<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of
the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/X/ Definitive Information Statement
VESTRO NATURAL FOODS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
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:
------------------------------------------------------------------------
/X/ 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>
VESTRO NATURAL FOODS INC.
1065 E. Walnut Street
Carson, CA 90746
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 20, 1996
----------------
To the Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
of Vestro Natural Foods Inc. (the "Company") which will be held at 1065 E.
Walnut Street, Carson, California 90746 on Thursday, June 20, 1996 at 10:00 A.M.
(Pacific Coast Time) for the following purposes:
(1) To elect directors;
(2) To consider and vote upon the adoption of the 1996 Incentive Stock
Plan;
(3) To ratify and approve the grant of non-qualified options to purchase
an aggregate of 160,000 Shares of Common Stock to non-employee
Directors; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 1, 1996 as
the record date for shareholders entitled to notice of and to vote at the
meeting. The share transfer books will not be closed.
By order of the Board of Directors,
Stephen Schorr
Secretary
May 15, 1996
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
<PAGE>
INFORMATION STATEMENT
For the Annual Meeting to be held on June 20, 1996.
This Information Statement is furnished in connection
with the Annual Meeting of Shareholders of Vestro Natural Foods Inc. (the
"Company") to be held at 10:00 A.M. (Pacific Coast Time) on Thursday, June 20,
1996 at 1065 E. Walnut Street, Carson, California 90746 or at any adjournment
thereof with respect to the matters referred to in the accompanying notice.
This Information Statement is to be mailed to shareholders on or about May 15,
1996.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
VOTING SECURITIES AND RECORD DATE
Only holders of record of the Company's Common Stock, $.01 par value, at
the close of business on May 1, 1996 will be entitled to notice of and to vote
at the meeting. On the record date, there were issued and outstanding 5,950,588
shares of Common Stock. Each outstanding share of Common Stock is entitled to
one vote.
See SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, for
information as to the holdings of persons owning in excess of 5% of the Common
Stock as well as the holdings of Management.
MATTERS TO BE ACTED UPON
(1) The election of nine directors to hold office until the next
Annual Meeting of Shareholders and until their respective successors
are duly elected and qualified;
(2) To consider and vote upon the adoption of the 1996 Incentive Stock
Plan;
(3) To ratify and approve the grant of non-qualified options to purchase
an aggregate of 160,000 Shares of Common Stock to non-employee
Directors; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
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ELECTION OF DIRECTORS
Nine directors are to be elected to serve until the next Annual Meeting of
Shareholders and until their successors are elected and qualified.
The following table sets forth the name of each nominee for director of the
Company, his age, position and office with the Company and period he has served
as a director:
POSITION AND OFFICE DIRECTOR
NAME AGE WITH COMPANY SINCE
- ---------------------- ----- ------------------------- --------
Robert J. Cresci 52 Chairman of the Board 1990
Allan Dalfen 53 Director 1992
Anthony J. Harnett 51 Director 1994
B. Allen Lay 61 President and Chief
Executive Officer
and Director 1987
Stephen P. Monticelli 41 Director 1994
Jay J. Miller 63 Director 1966
F. Noel Perry 43 Director 1995
Henry W. Poett, III 57 Director 1987
Donald R. Stroben 65 Director 1987
Robert J. Cresci has been a Managing Director of Pecks Management Partners
Ltd., an investment management firm, since September 1990. Mr Cresci currently
serves on the boards of Bridgeport Machines, Inc., Serv-Tech, Inc., EIS
International, Inc., Sepracor, Inc., Olympic Financial, Ltd., GeoWaste, Inc.,
Hitox, Inc., Natures Elements, Inc., Garnet Resources Corporation, HarCor
Energy, Inc., Meris Laboratories, Inc. and several private companies.
Allan Dalfen was President and Chief Executive Officer of the Company from
February, 1993 to January, 1995. From 1979 to 1992, Mr. Dalfen was President
and Chief Executive Officer of Weider Health and Fitness, a manufacturer of
health and fitness equipment, sports nutrition products and fitness
publications.
Anthony J. Harnett was the owner of Bread & Circus, a leading natural
products retailer, from 1975 through 1992. He currently serves as Chairman of
Harnett's , a homeopathic retail pharmacy. He is also Chairman of Hawkins
Associates Inc. and its subsidiary, Hawkins Transport. Hawkins is a major
supplier of organic and commercial produce to the natural foods industry.
B. Allen Lay was elected by the Board of Directors as President and Chief
Executive Officer on January 12, 1995. Mr. Lay has served as a
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General Partner of Southern California Ventures, a venture capital firm, since
May, 1983. He is a director of PairGain Technologies, Physical Optics Corp.,
Kofax Imaging, ViaSat Inc. and Medclone Inc. Mr. Lay was Chairman and Chief
Executive Officer of Meridian Data Inc. from July, 1993 to December, 1994.
Jay J. Miller has been a practicing attorney in the State of New York for
more than thirty years. Mr. Miller is a director of Total-Tel USA
Communications, Inc. a long distance telephone service provider, and Edison
Control Corporation, a manufacturer of electronic fault locating devices for the
power utility industry. He is also a director of Gulf Resources Pacific
Limited, a New Zealand real estate company.
Stephen P. Monticelli is a private equity investor. From 1991 to 1995 he
was a partner and Managing Director of Baccharis Capital, Inc., a venture
capital and buyout firm located in Menlo Park, California. From 1987 to 1991,
Mr. Monticelli was a Principal in the Private Ventures group of The Fremont
Group (formerly known as Bechtel Investments, Inc.), a private family investment
firm. Prior to 1987, he was a management consultant with Marakon Associates and
a Certified Public Accountant with Deloitte and Touche.
F. Noel Perry is the founder and a Managing Director of Baccharis Capital,
Inc., a private venture capital partnership which concentrates its interests in
the natural and organic food area. Mr. Perry currently serves on the board of
several private companies and served on the board of Earth's Best before its
recent sale.
Henry W. Poett, III was President and Chief Executive Officer of the
Company from April, 1992 to January, 1993. Previously he was Executive Vice
President-Operations and Chief Operating Officer of the Company from May, 1990
to March, 1992. Mr. Poett is currently a partner in Dalton Partners, a
management services company. Mr. Poett was an independent management consultant
from 1989 to 1990. He served as President and Chief Operating Officer of
Transcisco Industries Inc. from 1987 to 1988. From 1984 to 1987, he was Chief
Executive Officer of Wilsey Foods, Inc., a packager, marketer and distributor of
food products. He is a director of Biovation Inc., Wilsey Bennett Company, and
Armanino Foods.
Donald R. Stroben was Chairman of the Board of the Company from January,
1987 to January, 1993. He has served as a Managing General Partner of
Princeton/Montrose Partners, a venture capital firm, since December 1981. Mr.
Stroben currently serves as a director of Etz Lavud Ltd. (ASE) and several
private companies Mr. Stroben is also past Chairman of the Board of Laura
Scudder's, Inc., a snack food manufacturer.
During 1995, the Board held five meetings. Each director attended at least
75% of the meetings held. Where formal action has otherwise been required, the
Board has acted by unanimous written consent as permitted under applicable
corporate law and the Company's By-Laws. The Company's Board of Directors
currently has an Audit Committee consisting of Messrs. Stroben and Poett and a
Compensation Committee consisting of Messrs. Miller and Cresci. The Board
currently has no Nominating Committee.
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APPROVAL OF 1996 INCENTIVE STOCK PLAN
Shareholders are being asked to approve the 1996 Incentive Stock Plan (the
"1996 Plan"). The purpose of the 1996 Plan is to advance the interests of the
Company and its shareholders by strengthening the Company's ability to attract
and retain key employees and directors and to provide a means to encourage stock
ownership in the Company by such key employees and directors. A copy of the 1996
Plan is annexed as Exhibit A to this information statement.
BACKGROUND
The Company's 1988 Stock Option Plan (the "1988 Plan") was adopted by
shareholder vote in 1988. The 1988 Plan provided for an aggregate number of
150,000 shares available for issuance. As of March 31, 1996 149,500 shares of
Common Stock were subject to outstanding options under the 1988 Plan and only
500 additional shares would be available under the Plan for future option
grants.
All options granted have an exercise price of $1.375 per share. At March
31, 1996, options to purchase 27,500 shares of Common Stock were currently
exercisable. The expiration dates for all such outstanding options range from
April 19, 1999 (at the earliest) to October 25, 2000 (at the latest).
During the fiscal year ended December 31, 1995, the Board of Directors of
the Company granted options to purchase 125,500 shares of Common Stock under the
1988 Plan to 16 employees. Options to purchase 32,500 shares were cancelled
during the year due to the resignation of three employees. All of the options
vest over a period of five years, with 25% of each option exercisable at the end
of each year. No options were exercised during the fiscal year ended December
31, 1995.
GENERAL DESCRIPTION OF THE 1996 PLAN
ADMINISTRATION
The 1996 Plan will be administered by the Board of Directors and/or the
Compensation Committee of the Board (the "Committee"). The Committee must be
composed of not less than two members of the Board of Directors, each of whom is
a disinterested person, as contemplated by rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended. The Committee will have sole
discretion and authority, consistent with the provisions of the 1996 Plan, to
grant securities under the 1996 Plan, determine in good faith the fair market
value of the shares, select the eligible participants to whom options will be
granted under the 1996 Plan, construe and interpret the 1996 Plan, promulgate,
amend and rescind rules and regulations for the administration thereof, and make
such other determinations which are necessary and advisable for the 1996 Plan's
administration.
ELIGIBILITY
Any employee, officer, director or consultant of the Company is eligible
for selection to receive awards under the 1996 Plan.
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<PAGE>
TYPES OF AWARDS
The 1996 Plan provides for the granting of (i) incentive stock options
("ISOs"), as defined by Section 422 of the United States Internal Revenue Code
of 1986, as amended (the "Code"); (ii) stock options that do not meet such
requirements or "non-statutory stock options" ("NSOs"); (iii) awards of stock;
and (iv) restricted stock purchase rights. The shares of stock available under
the 1996 Plan for such options, grants and rights are 150,000 shares of the
Company's Common Stock.
OPTIONS. The exercise price of ISOs to be granted under the 1996 Plan will
be no less than the fair market value of a share of the Common Stock on the date
the option is granted (110% of fair market value with respect to ISO optionees
who own at least 10% of the total combined voting power of all classes of stock
outstanding). The exercise price of NSOs shall be determined by the Committee
and may be no less than 85% of the fair market value of a share of Common Stock
on the date the option is granted (110% of fair market value with respect to NSO
optionees who own at least 10% of the total combined voting power of all classes
of stock outstanding). The Committee will have the authority to determine the
time or times at which options granted under the 1996 Plan become exercisable,
but options expire no later than ten years from the date of grant (five years
with respect to optionees who own at least 10% of the total combined voting
power of all classes of stock outstanding). Options will be nontransferable,
other than by will and the laws of descent, and generally may be exercised only
by an optionee while employed by the Company or within three months after
termination of employment or between six months and one year in the event of
termination by reason of death or disability.
Any option granted to an employee of the Company shall become exercisable
over a period of not longer than five years, and not less than 20% of the shares
covered by the option shall become exercisable annually. In no event shall any
option be exercisable after the expiration of 10 years from the date it is
granted and no ISO granted to optionees who own at least 10% of the total
combined voting power of all classes of stock outstanding shall be exercisable
after the expiration of five years from the date of the option.
Options to be granted under the 1996 Plan will be exercisable in cash or by
delivery to the Company of shares of Common Stock.
STOCK AWARDS AND RESTRICTED STOCK PURCHASE OFFER. The Board or the
Committee may grant to a participant shares of Common Stock, or a right to
purchase a specified number of shares of Common Stock, subject to such
conditions and/or restrictions as the Board or Committee in its discretion
determines.
AMENDMENT TO OR TERMINATION OF THE 1996 PLAN
The Board may, with respect to any shares of Common Stock at the time not
subject to outstanding grants, suspend or terminate the 1996 Plan or revise or
amend it in any respect whatsoever, except that without the approval of the
shareholders of the Company, no such revision or amendment shall increase the
number of shares subject to the 1996 Plan, decrease the price at which grants
may be made, or materially increase the benefits to
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participants or change the class of person eligible to receive grants under the
plan.
FEDERAL INCOME TAX CONSIDERATIONS
INCENTIVE STOCK OPTIONS. An employee will not recognize income upon the
grant or exercise of an ISO. If an employee disposes of the shares acquired
upon exercise of an ISO at least two years after the date the option was granted
and at least one year after the date the shares are issued to him or her upon
the exercise of an option, the employee will realize long-term capital gain in
an amount equal to the excess, if any, of his or her selling price for the
shares over the exercise price. In such case, the Company will not be entitled
to any tax deduction. If an employee disposes of the shares acquired upon the
exercise of an ISO prior to the expiration of two years from the date the option
was granted, or one year from the date the shares are issued to him or her, any
gain realized will be taxable at such time as follows: (1) as ordinary income to
the extent of the difference between the Option exercise price and the lesser of
(a) the fair market value of the shares on the date the shares were issued to
him or her or (b) the amount realized on such disposition, and (2) as capital
gain to the extent of any excess, which gain shall be treated as short-term or
long-term capital gain depending upon the employee's holding period. In such
case, the Company may claim an income tax deduction for the amount taxable to
the employee as ordinary income. The difference between the fair market value
of the shares at the time the ISO is exercised and the exercise price will
constitute an item of adjustment, for purposes of determining alternative
minimum taxable income, and may under certain circumstances be subject, in the
year in which the option is exercised, to the alternative minimum tax. Under
current law, long-term capital gains generally are taxed at a maximum rate of
28%.
If an individual uses shares of Common Stock of the Company that he or she
owns to pay, in whole or in part, the exercise price under an ISO, (a) the
individual's holding period for the newly-issued shares equal in number to the
surrendered shares (the "exchanged shares") shall include the period during
which the surrendered shares were held, (b) the employee's basis in such
exchanged shares will be the same as his or her basis in the surrendered shares,
and (c) no gain or loss will be recognized by the employee on the exchange of
the surrendered shares for the exchanged shares. Further, the employee will
have a zero basis in any additional shares received over and above the exchanged
shares. However, if an employee tenders shares acquired pursuant to the
exercise of an ISO to pay all or part of the exercise price under an ISO, such
tender will constitute a disposition of such shares for purposes of the one year
(or two year) holding period requirement applicable to ISOs and such tender will
be treated as a taxable exchange if such holding period has not been met.
NON-OUALIFIED STOCK OPTIONS. A holder will not recognize any income at the
time an NSO is granted. If the employee is not a director, officer, or
principal shareholder (i.e., an owner of more than ten percent of the Common
Stock of the Company), he or she will recognize ordinary income at the time he
or she exercises a NSO in a total amount equal to: (1) in the case of options
which the employee exercises with cash, the excess of the then fair market value
of the shares acquired over the exercise price and (2) in the case of options
which an employee exercises by tendering
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previously owned shares, the then fair market value of the number of shares
issued in excess of the fair market value of the number of shares surrendered
upon such exercise. Section 83 of the Code generally provides that if a
director, officer, or principal shareholder receives shares pursuant to the
exercise of an NSO, he or she is not required to recognize income until the date
on which he or she can sell such shares at a profit without being subject to
liability under Section 16(b) of the 1934 Act. In general, pursuant to
regulations under Section 16(b) of the 1934 Act the restriction on selling such
shares at a profit will be considered to have lapsed six months after the later
of the original grant date of the option or the option holder's intervening
purchase of shares or other equity securities of the Company in a transaction
that is subject to the short-swing profit recovery provisions of Section 16(b)
of the 1934 Act. Alternatively, a director, officer or principal shareholder
who would not otherwise be subject to tax on the value of his or her shares as
of the date they were acquired can file a written election, within 30 days after
the shares are issued to him or her, pursuant to Section 83(b) of the Code, to
be taxed as of the date of transfer. In either case, the director, officer, or
principal shareholder would realize income equal to the amount by which the fair
market value, at the time the income is recognized, of the shares acquired
pursuant to the exercise of such option exceeds the price paid for such shares.
All income realized upon the exercise of any NSO will be taxed as ordinary
income. The Company may claim an income tax deduction (if applicable tax
withholding rules are satisfied) for the amount taxable to a holder in the same
year as those amounts are taxable to a holder. Gain or loss between exercise
and disposition on shares acquired pursuant to an NSO are generally eligible for
capital gain or loss treatment upon any subsequent disposition, provided
applicable holding periods have been met. Generally, a holder's holding period
will commence from the date such shares are issued to him or her, and his or her
basis in such shares will equal their fair market value as of that date, but the
holding period of a director, officer, or principal shareholder begins on the
date he or she recognizes income with respect to such shares, and his or her
basis in the shares will be equal to the greater of the then fair market value
of the shares or the amount paid for such shares. If an individual uses shares
of Common Stock that he or she owns to exercise an NSO, (a) the individual's
holding period for the newly-issued shares equal in number to the surrendered
shares (the "exchanged shares") shall include the period during which the
surrendered shares were held, (b) the holder's basis in such exchanged shares
will be the same as his or her basis in the surrendered shares, and (c) no gain
or loss will be recognized by the holder on the exchange of the surrendered
shares for the exchanged shares. Under current law, long-term capital gains
generally are taxed at a maximum rate of 28%.
The foregoing summarizes material Federal income tax consequences relating
to options; however, reference is made to the applicable provisions of the Code.
In addition, there may be tax considerations under state and local laws
applicable to participants.
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RATIFICATION AND APPROVAL OF GRANT OF STOCK OPTIONS
TO NON-EMPLOYEE DIRECTORS
Shareholders are being asked to ratify and approve the grant of options to
purchase 20,000 shares of the Company's $.01 par value Common Stock to each of
the non-employee Directors of the Company or an aggregate of 160,000 shares.
These options were not issued under an existing option plan.
On July 26, 1995, the Board of Directors granted to each of the eight non-
employee Directors, subject to shareholder approval, a non-qualified option to
purchase 20,000 shares of Common Stock, $.01 par value, of the Company. The
purpose of the grant was to assist the Company in retaining highly qualified
persons to serve as Directors by affording such persons an opportunity to
acquire a proprietary interest in the Company, thus more closely identifying the
interests of such Directors with those of the shareholders. The principal
features of the options are summarized below.
Each option is exercisable, in whole or in part, at any time or from time
to time, at a price of $1.875 per share, (the fair market value of the Company's
Common Stock on the date of grant) for a period of five years from the date of
grant and vest in three equal installments on each anniversary of the date of
grant, with credit to be given for up to two years of prior service by an option
holder. In other words, as to a non-employee Director who has served in such
capacity for two or more years prior to the grant, two-thirds of the option is
immediately vested and the balance vests one year after grant. The Company may
accelerate the vesting period in whole or in part. Each option terminates upon
termination of the holders directorship or upon his disability; however, an
option holder shall have the right to exercise his option, to the extent
previously vested, for up to the earlier of 180 days (90 days if termination was
for cause) following such termination, or the expiration date of the option. In
the event of the holders death, the option, which is otherwise non-transferable,
shall pass to his heirs or administrators and shall be exercisable, to the
extent previously vested, for up to one year following the holder's death or the
expiration date of the option.
The option has provisions designed to protect the holder from dilution by
reason of recapitalization, stock dividends, stock aplits, mergers or similar
events. No holder of an option shall have any rights as a shareholder of the
Company in respect of shares issuable upon exercise of an option unless the
option is exercised in accordance with its terms and a certificate representing
such shares has been issued and delivered to the holder.
Upon exercise of an option by a non-employee Director, the difference
between the exercise price and the then fair market value of the shares so
issued shall be recognized as ordinary income to the option holder. The Company
shall be entitled to a deduction for the amount so recognized as ordinary
income.
REQUIRED VOTE
FOR ELECTION OF DIRECTORS:
Assuming the presence of a quorum (a majority of the total issued and
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outstanding shares of the Company's Common Stock) a favorable vote of the
holders of a plurality of the shares of the Company's Common Stock present and
voting at the meeting for the election of each nominee or in favor of each
proposal is required.
FOR APPROVAL OF THE 1996 INCENTIVE STOCK PLAN:
Approval of this proposal requires an affirmative vote by the holders of a
majority of the issued and outstanding shares of Common Stock of the Company.
FOR APPROVAL OF GRANT OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS
Approval of this proposal requires an affirmative vote by the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote at the meeting, assuming the presence of a quorum.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information covering the executive officers
of the Company. All officers serve at the pleasure of the Board of Directors.
There are no family relationships among any officers or directors of the
Company.
NAME AGE POSITION
- ------------------- ----- ---------------------------------
Robert J. Cresci 52 Chairman of the Board
B. Allen Lay 61 President and Chief Executive Officer
Stephen Schorr 50 Vice President, Finance,
Secretary, Treasurer and Chief Financial
Officer
Messrs. Cresci and Lay currently serve as directors of the Company. See
ELECTION OF DIRECTORS for employment and background information for these
individuals.
Mr. Schorr joined the Company in July, 1988 as Vice President, Finance. He
is an officer and director of each of the Company's subsidiaries. From
December, 1982 through June, 1988, he held the positions of Vice President,
Finance and Corporate Controller of Linear Corporation, a manufacturer of
electronic components.
SIGNIFICANT EMPLOYEES
Andrew Jacobson (35) has been President of the Company's subsidiaries,
Westbrae Natural Foods, Inc. and Little Bear Organic Foods, Inc. since joining
the Company in November, 1992. From 1985 to 1992, Mr. Jacobson was employed by
Tree of Life Inc., a major national natural products distributor, in several
executive capacities culminating as Director of Sales of Tree of Life West, Sun
Valley and Hayward, CA. Mr. Jacobson is a
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member of the Board of Directors of the National Nutritional Foods Association.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation which the Company paid
during the three years ended December 31, 1995 to the Chief Executive Officer
and to its other executive officers.
<TABLE>
<CAPTION>
NAME AND OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS GRANTED COMPENSATION
- ------------------- ---- ---------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
B. Allen Lay, CEO 1995 $115,000 (a)(b) 120,000 (i) $ 5,000(c)
Allan Dalfen, CEO 1994 $120,000 (d) $ 3,120 (e)
1993 $ 75,000 (d) $ 32,220 (e) (f)
Andrew Jacobson, Pres., Westbrae Natural Foods, Inc.
1995 $120,000 $ 15,000 (g)
1994 $120,000 $ 3,120 (e)
1993 $110,000 $ 32,220 (e) 329,875
Stephen Schorr, CFO 1995 $105,000 $ 9,300 (g) 30,000 (i)
1994 $105,000 $ 2,000 20,000 (h)
1993 $ 95,000 $ 9,500
</TABLE>
(a) Represents amounts paid as a consulting fee to SCV Management Company of
which Mr. Lay is a general partner.
(b) Began employment on January 12, 1995.
(c) Consulting fee paid prior to becoming CEO.
(d) Represents amounts paid as a consulting fee to Dalfen Corporation, of which
Mr. Dalfen is the sole shareholder.
(e) Paid under a management bonus agreement which provided for the payment of
6% of pretax income above $500,000 in a year to Mr. Dalfen and Mr.
Jacobson.
(f) Mr. Dalfen purchased 395,850 shares of Common Stock for $510,025 ($1.29 per
share) - $66,000 in cash and a note for $444,025 bearing interest at 5.75%
per annum under a Stock Purchase Agreement as of July 29, 1993 and a
Severance and Settlement Agreement as of March 1, 1995. The total
difference between the quoted price and the sale price of these shares was
$178,000.
(g) Bonus paid under an incentive plan covering substantially all employees of
the Company.
(h) Replaced options that expired in 1994.
(i) See Option Grants in Last Fiscal Year table below.
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OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ANNUAL RATES
OF STOCK
OPTIONS % OF TOTAL EXERCISE EXPIRATION APPRECIATION
NAME GRANTED GRANTED PRICE DATE 5% 10%
- ----- --------- ---------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
B. Allen Lay
120,000 30 $1.75 07/26/2000 $58,074 $128,343
Stephen Schorr
30,000 7 $1.375 10/25/2000 $11,408 $ 25,212
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors has structured a compensation package for the
Company's Chief Executive Officer which puts a substantial emphasis on equity-
based compensation over fixed compensation. Mr. Lay's salary of $10,000 per
month ($115,000 in 1995 from January 12, 1995) is low for a firm of the
Company's size and industry. The Board of Directors has supplemented Mr. Lay's
salary with grants of options to purchase 60,000 shares (approximately 1% of the
total outstanding) at the inception of his employment and 60,000 shares at
subsequent six month intervals. To March 31, 1996, Mr. Lay has received options
to purchase 180,000 shares of the Company's Common Stock. Each option is
granted at the then-current market value of the Company's Common Stock.
The current compensation package of the Chief Executive Officer was
designed to closely align his interests with those of the Company's
shareholders.
Board of Directors Compensation Committee
Robert J. Cresci
Jay J. Miller
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COMPARISON OF FIVE YEAR TOTAL RETURN
VESTRO NATURAL FOODS & NASDAQ INDEX
TOTAL RETURN GRAPH
VESTRO NASDAQ
NATURAL NON FINANCIAL
FOODS STOCKS
1990 100 100
1991 63 161
1992 56 176
1993 66 202
1994 40 193
1995 33 275
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STOCK OPTIONS
The Company adopted a Stock Option Plan at its May 23, 1988 Annual Meeting.
This plan provides for options to purchase up to 150,000 shares of the Company's
Common Stock to be granted at prices not less than the fair market value on the
date of grant. Both incentive and non-incentive options may be issued under the
1988 Plan. At December 31, 1995, there were 149,500 incentive options
outstanding under the 1988 Plan, of which options to purchase 21,000 shares were
currently exercisable. During the year ended December 31, 1995, options to
purchase 125,500 shares of the Company's Common Stock were granted under this
plan.
During 1993, the Company granted a stock option to Mr. Jacobson to purchase
329,075 shares of its Common Stock at a price of $1.29 per share. This option
is exercisable in installments through November 1, 1997.
The Company has granted non-qualified stock options to certain officers,
key employees, and directors of the Company. All non-qualified stock options
were granted at prices representative of the fair market value of the Common
Stock at the dates of grant. All options granted are for a five-year period,
and generally become exercisable, ratably, over three to four years. Options
granted to officers are not exercisable for a period of one year after date of
grant and, thereafter, become exercisable at 25% per year. During 1995, options
to purchase 160,000 shares were granted and no option was exercised.
On each of January 31, 1995, July 26, 1995 and January 30, 1996 non-
qualified options to purchase 60,000 shares of the Company's Common Stock was
issued to Mr. Lay. Each option was granted at the then-current market value and
has a term of five years. Each option is immediately exercisable in full. SEE
EXECUTIVE COMPENSATION
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information concerning persons known by the
Company to own beneficially more than 5% of the shares of Common Stock of the
Company outstanding on March 31, 1996.
NUMBER OF PERCENT
NAME AND ADDRESS BENEFICIALLY OF
OF BENEFICIAL OWNER OWNED SHARES (1) CLASS (1)
----------------------- ----------------- -------------
NAP & Company 983,940 16.5%
Nominee for Delaware State
Employee's Retirement Fund
1 Hopkins Plaza
Baltimore, MD 21203
Baccharis Capital, Inc. 702,814 11.8%
2420 Sand Hill Rd., Suite 100
Menlo Park, CA 94025
Allan Dalfen 602,388 10.1%
467 S. Rodeo Drive
Beverly Hills, CA 90212
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Princeton/Montrose Partners 548,016 9.2%
243 No. Highway 101
Solana Beach, CA 92075
Scottish Invest. Trust PLC 527,111 8.9%
6 Albyn Place
Edinburgh, Scotland EH24 NL
Southern Calif. Ventures II 365,345 6.1%
A California Limited Partnership
406 Amapola Avenue, Suite 205
Torrance, CA 90501
Natural Venture Partners I 351,407 5.9%
100 Crescent Rd.
Needham, MA 02194
The following table sets forth the beneficial share ownership of each
director of the Company, and the number of shares of Common Stock beneficially
owned by all officers and directors as a group as of March 31, 1996:
NUMBER OF PERCENT
NAME AND ADDRESS BENEFICIALLY OF
OF BENEFICIAL OWNER OWNED SHARES (8) CLASS (1)
----------------- -----------
Robert J. Cresci (2) 1,418,962 23.6%
Allan Dalfen 602,388 (7) 10.1%
Anthony J. Harnett (3) 358,074 6.0%
B. Allen Lay (4) 562,916 9.4%
Jay J. Miller 98,478 1.7%
Stephen P. Monticelli 16,667 .3%
F. Noel Perry (5) 702,814 11.8%
Henry W. Poett, III 22,119 .4%
Donald R. Stroben (6) 561,349 9.4%
Officers and directors as a
group (10 persons) 4,362,554 72.9%
(1) Based upon an aggregate of 5,950,588 shares of Common Stock outstanding and
currently exercisable stock options to purchase an aggregate of 485,425
shares of Common Stock. Each of the above shareholders has sole voting and
sole dispositive power with respect to the shares beneficially owned.
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(2) Mr. Cresci is the investment advisor for Nap & Company, Fuelship & Company
and Northman and Company.
(3) Mr. Harnett is a partner of Natural Venture Partners I.
(4) Mr. Lay is a General Partner of Southern California Ventures II.
(5) Mr. Perry is a Managing Director of Baccharis Capital, Inc.
(6) Mr. Stroben is a Managing General Partner of Princeton/Montrose Partners.
(7) Includes 263,900 shares of the Company's Common Stock purchased in 1993 at
a price of $1.29 per share and 131,950 shares of the Company's Common Stock
purchased in 1995 under a Severance and Settlement Agreement at a price of
$1.29 per share. Mr. Dalfen paid the Company $66,000 for the shares and
executed a note payable to the Company for $444,025. The note is interest
bearing at the rate of 5.75%, due on December 31, 1997 and is secured by
the shares of stock purchased.
(8) Shares include currently exercisable stock options to purchase shares of
Common Stock as follows:
Robert J. Cresci 13,333
Allan Dalfen 13,333
Anthony J. Harnett 6,667
B. Allen Lay 180,000
Jay J. Miller 13,333
Stephen P. Monticelli 6,667
Henry W. Poett, III 13,333
Donald R. Stroben 13,333
Officers and directors as a
group (9 persons) 272,499
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Subsidiaries of the Company currently rent warehouse and office space from
a partnership, in which Mr. Poett is a partner, for which they paid rentals of
$196,000 in 1995. The rent paid for such space is believed to be equivalent to
that which would be paid under an arm's length transaction. The lease expires
on September 30, 1997 subject to earlier termination by the lessor or the
Company under certain circumstances.
The Company has used the law office of Mr. Miller for certain legal
services. It is believed that the fees paid for such services are not greater
than those which would have been paid to an unaffiliated party .
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended December 31,
1995 is being mailed to shareholders with this Information Statement. The
Company's audited financial statements and Management's Discussion and Analysis
of Financial Condition and results of operations for the year ended
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December 31, 1995, are included in the Annual Report. The Company's Form 10-K
as filed with the Securities and Exchange Commission is available upon request.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any proposals by a shareholder intended to be presented at the 1997 Annual
Meeting of Shareholders must be received by the Corporation no later than March
31, 1997 and be in compliance with applicable Securities and Exchange Commission
regulations, for inclusion in the Corporation's Information or Proxy Statement
relating to such meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
It is expected that a representative of Price Waterhouse, which serves as
the Company's independent public accountants will be available to respond to
questions raised at the Meeting.
OTHER MATTERS
The Management knows of no business which will be presented for
consideration at the Meeting other than as stated in the Notice of Meeting.
By Order of the Board of Directors,
Stephen Schorr
Secretary
May 15, 1996
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EXHIBIT "A"
VESTRO NATURAL FOODS INC.
1996 INCENTIVE STOCK PLAN
1. OBJECTIVES.
The VESTRO NATURAL FOODS INC. 1996 Incentive Stock Plan (the "Plan") is
designed to retain directors, executives and selected employees and consultants
and reward them for making major contributions to the success of the Company.
These objectives are accomplished by making long-term incentive awards under the
Plan thereby providing Participants with a proprietary interest in the growth
and performance of the Company.
2. DEFINITIONS.
(a) "BOARD" - The Board of Directors of the Company.
(b "CALIFORNIA SECURITIES RULES" - Chapter 3, Subchapter 2,
Subarticle 4 of Article 4 of Title 10 of the Corporate Securities Rules of the
Commissioner of Corporations of the state of California.
(c) "CODE" - The Internal Revenue Code of 1986, as amended from time
to time.
(d) "COMMITTEE" - The Executive Compensation Committee of the
Company's Board, or such other committee of the Board that is designated by the
Board to administer the Plan, composed of not less than two members of the Board
all of whom are disinterested persons, as contemplated by Rule 16b-3 ("Rule 16b-
3") promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(e) "COMPANY" - VESTRO NATURAL FOODS INC. and its subsidiaries
including subsidiaries of subsidiaries.
(f) "EXCHANGE ACT" - The Securities Exchange Act of 1934, as amended
from time to time.
(g) "FAIR MARKET VALUE" - The fair market value of the Company's
issued and outstanding Stock as determined in good faith by the Board or
Committee.
(h) "GRANT" - The grant of any form of stock option, stock award, or
stock purchase offer, whether granted singly, in combination or in tandem, to a
Participant pursuant to such terms, conditions and limitations as the Committee
may establish in order to fulfill the objectives of the Plan.
(i) "GRANT AGREEMENT" - An agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
a Grant.
(j) "OPTION" - Either an Incentive Stock Option, in accordance with
Section 422 of Code, or a Nonstatutory Option, to purchase the Company's Stock
that may be awarded to a Participant
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under the Plan. A Participant who receives an award of an Option shall be
referred to as an "Optionee."
(k) "PARTICIPANT" - A director, officer, employee or consultant of
the Company to whom an Award has been made under the Plan.
(l) "RESTRICTED STOCK PURCHASE OFFER" - A Grant of the right to
purchase a specified number of shares of Stock pursuant to a written agreement
issued under the Plan.
(m) "SECURITIES ACT" - The Securities Act of 1933, as amended from
time to time.
(n) "STOCK" - Authorized and issued or unissued shares of Common
Stock of the Company.
(o) "STOCK AWARD" - A Grant made under the Plan in stock or
denominated in units of stock for which the Participant is not obligated to pay
additional consideration.
3. ADMINISTRATION
The Plan shall be administered by the Board, provided however, that the
Board may delegate such administration to the Committee. Subject to the
provisions of the Plan, the Board and/or the Committee shall have authority to
(a) grant, in its discretion, Incentive Stock Options in accordance with Section
422 of the Code, or Nonstatutory Options, Stock Awards or Restricted Stock
Purchase Offers; (b) determine in good faith the fair market value of the Stock
covered by any Grant; (c) determine which eligible persons shall receive Grants
and the number of shares, restrictions, terms and conditions to be included in
such Grants; (d) construe and interpret the Plan; (e) promulgate, amend and
rescind rules and regulations relating to its administration, and correct
defects, omissions and inconsistencies in the Plan or any Grant; (f) consistent
with the Plan and with the consent of the Participant, as appropriate, amend any
outstanding Grant or amend the exercise date or dates thereof; (g) determine the
duration and purpose of leaves of absence which may be granted to Participants
without constituting termination of their employment for the purpose of the Plan
or any Grant; and (h) make all other determinations necessary or advisable for
the Plan's administration. The interpretation and construction by the Board of
any provisions of the Plan or selection of Participants shall be conclusive and
final. No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Grant made
thereunder.
4. ELIGIBILITY
(a) GENERAL: The persons who shall be eligible to receive Grants
shall be directors, officers, employees or consultants to the Company. The term
consultant shall mean any person, other than an employee, who is engaged by the
Company to render services and is compensated for such services. An Optionee
may hold more than one Option. Any issuance of a Grant to an officer or
director of the Company subsequent to the first registration of any of the
securities of the Company under the Exchange Act shall comply with the
requirements of Rule 16b-3.
(b) INCENTIVE STOCK OPTIONS: Incentive Stock Options may only be
issued to employees of the Company. Incentive Stock Options may be granted to
officers, whether or not they are directors, provided they are also employees of
the Company. Payment of a director's fee shall not be sufficient
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to constitute employment by the Company.
The Company shall not grant an Incentive Stock Option under the
Plan to any employee if such Grant would result in such employee holding the
right to exercise for the first time in any one calendar year, under all
Incentive Stock Options granted under the Plan or any other plan maintained by
the Company, with respect to shares of Stock having an aggregate fair market
value, determined as of the date of the Option is granted, in excess of
$100,000. Should it be determined that an Incentive Stock Option granted under
the Plan exceeds such maximum for any reason other than a failure in good faith
to value the Stock subject to such option, the excess portion of such option
shall be considered a Nonstatutory Option. To the extent the employee holds two
(2) or more such Options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability of such Option as
Incentive Stock Options under the Federal tax laws shall be applied on the basis
of the order in which such Options are granted. If, for any reason, an entire
Option does not qualify as an Incentive Stock Option by reason of exceeding such
maximum, such Option shall be considered a Nonstatutory Option.
(c) NONSTATUTORY OPTION: The provisions of the foregoing Section
4(b) shall not apply to any Option designated as a "Nonstatutory Option" or
which sets forth the intention of the parties that the Option be a Nonstatutory
Option.
(d) STOCK AWARDS AND RESTRICTED STOCK PURCHASE OFFERS: The
provisions of this Section 4 shall not apply to any Stock Award or Restricted
Stock Purchase Offer under the Plan.
5. STOCK
(a) AUTHORIZED STOCK: Stock subject to Grants may be either unissued
or reacquired Stock.
(b) NUMBER OF SHARES: Subject to adjustment as provided in Section
6(i) of the Plan, the total number of shares of Stock which may be purchased or
granted directly by Options, Stock Awards or Restricted Stock Purchase Offers,
or purchased indirectly through exercise of Options granted under the Plan shall
not exceed 150,000. If any Grant shall for any reason terminate or expire, any
shares allocated thereto but remaining unpurchased upon such expiration or
termination shall again be available for Grants with respect thereto under the
Plan as though no Grant had previously occurred with respect to such shares.
Any shares of Stock issued pursuant to a Grant and repurchased pursuant to the
terms thereof shall be available for future Grants as though not previously
covered by a Grant.
(c) RESERVATION OF SHARES: The Company shall reserve and keep
available at all times during the term of the Plan such number of shares as
shall be sufficient to satisfy the requirements of the Plan. If, after
reasonable efforts, which efforts shall not include the registration of the Plan
or Grants under the Securities Act, the Company is unable to obtain authority
from any applicable regulatory body, which authorization is deemed necessary by
legal counsel for the Company for the lawful issuance of shares hereunder, the
Company shall be relieved of any liability with respect to its failure to issue
and sell the shares for which such requisite authority was so deemed necessary
unless and until such authority is obtained.
(d) APPLICATION OF FUNDS
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The proceeds received by the Company from the sale of common
Stock pursuant to the exercise of Options or rights under Stock Purchase
Agreements will be used for general corporate purposes.
(e) NO OBLIGATION TO EXERCISE
The issuance of a Grant shall impose no obligation upon the
Participant to exercise any rights under such Grant.
6. TERMS AND CONDITIONS OF OPTIONS
Options granted hereunder shall be evidenced by agreements between the
Company and the respective Optionees, in such form and substance as the Board or
Committee shall from time to time approve. The form of Incentive Stock Option
Agreement attached hereto as Exhibit "A" and the three forms of a Nonstatutory
Stock Option Agreement for employees, for directors and for consultants,
attached hereto as Exhibits "B-1," "B-2" and "B-3," respectively, shall be
deemed to be approved by the Board. Option agreements need not be identical,
and in each case may include such provisions as the Board or Committee may
determine, but all such agreements shall be subject to and limited by the
following terms and conditions:
(a) NUMBER OF SHARES: Each Option shall state the number of shares
to which it pertains.
(b) EXERCISE PRICE: Each Option shall state the exercise price,
which shall be determined as follows:
(i) Any Option granted to a person who at the time the Option is
granted owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power or
value of all classes of stock of the Company, ("Ten Percent Holder") shall have
an exercise price of no less than 110% of the Fair Market Value of the Stock as
of the date of grant; and
(ii) Incentive Stock Options granted to a person who at the time the
Option is granted is not a Ten Percent Holder shall have an exercise price of no
less than 100% of the Fair Market Value of the Common Stock as of the date of
grant.
(iii) Nonstatutory Options granted to a person who at the time the
Option is granted is not a Ten Percent Holder shall have an exercise price of no
less than 85% of the Fair Market Value of the Stock as of the date of grant.
For the purposes of this Section 6(b), the Fair Market Value per share shall be
the average of the bid and asked prices (or the closing price if such stock is
listed on the NASDAQ National Market System or Small Cap Issue Market) on the
date of grant of the Option, or if listed on a stock exchange, the closing price
on such exchange on such date of grant; provided however, that if there is no
public market for such Stock, the Fair Market Value shall be as determined by
the Board in good faith, which determination shall be conclusive and binding.
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(c) MEDIUM AND TIME OF PAYMENT: The exercise price shall become
immediately due upon exercise of the Option and shall be paid in cash or check
made payable to the Company. Should the Company's outstanding Stock be
registered under Section 12(g) of the Exchange Act at the time the Option is
exercised, then the exercise price may also be paid as follows:
(i) in shares of the Company's Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Company's earnings for
financial reporting purposes and valued at Fair Market Value on the exercise
date, or
(ii) through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable written instructions (a) to
a Company designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Company, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Company by reason of
such purchase and (b) to the Company to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale
transaction.
At the discretion of the Board, exercisable either at the time of
Option grant or of Option exercise, the exercise price may also be paid (i) by
Optionee's delivery of a promissory note in form and substance satisfactory to
the Company and permissible under the California Securities Rules and bearing
interest at a rate determined by the Board in its sole discretion, but in no
event less than the minimum rate of interest required to avoid the imputation of
compensation income to the Optionee under the Federal tax laws, or (ii) in such
other form of consideration permitted by the California Corporations Code as may
be acceptable to the Board.
(d) TERM AND EXERCISE OF OPTIONS: Any Option granted to an employee of
the Company shall become exercisable over a period of no longer than five (5)
years, and no less than twenty percent (20%) of the shares covered thereby shall
become exercisable annually. No Option shall be exercisable, in whole or in
part, prior to one (1) year from the date it is granted unless the Board shall
specifically determine otherwise, as provided herein. In no event shall any
Option be exercisable after the expiration of ten (10) years from the date it is
granted, and no Incentive Stock Option granted to a Ten Percent Holder shall, by
its terms, be exercisable after the expiration of five (5) years from the date
of the Option. Unless otherwise specified by the Board or the Committee in the
resolution authorizing such option, the date of grant of an Option shall be
deemed to be the date upon which the Board or the Committee authorizes the
granting of such Option.
Each Option shall be exercisable to the nearest whole share, in
installments or otherwise, as the respective Option agreements may provide.
During the lifetime of an Optionee, the Option shall be exercisable only by the
Optionee and shall not be assignable or transferable by the Optionee, and no
other person shall acquire any rights therein. To the extent not exercised,
installments (if more than one) shall accumulate, but shall be exercisable, in
whole or in part, only during the period for exercise as stated in the Option
agreement, whether or not other installments are then exercisable.
(e) TERMINATION OF STATUS AS EMPLOYEE, CONSULTANT OR DIRECTOR: If
Optionee's status as an employee shall terminate for any reason other than
Optionee's disability or death, then the Optionee (or if the Optionee shall die
after such termination, but prior to exercise, Optionee's personal
representative or the person entitled to succeed to the Option) shall have the
right to exercise the portions of any of
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Optionee's Incentive Stock Options which were exercisable as of the date of such
termination, in whole or in part, not less than 30 days nor more than three (3)
months after such termination (or, in the event of "termination for cause" as
that term is defined in Section 2922 of the California Labor Code and case law
related thereto, or by the terms of the Plan or the Option Agreement or an
employment agreement, the Option shall automatically terminate as of the
termination of employment as to all shares covered by the Option).
With respect to Nonstatutory Options granted to employees, directors
or consultants, the Board may specify such period for exercise, not less than 30
days (except that in the case of "termination for cause" or termination of a
director pursuant to Section 302 or 304 of the California Corporations Code, the
Option shall automatically terminate as of the termination of employment or
services as to shares covered by the Option), following termination of
employment or services as the Board deems reasonable and appropriate. The
Option may be exercised only with respect to installments that the Optionee
could have exercised at the date of termination of employment or services.
Nothing contained herein or in any Option granted pursuant hereto shall be
construed to affect or restrict in any way the right of the Company to terminate
the employment or services of an Optionee with or without cause.
(f) DISABILITY OF OPTIONEE: If an Optionee is disabled (within the
meaning of Section 22(e)(3) of the Code) at the time of termination, the three
(3) month period set forth in Section 6(e) shall be a period, as determined by
the Board and set forth in the Option, of not less than six months nor more than
one year after such termination.
(g) DEATH OF OPTIONEE: If an Optionee dies while employed by,
engaged as a consultant to, or serving as a Director of the Company, the portion
of such Optionee's Option which was exercisable at the date of death may be
exercised, in whole or in part, by the estate of the decedent or by a person
succeeding to the right to exercise such Option at any time within (i) a period,
as determined by the Board and set forth in the Option, of not less than six (6)
months nor more than one (1) year after Optionee's death, which period shall not
be more, in the case of a Nonstatutory Option, than the period for exercise
following termination of employment or services, or (ii) during the remaining
term of the Option, whichever is the lesser. The Option may be so exercised
only with respect to installments exercisable at the time of Optionee's death
and not previously exercised by the Optionee.
(h) NONTRANSFERABILITY OF OPTION: No Option shall be transferable by
the Optionee, except by will or by the laws of descent and distribution.
(i) RECAPITALIZATION: Subject to any required action of
shareholders, the number of shares of Stock covered by each outstanding Option,
and the Exercise price per share thereof set forth in each such Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock of the Company resulting from a subdivision or consolidation of
shares or the payment of a stock dividend, or any other increase or decrease in
the number of such shares affected without receipt of consideration by the
Company; provided, however, the conversion of any convertible securities of the
Company shall not be deemed to have been "effected" without receipt of
consideration by the Company.
In the event of a proposed dissolution or liquidation of the
Company, a merger or consolidation in which the Company is not the surviving
entity, or a sale of all or substantially all of the assets or capital stock of
the Company (collectively, a "Reorganization"), unless otherwise provided by
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the Board, this Option shall terminate immediately prior to such date as is
determined by the Board, which date shall be no later than the consummation of
such Reorganization. In such event, if the entity which shall be the surviving
entity does not tender to Optionee an offer, for which it has no obligation to
do so, to substitute for any unexercised Option a stock option or capital stock
of such surviving of such surviving entity, as applicable, which on an equitable
basis shall provide the Optionee with substantially the same economic benefit as
such unexercised Option, then the Board may grant to such Optionee, in its sole
and absolute discretion and without obligation, the right for a period
commencing thirty (30) days prior to and ending immediately prior to the date
determined by the Board pursuant hereto for termination of the Option or during
the remaining term of the Option, whichever is the lesser, to exercise any
unexpired Option or Options without regard to the installment provisions of
Paragraph 6(d) of the Plan; provided, that any such right granted shall be
granted to all Optionees not receiving an offer to receive substitute options on
a consistent basis, and provided further, that any such exercise shall be
subject to the consummation of such Reorganization.
Subject to any required action of shareholders, if the Company
shall be the surviving entity in any merger or consolidation, each outstanding
Option thereafter shall pertain to and apply to the securities to which a holder
of shares of Common Stock equal to the shares subject to the Option would have
been entitled by reason of such merger or consolidation.
In the event of a change in the Common Stock of the Company as
presently constituted, which is limited to a change of all of its authorized
shares without par value into the same number of shares with a par value, the
shares resulting from any such change shall be deemed to be the Stock within the
meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided in this Section 6(i), the Optionee shall have no rights by
reason of any subdivision or consolidation of shares of stock of any class or
the payment of any stock dividend or any other increase or decrease in the
number of shares of stock of any class, and the number or price of shares of
Stock subject to any Option shall not be affected by, and no adjustment shall be
made by reason of, any dissolution, liquidation, merger, consolidation or sale
of assets or capital stock, or any issue by the Company of shares of stock of
any class or securities convertible into shares of stock of any class.
The grant of an Option pursuant to the Plan shall not affect in
any way the right or power of the Company to make any adjustments,
reclassifications, reorganizations or changes in its capital or business
structure or to merge, consolidate, dissolve, or liquidate or to sell or
transfer all or any part of its business or assets.
(j) RIGHTS AS A SHAREHOLDER: An Optionee shall have no rights as a
shareholder with respect to any shares covered by an Option until the effective
date of the issuance of the shares following exercise of such Option by
Optionee. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 6(i) hereof.
(k) MODIFICATION, ACCELERATION, EXTENSION, AND RENEWAL OF OPTIONS:
Subject to the
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terms and conditions and within the limitations of the Plan, the Board may
modify an Option, or, once an Option is exercisable, accelerate the rate at
which it may be exercised, and may extend or renew outstanding Options granted
under the Plan or accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
for such Options, provided such action is permissible under Section 422 of the
Code and the California Securities Rules. Notwithstanding the provisions of
this Section 6(k), however, no modification of an Option shall, without the
consent of the Optionee, alter to the Optionee's detriment or impair any rights
or obligations under any Option theretofore granted under the Plan.
(l) EXERCISE BEFORE EXERCISE DATE: At the discretion of the Board,
the Option may, but need not, include a provision whereby the Optionee may elect
to exercise all or any portion of the Option prior to the stated exercise date
of the Option or any installment thereof. Any shares so purchased prior to the
stated exercise date shall be subject to repurchase by the Company upon
termination of Optionee's employment as contemplated by Section 6(n) hereof
prior to the exercise date stated in the Option and such other restrictions and
conditions as the Board or Committee may deem advisable.
(m) OTHER PROVISIONS: The Option agreements authorized under the
Plan shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the Options, as the Board or the Committee
shall deem advisable. Shares shall not be issued pursuant to the exercise of an
Option, if the exercise of such Option or the issuance of shares thereunder
would violate, in the opinion of legal counsel for the Company, the provisions
of any applicable law or the rules or regulations of any applicable governmental
or administrative agency or body, such as the Code, the Securities Act, the
Exchange Act, the California Securities Rules, California Corporations Code, and
the rules promulgated under the foregoing or the rules and regulations of any
exchange upon which the shares of the Company are listed. Without limiting the
generality of the foregoing, the exercise of each Option shall be subject to the
condition that if at any time the Company shall determine that (i) the
satisfaction of withholding tax or other similar liabilities, or (ii) the
listing, registration or qualification of any shares covered by such exercise
upon any securities exchange or under any state or federal law, or (iii) the
consent or approval of any regulatory body, or (iv) the perfection of any
exemption from any such withholding, listing, registration, qualification,
consent or approval is necessary or desirable in connection with such exercise
or the issuance of shares thereunder, then in any such event, such exercise
shall not be effective unless such withholding, listing registration,
qualification, consent, approval or exemption shall have been effected, obtained
or perfected free of any conditions not acceptable to the Corporation.
(n) REPURCHASE AGREEMENT: The Board may, in its discretion, require
as a condition to the grant of an Option hereunder, that an Optionee execute an
agreement with the Company, in form and substance satisfactory to the Board in
its discretion ("Repurchase Agreement"), (i) restricting the Optionee's right to
transfer shares purchased under such Option without first offering such shares
to the Company or another shareholder of the Company upon the same terms and
conditions as provided therein; and (ii) providing that upon termination of
Optionee's employment with the Company, for any reason, the Company (or another
shareholder of the Company, as provided in the Repurchase Agreement) shall have
the right at its discretion (or the discretion of such other shareholders) to
purchase and/or redeem all such shares owned by the Optionee on the date of
termination of his or her employment at a price equal to (A) the fair value of
such shares as of such date of termination, or (B) if such repurchase right
lapses at 20% of the number of shares per year, the original purchase price of
such shares, and upon terms of payment permissible under the California
Securities Rules; provided that in the case of Options or Stock Awards granted
to officers, directors, consultants or affiliates of the Company, such
repurchase
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provisions may be subject to additional or greater restrictions as determined by
the Board or Committee.
7. STOCK AWARDS AND RESTRICTED STOCK PURCHASE OFFERS
(a) TYPES OF GRANTS.
(i) STOCK AWARD. All or part of any Stock Award under the Plan
may be subject to conditions established by the Board or the Committee, and set
forth in the Stock Award Agreement, which may include, but are not limited to,
continuous service with the Company, achievement of specific business
objectives, increases in specified indices, attaining growth rates and other
comparable measurements of Company performance. Such Awards may be based on
Fair Market Value or other specified valuation. All Stock Awards will be made
pursuant to the execution of a Stock Award Agreement substantially in the form
attached hereto as Exhibit "C".
(ii) RESTRICTED STOCK PURCHASE OFFER. A Grant of a Restricted
Stock Purchase Offer under the Plan shall be subject to such (i) vesting
contingencies related to the Participant's continued association with the
Company for a specified time and (ii) other specified conditions as the Board or
Committee shall determine, in their sole discretion, consistent with the
provisions of the Plan. All Restricted Stock Purchase Offers shall be made
pursuant to a Restricted Stock Purchase Offer substantially in the form attached
hereto as Exhibit "D".
(b) CONDITIONS AND RESTRICTIONS. Shares of Stock which Participants
may receive as a Stock Award under a Stock Award Agreement or Restricted Stock
Purchase Offer under a Restricted Stock Purchase Offer may include such
restrictions as the Board or Committee, as applicable, shall determine,
including restrictions on transfer, repurchase rights, right of first refusal,
and forfeiture provisions. When transfer of Stock is so restricted or subject
to forfeiture provisions it is referred to as "Restricted Stock". Further, with
Board or Committee approval, Stock Awards or Restricted Stock Purchase Offers
may be deferred, either in the form of installments or a future lump sum
distribution. The Board or Committee may permit selected Participants to elect
to defer distributions of Stock Awards or Restricted Stock Purchase Offers in
accordance with procedures established by the Board or Committee to assure that
such deferrals comply with applicable requirements of the Code including, at the
choice of Participants, the capability to make further deferrals for
distribution after retirement. Any deferred distribution, whether elected by the
Participant or specified by the Stock Award Agreement, Restricted Stock Purchase
Offers or by the Board or Committee, may require the payment be forfeited in
accordance with the provisions of Section 7(c). Dividends or dividend
equivalent rights may be extended to and made part of any Stock Award or
Restricted Stock Purchase Offers denominated in Stock or units of Stock, subject
to such terms, conditions and restrictions as the Board or Committee may
establish.
(c) CANCELLATION AND RESCISSION OF GRANTS. Unless the Stock Award
Agreement or Restricted Stock Purchase Offer specifies otherwise, the Board or
Committee, as applicable, may cancel any unexpired, unpaid, or deferred Grants
at any time if the Participant is not in compliance with all other applicable
provisions of the Stock Award Agreement or Restricted Stock Purchase Offer, the
Plan and with the following conditions:
(i) A Participant shall not render services for any
organization or engage directly or indirectly in any business which, in the
judgment of the chief executive officer of the Company or other senior officer
designated by the Board or Committee, is or becomes competitive with
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the Company, or which organization or business, or the rendering of services to
such organization or business, is or becomes otherwise prejudicial to or in
conflict with the interests of the Company. For Participants whose employment
has terminated, the judgment of the chief executive officer shall be based on
the Participant's position and responsibilities while employed by the Company,
the Participant's post-employment responsibilities and position with the other
organization or business, the extent of past, current and potential competition
or conflict between the Company and the other organization or business, the
effect on the Company's customers, suppliers and competitors and such other
considerations as are deemed relevant given the applicable facts and
circumstances. A Participant who has retired shall be free, however, to
purchase as an investment or otherwise, stock or other securities of such
organization or business so long as they are listed upon a recognized securities
exchange or traded over-the-counter, and such investment does not represent a
substantial investment to the Participant or a greater than 10 percent equity
interest in the organization or business.
(ii) A Participant shall not, without prior written
authorization from the Company, disclose to anyone outside the Company, or use
in other than the Company's business, any confidential information or material,
as defined in the Company's Proprietary Information and Invention Agreement or
similar agreement regarding confidential information and intellectual property,
relating to the business of the Company, acquired by the Participant either
during or after employment with the Company.
(iii) A Participant, pursuant to the Company's Proprietary
Information and Invention Agreement, shall disclose promptly and assign to the
Company all right, title and interest in any invention or idea, patentable or
not, made or conceived by the Participant during employment by the Company,
relating in any manner to the actual or anticipated business, research or
development work of the Company and shall do anything reasonably necessary to
enable the Company to secure a patent where appropriate in the United States and
in foreign countries.
(iv) Upon exercise, payment or delivery pursuant to a Grant,
the Participant shall certify on a form acceptable to the Committee that he or
she is in compliance with the terms and conditions of the Plan. Failure to
comply with all of the provisions of this Section 7(c) prior to, or during the
six months after, any exercise, payment or delivery pursuant to a Grant shall
cause such exercise, payment or delivery to be rescinded. The Company shall
notify the Participant in writing of any such rescission within two years after
such exercise, payment or delivery. Within ten days after receiving such a
notice from the Company, the Participant shall pay to the Company the amount of
any gain realized or payment received as a result of the rescinded exercise,
payment or delivery pursuant to a Grant. Such payment shall be made either in
cash or by returning to the Company the number of shares of Stock that the
Participant received in connection with the rescinded exercise, payment or
delivery.
(d) NONASSIGNABILITY.
(i) Except pursuant to Section 7(e)(iii) and except as set
forth in Section 7(d)(ii), no Grant or any other benefit under the Plan shall
be assignable or transferable, or payable to or exercisable by, anyone other
than the Participant to whom it was granted.
(ii) Where a Participant terminates employment and retains a
Grant pursuant to Section 7(e)(ii) in order to assume a position with a
governmental, charitable or educational institution,
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the Board or Committee, in its discretion and to the extent permitted by law,
may authorize a third party (including but not limited to the trustee of a
"blind" trust), acceptable to the applicable governmental or institutional
authorities, the Participant and the Board or Committee, to act on behalf of the
Participant with regard to such Awards.
(e) TERMINATION OF EMPLOYMENT. If the employment or service to the
Company of a Participant terminates, other than pursuant to any of the following
provisions under this Section 7(e), all unexercised, deferred and unpaid Stock
Awards or Restricted Stock Purchase Offers shall be cancelled immediately,
unless the Stock Award Agreement or Restricted Stock Purchase Offer provides
otherwise:
(i) RETIREMENT UNDER A COMPANY RETIREMENT PLAN. When a
Participant=s employment terminates as a result of retirement in accordance with
the terms of a Company retirement plan, the Board or Committee may permit Stock
Awards or Restricted Stock Purchase Offers to continue in effect beyond the date
of retirement in accordance with the applicable Grant Agreement and the
exercisability and vesting of any such Grants may be accelerated.
(ii) RESIGNATION IN THE BEST INTERESTS OF THE COMPANY. When a
Participant resigns from the Company and, in the judgment of the Board or
Committee, the acceleration and/or continuation of outstanding Stock Awards or
Restricted Stock Purchase Offers would be in the best interests of the Company,
the Board or Committee may (i) authorize, where appropriate, the acceleration
and/or continuation of all or any part of Grants issued prior to such
termination and (ii) permit the exercise, vesting and payment of such Grants for
such period as may be set forth in the applicable Grant Agreement, subject to
earlier cancellation pursuant to Section 10 or at such time as the Board or
Committee shall deem the continuation of all or any part of the Participant's
Grants are not in the Company's best interest.
(iii) DEATH OR DISABILITY OF A PARTICIPANT.
(1) In the event of a Participant's death, the
Participant's estate or beneficiaries shall have a period up to the expiration
date specified in the Grant Agreement within which to receive or exercise any
outstanding Grant held by the Participant under such terms as may be specified
in the applicable Grant Agreement. Rights to any such outstanding Grants shall
pass by will or the laws of descent and distribution in the following order:
(a) to beneficiaries so designated by the Participant; if none, then (b) to a
legal representative of the Participant; if none, then (c) to the persons
entitled thereto as determined by a court of competent jurisdiction. Grants so
passing shall be made at such times and in such manner as if the Participant
were living.
(2) In the event a Participant is deemed by the Board or
Committee, to be unable to perform his or her usual duties by reason of mental
disorder or medical condition which does not result from facts which would be
grounds for termination for cause, Grants and rights to any such Grants may be
paid to or exercised by the Participant, if legally competent, or a committee or
other legally designated guardian or representative if the Participant is
legally incompetent by virtue of such disability.
(3) After the death or disability of a Participant, the
Board or Committee may in its sole discretion at any time (1) terminate
restrictions in Grant Agreements; (2) accelerate any or all installments and
rights; and (3) instruct the Company to pay the total of any accelerated
payments
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in a lump sum to the Participant, the Participant's estate, beneficiaries or
representative - notwithstanding that, in the absence of such termination of
restrictions or acceleration of payments, any or all of the payments due under
the Grant might ultimately have become payable to other beneficiaries.
(4) In the event of uncertainty as to interpretation of
or controversies concerning this Section 7, the determinations of the Board or
Committee, as applicable, shall be binding and conclusive.
8. INVESTMENT INTENT
All Grants under the Plan are intended to be exempt from registration
under the Securities Act provided by Rule 701 thereunder. Unless and until the
granting of Options or sale and issuance of Stock subject to the Plan are
registered under the Securities Act or shall be exempt pursuant to the rules
promulgated thereunder, each Grant under the Plan shall provide that the
purchases or other acquisitions of Stock thereunder shall be for investment
purposes and not with a view to, or for resale in connection with, any
distribution thereof. Further, unless the issuance and sale of the Stock have
been registered under the Securities Act, each Grant shall provide that no
shares shall be purchased upon the exercise of the rights under such Grant
unless and until (i) all then applicable requirements of state and federal laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel, and (ii) if requested to do so by the Company,
the person exercising the rights under the Grant shall (i) give written
assurances as to knowledge and experience of such person (or a representative
employed by such person) in financial and business matters and the ability of
such person (or representative) to evaluate the merits and risks of exercising
the Option, and (ii) execute and deliver to the Company a letter of investment
intent and/or such other form related to applicable exemptions from
registration, all in such form and substance as the Company may require. If
shares are issued upon exercise of any rights under a Grant without registration
under the Securities Act, subsequent registration of such shares shall relieve
the purchaser thereof of any investment restrictions or representations made
upon the exercise of such rights.
9. AMENDMENT, MODIFICATION, SUSPENSION OR DISCONTINUANCE OF THE
PLAN.
The Board may, insofar as permitted by law, from time to time,
with respect to any shares at the time not subject to outstanding Grants,
suspend or terminate the Plan or revise or amend it in any respect whatsoever,
except that without the approval of the shareholders of the Company, no such
revision or amendment shall (i) increase the number of shares subject to the
Plan, (ii) decrease the price at which Grants may be granted, (iii) materially
increase the benefits to Participants, or (iv) change the class of persons
eligible to receive Grants under the Plan; provided, however, no such action
shall alter or impair the rights and obligations under any Option, or Stock
Award, or Restricted Stock Purchase Offer outstanding as of the date thereof
without the written consent of the Participant thereunder. No Grant may be
issued while the Plan is suspended or after it is terminated, but the rights and
obligations under any Grant issued while the Plan is in effect shall not be
impaired by suspension or termination of the Plan.
In the event of any change in the outstanding Stock by reason of
a stock split, stock dividend, combination or reclassification of shares,
recapitalization, merger, or similar event, the Board or the Committee may
adjust proportionally (a) the number of shares of Stock (i) reserved under the
Plan,
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(ii) available for Incentive Stock Options and Nonstatutory Options and (iii)
covered by outstanding Stock Awards or Restricted Stock Purchase Offers; (b) the
Stock prices related to outstanding Grants; and (c) the appropriate Fair Market
Value and other price determinations for such Grants. In the event of any other
change affecting the Stock or any distribution (other than normal cash
dividends) to holders of Stock, such adjustments as may be deemed equitable by
the Committee, including adjustments to avoid fractional shares, shall be made
to give proper effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation, the Committee shall be authorized to issue or assume stock options,
whether or not in a transaction to which Section 424(a) of the Code applies, and
other Grants by means of substitution of new Grant Agreements for previously
issued Grants or an assumption of previously issued Grants.
10. TAX WITHHOLDING.
The Company shall have the right to deduct applicable taxes from
any Grant payment and withhold, at the time of delivery or exercise of Options,
Stock Awards or Restricted Stock Purchase Offers or vesting of shares under such
Grants, an appropriate number of shares for payment of taxes required by law or
to take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for withholding of such taxes. If Stock is used to
satisfy tax withholding, such stock shall be valued based on the Fair Market
Value when the tax withholding is required to be made.
11. AVAILABILITY OF INFORMATION.
During the term of the Plan and any additional period during
which a Grant granted pursuant to the Plan shall be exercisable, the Company
shall make available, not later than one hundred and twenty (120) days following
the close of each of its fiscal years, such financial and other information
regarding the Company as is required by the bylaws of the Company and applicable
law to be furnished in an annual report to the shareholders of the Company.
12. NOTICE.
Any written notice to the Company required by any of the
provisions of the Plan shall be addressed to the chief personnel officer or to
the chief executive officer of the Company, and shall become effective when it
is received by the office of the chief personnel officer or the chief executive
officer.
13. UNFUNDED PLAN.
Insofar as it provides for Grants, the Plan shall be unfunded.
Although bookkeeping accounts may be established with respect to Participants
who are entitled to Grants or rights thereto under the Plan, any such accounts
shall be used merely as a bookkeeping convenience. The Company shall not be
required to segregate any assets that may at any time be represented by Grants
or rights thereto, nor shall the Plan be construed as providing for such
segregation, nor shall the Company nor the Board nor the Committee be deemed to
be a trustee of any Grants or rights thereto to be granted under the Plan. Any
liability of the Company to any Participant with respect to a grant of Stock or
rights thereto under the Plan shall be based solely upon any contractual
obligations that may be created by the Plan and any Grant Agreement; no such
obligation of the Company shall be deemed to be secured by any pledge or other
encumbrance on any property of the Company. Neither the Company nor the Board
nor
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the Committee shall be required to give any security or bond for the performance
of any obligation that may be created by the Plan.
14. INDEMNIFICATION OF BOARD
In addition to such other rights or indemnifications as they may
have as directors or otherwise, and to the extent allowed by applicable law, the
members of the Board and the Committee shall be indemnified by the Company
against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any claim, action, suit
or proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken, or failure to act, under or
in connection with the Plan or any Grant granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board or Committee member is liable
for negligence or misconduct in the performance of his or her duties; provided
that within sixty (60) days after institution of any such action, suit or Board
proceeding the member involved shall offer the Company, in writing, the
opportunity, at its own expense, to handle and defend the same.
15. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant
hereto, to the extent not otherwise governed by the Code or the securities laws
of the United States, shall be governed by the law of the State of California
and construed accordingly.
16. EFFECTIVE AND TERMINATION DATES.
The Plan shall become effective on the date it is approved by the
holders of a majority of the shares of Stock then outstanding. The Plan shall
terminate ten years later, subject to earlier termination by the Board pursuant
to Section 9.
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