<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section 240.14a-12
Central Garden & Pet Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
CENTRAL GARDEN & PET COMPANY
3697 MT. DIABLO BOULEVARD
LAFAYETTE, CALIFORNIA 94549
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MONDAY, FEBRUARY 23, 1998, 10:30 A.M.
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of Central
Garden & Pet Company will be held at the LAFAYETTE PARK HOTEL, 3287 Mt. Diablo
Boulevard, Lafayette, California, on Monday, February 23, 1998, at 10:30 A.M.
for the following purposes:
(1) To elect four directors.
(2) To approve the amendment to the Company's Certificate of
Incorporation to increase (i) the number of shares of Common Stock
authorized for issuance by 40,000,000 and (ii) the number of shares
of Preferred Stock authorized for issuance by 999,000.
(3) To approve the amendment of the 1993 Omnibus Equity Incentive Plan
to increase the number of shares authorized for issuance thereunder
by 2,000,000.
(4) To transact such other business as may properly come before the
meeting.
Only stockholders of record on the books of the Company as of 5:00 P.M.,
January 2, 1998, will be entitled to vote at the meeting and any adjournment
thereof.
Dated: January 16, 1998 By Order of the Board of Directors
Robert B. Jones, Secretary
STOCKHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE.
<PAGE>
CENTRAL GARDEN & PET COMPANY
3697 MT. DIABLO BOULEVARD
LAFAYETTE, CALIFORNIA 94549
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Central Garden
& Pet Company (the "Company") to be used at the Annual Meeting of Stockholders
on February 23, 1998, for the purposes set forth in the foregoing notice. This
proxy statement and the enclosed form of proxy were first sent to stockholders
on or about January 23, 1998.
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted as recommended by
the Board of Directors. Any stockholder signing a proxy in the form
accompanying this Proxy Statement has the power to revoke it prior to or at
the Annual Meeting. A proxy may be revoked by a writing delivered to the
Secretary of the Company stating that the proxy is revoked, by a subsequent
proxy signed by the person who signed the earlier proxy, or by attendance at
the Annual Meeting and voting in person.
VOTING SECURITIES
Only stockholders of record on the books of the Company as of 5:00 P.M.,
January 2, 1998, will be entitled to vote at the Annual Meeting.
As of the close of business on January 2, 1998, there were outstanding
26,194,637 shares of Common Stock of the Company, entitled to one vote per
share, and 1,663,167 shares of Class B Stock of the Company, entitled to the
lesser of ten votes per share or 49% of the total votes cast. In addition,
there were 100 shares of Series A Preferred Stock outstanding, each of which
is convertible into 1,000 shares of Common Stock and has a number of votes
equal to the number of shares of Common Stock into which it is convertible.
Holders of Common Stock and Class B Stock will vote together on all matters
presented to the stockholders for their vote or approval at the meeting,
including the election of directors. The holders of a majority of the
outstanding shares of the stock of the Company, present in person or by proxy,
will constitute a quorum for the transaction of business at the Annual Meeting
or any adjournment thereof.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether
or not a quorum is present. The election inspectors will treat abstentions and
broker non-votes as shares that are present and entitled to vote for purposes
of determining the presence of a quorum but as unvoted for purposes of
determining the approval of any matter submitted to the stockholders for a
vote. With regard to the election of directors, votes may be cast "For" or
"Withhold Authority" for each nominee; votes that are withheld will be
excluded entirely from the vote and will have no effect. The proposal to amend
the Company's Certificate of Incorporation requires the approval of a majority
of the outstanding shares and the proposal to amend the 1993 Omnibus Equity
Incentive Plan requires the affirmative vote of a majority of shares present
in person or by proxy and entitled to vote. Accordingly, abstentions on the
proposal to amend the Company's Certificate of Incorporation and the proposal
to amend the 1993 Omnibus Equity Incentive Plan will have the effect of a
negative vote on these items. If a broker indicates on the proxy that it does
not have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote
with respect to that matter. Therefore, a broker non-vote will have the same
effect as a vote against the proposal to amend the Company's Certificate of
Incorporation, which requires the approval of a majority of the outstanding
shares. However, a broker non-vote will have no effect on the proposal to
amend the 1993 Omnibus Equity Incentive Plan, which requires the affirmative
vote of a majority of the shares represented at the Annual Meeting and
entitled to vote thereon.
<PAGE>
ELECTION OF DIRECTORS
The persons named below are nominees for director to serve until the next
Annual Meeting of Stockholders and until their successors shall have been
elected. The nominees constitute the present Board of Directors. In the
absence of instructions to the contrary, shares represented by the proxy will
be voted and the proxies will vote for the election of all such nominees to
the Board of Directors. If any of such persons is unable or unwilling to be a
candidate for the office of director at the date of the Annual Meeting, or any
adjournment thereof, the proxies will vote for such substitute nominee as
shall be designated by the proxies. The management has no reason to believe
that any of such nominees will be unable or unwilling to serve if elected a
director. Set forth below is certain information concerning the nominees which
is based on data furnished by them.
<TABLE>
<CAPTION>
SERVED AS
BUSINESS EXPERIENCE DURING PAST DIRECTOR
NOMINEES FOR DIRECTOR AGE FIVE YEARS AND OTHER INFORMATION SINCE
--------------------- --- ------------------------------------------- ---------
<C> <C> <S> <C>
William E. Brown............... 56 Chairman of the Board and Chief Executive 1980
Officer since 1980.
Glenn W. Novotny............... 50 President since June 1990. Prior to June 1990
1990, Mr. Novotny was with Weyerhaeuser
Corporation in a variety of capacities.
Lee D. Hines, Jr............... 51 Self-employed consultant since June 1993. 1992
From April 1991 until June 1993, Mr. Hines
was Executive Vice President and Chief
Financial Officer of the Company.
Daniel P. Hogan, Jr............ 69 Self-employed consultant. Prior to his 1993
retirement in 1987, Mr. Hogan was a Vice
President of Chevron Chemical Company and
General Manager of its Ortho Consumer
Products Division.
</TABLE>
FURTHER INFORMATION CONCERNING
THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
During fiscal 1997, the Board of Directors held seven meetings and acted by
unanimous written consent on a number of occasions. In 1993, after
consummation of its initial public offering, the Company established an Audit
and Compensation Committee. The Company does not have a Nominating Committee.
The members of the Audit and Compensation Committee are Lee D. Hines, Jr.
and Daniel P. Hogan, Jr.. Among the functions performed by this committee in
its capacity as an Audit Committee are to make recommendations to the Board of
Directors with respect to the engagement or discharge of independent auditors,
to review with the independent auditors the plan and results of the auditing
engagement, to review the Company's internal auditing procedures and system of
internal accounting controls and to make inquiries into matters within the
scope of its functions. Among the functions performed by this committee in its
capacity as a Compensation Committee are to review and make recommendations to
the Board of Directors concerning the compensation of the key management
employees of the Company and to administer the Company's equity incentive
plan. The Audit and Compensation Committee held seven meetings during fiscal
1997.
ATTENDANCE AT MEETINGS
During fiscal 1997, there were no members of the Board of Directors who
attended fewer than seventy-five percent of the meetings of the Board of
Directors and all committees of the Board on which they served.
2
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid directors fees
consisting of $12,000 per year and $1,000 for each Board meeting attended.
Directors who attend meetings of the Audit and Compensation Committee receive
an additional $1,000 for each meeting not held on the same day as a Board
meeting. In addition, Lee Hines performed certain consulting services for the
Company during fiscal 1997 for which he received compensation of $65,000.
Under the Non-Employee Director Stock Option Plan, Messrs. Hines and Hogan
will each be granted at the Annual Meeting and at each subsequent annual
meeting options to purchase the number of shares of Common Stock determined by
dividing $25,000 by the fair market value of a share of Common Stock on the
date of the Annual Meeting.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The compensation paid to the Company's Chief Executive Officer and the only
other executive officers who received compensation in excess of $100,000 for
services in all capacities to the Company and its subsidiaries during fiscal
1995, 1996 and 1997 is set forth below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------- ---------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPENSATION STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) ($)(2) AWARDS(#) OPTIONS(#) SATION($)(3)
- --------------------------- ------- --------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William E. Brown 1997 300,000 -- -- -- 300,000 --
Chairman and Chief 1996 300,000 -- -- -- 30,000 --
Executive Officer 1995 200,000 -- -- -- -- --
Glenn W. Novotny 1997 267,469 50,000 -- -- 30,000 2,700
President 1996 257,908 15,000 -- -- 30,000 2,250
1995 199,841 -- -- -- 37,000 2,250
Neill J. Hines 1997 174,120 15,000 -- -- 10,000 2,700
Executive Vice President 1996 160,656 -- -- -- 10,000 2,245
1995 103,508 -- -- -- 21,000 1,958
Robert B. Jones 1997 133,204 15,000 -- -- 15,000 2,102
Vice President, Chief 1996 118,165 -- -- -- 10,000 1,136
Financial Officer 1995 90,896 -- -- -- 21,000 --
</TABLE>
- --------
(1) In July 1995, the Company changed its fiscal year end to be the last
Saturday in September; as a result the fiscal year ending September 30,
1995 ("fiscal 1995") was a nine-month period.
(2) While the named executive officers enjoy certain perquisites, for fiscal
years 1995, 1996 and 1997 these did not exceed the lesser of $50,000 or
10% of each officer's salary and bonus.
(3) Represents the matching contribution which the Company made on behalf of
each executive officer to the Company's 401(k) Plan.
3
<PAGE>
The following table sets forth certain information regarding stock options
granted during fiscal 1997 to the executive officers named in the foregoing
Summary Compensation Table. None of such persons received awards of stock
appreciation rights during fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) (1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- ---- -------------- ------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
William E. Brown........ 300,000 45.4 21.125 12/27/06 1,750,934 3,869,107
Glenn W. Novotny........ 30,000 4.5 16.250 04/01/03 134,687 297,624
Neill J. Hines.......... 10,000 1.5 16.250 04/01/03 44,896 99,208
Robert B. Jones......... 15,000 2.3 16.250 04/01/03 67,344 148,812
</TABLE>
- --------
(1) All options granted in fiscal 1997 are exercisable in full, commencing one
year prior to expiration, except for those granted to Mr. Brown which vest
at a rate of 60,000 shares per year commencing December 27, 1997. Under
the terms of the Company's Stock Option Plan, the Audit and Compensation
Committee retains discretion, subject to plan limits, to modify the terms
of outstanding options.
(2) All options were granted at fair market value at date of grant.
(3) Realizable values are reported net of the option exercise price. The
dollar amounts under these columns are the result of calculations at the
5% and 10% rates (determined from the price at the date of grant, not the
stock's current market value) set by the Securities and Exchange
Commission and therefore are not intended to forecast possible future
appreciation, if any, of the Company's stock price. Actual gains, if any,
on stock option exercises are dependent on the future performance of the
Common Stock as well as the optionholder's continued employment through
the vesting period. The potential realizable value calculation assumes
that the optionholder waits until the end of the option term to exercise
the option.
The following table sets forth certain information with respect to option
exercises during fiscal 1997 and stock options held by each of the Company's
executive officers as of September 27, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END($)
SHARES --------------------- --------------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- --------------------- --------------------
<S> <C> <C> <C> <C>
William E. Brown........ -- -- 0/330,000 0/2,585,625
Glenn W. Novotny........ 873 6,984 9,487/ 97,000 179,660/1,607,188
Neill J. Hines.......... 590 5,387 5,128/ 41,000 97,112/ 752,038
Robert B. Jones......... 530 7,354 0/ 46,000 0/ 814,225
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Lee D. Hines, Jr., a member of the Board of Directors and the Audit and
Compensation Committee, performed certain consulting services for the Company
during fiscal 1997 for which he received compensation of $65,000.
4
<PAGE>
TRANSACTIONS WITH THE COMPANY
The Company leases a warehouse facility and certain related equipment in
Visalia, California from Road 80 Investors, a California general partnership
controlled by William E. Brown. In fiscal 1997, the Company paid approximately
$155,688 to Road 80 Investors under this lease.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK AND PREFERRED STOCK
In December 1997, the Board of Directors approved, subject to approval of
the stockholders at the Annual Meeting, (i) an increase in the number of
shares of authorized Common Stock from 40,000,000 shares to 80,000,000 shares
and (ii) an increase in the number of shares of authorized Preferred Stock
from 1,000 to 1,000,000, by adopting an amendment to the Certificate of
Incorporation of the Company. At January 2, 1998, 26,194,637 shares of the
Common Stock were issued and outstanding, 1,633,167 shares were reserved for
issuance upon conversion of outstanding Class B Stock, 100,000 shares were
reserved for issuance upon conversion of outstanding shares of Series A
Preferred Stock, 4,107,143 shares were reserved for future issuance upon the
assumed conversion of the Company's 6% Convertible Subordinated Notes due
2003, 1,682,238 shares were reserved for issuance upon exercise of options
under the Company's 1993 Omnibus Equity Incentive Plan, 100,000 shares were
reserved for issuance upon exercise of options under the Company's Nonemployee
Director Stock Option Plan, 400,000 shares were reserved for issuance under
the Company's Employee Stock Purchase Plan and 856,952 shares were reserved
for issuance under registration statements on Form S-4 for use in potential
acquisitions. At January 2, 1998, 100 shares of Preferred Stock were issued
and outstanding and 900 shares were available for future issuance. It is
intended that, unless otherwise directed by stockholders, proxies will be
voted for approval of the amendment.
The Board of Directors believes the proposed amendment is desirable
primarily to provide flexibility to issue additional shares of Common Stock
and Preferred Stock and to effect stock splits without further authorization
by the stockholders. The additional Common Stock and Preferred Stock
authorized by the amendment may be used for issuances deemed to be in the best
interest of the Company and its stockholders such as acquisitions, equity
financings or employee incentive plans. The Company presently has no
commitments that would involve the issuance of additional shares of Common
Stock or Preferred Stock.
The Company will apply for the designation for quotation on Nasdaq National
Market on which its Common Stock presently is quoted of the additional shares
of Common Stock which will be authorized as and when such shares are
authorized to be issued by the Board of Directors. Unless required by
applicable laws or Nasdaq National Market regulations, no further
authorization by vote of the stockholders will be solicited for the issuance
of additional shares of Common Stock or Preferred Stock.
POTENTIAL ANTI-TAKEOVER EFFECT
The proposed increases in authorized shares of Common Stock and Preferred
Stock could, under some circumstances, make attempts to acquire control of the
Company more difficult, although the Company has no present intention of
issuing additional shares for such purpose. Issuance of shares of Common Stock
or Preferred Stock could dilute the ownership interest and voting power of
stockholders of the Company who are seeking control. Shares of Common Stock or
Preferred Stock could be issued in a private placement to persons who support
the position of the Board of Directors and management in a takeover bid, or
other circumstances that could make more difficult, and thereby discourage
attempts to acquire control of the Company. To the extent that it impedes any
such attempts, the proposed amendment may serve to continue present
management.
REQUIRED VOTE
The affirmative vote of a majority of the outstanding shares of Common Stock
and Preferred Stock voting together and the affirmative vote of a majority of
the outstanding shares of Common Stock and Class B Stock, each voting
separately as a class, will be necessary to approve adoption of the amendment.
5
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
PROPOSAL TO AMEND THE
1993 OMNIBUS EQUITY INCENTIVE PLAN
At the Annual Meeting held in May 1994 the stockholders of the Company
adopted the 1993 Omnibus Equity Incentive Plan (the "Plan") pursuant to which
an aggregate of 900,000 shares of the Company's Common Stock were originally
reserved for issuance to key employees and consultants of the Company and its
subsidiaries. At the Annual Meetings held in May 1995 and February 1996, the
stockholders of the Company approved amendments to the Plan to increase the
number of shares authorized for issuance under the Plan by 300,000 shares and
800,000 shares, respectively. In November 1997, the Board of Directors of the
Company conditionally amended the Plan, subject to stockholder approval at the
Annual Meeting, to increase the number of shares authorized for issuance under
the Plan by an additional 2,000,000 shares.
The reason for this increase is to ensure that a sufficient number of shares
of the Company's Common Stock is available under the Plan for awards to
attract, retain and motivate selected employees with outstanding experience
and ability. As of December 31, 1997, there were 257,326 shares remaining for
awards, which would increase to 2,257,326 if the proposal is approved. Set
forth below is a summary of certain of the principal features of the Plan.
GENERAL
The Plan provides for the granting of stock options, stock appreciation
rights ("SARs"), restricted stock awards, performance unit awards and
performance share awards (collectively, "Awards") to key employees and
consultants of the Company and its subsidiaries.
PURPOSE
The purpose of the Plan is to promote the success, and enhance the value, of
the Company by linking the personal interests of participating employees and
consultants to those of the Company's stockholders and by providing such
employees and consultants with an incentive for outstanding performance. The
Plan is further intended to provide flexibility to the Company in its ability
to motivate, attract and retain the services of participating employees and
consultants upon whose judgment, interest and special efforts the Company is
largely dependent for the successful conduct of its operations.
ADMINISTRATION
The Plan is administered by the Audit and Compensation Committee of the
Board of Directors of the Company (the "Committee").
OPTIONS
The price of the shares of the Company's Common Stock subject to each option
(the "option price") is set by the Committee but may not be less than 30% of
the fair market value on the date of grant in the case of an option that is
not an incentive stock option (a "nonqualified stock option"), and not less
than 100% of the fair market value in the case of an incentive stock option.
Options granted under the Plan are exercisable at the times and on the terms
established by the Committee, provided that options granted to officers who
are subject to section 16(b) of the Securities and Exchange Act of 1934 (the
"Exchange Act") may not be exercised until six months following the date of
grant. Subject to the forgoing limitation, the Committee may accelerate the
exercisability of any option.
The option price must be paid in full in cash or its equivalent at the time
of exercise. The Committee also may permit payment of the option price by the
tender of previously acquired shares of the Company's stock or such other
legal consideration which the Committee determines to be consistent with the
Plan's purpose and applicable law.
6
<PAGE>
STOCK APPRECIATION RIGHTS
The Plan permits the grant of three types of SARs: Affiliated SARs,
Freestanding SARs, Tandem SARs, or any combination thereof. An Affiliated SAR
is an SAR that is granted in connection with a related option and which will
be deemed to automatically be exercised simultaneously with the exercise of
the related option. A Freestanding SAR is an SAR that is granted independently
of any options. A Tandem SAR is an SAR that is granted in connection with a
related option, the exercise of which requires a forfeiture of the right to
purchase a share under the related option (and when a share is purchased under
the option, the SAR is similarly cancelled).
The Committee has complete discretion to determine the number of SARs
granted to any optionee or recipient and the terms and conditions pertaining
to such SARs. However, the grant price must be at least equal to the fair
market value of a share of the Company's Common Stock on the date of grant in
the case of a Freestanding SAR and equal to the option price of the related
option in the case of an Affiliated or Tandem SAR. An SAR that is granted to
an officer who is subject to section 16(b) of the Exchange Act ("Section
16(b)") may not be exercised until at least six months following the date of
grant.
RESTRICTED STOCK AWARDS
The Plan permits the grant of restricted stock awards which are restricted
Common Stock bonuses that vest in accordance with terms established by the
Committee. Restricted Stock granted to an officer subject to Section 16(b) may
not vest prior to six months following the date of its grant. The Committee
may impose restrictions and conditions on the shares, including, without
limitation, restrictions based upon the achievement of specific performance
goals (Company-wide, divisional and/or individual), and/or restrictions under
applicable federal or state securities laws. The Committee may accelerate the
time at which any restrictions lapse, and/or remove any restrictions.
PERFORMANCE UNIT/SHARE AWARDS
The Plan permits the grant of performance unit and performance share awards
which are bonuses credited to an account established for the recipient and
payable in cash, Common Stock, or a combination thereof. Each performance unit
has an initial value that is established by the Committee at the time of its
grant. Each performance share has an initial value equal to the fair market
value of a share of the Company's Common Stock on the date of its grant. The
number and/or value of performance unit/shares that will be paid out to
recipients will depend upon the extent to which performance goals established
by the Committee are satisfied. The payment date for performance unit/share
awards granted to officers and directors subject to Section 16(b) may not be
less than six months from the date of grant.
After a performance unit/share award has vested, the recipient will be
entitled to receive a payout of the number of performance unit/shares earned
by the recipient, to be determined as a function of the extent to which the
corresponding performance goals have been achieved. The Committee also may
waive the achievement of any performance goals for such performance
unit/share.
Subject to the applicable award agreement, performance units/shares awarded
to recipients will be forfeited to the Company upon the earlier of the
recipient's termination of employment or the date set forth in the award
agreement.
NONTRANSFERABILITY OF AWARDS
Awards granted under the Plan may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
applicable laws of descent and distribution. However, an optionee or recipient
may designate one or more beneficiaries to receive any exercisable or vested
awards following his or her death.
NEW PLAN BENEFITS
Regulations recently adopted by the Securities and Exchange Commission
require disclosure of benefits to the executive officers of the Company named
in the summary compensation table and to certain other categories of award
recipient, if such benefits are determinable. In addition to the grants of
stock options set forth below, it
7
<PAGE>
is likely that substantial additional grants will be made to such persons and
others during the life of the Plan, and it is impossible to determine the
amount and terms of such future grants.
The following table sets forth as of December 31, 1997 (a) the aggregate
number of shares of the Company's Common Stock subject to awards granted under
the Plan, and (b) the dollar value of such awards based on the difference
between $26.25 per share, the closing price for the shares of Common Stock on
December 31, 1997, and the exercise price at which such stock options were
granted.
<TABLE>
<CAPTION>
NUMBER OF DOLLAR VALUE OF
NAME OF INDIVIDUAL OR GROUP SHARES GRANTED SHARES GRANTED
--------------------------- -------------- ---------------
<S> <C> <C>
William E. Brown, Chairman and Chief
Executive Officer........................... 330,000 1,781,250
Glenn W. Novotny, President and Chief
Operating Officer........................... 106,487 1,527,286
Neill J. Hines, Executive Vice President..... 46,128 736,712
Robert B. Jones, Vice President Finance and
Secretary................................... 46,000 702,100
All executive officers, as a group........... 528,615 4,747,348
All employees who are not executive officers,
as a group.................................. 896,297 13,575,426
All directors who are not executive officers,
as a group.................................. -- --
</TABLE>
REQUIRED VOTE
The affirmative vote of a majority of shares present in person or by proxy
at the Annual Meeting and entitled to vote is required to approve the proposed
amendment to the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE PLAN.
8
<PAGE>
REPORT OF THE AUDIT AND COMPENSATION COMMITTEE
To the Board of Directors:
In July 1993, the Company consummated its initial public offering, and in
October 1993, the Board of Directors created the Audit and Compensation
Committee, consisting solely of independent directors.
As members of the Audit and Compensation Committee, it is our duty to
determine the compensation for officers and directors, to administer the
Company's 1993 Omnibus Equity Incentive Plan and to review the Company's
salary, bonus and compensation arrangements generally. In addition, we
evaluate the performance of management and related matters.
As a public company, we utilize three primary tools to assist in
compensating executives. They are base salary, bonus and stock options.
Together they combine to provide an executive's total compensation package. We
view base salary as a primary indicator of the market value needed to attract
an executive with the skill and expertise to perform the position. We
periodically retain outside assistance to counsel us in determining market
value. We view bonus as a means of rewarding short term performance which
exceeds established goals and we utilize stock options as a means of linking
our executives' long term benefits to that received by our shareholders.
During 1997, the Committee retained the services of a compensation
consulting firm to assist in determining the market value compensation for the
Chief Executive Officer, William E. Brown. Survey data, coupled with
performance based peer group evaluations, were utilized to determine
competitive short and long term awards for Mr. Brown.
Based on the data and in light of the Company's earning performance the
Committee approved an increase of Mr. Brown's base salary to $400,000.
However, at Mr. Brown's request, the increase in salary was not implemented
during fiscal 1997.
The performance of the Company clearly indicated that a bonus was warranted
for Mr. Brown's performance in respect of fiscal 1996. At Mr. Brown's request,
however, no cash bonus was authorized; and in lieu of bonus the Committee
decided to grant stock options to Mr. Brown to reward him for his performance
and encourage him to continue to be aligned with the long term performance of
the Company and the return to shareholders on its stock.
The grant made to Mr. Brown was for non-qualified stock options to purchase
300,000 shares at a price equal to the closing price of the stock on December
27, 1996. No discount was provided. In order to assist the Company in
preserving tax deductibility in accordance with internal revenue Code Section
162(m), Mr. Brown will be required to obtain the approval of the Committee
prior to the exercise of options to purchase more than 50,000 shares in any
year.
As a matter of policy, the Company believes it is important to retain the
flexibility to maximize the Company's tax deductions. Amendments to Section
162(m) of the Internal Revenue Code have eliminated the deductibility of most
compensation over a million dollars in any given year. Except with respect to
the exercise of the options discussed above, the Committee believes that it is
highly unlikely that any officer of the Company will receive compensation in
excess of a million dollars per year in the foreseeable future. However,
subject to the foregoing, it will be the policy of the Committee to consider
the impact, if any, of Section 162(m) on the Company and to document as
necessary specific performance goals in order to seek to preserve the
Company's tax deductions.
We continue to subscribe to the philosophy that the Company's overall
performance and its return to shareholders will be the primary area of
consideration when rewarding the Company's top executives. In years when the
Company does well, we will reward using the tools described above; in years
when the performance does not meet expectations, the compensation of the top
executives of Central will be reflective of that fact.
Audit and Compensation Committee
Lee D. Hines, Jr.
Daniel P. Hogan, Jr.
9
<PAGE>
PERFORMANCE GRAPH
The following graph compares the percentage change in the Company's
cumulative total stockholder return on its Common Stock for the period from
the Company's initial public offering on July 15, 1993 to September 27, 1997
with the cumulative total return of the NASDAQ Composite (U.S.) Index and the
Dow Jones Non-Durable Household Products Index, a peer group index consisting
of 30 manufacturers and distributors of household products.
The comparisons in the graph below are based on historical data and are not
indicative of, or intended to forecast, the possible future performance of the
Company's Common Stock.
<TABLE>
<CAPTION>
7/15/93 12/26/93 12/25/94 9/30/95 9/28/96 9/27/97
------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Central Garden & Pet
Company................ 100.00 95.74 37.23 52.13 176.60 244.15
Dow Jones Household
Products............... 100.00 109.62 120.33 149.77 191.20 268.67
Nasdaq Composite (US)... 100.00 110.43 107.95 150.82 178.97 245.67
</TABLE>
10
<PAGE>
OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table indicates, as to each director, each named executive
officer and each holder known to the Company to be the beneficial owner of
more than five percent of any class of the Company's voting stock, the number
of shares and percentage of the Company's stock beneficially owned as of
September 27, 1997.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF SEPTEMBER 27, 1997
----------------------------------------
NUMBER OF NUMBER OF
BENEFICIAL OWNER CLASS B SHARES COMMON SHARES PERCENT(1)
---------------- -------------- ------------- ---------
<S> <C> <C> <C>
William E. Brown (2).............. 1,606,359 -- 7.7
Putnam Investments, Inc. (3)...... -- 2,591,288(4) 12.5
Warburg, Pincus Counsellors,
Inc. (5)......................... -- 1,924,800(4) 9.3
The Kaufmann Fund, Inc. (6)....... -- 1,600,000(4) 7.7
Strong Capital Management,
Inc. (7)......................... -- 1,357,725(4) 6.5
AIM Management Group Inc. (8)..... -- 1,052,600(4) 5.1
Glenn W. Novotny.................. -- 94,800(9) *
Neill J. Hines.................... 45,548 37,608(10) *
Robert B. Jones................... -- 2,008 *
Lee D. Hines, Jr.................. -- 51,000 *
Daniel P. Hogan, Jr............... -- 6,000 *
All directors and officers as a
group (six persons).............. 1,651,907 191,416(11) 8.9
</TABLE>
- --------
(*) Less than 1%.
(1) Represents the number of shares of Class B Stock and Common Stock
beneficially owned by each stockholder as a percentage of the total
number of shares of Class B Stock and Common Stock outstanding.
(2) The address of Mr. Brown is 3697 Mt. Diablo Boulevard, Lafayette,
California 94549. Mr. Brown may be deemed to be a "control person" of the
Company within the meaning of the rules and regulations of the Securities
and Exchange Commission by reason of his stock ownership and positions
with the Company.
(3) The address of Putnam Investments, Inc. is One Post Office Square, 12th
Floor, Boston, Massachusetts 02109.
(4) Based on a Schedule 13F filed reflecting beneficial ownership as of
September 30, 1997.
(5) The address of Warburg, Pincus counsellors, Inc. is 466 Lexington Avenue,
New York, New York 10017.
(6) The address of The Kaufmann Fund, Inc. is 140 East 45th Street, 43rd
Floor, New York, New York 10017.
(7) The address of Strong Capital Management, Inc. is 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
(8) The address of AIM Management Group Inc. is 11 Greenway Plaza, Suite
1919, Houston, Texas 77046.
(9) Includes 9,487 shares issuable upon exercise of outstanding options
exercisable within 60 days of September 27, 1997.
(10) Includes 5,128 shares issuable upon exercise of outstanding options
exercisable within 60 days of September 27, 1997.
(11) Includes 14,615 shares issuable upon exercise of outstanding options
exercisable within 60 days of September 27, 1997.
11
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
September 29, 1996 to September 27, 1997 all filing requirements applicable to
its officers, directors, and greater than ten-percent beneficial owners were
complied with.
AUDITORS
Deloitte & Touche LLP, independent certified public accountants, serves as
the Company's principal accountants. Representatives of Deloitte & Touche LLP
will be present at the Annual Meeting with the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.
OTHER MATTERS
As of the date of this Proxy Statement, there are no other matters which
management intends to present or has reason to believe others will present to
the meeting. If other matters properly come before the meeting, those who act
as proxies will vote in accordance with their judgment.
STOCKHOLDER PROPOSALS
If any stockholder intends to present a proposal for action at the Company's
1999 Annual Meeting and wishes to have such proposal set forth in management's
proxy statement, such stockholder must forward the proposal to the Company so
that it is received on or before September 18, 1998. Proposals should be
addressed to the Company at 3697 Mt. Diablo Boulevard, Lafayette, California
94549, Attention: Corporate Secretary.
COST OF SOLICITATION
All expenses in connection with the solicitation of this proxy, including
the charges of brokerage houses and other custodians, nominees or fiduciaries
for forwarding documents to stockholders, will be paid by the Company.
Dated: January 16, 1998.
By Order of the Board of Directors
Robert B. Jones, Secretary
12
<PAGE>
CENTRAL GARDEN & PET COMPANY
1993 OMNIBUS EQUITY INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 BACKGROUND, PURPOSE AND DURATION..................... 1
1.1 Background and Effective Date..................... 1
1.2 Purpose of the Plan............................... 1
1.3 Duration of the Plan.............................. 1
SECTION 2 DEFINITIONS.......................................... 1
2.1 "1934 Act"........................................ 1
2.2 "Affiliate"....................................... 2
2.3 "Affiliated SAR".................................. 2
2.4 "Award"........................................... 2
2.5 "Award Agreement"................................. 2
2.6 "Board"........................................... 2
2.7 "Code"............................................ 2
2.8 "Committee"....................................... 2
2.9 "Company"......................................... 2
2.10 "Consultant....................................... 2
2.11 "Director"........................................ 2
2.12 "Disability"...................................... 2
2.13 "Employee"........................................ 2
2.14 "ERISA"........................................... 3
2.15 "Fair Market Value"............................... 3
2.16 "Freestanding SAR"................................ 3
2.17 "Incentive Stock Option".......................... 3
2.18 "Nonqualified Stock Option"....................... 3
2.19 "Option".......................................... 3
2.20 "Option Price".................................... 3
2.21 "Participant"..................................... 3
2.22 "Performance Unit"................................ 3
2.23 "Performance Share"............................... 3
2.24 "Period of Restriction"........................... 3
2.25 "Plan............................................. 3
2.26 "Restricted Stock"................................ 4
2.27 "Retirement"...................................... 4
2.28 "Rule 16b-3"...................................... 4
2.29 "Section 16 Person"............................... 4
2.30 "Shares".......................................... 4
2.31 "Stock Appreciation Right"........................ 4
2.32 "Subsidiary"...................................... 4
2.33 "Tandem SAR"...................................... 4
2.34 "Termination of Employment"....................... 4
2.35 "Window Period"................................... 4
SECTION 3 ADMINISTRATION....................................... 5
3.1 The Committee..................................... 5
3.2 Authority of the Committee........................ 5
3.3 Decisions Binding................................. 5
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 4 SHARES SUBJECT TO THE PLAN................................... 5
4.1 Number of Shares.......................................... 5
4.2 Lapsed Awards............................................. 7
4.3 Adjustments in Authorized Shares.......................... 7
SECTION 5 STOCK OPTIONS................................................ 7
5.1 Grant of Options.......................................... 7
5.2 Award Agreement........................................... 7
5.3 Option Price.............................................. 7
5.3.1 Nonqualified Stock Options................................ 7
5.3.2 Incentive Stock Options................................... 8
5.4 Expiration of Options..................................... 8
5.5 Exercise of Options....................................... 9
5.6 Payment................................................... 9
5.7 Restrictions on Share Transferability..................... 10
5.8 Certain Additional Provisions for
Incentive Stock Options................................... 10
5.8.1 Exercisability............................................ 10
5.8.2 Termination of Employment................................. 10
5.8.3 Company and Subsidiaries Only............................. 10
5.9 Nontransferability of Options............................. 10
SECTION 6 STOCK APPRECIATION RIGHTS.................................... 11
6.1 Grant of SARs............................................. 11
6.2 Exercise of Tandem SARs................................... 11
6.2.1 ISOs...................................................... 11
6.3 Exercise of Affiliated SARs............................... 11
6.4 Exercise of Freestanding SARs............................. 11
6.5 SAR Agreement............................................. 12
6.6 Expiration of SARs........................................ 12
6.7 Payment of SAR Amount..................................... 12
6.8 Nontransferability of SARs................................ 12
SECTION 7 RESTRICTED STOCK............................................. 12
7.1 Grant of Restricted Stock................................. 12
7.2 Restricted Stock Agreement................................ 12
7.3 Transferability........................................... 13
7.4 Other Restrictions........................................ 13
7.5 Removal of Restrictions................................... 13
7.6 Voting Rights............................................. 14
7.7 Dividends and Other Distributions......................... 14
7.8 Return of Restricted Stock to Company..................... 14
SECTION 8 PERFORMANCE UNITS AND PERFORMANCE SHARES..................... 14
8.1 Grant of Performance Units/Shares......................... 14
8.2 Value of Performance Units/Shares......................... 14
8.3 Earning of Performance Units/Shares....................... 15
8.4 Form and Timing of Payment of
Performance Units/Shares.................................. 15
8.5 Cancellation of Performance Units/Shares.................. 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
8.6 Nontransferability..........................................15
SECTION 9 BENEFICIARY DESIGNATION.......................................15
SECTION 10 DEFERRALS.....................................................16
SECTION 11 RIGHTS OF EMPLOYEES...........................................16
11.1 No Effect on Employment or Service..........................16
11.2 Participation...............................................16
SECTION 12 AMENDMENT, SUSPENSION, OR TERMINATION.........................16
12.1 Amendment, Suspension, or Termination.......................16
SECTION 13 TAX WITHHOLDING...............................................17
13.1 Withholding Requirements....................................17
13.2 Shares Withholding..........................................17
SECTION 14 INDEMNIFICATION...............................................17
SECTION 15 SUCCESSORS....................................................18
SECTION 16 LEGAL CONSTRUCTION............................................18
16.1 Gender and Number...........................................18
16.2 Severability................................................18
16.3 Requirements of Law.........................................18
16.4 Securities Law Compliance...................................18
16.5 Governing Law...............................................18
16.6 Captions....................................................18
</TABLE>
<PAGE>
CENTRAL GARDEN & PET COMPANY
1993 OMNIBUS EQUITY INCENTIVE PLAN
(As amended, effective November 6, 1997)
CENTRAL GARDEN & PET COMPANY, hereby adopts the Central Garden & Pet
Company 1993 Omnibus Equity Incentive Plan, effective as of October 19, 1993, as
follows:
SECTION 1
BACKGROUND, PURPOSE AND DURATION
1.1 Background and Effective Date. The Plan provides for the
-----------------------------
granting of Nonqualified Stock Options, Incentive Stock Options, SARs,
Restricted Stock, Performance Units, and Performance Shares. The Plan is
effective as of October 19, 1993, subject to ratification by an affirmative vote
of the holders of a majority of Shares. Awards may be granted prior to the
receipt of such vote, but such grants shall be null and void if such vote is not
in fact received.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
-------------------
success, and enhance the value, of the Company by aligning the interests of
Participants with those of the Company's shareholders, and by providing
Participants with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract, and retain the services of outstanding
individuals, upon whose judgment, interest, and special effort the success of
the Company largely is dependent.
1.3 Duration of the Plan. The Plan shall commence on the date
--------------------
specified in Section 1.1, and subject to Section 12 (concerning the Board's
right to amend or terminate the Plan), shall remain in effect thereafter.
However, without further stockholder approval, no Incentive Stock Option may be
granted under the Plan on or after October 19, 2003.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings
unless a different meaning is plainly required by the context:
2.1 "1934 Act" means the Securities Exchange Act of 1934, as
--------
amended. Reference to a specific section of the Exchange Act or regulation
thereunder shall include such section or regulation, any valid regulation
promulgated under such section, and any comparable provision of any future
legislation
<PAGE>
or regulation amending, supplementing or superseding such section or regulation.
2.2 "Affiliate" means any corporation or any other entity
---------
(including, but not limited to, partnerships and joint ventures) controlling,
controlled by, or under common control with the Company.
2.3 "Affiliated SAR" means an SAR that is granted in connection with
--------------
a related Option, and which automatically will be deemed to be exercised at the
same time that the related Option is exercised.
2.4 "Award" means, individually or collectively, a grant under the
-----
Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted
Stock, Performance Units, or Performance Shares.
2.5 "Award Agreement" means the written agreement setting forth the
---------------
terms and provisions applicable to each Award granted under the Plan.
2.6 "Board" or "Board of Directors" means the Board of Directors
-----
of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
----
Reference to a specific section of the Code or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
2.8 "Committee" means the committee appointed by the Board
---------
(pursuant to Section 3.1) to administer the Plan.
2.9 "Company" means Central Garden & Pet Company, a Delaware
-------
corporation, or any successor thereto.
2.10 "Consultant" means an individual who provides significant
----------
services to the Company and/or an Affiliate, but who is neither a Director nor
an Employee.
2.11 "Director" means any individual who is a member of the Board of
--------
Directors of the Company.
2.12 "Disability" means a permanent and total disability within the
----------
meaning of Code Section 22(e)(3).
2.13 "Employee" means an employee of the Company or of an Affiliate,
--------
whether such employee is so employed at the time
2
<PAGE>
the Plan is adopted or becomes so employed subsequent to the adoption of the
Plan.
2.14 "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended. Reference to a specific section of ERISA shall include such
section, any valid regulation promulgated thereunder, and any comparable
provision of any future legislation amending, supplementing or superseding such
section.
2.15 "Fair Market Value" means the average of the highest and lowest
-----------------
quoted selling prices for Shares on the relevant date, or if there were no sales
on such date, the arithmetic mean of the highest and lowest quoted selling
prices on the nearest day before and the nearest day after the relevant date, as
determined by the Committee.
2.16 "Freestanding SAR" means a SAR that is granted independently of
----------------
any Option.
2.17 "Incentive Stock Option" or "ISO" means an option to purchase
----------------------
Shares, which is designated as an Incentive Stock Option and is intended to meet
the requirements of Section 422 of the Code.
2.18 "Nonqualified Stock Option" means an option to purchase Shares
-------------------------
which is not intended to be an Incentive Stock Option.
2.19 "Option" means an Incentive Stock Option or a Nonqualified
------
Stock Option.
2.20 "Option Price" means the price at which a Share may be
------------
purchased pursuant to an Option.
2.21 "Participant" means an Employee or Consultant who has an
-----------
outstanding Award.
2.22 "Performance Unit" means an Award granted to an Employee
----------------
pursuant to Section 8.
2.23 "Performance Share" means an Award granted to an Employee
-----------------
pursuant to Section 8.
2.24 "Period of Restriction" means the period during which the
---------------------
transfer of Shares of Restricted Stock are subject to restrictions.
2.25 "Plan" means the Central Garden & Pet Company 1993 Omnibus
----
Equity Incentive Plan, as set forth in this instrument and as hereafter amended
from time to time.
3
<PAGE>
2.26 "Restricted Stock" means an Award granted to a Participant
----------------
pursuant to Section 7.
2.27 "Retirement" means, in the case of an Employee, a Termination of
----------
Employment by reason of the Employee's retirement at or after age 62.
2.28 "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act,
----------
and any future regulation amending, supplementing or superseding such
regulation.
2.29 "Section 16 Person" means a person who, with respect to the
-----------------
Shares, is subject to Section 16 of the 1934 Act.
2.30 "Shares" means the shares of common stock, $0.01 par value, of
------
the Company.
2.31 "Stock Appreciation Right" or "SAR" means an Award, granted
------------------------
alone or in connection with a related Option, that pursuant to the terms of
Section 7 is designated as an SAR.
2.32 "Subsidiary" means any corporation in an unbroken chain of
----------
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
2.33 "Tandem SAR" means an SAR that is granted in connection with a
----------
related Option, the exercise of which shall require forfeiture of the right to
purchase an equal number of Shares under the related Option (and when a Share is
purchased under the Option, the SAR shall be canceled to the same extent).
2.34 "Termination of Employment" means a cessation of the employee-
-------------------------
employer relationship between an employee and the Company or an Affiliate for
any reason, including, but not by way of limitation, a termination by
resignation, discharge, death, Disability, Retirement, or the disaffiliation of
an Affiliate, but excluding any such termination where there is a simultaneous
reemployment by the Company or an Affiliate.
2.35 "Window Period" means the period beginning on the third business
-------------
day following the date of public release of the Company's quarterly sales and
earnings information, and ending on the twelfth business day following such
date.
4
<PAGE>
SECTION 3
ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the Committee.
-------------
The Committee shall consist of not less than two (2) Directors. The members of
the Committee shall be appointed from time to time by, and shall serve at the
pleasure of, the Board of Directors. The Committee shall be comprised solely of
Directors who are "disinterested persons" under Rule 16b-3.
3.2 Authority of the Committee. The Committee shall have all powers
--------------------------
and discretion necessary or appropriate to administer the Plan and to control
its operation, including, but not limited to, the power (a) to determine which
Employees and Consultants shall be granted Awards, (b) to prescribe the terms
and conditions of such Awards, (c) to interpret the Plan and the Awards, (d) to
adopt rules for the administration, interpretation and application of the Plan
as are consistent therewith, and (e) to interpret, amend or revoke any such
rules.
The Committee, in its sole discretion and on such terms and conditions
as it may provide, may delegate all or any part of its authority and powers
under the Plan to one or more directors and/or officers of the Company;
provided, however, that the Committee may not delegate its authority and powers
(a) with respect to Section 16 Persons, or (b) in any way which would jeopardize
the Plan's qualification under Rule 16b-3.
3.3 Decisions Binding. All determinations and decisions made by the
-----------------
Committee shall be final, conclusive, and binding on all persons, and shall be
given the maximum deference permitted by law.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section
----------------
4.3, the total number of Shares available for grant under the Plan may not
exceed 4,000,000. Such Shares may be authorized but unissued Shares or Treasury
Shares.
The following rules will apply for purposes of the determination of
the number of Shares available for grant under the Plan:
(a) While an Award is outstanding, it shall be counted against the
authorized pool of Shares, regardless of its vested status.
(b) The grant of an Option or Restricted Stock shall reduce the
Shares available for grant under the
5
<PAGE>
Plan by the number of Shares subject to such Award.
(c) The grant of a Tandem SAR shall reduce the number of Shares
available for grant by the number of Shares subject to the
related Option (i.e., there is no double counting of Options and
----
their related Tandem SARs); provided, however, that, upon the
exercise of such Tandem SAR, the authorized Share pool shall be
credited with the appropriate number of Shares representing the
number of shares reserved for such Tandem SAR less the number of
Shares actually delivered upon exercise thereof or the number of
Shares having a Fair Market Value equal to the cash payment made
upon such exercise.
(d) The grant of an Affiliated SAR shall reduce the number of Shares
available for grant by the number of Shares subject to the SAR,
in addition to the number of Shares subject to the related
Option; provided, however, that, upon the exercise of such
Affiliated SAR, the authorized Share pool shall be credited with
the appropriate number of Shares representing the number of
shares reserved for such Affiliated SAR less the number of Shares
actually delivered upon exercise thereof or the number of Shares
having a Fair Market Value equal to the cash payment made upon
such exercise.
(e) The grant of a Freestanding SAR shall reduce the number of Shares
available for grant by the number of Freestanding SARs granted;
provided, however, that, upon the exercise of such Freestanding
SAR, the authorized Share pool shall be credited with the
appropriate number of Shares representing the number of shares
reserved for such Freestanding SAR less the number of Shares
actually delivered upon exercise thereof or the number of Shares
having a Fair Market Value equal to the cash payment made upon
such exercise.
(f) The Committee shall in each case determine the appropriate number
of Shares to deduct from the authorized pool in connection with
the grant of Performance Units and/or Performance Shares.
(g) To the extent that an Award is settled in cash rather than in
Shares, the authorized Share pool shall be credited with the
appropriate number of Shares having a Fair Market Value equal to
the cash settlement of the Award.
6
<PAGE>
4.2 Lapsed Awards. If an Award is cancelled, terminates, expires, or
-------------
lapses for any reason (with the exception of the termination of a Tandem SAR
upon exercise of the related Option, or the termination of a related Option upon
exercise of the corresponding Tandem SAR), any Shares subject to such Award
again shall be available to be the subject of an Award. However, in the event
that prior to the Award's cancellation, termination, expiration, or lapse, the
holder of the Award at any time received one or more "benefits of ownership"
under Rule 16b-3, the Shares subject to such Award shall not be subject to
another Award.
4.3 Adjustments in Authorized Shares. In the event of any merger,
--------------------------------
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, such adjustment shall be made in
the number and class of Shares which may be delivered under the Plan, and in the
number and class of and/or price of Shares subject to outstanding Options, SARs,
and Restricted Stock granted under the Plan, as the Committee, in its sole
discretion, shall determine to be appropriate to prevent the dilution or
diminishment of Awards. Notwithstanding the preceding sentence, the number of
Shares subject to any Award always shall be a whole number.
SECTION 5
STOCK OPTIONS
5.1 Grant of Options. Options may be granted to Employees and Consultants
----------------
at any time and from time to time, as determined by the Committee in its sole
discretion. The Committee, in its sole discretion, shall determine the number of
Shares subject to Options granted to each Participant. The Committee may grant
ISOs, NQSOs, or a combination thereof.
5.2 Award Agreement. Each Option shall be evidenced by an Award
---------------
Agreement that shall specify the Option Price, the expiration date of the
Option, the number of Shares to which the Option pertains, any conditions to
exercise of the Option, and such other terms and conditions as the Committee, in
its discretion, shall determine. The Award Agreement also shall specify whether
the Option is intended to be an ISO or a NQSO.
5.3 Option Price. Subject to the provisions of this Section 5.3, the
------------
Option Price for each Option shall be determined by the Committee in its sole
discretion.
5.3.1 Nonqualified Stock Options. In the case of a Nonqualified
--------------------------
Stock Option, the Option Price shall be not less
7
<PAGE>
than thirty percent (30%) of the Fair Market Value of a Share on the date that
the Option is granted.
5.3.2 Incentive Stock Options. In the case of an Incentive Stock
-----------------------
Option, the Option Price shall be not less than one hundred percent (100%) of
the Fair Market Value of a Share on the date that the Option is granted;
provided, however, that if at the time that the Option is granted, the Employee
(together with persons whose stock ownership is attributed to the Employee
pursuant to Section 424(d) of the Code) owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any of
its Subsidiaries, the Option Price shall be not less than one hundred and ten
percent (110%) of the Fair Market Value of a Share on the date that the Option
is granted.
5.3.3 Substitute Options. Notwithstanding the provisions of Sections
------------------
5.3.1 and 5.3.2, in the event that the Company or an Affiliate consummates a
transaction described in Section 424(a) of the Code (e.g., the acquisition of
----
property or stock from an unrelated corporation), persons who become Employees
or Consultants on account of such transaction may be granted Options in
substitution for options granted by their former employer. If such substitute
Options are granted, the Committee, in its sole discretion, may determine that
such substitute Options shall have an exercise price less than 100% of the Fair
Market Value of the Shares on the date the Option is granted.
5.4 Expiration of Options. Each Option shall terminate upon the first
---------------------
to occur of the events listed in Section 5.4.1, subject to Section 5.4.2.
5.4.1 Expiration Dates.
----------------
(a) The date for termination of the Option set forth in the written
stock option agreement;
(b) The expiration of ten years from the date the Option was granted,
subject to the provisions of clause (f), below; or
(c) The expiration of one year from the date of the Optionee's
Termination of Employment for a reason other than the Optionee's
death, Disability or Retirement, subject to the provisions of
clause (f) below; or
(d) The expiration of three years from the date of the Optionee's
Termination of Employment by reason of Disability, subject to the
provisions of clause (f) below; or
8
<PAGE>
(e) The expiration of three years from the date of the Optionee's
Retirement; provided that no Incentive Stock Option may be exercised
after the expiration of three months from the date of the Optionee's
Retirement, subject in each case to the provisions of clause (f)
below; or
(f) The expiration of one year from the date of the Optionee's death,
if such death occurs while the Optionee is in the employ of the
Company or an Affiliate or within the one-year or three-year
periods referred to in (c), (d) or (e) above, whichever is
applicable.
5.4.2 Committee Discretion. Subject to the provisions of this
--------------------
Section 5.4, the Committee shall provide, in the terms of each individual
Option, when such Option expires and becomes unexercisable. After the Option is
granted, the Committee, in its sole discretion and subject to Section 5.8.4 and
this Section 5.4, may extend the maximum term of such Option.
5.5 Exercise of Options. Options granted under the Plan shall be
-------------------
exercisable at such times, and subject to such restrictions and conditions, as
the Committee shall determine in its sole discretion. After an Option is
granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option. However, in no event may any Option granted to a
Section 16 Person be exercisable until at least six (6) months following the
date of its grant.
5.6 Payment. Options shall be exercised by the Participant's
-------
delivery of a written notice of exercise to the Secretary of the Company,
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full in cash. The Committee, in its sole discretion, also may permit
exercise (a) by tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price (provided
that the Shares which are tendered must have been held by the Participant for at
least six (6) months prior to their tender to satisfy the Option Price), or (b)
by any other means which the Committee, in its sole discretion, determines to
both provide legal consideration for the Shares, and to be consistent with the
purposes of the Plan.
As soon as practicable after receipt of a written notification of exercise
and full payment for the Shares purchased, the Company shall deliver to the
Participant Share
9
<PAGE>
certificates (in the Participant's name) representing such Shares.
5.7 Restrictions on Share Transferability. The Committee may impose such
-------------------------------------
restrictions on any Shares acquired pursuant to the exercise of an Option, as it
may deem advisable, including, but not limited to, restrictions related to
Federal securities laws, the requirements of any national securities exchange or
system upon which such Shares are then listed and/or traded, and/or any blue sky
or state securities laws.
5.8 Certain Additional Provisions for Incentive Stock Options.
---------------------------------------------------------
5.8.1 Exercisability. The aggregate Fair Market Value (determined at
--------------
the time the Option is granted) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by any Employee during any
calendar year (under all plans of the Company and its Subsidiaries) shall not
exceed $100,000.
5.8.2 Termination of Employment. No Incentive Stock Option may be
-------------------------
exercised more than three months after the Participant's termination of
employment for any reason other than Disability or death, unless (a) the
Participant dies during such three-month period, and (b) the Award Agreement
and/or the Committee permits later exercise. No Incentive Stock Option may be
exercised more than one year after the Participant's termination of employment
on account of Disability, unless (a) the Participant dies during such one-year
period, and (b) the Award Agreement and/or the Committee permit later exercise.
5.8.3 Company and Subsidiaries Only. Incentive Stock Options may be
-----------------------------
granted only to persons who are employees of the Company and/or a Subsidiary at
the time of grant.
5.8.4 Expiration. No Incentive Stock Option may be exercised after
----------
the expiration of 10 years from the date such Option was granted; provided,
however, that if the Option is granted to an Employee who, together with persons
whose stock ownership is attributed to the Employee pursuant to Section 424(d)
of the Code, owns stock possessing more than 10% of the total combined voting
power of all classes of the stock of the Company or any of its Subsidiaries, the
Option may not be exercised after the expiration of 5 years from the date that
it was granted.
5.9 Nontransferability of Options. No Option granted under the Plan may
-----------------------------
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, the laws of descent and distribution, or as provided under
Section 9. All
10
<PAGE>
Options granted to a Participant under the Plan shall be exercisable during his
or her lifetime only by such Participant.
SECTION 6
STOCK APPRECIATION RIGHTS
6.1 Grant of SARs. An SAR may be granted to an Employee or Consultant at
-------------
any time and from time to time as determined by the Committee, in its sole
discretion. The Committee may grant Affiliated SARs, Freestanding SARs, Tandem
SARs, or any combination thereof.
The Committee shall have complete discretion to determine the number of
SARs granted to any Participant, and consistent with the provisions of the Plan,
the terms and conditions pertaining to such SARs. However, the grant price of a
Freestanding SAR shall be at least equal to the Fair Market Value of a Share on
the date of grant. The grant price of Tandem or Affiliated SARs shall equal the
Option Price of the related Option. In no event shall an SAR granted to a
Section 16 Person become exercisable until at least six (6) months after the
date that it was granted.
6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or
-----------------------
part of the Shares subject to the related Option upon the surrender of the right
to exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
6.2.1 ISOs. Notwithstanding any contrary provision of the Plan, with
----
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
shall expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR shall be for no more than one
hundred percent (100%) of the difference between the Option Price of the
underlying ISO and the Fair Market Value of the Shares subject to the underlying
ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR shall be
exercisable only when the Fair Market Value of the Shares subject to the ISO
exceeds the Option Price of the ISO.
6.3 Exercise of Affiliated SARs. An Affiliated SAR shall be deemed to be
---------------------------
exercised upon the exercise of the related Option. The deemed exercise of
an Affiliated SAR shall not necessitate a reduction in the number of Shares
subject to the related Option.
6.4 Exercise of Freestanding SARs. Freestanding SARs shall be exercisable
-----------------------------
on such terms and conditions as the Committee, in its sole discretion, shall
determine. However, no
11
<PAGE>
SAR granted to a Section 16 Person shall be exercisable until at least six (6)
months after the date of grant.
6.5 SAR Agreement. Each SAR shall be evidenced by an Award Agreement
-------------
that shall specify the grant price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Committee, in its sole
discretion, shall determine.
6.6 Expiration of SARs. An SAR granted under the Plan shall expire upon
------------------
the date determined by the Committee, in its sole discretion, and set forth in
the Award Agreement. Notwithstanding the foregoing, the rules of Section 5.4
(pertaining to Options) also shall apply to SARs.
6.7 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall
---------------------
be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the
date of exercise over the grant price; times
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, or in some combination thereof.
6.8 Nontransferability of SARs. No SAR granted under the Plan may be
--------------------------
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, the laws of descent and distribution, or as permitted under
Section 9. An SAR granted to a Participant shall be exercisable during the
Participant's lifetime only by such Participant.
SECTION 7
RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
-------------------------
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Employees and Consultants in such amounts as the Committee,
in its sole discretion, shall determine.
7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be
--------------------------
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Committee, in its sole discretion, shall determine. Unless the Committee
12
<PAGE>
determines otherwise, shares of Restricted Stock shall be held by the Company as
escrow agent until the restrictions on such shares have lapsed.
7.3 Transferability. Except as provided in this Section 7, Shares of
---------------
Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable Period of Restriction.
However, in no event may the restrictions on Restricted Stock granted to an
Section 16 Person lapse prior to six (6) months following the date of its grant.
All rights with respect to the Restricted Stock granted to a Participant under
the Plan shall be available during his or her lifetime only to such Participant.
7.4 Other Restrictions. The Committee, in its sole discretion, may impose
------------------
such other restrictions on any Shares of Restricted Stock as it may deem
advisable including, without limitation, restrictions based upon the achievement
of specific performance goals (Company-wide, divisional, and/or individual),
and/or restrictions under applicable Federal or state securities laws; and may
legend the certificates representing Restricted Stock to give appropriate notice
of such restrictions. For example, the Committee may determine that some or all
certificates representing Shares of Restricted Stock shall bear the following
legend:
"The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer as set forth in the Central
Garden & Pet Company 1993 Omnibus Equity Incentive Plan, and in a
Restricted Stock Agreement. A copy of the Plan and such Restricted Stock
Agreement may be obtained from the Secretary of Central Garden & Pet
Company."
7.5 Removal of Restrictions. Except as otherwise provided in this
-----------------------
Section 7, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall be released from escrow as soon as practicable after
the last day of the Period of Restriction. The Committee, in its discretion,
may accelerate the time at which any restrictions shall lapse, and/or remove any
restrictions; provided, however, that the Period of Restriction on Shares
granted to a Section 16 Person may not lapse until at least six (6) months after
the date of grant. After the restrictions have lapsed, the Participant shall be
entitled to have any legend or legends under Section 7.4 removed from his or her
Share certificate, and the Shares shall be freely transferable by the
Participant.
13
<PAGE>
7.6 Voting Rights. During the Period of Restriction, Participants
-------------
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares, unless the Committee determines otherwise.
7.7 Dividends and Other Distributions. During the Period of Restriction,
---------------------------------
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares, unless
otherwise provided in the Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
With respect to an Award to a Section 16 Person, any dividend or
distribution that constitutes a "derivative security" or an "equity security"
under Section 16 of the 1934 Act shall be subject to a Period of Restriction
equal to the longer of: (a) the remaining Period Restriction on the Shares of
Restricted Stock with respect to which the dividend or distribution is paid; or
(b) six (6) months.
7.8 Return of Restricted Stock to Company. Subject to the applicable
-------------------------------------
Award Agreement and Section 7.5, upon the earlier of (a) the Participant's
termination of employment, or (b) the date set forth in the Award Agreement, the
Restricted Stock for which restrictions have not lapsed shall revert to the
Company and, subject to Section 4.2, again shall become available for grant
under the Plan.
SECTION 8
PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1 Grant of Performance Units/Shares. Performance Units and Performance
---------------------------------
Shares may be granted to Employees and Consultants at any time and from time to
time, as shall be determined by the Committee, in its sole discretion. The
Committee shall have complete discretion in determining the number of
Performance Units and Performance Shares granted to each Participant.
8.2 Value of Performance Units/Shares. Each Performance Unit shall
---------------------------------
have an initial value that is established by the Committee at the time of grant.
Each Performance Share shall have an initial value equal to the Fair Market
Value of a Share on the date of grant. The Committee shall set performance
goals in its discretion which, depending on the extent to which they are met,
will determine the number and/or value of Performance Units/Shares that will be
paid out to the Participants. The time period during which the performance
goals
14
<PAGE>
must be met shall be called the "Performance Period". Performance Periods of
Awards granted to Section 16 Persons shall not be less than six (6) months.
8.3 Earning of Performance Units/Shares. After the applicable Performance
-----------------------------------
Period has ended, the holder of Performance Units/Shares shall be entitled to
receive a payout of the number of Performance Units/Shares earned by the
Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance goals have been achieved. After
the grant of a Performance Unit/Share, the Committee, in its sole discretion,
may adjust and/or waive the achievement of any performance goals for such
Performance Unit/Share; provided, however, that Performance Periods of Awards
granted to Section 16 Persons shall not be less than six (6) months.
8.4 Form and Timing of Payment of Performance Units/Shares. Payment
------------------------------------------------------
of earned Performance Units/Shares shall be made as soon as practicable after
the expiration of the applicable Performance Period. The Committee, in its sole
discretion, may pay earned Performance Units/Shares in the form of cash, in
Shares (which have an aggregate Fair Market Value equal to the value of the
earned Performance Units/Shares at the close of the applicable Performance
Period) or in a combination thereof.
8.5 Cancellation of Performance Units/Shares. Subject to the applicable
----------------------------------------
Award Agreement, upon the earlier of (a) the Participant's termination of
employment, or (b) the date set forth in the Award Agreement, all remaining
Performance Units/Shares shall be forfeited by the Participant to the Company,
and subject to Section 4.2, the Shares subject thereto shall again be available
for grant under the Plan.
8.6 Nontransferability. Performance Units/Shares may not be sold,
------------------
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will, the laws of descent and distribution, or as permitted under
Section 9. A Participant's rights under the Plan shall be exercisable during
the Participant's lifetime only by the Participant or the Participant's legal
representative.
SECTION 9
BENEFICIARY DESIGNATION
If permitted by the Committee, a Participant may name a beneficiary or
beneficiaries to whom any unpaid vested Award shall be paid in event of the
Participant's death. Each such designation shall revoke all prior designations
by the same Participant and shall be effective only if given in a form and
15
<PAGE>
manner acceptable to the Committee. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to the
Participant's estate and, subject to the terms of the Plan, any unexercised
vested Award may be exercised by the administrator or executor of the
Participant's estate.
SECTION 10
DEFERRALS
The Committee, in its sole discretion, may permit a Participant to defer
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant under an Award. Any such deferral elections shall be
subject to such rules and procedures as shall be determined by the Committee in
its sole discretion.
SECTION 11
RIGHTS OF EMPLOYEES AND CONSULTANTS
11.1 No Effect on Employment or Service. Nothing in the Plan shall
----------------------------------
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or service at any time, with or without cause.
11.2 Participation. No Employee or Consultant shall have the right to
-------------
be selected to receive an Award under this Plan, or, having been so selected, to
be selected to receive a future Award.
SECTION 12
AMENDMENT, SUSPENSION, OR TERMINATION
12.1 Amendment, Suspension, or Termination. The Board, in its sole
-------------------------------------
discretion, may alter, amend or terminate the Plan, or any part thereof, at any
time and for any reason. However, as required by Rule 16b-3, without further
stockholder approval, no such alteration or amendment shall (a) materially
increase the benefits accruing to participants under the Plan, (b) materially
increase the number of securities which may be issued under the Plan, or (c)
materially modify the requirements as to eligibility for participation in the
Plan; provided, however, that stockholder approval is not required if such
approval is not required in order to assure the Plan's continued qualification
under Rule 16b-3. Neither the amendment, suspension, nor termination of the
Plan shall, without the consent of the Participant, alter or impair any rights
or obligations under any Award theretofore granted. No Award may be granted
during any period of suspension nor after termination of the Plan.
16
<PAGE>
SECTION 13
TAX WITHHOLDING
13.1 Withholding Requirements. Prior to the delivery of any Shares or
------------------------
cash, pursuant to an Award, the Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes required to be withheld
with respect to such Award.
13.2 Shares Withholding. The Committee, in its sole discretion and
------------------
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part, by
electing to have the Company withhold Shares having a value equal to the amount
required to be withheld or by delivering to the Company already-owned shares to
satisfy the withholding requirement. The amount of the withholding requirement
shall be deemed to include any amount which the Committee agrees may be withheld
at the time the election is made, not to exceed the amount determined by using
the maximum federal, state or local marginal income tax rates applicable to the
Participant with respect to the Award on the date that the amount of tax to be
withheld is to be determined. The value of the Shares to be withheld or
delivered will be based on their Fair Market Value on the date that the taxes
are required to be withheld.
SECTION 14
INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, notion,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan or
any Award Agreement and against and from any and all amounts paid by him or her
in settlement thereof, with the Company's approval, or paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company's Articles of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may have to indemnify
them or hold them harmless.
17
<PAGE>
SECTION 15
SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
SECTION 16
LEGAL CONSTRUCTION
16.1 Gender and Number. Except where otherwise indicated by the context,
-----------------
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
16.2 Severability. In the event any provision of the Plan shall be held
------------
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
16.3 Requirements of Law. The granting of Awards and the issuance of
-------------------
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
16.4 Securities Law Compliance. With respect to Section 16 Persons,
-------------------------
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan, Award
Agreement or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
16.5 Governing Law. The Plan and all Award Agreements shall be construed
-------------
in accordance with and governed by the laws of the State of California.
16.6 Captions. Captions are provided herein for convenience only, and
--------
shall not serve as a basis for interpretation or construction of the Plan.
18
<PAGE>
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CENTRAL GARDEN & PET COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS FEBRUARY 23, 1998
The undersigned hereby appoints William E. Brown, Glenn W. Novotny and Robert
B. Jones, or any of them, each with power of substitution, as proxies of the
undersigned, to attend the Annual Meeting of Stockholders of CENTRAL GARDEN &
PET COMPANY to be held at the LAFAYETTE PARK HOTEL, 3287 Mt. Diablo Boulevard,
Lafayette, California, on February 23, 1998, at 10:30 A.M., and any adjournment
thereof, and to vote the number of shares the undersigned would be entitled to
vote if personally present on the following:
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE REVERSE SIDE)
<PAGE>
- --------------------------------------------------------------------------------
This proxy will be voted as directed. In the absence of contrary directions,
this proxy will be voted FOR the election of the directors listed above and FOR
proposals 2 and 3.
Please mark
[X] your votes
as this
1. ELECTION OF DIRECTORS:
FOR all WITHHOLD
nominees listed authority to vote
(Except as for all nominees
indicated) listed.
[_] [_]
Instruction: To withhold authority to vote for any individual nominee, strike
a line through that nominee's name in the list below:
William E. Brown, Glenn W. Novotny, Lee D. Hines, Jr. and Daniel P. Hogan, Jr.
2. To approve the amendment to the FOR AGAINST ABSTAIN
Company's Certificate of Incorporation to
increase the number of shares of Common [_] [_] [_]
Stock authorized for issuance by 40,000,000
and the number of shares of Preferred Stock
authorized for issuance by 999,000. I plan
to attend
3. To approve the amendment to the 1993 the meeting
Omnibus Equity Incentive Plan to [_] [_] [_] [_]
increase the number of shares authorized
for issuance by 2,000,000.
4. In their discretion, upon any and all STOCKHOLDERS ARE URGED TO MARK,
such other matters as may properly DATE, SIGN AND RETURN THIS PROXY
come before the meeting or any PROMPTLY IN THE ENVELOPE
adjournment thereof. PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED
STATES.
_______
|
|
|
Signature(s) ___________________________ Date _______________________________
The signature should correspond exactly with the name appearing on the
certificate evidencing your Common Stock. If more than one name appears, all
should sign. Joint owners should each sign personally.
- --------------------------------------------------------------------------------
