<PAGE>
SCHEDULE 14A
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 to (S)240.14a-11(c) or (S)240.14a-12
SEVENTH GENERATION, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
--------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing:
1) Amount previously paid:
--------------------------------------------------------------
2) Form, Schedule or Registration Statement No:
--------------------------------------------------------------
3) Filing party:
--------------------------------------------------------------
4) Date Filed:
--------------------------------------------------------------
<PAGE>
SEVENTH GENERATION, INC.
ONE MILL STREET, BOX A26
BURLINGTON, VT 05401-1530
April 19, 1999
Dear Stockholder,
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of SEVENTH GENERATION, INC. (the "Company"), to be held at 2:30 PM, on Monday,
May 17, 1999, at the Company's offices located at One Mill Street, Burlington,
Vermont.
At the Annual Meeting, you will be asked to consider and vote upon
(i) a proposal regarding the election of eight directors of the Company, and
(ii) a proposal to approve the Company's 1998 Employee, Director and Consultant
Stock Option Plan. Such other business will be transacted as may properly come
before the Annual Meeting.
We hope you will be able to attend the Annual Meeting. Whether you plan to
attend the Annual Meeting or not, it is important that your shares are
represented. Therefore, you are urged promptly to COMPLETE, SIGN, DATE and
RETURN the enclosed Proxy Card in accordance with the instructions set forth on
the Proxy Card. This will ensure your proper representation at the Annual
Meeting.
Sincerely,
/s/ Jeffrey A. Hollender
-------------------------------
Jeffrey A. Hollender
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY PROMPTLY.
<PAGE>
SEVENTH GENERATION, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held Monday, May 17, 1999
To the Stockholders of Seventh Generation, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of SEVENTH
GENERATION, INC., a Vermont corporation (the "Company"), will be held on Monday,
May 17, 1999, at 2:30 PM, at the Company's offices located at One Mill Street,
Burlington, Vermont, for the following purposes:
1. To elect eight (8) members to the Board of Directors to hold office until
the next Annual Meeting of Stockholders and until their successors are duly
elected and qualified.
2. To approve the adoption of the Company's 1998 Employee, Director and
Consultant Stock Option Plan and the issuance of stock options pursuant
thereto.
3. To transact such other business as may be properly brought before the
Annual Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on March 16, 1999 as
the Record Date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and at any adjournments thereof.
All stockholders are cordially invited to attend the Annual Meeting.
Whether you plan to attend the Annual Meeting or not, you are requested to
COMPLETE, SIGN, DATE and RETURN the enclosed Proxy Card as soon as possible in
accordance with the instructions on the Proxy Card. A pre-addressed, postage
prepaid return envelope is enclosed for your convenience.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Anita B. Lavoie
----------------------------------
Anita B. Lavoie
SECRETARY
April 19, 1999
<PAGE>
SEVENTH GENERATION, INC.
ONE MILL STREET, BOX A26
BURLINGTON, VT 05401-1530
(802) 658-3773
__________________________
PROXY STATEMENT
__________________________
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of SEVENTH GENERATION, INC. (the "Company"), a Vermont
corporation, of proxies, in the accompanying form, to be used at the Annual
Meeting of Stockholders to be held at the Company's offices located at One Mill
Street, Burlington, Vermont on Monday, May 17, 1999, at 2:30 PM, and any
adjournments thereof (the "Meeting").
Where the Stockholder specifies a choice on the proxy as to how his or her
shares are to be voted, the shares will be voted accordingly. If no choice is
specified with respect to one or more proposals, the shares will be voted FOR
the election of the eight nominees for director named herein and with respect to
other proposals in accordance with the recommendations of the Board of Directors
of the Company. Any proxy given pursuant to this solicitation may be revoked by
the person giving it at any time before its use by delivering to the Company a
written notice of revocation or a duly executed proxy bearing a later date. Any
Stockholder who has executed a proxy but is present at the Meeting, and who
wishes to vote in person, may do so by revoking his or her proxy as described in
the preceding sentence. Shares represented by valid proxies in the form
enclosed, received in time for use at the Meeting and not revoked at or prior to
the Meeting, will be voted at the Meeting. The presence, in person or by proxy,
of the holders of a majority of the outstanding shares of the Company's common
stock, par value $.000333 per share ("Common Stock"), is necessary to constitute
a quorum at the Meeting.
The affirmative vote of a plurality of the shares of Common Stock voted
affirmatively or negatively at the Meeting is required with respect to the
election of directors. Abstentions, votes withheld and broker non-votes will
not be treated as votes cast for this purpose and will not affect the outcome of
the election. A "broker non-vote" occurs when a registered broker holding a
customer's shares in the name of the broker has not received voting instructions
on a matter from the customer and is barred by applicable rules from exercising
discretionary authority to vote on the matter and so indicates on the proxy.
The affirmative vote of a majority of the shares of Common Stock voted
affirmatively or negatively at the Meeting is required to approve the adoption
of the Company's 1998 Employee, Director and Consultant Stock Option Plan (the
"1998 Option Plan") and the issuance of stock options in accordance with its
terms. Broker non-votes and abstentions will be counted as present, or
represented, and entitled to vote for purposes of determining the presence of a
majority entitled to vote; however, neither broker non-votes nor abstentions
will have any effect on the outcome of voting on the matter.
The close of business on March 16, 1999 has been fixed as the Record Date
for determining the Stockholders entitled to notice of and to vote at the
Meeting. As of the close of business on March 16, 1999, the Company had
2,428,791 shares of Common Stock outstanding and entitled to vote. Holders of
Common Stock are entitled to one vote per share on all matters to be voted on by
Stockholders.
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company. In
addition, the Company will reimburse brokerage firms and other persons
representing beneficial owners of Common Stock of the Company for their expenses
in forwarding proxy material to such beneficial owners. Solicitation of proxies
by mail may be supplemented by telephone, telegram, telex and personal
solicitation by the directors, officers or employees of the Company, who will
not be compensated for any such solicitation.
This Proxy Statement and the accompanying proxy are first being mailed on
or about April 19, 1999 to all Stockholders entitled to notice of and to vote at
the Meeting.
The Annual Report to Stockholders for the fiscal year ended December 31,
1998 is being mailed to the Stockholders with this Proxy Statement, but does not
constitute a part hereof.
<PAGE>
SHARE OWNERSHIP
The following table sets forth certain information as of March 8, 1999
concerning the ownership of Common Stock by each stockholder known by the
Company to be the beneficial owner of more than 5% of its outstanding shares of
Common Stock, each current member of the Board of Directors, the executive
officers named in the Summary Compensation Table on Page 9 hereof, and all
current Directors and executive officers as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned (1)
-----------------------------
Name and Address* Number Percent
- ----------------- ------ -------
<S> <C> <C>
Jeffrey A. Hollender (2)
1 Mill St., Box A26
Burlington, VT 05401-1530........................... 421,665 15.47%
Sheila Hollender (3)
1 Mill St., Box A26
Burlington, VT 05401-1530........................... 421,665 15.47%
Gary Stein (4)
900 19th Avenue South
Nashville, TN 37212.................................. 390,318 15.51%
Peter Graham (5)
540 Madison Avenue, 10th Floor
New York, NY 10022................................... 312,541 12.27%
Arthur Gray, Jr. (6)................................. 152,210 6.07%
Yoram Samets (7)..................................... 6,500 0.27%
Barnet Feinblum...................................... 0 0.00%
Sarah Finnie-Cabot................................... 0 0.00%
Jeffrey Phillips (8)................................. 86,000 3.42%
All executive officers and directors
as a group (9 persons) (9)......................... 1,369,234 44.21%
</TABLE>
* Addresses are given for beneficial owners of more than 5% of the outstanding
Common Stock only.
(1) The number of shares of Common Stock issued and outstanding on March 8, 1999
was 2,428,791. Beneficial ownership is determined in accordance with rules
of the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options, warrants and convertible debentures which are or become
exercisable or convertible within 60 days are deemed outstanding for
computing the percentage of the person holding such options, warrants or
convertible debentures, but are not deemed outstanding for computing the
percentage of any other person. Except as otherwise noted in the footnotes,
the persons named in the table have sole voting and investment power with
respect to all shares beneficially owned by them.
(2) Includes 125,444 shares of Common Stock owned by Mr. Hollender and 209,124
shares of Common Stock that Mr. Hollender may acquire upon the exercise of
options which are or become exercisable within 60 days and 87,097 shares of
Common Stock that Mr. Hollender may acquire upon the conversion of
convertible debentures. Excludes (i) 18,776 shares of Common Stock owned,
or which may be acquired upon the exercise of warrants and options by
various relatives of Mr. Hollender, of which Mr. Hollender disclaims
beneficial ownership and (ii) 170,000 shares of Common Stock subject to
options granted to Mr. Hollender which will be immediately exercisable upon
stockholder approval of the 1998 Option Plan. If the stockholders approve
the 1998 Option Plan, Mr Hollender would beneficially own 591,665 shares of
Common Stock or 20.44% of the outstanding Common Stock. See "Proposal Two."
(3) Represents the shares referred to in note (2) above owned by Jeffrey A.
Hollender, spouse of Sheila Hollender, of which Ms. Hollender disclaims
beneficial ownership.
<PAGE>
(4) Includes 303,221 shares of Common Stock owned by Mr. Stein and 87,097 shares
of Common Stock that Mr. Stein may acquire upon the conversion of
convertible debentures.
(5) Includes 194,944 shares of Common Stock owned by Mr. Graham and 30,500
shares of Common Stock that Mr. Graham may acquire upon the exercise of
options or warrants which are or become exercisable within 60 days and
87,097 shares of Common Stock that Mr. Graham may acquire upon the
conversion of convertible debentures. Excludes 42,500 shares of Common
Stock subject to options granted to Mr. Graham which will be immediately
exercisable upon stockholder approval of the 1998 Option Plan. If the
stockholders approve the 1998 Option Plan, Mr. Graham would beneficially own
355,041 shares of Common Stock or 13.71% of the outstanding Common Stock.
See "Proposal Two."
(6) Includes 68,199 shares of Common Stock owned by Mr. Gray and 36,500 shares
of Common Stock that Mr. Gray may acquire upon the exercise of options which
are or become exercisable within 60 days. Also includes 3,963 shares of
Common Stock owned by the Lerner Gray Foundation and 43,548 shares of Common
Stock that the Lerner Gray Foundation may acquire upon the conversion of
convertible debentures. Mr. Gray is the President of the Lerner Gray
Foundation. Excludes (i) 42,500 shares of Common Stock subject to options
granted to Mr. Gray which will become immediately exercisable upon
stockholder approval of the 1998 Option Plan and (ii) 2,772 shares of Common
Stock owned by Mr. Gray's daughter, of which Mr. Gray disclaims beneficial
ownership. If the stockholders approve the 1998 Option Plan, Mr. Gray would
beneficially own 194,710 shares of Common Stock or 7.63% of the outstanding
Common Stock. See "Proposal Two."
(7) Includes 5,000 shares of Common Stock owned by Mr. Samets and 1,500 shares
of Common Stock that Mr. Samets may acquire upon the exercise of options or
warrants which are or become exercisable within 60 days. Excludes 22,333
shares of Common Stock subject to options granted to Mr. Samets which will
become immediately exercisable upon stockholder approval of the 1998 Option
Plan. If the stockholders approve the 1998 Option Plan, Mr. Samets would
beneficially own 28,833 shares of Common Stock or 1.17% of the outstanding
Common Stock. See "Proposal Two."
(8) Represents 86,000 shares of Common Stock that Mr. Phillips may acquire upon
the exercise of options which are or become exercisable within 60 days.
Excludes 42,500 shares of Common Stock subject to options granted to
Mr. Phillips which will become immediately exercisable upon stockholder
approval of the 1998 Option Plan. If the stockholders approve the 1998
Option Plan, Mr. Phillips would beneficially own 128,500 shares of Common
Stock or 5.0% of the outstanding Common Stock. See "Proposal Two."
(9) Includes an aggregate of 700,771 shares of Common Stock owned by directors
and executive officers and an aggregate of 668,463 shares of Common Stock
which directors and executive officers may acquire upon the exercise of
options, warrants or debentures which are or become exercisable or
convertible within 60 days. If the stockholders approve the 1998 Option
Plan, all current directors and executive officers as a group would
beneficially own 1,689,067 shares of Common Stock or 49.43% of the
outstanding Common Stock. See "Proposal Two." See notes (2), (3), (4),
(5), (6) and (7).
MANAGEMENT
Directors
The Company's Articles of Incorporation and Restated By-Laws provide for
the Company's business to be managed by or under the direction of the Board of
Directors. Under the Company's Articles of Incorporation and Restated By-Laws,
the number of directors is fixed from time to time by the Board of Directors,
which number may not be less than three nor more than twelve, and directors
serve in office until the next Annual Meeting of Stockholders and until their
successors have been elected and qualified.
Pursuant to the Company's Articles of Incorporation and Restated By-Laws,
the Board of Directors has voted to (i) fix the size of the Board of Directors
at eight, and (ii) nominate Arthur Gray, Jr., Jeffrey Hollender, Sheila
Hollender, Peter Graham, Barnet Feinblum, Yoram Samets, Gary Stein and Sarah
Finnie Cabot for election at the Meeting to serve until the next Annual Meeting
of Stockholders and until their respective successors have been elected and
qualified.
<PAGE>
The names of the Company's current Directors and certain information about
them are set forth below:
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>
Arthur Gray, Jr.............. 76 Chairman of the Board
Jeffrey A. Hollender......... 44 President, Chief Executive Officer,
and Director
Sheila Hollender............. 44 Director
Peter Graham................. 44 Director
Yoram Samets................. 49 Director
Barnet Feinblum.............. 51 Director
Gary Stein .................. 42 Director
Sarah Finnie Cabot .......... 42 Director
</TABLE>
Arthur Gray, Jr. has served as a Director of the Company since June 1989
and as Chairman of the Board since August 1993. Since July 1993, Mr. Gray has
been a Managing Director of S.G. Cowen Investment Advisors, now a subsidiary of
S.G. Cowen Corp. Prior to joining S.G. Cowen Investment Advisors, from 1984 to
1993 Mr. Gray was President and Chief Executive Officer of Dreyfus Personal
Management, Inc., a division of Dreyfus, Inc. Mr. Gray is also a Director of
Genelabs Technologies, Inc., a publicly traded company, and the Smithsonian
National Museum of Natural History. Mr. Gray has also served as a Director and
Co-Chairman of the Finance Committee of the American Arbitration Association.
Jeffrey A. Hollender has served as the Chief Executive Officer and a
Director of the Company since March 1989 and President of the Company since
June 1992. He served as Chairman of the Board from March 1989 to August 1993.
Prior to joining the Company, Mr. Hollender was a management consultant with the
Briar Patch Group, a consulting firm he founded in 1987. From 1979 to 1987, he
was President and Chief Executive Officer of Warner Audio Publishing, a division
of Warner Communications, and its predecessor, Network for Learning, Inc.
Mr. Hollender is the author of How to Make the World a Better Place and serves
as the Chairman of the Board of Directors of the Vermont Businesses for Social
Responsibility.
Sheila Hollender has served as a Director of the Company since June 1993.
Ms. Hollender has been a partner of the law firm Rudd, Rosenberg & Hollender
since 1990, was a partner of the law firm Bell, Kalnick, Sassawer, Klee, Green &
Rudd from 1988 to 1990, and was a partner of the law firm Rosen, Rudd, Kera,
Graubard & Hollender from 1986 to 1988. Ms. Hollender also served, on a part-
time basis from 1993 to 1995, as a catalog merchandiser for Gaiam, Inc., the
purchaser of the Company's catalog business. Sheila Hollender is the spouse of
Jeffrey Hollender.
Peter Graham has served as a Director of the Company since December 1993.
He is Vice-Chairman and President of Ladenburg, Thalmann Group, Inc., a New York
investment banking firm. Mr. Graham joined Ladenburg, Thalmann Group's
subsidiary, Ladenburg, Thalmann & Co., Inc. ("Ladenburg"), in 1976, and has
served on Ladenburg's Board of Directors since 1982. He has also served as a
Director of the following public companies: Rudy's Restaurant Group, Inc.,
Suspensions and Parts Industries, Ltd., Regency Equities Corp., and Prism
Entertainment Corporation.
Yoram Samets has served as a Director of the Company since November 1997.
Mr Samets is the Managing Director of KSV Communicators, a subsidiary of
Kelliher Samets, LTD., the largest marketing communications agency in Vermont.
In addition to his Managing Director role, he is also the Executive Creative
Director for the agency.
Barnet Feinblum has served as a Director of the Company since July 1998.
Mr. Feinblum has been the President and Chief Executive Officer of Horizon
Organic Holding Corp since 1995. From 1993 to 1995, Mr. Feinblum was the
President of Natural Venture Partners, a private investment company. From 1976
to 1993, Mr. Feinblum served in various capacities at Celestial Seasonings,
Inc., eventually becoming the tea company's Chairman, CEO, and President.
Gary Stein has served as a Director of the Company since May 1998. Since
1996, Mr. Stein has been a partner in Britten and Stone Music, a music
publishing and consulting partnership. Between 1990 and 1996, Mr. Stein was
Executive Vice President - Corporate and Financial Development - for Lancit
Media Entertainment, a leading children's producer and licensing company. Prior
to joining Lancit, Mr. Stein was an independent corporate development consultant
to a wide variety of media and entertainment firms. Between 1983 and 1986,
Mr. Stein acted as Senior Analyst-Investment Banking at Rosenkrantz,
Ehrenkrantz, Lyon & Ross (now Josephthal and Co.). From 1981 to 1983, Mr. Stein
was a growth stock analyst for the same firm.
<PAGE>
Sarah Finnie Cabot has served as a Director of the Company since November
1998. Ms. Cabot is currently President of KSV Interactive, a subsidiary of
Kelliher Samets, LTD. From 1997 to 1998, Ms. Cabot was the Programming Director
of iVillage.com: The Women's Network, a New York City based Internet company.
From 1983 to 1995, Ms. Cabot worked at The Atlantic Monthly, the award-winning
general interest magazine, as the Editorial Promotion Manager. Ms. Cabot also
serves on the Shelburne Farms Steering Committee and the Board of Directors of
the Shelburne Craft School.
Committees of the Board of Directors and Meetings
Meeting Attendance. During the fiscal year ended December 31, 1998, there
were three meetings of the Board of Directors. Arthur Gray, Jr., Peter Graham,
Jeffrey Hollender, Sheila Hollender, Yoram Samets, Gary Stein and Barney
Feinblum attended all of the meetings held of the Board and of Committees of the
Board on which they served during 1998. On November 18, 1998 Sarah Finnie Cabot
joined the Board as a Director. Ms. Cabot attended the one meeting held after
her election.
Audit Committee. The Audit Committee, which met two times in fiscal 1998,
currently has two members, Arthur Gray, Jr. and Peter Graham. The Audit
Committee reviews the engagement of the Company's independent accountants,
reviews annual financial statements, considers matters relating to accounting
policy and internal controls, and reviews the scope of annual audits.
Compensation Committee. The Compensation Committee, which met three times
in fiscal 1998, currently has two members, Arthur Gray, Jr. and Peter Graham.
The Compensation Committee reviews, approves and makes recommendations on the
Company's compensation policies, practices and procedures to ensure that legal
and fiduciary responsibilities of the Board of Directors are carried out and
that such policies, practices and procedures contribute to the success of the
Company. The Compensation Committee also administers the Company's 1990 Stock
Option Plan and the 1993 and 1994 Employee, Director and Consultant Stock Option
Plans. If the stockholders approve the 1998 Option Plan, it will also be
administered by the Compensation Committee. See "Proposal Two."
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee has two members, Arthur Gray, Jr. and Peter Graham. None
of the members of the Compensation Committee are employed by the Company.
The Board of Directors does not have a standing nominating committee.
Compensation of Directors
Upon stockholder approval of the 1998 Option Plan, all eligible Directors
will receive stock options in accordance with the 1998 Option Plan. See
"Proposal Two."
Expenses incurred in attending the Board of Directors meetings and
Committee meetings are reimbursed by the Company.
Executive Officers
The name of, and certain information regarding, the sole executive officer
of the Company who is not also a director, is set forth below.
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>
Jeffrey M. Phillips ......... 47 Executive Vice President
</TABLE>
Jeffrey M. Phillips has served as Executive Vice President of the Company
since February 1996, and Vice President of Marketing and Sales since February
1994. Prior to joining the Company, from 1986 through February 1994,
Mr. Phillips served as Vice President of Marketing for Webster Industries, a
Division of Chelsea Industries, Inc., a manufacturer of consumer household
products.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table sets forth summary information as
to compensation received by the Company's Chief Executive Officer and the other
most highly compensated person who was serving as an executive officer of the
Company as of December 31, 1998 (together, the "Named Executive Officers") for
services rendered to the Company in all capacities during the three fiscal years
ended December 31, 1998. No other executive officer of the Company earned more
than $100,000 for the year ended December 31, 1998.
<TABLE>
<CAPTION>
Annual Long Term
Compensation $ Compensation
---------------------------- ------------
Securities
Name and Fiscal Underlying All Other
Principal Position Year Salary $ Bonus $ Options(#)(1) Compensation $
- ------------------------- ---- -------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Jeffrey A. Hollender 1998 $150,000 $25,000 170,000 (2) $ 7,219 (3)
President and Chief 1997 $135,000 0 0 $ 6,867
Executive Officer 1996 $135,000 $25,000 0 $ 6,571
Jeffrey M. Phillips 1998 $122,500 $20,000 42,500 (4) $ 6,000 (5)
Executive Vice President 1997 $115,000 0 0 $ 6,000
1996 $107,500 $20,000 50,000 $ 6,000
</TABLE>
(1) On November 18, 1998, the Board of Directors terminated the 1996 Stock
Appreciation Rights Plan and all stock appreciation rights previously
issued under such Plan were canceled.
(2) In November 1998, the Board of Directors adopted the 1998 Option Plan,
at which time Mr. Hollender was awarded 170,000 options pursuant to the
1998 Option Plan. The options have an exercise price of $0.85 per
share, or 110% of the then prevailing market price, and are not subject
to any vesting period. These grants are contingent upon stockholder
approval of the 1998 Option Plan. See "Proposal Two."
(3) The amounts of All Other Compensation for Jeffrey Hollender during the
last three fiscal years consist of insurance premiums paid by the
Company with respect to term life insurance for the benefit of
Mr. Hollender and the cost of leasing an automobile for Mr. Hollender's
use.
(4) In November 1998, the Board of Directors adopted the 1998 Option Plan,
at which time Mr. Phillips was awarded 42,500 options pursuant to the
1998 Option Plan. The options have an exercise price of $0.77 per
share, the then prevailing market price, and are not subject to any
vesting period. These grants are contingent upon stockholder approval
of the 1998 Option Plan. See "Proposal Two."
(5) The amount of All Other Compensation for Mr. Phillips consists of an
automobile allowance.
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1998 by the Company to the
Named Executive Officers.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grant
Potential Realizable Value at
Number of Percent of Assumed Annual Rates of Stock
Securities Total Options Exercise Price Appreciation for
Underlying Granted to or Base Option Term (1)
Options Employees in Price Expiration ----------------------
Name Granted (#) Fiscal Year (%) ($/share) Date 5% ($) 10% ($)
- ---- ----------- --------------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey A. Hollender........... 170,000 (2) 59.90% $0.85 12/31/03 $22,100 $66,300
Jeffrey M. Phillips............ 42,500 (3) 15.00% $0.77 12/31/03 $ 8,925 $19,975
</TABLE>
(1) The dollar amounts under these columns are the result of calculations
at the 5% and 10% rates set by the Securities and Exchange Commission
and, therefore, are not intended to forecast possible future
appreciation, if any, in the price of the underlying Common Stock. No
gain to the optionees is possible without an increase in price of the
underlying Common Stock, which will benefit all stockholders
proportionately.
(2) See Note (2) to the Summary Compensation Table.
(3) See Note (4) to the Summary Compensation Table.
Option Exercises in Last Fiscal Year and Fiscal Year-End Values
There were no exercises of options by the Named Executive Officers during
the last fiscal year. The following table indicates the number of shares covered
by both exercisable and unexercisable stock options held by the Named Executive
Officers as of December 31, 1998. None of the exercisable or unexercisable
options granted to the Named Executive Officers were "in-the-money" as of
December 31, 1998. Options are classified as "in-the-money" only if there is a
positive spread between the exercise price of such options and the fiscal year
end value of the Company's Common Stock. None of the options held by the Named
Executive Officers have exercise prices less than $.50, the average of the bid
and ask price per share of the Company's Common Stock as reported in the NASDAQ
OTC Bulletin Board on December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised Options Value of Unexercised
at Fiscal Year-End (#) (1) In-the-Money Options (1)
--------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jeffrey A. Hollender.. 209,124 170,000 (2) 0 0
Jeffrey M. Phillips... 86,000 42,500 (3) 0 0
</TABLE>
(1) On November 18, 1998, the Board of Directors terminated the 1996 Stock
Appreciation Rights Plan and all stock appreciation rights previously
issued under such Plan were canceled.
(2) See Note (2) to the Summary Compensation Table.
(3) See Note (4) to the Summary Compensation Table.
Employment Contracts, Termination of Employment, and Change of Control
Arrangements
The Company entered into a five-year employment agreement with Jeffrey A.
Hollender, effective November 29, 1993, pursuant to which Mr. Hollender serves
as President and Chief Executive Officer. The agreement terminated on November
28, 1998 and has not been renewed.
The Company entered into a five-year employment agreement with Jeffrey M.
Phillips, effective February 28, 1994, pursuant to which Mr. Phillips serves as
Vice President of Marketing and Sales of the Company. The agreement terminated
on February 28, 1999 and has not been renewed. The agreement contains a covenant
by Mr. Phillips not to compete with the Company during his employment and for a
period of two years thereafter. The agreement provides for an annual salary of
$100,000 during the first year, with annual increases thereafter to be
<PAGE>
determined by the Compensation Committee based on Mr. Phillips' performance and
the performance of the Company. Mr. Phillips is also entitled to receive a bonus
of up to $25,000, payable at the end of each fiscal year, as shall be determined
by the Compensation Committee of the Board of Directors in its sole discretion.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than 10% of the Company's
Common Stock, to file with the Securities and Exchange Commission (the "SEC")
initial reports of beneficial ownership and reports of changes in beneficial
ownership of the Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% beneficial owners are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998 and 1997, Jeffrey A. Hollender, the Chief Executive Officer of
the Company, guaranteed up to $300,000 of the obligations of the Company to one
of its principal suppliers.
During 1998, the Company engaged KSV Communicators to perform marketing
services for the Company at a cost of approximately $366,000. Mr. Yoram Samets,
a Director of the Company, is the Managing Director of KSV Communicators. The
$366,000 of expenses included $194,000 of radio advertising passed through at
KSV Communicators' cost.
During 1998, Barnet Feinblum, a Director of the Company, and Betty J. Gray,
spouse of a Director of the Company, purchased $100,000 and $50,000 of
subordinated debentures, respectively, from the Company on the same terms as
unaffiliated purchasers.
Proposal One
ELECTION OF DIRECTORS
Under the Company's Articles of Incorporation and Restated By-Laws, the
number of directors is fixed from time to time by the Board of Directors, which
number may not be less than three nor more than twelve, and directors serve in
office until the next Annual Meeting of Stockholders and until their successors
have been elected and qualified.
Pursuant to the Company's Articles of Incorporation and Restated By-Laws,
the Board of Directors has voted to (i) set the size of the Board of Directors
at eight, and (ii) nominate Arthur Gray, Jr., Jeffrey Hollender, Sheila
Hollender, Peter Graham,Yoram Samets, Barnet Feinblum, Gary Stein and Sarah
Finnie Cabot for election at the Meeting to serve until the next Annual Meeting
of Stockholders and until their respective successors have been elected and
qualified.
Unless authority to vote for any of the nominees named above is withheld,
the shares represented by the enclosed proxy will be voted FOR the election as
directors of such nominees. In the event that any nominee shall become unable
or unwilling to serve, the shares represented by the enclosed proxy will be
voted for the election of such other person as the Board of Directors may
recommend in his or her place. The Board has no reason to believe that any
nominee will be unable or unwilling to serve.
A plurality of the shares voted affirmatively or negatively at the Meeting
is required to elect each nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF ARTHUR GRAY, JR., JEFFREY
A. HOLLENDER, SHEILA HOLLENDER, PETER GRAHAM, YORAM SAMETS, BARNET FEINBLUM,
GARY STEIN AND SARAH FINNIE CABOT AS DIRECTORS, AND PROXIES SOLICITED BY THE
BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED
OTHERWISE ON THE PROXY.
<PAGE>
Proposal Two
APPROVAL OF THE COMPANY'S 1998 EMPLOYEE, DIRECTOR AND CONSULTANT
STOCK OPTION PLAN
In November 1998, the Board of Directors adopted, subject to approval by
the Company's stockholders, the 1998 Option Plan. Based upon a recommendation
from the Compensation Committee, the Board believes that options and other stock
awards are an important compensation element in attracting and retaining key
employees, directors and consultants. As the Company has been severely limited
in the amount of options it has been able to issue since December 1994 due to
certain provisions in the underwriting agreement for the Company's initial
public offering, and has only granted a total of 60,000 options to employees and
15,000 options to directors or consultants since December 1994, the Board
believes that the 1998 Option Plan is necessary to enable the Company to attract
and retain key employees, directors and consultants and that the 1998 Option
Plan is an important part of its overall incentive program.
As of April 1, 1999, the Board of Directors has granted, subject to
stockholder approval of this Proposal Two, the following options pursuant to the
1998 Option Plan:
<TABLE>
<CAPTION>
----------------- ----------------------
Number of Shares
Name and Position Underlying the Options
----------------- ----------------------
<S> <C>
Jeffrey Hollender, President
Chief Executive Officer,
Director 345,000
Jeffrey Phillips, Executive
Vice President 92,500
Executive Group: 509,500
Non-Executive Director
Group 248,333
Non-Executive Officer
Employee Group 116,167
-------
TOTAL 802,000
</TABLE>
All of the above options have been granted at Fair Market Value, as defined
in the 1998 Option Plan, with the exception of the options granted to the
Company's President and Chief Executive Officer, Jeffrey Hollender, and one
Director, Peter Graham, whose options have been granted at 110% of Fair Market
Value. 443,167 of the above options vest ratably over a three year period and
options covering: (i) 170,000 shares to Mr. Hollender; (ii) an aggregate of
107,333 shares to three directors, Arthur Gray, Peter Graham and Yoram Samets;
(iii) 42,500 shares to Jeffrey Phillips; and (iv) an aggregate of 39,000 shares
to non-executive officer employees are immediately exercisable.
Summary Description of the Plan
General
The 1998 Option Plan is intended to encourage ownership of shares of the
Common Stock by key employees and directors of and certain consultants to the
Company in order to attract such people, to induce them to work for the benefit
of the Company, and to provide additional incentive for them to promote the
success of the Company. The 1998 Option Plan provides for the granting of
incentive stock options ("ISOs"), as defined in Section 422(b) of the Internal
Revenue Code of 1986 (the "Code"), as amended, and stock options that do not
conform to the requirements of that Code section ("Non-Qualified Options,"
together with the "ISOs," the "Options"). The number of shares of Common Stock
which may be issued from time to time pursuant to the 1998 Option Plan is
950,000. As of April 1, 1999, the Board has granted options covering 802,000
shares of Common Stock pursuant to the 1998 Option Plan.
Administration and Eligibility
The Administrator of the 1998 Option Plan (the "Administrator") will be the
Board of Directors, except to the extent the Board of Directors delegates its
authority to the Compensation Committee of the Board of Directors, in which case
the Compensation Committee will be the Administrator. Subject to the provisions
of the 1998 Option Plan, the Administrator is authorized to:
<PAGE>
a) Interpret the provisions of the 1998 Option Plan or of any option
agreement and to make all rules and determinations which it deems
necessary or advisable for the administration of the 1998 Option Plan;
b) Determine which employees of the Company shall be designated as key
employees and which of the key employees, directors and consultants will
be granted Options;
c) Determine the number of shares for which an Option or Options will be
granted; and
d) Specify the terms and conditions upon which an Option or Options may be
granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions must be made and prescribed in the context of preserving the tax
status under Section 422 of the Internal Revenue Code of those Options which are
designated as ISOs. Subject to the foregoing, the interpretation and
construction by the Administrator of any provisions of the 1998 Option Plan or
of any Option granted under it will be final, unless otherwise determined by the
Board of Directors, if the Administrator is the Compensation Committee.
The Administrator will, in its sole discretion, name the participants in
the 1998 Option Plan; provided, however, that each participant must be a key
employee, director or consultant of the Company at the time an Option is
granted. Notwithstanding the foregoing, the Administrator may authorize the
grant of an Option to a person not then an employee, director or consultant of
the Company; provided, however, that the actual grant of such Option must be
conditioned upon such person becoming eligible to become a participant at or
prior to the time of the delivery of the option agreement evidencing such
Option. ISOs may be granted only to key employees and consultants, including
without limitation, an employee who is also serving as an officer or director of
the Company. Non-Qualified Options may be granted to any key employee or
director of or any consultant to the Company. The granting of any Option to any
individual shall neither entitle that individual to, nor disqualify him or her
from, participation in any other grant of Options.
As of April 1, 1999, approximately 14 employees, directors and consultants
were eligible to participate in the 1998 Option Plan.
Exercise Price
For Non-Qualified Options, the exercise price per share is determined by
the Administrator, subject to the limitation that the exercise price at least
equal the par value per share of the Common Stock (i.e. $0.000333 per share).
For ISOs, the exercise price per share is determined by the Administrator,
subject to the limitation that it at least equal 100% of the fair market value
per share of Common Stock on the date of grant of the ISO. If the optionee owns
more than 10% of the total combined voting power of the Company, the exercise
price per share must at least equal 110% of the fair market value per share of
Common Stock on the date of grant of the ISO.
Term
The term of Non-Qualified Options is determined by the Administrator. For
ISOs, the term of the Option, like the exercise price, is dependent upon the
ownership interest of the optionee in the Company. Generally, the term of an
ISO will be ten years. However, if the optionee owns more than 10% of the total
combined voting power of the Company, the term of the ISO will be no more than
five years. An Option is subject to early termination upon the termination of
employment or other relationship of the optionee with the Company, whether such
termination is at the option of the Company, the optionee, or as a result of the
death or disability of the optionee.
Vesting and Exercisability
An Option may be exercised by giving writing notice to the Company,
together with provision for payment of the full exercise price for the number of
shares as to which the Option is being exercised. The ability of an optionee to
exercise an Option, however, is subject to the vesting of the Option. At the
time the Option is granted, a vesting period is established, which generally
extends over a period of three years. As the Option vests, an optionee will be
able to exercise the Option with respect to the vested portion of the shares and
ultimately with respect to all of the vested shares, until such time as the
Option expires or terminates.
Federal Income Tax Consequences Relating to Stock Options
Incentive Stock Options. An optionee does not realize taxable income upon
the grant or exercise of an ISO under the 1998 Option Plan. If no disposition
of shares issued to an optionee pursuant to the exercise of an ISO is made by
the optionee within two years from the date of grant or within one year from the
date of exercise, then (a) upon sale of such shares, any gain or loss sustained
will be a long-term capital gain or loss, and (b) no deduction will be allowed
to the Company for Federal income tax purposes. The exercise of ISOs gives rise
to an adjustment in computing alternative minimum taxable income that may result
in alternative minimum tax liability for the optionee.
<PAGE>
If shares of Common Stock acquired upon the exercise of an ISO are disposed
of prior to the expiration of the two-year and one-year holding periods
described above (a "disqualifying disposition"), then (a) the optionee realizes
ordinary income in the year of disposition in an amount equal to the excess (if
any) of the fair market value of the shares at exercise (or, if less, the amount
realized on a sale of such shares) over the option price thereof, and (b) the
Company is entitled to deduct such amount. Any further gain realized is taxed
as a short-term or long-term capital gain and does not result in any deduction
to the Company. A disqualifying disposition in the year of exercise will
generally avoid the alternative minimum tax consequences of the exercise of an
ISO.
Non-Statutory Stock Options. No income is realized by the optionee at the
time a non-statutory option is granted. Upon exercise, (a) ordinary income is
realized by the optionee in an amount equal to the difference between the option
price and the fair market value of the shares on the date of exercise, and (b)
the Company receives a tax deduction for the same amount. Upon disposition of
the shares, appreciation or depreciation after the date of exercise is treated
as short-term or long-term capital gain or loss and will not result in any
deduction by the Company.
Required Vote
The affirmative vote of a majority of the shares voted affirmatively or
negatively at the Meeting is required for the approval of the 1998 Option Plan
and the issuance of stock options in accordance with its terms.
THE BOARD OF DIRECTORS BELIEVES THAT THE ADOPTION OF THE 1998 OPTION PLAN
IS IN THE BEST INTEREST OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A
VOTE FOR WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAD THE PROPOSAL TO
APPROVE THE 1998 OPTION PLAN AND PROXIES SOLICITED BY THE BOARD INDICATED
OTHERWISE ON THE PROXY.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
to the Meeting. If any other business is properly brought before the Meeting,
it is intended that proxies in the enclosed forms will be voted in respect
thereof in accordance with the judgement of the persons voting the proxies.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers, LLP,
independent public accountants, to audit the financial statements of the Company
for the fiscal year ending December 31, 1999. PricewaterhouseCoopers, LLP
(formerly Coopers & Lybrand, LLP) audited the Company's financial statements for
the fiscal year ended December 31, 1998. The Company does not expect that
representatives of PricewaterhouseCoopers, LLP will be present at the Meeting.
STOCKHOLDER PROPOSALS
To be considered for inclusion in the Proxy Statement relating to the
Annual Meeting of Stockholders to be held in 2000, stockholder proposals must be
received no later than December 10, 1999. To be considered for presentation at
the Annual Meeting, although not included in the Proxy Statement, proposals must
be received not later than March 18, 2000. All stockholder proposals should be
marked for the attention of Jeffrey A. Hollender, President and Chief Executive
Officer, Seventh Generation, Inc., One Mill Street, Box A26, Burlington, VT
05401-1530.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, YOU ARE URGED TO
FILL OUT, SIGN, DATE AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Anita B. Lavoie
----------------------------
Anita B. Lavoie
SECRETARY
April 19, 1999
<PAGE>
APPENDIX A
SEVENTH GENERATION, INC.
EMPLOYEE, DIRECTOR AND CONSULTANT
------------------------------------
1998 STOCK OPTION PLAN
-------------------------
1. DEFINITIONS.
-----------
Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this Seventh Generation, Inc. 1998 Employee,
Director and Consultant Stock Option Plan, have the following meanings:
Administrator means the Board of Directors, unless it has delegated power
-------------
to act on its behalf to the Committee, in which case the Administrator
means the Committee.
Affiliate means a corporation which, for purposes of Section 424 of the
---------
Code, is a parent or subsidiary of the Company, direct or indirect.
Board of Directors means the Board of Directors of the Company.
------------------
Code means the United States Internal Revenue Code of 1986, as amended.
----
Committee means the Compensation Committee of the Board of Directors to
---------
which the Board of Directors has delegated power to act under or pursuant
to the provisions of the Plan.
Common Stock means shares of the Company's common stock, $.000333 par value
------------
per share.
Company means Seventh Generation, Inc., a Vermont corporation.
-------
Disability or Disabled means permanent and total disability as defined in
---------- --------
Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
-----------------
(1) If the Common Stock is listed on a national securities exchange or
traded in the over-the-counter market and sales prices are regularly
reported for the Common Stock, either: (a) the average of the closing or
last prices of the Common Stock on the Composite Tape or other comparable
reporting system for
<PAGE>
the ten (10) consecutive trading days immediately preceding the applicable
date, or (b) the closing or last price of the Common Stock on the Composite
Tape or other comparable reporting system for the trading day immediately
preceding the applicable date, as the Administrator shall determine.
(2) If the Common Stock is not traded on a national securities exchange
but is traded on the over-the-counter market, if sales prices are not
regularly reported for the Common Stock for the trading days or day
referred to in clause (1), and if bid and asked prices for the Common Stock
are regularly reported, either: (a) the average of the mean between the bid
and the asked price for the Common Stock at the close of trading in the
over-the-counter market for the ten (10) trading days on which Common Stock
was traded immediately preceding the applicable date, or (b) the mean
between the bid and the asked price for the Common Stock at the close of
trading in the over-the-counter market for the trading day on which Common
Stock was traded immediately preceding the applicable date, as the
Administrator shall determine; and
(3) If the Common Stock is neither listed on a national securities
exchange nor traded in the over-the-counter market, such value as the
Administrator, in good faith, shall determine.
ISO means an option meant to qualify as an incentive stock option under
---
Section 422 of the Code.
Key Employee means an employee or consultant of the Company or of an
------------
Affiliate (including, without limitation, an employee who is also serving
as an officer or director of the Company or of an Affiliate), designated by
the Administrator to be eligible to be granted one or more Options under
the Plan.
Non-Qualified Option means an option which is not intended to qualify as an
--------------------
ISO.
Option means an ISO or Non-Qualified Option granted under the Plan.
------
Option Agreement means an agreement between the Company and a Participant
----------------
delivered pursuant to the Plan, in such form as the Administrator shall
approve.
Participant means a Key Employee, director or consultant to whom one or
-----------
more Options are granted under the Plan. As used herein, "Participant"
shall include "Participant's Survivors" where the context requires.
Plan means this Seventh Generation, Inc. 1998 Employee, Director and
----
Consultant Stock Option Plan.
2
<PAGE>
Shares means shares of the Common Stock as to which Options have been or
------
may be granted under the Plan or any shares of capital stock into which the
Shares are changed or for which they are exchanged within the provisions of
Paragraph 3 of the Plan. The Shares issued upon exercise of Options granted
under the Plan may be authorized and unissued shares or shares held by the
Company in its treasury, or both.
Survivors means a deceased Participant's legal representatives and/or any
---------
person or persons who acquired the Participant's rights to an Option by
will or by the laws of descent and distribution.
2. PURPOSES OF THE PLAN.
--------------------
The Plan is intended to encourage ownership of Shares by Key Employees and
directors of and certain consultants to the Company in order to attract such
people, to induce them to work for the benefit of the Company or of an
Affiliate, and to provide additional incentive for them to promote the success
of the Company or of an Affiliate. The Plan provides for the granting of ISOs
and Non-Qualified Options.
3. SHARES SUBJECT TO THE PLAN.
--------------------------
The number of Shares which may be issued from time to time pursuant to this
Plan shall be 950,000, or the equivalent of such number of Shares after the
Administrator, in its sole discretion, has interpreted the effect of any stock
split, stock dividend, combination, recapitalization or similar transaction in
accordance with Paragraph 16 of this Plan.
If an Option ceases to be "outstanding," in whole or in part, the Shares
which were subject to such Option shall be available for the granting of other
Options under the Plan. Any Option shall be treated as "outstanding" until such
Option is exercised in full, or terminates or expires under the provisions of
the Plan, or by agreement of the parties to the pertinent Option Agreement.
4. ADMINISTRATION OF THE PLAN.
--------------------------
The Administrator of the Plan will be the Board of Directors, except to the
extent the Board of Directors delegates its authority to the Committee, in which
case the Committee shall be the Administrator. Subject to the provisions of the
Plan, the Administrator is authorized to:
a. Interpret the provisions of the Plan or of any Option or Option
Agreement and to make all rules and determinations which it deems
necessary or advisable for the administration of the Plan;
b. Determine which employees of the Company or of an Affiliate shall be
designated as Key Employees and which of the Key Employees, directors
and consultants shall be granted Options;
3
<PAGE>
c. Determine the number of Shares for which an Option or Options shall be
granted; and
d. Specify the terms and conditions upon which an Option or Options may
be granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Section 422 of the Code of those Options which are designated as
ISOs. Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Option granted under it
shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is the Committee.
5. ELIGIBILITY FOR PARTICIPATION.
-----------------------------
The Administrator will, in its sole discretion, name the Participants in the
Plan; provided, however, that each Participant must be a Key Employee, director
or consultant of the Company or of an Affiliate at the time an Option is
granted. Notwithstanding the foregoing, the Administrator may authorize the
grant of an Option to a person not then an employee, director or consultant of
the Company or of an Affiliate; provided, however, that the actual grant of such
Option shall be conditioned upon such person becoming eligible to become a
Participant at or prior to the time of the delivery of the Option Agreement
evidencing such Option. ISOs may be granted only to Key Employees. Non-Qualified
Options may be granted to any Key Employee, director or consultant of the
Company or an Affiliate. The granting of any Option to any individual shall
neither entitle that individual to, nor disqualify him or her from,
participation in any other grant of Options.
6. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
Each Option shall be set forth in writing in an Option Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant. The Administrator may provide that Options be
granted subject to such terms and conditions, consistent with the terms and
conditions specifically required under this Plan, as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
shareholders of the Company of this Plan or any amendments thereto.
a. Non-Qualified Options: Each Option intended to be a Non-Qualified
---------------------
Option shall be subject to the terms and conditions which the
Administrator determines to be appropriate and in the best interest of
the Company, subject to the following minimum standards for any such
Non-Qualified Option:
4
<PAGE>
i. Option Price: Each Option Agreement shall state the option price
(per share) of the Shares covered by each Option, which option
price shall be determined by the Administrator but shall not be
less than the par value per share of Common Stock;
ii. Each Option Agreement shall state the number of Shares to
which it pertains;
iii. Each Option Agreement shall state the date or dates on which
it first is exercisable and the date after which it may no longer
be exercised, and may provide that the Option rights accrue or
become exercisable in installments over a period of months or
years, or upon the occurrence of certain conditions or the
attainment of stated goals or events; and
iv. Exercise of any Option may be conditioned upon the
Participant's execution of a Share purchase agreement in form
satisfactory to the Administrator providing for certain
protections for the Company and its other shareholders, including
requirements that:
1. The Participant's or the Participant's Survivors' right to
sell or transfer the Shares may be restricted; and
2. The Participant or the Participant's Survivors may be
required to execute letters of investment intent and must
also acknowledge that the Shares will bear legends noting
any applicable restrictions.
b. ISOs: Each Option intended to be an ISO shall be issued only to a Key
----
Employee and be subject to the following terms and conditions, with
such additional restrictions or changes as the Administrator
determines are appropriate but not in conflict with Section 422 of the
Code and relevant regulations and rulings of the Internal Revenue
Service:
i. Minimum Standards: The ISO shall meet the minimum standards
required of Non-Qualified Options, as described in Paragraph 6(A)
above, except clauses (a) thereunder.
ii. Option Price: Immediately before the Option is granted, if
the Participant owns, directly or by reason of the applicable
attribution rules in Section 424(d) of the Code:
1. Ten percent (10%) or less of the total combined voting power
of all classes of share capital of the Company or an
Affiliate, the Option price per share of the Shares covered
by each Option shall not be less than one hundred percent
(100%) of the Fair Market Value per share of the Shares on
the date of the grant of the Option.
5
<PAGE>
2. More than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or an
Affiliate, the Option price per share of the Shares covered
by each Option shall not be less than one hundred ten
percent (110%) of the said Fair Market Value on the date of
grant.
iii. Term of Option: For Participants who own:
1. Ten percent (10%) or less of the total combined voting power
of all classes of share capital of the Company or an
Affiliate, each Option shall terminate not more than ten
(10) years from the date of the grant or at such earlier
time as the Option Agreement may provide.
2. More than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or an
Affiliate, each Option shall terminate not more than five
(5) years from the date of the grant or at such earlier time
as the Option Agreement may provide.
iv. Limitation on Yearly Exercise: The Option Agreements shall
restrict the amount of Options which may be exercisable in any
calendar year (under this or any other ISO plan of the Company or
an Affiliate) so that the aggregate Fair Market Value (determined
at the time each ISO is granted) of the stock with respect to
which ISOs are exercisable for the first time by the Participant
in any calendar year does not exceed one hundred thousand dollars
($100,000), provided that this subparagraph (d) shall have no
force or effect if its inclusion in the Plan is not necessary for
Options issued as ISOs to qualify as ISOs pursuant to Section
422(d) of the Code.
7. EXERCISE OF OPTIONS AND ISSUE OF SHARES.
---------------------------------------
An Option (or any part or installment thereof) shall be exercised by giving
written notice to the Company at its principal executive office address,
together with provision for payment of the full purchase price in accordance
with this Paragraph for the Shares as to which the Option is being exercised,
and upon compliance with any other condition(s) set forth in the Option
Agreement. Such written notice shall be signed by the person exercising the
Option, shall state the number of Shares with respect to which the Option is
being exercised, and shall contain any representation required by the Plan or
the Option Agreement. Payment of the purchase price for the Shares as to which
such Option is being exercised shall be made: (a) in United States dollars in
cash or by check, or (b) at the discretion of the Administrator, through
delivery of shares of Common Stock having a Fair Market Value equal as of the
date of the exercise to the cash exercise price of the Option, or (c) at the
discretion of the Administrator, by having the Company retain from the shares
otherwise issuable upon exercise of the Option, a number of shares having a Fair
Market Value equal as of the date of exercise to the exercise price of the
Option, or (d) at
6
<PAGE>
the discretion of the Administrator, by delivery of the grantee's personal
recourse note bearing interest payable not less than annually at no less than
100% of the applicable Federal rate, as defined in Section 1274(d) of the Code,
or (e) at the discretion of the Administrator, in accordance with a cashless
exercise program established with a securities brokerage firm, and approved by
the Administrator, or (f) at the discretion of the Administrator, by any
combination of (a), (b), (c), (d) and (e) above. Notwithstanding the foregoing,
the Administrator shall accept only such payment on exercise of an ISO as is
permitted by Section 422 of the Code.
The Company shall then reasonably promptly deliver the Shares as to which
such Option was exercised to the Participant (or to the Participant's Survivors,
as the case may be). In determining what constitutes "reasonably promptly," it
is expressly understood that the delivery of the Shares may be delayed by the
Company in order to comply with any law or regulation (including, without
limitation, state securities or "blue sky" laws) which requires the Company to
take any action with respect to the Shares prior to their issuance. The Shares
shall, upon delivery, be evidenced by an appropriate certificate or certificates
for fully paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date of exercise of
any installment of any Option; provided that the Administrator shall not
accelerate the exercise date of any installment of any Option granted to any Key
Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 19) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in Paragraph
6.B.d.
The Administrator may, in its discretion, amend any term or condition of an
outstanding Option provided: (i) such term or condition as amended is permitted
by the Plan, (ii) any such amendment shall be made only with the consent of the
Participant to whom the Option was granted, or in the event of the death of the
Participant, the Participant's Survivors, if the amendment is adverse to the
Participant, and (iii) any such amendment of any ISO shall be made only after
the Administrator, after consulting the counsel for the Company, determines
whether such amendment would constitute a "modification" of any Option which is
an ISO (as that term is defined in Section 424(h) of the Code) or would cause
any adverse tax consequences for the holder of such ISO.
8. RIGHTS AS A SHAREHOLDER.
-----------------------
No Participant to whom an Option has been granted shall have rights as a
shareholder with respect to any Shares covered by such Option, except after due
exercise of the Option and tender of the full purchase price for the Shares
being purchased pursuant to such exercise and registration of the Shares in the
Company's share register in the name of the Participant.
7
<PAGE>
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS.
--------------------------------------------
By its terms, an Option granted to a Participant shall not be transferable
by the Participant other than (i) by will or by the laws of descent and
distribution, or (ii) as otherwise determined by the Administrator and set forth
in the applicable Option Agreement. The designation of a beneficiary of an
Option by a Participant shall not be deemed a transfer prohibited by this
Paragraph. Except as provided above, an Option shall be exercisable, during the
Participant's lifetime, only by such Participant (or by his or her legal
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of any Option or of any rights
granted thereunder contrary to the provisions of this Plan, or the levy of any
attachment or similar process upon an Option, shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR DEATH OR
-------------------------------------------------------------------
DISABILITY.
----------
Except as otherwise provided in the pertinent Option Agreement, in the event
of a termination of service (whether as an employee, director or consultant)
with the Company or an Affiliate before the Participant has exercised all
Options, the following rules apply:
a. A Participant who ceases to be an employee, director or consultant of
the Company or of an Affiliate (for any reason other than termination
"for cause," Disability, or death for which events there are special
rules in Paragraphs 11, 12, and 13, respectively) may exercise any
Option granted to him or her to the extent that the Option is
exercisable on the date of such termination of service, but only
--------
within such term as the Administrator has designated in the pertinent
---------------------------------------------------------------------
Option Agreement.
----------------
b. Except as provided in Subparagraph (c) below, or Paragraph 12 or 13,
in no event may an Option Agreement provide, if the Option is intended
to be an ISO, that the time for exercise be later than three (3)
months after the Participant's termination of employment.
c. The provisions of this Paragraph, and not the provisions of Paragraph
12 or 13, shall apply to a Participant who subsequently becomes
Disabled or dies after the termination of employment, director status
or consultancy; provided, however, in the case of a Participant's
Disability or death within three (3) months after the termination of
employment, director status or consultancy, the Participant or the
Participant's Survivors may exercise the Option within one (1) year
after the date of the Participant's termination of employment, but in
no event after the date of expiration of the term of the Option.
8
<PAGE>
d. Notwithstanding anything herein to the contrary, if subsequent to a
Participant's termination of employment, termination of director
status or termination of consultancy, but prior to the exercise of an
Option, the Board of Directors determines that, either prior or
subsequent to the Participant's termination, the Participant engaged
in conduct which would constitute "cause," then such Participant shall
forthwith cease to have any right to exercise any Option.
e. A Participant to whom an Option has been granted under the Plan who is
absent from work with the Company or with an Affiliate because of
temporary disability (any disability other than a permanent and total
Disability as defined in Paragraph 1 hereof), or who is on leave of
absence for any purpose, shall not, during the period of any such
absence, be deemed, by virtue of such absence alone, to have
terminated such Participant's employment, director status or
consultancy with the Company or with an Affiliate, except as the
Administrator may otherwise expressly provide.
f. Except as required by law or as set forth in the pertinent Option
Agreement, Options granted under the Plan shall not be affected by any
change of a Participant's status within or among the Company and any
Affiliates, so long as the Participant continues to be an employee,
director or consultant of the Company or any Affiliate.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE".
--------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, the
following rules apply if the Participant's service (whether as an employee,
director or consultant) with the Company or an Affiliate is terminated "for
cause" prior to the time that all his or her outstanding Options have been
exercised:
a. All outstanding and unexercised Options as of the time the Participant
is notified his or her service is terminated "for cause" will
immediately be forfeited.
b. For purposes of this Plan, "cause" shall include (and is not limited
to) dishonesty with respect to the Company or any Affiliate,
insubordination, substantial malfeasance or non-feasance of duty,
unauthorized disclosure of confidential information, and conduct
substantially prejudicial to the business of the Company or any
Affiliate. The determination of the Administrator as to the existence
of "cause" will be conclusive on the Participant and the Company.
9
<PAGE>
c. "Cause" is not limited to events which have occurred prior to a
Participant's termination of service, nor is it necessary that the
Administrator's finding of "cause" occur prior to termination. If the
Administrator determines, subsequent to a Participant's termination of
service but prior to the exercise of an Option, that either prior or
subsequent to the Participant's termination the Participant engaged in
conduct which would constitute "cause," then the right to exercise any
Option is forfeited.
d. Any definition in an agreement between the Participant and the Company
or an Affiliate, which contains a conflicting definition of "cause"
for termination and which is in effect at the time of such
termination, shall supersede the definition in this Plan with respect
to such Participant.
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
-----------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, a
Participant who ceases to be an employee, director or consultant of the Company
or of an Affiliate by reason of Disability may exercise any Option granted to
such Participant:
a. To the extent exercisable but not exercised on the date of
Disability; and
b. In the event rights to exercise the Option accrue periodically, to the
extent of a pro-rata portion of any additional rights as would have
accrued had the Participant not become Disabled prior to the end of
the accrual period which next ends following the date of Disability.
The proration shall be based upon the number of days of such accrual
period prior to the date of Disability.
A Disabled Participant may exercise such rights only within the period ending
one (1) year after the date of the Participant's termination of employment,
directorship or consultancy, as the case may be, notwithstanding that the
Participant might have been able to exercise the Option as to some or all of the
Shares on a later date if the Participant had not become disabled and had
continued to be an employee, director or consultant or, if earlier, within the
originally prescribed term of the Option.
The Administrator shall make the determination both of whether Disability has
occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such determination).
If requested, the Participant shall be examined by a physician selected or
approved by the Administrator, the cost of which examination shall be paid for
by the Company.
10
<PAGE>
13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
---------------------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, in the event
of the death of a Participant while the Participant is an employee, director or
consultant of the Company or of an Affiliate, such Option may be exercised by
the Participant's Survivors:
a. To the extent exercisable but not exercised on the date of death; and
b. In the event rights to exercise the Option accrue periodically, to the
extent of a pro-rata portion of any additional rights which would have
accrued had the Participant not died prior to the end of the accrual
period which next ends following the date of death. The proration
shall be based upon the number of days of such accrual period prior to
the Participant's death.
If the Participant's Survivors wish to exercise the Option, they must take all
necessary steps to exercise the Option within one (1) year after the date of
death of such Participant, notwithstanding that the decedent might have been
able to exercise the Option as to some or all of the Shares on a later date if
he or she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of the Option.
14. PURCHASE FOR INVESTMENT.
-----------------------
Unless the offering and sale of the Shares to be issued upon the particular
exercise of an Option shall have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended (the "1933 Act"),
the Company shall be under no obligation to issue the Shares covered by such
exercise unless and until the following conditions have been fulfilled:
a. The person(s) who exercise(s) such Option shall warrant to the
Company, prior to the receipt of such Shares, that such person(s) are
acquiring such Shares for their own respective accounts, for
investment, and not with a view to, or for sale in connection with,
the distribution of any such Shares, in which event the person(s)
acquiring such Shares shall be bound by the provisions of the
following legend which shall be endorsed upon the certificate(s)
evidencing their Shares issued pursuant to such exercise or such
grant:
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by
any person, including a pledgee, unless: (1) either (a) a
Registration Statement with respect to such shares shall be
effective under the Securities Act of 1933, as amended, or (b)
the Company shall have received an opinion of counsel
satisfactory to it that an exemption from registration under such
Act is then available, and (2) there shall have been compliance
with all applicable state securities laws."
11
<PAGE>
b. At the discretion of the Administrator, the Company shall have
received an opinion of its counsel that the Shares may be issued upon
such particular exercise in compliance with the 1933 Act without
registration thereunder.
15. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
-----------------------------------------
Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised will
terminate and become null and void; provided, however, that if the rights of a
Participant or a Participant's Survivors have not otherwise terminated and
expired, the Participant or the Participant's Survivors will have the right
immediately prior to such dissolution or liquidation to exercise any Option to
the extent that the Option is exercisable as of the date immediately prior to
such dissolution or liquidation.
16. ADJUSTMENTS.
-----------
Upon the occurrence of any of the following events, a Participant's rights
with respect to any Option granted to him or her hereunder which has not
previously been exercised in full shall be adjusted as hereinafter provided,
unless otherwise specifically provided in the pertinent Option Agreement:
a. Stock Dividends and Stock Splits. If (i) the shares of Common Stock shall
--------------------------------
be subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, or (ii) additional shares or new or different shares
or other securities of the Company or other non-cash assets are distributed with
respect to such shares of Common Stock, the number of shares of Common Stock
deliverable upon the exercise of such Option may be appropriately increased or
decreased proportionately, and appropriate adjustments may be made in the
purchase price per share to reflect such events.
b. Consolidations or Mergers. If the Company is to be consolidated with or
-------------------------
acquired by another entity in a merger, sale of all or substantially all of the
Company's assets or otherwise (an "Acquisition"), the Administrator or the board
of directors of any entity assuming the obligations of the Company hereunder
(the "Successor Board"), shall, as to outstanding Options, either: (i) make
appropriate provision for the continuation of such Options by substituting on an
equitable basis for the Shares then subject to such Options either the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition or securities of any successor or acquiring
entity; or (ii) upon written notice to the Participants, provide that all
Options must be exercised (either to the extent then exercisable or, at the
discretion of the Administrator, all Options being made fully exercisable for
purposes of this Subparagraph), within a specified number of days of the date of
such notice, at the end of which period the Options shall terminate; or (iii)
terminate all Options in exchange for a cash payment equal to the excess of the
Fair Market Value of the shares subject to such Options (either to the extent
then exercisable or, at the discretion of the Administrator, all Options being
made fully exercisable for purposes of this Subparagraph) over the exercise
price thereof.
12
<PAGE>
c. Recapitalization or Reorganization. In the event of a recapitalization or
----------------------------------
reorganization of the Company (other than a transaction described in
Subparagraph B above) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock, a
Participant upon exercising an Option shall be entitled to receive for the
purchase price paid upon such exercise the securities which would have been
received if such Option had been exercised prior to such recapitalization or
reorganization.
d. Modification of ISOs. Notwithstanding the foregoing, any adjustments made
--------------------
pursuant to Subparagraph A, B or C with respect to ISOs shall be made only after
the Administrator, after consulting with counsel for the Company, determines
whether such adjustments would constitute a "modification" of such ISOs (as that
term is defined in Section 424(h) of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Administrator determines that
such adjustments made with respect to ISOs would constitute a modification of
such ISOs, it may refrain from making such adjustments, unless the holder of an
ISO specifically requests in writing that such adjustment be made and such
writing indicates that the holder has full knowledge of the consequences of such
"modification" on his or her income tax treatment with respect to the ISO.
17. ISSUANCES OF SECURITIES.
-----------------------
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. Except as
expressly provided herein, no adjustments shall be made for dividends paid in
cash or in property (including without limitation, securities) of the Company.
18. FRACTIONAL SHARES.
-----------------
No fractional shares shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional shares equal to the Fair Market Value thereof.
19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
------------------------------------------------------------------
The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant's
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an employee of the Company
or an Affiliate at the time of such conversion. Such actions may include, but
not be limited to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options. At the time of such
conversion, the Administrator (with the consent of the Participant) may impose
such conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed
to give
13
<PAGE>
any Participant the right to have such Participant's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.
20. WITHHOLDING.
-----------
In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or governmental regulation to be withheld
from the Participant's salary, wages or other remuneration in connection with
the exercise of an Option or a Disqualifying Disposition (as defined in
Paragraph 21), the Company may withhold from the Participant's compensation, if
any, or may require that the Participant advance in cash to the Company, or to
any Affiliate of the Company which employs or employed the Participant, the
amount of such withholdings unless a different withholding arrangement,
including the use of shares of the Company's Common Stock or a promissory note,
is authorized by the Administrator (and permitted by law). For purposes hereof,
the fair market value of the shares withheld for purposes of payroll withholding
shall be determined in the manner provided in Paragraph 1 above, as of the most
recent practicable date prior to the date of exercise. If the fair market value
of the shares withheld is less than the amount of payroll withholdings required,
the Participant may be required to advance the difference in cash to the Company
or the Affiliate employer. The Administrator in its discretion may condition the
exercise of an Option for less than the then Fair Market Value on the
Participant's payment of such additional withholding.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
----------------------------------------------
Each Key Employee who receives an ISO must agree to notify the Company in
writing immediately after the Key Employee makes a Disqualifying Disposition of
any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired Shares by exercising the
ISO. If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
22. TERMINATION OF THE PLAN.
-----------------------
The Plan will terminate on November 18, 2008, the date which is ten (10)
years from the earlier of the date of its adoption and the date of its approval
-------
by the shareholders of the Company. The Plan may be terminated at an earlier
date by vote of the shareholders of the Company; provided, however, that any
such earlier termination shall not affect any Option Agreements executed prior
to the effective date of such termination.
14
<PAGE>
23. AMENDMENT OF THE PLAN AND AGREEMENTS.
------------------------------------
The Plan may be amended by the shareholders of the Company. The Plan may
also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, and to the extent
necessary to qualify the shares issuable upon exercise of any outstanding
Options granted, or Options to be granted, under the Plan for listing on any
national securities exchange or quotation in any national automated quotation
system of securities dealers. Any amendment approved by the Administrator which
the Administrator determines is of a scope that requires shareholder approval
shall be subject to obtaining such shareholder approval. Any modification or
amendment of the Plan shall not, without the consent of a Participant, adversely
affect his or her rights under an Option previously granted to him or her. With
the consent of the Participant affected, the Administrator may amend outstanding
Option Agreements in a manner which may be adverse to the Participant but which
is not inconsistent with the Plan. In the discretion of the Administrator,
outstanding Option Agreements may be amended by the Administrator in a manner
which is not adverse to the Participant.
24. EMPLOYMENT OR OTHER RELATIONSHIP.
--------------------------------
Nothing in this Plan or any Option Agreement shall be deemed to prevent the
Company or an Affiliate from terminating the employment, consultancy or director
status of a Participant, nor to prevent a Participant from terminating his or
her own employment, consultancy or director status or to give any Participant a
right to be retained in employment or other service by the Company or any
Affiliate for any period of time.
25. GOVERNING LAW.
-------------
This Plan shall be construed and enforced in accordance with the laws of
the State of Vermont.
15
<PAGE>
SEVENTH GENERATION, INC.
THIS PROXY IS BEING SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS
The undersigned, revoking any previous proxies relating to these shares, hereby
acknowledges receipt of the Notice and Proxy Statement dated April 19, 1999 in
connection with the Annual Meeting to be held at 2:30 p.m. on Monday, May 17,
1999, at the Company's offices located at One Mill Street, Burlington, Vermont
05401-1530, and hereby appoints Jeffrey A. Hollender and Jeffrey M. Phillips,
and each of them (with full power to act alone), the attorneys and proxies of
the undersigned, with power of substitution to each, to vote all shares of the
Common Stock of SEVENTH GENERATION, INC. registered in the name provided herein
which the undersigned is entitled to vote at the 1999 Annual Meeting of
Stockholders, and at any adjournments thereof, with all the powers the
undersigned would have if personally present. Without limiting the general
authorization hereby given, said proxies are, and each of them is, instructed to
vote or act as follows on the proposals set forth in said Proxy.
PLEASE MARK VOTES AS IN THIS EXAMPLE. [X]
If you wish to vote in accordance with the Board of Directors' recommendations,
just sign on the reverse side; you need not mark any boxes.
1. Election of Directors.
FOR [ ] WITHHELD [ ]
The Board of Directors recommends a vote FOR all nominees.
Nominees: Arthur Gray, Jr., Jeffrey A. Hollender, Sheila Hollender,
Peter Graham, Yoram Samets, Barnet Feinblum, Gary Stein, and
Sarah Finnie Cabot
(or if any nominee is not available for election, such substitute
as the Board of Directors may designate)
-----------------------------------------------------------------
For all nominees except as noted above.
2. Adoption of the 1998 Employee, Director, and Consultant Stock Option Plan and
the options granted thereunder. The Board of Directors recommends a vote
FOR the adoption of the Plan and the options granted thereunder.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(SEE REVERSE SIDE)
This proxy when executed will be voted in the
manner directed herein. If no direction is made
this proxy will be voted FOR Proposals 1 and 2. In
their discretion the proxies are authorized to vote
upon such other matters as may properly come before
the meeting or any adjournments thereof.
Please sign exactly as name(s) appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
Date:
--------------------------------------------
Signature:
---------------------------------------
Signature:
---------------------------------------
