UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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:
[X] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
ANNIE'S HOMEGROWN, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
SEC 1913 (3-99)
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ANNIE'S HOMEGROWN, INC.
395 MAIN STREET
WAKEFIELD, MASSACHUSETTS 01880
(781) 224-1172
---------------------------------
Dear Stockholder:
It is with great pleasure that the directors and I invite you to attend
a Special Meeting in Lieu of an Annual Meeting of Stockholders of Annie's
Homegrown, Inc. (the "Company") which will be held at 10:00 a.m. (Eastern
Standard Time) on November 30, 1999 at the offices of Kirkpatrick & Lockhart
LLP, 75 State Street, Sixth Floor, Boston, Massachusetts.
At the meeting, you will be asked (i) to elect five directors to serve
until the next Annual Meeting of Stockholders, (ii) to approve the appointment
of KPMG LLP as the Company's independent public accountants for fiscal year
2000, (iii) to approve the Company's 1999 Omnibus Stock Option Plan, (iv) to
approve the Company's 1999 Non-Employee Directors' Stock Option Plan, and (v) to
amend the Company's Certificate of Incorporation, as amended, to authorize one
million shares of Annie's Homegrown, Inc. Preferred Stock, par value $2.00 per
share, and to allow the Board of Directors to designate the rights and
preferences of various series of that Preferred Stock from time to time.
The Notice of the Special Meeting in Lieu of an Annual Meeting of
Stockholders and Proxy Statement that accompany this letter describe in detail
the matters that will be presented at the meeting.
Your vote is important regardless of the number of shares you own. We
urge you to complete, sign, date and return the enclosed proxy card promptly in
the prepaid envelope provided, whether or not you plan to attend the meeting in
person. Alternatively, you may grant a proxy by following the telephone or
internet instructions on the back of the proxy card. Providing a proxy will
ensure your proper representation at the meeting. If you decide to attend the
meeting in person, and you so desire, your proxy will be returned to you and you
may vote your shares in person.
Thank you for giving these materials your careful consideration. We
hope to see you on November 30th.
Only stockholders of record at the close of business on October 15,
1999, the record date, are entitled to notice of, and to vote at, the Special
Meeting.
By Order of the Board of Directors
Deborah Churchill Luster, Secretary
Wakefield, Massachusetts
October 26, 1999
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ANNIE'S HOMEGROWN, INC.
395 MAIN STREET
WAKEFIELD, MASSACHUSETTS 01880
(781) 224-1172
---------------------------------
NOTICE OF SPECIAL MEETING
IN LIEU OF AN ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 30, 1999
Notice is hereby given that a Special Meeting in Lieu of an Annual
Meeting of Stockholders of Annie's Homegrown, Inc., a Delaware corporation (the
"Company"), will be held on Tuesday, November 30, 1999 at 10:00 a.m. (Eastern
Standard Time) at the offices of Kirkpatrick & Lockhart LLP, 75 State Street,
Sixth Floor, Boston, Massachusetts for the following purposes:
1. To elect five directors to serve until the next Annual Meeting
of Stockholders and until their successors are elected and
qualified;
2. To approve the appointment of KPMG LLP as the Company's
independent public accountants for the fiscal year ending
March 31, 2000;
3. To approve the Company's 1999 Omnibus Stock Option Plan;
4. To approve the Company's 1999 Non-Employee Directors' Stock
Option Plan; and
5. To amend the Company's Certificate of Incorporation, as
amended, to authorize one million shares of Annie's Homegrown,
Inc. Preferred Stock, par value $2.00 per share, and to allow
the Board of Directors to designate the rights and preferences
of various series of that Preferred Stock from time to time.
The stockholders will also consider and act upon any other business
that may properly come before the meeting.
Reference is hereby made to the accompanying Proxy Statement for more
complete information concerning the matters to be acted upon at the meeting.
Only stockholders of record of the Company's Common Stock at the close
of business on October 15, 1999 will be entitled to vote at the Special Meeting
and any adjournments thereof.
Stockholders are requested to complete, sign, date, and return the
enclosed proxy card in the enclosed envelope. Alternatively, stockholders may
grant a proxy by following the telephone or internet instructions set forth on
the face of the proxy card.
By Order of the Board of Directors
Deborah Churchill Luster, Secretary
October 26, 1999
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ANNIE'S HOMEGROWN, INC.
395 MAIN STREET
WAKEFIELD, MASSACHUSETTS 01880
(781) 224-1172
---------------------------------
PROXY STATEMENT
---------------------------------
Proxies in the form enclosed with this Proxy Statement are being solicited
by the Board of Directors of Annie's Homegrown, Inc., a Delaware corporation
(the "Company"), for use at a Special Meeting in Lieu of an Annual Meeting of
Stockholders of the Company to be held at 10:00 a.m. (Eastern Standard Time) on
Tuesday, November 30, 1999 at the offices of Kirkpatrick & Lockhart LLP, 75
State Street, Sixth Floor, Boston, Massachusetts, and any adjournments thereof
(the "Meeting"). This proxy is dated October 26, 1999.
Only holders of record as of the close of business on October 15, 1999 (the
"Record Date"), of the Company's Common Stock, $0.001 par value per share (the
"Common Stock"), will be entitled to notice of, and to vote at, the Meeting. As
of the Record Date, 4,709,768 shares of Common Stock of the Company were
outstanding and were held by 2,540 holders of record. Holders of Common Stock
are entitled to cast one vote for each share of Common Stock held of record by
them on each proposal submitted to a vote at the Meeting. Stockholders may vote
in person or by proxy. Granting of a proxy does not in any way affect a
stockholder's right to attend the Meeting and vote in person. Any stockholder
giving a proxy has the right to revoke that proxy by (i) filing a later-dated
proxy or a written notice of revocation with the Secretary of the Company at the
address set forth above at any time before the original proxy is exercised, or
(ii) voting in person at the Meeting.
The persons named as attorneys in the proxy are Mr. Paul B. Nardone and Mr.
Neil Raiff. Mr. Nardone is the President and Chief Operating Officer of the
Company and is also a member of the Company's Board of Directors. Mr. Raiff is
the Chief Financial Officer and Treasurer of the Company. Mr. Nardone and/or Mr.
Raiff will vote all shares represented by properly executed proxies returned in
time to be counted at the Meeting, as described below under "Voting Procedures."
Any stockholder granting a proxy has the right to withhold authority to vote for
any individual nominee to the Board of Directors. Where a vote has been
specified in the proxy with respect to the matters identified in the Notice of
the Special Meeting, including the election of directors, the shares represented
by the proxy will be voted in accordance with those voting specifications.
Shares represented by proxy will be voted FOR each proposal identified on the
Notice of the Special Meeting if no voting instructions are indicated.
The stockholders will consider and vote upon proposals (i) to elect five
directors to serve until the next Annual Meeting of Stockholders, (ii) to
approve the appointment of KPMG LLP as the Company's independent public
accountants for fiscal year 2000, (iii) to approve the Company's 1999 Omnibus
Stock Option Plan, (iv) to approve the Company's 1999 Non-Employee Directors'
Stock Option Plan, and (v) to amend the Company's Certificate of Incorporation,
as amended, to authorize one million shares of Annie's
<PAGE>
Homegrown, Inc. Preferred Stock, par value $2.00 per share, and to allow the
Board of Directors to designate the rights and preferences of various series of
Preferred Stock from time to time. Stockholders will also consider and act upon
such other business as may properly come before the meeting.
The Board of Directors of the Company knows of no other matters to be
presented at the Meeting. If any other matter should be presented at the Meeting
upon which a vote properly may be taken, including any proposal to adjourn the
Meeting, Mr. Nardone and/or Mr. Raiff will vote shares represented by all
proxies received by the Board of Directors in accordance with their judgment.
An Annual Report to Stockholders, containing financial statements for the
fiscal year ended March 31, 1999 has been furnished to all stockholders entitled
to vote. This Proxy Statement and the form of proxy were first mailed to
stockholders on or about [______], 1999.
VOTING PROCEDURES
The presence, in person or by proxy, of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to establish a quorum for the transaction of business. Shares represented by
proxies pursuant to which votes have been withheld for any nominee for director,
or which contain one or more abstentions, are counted as present for purposes of
determining the presence or absence of a quorum for the Meeting.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Meeting as specified in such proxies. Directors
will be elected by a plurality of the votes cast, in person or by proxy, at the
Meeting. The five nominees receiving the highest number of affirmative votes of
the shares present or represented at the Meeting and voting on the election of
directors will be elected as directors. Only shares that are voted in favor of a
particular nominee will be counted toward that nominee's achievement of a
plurality. Shares present at the Meeting that are not voted for a particular
nominee or shares present by proxy where the stockholder properly withheld
authority to vote for such nominee will not be counted toward that nominee's
achievement of a plurality. Votes at the Meeting will be tabulated by one or
more independent inspectors of elections appointed by the Company.
For all other matters being submitted to stockholders at the Meeting, the
affirmative vote of the majority of shares present (in person or represented by
proxy) and voting on that matter is required for approval. Shares voted to
abstain, since they are not affirmative votes for the matter, will have the same
effect as votes against those matters.
SECURITY OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 1, 1999, certain information
regarding the ownership of the Company's voting securities by (i) each person
who, to the knowledge of the Company, beneficially owned more than 5% of the
Company's voting securities outstanding on such date, (ii) each director (or
nominee for director) of the Company, (iii) each Named Executive Officer (as
defined below under "Compensation and Other Information Concerning Directors and
Officers--Executive Compensation"), and (iv) all directors (and nominees for
director) and executive officers as a group.
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS (1) BENEFICIAL OWNERSHIP (2)(3) COMMON STOCK (4)
- -------------------- --------------------------- ----------------
<S> <C> <C>
Ann E. Withey (5)
c/o Annie's Homegrown, Inc.
395 Main Street
Wakefield, Massachusetts 01880 1,704,209 36.18%
Andrew M. Martin (6)
c/o Annie's Homegrown, Inc.
395 Main Street
Wakefield, Massachusetts 01880 1,714,993 36.41%
Brady Bevis (7) 13,500 *
Ronald L. Cheney 52,238 1.11%
Deborah Churchill Luster (8) 149,092 3.17%
Patrick DeTemple 2,500 *
Paul Nardone (9) 9,699 *
Neil Raiff (10) 57,632 1.22%
====== =====
All directors and executive officers 3,698,863 78.54%
as a group (8 persons) (11)
- ------------------
</TABLE>
* Less than, 1% of total voting securities.
(1) Pursuant to rules of the Securities and Exchange Commission ("SEC"),
addresses are provided only for 5% beneficial owners.
(2) Except as otherwise noted in the footnotes to this table, each person or
entity named in the table has sole voting and investment power with respect to
all shares shown as owned, based on information provided to the Company by the
persons and entities named in the table.
(3) Shares of Common Stock subject to stock options exercisable within 60 days
of October 1, 1999 are deemed outstanding for computing the percentage of the
person or group holding such securities.
(4) Percentage of beneficial ownership is calculated on the basis of the amount
of outstanding securities at October 1, 1999, (4,709,768), plus, for each
person, any securities that such person has the right to acquire within 60 days
pursuant to stock options or other rights.
(5) Includes 15,667 shares of Common Stock issuable upon exercise of certain
options granted pursuant to the Company's 1990 Incentive Stock Option Plan. All
of Ms. Withey's shares of Company stock are subject to Irrevocable Stock
Transfer Instructions dated July 25, 1995.
(6) Includes 37,302 shares of Common Stock issuable upon exercise of certain
options granted pursuant to the Company's 1990 Incentive Stock Option Plan. All
of Mr. Martin's shares of Company stock are subject to Irrevocable Stock
Transfer Instructions dated July 25, 1995.
(7) Includes 10,000 shares of Common Stock issuable upon exercise of certain
options granted to Ms. Bevis as director compensation.
(8) Includes 11,191 shares of Common Stock issuable upon exercise of certain
options granted pursuant to the Company's 1990 Incentive Stock Option Plan;
includes 3,000 shares held in trust for her minor child as to which Ms.
Churchill Luster is the custodian; and includes 600 shares held jointly with her
husband.
(9) Includes 9,699 shares of Common Stock issuable upon exercise of certain
options granted under the 1990 Incentive Stock Option Plan. Does not include (i)
incentive stock options to purchase 37,500 shares of Common Stock to which Mr.
Nardone is entitled under his Employment Agreement with the Company but have not
been issued; (ii) a non-qualified stock option that has not been issued to
purchase 107,366 shares of the Company's Common Stock under the 1996 Stock Plan
at an exercise price of $0.01 per share in exchange for certain changes in his
Employment Agreement, including the surrender of his entitlement to the
incentive stock options to purchase 37,500 shares of Common Stock described
above; (iii) an incentive stock option to purchase 237,500 shares of the
Company's Common Stock under the 1999 Omnibus Stock Option Plan, with
accelerated vesting upon the achievement of certain performance milestones,
authorized by the Compensation Committee on July 7, 1999 but not yet issued; and
(iv) 36,000 shares subject to options exercisable at $2.00 per share granted to
Mr. Nardone on August 31, 1993 by Mr. Martin and Ms. Withey.
(10) Includes 5,409 shares of Common Stock issuable upon exercise of certain
options granted pursuant to the Company's 1990 Stock Option Plan. Does not
include (i) a non-qualified stock option that has not been issued to purchase
47,368 shares of the Company's Common Stock under the 1996 Stock Plan at an
exercise price of $0.01 per share in exchange for certain changes to the Change
of Control and Severance Agreement between Mr. Raiff and the Company, and (ii)
an incentive stock option to purchase 118,750 shares of the Company's Common
Stock, under the 1999 Omnibus Stock Option Plan, with accelerated vesting based
upon the achievement of certain performance milestones, authorized by the
Compensation Committee on July 7, 1999 but not yet issued.
(11) Includes 89,268 shares of Common Stock issuable upon exercise of certain
options granted to directors and executive officers pursuant to the Company's
1990 Stock Option Plan. Includes 36,000 shares subject to options exercisable at
$2.00 per share granted to Mr. Nardone on August 31, 1993 by Mr. Martin and Ms.
Withey.
<PAGE>
In July 1995, the Company's co-founders, Ms. Withey and Mr. Martin, each
delivered to the Company's stock transfer agent certificates for 750,000 of
their shares of the Company's Common Stock. With those certificates, the
co-founders also delivered Irrevocable Stock Transfer Instructions which provide
that no transfer of those shares may be made until the sixth anniversary of the
date of those Irrevocable Stock Transfer Instructions, July 27, 1995. On the
sixth, seventh, eighth and ninth anniversaries of that date, 25% of each of
their shares will become freely transferable. All of the shares may become
transferable upon certification by the Company's Chief Financial Officer that
any of the following has been achieved: (i) for two consecutive fiscal years the
Company has minimum annual earnings equal to $0.30 per share; (ii) for five
consecutive fiscal years, the Company has an average minimum annual earnings of
$0.30 per share; or (iii) the Company's shares have traded on a United States
stock exchange at a price at least equal to $10.50 (adjusted for stock splits,
stock dividends and recapitalizations) for at least 90 consecutive trading days.
In addition, pursuant to an addendum to the Irrevocable Stock Transfer
Instructions, none of the co-founders' other shares of the Company's Common
Stock may be transferred until any of the above conditions has been achieved,
except that each co-founder may transfer a number of those other shares that,
within any three-month period, would equal 1% of the Company's Common Stock then
outstanding.
The shares subject to the Irrevocable Stock Transfer Instructions may be
transferred upon death or by gift to family members, provided that the shares
remain subject to the restrictions described above. The shares subject to the
Irrevocable Stock Transfer Instructions do not have any right, title interest or
participation in the assets of the Company in the event of a dissolution,
liquidation, reorganization or any other transaction or proceeding which results
in a distribution of the assets of the Company until the holders of all shares
not covered by the Irrevocable Stock Transfer Instructions have received an
amount equal to the public offering price. The shares subject to the Irrevocable
Stock Transfer Instructions will continue to have all voting rights to which
those shares are entitled. The Company will withhold any dividends on Ms.
Withey's and Mr. Martin's shares and will pay those dividends to Ms. Withey and
Mr. Martin only as their shares become free for transfer.
In connection with a proposed financing of the Company, Mr. Martin and Ms.
Withey have executed a non-binding term sheet with Homegrown Holdings Corp.,
described in further detail under the section titled "Certain Relationships and
Related Transactions" and under Proxy Item 5, below. As described in Proxy Item
5, Homegrown Holdings Corp. has proposed to enter into a stock collar with Mr.
Martin and Ms. Withey, whereby Homegrown Holdings Corp. will have a call option
for $2.00 per share and Mr. Martin has a put option to Homegrown Holdings Corp.
for $1.92 per share on 1,677,691 shares of the Company's Common Stock held by
Mr. Martin. Homegrown Holdings Corp. will also have a call option for $2.00 per
share and Ms. Withey has a put option for $1.92 per share on 900,000 shares of
Common Stock held by Ms. Withey. Homegrown Holdings Corp.'s call options are
exercisable as quickly as Mr. Martin and Ms. Withey's shares of Common Stock are
freed from the Irrevocable Stock Transfer Instructions. Mr. Martin's and Ms.
Withey's put options become exercisable fifteen days after Homegrown Holdings
Corp.'s call option becomes exercisable. Such purchases and sales, if completed,
would result in a change of control of the Company. Completion of the
transactions with Mr. Martin and Ms. Withey is a condition to the completion of
the financing of the Company described in detail under Proxy Item 5, below.
Therefore, both Ms. Withey and Mr. Martin have a personal interest in Proxy Item
5 that is in addition to any interest which they may have as holders of the
Company's Common Stock.
<PAGE>
ELECTION OF DIRECTORS
(PROXY ITEM 1)
The Company's by-laws presently fix the number of directors at nine. The
Board of Directors has named fewer nominees than the number of directors fixed
by the by-laws because the Board of Directors expects to identify and appoint
additional directors to fill the vacancies, or the stockholders will be asked to
elect additional directors in the future. As of the date of this Proxy
Statement, no person has been offered any such position, nor has any person
agreed to fill any vacancy of the Board of Directors. However, as described
above and in Proxy Item 5, below, the Company has executed a non-binding term
sheet with Homegrown Holdings Corp., a previously unaffiliated third party, by
which Homegrown Holdings Corp. will purchase an amount of the Company's
Preferred Stock for cash and will provide debt financing for the Company.
Pursuant to that proposal, the Board of Directors would agree to appoint some
number of directors identified by Homegrown Holdings Corp. No binding agreement
to appoint directors currently exists between Homegrown Holdings Corp. (or any
other party) and the Company as of the date of this Proxy Statement.
Homegrown Holdings Corp. has requested that Mr. Martin and Ms. Churchill
Luster resign as directors in the event that the Company completes the proposed
financing and related transactions with Homegrown Holdings Corp.
The Board of Directors knows of no reason why Mr. Cheney, Mr. Nardone or
Ms. Withey, the other board nominees, will be unable to serve their full terms.
The Board of Directors may appoint directors to fill vacancies in the event that
one or more directors leave the Board of Directors.
A plurality of the votes cast by the holders of Common Stock present or
represented by proxy and entitled to vote at the Meeting is required for the
election of a nominee. Proxies cannot be voted for a greater number of persons
than the number of nominees named or for persons other than the named nominees.
The Board of Directors of the Company has nominated the following persons
for election as directors of the Company at the Meeting. All nominees are
currently members of the Company's Board of Directors. The nominees and the year
they first joined the Board of Directors are:
<TABLE>
<CAPTION>
NOMINEE AGE YEAR FIRST JOINED BOARD CURRENT POSITION(S)
------- --- ----------------------- -------------------
<S> <C> <C> <C>
RONALD L. CHENEY 63 1998 Director
DEBORAH CHURCHILL LUSTER 37 1991 Director and Secretary
ANDREW M. MARTIN 45 1989 Director
PAUL B. NARDONE 31 1999 President, Chief Operating
Officer and Director
ANN E. WITHEY 36 1989 Inspirational President and
Director
</TABLE>
<PAGE>
BACKGROUND OF NOMINEES FOR THE BOARD OF DIRECTORS AND CERTAIN KEY OFFICERS
RONALD L. CHENEY, 63, has been a director of the Company since 1998. He is a
co-principal of an unregistered investment fund. He retired from his practice of
law in 1996. Prior to his retirement, Mr. Cheney worked for the last ten years
as a sole practitioner specializing in the area of securities law. Mr. Cheney
has been a panelist at discussions on securities litigation, lectured in law
school and published articles on securities law. Mr. Cheney holds a B.A. degree
from Yale University and his LL.B. from Harvard Law School.
DEBORAH CHURCHILL LUSTER, 37, is currently serving as the Company's Secretary.
She has been a director since 1991. She also served as the Company's President
from October 1991 through October 1996, and as Vice-Chairperson and a part-time
employee from October 1996 through April 1999. Her responsibilities included
serving as a spokesperson for the Company, its products and philosophy. She has
been honored as a speaker by many groups on behalf of issues relating to women,
business and the environment. Prior to joining the Company in May 1990, Ms.
Churchill Luster was a District Loan Officer, in charge of all loan operations
in Northern California, with Glendale Federal Bank of San Mateo California. Ms.
Churchill Luster holds a B.A. in Economics from the University of California at
Santa Barbara.
ANDREW M. MARTIN, 45, co-founded the Company and has been a director since 1989.
He has also served as the Company's Chief Executive Officer and Chairman until
July 1999. Currently, Mr. Martin resides and works in New Zealand and
communicates with the Company via phone, fax and e-mail. Mr. Martin actively
supports a variety of programs that benefit women, children, education and the
environment. He has also created several successful programs to benefit the
homeless and the environment including S.A.V.E., Be Green(R), Bottle Bag and
several of the Company's community programs.
PAUL B. NARDONE, 31, is currently the Company's President and Chief Operating
Officer. In July 1999, Mr. Nardone was elected to the Board of Directors. Mr.
Nardone is responsible for managing the Company's strategic plan. In 1988, Mr.
Nardone founded the Olde Boston(R) brand. In 1990, Mr. Nardone founded New
England Snacks, Inc., a regional snack food distributorship. In March, 1992, New
England Snacks, Inc. was sold to Alternative Distributors where Mr. Nardone
served as Vice President of sales until joining the Company in 1993. Mr. Nardone
holds a B.A. degree in Political Science from Tufts University.
ANN E. WITHEY, 36, co-founded the Company in 1989 and is currently a director
and the Company's Inspirational President. Ms. Withey has served as a director
of the Company since 1989. Ms. Withey's responsibilities include new product
development and consumer correspondence and relations. Ms. Withey was a
co-founder of Smartfood, Inc. and creator of the original recipe for
Smartfood(R) popcorn. Smartfood Inc. was sold to Frito-Lay, Inc. in 1989. Ms.
Withey and her husband currently own and operate a small organic produce farm in
Connecticut. Ms. Withey actively supports a variety of programs that benefit
women, children, education and the environment. Ms. Withey holds a B.A. degree
from the University of Connecticut.
NEIL RAIFF, 42, is the Company's Chief Financial Officer and Treasurer. From
1989 to September 1994, Mr. Raiff served in this capacity on a contractual
basis. In October 1994, Mr. Raiff became a part-time employee, and in May 1995
he joined the Company as a
<PAGE>
full-time employee. Mr. Raiff is responsible for all of the Company's financial
and administrative functions including financial forecasting and strategic
planning, expense control, accounting and banking and insurance relationships.
From 1991 to May 1995, Mr. Raiff was self-employed as a certified public
accountant in private practice. Mr. Raiff holds a B.S. in Accountancy from
Bentley College.
OLDE BOSTON(R) is a registered trademark of Olde Boston Snacks, Inc.
SMARTFOOD(R) is a registered trademark of Smartfood, Inc.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met eleven times during fiscal year 1999. Each of
the directors attended at least 75% of the aggregate of (i) the total number of
Board of Directors (held during the period for which he or she has been a
director); and (ii) the total number of meetings held by all committees of the
Board of Directors on which he or she served (during the period in which he or
she served).
The Board of Directors has established three standing committees: the
Compensation Committee, the Executive Committee and the Nominating Committee.
The Committee does not have a standing Audit Committee. The Compensation
Committee was established to oversee the Company's various compensation
mechanisms and to guide the Company's efforts to attract high-quality employees
and consultants. Currently, the members of the Compensation Committee are Brady
Bevis, Ronald L. Cheney, and Patrick DeTemple. The Compensation Committee met
three times during fiscal year 1999. The Executive Committee was created on July
1, 1999. It is charged with assisting the Company's management with the
formulation and implementation of various cost reduction, employee incentive and
other management programs and initiatives and other duties as assigned from time
to time by the Board of Directors. Currently, the members of the Executive
Committee are Ann E. Withey, Ronald L. Cheney and Deborah Churchill Luster. The
Nominating Committee was also created on July 1, 1999. It is charged with the
selection of potential nominees for available director positions. Currently the
members of the Nominating Committee are Andrew M. Martin, Ann E. Withey, Ronald
L. Cheney and Deborah Churchill Luster. It does not solicit stockholder input
for its selection of nominees other than the input of stockholder-directors
serving on the Nominating Committee. The Board of Directors also forms AD HOC
committees from time to time. On September 14, 1998, the Company formed a
Special Committee. The Special Committee is charged with overseeing the
Company's efforts to maximize stockholder value. Currently, the members of the
Special Committee are Brady Bevis, Ronald L. Cheney and Patrick DeTemple.
COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
The Board of Directors has the authority to fix the compensation of the
directors. The directors may be paid their expenses and a fixed sum for their
attendance at each meeting of the Board or a stated salary as a director and
each may be reimbursed for his or her expenses. Non-employee directors are paid
a fee for their services as a director through the next annual meeting. The
Company pays no compensation for its directors who are also employees of the
Company. Each of the Non-employee directors was paid $3,000 for their services
for fiscal year 1999. On August 5, 1999, Patrick DeTemple and Brady Bevis were
each granted 2,500 shares of Common Stock of the Company as compensation for
their services as directors for fiscal year 1999.
On July 7, 1999, the Board of Directors eliminated its policy of cash
payment to directors effective for the directors elected at this Meeting and
adopted the 1999 Non-Employee Directors' Stock Option Plan. Pursuant to a
meeting of the Executive Committee on August 24, 1999, the Board of Directors
resolved to grant
<PAGE>
five-year non-qualified stock options to purchase 7,500 shares of the Company's
Common Stock to each non-employee director for service on the Board of Directors
and 2,500 shares for each Committee of the Board of Directors on which each
non-employee director serves, both at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. Non-employee directors
may also receive reimbursement for their expenses in attending the meetings. The
stockholders are asked to approve the 1999 Non-employee Directors' Stock Option
Plan at the Meeting pursuant to Proxy Item 4, below.
The following table sets forth, for the fiscal years ended March 31, 1999,
March 31, 1998 and March 31, 1997, a summary of compensation awarded to, earned
by or paid to the Company's Chief Executive Officer and each of its four other
most highly compensated executive officers (the "Named Executive Officers") at
March 31, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL YEAR SALARY(1) BONUS OPTIONS(2) COMPENSATION
POSITION
($) ($) (#)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ANDREW M. MARTIN(2) 1999 $ 121,500 $ -- -- $35,949(3)
----
1998 82,500 -- -- $22,278(3)
----
1997 79,500 -- -- $12,682(3)
----
PAUL NARDONE(4) 1999 $ 109,000 $ 33,852 -- --
----
President, Chief 1998 69,500 19,288 -- --
----
Operating Officer 1997 65,500 -- --
----
7,958
NEIL RAIFF(5) 1999 $ 100,500 $ -- -- --
----
Chief Financial 1998 61,500 -- -- --
----
Officer, Treasurer 1997 60,000 -- -- --
----
- ------------------
</TABLE>
(1) Amounts shown do not include the cost to the Company of personal benefits,
the value of which did not exceed 10% of the aggregate salary and bonus
compensation for each Named Executive Officer.
(2) Mr. Martin served as the Company's Chief Executive Officer until July 1999.
(3) Other compensation to Mr. Martin includes imputed interest on indebtedness
to the Company, the personal portion of rent and telephone expenses paid by the
Company on Mr. Martin's behalf and the forgiveness of the 1997 Stock Option
Loan, described in the section titled "Certain Relationships and Related
Transactions," below.
(4) Pursuant to an Employment Agreement between Mr. Nardone and the Company
dated November 26, 1996, Mr. Nardone receives a quarterly cash bonus and a fixed
number of stock options based on the amount by which the Company's actual
performance exceeds budget during the preceding quarter. Mr. Nardone has earned,
and is owed, stock options to purchase 37,500 shares of Common Stock. The
Company has not granted such stock options. On July 7, 1999, the Compensation
Committee authorized the issuance of an incentive stock option to Mr. Nardone to
purchase 237,500 shares of the Company's Common Stock under the Company's 1999
Omnibus Stock Option Plan, with accelerated vesting based upon the achievement
of certain performance incentives. This incentive stock option has not been
issued as of the date of this Proxy Statement. On August 26, 1999, the
Compensation Committee authorized the issuance of a non-qualified stock option
to Mr. Nardone to purchase 107,366 shares of the Company's Common Stock under
the Company's 1996 Stock Plan, at an exercise price of $0.01 per share, in
exchange for the following changes to Mr. Nardone's Employment Agreement: (i)
surrender of his entitlement to a change of control bonus of 2%; (ii) surrender
of his entitlement to the incentive stock options to purchase 37,500 shares of
Common Stock mentioned above; (iii) reduction of his base salary from $120,000
to $96,000, (iv) surrender of his entitlement to certain cash bonuses based on
performance in exchange for his participation in the Company's Bonus Pool
Program, described below, and (v) extension of the term of his Employment
Agreement to March 31, 2000. The amendment to Mr. Nardone's Employment Agreement
has not been executed and the non-qualified stock option has not been issued as
of the date of this Proxy Statement.
(5) On July 7, 1999, the Compensation Committee authorized the issuance of an
incentive stock option to Mr. Raiff to purchase 118,750 shares of the Company's
Common Stock under the Company's 1999 Omnibus Stock Option Plan, with
accelerated vesting based upon the achievement of certain performance
incentives. This incentive stock option has not been issued as of the date of
this Proxy Statement. On August 26, 1999, the Compensation Committee authorized
the issuance of a ten-year non-qualified stock option to Mr. Raiff to purchase
47,368 shares of the Company's Common Stock under the Company's 1996 Stock Plan,
with an exercise price of $0.01 per share, in exchange for the following changes
to Mr. Raiff's Change of Control and Severance Agreement with the Company, dated
December 21, 1998: (i) surrender of his entitlement to a change of control bonus
of 1%, and (ii) the modification of his severance entitlement to six months in
all instances. The amendment to Mr. Raiff's Change of Control and Severance
Agreement has not been executed and the non-qualified stock option has not been
issued as of the date of this Proxy Statement.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted to the Named Executive Officers during the
1999 fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of stock options during the fiscal
years ended March 31, 1999, March 31, 1998 and March 31, 1997 and unexercised
stock options held as of the end of fiscal year 1999. The values reported for
the fiscal year ended March 31, 1997 have been adjusted to give effect to a
change in the Company's fiscal year from December 31 to March 31, effective as
of March 27, 1997.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
SHARES TO BE OPTIONS AT FY- FY-END ($) (1)
RECEIVED END EXERCISABLE/ EXERCISABLE/
NAME YEAR ON EXERCISE UNEXERCISABLE UNEXERCISABLE
- ---- ---- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Andrew M. Martin(2) 1999 101,959 37,302/0 $3,730/$0
1998 84,552 139,261/0 $513,015/$0
1997 -- 268,874/0 $1,177,540/$0
Ann E. Withey 1999 71,620 15,667/0 $1,567/$0
Inspirational 1998 84,552 87,287/0 $359,309/$0
President 1997 -- 171,839/0 $798,979/$0
- -----------------------
</TABLE>
(1) Calculated based on the initial public offering price of the Company's
Common Stock ($6.00), minus the exercise price of the option. The initial public
offering price is used because the Company's stock does not trade on any
exchange or public market and to the Company's knowledge there have been no
sales by which the Company could reasonably determine the fair market value of
the Common Stock. As a result, the fair market value of the Company's Common
Stock is indeterminable.
(2) Mr. Martin served as the Company's Chief Executive Officer until July 1999.
<PAGE>
BONUS POOL PROGRAM
On July 7, 1999, the Board of Directors adopted the Company's Bonus Pool
Program. In connection with the adoption of the Bonus Pool Program, the Company
reduced the base salary of Paul B. Nardone, the Company's President and Chief
Operating Officer. Mr. Nardone's annual base salary was reduced from $120,000 to
$96,000. The Bonus Pool Program provides employees designated to participate
with an opportunity to receive cash bonus awards up to an aggregate of 15% of
the Company's earnings before interest and taxes ("EBIT") upon the achievement
of certain financial targets. The financial targets are tied directly to the
Company's EBIT. The Company's Executive Committee determines eligibility for
participation in the Bonus Pool Program and administers the Program. Ann Withey,
the Company's co-founder and Inspirational President, is not participating in
the Bonus Pool Program. Mr. Nardone currently participates in the bonus pool
program.
The chart below outlines the Bonus Pool Program.
<PAGE>
<TABLE>
<CAPTION>
FY 2000 EBIT % OF TARGET BONUS TO EACH PLAN ADDITIONAL BONUS TO
ACHIEVED(1) ACHIEVED BENEFICIARY(2)(3) PAUL B. NARDONE(4)
----------- -------- ----------------- ------------------
<S> <C> <C> <C> <C>
Level 1 $450,000(5) 90% - 94% 5% --
to $4,74,999
Level 2 $475,000 95% - 99% 10% $5,000
to $499,999
Level 3 $500,000 100% - 109% 15% $10,000
to $549,999
Level 4 $550,000 110%-124% 20% $15,000
to $624,999
Level 5 $625,000 125% + 25% $20,000
</TABLE>
(1) The FY 2000 EBIT target is $500,000. EBIT will be determined in accordance
with Generally Accepted Accounting Principles, consistently applied, with
certain adjustments for compensation charges in connection with incentive
programs.
(2) The participants in the Bonus Pool will be Mr. Paul B. Nardone, President
and Chief Operating Officer, and such other employees as determined by the
Company's Executive Committee.
(3) Bonus to be granted under the Bonus Plan as a percentage of each eligible
beneficiary's annual salary.
(4) Potential additional bonus to Mr. Nardone for his participation in the Bonus
Pool. Mr. Nardone's participation in the Bonus Pool Program is in lieu of his
rights to bonuses under his Employment Agreement with the Company.
(5) No bonus will be paid in the event that the Company's EBIT for fiscal year
2000 is less than $450,000.
1996 STOCK PLAN
On October 28, 1996, the Company adopted a 1996 stock option plan (the
"1996 Plan"). The purpose of the 1996 Plan is to encourage ownership of Common
Stock of the Company by officers, key employees, directors, consultants and
other persons not employed by the Company. Pursuant to the 1996 Plan, the
Company may grant incentive stock options and non-qualified stock options to the
Company's employees, officers, directors and consultants. A total of 200,000
shares of Common Stock were reserved for issuance under the 1996 Plan. The Board
of Directors is authorized to determine the employees, officers, directors and
consultants to whom options are granted and the number of shares for each
option. The Board of Directors also interprets the 1996 Plan and the options
granted thereunder and is authorized to adopt, amend or rescind the rules and
regulations and make all other determinations necessary or advisable for the
administration of the 1996 Plan. At October 1, 1999, no options to purchase
shares were issued under the 1996 Plan. The Board may amend the 1996 Plan at any
time, although certain amendments would require stockholder approval.
The Board of Directors has the discretion to determine the extent to which
an option may be exercised in part and the extent to which any part may or may
not be exercised prior to expiration of specified periods of time after the
grant. However, no option shall be exercisable to any extent after the
expiration of ten years (five years in the case of an incentive stock option
granted to a greater than 10% stockholder). If the option recipient terminates
his or her services with the Company, the recipient must exercise the option
within the earlier of the expiration date of such option or within 90 days of
termination of services for any reason other than death or disability. In the
event of an option recipient's death or retirement, incentive stock options will
terminate at the earlier of such date of expiration or within 180 days and 90
days respectively following such event. The exercise price of incentive stock
<PAGE>
options granted under the 1996 Plan must be at least equal to the fair market
value of the Common Stock of the Company on the date of grant. The exercise
price of incentive stock options granted to an option recipient who owns stock
possessing more than 10% of the Company's Common Stock must equal at least 110%
of the fair market value of the Common Stock on the date of grant.
1990 INCENTIVE STOCK OPTION PLAN
In January 1990, the Company adopted an incentive stock option plan (the
"1990 Plan"). The purpose of the 1990 Plan is to encourage ownership of Common
Stock of the Company by officers, key employees, directors, consultants and
other persons not employed by the Company. Pursuant to the 1990 Plan, the
Company may grant incentive stock options and non-qualified stock options to the
Company's employees, officers, directors and consultants. The Board of Directors
is authorized to determine the employees, officers, directors and consultants to
whom options are granted and the number of shares for each option. The Board
also interprets the 1990 Plan and the options granted thereunder and is
authorized to adopt, amend or rescind the rules and regulations and make all
other determinations necessary or advisable for the administration of the 1990
Plan.
The Board has the discretion to determine the extent to which an option may
be exercised in part and the extent to which any part may or may not be
exercised prior to expiration of specified periods of time after the grant.
However, no option shall be exercisable to any extent after the expiration of
ten years (five years in the case of an incentive stock option granted to a
greater-than 10% stockholder). If an option recipient terminates his or her
services with the Company, the recipient must exercise the option within the
earlier of the expiration date of such option or within 30 days of termination
of services for any reason other than death, retirement or disability. In the
event of death or retirement, the incentive stock option shall terminate at the
earlier of such date of expiration or within 180 days and 90 days respectively
following such event. The exercise price of incentive stock options granted
under the 1990 Plan must be at least equal to the fair market value of the
Common Stock of the Company on the date of grant. The exercise price of
incentive stock options granted to an option recipient who owns stock possessing
more than 10% of the Company's Common Stock must equal at least 110% of the fair
market value of the Common Stock on the date of grant.
As of October 1, 1999, options to purchase an aggregate of 120,088 shares were
outstanding at exercise prices per share ranging from $5.10 to $5.90, and 12,338
shares of Common Stock were available for future grants under the 1990 Plan. The
1990 Plan may be amended at any time by the Board, although certain amendments
would require stockholder approval. The 1990 Plan will terminate in January,
2000, unless earlier terminated when the total amount of Common Stock with
respect to which options may be granted shall have been issued upon the exercise
of options or by action of the Board, whichever shall occur first.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
HOMEGROWN HOLDINGS CORP.
In connection with a proposed financing of the Company, Mr. Martin and Ms.
Withey have executed a non-binding term sheet with Homegrown Holdings Corp.,
described in further detail under Proxy Item 5, below. Under the term sheet,
Homegrown Holdings Corp. would be granted a call option at $2.00 per share on
1,677,691 shares of the Company's Common Stock held by Mr. Martin and 900,000
shares of the Company's Common Stock held by Ms. Withey, each exercisable as
quickly as those shares are released from certain Irrevocable Stock Transfer
Instructions, described above under the heading "Security Ownership" by
Management and Principal Stockholders. It is anticipated that the call and put
options will be exercisable quarterly over a five-year period following the
closing of the Homegrown Holdings Corp. transaction. In addition, Mr. Martin
would be granted a put option at $1.92 per share with regard to 1,677,691 shares
of the Company's Common Stock held by him, exercisable fifteen days after
Homegrown Holdings Corp.'s call option is exercisable. Ms. Withey would be
granted a put option on the same terms with respect to 900,000 shares of Common
Stock owned by her.
LOANS TO OFFICER
Mr. Martin, a director of the Company, borrowed $75,000 from the Company on
June 30, 1995 pursuant to an unsecured demand note accruing interest at 11% per
annum. As of June 30, 1999, the full principal balance of the loan was
outstanding. The Company called the demand note and Mr. Martin executed a
secured promissory note dated December 31, 1997 in the principal amount of
$75,000 providing for interest payable quarterly at 6.02%, secured by 25,000
shares of the Company's Common Stock owned by Mr. Martin, which stock was
deposited in an escrow account established for this purpose, together with stock
powers in blank authorizing the resale of such shares under the applicable rules
and regulations of the Securities and Exchange Commission, and restricting the
resale of other shares of the Company's Common Stock owned by Mr. Martin under
certain circumstances.
AMOUNTS DUE FROM OFFICER
The Company periodically pays certain of Mr. Martin's personal expenses,
which are accounted for on the Company's books as "Due From Officer." The total
amount of such advances outstanding on March 31, 1999 was $24,759.
STOCK OPTION LOANS
Pursuant to Section 8 of the Company's 1990 Stock Option Plan, on December
21, 1998, the Company made loans to Mr. Martin, Ms. Withey and to Ms. Churchill
Luster in the amounts of $102,468.80, $71,978.10 and $43,236.11, respectively,
to enable each of them to purchase shares of Common Stock upon exercise of
certain options which previously were granted to them. In each case, the options
were granted on December 30, 1993 for a term of five years with an exercise
price of $1.005 per share. The terms of the Stock Purchase and Loan Agreements
("1998 Stock Loans") provide for annual interest at the rate of 4.51%, the
mid-term Applicable Federal Rate in effect for December 1998. Interest is
payable annually on December 30. The entire outstanding principal is due on
December 30, 2003. The terms of the 1998 Stock Loans further provide for the
Company to pay all interest due on the foregoing loan on each borrower's behalf,
plus one-fifth of the original principal amount of such loans, providing that
each such borrower is still employed by the Company on December 29 of each year
during the life of the obligation. Payments of principal and interest are deemed
compensation income to each borrower. The 1998 Stock Loans are secured by the
Common Stock (the "1998
<PAGE>
Stock Loan Pledged Shares") issuable upon exercise of the options. In the event
that a borrower is terminated by the Company for good cause, the 1999 Stock Loan
Pledged Shares are subject to repurchase by the Company at $1.005 per share. In
the event that a borrower is terminated for other than good cause, such a
borrower may obtain title to the 1998 Stock Loan Pledged Shares by payment of
all outstanding principal and interest due on his or her stock loan, or may
resell the 1998 Stock Loan Pledged Shares to the Company at $1.005 per share.
On October 1, 1997 and pursuant to Section 8 of the 1990 Option Plan, the
Company also made loans to Ms. Churchill Luster, Mr. Martin and Ms. Withey in
the amounts of $49,735.20, $67,641.60 and $67,641.60, respectively, to enable
each of them to purchase shares of Common Stock upon exercise of certain options
which previously were granted to them (the "1997 Stock Loans"). In each case,
the options were granted on October 1, 1992 for a term of five years with an
exercise price of $0.80 per share. The terms of the 1997 Stock Loans provide for
annual interest at the rate of 6.34%, the mid-term Applicable Federal Rate in
effect for October 1997. Interest is payable annually on October 1. The entire
outstanding principal is due on October 1, 2002. The terms of the 1997 Stock
Loans further provide for the Company to pay all interest due on the foregoing
loan on each borrower's behalf, plus one-fifth of the original principal amount
of such loans, providing that each such borrower is still employed by the
Company on September 30 of each year during the life of the obligation. Payments
of principal and interest are deemed compensation income to each borrower. The
1997 Stock Loans are secured by the Common Stock (the "1997 Stock Loan Pledged
Shares") issuable upon exercise of the options. In the event that a borrower is
terminated by the Company for good cause, the 1997 Stock Loan Pledged Shares are
subject to repurchase by the Company at $0.80 per share. In the event that a
borrower is terminated other than for good cause, the borrower may obtain title
to the 1997 Stock Loan Pledged Shares by payment of all outstanding principal
and interest due on his or may her stock loan, or resell the 1997 Stock Loan
Pledged Shares to the Company at $0.80 per share.
Pursuant to the terms of the 1998 Stock Loans and the 1997 Stock Loans, Mr.
Martin's and Ms. Churchill Luster's stock loans became due and payable 45 days
after the date of their respective terminations. Mr. Martin and Ms. Churchill
Luster are each currently negotiating with the Company for an extension of their
stock loans.
TRANSACTIONS WITH AHA!, INK.
The Company entered into a licensing agreement with Aha! Ink (the
"License") dated March 21, 1997 pursuant to which Aha! Ink has been granted an
exclusive license for a period of up to ten years to use certain of the
Company's trademarks (the "Marks"), principally the character Bernie(R), in
children's books and other publications for children. As consideration for the
License, the License provides for an initial payment to the Company of 5% of the
capital stock of Aha! Ink, and royalties, payable quarterly, equal to 2.5% of
Aha! Ink's gross receipts attributable to the use of the Marks. Aha! Ink is
controlled by Heather Smith Martin, the wife of Andrew M. Martin who, in
addition to being a director of the Company, is also an officer of Aha! Ink.
Deborah Churchill Luster, a director of the Company is a stockholder of Aha! Ink
and presently serves on its Board of Directors. The Company paid approximately
$20,000 to Aha! Ink for children's books in exchange for a termination of the
License Agreement on August 20, 1998.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF THE
NOMINEES AS DIRECTORS OF THE COMPANY.
<PAGE>
PROPOSAL TO RATIFY SELECTION OF AUDITORS
(PROXY ITEM 2)
The Board of Directors has selected the firm of KPMG LLP, independent
certified public accountants, to serve as auditors for the fiscal year ending
March 31, 2000. KPMG LLP has served as the Company's auditors for the past four
fiscal years. Representatives of KPMG LLP are not expected to be in attendance
at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
KPMG LLP AS THE COMPANY'S AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2000.
PROPOSAL TO APPROVE THE 1999 OMNIBUS STOCK OPTION PLAN
(PROXY ITEM 3)
The Company's management strives to attract and retain top quality
employees, consultants and directors. To that end, in July 1999, the Board of
Directors adopted, subject to approval of the Company's stockholders, the
Company's 1999 Omnibus Stock Option Plan (the "1999 Plan"). A majority of votes
cast in person or by proxy at the Meeting is required for approval of the 1999
Plan. In the event that the 1999 Plan is not approved by the stockholders, none
of the grants made under the plan will qualify as incentive stock options
("ISOs"). The following is a general summary of the plan, which is qualified in
its entirety by reference to the 1999 Plan, a copy of which is attached as
Appendix A.
Under the 1999 Plan, options to purchase shares of the Company's Common
Stock may be granted which are either (i) options intended to qualify as ISOs
under Section 422(b) of the Internal Revenue Code, or (ii) non-qualified stock
options ("NQSOs"). Options to purchase a total of 475,000 shares of Common Stock
may be granted under the 1999 Plan; however, options to purchase more than
300,000 shares may not be granted to any single recipient during any single
calendar year. If there is a change of the number or kind of shares issuable
under the 1999 Plan as a result of declaration of stock dividend, stock split,
combination, exchange, merger, consolidation, reclassification or any similar
extraordinary event affecting the Company's Common Stock, an adjustment will be
made in the maximum aggregate number of shares that may be subject to the 1999
Plan, as well as in the number of shares subject to outstanding options and the
exercise price of options granted under the 1999 Plan. The Compensation
Committee will oversee and administer the 1999 Plan (subject to the 1999 Plan's
terms), will have authority to select recipients eligible to receive option
grants, and will grant ISOs and NQSOs under the 1999 Plan's terms. The
Compensation Committee may grant ISOs or NQSOs or any combination of such
options, but the Company's directors and consultants will only be entitled to
receive NQSOs.
The exercise price of options under the 1999 Plan will be not less than
100% of the fair market value of the Company's Common Stock on the date of grant
if the grant is intended to be an ISO. No ISO will be granted to any individual
who, immediately prior to the grant, owns Company stock possessing more than 10%
of the total combined voting power of stock of the Company, unless that option's
exercise price is not less than 110% of fair market value of the Company's
Common Stock on the date of
<PAGE>
grant and the option, by its terms, expires no later than five years after the
date of grant.
The Company will determine the exercise period and vesting terms, if any,
for each option grant, but the exercise period will not be more than ten years
after the date the option is granted. If a recipient of options ceases to be an
employee, consultant or director to the Company for any reason other than his or
her death, disability or approved retirement, any option which is otherwise
exercisable by such former employee, consultant or director will terminate
unless it is exercised within 30 days of the date of his or her termination. If
a recipient ceases to be an employee, consultant or director of the Company by
reason of his or her death, any option held by that recipient which was
exercisable on the date of his or her death may be exercised by the legal
representative of the recipient's estate for up to one year after his or her
death or until the stated expiration date of the option, whichever period is
shorter. Any option not exercisable on the date of the recipient's death is
forfeited. If a recipient ceases to be an employee, consultant or director as a
result of his or her disability, any such options which are exercisable on the
date of his or her termination may be exercised for up to one year following the
date of termination or until the stated expiration date of such option,
whichever period is shorter. If a recipient is "Terminated for Cause", as
defined under the 1999 Plan (E.G., for violation of the Company's personnel
policies), the terminated recipient's options will immediately be forfeited.
In the event of a Change of Control, as defined in the 1999 Plan unless
otherwise proscribed in the stock option grant, one-half of the unvested
portions of each grant under the 1999 Plan will become fully exercisable
immediately prior to such event. The Company does not intend for the Homegrown
Holdings Corp. transaction described above to constitute a "Change of Control"
for the purposes of the 1999 Plan, and the stock option grants prior to the
closing of the Homegrown Holdings Corp. transaction will so indicate. If the
1999 Plan remains in effect following such a Change of Control, the remainder of
any unvested options will continue to vest as otherwise provided unless the
Compensation Committee determines otherwise.
The Compensation Committee may amend, discontinue or terminate the 1999
Plan at any time. The 1999 Plan will automatically terminate on the tenth
anniversary of its effective date.
The number of options or shares, if any, that will be granted to executive
officers and other employees under the 1999 Plan cannot currently be determined,
since any such grants are subject to the discretion of the Compensation
Committee.
On July 7, 1999 and August 26, 1999, pursuant to the 1999 Plan, the
Compensation Committee of the Board of Directors approved the issuance of
incentive stock options to purchase an aggregate of 391,862 shares to five
employees with an exercise price equal to the fair market value of the Common
Stock on the date of grant, with accelerated vesting based upon the achievement
of certain performance milestones. These stock options have not been issued as
of the date of this Proxy Statement, however.
The discussion of federal income tax consequences that follows is based on
an analysis of the Internal Revenue Code as currently in effect, existing law,
judicial decisions and administrative regulations and rulings, all of which are
subject to change.
The Internal Revenue Code prevents the taxation of ISOs as income to the
recipient at the time that the incentive stock option is granted and at the time
the recipient exercises his or her option and purchases stock. The Internal
Revenue Code also prevents a deduction to the Company at such times. The ISO is
taxed at capital gains rates when the recipient sells the stock received upon
exercise of the option, assuming that certain holding periods and other
conditions are met.
No taxable income is realized by the recipient of an NQSO option on the
<PAGE>
Company's Common Stock at the time the option is granted. Generally, (a) at
exercise, ordinary income is realized by the holder of an NQSO in an amount
equal to the difference between the exercise price and the fair market value of
the subject shares of Common Stock on the date of exercise, and the Company
receives a tax deduction for the same amount, subject to applicable withholding
requirements and subject to certain limits on the deductibility of compensation
including the limits set forth in Section 162(m) of the Internal Revenue Code;
and (b) at disposition, appreciation or depreciation after the date of exercise
is treated as either capital gain or loss.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE 1999 OMNIBUS STOCK OPTION PLAN.
PROPOSAL TO APPROVE THE 1999 NON-EMPLOYEES DIRECTORS' PLAN
(PROXY ITEM 4)
In July, 1999, the Board of Directors adopted Company's 1999 Non-Employee
Directors' Stock Option Plan (the "Non-Employee Directors' Plan"). The
Non-Employee Directors' Plan was created to compensate directors while
simultaneously creating an incentive to such directors to maximize stockholder
value. The following is a general summary of the plan, which is qualified in its
entirety by reference to the Non-Employee Directors' Plan, a copy of which is
attached as Exhibit B.
The Non-Employee Directors' Plan provides for an annual non-discretionary
grant of stock options to each director who is not an employee of the Company
(collectively, the "Non-Employee Directors"). This annual grant is in lieu of
all other compensation for service as a member of the Board of Directors
(although Non-Employee Directors may still receive reimbursement for their
expenses in attending meetings). A total of 100,000 shares of Common Stock is
reserved for issuance under the Non-Employee Directors' Plan.
Each Non-Employee Director will receive an annual option grant on the
anniversary of his or her election or appointment to the Board of Directors to
purchase 7,500 shares of the Company's Common Stock for service on the Board of
Directors for the ensuing year and 2,500 shares for each committee on which the
Non-Employee Director serves, both with an exercise price equal to the fair
market value of the underlying Common Stock on the date option is granted. The
exercise price will be 110% of the fair market value for any person who owns
stock possessing more than 10% of the total combined voting power or value of
the Company's equity. Options will remain exercisable for five years from the
date granted.
The discussion of federal income tax consequences that follows is based on
an analysis of the Internal Revenue Code as currently in effect, judicial
discussions and administrative regulations and rulings all of which are subject
to change.
No taxable income is realized by Non-Employee Directors upon the grant of
options under the Non-Employee Directors' Plan. Upon exercise of such options,
optionholders will realize ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the Common Stock
acquired upon exercise. The Company will receive a deduction for the same
amount, subject to applicable withholding and other provisions limiting the
deductibility of business expenses. At disposition, appreciation or depreciation
after the date of exercise will be treated as capital gain or loss.
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE 1999
NON-EMPLOYEE DIRECTORS' PLAN.
PROPOSALTO AMEND THE CERTIFICATE OF INCORPORATION TO AUTHORIZE ONE MILLION
SHARES OF PREFERRED STOCK, PAR VALUE $2.00 PER SHARE, AND TO DELEGATE
TO THE BOARD OF DIRECTORS DESIGNATION RIGHTS FOR PREFERRED STOCK
(PROXY ITEM 5)
At the Meeting, the Company's stockholders will vote on a proposed
amendment to the Company's Certificate of Incorporation, as amended, that will
authorize one million shares of Preferred Stock, par value $2.00. The Company's
capitalization currently consists of ten million shares of Common Stock, par
value $0.001, authorized, of which 4,709,768 are outstanding as of the Record
Date. The terms of the Preferred Stock, including dividend or interest rates,
conversion prices, voting rights, redemption prices, maturity dates and similar
matters will be determined from time to time by the stockholders or the Board of
Directors prior to the issuance of shares of Preferred Stock. The text of the
proposed amendment to the Certificate of Incorporation is attached as Exhibit C.
The Company's financial information from its Form 10-KSB for fiscal year 1999 is
hereby incorporated by reference.
The issuance of any Preferred Stock authorized as a result of this Proxy
Item will have the effect of diluting the interests of the Company's current
stockholders. Furthermore, to the extent that the rights and privileges of
Preferred Stock are superior to the rights and privileges of Common Stock, any
such issuances could have the result of reducing the value of Common Stock.
The Board of Directors approved this amendment to the Certificate of
Incorporation on July 7, 1999. After that date, the Company signed a non-binding
term sheet for a proposed investment in the Company by Homegrown Holdings Corp.,
a Delaware corporation that is presently unaffiliated with the Company. A final
agreement between the Company and Homegrown Holdings Corp. has not yet been
reached. However, under the terms of a non-binding term sheet signed by the
Company, the Company expects that Homegrown Holding Corp.'s financing will be
made on the following terms:
o Homegrown Holdings Corp. will purchase one million shares of convertible
Preferred Stock, par value $2.00 per share, from the Company for $2 million
pursuant to a private placement. The Preferred Stock will be redeemable at
its par value with a liquidation preference of par plus 10% per annum, will
have voting rights equivalent to one million shares of the Company's Common
Stock, and will be convertible into Common Stock at $2.00 per share.
o Homegrown Holdings Corp. will loan $1 million to the Company pursuant to an
unsecured subordinated promissory note, bearing interest at 10% per annum
and providing for interest only payments for five years, with the principal
then being due.
o In connection with this loan, the Company will issue five-year warrants to
purchase 1,500,000 shares of its Common Stock to Homegrown Holdings. The
exercise price of the warrants will be $2.00 per share until the third
anniversary of the issuance of the warrants; $2.50 during the six months
thereafter; $3.00 until the fourth anniversary of the issuance of the
warrants; $3.50 for the six months thereafter; and $4.00 per share from
that date until the expiration of the warrants. In the event that the net
sales of the Company for fiscal year 2000 do not equal or exceed $9.5
million or the net adjusted income for the Company for that year is not
positive, the exercise price of the warrants will be reduced by $0.50 per
share.
<PAGE>
In a transaction related to the Homegrown Holdings Corp. financing, Mr.
Martin, and Ms. Withey, both of whom are directors and co-founders of the
Company, have signed a non-binding term sheet with Homegrown Holdings Corp.
Under that term sheet, Mr. Martin would grant Homegrown Holdings Corp. a call
option to purchase 1,677,691 shares of the Company's Common Stock, exercisable
at $2.00 per share. Homegrown Holdings Corp. would grant a put option to Mr.
Martin on those shares exercisable by him at $1.92 per share. Ms. Withey would
grant an identical call option and receive an identical put option (with the
same exercise prices) with respect to 900,000 shares of Common Stock held by her
with similar exercise prices. Homegrown Holdings Corp.'s call option will be
exercisable as quickly as Mr. Martin's and Ms. Withey's shares of Common Stock
are released from the Irrevocable Stock Transfer Instructions described above.
Mr. Martin's and Ms. Withey's put options will be exercisable fifteen days after
Homegrown Holdings Corp.'s call option is exercisable. However, if the Internal
Revenue Service adopts regulations that retroactively apply to this type of
transaction, commonly known as a "stock collar", and such regulations would
characterize the transaction as a constructive sale, then the exercise prices
will be adjusted to the extent necessary to avoid such a characterization, but
in no case will either exercise price be less than $1.60 per share.
The Company and Homegrown Holdings Corp. and Mr. Martin, Ms. Withey and
Homegrown Holdings Corp. have only signed non-binding term sheets and there is
no guarantee that the transactions with Homegrown Holdings Corp. will be
completed. If the Homegrown Holdings Corp. transactions are not completed, the
one million shares of Preferred Stock will remain authorized but unissued until
further action by the stockholders or Board of Directors.
The Certificate of Amendment that the stockholders are asked to approve
also includes language authorized by Section 151 of General Corporation Law of
the State of Delaware delegating to the Board of Directors the power to issue
one or more series of Preferred Stock from time to time and by resolution to
designate the powers, designations, preferences and relative participating,
optional or other special rights, and the qualifications, limitations, or
restrictions of any class of stock or any series of such class of stock to the
extent not inconsistent with the Company's Certificate of Incorporation, as
amended, or in conflict with the rights of any other series fixed by resolution
of the Board of Directors and set forth in a certificate of designation filed
with the Secretary of State of Delaware. In the absence of this delegation of
authority to the Board of Directors, these powers would be reserved to the
stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE TO
APPROVE THIS AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION, AS
AMENDED.
STOCKHOLDER PROPOSALS
It is contemplated that the next Annual Meeting of Stockholders will be
held on or about September 18, 2000. To be eligible for inclusion in the proxy
statement to be
<PAGE>
furnished to all stockholders entitled to vote at the next Annual Meeting,
proposals must comply with Securities and Exchange Commission rules and
regulations and be received at the Company's principal executive offices not
later than May 22, 2000. In order to avoid controversy as to the date on which a
proposal was received by the Company, it is suggested that any stockholder who
wishes to submit a proposal submit such proposal by Certified Mail, Return
Receipt Requested.
EXPENSES AND SOLICITATION
The costs of printing and mailing proxies will be borne by the Company. In
addition to soliciting stockholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company registered
in the names of a nominee and, if so, will reimburse
such banks, brokers and other custodians, nominees and fiduciaries for their
reasonable out-of-pocket costs. Solicitation by officers and employees of the
Company may also be made of some stockholders following the original
solicitation.
OTHER BUSINESS
The Board of Directors knows of no other items that are likely to be
brought before the Meeting except those that are set forth in the foregoing
Notice of Annual Meeting of Stockholders. If any other matters properly come
before the Meeting, the persons designated on the enclosed proxy will vote in
accordance with their judgment on such matters.
By Order of the Board of Directors
/s/ Deborah Churchill Luster
------------------------------
Deborah Churchill Luster
SECRETARY
Wakefield, Massachusetts
October 26, 1999
ANNIE'S HOMEGROWN, INC. WILL FURNISH WITHOUT CHARGE TO EACH PERSON A COPY OF
THIS PROXY STATEMENT, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, UPON RECEIPT OF A WRITTEN REQUEST SENT
TO THE SECRETARY OF ANNIE'S HOMEGROWN, INC., 395 MAIN STREET, WAKEFIELD,
MASSACHUSETTS 01880.
<PAGE>
[COMPANY LOGO]
TO ANNIE'S STOCKHOLDERS:
ANNIE'S HOMEGROWN, INC. IS YOUR COMPANY!
AS ANNIE'S STOCKHOLDERS, YOU HAVE AN OPPORTUNITY TO VOTE ON ISSUES WHICH AFFECT
YOUR COMPANY. PLEASE RETURN YOUR PROXY CARD IN THE ADDRESSED STAMPED ENVELOPE AS
SOON AS POSSIBLE WITH YOUR VOTE. THANK YOU FOR SHARING IN THE FUTURE OF ANNIE'S.
ANN07B DETACH HERE
PROXY
ANNIE'S HOMEGROWN, INC.
395 Main Street
Wakefield, Massachusetts 01880
PROXY FOR SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
November 30, 1999
The undersigned hereby appoints Paul Nardone and Neil Raiff, and each of them
singly, true and lawful agents and proxies for the undersigned, with full power
of attorney and power of substitution, to represent the undersigned and vote all
shares of capital stock of any class which the undersigned is entitled to vote
at the Special Meeting in lieu of Annual Meeting of Stockholders (the "Meeting")
of Annie's Homegrown, Inc. (the "Company") to be held on Tuesday, November 30,
1999, at 10:00 a.m., at the offices of Kirkpatrick & Lockhart LLP, 75 State
Street, Sixth Floor, Boston, Massachusetts 02109 or at any adjournment thereof,
upon the matters set forth in the Notice of Special Meeting in lieu of Annual
Meeting of Stockholders and accompanying Proxy Statement, each dated October 26,
1999, receipt of which is hereby acknowledged.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SEE REVERSE
SIDE SIDE
<PAGE>
<TABLE>
<CAPTION>
VOTE BY TELEPHONE VOTE BY INTERNET
<S> <C>
It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement/Prospectus and Proxy Card. Statement/Prospectus and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). For http://www.eproxyvote.com/___
shareholders residing outside the United
States call collect on a touch-tone phone 3. Enter your 14-digit Voter Control Number
1-201-536-8073. located on your Proxy Card above your name.
3. Enter your 14-digit Voter Control Number 4. Follow the instructions provided.
located on your Proxy Card above your name.
4. Follow the recorded instructions.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/___ anytime!
</TABLE>
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR
INTERNET
ANN07A DETACH HERE
Please mark
[X] votes as in
this example.
1. To elect a Board of Directors for the ensuing year.
Nominees: (01) Andrew M. Martin, (02) Ann E. Withey, (03) Paul B.
Nardone, (04) Deborah Churchill Luster, (05) Ronald L. Cheney
FOR WITHHELD MARK HERE
ALL [ ] FROM ALL [ ] IF YOU PLAN [ ]
NOMINEES NOMINEES TO ATTEND
THE MEETING
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE BELOW
--------------------------------------
[ ] For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To ratify the selection of the firm of KPMG [ ] [ ] [ ]
LLP as auditors of the Company for the
fiscal year ending March 31, 2000.
3. To approve the Company's 1999 Omnibus [ ] [ ] [ ]
Stock Option Plan.
4. To approve the Company's 1999 [ ] [ ] [ ]
Non-Employee Directors' Stock Option
Plan.
5. To amend the Company's Certificate of [ ] [ ] [ ]
Incorporation, as amended, to authorize
one million shares of Annie's Homegrown,
Inc. Preferred Stock, par value of $2.00 per
share, and to allow the Board of Directors
to designate the rights and preferences of
various series of that Preferred Stock from
time to time.
IMPORTANT: Please date this Proxy and sign exactly as your name(s)
appear(s) hereon. If stock is held jointly, each owner should sign. If signing
as attorney, executor, administrator, trustee, guardian or other fiduciary
please give your full title as such.
Signature:__________________ Date:___________
Signature:__________________ Date:___________
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ANNIE'S HOMEGROWN, INC.
Annie's Homegrown, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify that:
FIRST: That the Board of Directors of Annie's Homegrown, Inc., by a
unanimous vote of its members at a duly called Board of Directors Meeting on
July 7, 1999, adopted resolutions setting forth a proposed Amendment to the
Certificate of Incorporation of said corporation, declaring said Amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof.
SECOND: That, in accordance with Section 228 of General Corporation Law
of the State of Delaware, the holders of all the issued and outstanding capital
stock of the Corporation approved said amendment at a Special Meeting in Lieu of
an Annual Meeting for Stockholders on November 30, 1999.
VOTED: that the Certificate of Incorporation of this Corporation be
amended by striking Article 4 in its entirety and replacing it with the
following:
"4. The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is Eleven Million (11,000,000)
shares, consisting of Ten Million (10,000,000) shares of Common Stock, $.001 par
value per share (the "Common Stock"), and One Million (1,000,000) shares of
undesignated Preferred Stock, $2.00 par value per share (the "Preferred Stock").
The Board of Directors of the Corporation is hereby expressly
vested with the power to issue one or more series of Preferred Stock of the
Corporation from time to time and by resolution to designate the powers,
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions of any class of
stock or any series of such class of stock to the extent not inconsistent with
the provisions of this FOURTH Article or in conflict with the powers,
designations, preferences or relative, participating, optional or other special
rights, or the qualifications, limitations or restrictions of any other series
fixed by resolution of the Board of Directors and set forth in a certificate of
designation filed with the Secretary of State of Delaware."
<PAGE>
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Annie's Homegrown, Inc. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by its President
and its Secretary, this ______ day of November, 1999.
ANNIE'S HOMEGROWN, INC.
[SEAL] By: ________________________
President
- ----------------------
Secretary
EXHIBIT 10.51
ANNIE'S HOMEGROWN, INC.
1999 OMNIBUS STOCK OPTION PLAN
1. PURPOSE. The purpose of this Omnibus Stock Option Plan (the "Plan") is to
enable Annie's Homegrown, Inc. (the "Company") to offer options to acquire
equity interests in the Company to employees and directors of, and consultants
to, the Company, thereby attracting, retaining, and rewarding such persons and
strengthening the mutuality of interests between such persons and the Company's
stockholders.
2. DEFINITIONS.
For purposes of the Plan, the following terms shall have their
correspondent meanings:
2.1 "Award" shall mean an award of any Stock Option pursuant to the
Plan.
2.2 "Board" shall mean the Board of Directors of the Company.
2.3 "Change of Control" shall mean the occurrence of any one of the
following: (i) the Company completes a reorganization, merger, or consolidation
pursuant to which the Company or a Subsidiary is not the surviving entity; (ii)
the Company sells substantially all its assets to a purchaser other than a
Subsidiary; or (iii) shares of stock of the Company representing in excess of
50% of the total combined voting power of all outstanding classes of stock of
the Company are acquired, in one transaction or a series of transactions, by a
single purchaser or group of related purchasers (as such terms are defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended), in any case
other than in a transaction that has been approved by the Board.
2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.5 "Committee" shall mean the Compensation Committee of the Board,
which shall consist of two or more non-employee Directors of the Company as set
forth in Regulation 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended, or, if no Compensation Committee is appointed, the full Board.
2.6 "Common Stock" shall mean the Company's Common Stock, par value
$.001 per share.
2.7 "Company" shall mean Annie's Homegrown, Inc.
2.8 "Consultant" shall mean any individual who is a consultant to the
Company.
2.9 "Director" shall mean any individual who is a member of the
Board.
<PAGE>
2.10 "Disability" shall mean a disability as defined in Section
22(e)(3) of the Code.
2.11 "Fair Market Value", unless otherwise required by any applicable
provision of the Code or any regulations issued thereunder, shall mean, as of
any date, the fair market value of the Company's Common Stock, as determined
with reference to any published trading price of the Common Stock or, if no such
trading price is available, the fair market value of the Common Stock is
available, as determined in good faith by the Board, which determination shall
be conclusive.
2.12 "Incentive Stock Option" shall mean any Stock Option awarded under
the Plan intended to be and designated as an "Incentive Stock Option" within the
meaning of Section 422 of the Code.
2.13 "Non-Qualified Stock Option" shall mean any Stock Option awarded
under the Plan that is not an Incentive Stock Option.
2.14 "Participant" shall mean an employee, Director, or Consultant to
whom an Award has been made pursuant to the Plan.
2.15 "Stock Option" or "Option" shall mean any option to purchase
shares of Common Stock granted pursuant to Section 6 hereof.
2.16 "Subsidiary" shall mean any subsidiary of the Company, 51% or more
of the voting stock of which is owned, directly or indirectly, by the Company.
2.17 "Termination for Cause" shall mean a Termination of Employment
that has been designated as a "termination for cause" pursuant to standard
Company procedures.
2.18 "Termination of Employment" shall mean a termination of employment
with, or service as a Director or Consultant of, the Company for reasons other
than Termination for Cause.
3. ADMINISTRATION.
3.1 THE COMMITTEE. The Plan shall be administered and interpreted by
the Committee.
3.2 AWARDS. The Committee shall have full authority to grant Stock
Options pursuant to the terms of the Plan to persons eligible under Section 5.
3.3 GUIDELINES. Subject to Section 7 hereof, the Committee shall have
the authority to adopt, alter, and repeal such administrative rules, guidelines,
or practices governing the Plan as it shall, from time to time, deem advisable;
to interpret the terms and provisions of the Plan and any Award issued under the
Plan (and any agreements relating thereto), and to otherwise
-2-
<PAGE>
supervise the administration of the Plan. The Committee may correct any defect,
supply any omission, or reconcile any inconsistency in the Plan or in any Award
granted in the manner and to the extent it shall deem necessary to carry the
Plan into effect. Notwithstanding the foregoing, no action of the Committee
under this Section 3.3 shall impair the rights of any Participant without the
Participant's consent, unless otherwise required by law.
3.4 DECISIONS FINAL. Any decision, interpretation, or other action made
or taken in good faith by the Committee arising out of or in connection with the
Plan shall be final, binding, and conclusive on the Company, all Participants
and their respective heirs, executors, administrators, successors, and assigns.
4. SHARE LIMITATION.
4.1 SHARES. The maximum aggregate number of shares of Common Stock
which may be issued under the Plan shall be 475,000 shares (subject to any
increase or decrease pursuant to Section 4.2), which may be either authorized
and unissued Common Stock or issued Common Stock reacquired by the Company. If
any Option granted under the Plan shall expire, terminate, or be canceled for
any reason without having been exercised in full, the number of unpurchased
shares shall again be available for the purposes of the Plan.
4.2 CHANGES. In the event of any merger, reorganization, consolidation,
recapitalization, dividend (other than a dividend or its equivalent which is
credited to a Participant or a regular cash dividend), stock split, or other
change in corporate structure affecting the Common Stock, an adjustment shall be
made in the maximum aggregate number of shares which may be issued under the
Plan, in the number of shares subject to outstanding Options and exercise price
of Options granted under the Plan as may be determined to be appropriate by the
Committee, in its sole discretion, PROVIDED that the number of shares subject to
any Award shall always be a whole number.
5. ELIGIBILITY.
5.1 EMPLOYEES. Officers and other employees of the Company are eligible
to be granted Awards under the Plan.
5.2 DIRECTORS AND CONSULTANTS. Directors and Consultants are eligible
to be granted Awards under the Plan, PROVIDED that Directors and Consultants who
are not employees of the Company may not be granted Incentive Stock Options.
6. STOCK OPTIONS.
6.1 OPTIONS. Each Stock Option granted under the Plan shall be either
an Incentive Stock Option or a Non-Qualified Stock Option.
6.2 GRANTS. The Committee shall have the authority to grant to any
person eligible under Section 5 one or more Incentive Stock Options,
Non-Qualified Stock Options, or both
-3-
<PAGE>
types of Stock Options. To the extent that any Stock Option does not qualify as
an Incentive Stock Option (whether because of its provisions or the time or
manner of its exercise or otherwise), such Stock Option or the portion thereof
which does not qualify as an Incentive Stock Option shall constitute a separate
Non-Qualified Stock Option. The Committee shall not grant to any person during
any calendar year options to purchase more than 300,000 shares of Common Stock.
6.3 INCENTIVE STOCK OPTIONS. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options shall
be interpreted, amended, or altered, nor shall any discretion or authority
granted under the Plan be exercised so as to disqualify the Plan under Section
422 of the Code, or, without the consent of the Participants affected, to
disqualify any Incentive Stock Option under such Section 422 of the Code.
6.4 TERMS OF OPTIONS. Options granted under the Plan shall be subject
to the following terms and conditions and shall contain such additional terms
and conditions, not inconsistent with the terms of the Plan, as the Committee
shall deem desirable:
(a) STOCK OPTION GRANT. Each Stock Option shall be evidenced
by, and subject to the terms of, a Stock Option Grant executed by the Company
and the Participant. The Stock Option Grant shall specify whether the Option is
an Incentive Stock Option or a Non-Qualified Stock Option, the number of shares
of Common Stock subject to the Stock Option, the option price, the option term,
and the other terms and conditions applicable to the Stock Option.
(b) OPTION PRICE. Subject to sub-section (l) below, the option
price per share of Common Stock purchasable upon exercise of a Stock Option
shall be determined by the Committee at the time of grant but shall be not less
than 100% of the Fair Market Value of the Common Stock on the date of grant, if
the Stock Option is intended to be an Incentive Stock Option.
(c) OPTION TERM. Subject to sub-section (l) below, the term of
each Stock Option shall be fixed by the Committee, but no Stock Option shall be
exercisable more than ten years after the date it is granted.
(d) EXERCISABILITY. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Committee at the time of grant; PROVIDED, HOWEVER, that the Committee may
waive any installment exercise or waiting period provisions, in whole or in
part, at any time after the date of grant, based on such factors as the
Committee shall deem appropriate in its sole discretion.
(e) METHOD OF EXERCISE. Subject to such installment exercise
and waiting period provisions as may be imposed by the Committee, Stock Options
may be exercised in whole or in part at any time during the option term by
giving written notice of exercise to the Company specifying the number of shares
of Common Stock to be purchased and the option price therefor. The notice of
exercise shall be accompanied by payment in full of the option price in cash or
by check or in such other form as the Committee may accept (including payment by
-4-
<PAGE>
promissory note or loan agreement if, and on such terms as, approved in advance
by the Committee). If requested, the notice of exercise shall also be
accompanied by the representation described in Section 9.2. Upon payment in full
of the option price, as provided herein, a stock certificate or stock
certificates representing the number of shares of Common Stock to which the
Participant is entitled shall be issued and delivered to the Participant. A
Participant shall not be deemed to be the holder of Common Stock, or to have the
rights of a holder of Common Stock, with respect to shares subject to the
Option, unless and until a stock certificate or stock certificates representing
such shares of Common Stock are issued to such Participant.
(f) DEATH. If a Participant's employment by the Company
terminates by reason of death, unless otherwise determined by the Committee at
the time of grant, any Stock Option held by such Participant which was
exercisable at the date of death may be exercised by the legal representative of
the Participant's estate at any time or times during the period beginning on the
date of death and ending one year after the date of death or until the
expiration of the stated term of such Stock Option, whichever period is shorter,
and any Stock Option not exercisable at the date of death shall be forfeited.
(g) DISABILITY. If a Participant's employment by the Company
terminates by reason of Disability, unless otherwise determined by the Committee
at the time of grant, any Stock Option held by such Participant which was
exercisable on the date of such Termination of Employment may thereafter be
exercised by the Participant at any time or times during the period beginning on
the date of such termination and ending one year after the date of such
termination or until the expiration of the stated term of such Stock Option,
whichever period is shorter, and any Stock Option not exercisable on the date of
such Termination of Employment shall be forfeited. If an Incentive Stock Option
is exercised after the expiration of the exercise period that applies for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(h) TERMINATION OF EMPLOYMENT. In the event of a Termination
of Employment by reason of retirement or for any reason other than death,
Disability, or Termination for Cause, unless otherwise determined by the
Committee at the time of grant, any Stock Option held by such Participant which
was exercisable on the date of such Termination of Employment may be exercised
by the Participant at any time or times during the period beginning on the date
of such Termination of Employment and ending thirty (30) days after such date or
until the expiration of the stated term of such Stock Option, whichever period
is shorter, and any Stock Option not exercisable on the date of such Termination
of Employment shall be forfeited.
(i) TERMINATION FOR CAUSE. In the event of a Termination for
Cause, any Stock Option held by the Participant which was not exercised prior to
the date of such Termination for Cause shall be forfeited.
(j) CHANGE OF CONTROL. Unless otherwise provided in the Stock
Option Grant, in the event of a Change of Control, fifty percent (50%) of the
unvested portions of all outstanding Stock Options shall become fully
exercisable immediately prior to such event, and
-5-
<PAGE>
upon payment by the Participant of the option price (and, if requested, delivery
of the representation described in Section 9.2), a stock certificate or
certificates representing the Common Stock covered thereby shall be issued and
delivered to the Participant. If this Plan remains in effect following the
Change of Control, the remainder of the unvested Stock Options shall continue to
vest as provided in the respective Stock Option Grants, unless the Committee
determines otherwise.
(k) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the
aggregate Fair Market Value (determined as of date of grant) of the Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by the Participant during any calendar year under the Plan and/or any other
stock option plan of the Company or any subsidiary or parent corporation (within
the meaning of Section 424 of the Code) exceeds $100,000, such Options shall be
treated as Options which are not Incentive Stock Options.
Should the foregoing provisions not be necessary in order for
the Stock Options to qualify as Incentive Stock Options, or should any
additional provisions be required, the Committee may amend the Plan accordingly,
without the necessity of obtaining the approval of the stockholders of the
Company.
(l) TEN-PERCENT STOCKHOLDER RULE. Notwithstanding any other
provision of the Plan to the contrary, no Incentive Stock Option shall be
granted to any person who, immediately prior to the grant, owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company, unless the option price is at least 110% of the Fair Market Value of
the Common Stock on the date of grant and the Option, by its terms, expires no
later than five years after the date of grant.
7. TERMINATION OR AMENDMENT
7.1 TERMINATION OR AMENDMENT OF THE PLAN. The Committee may at any time
amend, discontinue, or terminate the Plan or any part thereof (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Section 9); PROVIDED, HOWEVER, that,
unless otherwise required by law, the rights of a Participant with respect to
Awards granted prior to such amendment, discontinuance, or termination, may not
be impaired without the consent of such Participant, and PROVIDED further, that
no amendment may be made without the approval of the Company's stockholders if
such stockholder approval is required by applicable law or regulations.
7.2 AMENDMENT OF AWARDS. The Committee may amend the terms of any Award
theretofore granted, prospectively or retroactively, but subject to Section 4,
no such amendment or other action by the Committee shall impair the rights of
any holder without the holder's consent.
8. UNFUNDED PLAN. The Plan is intended to constitute an "unfunded" plan for
incentive compensation. With respect to any payment not yet made to a
Participant by the Company,
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nothing contained herein shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
9. GENERAL PROVISIONS
9.1 NONASSIGNMENT. Unless otherwise provided in the Stock Option Grant,
except to the extent Non-Qualified Stock Options may be transferred for estate
planning purposes and as otherwise provided in the Plan, Awards made hereunder
and the rights and privileges conferred thereby shall not be sold, transferred,
assigned, pledged, or hypothecated in any way (whether by operation of law or
otherwise), and shall not be subject to execution, attachment, or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate, or otherwise
dispose of such Award, right, or privilege contrary to the provisions hereof, or
upon the levy of any attachment or similar process thereon, such Award and the
rights and privileges conferred hereby shall immediately terminate and the Award
shall immediately be forfeited to the Company.
9.2 LEGEND. The Committee may require each person acquiring shares
pursuant to an Award under the Plan to represent to the Company in writing that
the Participant is acquiring the shares without a view to distribution thereof.
The stock certificates representing such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer. All
certificates representing shares of Common Stock delivered under the Plan shall
be subject to such stock transfer orders and other restrictions as the Committee
may deem advisable, any applicable federal or state securities law or any
applicable corporate law, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such restrictions.
9.3 OTHER PLANS. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required, and such arrangements may be
either generally applicable or applicable only in specific cases.
9.4 NO RIGHT TO EMPLOYMENT. Neither the Plan nor the grant of any Award
hereunder shall give any Participant or other employee any right with respect to
continuance of employment by the Company, nor shall there be a limitation in any
way on the right of the Company by which a Participant is employed to terminate
such Participant's employment at any time. Neither the Plan nor the grant of any
Award hereunder shall give any Director or Consultant any right with respect to
continued service as a director or consultant, nor shall the Plan impose any
limitation on the right of the Company to terminate a Consultant's services at
any time or constitute evidence of any agreement or understanding by the
Company's stockholders that the Company will nominate any director for
reelection.
9.5 WITHHOLDING OF TAXES. The Company shall have the right to reduce
the number of shares of Common Stock otherwise deliverable pursuant to the Plan
by an amount that would have a Fair Market Value equal to the amount of all
federal, state and local taxes required to be withheld, or to deduct the amount
of such taxes from any cash payment otherwise to be made to
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the Participant. In connection with such withholding, the Committee may make
such arrangements as are consistent with the Plan as it may deem appropriate.
9.6 GOVERNING LAW. The Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Delaware.
9.7 CONSTRUCTION. Wherever any words are used in the Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
9.8 LIABILITY OF THE BOARD AND THE COMMITTEE. No member of the Board or
the Committee nor any employee of the Company shall be liable for any act or
action hereunder, whether of omission or commission, by any other member or
employee or by any agent to whom duties in connection with the administration of
the Plan have been delegated or, except in circumstances involving bad faith,
gross negligence, or fraud.
9.9 OTHER BENEFITS. No payment pursuant to an Award under the Plan
shall be deemed compensation for purposes of computing benefits under any
retirement plan of the Company nor affect any benefits under any other benefit
plan now or hereafter in effect under which the availability or amount of
benefits is related to the level of compensation.
9.10 COSTS. The Company shall bear all expenses incurred in
administering the Plan, including expenses of issuing Common Stock upon the
exercise of Options granted.
9.11 SEVERABILITY. If any part of the Plan shall be determined to be
invalid or void in any respect, such determination shall not affect, impair,
invalidate, or nullify the remaining provisions of the Plan, which shall
continue in full force and effect.
9.12 SUCCESSORS. The Plan shall be binding upon and inure to the
benefit of any successor or successors of the Company.
9.13 HEADINGS. Section headings contained in the Plan are included for
convenience only and are not to be used in construing or interpreting the Plan.
10. EFFECTIVE DATE OF PLAN. The Plan shall be effective as of July 7, 1999,
subject to its approval by the Company's stockholders.
11. TERM OF PLAN. No Stock Option shall be granted pursuant to the Plan on or
after the tenth anniversary of its approval by the Company's stockholders, but
Awards granted prior to such tenth anniversary may extend beyond that date.
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EXHIBIT 10.52
ANNIE'S HOMEGROWN, INC.
1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The purpose of the 1999 Annie's Homegrown, Inc. Non-Employee Directors'
Stock Option Plan (the "Plan") are to foster and promote the long-term financial
success of Annie's Homegrown, Inc., and its subsidiaries and affiliates, if any
(hereinafter collectively referred to as the "Company") by (a) attracting and
retaining directors who are not employees ("Non-Employee Directors") of
outstanding ability by providing for the grant of nonqualified stock options;
(b) providing Non-Employee Directors with compensation opportunities which are
competitive with other corporations; and (c) enabling the Non-Employee Directors
to have a stake in such financial success of the Company by facilitating their
ownership of the Common Stock of the Company. The Company believes that this
Plan will cause the participants to contribute materially to the growth of the
Company, thereby benefiting the Company's shareholders.
1. ADMINISTRATION
Administration of this Plan is intended to be self-executing in
accordance with the express terms and conditions of the Plan. However, to the
extent that determinations are required with respect to ministerial matters
under the Plan, such determinations shall be made by the Executive Committee
(the "Committee") consisting of not less than two persons appointed by the Board
of Directors of the Company (the "Board"), or in the absence of such Committee,
determinations shall be made by the full Board acting as the Committee. In no
event shall such determinations affect the eligibility of awards made or to be
made under the Plan as "formula awards" within the meaning of Rule
16b-3(c)(2)(ii) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and any applicable regulations. Any provision in this Plan with
respect to the Committee contrary to Rule 16b-3 shall be deemed null and void to
the extent permitted by law and deemed appropriate by the Committee. Subject to
the foregoing, the Committee's interpretations of the Plan, including factual
determinations and all determinations made by the Committee pursuant to the
powers vested in it hereunder shall be conclusive and binding.
2. GRANTS
Incentives under the Plan shall consist of nonqualified stock options
("Stock Options"). All Stock Options shall be subject to the terms and
conditions set forth herein and to those other ministerial terms and conditions
consistent with this Plan as the Committee deems appropriate and as are
specified in writing by the Committee to the Non-Employee Director (each, a
"Stock Option Grant"). The Committee shall approve the form and provisions of
each Stock Option Grant to each Non-Employee Director; PROVIDED, HOWEVER, that
Stock Options shall be granted to Non-Employee Directors only in accordance with
the provisions of Section 5 of this Plan.
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3. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustment specified below, the aggregate number and
kind of shares of the Company's capital stock with respect to which options may
be granted that have been or may be issued or transferred under the Plan shall
be One Hundred Thousand (100,000) shares of the Company's Common Stock, par
value $.001 ("Common Stock"). The shares may be authorized but unissued shares
of Common Stock or reacquired shares of Common Stock, including shares
repurchased by the Company. If and to the extent Stock Options granted under the
Plan terminate or expire, or are canceled, forfeited, exchanged or surrendered
without having been exercised, the shares subject to such Stock Options shall
again be available for purposes of the Plan.
(b) If there is any change in the number or kind of shares of Common
Stock issuable under the Plan as a result of (i) the declaration of stock
dividends, or through a recapitalization, stock split, combination or exchange
of such shares, (ii) a merger, reorganization or consolidation of the Company,
(iii) a reclassification or change in par value, or by reason of any other
extraordinary or unusual event affecting the outstanding Common Stock as a class
without the Company's receipt of consideration, then (1) the maximum number of
shares of Common Stock available for Stock Options, (2) the number of shares of
Common Stock for which Stock Options are to be subsequently made to Non-Employee
Directors under Section 5 of this Plan, (3) the number of such shares covered by
outstanding Stock Options, and (4) the price per share or the applicable market
value of such Stock Options, shall be proportionately adjusted by the Committee
to reflect any increase or decrease in the number or kind of issued shares of
Common Stock to preclude the enlargement or dilution of rights and benefits
under such Stock Options; PROVIDED, HOWEVER, that any fractional shares
resulting from such adjustment shall be eliminated. The adjustments determined
by the Committee shall be final, binding and conclusive.
4. ELIGIBILITY FOR PARTICIPATION
Only Non-Employee Directors shall be eligible to participate in the
Plan.
5. GRANTS TO NON-EMPLOYEE DIRECTORS
(a) NUMBER OF SHARES. In lieu of other compensation for service as a
member of the Board and subject to the approval of the Plan by the Company's
shareholders, each director who is a Non-Employee Director shall receive an
annual Stock Option Grant on the anniversary of his or her election (the "Date
of Grant"), to purchase 7,500 shares of Common Stock for service on the Board
for the ensuing year and 2,500 shares for each Committee on which the
Non-Employee Director serves, both with an exercise price equal to the fair
market value of Common Stock on the Date of Grant. The Stock Options shall vest
as provided in Section 5(c). The first such grants shall be made on the date of
the 1999 Annual Meeting of Stockholders or Special Meeting in Lieu of the 1999
Annual Meeting, or as soon thereafter as practicable. If the Non-Employee
Director is appointed to fill a vacancy, the initial Stock Option Grant shall be
made on the date of his or her appointment and subsequent grants shall be made
on the date of his or her election and each anniversary of such election,
provided, however, that the Committee may, but shall not be required to, prorate
the initial Stock Option Grant.
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(b) OPTION PRICE AND OPTION EXERCISE PERIOD. The purchase price
("Option Price") of Common Stock subject to each Stock Option Grant shall be
equal to the fair market value of a share of Common Stock on the Date of Grant;
PROVIDED, HOWEVER, that a Stock Option Grant shall not be made to any individual
who, at the time the grant is made, owns stock possessing more than 10% of the
total combined voting power or value of all classes of stock of the Company or
parent of the Company, unless the Option Price per share is not less than 110%
of the fair market value of Common Stock on the Date of Grant. If at the time a
Stock Option is granted, the Company's Common Stock is listed upon an
established stock exchange or other market source, as determined by the
Committee, "fair market value" on any date of reference shall be the closing
price of a share of Common Stock (on a consolidated basis) on the principal
exchange or other recognized market source, as determined by the Committee on
such date, or if there is no sale on such date, then the closing price of a
share of Common Stock on the last previous day on which a sale is reported. If
the Common Stock is not listed on an established stock exchange or traded in the
over-the-counter-market at the time a Stock Option is granted under the Plan,
"fair market value" shall be deemed to be the fair value of the Common Stock as
determined by the Committee.
Each grant pursuant to this Section shall have an exercise period of
five (5) years from the Date of Grant (the "Option Exercise Period").
(c) VESTING OF OPTIONS. All Stock Options shall be unvested on grant
and shall vest 100% on the last day of the term of service to which the Stock
Option Grant relates if and only if the Non-Employee Director is then serving on
the Board.
(d) MANNER OF EXERCISE. A Non-Employee Director may exercise Stock
Options by delivering a notice of exercise to the Secretary of the Company with
accompanying payment of the Option Price. Such notice may instruct the Company
to deliver shares of Common Stock due upon the exercise of the Stock Options to
any registered broker or dealer designated by the grantee ("Designated Broker")
in lieu of delivery to the grantee. Such instruction must designate the account
into which the shares are to be deposited.
(e) SATISFACTION OF OPTION PRICE. A Non-Employee Director shall pay the
Option Price in (i) cash, (ii) previously acquired Common Stock the fair market
value of which is equal to the Option Price (iii) or through any combination of
(i) or (ii). Shares of Common Stock shall not be issued or transferred upon
exercise of a Stock Option until the Option Price is fully paid.
(f) TERMINATION OF RELATIONSHIP WITH THE COMPANY. In the event a
Non-Employee Director ceases to serve as a Non-Employee Director for any reason,
any vested Stock Option made pursuant to this Section 5 shall terminate as of
the date of expiration of the Option Exercise Period, unless exercised by the
Non-Employee Director or the Successor Grantee (as defined in Section 6) prior
to that time. Unvested Stock Options shall terminate immediately.
(g) RULE 16B-3 RESTRICTIONS. Unless a Non-Employee Director could
otherwise transfer Common Stock issued pursuant to a Stock Option made hereunder
without incurring
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liability under Section 16(b) of the Exchange Act, at least
six months must elapse from the Date of Grant to the date of disposition of the
Common Stock issued upon exercise of such Stock Option. Notwithstanding any
other provision of the Plan, this Section may not be amended more than once
every six months, except for amendments necessary to conform the Plan to changes
of the provisions of, or the regulations relating to, the Internal Revenue Code
of 1986, as amended (the "Code").
6. TRANSFERABILITY OF OPTIONS
Only a Non-Employee Director or the Director's authorized legal
representative may exercise rights under a Stock Option. Such persons may not
transfer those rights except by will or by the laws of descent and distribution
or, if permitted under Rule 16b-3 of the Exchange Act and if permitted in any
specific case by the Committee in their sole discretion, pursuant to a qualified
domestic relations order as defined under the Code or Title I of ERISA or the
regulations thereunder. When a Non-Employee Director dies, the personal
representative or other person entitled to succeed to the rights of the
Non-Employee Director (a "Successor Grantee") may exercise such rights. A
Successor Grantee must furnish proof satisfactory to the Company of his or her
right to receive the Stock Option under the Non-Employee Director's will or
under the applicable laws of descent and distribution.
7. AMENDMENT AND TERMINATION OF THE PLAN
(a) AMENDMENT. The Board, by written resolution, may amend or terminate
the Plan at any time; PROVIDED, HOWEVER, that the Board shall not amend the Plan
without the approval of the shareholders of the Company, if such amendment would
cause the Plan or any Stock Option, or the exercise of any right under the Plan
to fail to comply with the requirements of Rule 16b-3 under the Exchange Act.
(b) TERMINATION OF PLAN. The Plan shall terminate on the tenth
anniversary of its effective date unless terminated earlier by the Board or
unless extended by the Board with the approval of the shareholders.
(c) TERMINATION AND AMENDMENT OF OUTSTANDING GRANTS. A termination or
amendment of the Plan that occurs after a Stock Option Grant is made shall not
result in the termination or amendment of the Stock Option unless the grantee
consents or unless the Committee acts under Section 14(a) of the Plan. The
termination of the Plan shall not impair the power and authority of the
Committee with respect to an outstanding Stock Option. Whether or not the Plan
has terminated, an outstanding Stock Option may be terminated or amended under
Section 14(a) or may be amended by agreement of the Company and the grantee
consistent with the Plan.
8. FUNDING OF THE PLAN
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Stock
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Options under this Plan. In no event shall interest be paid or accrued on any
Stock Options including unpaid installments of Stock Options.
9. RIGHTS OF NON-EMPLOYEE DIRECTORS
Nothing in this Plan shall entitle any individual or other person to
any claim or right to a Stock Option under this Plan. Neither this Plan nor any
action taken hereunder shall be construed as giving any individual any rights to
be retained by or in the employ of the Company.
10. REQUIREMENTS FOR ISSUANCE OF SHARES
No Common Stock shall be issued or transferred upon exercise of any
Stock Option hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Common Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Stock Option made to any Non-Employee Director hereunder on such Director's
undertaking in writing to comply with such restrictions on subsequent
disposition of such shares of Common Stock as the Committee shall deem necessary
or advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such shares may be
legended to reflect any such restrictions.
11. ADJUSTMENTS OF OPTIONS IN THE EVENT OF MERGERS OR CONSOLIDATIONS
In the event of any general offer to holders of Common Stock relating
to the acquisition of their shares, the Committee may make such adjustment as it
deems equitable in respect of outstanding options, including in the Committee's
discretion revision of outstanding options, so that they may be exercisable for
the consideration payable in the acquisition transaction. Any such determination
by the Committee shall be conclusive.
12. HEADINGS
Section headings are for reference only. In the event of a conflict
between title and the content of a Section, the content of the Section shall
control.
13. EFFECTIVE DATE
Subject to the approval of the Company's shareholders, this Plan shall
be effective as of July 7, 1999 (the "Effective Date").
14. MISCELLANEOUS
(a) COMPLIANCE WITH LAW. The Plan, the exercise of Stock Options and
the obligations of the Company to issue or transfer shares of Common Stock
underlying Stock Options shall be subject to all applicable laws and to
approvals by governmental or regulatory agencies as may be required. With
respect to persons subject to Section 16 of the Exchange Act, it is the intent
of the Company that the Plan and all transactions under the Plan comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act.
The Committee may revoke any Stock Option Grant if it is contrary to law or
modify a Stock Option to bring it
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into compliance with any valid and mandatory government regulation. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(b) OWNERSHIP OF STOCK. A grantee or Successor Grantee shall have no
rights as a shareholder with respect to any shares of Common Stock covered by a
Stock Option until the shares are issued or transferred to the grantee or
Successor Grantee on the stock transfer records of the Company.
(c) INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan or any Stock Option thereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding except in relation to matters as
to which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
her duties; provided that within 60 days after institution of any such action,
suit or proceeding the Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
