SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
AMERICAN ITALIAN PASTA COMPANY
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not applicable
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(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
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<PAGE>
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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<PAGE>
4100 N. Mulberry Drive, Suite 200
Kansas City, Missouri 64116
AMERICAN ITALIAN PASTA COMPANY
NOTICE AND PROXY STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
FEBRUARY 8, 2001
YOUR VOTE IS IMPORTANT!
Please mark, date and sign the enclosed proxy card and promptly
return it to the Company in the enclosed envelope.
Mailing of this Notice and Proxy Statement, the accompanying Proxy, and the
accompanying 2000 Annual Report, commenced on or about January 13, 2001.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
4100 N. MULBERRY DRIVE, SUITE 200
KANSAS CITY, MISSOURI 64116
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-------------------
The Annual Meeting of the Stockholders of American Italian Pasta
Company, a Delaware corporation ("AIPC"), will be held at The Hyatt Regency
Crown Center, 2345 McGee, Kansas City, Missouri 64108 at 10:30 a.m. on February
8, 2001, to consider and vote upon the following:
1. Election of three Directors;
2. Ratification of the Board of Directors' selection of Ernst & Young LLP to
serve as AIPC's independent auditors for fiscal year 2001;
3. Approval of American Italian Pasta Company's 2000 Equity Incentive Plan;
and
4. Such other matters as may properly be brought before the Annual Meeting or
any adjournment thereof.
Only stockholders of record at the close of business on December 12, 2000, are
entitled to notice of and to vote at this meeting or any adjournment thereof.
By Order of the Board of Directors,
Executive Vice President &
Chief Financial Officer
The date of this Notice is January 13, 2001.
Please date, sign and promptly return the enclosed proxy card, regardless of the
number of shares you may own and whether or not you plan to attend the meeting
in person. You may revoke your proxy and vote your shares in person if revoked
in accordance with the procedures described in the attached proxy statement.
Please also indicate on the enclosed response form whether you plan to attend
the Annual Meeting.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
4100 N. Mulberry Drive, Suite 200
Kansas City, Missouri 64116
PROXY STATEMENT
TABLE OF CONTENTS
-----------------
General Information......................................................2
Proposal 1 - Election of Three Directors.................................3
The Board of Directors...................................................4
Stock Owned Beneficially by Directors,
Nominees and Certain Executive Officers...................7
Stock Performance Graph..................................................9
Audit Committee Report..................................................11
Management Compensation.................................................12
Certain Relationships and Related Transactions..........................21
Proposal 2 - Ratification of the Board of
Directors' Selection of Independent Auditors.............22
Proposal 3 - Approval of American Italian Pasta Company
2000 Equity Incentive Plan...............................23
Voting and Proxies......................................................27
Principal Stockholders..................................................29
Stockholder Proposals...................................................30
(a).....Section 16(a) Beneficial Ownership Reporting Compliance.........32
Other Matters...........................................................32
<PAGE>
GENERAL INFORMATION
This Proxy Statement is being mailed on or about January 13, 2001 to the
holders of record at the close of business on December 12, 2000 (the "Record
Date") Class A Convertible Common Stock, of American Italian Pasta Company, a
Delaware corporation ("AIPC" or the "Company"), par value $0.001 per share (the
"Common Stock"), in connection with the solicitation of proxies by AIPC's Board
of Directors for use at the Annual Meeting of Stockholders to be held at The
Hyatt Regency Crown Center, 2345 McGee, Kansas City, Missouri, on February 8,
2001, at 10:30 a.m. and any adjournment thereof (the "Annual Meeting"). The
Notice of Annual Meeting of Stockholders, AIPC's 2000 Annual Report to
Stockholders (the "Annual Report"), and the proxy card accompany this Proxy
Statement.
Attendance at the Annual Meeting of Stockholders is limited to
stockholders of record or their proxies, beneficial owners of AIPC's stock
having evidence of such ownership and guests of AIPC. Any stockholder or
stockholder's representative who, because of a disability, may need special
assistance or accommodation to allow him or her to participate in the Annual
Meeting may request reasonable assistance or accommodation from AIPC by
contacting AIPC's Investor Relations Coordinator at 4100 N. Mulberry Drive,
Suite 200, Kansas City, Missouri 64116, at 816-584-5000. To provide AIPC
sufficient time to arrange for reasonable assistance please submit all requests
by January 19, 2001.
AIPC changed its fiscal year end from December 31 to the last Friday of
September or the first Friday of October effective beginning with the nine-month
fiscal period ended September 27, 1996 and for all subsequent periods. This
change resulted in a nine-month fiscal year for 1996, and a 52 or 53-week year
for all subsequent fiscal years. The Company's first three fiscal quarters end
on the Friday last preceding December 31, March 31 and June 30 or the first
Friday of the following month of each quarter. For purposes of this Proxy
Statement, the 2000 and 1999 fiscal years are described as having ended
September 30.
2
<PAGE>
PROPOSAL 1 - ELECTION OF THREE DIRECTORS
The Board of Directors of AIPC is divided into three classes. The
members of each class serve staggered three-year terms of office, which results
in one class standing for election at each annual meeting of stockholders. The
term of office for the directors elected at the Annual Meeting will expire in
2004 or when their successors are elected and qualified.
Three persons have been nominated by the Board for election as
directors. All three individuals are presently directors of AIPC, have indicated
that they are willing and able to serve as directors if elected, and have
consented to being named as nominees in this Proxy Statement. If any nominee
should become unable or unwilling to serve, the persons named as proxies intend
to vote for one or more substitute nominees chosen by them in their sole
discretion. AIPC's Certificate of Incorporation and Bylaws do not have any
eligibility requirements for directors.
As explained further under "Voting and Proxies," Directors are elected
by the affirmative vote of the plurality of the shares of Common Stock present
at the Annual Meeting that are entitled to vote on the election of directors,
assuming a quorum.
Nominees for Director to Serve Until the Annual Meeting of Stockholders in 2004:
DAVID Y. HOWE, age 36, has served as a Director of the Company since
1995. He is a Vice President of Citicorp Venture Capital, Ltd., a venture
capital firm, where he has been employed since 1993. He is also a director of
Insilco Holding Co., Pen-Tab Industries, Inc., Trianon Industries, Formica Corp,
and eight private companies.
JOHN P. O'BRIEN, age 59, has served as a Director of the Company since
1997. Mr. O'Brien has been Managing Director of Inglewood Associates, Inc., a
private investment and consulting firm specializing in turnarounds of
financially under-performing companies, since April 1993. Mr. O'Brien has also
been Co-Chairman of the Board and Chief Executive Officer of Jeffery Mining
Products, L.P. (now known as JMP Partners, L.P., a manufacturer and distributor
of underground mining products) since October 1995 and Chairman of the Board of
Allied Construction Products, Inc. (a manufacturer and distributor of hydraulic
and pneumatic demolition, compaction, boring and trench shoring devices) since
March 1993, each of which is an Inglewood Associates, Inc. portfolio company.
Mr. O'Brien has served as a Director and President of Cleveland Sight Center
since 1993. Prior to joining Inglewood Associates, Inc., he was the Southeast
Regional Managing Partner for Price Waterhouse (now PricewaterhouseCoopers LLP)
and a member of the firm's Policy Board and Management Committee from July 1984
to April 1990. Since August 6, 1999, Mr. O'Brien has been a board member of
International Total Services, Inc. (ITSW) NASDAQ, and since October 19, 1999,
has been Co-Chairman of the Board. Since July 2000, Mr. O'Brien has been a board
member of Century Aluminum Company (CENX) NASDAQ.
WILLIAM R. PATTERSON, age 59, has served as a Director of the Company since
1997. He is a founder and manager of Stonecreek Management, LLC, a private
investment firm since August 1998. Prior to that, he served as Vice President of
PSF Holdings, L.L.C., and the Executive Vice President, Chief Financial Officer
and Treasurer of its wholly owned subsidiary, Premium Standard Farms, Inc.
("PSF, Inc."), a fully-integrated pork producer and processor from October 1996
to August 1998. From January to October 1996, Mr. Patterson was a principal of
Patterson Consulting, LLC and as a consultant was acting chief financial officer
for PSF, Inc. From 1976 through 1995, Mr. Patterson was a partner in Arthur
Andersen LLP. He is also a director of Paul Mueller Company and Collins
Industries, Inc.
3
<PAGE>
YOUR BOARD RECOMMENDS THAT YOU VOTE
"FOR"
THE ELECTION OF MANAGEMENT'S NOMINEES
THE BOARD OF DIRECTORS
The Board meets regularly to review significant developments affecting
AIPC and to act on matters requiring Board approval. The Board of Directors met
three times in fiscal year 2000. Messrs. Patterson and O'Brien attended all
three meetings of the Board in fiscal year 2000, Messrs. Baum, Demetree,
Thompson, and Niehaus attended two of the three meetings, and Mr. Howe attended
one of the three meetings.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 2002:
JONATHAN E. BAUM, age 40, has served as a Director of the Company since
1994. Mr. Baum is also a director of George K. Baum Merchant Banc, L.L.C. and
Prairie Capital Management, Inc. He has been the Chairman and Chief Executive
Officer of George K. Baum & Company, an investment banking firm, since 1994. He
is also co-chair of Kansas City Area Development Council.
ROBERT H. NIEHAUS, age 45, has served as a Director of the Company since
1992. Previously, he had been a Managing Director of Morgan Stanley Dean Witter
Capital Partners from 1990 to 1999. He is also a director of Waterford Wedgewood
U.K., plc, Waterford Crystal Ltd., and Berliner Communications, Inc. He is also
Managing Director of Greenhill Capital Partners, LLC.
RICHARD C. THOMPSON, age 49, has served as a Director of the Company
since 1986. Previously, he had been Chairman and Chief Executive Officer of
Thompson's Nutritional Technology, Inc., a pet food producer, from 1993 to 2000.
He is a co-founder of the Company and served as its President from May 1986 to
June 1991. Mr. Thompson is Managing Partner of Iron Street Labs, LLC.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 2003:
HORST W. SCHROEDER, age 59, has served as Chairman of the Board of
Directors of the Company since June 1991, and as a Director of the Company since
August 1990. Since 1990, Mr. Schroeder has been President of HWS & Associates,
Inc., a Hilton Head, South Carolina management consulting firm owned by Mr.
Schroeder. Prior to founding HWS & Associates, Mr. Schroeder served the Kellogg
Company, a manufacturer and marketer of ready-to-eat and other convenience food
products, in various capacities for more than 20 years, most recently as
President and Chief Operating Officer. He was a manager of PSF Holdings, L.L.C.
and served as Chairman of the Board of its wholly-owned subsidiary, Premium
Standard Farms, Inc., a vertically-integrated pork producer, from 1996 to May
1998.
MARK C. DEMETREE, age 44, has served as a Director of the Company since
1998. Since 1997, he has been Chairman of the Board and Chief Executive Officer
of US Salt Holdings, LLC, which is an investment and management firm,
specializing in the natural resource, basic chemicals and specialty chemicals
industries. Previously he had been President of North American Salt Company from
1993 to 1997. He is also Chairman and Director of Pinnacle Properties
Management, Inc.
TIMOTHY S. WEBSTER, age 39, has served as President of the Company since
June 1991, as President and Chief Executive Officer of the Company since May
1992, and as a Director since June 1989. Mr.
4
<PAGE>
Webster joined the Company in April 1989, and served as Chief Financial Officer
from May 1989 to December 1990 and as Chief Operating Officer from December 1990
to June 1991.
JAMES A. HEETER, age 52, has served as a Director of the Company since
May of 2000. He is an attorney in Kansas City specializing in Corporate
Securities and Healthcare, and for more than five years has been a partner with
Sonnenschein Nath & Rosenthal, a general partnership.
COMMITTEES OF THE BOARD OF DIRECTORS
Under AIPC's Bylaws, the Board of Directors may establish, change and
terminate one or more committees made up of members of the Board of Directors to
perform certain functions. The Board of Directors has established an Audit
Committee and a Compensation Committee. Each such committee has two or more
members who serve at the pleasure of the Board of Directors. There were two
meetings of the Audit Committee, and one meeting of the Compensation Committee
during fiscal year 2000. All of the directors attended the meetings of the
committees on which they served during fiscal 2000.
THE AUDIT COMMITTEE
The Audit Committee is responsible for reviewing the Company's financial
statements, audit reports, internal financial controls and the services
performed by the Company's independent public auditors, and for making
recommendations with respect to those matters to the Board of Directors. The
Audit Committee has an Audit Committee Charter in place which has been adopted
by the Board of Directors. The current members of the Audit Committee are:
Messrs. Patterson, Heeter, and Baum. Each of the members is "independent", as
defined by the rules of the New York Stock Exchange.
THE COMPENSATION COMMITTEE
The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors with respect to the salaries, bonuses,
and other compensation paid to key employees and officers of AIPC, including the
terms and conditions of their employment, and administers all stock option and
other benefit plans affecting key employees' and officers' direct and indirect
remuneration. The current members of the Compensation Committee are: Messrs.
Niehaus, Demetree, O'Brien and Schroeder. The Committee's report on executive
compensation is set forth in the section under "Management Compensation."
5
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All compensation decisions during the fiscal year ended September 29,
2000 for each of the Named Executive Officers were made by the Compensation
Committee of the Board of Directors. Mr. Schroeder as Chairman of the Board, is
an officer of AIPC.
COMPENSATION OF DIRECTORS
Messrs. Howe, Schroeder, and Webster currently are the only directors
who do not receive fees for serving as directors of the Company. Effective
January 1, 1998, all directors who are not employees of AIPC or employees of
significant stockholders ("Outside Directors") are paid an annual retainer of
$15,000, which is payable in Common Stock immediately following AIPC's annual
meeting of stockholders, and paid $1,500 in cash for each meeting of the Board
of Directors attended. Additionally, Outside Directors who are members of a
committee of the Board of Directors are paid $500 in cash for each committee
meeting attended. An Outside Director who is a chairman of such a committee is
paid an annual cash retainer of $2,500. All directors are reimbursed for
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors and meetings of Board committees.
6
<PAGE>
STOCK OWNED BENEFICIALLY BY DIRECTORS, NOMINEES
AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth information regarding beneficial
ownership of the Company's Common Stock as of the Record Date by: (i) each
director or nominee for director of AIPC; (ii) certain executive officers; and
(iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK
NAME OF BENEFICIALLY OWNED
BENEFICIAL OWNER(1) NUMBER PERCENT
------------------- ------ -------
<S> <C> <C>
Horst W. Schroeder (2)(3) 675,726 3.77%
Jonathan E. Baum (4) 22,647 *
James A. Heeter (7) 5,889 *
David Y. Howe -- --
Robert H. Niehaus 4,548 *
Mark C. Demetree 11,086 *
John P. O'Brien 5,130 *
William R. Patterson 5,630 *
Timothy S. Webster (3)(5) 649,228 3.60%
David E. Watson (3)(6) 173,488 *
Norman F. Abreo (3) 72,217 *
Warren B. Schmidgall (3)(8) 62,198 *
Richard C. Thompson 11,990 *
All directors and executive 1,876,877 9.91%
officers as a group
(21 persons) (3)
</TABLE>
-----------------------------
* Less than 1% of the outstanding Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
United States Securities and Exchange Commission (the "Commission"), but
generally refers to either the sole or shared power to vote or dispose
of the shares. Such shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person.
Except as otherwise indicated in a footnote to this table or as provided
in the Stockholders Agreement (see "Certain Relationships and Related
Transactions - Stockholders Agreement"), the persons in this table
7
<PAGE>
have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them.
(2) The shares beneficially owned by Mr. Schroeder include 137,341 shares
held by The Living Trust of Horst W. Schroeder, 11,406 shares held by
The Living Trust of Gisela I. Schroeder for the benefit of Mr. and Ms.
Schroeder, respectively, and members of their family, 3,066 shares held
by Mr. Schroeder's daughter and 3,066 shares held by his son. Mr.
Schroeder has voting power, but not investment power, with respect to
all of these shares. Mr. Schroeder disclaims beneficial ownership of the
shares held by The Living Trust of Gisela I. Schroeder.
(3) In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock subject to
options and warrants held by that person that are currently exercisable
or will become exercisable within 60 days of the Record Date are deemed
beneficially owned by that person. Options that are currently
exercisable or will become exercisable within 60 days of the Record Date
to purchase shares of Common Stock as follows: Mr. Schroeder (526,979
shares), Mr. Webster (613,035 shares) Mr. Watson (122,866 shares), Mr.
Abreo (72,217 shares), and Mr. Schmidgall (52,167 shares) and all
executive officers and directors as a group (1,242,145 shares).
(4) Includes 13,083 shares held by Group Partners, L.P., 1,956 shares held
by George K. Baum Holdings, Inc., 223 shares held by GKB Equity, Inc.
and 1,776 shares held by Grandchild, L.P. As an officer and/or equity
owner of the entities holding such shares, Mr. Baum may share voting
power with respect to such shares. Mr. Baum also may be deemed to own
beneficially 200 shares held by his wife, Sarah Baum, and 1,600 shares
held by his wife, Sarah Baum, as custodian for their minor children. Mr.
Baum disclaims beneficial ownership of such shares, except for the
shares held by GKB Equity, Inc. and the shares held by George K. Baum
Holdings, Inc.
(5) Includes 15,625 shares beneficially owned by Mr. Webster which are held
in various trusts for the benefit of Mr. Webster's family members. Mr.
Webster has voting power, but not investment power, with respect to all
of such shares. Mr. Webster also may be deemed to own beneficially 4,600
shares held by his wife. Mr. Webster disclaims beneficial ownership of
such shares.
(6) Includes 750 shares held as custodian for his children.
(7) Mr. Heeter also may be deemed to own beneficially 745 shares held by his
wife, Judith S. Heeter, and 300 shares held by his wife, Judith S.
Heeter, as custodian for their minor children. Mr. Heeter disclaims
beneficial ownership of such shares held by or for the benefit of his
wife and children.
(8) Includes 31 shares held as custodian for his children and 2,000 shares
held by his wife, Beth Schmidgall.
8
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows the changes in value over the two fiscal years
ending September 30, 1999 of an assumed investment of $100 in: (i) AIPC's Common
Stock; (ii) a group of peer companies(1); and (iii) the stocks that comprise the
Russell 2000 Index(2). The table following the graph shows the value of those
investments as of September 30, 1999 and 2000. The value for the assumed
investments depicted on the graph and in the table has been calculated assuming
that any cash dividends are reinvested at the end of each quarter during the
fiscal year paid. The closing price of the common Stock on the New York Stock
Exchange on December 29, 2000 was $26.8125 per share.
AMERICAN ITALIAN PASTA COMPANY
RELATIVE MARKET PERFORMANCE
TOTAL RETURN FISCAL 2000
[graph omitted]
9
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, September 30, September 30, September 30,
----------------- -------------- -------------- -------------- -------------
1997(3) 1998 1999 2000
------- ---- ---- ----
<S> <C> <C> <C> <C>
AIPC Total $100 $145.83 $159.03 $106.60
Return
Peer Group Total $100 $102.32 $92.98 $98.25
Return
Russell 2000 $100 $79.12 $94.21 $116.25
Index
Total Return
</TABLE>
1. The peer group index is comprised of the following companies: Aurora
Foods Inc; Dole Food Inc; Earthgrains Co; Flowers Inds Inc;
International Home Foods Inc; Keebler Foods Co; McCormick & Co Inc; and
Riviana Foods, Inc.
2. The Russell 2000 is an index prepared by Frank Russell Company, an
independent company. The Russell 2000 reflects the change in weighted
average market value for 2000 companies whose shares are traded on the
New York Stock Exchange, American Stock Exchange and in the
over-the-counter market. Information concerning Frank Russell Company
and the Russell 2000 Index is available on the Internet at
www.russell.com.
3. AIPC Common Stock began trading publicly on October 8, 1997.
10
<PAGE>
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the audited financial
statements of the Company with management and has discussed with Ernst & Young
LLP, the company's independent auditors, the matters required to be discussed
under Statements on Auditing Standards No. 61 ("SAS 61"). In addition, the Audit
committee has received from Ernst & Young the written disclosures and the letter
required to be delivered by Ernst & Young under Independence Standards Board
Standard No. 1 ("ISB Standard No. 1") addressing all relationships between the
auditors and the Company that might bear on the auditors' independence. The
Audit committee has reviewed the materials received from Ernst & Young, has met
with representatives of Ernst & Young to discuss the independence of the
auditing firm, and has satisfied itself as to the auditors' independence.
Based on the Audit Committee's review of the financial statements, its
discussion with Ernst & Young regarding SAS 61, and the written materials
provided by Ernst & Young under ISB Standard No. 1 and the related discussion
with Ernst & Young of their independence, the Audit committee has recommended to
the Board of Directors that the audited financial statements of the Company be
included in its Annual Report on Form 10-K for the fiscal year ended September
30, 2000, for filing with the Securities and Exchange Commission.
On September 16, 1999, the Audit Committee presented to the Board, and
the Board of Directors adopted, a written Charter for the Audit Committee. A
copy of the Company's current Audit Committee Charter is attached to this Proxy
Statement as Exhibit A.
THE AUDIT COMMITTEE.
William R. Patterson
James A. Heeter
Jonathan E. Baum
11
<PAGE>
MANAGEMENT COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Board of Directors' compensation policy is to reward exceptional
performance by the Company's employees while providing reasonably competitive
base compensation. The Compensation Committee is responsible for implementing
this policy for the executive officers of the Company.
The Committee evaluates the compensation packages of these executives at
least annually. The Committee regularly discusses with independent compensation
consultants both the composition and level of the compensation packages, and the
Committee regularly informs the Board of the Committee's activities.
In designing the compensation packages for the Company's executives, the
Committee uses surveys, prepared by the compensation consultants, of the
compensation practices for different job levels of other industrial companies
with revenues of $1 billion or less. The Committee believes that those are the
companies with which the Company most actively competes for executives. The job
level for a position at AIPC and in the surveys is determined based upon the
compensation consultants' analysis of the position's level of knowledge,
accountability and problem solving (as contrasted to determining the job level
based upon title). The use of job level analysis allows the Committee to compare
more accurately the Company's compensation package for a particular executive
with the market practices within the comparison market. The compensation
consultants do not consider the financial performance of companies participating
in the survey when comparing the Company's compensation packages to the market.
The Committee's current compensation program has three primary
components: base salary, annual incentives and long-term equity based
incentives. The Committee's process of determining each of these components for
the executives in general, and Mr. Webster in particular, is discussed below.
Base Salary. The Committee initially sets an executive's base salary at
the median of the range of base salaries indicated in the surveys, but may
adjust the salary, in the Committee's discretion, upwards or downwards within a
limited range around that point. The Committee considers the recommendations of
the Chairman of the Board and the Chief Executive Officer when making any such
adjustment. The Committee chooses the median of the base salary range so the
Company's base salaries are competitive with the base salaries of other
industrial companies. The Committee does not consider the financial performance
of the Company in setting base salaries.
Annual Incentives. The Committee uses annual incentives to focus
executives on accomplishing specific objectives, both corporate and personal,
that the Committee and Board believe are necessary to enhance the shorter-term
performance of the Company. All executives participate in the annual cash
incentive program administered by the Committee. Each of the various objectives,
goals, targets and proportions related to determining the annual incentive is
established by the Committee or agreed to with the executive prior to the period
in which the performance is to be measured. The annual incentives are paid in
cash or stock options or both. For fiscal 2000, executive officers and eligible
members of senior management received their annual incentive bonus in cash.
12
<PAGE>
An executive's annual incentive payment is the result of a target annual
incentive adjusted for the executive's personal performance and the financial
performance of the Company. The Committee sets an executive's target annual
incentive so that if earned, the executive's total cash compensation (base
salary plus annual incentive) would be at the seventy-fifth percentile level of
the range of total cash compensation indicated in the compensation survey for
the job level. The Committee believes that this level is consistent with the
Company's compensation policy of focusing on performance-based compensation.
The personal performance component of the annual incentive is based upon
the Committee's assessment of the executive's actual performance against
specific corporate objectives for the executive and the executive's agreed upon
personal goals. These corporate objectives vary among executives, but generally
relate to corporate performance measures in the executive's area of
responsibility. The personal goals also vary among executives, but generally
focus on the key accountabilities defined in the job description. Each of these
factors is given special weight in determining the executive's performance
rating. The Committee may also, in its discretion, take into account other
factors in determining an executive's overall personal performance rating. This
performance rating is used to adjust the target annual incentive downward to
nothing or upwards to 150 percent of the target annual incentive to arrive at
the executive's potential annual incentive.
Of the total potential annual incentive, 100 percent is based upon the
executive's personal performance, but may be adjusted upward or downward based
upon the actual financial performance of the Company. There is no further
adjustment to the portion attributable to personal performance.
The financial performance rating of the Company is based upon the
comparison of the Company's actual earnings to a pre-established earnings target
and range of earnings of the Company for the measurement period. No adjustment
is made to the financial performance portion if the Company's earnings match the
target, and none of the potential annual incentive relating to the financial
performance of the Company is paid if the Company's earnings fall below the
bottom of the range. If the Company's earnings fall below the earnings target
but within the range, the financial performance portion is adjusted to 75
percent of its initial level. If the Company's earnings exceed the earning
target, the financial performance portion is adjusted up to 125 percent of its
initial level, depending on the size of the excess.
Long-Term Equity Incentives. Equity incentives are a very important
component of the Company's executive compensation program. Equity incentives are
the most effective means known to the Committee of aligning an executive's
interests with those of the stockholders and focusing the executive on creating
long-term value for the Company's stockholders. Generally, all executives
participate in the Company's equity incentives program. The Committee may,
however, determine in its discretion to not award any equity incentives to
certain executives. In making such a determination, the Committee will generally
consider the executive's past performance and recommendations of the Chairman of
the Board and Chief Executive Officer. No particular weighting is given to any
of these factors.
The Committee uses stock options with an exercise price equal to the
value of the stock on the date of the option award as the Company's equity
incentive because options do not reward the executive until all stockholders
realize an increase in the value of their investment in the Company. The
Committee sets the number of shares to be covered by any option awarded by
equating the present value of the options (using an assumed appreciation and the
cost of funds rates) to a target equity incentive level for the executive.
13
<PAGE>
The target equity incentive level is determined by setting target total
direct compensation (base salary plus target annual and equity incentives) for a
particular executive at the seventy-fifth percentile level of the range of
values of the total direct compensation indicated in the compensation surveys
for the job level. As with the annual incentives, the Committee believes this
level is consistent with the Company's compensation policy of focusing on pay
for performance.
The Committee may then, in its discretion, adjust the target equity
incentive level upwards or downwards within a limited range around the target
level. The Committee does not generally consider any specific factors when
making any adjustment to the target incentive level other than previously
awarded equity incentives, the Committee's perception of the executive's
contribution to the Company and the recommendations of the Chairman of the Board
and the Chief Executive Officer. No particular weighting is given to these
factors. The stock options awarded the Company's executives are intended to
cover a five-year period. The options, therefore, become exercisable at a rate
of twenty percent per year.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee determines Mr. Webster's compensation package using the
same methods as it uses for the other executives of the Company. For fiscal year
2000, the Committee set Mr. Webster's base salary at approximately the midpoint
of the range of comparable salaries indicated on the surveys utilized. Mr.
Webster's 2000 annual incentive performance objectives were based on the
earnings of the Company and meeting all of his personal annual performance
objectives. In establishing Mr. Webster's annual incentive compensation, the
Committee sought to reward his outstanding performance in connection with the
growth of production at the Kenosha facility, the completion of the Italian
pasta manufacturing facility, as well as leading the Company in achieving record
sales and earnings.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code generally limits deductions
by publicly held corporations for federal income tax purposes to $1 million of
compensation paid to each of the executive officers listed in the corporation's
summary compensation table unless such excess compensation is "performance
based" as defined in Section 162(m). In order for compensation to qualify as
"performance based," among other requirements, the performance goals must be set
(and in the case of options, the options must be granted) by a compensation
committee consisting solely of two or more outside directors (as defined in
Section 162(m)). The Committee member who does not qualify as an "outside
director" abstains from the vote on performance-based compensation and on the
granting of options or other equity-based compensation. Based on a private
letter ruling issued by the Internal Revenue Service ("IRS") in December 1997,
the Committee believes that, with the non-outside director abstaining, the
Committee qualifies as a compensation committee consisting solely of two or more
outside directors (as defined in Section 162(m)), and that, accordingly,
compensation arising from the exercise of non-qualified options granted by the
Committee under the 1992 Plan, the 1993 Plan, and the 1997 Plan, as well as
stock appreciation rights granted under the 1997 Plan will be tax-deductible by
the Company. However, there can be no assurance of that result. While a private
letter ruling is not binding on the IRS except with respect to the party to whom
it is issued, it is instructive as to the thinking of the IRS at the time the
letter was issued. Restricted Shares and Bonus Shares granted under the 1997
Plan will be subject to the limitations of Section 162(m).
14
<PAGE>
The Committee will review from time to time in the future the potential
impact of Section 162(m) on the deductibility of executive compensation.
However, the Committee intends to maintain the flexibility to take actions that
it considers to be in the best interests of the Company and its stockholders and
which may be based on considerations in addition to tax deductibility.
THE COMPENSATION COMMITTEE.
John P. O'Brien
Horst W. Schroeder
Mark C. Demetree
Robert H. Niehaus
15
<PAGE>
SUMMARY COMPENSATION TABLE
The Summary Compensation Table below shows certain information
concerning the compensation paid by AIPC to the CEO and the Named Executive
Officers during fiscal 2000 (based upon the total salary and bonus paid during
fiscal 2000).
<TABLE>
<CAPTION>
FISCAL LONG-TERM
PERIOD COMPENSATION
COMPENSATION AWARDS
------------ ------
SECURITIES ALL
NAME AND PRINCIPAL POSITION FISCAL UNDERLYING OTHER
--------------------------- PERIOD SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION
------- ---------- --------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Timothy S. Webster 2000 $417,373 $125,000 (1) 130,000 $6,330 (3)
President and Chief Executive Officer 1999 361,677 162,000 (2) -- 5,732 (3)
1998 359,676 250,000 398,583 5,237 (3)
Horst W. Schroeder 2000 220,000 77,000 (1) 130,000 343 (4)
Chairman of the Board 1999 222,000 50,000 (2) - 305 (4)
1998 272,000 125,000 275,942 260 (4)
David E. Watson 2000 204,398 32,500 (1) 26,600 5,556 (5)
Executive Vice President - Operations Support 1999 190,935 66,836 (2) - 5,383 (5)
and Technology 1998 198,307 80,000 61,320 5,781 (5)
Norman F. Abreo 2000 194,604 38,000 (1) 27,000 4,513 (6)
Executive Vice President - Operations 1999 182,604 64,800 (2) - 5,845 (6)
1998 175,600 70,000 61,320 4,808 (6)
Warren B. Schmidgall 2000 194,376 38,000 (1) 67,500 46,849 (8)
Executive Vice President and 1999 164,308 (7) 56,420 (2) 50,000 53,378 (8)
Chief Financial Officer 1998 - - - -
</TABLE>
[FN]
(1) The fiscal year 2000 bonus structure was modified by the Compensation
Committee to reflect the strategic significance of the Mueller
acquisition on fiscal year 2000 and future years' results. Accordingly,
the amounts indicated represent 50% of the fiscal year 2000 bonus
potential and were paid in cash December 15, 2000. Additionally, in
fiscal year 2001, the Compensation Committee authorized a second
incentive payment equal to the cash bonus paid for fiscal year 2000,
payable in the second quarter of fiscal year 2001 upon the successful
completion and integration of the Mueller's acquisition.
(2) For the fiscal year 1999 bonus, the officers received a portion of their
bonus in immediately vested stock options granted at fair market value
on October 21, 1999. Options granted were as follows: Timothy S. Webster
50,000 shares, Horst W. Schroeder 50,000 shares, David E. Watson 3,300
shares, Norman F. Abreo 2,500 shares, and Warren B. Schmidgall 3,500
shares.
(3) Includes contributions on the officer's behalf to the American Italian
Pasta Company Retirement Savings Plan in the amounts of $2,787, $5,307,
and $4,875, in fiscal years 2000, 1999, and 1998, respectively, premiums
paid by the Company on a life insurance policy in the amounts of $343,
$425, and $362, in fiscal years 2000, 1999, and 1998, respectively, and
premiums paid by the Company on a split dollar life insurance policy in
the amounts of $3,200, $3,335, and $690 in fiscal years 2000, 1999, and
1998, respectively.
16
<PAGE>
(4) Represents premiums paid by the Company on a life insurance policy for
the benefit of the Named Executive Officer.
(5) Includes contributions on the officer's behalf to the American Italian
Pasta Company Retirement Savings Plan in the amounts of $5,213, $4,955,
and $5,481, in fiscal years 2000, 1999, and 1998, respectively, and
premiums paid by the Company on a life insurance policy in the amounts
of $343, $425, and $300, in fiscal years 2000, 1999, and 1998,
respectively.
(6) Includes contributions on the officer's behalf to the American Italian
Pasta Company Retirement Savings Plan in the amounts of $4,170, $5,420,
and $4,552, in fiscal years 2000, 1999, and 1998, respectively, and
premiums paid by the Company on a life insurance policy in the amounts
of $343, $425, and $256, in fiscal years 2000, 1999, and 1998,
respectively.
(7) Mr. Schmidgall's annual salary for fiscal year 1999 would have been
$180,000, if he had been with the Company for the entire fiscal year. He
joined the Company in October 1998.
(8) Includes contributions on the officer's behalf to the AIPC retirement
savings plan in the amount of $3,951 in fiscal year 2000, and recruiting
and relocation fees paid by the Company in the amounts of $42,555 and
$53,318 in fiscal years 2000 and 1999, respectively, and premiums paid
by the Company on a life insurance policy in the amount of $343 in
fiscal 2000.
</FN>
OPTION GRANTS IN FISCAL YEAR 2000
The following table sets forth information with respect to the options
granted by AIPC during fiscal 2000 to AIPC's Executive Officers named in the
Summary Compensation Table above.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM (2)
----------------------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS
SHARES GRANTED TO
UNDERLYI EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE PER EXPIRATION
NAME GRANTED 2000 SHARE (1) DATE 5% 10%
---- ------- ---- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Timothy S. Webster 100,000 11.6% $25.00 10/21/09 $1,572,237 $3,984,356
30,000 3.5% $18.50 09/28/10 $349,037 $884,527
Horst W. Schroeder 100,000 11.6% $25.00 10/21/09 $1,572,237 $3,984,356
30,000 3.5% $18.50 09/28/10 $349,037 $884,527
David E. Watson 23,300 2.7% $25.00 10/21/09 $366,331 $928,355
3,300 0.4% $18.50 09/28/10 $38,394 $97,298
Norman F. Abreo 22,500 2.6% $25.00 10/21/09 $353,753 $896,480
4,500 0.5% $18.50 09/28/10 $52,355 $132,679
Warren B. Schmidgall 23,500 2.7% $25.00 10/21/09 $369,476 $936,324
44,000 5.1% $18.50 09/28/10 $511,920 $1,297,306
</TABLE>
17
<PAGE>
[FN]
(1) The exercise price is based on the Fair Market Value at the date of the
grant of the option. The options have various vesting periods, ranging
from date of grant to five years, and the options terminate ten years
from the date of grant, subject to earlier termination in certain
conditions. The exercisability of the options is accelerated in the
event of a change of control (as defined in the option agreements).
(2) The amounts shown as potential realizable values are based on assumed
annualized rates of appreciation in the price of Common Stock of five
percent and ten percent over the term of the options, as set forth in
the rules of the Securities and Exchange Commission. Actual gains, if
any, on stock option exercises are dependent upon the future performance
of the Common Stock. There can be no assurance that the potential
realizable values reflected in this table will be achieved.
</FN>
18
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000 AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth information with respect to the aggregate option
exercises during fiscal 2000 by the named Executive Officers and the number and
value of options held by such officers as of September 30, 2000.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 2000
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS (1)
------------------- ------------------------
SHARES
ACQUIRED VALUE
NAME UPON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy S. Webster - - 596,368 224,433 $3,635,849 $199,635
Horst W. Schroeder 118,681 2,768,828 514,479 65,000 1,986,258 10,313
David E. Watson 15,193 303,556 116,199 46,178 738,469 1,134
Norman F. Abreo 25,225 400,880 68,217 46,778 187,138 1,547
Warren B. Schmidgall - - 45,500 72,000 15,125 15,125
</TABLE>
[FN]
(1) Based on the price of the Company's common stock at the close of business on
Friday, September 29, 2000 and the exercise price of the options.
</FN>
19
<PAGE>
Employment Agreements, Severance of Employment Agreements and Change of Control
Arrangements with Named Executive Officers
------------------------------------------
EMPLOYMENT AGREEMENTS
MR. WEBSTER. Mr. Webster entered into an employment agreement with the
Company effective October 8, 1997 and terminating September 30, 2002. Under the
agreement, Mr. Webster is entitled to an annual base salary of $330,000, subject
to annual adjustment by the Board. Mr. Webster is also eligible to receive
annual bonuses at the discretion of the Board under the Company's Salaried Bonus
Plan (the "Bonus Plan"). On the effective date of his employment agreement, Mr.
Webster was granted options to purchase shares of Common Stock equal to 3
percent of the shares of Common Stock outstanding immediately prior to AIPC's
initial public offering of the Common Stock on October 8, 1997 (the "Offering"),
on a fully diluted basis, at an exercise price of $18.00 per share. If Mr.
Webster's employment is terminated without cause, due to his disability or if he
resigns for good reason, he is to receive payments equal to two times his then
current base salary and bonus. Mr. Webster has agreed not to compete with the
Company for two years after termination of employment, subject to the receipt by
Mr. Webster of certain severance payments, in some cases at the election of the
Company. All stock options awarded to Mr. Webster will vest (i) immediately upon
a termination of his employment without cause or his resignation for good
reason; (ii) if the employment agreement expires and the Company does not offer
Mr. Webster a new agreement on terms no less favorable than those in the current
agreement; or (iii) upon a change of control (as defined in the agreement).
MR. SCHROEDER. Mr. Schroeder entered into an employment agreement with
the Company effective October 9, 1997 and terminating October 8, 2000. Mr.
Schroeder entered into an amendment to his employment agreement with the Company
effective October 1, 1999, which, among other things, extends the term of the
agreement to September 30, 2003. Under the agreement, as amended, Mr. Schroeder
will serve as Chairman of the Board and is entitled to receive base compensation
of $4,000 per day of service to the Company, subject to a minimum payment of
$120,000 per year. Mr. Schroeder is eligible to participate in the Company's
Bonus Plan. If Mr. Schroeder terminates his agreement for good reason, including
a "change of control" as defined in the Shareholders Agreement, dated October
30, 1992 by and among the Company and its stockholders, he is entitled to
receive payment of all unpaid amounts due for service rendered, as well as an
additional amount equal to the unpaid balance due for the remainder of the term
of the agreement and an additional payment equal to $2,000 multiplied by the
number of days of service remaining under the term, which in no event shall be
more than 30 days during any calendar year. In addition, upon termination of
employment for good reason, the unvested portion of Mr. Schroeder's options
under the Company's stock option plans will become immediately vested. Mr.
Schroeder has agreed not to compete with the Company for a period of two years
after termination of his employment.
MESSRS. WATSON AND ABREO. Messrs. Watson and Abreo entered into
employment agreements with the Company effective October 9, 1997 and terminating
October 8, 2000. Messrs. Watson and Abreo have entered into amendments to their
employment agreements with the Company effective September 30, 1999, which,
among other things, extend the term of the agreements to September 30, 2002.
Such agreements are, as amended, renewable automatically for a two-year period
thereafter, and after such two-year period, for successive one-year terms,
unless the Company gives the employee at least six months' prior written notice
of nonrenewal. The agreements entitle Messrs. Watson and Abreo to annual base
salaries of $180,000 and $160,000, respectively (subject to annual merit
increase reviews by the Board of Directors), and annual bonuses at the
discretion of the Board of Directors in accordance with the terms of the Bonus
Plan. In the event of termination of employment without cause or resignation for
good reason, or in the event their employment is terminated by the Company
without cause within six months after a change of control, Messrs. Watson and
Abreo are each entitled to the greater of (i) one-year's annual base salary and
bonus or (ii) annual base salary
20
<PAGE>
and bonus for the remainder of the initial employment term under their
respective employment agreements. The employment agreements also contain
eighteen month covenants not to compete after any termination of employment. All
stock options awarded to each of Messrs. Watson and Abreo will vest immediately
upon (i) resignation for good reason or (ii) a change of control of the Company.
MR. SCHMIDGALL. Mr. Schmidgall entered into an employment agreement with
the Company effective September 30, 1999 and terminating September 30, 2002.
Such agreement is renewable automatically for successive one-year terms, unless
the Company gives Mr. Schmidgall at least six months' prior written notice of
nonrenewal. Under the agreement, Mr. Schmidgall is entitled to an annual salary
of $180,000, subject to annual adjustment by the Board. Mr. Schmidgall is also
eligible to receive annual bonuses at the discretion of the Board under the
Company's Bonus Plan. If Mr. Schmidgall's employment is terminated without cause
or if he resigns for good reason, he is to receive payments equal to one year's
annual base salary and bonus. If Mr. Schmidgall is terminated without cause
within six months following a change of control of the Company, he is entitled
to his base salary and bonus for a period of one year following such
termination. Mr. Schmidgall has agreed not to compete with the Company for
eighteen months after termination of employment. All stock options awarded to
Mr. Schmidgall will vest (i) immediately upon a termination by employee for good
reason; and (ii) upon a change of control (as defined in the agreement).
SALARIED BONUS PLAN
The Company maintains the Bonus Plan for certain salaried employees of
the Company, including the Named Executive Officers. The Bonus Plan permits
these employees to earn cash performance bonus awards of up to a percentage of
their respective salaries as determined by the Board of Directors, or by
management on the Board's behalf. The amount of any bonus is based upon the
Company's performance and the individual performance of such participant. For
fiscal 1999, eligible members of senior management received a portion of their
annual incentive bonus in the form of vested stock options granted at fair
market value.
OTHER CHANGE OF CONTROL ARRANGEMENTS
In addition to the change of control arrangements set forth in the named
executive officers' employment agreements, the Company has certain other such
arrangements with these officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
Effective April 7, 1998, the Company, the "Morgan Stanley Stockholders"
(which are the MSLEF, MSCP and certain funds affiliated with MSCP), Citicorp,
affiliated entities of George K. Baum & Company ("GKB"), and Messrs. Schroeder,
Thompson, Webster, Watson, Abreo and Potter and certain other stockholders of
the Company (collectively, the "Existing Stockholders") amended their existing
stockholders agreement, which sets forth certain rights and obligations of such
Existing Stockholders. The amended Stockholders Agreement provides that until
December 31, 2000, the Management Stockholders (as defined in the agreement) may
sell or pledge only a limited number of shares of Common Stock.
The amended Stockholders Agreement also grants Citicorp certain demand
registration rights. In addition, the Existing Stockholders are entitled,
subject to certain limitations, to register shares of Common Stock in connection
with certain registration statements filed by the Company for its own account or
the account of its stockholders. The amended Stockholders Agreement contains
customary terms and provisions with respect to, among other things, registration
procedures and certain rights to indemnification granted by the parties
thereunder in connection with any such registration.
21
<PAGE>
FINANCIAL ADVISORY SERVICES
Since 1994, the Company has paid fees to George K. Baum & Company's
Investment Banking Division for investment banking and financial advisory
services and has paid George K. Baum & Company Professional Investment Advisors
Division fees for investment advice provided with respect to the AIPC 401(k)
Plan. Jonathan E. Baum, a Director of the Company, owns all voting shares of
George K. Baum Holdings, Inc., which owns 100 percent of George K. Baum &
Company.
MANAGEMENT INDEBTEDNESS
The Company loaned funds to certain of its officers including Mr. Watson
to purchase shares of Common Stock at prices ranging between $4.92 and $7.02 per
share. Each loan was evidenced by a promissory note bearing interest at the then
applicable federal rate and payable in equal installments over three years. The
table below sets forth the aggregate number of shares purchased with funds
loaned by the Company, the original aggregate loan amount, and the aggregate
loan balance as of September 30, 2000 for those officers whose loan balances
exceeded $60,000 during fiscal year 2000.
Number of Highest Loan Balance Balance at
Executive Officer Shares During 2000 Fiscal Year September 30, 2000
----------------- ------ ----------------------- ------------------
David E. Watson 14,269 $60,602 $60,602
EXPENSE REIMBURSEMENT AGREEMENT
The Company entered into an agreement with HWS & Associates, Inc.
("HWS") effective October 1, 1999 pursuant to which the Company agreed to
reimburse HWS for certain costs and expenses incurred by HWS in connection with
supporting the activities of Horst W. Schroeder as an employee and Chairman of
the Board of the Company and the activities of other employees of the company.
Mr. Schroeder, a Director and the Chairman of the Board of the Company, owns HWS
and serves as its President. Pursuant to this agreement, on a quarterly basis,
beginning October 1, 1999 and continuing during the term of Mr. Schroeder's
employment by the Company, HWS will invoice the Company in advance for
reimbursement of such expenses, and will be reimbursed for such expenses in the
amount of $18,750 per quarter. In fiscal 2000, the Company paid Mr. Schroeder
$56,250 under this agreement.
PROPOSAL 2 - RATIFICATION OF THE BOARD OF DIRECTORS'
SELECTION OF INDEPENDENT AUDITORS
The Audit Committee has recommended, and the Board of Directors has
selected, the firm of Ernst & Young LLP as AIPC's independent auditors to
examine the consolidated financial statements of AIPC for fiscal year 2001.
Ernst & Young served as AIPC's independent auditors for fiscal year 2000. No
relationship exists between AIPC and Ernst & Young LLP other than that of
independent auditors and client.
AIPC is seeking its stockholders' ratification of the Board of
Directors' selection of AIPC's independent auditors even though AIPC is not
legally required to do so. If AIPC's stockholders ratify the Board of Directors'
selection, the Board of Directors nonetheless may, in their discretion, retain
another independent auditing firm at any time during the year if the Board of
Directors feels that such change would be in the best interest of AIPC.
Alternatively, in the event that this proposal is not approved by stockholders,
the Audit Committee and the Board may re-evaluate their decision.
One or more representatives of Ernst & Young LLP will be present at the
Annual Meeting and will have the opportunity to make a statement, if desired,
and to respond to appropriate questions by stockholders.
22
<PAGE>
As explained further under "Voting," approval of this proposal requires
the affirmative vote of a majority of the shares of Common Stock present at the
Annual Meeting that are entitled to vote on the proposal, assuming a quorum.
YOUR BOARD RECOMMENDS THAT YOU VOTE
"FOR"
RATIFICATION OF THE BOARD OF DIRECTORS'
SELECTION OF ERNST & YOUNG LLP
PROPOSAL 3 - APPROVAL OF AMERICAN ITALIAN PASTA COMPANY
2000 EQUITY INCENTIVE PLAN
The Company is asking stockholders to approve the proposed 2000 Equity
Incentive Plan. The 2000 Equity Incentive Plan (the "2000 Plan") is designed to
attract, motivate and retain officers, directors and employees of the Company
and to further the growth and financial success of the Company and its
affiliates by aligning the interests of such persons through ownership with the
interests of the Company stockholders. The 2000 Plan replaces the Company's
existing 1997 Equity Incentive Plan. The 1997 Equity Incentive Plan (the "1997
Plan") provided for the grant of 2,000,000 shares of Class A Convertible Common
Stock (the "Common Stock"), of which 1,893,174 shares have been issued or are
the subject of existing awards as of December 12, 2000. No future awards will be
granted under the 1997 Plan after stockholder approval of the 2000 Plan. In
order to continue to further the purposes of the Company above, the Company has
determined that a new incentive plan should be adopted.
Description of the 2000 Equity Incentive Plan
The following paragraphs provide a summary of the principal features of
the 2000 Plan and its operation. The following summary is qualified in its
entirety by reference to the 2000 Plan, a copy of which is attached as Exhibit B
hereto.
Administration of the 2000 Equity Incentive Plan
The Board of Directors adopted the 2000 Plan on December 12, 2000. The
2000 Plan is administered by the Compensation Committee (the "Committee") of the
Board of Directors. If the Board of Directors determines it advisable, the
members of the Committee must qualify as "non-employee directors" under Rule
16b-3 under the Securities Exchange Act of 1934, and as "outside directors"
under section 162(m) of the Internal Revenue Code, as amended (for purposes of
qualifying amounts received under the 2000 Plan as "performance-based
compensation" under section 162(m)). Currently, the Compensation Committee
consists of Horst W. Schroeder, Robert H. Niehaus, John P. O'Brien, and Mark C.
Demetree.
Subject to the terms of the 2000 Plan, the Committee has the sole
discretion to determine the persons who shall be granted awards under the 2000
Plan ("Awards"), the size and types of such Awards, and the terms and conditions
of such Awards. The Committee may delegate its authority to grant and administer
Awards to a separate committee appointed by the Committee, provided such
delegation would not jeopardize qualification under Rule 16b-3 or section
162(m).
Shares Subject to Awards
The 2000 Plan sets aside 1,000,000 shares of Common Stock for issuance
as Awards plus any shares which remain available under the 1997 Plan or which
become available through forfeiture or cancellation. No future awards will be
granted under the 1997 Plan after stockholder approval of the 2000 Plan. If
Awards
23
<PAGE>
granted under the 2000 Plan expire, are cancelled or lost for any reason, shares
subject to such Awards again become available for issuance under the 2000 Plan.
If shares are delivered to the Company by a participant as payment of the
exercise price of an option or for withholding of taxes, such number of shares
shall also be available for issuance under the 2000 Plan.
Eligibility to Receive Awards
Officers, directors, employees and consultants of the Company and its
affiliates (i.e., any corporation or other entity controlling, controlled by or
under common control with the Company) are eligible to be selected to receive
one or more Awards.
Options
The Committee may grant nonqualified stock options, incentive stock
options ("ISOs," which are entitled to favorable tax treatment), or any
combination thereof. The number of shares covered by each option will be
determined by the Committee, but during any fiscal year of the Company, no
participant may be granted options for more than 500,000 shares.
The exercise price of each option is set by the Committee, and may be
less than 100% of the fair market value of the Common Stock on the date of
grant, if the option is a nonqualified option. The exercise price of an ISO must
be at least 110% of the fair market value if the participant, on the grant date,
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company and any of its subsidiaries. Also, the aggregate
fair market value of the shares (determined on the grant date) covered by ISOs
which first become exercisable by any participant during any calendar year may
not exceed $100,000.
The exercise price of each option must be paid in full at the time of
exercise. The Committee may permit payment through the tender of shares of
Common Stock then owned by the participant, or by any other means that the
Committee determines to be consistent with the 2000 Plan's purpose. Any taxes
required to be withheld must be paid by the participant at the time of exercise.
Options become exercisable at the times and on the terms established by
the Committee. Options expire at the times established by the Committee, but
generally not later than 10 years after the date of grant. The Committee may
extend the maximum term of any option granted under the 2000 Plan, subject to
the preceding limits.
The 2000 Plan authorizes the Committee, in connection with the grant of
an option, to provide that a participant may receive an additional option (a
"reload option") if a participant satisfies the exercise price of the original
option, or pays withholding taxes, by delivery of shares of Common Stock which
the participant has held for at least six months and has not received any other
reload option in the six months prior to the exercise. The reload option will be
for the number of shares tendered to pay the exercise price or any tax
withholding and will have an exercise price of not less then the fair market
value of the Common Stock on the date of grant. The Committee may place such
other restrictions on the reload option as it sees fit. Reload options will not
be granted in connection with an option which has been transferred by the
initial participant.
Stock Appreciation Rights ("SARs")
The Committee determines the terms and conditions of each SAR. SARs may
be granted in conjunction with an option, or may be granted on an independent
basis. The number of shares covered by each SAR will be determined by the
Committee, but during any fiscal year of the Company, no participant may be
granted SARs for more than 500,000 shares.
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<PAGE>
Upon exercise of a SAR, the participant will receive payment from the
Company in an amount determined by multiplying (1) the positive difference
between (a) the fair market value of a share of Common Stock on the date of
exercise, and (b) the exercise price, by (2) the number of shares with respect
to which the SAR is exercised. Thus, a SAR will have value only if the Common
Stock appreciates in value after the date of grant.
SARs are exercisable at the times and on the terms established by the
Committee. Proceeds from SAR exercises may be paid in cash or shares of the
Common Stock, as determined by the Committee. SARs expire at the times
established by the Committee, but are subject to the same maximum time limits as
are applicable to options granted under the 2000 Plan.
Restricted Stock Awards
Restricted stock awards are shares of the Common Stock that vest in
accordance with terms established by the Committee. The number of shares of
restricted stock (if any) granted to a participant will be determined by the
Committee, but during any fiscal year of the Company, no participant may be
granted more than 500,000 shares.
In determining the vesting schedule for each Award of restricted stock,
the Committee may impose whatever conditions to vesting as it determines to be
appropriate. For example, the Committee may (but is not required to) provide
that restricted stock will vest only if one or more performance goals are
satisfied. In order for the Award to qualify as "performance-based" compensation
under section 162(m) of the Internal Revenue Code, as amended, the Committee
must use one or more of the following measures in setting the performance goals:
(1) earnings (either in the aggregate or on a per share basis), (2) net income
(before or after taxes), (3) operating income, (4) cash flow, (5) return
measures (including return on assets, equity or sales), (6) earnings before or
after taxes, and before or after depreciation and amortization, (7) gross
revenues, (8) share price (including growth measures and total stockholder
return or attainment by the shares of a specified volume for a specified period
of time), (9) reductions in expense levels, (10) net economic value; or (11)
market share. These performance measures are set forth in the 2000 Plan. The
Committee may apply the performance measures on a corporate or business unit
basis, as deemed appropriate in light of the participant's specific
responsibilities. The Committee may, in its sole discretion, accelerate the time
at which any restriction lapses or remove any restriction.
Performance Unit Awards and Performance Share Awards
Performance unit awards and performance share awards are not actual
shares of stock, but rather are amounts credited to a account established for
the participant. A performance unit has an initial value that is established by
the Committee at the time of its grant. A performance share has an initial value
equal to the fair market value of a share of the Common Stock on the date of
grant. The number of performance units or performance shares (if any) granted to
a participant will be determined by the Committee, but during any fiscal year
for the Company, no participant may be granted more than 250,000 performance
shares or performance units having an initial value greater than the value of
250,000 shares.
Whether a performance unit or performance share actually will result in
a payment to a participant will depend upon the extent to which performance
goals established by the Committee are satisfied. The applicable performance
goals will be determined by the Committee. In particular, the 2000 Plan permits
the Committee to use the same performance goals as are discussed above with
respect to restricted stock. The Committee may, in its sole discretion, waive
any performance goal requirement.
After a performance unit or performance share award has vested (that is,
after the applicable performance goal or goals have been achieved), the
participant will be entitled to receive a payout of cash,
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<PAGE>
Common Stock, or any combination thereof, as determined by the Committee.
Unvested performance units and performance shares will be forfeited upon the
earlier of the recipient's termination of employment or the date set forth in
the Award agreement.
Nontransferability of Awards
Unless otherwise provided by the Committee in an Award agreement, Awards
granted under the 2000 Equity may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by will or by the applicable
laws of descent and distribution.
Change in Control
Transactions resulting in a change to our corporate structure, such as a
merger, reorganization, consolidation, stock dividend or stock split, may change
the class and number of shares subject to the plan and to outstanding awards. In
that event, the Committee will appropriately adjust the plan as to the class and
maximum number of shares subject to the Plan. The committee will also adjust the
outstanding awards as to the class, number of shares and price per share subject
to such awards.
Upon a change in control of the Company, all awards will generally
become immediately exercisable, unless the Committee declares that the event
does not constitute a change in control for purposes of qualifying for
pooling-of-interests accounting. If there is a sale of substantially all of the
assets of, or a merger involving, the Company, the Committee may require the
surviving entity to either assume or replace outstanding Awards under the 2000
Plan. Otherwise, the Awards will fully vest and become immediately exercisable
for a period of 25 days.
Tax Aspects
The following discussion is intended to provide an overview of the U.S.
federal income tax laws which are generally applicable to Awards granted under
the 2000 Plan as of the date of this Proxy Statement. People or entities in
differing circumstances may have different tax consequences, and the tax laws
may change in the future. This discussion is not to be construed as tax advice.
A recipient of a stock option or SAR will not have taxable income on the
date of grant. Upon the exercise of nonqualified options and SARs, the
participant will recognize ordinary income equal to the difference between the
fair market value of the shares on the date of exercise and the exercise price.
Any gain or loss recognized upon any later disposition of the shares generally
will be capital gain or loss, if held for more than 12 months after exercise.
Purchase of shares upon exercise of an ISO will not result in any
taxable income to the participant, except for purposes of the alternative
minimum tax. Gain or loss recognized by the participant on a later sale or other
disposition either will be long-term capital gain or loss or ordinary income,
depending upon how long the participant holds the shares. Any ordinary income
recognized will be in the amount, if any, by which the lesser of (1) the fair
market value of such shares on the date of exercise, or (2) the amount realized
from the sale, exceeds the exercise price.
Upon grant of restricted stock, a performance unit or a performance
share, the participant will not have taxable income unless he or she elects to
be taxed. Absent such election, upon vesting the participant will recognize
ordinary income equal to the fair market value of the shares or units at such
time.
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<PAGE>
The Committee may permit participants to satisfy tax withholding
requirements in connection with the exercise or receipt of an Award by (1)
electing to have the Company withhold otherwise deliverable shares, or (2)
delivering to the Company then owned shares having a value equal to the amount
required to be withheld.
The Company will be entitled to a tax deduction for an Award in an
amount equal to the ordinary income realized by the participant at the time the
participant recognizes such income. In addition, Internal Revenue Code section
162(m) contains special rules regarding the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly compensated executive officers. The general rule is that
annual compensation paid to any of these specified executives will be deductible
only to the extent that it does not exceed $1 million. The Company can preserve
the deductibility of certain compensation in excess of $1 million, however, if
the Company complies with conditions imposed by section 162(m). The 2000 Plan
has been designed to permit the Committee to grant Awards which satisfy the
requirements of section 162(m).
Amendment and Termination of the 2000 Equity Incentive Plan
The Board generally may amend or terminate the 2000 Plan at any time and
for any reason.
VOTING AND PROXIES
Stockholders at the Annual Meeting will consider and vote upon: (1) the
election of three directors; (2) ratification of the Board of Directors'
selection of Ernst & Young LLP to serve as AIPC's independent accountants for
fiscal year 2001; (3) approval of American Italian Pasta Company 2000 Equity
Incentive Plan and (4) such other matters as may properly come before the Annual
Meeting or any adjournment thereof. Stockholders do not have dissenters' rights
of appraisal in connection with any of these matters. Each of these matters has
been proposed by the Board of Directors and none of them is related to or
contingent on the other.
Only the holders of AIPC's Common Stock of record at the close of
business on the Record Date are entitled to notice of and to vote at the Annual
Meeting. On that date, AIPC had outstanding 17,400,238 shares of Common Stock
eligible to be voted at the Annual Meeting.
The Common Stock constitutes AIPC's only class of voting securities
outstanding and will vote as a single class on all matters to be considered at
the Annual Meeting. Each holder of Common Stock is entitled to cast one vote for
each share of Common Stock held on the Record Date on all matters. Stockholders
do not have the right to vote cumulatively in the election of directors.
In order for any of the proposals to be approved at the Annual Meeting
(other than the election of directors) by the stockholders, a quorum, consisting
of the holders of a majority of the shares of Common Stock entitled to vote,
must be present and a majority of such quorum must be affirmatively voted for
approval. The shares of Common Stock of each stockholder entitled to vote at the
Annual Meeting who is present, either in person or through a proxy, are counted
for purposes of determining whether there is a quorum, regardless of whether the
stockholder votes such shares. The directors are elected by an affirmative vote
of the plurality of a quorum of shares of Common Stock present at the Annual
Meeting that are entitled to vote.
Voting ceases when the chairman of the Annual Meeting closes the polls.
The votes are counted and certified by inspectors appointed by the Board of
Directors of AIPC in advance of the Annual Meeting. In determining the
percentage of shares that have been affirmatively voted for a particular
proposal (other than the election of directors), the affirmative votes are
measured against the votes for and against the proposal plus the abstentions
from voting on the proposal. A stockholder may abstain from voting on any
proposal other than the
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<PAGE>
election of directors, and shares for which the holders abstain from voting are
not considered to be votes affirmatively cast. Abstaining will, thus, have the
effect of a vote against a proposal. With regard to the election of directors, a
stockholder may cast votes in favor of a candidate or withhold his or her votes;
votes that are withheld will be excluded entirely from the vote and will have no
effect.
Under the rules of the New York Stock Exchange, Inc. (the "NYSE"),
member stockbrokers who hold shares of Common Stock in the broker's name for
customers are required to solicit directions from those customers on how to vote
such shares. In the absence of any such instructions, the stockbrokers may vote
shares of Common Stock on certain proposals. The Staff of the NYSE, prior to the
Annual Meeting, informs the brokers of those proposals upon which the brokers
are entitled to vote the undirected shares.
When a stockbroker does not vote, it is referred to as a "broker
non-vote" (customer-directed abstentions are not broker non-votes). Broker
non-votes generally do not affect the determination of whether a quorum is
present at the Annual Meeting because in most cases some of the shares held in
the broker's name have been voted on at least some proposals, and therefore, all
of such shares are considered present at the Annual Meeting. Under applicable
law, a broker non-vote will have the same effect as a vote against any proposal
other than the election of directors and will have no effect on the outcome of
the election of directors.
Stockholders who return a properly executed proxy are appointing the
Proxy Committee to vote their shares of Common Stock covered by the Proxy. That
Committee has three members whose names are listed on the accompanying proxy
card, each of whom is a director or executive officer of AIPC. A stockholder
wishing to name as his or her proxy someone other than the Proxy Committee
designated on the proxy card may do so by crossing out the names of the
designated proxies and inserting the name of such other person. In that case, it
will be necessary for the stockholder to sign the proxy card and deliver it
directly to the person so named and for that person to be present in person and
vote at the Annual Meeting. Proxy cards so marked should NOT be mailed to AIPC.
The Proxy Committee will vote the shares of Common Stock covered by a
proxy in accordance with the instructions given by the stockholders executing
such proxies. If a properly executed and unrevoked proxy solicited hereunder
does not specify how the shares represented thereby are to be voted, the Proxy
Committee intends to vote such shares FOR the election as directors of the
persons nominated by management, FOR ratification of the Board of Directors'
selection of Ernst & Young LLP to serve as AIPC's independent auditors for
fiscal year 2001, FOR approval of the Company's 2000 Equity Incentive Plan and
in accordance with their discretion upon such other matters as may properly come
before the Annual Meeting.
A stockholder may revoke a valid proxy with a later-dated, properly
executed proxy or other writing delivered to the Corporate Secretary of AIPC at
any time before the polls for the Annual Meeting are closed. Attendance at the
Annual Meeting will not have the effect of revoking a valid proxy unless the
stockholder delivers a written revocation to the Corporate Secretary before the
proxy is voted. Stockholders whose shares are held by a broker will have to
contact the broker to determine how to revoke a proxy solicited through the
broker.
401(K) PLAN PARTICIPANTS
Participants in the American Italian Pasta Company Retirement Savings
Plan (the "401(k) Plan") are provided a separate voting instruction card
(accompanying this Proxy Statement) to instruct the trustee of the 401(k) Plan
how to vote the shares of Common Stock held on behalf of such participant. The
401(k) Plan trustee is required under the trust agreement to vote the shares in
accordance with the instructions indicated on the voting instruction card. If
the voting instruction card is not returned, the trustee is required under the
applicable trust agreement to vote such shares, as well as any unallocated
shares, in the manner directed by a committee designated under the plan. The
voting instruction card should be returned directly to the trustee in
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the envelope provided AND SHOULD NOT BE RETURNED TO AIPC. The mailing address of
the trustee is George K. Baum Trust Company, Twelve Wyandotte Plaza, 120 West
12th Street, Suite 850, Kansas City, Missouri 64105. 401(k) Plan participants
who wish to revoke a voting instruction card will need to contact the trustee
and follow its procedures.
Confidentiality of Voting of 401(k) Plan Participants. Under the terms
of the 401(k) Plan trust agreement, the trustee is required to establish
procedures to ensure that the instructions received from participants are held
in confidence and not divulged, released or otherwise utilized in a manner that
might influence the participants' free exercise of their voting rights.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of the Record Date by each person who is known
by the Company to own beneficially more than 5 percent of the outstanding shares
of Common Stock. Beneficial ownership is generally either the sole or shared
power to vote or dispose of the shares. The percentage ownership is based on the
number of shares outstanding as of the Record Date. Except as otherwise noted,
the holders have sole voting and dispositive power.
<TABLE>
<CAPTION>
Class A Common Stock
Shares Beneficially Owned
Name and Address of Beneficial Owner Number Percent (1)
------------------------------------ ------ -----------
<S> <C> <C>
FMR Corp., Edward C. Johnson 3d 2,204,200(2) 12.67%
and Abigail P. Johnson (2)
82 Devonshire Street
Boston, MA
Citicorp Venture Capital Ltd. (3) 1,047,298(3) 6.02%
399 Park Avenue
New York, NY 10043
Lazard Freres & Co., LLC (4) 1,654,854(4) 9.51%
30 Rockefeller Plaza
New York, NY 10020
Pilgrim Baxter & Assoc. Ltd. (5) 1,140,800(5) 6.56%
825 Duportail Road
Wayne, PA 19087
Waddell & Reed Investment Management Co. (6) 1,332,600(6) 7.66%
6300 Lamar Avenue
Shawnee Mission, KS 66201
T. Rowe Price Associates, Inc. (7) 935,300(7) 5.38%
100 E. Pratt Street
Baltimore, MD 21202
</TABLE>
[FN]
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number and percentage of shares beneficially
owned by a person and the percentage ownership of that person, shares of
Common Stock subject to options and warrants held by that person that are
currently exercisable or will become exercisable within 60 days of the
Record Date are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of any
other person.
</FN>
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<PAGE>
(3) Based on an amended Schedule 13G dated March 24, 2000 filed jointly by
Citicorp Venture Capital Ltd., Citibank, N.A., Citicorp and Citigroup Inc.
(the "Citicorp Companies"). The shares beneficially owned by the Citicorp
Companies include 157,103 shares held by an affiliate of Citicorp Venture
Capital Ltd. The Citicorp Companies share voting and dispositive power.
(4) Based on an amended Schedule 13G dated January 7, 2000. According to such
Schedule 13G, Lazard Freres & Co, LLC has sole voting power with respect to
1,345,914 shares.
(5) Based on an amended Schedule 13G dated January 7, 2000. According to such
Schedule 13G, Pilgram Baxter & Associates, Ltd. has sole voting power with
respect to 992,000 shares.
(6) Based on an amended Schedule 13G dated April 7, 2000.
(7) Based on a Schedule 13G dated February 3, 2000. According to such schedule
13G, T. Rowe Price Associates, Inc. has sole voting power with respect to
85,700 shares and sole power to dispose of 935,300 shares.
STOCKHOLDER PROPOSALS
To be properly brought before the Annual Meeting, a proposal must be
either (i) specified in the notice of the meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (ii) otherwise properly
brought before the meeting by or at the direction of the Board of Directors, or
(iii) otherwise properly brought before the meeting by a stockholder.
If a holder of AIPC Common Stock wishes to present a proposal, other
than the election of a director, in AIPC's Proxy Statement for next year's
annual meeting of stockholders, such proposal must be received by AIPC on or
before August 30, 2001. Such proposal must be made in accordance with the
applicable laws and rules of the Securities and Exchange Commission and the
interpretations thereof. Any such proposal should be sent to the Corporate
Secretary of AIPC at 4100 N. Mulberry Drive, Suite 200, Kansas City, Missouri
64116.
In order for a stockholder proposal that is not included in AIPC's Proxy
Statement for next year's annual meeting of stockholders to be properly brought
before such meeting, such proposal must be delivered to the Corporate Secretary
and received at AIPC's executive offices no earlier than November 10, 2001 and
no later than December 9, 2001 (assuming a meeting date of February 7, 2002) and
such proposal must also comply with the procedures outlined below, which are set
forth in AIPC's By-laws. The determination that any such proposal has been
properly brought before such meeting is made by the officer presiding over such
meeting.
DIRECTOR NOMINATIONS
With respect to stockholder nominations of candidates for AIPC's Board
of Directors, AIPC's Bylaws provide that not less than 60 days nor more than 90
days prior to the anniversary date of the immediately preceding annual meeting
of stockholders (provided, however, that in the event that the annual meeting is
called for a date that is not within 30 days before or after such anniversary
date, the Nomination Notice (as defined below) by the stockholder in order to be
timely must be so received not later than the close of business on the
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tenth day following the day on which such notice of the date of the annual
meeting is mailed or such public disclosure of the date of the annual meeting is
made, whichever first occurs), any stockholder who intends to make a nomination
at the Election Meeting shall deliver a notice in writing (the "Nomination
Notice") to the Secretary of AIPC at its principal executive offices setting
forth (a) as to each nominee whom the stockholder proposes to nominate for
election as a director, (i) the name, date of birth, business address and
residence address of such individual, (ii) the business experience during the
past five years of such nominee, including his or her principal occupations and
employment during such period, the name and principal business of any
corporation or other organization in which such occupations and employment were
carried on, and such other information as to the nature of his or her
responsibilities and level of professional competence as may be sufficient to
permit assessment of his or her prior business experience, (iii) whether the
nominee is or ever has been at any time a director, officer or owner of 5
percent or more of any class of capital stock, partnership interests or other
equity interest of any corporation, partnership or other entity, (iv) any
directorships held by such nominee in any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of
the Exchange Act or any company registered as an investment company under the
Investment Company Act of 1940, as amended, (v) whether, in the last five years,
such nominee has been convicted in a criminal proceeding or has been subject to
a judgment, order, finding, decree or proceeding which may be material to an
evaluation of the ability or integrity of the nominee, and (vi) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act, and the rules and regulations promulgated thereunder; and (b) as
to the Person submitting the Nomination Notice and any Person acting in concert
with such Person, (i) the name and business address of such Person, (ii) the
name and addresses of such Person as they appear on the Corporation's books,
(iii) the class and number of shares of the Corporation that are beneficially
owned by such Person, (iv) a description of all arrangements or understandings
between such stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to be
made by such stockholder and (v) any other information relating to such
stockholder that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of proxies for
election of directors pursuant to Section 14 of the Exchange Act and the rules
and regulations promulgated thereunder. A written consent to being named in a
proxy statement as a nominee, and to serve as a director if elected, signed by
the nominee, shall be filed with the Nomination Notice.
MATTERS OTHER THAN DIRECTOR NOMINATIONS
AIPC's Bylaws provide that, in addition to any other applicable
requirements, for a proposal to be properly brought before the meeting by a
stockholder, (a) the stockholder must have been a stockholder of record on the
date of the giving of the notice of the Stockholder Proposal (as defined below)
and on the record date for the determination of stockholders entitled to vote at
such meeting; and (b) such stockholder has filed a written notice (a "Proposal
Notice") setting forth with particularity (i) the names and business addresses
of the proponent and all persons or entities (collectively, the "persons" and,
singularly, a "person") acting in concert with the proponent; (ii) the name and
address of the proponent and the persons identified in clause (i), as they
appear on the Corporation's books (if they so appear); (iii) the class and
number of shares of AIPC beneficially owned by the proponent and the persons
identified in clause (i); (iv) a description of the Stockholder Proposal
containing all material information relating thereto; and (v) such other
information as the Board of Directors reasonably determines is necessary or
appropriate to enable the Board of Directors and stockholders of AIPC to
consider the Stockholder Proposal; and (c) the Proposal Notices must be
delivered to the Secretary and received at the principal executive offices of
AIPC (1) in the case of an annual meeting, not less than 60 days nor more than
90 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders; PROVIDED, HOWEVER, that in the event that the annual
meeting is called for a date that is not within 30 days before or after such
anniversary date, the Proposal Notice by the stockholder in order to be timely
must be so
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<PAGE>
received not later than the close of business on the tenth day following the day
on which such notice of the date of the annual meeting is mailed or such public
disclosure of the date of the annual meeting is made, whichever first occurs, or
(2) in the case of a special meeting of stockholders called for the purpose of
electing directors, not later than the close of business on the 10th day
following the day on which notice of the date of the special meeting is mailed
or public disclosure of the date of the special meeting is made, whichever first
occurs.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
AIPC's directors and executive officers, and other persons, legal or natural,
who own more than 10 percent of AIPC's Common Stock (collectively, "Reporting
Persons"), to file reports of their ownership of such stock, and the changes
therein, with the Securities and Exchange Commission, the New York Stock
Exchange and AIPC (the "Section 16 Reports"). All such reports due were filed in
a timely manner during fiscal year 2000.
OTHER MATTERS
AIPC will bear the cost of the Annual Meeting, including the cost of
mailing the proxy materials and any supplemental materials. Directors, officers
and employees not specifically engaged or compensated for that purpose may also
solicit proxies by telephone, telegraph or in person. In addition, AIPC may
reimburse brokerage firms and other persons representing beneficial owners of
AIPC's shares for their expenses in forwarding this Proxy Statement, the Annual
Report and other soliciting materials to such beneficial owners.
Brokers, dealers, banks, voting trustees, other custodians, and their
nominees are asked to forward soliciting materials to the beneficial owners of
shares held of record by them and upon request will be reimbursed for their
reasonable expenses in completing the mailing of soliciting materials to such
beneficial owners.
The Board of Directors knows of no other matters that are expected to be
presented for consideration at the Annual Meeting. As of the date of this Proxy
Statement, no notice of any matters has been received in accordance with AIPC's
Bylaws, as discussed above. However, if other matters properly come before the
meeting, it is intended that persons named in the accompanying proxy will vote
on them in accordance with their best judgment.
Notwithstanding anything to the contrary set forth in any of AIPC's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the Compensation Committee Report on Executive Compensation
(included herein) shall not be incorporated by reference into any such filings.
By Order of the Board of Directors
Executive Vice President and Chief Financial
Officer
Kansas City, Missouri
January 13, 2001
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<PAGE>
AIPC will furnish without charge, a copy of its Annual Report on Form
10-K for the year ended September 29, 2000 (without exhibits) as filed with the
Securities and Exchange Commission (the "SEC") upon written request. The Annual
Report on Form 10-K includes a list of all exhibits thereto. AIPC will furnish
written copies of such exhibits upon written request therefor and payment of
AIPC's reasonable expenses in furnishing such exhibits. Each such request must
set forth a good faith representation that, as of the Record Date, the person
making such request was a beneficial owner of Common Stock entitled to vote at
the Annual Meeting. Such written request should be directed to the Corporate
Secretary of AIPC, 4100 N. Mulberry Drive, Suite 200, Kansas City, Missouri
64116. The Annual Report on Form 10-K for the year ended September 29, 2000 with
exhibits, as well as other filings by AIPC with the SEC, are also available
through the SEC's Internet site on the World Wide Web at www.sec.gov.
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<PAGE>
APPENDIX A - GRAPHIC AND IMAGE MATERIAL IN PROXY STATEMENT
In accordance with Rule 304 of Regulation S-T, the following graphic and
image material is included in the AIPC proxy statement.
STOCK PERFORMANCE GRAPH
The proxy statement also includes a stock performance graph, which is
supplemented by a table showing the dollar value of the points on the graph. The
table is set forth in this electronic format document in the section entitled
"STOCK PERFORMANCE GRAPH." Both the graph and the table will be included in the
paper format definitive proxy mailed to AIPC's Stockholders. In accordance with
a letter to EDGAR filers dated November 16, 1992 from Mauri L. Osheroff,
Associate Director of Regulatory Policy of the Division of Corporate Finance, no
further explanation of the graph is set forth in this appendix.
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<PAGE>
APPENDIX B - FORMS OF PROXY AND VOTING INSTRUCTION CARD
AMERICAN ITALIAN PASTA COMPANY
4100 N. Mulberry Drive, Suite 200
Kansas City, Missouri 64116
This proxy confers discretionary authority as described in and may be
revoked in the manner described in the proxy statement dated January 13, 2001,
receipt of which is hereby acknowledged.
Signature Date _____________________
Signature Date _____________________
Please date and sign exactly as name(s) appear. All joint owners should sign.
Executors, administrators, trustees, guardians, attorneys-in-fact, and officers
of corporate stockholders should indicate the capacity in which they are
signing. Please indicate whether you plan to attend the Annual Meeting:
[ ] Will attend [ ] Will not attend
(Continued on other side)
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<PAGE>
(Continued, and to be signed on reverse side)
AMERICAN ITALIAN PASTA COMPANY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. Horst W. Schroeder, Timothy
S. Webster and Warren B. Schmidgall, or a majority of them, are hereby
authorized, with full power of substitution, to vote the shares of stock of
American Italian Pasta Company entitled to vote for the stockholder(s) signing
this proxy at the Annual Meeting of Stockholders to be held on February 8, 2001,
or any adjournment thereof as specified below and in their discretion on all
other matters that are properly brought before the Annual Meeting. IF NO CHOICE
IS SPECIFIED, SUCH PROXIES WILL VOTE "FOR" THE NOMINEES NAMED HEREON AND "FOR"
PROPOSAL 2.
1. Election of three directors: Nominees: David Y. Howe, John P. O'Brien,
William R. Patterson.
[ ] FOR all nominees
[ ] FOR all nominees except those indicated below:
[ ] WITHHOLD AUTHORITY to vote for all nominees.
2. Ratification of the Board of Directors' selection of Ernst & Young LLP to
serve as AIPC's independent auditors for fiscal year 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of American Italian Pasta Company's 2000 Equity Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The nominees named above and each of the other matters specified above are
proposed by the Board of Directors. None of the matters is related to or
conditioned on the approval of other matters.
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AMERICAN ITALIAN PASTA COMPANY
4100 N. Mulberry Drive, Suite 200
Kansas City, Missouri 64116
January 13, 2001
Dear Retirement Savings Plan Participant:
Enclosed is your voting instruction card to George K. Baum Trust Company as
Trustee for shares allocated to your account under the Retirement Savings Plan
(Retirement Plan).
Please do NOT deliver this card to the Company, as your vote is confidential.
Your card should be returned directly to the Trustee, George K. Baum Trust
Company, Twelve Wyandotte Plaza, 120 West 12th Street, Suite 830, Kansas City,
Missouri 64105, in the enclosed postage-paid return envelope at your earliest
convenience.
If you have questions about the allocation of these shares, you may call the
following individual for further information:
AIPC employee contact: Valerie R. Finney
(816) 502-6000
Thank you,
____________________________________________________
Executive Vice President and Chief Financial Officer
PLEASE SEE REVERSE SIDE FOR PROPOSALS TO BE VOTED
(Date, sign and return promptly
in the prepaid envelope enclosed.)
(Tear Here)
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CONFIDENTIAL VOTING INSTRUCTIONS TO GEORGE K. BAUM TRUST COMPANY
AS TRUSTEE UNDER THE AMERICAN ITALIAN PASTA COMPANY
RETIREMENT SAVINGS PLAN
Date
------------------------------------------- ------------------------
Signature
Please sign exactly as name appears.
(Continued on other side.)
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This voting instruction card is solicited by the Trustee. I hereby direct that
the voting rights pertaining to shares of stock of American Italian Pasta
Company held by the Trustee and allocated to my account shall be exercised at
the Annual Meeting of Stockholders to be held on February 8, 2001 or any
adjournment thereof as specified hereon and in their discretion on all other
matters that are properly brought before the Annual Meeting.
1. Election of three directors: Nominees: David Y. Howe, John P. O'Brien,
William R. Patterson
[ ] FOR all nominees
[ ] FOR all nominees except those indicated below:
[ ] WITHHOLD AUTHORITY to vote for all nominees.
2. Ratification of the Board of Directors' selection of Ernst & Young LLP to
serve as AIPC's independent accountants for fiscal year 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of American Italian Pasta Company's 2000 Equity Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
If no choice is specified, the shares held in your Retirement Plan account will
be voted in the same proportion as the shares held by the Retirement Plan for
which the Trustee receives voting instructions.
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EXHIBIT A
AMERICAN ITALIAN PASTA COMPANY
AUDIT COMMITTEE CHARTER
1. The committee will have three members, each of whom will be independent
outside directors. Committee members will be financially literate and
their backgrounds will include at least one of the following key
qualities:
|_| industry knowledge
|_| financial reporting or auditing background
|_| experience in business risk management
|_| experience as an audit committee member with a publicly held company
2. It will be the committee's responsibility to:
|_| Assess auditor performance; recommend appointment of auditors; approve the
auditor's fees; assess auditor independence; assess the need for an internal
audit function; review any other engagements performed by the auditor's firm
for the Company and assess the impact on the auditor's independence.
|_| Hold at least two meetings annually with the auditors and financial
management. Hold the first meeting before the commencement of fieldwork to
discuss the consideration of key business, financial and regulatory risk as
well as the scope of the audit examination. Held after completion of the
audit examination, the second meeting will receive the results of the audit
and discuss any issues that arose. Each meeting will include a session with
management absent to facilitate auditor communication of any concerns.
|_| Periodically receive and evaluate reports from senior management on
processes for identification and control of key business, financial and
regulatory risks.
|_| Work with senior management to develop a corporate code of conduct and to
monitor compliance.
|_| Monitor the procedures for insuring the integrity and quality of annual and
interim reporting to stakeholders.
|_| Review and approve significant new or changed accounting and reporting
practices and policies.
3. The committee will have access to the auditors and members of management
as needed to discharge its responsibilities. The Board and senior
management will advise the auditors that the Board is the audit client.
The Board and senior management will direct the auditors to communicate
directly with the committee, through its chairman, any concerns related
to the quality of financial reporting, regulatory compliance, or the
integrity of management. The committee chairman will meet periodically
with Company legal counsel to receive updates on matters related to
regulatory changes and compliance.
4. The committee will report to the full Board the results of discharge of
its responsibilities. Periodically, the committee will assess whether to
recommend to the full Board the need to issue a report on its activities
to the shareholders.
5. The committee will operate under this Charter with approval of the full
Board after obtaining input from senior management, the auditors and
legal counsel.
6. The committee will receive annually from management a report on the
procedures used to insure that the information contained in SEC filings
and other published documents containing financial information is
consistent with the information contained in the financial statements.
7. The committee will have the power to conduct or authorize investigations
into any matters within the committee's scope of responsibilities. The
committee will be empowered to seek Board approval if the committee
feels it needs to retain independent counsel, accountants, or others to
assist in the conduct of any investigation.
8. The committee will biannually perform a self-assessment of audit
committee performance and review of this charter. The self-assessment
will be reviewed with the full Board to obtain its approval.
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EXHIBIT B
AMERICAN ITALIAN PASTA COMPANY
2000 EQUITY INCENTIVE PLAN
SECTION 1
PURPOSE AND DURATION
1.1 Establishment; Effective Date. American Italian Pasta Company hereby
establishes an incentive compensation plan. This Plan permits the grant of
Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units and Performance Shares. This Plan shall be effective on the
date of its adoption by the Company's Board of Directors, subject to approval of
the Company's stockholders.
1.2 Purpose of this Plan. This Plan is intended to attract, motivate, and retain
(a) employees of the Company and its Affiliates, (b) consultants who provide
significant services to the Company and its Affiliates, and (c) members of the
Board of Directors of the Company who are employees of neither the Company nor
any Affiliate. This Plan also is designed to further the growth and financial
success of the Company and its Affiliates by aligning the interests of the
Participants, through the ownership of Shares and through other incentives, with
the interests of the Company's stockholders.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings unless
a different meaning is plainly required by the context:
"1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
"Affiliate" means any corporation or any other entity (including, but
not limited to, partnerships and joint ventures) controlling, controlled by or
under common control with the Company.
"Affiliated SAR" means an SAR that is granted in connection with a
related Option, and that automatically will be deemed to be exercised at the
same time that the related Option is exercised.
"Award" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units or Performance Shares.
"Award Agreement" means the written agreement setting forth the terms
and provisions applicable to each Award granted under this Plan.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Board Member" means any individual who is a member of the Board of
Directors of the Company.
"Cause" means, unless otherwise defined in any employment agreement with
the Participant or Award Agreement, any one or more of the following:
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(A) A Participant's plea of guilty or no contest to, or finding of
guilty for, commission of a crime that, in the judgment of the
Committee, may result in injury to the Company or a Subsidiary or
to the reputation of the Company or a Subsidiary;
(B) The material violation by the Participant of written policies or
established practices of the Company or a Subsidiary including,
but not limited to, anti-discrimination and anti-harassment
policies and practices;
(C) In the good faith belief of the Company, the habitual neglect by
the Participant in the performance of his or her duties to the
Company or a Subsidiary after notice by the Committee and thirty
days to cure;
(D) Action or inaction by the Participant in connection with his or
her duties to the Company or a Subsidiary resulting, in the
judgment of the Committee, in a material injury to the Company or
a Subsidiary or to the reputation of the Company or a Subsidiary;
(E) The rendering of services by the Participant for any organization
or business engaging directly or indirectly in any business that
is or becomes competitive with the Company or a Subsidiary 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
or a Subsidiary;
(F) Any attempt by the Participant directly or indirectly to induce
any employee of the Company or a Subsidiary to be employed or
perform services elsewhere or any attempt directly or indirectly
to solicit (other than for the account of the Company or a
Subsidiary) the trade or business of any current or prospective
customer, supplier, or partner of the Company or a Subsidiary; or
(G) Any other conduct or act determined by the Committee to be
injurious, detrimental, or prejudicial to any interest of the
Company or a Subsidiary, including, but not limited to, the
reputation of the Company or a Subsidiary.
"Change in Control" shall have the meaning assigned to such term in
Section 12.3.
"Code" means the Internal Revenue Code of 1986, as amended. Reference to
a specific section of the Code or regulation thereunder shall include such
section or regulation, any valid regulation promulgated under such section, and
any comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.
"Committee" means the committee appointed by the Board (pursuant to
Section 3.1) to administer this Plan.
"Common Stock" means the Class A Convertible Common Stock, $.001 par
value, of the Company.
"Company" means American Italian Pasta Company, a Delaware corporation,
and any successor thereto. With respect to the definition of Performance Goals,
the Committee in its sole discretion may determine that "Company" means American
Italian Pasta Company, and/or any of its consolidated subsidiaries.
"Consultant" means any consultant, independent contractor or other
person who provides significant services to the Company or its Affiliates, but
who is neither an Employee nor a Board Member.
"Disability" means a permanent and total disability within the meaning
of Code section 22(e)(3), provided that in the case of Awards other than
Incentive Stock Options, the Committee in its sole discretion
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may determine whether a permanent and total disability exists in accordance with
uniform and non-discriminatory standards adopted by the Committee from time to
time.
"Employee" means any employee of the Company or of an Affiliate, whether
such employee is so employed at the time this Plan is adopted or becomes so
employed subsequent to the adoption of this Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. Reference to a specific section of ERISA or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
"Exercise Price" means the price at which a Share may be purchased by a
Participant pursuant to the exercise of an Option.
"Fair Market Value" means (A) with respect to any property other than
Shares, the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee, and (B)
with respect to Shares, unless otherwise determined in the good faith discretion
of the Committee, as of any date, (i) the closing price on the date of
determination on the New York Stock Exchange (or, if no sale of Shares was
reported for such date, on the next preceding date on which a sale of Shares was
reported), (ii) if the Shares are not listed on the New York Stock Exchange, the
closing price of the Shares on such other national exchange on which the Shares
are principally traded or as reported by the National Market System, or similar
organization, or if no such quotations are available, the average of the high
bid and low asked quotations in the over-the-counter market as reported by the
National Quotation Bureau Incorporated or similar organizations; or (iii) in the
event that there shall be no public market for the Shares, the fair market value
of the Shares as determined (which determination shall be conclusive) in good
faith by the Committee, based upon the value of the Company as a going concern,
as if such Shares were publicly owned stock, but without any discount with
respect to minority ownership.
"Fiscal Year" means the fiscal year of the Company.
"Freestanding SAR" means a SAR that is granted independently of any
Option.
"Grant Date" means, with respect to an Award, the date that the Award
was granted.
"Incentive Stock Option" means an Option to purchase Shares which is
designated as an Incentive Stock Option and is intended to meet the requirements
of section 422 of the Code.
"Nonemployee Board Member" means a Board Member who is not an employee
of the Company or of any Affiliate.
"Nonqualified Stock Option" means an Option to purchase Shares which is
not an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonqualified Stock Option.
"Participant" means an Employee, Consultant or Nonemployee Board Member.
"Performance Goals" means the goal(s) (or combined goal(s)) determined
by the Committee (in its sole discretion) to be applicable to a Participant with
respect to an Award. For Awards that are intended to qualify as
"performance-based compensation" under section 162(m) of the Code, as determined
by the Committee, the Performance Goals applicable to an Award may provide for a
targeted level or levels of achievement using one or more of the following
predetermined measurements: (a) earnings (either in the aggregate or on a
per-share
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basis); (b) net income (before or after taxes); (c) operating income; (d) cash
flow; (e) return measures (including return on assets, equity or sales); (f)
earnings before or after taxes, and before or after depreciation and
amortization; (g) gross revenues; (h) share price (including growth measures and
total stockholder return or attainment by the Shares of a specified value for a
specified period of time); (i) reductions in expense levels in each case where
applicable determined either in a Company-wide basis or in respect of any one or
more business units; (j) net economic value; or (k) market share. The
Performance Goals may differ from Participant to Participant and from Award to
Award.
"Performance Period" shall have the meaning assigned to such term in
Section 8.3.
"Performance Share" means an Award granted to a Participant pursuant to
Section 8.
"Performance Unit" means an Award granted to a Participant pursuant to
Section 8.
"Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions and, therefore, the
Shares are subject to a substantial risk of forfeiture. As provided in Section
7, such restrictions may be based on the passage of time, the achievement of
target levels of performance or the occurrence of other events as determined by
the Committee in its sole discretion.
"Plan" means the American Italian Pasta Company 2000 Equity Incentive
Plan, as set forth in this instrument and as hereafter amended from time to
time.
"Reload Option" shall have the meaning assigned in Section 5.9.
"Restricted Stock" means an Award granted to a Participant pursuant to
Section 7.
"Retirement" means, in the case of an Employee, a Termination of Service
by reason of the Employee's retirement pursuant to any retirement program
instituted by the Company or any Affiliate employer or as otherwise agreed to by
the Employer or the applicable Affiliate employer. With respect to a Consultant,
no Termination of Service shall be deemed to be on account of "Retirement". With
respect to a Nonemployee Board Member, "Retirement" means termination of service
on the Board at or after age sixty-five (65).
"Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, and any
future regulation amending, supplementing or superseding such regulation.
"Section 16 Person" means a person who, with respect to the Shares, is
subject to Section 16 of the 1934 Act.
"Shares" means the shares of Common Stock of the Company.
"Stock Appreciation Right" or "SAR" means an Award, granted alone or in
connection with a related Option, that is designated as a SAR pursuant to
Section 6.
"Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
"Tandem SAR" means an SAR that is granted in connection with a related
Option, the exercise of which shall require forfeiture of the right to purchase
an equal number of Shares under the related Option (and when a Share is
purchased under the Option, the SAR shall be canceled to the same extent).
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"Termination of Service" means (a) in the case of an Employee, a
cessation of the employee-employer relationship between an employee and the
Company or an Affiliate for any reason, including, but not limited to, a
cessation by resignation, discharge, death, Disability, Retirement or the
disaffiliation of an Affiliate, but excluding any such cessation where there is
a simultaneous reemployment by the Company or an Affiliate, and (b) in the case
of a Board Member or Consultant, a cessation of the service relationship between
a Board Member or Consultant and the Company or an Affiliate for any reason,
including, but not limited to, a cessation by resignation, discharge, death,
Disability, Retirement (with respect to a Board Member) or the disaffiliation of
an Affiliate, but excluding any such cessation where there is a simultaneous
reengagement of the Board Member or Consultant by the Company or an Affiliate.
SECTION 3
ADMINISTRATION
3.1 The Committee. Subject to Section 3.2, the Plan shall be administered by the
Board, or a committee appointed by the Board to administer the Plan. Any
references herein to "Committee" are references to the Board, or a committee
established by the Board, as applicable. To the extent the Board considers it
desirable to comply with or qualify under Rule 16b-3 or meet the
performance-based exception under section 162(m) of the Code, the Committee
shall consist of two or more directors of the Company, all of whom qualify as
"outside directors" as defined for purposes of the regulations under Code
section 162(m) and "non-employee directors" within the meaning of Rule 16b-3.
The number of members of the Committee shall from time to time be increased or
decreased, and shall be subject to such conditions, in each case as the Board
deems appropriate to permit transactions in Shares pursuant to the Plan to
satisfy such conditions of Rule 16b-3 and Code section 162(m) as then in effect.
3.2 Authority of the Committee. Subject to the express provisions of the Plan,
the Committee has full and final authority and sole discretion as follows:
(a) To determine when, to whom and in what types and amounts Awards should be
granted and the terms and conditions applicable to each Award, and whether
or not specific Awards shall be granted in connection with other specific
Awards, and if so whether they shall be exercisable cumulatively with, or
alternatively to, such other specific Awards;
(b) To construe and interpret the Plan and to make all determinations necessary
or advisable for the administration of the Plan;
(c) To make, amend and rescind rules relating to the Plan, including rules with
respect to the exercisability and nonforfeitability of Awards upon the
Termination of Service of a Participant;
(d) To determine the terms and conditions of all Award Agreements (which need
not be identical) and, with the consent of the Participant, to amend any
such Award Agreement at any time, provided that the consent of the
Participant shall not be required for any amendment which (A) does not
adversely affect the rights of the Participant, or (B) is necessary or
advisable (as determined by the Committee) to carry out the purpose of the
Award as a result of any new or change in existing applicable law;
(e) To cancel, with the consent of the Participant, outstanding Awards and to
grant new Awards in substitution therefor;
(f) To accelerate the exercisability (including exercisability within a period
of less than six months after the Grant Date) of, and to accelerate or
waive any or all of the terms and conditions applicable to, any Award or
any group of Awards for any reason and at any time, including in connection
with a Termination of Service;
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(g) To make such adjustments or modifications to Awards to Participants working
outside the United States as are advisable to fulfill the purposes of the
Plan;
(h) To impose such additional terms and conditions upon the grant, exercise or
retention of Awards as the Committee may, before or concurrently with the
grant thereof, deem appropriate, including limiting the percentage of
Awards which may from time to time be exercised by a Participant; and
(i) To take any other action with respect to any matters relating to the Plan
for which it is responsible.
3.3 Delegation by the Committee. The Committee, in its sole discretion and on
such terms and conditions as it may provide, may delegate all or any part of its
authority and powers under this Plan to one or more Board Members or officers of
the Company; provided, however, that the Committee may not delegate its
authority and powers in any way which would jeopardize this Plan's or any
Award's qualification under Rule 16b-3 or Code section 162(m).
3.4 Decisions Binding. All determinations and decisions made by the Committee,
the Board and any delegate of the Committee pursuant to Section 3.3 shall be
final, conclusive, and binding on all persons, and shall be given the maximum
deference permitted by law.
SECTION 4
SHARES SUBJECT TO THIS PLAN; GENERAL CONDITIONS
4.1 Number of Shares. The Shares for which Awards may be granted under the Plan
shall be subject to the following:
(a) The Shares with respect to which Awards may be made under the Plan shall
be Shares currently authorized but unissued or currently held or
subsequently acquired by the Company as treasury shares, including
Shares purchased in the open market or in private transactions.
(b) Subject to adjustment as provided in Sections 4.2 and 4.3 and to the
following provisions of this Section 4.1, the maximum number of Shares
that may be delivered to Participants and their beneficiaries under the
Plan shall be equal to the sum of: (i) 1,000,000 Shares; and (ii) any
Shares available for future awards under the Company's 1997 Equity
Incentive Plan (the "Prior Plan") as of the effective date of this Plan,
and any Shares that are represented by awards granted under the Prior
Plan which are forfeited, expire or are canceled without delivery of
Shares or which result in the forfeiture of Shares back to the Company.
(c) If the Exercise Price of, or the tax withholding with respect to any
Award granted under the Plan or the Prior Plan is satisfied by tendering
Shares to the Company (by either actual delivery or by attestation),
such Shares shall also be available for delivery under the Plan.
(d) Notwithstanding anything to the contrary in this Section 4.1, in no
event, shall grants of Incentive Stock Options exceed 1,000,000 Shares.
4.2 Lapsed Awards. If an Award is settled in cash, or is canceled, terminates,
expires or lapses for any reason (with the exception of the termination of a
Tandem SAR upon exercise of the related Option, or the termination of a related
Option upon exercise of the corresponding Tandem SAR), any Shares subject to
such Award thereafter shall be available to be the subject of another Award.
With respect to an Award that is intended to qualify as "performance-based
compensation" under section 162(m) of the Code, if an Award is cancelled, the
Shares subject to the Award continue to count against the maximum number of
Shares under an Award which may be granted to a Participant in any fiscal year.
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4.3 Adjustments in Awards and Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, stock split, Share combination, or other change in the corporate
structure of the Company affecting the Shares, the Committee shall adjust the
number and class of Shares which may be delivered under this Plan, the number,
class and price of Shares subject to outstanding Awards, and the numerical
limits of Sections 4.1, 5.1, 6.1, 7.1 and 8.1, or if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award, in such a
manner as the Committee (in its sole discretion) shall determine to be advisable
or appropriate to prevent the dilution or diminution of such Awards. In each
case, with respect to Awards of Incentive Stock Options no such adjustment shall
be authorized to the extent that such authority would cause the Plan to violate
section 422(b)(1) of the Code or any successor provision thereto.
Notwithstanding the preceding, the number of Shares subject to any Award always
shall be a whole number.
4.4 Buy-Out Provision. The Committee may at any time offer on behalf of the
Company to buy out, for a payment in cash or Shares, an Award previously
granted, based on such terms and conditions as the Committee, in its sole
discretion, shall establish and communicate to the applicable Participant at the
time such offer is made.
4.5 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Award as it
may deem advisable or appropriate in its sole discretion, including, but not
limited to, restrictions related to applicable Federal securities laws, the
requirements of any national securities exchange or system upon which Shares are
then listed or traded, and any blue sky or state securities laws.
4.6 Cancellation and Rescission of Awards.
(a) Unless the Award Agreement specifies otherwise, the Committee may cancel,
rescind, suspend, withhold or otherwise limit or restrict any unexercised
Award at any time if the Participant is not in compliance with all
applicable provisions of the Award Agreement and the Plan or if the
Participant has a Termination of Service for Cause.
(b) Upon exercise, payment or delivery pursuant to an Award, the Participant
shall certify in a manner acceptable to the Company that he or she is in
compliance with the terms and conditions of the Plan. In the event a
Participant fails to comply with the provisions of this Section 4.6 prior
to, or during the six months after, any exercise, payment or delivery
pursuant to an Award, such exercise, payment or delivery may be rescinded
by the Company within two years thereafter. In the event of any such
rescission, 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 in such manner and on such terms and conditions as may be
required, and the Company shall be entitled to set-off against the amount
of any such gain any amount owed to the Participant by the Company.
4.7 Loans and Guarantees. The Committee may in its discretion allow a
Participant to defer payment to the Company of all or any portion of (i) the
Exercise Price of an Option, (ii) the purchase price of Restricted Stock, if
any, or (iii) subject to applicable law, any taxes associated with the exercise,
nonforfeitability of, or payment of benefits in connection with, an Award, or
cause the Company to guarantee a loan from a third party to the Participant, in
an amount equal to all or any portion of such Exercise Price, or any related
taxes. Any such payment deferral or guarantee by the Company shall be on such
terms and conditions as the Committee may determine.
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SECTION 5
STOCK OPTIONS
5.1 Grant of Options. Subject to the terms and provisions of this Plan, Options
may be granted to Participants at any time and from time to time as determined
by the Committee in its sole discretion. The Committee, in its sole discretion,
shall determine the number of Shares subject to each Option; provided, however,
that during any Fiscal Year, no Participant shall be granted Options covering
more than 500,000 Shares. The Committee may grant Incentive Stock Options,
Nonqualified Stock Options, or any combination thereof.
5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that
shall specify the Exercise Price, the expiration date of the Option, the number
of Shares to which the Option pertains, any conditions to exercise of the Option
and such other terms and conditions as the Committee, in its sole discretion,
shall determine. The Award Agreement also shall specify whether the Option is
intended to be an Incentive Stock Option or a Nonqualified Stock Option.
5.3 Exercise Price. Subject to the provisions of this Section 5.3, the Exercise
Price for each Option shall be determined by the Committee in its sole
discretion.
5.3.1 Nonqualified Stock Options. In the case of a Nonqualified Stock
Option, the Exercise Price may be less than the Fair Market Value of a
Share on the Grant Date.
5.3.2 Incentive Stock Options. In the case of an Incentive Stock
Option, the Exercise Price shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date; provided,
however, that if on the Grant Date, the Employee (together with persons
whose stock ownership is attributed to the Employee pursuant to section
424(d) of the Code) owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any of its
Subsidiaries, the Exercise Price shall be not less than one hundred ten
percent (110%) of the Fair Market Value of a Share on the Grant Date.
5.3.3 Substitute Options. Notwithstanding the provisions of Sections
5.3.1 and 5.3.2, in the event that the Company or an Affiliate consummates
a transaction described in section 424(a) of the Code (e.g., the
acquisition of property or stock from an unrelated corporation), persons
who become Participants on account of such transaction may be granted
Options in substitution for options granted by such former employer or
recipient of services. If such substitute Options are granted, the
Committee, in its sole discretion and consistent with section 424(a) of the
Code, may determine that such substitute Options shall have an exercise
price less than one hundred (100%) of the Fair Market Value of the Shares
on the Grant Date.
5.4 Expiration of Options.
5.4.1 Expiration Dates. Except as provided in Section 5.8 regarding
Incentive Stock Options, each Option shall terminate upon the earlier of
the first to occur of the following events:
(a) The date(s) for termination of the Option set forth in the Award
Agreement; or
(b) The expiration of ten (10) years from the Grant Date.
5.4.2 Committee Discretion. Subject to the limits of Section 5.4.1,
the Committee, in its sole discretion, (a) shall provide in each Award
Agreement when each Option expires and becomes
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unexercisable, and (b) may, after an Option is granted, extend the maximum
term of the Option (subject to Section 5.8 regarding Incentive Stock
Options).
5.5 Exercisability of Options. Options granted under this Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall determine in its sole discretion. After an Option is
granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option. If the Committee provides that any Option is
exercisable only in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part, based on such factors as
the Committee may determine.
5.6 Termination of Service. Each Award Agreement shall set forth the extent to
which the Participant shall have the right to exercise the Option following
Termination of Service. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement, need not
be uniform among all Options granted under the Plan, and may reflect
distinctions based on the reasons for Termination of Service.
5.7 Payment. Options shall be exercised by the Participant's delivery of a
written notice of exercise to the Secretary of the Company (or its designee),
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares.
Upon the exercise of any Option, the Exercise Price shall be payable to
the Company in full in cash or its equivalent. The Committee, in its sole
discretion, also may permit exercise (a) by tendering previously acquired Shares
having an aggregate Fair Market Value at the time of exercise equal to the total
Exercise Price, or (b) by any other means which the Committee, in its sole
discretion, determines (i) to provide legal consideration for the Shares, and
(ii) to be consistent with the purposes of this Plan.
As soon as practicable after receipt of a written notification of
exercise and full payment for the Shares purchased, the Company shall deliver to
the Participant (or the Participant's designated broker), Share certificates
(which may be in book entry form) representing such Shares.
5.8 Certain Additional Provisions for Incentive Stock Options.
5.8.1 Exercisability. The aggregate Fair Market Value (determined on
the Grant Date(s)) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by any Employee during any
calendar year (under all plans of the Company and its Subsidiaries) shall
not exceed $100,000.
5.8.2 Termination of Service. No Incentive Stock Option may be
exercised more than three (3) months after the Participant's Termination of
Service for any reason other than Disability or death, unless (a) the
Participant dies during such three-month period, and (b) the Award
Agreement or the Committee permits later exercise. No Incentive Stock
Option may be exercised more than one (1) year after the Participant's
termination of employment on account of Disability, unless (a) the
Participant dies during such one-year period, and (b) the Award Agreement
or the Committee permits later exercise.
5.8.3 Company and Subsidiaries Only. Incentive Stock Options may be
granted only to persons who are employees of the Company or a Subsidiary on
the Grant Date.
5.8.4 Expiration. No Incentive Stock Option may be exercised after the
expiration of ten (10) years from the Grant Date; provided, however, that
if the Option is granted to an Employee who, together with persons whose
stock ownership is attributed to the Employee pursuant to section 424(d) of
the Code, owns stock possessing more than 10% of the total combined voting
power of all classes of
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stock of the Company or any of its Subsidiaries, the Option may not be
exercised after the expiration of five (5) years from the Grant Date.
5.8.5 Nontransferable. Each Incentive Stock Option shall by its terms
not be assignable or transferable other than by will or the laws of descent
and distribution and may be exercised, during the Participant's lifetime,
only by the Participant; provided, however, that the Participant may, to
the extent provided in the Plan in any manner specified by the Committee,
designate in writing a beneficiary to exercise his or her Incentive Stock
Option after the Participant's death.
5.9 Grant of Reload Options. The Committee may in connection with the grant of
an Option, in the Award Agreement, provide that a Participant who (i) is a
Participant when he or she exercises an Option (the "Exercised Option"), (ii)
has not received a Reload Option (as defined below) within the six (6) months
prior to such exercise, and (iii) satisfies the Exercise Price or any required
tax withholding applicable thereto with Shares which have been held by the
Participant for at least six (6) months, shall automatically be granted, subject
to Section 3, an additional Option ("Reload Option") in an amount equal to the
sum ("Reload Number") of the number of Shares tendered to exercise the Exercised
Option plus, if so provided by the Committee, the number of Shares, if any,
retained by the Company in connection with the exercise of the Exercised Option
to satisfy any federal, state or local tax withholding requirements; provided
that no Reload Option shall be granted in connection with the exercise of an
Option that has been transferred by the initial Participant thereof. All Reload
Options shall be Nonqualified Stock Options.
5.10 Conditions on Reload Options. Reload Options shall be subject to the
following terms and conditions:
(a) The Grant Date for each Reload Option shall be the date of exercise of
the Exercised Option to which it relates.
(b) Unless otherwise determined by the Committee, the Reload Option shall be
fully vested and may be exercised at any time during the remaining term
of the Exercised Option (subject to earlier termination thereof as
provided in the Plan or in the applicable Award Agreement).
(c) Unless otherwise determined by the Committee, the terms of the Reload
Option shall be the same as the terms of the Exercised Option to which
it relates, except that the Exercise Price for the Reload Option shall,
in every case, be 100% of the Fair Market Value of a Share on the Grant
Date of the Reload Option.
(d) Each Award Agreement shall state whether the Committee has authorized
Reload Options with respect to the underlying Stock Options. Upon the
exercise of an Underlying Stock Option or other Reload Option, the
Reload Option will be evidenced by an amendment to the underlying Award
Agreement or a new Award Agreement.
(e) No additional Reload Options shall be granted to Participants when Stock
Options and/or Reload Options are exercised pursuant to the terms of
this Plan following Termination of Service with the Company or a
Subsidiary.
SECTION 6
STOCK APPRECIATION RIGHTS
6.1 Grant of SARs. Subject to the terms and conditions of this Plan, an SAR may
be granted to Participants at any time and from time to time as shall be
determined by the Committee, in its sole discretion. The Committee may grant
Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof.
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6.1.1 Number of Shares. The Committee shall have complete discretion
to determine the number of SARs granted to any Participant, provided that
during any Fiscal Year, no Participant shall be granted SARs covering more
than 500,000 Shares.
6.1.2 Exercise Price and Other Terms. The Committee, subject to the
provisions of this Plan, shall have complete discretion to determine the
terms and conditions of SARs granted under this Plan; provided, however,
that the exercise price of a Freestanding SAR shall be not less than one
hundred percent (100%) of the Fair Market Value of a Share on the Grant
Date. The exercise price of Tandem or Affiliated SARs shall equal the
Exercise Price of the related Option.
6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the
Shares subject to the related Option upon the surrender of the right to exercise
the equivalent portion of the related Option. A Tandem SAR may be exercised only
with respect to the Shares for which its related Option is then exercisable.
With respect to a Tandem SAR granted in connection with an Incentive Stock
Option: (a) the Tandem SAR shall expire no later than the expiration of the
underlying Incentive Stock Option; (b) the value of the payout with respect to
the Tandem SAR shall be for no more than one hundred percent (100%) of the
difference between the Exercise Price of the underlying Incentive Stock Option
and the Fair Market Value of the Shares subject to the underlying Incentive
Stock Option at the time the Tandem SAR is exercised; and (c) the Tandem SAR
shall be exercisable only when the Fair Market Value of the Shares subject to
the Incentive Stock Option exceeds the Exercise Price of the Incentive Stock
Option.
6.3 Exercise of Affiliated SARs. An Affiliated SAR shall be deemed to be
exercised upon the exercise of the related Option. The deemed exercise of an
Affiliated SAR shall not necessitate a reduction in the number of Shares subject
to the related Option.
6.4 Exercise of Freestanding SARs. Freestanding SARs shall be exercisable on
such terms and conditions as the Committee, in its sole discretion, shall
determine.
6.5 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that
shall specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Committee, in its sole
discretion, shall determine.
6.6 Expiration of SARs. An SAR granted under this Plan shall expire upon the
date determined by the Committee, in its sole discretion, as set forth in the
Award Agreement. Notwithstanding the foregoing, the terms and provisions of
Section 5.4 also shall apply to SARs.
6.7 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The positive difference between the Fair Market Value of a Share on the
date of exercise over the exercise price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the sole discretion of the Committee, the payment upon SAR exercise
may be in cash, in Shares of equivalent value, or in any combination thereof.
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SECTION 7
RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and provisions of this Plan,
the Committee, at any time and from time to time, may grant Shares of Restricted
Stock to Participants in such amounts as the Committee, in its sole discretion,
shall determine. The Committee, in its sole discretion, shall determine the
number of Shares to be granted to each Participant; provided, however, that
during any Fiscal Year, no Participant shall receive more than 500,000 Shares of
Restricted Stock. The Committee shall determine the amount, if any, that a
Participant shall pay for Restricted Stock, subject to applicable requirements
of the Delaware General Corporation Law.
7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Committee, in its sole discretion, shall determine. Unless the Committee, in its
sole discretion, determines otherwise, Shares of Restricted Stock shall be held
by the Company as escrow agent until the end of the applicable Period of
Restriction.
7.3 Transferability. Except as otherwise determined by the Committee, in its
sole discretion, Shares of Restricted Stock may not be sold, transferred,
gifted, bequeathed, pledged, assigned, or otherwise alienated or hypothecated,
voluntarily or involuntarily, until the end of the applicable Period of
Restriction.
7.4 Other Restrictions. The Committee, in its sole discretion, may impose such
other restrictions on Shares of Restricted Stock as it may deem advisable or
appropriate in accordance with this Section 7.4.
7.4.1 General Restrictions. The Committee may set restrictions based
upon (a) the achievement of specific performance objectives (Company-wide,
divisional or individual), (b) applicable Federal or state securities laws,
or (c) any other basis determined by the Committee in its sole discretion.
7.4.2 Section 162(m) Performance Restrictions. For purposes of
qualifying grants of Restricted Stock as "performance-based compensation"
under section 162(m) of the Code, the Committee, in its sole discretion,
may set restrictions based upon the achievement of Performance Goals. The
Performance Goals shall be set by the Committee on or before the latest
date permissible to enable the Restricted Stock to qualify as
"performance-based compensation" under section 162(m) of the Code. In
granting Restricted Stock that is intended to qualify under Code section
162(m), the Committee shall follow any procedures determined by it in its
sole discretion from time to time to be necessary, advisable or appropriate
to ensure qualification of the Restricted Stock under Code section 162(m)
(e.g., in determining the Performance Goals).
7.4.3 Legend on Certificates. The Committee, in its sole discretion,
may legend the certificates representing Restricted Stock to give
appropriate notice of such restrictions. For example, the Committee may
determine that some or all certificates representing Shares of Restricted
Stock shall bear the following legend:
"THE SALE OR OTHER TRANSFER OF THE SHARES OF STOCK REPRESENTED BY
THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION
OF LAW, IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE AMERICAN ITALIAN PASTA COMPANY 2001 EQUITY INCENTIVE
PLAN, AND IN A RESTRICTED STOCK AGREEMENT. A COPY OF THIS PLAN
AND SUCH RESTRICTED STOCK AGREEMENT MAY BE OBTAINED FROM THE
SECRETARY OF AMERICAN ITALIAN PASTA COMPANY."
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7.5 Removal of Restrictions. Except as otherwise provided in this Section 7,
Shares of Restricted Stock covered by each Restricted Stock grant made under
this Plan shall be released from escrow as soon as practicable after the end of
the applicable Period of Restriction. The Committee, in its sole discretion, may
accelerate the time at which any restrictions shall lapse and remove any
restrictions. After the end of the applicable Period of Restriction, the
Participant shall be entitled to have any legend or legends under Section 7.4.3
removed from his or her Share certificate, and the Shares shall be freely
transferable by the Participant.
7.6 Voting Rights. During the Period of Restriction, Participants holding Shares
of Restricted Stock granted hereunder may exercise full voting rights with
respect to those Shares, unless the applicable Award Agreement provides
otherwise.
7.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the applicable Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
7.8 Return of Restricted Stock to Company. On the date set forth in the
applicable Award Agreement, the Restricted Stock for which restrictions have not
lapsed shall revert to the Company and thereafter shall be available for grant
under this Plan.
7.9 Termination of Service. Each Restricted Stock Award Agreement shall set
forth the extent to which the Participant shall have the right to receive
unvested Restricted Stock following his or her Termination of Service. Such
provision shall be determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with each Participant, need not be
uniform among all Restricted Stock issued pursuant to the Plan and may reflect
distinctions based on the reasons for termination.
SECTION 8
PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1 Grant of Performance Units/Shares. Performance Units and Performance Shares
may be granted to Participants at any time and from time to time, as shall be
determined by the Committee, in its sole discretion. The Committee shall have
complete discretion in determining the number of Performance Units and
Performance Shares granted to each Participant; provided, however, that during
any Fiscal Year, (a) no Participant shall receive Performance Units having an
initial value greater than the value of 250,000 Shares, and (b) no Participant
shall receive more than 250,000 Performance Shares.
8.2 Value of Performance Units/Shares. Each Performance Unit shall have an
initial value that is established by the Committee on or before the Grant Date.
Each Performance Share shall have an initial value equal to the Fair Market
Value of a Share on the Grant Date.
8.3 Performance Objectives and Other Terms. The Committee shall set performance
objectives in its sole discretion which, depending on the extent to which they
are met, will determine the number or value of Performance Units or Performance
Shares, or both, that will be paid out to the Participants. The time period
during which the performance objectives must be met shall be called the
"Performance Period". Each Award of Performance Units or Performance Shares
shall be evidenced by an Award Agreement that shall specify the Performance
Period, and such other terms and conditions as the Committee, in its sole
discretion, shall determine.
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8.3.1 General Performance Objectives. The Committee may set
performance objectives based upon (a) the achievement of Company-wide,
divisional or individual goals, (b) applicable Federal or state securities
laws, or (c) any other basis determined by the Committee in its discretion.
8.3.2 Section 162(m) Performance Objectives. For purposes of
qualifying grants of Performance Units or Performance Shares as
"performance-based compensation" under section 162(m) of the Code, the
Committee, in its sole discretion, may determine that the performance
objectives applicable to Performance Units or Performance Shares, as the
case may be, shall be based on the achievement of Performance Goals. The
Performance Goals shall be set by the Committee on or before the latest
date permissible to enable the Performance Units or Performance Shares, as
the case may be, to qualify as "performance-based compensation" under
section 162(m) of the Code. In granting Performance Units or Performance
Shares which are intended to qualify under Code section 162(m), the
Committee shall follow any procedures determined by it from time to time to
be necessary or appropriate in its sole discretion to ensure qualification
of the Performance Units or Performance Shares, as the case may be, under
Code section 162(m) (e.g., in determining the Performance Goals).
8.4 Earning of Performance Units/Shares. After the applicable Performance Period
has ended, the holder of Performance Units or Performance Shares shall be
entitled to receive a payout of the number of Performance Units or Performance
Shares, as the case may be, earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance objectives have been achieved. After the grant of a Performance Unit
or Performance Share, the Committee, in its sole discretion, may reduce or waive
any performance objectives for such Performance Unit or Performance Share.
8.5 Form and Timing of Payment of Performance Units/Shares. Payment of earned
Performance Units or Performance Shares shall be made as soon as practicable
after the end of the applicable Performance Period. The Committee, in its sole
discretion, may pay earned Performance Units or Performance Shares in the form
of cash, in Shares (which have an aggregate Fair Market Value equal to the value
of the earned Performance Units or Performance Shares, as the case may be, at
the end of the applicable Performance Period), or in any combination thereof.
8.6 Cancellation of Performance Units/Shares. On the earlier of the date set
forth in the Award Agreement or the Participant's Termination of Service (other
than by death, Disability or, with respect to an Employee, Retirement), all
unearned or unvested Performance Units or Performance Shares shall be forfeited
to the Company, and thereafter shall be available for grant under this Plan. In
the event of a Participant's death, Disability or, with respect to an Employee,
Retirement, prior to the end of a Performance Period, the Committee shall reduce
his or her Performance Units or Performance Shares proportionately based on the
date of such Termination of Service.
SECTION 9
MISCELLANEOUS
9.1 Deferrals. The Committee, in its sole discretion, may permit a Participant
to defer receipt of the payment of cash or the delivery of Shares that would
otherwise be due to such Participant under an Award. Any such deferral election
shall be subject to such rules and procedures as shall be determined by the
Committee in its sole discretion.
9.2 No Effect on Employment or Service. Nothing in this Plan shall interfere
with or limit in any way the right of the Company to terminate any Participant's
employment or service at any time, with or without Cause. For purposes of this
Plan, transfer of employment of a Participant between the Company and any of its
Affiliates (or between Affiliates) shall not be deemed a Termination of Service.
Employment or secure relationship with the Company and its Affiliates is on an
at-will basis only, unless otherwise provided by an
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applicable written employment or service agreement between the Participant and
the Company or its Affiliate, as the case may be.
9.3 Participation. No Participant shall have the right to be selected to receive
an Award under this Plan, or, having been so selected, to be selected to receive
a future Award.
9.4 Indemnification. Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from (a) any loss, cost, liability or expense (including
attorneys' fees) that may be imposed upon or reasonably incurred by him or her
in connection with or resulting from any claim, action, suit or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action taken or failure to act under this Plan or any Award Agreement,
and (b) from any and all amounts paid by him or her in settlement thereof, with
the Company's prior written approval, or paid by him or her in satisfaction of
any judgment in any such claim, action, suit or proceeding against him or her;
provided, however, that he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such
persons may be entitled under the Company's Certificate of Incorporation or
Bylaws, by contract, as a matter of law or otherwise, or under any power that
the Company may have to indemnify them or hold them harmless.
9.5 Successors. All obligations of the Company under this Plan, with respect to
Awards granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation or otherwise, of all or substantially all of the
business or assets of the Company.
9.6 Beneficiary Designations. If permitted by the Committee, a Participant under
this Plan may name a beneficiary or beneficiaries to whom any vested but unpaid
Award shall be paid in the event of the Participant's death. Each such
designation shall revoke all prior designations by the Participant and shall be
effective only if given in a form and manner acceptable to the Committee. In the
absence of any such designation, any vested benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate and, subject to
the terms of this Plan and of the applicable Award Agreement, any unexercised
vested Award may be exercised by the administrator or executor of the
Participant's estate.
9.7 Transferability of Awards. Unless otherwise provided by the Committee in an
Award Agreement, no Award granted under this Plan may be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated, other than by will, by
the laws of descent and distribution, or to the limited extent provided in
Section 9.6.
9.8 No Rights as Stockholder. Except to the limited extent provided in Sections
7.6 and 7.7, no Participant (nor any beneficiary thereof) shall have any of the
rights or privileges of a stockholder of the Company with respect to any Shares
issuable pursuant to an Award (or the exercise thereof), unless and until
certificates representing such Shares shall have been issued, recorded on the
records of the Company or its transfer agents or registrars, and delivered to
the Participant (or his or her beneficiary).
SECTION 10
AMENDMENT, TERMINATION AND DURATION
10.1 Amendment, Suspension, or Termination. The Board, in its sole discretion,
may amend or terminate this Plan, or any part thereof, at any time and for any
reason; provided, however, that if and to the extent required by law or to
maintain this Plan's qualification under Rule 16b-3, the Code, or the rules of
any national securities exchange (if applicable), any such amendment shall be
subject to stockholder approval. Subject to
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Section 3.2(d), the amendment, suspension or termination of this Plan shall not,
without the consent of the Participant, adversely affect any rights or
obligations under any Award theretofore granted to such Participant. No Award
may be granted during any period of suspension or after termination of this
Plan.
10.2 Duration of this Plan. This Plan shall become effective on the date
specified herein, and subject to Section 10.1 (regarding the Board's right to
amend or terminate this Plan), shall remain in effect thereafter; provided,
however, that without further stockholder approval, no Incentive Stock Option
may be granted under this Plan after the tenth anniversary of the effective date
of this Plan.
SECTION 11
TAX WITHHOLDING
11.1 Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or the exercise thereof), the Company shall have the power
and the right to deduct or withhold from any amounts due to the Participant from
the Company, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA obligation) required to be withheld with respect to such
Award (or the exercise thereof).
11.2 Withholding Arrangements. The Committee, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part, by
(a) electing to have the Company withhold otherwise deliverable Shares, or (b)
delivering to the Company Shares then owned by the Participant having a Fair
Market Value equal to the amount required to be withheld. The amount of the
withholding requirement shall be deemed to include any amount that the Committee
agrees may be withheld at the time any such election is made, not to exceed the
amount determined by using the maximum federal, state or local marginal income
tax rates applicable to the Participant with respect to the Award on the date
that the amount of tax to be withheld is to be determined. The Fair Market Value
of the Shares to be withheld or delivered shall be determined as of the date
that the taxes are required to be withheld.
11.3 Notification under Code section 83(b). If the Participant, in connection
with the exercise of any Option, or the grant of Restricted Stock, makes the
election permitted under section 83(b) of the Code to include in such
Participant's gross income in the year of transfer the amounts specified in
section 83(b) of the Code, then such Participant shall notify the Company of
such election within 10 days after filing the notice of the election with the
Internal Revenue Service, in addition to any filing and notification required
pursuant to regulations issued under section 83(b) of the Code. The Committee
may, in connection with the grant of an Award or at any time thereafter,
prohibit a Participant from making the election described above.
SECTION 12
CHANGE IN CONTROL
12.1 Change in Control. In the event of a Change in Control of the Company, all
Awards granted under this Plan that then are outstanding and not then
exercisable or are subject to restrictions, shall, except as provided in Section
12.2, or unless otherwise provided for in the Award Agreements applicable
thereto, become immediately exercisable, and all restrictions shall be removed,
as of the first date that the Change in Control has been deemed to have
occurred, and shall remain as such for the remaining life of the Award as
provided herein and within the provisions of the related Award Agreements.
Notwithstanding the preceding sentence, in the event that the Committee is
advised by the Company's independent auditors that the effect of the preceding
sentence would be to preclude the ability of the Company to account for an
acquisition or merger transaction as a pooling of interests, the Committee may
declare the preceding sentence to be inoperable to such extent as the Committee,
in its sole discretion, deems advisable.
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12.2 Adjustments upon Merger or Asset Sale. In the event of a Change in Control
under Section 12.3(c) or (d)(ii) (a "Section 12.2 Event") and the successor
corporation does not either (i) assume each outstanding Award or (ii) substitute
an equivalent award by the successor corporation or a Parent or Subsidiary of
the successor corporation, then the Award shall fully vest and become
immediately exercisable and the Committee shall notify the Participant that the
Award shall be exercisable for a period of twenty-five (25) days from the date
of such notice, and the Award shall terminate upon the expiration of such period
unless exercised. For the purposes of this paragraph, the Award shall be
considered assumed if, following the Section 10.2 Event, the Award confers the
right to purchase or receive, for each Share subject to the Award immediately
prior to the Section 12.2 Event, equal consideration (whether stock, cash, or
other securities or property) as received in the Section 12.2 Event by holders
of each Share of common stock held on the effective date of the transaction (and
if holders of Shares were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the Section 12.2 Event
was not solely common stock of the successor corporation or its Parent, the
Committee may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Award, for each Share
subject to the award, to be cash and/or other securities equal in fair market
value to the per share consideration received by holders of common stock in the
merger or sale of assets.
12.3 Definition. For purposes of this Section 12, a Change in Control of the
Company shall be deemed to have occurred if the conditions set forth in any one
or more of the following shall have been satisfied, unless such condition shall
have received prior approval of a majority vote of the Continuing Directors, as
defined below, indicating that this Section 12 shall not apply thereto:
(a) any "person", as such term is used in Sections 13(d) and 14(d) of the 1934
Act (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), is or becomes the "beneficial owner" (as defined in Rule 13(d)(3)
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the Company's then
outstanding securities or 51% or more of the combined voting power of the
Company's then outstanding securities;
(b) during any period of two consecutive years (not including any period prior
to the Effective Date of this Plan), individuals ("Existing Directors") who
at the beginning of such period constitute the Board of Directors, and any
new board member (an "Approved Director") (other than a board member
designated by a person who has entered into an agreement with the Company
to effect a transaction described in paragraph (a), (b) or (c) of this
Section 12.3) whose election by the Board of Directors or nomination for
election by the Company's shareholders was approved by a vote of a least
two-thirds (2/3) of the board members then still in office who either were
board members at the beginning of the period or whose election or
nomination for election previously was so approved (Existing Directors
together with Approved Directors constituting "Continuing Directors"),
cease for any reason to constitute at least a majority of the Board of
Directors; or
(c) the consummation of the merger or consolidation of the Company with any
other corporation, other than a merger with a wholly-owned subsidiary, the
sale of substantially all of the assets of the Company, or the liquidation
or dissolution of the Company, unless, in the case of a merger or
consolidation, (x) the directors in office immediately prior to such merger
or consolidation will constitute at least majority of the Board of the
surviving corporation of such merger or consolidation and any parent (as
such term is defined in Rule 12b-2 under the Exchange Act) of such
corporation, or (y) the voting securities of the Company outstanding
immediately prior thereto represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than
66-2/3% of the combined voting power of the voting securities of the
Company or such surviving entity and are owned by all or substantially all
of the persons who
57
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were the holders of the voting securities of the Company immediately prior
to the transaction in substantially the same proportions as such holders
owned such voting securities immediately prior to the transaction; or
(d) the stockholders of the Company approve (i) a plan of complete liquidation
of the Company or (ii) an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
SECTION 13
LEGAL CONSTRUCTION
13.1 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
13.2 Severability. In the event any provision of this Plan shall be held illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of this Plan, and this Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
13.3 Requirements of Law. The grant of Awards and the issuance of Shares under
this Plan shall be subject to all applicable laws, rules and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required from time to time.
13.4 Securities Law Compliance. With respect to Section 16 Persons, Awards under
this Plan are intended to comply with all applicable conditions of Rule 16b-3.
To the extent any provision of this Plan, Award Agreement or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable or appropriate by the Committee in its
sole discretion.
13.5 Governing Law. This Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of Delaware (excluding its
conflict of laws provisions).
13.6 Captions. Captions are provided herein for convenience of reference only,
and shall not serve as a basis for interpretation or construction of this Plan.
Adopted December 12, 2000
