<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Saratoga Beverage Group, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Saratoga Beverage Group, Inc.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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
fees was paid previously. Identify the previous filing by registration
statement number or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SARATOGA BEVERAGE GROUP, INC.
11 GEYSER ROAD
SARATOGA SPRINGS, NY 12866
(518) 584-6363
------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------------------------------------------------------------
TO BE HELD ON OCTOBER 28, 1998
Notice is hereby given that the Annual Meeting of Stockholders of Saratoga
Beverage Group, Inc. (the "Company") will be held at the Company's headquarters
at 11 Geyser Road in Saratoga Springs, New York, on Wednesday, October 28, 1998
at 10 a.m. eastern daylight time.
The Annual Meeting will be held for the following purposes:
1. Election of Directors. Election of directors of the Company by holders
of Class A and Class B Common Stock, voting together as a single
class.
2. Approval of 1998 Stock Option Plan. Adoption of the Company's 1998
Stock Option Plan.
3. Other Business. Such other matters as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on August 30, 1998 are
entitled to vote at the meeting or any adjournment thereof. Such stockholders
may vote in person or by proxy. The stock transfer books of the Company will
not be closed.
We urge you to read the enclosed Proxy Statement carefully so that you may
be informed about the business to come before the meeting, or any adjournment
thereof. At your earliest convenience, please sign and return the accompanying
proxy in the postage-paid envelope furnished for that purpose.
A copy of our Annual Report for the fiscal year ended December 31, 1997 is
enclosed. The Annual Report and the financial statements contained therein are
not a part of the proxy soliciting material enclosed with this notice.
By Order of the Board of Directors
Gayle J. Henderson
Secretary
Saratoga Springs, New York
September 25, 1998
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER
OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN,
DATE AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
SARATOGA BEVERAGE GROUP, INC.
11 GEYSER ROAD
SARATOGA SPRINGS, NY 12866
(518) 584-6363
------------------------------
PROXY STATEMENT
------------------------------
FOR
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 28, 1998
This Proxy Statement is being furnished to the holders of Class A Common
Stock, $.01 par value per share (the "Class A Common Stock"), of Saratoga
Beverage Group, Inc., a Delaware corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company to be
voted at the Annual Meeting of Stockholders to be held at 10 a.m., eastern
daylight time, on October 28, 1998, at the Company's headquarters at 11 Geyser
Road in Saratoga Springs, New York, and at any adjournment of such meeting.
This Proxy Statement is expected to be mailed to stockholders on or about
September 25, 1998.
The proxy solicited hereby, if properly signed and returned to the Company
and not revoked prior to its use, will be voted in accordance with the
instructions contained herein. If no contrary instructions are given, each
proxy received will be voted for each of the matters described below and, upon
the transaction of such other business as may properly come before the meeting,
in accordance with the best judgment of the persons appointed as proxies.
Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Company written
notice thereof (11 Geyser Road, Saratoga Springs, New York 12866), (ii)
submitting a duly executed proxy bearing a later date, or (iii) by appearing at
the Annual Meeting and giving the Secretary written notice of his or her
intention to vote in person and to revoke his or her proxy prior to the
exercise of the proxy. Proxies solicited hereby may be exercised only at the
Annual Meeting and any adjournment thereof and will not be used for any other
meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on August 30, 1998
("Voting Record Date") will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 2,646,139 shares of the Class A Common Stock
issued and outstanding and 522,955 shares of the Class B Common Stock issued
and outstanding. Each share of Class A Common Stock is entitled to one vote,
and each share of Class B Common Stock is entitled to five votes on all matters
properly presented at the Annual Meeting. Abstentions will have the same effect
as votes against the proposals. Broker non-votes (i.e., instances where brokers
are prohibited from exercising discretionary authority for beneficial owners
who have not returned a proxy) will be disregarded for the matters described
below and will have no effect on the outcome of the votes for such matters. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE MATTERS DESCRIBED BELOW.
The following table sets forth certain information regarding the
beneficial ownership of the Class A Common Stock and Class B Common Stock as of
August 30, 1998, by each person who is known by the Company to owned
beneficially 5% or more of the Company's outstanding securities. Unless
otherwise indicated, the named beneficial owner has sole voting and dispositive
power with respect to the shares reported.
1
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
of Common Percentage Beneficially Owned
Name and Stock Stock Beneficially ----------------------------------
Address of Owned At Of Shares Of Voting
Beneficial Owner August 30,1998 (1)(2) Power (1)(2)(3)
- ------------------------- ------------------ ------------ ---------------
<S> <C> <C> <C>
Anthony Malatino (4) 399,995 (7) 12.6% 34.6%
Robin Prever (5) 242,985 (8) 7.5% 17.2%
Warren Lichtenstein (6) 333,000 (9) 10.4% 6.3%
</TABLE>
(1) Based upon 2,646,139 shares of Class A Common Stock and 522,955 shares
of Class B Common Stock outstanding at August 30, 1998.
(2) The information presented with respect to stock ownership and related
percentage information is based on Common Stock as a percentage of the
aggregate number of shares of Common Stock outstanding, treating the
Class A Common Stock and the Class B Common Stock as a single class.
The number of shares of Class A Common Stock outstanding does not
include (i) 30,000 shares issuable upon exercise of warrants to Global
Financial Group, Inc. for acting as placement agent in connection with
the offering of a 5% Subordinated Convertible Note, and (ii) shares
issuable upon exercise of certain outstanding stock options or
reserved for issuance pursuant to the Company's 1993 Stock Option Plan
or otherwise.
(3) The Class A Common Stock and the Class B Common Stock are identical,
except that the holders of the Class A Common Stock are entitled to
one vote per share, whereas the holders of the Class B Common Stock
are entitled to five votes per share on all matters submitted for
stockholder vote.
(4) The business address of Mr. Malatino is c/o Dean Witter Reynolds, One
KeyCorp Plaza, Albany, NY 12207.
(5) The business address of Ms Prever is c/o Saratoga Beverage Group,
Inc., 11 Geyser Road, Saratoga Springs, NY 12866.
(6) The business address of Mr. Lichtenstein is c/o Steel Partners, 750
Lexington Avenue, New York, NY 10022.
(7) Based on an amendment to a Schedule 13D with event date of April 17,
1998
(8) Includes 65,000 shares of Class A Common Stock issuable upon exercise
of certain options that are exercisable within 60 days and excludes
50,000 shares issuable upon options that are not exercisable within 60
days.
(9) Includes 33,000 shares of Class A Common Stock issuable upon exercise
of certain options that are exercisable within 60 days and excludes
25,000 shares issuable upon options that are not exercisable within 60
days. Also includes 300,000 shares held by Steel Partners, with which
Mr. Lichtenstein is affiliated.
2
<PAGE>
PROPOSAL I - ELECTION OF DIRECTORS
The Company's By-Laws provide that a plurality of the votes cast at the
Annual Meeting of stockholders shall elect a Board of Directors, consisting of
up to fifteen members. Directors are elected for one-year terms and serve until
the next annual meeting of stockholders and until their successors are elected
or until their death, resignation or removal. Currently, the Board of Directors
has four members. A total of four members will be elected at the Annual
Meeting. The nominees for director are Robin Prever, John A. Morabito, Leonard
Toboroff and Warren Lichtenstein.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees listed below. If any
person named as a nominee should be unable or unwilling to stand for election
at the time of the Annual Meeting, the proxy holders will nominate and vote for
a replacement nominee recommended by the Board of Directors. At this time, the
Board of Directors knows of no reason why the nominees listed below may not be
able to serve as directors if elected.
The following table sets forth certain information regarding the nominees
for election as a director including the number and percent of shares of the
Company's voting securities beneficially owned by such persons as of the Voting
Record Date. No nominee for director is related to any other nominee for
director or executive officer of the Company by blood, marriage, or adoption,
and, except as described below, there are no arrangements or understandings
between any nominee and any other person pursuant to which such nominee was
selected. The table also sets forth the number of shares of the Company's
voting securities beneficially owned by each executive officer of the
Corporation and by all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
Number of Shares of Percentage Beneficially Owned
Director of Common Stock ---------------------------------
Name and Address of Company Beneficially Owned Of Shares Of Voting
Officers and Directors Since August 30, 1998 (1)(2) Power (1)(2)(3)
- ---------------------- ------------- ------------------------- -------- ----------------
<S> <C> <C> <C> <C>
Director Nominees
Robin Prever (4) 1992 242,985 (8) 7.5% 17.1%
John A. Morabito (5) 1993 15,000 (9) * *
Leonard Toboroff (6) 1993 120,000 (10) 3.7% 2.2%
Warren Lichtenstein (7) 1994 333,000 (11) 10.4% 6.3%
Other Executive Officers
Adam Madkour (4) 46,025 (12) 1.4% *
Gayle Henderson (4) (13) * *
All directors, executive
officers and nominees for
directors as a group (6
persons) 1,157,005 33.6% 58.6%
</TABLE>
- ----------
* Less than 1%
3
<PAGE>
(1) Based upon 2,646,139 shares of Class A Common Stock and 522,955 shares
of Class B Common Stock outstanding at August 30, 1998.
(2) The information presented with respect to stock ownership and related
percentage information is based on Common Stock as a percentage of the
aggregate number of shares of Common Stock outstanding, treating the
Class A Common Stock and the Class B Common Stock as a single class.
The number of shares of Class A Common Stock outstanding does not
include (i) 30,000 shares issuable upon exercise of warrants to Global
Financial Group, Inc. for acting as placement agent in connection with
the offering of a 5% Subordinated Convertible Note, and (ii) shares
issuable upon exercise of certain outstanding stock options or
reserved for issuance pursuant to the Company's 1993 Stock Option Plan
or otherwise.
(3) The Class A Common Stock and the Class B Common Stock are identical,
except that the holders of the Class A Common Stock are entitled to
one vote per share, whereas the holders of the Class B Common Stock
are entitled to five votes per share on all matters submitted for
stockholder vote.
(4) The business address of Ms. Prever, Mr. Madkour and Ms. Henderson is
c/o Saratoga Beverage Group, Inc., 11 Geyser Road, Saratoga Springs,
NY 12866.
(5) The business address of Mr. Morabito is 1937 Fields Pond Drive,
Marietta, GA 30068.
(6) The business address of Mr. Toboroff is c/o Riddell Sports, 900 Third
Avenue, New York, NY 10022.
(7) The business address of Mr. Lichtenstein is c/o Steel Partners, 750
Lexington Avenue, New York, NY 10022.
(8) Includes 65,000 shares of Class A Common Stock issuable upon exercise
of certain options that are exercisable within 60 days and excludes
50,000 shares issuable upon options that are not exercisable within 60
days.
(9) Includes 15,000 shares of Class A Common Stock issuable upon exercise
of certain options that are exercisable within 60 days and excludes
5,000 shares issuable upon options that are not exercisable within 60
days.
(10) Includes 120,000 shares of Class A Common Stock issuable upon exercise
of certain options that are exercisable within 60 days and excludes
50,000 shares issuable upon options that are not exercisable within 60
days.
(11) Includes 33,000 shares of Class A Common Stock issuable upon exercise
of certain options that are exercisable within 60 days and excludes
25,000 shares issuable upon options that are not exercisable within 60
days. Also includes 300,000 shares held by Steel Partners, with which
Mr. Lichtenstein is affiliated.
(12) Includes 46,000 shares of Class A Common Stock issuable upon exercise
of certain options that are exercisable within 60 days and excludes
25,000 shares issuable upon options that are not exercisable within 60
days.
(13) Includes 0 shares of Class A Common Stock issuable upon exercise of
certain options that are exercisable within 60 days and excludes 5,000
shares issuable upon options that are not exercisable within 60 days.
Ms. Prever (age 38) has been the chief executive officer and a
director of the Company since its inception in April 1992. Ms. Prever was the
president of the Company from its inception until April 1993. Ms. Prever was a
vice president of Gabelli Asset Management Company ("GAMCO"), an investment
advisory firm, where she was employed from 1986 to 1993. Ms. Prever is an
attorney and has been a member of the bar in the State of Florida since 1985.
Mr. Morabito (age 39), a director of the Company since June 1993, is
division manager for Remy Amerique and was previously regional manager for
Boston Beer Company. Prior to this, Mr. Morabito was the director of sales
development for United Distillers Glenmore, Inc. since 1989. From 1986 through
1989, Mr. Morabito was a regional manager for Brown-Foreman Beverage Company
and from 1983 through 1986 Mr. Morabito was a regional manager for Joseph
Victori Wine Company. Prior to that time, Mr. Morabito was employed by each of
Foreman Brothers Incorporated and D. Bertoline and Sons as a sales
representative.
4
<PAGE>
Mr. Toboroff (age 65) has been a director of the Company since June
1993 and was elected chairman of the board of directors on December 12, 1995.
Mr. Toboroff has been vice president and vice chairman of the board of
Allis-Chalmers Corp. since May 1988. Mr. Toboroff has been a practicing
attorney since 1961 and from January 1, 1988 to December 31, 1990 was counsel
to Summit Solomon & Feldesman in New York City. Mr. Toboroff has been a
director of Ameriscribe, Inc. since August 1987 and was the chairman and chief
executive officer thereof from December 1987 to May 1988. Mr. Toboroff was a
director from May 1982 through September 1988, chairman and chief executive
officer in June 1982 and vice chairman from June 1982 through September 1988 of
American Bakeries Company. Mr. Toboroff is also an executive vice president and
a director of Riddell Sports, Inc. Mr. Toboroff is a director of Banner
Industries and Engex Corporation.
Mr. Lichtenstein (age 32) has served on the board of directors since
June 1994. Mr. Lichtenstein has been with Steel Partners since 1990. Prior
thereto, Mr. Lichenstein was with Ballantrae, a private investment firm, for
two years. Mr. Lichtenstein serves as a director of SL Industries, Inc.,
Synercom Technology Inc. and Gateway Communications, Inc.
Mr. Madkour (age 46) joined the Company in September 1993 as the chief
operating officer. Mr. Madkour was general manager of manufacturing for the
Deer Park Division of Clorox Inc. since 1987, and is an electrical engineer.
Ms. Henderson (age 51) has been the chief financial officer of the
Company since November 15, 1997. Ms. Henderson, who is a New York State
Certified Public Accountant, brings several years of financial management
experience from the food manufacturing industry. Ms. Henderson was a member of
the financial management group for the Charles Freihofer Baking Company, Inc.,
a division of Best Foods.
THE DIRECTORS SHALL BE ELECTED UPON RECEIPT OF A PLURALITY OF ALL VOTES
CAST BY HOLDERS OF CLASS A AND CLASS B COMMON STOCK AT THE ANNUAL STOCKHOLDERS
MEETING.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1997, the Board of Directors of
the company met five times in addition to taking a number of actions by
unanimous written consent. During fiscal year 1997, no incumbent director of
the Company attended fewer than 75% of the aggregate of the total number of
Board meetings and the total number of meetings held by the committees of the
Board of Directors on which he or she served.
The Company's Audit Committee is responsible for recommending the
appointment of the Company's independent accountants, meeting with the
independent accountants to outline the scope and review the results of the
annual audit, and reviewing the systems of internal control and audit reports.
The current members of the Audit Committee are directors Prever, Morabito and
Toboroff, with Mr. Toboroff serving as chairman. The Audit Committee met two
times during the year ended December 31, 1997.
The Compensation Committee of the Board of Directors recommends
employee compensation, benefits and personnel policies to the Board of
Directors and established for Board approval salary and cash bonuses for senior
officers. Mr. Toboroff and Mr. Lichtenstein are the current members of the
Compensation Committee. The Compensation Committee held two meetings in 1997.
The Stock Option Committee administers the Company's 1993 Stock Option
Plan and will administer the 1998 Stock Option Plan if it is adopted at the
Annual Meeting. See "Proposal II--Adoption of 1998 Stock Option Plan." The
current members of the Stock Option Committee are directors Morabito, Toboroff,
and Lichtenstein. The Stock Option Committee held one meeting in 1997.
MANAGEMENT REMUNERATION
The following table sets forth the compensation paid or accrued during the
fiscal years ended December 31, 1997, 1996 and 1995 for services rendered
during such period by the chief executive officer and the chief operating
officer.
5
<PAGE>
No other executive officer of the Company received aggregate compensation from
the Company exceeding $100,000 during the Company's fiscal year ended December
31, 1997.
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
Name and Principal Position Year Salary ($) Bonus ($) Options - (#) of shares
--------------------------- ---- ---------- --------- -----------------------
<S> <C> <C> <C> <C>
Robin Prever, President 1997 125,000 0 0
and Chief Executive Officer 1996 125,000 0 (1)15,000
1995 108,173 0 0
Adam Madkour, Chief 1997 100,000 5,600 0
Operating Officer 1996 90,000 0 0
1995 84,500 0 0
</TABLE>
(1) Represents compensation for a voluntary salary reduction in 1994.
Employment Agreements
In June 1993, the Company entered into an employment agreement with
Ms. Prever, its president and chief executive officer, providing for annual
compensation of $125,000. The agreement has been extended through June 1999.
The agreement also provides for payment of an annual bonus at the sole
discretion of the Board of Directors, with a minimum bonus each year equal to
5% of the Company's pre-tax profit in each contract year. In addition, the
agreement includes certain insurance and severance benefits. The Company is
negotiating a new employment agreement with Ms. Prever.
Stock Options
The Company did not grant any stock options to Ms. Prever or Mr.
Madkour during the Company's fiscal year ended December 31, 1997.
Stock Option Holdings
The following table sets forth information with respect to Robin
Prever and Adam Madkour concerning the unexercised stock options held as of the
end of the last fiscal year. Neither Ms. Prever nor Mr. Madkour exercised stock
options during the Company's fiscal year ended December 31, 1997.
FISCAL YEAR-ENDED OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS MONEY OPTIONS AT
AT DECEMBER 31, 1997 DECEMBER 31, 1997 (1)
-------------------------------------- ---------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Robin
Prever 165,000 -- -- --
Adam
Madkour 21,000 -- -- --
</TABLE>
(1) No options were in the money at December 31, 1997. The closing stock
price at December 31, 1997 was $2.125.
6
<PAGE>
1993 Stock Option Plan
In June 1993, the Board of Directors of the Company approved the adoption
of the Saratoga Spring Water Company 1993 Stock Option Plan (the "1993 Stock
Option Plan"). The 1993 Stock Option Plan originally provided for the issuance
of options covering up to 466,000 shares of Class A common stock (subject to
adjustments in the event of stock splits, stock dividends and similar dilutive
events) and Stock Appreciation Rights in tandem with options. Generally, Stock
Appreciation Rights will be subject to the same terms and conditions as
options. Options may be granted under the 1993 Stock Option Plan to employees,
officers or directors of, and consultants and advisors to, the Company.
On December 12, 1995 the shareholders of the Company approved an amendment
to the Company's 1993 Stock Option Plan increasing the number of shares
available for issuance from 466,000 to 616,000.
Options granted to employees may either be incentive stock options (as
defined in the Internal Revenue Code of 1986, as amended) or non qualified
stock options. The purchase price of the Class A common stock made subject to
an option shall be determined by the Compensation Committee at the time of
grant, provided that the purchase price of incentive stock options may not be
less than the fair market value of the Company's Class A common stock on the
date of grant. Subject to the foregoing, the terms of each option and the
increments in which it is exercisable are determined by the Compensation
Committee, provided that no option may be exercised after ten years and one day
from the date of grant (ten years in the case of an incentive stock option). To
the extent that the aggregate fair market value, as of the date of grant, of
the shares for which incentive stock options become exercisable for the first
time by an optionee during any calendar year exceeds $100,000, the portion of
such option which is in excess of the $100,000 limitation will be treated as a
non qualified stock option. In addition, if an optionee owns more than 10% of
the total voting power of all classes of the Company's stock at the time the
individual is granted an incentive stock option, the purchase price per share
cannot be less than 110% of the fair market value on the date of grant and the
term of the incentive stock option cannot exceed five years from the date of
grant.
Furthermore, under the 1993 Stock Option Plan, directors who are not also
employees of the Company receive an Option ("Initial Option") to purchase 2,000
shares of Class A common stock upon their initial election to the Board of
Directors, exercisable at the fair market value on the date of grant. On June
23, 1993, each person who was then a non-employee director received 2,000
options ("IPO Options"), at an exercise price of $5.00 per share. These options
are exercisable as to 33 1/3% of the shares subject thereto on the date of
grant, and as to 33 1/3% on each of the following two anniversaries of such
date of grant. In addition, on the date of each annual meeting of stockholders
held subsequent to January 1, 1994, each qualified director will automatically
receive options ("Annual Options") to purchase 2,000 shares of Class A common
stock exercisable 50% per year over a period of two years beginning on the date
of grant, at the fair market value of the Class A common stock on the date of
grant.
Generally, options granted to directors under the 1993 Stock Option Plan
will terminate three months after the date of the director's termination,
resignation or retirement from the Board of Directors of the Company, but in no
event after the option has expired by its terms. If any option granted under
the 1993 Stock Option Plan should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased shares will become
available for further grant under the 1993 Stock Option Plan.
In January 1998, the Board voted to approve the grants of the following
options to directors and executive officers of the Company: Ms. Prever, 100,000
options; Mr. Toboroff, 100,000 options; Mr. Lichtenstein, 50,000 options; Mr.
Madkour, 50,000 options; and Mr. Morabito, 10,000 options. All such options
bear an exercise price of $2.25 per share, vest according to the provisions of
the 1993 Stock Option Plan and have a term of ten years, except that the
options granted to Ms. Prever have a term of five years.
During 1997, 65,423 stock options were granted, 41,834 were exercised, and
57,756 were canceled. The Company did not grant stock appreciation rights.
If the Company's 1998 Stock Option Plan is approved by the stockholders,
all options outstanding under the 1993 Stock Option Plan will remain in effect
in accordance with their terms, and options granted thereafter may be granted
7
<PAGE>
under either plan, and will be subject to all terms and conditions under the
plan under which such options were granted; provided, however, that no options
shall be granted to non-employee directors under the 1993 Stock Option Plan
once the 1998 Stock Option Plan is approved. "See Proposal II--Adoption of 1998
Stock Option Plan."
Director Compensation
All non-employee directors are reimbursed for reasonable expenses incurred
in connection with attending meetings of the Board of Directors. Directors of
the Company are also entitled to participate in the 1993 Stock Option Plan. On
the date of each Annual Meeting of the Company's stockholders, each director
has been granted options to purchase 2,000 shares of Class A common stock. If
the Company's 1998 Stock Option Plan is approved by the stockholders, no
options shall be granted to non-employee directors under the 1993 Stock Option
Plan in the future, but 5,000 options will be granted to non-employee directors
on January 1st of each year of service on the Board of Directors under the 1998
Stock Option Plan. Beginning July 1, 1998, each non-employee director will
receive $1,000 for each quarterly meeting attended. Prior to July 1, 1998, no
cash remuneration was received by non-emloyee directors for attendance at
quarterly meetings.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND STOCKHOLDERS
At June 30, 1998, the Company's cash, cash equivalents, and short term
investment balance includes approximately $2,047,000 with Dean Witter Reynolds,
Inc. A principal stockholder of the Company is an officer of Dean Witter
Reynolds, Inc.
PROPOSAL II -- ADOPTION OF 1998 STOCK OPTION PLAN
Since the Company's initial public offering in June 1993, the Company has
granted stock options to employees, directors and others pursuant to the 1993
Stock Option Plan. The Board believes that the 1993 Stock Option Plan is no
longer appropriate to satisfy fully the Company's needs, and on August 7, 1998,
approved the 1998 Stock Option Plan, subject to approval of the 1998 Stock
Option Plan by the Company's stockholders. The purposes of the 1998 Stock
Option Plan are to encourage selected employees and directors of the Company
(together with any successor thereto, the "Company"), or any present or future
Subsidiary Corporation (as defined below) of the Company to acquire a
proprietary interest in the growth and performance of the Company, to generate
an increased incentive to contribute to the Company's future success and
prosperity, thus enhancing the value of the Company for the benefit of its
stockholders, and to enhance the ability of the Company to attract and retain
qualified individuals upon whom, in large measure, the sustained progress,
growth and profitability of the Company depend.
The following summary of the 1998 Stock Option Plan is qualified in its
entirety by reference to the terms of the 1998 Stock Option Plan, a copy of
which is included herewith as Exhibit A.
General. The 1998 Stock Option Plan provides for the issuance of options
covering up to 900,000 shares of Class A Common Stock or Class B Common Stock
(collectively "Shares") (subject to adjustments in the event of stock splits,
stock dividends and similar dilutive events). Options may be granted under the
1998 Stock Option Plan to employees, officers or directors of the Company. The
1998 Stock Option Plan will be administered by the Stock Option Committee of
the Board (the "Committee").
Options granted to employees may either be incentive stock options (as
defined in the Internal Revenue Code of 1986, as amended) ("ISOs") or
non-qualified stock options ("NQSOs"). The purchase price of Shares made
subject to an option shall be determined by the Stock Option Committee at the
time of grant, provided that the purchase price of ISOs may not be, and the
price of NQSOs generally will not be, less than the fair market value of the
Class A Common Stock on the date of grant. Subject to the foregoing, the terms
of each option and the increments in which it is exercisable are determined by
the Stock Option Committee, which will generally provide that no option may be
exercised after ten years from the date of grant. If an optionee owns more than
10% of the total voting power of all classes of the Company's stock at the time
the individual is granted an ISO, the purchase price per share cannot be
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less than 110% of the fair market value on the date of grant and the term of
the ISO cannot exceed five years from the date of grant.
To date, no options have been granted under the 1998 Stock Option Plan.
As discussed below, if the stockholders of the Company adopt the 1998 Stock
Option Plan, the Company will also retain the Company's 1993 Stock Option Plan.
The Company currently has one other outstanding option plan, the 1993
Stock Option Plan, pursuant to which approximately 61,500 shares of Class A
Common Stock remain available for issuance under the 1993 Plan as of August 30,
1998. If the Stockholders fail to approve the adoption of the 1998 Stock Option
Plan, stock option grants will continue to be made under the 1993 Stock Option
Plan and otherwise.
Eligibility and Extent of Participation. Non-employee directors and key
employees (defined as full-time employees) of the Company or any future
Subsidiary Corporation (as defined in the 1998 Stock Option Plan) of the
Company are eligible to participate in the 1998 Stock Option Plan; provided,
however, that ISOs may only be granted to employees of the Company or a
Subsidiary Corporation. Approximately 30 persons are initially expected to
participate in the 1998 Stock Option Plan, including all of the directors of
the Company.
Stock Subject to 1998 Plan. The Company has authorized and reserved for
issuance upon the exercise of options pursuant to the 1998 Plan 900,000 Shares
(subject to adjustment for stock dividends, stock splits and similar changes in
the Company's capitalization). An option may by designated as an ISO or an
NQSO. Any one optionee may not be granted options to purchase in excess of
300,000 Shares during any fiscal year of the Company; provided, however, that
the Committee may adopt procedures for the counting of shares relating to any
grant of options to ensure appropriate counting, avoid double counting and
provide for adjustments in any case in which the number of shares actually
distributed differs from the number of shares previously counted in connection
with such grant; provided further, however, that the options granted under the
1993 Plan shall not be treated as outstanding. On September 15,1998, the
closing price of the Class A Common Stock was $2.50 per share. The authorized
number of shares of Common Stock under the 1998 Stock Option Plan represents
28.4% of the Company's outstanding shares of Common Stock as of August 30,
1998.
Grant of Options. Subject to the terms of the 1998 Stock Option Plan and
applicable law, the Committee shall have full power and authority to: designate
participants; determine the type or types of options to be granted to each
participant under the 1998 Stock Option Plan; determine the number of Shares to
be covered by options; determine the terms and conditions of any option;
determine whether, to what extent, and under what circumstances options may be
settled or exercised in cash, Shares, other options or property, or canceled,
or suspended; interpret and administer the 1998 Stock Option Plan and any
instruments or agreements relating to, or options granted under, the 1998 Stock
Option Plan; establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the 1998 Plan; and make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
1998 Plan. Unless otherwise expressly provided in the 1998 Stock Option Plan,
all designations, determinations, interpretations and other decisions under or
with respect to the 1998 Stock Option Plan, or any option shall be within the
sole discretion of the Committee and shall be final, conclusive and binding
upon all persons.
Adjustment of Options. In the event that the Committee shall determine
that any change in the corporate capitalization, such as a dividend or other
distribution of Shares or a corporate transaction, such as a merger,
consolidation, reorganization or partial or complete liquidation of the Company
or other similar corporate transactions or event, affects the Shares such that
the adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the 1998 Stock Option Plan, then the Committee
shall, in such manner as it may deem necessary to prevent dilution or
enlargement of the benefits or potential benefits intended to be made under the
1998 Stock Option Plan, adjust any or all of (x) the number and type of Shares
which thereafter may be made the subject of options, (y) the number and type of
Shares subject to outstanding options, and (z) the grant, purchase, or exercise
price with respect to any option or, if deemed appropriate, make provision for
a cash payment to the holder of an outstanding option; provided, however, in
each case that (i) with respect to ISOs no such adjustment shall be authorized
to the extent that such adjustment would cause the 1998 Stock Option Plan to
violate Code Section 422 or any successor provision thereto; (ii) such
adjustment
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shall be made in such manner as not to adversely affect the status of any
option as "performance based compensation" under Code Section 162(m); and (iii)
the number of Shares subject to any option shall always be a whole number.
Transfer of Options. Subject to the Code Section 422, no option and no
right under any such option, shall be assignable, alienable, saleable, or
transferable by a participant otherwise than by will or by the laws of decent
and distribution, and such option, and each right under any such option, shall
be exercisable during the participant's lifetime, only by the participant or,
if permissible under applicable law (including Code Section 422, in the case of
an ISO), by the participant's guardian or legal representative. No option and
no right under any such option may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment, or encumbrance
thereof shall be void and unenforceable against the Company. Notwithstanding
the foregoing, the Committee may, in its discretion, provide that NQSOs be
transferable, without consideration, to immediate family members (i.e.,
children, grandchildren, or spouse), to trust for the benefit of such immediate
family members and to partnerships in which such family members are the only
partners. The Committee may attach such terms and conditions as it deems
advisable to any such transferability right. In addition, a participant may, in
the manner established by the Committee, designate a beneficiary (which may be
a person or a trust) to exercise the rights of the participant, and to receive
any distribution, with respect to any option upon the death of the participant.
A beneficiary, guardian, legal representative or other person claiming any
rights under the 1998 Stock Option Plan and any option agreement applicable to
such participant, except as otherwise determined by the Committee, and to any
additional restriction deemed necessary or appropriate by the Committee.
No employee shall have any claim to be granted any option under the 1998
Stock Option Plan, and there is no obligation for uniformity of treatment of
employees or holders or beneficiaries of options under the 1998 Stock Option
Plan. The terms and conditions of options need not be the same with respect to
each recipient. The grant of an option shall not be construed as giving a
participant the right to be retained in the employ of the Company or any
Subsidiary Corporation. Further, the Company may at any time dismiss a
participant from employment, free from any liability or any claim under the
1998 Stock Option Plan, unless otherwise expressly provided in the 1998 Stock
Option Plan or in any option agreement.
Exercise of Options. The Committee shall determine the time or times at
which the right to exercise an option may vest in whole or in part, and the
method or methods by which, and the form or forms in which, payment of the
option price with respect to exercise of such option may be made or deemed to
have been made (including, without limitation, (i) cash, Shares, outstanding
options or other consideration, or any combination thereof, having a Fair
Market Value on the exercise date equal to the relevant option price and (ii) a
broker-assisted cashless exercise program established by the Committee),
provided in each case that such methods avoid "short-swing" profits to the
participant under Section 16(b) of the Exchange Act. The payment of the
exercise price of an option may be made in a single payment or transfer in
installments, or on a deferred basis, in each case in accordance with rules and
procedures established by the Committee. Upon the exercise of an option, the
holder shall pay to the Company the exercise price plus the amount of the
required federal and state withholding taxes, if any. The 1998 Stock Option
Plan also allows participants to elect to have shares withheld upon exercise
for the payment of federal and state withholding taxes.
Amendment or Termination of the 1998 Plan. The 1998 Stock Option Plan may
be wholly or partially amended or otherwise modified, suspended or terminated
at any time or from time to time by the Board of Directors, but no amendment
without the approval of the stockholders of the Company shall be made if such
amendment would be required under Code Section 162(m) or 422, Rule 16b-3 or any
other law or rule of any governmental authority, stock exchange or other
self-regulatory organization to which the Company may then be subject. Neither
the amendment, suspension nor termination of the 1998 Stock Option Plan shall,
without the consent of the holder of an option, alter or impair any rights or
obligation under any option theretofore granted. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the 1998 Stock
Option Plan or any option in the manner and to the extent it shall deem
necessary to effectuate the 1998 Stock Option Plan.
Grants to Non-Employee Directors. Furthermore, under the 1998 Stock Option
Plan, directors who are not also employees of the Company receive a NQSO to
purchase 5,000 Shares on January 1 of each year of service on the Board. All
such options granted to directors will (a) bear an exercise price per share
equal to 100% of the fair market value of a share of Class A Common Stock on
the date of the grant; (b) have a term of ten years from the date of grant; (c)
terminate three months following termination of service as a director of the
Company for any reason other
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than for cause, or immediately upon termination of service as a director for
cause, but in no event after the option has expired by its terms.
Federal Income Tax Consequences. The following discussion of the federal
income tax consequences of the granting and exercise of options under the 1998
Stock Option Plan, and the sale of Shares acquired as a result thereof, is
based on an analysis of the Code as in effect on the date hereof, existing
laws, judicial decisions and administrative rulings and regulations, all of
which are subject to change. In addition to being subject to the federal income
tax consequences described below, an optionee may also be subject to state
and/or local income tax consequences in the jurisdiction in which he or she
works and/or resides. Each optionee should consult his or her personal tax
advisor to determine the taxes applicable to the issuance, exercise and sale of
options.
NQSOs. No income will be recognized by an optionee at the time
an NQSO is granted. Ordinary income generally will be recognized by
an optionee at the time an NQSO is exercised, in an amount equal to
the excess of the fair market value of the Shares (without regard to
any restrictions) on the exercise date of the Shares issued to the
optionee over the exercise price. This ordinary income will also
constitute wages subject to the withholding of income tax, and the
Company will be required to make whatever arrangements are necessary
to ensure that the proper amount required to be withheld is
available for withholding, in cash. An optionee's holding period
with respect to the Shares acquired will begin on the date of
exercise of the NQSO.
The tax basis of the stock acquired upon the exercise of an
NQSO will be equal to the sum of (a) the exercise price of such NQSO
and (b) the amount included in income on the exercise of such NQSO.
Gain or loss on a subsequent sale or other disposition of the stock
will be measured by the difference between the amount realized on
the disposition and the tax basis of such shares. Such gain or loss
will be capital gain or loss assuming that the stock is held as a
capital asset (i.e., generally for investment purposes) and any such
captial gain or loss will be long-term capital gain or loss if the
shares are held for more than one year.
If the optionee is permitted to, and does, make the required
payment of the option price by delivering Shares, the optionee
generally will not recognize any gain as a result of such delivery,
but the amount of gain, if any, which is not so recognized will be
excluded from his or her basis in the new shares received. In such a
case, an optionee's holding period in the shares received will be
determined by reference to his or her holding period in the Shares
exchanged therefor.
An optionee should be aware that if he or she is permitted to,
and does, transfer an NQSO in a non-arm's length transaction, the
optionee and not the transferee of the option will be subject to tax
on the compensation income attributable upon the exercise of the
option under the rules described above.
The Company will generally be entitled to a deduction for
federal income tax purposes in the same amount and at the same time
as the amount included in income by the optionee with respect to his
or her NQSO. The deduction will be allowed for the taxable year of
the Company within which the taxable year of the optionee in which
such ordinary income is recognized by the optionee ends.
ISOs. In general, neither the grant nor the exercise of an ISO
will result in taxable income to an optionee or a deduction to the
Company. Unless there is a disqualifying disposition of the stock
received pursuant to the exercise of an ISO (see below) and unless
such disqualifying disposition occurs in the same year as the year
of exercise of such ISO, the exercise of an ISO will give rise to
income includible by the optionee for purposes of the alternative
minimum tax in an amount equal to the excess of the fair market
value of the Shares acquired upon the exercise of the ISO over the
exercise price.
The sale or exchange of Shares received pursuant to the
exercise of an ISO after the expiration of the applicable holding
period discussed below will result in the entire gain (based upon
the excess between the amount realized upon sale or exchange over
the exercise price) being treated as long-term capital gain or loss
to an optionee and will not result in a tax deduction to the
Company. To receive ISO treatment as to the stock acquired upon
exercise of an ISO, an optionee must neither dispose of such stock
within two years after such ISO is granted or within one year after
the exercise of such ISO. In addition, an optionee
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generally must be an employee of the Company (or of a Subsidiary
Corporation) at all times between the date of grant and the date
three months before exercise of such ISO.
If an optionee sells or exchanges the shares prior to the
expiration of the holding period set forth above (a "disqualifying
disposition"), such optionee will realize ordinary compensation
income in the amount equal to the difference between the exercise
price and the fair market value on the date of exercise. The
compensation income will be added to such optionee's basis for
purposes of determining the gain on the sale of the shares. Such
gain will be capital gain if the shares are held as capital assets
(i.e., generally for investment purposes). If the application of the
above-described rule would result in a loss to the optionee, the
compensation income required to be recognized thereby would be
limited to the excess, if any, of the amount realized on the sale
over the basis of the shares sold. If an optionee disposes of shares
obtained upon exercise of an ISO prior to the expiration of the
holding period described above, the Company will be entitled to a
deduction in the amount and at the same time as the compensation
income is realized by the optionee as a result of the disqualifying
disposition, subject to the Company satisfying its withholding
and/or reporting obligation.
If an optionee is permitted to, and does, make the required
payment of the option price by delivering Shares, the optionee
generally will not recognize any gain as a result of such delivery,
but the amount of gain, if any, which is not so recognized will be
excluded from his basis in the new shares received. However, the use
by an optionee of Shares previously acquired pursuant to the
exercise of an ISO to exercise an ISO will be treated as a taxable
disposition if the transferred shares have not been held by the
optionee for the requisite holding period described above.
Code Section 162(m). Code Section 162(m) generally limits the
annual deduction available to a publicly held corporation for
applicable remuneration paid to its chief executive officer and
certain other highly compensated individuals to $1,000,000. The
Company believes that options granted pursuant to the 1998 Stock
Option Plan will satisfy certain requirements contained in Code
Section 162(m) so that the compensation element of such options will
qualify for the exemption from the deduction limitation of Code
Section 162(m) for "performance-based compensation."
Other. If any options granted under the 1998 Stock Option Plan should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased shares will become available for further grant under the
1998 Stock Option Plan.
The 1998 Stock Option Plan will become effective as of November 1, 1998,
if approved by the stockholders prior to such date, and will continue until the
earliest of (i) the date on which all options issuable thereunder have been
issued, (ii) termination of the Plan by the Board or (iii) August 6, 2008.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL
AND ADOPTION OF THE 1998 STOCK OPTION PLAN.
ADOPTION OF THE 1998 STOCK OPTION PLAN REQUIRES THAT THE VOTES CAST (IN
PERSON OR BY PROXY) AT THE ANNUAL MEETING OR AT ANY ADJOURNMENT THEREOF IN
FAVOR OF ADOPTION EXCEED THOSE CAST AGAINST.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder wishes to have presented at the next
Annual Meeting of the Company must be received at the main office of the
company for inclusion in the proxy statement no later than 120 days in advance
of October 28, 1999. Any such proposal such be sent to the attention of the
Secretary of the Company at 11 Geyser Road, Saratoga Springs, New York 12866 by
certified mail, returned receipt requested. A proxy will confer discretionary
authority to management of the Company to vote on any matter for which the
Company received notice by a Stockholder prior to August 11, 1999; provided
however, that if the next Annual Meeting is held prior to September 28, 1998
the Company will notify Stockholders of a revised date for submitting notice to
the Company.
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FILINGS UNDER SECTION 16(A) OF THE 1934 ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's officers and directors and persons who own more than 10% of
the Company's Class A Common Stock (collectively, the "Reporting Person") file
initial reports of beneficial ownership and reports of changes in beneficial
ownership with the Securities and Exchange Commission (the "SEC"). Reporting
Persons are required by SEC regulation to furnish the Company with copies of
all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by the
Company, and/or written representations from certain Reporting Persons that no
Forms 5 were required for those persons, the Company believes that during the
fiscal year ended December 31, 1998, all filing requirements applicable all
Reporting Persons with respect to Section 16(a) of the 1934 Act were complied
with.
OTHER MATTERS
A representative of PricewaterhouseCoopers, LLP, the Company's
independent auditors, will be present at the Annual Meeting to respond to
appropriate questions and to make statements as he may desire.
Upon the written request of any stockholder, management will provide, free
of charge, a copy of the Company's Annual Report in Form 10-KSB for the fiscal
year ended December 31, 1997, including financial statements and exhibits
thereto. Requests should be directed to Secretary, Saratoga Beverage Group,
Inc., 11 Geyser Road, Saratoga Springs, NY 12866.
Management is not aware of any business to come before the Annual Meeting
other than those matters described in the Proxy Statement. However, if any
other matters should properly come before the Annual Meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to the beneficial owners of the Class A Common Stock. In addition to
solicitation by mail, directors, officers, and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
It is important that your shares by represented at the Annual Meeting. If
you are unable to be present at the Annual Meeting in person, you are
respectfully requested to complete, date and sign the proxy and return it
promptly in the enclosed return envelope.
Insofar as any of the information in the Proxy Statement may rest
peculiarly within the knowledge of persons other than the Company, the Company
relies upon information furnished by others for the accuracy and completeness
thereof.
By Order of the Board of Directors
Robin Prever, President
and Chief Executive Officer
September 25,1998
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EXHIBIT A
SARATOGA BEVERAGE GROUP, INC.
1998 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purposes of this Saratoga Beverage Group, Inc. 1998 Stock Option
Plan (the "Plan") are to encourage selected employees and directors of Saratoga
Beverage Group, Inc., a Delaware corporation (together with any successor
thereto, the "Company"), or any present or future Subsidiary Corporation (as
defined below) of the Company to acquire a proprietary interest in the growth
and performance of the Company, to generate an increased incentive to
contribute to the Company's future success and prosperity, thus enhancing the
value of the Company for the benefit of its stockholders, and to enhance the
ability of the Company to attract and retain qualified individuals upon whom,
in large measure, the sustained progress, growth and profitability of the
Company depend.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Class A Shares" shall mean the Class A common stock of the
Company, $.01 par value, and such other securities or property as may
become the subject of Options pursuant to an adjustment made under Section
4(b) of the Plan.
(c) "Class B Shares" shall mean the Class B common stock of the
Company, $.01 par value (which Class B Shares are convertible into Class A
Shares on a one-for-one basis), and such other securities or property as
may become the subject of Options pursuant to an adjustment made under
Section 4(b) of the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" shall mean a committee of the Board designated by
the Board to administer the Plan and composed of not less than two (2)
directors.
(f) "Fair Market Value" shall mean, with respect to Shares or other
securities, the fair market value of the Shares or other securities
determined by such methods or procedures as shall be established from time
to time by the Committee in good faith or in accordance with applicable
law. Unless otherwise determined by the Committee, the Fair Market Value
of Shares shall mean (i) the closing price per Share of the Class A Shares
on the principal exchange on which the Class A Shares are then trading, if
any, on such date, or, if the Class A Shares were not traded on such date,
then on the next preceding trading day during which a sale occurred; or
(ii) if the Class A Shares are not traded on an exchange but are quoted on
the NASDAQ Stock Market or a successor quotation system, (1) the last
sales price (if the Class A Shares are then listed as a National Market
Issue on the NASDAQ Stock Market) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the Class A
Shares on such date as reported by the NASDAQ Stock Market or such
successor quotation system; or (iii) if the Class A Shares are not
publicly traded on an exchange and not quoted on the NASDAQ Stock Market
or a successor quotation system, the mean between the closing bid and
asked prices for the Class A Shares on such date as determined in good
faith by the Committee.
(g) "Incentive Stock Option" shall mean an option granted under the
Plan that is designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.
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(h) "Independent Director" shall mean each member of the Board who
is not an employee of the Company or any Subsidiary Corporation of the
Company.
(i) "Key Employee" shall mean any officer, director or other
employee who is a regular full-time employee of the Company or its present
and future Subsidiary Corporations.
(j) "Non-Qualified Stock Option" shall mean an Option granted under
the Plan that is not designated as an Incentive Stock Option.
(k) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(l) "Option Agreement" shall mean a written agreement, contract or
other instrument or document evidencing an Option granted under the Plan.
(m) "Participant" shall mean a Key Employee or Independent Director
who has been granted an Option under the Plan.
(n) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization or
government or political subdivision thereof.
(o) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation thereto.
(p) "Shares" shall mean the Class A Shares and the Class B Shares.
(q) "Subsidiary Corporation" shall have the meaning ascribed thereto
in Code Section 424(f).
(r) "Ten Percent Stockholder" shall mean a Person, who together with
his or her spouse, children and trusts and custodial accounts for their
benefit, immediately at the time of the grant of an Option and assuming
its immediate exercise, would beneficially own, within the meaning of
Section 424(d) of the Code, Shares possessing more than ten percent (10%)
of the total combined voting power of all of the outstanding capital stock
of the Company or any Subsidiary Corporation of the Company.
SECTION 3. ADMINISTRATION
(a) Generally. The Plan shall be administered by the Committee.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect
to the Plan or any Option shall be within the sole discretion of the
Committee, may be made at any time, and shall be final, conclusive, and
binding upon all Persons, including the Company, any Participant, any
holder or beneficiary of any Option, any stockholder of the Company and
any employee of the Company.
(b) Powers. Subject to the terms of the Plan and applicable law and
except as provided in Section 7 hereof, the Committee shall have full
power and authority to: (i) designate Participants; (ii) determine the
type or types of Options to be granted to each Participant under the Plan;
(iii) determine the number of Shares to be covered by Options; (iv)
determine the terms and conditions of any Option; (v) determine whether,
to what extent, and under what circumstances Options may be settled or
exercised in cash, Shares, other Options, or other property, or canceled,
forfeited, or suspended, and the method or methods by which Options may be
settled, exercised, canceled, forfeited, or suspended; (vi) interpret and
administer the Plan and any instruments or agreements relating to, or
Options granted under, the Plan; (vii) establish, amend, suspend, or waive
such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (viii) make any
other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan.
SECTION 4. SHARES AVAILABLE FOR OPTIONS
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(a) Shares Available. Subject to adjustment as provided in Section
4(b):
(i) Limitation on Number of Shares. Options issuable under the
Plan are limited such that the maximum aggregate number of Shares which
may be issued pursuant to, or by reason of, Options is 900,000. Further,
no Participant shall be granted Options to purchase more than 300,000
Shares in any one fiscal year; provided, however, that the Committee may
adopt procedures for the counting of Shares relating to any grant of
Options to ensure appropriate counting, avoid double counting, and provide
for adjustments in any case in which the number of Shares actually
distributed differs from the number of Shares previously counted in
connection with such grant; provided further, however, that the options
granted under the Company's 1993 Stock Option Plan shall not be treated as
outstanding. To the extent that an Option granted to a (A) Key Employee or
(B) an Independent Director ceases to remain outstanding by reason of
termination of rights granted thereunder, forfeiture or otherwise, the
Shares subject to such Option shall again become available for award under
the Plan to (x) Key Employees and (y) Independent Directors, respectively.
(ii) Sources of Shares Deliverable Under Options. Any Shares
delivered pursuant to an Option may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.
(iii) Options to Purchase Class B Shares. Options to purchase
Class B Shares may be granted only to those Participants who are eligible
to receive Class B Shares under the Company's Certificate of Incorporation
in effect on the date of grant of any Option. While any Class B Shares
underlying Options shall not be registrable under the Securities Act of
1933, as amended, the Class A Shares into which the Class B Shares are
convertible shall be registrable under the Securities Act.
(b) Adjustments. In the event that the Committee shall determine
that any change in corporate capitalization, such as a dividend or other
distribution of Shares, or a corporate transaction, such as a merger,
consolidation, reorganization or partial or complete liquidation of the
Company or other similar corporate transaction or event, affects the
Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem necessary to prevent
dilution or enlargement of the benefits or potential benefits intended to
be made under the Plan, adjust any or all of (x) the number and type of
Shares which thereafter may be made the subject of Options, (y) the number
and type of Shares subject to outstanding Options, and (z) the grant,
purchase, or exercise price with respect to any Option or, if deemed
appropriate, make provision for a cash payment to the holder of an
outstanding Option; provided, however, in each case, that (i) with respect
to Incentive Stock Options no such adjustment shall be authorized to the
extent that such adjustment would cause the Plan to violate Section 422 of
the Code or any successor provision thereto; (ii) such adjustment shall be
made in such manner as not to adversely affect the status of any Option as
"performance-based compensation" under Section 162(m) of the Code; and
(iii) the number of Shares subject to any Option denominated in Shares
shall always be a whole number.
SECTION 5. ELIGIBILITY
In determining the Participants to whom Options shall be granted and
the number of Shares to be covered by each Option, the Committee shall take
into account the nature of the Person's duties, such Person's present and
potential contributions to the success of the Company and such other factors as
it shall deem relevant in connection with accomplishing the purposes of the
Plan. A Key Employee who has been granted an Option or Options under the Plan
may be granted an additional Option or Options, subject to such limitations as
may be imposed by the Code on the grant of Incentive Stock Options.
Notwithstanding anything herein to the contrary, Incentive Stock Options may be
granted only to Key Employees of the Company or any Parent Corporation or
Subsidiary Corporation.
SECTION 6. OPTIONS
The Committee is hereby authorized to grant Options to Participants
upon the following terms and the conditions (except to the extent otherwise
provided in Section 7) and with such additional terms and conditions, in either
case not inconsistent with the provisions of the Plan, as the Committee shall
determine:
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(a) Exercise Price. The exercise price per Share purchasable under
Options shall be determined by the Committee at the time the Option is
granted but generally shall not be less than the Fair Market Value of the
Shares covered thereby at the time the Option is granted.
(b) Option Term. The term of each Non-Qualified Stock Option shall
be fixed by the Committee but generally shall not exceed ten (10) years
from the date of grant.
(c) Time and Method of Exercise. The Committee shall determine the
time or times at which the right to exercise an Option may vest, and the
method or methods by which, and the form or forms in which, payment of the
option price with respect to exercises of such Option may be made or
deemed to have been made (including, without limitation, (i) cash, Shares,
outstanding Options or other consideration, or any combination thereof,
having a Fair Market Value on the exercise date equal to the relevant
option price and (ii) a broker-assisted cashless exercise program
established by the Committee), provided in each case that such methods
avoid "short-swing" profits to the Participant under Section 16(b) of the
Securities Exchange Act of 1934, as amended. The payment of the exercise
price of an Option may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case in accordance with
rules and procedures established by the Committee.
(d) Incentive Stock Options. All terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions of
Section 422 of the Code, or any successor provision thereto, and any
regulations promulgated thereunder including that, (i)(A) in the case of a
grant to a Participant that is not a Ten Percent Stockholder the purchase
price per Share purchasable under Incentive Stock Options shall not be
less than the Fair Market Value of a Share on the date of grant and (B) in
the case of a grant to a Ten Percent Stockholder the purchase price per
Share purchasable under Incentive Stock Options shall not be less than
110% of the Fair Market Value of a Share on the date of grant and (ii) the
term of each Incentive Stock Option shall be fixed by the Committee but
shall in no event be more than ten (10) years from the date of grant, or
in the case of an Incentive Stock Option granted to a Ten Percent
Stockholder, five (5) years from the date of grant.
(e) Limits on Transfer of Options. Subject to Code Section 422, no
Option and no right under any such Option, shall be assignable, alienable,
saleable or transferable by a Participant otherwise than by will or by the
laws of descent and distribution, and such Option, and each right under
any such Option, shall be exercisable during the Participant's lifetime,
only by the Participant or, if permissible under applicable law (including
Code Section 422, in the case of an Incentive Stock Option), by the
Participant's guardian or legal representative. No Option and no right
under any such Option, may be pledged, alienated, attached, or otherwise
encumbered, and any purported pledge, alienation, attachment, or
encumbrance thereof shall be void and unenforceable against the Company.
Notwithstanding the foregoing, the Committee may, in its discretion,
provide that Non-Qualified Stock Options be transferable, without
consideration, to immediate family members (i.e., children, grandchildren
or spouse), to trusts for the benefit of such immediate family members and
to partnerships in which such family members are the only partners. The
Committee may attach to such transferability feature such terms and
conditions as it deems advisable. In addition, a Participant may, in the
manner established by the Committee, designate a beneficiary (which may be
a person or a trust) to exercise the rights of the Participant, and to
receive any distribution, with respect to any Option upon the death of the
Participant. A beneficiary, guardian, legal representative or other person
claiming any rights under the Plan from or through any Participant shall
be subject to all terms and conditions of the Plan and any Option
Agreement applicable to such Participant, except as otherwise determined
by the Committee, and to any additional restrictions deemed necessary or
appropriate by the Committee.
(f) Tax Withholding. The Company or any Subsidiary is authorized to
withhold from any Option granted any payment relating to an Option under
the Plan, including from the exercise of an Option, amounts of withholding
and other taxes due in connection with any transaction involving an
Option, and to take such other action as the Committee may deem advisable
to enable the Company and Participants to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any
Option. This authority shall include authority to withhold or receive
Shares or other property and to make cash payments in respect thereof in
satisfaction of a Participant's tax obligations.
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(g) Loan Provisions. With the consent of the Committee, and subject
at all times to laws and regulations and other binding obligations or
provisions applicable to the Company, the Company may make, guarantee, or
arrange for a loan or loans to a Participant with respect to the exercise
of any Option, including the payment by a Participant of any or all
federal, state, or local income or other taxes due in connection with the
exercise of any Option. Subject to such limitations, the Committee shall
have full authority to decide whether to make a loan or loans hereunder
and to determine the amount, terms, and provisions of any such loan or
loans, including the interest rate to be charged in respect of any such
loan or loans, whether the loan or loans are to be with or without
recourse against the borrower, the terms on which the loan is to be repaid
and the conditions, if any, under which the loan or loans may be forgiven.
SECTION 7. OPTIONS AWARDED TO INDEPENDENT DIRECTORS
Each Independent Director who is a member of the Board on January 1
of a year during the term of the Plan shall automatically be granted a
Non-Qualified Stock Option to purchase 5,000 Shares on January 1 of each year
of service on the Board as an Independent Director. All Options granted
pursuant to this Section 7 shall (a) be at an exercise price per Share equal to
100% of the Fair Market Value of a Share on the date of the grant; (b) have a
term of ten (10) years; (c) terminate (i) three (3) months following
termination of an Independent Director's service as a director of the Company
for any reason other than for Cause (as defined by the Committee in its sole
discretion) and (ii) immediately upon termination for Cause; and (d) be
otherwise on the same terms and conditions as all other Options granted
pursuant to the Plan.
SECTION 8. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Option Agreement or in the Plan:
(a) Amendments to the Plan. The Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from
time to time by the Board, but no amendment without the approval of the
stockholders of the Company shall be made if such amendment would be
required under Sections 162(m) or 422 of the Code, Rule 16b-3 or any other
law or rule of any governmental authority, stock exchange or other
self-regulatory organization to which the Company may then be subject.
Neither the amendment, suspension nor termination of the Plan shall,
without the consent of the holder of such Option, alter or impair any
rights or obligations under any Option theretofore granted.
(b) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
SECTION 9. GENERAL PROVISIONS
(a) No Rights to Awards. No Key Employee shall have any claim to be
granted any Option under the Plan, and there is no obligation for
uniformity of treatment of Key Employees or holders or beneficiaries of
Options under the Plan. The terms and conditions of Options need not be
the same with respect to each recipient.
(b) No Right to Employment. The grant of an Option shall not be
construed as giving a Participant the right to be retained in the employ
of the Company. Further, the Company may at any time dismiss a Participant
from employment, free from any liability, or any claim under the Plan,
unless otherwise expressly provided in the Plan or in any Option
Agreement.
(c) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Delaware and
applicable Federal law.
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(d) Severability. If any provision of the Plan or any Option is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction, or would disqualify the Plan or any Option under any law
deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be construed
or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, such provision shall be deemed
void, stricken and the remainder of the Plan and any such Option shall
remain in full force and effect.
(e) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option, and the Committee shall
determine whether cash, other securities, or other property shall be paid
or transferred in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated, or otherwise
eliminated.
(f) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision hereof.
SECTION 10. EFFECTIVE DATE OF THE PLAN
The Plan is effective as of November 1, 1998, subject to stockholder
approval of the Plan prior to such date.
SECTION 11. TERM OF THE PLAN
The Plan shall continue until the earlier of (i) the date on which
all Options issuable hereunder have been issued, (ii) the termination of the
Plan by the Board or (iii) August 6, 2008. However, unless otherwise expressly
provided in the Plan or in an applicable Option Agreement, any Option
theretofore granted may extend beyond such date and the authority of the
Committee to amend, alter, adjust, suspend, discontinue, or terminate any such
Option or to waive any conditions or rights under any such Option, and the
authority of the Board to amend the Plan, shall extend beyond such date.
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