on Transferability; Beneficiaries........................18
(c) Adjustments.....................................................18
(d) Taxes...........................................................19
(e) Changes to the Plan and Awards..................................19
(f) Limitation on Rights Conferred under Plan.......................20
(g) Unfunded Status of Awards, Creation of Trusts...................20
(h) Nonexclusivity of the Plan......................................20
(i) Payments in the Event of Forfeitures; Fractional Shares.........20
(j) Governing Law...................................................20
(k) Awards under Preexisting Plan(s)................................21
(l) Plan Effective Date and Shareholder Approval....................21
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HEALTHY PLANET PRODUCTS, INC.
1999 INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this 1999 Incentive Compensation Plan (the
"Plan") is to assist Healthy Planet Products, Inc., a Delaware corporation (the
"Corporation"), and its subsidiaries in attracting, retaining, and rewarding
high-quality executives, employees, directors and other persons who provide
services to the Corporation and/or its subsidiaries, enabling such persons to
acquire or increase a proprietary interest in the Corporation to strengthen the
mutuality of interests between such persons and the Corporation's shareholders,
and providing such persons with annual and long-term performance incentives to
expend their maximum efforts in the creation of shareholder value. The Plan is
also intended to qualify certain compensation awarded under the Plan for tax
deductibility under Code Section 162(m) (as hereafter defined) to the extent
deemed appropriate by the Committee (or any successor committee) of the Board of
Directors of the Corporation.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or other
Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, RSU, Stock granted as a bonus or in lieu of another award, Dividend
Equivalent, Other Stock-Based Award, Performance Award or Annual Incentive
Award, together with any other right or interest granted to a Participant under
the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under the
Plan upon such Participant's death or to which Awards or other rights are
transferred if and to the extent permitted under Section 11 (b) hereof. If, upon
a Participant's death, there is no designated Beneficiary or surviving
designated Beneficiary, then the term Beneficiary means person, persons, trust
or trusts entitled by will or the laws of descent and distribution to receive
such benefits.
(d) "Beneficial Owner"shall have the meaning ascribed to such term in
Rule 13d-3 under the Exchange Act and any successor to such Rule.
(e) "Board" means the Corporation's Board of Directors.
(f) "Change in Control" means Change in Control as defined with related
terms in Section 9 of the Plan.
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(g) "Change In Control Price" means the amount calculated in accordance
with Section 9(c) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee of two or more directors designated
by the Board to administer the Plan; provided, however, that, unless otherwise
determined by the Board, the Committee shall consist solely of two or more
directors, each of whom shall be (i) a "non employee director" within the
meaning of Rule 16b-3 under the Exchange Act, unless administration of the Plan
by "non-employee directors" is not then required in order for exemptions under
Rule 16b-3 to apply to transactions under the Plan, and (ii) an "outside
director" as defined under Code Section 162(m), unless administration of the
Plan by "outside directors" is not then required to qualify for tax
deductibility under Code Section 162(m).
(j) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.
(k) "Dividend Equivalent" means a right granted to a Participant under
Section 6(g), to receive cash, Stock, other Awards or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments.
(l) "Effective Date" means July 21, 1999, subject to approval by
stockholders of the Company.
(m) "Eligible Person" means each Executive Officer and other officers
and employees of the Corporation or of any subsidiary, and other persons who
provide services to the Corporation or any of its subsidiaries including
directors of the Corporation. An employee on leave of absence may be considered
as still in the employ of the Corporation or a subsidiary for purposes of
eligibility for participation in the Plan.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.
(o) "Executive Officer" means an executive officer of the Corporation
as defined under the Exchange Act.
(p) "Fair Market Value" means the fair market value of Stock, Awards or
other property as determined by the Committee or under procedures established by
the Committee. Unless otherwise determined by the Committee, the Fair Market
Value of Stock shall be the closing price of a share of Stock, as quoted on the
composite transactions table on the American Stock Exchange, on the date on
which the determination of fair market value is being made, or if no shares of
Stock were traded on such date, then the last trading date prior thereto.
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(q) "Incentive Stock Option" or "ISO" means any Option intended to be
and designated as an incentive stock option within the meaning of Code Section
422 or any successor provision thereto.
(r) "Limited SAR" means a right granted to a Participant under Section
6(c) hereof.
(s) "Option" means a right, granted to a Participant under Section 6(b)
hereof, to purchase Stock or other Awards at a specified price during specified
time periods.
(t) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(u) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(v) "Performance Award" means a right, granted to a Participant under
Section 8 hereof, to receive Awards based upon performance criteria specified by
the Committee.
(w) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and
shall include a "group" as defined in Section 13(d) thereof.
(x) "Preexisting Plan(s)" means the 1991 Senior Management Incentive
Plan and the Non-Employee Director Plan.
(y) "Qualified Member" means a member of the Committee who is a
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3) and an "outside
director" within the meaning of Regulation 1-162-27 under Code Section 162(m).
(z) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk of
forfeiture.
(aa) "Restricted Stock Unit or "RSU" means a right, granted to a
Participant under Section 6(e) hereof, to receive Stock, cash or a combination
thereof at the end of a specified deferral period.
(bb) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
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(cc) "Stock" means the Corporation's Common Stock, $0.01 par value per
share, and such other securities as may be substituted (or resubstituted) for
Stock pursuant to Section 11(c) hereof.
(dd) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee except to the extent the Board elects to administer the Plan, in which
case references herein to the "Committee" shall be deemed to include references
to the "Board." The Committee shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to select Eligible
Persons to become Participants, grant Awards, determine the type, number and
other terms and conditions of, and all other matters relating to, Awards,
prescribe Award agreements (which need not be identical for each Participant)
and rules and regulations for the administration of the Plan, construe and
interpret the Plan and Award agreements and correct defects, supply omissions or
reconcile inconsistencies therein, and to make all other decisions and
determinations as the Committee may deem necessary or advisable for the
administration of the Plan.
(b) Manner of Exercise of Committee Authority. At any time that a
member of the Committee is not a Qualified Member, any action of the Committee
relating to an Award granted or to be granted to a Participant who is then
subject to Section 16 of the Exchange Act in respect of the Corporation, or
relating to an Award intended by the Committee to qualify as "performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder, may be taken either (i) by a subcommittee, designated by the
Committee, composed solely of two or more Qualified Members, or (ii) by the
Committee but with each such member who is not a Qualified Member abstaining or
recusing himself or herself from such action; provided, however, that, upon such
abstention or recusal, the Committee remains composed solely of two or more
Qualified Members. Such action, authorized by such a subcommittee or by the
Committee upon the abstention or recusal of such non-Qualified Member(s), shall
be the action of the Committee for purposes of the Plan. Any action of the
Committee shall be final, conclusive and binding on all persons, including the
Corporation, its subsidiaries, Participants, Beneficiaries, transferees under
Section 11(b) hereof or other persons claiming rights from or through a
Participant, and shareholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee. The Committee may delegate
to officers or managers of the Corporation or any subsidiary, or committees
thereof, the authority, subject to such terms as the Committee shall determine,
to perform such functions, including administrative functions, as the Committee
may determine, to the extent that such delegation will not result in the loss of
an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject
to Section 16 of the Exchange Act in respect of the Corporation and will not
cause Awards intended to qualify as "performance-based compensation" under Code
Section 162(m) to fail to so qualify. The Committee may appoint agents to assist
it in administering the Plan.
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(c) Limitation of Liability. The Committee and each member thereof
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any executive officer, other officer or
employee of the Corporation or a subsidiary, the Corporation's independent
auditors, consultants or any other agents assisting in the administration of the
Plan. Members of the Committee and any officer or employee of the Corporation or
a subsidiary acting at the direction or on behalf of the Committee shall not be
personally liable for any action or determination taken or made in good faith
with respect to the Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Corporation with respect to any such action or
determination.
4. Stock Subject to Plan.
(a) Overall Number of Shares Available for Delivery. Subject to
adjustment as provided in Section 11(c) hereof, the total number of shares of
Stock reserved and available for delivery in connection with Awards under the
Plan shall be (i) 400,000 plus (ii) the number of shares of Stock remaining
available under Preexisting Plan(s) immediately prior to the date on which
shareholders of the Corporation approve the adoption of the Plan, plus (iii) the
number of shares of Stock subject to awards under Preexisting Plan(s) which
become available in accordance with Section 4(c) hereof after the date on which
shareholders of the Corporation approve the adoption of the Plan. Any shares of
stock delivered under the Plan shall consist of authorized and unissued shares
or treasury shares.
(b) Application of Limitation to Grants of Awards. No Award may be
granted if the number of shares of Stock to be delivered in connection with such
Award or, in the case of an Award relating to shares of Stock but settleable
only in cash (such as cash-only SARs), the number of shares to which such Award
relates, exceeds the number of shares of Stock remaining available under the
Plan minus the number of shares of Stock issuable in settlement of or relating
to then outstanding Awards. The Committee may adopt reasonable counting
procedures to ensure appropriate counting, avoid double counting (as, for
example, in the case of tandem or substitute awards) and make adjustments if the
number of shares of Stock actually delivered differs from the number of shares
previously counted in connection with an Award.
(c) Availability of Shares Not Delivered under Awards. Shares of Stock
subject to an Award under the Plan or award under any Preexisting Plan(s) that
are canceled, expired, forfeited, settled in cash or otherwise terminated
without a delivery of shares to the Participant, including (i) the number of
shares withheld in payment of any exercise or purchase price of an Award or
award or taxes relating to Awards or awards, and (ii) the number of shares
surrendered in payment of any exercise or purchase price of an Award or award or
taxes relating to any Award or award, will again be available for Awards under
the Plan, except that if any such shares could not again be available for Awards
to a particular Participant under any applicable law or regulation, such shares
shall be available exclusively for Awards to Participants who are not subject to
such limitation.
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5. Eligibility; Per-Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year during any part of which
the Plan is in effect, an Eligible Person may not be granted Awards relating to
more than a number of shares of Common Stock recommended by the Compensation
Committee, subject to adjustment as provided in Section 11(c), under each of
Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h), 8(b) and 8(c). In addition,
the maximum cash amount that may be earned under the Plan as a final Annual
Incentive Award or other cash annual Award in respect of any fiscal year by any
one Participant shall not exceed an amount recommended by the Compensation
Committee, and the maximum cash amount that may be earned under the Plan as a
final Performance Award or other cash Award in respect of a performance period
other than an annual period by any one Participant on an annualized basis shall
not exceed an amount recommended by the Compensation Committee.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter (subject to Section 11
(e)), such additional terms and conditions, not inconsistent with the provisions
of the Plan, as the Committee shall determine, including terms requiring
forfeiture of Awards in the event of termination of employment by the
Participant and terms permitting a Participant to make elections relating to his
or her Award. The Committee shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of an Award that
is not mandatory under the Plan; provided, however, that the Committee shall not
have any discretion to accelerate, waive or modify any term or condition of an
Award that is intended to qualify as "performance-based compensation" for
purposes of Code Section 162(m) if such discretion would cause the Award not to
so qualify. Except in cases in which the Committee is authorized to require
other forms of consideration under the Plan, or to the extent other forms of
consideration must by paid to satisfy the requirements of state law, no
consideration other than services may be required for the grant (but not the
exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee, provided that
such exercise price shall be not less than the Fair Market Value of a share of
Stock on the date of grant of such Option except as provided under Section 7(a)
hereof.
(ii) Time and Method of Exercise. The Committee shall determine the
time or times at which or the circumstances under which an Option may be
exercised in whole or in part (including based on achievement of performance
goals and/or future service requirements), the methods by which such exercise
price may be paid or deemed to be paid, the form of such payment, including,
without limitation, cash, Stock, other Awards or awards granted under other
plans of the Corporation or any subsidiary, or other property (including notes
or other contractual
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obligations of Participants to make payment on a deferred basis), and the
methods by or forms in which Stock will be delivered or deemed to be delivered
to Participants. In no event may an Option remain exercisable more than ten
years following the date of grant.
(iii) ISOs. The terms of any ISO granted under the Plan shall comply
in all respects with the provisions of Code Section 422. Anything in the Plan to
the contrary notwithstanding, no term of the Plan relating to ISOs (including
any SAR in tandem therewith) shall be interpreted, amended or altered, nor shall
any discretion or authority granted under the Plan be exercised, so as to
disqualify either the Plan or any ISO under Code Section 422, unless the
Participant has first requested the change that will result in such
disqualification.
(c) Stock Appreciation Rights. The Committee is authorized to grant
SAR's to Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Participant to whom
it is granted a right to receive, upon exercise thereof, the excess of (A) the
Fair Market Value of one share of Stock on the date of exercise (or, in the case
of a "Limited SAR," the Fair Market Value determined by reference to the Change
in Control Price, as defined under Section 9(c) hereof) over (B) the grant price
of the SAR as determined by the Committee provided that such grant price shall
not be less than the Fair Market Value of a share of Stock on the date of grant
of such SAR except as provided under Section 7(a) hereof.
(ii) Other Terms. The Committee shall determine at the date of grant
or thereafter, the time or times at which and the circumstances under which a
SAR may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the method of exercise,
method of settlement, form of consideration payable in settlement, method by or
forms in which Stock will be delivered or deemed to be delivered to
Participants, whether or not a SAR shall be in tandem or in combination with any
other Award, and any other terms and conditions of any SAR. Limited SARs that
may only be exercised in connection with a Change in Control or other event as
specified by the Committee may be granted on such terms, not inconsistent with
this Section 6(c), as the Committee may determine. SARs and Limited SARs may be
either freestanding or in tandem with other Awards.
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Committee may impose, which restrictions may lapse separately or
in combination at such times, under such circumstances (including based on
achievement of performance goals and/or future service requirements), in such
installments or otherwise, as the Committee may determine at the date of grant
or thereafter. Except to the extent restricted under the terms of the Plan and
any Award agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of
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the rights of a shareholder, including the right to vote the Restricted Stock
and the right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee). During the
restricted period applicable to the Restricted Stock, subject to Section 11(b)
below, the Restricted Stock may not be sold, transferred, pledged, hypothecated,
margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be forfeited
and reacquired by the Corporation; provided that the Committee may provide, by
rule or regulation or in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to Restricted Stock
shall be waived in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole or in part
the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of the
Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock, that the Corporation retain physical
possession of the certificates, and that the Participant deliver a stock power
to the Corporation, endorsed in blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an Award
of Restricted Stock, the Committee may require or permit a Participant to elect
that any cash dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the purchase
of additional Awards under the Plan. Unless otherwise determined by the
Committee, Stock distributed in connection with a Stock split or Stock dividend,
and other property distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted Stock with respect
to which such Stock or other property has been distributed.
(e) RSUs. The Committee is authorized to grant RSUs to Participants,
which are rights to receive Stock, cash, or a combination thereof at the end of
a specified deferral period, subject to the following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of RSUs shall
occur upon expiration of the deferral period specified for such RSUs by the
Committee (or, if permitted by the Committee, as elected by the Participant). In
addition, RSUs shall be subject to such restrictions (which may include a risk
of forfeiture) as the Committee may impose, if any, which restrictions may lapse
at the expiration of the deferral period or at earlier specified times
(including based on achievement of performance goals and/or future service
requirements), separately or in combination, in installments or otherwise, as
the Committee may determine. RSUs may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of shares of Stock
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covered by the RSUs, or a combination thereof, as determined by the Committee at
the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment during the applicable deferral period or portion
thereof to which forfeiture conditions apply (as provided in the Award agreement
evidencing the RSUs), all RSUs that are at that time subject to deferral (other
than a deferral at the election of the Participant) shall be forfeited; provided
that the Committee, may provide, by rule or regulation or in any Award
agreement, or may determine in any individual case, that restrictions or
forfeiture conditions relating to RSUs shall be waived in whole or in part in
the event of terminations resulting from specified causes, and the Committee may
in other cases waive in whole or in part the forfeiture of RSUs.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee at date of grant, Dividend Equivalents on the specified number of
shares of Stock covered by an Award of RSUs shall be either (A) paid with
respect to such RSUs at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such RSUs and the amount or value
thereof automatically deemed reinvested in additional RSUs, other Awards or
other investment vehicles, as the Committee shall determine or permit the
Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of obligations to pay cash or deliver other property under the Plan or under
other plans or compensatory arrangements, provided that, in the case of
Participants subject to Section 16 of the Exchange Act, the amount of such
grants remains within the discretion of the Committee to the extent necessary to
ensure that acquisitions of Stock or other Awards are exempt from liability
under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall
be subject to such other terms as Shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Stock,
other Awards, or other property equal in value to dividends paid with respect to
a specified number of shares of Stock, or other periodic payments. Dividend
Equivalents may be awarded on a free-standing basis or in connection with
another Award. The Committee may provide that Dividend Equivalents shall be paid
or distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the Committee may
specify.
(h) Annual Incentive and Performance Awards. The Committee is
authorized to make Annual Incentive Awards and Performance Awards payable in
cash, Shares, or other Awards, on terms and conditions established by the
Committee, subject to Section 8 in the event of Annual Incentive Awards or
Performance Awards intended to qualify as "performance-based compensation" for
purposes of Code Section 162(m).
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(i) Other Stock-Based Awards. The Committee is authorized, subject
to limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without limitation,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into Stock, purchase rights for Stock, Awards with value and
payment contingent upon performance of the Corporation or any other factors
designated by the Committee, and Awards valued by reference to the book value of
Stock or the value of securities of or the performance of specified
subsidiaries. The Committee shall determine the terms and conditions of such
Awards. Stock delivered pursuant to an Award in the nature of a purchase right
granted under this Section 6(h) shall be purchased for such consideration, paid
for at such times, by such methods, and in such forms including, without
limitation, cash, Stock, other Awards, or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Corporation,
any subsidiary, or any business entity to be acquired by the Corporation or a
subsidiary, or any other right of a Participant to receive payment from the
Corporation or any subsidiary. Such additional, tandem, and substitute or
exchange Awards may be granted at any time. If an Award is granted in
substitution or exchange for another Award or award, the Committee shall require
the surrender of such other Award or award in consideration for the grant of the
new Award. In addition, Awards may be granted in lieu of cash compensation,
including in lieu of cash amounts payable under other plans of the Corporation
or any subsidiary, in which the value of Stock subject to the Award is
equivalent in value to the cash compensation (for example, RSUs or Restricted
Stock), or in which the exercise price, grant price or purchase price of the
Award in the nature of a right that may be exercised is equal to the Fair Market
Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price "discounted" by
the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided that in no event shall the term of
any Option or SAR exceed a period of ten years (or such shorter term as may be
required in respect of an ISO under Code Section 422).
(c) Form and Timing of Payment under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made by the
Corporation or a subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Stock, other Awards or other
property, and may be made in a single payment or transfer, in installments, or
on
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a deferred basis. The settlement of any Award may be accelerated, and cash paid
in lieu of Stock in connection with such settlement, in the discretion of the
Committee or upon occurrence of one or more specified events (in addition to a
Change in Control). Installment or deferred payments may be required by the
Committee (subject to Section 11(e) of the Plan, including the consent
provisions thereof in the case of any deferral of an outstanding Award not
provided for in the original Award agreement) or permitted at the election of
the Participant on terms and conditions established by the Committee. Payments
may include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.
(d) Exemptions from Section 16(b) Liability. It is the intent of the
Corporation that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be exempt
from Section 16 pursuant to an applicable exemption (except for transactions
acknowledged in writing to be non-exempt by such Participant). Accordingly, if
any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 as then applicable to any such transaction, such
provision shall be construed or deemed amended to the extent necessary to
conform to the applicable requirements of Rule 16b-3 so that such Participant
shall avoid liability under Section 16(b).
8. Performance and Annual Incentive Awards.
(a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee. The
Committee may use such business criteria and other measures of performance as it
may deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under any
Award subject to performance conditions, except as limited under Sections 8(b)
and 8(c) hereof in the case of a Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. If the
Committee determines that a Performance Award to be granted to an Eligible
Person who is designated by the Committee as likely to be a Covered Employee
should qualify as "performance-based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Performance Award shall be
contingent upon achievement of preestablished performance goals and other terms
set forth in this Section 8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a targeted
level or levels of performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 8(b). Performance goals
shall be objective and shall otherwise meet the requirements of Code Section
162(m) and regulations thereunder (including Regulation 1.162-27 and successor
regulations thereto), including the requirement that the level or levels of
performance targeted by the
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Committee result in the achievement of performance goals being "substantially
uncertain." The Committee may determine that such Performance Awards shall be
granted, exercised and/or settled upon achievement of any one performance goal
or that two or more of the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards. Performance goals
may differ for Performance Awards granted to any one Participant or to different
Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Corporation, on a consolidated basis, and/or for specified
subsidiaries or business or geographical units of the Corporation (except with
respect to the total shareholder return and earnings per share criteria), shall
be used by the Committee in establishing performance goals for such Performance
Awards: (1) earnings per share, (2) increase in revenues or margin: (3) increase
in cash flow; (4) operating margin; (5) return on net assets, return on assets,
return on investment, return on capital, return on equity; (6) economic value
added; (7) direct contribution; (8) net income; pretax earnings: pretax earnings
before interest; depreciation and amortization (EBITDA): pretax earnings after
interest expense and before extraordinary or special items; operating income;
income before interest income or expense, unusual items and income taxes (local,
state or federal) and excluding budgeted and actual bonuses which might be paid
under any ongoing bonus plans of the Corporation; (9) working capital; (10)
management of fixed costs or variable costs, (11) identification or consummation
of investment opportunities or completion of specified projects in accordance
with corporate business plans, including strategic mergers, acquisitions or
divestitures, (12) total shareholder return; (13) debt reduction: and (14) any
of the above goals determined on an absolute or relative basis or as compared to
the performance of a published or special index deemed applicable by the
Committee including, but not limited to, the Standard & Poors 500 Stock Index or
a group of comparator companies. One or more of the foregoing business criteria
shall also be exclusively used in establishing performance goals for Annual
Incentive Awards granted to a Covered Employee under Section 8(c) hereof.
(iii) Performance Period; Timing for Establishing Performance Goals.
Achievement of performance goals in respect of such Performance Awards shall be
measured over a performance period of up to ten years, as specified by the
Committee. Performance goals shall be established not later than 90 days after
the beginning of any performance period applicable to such Performance Awards,
or at such other date as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes of
measuring performance of the Corporation in connection with Performance Awards.
The amount of such Performance Award pool shall be based upon the achievement of
a performance goal or goals based on one or more of the business criteria set
forth in Section 8(b)(ii) hereof during the given performance period, as
specified by the Committee in accordance with Section 8(b)(iii) hereof. The
Committee may specify the amount of the Performance Award pool as a percentage
of any of such business criteria,
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a percentage thereof in excess of a threshold amount, or as another amount which
need not bear a strictly mathematical relationship to such business criteria.
(v) Settlement of Performance Awards; Other Terms. After the end of
each performance period, the Committee shall determine the amount, if any, of
(A) the Performance Award pool, and the maximum amount of potential Performance
Award payable to each Participant in the Performance Award pool, or (B) the
amount of potential Performance Award otherwise payable to each Participant.
Settlement of such Performance Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection
with such Performance Awards, but may not exercise discretion to increase any
such amount payable to a Covered Employee in respect of a Performance Award
subject to this Section 8(b). The Committee shall specify the circumstances in
which such Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a performance
period or settlement of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered Employees. If
the Committee determines that an Annual Incentive Award to be granted to an
Eligible Person who is designated by the Committee as likely to be a Covered
Employee should qualify as a performance-based compensation" for purposes of
Code Section 162(m), the grant, exercise and/or settlement of such Annual
Incentive Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 8(c).
(i) Annual Incentive Award Pool. The Committee may establish an
Annual Incentive Award pool, which shall be an unfunded pool, for purposes of
measuring performance of the Corporation in connection with Annual Incentive
Awards. The amount of such Annual Incentive Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the business
criteria set forth in Section 8(b)(ii) hereof during the given performance
period, as specified by the Committee in accordance with Section 8(b)(iii)
hereof. The Committee may specify the amount of the Annual Incentive Award pool
as a percentage of any of such business criteria, a percentage thereof in excess
of a threshold amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later than the end of
the 90th day of each fiscal year, or at such other date as may be required or
permitted in the case of Awards intended to be "performance-based compensation"
under Code Section 162(m), the Committee shall determine the Eligible Persons
who will potentially receive Annual Incentive Awards, and the amounts
potentially payable thereunder, for that fiscal year, either out of an Annual
Incentive Award pool established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual Annual Incentive
Awards intended to qualify under Code Section 162(m), the amount potentially
payable shall be based upon the achievement of a performance goal or goals based
on one or more of the business criteria set forth in Section B(b)(11) hereof in
the given performance year, as specified by the Committee; in other cases, such
amount shall be based on such
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criteria as shall be established by the Committee. In all cases, the maximum
Annual Incentive Award of any Participant shall be subject to the limitation set
forth in Section 5 hereof.
(iii) Payout of Annual Incentive Awards. After the end of each
fiscal year, the Committee shall determine the amount, if any, of (A) the Annual
Incentive Award pool, and the maximum amount of potential Annual Incentive Award
payable to each Participant in the Annual Incentive Award pool, or (B) the
amount of potential Annual Incentive Award otherwise payable to each
Participant. The Committee may, in its discretion, determine that the amount
payable to any Participant as a final Annual Incentive Award shall be increased
or reduced from the amount of his or her potential Annual Incentive Award,
including a determination to make no final Award whatsoever, but may not
exercise discretion to increase any such amount in the case of an Annual
Incentive Award intended to qualify under Code Section 162(m). The Committee
shall specify the circumstances in which an Annual Incentive Award shall be paid
or forfeited in the event of termination of employment by the Participant prior
to the end of a fiscal year or settlement of such Annual Incentive Award.
(d) Written Determinations. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance Award pool
or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b), and the
amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards and the amount of final Annual Incentive Awards under Section
8(c), shall be made in writing in the case of any Award intended to qualify
under Code Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards or Annual Incentive Awards.
(e) Status of Section 8(b) and Section 8(c) Awards under Code Section
162(m). It is the intent of the Corporation that Performance Awards and Annual
Incentive Awards under Sections 8(b) and B(c) hereof granted to persons who are
designated by the Committee as likely to be Covered Employees within the meaning
of Code Section 162(m) and regulations thereunder (including Regulation 1.162-27
and successor regulations thereto) shall, if so designated by the Committee,
constitute "performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder. Accordingly, the terms of Sections 8(b), (c),
(d) and (e), including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section 162(m)
and regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards or an Annual Incentive
Award, as likely to be a Covered Employee with respect to that fiscal year. If
any provision of the Plan as in effect on the date of adoption or any agreements
relating to Performance Awards or Annual Incentive Awards that are designated as
intended to comply with Code Section 162(m) does not comply or is inconsistent
with the requirements of Code Section 182(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.
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9. Change in Control.
(a) Effect of "Change In Control." In the event of a "Change in
Control," the following provisions shall apply unless otherwise provided in the
Award agreement:
(i) Any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested as of the time
of the Change in Control and shall remain exercisable and vested for the balance
of the stated term of such Award without regard to any termination of employment
by the Participant, subject only to applicable restrictions set forth in Section
11(a) hereof;
(ii) Any optionee who holds an Option shall be entitled to elect,
during the 60 day period immediately following a Change in Control, in lieu of
acquiring the shares of Stock covered by such Option, to receive, and the
Corporation shall be obligated to pay, in cash the excess of the Change in
Control Price over the exercise price of such Option, multiplied by the number
of shares of Stock covered by such Option;
(iii) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan shall lapse and
such Awards shall be deemed fully vested as of the time of the Change in
Control, except to the extent of any waiver by the Participant and subject to
applicable restrictions set forth in Section 11(a) hereof; and
(iv) With respect to any outstanding Award subject to achievement of
performance goals and conditions under the Plan, such performance goals and
other conditions will be deemed to be met if and to the extent so provided in
the Award agreement relating to such Award.
(b) Definition of "Change in Control." A "Change in Control" shall be
deemed to have occurred if:
(i) any Person (other than the Corporation, any trustee or other
fiduciary holding securities under any employee benefit plan of the Corporation,
or any company owned, directly or indirectly, by the stockholders of the
Corporation immediately prior to the occurrence with respect to which the
evaluation is being made in substantially the same proportions as their
ownership of the common stock of the Corporation) acquires securities of the
Corporation and immediately thereafter is the Beneficial Owner (except that a
Person shall be deemed to be the Beneficial Owner of all shares that any such
Person has the right to acquire pursuant to any agreement or arrangement or upon
exercise of conversion rights, warrants or options or otherwise, without regard
to the sixty day period referred to in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing 20% or
more of the combined voting power of the Corporation's then outstanding
securities (except that an acquisition of securities directly from the
Corporation shall not be deemed an acquisition for purposes of this clause (i));
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(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board, and any new director (other
than a director designated by a person who has entered into an agreement with
the Corporation to effect a transaction described in clause (i), (iii), or (iv)
of this paragraph) whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two thirds of the
directors then still in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was previously so
approved but excluding for this purpose any such new director whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 148-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of an individual, corporation,
partnership, group, associate or other entity or Person other than the Board,
cease for any reason to constitute at least a majority of the Board;
(iii) the consummation of a merger or consolidation of the
Corporation with any other entity, other than (i) a merger or consolidation
which would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving or
resulting entity) more than 50% of the combined voting power of the surviving or
resulting entity outstanding immediately after such merger or consolidation or
(ii) a merger or consolidation in which no premium is intended to be paid to any
shareholder participating in the merger or consolidation;
(iv) the stockholders of the Corporation approve a plan or agreement
for the sale or disposition of all or substantially all of the consolidated
assets of the Corporation (other than such a sale or disposition immediately
after which such assets will be owned directly or indirectly by the stockholders
of the Corporation, in substantially the same proportions as their ownership of
the common stock of the Corporation immediately prior to such sale or
disposition) in which case the Board shall determine the effective date of the
Change in Control resulting therefrom; or
(v) any other event occurs which the Board determines, in its
discretion, would materially alter the structure of the Corporation or its
ownership.
For purposes of this definition:
(1) The term "Beneficial Owner" shall have the meaning
ascribed to such term in Rule 13d-3 under the Exchange Act
(including any successor to such Rule).
(2) The term "Exchange Act" means the Securities
Exchange Act of 1934, as amended from time to time, or any
successor act thereto.
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(3) The term "Person" shall have the meaning ascribed to
such term in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including "group" as defined
in Section 13(d) thereof.
(c) Definition of "Change in Control Price." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of cash and
fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any transaction triggering the Change in
Control or any liquidation of shares following a sale of substantially all
assets of the Corporation, or (ii) the highest Fair Market Value per share at
any time during the 60-day period preceding and 60-day period following the
Change in Control.
10. Options Granted Automatically to Non-Employee Directors.
(a) Annual Option Grants. A Non-Employee Director Annual Option will
be automatically granted at the close of business on the last trading day of
each July.
(b) Number of Shares Subject to Automatic Option Grants. Unless
otherwise determined by the Board in a resolution adopted on or prior to the
date of the annual meeting of the Company's shareholders that coincides with or
most recently precedes the date of grant of an Option to a Non-Employee
Director, the number of shares of Stock to be subject to each Annual Option
shall be 5,000, in each case subject to adjustment as provided in Section 11(c).
(c) Other Non-Employee Director Annual Option Terms. Unless otherwise
determined by the Board, other terms of Annual Options shall be as follows:
(i) The exercise price per share of Stock purchasable upon
exercise of a Non-Employee Director Annual Option will be equal to 100% of the
Fair Market Value of a share of Stock on the date of grant of the Option.
(ii) A Non-Employee Director Annual Option will expire at the
earlier of (A) 10 years after the date of grant or (B) three months after the
date the Participant ceases to serve as a director of the Company for any
reason.
(iii) Each Non-Employee Director Annual Option will become
exercisable in three equal installments after each of the first, second and
third anniversaries of the date of grant.
(d) Method of Exercise. A Participant may exercise a Non-Employee
Director Annual Option, in whole or in part, at such time as it is exercisable
and prior to its expiration, by giving written notice of exercise to the
Secretary of the Company, specifying the Option to be exercised and the number
of shares to be purchased, and paying in full the exercise price in cash
(including by check) or by surrender of shares of Stock already owned by the
Participant (except for shares acquired from the Company by exercise of an
option less than six months before the date of
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surrender) having a Fair Market Value at the time of exercise equal to the
exercise price, or by a combination of cash and shares.
(e) Availability of Shares. If an automatic grant of Options
authorized under Section 10(a) or (b) cannot be made in full due to the
limitation set forth in Section 4(a), such grant shall be made (together with
other automatic grants to occur at the same time) to the greatest extent then
permitted under Section 4(a).
11. General Provisions.
(a) Compliance with Legal and Other Requirements. The Corporation may,
to the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award until
completion of such registration or qualification of such Stock or other required
action under any federal or state law, rule or regulation, listing or other
required action with respect to any stock exchange or automated quotation system
upon which the Stock or other securities of the Corporation are listed or
quoted, or compliance with any other obligation of the Corporation, as the
Committee may consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and reasons, listing requirements, or other obligations.
(b) Limits on Transferability; Beneficiaries. No Award or other right
or interest granted under the Plan shall be pledged, hypothecated or otherwise
encumbered or subject to any lien, obligation or liability of such Participant
to any party (other than the Corporation or a subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs in
tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such
transferees in accordance with the terms of such Award, but only if and to the
extent such transfers are permitted by the Committee pursuant to the express
terms of an Award agreement (subject to any terms and conditions which the
Committee may impose thereon). A Beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall be
subject to all terms and conditions of the Plan and any Award agreement
applicable to such Participant, except as otherwise determined by the Committee,
and to any additional terms and conditions deemed necessary or appropriate by
the Committee.
(c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar transaction or event affects the Stock such that an adjustment is
determined by the
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<PAGE>
Committee to be appropriate under the Plan, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of (i) the number and kind of
shares of Stock which may be delivered in connection with Awards granted
thereafter, (ii) the number and kind of shares of Stock by which annual
per-person Award limitations are measured under Section 5 hereof, (iii) the
number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the business unit, or
the financial statements of the Corporation or any subsidiary, or in response to
changes in applicable laws, regulations, accounting principles, tax rates and
regulations or business conditions or in view of the Committee's assessment of
the, business strategy of the Corporation, any subsidiary or business unit
thereof, performance of comparable organizations, economic and business
conditions, personal performance of a Participant, and any other circumstances
deemed relevant; provided, that no such adjustment shall be authorized or made
if and to the extent that such authority or the making of such adjustment would
cause Options, SARs, Performance Awards granted under Section 8(b) hereof or
Annual Incentive Awards granted under Section 8(c) hereof to Participants
designated by the Committee as Covered Employees and intended to qualify as
"performance-based compensation" under Code Section 162(m) and regulations
thereunder to otherwise fail to qualify as "performance-based compensation"
under Code Section 162(m) and regulations thereunder.
(d) Taxes. The Corporation and any subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Corporation and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participants tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to grant
Awards under the Plan without the consent of shareholders or Participants,
except that any amendment or alteration to the Plan shall be subject to the
approval of the Corporation's shareholders not later than the annual meeting
next following such Board action if such shareholder approval is required by any
federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such
changes to the Plan to shareholders for approval; provided that, without the
consent of an affected Participant, no such Board action may materially and
adversely affect the rights of such Participant under any previously granted and
outstanding Award. The Committee may waive any conditions or rights under, or
amend, alter, suspend, discontinue or terminate any Award theretofore granted
and any Award agreement relating thereto, except as otherwise provided in the
Plan; provided that, without the consent of an affected Participant, no such
Committee action may
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<PAGE>
materially and adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution of
Stock having a Fair Market Value equal to the cash otherwise payable hereunder
for that right which caused the transaction to be ineligible for pooling of
interest accounting. In addition, the Board shall also have the authority to
modify the Plan, to the extent it deems necessary or desirable in its sole
discretion, to minimize the taxes incurred by either the Company or any
Participant relating to any Award.
(f) Limitation on Rights Conferred under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible Person
or Participant the right to continue as an Eligible Person or Participant or in
the employ or service of the Corporation or a subsidiary, (ii) interfering in
any way with the right of the Corporation or a subsidiary to terminate any
Eligible Person's or Participant's employment or service at any time, (iii)
giving an Eligible Person or Participant any claim to be granted any Award under
the Plan or to be treated uniformly with other Participants and employees, or
(iv) conferring on a Participant any of the rights of a shareholder of the
Corporation unless and until the Participant is duly issued or transferred
shares of Stock in accordance with the terms of an Award.
(g) Unfunded Status of Awards, Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for certain incentive awards and
deferred compensation. With respect to any payments not yet made to a
Participant or obligation to deliver Stock pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Participant any rights
that are greater than those of a general creditor of the Corporation.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the shareholders of the Corporation for approval
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify under
Code Section 162(m).
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award
with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration. No
fractional shares of Stock shall be issued or delivered pursuant to the Plan or
any Award. The Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
(j) Governing Law. The validity, construction and effect of the Plan,
any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with
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<PAGE>
the laws of the State of New York, without giving effect to principles of
conflicts of laws, and applicable federal law.
(k) Awards under Preexisting Plan(s). Upon approval of the Plan by
shareholders of the Corporation as required under Section 11(1) hereof, no
further awards shall be granted under the Preexisting Plan(s).
(l) Plan Effective Date and Shareholder Approval. The Plan has been
adopted by the Board effective July 21, 1999, subject to approval by the
shareholders of the Corporation.
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<PAGE>
HEALTHY PLANET PRODUCTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 21, 1999
The undersigned shareholder(s) of Healthy Planet Products, Inc., a
Delaware corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and the Proxy Statement and hereby appoints Bruce A.
Wilson and Michael G. Zybala, each with the full authority to act without the
other and with the power to appoint his substitute, as proxies and attorneys-in-
fact and hereby authorizes them to represent and vote, as designated on this
proxy card, all the shares of Common Stock of Healthy Planet Products, Inc. held
of record by the undersigned on May 28, 1999 at the Annual Meeting of
Shareholders to be held on July 21, 1999 and at any adjournment or adjournments
thereof, as indicated on the matters set forth on the reverse side:
(Continued and to be signed on reverse side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
HEALTHY PLANET PRODUCTS, INC.
July 21, 1999
| |
\|/ Please Detach and Mail in the Envelope Provided \|/
- -------------------------------------------------------------------------------
[X] Please mark your votes as in this example.
WITHHOLD
AUTHORITY
FOR all nominee to vote for all nominees
listed at right listed at right
Election [_] [_]
of
Diectors
Nominees: John V. Winfield
Robert W. Sweitzer, Ph.D.
Instruction: To withhold authority to vote for any individual nominee or
nominees, specify the name of such nominee(s):
- -------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Adoption of the 1999 Incentive [_] [_] [_]
Compensation Plan.
3. In their discretion, upon any other matter or matters as may properly come
before the meeting or any adjournment or adjournments thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
This Proxy, when properly executed, will be voted and will be voted in
accordance with the directions given by the undersigned shareholder. If no
direction is made, it will be voted "FOR" Items 1 and 2 as described above and
in the accompanying Proxy Statement, and as the proxies deem advisable on any
other matters as may properly come before the meeting.
_________________________ _______________________ Dated: ______________, 1999
Signature Signature
Note: (This Proxy should be marked, dated and signed by the shareholder(s)
exactly as his or her name appears hereon, and returned promptly in the
enclosed envelope. Persons signing in a fiduciary should so indicate. If
shares are held by joint tenants or as community property, both should
sign.)
