<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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Commission file number 0-15568
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MICHAEL FOODS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 41-1579532
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Suite 324, Park National Bank Building
5353 Wayzata Boulevard
Minneapolis, Minnesota 55416
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 546-1500
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 par value
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(Title of class)
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for
the calendar year ended December 31, 1995 as set forth in the pages attached
hereto:
<PAGE> 2
The Registrant (the "Company") hereby amends Part III as follows:
Item 10 - Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
NOMINEES
The following table sets forth certain information regarding nominees to
the Board of Directors of the Company (the "Board") to be presented at the 1996
Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
First Became
A Director
Name Age Biographical Summary Of The Company
- ------------------------- --- ------------------------------------------------- ------------
<S> <C> <C> <C>
James H. Michael......... 75 Chairman of the Board since 1987. Chairman of the 1987
Executive Committee of the Board of Directors of
North Star Universal, Inc. ("NSU") since 1988.
Chairman of the NSU Board from 1981 to 1991. Mr.
Michael is also a real estate owner and
developer.
Gregg A. Ostrander....... 43 President and Chief Executive Officer of the 1994
Company since January 1994. Chief Operating
Officer from February 1993 to December 1993.
President of Swift-Eckrich Prepared Foods from
December 1990 to February 1993. Mr. Ostrander is
also a director of Arctco, Inc.
Richard A. Coonrod....... 64 President of Coonrod Agriproduction Corporation, 1993
a food and agribusiness consulting and investment
firm, since 1985. President of St. Louis Ship,
Inc., a marine equipment manufacturer, from 1988
to 1991. General Partner of The Food Fund, a
Minneapolis-based limited partnership
specializing in food-related investments, since
1990. Mr. Coonrod is also a director of
Orange-co, Inc.
Miles E. Efron........... 69 Chairman of the NSU Board since 1991. 1988
Arvid C. Knudtson........ 69 Consultant. Principal in ACK Financial, a 1987
financial services firm serving the agricultural
market, from 1988 to 1993.
Joseph D. Marshburn...... 67 Senior Vice President of Citrus World, Inc., a 1987
citrus processing and marketing cooperative,
since November 1993. Chief Executive Officer of
Citrus World, Inc. from 1978 to November 1993.
Jeffrey J. Michael....... 39 President and Chief Executive Officer of NSU 1990
since December 1990. Mr. Michael is also a
director of NSU and CorVel Corporation, and is
the son of Mr. James H. Michael.
Richard G. Olson......... 62 President and Chief Executive Officer of the 1987
Company from 1987 to 1993. Chairman of Fil-Mor
Express, Inc., a Minnesota-based trucking
company, since 1982.
</TABLE>
A current director, Orville L. Freeman age 77 and a director of the Company
since 1989, is not standing for election at the 1996 Annual Meeting of
Stockholders.
STOCK TRANSACTION REPORTING
The rules of the Securities and Exchange Commission require disclosure of
late Section 16 filings by the Company's directors and executive officers. Based
on the information provided to the Company, the Company is not aware of any
director or executive officer of the Company who failed to timely file any
report required to be filed.
2
<PAGE> 3
Item 11 - Executive Compensation
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SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
of the Company's Chief Executive Officer and each of the Company's four other
most highly compensated executive officers during each of the Company's last
three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION ------------
FISCAL -------------------- STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(2) COMPENSATION(3)
- --------------------------------------- ------ -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Gregg A. Ostrander..................... 1995 $294,000 $201,230 44,500 $ 6,410
President & Chief Executive Officer 1994 280,000 203,000 20,000 7,370
1993 224,519 125,000 50,000 100,258
Jeffrey M. Shapiro..................... 1995 238,000 162,850 18,000 6,316
Executive Vice President & Secretary 1994 226,000 163,850 -- 6,676
1993 216,000 -- 5,000 9,055
Norman A. Rodriguez.................... 1995 176,000 167,200 3,000 6,212
President, Crystal Farms Refrigerated 1994 176,000 140,800 -- 6,242
Distribution Co. 1993 176,000 25,819 5,000 7,378
Bill L. Goucher(4)..................... 1995 179,000 155,919 23,000 6,372
President, M. G. Waldbaum Co. 1994 169,500 84,746 -- 5,568
1993 116,962 75,000 20,000 67,418
John D. Reedy.......................... 1995 185,000 126,618 30,000 6,227
Vice President -- Finance, Chief 1994 176,000 127,595 -- 6,971
Financial Officer & Treasurer 1993 161,500 -- 5,000 6,742
</TABLE>
- -------------------------
(1) Amounts for 1995 and 1994 include Common Stock incentive awards paid under
the 1994 Executive Incentive Plan, as Amended Effective January 1, 1995 and
the 1994 Executive Incentive Plan as follows (1995/1994): Mr. Ostrander
$57,750/$34,999; Mr. Shapiro $46,703/$28,246; Mr. Rodriguez
$35,211/$22,005; Mr. Goucher $35,088/$21,193; Mr. Reedy $36,334/$22,005.
Awards for 1995 represent 50% of the amount earned for 1995 performance
under the vesting schedule of the 1994 Executive Incentive Plan, as amended
effective January 1, 1995, and 30% of the amount earned for 1994
performance under the vesting schedule of the 1994 Executive Incentive
Plan. Awards for 1994 represent 50% of the amount earned for 1994
performance under the vesting schedule of the 1994 Executive Incentive Plan
(see "Report of Compensation Committee on Executive Compensation"). 1995
awards were valued using the closing price of the Common Stock on February
20, 1996 of $11.125 and 1994 awards were valued using the closing price of
the Common Stock on February 22, 1995 of $11.125, resulting in share awards
as follows (1995/1994): Mr. Ostrander 5,191 shares/3,146 shares; Mr.
Shapiro 4,198/2,539; Mr. Rodriguez 3,165/1,978; Mr. Goucher 3,154/1,905;
Mr. Reedy 3,266/1,978.
(2) Number of shares of Common Stock purchasable under option grants. Pursuant
to the 1994 Executive Incentive Plan, as amended effective January 1, 1995,
stock option grants were made to certain executive officers. The number of
shares of Common Stock purchasable under option awards made to named
executive officers were: Mr. Ostrander, 4,500 shares; Mr. Shapiro, 3,000
shares; Mr. Rodriguez, 3,000 shares; Mr. Goucher, 3,000 shares and Mr.
Reedy, 3,000 shares.
(3) Reflects the value of the Company's contributions under the Retirement
Savings Plan and the value of life insurance premiums paid by the Company.
The 1993 figure for Mr. Ostrander includes reimbursement of moving expenses
of $98,464 and the benefit from an interest-free loan of $1,474 provided by
the Company to assist in his relocation. 1993 figure for Mr. Goucher
includes reimbursement of moving expenses of $65,880 and the benefit from
an interest-free loan of $1,394 provided by the Company to assist in his
relocation.
(4) Mr. Goucher joined the Company during 1993.
3
<PAGE> 4
OSTRANDER EMPLOYMENT AGREEMENT
Effective January 1, 1994, the Company entered into a three year employment
agreement with Mr. Ostrander (the "Ostrander Employment Agreement") in
connection with his appointment as President and Chief Executive Officer. The
agreement provided for an annual base salary of $280,000 and entitles Mr.
Ostrander to participate in the Michael Foods, Inc. 1994 Executive Incentive
Plan ("1994 Executive Incentive Plan") and other fringe benefit plans
established by the Company for its executive officers. The agreement also
provided for a non-qualified stock option to purchase 20,000 shares of Common
Stock at an exercise price of $8.125, which was granted to Mr. Ostrander on
January 3, 1994. The option vests ratably over five years and expires January 3,
2004. In the event Mr. Ostrander's employment is terminated by incapacity, death
or thirty days' written notice by the Company, Mr. Ostrander will receive a
termination payment equal to the remaining base salary due under this agreement,
but in any event not less than two years' base salary, plus 50% of such base
salary amount in lieu of any incentive compensation or options to purchase
Common Stock for the remaining term of the agreement, plus any incentive
compensation earned for any year prior to the year of termination which is
unpaid at the date of termination. In the case of incapacity or death, or
termination by the Company without cause (which is defined to include
termination after a change in control), all options to purchase Common Stock
granted to Mr. Ostrander become fully vested.
If Mr. Ostrander's employment is terminated by Mr. Ostrander providing the
Company with thirty days' written notice, he is to receive as a termination
payment one year's base salary, plus any incentive compensation earned for any
year prior to the year of termination which is unpaid at the date of
termination. If the Company terminates Mr. Ostrander without notice for cause,
no amount will be paid beyond the last day of service by Mr. Ostrander and he
will not be deemed to have earned any incentive compensation or options to
purchase Common Stock for the year of termination.
Effective January 1, 1995, the Company and Mr. Ostrander agreed to enter
into Amendment No. 1 to the Ostrander Employment Agreement. The amendment
provides for an annual base salary of at least $294,000 effective January 1,
1995. The amendment also provides for a non-qualified stock option to purchase
40,000 shares of Common Stock at an exercise price of $10.00, which was granted
to Mr. Ostrander on January 3, 1995. The option vests ratably over five years
and expires January 3, 2005. The amendment further provided for a non-qualified
stock option to purchase 40,000 shares of Common Stock to be granted on January
2, 1996 at an exercise price equal to the price of the Common Stock as of the
close of business on that date, or $10.00 per share, whichever is greater. This
non-qualified option was awarded January 2, 1996 at an exercise price of
$11.875. The option vests ratably over five years and expires on January 2,
2006.
Amendment No. 1 to the Ostrander Employment Agreement also added an
additional termination provision whereby, if Mr. Ostrander's employment is
terminated by the Company without cause or if there is a change in control of
the Company and thereafter Mr. Ostrander's duties are substantially reduced or
negatively altered without his prior written consent, Mr. Ostrander will receive
as a termination payment all amounts due under the agreement as base salary,
plus 50% of such base salary in lieu of any incentive compensation and options
to purchase Common Stock for the remaining term of the agreement, but in any
event not less than two years' base salary, plus any incentive compensation
earned for any year prior to the year of termination which is unpaid at the date
of termination.
Effective January 1, 1996, the Company and Mr. Ostrander agreed to enter
into Amendment No. 2 to the Ostrander Employment Agreement, which extended the
termination date of the agreement one year to December 31, 1997 and established
Mr. Ostrander's annual base salary as being at least $309,000 from January 1,
1996 through December 31, 1997.
SHAPIRO EMPLOYMENT AGREEMENTS
Effective January 1, 1990, the Company entered into a five year employment
agreement with Mr. Shapiro. The agreement provided for an annual base salary of
$180,000 in 1990, with such amount increasing $10,000 per year for each of the
remaining four years. Mr. Shapiro also participated in the Company's Annual
Incentive Compensation Plan and other fringe benefit plans established by the
Company for its executive officers. In addition, the agreement provided for a
fully-vested non-qualified stock option to
4
<PAGE> 5
purchase 15,000 shares of Common Stock with an exercise price of $9.33, which
was granted to Mr. Shapiro on January 2, 1990.
Effective January 1, 1995, the Company and Mr. Shapiro entered into a new
two year employment agreement (the "Shapiro Employment Agreement"). The
agreement provides for an annual base salary of at least $238,000 and entitles
Mr. Shapiro to participate in the 1994 Executive Incentive Plan and other fringe
benefit plans established by the Company for its executive officers. In the
event Mr. Shapiro's employment is terminated by incapacity, death, or by thirty
days' written notice by the Company, Mr. Shapiro will receive as a termination
payment all amounts due under the agreement as base salary, but in any event not
less than one year's base salary, plus 50% of such base salary amount in lieu of
any incentive compensation and options to purchase Common Stock for the
remaining term of the agreement, plus any incentive compensation earned for any
year prior to the year of termination which is unpaid at the date of
termination. In the case of incapacity or death, or termination by the Company
without cause (which is defined to include termination after a change in
control), all options to purchase Common Stock granted to Mr. Shapiro become
fully vested.
If Mr. Shapiro's employment is terminated by Mr. Shapiro, he will receive
no termination payment. However, Mr. Shapiro will be entitled to receive any
incentive compensation earned for any year prior to the year of termination
which is unpaid at the date of termination. If the Company terminates Mr.
Shapiro for cause, no amount will be paid beyond the last day of service by Mr.
Shapiro and he will not be entitled to any incentive compensation or options to
purchase Common Stock for the year of termination.
If Mr. Shapiro's employment is terminated by the Company without cause or
if there is a change in control of the Company and thereafter Mr. Shapiro's
duties are substantially reduced or negatively altered without his prior written
consent, Mr. Shapiro will receive as a termination payment all amounts due under
the agreement as base salary, plus 50% of such base salary in lieu of any
incentive compensation and options to purchase Common Stock for the remaining
term of the agreement, but in any event not less than two year's base salary,
plus any incentive compensation earned for any year prior to the year of
termination which is unpaid at the date of termination.
Effective January 1, 1996, the Company and Mr. Shapiro agreed to enter into
Amendment No. 1 to the Shapiro Employment Agreement, which extended the
termination date of the agreement one year to December 31, 1997 and established
Mr. Shapiro's annual base salary as being at least $250,000 from January 1, 1996
through December 31, 1997.
RODRIGUEZ EMPLOYMENT AGREEMENT
Effective January 1, 1995, the Company entered into a two year employment
agreement with Mr. Rodriguez (the "Rodriguez Employment Agreement"). The
agreement provided for an annual base salary of at least $176,000 and entitles
Mr. Rodriguez to participate in the Executive Incentive Compensation Plan and
other fringe benefit plans established by the Company for its executive
officers. In the event Mr. Rodriguez's employment is terminated by incapacity,
death, or by thirty days' written notice by the Company, Mr. Rodriguez will
receive a termination payment equal to one year's base salary, plus any
incentive compensation earned for any year prior to the year of termination
which is unpaid at the date of termination. In the case of incapacity or death,
or termination by the Company without cause (which is defined to include
termination after a change in control), all options to purchase Common Stock
granted to Mr. Rodriguez become fully vested.
If Mr. Rodriguez's employment is terminated by Mr. Rodriguez, he will
receive no termination payment. However, Mr. Rodriguez will be entitled to
receive any incentive compensation earned for any year prior to the year of
termination which is unpaid at the date of termination. If the Company
terminates Mr. Rodriguez for cause, no amount will be paid beyond the last day
of service by Mr. Rodriguez and he will not be entitled to any incentive
compensation or options to purchase Michael Common Stock for the year of
termination.
If Mr. Rodriguez's employment is terminated by the Company without cause or
if there is a change in control of the Company and thereafter Mr. Rodriguez's
duties are substantially reduced or negatively altered
5
<PAGE> 6
without his prior written consent, Mr. Rodriguez will receive as a termination
payment an amount equal to two years' base salary, plus any incentive
compensation earned for any year prior to the year of termination which is
unpaid at the date of termination. The Rodriguez Employment Agreement had no
bearing on Mr. Rodriguez's 1993 or 1994 compensation.
Effective January 1, 1996, the Company and Mr. Rodriguez agreed to enter
into Amendment No. 1 to the Rodriguez Employment Agreement, which extended the
termination date of the agreement one year to December 31, 1997 and established
Mr. Rodriguez's annual base salary as being at least $183,000 from January 1,
1996 through December 31, 1997.
GOUCHER EMPLOYMENT AGREEMENT
Effective January 1, 1996, the Company entered into a two year employment
agreement with Mr. Goucher (the "Goucher Employment Agreement"). The agreement
provides for an annual base salary of at least $188,000 and entitles Mr. Goucher
to participate in the Executive Incentive Compensation Plan and other fringe
benefit plans established by the Company for its executive officers. In the
event Mr. Goucher's employment is terminated by incapacity, death, or by thirty
days' written notice by the Company, he will receive as a termination payment
equal to one year's base salary, plus any incentive compensation earned for any
year prior to the year of termination which is unpaid at the date of
termination. In the case of incapacity or death, or termination by the Company
without cause (which is defined to include termination after a change in
control), all options to purchase Common Stock granted to Mr. Goucher become
fully vested.
If Mr. Goucher's employment is terminated by Mr. Goucher, he will receive
no termination payment. However, Mr. Goucher will be entitled to receive any
incentive compensation earned for any year prior to the year of termination
which is unpaid at the date of termination. If the Company terminates Mr.
Goucher for cause, no amount will be paid beyond the last day of service by Mr.
Goucher and he will not be entitled to any incentive compensation or options to
purchase Common Stock for the year of termination.
If Mr. Goucher's employment is terminated by the Company without cause or
if there is a change in control of the Company and thereafter Mr. Goucher's
duties are substantially reduced or negatively altered without his prior written
consent, Mr. Goucher will receive as a termination payment an amount equal to
two years' base salary, plus any incentive compensation earned for any year
prior to the year of termination which is unpaid at the date of termination. The
Goucher Employment Agreement had no bearing on Mr. Goucher's 1993, 1994 or 1995
compensation.
REEDY EMPLOYMENT AGREEMENT
Effective January 1, 1995, the Company and Mr. Reedy entered in a two year
employment agreement (the "Reedy Employment Agreement"). The agreement provided
for an annual base salary of at least $185,000 and entitles Mr. Reedy to
participate in the Executive Compensation Plan and other fringe benefit plans
established by the Company for its executive officers. In the event Mr. Reedy's
employment is terminated by incapacity, death, or by thirty days' written notice
by the Company, Mr. Reedy will receive as a termination payment all amounts due
under the agreement as base salary, but in any event not less than one year's
base salary, plus 50% of such base salary amount in lieu of any incentive
compensation and options to purchase Common Stock for the remaining term of the
agreement, plus any incentive compensation earned for any year prior to the year
of termination which is unpaid at the date of termination. In the case of
incapacity or death, or termination by the Company without cause (which is
defined to include termination after a change in control), all options to
purchase Common Stock granted to Mr. Reedy become fully vested.
If Mr. Reedy's employment is terminated by Mr. Reedy, he will receive no
termination payment. However, Mr. Reedy will be entitled to receive any
incentive compensation earned for any year prior to the year of termination
which is unpaid at the date of termination. If the Company terminates Mr. Reedy
for cause, no amount will be paid beyond the last day of service by Mr. Reedy
and he will not be entitled to any incentive compensation or options to purchase
Common Stock for the year of termination.
6
<PAGE> 7
If Mr. Reedy's employment is terminated by the Company without cause or if
there is a change in control of the Company and thereafter Mr. Reedy's duties
are substantially reduced or negatively altered without his prior written
consent, Mr. Reedy will receive as a termination payment all amounts due under
the agreement as base salary, plus 50% of such base salary in lieu of any
incentive compensation and options to purchase Common Stock for the remaining
term of the agreement, but in any event not less than two years' base salary,
plus any incentive compensation earned for any year prior to the year of
termination which is unpaid at the date of termination. The Reedy Employment
Agreement had no bearing on Mr. Reedy's 1993 or 1994 compensation.
Effective January 1, 1996, the Company and Mr. Reedy agreed to enter into
Amendment No. 1 to the Reedy Employment Agreement, which extended the
termination date of the agreement one year to December 31, 1997 and established
Mr. Reedy's annual base salary as being at least $195,000 from January 1, 1996
through December 31, 1997.
1994 EXECUTIVE INCENTIVE PLAN
On January 1, 1994, the Company established the 1994 Executive Incentive
Plan. The 1994 Executive Incentive Plan and 1994 Executive Incentive Plan, as
amended effective January 1, 1995 are described in the Report of Compensation
Committee on Executive Compensation.
CHANGE IN CONTROL ARRANGEMENTS
Certain key employees of the Company and its subsidiaries are covered under
the Severance Plan for Eligible Employees of Michael Foods, Inc. and its
Subsidiaries (the "Severance Plan") should they be terminated without cause
within 24 months following a change in control. Generally, the Severance Plan
defines a change in control as occurring when a person acquires the power to
elect, appoint or cause the election or appointment of at least a majority of
the Board or purchases all or substantially all of the properties and assets of
the Company; provided, however, that a change in control does not include
certain acquisitions pursuant to a merger, consolidation or sale of properties
and assets. Under the Severance Plan, certain key employees would be entitled to
receive a lump sum payment equal to two times total annual compensation. Annual
compensation is defined as the employee's highest annual rate of salary
(excluding bonuses, benefits, allowances, etc.) within the three calendar year
periods prior to the date of termination of employment; provided, however, that
if the employee has been employed by the Company or a predecessor for less than
three years, total annual compensation means the highest annualized salary
during the period of employment.
The Company's severance compensation agreements with Messrs. Ostrander,
Shapiro, Rodriguez, Goucher and Reedy are contained in their respective
Employment Agreements (see "OSTRANDER EMPLOYMENT AGREEMENT," "SHAPIRO
EMPLOYMENT AGREEMENTS," "RODRIGUEZ EMPLOYMENT AGREEMENT," "GOUCHER
EMPLOYMENT AGREEMENT" and "REEDY EMPLOYMENT AGREEMENT") that are effective
upon termination of employment without cause, which includes termination after a
change in control of the Company. In the event of a change in control of the
Company, all options to purchase Common Stock become fully vested. A transaction
where the Company's stockholders, directly or indirectly, retain in excess of
fifty percent of the voting control over the Company would not trigger this
vesting feature.
DESCRIPTION OF STOCK OPTION PLANS FOR KEY EMPLOYEES
On March 20, 1987, the Company adopted the Stock Option Plans. These plans
provide for the grant of options to purchase shares of Common Stock to key
employees of the Company and its subsidiaries as determined by the Compensation
Committee of the Board (the "Committee"). The aggregate number of shares of
Common Stock as to which options may be awarded under the Stock Option Plans
currently is 2,332,700. The maximum aggregate number of shares of Common Stock
as to which options may be granted under the Stock Option Plans to any one
employee is 337,500 shares. The Stock Option Plans play a critical role in the
Company's compensation strategy of providing performance incentives to attract
and retain certain key individuals and to give such individuals a direct
financial interest in the future success and profitability of the Company.
7
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The Incentive Stock Option Plan provides for the granting of "incentive
stock options" within the meaning of Section 422A of the Code. Among other
restrictions, an option granted under the Incentive Stock Option Plan cannot, in
general, be exercised during the first 12 months after the date of its grant,
and will become exercisable ratably over the first five years. Options granted
under the plan expire not later than 10 years after grant. The Non-Qualified
Stock Option Plan provides for the granting of options which do not qualify as
"incentive stock options" within the meaning of Section 422A of the Code.
Although the Committee has not done so, the Non-Qualified Stock Option Plan
permits the Committee to grant, in its discretion, new options to replace
options surrendered for cancellation, but the new option grants must meet all
Non-Qualified Stock Option Plan requirements. As with the Incentive Stock Option
Plan, options granted under the Non-Qualified Stock Option Plan cannot, in
general, be exercised during the first 12 months after the date of grant, will
become exercisable ratably over the first five years, and expire not later than
10 years after the grant. The option price per share for options granted under
the Stock Option Plans is not less than the fair market value of a share of
Common Stock on the date of grant. An optionee generally must pay the full
exercise price of an option in cash. The Stock Option Plans are subject to
amendment by the Committee subject to the restriction that, in general, the
Committee may not increase the number of shares of Common Stock which may be
issued under the Stock Option Plans or the class of employees eligible to be
granted options.
DESCRIPTION OF STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
In 1992, the Board approved a Stock Option Plan for Non-Employee Directors
(the "Director Plan"), which was subsequently approved by the Company's
stockholders. The purpose of the Director Plan is to aid the Company in
attracting and retaining non-employee directors by enabling the acquisition of a
financial interest in the Company by non-employee directors through the issuance
of shares of Common Stock with respect to his or her services as a director of
the Company. The Director Plan also memorializes the Company's practice since
inception of granting options to purchase Common Stock to non-employee directors
upon their election or appointment as a director.
The Director Plan provides that non-employee directors will receive, upon
their initial election or appointment, an option to purchase 5,000 shares of
Common Stock at the then fair market value of the Common Stock. The Director
Plan also provides for the grant of an option to purchase an additional 5,000
shares of Common Stock upon each director's subsequent five year anniversary of
participation on the Board. The options become exercisable in full one year
after the date of grant and expire ten years from the date of grant. The Board
currently has eight non-employee directors and 35,000 shares of Common Stock are
currently subject to options granted to non-employee directors under the
Director Plan.
The number of shares of Common Stock remaining available for issuance under
the Director Plan is 115,000. This number will be subject to adjustment in the
event of stock splits, reclassifications of shares of Common Stock,
recapitalizations, stock dividends or similar adjustments in the Common Stock.
The Board may amend the Director Plan to conform it to securities laws or
other laws, or to comply with stock exchange rules or requirements. However, the
Board may not amend the Director Plan to change: (i) the total number of shares
of Common Stock as to which options may be granted; (ii) the class of persons
eligible to receive options under the Director Plan; (iii) the manner of
determining option prices; (iv) the period during which the options may be
granted or exercised; or (v) the provisions relating to the administration of
the Director Plan by the Board. The Board may terminate the Director Plan
without stockholder approval.
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OPTION GRANTS IN LAST YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE OR PRICE APPRECIATION
UNDERLYING GRANTED TO BASE PRICE FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION ------------------
NAME GRANTED(1) LAST YEAR ($/SH)(2) DATE(3) 5% ($) 10% ($)
- -------------------------------- ---------- ------------ ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Gregg A. Ostrander.............. 40,000 22.7 10.00 01/03/05 251,558 637,497
Jeffrey M. Shapiro.............. 15,000 8.5 10.00 01/03/05 94,334 239,061
Norman A. Rodriguez............. -- -- -- -- -- --
Bill L. Goucher................. 20,000 11.4 10.00 01/03/05 125,779 318,748
John D. Reedy................... 27,000 15.3 10.00 01/03/05 169,802 430,310
</TABLE>
- ------------------------
(1) All options granted in 1995 are exercisable in cumulative 20% installments
commencing one year from date of grant, with full vesting occurring on the
fifth anniversary date. Vesting may be accelerated in certain events
relating to a change in control of the Company.
(2) All options were granted at an exercise price of $10.00 per share as
specified by the Committee, such price being in excess of the fair market
value of the Common Stock relative to the last reported price on date of
grant. The exercise price and tax withholding obligations related to
exercise may be paid by delivery of already owned shares or the tax
withholding obligations related to exercises only may also be paid by offset
of the underlying shares, subject to certain conditions.
(3) All options have a ten year term, subject to termination of employment.
(4) Potential gains are reported net of the option exercise price, but before
taxes associated with exercise. THESE AMOUNTS REPRESENT CERTAIN ASSUMED
RATES OF APPRECIATION ONLY. ACTUAL GAINS, IF ANY, ON STOCK OPTION EXERCISES
ARE DEPENDENT ON THE FUTURE PERFORMANCE OF THE COMMON STOCK, OVERALL STOCK
MARKET CONDITIONS, AS WELL AS THE OPTIONHOLDER'S CONTINUED EMPLOYMENT
THROUGH THE VESTING PERIOD. THE AMOUNTS REFLECTED IN THIS TABLE MAY NOT
NECESSARILY BE REALIZED.
OPTION EXERCISES IN LAST YEAR AND YEAR END OPTION VALUES
There were no option exercises by the named executive officers in 1995. The
following table provides information related to the number and value of options
held at December 31, 1995 by the named executive officers.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR-END OPTIONS AT YEAR-END($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gregg A. Ostrander............................. 24,000 86,000 69,000 203,500
Jeffrey M. Shapiro............................. 81,326 20,017 291,281 28,875
Norman A. Rodriguez............................ 65,876 4,906 3,000 4,500
Bill L. Goucher................................ 8,000 32,000 29,000 76,000
John D. Reedy.................................. 39,518 30,942 35,344 48,375
</TABLE>
- -------------------------
(1) The closing price for the Common Stock on December 29, 1995 was $11.625. The
value is calculated on the basis of the difference between the option
exercise price and $11.625 multiplied by the number of shares of Common
Stock underlying the options.
9
<PAGE> 10
Item 12 - Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of April 15, 1996
with respect to the beneficial holdings of each person or entity known by the
Company to own beneficially more than 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED(1) OF CLASS
- ------------------------------------------------------------------ --------------------- --------
<S> <C> <C>
North Star Universal, Inc......................................... 7,365,187(2) 38.0%
610 Park National Bank Building
5353 Wayzata Boulevard
Minneapolis, Minnesota 55416
State of Wisconsin Investment Board............................... 1,795,000 9.3%
P.O. Box 7842
Madison, Wisconsin 53707
Sanford C. Bernstein & Co., Inc................................... 971,634 5.0%
One State Street Plaza
New York, New York 10004
</TABLE>
- -------------------------
(1) Owned of record and beneficially, except as otherwise noted.
(2) Includes 4,050 shares owned of record or beneficially by James Michael and
6,187 shares owned of record or beneficially by Jeffrey Michael.
SECURITIES OWNED BY MANAGEMENT
The following table sets forth certain information as of April 15, 1996
with respect to the beneficial holdings of each director and nominee, each named
executive officer and all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
- ------------------------------------------------------------- --------------------- --------
<S> <C> <C>
Directors and Nominees:
James H. Michael........................................... 7,359,000(2) 38.0%
Gregg A. Ostrander......................................... 59,337(4) *
Richard A. Coonrod......................................... 6,000(3) *
Miles E. Efron............................................. -- --
Orville L. Freeman......................................... 5,000(3) *
Arvid C. Knudtson.......................................... 6,000(3) *
Joseph D. Marshburn........................................ 5,000(3) *
Jeffrey J. Michael......................................... 7,361,137(2) 38.0%
Richard G. Olson........................................... 325,928(5) 1.7%
Named Executive Officers:
Jeffrey M. Shapiro......................................... 97,190(6) *
Norman A. Rodriguez........................................ 77,825(7) *
Bill L. Goucher............................................ 22,059(8) *
John D. Reedy.............................................. 62,104(9) *
All Directors and Executive Officers as a Group: (17
persons)................................................... 8,178,958(10) 42.2%
</TABLE>
- -------------------------
* Less than 1%
(1) Owned of record and beneficially, except as otherwise noted.
10
<PAGE> 11
(2) Includes 7,354,950 shares of Common Stock owned of record by NSU. Messrs.
James Michael and Jeffrey Michael directly or beneficially own in the
aggregate approximately 60% of the common stock of NSU. See "PRINCIPAL
STOCKHOLDERS."
(3) Includes 5,000 shares of Common Stock as to which Messrs. Coonrod, Freeman,
Knudtson and Marshburn each have the right to acquire beneficial ownership
within 60 days by the exercise of options granted to non-employee directors
upon their election or appointment. See "DESCRIPTION OF STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS."
(4) Includes 46,000 shares of Common Stock as to which Mr. Ostrander has the
right to acquire beneficial ownership within 60 days by the exercise of
options granted.
(5) Includes 325,928 shares of Common Stock as to which Mr. Olson has the right
to acquire beneficial ownership within 60 days by the exercise of options
granted.
(6) Includes 87,343 shares of Common Stock as to which Mr. Shapiro has the
right to acquire beneficial ownership within 60 days by the exercise of
options granted.
(7) Includes 68,782 shares of Common Stock as to which Mr. Rodriguez has the
right to acquire beneficial ownership within 60 days by the exercise of
options granted and 505 shares of Common Stock held in an Individual
Retirement Account.
(8) Includes 16,000 shares of Common Stock as to which Mr. Goucher has the
right to acquire beneficial ownership within 60 days by the exercise of
options granted.
(9) Includes 46,860 shares of Common Stock as to which Mr. Reedy has the right
to acquire beneficial ownership within 60 days by the exercise of options
granted and 10,000 shares of Common Stock held for his benefit in a Money
Purchase Pension (Keogh) Account.
(10) Includes 120 shares and 750 shares of Common Stock held in two executive
officers' Individual Retirement Account, 230 shares held in a Simplified
Employee Plan for an executive officer, 100 shares held by two minor
daughters of an executive officer and 736,181 shares of Common Stock as to
which certain executive officers and directors have the right to acquire
beneficial ownership within 60 days by the exercise of options granted.
11
<PAGE> 12
Item 13 - Certain Relationships and Related Transactions
- --------------------------------------------------------
Reference is made to Item 10 and Item 12 with respect to the Michael
family and NSU's ownership interest in the Company.
RELATED PARTY TRANSACTION
In December, 1995 the Company, NSU and NSU Merger Co. entered into an
Agreement and Plan of Reorganization (the "Reorganization Agreement") whereby
the Company and NSU plan to complete a tax-free business combination of the two
companies in the summer of 1996. Three directors of the Company (Messrs.
Efron, James Michael and Jeffrey Michael) are also directors of NSU. Between
them, Mr. James Michael and Mr. Jeffrey Michael own, or exercise sole voting
control over, approximately 60% of the common stock of NSU. NSU, in turn, owns
approximately 38% of the Company's Common Stock.
In a related agreement, NSU, Mr. James Michael and Mr. Jeffrey Michael,
for themselves and on behalf of certain trusts that are shareholders of NSU
(the "Michael Family Shareholders"), agreed that for two years following
the business combination described above, the Michael Family Shareholders will
be entitled to designate two nominees to the Board of Directors of the
resulting company if they collectively own ten percent or more of the
outstanding common stock of the resultant company and one nominee for director
if their ownership is less than ten percent. The Michael Family Shareholders
have designated Mr. Jeffrey Michael and Mr. Miles Efron as their initial
nominees to the Board of Directors of the resulting company after the
completion of the transaction described above.
Concurrently with the execution of the Reorganization Agreement, the
Michael Family Shareholders, which own an aggregate of 5,685,100 shares of the
outstanding NSU common stock (approximately 60%), and NSU entered into an
Orderly Disposition and Registration Rights Agreement, dated December
21, 1995 (the "Orderly Disposition Agreement"). Under the Orderly Disposition
Agreement, the Michael Family Shareholders have agreed, among other things, to
vote the shares of NSU common stock owned by them in favor of NSU's Annual
Meeting of Shareholders proposals. The Michael Family Shareholders have also
agreed to refrain for a period of two years after the merger from selling,
pledging or otherwise disposing of any of the shares of common stock of the
resultant company owned by them if the purchaser of such shares owns or would
own more than five percent of the outstanding common stock of the resultant
company, unless the resultant company is first given an opportunity to purchase
such shares. The disposition restrictions do not apply if a tender offer is
made for all of the outstanding common stock of the resultant company. In
addition, the Michael Family Shareholders are entitled during such two year
period to certain registration rights under the Securities Act of 1933, as
amended with respect to the common stock owned by them.
12
<PAGE> 13
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-K/A, amending the registrant's Form
10-K for the fiscal year ended December 31, 1995, to be signed on its behalf
by the undersigned hereunto authorized.
MICHAEL FOODS, INC.
-----------------------
(Registrant)
Date: April 26, 1996 By: /s/ John D. Reedy
-----------------------
John D. Reedy, Vice
President-Finance, Chief
Financial Officer and
Treasurer
13
