UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 ss.240.14a-11(c) or ss.240.14a-12
GARDENBURGER, INC.
(Exact Name of Registrant as Specified In Its Charter)
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:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
GARDENBURGER, INC.
1411 SW MORRISON STREET, SUITE 400
PORTLAND, OREGON 97205
March 19, 1998
Dear Shareholders:
Our Annual Meeting of Shareholders will be held on Tuesday, April 21, 1998, at
10:00 a.m. Mountain Time, at the Little America Hotel and Towers, 500 South Main
Street, Salt Lake City, UT 84101. You are invited to attend this meeting to give
us an opportunity to meet you personally, to allow us to introduce to you the
key management of your Company and its Directors, and to answer questions you
may have.
The formal Notice of Meeting, the Proxy Statement, the proxy card and a copy of
the Annual Report to Shareholders describing the Company's operations for the
year ended December 31, 1997 are enclosed.
I hope that you will be able to attend the meeting in person. Whether or not you
plan to attend the meeting, please sign and return the enclosed proxy card
promptly. A prepaid return envelope is provided for this purpose. Your shares
will be voted at the meeting in accordance with your proxy.
If you have shares in more than one name, or if your stock is registered in more
than one way, you may receive multiple copies of the proxy materials. If so,
please sign and return each proxy card you receive so that all of your shares
may be voted. I look forward to meeting you at the Annual Meeting.
Yours for Better Health,
GARDENBURGER, INC.
E. Kay Stepp
CHAIRMAN OF THE BOARD OF DIRECTORS
<PAGE>
GARDENBURGER, INC.
1411 SW MORRISON STREET, SUITE 400
PORTLAND, OREGON 97205
----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 1998
-----------------------
To the Shareholders of Gardenburger, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of GARDENBURGER,
INC. (the "Company"), an Oregon corporation, will be held at the Little America
Hotel and Towers, 500 South Main Street, Salt Lake City, UT 84101, on Tuesday,
April 21, 1998, at 10:00 a.m. Mountain Time. The purposes of the Annual Meeting
will be:
1. To elect the Board of Directors to serve until the next Annual Meeting
of Shareholders (Proposal No. 1) and;
2. To consider and act upon any other matter which may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Friday, March 6, 1998,
as the record date for determining shareholders entitled to notice of and to
vote at the meeting or any adjournment thereof. Only holders of record of Common
Stock of the Company at the close of business on the record date will be
entitled to notice of and to vote at the meeting and any adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting. A review of
the Company's operations for the year ended December 31, 1997 will be presented.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY RETURN
THE ENCLOSED PROXY CARD, WHICH YOU MAY REVOKE AT ANY TIME PRIOR TO ITS USE. A
prepaid, self-addressed envelope is enclosed for your convenience. Your shares
will be voted at the meeting in accordance with your proxy. If you attend the
meeting, you may revoke your proxy and vote in person.
By Order of the Board of Directors:
E. KAY STEPP
CHAIRMAN OF THE BOARD OF DIRECTORS
Portland, Oregon
March 19, 1998
<PAGE>
GARDENBURGER, INC.
1411 SW MORRISON STREET, SUITE 400
PORTLAND, OREGON 97205
-----------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 1998
----------------------
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying Annual Report to Shareholders, the
Notice of Annual Meeting and the proxy card are being furnished to the
shareholders of Gardenburger, Inc. (the "Company"), an Oregon corporation, in
connection with the solicitation of proxies by the Company's Board of Directors
for use at the Company's 1998 Annual Meeting of Shareholders (the "Annual
Meeting") to be held at the Little America Hotel and Towers, 500 South Main
Street, Salt Lake City, UT 84101, on Tuesday, April 21, 1998, at 10:00 a.m.
Mountain Time and any adjournment thereof. The solicitation of proxies by mail
may be followed by personal solicitation of certain shareholders by officers or
regular employees of the Company without additional compensation for such
services. All expenses of the Company associated with this solicitation will be
borne by the Company. In addition, the Company reserves the right to utilize the
services of an independent proxy solicitation firm to assist with the
solicitation of proxies. If the services of an independent proxy solicitation
firm are used, the cost is estimated not to exceed $4,000.
The two persons named as proxies on the enclosed proxy card, E. Kay Stepp and
Richard C. Dietz, were designated by the Board of Directors. All properly
executed proxies will be voted (except to the extent that authority to vote has
been withheld) and where a choice has been specified by the shareholder as
provided in the proxy card, it will be voted in accordance with the
specification so made. Proxies submitted without specification will be voted FOR
Proposal No. 1 to elect the nominees for Directors proposed by the Board of
Directors.
A proxy may be revoked by a shareholder prior to its exercise by written notice
to the Secretary of the Company, by submission of another proxy bearing a later
date or by voting in person at the Annual Meeting. Such notice or later proxy
will not affect a vote on any matter taken prior to the receipt thereof by the
Company.
These proxy materials and the Company's 1997 Annual Report to Shareholders are
first being mailed on or about March 19, 1998 to shareholders of record on March
6, 1998 of the Company's Common Stock. The principal executive office and
mailing address of the Company is 1411 SW Morrison Street, Suite 400, Portland,
Oregon 97205.
1
<PAGE>
VOTING AT THE MEETING
The shares of Common Stock constitute the only class of securities entitled to
notice of and to vote at the meeting. In accordance with the Company's Bylaws,
the stock transfer records were compiled on March 6, 1998, the record date set
by the Board of Directors for determining the shareholders entitled to notice
of, and to vote at, this meeting and any adjournment thereof. On that date,
there were 8,613,868 shares of Common Stock outstanding and entitled to vote.
The closing price of the Company's Common Stock on that date was $10.875 as
reported by the Nasdaq National Market System.
Each share of Common Stock outstanding on the record date is entitled to one
vote per share at the Annual Meeting. If a quorum is present at the Annual
Meeting, the six (6) nominees for election as Directors who receive the greatest
number of votes cast for the election of Directors by the shares of Common Stock
present in person or represented by proxy at the meeting and entitled to vote
shall be elected Directors.
With respect to the election of Directors, Directors are elected by a plurality
of the votes cast and only votes cast in favor of a nominee will have an effect
on the outcome. Therefore, abstention from voting or nonvoting by brokers will
have no effect thereon. A broker "nonvote" occurs when a nominee holding shares
for a beneficial owner votes on one proposal, but does not vote on another
proposal because the nominee does not have discretionary voting power and has
not received instructions from the beneficial owner.
2
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Six (6) Directors, comprising a full slate for the Board of Directors of the
Company, are to be elected at the Annual Meeting. Directors are elected on an
annual basis. Each Director will serve until the next annual meeting of
shareholders and until his successor is duly elected and qualified. Proxies
cannot be voted for a greater number of persons than the number of nominees
named.
NOMINEES FOR DIRECTOR
The names and certain information concerning the persons to be nominated by the
Board of Directors at the Annual Meeting are set forth below. THE BOARD OF
DIRECTORS RECOMMENDS VOTING FOR THE ELECTION OF EACH OF THE NOMINEES NAMED
BELOW. Shares represented by the proxies will be voted for the election to the
Board of Directors of the persons named below unless authority to vote for a
particular Director or Directors has been withheld in the proxy. All nominees
have consented to serve as Directors for the ensuing year. The Board of
Directors has no reason to believe that any of the nominees will be unable to
serve as a Director. In the event of the death or unavailability of any nominee
or nominees, the proxy holders will have discretionary authority under the proxy
to vote for a suitable substitute nominee as the Board of Directors may
recommend. Proxies may not be voted for more than six (6) nominees. The Board of
Directors has nominated the persons named in the following table to be elected
as Directors:
<TABLE>
<CAPTION>
NAME POSITION AGE DIRECTOR SINCE
- ---- -------- --- --------------
<S> <C> <C> <C>
Lyle G. Hubbard President, Chief Executive Officer 47 1996
and Director
Richard L. Mazer Director 52 1998
Mary O. McWilliams Director 49 1995
Michael L. Ray Director 59 1995
E. Kay Stepp Chairman of the Board of Directors 53 1995
Paul F. Wenner Founder, Chief Creative Officer and 50 1985
Director
</TABLE>
LYLE G. HUBBARD joined the Company in April 1996 as President and Chief
Executive Officer. In November 1996, Mr. Hubbard was named as a Director of the
Company to fill the vacancy created by the death of Jack Lee. Prior to his
employment with the Company, Mr. Hubbard spent 15 years with the Quaker Oats
Company in Chicago, Illinois. During his tenure at Quaker Oats, Mr. Hubbard was
President of the $500 million Convenience Foods Retail Division and Senior Vice
President and Chief Marketing Officer for the $1.8 billion Gatorade and Snapple
Beverages, North America Division. While at Quaker, Mr. Hubbard was also
credited with turning around several businesses, including Quaker Rice Cakes.
Mr. Hubbard holds an M.B.A. with a specialization in marketing from the
University of Chicago and a B.A. degree with a psychology major from Lake Forest
College.
3
<PAGE>
RICHARD L. MAZER is currently the Executive Vice President and Chief Operating
Officer for Ventura Foods, LLC., a food processor. Mr. Mazer held management
positions in several companies before establishing his area of expertise as a
strategic and financial consultant to companies in the food industry. Mr. Mazer
has been involved in the food industry for the past 15 years. His most recent
venture included an advisory role with Wilsey Foods during its negotiations of a
merger with Holsum Foods to form Ventura Foods in 1996. Mr. Mazer is on the
Board of Trustees of Food for All (formerly Food Industry Crusade Against Hunger
- - FICAH). Mr. Mazer holds B.S. degrees in Economics and Management from MIT.
MARY O. MCWILLIAMS has been Executive Vice President of Health Care Services and
Boeing for Regence BlueShield since September 1997. Ms. McWilliams was
previously President and CEO of PacifiCare of Washington, beginning in 1994. She
also assumed responsibility for the Northwest Region of PacifiCare Health
Systems in 1995 and held these positions through 1996. Previous to PacifiCare,
she served as CEO for Sisters of Providence Health Plans in Oregon for 11 years.
Ms. McWilliams currently serves on the Board of Directors for the Seattle
Symphony Orchestra.
MICHAEL L. RAY has been on the faculty at Stanford University since 1967 and is
currently the John G. McCoy-Banc One Corporation Professor of Creativity and
Innovation and of Marketing at Stanford University's Graduate School of
Business. He is a specialist in new paradigm business, creativity, innovation,
marketing communication, advertising and the behavioral science approach to
marketing problems. Professor Ray is a psychologist with training and extensive
experience in advertising and marketing management. Professor Ray has
co-authored several books including ADVERTISING AND COMMUNICATION MANAGEMENT,
CREATIVITY IN BUSINESS, THE PATH OF THE EVERYDAY HERO, THE NEW PARADIGM IN
BUSINESS: EMERGING STRATEGIES FOR LEADERSHIP AND ORGANIZATIONAL CHANGE, THE NEW
ENTREPRENEURS: BUSINESS VISIONARIES FOR THE 21ST CENTURY, and others. Mr. Ray is
also on the Board of Directors of The Men's Wearhouse and is a founder, director
and Chief Creative Officer of Insight Out Collaborations Inc., a company that
offers training courses in creativity for corporations.
E. KAY STEPP formed and now operates Executive Solutions, Inc., a consulting
firm, which provides consulting services to senior executives and Boards of
Directors. In 1995, Ms. Stepp was named as the Chairman of the Board of the
Company. From 1989 to 1992, Ms. Stepp held the position of President and Chief
Operating Officer of Portland General Electric Company ("PGE"), a Portland,
Oregon, investor owned utilities company. From 1978 to 1989 Ms. Stepp held
various other positions at PGE including President of the Energy Service
Division, Vice President of Marketing and Operations and Vice President of Human
Resources and Administration. Ms. Stepp currently serves on the Boards of
Directors of Standard Insurance Company, Franklin Covey Company, Bank of the
Northwest and Working Assets. She is a former director of the Federal Reserve
Bank of San Francisco.
4
<PAGE>
PAUL F. WENNER founded the Company in 1985 as a sole proprietorship and acted as
its Vice President from the date of its incorporation until December 1989, when
he became the Company's President, Chief Executive Officer and Chairman of the
Board. In 1994, Mr. Wenner relinquished his duties as President and in 1995
relinquished his duties as Chairman of the Board, at which time he held the
title of Founder, Senior Chairman of the Board of Directors and Chief Executive
Officer. In April 1996, Mr. Wenner became Founder, Senior Chairman of the Board
and Chief Creative Officer. In 1997, he relinquished the title of Senior
Chairman of the Board, but remains a Director of the Company. From 1980 through
1984, he owned and operated the Garden House Restaurant and Gourmet Cooking
School (the "School"), where he developed the Gardenburger(R) veggie patty. The
School was affiliated with Mt. Hood Community College's evening educational
curriculum. Mr. Wenner graduated from Mt. Hood Community College in Portland,
Oregon in 1973, with two Associate of Arts degrees.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six (6) regular meetings and took action pursuant to
three (3) unanimous written consents during the year ended December 31, 1997.
During fiscal 1997, the Board of Directors had four committees including an
Executive Committee, a Finance and Audit Committee, an Executive Personnel and
Compensation Committee and a Nominating and Governance Committee. No Director
attended fewer than 75 percent of all Board Meetings and Committee Meetings for
which they served as members during 1997.
EXECUTIVE COMMITTEE The Executive Committee is composed of Mr. Wenner (Committee
Chair), Ms. Stepp and Mr. Hubbard. The Executive Committee coordinates the
business of the Board and oversees special projects authorized by the Board. The
Executive Committee did not meet during 1997.
AUDIT COMMITTEE The Finance and Audit Committee (the "Audit Committee") is
composed of Ms. Stepp (Committee Chair) and Ms. McWilliams, who are outside
Directors and have not been, at any time in the past, officers of the Company,
as well as Messrs. Wenner and Hubbard. The Audit Committee reviews the Company's
financial and operational activities and seeks to ensure that such activities
are performed in accordance with all internal and external auditing and
accounting requirements. It also evaluates the Company's relationship with its
outside auditors. The Audit Committee held two meetings in 1997.
COMPENSATION COMMITTEE The Executive Personnel and Compensation Committee (the
"Compensation Committee") is composed of Ms. McWilliams (Committee Chair), Ms.
Stepp and Mr. Ray, who are outside Directors and have not been, at any time in
the past, officers of the Company, as well as Mr. Hubbard. The Compensation
Committee is responsible for designing and administering the Company's executive
and all other employee compensation plans, including the 1992 First Amended and
Restated Combination Stock Option Plan, providing oversight of other
compensation matters and establishing officer salaries and bonuses. Mr. Hubbard
does not participate in decisions regarding his own compensation. The
Compensation Committee held five regular meetings and took action pursuant to
one unanimous written consent during 1997.
5
<PAGE>
NOMINATING COMMITTEE The Nominating and Governance Committee (the "Nominating
Committee") is composed of Messrs. Hubbard, Ray and Wenner, Ms. Stepp and Ms.
McWilliams. The Nominating Committee is responsible for performing the Board's
annual self evaluation, locating potential candidates to fill Board vacancies,
and selecting the nominees to stand for election to the Board of Directors at
each annual meeting of shareholders. The Nominating Committee does not consider
nominees recommended by shareholders. During 1997, the Nominating Committee did
not hold any meetings separate from the Board meetings; the Nominating Committee
conducted its business during Board meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
From January to July 1997, the Executive Personnel and Compensation Committee
(the "Compensation Committee") was composed of Ms. McWilliams, Mr. Ray, Ms.
Stepp and Ralph M. Kovel, outside Directors who have not been, at any time in
the past, officers of the Company, in addition to Mr. Hubbard. Mr. Kovel
resigned from the Board in July 1997. During the remainder of 1997, the
Compensation Committee was composed of Ms. McWilliams (Committee Chair), Ms.
Stepp and Messrs. Ray and Hubbard. Mr. Hubbard does not participate in decisions
regarding his own compensation.
In November 1996, the Company entered into a consulting agreement with Ms.
Stepp, the Chairman of the Board of Directors, pursuant to which her duties are:
to preside at all meetings of the Board of Directors, to provide leadership to
the Board in reviewing and deciding upon matters which substantially impact the
manner in which the Company's business is conducted, to act in a general
advisory capacity to the Chief Executive Officer and other officers in all
matters concerning the interests and management of the Company, and to perform
such other duties as may be conferred by law or assigned by the Chief Executive
Officer or the Board. Ms. Stepp was paid $49,000 pursuant to the consulting
agreement during 1997. She also received a stock option grant covering 7,500
shares of the Company's Common Stock at a price of $11.0625 on November 1, 1997.
As of January 1, 1998, Ms. Stepp's agreement was amended to provide for a
quarterly payment of $5,000 payable in advance on each of January 1, 1998, April
1, 1998, July 1, 1998 and October 1, 1998.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 27, 1998, certain information
furnished to the Company with respect to beneficial ownership of the Company's
Common Stock of (i) each Director and Director nominee, (ii) the "named
executive officers" (as defined under "Executive Compensation"), (iii) all
persons known by the Company to be beneficial owners of more than 5% of its
Common Stock, and (iv) all current executive officers and Directors as a group.
<TABLE>
<CAPTION>
COMMON STOCK (A)
--------------------------------------------
NUMBER OF PERCENT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OUTSTANDING
- ------------------------------------------------------- ------------------ -------------------------
<S> <C> <C>
Paul F. Wenner (B) (C) 1,926,920 20.0%
Lyle G. Hubbard (C) 244,750 2.8%
Michael P. Rubic (C) 71,500 *
Richard C. Dietz (C) 61,750 *
Charles A. Monahan (C) 45,000 *
E. Kay Stepp (C) (D) 38,485 *
Michael L. Ray (C) 10,000 *
Mary O. McWilliams (C) 7,000 *
Richard L. Mazer - -
All current executive officers and Directors as
a group (7 persons) (C) 2,288,905 22.9%
- ---------------------
*Less than one percent
</TABLE>
(A) Applicable percentage of ownership is based on 8,608,854 shares of Common
Stock outstanding as of February 27, 1998 together with applicable options
held by each shareholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission, and includes
voting and investment power with respect to shares. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable within
60 days after February 27, 1998 are deemed outstanding for purposes of
computing the percentage ownership of the person or group holding such
options or warrants, but are not deemed outstanding for computing the
percentage of any other person. Unless otherwise indicated, each of the
shareholders named above has sole voting and investment power with respect
to all shares shown as being beneficially owned by them.
(B) Mr. Wenner's address is 1411 SW Morrison Street, Suite 400, Portland,
Oregon 97205.
(C) Includes shares subject to options exercisable within 60 days after
February 27, 1998, as follows: Mr. Wenner, 1,036,240 shares; Mr. Hubbard,
229,250 shares; Mr. Rubic, 71,500 shares; Mr. Dietz, 61,750 shares; Mr.
Monahan, 45,000 shares; Ms. Stepp, 28,500 shares; Mr. Ray, 9,000 shares;
Ms. McWilliams, 6,000 shares; and all current executive officers and
directors as a group, 1,370,740 shares.
(D) Includes 4,935 shares owned by Ms. Stepp's husband, as to which Ms. Stepp
has indirect ownership. Ms. Stepp does not have any voting or investment
power with respect to such shares owned by her husband.
7
<PAGE>
EXECUTIVE OFFICERS
The following table identifies the executive officers of the Company as of March
6, 1998, the positions they hold, and the year in which they began serving in
their respective capacities. Officers of the Company are elected by the Board of
Directors at the Annual Meeting to hold office until their successors are
elected and qualified.
<TABLE>
<CAPTION>
POSITION HELD
NAME AGE CURRENT POSITION(S) WITH COMPANY SINCE
- ----------------------------- ------- -------------------------------------------- ----------------
<S> <C> <C> <C>
Lyle G. Hubbard 47 President, Chief Executive Officer and 1996
Director
Paul F. Wenner 50 Founder, Chief Creative Officer and 1996
Director
Richard C. Dietz 36 Executive Vice President, Chief 1996
Financial Officer, Treasurer and
Secretary
</TABLE>
For information on the business backgrounds of Messrs. Hubbard and Wenner see
"Nominees for Director" above.
RICHARD C. DIETZ, C.P.A. joined the Company in August 1994 as Executive Vice
President, Treasurer and Chief Financial Officer. In May 1995, Mr. Dietz was
also named as the Assistant Secretary of the Company. In 1996, Mr. Dietz was
named as the Secretary of the Company. From 1993 to July 1994, Mr. Dietz served
as Vice President and Chief Financial Officer of Fine Arts Graphics Corporation
of Oregon. From 1990 to 1993, Mr. Dietz was the Chief Financial Officer of Wyatt
Software, Inc. Mr. Dietz received his public accounting experience with Arthur
Andersen LLP from 1983 to 1987. He received a B.S. in Business Administration
from Oregon State University in 1984 and an M.B.A. from the University of Oregon
in 1991 and has also attended the Executive Education Series at the Harvard
Business School.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning compensation
awarded to, earned by or paid to the Company's Chief Executive Officer, two
other current executive officers of the Company who received total salary and
bonus during 1997 of at least $100,000, and certain former executive officers
(collectively referred to as the "named executive officers") for the three years
ended December 31, 1997.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------------ ---------------
Securities All Other
Underlying Compen-
Name and Principal Position Year Salary (A) Bonus (B) Options ( #) sation
- ------------------------------ ------- ------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Lyle G. Hubbard, President, 1997 $239,365 $ 117,218 11,250 --
Chief Executive Officer and 1996 149,909 22,500 450,000 $ 180,000
Director (C) 1995 -- -- -- --
Paul F. Wenner, Chief Creative 1997 164,800 53,400 11,240 --
Officer and Director 1996 166,259 16,480 -- --
1995 191,948 10,000 -- --
Richard C. Dietz, Executive 1997 130,000 42,329 9,750 --
Vice President, Chief Financial 1996 120,473 19,500 10,000 --
Officer, Treasurer and 1995 100,318 10,000 40,000 --
Secretary
Charles A. Monahan, Vice 1997 120,000 38,570 9,000 --
President, Food Service 1996 109,486 18,000 10,000 --
Division (D) 1995 98,462 10,000 50,000 --
Michael P. Rubic, Former 1997 120,000 9,780 9,000 --
Executive Vice President, 1996 110,461 18,000 10,000 --
Operations (E) 1995 90,883 10,000 35,000 --
</TABLE>
(A) Amounts shown include cash compensation earned in each respective year,
including amounts deferred at the election of the Named Executive Officer
pursuant to the Company's 401(k) Plan.
(B) Bonus amounts earned in each respective year were paid in the first quarter
of the following year.
(C) Salary for 1996 includes amounts earned since April 1996 when Mr. Hubbard
joined the Company. All Other Compensation for 1996 represents a lump-sum
payment for relocation expenses.
(D) As of April 22, 1997, Mr. Monahan was no longer considered an executive
officer of the Company, although he remains employed by the Company.
(E) As of April 22, 1997, Mr. Rubic was no longer considered an executive
officer of the Company. Mr. Rubic's employment with the Company terminated
effective December 31, 1997.
9
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock options
under the Company's 1992 First Amended and Restated Combination Stock Option
Plan (the "1992 Plan") to the named executive officers in 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value
At Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term (B)
------------------------------------------------------------ ----------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted (A) Fiscal Year Price ($/Sh.) Date 5% 10%
- ---------------------- -------------- ------------ ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Lyle G. Hubbard 11,250 6.5% $ 7.00 2/10/07 $ 47,234 $ 121,859
Paul F. Wenner 8,240 4.8% 7.70 2/10/02 12,950 32,699
3,000 1.7% 6.78 4/22/07 8,853 27,787
Richard C. Dietz 9,750 5.6% 7.00 2/10/07 40,936 105,611
Charles A. Monahan 9,000 5.2% 7.00 2/10/07 37,787 97,487
Michael P. Rubic (C) 9,000 5.2% 7.00 9/28/98 1,968 5,062
</TABLE>
(A) Except for Mr. Wenner's option grant covering 3,000 shares, all option
grants listed above were immediately exercisable upon grant. Mr. Wenner's
option grant covering 3,000 shares vests and becomes exercisable on April
22, 1998, one year following the date of grant. See "Change-in-Control
Arrangements."
(B) These calculations are based on certain assumed annual rates of
appreciation as required by rules adopted by the Securities and Exchange
Commission requiring additional disclosure regarding executive
compensation. Under these rules, an assumption is made that the shares
underlying the stock options shown in this table could appreciate at rates
of 5% and 10% per annum on a compounded basis over the ten-year term of the
stock options. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Company's Common Stock and
overall stock market conditions. There can be no assurance that amounts
reflected in this table will be achieved.
(C) Mr. Rubic's employment with the Company terminated as of December 31, 1997;
therefore, the calculations of his potential gain were prepared based on an
expiration date of September 28, 1998.
10
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information concerning the exercise of options
during 1997 and unexercised options held at December 31, 1997 with respect to
the named executive officers.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Underlying Value of Unexercised
Shares Acquired Value Unexercised Options In-The-Money Options
On Exercise Realized At December 31, 1997 (#) At December 31, 1997 (B)
Name (#) (A) ($) (A) Exercisable Unexercisable Exercisable Unexercisable
-------------------- ---------------- ----------- ----------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Lyle G. Hubbard - - 141,250 320,000 $ 45,142 $59,198
Paul F. Wenner - - 1,033,240 3,000 8,081,557 6,285
Richard C. Dietz - - 57,750 22,000 27,530 13,874
Charles A. Monahan - - 43,000 26,000 26,124 13,874
Michael P. Rubic - - 71,500 6,000 38,286 13,875
</TABLE>
(A) The named executive officers did not exercise any options during 1997.
(B) Calculated based on the difference between the market value of the
underlying securities at December 31, 1997, $8.875 per share and the
exercise price of the unexercised options.
DIRECTOR COMPENSATION
During 1997, non-employee Directors of the Company received an annual retainer
of $5,000 paid in equal quarterly installments, $600 for each Board of Directors
meeting attended in person, $600 for each telephonic Board meeting lasting more
than two hours, $300 for each telephonic Board meeting lasting less than two
hours, $500 for each committee meeting attended in person, $500 for each
telephonic committee meeting lasting more than two hours and $250 for each
telephonic committee meeting lasting less than two hours. The non-employee
Directors are also reimbursed for their expenses in attending meetings of the
Company's Board of Directors. Each non-employee, eligible Director, as well as
Mr. Wenner, also automatically receives an annual stock option grant under the
1992 Plan covering 3,000 shares of the Company's Common Stock on the date of
each Annual Meeting of Shareholders. The Company pays no additional compensation
to employees of the Company who serve as Directors. Beginning in January 1998,
non-employee Directors of the Company will receive a retainer of $12,000 per
year and an option grant covering 6,000 shares of the Company's Common Stock
annually. See also "Compensation Committee Interlocks and Insider Participation
in Compensation Decisions."
11
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-
CONTROL ARRANGEMENTS
EMPLOYMENT CONTRACTS
Mr. Hubbard, the Company's President and Chief Executive Officer, has a
three-year employment agreement (the "Agreement") with the Company that expires
on April 13, 1999, subject to one-year extensions beginning in 1998, unless
terminated earlier pursuant to the terms of the Agreement. The Agreement calls
for base compensation of $225,000 per year plus performance-based bonus
opportunities. Mr. Hubbard was also granted a nonstatutory stock option covering
300,000 shares of the Company's Common Stock, of which 120,000 shares have
vested and an additional 20 percent will vest on each of April 14, 1998 and
1999. A second option covering 150,000 shares of the Company's Common Stock was
granted concurrently, of which 10,000 shares have vested and 20,000 shares will
vest in 1998, 30,000 in 1999, 40,000 in 2000, and 50,000 in 2001, in each case
subject to acceleration upon satisfaction of specified performance criteria
based on net sales, income as a percentage of net sales and return on
shareholders' equity. Both options will immediately vest in full upon Mr.
Hubbard's termination without cause (as defined in the Agreement) or a change in
control of the Company (as defined below). Mr. Hubbard has also entered into
non-compete and confidentiality provisions. The Agreement also specifies that,
if Mr. Hubbard's employment is terminated without cause, by reason of death or
disability, within 180 days following a change in control of the Company or due
to the Company's failure to extend the term of the Agreement, Mr. Hubbard will
be entitled to receive the greater of 18 months' base compensation or the amount
remaining to be paid under the Agreement.
TERMINATION OF EMPLOYMENT
In connection with termination other than for cause, each executive officer of
the Company, unless covered by a separate agreement, is entitled to receive six
months' salary and benefits plus up to an additional six months' salary and
benefits until new employment is found. In addition, all unvested options held
by the executive officer will become immediately exercisable and will have a
five-year term from the date of termination.
CHANGE-IN-CONTROL ARRANGEMENTS
Options granted to executive officers of the Company after May 24, 1995 contain
termination of employment and change-in-control provisions to the effect that
such options will immediately vest as to any option shares that have not then
become vested upon (i) the termination of the employment of the optionee by the
Company without cause, or as a result of the optionee's death or disability; or
(ii) a "Change-in-Control" of the Company, which shall be deemed to have
occurred upon the earlier of:
(a) the date that any "person" (as defined in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, becomes a beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 25 percent or more of the
combined voting power of the Company's then outstanding securities; or
(b) the date of any annual or special meeting of shareholders at which
a majority of the Directors then elected are not individuals nominated by the
Company's then incumbent Board; or
12
<PAGE>
(c) the date of approval by the shareholders of the Company of a plan
of merger or consolidation of the Company in which such shareholders will not
hold at least 75 percent of the combined voting power of the resulting entity
immediately following such merger or consolidation, or the approval by the
shareholders of the Company of a plan of complete liquidation of the Company or
an agreement for the sale of substantially all of the Company's assets.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors approves all of the
policies under which compensation is paid or awarded to the Company's executive
officers. The Board of Directors is responsible for reviewing executive officer
compensation with dollar amounts established by the Chief Executive Officer in
accordance with policies approved by the Board. Executive officers who serve on
the Board of Directors do not participate in decisions concerning their own
compensation. Awards to executive officers under the Company's 1992 First
Amended and Restated Combination Stock Option Plan are made by the Compensation
Committee.
COMPENSATION PHILOSOPHY AND POLICIES
The Company's philosophy is to structure executive officer compensation so that
it will attract, motivate and retain senior management by providing an
opportunity for competitive compensation based on the performance of the
Company. Executive officer compensation includes market competitive base
salaries, annual performance-based bonuses, 401(k) contributions and long-term
stock-based incentive opportunities in the form of options exercisable to
purchase the Company's Common Stock. Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), places a limit on the amount of compensation
that may be deducted by the Company in any year with respect to each of the
Company's named executive officers. It is the policy of the Board of Directors
that, to the extent possible, compensation will be structured so that it meets
the "performance-based" criteria as defined by Section 162(m) of the Code and
therefore is not subject to federal income tax deduction limitations. The Board
of Directors has the right to waive pre-established performance criteria in
granting awards.
BASE SALARIES
In setting the salaries and bonuses for 1997 of the named executive officers
listed in the Summary Compensation Table above, the Company utilized a study
prepared by Towers Perrin. The study surveyed companies within the Company's
industry and looked at factors such as annual revenues and expected growth
rates. Some of the companies included in the above mentioned survey are also
included in the indices used in the Performance Graph included in this Proxy
Statement. Base salaries are targeted to be near the 50th percentile of the
comparison companies.
ANNUAL BONUSES
The Company's 1997 Executive Bonus Plan provided for performance-based bonuses
based on meeting targets in two areas: revenue growth and operating income.
Towers Perrin assisted the Compensation Committee in the determination of bonus
criteria and target amounts relative to annual base salary. Bonuses of between
$9,780 and $117,218 were paid in the first quarter of 1998 to the named
executive officers. The bonus paid to the Chief Executive Officer related to
1997 performance was $117,218.
13
<PAGE>
CAPITAL ACCUMULATION/RETIREMENT PLANS
The Company offers its employees the opportunity to participate in a defined
contribution retirement (401(k)) plan designed to allow employees, including
executive officers, to accumulate retirement funds. The first two percent of
each employee's compensation is eligible for a pro-rata matching contribution by
the Company.
STOCK OPTION AWARDS FOR 1997
The Company's 1992 First Amended and Restated Combination Stock Option Plan
provides for the issuance of stock options to officers and employees of the
Company to purchase shares of the Company's Common Stock at an exercise price
equal to no less than 100% of the fair market value of the Company's Common
Stock on the date of grant. Stock options are granted to aid in attracting and
retaining key employees and to align the interests of key employees with those
of shareholders by providing an economic incentive to maximize shareholder
value. Stock options have value for employees only if the price of the Company's
stock increases above the fair market value on the date the option is granted.
The number of shares subject to stock options granted to an employee are based
on the employee's ability to affect corporate results, which generally depends
on the level and amount of responsibility. Towers Perrin advised the
Compensation Committee as to the appropriate number of stock options to grant to
executive officers of the Company to remain competitive. See the "Option Grants
in Last Fiscal Year" table for a summary of stock options granted to the named
executive officers of the Company in 1997, which were targeted to be in the 50th
to 75th percentile of the companies included in the Towers Perrin survey. Mr.
Hubbard received options covering a total of 11,250 shares of the Company's
Common Stock in 1997 related to 1996 Company performance and options covering
40,000 shares of the Company's Common Stock in the first quarter of 1998 related
to 1997 Company performance.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
Mary O. McWilliams (Chair) Lyle G. Hubbard
Michael L. Ray E. Kay Stepp
14
<PAGE>
STOCK PERFORMANCE GRAPH
The SEC requires that registrants include in their proxy statement a line-graph
presentation comparing cumulative five-year shareholder returns on an indexed
basis, assuming a $100 initial investment and reinvestment of dividends, of (a)
the registrant, (b) a broad-based equity market index and (c) an
industry-specific index. The broad-based market index used is the Nasdaq Stock
Market Total Return Index U.S. and the industry-specific index used is the
Standard & Poors MidCap Foods Index.
<TABLE>
<CAPTION>
Annual Percentage Return
Year Ended
--------------------------------------------------------------------
Company/Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------------------------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Gardenburger, Inc. 518.98 (15.86) (33.70) (18.03) 44.00
Nasdaq U.S. Index 14.80 (2.26) 41.43 22.99 22.72
S&P MidCap Foods Index (4.41) (8.17) 29.76 10.65 23.79
</TABLE>
<TABLE>
<CAPTION>
Base Indexed Returns
Period Year Ended
-------------------------------------------------------------------
Company/Index 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------------------------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gardenburger, Inc. $100.00 $618.98 $520.83 $345.34 $283.06 $407.61
Nasdaq U.S. Index 100.00 114.80 112.21 158.70 195.19 239.53
S&P MidCap Foods Index 100.00 95.59 87.78 113.90 126.03 156.02
</TABLE>
15
<PAGE>
[STOCK PERFORMANCE GRAPH DIAGRAM]
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected Arthur Andersen LLP as its independent public
accountant for the year ended December 31, 1998. Arthur Andersen LLP was the
Company's independent public accountant for the year ended December 31, 1997. A
representative from Arthur Andersen LLP is expected to be present at the
Company's Annual Meeting of Shareholders, will be available to respond to
appropriate questions and will have the opportunity, although is not expected,
to make a statement if he desires to do so.
MANAGEMENT TRANSACTIONS
The Company's Board of Directors has adopted a policy that any transactions
between the Company and its officers, Directors, employees and affiliates will
be on terms no less favorable to the Company than can be obtained from
unaffiliated parties. Any such transactions will be subject to the approval of a
majority of the disinterested members of the Board of Directors.
Pursuant to a month-to-month lease, the Company leases its S.E. 8th Avenue plant
facility in Portland, Oregon from Paul Wenner, a Director and the Company's
Chief Creative Officer, and Frank Card, a shareholder. This lease agreement
provides for a $2,200 monthly payment, which is considered to be an arms-length
rate based on comparable rentals. The lease provides for cancellation, without
penalty, by either party upon a 30-day notice.
For a discussion of the consulting agreement with Ms. Stepp, Chairman of the
Board, see "Compensation Committee Interlocks and Insider Participation in
Compensation Decisions" above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors and executive
officers and persons who own more than 10 percent of the outstanding shares of
the Company's Common Stock ("10 percent shareholders"), to file with the SEC
initial reports of beneficial ownership and reports of changes in beneficial
ownership of shares of Common Stock and other equity securities of the Company.
To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company or otherwise in its files and on written
representations from its Directors, executive officers and 10 percent
shareholders that no other reports were required, during the fiscal year ended
December 31, 1997 and prior years, the Company's officers, Directors and 10
percent shareholders complied with all applicable Section 16(a) filing
requirements during 1997, except in the following instances: 1) Mr. Wenner, a
Director, executive officer and 10 percent shareholder of the Company, filed one
late report on Form 4, Statement of Changes in Beneficial Ownership, involving
one transaction and 2) Ms. Stepp, Chairman of the Board, filed one late report
on Form 4, Statement of Changes in Beneficial Ownership, involving one
transaction.
16
<PAGE>
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the Company's 1999 Annual
Meeting must be received by the Company at its principal executive office no
later than November 19, 1998 in order to be included in the Company's 1999 Proxy
Statement and proxy card.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware of
any other matters that may come before this meeting. It is the intention of the
persons named in the enclosed proxy to vote the proxy in accordance with their
best judgment if any other matters do properly come before the meeting.
Please return your proxy as soon as possible. Unless a quorum consisting of a
majority of the outstanding shares entitled to vote is represented at the
meeting, no business can be transacted. Therefore, please be sure to date and
sign your proxy exactly as your name appears on your stock certificate and
return it in the enclosed postage prepaid return envelope. Please act promptly
to ensure that you will be represented at this important meeting.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, ON THE WRITTEN REQUEST OF ANY
BENEFICIAL OWNER OF SHARES OF THE COMPANY'S COMMON STOCK ENTITLED TO VOTE AT THE
ANNUAL MEETING OF SHAREHOLDERS, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION FOR THE COMPANY'S
FISCAL YEAR ENDED DECEMBER 31, 1997. WRITTEN REQUESTS SHOULD BE MAILED TO THE
SECRETARY, GARDENBURGER, INC., 1411 SW MORRISON STREET, SUITE 400, PORTLAND,
OREGON 97205.
By Order of the Board of Directors:
E. Kay Stepp
Dated: March 19, 1998 CHAIRMAN OF THE BOARD OF DIRECTORS
17
<PAGE>
(BACK SIDE OF OCR PROXY CARD)
GARDENBURGER, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints E. Kay Stepp and Richard C. Dietz as
proxies, each with power to act alone and with full power of
substitution, to vote all of the shares that the undersigned is
entitled to vote at the Annual Meeting of Shareholders of
Gardenburger, Inc. to be held on April 21, 1998, at 10:00 a.m.
Mountain Time, and any adjournments thereof, with all the powers that
the undersigned would possess if personally present.
PLEASE MARK, SIGN, AND RETURN THE PROXY CARD PROMPTLY.
(Continued and to be signed on reverse side.)
<PAGE>
(FRONT SIDE OF OCR PROXY CARD)
X Please mark your
votes as in this
example.
THE SHARES REPRESENTED BY THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
IF NO SPECIFIC DIRECTION IS GIVEN AS TO THE ITEM BELOW, THIS PROXY WILL BE VOTED
FOR EACH OF THE NOMINEES NAMED IN PROPOSAL 1.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
LISTED BELOW.
- --------------------------------------------------------------------------------
FOR WITHHELD
[ ] [ ]
1.Election of Nominees:
Directors Lyle G. Hubbard, Richard L. Mazer,
(Check only one box) Mary O. McWilliams, Michael L. Ray,
E. Kay Stepp, Paul F. Wenner
Instruction: To withhold authority to vote for any individual nominee, mark
"For" above and write the individual's name on the line below.
- ------------------------------------------
- --------------------------------------------------------------------------------
In their discretion, the Proxies are authorized to consider and act upon any
other matter which may properly come before the meeting or any adjournment
thereof.
The undersigned acknowledge receipt of the 1998 Notice of Annual Meeting and
accompanying Proxy Statement and revokes all prior proxies for said meeting.
SIGNATURE(S)___________________________________________DATE_____________________
- --------------------------------------------------------------------------------
NOTE: Please sign exactly as name appears above. Joint owners each should sign.
Fiduciaries should add their full title to their signature. Corporations should
sign in full corporate name by an authorized officer. Partnerships should sign
in partnership name by an authorized person.
<PAGE>
YOU ARE CORDIALLY INVITED TO ATTEND THE
ANNUAL MEETING OF SHAREHOLDERS OF
GARDENBURGER, INC.
TO BE HELD
TUESDAY, APRIL 21, 1998, AT 10:00 A.M. MOUNTAIN TIME,
AT LITTLE AMERICA HOTEL AND TOWERS,
500 SOUTH MAIN STREET,
SALT LAKE CITY, UTAH 84101
