<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e) (2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MONTEREY PASTA COMPANY
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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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(i)(2) or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
<PAGE>
- --------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
MONTEREY PASTA COMPANY
June 21, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Monterey Pasta Company (the "Company") on Thursday, July 25, 1996, commencing at
9:00 a.m. local time, at the Holiday Inn Financial District, Coit Room, 750
Kearny Street, San Francisco, California.
At the meeting, you will be asked to approve the reincorporation of the
Company in Delaware, to increase the number of authorized shares of the
Company's common stock, and to increase the number of shares reserved for
issuance under the Company's First Amended and Restated 1993 Stock Option Plan
(the "Option Plan").
The Board of Directors has recommended the reincorporation of the Company
in Delaware (it is now incorporated in California) to enable the Company to take
advantage of the greater flexibility of Delaware corporate law, the substantial
body of judicial case law interpreting that law, and the increased ability of
the Company to attract and retain qualified directors. As part of the
reincorporation proposal, it is recommended that the number of shares of common
stock authorized for issuance be increased from 20,000,000 to 70,000,000 shares
to implement the Company's shareholder rights plan, so that those shares are
available in the event that the Board of Directors determines that it is
necessary to effect stock dividends, to raise additional capital through the
sale of securities, to grant options to the Company's employees, or to utilize
stock in the acquisition of other companies, businesses or assets. You are also
being asked to approve this increase in the number of authorized shares for the
current (California) company, in the event that, for any reason, the
reincorporation in Delaware is not pursued. There are no commitments or
agreements for the utilization of the increased number of shares other than the
reservation of 1,740,000 of those shares for issuance under the Company's Option
Plan upon the approval of the amendment described below.
Finally, we are recommending that the Option Plan be amended to increase
the number of shares reserved for issuance under the Plan to 1,740,000 shares,
an increase of 540,000 shares. Increasing the number of shares available under
this option plan will enable the Company to continue its policy of encouraging
employee equity ownership and enhances the long-term retention of key
management. We have set challenging goals for the Company over the coming
years, and we believe that the availability of incentive stock options will help
achieve those goals.
We hope you will be able to join us for this important meeting. If you are
unable to attend, we strongly urge you to complete and return your enclosed
proxy. Your vote is very important.
Sincerely,
NORMAN E. DEAN
President and Chief Executive Officer
<PAGE>
MONTEREY PASTA COMPANY
353 SACRAMENTO STREET, SUITE 500
SAN FRANCISCO, CALIFORNIA 94111
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 25, 1996
To the Shareholders of Monterey Pasta Company:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of MONTEREY
PASTA COMPANY (the "Company"), a California corporation, will be held on
Thursday, July 25, 1996, at 9:00 a.m. local time, at the Holiday Inn, Financial
District, Coit Room, 750 Kearny Street, San Francisco, California 94108, for the
following purposes:
1. To authorize the Company to change the Company's state of
incorporation from California to Delaware.
2. To approve an amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of the Company's Common Stock from
20,000,000 to 70,000,000, an increase of 50,000,000 shares.
3. To approve an amendment to the Company's First Amended and Restated
1993 Stock Option Plan to increase the number of shares of the Company's Common
Stock reserved for issuance thereunder from 1,200,000 to 1,740,000, an increase
of 540,000 shares.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. NO OTHER BUSINESS WILL BE CONDUCTED AT THE
MEETING.
Only shareholders of record at the close of business on June 11, 1996 are
entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign and
return the enclosed Proxy as promptly as possible in the return envelope
enclosed for that purpose. Any shareholder attending the meeting may vote in
person even if he or she has returned a Proxy.
By Order of the Board of Directors
Carolyn Mar, Secretary
San Francisco, California
June 25, 1996
<PAGE>
MONTEREY PASTA COMPANY
353 SACRAMENTO STREET, SUITE 500
SAN FRANCISCO, CALIFORNIA 94111
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of MONTEREY PASTA COMPANY (the
"Company") for use at the Special Meeting of Shareholders to be held on
Thursday, July 25, 1996, at 9:00 a.m., local time, or at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice of
Special Meeting of Shareholders. The Special Meeting will be held at the
Holiday Inn, Financial District, Coit Room, 750 Kearny Street, San Francisco,
California.
These proxy solicitation materials will be mailed on or about June 21,
1996, to all shareholders entitled to vote at the meeting.
RECORD DATE AND SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Shareholders of record at the close of business on June 11, 1996 are
entitled to notice of and to vote at the meeting. At the record date, 8,708,588
shares of the Company's Common Stock were issued and outstanding. As of June
11, 1996, the following persons were known by management to be the beneficial
owner of more than five percent (5%) of the Company's Common Stock:
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
Gruber and McBaine Capital 593,300 6.81281%
Management(1)
50 Osgood Place
San Francisco, CA 94133
Wellington Management Company(2) 585,100 6.71865%
75 State Street
Boston, MA 02109
Lance H. Mortensen 980,349(3) 11.25726%
117 Warwick Court
Alameda, CA 94507
(1) According to a Schedule 13D filed with the Securities and Exchange
Commission on August 24, 1995, Jon D. Gruber and J. Patterson McBaine are
the only directors of, and hold all executive offices of, Gruber & McBaine
Capital Management ("GMCM"), an investment advisor. Pursuant to a
memorandum dated April 4, 1996 from GMCM to the Company, GMCM reported that
GMCM, together with Messrs. Gruber, McBaine and Thomas O. Lloyd-Butler, are
the general partners of Lagunitas Partners, L.P., a California limited
partnership ("Lagunitas"), which is an investment limited partnership.
Messrs. Gruber and McBaine and GMCM are also the general partners of GMJ
Investments, L.P., a California limited partnership ("GMJ"). As of April 3,
1996, GMCM has shared voting and investment
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power over 456,200 shares; Mr. Gruber has sole voting and investment power
over 78,000 shares and shared voting and investment power over 456,200
shares; Mr. McBaine has sole voting and investment power over 59,100 shares
and shared voting and investment power over 456,200 shares; Lagunitas has
sole voting and investment power over 246,100 shares; and GMJ has sole
voting and investment power over 6,500 shares.
(2) According to Amendment No. 1 to a Schedule 13G filed with the Securities
and Exchange Commission on February 13, 1996, Wellington Management
Company, in its capacity as an investment adviser, may be deemed to be the
beneficial owner of all 585,100 shares of Common Stock that are owned by
its investment advisory clients. Wellington Management Company has shared
voting power over 295,100 of those shares and shared investment power over
all 585,100 shares.
(3) Includes presently exercisable options for 105,800 shares. Mr. Mortensen
is a director and former Chief Executive Officer and President of the
Company.
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of June 11, 1996, by (i) each current director,
(ii) each executive officer of the Company included in the Summary Compensation
Table under "EXECUTIVE COMPENSATION" below; and (iii) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Relationship with Company Beneficial Ownership (1) Percent of Class
<S> <C> <C> <C>
Lance H. Mortensen Director 980,349 (2) 11.25726%
Charles B. Bonner Director 73,077 (3) *
Norman E. Dean Director 40,000 (4) *
Daniel J. Gallery Director; Consultant 35,500 (5) *
Christopher Gillam Director 10,000 (6) *
Floyd R. Hill Director 282,527 (7) 3.24423%
E. Michael Moone Director 25,000 (7) *
Timothy J. Ryan Director 49,000 (8) *
Robert J. Otto Executive Vice President 2,000 (9) *
Anthony W. Giannini Senior Vice President of Sales 51,500 (10) *
All directors and officers as 1,548,953 17.78649%
a group (10)
* Less than 1%
</TABLE>
2.
<PAGE>
(1) This table is based upon information supplied by directors and executive
officers. Unless otherwise indicated in the footnotes to this table and
subject to community property laws where applicable, each of the
shareholders named in this table has sole voting and investment power with
respect to the shares indicated as beneficially owned.
(2) Includes presently exercisable options for 105,800 shares.
(3) Includes presently exercisable options for 10,000 shares. Mr. Bonner
shares voting and investment power with his wife, over 43,727 shares, and
20,000 options granted under the 1993 Stock Option Plan, which are held as
community property. Of the 73,077 shares, Mr. Bonner has sole voting and
investment power over 5,000 shares, and holds, as trustee, for his three
children 1,450 shares each in three separate trusts. Mr. Bonner disclaims
beneficial ownership of these shares. Mr. Bonner was reinstated on the
Company's Board of Directors in September 1995.
(4) Of the 40,000 shares, Mr. Dean holds 10,000 shares as trustee of The 1990
Dean Family Revocable Trust UA 5-1-90. Includes presently exercisable
options for 20,000 shares.
(5) Includes presently exercisable options for 22,500 shares, and 13,000 shares
over which Mr. Gallery shares voting and investment power with his wife.
(6) Includes presently exercisable options for 20,000 shares.
(7) Of the 25,000 shares, Mr. Moone holds 10,000 shares as trustee of the Moone
Family Trust Established 1986. Includes presently exercisable options for
5,000 shares.
(8) Includes presently exercisable options for 49,000 shares.
(9) Includes presently exercisable options for 50,000 shares.
(10)Mr. Otto holds 2,000 shares as trustee of the Robert J. Otto and Lynn Ann
Otto 1985 Trust dated 12-23-85.
3.
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REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company at its principal offices a written notice of revocation or a duly
executed proxy bearing a later date or by attending the meeting and voting in
person.
VOTING AND SOLICITATION
On all matters to be voted on at the special meeting, each share has one
vote.
The cost of soliciting proxies will be borne by the Company. The Company
has retained the services of Corporate Investor Communications, Inc., a proxy
solicitation firm, to aid in the solicitation of proxies from brokers, bank
nominees and other institutional owners, on terms customary for such services at
a cost of $4,000. In addition, the Company may reimburse brokerage firms and
other persons representing beneficial owners for their expenses in forwarding
solicitation materials to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and employees, without
additional compensation, personally or by telephone or other means of
communication.
PROPOSAL NO. 1 -- REINCORPORATION IN DELAWARE
INTRODUCTION
The Board of Directors believes that the best interests of the Company and
its shareholders will be served by changing the state of incorporation of the
Company from California to Delaware (the "Reincorporation Proposal" or the
"Proposed Reincorporation"). As discussed below, the principal reasons for
reincorporation are the greater flexibility of Delaware corporate law, the
substantial body of case law interpreting that law and the increased ability of
the Company to attract and retain qualified directors. Shareholders are urged
to read the following sections of this Proxy Statement carefully, including the
related exhibits, before voting on the Reincorporation Proposal. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE PROPOSED
REINCORPORATION.
The Reincorporation Proposal will be effected by merging the Company into a
wholly-owned subsidiary of the Company, which was incorporated for this purpose.
Throughout the Proxy Statement, the term "MPC California" refers to the existing
California corporation, and the term "MPC Delaware" refers to the new Delaware
corporation, which is the proposed successor to MPC California. Upon completion
of the merger, MPC California will cease to exist, and MPC Delaware will
continue to operate the business of the Company under the name Monterey Pasta
Company.
Pursuant to the Agreement and Plan of Merger, which will be substantially
in the form attached hereto as Exhibit A (the "Merger Agreement"), each
outstanding share of MPC California Common Stock will automatically be converted
into one share of MPC Delaware Common Stock, $0.001 par value, upon the
effective date of the merger. Each stock certificate representing issued and
outstanding shares of MPC California Common Stock will continue to represent the
same number of shares of Common Stock of MPC Delaware. IT WILL NOT BE NECESSARY
FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK
CERTIFICATES OF MPC DELAWARE. However, shareholders may exchange their
certificates if they so choose. The Common Stock of MPC California is listed
for trading on the NASDAQ National Market System, and after the merger MPC
Delaware's Common Stock will continue to be traded on the NASDAQ National Market
System without interruption under the same symbol ("PSTA") as the shares of MPC
California Common Stock were traded on such system prior to the merger.
Under California law, the affirmative vote of a majority of the outstanding
shares of Common Stock of MPC California is required for approval of the Merger
Agreement and the other terms of the Proposed Reincorporation. See "Vote
Required for the Reincorporation Proposal." The Proposed Reincorporation has
4.
<PAGE>
been approved by MPC California's Board of Directors, which unanimously
recommends a vote in favor of the proposal. If approved by the shareholders, it
is anticipated that the merger will become effective as soon as practicable
following the Special Meeting of Shareholders (the "Effective Date"). However,
pursuant to the Merger Agreement, the merger may be abandoned or the Merger
Agreement may be amended by the Board of Directors (except that the principal
terms may not be amended without shareholder approval) either before or after
shareholder approval has been obtained and prior to the Effective Date of the
Proposed Reincorporation if, in the opinion of the Board of Directors of either
company circumstances arise which make either action advisable.
Shareholders of MPC California will have no dissenters' rights of appraisal
with respect to the Reincorporation Proposal. See "Significant Differences
Between the Corporation Laws of California and Delaware--Appraisal Rights".
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation of MPC Delaware (the
"Certificate of Incorporation") and the Bylaws of MPC Delaware, which will be
substantially in the forms attached hereto as Exhibits B and C, respectively.
APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION AND THE
BYLAWS OF MPC DELAWARE, WHICH WILL BE SUBSTANTIALLY IN THE FORMS SET FORTH AS
EXHIBITS A, B AND C TO THIS PROXY STATEMENT.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
FLEXIBILITY OF DELAWARE LAW. For many years Delaware has followed a policy
of encouraging incorporation in that state and, in furtherance of that policy,
has been a leader in adopting, construing and implementing comprehensive,
flexible corporate laws responsive to the legal and business needs of
corporations organized under its laws. Many corporations have initially chosen
Delaware for their state of incorporation or have subsequently changed their
corporate domicile to Delaware in a manner similar to that proposed by the
Company. Because of Delaware's prominence as the state of incorporation for
many major corporations, both the legislature and courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to meet
changing business needs. The Delaware courts have developed considerable
expertise in dealing with corporate issues, and a substantial body of case law
has developed construing Delaware law and establishing public policies with
respect to corporate legal affairs.
ATTRACTION AND RETENTION OF QUALIFIED DIRECTORS. Both California and
Delaware law permit a corporation to include a provision in its certificate of
incorporation which reduces, limits or eliminates the monetary liability of
directors for breaches of fiduciary duty in certain circumstances. The
increasing frequency of claims and litigation directed against directors and
officers has greatly expanded the risks facing directors and officers of
corporations in exercising their respective duties. The amount of time and
money required to respond to such claims and to defend such litigation can be
substantial. It is the Company's desire to reduce such risks to its directors
and officers and to limit situations in which monetary damages can be recovered
against directors so that the Company may continue to attract and retain
qualified directors who might otherwise be unwilling to serve because of the
increased risks involved.
In accordance with current California law, MPC California's Articles of
Incorporation include a provision which limits director liability in certain
circumstances. In general, however, the ability to limit liability may be
somewhat broader under Delaware law, and Delaware case law is also more
developed to provide guidance in this regard. It should be noted, however, that
neither California nor Delaware law permits a corporation to limit or eliminate
the liability of its directors for intentional misconduct, bad faith conduct or
any transaction from which the director derives an improper personal benefit.
In addition, liability for violations of federal laws such as the federal
securities laws may not be subject to any such limitations. See "Significant
Differences Between the Corporation Laws of California and
Delaware--Indemnification and Limitation of Liability".
5.
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In addition, Delaware law permits a corporation to adopt a number of
measures through amendment of the corporate charter or bylaws or otherwise,
designed to reduce a corporation's vulnerability to unsolicited takeover
attempts. The Board of Directors has no present intention following the
Proposed Reincorporation to amend the Certificate of Incorporation or Bylaws
to include additional provisions which might deter an unsolicited takeover
attempt. However, in the discharge of its fiduciary obligations to its
shareholders, the Board of Directors of the Company has evaluated the
Company's vulnerability to potential unsolicited bids to acquire the Company
on unfavorable terms. As a result, the Board of Directors has adopted a
shareholders rights plan as of May 7, 1996. A summary of such rights plan
was mailed to shareholders on May 31, 1996.
POSSIBLE DISADVANTAGES
Despite the unanimous belief of the Board of Directors that the
Reincorporation Proposal is in the best interests of MPC California and its
shareholders, it should be noted that Delaware law has been criticized by some
commentators on the grounds that it does not afford minority shareholders the
same substantive rights and protections as are available in a number of other
states. For a comparison of shareholders' rights and the powers of management
under Delaware and California law, see "Significant Differences Between the
Corporation Laws of California and Delaware". The Reincorporation Proposal,
however, does not include certain changes to the Company's Articles of
Incorporation and Bylaws permitted by Delaware law which may reduce shareholder
participation in important corporate decisions. See "The Charters and Bylaws of
MPC California and MPC Delaware".
NO CHANGE IN THE NAME, BOARD MEMBERS, BUSINESS, MANAGEMENT, LOCATION OF
PRINCIPAL FACILITIES OR EMPLOYEE PLANS OF THE COMPANY
The Reincorporation Proposal will effect only a change in the legal
domicile of the Company and other changes of a legal nature, certain of which
are described in this Proxy Statement. The Proposed Reincorporation will NOT
result in any change in the name, business, management, fiscal year, location of
the principal facilities, assets or liabilities of the Company. The eight
directors who were elected at the Annual Meeting of Shareholders earlier this
year will become the directors of MPC Delaware. All employee benefit stock
option and stock purchase plans of MPC California will be continued by MPC
Delaware, and each option or right issued pursuant to any such plan will
automatically be converted into an option or right to purchase the same number
of shares of MPC Delaware Common Stock, at the same price per share, upon the
same terms, and subject to the same conditions, as set forth in such plan.
Shareholders should note that approval of the Reincorporation Proposal will also
constitute approval of the assumption of these plans by MPC Delaware. MPC
California's other officer and employee benefit arrangements will also be
continued by MPC Delaware upon the terms, and subject to the conditions,
currently in effect. As noted above, after the merger, the shares of Common
Stock of MPC Delaware will continue to be traded, without interruption, on the
NASDAQ National Market System under the same symbol ("PSTA") as the shares of
Common Stock of MPC California were traded prior to the merger.
THE CHARTERS AND BYLAWS OF MPC CALIFORNIA AND MPC DELAWARE
The provisions of the MPC Delaware Certificate of Incorporation and Bylaws
are similar to those of the MPC California Articles of Incorporation and Bylaws
in most respects. Delaware law does permit the implementation of certain
provisions in a corporation's certificate of incorporation or bylaws which would
alter some of the rights of shareholders and the powers of management of a
California company. Although the Board of Directors of MPC California has no
current plan to implement these changes, certain changes could be implemented in
the future by amendment of the Certificate of Incorporation of MPC Delaware
following stockholder approval, and certain changes could be implemented by
amendment of the Bylaws of MPC Delaware without stockholder approval. For a
discussion of such changes, see "Significant Differences Between the Corporation
Laws of California and Delaware". This discussion of the Certificate of
Incorporation and Bylaws of MPC Delaware is qualified by reference to Exhibits B
and C hereto, respectively.
6.
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AUTHORIZED STOCK. The Articles of Incorporation of MPC California
authorize twenty million (20,000,000) shares of Common Stock and five million
(5,000,000) shares of undesignated Preferred Stock. At the Special Meeting, the
shareholders are being asked to approve an increase in the number of shares of
Common Stock which the Company is authorized to issue from twenty million
(20,000,000) to seventy million (70,000,000) shares of Common Stock, as more
fully discussed below. See "Proposal 2-Amendment and Restatement of Articles of
Incorporation to Increase the Number of Authorized Shares of Common Stock."
Consistent with such proposal, the proposed Certificate of Incorporation of MPC
Delaware authorizes MPC Delaware to issue seventy million (70,000,000) shares of
Common Stock, $0.001 par value, as well as one million (1,000,000) shares of
undesignated Preferred Stock, $0.001 par value. If the shareholders were to
approve the Reincorporation Proposal but not approve Proposal 2, and if the
Company were to go forward with the Proposed Reincorporation, the Certificate of
Incorporation of MPC Delaware would be changed prior to the merger to authorize
the issuance of only twenty million (20,000,000) shares of Common Stock.
Disapproval of Proposal No. 2 will not affect the authorization of one million
(1,000,000) shares of undesignated Preferred Stock.
NUMBER OF DIRECTORS. The Bylaws of MPC California authorize the directors
to fix the number of directors within a range from five to nine, with the number
of directors currently set at eight. The Bylaws of MPC Delaware will also
authorize the directors to fix the number of directors within a range from five
to nine, with the number of directors set at eight so that the Company may, if
it so chooses, have greater flexibility in increasing the size of the Board of
Directors. In contrast to the Bylaws of MPC California, however, the Bylaws of
MPC Delaware provide that the range of the number of directors may be changed by
the Board of Directors without further shareholder approval. See "Significant
Differences Between the Corporation Laws of California and Delaware-Size of the
Board of Directors".
MONETARY LIABILITY OF DIRECTORS. The Articles of Incorporation of MPC
California and the Certificate of Incorporation of MPC Delaware both provide for
the elimination of personal monetary liability of directors to the fullest
extent permissible under the laws of each corporation's respective state of
incorporation. The provision eliminating monetary liability of directors set
forth in the Certificate of Incorporation of MPC Delaware is potentially more
expansive in that it incorporates future amendments to Delaware law with respect
to the elimination of such liability.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE
The General Corporation Laws of California and Delaware differ in many
respects. While not all of such differences are summarized in this Proxy
Statement, a number of the principal differences which could materially affect
the rights of shareholders are discussed below.
SIZE OF THE BOARD OF DIRECTORS. Under California law, although changes in
the number of directors must in general be approved by a majority of the
outstanding shares, the Board of Directors may fix the exact number of directors
within a stated range set forth in the articles of incorporation or bylaws, if
that stated range has been approved by the shareholders. Delaware law permits
the Board of Directors alone to change the authorized number, or the range, of
directors by amendment to the bylaws, unless the directors are not authorized to
amend the bylaws or the number of directors is fixed in the certificate of
incorporation (in which case a change in the number of directors may be made
only by amendment to the certificate of incorporation approved by the
stockholders). The Certificate of Incorporation of MPC Delaware provides that
the number of directors shall be as specified in the Bylaws and authorizes the
Board of Directors to make, alter, amend or repeal the Bylaws. The Board of
Directors of MPC Delaware may therefore change the authorized range, as well as
the exact number, of directors. If the Reincorporation Proposal is approved,
the eight directors of MPC California who were elected at the Annual Meeting of
Shareholders will continue as directors of MPC Delaware after the Proposed
Reincorporation is consummated.
CUMULATIVE VOTING. Under California law, if any shareholder gives notice
of his or her intention to cumulate votes for the election of directors, any
other shareholder of the corporation is also entitled to cumulate his or her
votes at such election. Under Delaware law, cumulative voting in the election
of directors is not mandatory. THE CERTIFICATE OF INCORPORATION OF MPC DELAWARE
DOES NOT PROVIDE FOR CUMULATIVE VOTING, SO THAT UNLESS THE CERTIFICATE OF
INCORPORATION OF MPC DELAWARE IS AMENDED FOLLOWING THE PROPOSED REINCORPORATION
TO SPECIFY
7.
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CUMULATIVE VOTING (WHICH MAY BE DONE ONLY WITH STOCKHOLDER APPROVAL),
STOCKHOLDERS OF MPC DELAWARE WILL HAVE NO CUMULATIVE VOTING RIGHTS. The
elimination of cumulative voting would limit the ability of minority
stockholders to obtain representation on the Board of Directors.
CLASSIFIED BOARD OF DIRECTORS. A classified board is one on which a
certain number of the directors, but not all, are elected on a rotating basis
each year. Under California law, directors must be elected annually, and,
therefore, a classified board is not permitted. Delaware law permits, but does
not require, a classified board of directors, with staggered terms under which
one-half or one-third of the directors are elected for terms of two or three
years, respectively. This method of electing directors makes changes in the
composition of the board of directors, and thus a change in control of a
corporation, a lengthier and more difficult process. The MPC Delaware
Certificate of Incorporation and Bylaws do not provide for a classified board of
directors. The establishment of a classified board following the Proposed
Reincorporation would require the approval of the stockholders of MPC Delaware.
POWER TO CALL SPECIAL SHAREHOLDERS' MEETINGS. Under California law, a
special meeting of shareholders may be called by the board of directors, the
chairman of the board, the president, the holders of shares entitled to cast not
less than ten percent of the votes at such meeting and such additional persons
as are authorized by the articles of incorporation or the bylaws. Under
Delaware law, a special meeting of stockholders may be called by the board of
directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. The Bylaws of MPC Delaware provide that special
meetings of stockholders may be called only by the board of directors or the
chairman of the board pursuant to a resolution adopted by a majority of the
total number of directors. Following the Proposed Reincorporation, the Board of
Directors of MPC Delaware could (although it has no current intention to do so)
amend the Bylaws to limit or eliminate the right of stockholders to call a
special meeting of stockholders. Any such limitation could make it more
difficult for stockholders to initiate action that is opposed by the Board of
Directors.
ACTION BY WRITTEN CONSENT. Both the Delaware and California law permit
stockholders, unless specifically prohibited by the certificate or articles of
incorporation, to take action without a meeting by the written consent of the
holders of at least the number of shares necessary to authorize or take such
action at a meeting at which all shares entitled to vote therein were present
and voted. Action by written consent may, in some circumstances, permit the
taking of stockholder action opposed by the Board of Directors more rapidly than
would be possible if a meeting of stockholders were required. The Bylaws of MPC
California currently provide for such stockholder action by written consent.
However, in connection with its evaluation of the Proposed Reincorporation, the
Board of Directors has determined that it is important that it be able to give
advance notice of and consideration to any such stockholder action, and that
stockholders be able to discuss at a meeting matters which may affect their
rights. Accordingly, the Certificate of Incorporation of MPC Delaware includes
a prohibition on stockholder action by written consent without a meeting.
STOCKHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS. In the last several
years, a number of states (but not California) have adopted special laws
designed to make certain kinds of "unfriendly" corporate takeovers, or other
transactions involving a corporation and one or more of its significant
shareholders, more difficult. Under Section 203 of the Delaware General
Corporation Law ("Section 203"), certain "business combinations" with
"interested stockholders" of Delaware corporations are subject to a three-year
moratorium unless specified conditions are met.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for three years following the
time that such person becomes an interested stockholder. With certain
exceptions, an interested stockholder is a person or group who or which owns 15%
or more of the corporation's outstanding voting stock (including any rights to
acquire stock pursuant to an option, warrant, agreement, arrangement or
understanding, or upon the exercise of conversion or exchange rights, and stock
with respect to which the person has voting rights only), or is an affiliated
associate of the corporation and was the owner of 15% or more of such voting
stock at any time within the previous three years.
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For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder; sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a
subsidiary equal to ten percent or more of the aggregate market value of the
corporation's consolidated assets or its outstanding stock; the issuance or
transfer by the corporation or a subsidiary of stock of the corporation or such
subsidiary to the interested stockholder (except for transfers in a conversion
or exchange or a pro rata distribution or certain other transactions, none of
which increase the interested stockholder's proportionate ownership of any class
or series of the corporation's or such subsidiary's stock); or any receipt by
the interested stockholder (except proportionately as a stockholder), directly
or indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if (i) prior to the time on which such stockholder becomes an
interested stockholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
interested stockholder; (ii) the interested stockholder owns 85% of the
corporation's voting stock upon consummation of the transaction which made him
or her an interested stockholder (excluding from the 85% calculation shares
owned by directors who are also officers of the target corporation and shares
held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or (iii) on or
after the time such person becomes an interested stockholder, the board
approves the business combination and it is also approved at a stockholder
meeting by sixty-six and two-thirds percent (66-2/3%) of the voting stock not
owned by the interested stockholder.
Section 203 applies only to Delaware corporations which have a class of
voting stock that is listed on a national securities exchange, are quoted on an
interdealer quotation system such as NASDAQ (as is MPC California, and as MPC
Delaware would be) or are held of record by more than 2,000 stockholders.
However, a Delaware corporation may elect not to be governed by Section 203 by a
provision in its original certificate of incorporation or an amendment thereto
or to the bylaws, which amendment must be approved by a majority of the shares
entitled to vote and, in the case of a bylaw amendment, may not be further
amended by the board of directors. MPC Delaware does not intend to elect not to
be governed by Section 203, therefore, Section 203 will apply to MPC Delaware.
The Company believes that Section 203 will have the effect of encouraging
any potential acquiror to negotiate with the Company's Board of Directors.
Section 203 should also discourage certain potential acquirors unwilling to
comply with its provisions.
REMOVAL OF DIRECTORS. Under California law, any director or the entire
board of directors may be removed, with or without cause, with the approval of a
majority of the outstanding shares entitled to vote; however, no individual
director may be removed (unless the entire board is removed) if the number of
votes cast against such removal would be sufficient to elect the director under
cumulative voting. Under Delaware law, a director of a corporation that does
not have a classified board of directors or cumulative voting may be removed
with or without cause with the approval of a majority of the outstanding shares
entitled to vote. In the case of a Delaware corporation having cumulative
voting, if less than the entire board is to be removed, a director may not be
removed without cause unless the shares voted against such removal would not be
sufficient to elect the director under such cumulative voting procedures. A
director of a corporation with a classified board of directors may be removed
only for cause, unless the certificate of incorporation otherwise provides. The
Certificate of Incorporation of MPC Delaware provides that any director may be
removed from office at any time with or without cause but only on the
affirmative vote of the holders of at least 80 percent of the voting power of
the then outstanding voting stock.
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FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under California law, any
vacancy on the board of directors, other than one created by removal of a
director, may be filled by the board. If the number of directors is less than a
quorum, a vacancy may be filled by the unanimous written consent of the
remaining directors in office, or the affirmative vote of a majority of the
remaining directors at a meeting. A vacancy created by removal of a director
may be filled by the board only if so authorized by a corporation's articles of
incorporation or by a bylaw approved by the corporation's shareholders. MPC
California's Bylaws do not permit directors to fill vacancies created by removal
of a director. Under Delaware law, vacancies and newly created directorships
may be filled by a majority of the directors then in office (even though less
than a quorum) unless otherwise provided in the certificate of incorporation or
bylaws. The Bylaws of MPC Delaware provide, that any vacancy resulting from
death, resignation, retirement, disqualification, removal from office, or other
cause and newly created directorships, may only be filled by the affirmative
vote of a majority of the remaining directors. Following the Proposed
Reincorporation, the Board of Directors of MPC Delaware could (although it has
no current intention to do so) amend the Bylaws to provide that directors may
fill any vacancy created by the removal of a director by the stockholders.
LOANS TO OFFICERS AND EMPLOYEES. Pursuant to California law and the Bylaws
of MPC California, the Board of Directors of the Company is currently authorized
to approve loans or guaranties to or on behalf of officers (whether or not such
officers are directors) if the board determines that such loans or guaranties
may reasonably be expected to benefit the corporation. Under Delaware law, a
corporation, its officers or other employees may make loans to, guarantee the
obligations of or otherwise assist its officers or other employees of those of
its subsidiaries (including directors who are also officers or employees) when
such action, in the judgment of the directors, may reasonably, be expected to
benefit the corporation.
INDEMNIFICATION AND LIMITATION OF LIABILITY. California and Delaware have
similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit a
corporation to adopt a provision in its articles of incorporation or certificate
of incorporation eliminating the liability of a director to the corporation or
its shareholders for monetary damages for breach of the director's fiduciary
duty of care. There are nonetheless certain differences between the laws of the
two states respecting indemnification and limitation of liability.
The Articles of Incorporation of MPC California eliminate the liability of
directors to the corporation to the fullest extent permissible under California
law.
California law does not permit the elimination of monetary liability where
such liability is based on: (i) intentional misconduct or knowing and culpable
violation of law; (ii) acts or omissions that a director believes contrary to
the best interests of the corporation or its shareholders, or that involve the
absence of good faith on the part of the director; (iii) receipt of an improper
personal benefit; (iv) acts or omissions that show reckless disregard for the
director's duty to the corporation or its shareholders, where the director in
the ordinary course of performing a director's duties should be aware of a risk
of serious injury to the corporation or its shareholders; (v) acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation and its shareholders; (vi)
interested transactions between the corporation and a director in which a
director has a material financial interest; or (vii) liability for improper
distributions, loans or guarantees.
The Certificate of Incorporation of MPC Delaware also eliminates the
liability of directors to the fullest extent permissible under Delaware law, as
such law exists currently or as it may be amended in the future. Under Delaware
law, such a provision may not eliminate or limit director monetary liability for
(i) breaches of the director's duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law; (iii) the payment of unlawful dividends
or unlawful stock repurchases or redemptions; or (iv) transactions in which the
director received an improper personal benefit. Such a limitation of liability
provision also may not limit a director's liability for violation of, or
otherwise relieve MPC Delaware or its directors from the necessity of complying
with federal or state securities laws or affect the availability of nonmonetary
remedies such as injunctive relief or rescission.
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California law permits indemnification of expenses incurred in derivative
or third-party actions, except that with respect to derivative actions (i) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines that person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that the court so determines, and (ii) no indemnification may
be made without court approval in respect of amounts paid or expenses incurred
in settling or otherwise disposing of a threatened or pending action or in
respect of amounts incurred in defending a pending action which is settled or
otherwise disposed of without court approval.
Indemnification is permitted by California law only for acts taken in good
faith and believed to be in the best interests of the corporation and its
shareholders, as determined by a majority vote of a disinterested quorum of the
directors, independent legal counsel (if a quorum of independent directors is
not obtainable), a majority vote of a quorum of the shareholders (excluding
shares owned by the indemnified party), or the court handling the action.
California law requires indemnification when the individual has successfully
defended the action on the merits (as opposed to Delaware law which requires
indemnification relating to any successful defense, whether on the merits or
otherwise).
Delaware law generally permits indemnification of expenses (including
attorneys' fees) incurred in the defense or settlement of a derivative or
third-party action, provided there is a determination by a majority vote of the
disinterested directors even though less than a quorum, by independent legal
counsel or by stockholders that the person seeking indemnification acted in
good faith and in a manner reasonably believed to be in or (in contrast to
California law) not opposed to the best interests of the corporation. Without
court approval, however, no indemnification may be made in respect of any
derivative action in which such person is adjudged liable for negligence or
misconduct in the performance of his or her duty to the corporation. Delaware
law also requires indemnification of expenses when the individual being
indemnified has successfully defended the action on the merits or otherwise.
California corporations may include in their articles of incorporation a
provision which extends the scope of indemnification through agreements, bylaws
or other corporate action beyond that specifically authorized by statute. The
Articles of Incorporation of MPC California include such a provision.
A provision of Delaware law states that the indemnification provided by
statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise. As a
result, Delaware law permits the indemnification agreements such as those
entered into by MPC California with its officers and directors, and such
agreements will be assumed by MPC Delaware upon completion of the Proposed
Reincorporation.
The indemnification and limitations of liability provisions of California
law, and not Delaware law, will apply to actions of the directors and officers
of MPC California taken prior to the Proposed Reincorporation.
INSPECTION OF SHAREHOLDERS' LIST. Both California and Delaware law allow
any shareholder to inspect a corporation's shareholders' list for a purpose
reasonably related to such person's interest as a shareholder. California law
provides, in addition, an absolute right to inspect and copy the corporation's
shareholders' list to persons holding an aggregate of 5% or more of a
corporation's voting shares, or shareholders holding an aggregate of 1% or more
of such shares who have filed a Schedule 14B with the Securities and Exchange
Commission relating to the election of directors. Delaware law does not provide
for any such absolute right of inspection, and no such right is granted under
the Certificate of Incorporation or Bylaws of MPC Delaware.
DIVIDENDS AND REPURCHASES OF SHARES. California law dispenses with the
concepts of par value of shares as well as statutory definitions of capital,
surplus and the like. The concepts of par value, capital and surplus are
retained under Delaware law.
Under California law, a corporation may not make any distribution
(including dividends, whether in cash or other property, and repurchases of its
shares) unless either the corporation's retained earnings immediately prior to
the proposed distribution equal or exceed the amount of the proposed
distribution or, immediately after
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giving effect to such distribution, the corporation's assets (exclusive of
goodwill, capitalized research and development expenses and deferred charges)
would be at least equal to 6-1/4 times its liabilities (not including deferred
taxes, deferred income and other deferred credits), and the corporation's
current assets would be at least equal to its current liabilities (or 6-1/4
times its current liabilities if the average pre-tax and pre-interest expense
earnings for the preceding two fiscal years were less than the average interest
expense for such years). Under California law, there are exceptions to the
foregoing rules for repurchases of shares in connection with certain rescission
actions or pursuant to certain employee stock plans.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, Delaware law generally provides that a
corporation may redeem or repurchase its shares only if such redemption or
repurchase would not impair the capital of the corporation.
To date, the Company has not paid cash dividends on its capital stock. It
is the current policy of the Board of Directors to retain earnings for use in
the Company's business, and therefore, the Company does not anticipate paying
cash dividends on its Common Stock in the foreseeable future.
SHAREHOLDER VOTING. Both California and Delaware law generally require
that the holders of a majority in voting power of the outstanding shares of
stock of both acquiring and target corporations entitled to vote approve
statutory mergers. Delaware law does not require a stockholder vote of the
surviving corporation in a merger (unless the corporation provides otherwise in
its certificate of incorporation) if (i) the merger agreement does not amend the
existing certificate of incorporation, (ii) each share of the surviving
corporation outstanding before the merger is an identical outstanding or
treasury share after the merger, and (iii) the number of shares to be issued by
the surviving corporation in the merger does not exceed 20% of the shares
outstanding immediately prior to the merger. California law contains a similar
exception to its voting requirements for reorganizations where shareholders or
the corporation itself, or both, immediately prior to the reorganization will
own immediately after the reorganization equity securities constituting more
than five-sixths of the voting power of the surviving or acquiring corporation
or its parent entity.
Both California and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the outstanding voting shares of the corporation transferring such assets.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. By contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation which adversely
affects a specific class or series of shares.
California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than 50% but less than 90% of such common stock or its affiliate
unless all of the holders of such common stock consent to the transaction. This
provision of California law may have the effect of making a "cash-out" merger by
a majority shareholder more difficult to accomplish. Delaware law has no
comparable provision.
California law also provides that except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is made
by an interested party (generally, a controlling or managing party of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to shareholders.
This fairness opinion requirement does not apply to a corporation which does not
have shares held of record by at least 100 persons, or to a transaction which
has been qualified under California state securities laws. Furthermore, if a
tender of shares or vote is sought pursuant to an interested party's proposal
and a later proposal is made by another party at least ten days prior to the
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date of acceptance of the interested party proposal, the shareholders must be
informed of the later offer and be afforded a reasonable opportunity to withdraw
any vote, consent or proxy, or to withdraw any tendered shares. Again, Delaware
law has no comparable provision.
INTERESTED DIRECTOR TRANSACTIONS. Under both California and Delaware law,
certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable solely because of such
interest provided that certain conditions, such as obtaining the required
approval and fulfilling the requirements of good faith and full disclosure, are
met. With certain exceptions, the conditions are similar under California and
Delaware law. Under California and Delaware law, either the shareholders or the
board of directors must approve any such contract or transaction after full
disclosure of the material facts, and in the case of board approval the contract
or transaction must also be "just and reasonable" (in California) to the
corporation, or (ii) the contract or transaction must have been just and
reasonable or fair (in Delaware), as applicable, to the corporation at the time
it was approved. In the latter case, California law explicitly places the
burden of proof on the interested director. Under California law, if
shareholder approval is sought, the interested director is not entitled to vote
his shares at a shareholder meeting with respect to any action regarding such
contract or transaction. If board approval is sought, the contract or
transaction must be approved by a majority vote of a quorum of the directors,
without counting the vote of any interested directors (except that interested
directors may be counted for purposes of establishing a quorum). Under Delaware
law, if board approval is sought, the contract or transaction must be approved
by a majority of the disinterested directors (even though less than a majority
of a quorum). Therefore, certain transactions that the Board of Directors of
MPC California might not be able to approve because of the number of interested
directors, or the exclusion of interested director shares, could be approved by
a majority of the disinterested directors of MPC Delaware, although less than a
majority of a quorum, or by a majority of all voting shares, which might not
include a majority of the disinterested shares. The Company is not aware of any
plans to propose any transaction involving directors of the Company which could
not be so approved under California law but could be so approved under Delaware
law.
VOTING BY BALLOT. California law provides that the election of directors
may proceed in the manner described in a corporation's bylaws. MPC California's
Bylaws provide that the election of directors at a shareholders' meeting may be
by voice vote or ballot, unless prior to such vote a shareholder demands vote by
ballot, in which case such vote must be by ballot. Under Delaware law, the
right to vote by written ballot may be restricted if so provided in the
certificate of incorporation. The Certificate of Incorporation of MPC Delaware
provides that unless and except to the extent that the Bylaws shall so require,
the election of directors need not be by written ballot. The Bylaws of MPC
Delaware provide that election shall be by written ballot.
SHAREHOLDER DERIVATIVE SUITS. California law provides that a shareholder
bringing a derivative action on behalf of a corporation need not have been a
shareholder at the time of the transaction in question, provided that certain
tests are met. Under Delaware law, a stockholder may only bring a derivative
action on behalf of the corporation if the stockholder was a stockholder of the
corporation at the time of the transaction in question or his or her stock
thereafter devolved upon him or her by operation of law. California law also
provides that the corporation or the defendant in a derivative suit may make a
motion to the court for an order requiring the plaintiff shareholder to furnish
a security bond. Delaware does not have a similar bonding requirement.
APPRAISAL RIGHTS. Under both California and Delaware law, a shareholder of
a corporation participating in certain major corporate transactions may, under
varying circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in the
transaction. Under Delaware law, unless the Certificate of Incorporation
otherwise provides, such appraisal rights are not available (i) with respect to
the sale, lease or exchange of all or substantially all of the assets of a
corporation, (ii) with respect to a merger or
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consolidation by a corporation the shares of which are either listed on a
national securities exchange or are held of record by more than 2,000 holders if
such stockholders receive only shares of the surviving corporation or shares of
any other corporation which are either listed on a national securities exchange
or held of record by more than 2,000 holders, plus cash in lieu of fractional
shares, or any combination thereof, or (iii) to stockholders of a corporation
surviving a merger if no vote of the stockholders of the surviving corporation
is required to approve the merger because the merger agreement does not amend
the existing certificate of incorporation, each share of the surviving
corporation outstanding prior to the merger is an identical outstanding or
treasury share after the merger, and the number of shares to be issued in the
merger does not exceed 20% of the shares of the surviving corporation
outstanding immediately prior to the merger and if certain other conditions are
met.
The limitations on the availability of appraisal rights under California
law are different from those under Delaware law. Shareholders of a California
corporation whose shares are listed on a national securities exchange or on a
list of over-the-counter margin stocks issued by the Board of Governors of the
Federal Reserve System (as are the shares of MPC California) generally do not
have such appraisal rights unless the holders of at least 5% of the class of
outstanding shares claim the right or unless the corporation or any law
restricts the transfer of such shares. Appraisal rights are unavailable,
however, if the shareholders of a corporation or the corporation itself, or
both, immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than five-sixths of the
voting power of the surviving or acquiring corporation or its parent entity. In
general, California law affords appraisal rights in sale of assets
reorganizations.
As a consequence of the foregoing, appraisal or dissenters' rights are not
available to shareholders
of MPC California with respect to the Reincorporation Proposal.
DISSOLUTION. Under California law, shareholders holding 50% or more of the
total voting power may authorize a corporation's dissolution, with or without
the approval of the corporation's board of directors, and this right may not be
modified by the articles of incorporation. Under Delaware law, unless the board
of directors approves the proposal to dissolve, the dissolution must be approved
by stockholders holding 100% of the total voting power of the corporation. Only
if the dissolution is initiated by the board of directors may it be approved by
a simple majority of the corporation's stockholders. In the event of such a
board-initiated dissolution, Delaware law allows a Delaware corporation to
include in its certificate of incorporation a supermajority voting requirement
in connection with dissolutions. MPC Delaware's Certificate of Incorporation
contains no such supermajority voting requirement, however, and a majority of
shares voting at a meeting at which a quorum is present would be sufficient to
approve a dissolution of MPC Delaware which had previously been approved by its
Board of Directors.
APPLICATION OF THE GENERAL CORPORATION LAW OF CALIFORNIA TO DELAWARE
CORPORATIONS
Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e. corporations not organized under California law) are
placed in a special category if they have characteristics of ownership and
operation which indicate that they have significant contacts with California.
So long as a Delaware or other foreign corporation is in this special category,
and it does not qualify for one of the statutory exemptions, it is subject to a
number of key provisions of the California General Corporation Law applicable to
corporations incorporated in California. Among the more important provisions
are those relating to the election and removal of directors, cumulative voting,
prohibition of classified boards of directors, standards of liability and
indemnification of directors, distributions, dividends and repurchases of
shares, shareholder meetings, approval of certain corporate transactions,
dissenters' and appraisal rights and inspection of corporate records. See
"Significant Differences Between the Corporation Laws of California and
Delaware" above.
Exemptions from Section 2115 are provided for corporations whose shares are
listed on a major national securities exchange or are traded in the NASDAQ
National Market System and which have 800 or more shareholders of record.
Following the Proposed Reincorporation, the Common Stock of MPC Delaware will be
traded on the NASDAQ National Market System, and held beneficially by more than
800 stockholders as of the record date of its most recent annual meeting and,
accordingly, MPC Delaware will be exempt from Section 2115.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax consequences to
holders of MPC California Common Stock who receive MPC Delaware Common Stock in
exchange for their MPC California Common Stock as a result of the Proposed
Reincorporation. The discussion does not address all the tax consequences of
the Proposed Reincorporation that may be relevant to particular MPC California
shareholders, such as dealers in securities, holders of stock options or those
MPC California shareholders who acquired their shares upon the exercise of stock
options. In view of the varying nature of such tax consequences, each
shareholder is urged to consult its own tax advisor as to the specific tax
consequences to it of the Proposed Reincorporation, including the applicability
of federal, state, local or foreign tax laws.
The Company has not requested a ruling from the Internal Revenue Service
(the "IRS") with respect to the federal income tax consequences of the Proposed
Reincorporation under the Internal Revenue Code of 1986, as amended (the
"Code"). The Company will, however, receive an opinion from its legal counsel,
Graham & James, substantially, to the effect that: (i) the Proposed
Reincorporation will constitute a tax-free reorganization under Section 368(a)
of the Code; (ii) no gain or loss will be recognized by holders of Common Stock
of MPC California upon receipt of Common Stock of MPC Delaware pursuant to the
Proposed Reincorporation; (iii) the aggregate tax basis of the Common Stock of
MPC Delaware received by each shareholder will be the same as the aggregate tax
basis of the Common Stock of MPC California held by such shareholder at the time
of the Proposed Reincorporation; and (iv) the holding period of the Common Stock
of MPC Delaware received by each shareholder of MPC California will include the
period for which such shareholder held the Common Stock of MPC California
surrendered in exchange therefor, provided that such MPC California stock was
held by such shareholder as a capital asset at the time of the Proposed
Reincorporation. Counsel's opinion will be subject to certain assumptions and
qualifications and will be based upon certain representations made by the
management of MPC California. Counsel's opinion is not binding upon the IRS nor
does it preclude the IRS from taking a contrary position.
A successful IRS challenge to the tax-free status of the Proposed
Reincorporation would result in a shareholder recognizing gain or loss with
respect to each share of MPC California Common Stock surrendered equal to the
difference between that shareholder's basis in such share and the fair market
value, as of the time of the Proposed Reincorporation, of the MPC Delaware
Common Stock received in exchange therefor. In such event, a shareholder's
aggregate basis in the shares of MPC Delaware Common Stock received in the
exchange would equal such fair market value, and his or her holding period for
such shares would not include the period during which he or she held MPC
California Common Stock.
State, local or foreign income tax consequences to shareholders may vary
from the federal tax consequences described above. SHAREHOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS AS TO THE EFFECT OF THE REINCORPORATION PROPOSAL UNDER
APPLICABLE FEDERAL, STATE, LOCAL OR FOREIGN INCOME TAX OR FRANCHISE TAX LAWS.
The Company should not recognize gain or loss for federal income tax
purposes as a result of the Proposed Reincorporation, and MPC Delaware will
succeed without adjustment to the federal income tax attributes of MPC
California.
VOTE REQUIRED FOR THE REINCORPORATION PROPOSAL
Approval of the Reincorporation Proposal, which includes approval of the
Merger Agreement, MPC Delaware's Certificate of Incorporation and Bylaws, and
approval of the assumption of MPC California's stock option plan and stock
purchase plan by MPC Delaware, requires the affirmative vote of a majority of
the shares of MPC California Common Stock outstanding on the Record Date.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSED REINCORPORATION IN DELAWARE.
THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE
REINCORPORATION PROPOSAL.
15.
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PROPOSAL NO. 2 -- AMENDMENT AND RESTATEMENT OF ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The capital structure of MPC Delaware includes an authorization of
70,000,000 shares of Common Stock, a level which the Board of Directors believes
should be adequate for the present and for the reasonably foreseeable future.
In the event that, for any reason, the Company's reincorporation in Delaware is
not implemented, the Board believes that it is desirable for MPC California to
have a capital structure which is similar to the one proposed for MPC Delaware.
Therefore, the Board of Directors has unanimously approved the Amendment and
Restatement of MPC California's Articles of Incorporation to amend Article THREE
of the Company's Restated Articles of Incorporation to increase the number of
shares of presently authorized Common Stock from 20,000,000 to 70,000,000, and
recommends such amendment to the Company's shareholders for adoption. At June
11, 1996, 8,708,588 shares of Common Stock were outstanding.
The principal purpose of this proposed amendment is to make additional
shares of Common Stock available in the event the Board of Directors determines
that it is necessary to raise additional capital through the sale of securities,
to grant options to the Company's employees or to utilize stock in the
acquisition of other companies, businesses or assets. Management of the Company
has no agreements or commitments at the present time for the issuance or use of
shares of Common Stock, except for the reservation of 1,740,000 shares under the
Company's First Amended and Restated 1993 Stock Option Plan (the "Option Plan").
The proposed increase in the authorized number of shares of Common Stock
could have a number of effects on the Company's shareholders, depending upon the
exact nature and circumstances of any actual issuances of such additional
authorized but unissued shares. The increase could have an antitakeover effect,
in that additional shares could be issued (within the limits imposed by
applicable law) in one or more transactions which could make a change in control
or takeover of the Company more difficult. For example, additional shares could
be issued by the Company so as to dilute the stock ownership or voting rights of
persons seeking to obtain control of the Company. Similarly, the issuance of
additional shares to certain persons allied with the Company's management could
have the effect of making it more difficult to remove the Company's current
management by diluting the stock ownership or voting rights of persons seeking
to cause such removal.
In addition, an issuance of additional shares by the Company could have an
effect on the potential realizable value of a shareholder's investment. In the
absence of a proportionate increase in the Company's earnings and book value, an
increase in the aggregate number of outstanding shares of the Company caused by
the issuance of the additional shares could dilute the earnings per share and
book value per share of all outstanding shares of the Company's stock. If such
factors were reflected in the price per share of Common Stock, the potential
realizable value of a shareholder's investment could be affected.
The amendment and restatement of the Articles of Incorporation requires the
affirmative vote of a majority of the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED
AMENDMENT TO THE ARTICLES OF INCORPORATION.
PROPOSAL NO. 3 -- AMENDMENT OF FIRST AMENDED AND
RESTATED 1993 STOCK OPTION PLAN
A total of 315,000 shares of Common Stock originally was reserved for
issuance under the Option Plan which was originally adopted on August 31, 1993
by the Company. By subsequent amendments adopted by the Board of Directors and
the shareholders, the number of shares originally reserved for issuance under
the Option Plan has been increased from 315,000 to 915,000 on January 12, 1994,
to 1,200,000 shares on October 19, 1994, subject to shareholder approval. In
May 1996, the Board of Directors approved, and the shareholders are being asked
to ratify, an amendment reserving an additional 540,000 shares for the Option
Plan, bringing the total shares reserved under the Option Plan to 1,740,000
shares of Common Stock. Options granted
16.
<PAGE>
under the Option Plan may be either "incentive stock options", as defined in
Section 422A of the Internal Revenue Code of 1986 (the "Code"), or nonstatutory
stock options. The tax treatment of incentive stock options and nonstatutory
options is described below under "Tax Information". The affirmative vote of the
holders of a majority of the outstanding shares of the Company's Common Stock
present and entitled to vote at the meeting is required to approve the
amendment. As of June 11, 1996, the aggregate market value of the Company's
common stock subject to the Option Plan was $7,500,000. The principal features
of the Option Plan are as follows:
PURPOSE
The purposes of the Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to the employees and consultants of the Company and to
promote the growth and success of the Company's business. The Option Plan is
also meant to attract and retain, as its Board of Directors, knowledgeable
persons of broad business or professional experience who have no employment
relationship with the Company by providing automatic grants of nonstatutory
stock options to the Company's non-employee directors ("Outside Directors
Options").
ADMINISTRATION
The Option Plan is administered by the Board of Directors or a committee of
the Board of Directors called the Compensation Committee which meets the
requirements of Section 162(m)(4)(C)(i) of the Code. Options granted under the
Option Plan may be either incentive stock options or nonstatutory stock options.
The Board of Directors or the committee determines the criteria upon which
employee options are granted. The Board of Directors or a duly appointed
committee has the power to terminate or amend the Option Plan at any time,
subject to the terms of the Plan and any applicable limitations imposed by law.
The Option Plan is administered by the Board in compliance with the
"disinterested administration" requirement of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended. The Board has no authority, discretion or
power to select the Outside Directors of the Company who will receive Outside
Director Options under the Plan, nor to set the terms and conditions, or alter
the terms or conditions specified in the Plan with respect to Outside Directors
Options.
ELIGIBILITY
The Option Plan provides that options may be granted to employees,
including officers and directors who are also employees, and consultants of the
Company, directors or any of its subsidiaries. The Company had 200 employees as
of June 11, 1996, all of whom are eligible to participate in the Option Plan.
The Board of Directors or the Compensation Committee, as the case may be,
selects the optionees and determines the number of shares to be subject to each
option. No employee may be granted options to purchase in excess of 60,000
shares during any fiscal year; provided, however, that new hires may be granted
employee options for up to 90,000 shares during the first fiscal year of such
person's employment with the Company, subject to adjustment in the event of
stock dividends, stock splits, reverse stock splits and combinations,
reclassifications or like changes in the capital structure of the Company.
TYPES OF OPTIONS
The Option Plan consists of (i) employee stock options which provide for
the grant of both incentive stock options which meet the requirements of Section
422 of the Code and which may be granted only to employees, including officers
and directors who are also employees, and nonstatutory stock options that do not
meet such requirements and which may be granted to prospective employees,
consultants and independent contractors of the Company, and (ii) Outside
Directors Options, which are nonstatutory stock options that may be granted to
non-employee directors of the Company.
17.
<PAGE>
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company
and the employee, consultant or director to whom such option is granted in such
form as the Board or the Compensation Committee, as the case may be, shall from
time to time establish and is subject to the following additional terms and
conditions:
EXERCISE OF THE OPTION: The Board of Directors or the Compensation
Committee, as the case may be, determines when options granted under the Option
Plan may be exercised. An option is exercised by giving written notice of
exercise to the Company, specifying the number of whole shares of Common Stock
to be purchased and tendering payment to the Company of the purchase price.
Payment for shares issued upon exercise of an option may consist of cash,
promissory note, exchange of shares of the Company's Common Stock or such other
consideration as determined by the Board of Directors or the Compensation
Committee and as permitted by the California Corporations Code.
OPTION PRICE: The option price under the Option Plan is determined by the
Board of Directors or the Compensation Committee and may not be less than the
fair market value of the Company's Common Stock on the date the option is
granted. In the case of an option granted to a person who, at the time of grant
of such option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any parent or subsidiary
corporation, the option price may not be less than 110% of the fair market value
of the Company's Common Stock on the date the option is granted. The Board of
Directors of the Company or the Compensation Committee determines such fair
market value based upon the closing sales price of the Common Stock on the
NASDAQ National Market System on the date the option is granted.
TERMINATION OF EMPLOYMENT: The option agreements provide that if the
optionee's employment or consulting relationship with the Company is terminated
for any reason, other than death or disability or termination for cause, options
may be exercised within three months after the date on which the optionee ceased
to be an employee and may be exercised only to the extent the options were
exercisable on the date of termination.
DEATH: If an optionee should die while employed by or consulting for the
Company, options may be exercised at any time within 12 months after the date
the optionee's service with the Company terminated, but only to the extent that
the options would have been exercisable at the date of death, if an optionee
should die within three months after termination of employment or a consulting
relationship with the Company, the option may be exercised within 12 months
after death to the extent the option was exercisable on the date of such
termination.
DISABILITY: If an optionee is unable to continue his employment or
consulting relationship with the Company as a result of his total and permanent
disability, options may be exercised at any time within 12 months after the date
the optionee's service with the Company terminated, but only to the extent the
option was exercisable on the date of such termination.
TERMINATION OF OPTIONS: All options granted under the Option Plan expire
ten (10) years from the date of grant.
NONTRANSFERABILITY OF OPTIONS: An option is not transferable by the
optionee, other than by will or the laws of descent and distribution, and is
exercisable only by the optionee during his or her lifetime or, in the event of
death, by a person who acquires the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee.
ACCELERATION OF OPTIONS: In the event of a merger or consolidation in
which the Company is not the surviving entity, all outstanding options under the
Option Plan shall become immediately exercisable as of the date 30 days prior to
the date of transfer of control, if such options would otherwise terminate upon
consummation of the transaction, unless the acquiring corporation either assumes
the options granted under
18.
<PAGE>
the Option Plan or else substitutes its own options for the Option Plan options.
Any options which are neither assumed or substituted for by the acquiring
corporation nor exercised as of the date of the transfer of control, will
terminate effective as of the date of transfer of the control.
OTHER PROVISIONS: The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Option Plan as may be
determined by the Board of Directors or the Compensation Committee.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
As discussed above, the Option Plan provides that upon, among other things,
the dissolution, liquidation, reorganization, merger or consolidation of the
Company or the sale of all or substantially all of the assets of the Company, or
transfer of control (as such term is defined under Section 7.1 of the Option
Plan), all outstanding options under the Option Plan shall become immediately
exercisable as of the date 30 days prior to the date of transfer of control if
such options would otherwise terminate upon consummation of the transaction or
if the surviving or successor corporation as the case may be, does not assume
the Company's obligations under the Option Plan or substitute for such
outstanding options.
AMENDMENT AND TERMINATION
The Board of Directors, including any duly appointed committee of the
Board, may terminate or amend the Option Plan or the option granted under the
Plan at any time without approval of the Company's shareholders; provided,
however, that shareholder approval is required for any amendment which would
increase the total number of shares which may be issued under the Option Plan
(except by operation of the provisions of Section 4.2 of the Option Plan
relating to changes in the capital structure of the Company), change the
class of persons eligible to receive incentive stock options under the Option
Plan, or expand the class of persons eligible to receive nonstatutory stock
options. Further, the provisions of the plan addressing eligibility for
Outside Directors options, and the amount, price and timing of grants of
those options shall not be amended more than every six (6) months, other than
to conform to changes in the Code, or the rules thereunder. The Board will
also seek shareholder approval for any amendment to the Option Plan or an
option which the Board deems shareholder approval is necessary in order to
comply with Rule 16b-3 of the Securities Exchange Act of 1934, as amended,
relating to the pooling of shares available under the Option Plan.
In any event, all options shall be granted, if at all, under the Option Plan
within ten years of August 31, 1993.
TAX INFORMATION
If an option granted under the Option Plan is an incentive stock option,
the optionee will recognize no income upon grant of the incentive stock option
and incur no tax liability due to the exercise unless the optionee is subject
to the alternative minimum tax. The Company will not be allowed a deduction for
federal income tax purposes as a result of the exercise of an incentive stock
option regardless of the applicability of the alternative minimum tax. Upon the
sale of the shares at least two years after grant of the option and one year
after receipt of the shares by the optionee after exercise, will be treated as
long-term capital gain. If these holding periods are not satisfied, the
optionee will recognize ordinary income equal to the difference between the
exercise price and the lower of the fair market value of the stock at the date
of the option exercise or the sale price of the stock. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain recognized on such a premature sale of the shares in
excess of the amount treated as ordinary income will be characterized as capital
gain. Under current federal law, capital gain is fully included in gross income
and is taxed at a rate of 28%. Under current law, capital losses are allowed in
full against capital gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he or she is granted a nonstatutory option.
19.
<PAGE>
However, upon its exercise, the optionee will recognize ordinary income for tax
purposes measured by the excess of the then fair market value of the shares over
the option price. The income recognized by the optionee will be subject to tax
withholding by the Company by payment in cash or out of the current earnings
paid to the optionee. Upon resale of such shares by the optionee, any
difference between the sales price and the exercise price, to the extent not
recognized as ordinary income as provided above, will be treated as capital gain
or loss. Under current federal law, capital gain is fully included in gross
income and is taxed at a rate of 28%. Under current federal law, capital losses
are allowed in full against capital gains plus $3,000 of other income. The
Company will be entitled to a tax deduction in the amount and at the time that
the optionee recognizes ordinary income with respect to shares acquired upon
exercise of a nonstatutory option.
The foregoing is only a summary of the effects of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options and purchase of shares under the Option Plan. Reference should be made
to the applicable provisions of the Code. In addition, this summary does not
discuss the income tax laws of any state or foreign country in which an optionee
may reside.
VOTE REQUIRED
Approval of this Amendment to the Option Plan requires the affirmative vote
of a majority of the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE INCREASE IN THE NUMBER
OF SHARES RESERVED UNDER THE OPTION PLAN.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
In addition to Mr. Dean, President and Chief Executive Officer, the other
executive officers and significant employees of the Company as of June 11, 1996,
are listed below:
<TABLE>
<CAPTION>
Name Age Since Position
<S> <C> <C> <C>
Robert J. Otto 55 1996 Executive Vice President
William H. Bender 41 1993 Business Manager of Food Service Sales
Karen Borie 42 1996 Director of Special Sales
Anthony W. Giannini 36 1993 Senior Vice President of Sales
Carolyn Mar 42 1996 Vice President of Legal Affairs; Secretary
Paul Eldering 1996 Acting Chief Financial Officer
Donald L. Milan 47 1993 Business Manager of Canadian and Military Sales
Marshall Stevens 55 1995 Senior Vice President of Manufacturing
</TABLE>
20.
<PAGE>
The principal occupations of certain other officers and significant
employees of the Company, for the past five years, are as follows:
ROBERT J. OTTO, EXECUTIVE VICE PRESIDENT. Mr. Otto joined the Company as
its Executive Vice President in April 1996. Mr. Otto was the Executive Vice
President of Koala Springs, a beverage company, from July 1994 to October 1995,
and the Senior Vice President - Sales of Nestle Beverage Company from January
1976 to April 1994. Mr. Otto also served as a Director of Koala Springs
International/Koala Springs Group.
WILLIAM H. BENDER, BUSINESS MANAGER OF FOOD SERVICE SALES. Mr. Bender
joined the Company as Vice President of Training in July 1993. From 1988 to
1993, Mr. Bender was a food service consultant for a sole proprietorship
operating under the name Results in Management and specializing in
operational control methods to help food service operators maintain and
increase profitability. From 1974 to 1987, Mr. Bender was employed by Oceans
8 restaurants, as General Manager of its steak and seafood restaurant located
in San Diego, California and later as its Vice President of Operations
responsible for opening new restaurants and supervising multiple locations in
the San Diego market.
KAREN L. BORIE, DIRECTOR OF SPECIAL SALES. Ms. Borie joined the
Company in April 1996 as Director of Special Sales and is responsible for the
management of and sales to wholesale clubs and mass merchandisers, and
assisting in the expansion of the food service business. From 1991 to 1996,
Ms. Borie was President and owner of a national sales broker, KB Marketing
and Associates, where she was responsible for calls and sales to clubs, mass
merchandisers, and retail chain stores. In that capacity, she represented
several national companies including, Nestle Beverage, Koala Springs
International, Inc., and Vigo Importing Company. From 1981 to 1991, Ms.
Borie was with Nestle/Hills Bros. Coffee Company, starting as a sales
representative, and for the last five years of that period, served as
National Sales Manager of Special Sales.
ANTHONY W. GIANNINI, SENIOR VICE PRESIDENT OF SALES. Mr. Giannini joined
the Company in February 1993 as Vice President of Sales/Marketing and is
responsible for management of the sales of the Company. From 1991 until he
joined the Company, Mr. Giannini was Director of Sales and Marketing for
Carriage House Foods which sells condiments and sauces. From 1987 to 1991,
Mr. Giannini was with Nestle's Hills Bros. Coffee first as the National Sales
Manager for Private Label/Chase & Sanborn Division and then in 1989, he was
promoted to General Manager of Gourmet Coffees overseeing a subsidiary
company, Sarks Supreme Gourmet Coffee ("Sarks"). He was directly responsible
for sales, marketing, distribution and production at Sarks. Mr. Giannini
expanded Sarks' markets from Southern California to Northern California,
Phoenix, Ohio and Florida, utilizing company-employed route drivers and
trucks. From 1982 to 1987, Mr. Giannini was the Western Zone Sales Manager
for Bonner Packing Company.
CAROLYN MAR, VICE PRESIDENT - LEGAL AFFAIRS; SECRETARY. Ms. Mar joined
the Company in January 1996. From August 1976 to September 1985, Ms. Mar
served as Corporate/Securities Specialist at the law firm of Pettit & Martin.
From October 1985 to December 1995, Ms. Mar served as a Senior Legal
Assistant specializing in major real estate and corporate transactions with
the law firm of Heller, Ehrman, White & McAuliffe. Ms. Mar is a member of
San Francisco Association of Legal Assistants and the American Society of
Corporate Secretaries.
DONALD L. MILAN, BUSINESS MANAGER OF CANADIAN AND MILITARY SALES. Mr.
Milan joined the Company as Vice President of Construction in January 1995,
and in May 1996 became Business Manager of Canadian and Military Sales. From
April 1981 to December 1994, Mr. Milan served as President of D.L. Milan Co.,
Inc., a construction company, which performed consulting services for the
Company's wholly-owned restaurant subsidiary, Upscale Food Outlets, Inc.
From June 1991 to March 1993, he served as Vice President of Morweg
Development Company, a privately-owned, California based residential
construction company.
MARSHALL E. STEVENS, SENIOR VICE PRESIDENT OF MANUFACTURING . Mr.
Stevens joined the Company in October 1995 as Senior Vice President of
Manufacturing. From July 1964 to September 1995, Mr. Stevens served as Vice
President of Manufacturing with Del Monte Corporation, a food manufacturing
company, where he assumed overall responsibility for operations of that
company's fourteen manufacturing facilities located in the United States.
21.
<PAGE>
No director or executive officer of the Company has any family
relationship with any other director or executive officer of the Company.
David J. Massara resigned as Chief Financial Officer of the Company in
May 1996; it is anticipated that a new Chief Financial Officer will be
designated on or about July 1, 1996.
EXECUTIVE COMPENSATION
The following table sets forth, for each of the last three fiscal
years, the compensation of the Chief Executive Officer and the most highly
compensated executive officers of the Company at June 11, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
OTHER ALL
ANNUAL SECURITIES OTHER
COMPENSATION UNDERLYING COMPENSATION
Name and YEAR SALARY BONUS($) ($) OPTIONS ($)
Principal (#)
Position
<S> <C> <C> <C> <C> <C> <C>
Norman E. Dean 1995 $58,000(1) -0- $1,200 (2) 600,000 -0-
President and
Chief 1994 -0- -0- -0- -0-
Executive Officer
1993 -0- -0- -0- -0-
Robert J. Otto 1996 $150,000 (3) -0- $ (4) -50,000(5)- -0-
Executive Vice
President 1995 -0- -0- -0- -0- -0-
1994 -0- -0- -0- -0- -0-
Anthony W. 1995 $107,520 $36,950 $6,600(6) -0- -0-
Giannini
Senior Vice 1994 $101,124 $15,676 -0- -0- -0-
President of
Sales 1993 $72,497 -0- -0- 55,000 -0-
1995 $125,000 (7) $10,069 $4,800(8) -0- -0-
David J.
Massara 1994 $16,827 (7) -0- $800(8) 40,000 -0-
Chief Financial
Officer (7) 1993 -0- -0- -0- -0- -0-
</TABLE>
(1) Mr. Dean was appointed Chief Executive Officer and President of the
Company, effective October 2, 1995, upon the resignation of Mr.
Mortensen from those same positions. Prior to that date, Mr. Dean
served as a Director of the Company and received no salary.
(2) Mr. Dean received an auto allowance of $400 per month during fiscal year
ended 1995. Such auto allowance was increased to $650 per month
commencing May 1, 1996.
(3) Mr. Otto was appointed Executive Vice President effective
February 12, 1996.
22.
<PAGE>
(4) Upon commencement of employment, Mr. Otto received an auto allowance of
$400 per month. Effective May 1, 1996, such auto allowance was increased
to $650 per month.
(5) The Board granted to Mr. Otto options to purchase 50,000 shares at $6.00
per share, on April 23, 1996, which options become fully vested on
February 12, 1999, three years from the date of employment. Mr. Otto
holds 2,000 shares as trustee of the Robert J. Otto and Lynn Ann Otto
1985 Trust dated 12-23-85.
(6) During fiscal year ended 1995, Mr. Giannini received an auto allowance
of $550 per month. Effective May 1, 1996, such auto allowance was
increased to $650 per month.
(7) Mr. Massara was appointed Chief Financial Officer of the Company
effective November 7, 1994, and resigned from that position on May 26,
1996. It is anticipated that a new Chief Financial Officer will be
designated on or about July 1, 1996.
(8) During fiscal years ended 1994 and 1995, Mr. Massara received an auto
allowance of $400 per month.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth for the fiscal year ended December 31,
1995, and through June 11, 1996, the options granted to the executive
officers named below. During the fiscal year ended December 31, 1995, and
June 11, 1996, there were no exercises of stock options by the executive
officers named in the table below.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
FOR OPTION TERM
(1)
NUMBER OF
SECURITIES % OF TOTAL OPTIONS GRANTED TO
UNDERLYING EMPLOYEES IN FISCAL YEAR
OPTIONS EXERCISE
GRANTED (#) OR BASE EXPIRATI
NAME (2) PRICE ON DATE 5% ($) 10% ($)
($/SH)
<S> <C> <C> <C> <C> <C> <C>
Norman E. 10,000 (3) 1.35% $6.50 1-6-2005 $40,878 $103,593
Dean
10,000 (4) 1.35% $6.50 4-19-2005 $40,878 $103,593
90,000 (5) 12.13% $7.00 9-7-2005 $396,204 $1,004,058
210,000 (6) 28.31% $7.00 9-7-2005 $924,475 $2,342,801
300,000 (7) 40.44% $7.00 9-7-2005 $1,320,679 $3,346,859
Robert J. 50,000 (8) ___% -0- -- -- --
Otto
Anthony (9) -0- -0- -- -- --
W. Giannini
David J. -0- -0- -0- -- -- --
Massara (10)
</TABLE>
23.
<PAGE>
(1) The assumed annual rates of appreciation in the table are shown for
illustrative purposes only pursuant to applicable Securities and Exchange
Commission requirements. Actual values realized on stock options are
dependent on actual future performance of the Company's stock, among other
factors. Accordingly, the amounts shown may not necessarily be realized.
(2) The 1993 Stock Option Plan provides that upon, among other things, the
dissolution, liquidation, reorganization, merger or consolidation of the
Company or the sale of all or substantially all of the assets of the
Company, or transfer of control (as such term is defined under Section 7.1
of the Plan), all outstanding options under the 1993 Stock Option Plan
shall become immediately exercisable as of the date 30 days prior to the
date of transfer of control if such options would otherwise terminate upon
consummation of the transaction or if the surviving or successor
corporation as the case may be, does not assume the Company's obligations
under the 1993 Stock Option Plan or substitute for such outstanding
options.
(3) Mr. Dean was granted non-employee director options to purchase 10,000
shares of the Company's Common Stock at an exercise price of $8.3125 per
share, which exercise price was adjusted by resolution adopted by the Board
of Directors on April 4, 1995 to $6.50 per share.
(4) Mr. Dean was granted additional non-employee director options to purchase
10,000 shares of the Company's Common Stock at an exercise price of $6.50
per share.
(5) On September 7, 1995, Mr. Dean was granted options to purchase 90,000
shares of the Company's Common Stock at an exercise price of $7.00 per
share, all of which become fully exercisable on January 1, 1997.
(6) On September 7, 1995, Mr. Dean was granted options to purchase 210,000
shares of the Company's Common Stock at an exercise price of $7.00 per
share, which become exercisable 52% on January 1, 1997, and 100% on
January 1, 1988.
(7) On September 7, 1995, Mr. Dean was granted options to purchase 300,000
shares of the Company's Common Stock at an exercise price of $7.00 per
share, which become exercisable on September 7, 2000, or earlier based upon
achievement of certain performance-based criteria. Such performance-based
criteria allows for accelerated vesting of the options utilizing specified
financial performance ratios of the Company's Common Stock. (See "Report of
the Compensation Committee").
(8) On April 23, 1996, Mr. Otto was granted options to purchase 50,000 shares
of the Company's Common Stock at an exercise price of $6.00 per share,
which vest ratably over a three year period, all of which become fully
exercisable on February 12, 1999.
(9) The Company is considering a grant of options to Mr. Giannini based on the
achievement of certain performance goals.
(10)Mr. Massara resigned as Chief Financial Officer of the Company effective
May 26, 1996. It is anticipated that a new Chief Financial Officer will be
designated on or about July 1, 1996.
EMPLOYMENT CONTRACTS
On September 5, 1995, the Company entered into an employment agreement
with Norman E. Dean to serve as President and Chief Executive Officer,
effective October 2, 1995. The contract does not provide for a specific term
of employment. The contract provides a base annual salary of $250,000, and a
guaranteed bonus of $50,000 payable on January 1, 1997, provided that Mr. Dean
has not voluntarily terminated his employment at that date. The contract also
provides for payment of an incentive bonus payable at the Board of Directors'
discretion. In connection with his employment, the Company's Compensation
Committee authorized the grant
24.
<PAGE>
to Mr. Dean of 90,000 shares of the Company's Common Stock at an exercise
price of $7.00 per share under the 1993 Stock Option Plan, and 510,000 shares
of the Company's Common Stock at an exercise price of $7.00 per share outside
the 1993 Stock Option Plan, which option terms each expire ten years from the
date of grant. Similar to the Company's form of stock option agreements
offered to other employees and outside directors, Mr. Dean's stock option
agreements with the Company contain provisions regarding ownership change and
transfer of control, as more particularly described therein. The contract
provides Mr. Dean with the employment benefits accorded to other members of
the senior management of the Company.
The Company entered into an employment agreement with Robert J. Otto to
serve as Executive Vice President, effective February 12, 1996. The
contract does not provide for a specific term of employment. The contract
provides a base annual salary of $150,000, with a bonus plan to be formulated
at the Company's strategic planning session in July 1996. In connection with
his employment, the Company's Compensation Committee authorized the grant to
Mr. Otto of 50,000 shares of the Company's Common Stock at an exercise price
of $6.00 per share under the 1993 Stock Option Plan, which option term
expires ten years from the date of grant. Similar to the Company's form of
stock option agreements offered to other employees and outside directors, Mr.
Otto's stock option agreement with the Company contain provisions regarding
ownership change and transfer of control, as more particularly described
therein. The contract provides Mr. Otto with the employment benefits
accorded to other members of the senior management of the Company.
On June 30, 1993, the Company entered into a two-year employment
agreement with Anthony W. Giannini as Vice President of Sales, which contract
is renewed automatically for succeeding terms of one year unless terminated
in writing by either party in accordance with the agreement The contract
provided for a base annual salary of $84,000 and a cash bonus based upon a
percentage of applicable monthly sales (as defined in the agreement to mean
the Company's gross product sales to grocery and club stores less returns for
each calendar month in excess of a percentage of the Company's gross product
sales and all promotional cash allowances as reflected in the Company's
monthly financial statements prepared by the Company's accountants, as more
particularly described in Mr. Giannini's agreement). The contract provides
that Mr. Giannini is also entitled to receive the employment benefits
accorded to other members of the senior management of the Company. In
connection with his employment, Mr. Giannini was granted options to purchase
50,000 shares of the Company's Common Stock at an exercise price of
$6.00/share under the 1993 Stock Option Plan, which option term expires six
years from the date of grant.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, executive officers, and any person who owns
more than ten percent (10%) of the Company's Common Stock, to file initial
reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Directors, executive officers and greater than
ten-percent holders of the Company's Common Stock, if any, are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the
Company believes that all filing requirements applicable to the Company's
directors, executive officers, directors and greater than ten percent holders
of the Company's Common Stock for the fiscal year ended December 31, 1995,
were complied with, except that F. John Abrams, the Company's former
Executive Vice President, General Counsel, Secretary and a former Director,
failed to file a Form 4 covering disposition of shares held indirectly by him
in January 1996 in a timely manner. The Company has been advised by Mr.
Abrams that a Form 4 covering that respective period was filed by Mr. Abrams'
wife, Lynda Davis, in February 1996.
BOARD COMMITTEES AND MEETINGS
The Board of Directors of the Company has two standing committees: an
Audit Committee and a Compensation Committee. The Audit Committee was formed
in the first quarter of fiscal 1994 in connection with the Company's initial
public offering. Members of the Audit Committee include Mr. Bonner, as
Chairman,
25.
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and Messrs. Hill and Ryan. The Audit Committee held one meeting during the
fiscal year ended December 31, 1995. The Audit Committee recommends to the
Board the independent auditors to be retained by the Company; meets with the
Company's independent auditors to review the purpose, scope and general
extent of such auditors' services, proposed fee arrangements and the results
of the Company's annual audit; reviews the adequacy of, compliance and
implementation of, the Company's accounting and financial reporting, policies
and internal controls; reviews the independence of the Company's independent
auditors; reviews with the Company's Chief Financial Officer the foregoing
and, whenever deemed appropriate, reviews and undertakes special assignments.
Prior to January 1994, the full Board of Directors of the Company
performed the functions of the Compensation Committee. Since that date, a
Compensation Committee has been created, comprised of three non-employee
directors of the Company. Members of the Compensation Committee are Mr.
Moone, as Chairman, and Messrs. Gillam and Gallery. The Compensation
Committee held one meeting during the fiscal year ended December 31, 1995,
and one meeting on April 23, 1996. Its functions include setting and
administering the policies that govern the compensation of the executive
officers of the Company. The Compensation Committee also reviews and
recommends salaries, bonuses and perquisites, as well as incentive
compensation programs and stock option grants. See "Report of the
Compensation Committee" and "Executive Compensation" above.
During the fiscal year ended December 31, 1995, the Board of Directors of
the Company held seven (7) meetings and adopted actions by unanimous written
consents in lieu of three meetings. During the first six months of 1996, the
Board of Directors of the Company held three (3) meetings and adopted actions
by written consents in lieu of two meetings. No director attended fewer than
75% of the total number of meetings of the Board and all of the committees of
the Board on which such director was serving held during those periods. The
Company's Board of Directors has no standing nominating committee.
COMPENSATION OF DIRECTORS
At the Company's Annual Meeting of Shareholders held on January 6, 1995,
the Company's shareholders approved an amendment to the Company's First
Amended and Restated 1993 Stock Option Plan (the "1993 Stock Option Plan") to
provide for the grant of nonstatutory stock options for 10,000 shares each to
non-employee directors of the Company on October 19, 1994, the effective date
of the 1993 Stock Option Plan, if such non-employee director was serving at
such time or upon appointment or election as a director of the Company at an
exercise price per share equal to the fair market value of a share of the
Company's Common Stock on the date of grant.
Each non-employee director will thereafter receive automatic grants of
nonstatutory stock options to purchase 10,000 shares of the Company's Common
Stock on each anniversary of his or her anniversary date (defined to mean (i)
October 19, 1994 for an outside director who was granted an outside director
option on such date, or (ii) the date upon which any other outside director
was first granted an outside director option under the 1993 Stock Option
Plan). During the fiscal year ended December 31, 1995, the Company granted
options to purchase 10,000 shares of the Company's Common Stock to each of
Messrs. Bonner, Dean, Gallery, Moone and Ryan. During the first six months
of 1996, Messrs. Gallery and Moone each received an automatic grant of 10,000
shares each. In January 1996, Mr. Gillam was granted an option , as a
non-employee director, to purchase 10,000 shares of the Company's common
stock at an exercise price of $5.375 per share. The option vests in two
approximately equal annual installments commencing one year after the date of
grant of the option, provided that the director has continuously served as a
director from the date of grant.
Options granted to a director who is also an employee of the Company
(or to any other employee eligible under the 1993 Stock Option Plan) are
subject to different terms under the 1993 Stock Option Plan than those of the
non-employee director options. A director who becomes an employee of the
Company is no longer eligible for non-employee director options. Under the
1993 Stock Option Plan, the Board determines for each employee option, among
other things, the number of shares of stock underlying the option, the timing
and terms of exercisability and vesting of the option and the expiration of
the option. The exercise price for each employee
26.
<PAGE>
option is determined by the Board, in its sole discretion, but which shall
not be less than the fair market value of a share of Common Stock on the date
of grant. The option vests in two approximately equal annual installments
commencing one year after the date of grant of the option, provided that the
director has continuously served as a director from the date of grant.
Certain directors are also reimbursed for out-of-pocket travel expenses
related to Board meetings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1995, the Company leased space for executive offices and training
facilities in Danville, California from a partnership in which Mr. Lance H.
Mortensen, a director of the Company, is a limited partner. The Company
moved out of such space in February 1996 and is currently negotiating the
termination of those leases. In February 1996, the Company relocated its
executive offices to 353 Sacramento Street, Suite 500, in San Francisco,
California.
Subsequent to the year ended December 31, 1995, the Company decided to
discontinue the business of its restaurant and franchise subsidiaries. The
Company has entered into a letter of intent and is currently negotiating a
definitive agreement to sell its wholly-owned restaurant subsidiary, Upscale
Food Outlets, Inc. ("UFO"), to an affiliate of Mr. Mortensen. The Company
anticipates that as a part of such sale, UFO will continue to have
responsibility for the operations and obligations of all of the leases for
those restaurants currently operated by UFO.
During fiscal year 1993, the Company purchased several mobile carts and
kiosks from Carts of Colorado, Inc., a company in which Daniel J. Gallery, a
director, is a co-founder and Executive Vice President. The Company did not
purchase any such carts or kiosks in 1994. During the fiscal year ended
December 31, 1995, the Company purchased carts and kiosks from Carts of
Colorado, Inc. for a total purchase price of approximately $210,806.
On May 25, 1995, the Company entered into a consulting agreement with
Mr. Gallery, pursuant to which Mr. Gallery provides services relating to the
sale of the Company's products through nontraditional venues, such as sports
coliseums, airports, universities, office buildings and schools. The Company
is able to serve its pasta products in such venues using the specially
designed carts/kiosks that Carts of Colorado, Inc. manufactures. Mr.
Gallery's consulting agreement provides for the grant of 50,000 options, to
be vested upon attainment of certain specified performance criteria, and
attainment of license agreements with certain contract feeders/national food
service distributors. The agreement also provides that the Company reimburse
Mr. Gallery for certain business related expenses.
Management of the Company believes that all of the transactions described
above are or were fair, reasonable and consistent with terms of transactions
which the Company might otherwise have entered into with third party
nonaffiliated entities. A majority of the disinterested members of the
Company's Board of Directors approved the related party transactions entered
into in 1995.
On May 7, 1996, the board of Directors of the Company (without
participation by Mr. Mortensen) authorized the purchase of certain furniture
and equipment by the Company from an affiliate of Mr. Mortensen for
$100,000, which was deemed to be the fair value of such furniture and
equipment.
REPORT OF THE COMPENSATION COMMITTEE
Prior to January 12, 1994, the full Board of Directors performed the
functions of the Compensation Committee. As mentioned above, the
Compensation Committee is currently comprised of three non-employee directors
of the Company. See "Board Committees and Meetings Above". The Compensation
Committee is responsible for setting and administering the policies governing
compensation, including cash compensation and stock ownership programs. The
goals of the Company's compensation policy are to attract and retain
executive officers who contribute to the overall success of the Company by
offering compensation which is competitive in the food processing industry
for companies of the Company's size and to motivate executives to
27.
<PAGE>
achieve the Company's business objectives and reward them for their
achievements. The Company uses salary, incentive compensation and stock
options to meet these goals. Meetings of the Committee are scheduled as
necessary.
The Company believes that employee equity ownership, through stock
options, provides significant additional motivation to executive officers to
maximize value for the Company's shareholders. Because the stock options
will be granted at the prevailing market price, the stock options will only
have value if the Company's stock price increases over the exercise price.
Therefore, the Compensation Committee believes that stock options will serve
to align the interest of executive officers closely with other shareholders
because of the direct benefit executive officers receive through improved
stock performance. The Committee reviews the 1993 Stock Option Plan and the
grant of stock options with the foregoing philosophy. Levels of
compensation, particularly bonuses and incentive compensation, are tied to
both the overall performance of the Company as well as the effectiveness of
each individual executive in adding to that performance.
In connection with the appointment of Norman E. Dean as the Company's
Chief Executive Officer and President in October 1995, the Compensation
Committee approved at its September 1995 meeting, the grant of stock options
to Mr. Dean in recognition of his outstanding experience and performance in
the food industry. Recognizing the need for the Company to grow, the
Committee structured the grant of options to Mr. Dean as follows: 90,000
options under the Company's 1993 Stock Option Plan will fully vest in January
1997; an additional 210,000 options granted outside of the Company's 1993
Stock Option Plan will vest and become exercisable in two installments: 52%
on January 1, 1997, and 100% on January 1, 1998; and an additional 300,000
options granted outside the Company's 1993 Stock Option Plan, with vesting
tied to the Company's attainment of certain earnings per share, as reported
in its Annual Report on Form 10-K, or on the market price of the Company's
Common Stock for a designated time period.
The Board of Directors did not modify or reject in any material way any
action or recommendation made by the Committee during fiscal year 1995.
Compensation Committee For Fiscal Year Ended December 31, 1995
E. Michael Moone, Chairperson
Christopher Gillam
Daniel J. Gallery
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Next year's Annual Meeting of Shareholders will be held on May 7,
1997. Any shareholder who wishes to submit a proposal for inclusion in the
proxy statement and form of proxy for the 1997 Annual Meeting of Shareholders
must submit such proposal by December 31, 1996. All proposals should be
submitted by certified mail-return receipt requested, to Carolyn Mar,
Secretary, 353 Sacramento Street, Suite 500, San Francisco, California 94111.
OTHER MATTERS
No other matters will be submitted to the meeting.
Dated: June 14, 1996
By Order Of The Board of Directors
Carolyn Mar, Secretary
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EXHIBIT A
FORM OF
AGREEMENT AND PLAN OF MERGER
OF MONTEREY PASTA COMPANY
A DELAWARE CORPORATION,
AND
MONTEREY PASTA COMPANY
A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of , 1996 (the
"Agreement") is between Monterey Pasta Company, a Delaware corporation ("MPC
Delaware") and Monterey Pasta Company, a California corporation ("MPC
California"). MPC Delaware and MPC California are sometimes referred to herein
as the "Constituent Corporations".
RECITALS
A. MPC Delaware is a corporation duly organized and existing under
the laws of the State of Delaware and has an authorized capital of 70 million
shares of "Common Stock," $0.001 par value and 1 million shares of "Preferred
Stock," $0.001 par value. As of , 1996, 100 shares of Common Stock
were issued and outstanding, all of which are held by MPC California.
B. MPC California is a corporation duly organized and existing
under the laws of the State of California and has an authorized capital of 20
million shares of "Common Stock," no par value, and 5 million shares of
"Preferred Stock," no par value. As of , 1996, shares
of Common Stock and shares of Preferred Stock were issued and outstanding.
C. The Board of Directors of MPC California has determined that,
for the purpose of effecting the reincorporation of MPC California in the State
of Delaware, it is advisable and in the best interests of MPC California that
MPC California merge with and into MPC Delaware upon the terms and conditions
herein provided.
D. The respective Boards of Directors of MPC Delaware and MPC
California have approved this Agreement and have directed that this Agreement be
submitted to a vote of their respective stockholders and executed by the
undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, MPC Delaware and MPC California hereby agree, subject to the
terms and conditions hereinafter set forth, as follows:
I
MERGER
1.1 MERGER. In accordance with the provisions of this Agreement,
the Delaware General Corporation Law and the California General Corporation Law,
MPC California shall be merged with and into MPC Delaware (the "Merger"), the
separate existence of MPC California shall cease and MPC Delaware shall be, and
is herein sometimes referred to as, the "Surviving Corporation," and the name of
the Surviving Corporation shall be Monterey Pasta Company.
1.2 FILING AND EFFECTIVENESS. The Merger shall become effective
when the following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted
and approved by the stockholders of each Constituent Corporation in
accordance with the requirements of the Delaware General Corporation Law
and the California General Corporation Law;
<PAGE>
(b) All of the conditions precedent to the consummation of
the Merger specified in this Agreement shall have been satisfied or duly
waived by the party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed
counterpart of this Agreement meeting the requirements of the Delaware
General Corporation Law shall have been filed with the Secretary of
State of the State of Delaware; and
(d) An executed Certificate of Merger or an executed
counterpart of this Agreement meeting the requirements of the California
General Corporation Law shall have been filed with the Secretary of
State of the State of California.
The date and time when the Merger shall become effective, as aforesaid,
is herein called the "Effective Date of the Merger."
1.3 EFFECT OF THE MERGER. Upon the Effective Date of the Merger,
the separate existence of MPC California shall cease and MPC Delaware, as the
Surviving Corporation, (i) shall continue to possess all of its assets, rights,
powers and property as constituted immediately prior to the Effective Date of
the Merger, (ii) shall be subject to all actions previously taken by its and MPC
California's Board of Directors, (iii) shall succeed, without other transfer, to
all of the assets, rights, powers and property of MPC California in the manner
as more fully set forth in Section 259 of the Delaware General Corporation Law,
(iv) shall continue to be subject to all of its debts, liabilities and
obligations as constituted immediately prior to the Effective Date of the
Merger, and (v) shall succeed, without other transfer, to all of the debts,
liabilities and obligations of MPC California in the same manner as if MPC
Delaware had itself incurred them, all as more fully provided under the
applicable provisions of the Delaware General Corporation Law and the California
General Corporation Law.
II
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of MPC Delaware as in effect immediately prior to the Effective Date of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.2 BYLAWS. The Bylaws of MPC Delaware as in effect immediately
prior to the Effective Date of the Merger shall continue in full force and
effect as the Bylaws of the Surviving Corporation until duly amended in
accordance with the provisions thereof and applicable law.
2.3 DIRECTORS AND OFFICERS. The directors and officers of MPC
Delaware immediately prior to the Effective Date of the Merger shall be the
directors and officers of the Surviving Corporation until their successors shall
have been duly elected and qualified or until as otherwise provided by law, the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
III
MANNER OF CONVERSION OF STOCK
3.1 MPC CALIFORNIA COMMON STOCK. Upon the Effective Date of the
Merger, each share of MPC California Common Stock, no par value, issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by the Constituent Corporations, the holder of such shares or any
other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.001 par value, of the Surviving
Corporation.
2.
<PAGE>
3.2 MPC CALIFORNIA OPTIONS. Upon the Effective Date of the Merger,
the Surviving Corporation shall assume and continue, on the terms provided
therein, the stock option and stock purchase plans (including the First Amended
and Restated 1993 Stock Option Plan, as amended and the 1995 Employee Stock
Purchase Plan) and all other employee benefit plans of MPC California. Each
outstanding and unexercised option to purchase MPC California Common Stock shall
become an option to purchase the Surviving Corporation's Common Stock on the
basis of one share of the Surviving Corporation's Common Stock for each share of
MPC California Common Stock issuable pursuant to any such option to purchase on
the same terms and conditions and at an exercise price per share equal to the
exercise price applicable to any such MPC California option at the Effective
Date of the Merger.
A number of shares of the Surviving Corporation's Common Stock shall be
reserved for issuance upon the conversion or exercise of options equal to the
number of shares of MPC California Common Stock so reserved immediately prior to
the Effective Date of the Merger.
3.3 MPC DELAWARE COMMON STOCK. Upon the Effective Date of the
Merger, each share of Common Stock, $.001 par value, of MPC Delaware issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by MPC Delaware, the holder of such shares or any other person, be
cancelled and returned to the status of authorized but unissued shares.
3.4 EXCHANGE OF CERTIFICATES. After the Effective Date of the
Merger, each holder of an outstanding certificate representing shares of MPC
California Common Stock may, at such stockholder's option, surrender the same
for cancellation to Corporate Stock Transfer, as exchange agent (the "Exchange
Agent"), and each such holder shall be entitled to receive in exchange therefor
a certificate or certificates representing the number of shares of the Surviving
Corporation's Common Stock into which the surrendered shares were converted as
herein provided. Until so surrendered, each outstanding certificate theretofore
representing shares of MPC California Common Stock shall be deemed for all
purposes to represent the number of shares of the Surviving Corporation's Common
Stock into which such shares of MPC California Common Stock were converted in
the Merger.
The registered owner on the books and records of the Surviving
Corporation or the Exchange Agent of any such outstanding certificate shall,
until such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to the Surviving Corporation or the Exchange Agent, have
and be entitled to exercise any voting and other rights with respect to and to
receive dividends and other distributions upon the shares of Common Stock of the
Surviving Corporation represented by such outstanding certificate as provided
above.
Each certificate representing Common Stock of the Surviving Corporation
so issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of MPC California so
converted and given in exchange therefor, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws.
If any certificate for shares of MPC Delaware stock is to be issued in a
name other than that in which the certificate surrendered in exchange therefor
is registered, it shall be a condition of issuance thereof that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay to the Exchange Agent any transfer or other taxes payable by
reason of the issuance of such new certificate in a name other than that of the
registered holder of the certificate surrendered or establish to the
satisfaction of MPC Delaware that such tax has been paid or is not payable.
3.
<PAGE>
IV
GENERAL
4.1 COVENANTS OF MPC DELAWARE. MPC Delaware covenants and agrees
that it will, on or before the Effective Date of the Merger:
(a) Qualify to do business as a foreign corporation in the
State of California and in connection therewith irrevocably appoint an
agent for service of process as required under the provisions of Section
2105 of the California General Corporation Law.
(b) File any and all documents with the California Franchise
Tax Board necessary for the assumption by MPC Delaware of all of the
franchise tax liabilities of MPC California.
(c) Take such other actions as may be required by the
California General Corporation Law.
4.2 FURTHER ASSURANCES. From time to time, as and when required by
MPC Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of MPC California such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other actions,
as shall be appropriate or necessary in order to vest or perfect in or conform
of record or otherwise by MPC Delaware the title to and possession of all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of MPC California and otherwise to carry out the purposes of this
Agreement, and the officers and directors of MPC Delaware are fully authorized
in the name and on behalf of MPC California or otherwise to take any and all
such action and to execute and deliver any and all such deeds and other
instruments.
4.3 ABANDONMENT. At any time before the Effective Date of the
Merger, this Agreement may be terminated and the Merger may be abandoned for any
reason whatsoever by the Board of Directors of either MPC California or of MPC
Delaware, or of both, notwithstanding the approval of this Agreement by the
shareholders of MPC California or by the sole stockholder of MPC Delaware, or by
both.
4.4 AMENDMENT. The Boards of Directors of the Constituent
Corporations may amend this Agreement at any time prior to the filing of this
Agreement (or certificate in lieu thereof) with the Secretary of State of the
State of Delaware, provided that an amendment made subsequent to the adoption of
this Agreement by the stockholders of either Constituent Corporation shall not:
(1) alter or change the amount or kind of shares, securities, cash, property
and/or rights to be received in exchange for or on conversion of all or any of
the shares of any class or series thereof of such Constituent Corporation, (2)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (3) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series thereof of such Constituent
Corporation.
4.5 REGISTERED OFFICE. The registered office of the Surviving
Corporation in the State of Delaware is located at 1013 Center Road, in the City
of Wilmington, Delaware 19805, County of New Castle, and Corporation Service
Company is the registered agent of the Surviving Corporation at such address.
4.6 AGREEMENT. Executed copies of this Agreement will be on file at
the principal place of business of the Surviving Corporation at 353 Sacramento
Street, Suite 500, San Francisco, California 94111 and copies thereof will be
furnished to any stockholder of either Constituent Corporation, upon request and
without cost.
4.7 GOVERNING LAW. This Agreement shall in all respects be
construed, interpreted and enforced in accordance with and governed by the laws
of the State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
4.8 COUNTERPARTS. In order to facilitate the filing and recording
of this Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
4.
<PAGE>
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolutions of the Boards of Directors of MPC Delaware and MPC California, is
hereby executed on behalf of each of such two corporations and attested by their
respective officers thereunto duly authorized.
ATTEST: MONTEREY PASTA COMPANY
a Delaware corporation
- ----------------------------------- By: -----------------------------------
Carolyn Mar, SECRETARY Norman E. Dean
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATTEST: MONTEREY PASTA COMPANY
a California corporation
- ----------------------------------- By: ------------------------------------
Carolyn Mar, SECRETARY Norman E. Dean
PRESIDENT AND CHIEF EXECUTIVE OFFICER
5.
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
MONTEREY PASTA COMPANY
The undersigned, for purposes of organizing a corporation under the
General Corporation Law of the State of Delaware, does hereby certify as
follows:
ARTICLE I
The name of the corporation (which is hereinafter referred to as the
"Corporation") is
Monterey Pasta Company
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1013 Center Road, in the City of Wilmington, County of New Castle,
19805. The name of its registered agent at such address is Corporation Service
Company.
ARTICLE III
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware (the "GCL").
ARTICLE IV
The total number of shares of Stock which the Corporation shall have
authority to issue is Seventy-One Million (71,000,000), consisting of One
Million (1,000,000) shares of Preferred Stock, par value $.001 per share
(hereinafter referred to as "Preferred Stock"), and Seventy Million (70,000,000)
shares of Common Stock, par value $.001 per share (hereinafter referred to as
"Common Stock").
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized to provide for the issuance
of shares of Preferred Stock in one or more series and, by filing a certificate
pursuant to the applicable law of the State of Delaware (hereinafter referred to
as "Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof. The authority of the Board of Directors
<PAGE>
with respect to each series shall include, but not be limited to, determination
of the following:
(a) The designation of the series, which may be by distinguishing
number, letter or title.
(b) The number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the Preferred Stock
Designation) increase or decrease (but not below the number of shares thereof
then outstanding).
(c) The amounts payable on, and the preferences, if any, of shares
of the series in respect of dividends, and whether such dividends, if any, shall
be cumulative or noncumulative.
(d) Dates at which dividends, if any, shall be payable.
(e) The redemption rights and price or prices, if any, for shares of
the series.
(f) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series.
(g) The amounts payable on, and the preferences, if any, of shares
of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation.
(h) Whether the shares of the series shall be convertible into or
exchangeable for shares of any other class or series, or any other security, of
the Corporation or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion or exchange price
or prices or rate or rates, any adjustments thereof, the date or dates at which
such shares shall be convertible or exchangeable and all other terms and
conditions upon which such conversion or exchange may be made.
(i) Restrictions on the issuance of shares of the same series or of
any other class or series.
(j) The voting rights, if any, of the holders of shares of the
series.
The Common Stock shall be subject to the express terms of the Preferred
Stock and any series thereof except as may otherwise be provided by applicable
law in this Certificate of Incorporation or in a Preferred Stock Designation,
the holders of shares of Common Stock shall be entitled to one vote for each
such share upon all questions presented to the stockholders, the Common Stock
shall have the exclusive right to vote for the election of directors and for all
other purposes, and holders of Preferred Stock shall not be entitled to vote at
or receive notice of any meeting of stockholders.
2.
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The Corporation shall be entitled to treat the person in whose name any
share of its stock is registered as the owner thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not the Corporation shall have
notice thereof, except as otherwise expressly provided by applicable law.
ARTICLE V
The name and mailing address of the incorporator of the Corporation is
Carolyn Mar, whose mailing address is c/o Monterey Pasta Company, 353 Sacramento
Street, Suite 500, San Francisco, California 94111.
ARTICLE VI
In furtherance of, and not in limitation of, the powers conferred-by
law, the Board of Directors is expressly authorized and empowered:
(a) to adopt, amend or repeal the Bylaws of the Corporation;
PROVIDED, HOWEVER, that the Bylaws adopted by the Board of Directors under the
powers hereby conferred may be amended or repealed by the Board of Directors or
by the stockholders having voting power with respect thereto, PROVIDED, FURTHER
that, notwithstanding any other provision of this Certificate of Incorporation
or any provision of law which might otherwise permit a lesser vote or no vote,
but in addition to any affirmative vote of the holders of any particular class
or series of the stock required by law or this Certificate of Incorporation, the
affirmative vote of the holders of at least 80 percent of the voting power of
the then outstanding Voting Stock, voting together as a single class, shall be
required in order for the stockholders to adopt, alter, amend or repeal any
bylaw; and
(b) from time to time to determine whether and to what
extent, and at what times and places, and under what conditions and regulations,
the accounts and books of the Corporation, or any of them, shall be open to
inspection of stockholders; and, except as so determined or as expressly
provided in this Certificate of Incorporation or in any Preferred Stock
Designation, no stockholder shall have any right to inspect any account, book or
document of the Corporation other than such rights as may be conferred by
applicable law.
The Corporation may in its Bylaws confer powers upon the Board of
Directors in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board of Directors by applicable law.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, the affirmative vote of the holders of at least 80 percent of the
voting power of the then outstanding Voting Stock, voting together as a single
class, shall be required to amend, repeal or adopt any provision inconsistent
with paragraph (a) of this Article VI. For the purposes of this Certificate of
Incorporation, "Voting Stock" shall mean the outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of directors.
3.
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ARTICLE VII
Subject to the rights of the holders of any series of Preferred Stock
any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing in lieu of a meeting of such stockholders. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the affirmative
vote of at least 80 percent of the voting power of the then outstanding Voting
Stock, voting together as a single class, shall be required to amend, repeal or
adopt any provision inconsistent with this Article VII.
ARTICLE VIII
Subject to the rights of the holders of any series of Preferred Stock to
elect additional directors under specified circumstances, the number of
directors of the Corporation shall be fixed by the Bylaws of the Corporation and
may be increased or decreased from time to time in such a manner as may be
prescribed by the Bylaws.
Unless and except to the extent that the Bylaws of the Corporation shall
so require, the election of directors of the Corporation need not be by written
ballot.
Subject to the rights of the holders of any series of Preferred Stock,
or any other series or class of stock as set forth in this Certificate of
Incorporation to elect additional directors under specified circumstances, any
director may be removed from office at any time with or without cause, but only
by the affirmative vote of the holders of at least 80 percent of the voting
power of the then outstanding Voting Stock, voting together as a single class.
Subject to the rights of the holders of any series of Preferred Stock,
or any other series or class of stock as set forth in this Certificate of
Incorporation, to elect additional directors under specified circumstances, and
unless the Board of Directors otherwise determines, vacancies resulting from
death, resignation, retirement, disqualification, removal from office or other
cause, and newly created directorships resulting from any increase in the
authorized number of directors, may be filled only by the affirmative vote of a
majority of the remaining directors, though less than a quorum of the Board of
Directors, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office expires and until
such director's successor shall have been duly elected and qualified. No
decrease in the number of authorized directors constituting the whole Board of
Directors shall shorten the term of any incumbent director.
Notwithstanding anything contained in this Certificate of Incorporation
to the contrary, the affirmative vote of the holders of at least 80 percent of
the voting power of
4.
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the then outstanding Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with this Article
VIII.
ARTICLE IX
Section 1. Vote Required for Certain Business Combinations.
(A) Higher Vote for Certain Business Combinations. In addition to
any affirmative vote required by law or this Certificate of Incorporation, and
except as otherwise expressly provided in Section 2 of this Article IX:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested Stockholder (as
hereinafter defined), or (b) any other corporation (whether or not itself an
Interested Stockholder) which is, or after such merger or consolidation would
be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder, including all Affiliates of the Interested
Stockholder, of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value (as hereinafter defined) of $10,000,000 or more; or
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Stockholder, including all
Affiliates of the Interested Stockholder, in exchange for cash, securities or
other property (or a combination thereof) having an aggregate Fair Market Value
of $10,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliates of an Interested Stockholder, or
(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not an Interested Stockholder is a party thereto) which
has the effect, directly or indirectly, of increasing the proportionate share of
the outstanding shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which are directly or indirectly owned by any
Interested Stockholder or one or more Affiliates of the Interested Stockholder;
shall, except as otherwise prohibited by applicable law, require the affirmative
vote of the holders of at least 66-2/3% of the voting power of the then
outstanding Voting Stock, voting together as a single class, including the
affirmative vote of the holders of at least 66-2/3% of the voting power of the
then outstanding Voting Stock not owned directly or indirectly by any Interested
Stockholder or any Affiliate of any Interested Stockholder.
5.
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Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be permitted, by law or in any
agreement with any national securities exchange or otherwise.
(B) Definition of "Business Combination." The term "Business
Combination" as used in this Article IX shall mean any transaction described in
any one or more of clauses (i) through (v) of paragraph A of this Section 1.
Section 2. When Higher Vote is Not Required. The provisions of Section
1 of this Article IX shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such affirmative
vote as is required by law or any other provision of this Certificate of
Incorporation, if the conditions specified in either of the following paragraphs
(A) or (B) are met:
(A) Approval by Continuing Directors. The Business Combination
shall have been approved by a majority of the Continuing Directors (as
hereinafter defined).
(B) Price and Procedure Requirements. All of the following
conditions shall have been met:
(i) the aggregate amount of the cash and the Fair Market
Value (as hereinafter defined) as of the date of the consummation of the
Business Combination of consideration other than cash, to be received per share
by holders of Common Stock in such Business Combination, shall be at least equal
to the highest of the following:
(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of Common Stock acquired
by it ( 1) within the two-year period immediately prior to the first public
announcement of the proposal of such Business Combination (the "Announcement
Date"), or (2) in the transaction in which it became an Interested Stockholder,
whichever is higher;
(b) the Fair Market Value per share of Common Stock
on the Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (the "Determination Date"), whichever is
higher; and
(c) (if applicable) the price per share equal to the
Fair Market Value per share of Common Stock determined pursuant to paragraph
(B)(i)(b) above, multiplied by the ratio of (l) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of Common Stock acquired
by it within the two-year period immediately prior to the Announcement Date to
(2) the Fair Market Value per share of Common Stock on the first day in such
two-year period upon which the Interested Stockholder acquired any shares of
Common Stock.
6.
<PAGE>
(ii) The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of shares of
any other class, other than Common Stock or Excluded Preferred Stock, of
outstanding Voting Stock shall be at least equal to the highest of the following
(it being intended that the requirements of this paragraph (B)(ii) shall be
required to be met with respect to every such class of outstanding Voting Stock,
whether or not the Interested Stockholder has previously acquired any shares of
a particular class of Voting Stock):
(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of such class of Voting
Stock acquired by it (1) within the two-year period immediately prior to the
Announcement Date, or (2) in the transaction in which it became an Interested
Stockholder, whichever is higher;
(b) (if applicable) the highest preferential amount
per share to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation;
(c) the Fair Market Value per share of such class of
Voting Stock on the Announcement Date or on the Determination Date, whichever is
higher, and
(d) (if applicable) the price per share equal to the
Fair Market Value per share of such class of Voting Stock determined pursuant to
paragraph (B)(ii)(c) above, multiplied by the ratio of (1) the highest per share
price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Stockholder for any shares of such class
of Voting Stock acquired by it within the two-year period immediately prior to
the Announcement Date to (2) the Fair Market Value per share of such class of
Voting Stock on the first day in such two-year period upon which the Interested
Stockholder acquired any shares of such class of Voting Stock.
(iii) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common Stock and other
than Excluded Preferred Stock) shall be in cash or in the same form as the
Interested Stockholder has previously paid for shares of such class of Voting
Stock. If the Interested Stockholder has paid for shares of any class of Voting
Stock with varying forms of consideration, the form of consideration for such
class of Voting Stock shall be either cash or the form used to acquire the
largest number of shares of such class of Voting Stock previously acquired by
it.
(iv) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such Business
Combination: (a) there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not cumulative)
on any outstanding Preferred Stock, except as approved by a majority of the
Continuing Directors; (b) there shall have been no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of the
Continuing
7.
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Directors; (c) there shall have been an increase in the annual rate of dividends
as necessary fully to reflect any recapitalization (including any reverse stock
split), reorganization or any similar reorganization which has the effect of
reducing the number of outstanding shares of the Common Stock, unless the
failure so to increase such annual rate is approved by a majority of the
Continuing Directors; and (d) such Interested Stockholder shall not have become
the Beneficial Owner of any additional Voting Stock except as part of the
transaction which results in such Interested Stockholder becoming an Interested
Stockholder.
(v) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a shareholder), of
any loans, advances, guarantees, pledges or other financial assistance or any
tax credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (or
any subsequent provisions replacing such act, rules or regulations) shall be
mailed to shareholders of the Corporation at least thirty (30) days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such act or
subsequent provisions).
Section 3. Certain Definitions For purposes of this Article IX:
(A) "Person" shall mean any individual, firm, corporation or other
entity.
(B) "Interested Stockholder" shall mean any Person (other than the
Corporation or any Subsidiary and other than any profit-sharing, employee stock
ownership or other employee benefit plan of the Corporation or any Subsidiary or
any trustee or fiduciary with respect to any such plan or holding Voting Stock
for the purpose of funding any such plan or funding other employee benefits for
employees of the corporation or on Subsidiary when acting in such capacity) who
or which:
(i) itself, or along with its Affiliates, is the Beneficial
Owner, directly or indirectly, of more than 10% of the then outstanding Voting
Stock; or
(ii) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date in question was itself,
or along with its Affiliates, the Beneficial Owner, directly or indirectly, of
10% or more of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any
Voting Stock which was at any time within the two-year period immediately prior
to the date in question beneficially owned by an Interested Stockholder, if such
assignment or succession shall have
8.
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occurred in the course of a transaction or series of transactions not involving
a public offering within the meaning of the Securities Act of 1933, as amended.
(C) "Beneficial Owner" shall have the meaning ascribed to such term
in Rule 13d-3 of the General Rules and Regulations of the Securities Exchange
Act of 1934, as amended. In addition, a Person shall be the "Beneficial Owner"
of any Voting Stock which such Person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding (but neither such Person nor any such
Affiliate or Associate shall be deemed to be the Beneficial Owner of any shares
of Voting Stock solely by reason of a revocable proxy granted for a particular
meeting of stockholders, pursuant to a public solicitation of proxies for such
meeting, and with respect to which shares neither such Person nor any such
Affiliate or Associate is otherwise deemed the Beneficial Owner).
Notwithstanding the foregoing, a Person shall not be a "Beneficial Owner" of any
Voting Stock for purposes of this Article IX which such person may have the
right to acquire pursuant to the Rights Agreement, dated May 15, 1996, between
the Corporation and Corporate Stock Transfer, as Rights Agent, and the rights
issued thereunder.
(D) For the purpose of determining whether a Person is an Interested
Stockholder pursuant to paragraph (B) of this Section 3, the number of shares of
Voting Stock deemed to be outstanding shall include shares deemed owned through
application of paragraph C of this Section 3 but shall not include any other
shares of Voting Stock which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options or otherwise.
(E) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such teens in Rule 1 2b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended.
(F) "Subsidiary" shall mean any corporation of which a majority of
any share of equity security is owned, directly or indirectly, by the
Corporation, PROVIDED, HOWEVER, that for the purposes of the definition of
Interested Stockholder set forth in paragraph (B) of this Section 3, the term
"Subsidiary" shall mean only a corporation of which a majority of each share of
equity security is owned, directly or indirectly, by the Corporation.
(G) "Continuing Director" shall mean any member of the Board of
Directors of the Corporation (the "Board") who is unaffiliated with the
Interested Stockholder and was a member of the Board prior to the time that the
Interested Stockholder became an Interested Stockholder, and any director who is
thereafter chosen to fill any vacancy on the Board or who is elected and who, in
either event, is unaffiliated with the Interested Stockholder and in connection
with his or her initial assumption of office is recommended for appointment or
election by a majority of Continuing Directors then on the Board.
9.
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(H) "Fair Market Value" shall mean (i) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite Tape for New York
Stock Exchange listed stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on such
exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934, as amended, on which such stock is listed,
or, if such stock is not listed on any such exchange, the highest closing sale
price during the 30-day period immediately preceding the date in question of a
share of such stock on The NASDAQ Stock Market operated by The NASDAQ Stock
Market, Inc. or any system then in use in its stead, or if no such price is
available, the fair market value on the date in question of a share of such
stock as determined by the Board in accordance with Section 4 of this Article
IX; and (ii) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by the Board in
accordance with Section 4 of this Article IX.
(I) In the event of any Business Combination in which the
Corporation survives, the phrase "other consideration to be received" as used in
paragraphs (B)(i) and (ii) and Section 2 of this Article IX shall include the
shares of Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
(I) "Excluded Preferred Stock" means any series of Preferred Stock
with respect to which a majority of the Continuing Directors have approved a
Preferred Stock Designation creating such series that expressly provides that
the provisions of this Article IX shall not apply.
Section 4. The Continuing Directors of the Corporation shall have the
power and duty to determine for the purposes of this Article IX, on the basis of
information known to them after reasonable inquiry, all facts necessary to
determine compliance with this Article IX, including, without limitation (i)
whether a Person is an Interested Stockholder, (ii) the number of shares of
Voting Stock beneficially owned by any Person, (iii) whether a Person is an
Affiliate or Associate of another, (iv) whether the applicable conditions set
forth in paragraph (B) of Section 2 of this Article IX have been met with
respect to any Business Combination, (v) the Fair Market Value of stock or other
property in accordance with paragraph (H) of Section 3 of this Article IX, and
(vi) whether the assets which are the subject of any Business Combination have,
or the consideration to be received for the issuance or transfer of securities
by the Corporation or any Subsidiary in any Business Combination has, an
aggregate Fair Market Value of $10,000,000 or more.
Section 5. No Effect on Fiduciary of Interested Stockholders. Nothing
contained in this Article IX shall be construed to relieve any Interested
Stockholder from any fiduciary obligation imposed by law.
Section 6. Amendment, Repeal, etc. Notwithstanding any other
provisions of this Certificate of Incorporation or the Bylaws of the Corporation
(and notwithstanding the fact
10.
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that a lesser percentage may be permitted by law, this Certificate of
Incorporation or the Bylaws of the Corporation), but in addition to any
affirmative vote of the holders of any particular class of the Voting Stock
required by law or this Certificate of Incorporation, the affirmative vote of
the holders of 66-2/3% of the voting power of the shares of the then outstanding
Voting Stock voting together as a single class, including the affirmative vote
of the holders of 66-2/3% of the voting power of the then outstanding Voting
Stock not owned directly or indirectly by any Interested Stockholder or any
Affiliate of any Interested Stockholder, shall be required to amend or repeal,
or adopt any provisions inconsistent with, this Article IX of this Certificate
of Incorporation.
ARTICLE X
A director of the Corporation shall not be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the GCL as the same exists or may hereafter be
amended. Any amendment, modification or repeal of the foregoing sentence shall
not adversely affect any right or protection of a director of the corporation
hereunder in respect of any act or omission occurring prior to the time of such
amendment, modification or repeal.
ARTICLE XI
Subject to the Certificate of Incorporation and applicable law, the
Corporation reserves the right at any time and from time to time to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation or a Preferred Stock Designation, and any other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted, in the manner now or hereafter prescribed herein or by
applicable law, and all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or any other persons whomsoever by and
pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the right reserved in this Article XI,
PROVIDED, HOWEVER, that any amendment or repeal of Article X of this Certificate
of Incorporation shall not adversely affect any right or protection existing
hereunder in respect of any act or omission occurring prior to such amendment or
repeal; and PROVIDED, FURTHER that no Preferred Stock Designation shall be
amended after the issuance of any shares of the series of Preferred Stock
created thereby, except in accordance with the terms of such Preferred Stock
Designation and the requirements of applicable law.
ARTICLE XII
The powers of the incorporator are to terminate upon the filing of this
Certificate of Incorporation with the Secretary of State of the State of
Delaware. The name and mailing address of the person who is to serve as the
initial director of the corporation until the first annual meeting of
stockholders of the corporation, or until his or her successor is elected and
qualified is:
11.
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Carolyn Mar
c/o Monterey Pasta Company
353 Sacramento Street, Suite 500
San Francisco, California 94111
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation this ______ day of ________________, 1996.
MONTEREY PASTA COMPANY
By:
-----------------------------------
12.
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EXHIBIT C
BYLAWS
OF
MONTEREY PASTA COMPANY
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. DELAWARE OFFICE. The principal office of the Corporation
in the State of Delaware shall be located in the City of Wilmington, County of
New Castle, and the name and address of its registered agent is Corporation
Service Company, 1013 Center Road, Wilmington, Delaware 19805.
SECTION 1.2. OTHER OFFICES. The Corporation may have such other
offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from time to
time require.
SECTION 1.3. BOOKS AND RECORDS. The books and records of the
Corporation may be kept at the Corporation's headquarters currently in
San Francisco, California or at such other locations outside the State of
Delaware as may from time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. ANNUAL MEETING. The annual meeting of the stockholders of
the Corporation shall be held at such date, place and/or time as may be fixed by
resolution of the Board of Directors.
SECTION 2.2. SPECIAL MEETING. Subject to the rights of the holders of
any series of preferred Stock, par value $.001 per share, of the Corporation
(the "Preferred Stock") or any other series or class of Stock as set forth in
the Certificate of Incorporation to elect additional directors under specified
circumstances, special meetings of the stockholders may be called only by the
Chairman of the Board or by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of directors which the Corporation
would have if there were no vacancies (the "Whole Board").
<PAGE>
SECTION 2.3. PLACE OF MEETING. The Board of Directors may designate
the place of meeting for any meeting of the stockholders. If no designation is
made by the Board of Directors, the place of meeting shall be the principal
office of the Corporation.
SECTION 2.4. NOTICE OF MEETING. Written or printed notice, stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be prepared and delivered by the Corporation not less
than ten days nor more than sixty days before the date of the meeting, either
personally, or by mail, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail with postage thereon prepaid, addressed to the
stockholder at his address as it appears on the stock transfer books of the
Corporation. Such further notice shall be given as may be required by law.
Meetings may be held without notice if all stockholders entitled to vote are
present (except as otherwise provided by law), or if notice is waived by those
not present. Any previously scheduled meeting of the stockholders may be
postponed and (unless the Certificate of Incorporation otherwise provides) any
special meeting of shareholders may be cancelled by resolution of the Board of
Directors upon public notice given prior to the time previously scheduled for
such meeting of stockholders.
SECTION 2.5. QUORUM AND ADJOURNMENT. Except as otherwise provided by
law or by the Certificate of Incorporation, the holders of a majority of the
voting power of the outstanding shares of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock"), represented in
person or by proxy, shall constitute a quorum at a meeting of stockholders,
except that when specified business is to be voted on by a class or series
voting separately as a class or series, the holders of a majority of the voting
power of the shares of such class or series shall constitute a quorum for the
transaction of such business. The chairman of the meeting or a majority of the
shares of Voting Stock so represented may adjourn the meeting from time to time,
whether or not there is such a quorum (or, in the case of specified business to
be voted on by a class or series, the chairman or a majority of the shares of
such class or series so represented may adjourn the meeting with respect to such
specified business). No notice of the time and place of adjourned meetings need
be given except as required by law. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
SECTION 2.6. PROXIES. At all meetings of stockholders, a stockholder
may vote by proxy executed in writing by the stockholder or as may be permitted
by law, or by his duly authorized attorney-in-fact. Such proxy must be filed
with the Secretary of the Corporation or her representative at or before the
time of the meeting.
SECTION 2.7. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) Special Meetings of Stockholders. (1) Nominations of persons
for election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the Corporation's notice of meeting delivered
pursuant to Section 2.4 of these
2.
<PAGE>
Bylaws, (b) by or at the direction of the Chairman or the Board of Directors or
(c) by any stockholder of the Corporation who is entitled to vote at the
meeting, who complied with the notice procedures set forth in clauses (2) and
(3) of this paragraph (A) of this Bylaw and who was a stockholder of record at
the time such notice is delivered to the Secretary of the Corporation.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this Bylaw, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice
shall be delivered to the Secretary at the principal executive offices of the
Corporation not less than seventy days nor more than ninety days prior to the
first anniversary of the preceding year's annual meeting; PROVIDED, HOWEVER,
that in the event that the date of the annual meeting is advanced by more than
twenty days, or delayed by more than seventy days, from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of the seventieth day prior to such annual meeting or the
tenth day following the day on which public announcement of the date of such
meeting is first made. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14a-11 thereunder, including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected; (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a stockholder's notice described above.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Bylaw to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the Corporation
at least eighty days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice required by this Bylaw shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation
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not later than the close of business on the tenth day following the day on which
such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting pursuant to Section
2.4 of these Bylaws. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (a) by or at
the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this Bylaw and who is a stockholder of record at the
time such notice is delivered to the Secretary of the Corporation. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as are specified in the Corporation's Notice of Meeting, if the
stockholder's notice as required by paragraph (A)(2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the ninetieth day prior to such special meeting and not later
than the close of business on the later of the seventieth day prior to such
special meeting or the tenth day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting. In no event shall the
public announcement of an adjournment of a special meeting commence a new time
period for the giving of a stockholders notice as described above.
(C) General. (1) Only persons who are nominated in accordance with
the procedures set forth in this Bylaw shall be eligible to serve as director
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Bylaw. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this Bylaw and, if any proposed nomination or business is not in compliance
with this Bylaw, to declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
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SECTION 2.8. PROCEDURE FOR ELECTION OF DIRECTORS. Election of
directors at all meetings of the stockholders at which directors are to be
elected shall be by written ballot, and, except as otherwise set forth in the
Certificate of Incorporation with respect to the right of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, a plurality of the votes cast thereat shall elect directors.
Except as otherwise provided by law, the Certificate of Incorporation or these
Bylaws, all matters other than the election of directors submitted to the
stockholders at any meeting shall be decided by the affirmative vote of a
majority of the voting power of the outstanding Voting Stock present in person
or represented by proxy at the meeting and entitled to vote thereon.
SECTION 2.9. INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE POLLS.
(A) The Board of Directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act, at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by the General Corporation Law of the State of
Delaware.
(B) The chairman of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws expressly
conferred upon them, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Certificate of Incorporation or by these Bylaws required to be exercised or done
by the stockholders.
SECTION 3.2. NUMBER, TENURE AND QUALIFICATIONS. Subject to the rights
of the holders of any series of Preferred Stock, or any other series or class of
Stock as set forth in the Certificate of Incorporation, to elect directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively pursuant to a resolution adopted
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by a majority of the Whole Board, but shall consist of not more than five nor
less than nine directors.
SECTION 3.3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without notice other than this Bylaw immediately after,
and at the same place as, each annual meeting of stockholders. The Board of
Directors may, by resolution, provide the time and place for the holding of
additional regular meetings without notice other than such resolution.
SECTION 3.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the
President or a majority of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings.
SECTION 3.5. NOTICE. Notice of any special meeting shall be given to
each director at his business or residence in writing or by telegram or by
telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with
postage thereon prepaid, at least five days before such meeting. If by
telegram, such notice shall be deemed adequately delivered when the telegram
is delivered to the telegraph company at least twenty-four hours before such
meeting. If by facsimile transmission, such notice shall be transmitted at
least twenty-four hours before such meeting. If by telephone, the notice
shall be given at least twelve hours prior to the time set for the meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the notice of
such meeting, except for amendments to these Bylaws as provided under Section
8.1 of Article VIII hereof. A meeting may be held at any time without notice
if all the directors are present (except as otherwise provided by law) or if
those not present waive notice of the meeting in writing, either before or
after such meeting.
SECTION 3.6. QUORUM. A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors. The directors present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a quorum.
SECTION 3.7. VACANCIES. Subject to the rights of the holders of any
series of Preferred Stock, or any other series or class of stock as set forth in
the Certificate of Incorporation, to elect additional directors under specified
circumstances, and unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from
office or other cause, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled only by the
affirmative vote of a majority of the remaining directors, though less than a
quorum of the Board of Directors, and directors so chosen shall hold office for
a term
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expiring at the annual meeting of stockholders at which the term of office
expires and until such director's successor shall have been duly elected and
qualified. No decrease in the number of authorized directors constituting the
Whole Board shall shorten the term of any incumbent director.
SECTION 3.8. COMMITTEES. The Board of Directors, immediately following
each annual meeting of stockholders or a special meeting of the same held in
lieu of the annual meeting for the election of directors, shall meet and shall
appoint from its number an Executive Committee of such number of members as from
time to time may be selected by the Board, to serve until the next annual or
special meeting at which a majority of directors is elected or until the
respective successor of each is duly appointed. The Executive Committee shall
possess and may exercise all the powers and authority of the Board of Directors
in the management and direction of the business and affairs of the Corporation,
except as limited by law and except for the power to change the membership or to
fill vacancies in the Board or said Committee. The Board shall have the power
at any time to change the membership of said Committee, to fill vacancies in it
or to make rules for the conduct of its business.
The Board of Directors may designate one or more committees, each
consisting of one or more Directors, to serve at the pleasure of the Board of
Directors. The Board of Directors may designate one or more Directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. Except as otherwise prohibited by applicable law, any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have all the authority of the Board of Directors.
SECTION 3.9. REMOVAL. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, any director, or the entire Board of Directors, may be removed
from office at any time, with or without cause, but only by the affirmative vote
of the holders of at least 80 percent of the voting power of the then
outstanding Voting Stock, voting together as a single class.
ARTICLE IV
OFFICERS
SECTION 4.1. ELECTED OFFICERS. The elected officers of the Corporation
shall be a President, a Secretary, a Treasurer, and such other officers as the
Board of Directors from time to time may deem proper. The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board who
shall be chosen from the directors, one or more Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Chief Financial Officers and such
other officers as may be appointed in accordance with Section 4.7 of this
Article IV. Any number of offices may be held by the same person. All officers
chosen by the Board of Directors shall each have such powers and duties as
generally pertain to their respective offices, subject to the specific
provisions of this Article IV. Such officers
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shall also have powers and duties as from time to time may be conferred by the
Board of Directors or by any committee thereof.
SECTION 4.2. ELECTION AND TERM OF OFFICE. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to
Section 4.7 of these Bylaws, each officer shall hold office until his or her
successor shall have been duly elected and shall have qualified or until his or
her death or until he or she shall resign.
SECTION 4.3. CHAIRMAN OF THE BOARD. The Chairman of the Board or the
President if there is no Chairman of the Board shall preside at all meetings of
the stockholders and of the Board of Directors. The Chairman of the Board or
the President, as the case may be, shall be responsible for the general
management of the affairs of the Corporation and shall perform all duties
incidental to his office which may be required by law and all such other duties
as are properly required of him by the Board of Directors. Except where by law
the signature of the President is required, the Chairman of the Board shall
possess the same power as the President to sign all certificates, contracts, and
other instruments of the Corporation which may be authorized by the Board of
Directors. He or the President, as the case may be, shall make reports to the
Board of Directors and the stockholders, and shall perform all such other duties
as are properly required of him by the Board of Directors. He shall see that
all orders and resolutions of the Board of Directors and of any committee
thereof are carried into effect.
SECTION 4.4. PRESIDENT. The President shall act in a general executive
capacity and oversee the administration and operation of the Corporation's
business and general supervision of its policies and affairs. The President
shall, in the absence of or because of the inability to act of the Chairman of
the Board, perform all duties of the Chairman of the Board and preside at all
meetings of stockholders and of the Board of Directors. The President may sign,
alone or with the Secretary, or an Assistant Secretary, or any other proper
officer of the Corporation authorized by the Board of Directors, certificates,
contracts, and other instruments of the Corporation as authorized by the Board
of Directors.
SECTION 4.5. SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and Directors and all other
notices required by law or by these Bylaws, and in case of his or her absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the Chairman of the Board or the President, as the case
may be, or by the Board of Directors, upon whose request the meeting is called
as provided in these Bylaws. The Secretary shall record all the proceedings of
the meetings of the Board of Directors, any committees thereof and the
stockholders of the Corporation in a book to be kept for that purpose, and shall
perform such other duties as may be assigned to him or her by the Board of
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Directors, the Chairman of the Board or the President, as the case may be. The
Secretary shall have the custody of the seal of the Corporation and shall affix
the same to all instruments requiring it, when authorized by the Board of
Directors, the Chairman of the Board or the President, as the case may be, and
attest to the same.
SECTION 4.6. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate receipts and
disbursements in books belonging to the Corporation. The Treasurer shall
deposit all moneys and other valuables in the name and to the credit of the
Corporation in such depositaries as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, the Chairman of the Board, or the
President, as the case may be taking proper vouchers for such disbursements.
The Treasurer shall render to the Board of Directors, the Chairman of the
Board or the President, as the case may be, whenever requested, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond for the faithful discharge of his or her duties in
such amount and with such surety as the Board of Directors shall prescribe.
SECTION 4.7. ADDITIONAL OFFICERS. The Board of Directors may
appoint, and may authorize the Chairman of the Board or the President or another
officer to appoint, any other officers that the business of the Corporation may
require, each of whom shall have the title, hold office for the period, have
the authority, and perform the duties specified in these Bylaws or determined
from time to time by the Board of Directors.
SECTION 4.8. REMOVAL. Any officer elected by the Board of Directors
may be removed by the Board of Directors whenever, in their judgment, the best
interests of the Corporation would be served thereby. No elected officer shall
have any contractual rights against the Corporation for compensation by virtue
of such election beyond the date of the election of his or her successor, his or
her death, his or her resignation or his or her removal, whichever event shall
first occur, except as otherwise provided in an employment contract or an
employee plan.
SECTION 4.9. VACANCIES. A newly created office and a vacancy in any
office because of death, resignation, or removal may be filled by the Board of
Directors for the unexpired portion of the term at any meeting of the Board of
Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. STOCK CERTIFICATES AND TRANSFERS.
(A) The interest of each stockholder of the Corporation shall be
evidenced by certificates for shares of stock in such form as the Board of
Directors of the Corporation may from time to time prescribe. The shares of the
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stock of the Corporation shall be transferred on the books of the Corporation by
the holder thereof in person or by his or her attorney, upon surrender for
cancellation of certificates for the same number of shares, with an assignment
and power of transfer endorsed thereon or attached thereto, duly executed, and
with such proof of the authenticity of the signature as the Corporation or its
agents may reasonably require.
(B) The certificates of stock shall be signed, countersigned and
registered in such manner as the Board of Directors may by resolution prescribe,
which resolution may permit all or any of the signatures on such certificates to
be in facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he or
she were such officer, transfer agent or registrar at the date of issue.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1. RIGHT TO INDEMNIFICATION. The Corporation shall indemnify
and hold harmless, to the fullest permitted by applicable law as it presently
exists or may hereafter be amended, any person (an "Indemnitee") who was or is
made or is threatened to be made a party or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he or she, or a person for whom he or
she is the legal representative, is or was a director or officer of the
Corporation or, while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or nonprofit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred by such Indemnitee. Notwithstanding the
preceding sentence, except as otherwise provided in Section 6.3, the Corporation
shall be required to indemnify an Indemnitee in connection with a proceeding (or
part thereof) commenced by such Indemnitee only if the commencement of such
proceeding (or part thereof) by the Indemnitee was authorized by the Board of
Directors of the Corporation.
SECTION 6.2. PREPAYMENT OF EXPENSES. The Corporation shall pay the
expenses (including attorneys' fees) incurred by an Indemnitee in defending any
proceeding in advance of its final disposition, PROVIDED, HOWEVER, that, to the
extent required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the Indemnitee to repay all amounts advanced if it should be ultimately
determined that the Indemnitee is not entitled to be indemnified under this
Article VI or otherwise.
SECTION 6.3. CLAIMS. If a claim for indemnification or payment of
expenses under this Article VI is not paid in full within sixty days after a
written claim therefor by the Indemnitee has been received by the Corporation,
the Indemnitee may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to
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be paid the expense of prosecuting such claim. In any such action the
Corporation shall have the burden of proving that the Indemnitee is not entitled
to the requested indemnification or payment of expenses under applicable law.
SECTION 6.4. NONEXCLUSIVITY OF RIGHTS. The rights conferred on any
Indemnitee by this Article VI shall not be exclusive of any other rights which
such Indemnitee may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders
or disinterested directors or otherwise.
SECTION 6.5. OTHER SOURCES. The Corporation's obligation, if any, to
indemnify or to advance expenses to any Indemnitee who was or is serving at its
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such Indemnitee may collect as indemnification or
advancement of expenses from such other corporation, partnership, joint venture,
trust, enterprise or nonprofit enterprise.
SECTION 6.6. AMENDMENT OR REPEAL. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any Indemnitee in respect of any act or omission
occurring prior to the time of such repeal or modification.
SECTION 6.7. OTHER INDEMNIFICATION AND PREPAYMENT OF EXPENSES. This
Article VI shall not limit the right of the Corporation, to the extent and in
the manner permitted by law, to indemnify and to advance expenses to persons
other than Indemnitees when and as authorized by appropriate corporate action.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. FISCAL YEAR. The fiscal year of the Corporation shall end
on the last Sunday of each calendar year with the effect being a 52/53 week
fiscal year.
SECTION 7.2. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and its Certificate of
Incorporation.
SECTION 7.3. SEAL. The corporate seal shall have inscribed the name of
the Corporation thereon and shall be in such form as may be approved from time
to time by the Board of Directors.
SECTION 7.4. WAIVER OF NOTICE. Whenever any notice is required to be
given to any stockholder or director of the Corporation under the provisions of
the General Corporation Law of the State of Delaware, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed
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equivalent to the giving of such notice. Neither the business to be transacted
at, nor the purpose of, any annual or special meeting of the stockholders of the
Board of Directors need be specified in any waiver of notice of such meeting.
SECTION 7.5. AUDITS. The accounts, books and records of the
Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant selected by the Board of Directors, and
it shall be the duty of the Board of Directors to cause such audit to be made
annually.
SECTION 7.6. RESIGNATIONS. Any director or any officer, whether
elected or appointed, may resign at any time by serving written notice of such
resignation on the Chairman of the Board, the President or the Secretary, and
such resignation shall be deemed to be effective as of the close of business on
the date said notice is received by the Chairman of the Board, the President, or
the Secretary or at such later date as is stated therein. No formal action
shall be required of the Board of Directors or the stockholders to make any such
resignation effective unless otherwise provided therein.
SECTION 7.7. CONTRACTS. Except as otherwise required by law, the
Certificate of Incorporation or these Bylaws, any contracts or other instruments
may be executed and delivered in the name and on the behalf of the Corporation
by such officer or officers of the Corporation as the Board of Directors may
from time to time direct. Such authority may be general or confined to specific
instances as the Board may determine. The Chairman of the Board, the President,
the Treasurer or any Vice President may execute bonds, contracts, deeds, leases
and other instruments to be made or executed for or on behalf of the
Corporation. Subject to any restrictions imposed by the Board of Directors or
the Chairman of the Board, the President or any Vice President of the
Corporation may delegate contractual powers to others under his or her
jurisdiction, it being understood, however, that any such delegation of power
shall not relieve such officer of responsibility with respect to the exercise of
such delegated power.
SECTION 7.8. PROXIES. Unless otherwise provided by resolution adopted
by the Board of Directors, the Chairman of the Board, the President or any Vice
President may from time to time appoint an attorney or attorneys or agent or
agents of the Corporation, in the name and on behalf of the Corporation, to cast
the votes which the Corporation may be entitled to cast as the holder of stock
or other securities in any other corporation or other entity, any of whose stock
or other securities may be held by the Corporation, at meetings of the holders
of the stock or other securities of such other corporation or other entity, or
to consent in writing, in the name of the Corporation as such holder, to any
action by such other corporation or other entity, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed in the name and on behalf of
the Corporation and under its corporate seal or otherwise, all such written
proxies or other instruments as he or she may deem necessary or proper in the
premises.
ARTICLE VIII
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AMENDMENTS
SECTION 8.1. AMENDMENTS. These Bylaws may be amended, altered, added
to, rescinded or repealed at any meeting of the Board of Directors or of the
stockholders, provided notice of the proposed change was given in the notice of
the meeting and, in the case of a meeting of the Board of Directors, in a notice
given no less than twenty-four hours prior to the meeting; PROVIDED, HOWEVER,
that, notwithstanding any other provisions of these Bylaws or any provision of
law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series of the
stock required by law, the Certificate of Incorporation or these Bylaws, the
affirmative vote of the holders of at least 80 percent of the voting power of
the then outstanding Voting Stock, voting together as a single class, shall be
required in order for stockholders to adopt, alter, amend or repeal any bylaws.
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[LETTERHEAD]
JUNE , 1996
TAX OPINION
The Directors and Officers
of Monterey Pasta Company
353 Sacramento Street, Suite 500
San Francisco, CA 94111
Attention: Carolyn Mar
RE: REINCORPORATION IN DELAWARE
Gentlemen:
We have acted as counsel to Monterey Pasta Company, a California corporation
("MPC California"), in connection with the proposed merger (the "Merger") of
MPC California with and into its wholly-owned subsidiary Monterey Pasta
Company, a Delaware corporation ("MPC Delaware"), pursuant to the terms of
the Agreement and Plan of Merger, dated as of June , 1996 (the "Merger
Agreement"), between MPC California and MPC Delaware. This opinion is being
furnished to you pursuant to your request. All capitalized terms used herein,
unless otherwise defined herein or the context otherwise requires, shall have
the meanings assigned thereto in the Merger Agreement.
DESCRIPTION OF TRANSACTION
Pursuant to the Merger Agreement, each outstanding share of MPC California
common stock, without par value ("MPC California Common Stock") will
automatically be converted into one share of MPC Delaware common stock, par
value $0.001 ("MPC Delaware Common Stock"), upon the Effective Date of the
Merger. In addition, each share of MPC Delaware Common Stock outstanding
immediately prior to the Merger (all of which will be held by MPC California
at such time) will by virtue of the Merger be cancelled and returned to the
status of authorized but unissued shares. Consequently, the holders of MPC
California Common Stock immediately prior to the Merger will own all the
outstanding shares of MPC Delaware Common Stock immediately after the Merger.
<PAGE>
The Directors and Officers
of Monterey Pasta Company
June , 1996
Page 2
OPINION
In connection with this opinion, we have examined the following documents:
1. The Merger Agreement;
2. The MPC California Proxy Statement dated June , 1996;
3. The MPC California Officer's Certificate dated June , 1996 (the "MPC
California Officer's Certificate");
4. The MPC Delaware Officer's Certificate dated June , 1996 (the "MPC
Delaware Officer's Certificate"); and
5. Such other documents as we have deemed appropriate in rendering the
opinions set forth below.
In rendering our opinion, we have assumed the following:
1. The authenticity, accuracy, completeness, and correctness of all documents
submitted to us as originals and the conformity to original documents of all
documents submitted to us as copies.
2. The accuracy, completeness, and correctness of the representations,
warranties, and covenants as to factual matters made by MPC California and
MPC Delaware in the Merger Agreement, and the performance of the Merger
Agreement in accordance with its terms.
3. The accuracy, completeness, and correctness of the representations
contained within the MPC California Officer's Certificate and the MPC
Delaware Officer's Certificate.
In rendering our opinion, we have considered the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations,
pertinent judicial authorities, interpretive rulings of the Internal Revenue
Service, and such other authorities as we have considered relevant.
<PAGE>
The Directors and Officers
of Monterey Pasta Company
June , 1996
Page 3
Our opinion is subject to the following qualifications:
1. Our opinion is limited to the effect of the Federal tax laws of the United
States on the transaction contemplated by the Merger Agreement, and we
express no opinion as to matters governed by other laws.
2. In making our examination of documents and instruments executed by persons
or entities other than MPC California and MPC Delaware, we have assumed,
without investigation, the power and legal capacity of each such person
or other entity to enter into and perform all of its obligations under
such documents and instruments, the due authorization by each such person
or other entity of such documents and instruments, and the due execution
and delivery by each such person or other entity of such documents and
instruments.
3. There is no plan or intention on the part of MPC California's
shareholders (a "Plan") to engage in a sale, exchange, transfer,
distribution, pledge, or other distribution (including a distribution by
a partnership to its partners or by a corporation to its shareholders) or
any transaction which results in a reduction of risk of ownership, or a
direct or indirect disposition (a "Sale") of shares of MPC Delaware
Common Stock to be received in the Merger that would reduce MPC
California's shareholders' ownership of MPC Delaware Common Stock to a
number of shares having an aggregate fair market value, as of the
Effective Date of the Merger, of less than fifty percent (50%) of the
value of all of the stock of MPC California outstanding immediately prior
to the Merger. Shares of MPC California stock which are sold, redeemed or
disposed of in a transaction that is in contemplation of or related to
the Merger shall be considered shares of MPC California stock held by
shareholders of MPC California immediately before the Merger which are
exchanged in the Merger for shares of MPC Delaware Common Stock which are
then disposed of pursuant to a Plan.
4. Our opinions are limited to the matters expressly set forth in this
opinion letter, and no opinion is to be implied or may be inferred beyond
the matters expressly so stated.
<PAGE>
The Directors and Officers
of Monterey Pasta Company
June , 1996
Page 4
5. This opinion letter is dated as of the Effective Date of the Merger and,
therefore, relates only to applicable laws as of that time. We disclaim
any obligation to update this opinion letter for any events, and any
changes in law or the interpretation thereof, occurring after the date of
this opinion letter.
Based upon, and subject to the foregoing, we are of the opinion that the Merger
will, under current law, have the following Federal income tax
consequences for MPC California shareholders:
1. The Merger will constitute a tax-fee reorganization under Section 368(a) of
the Code.
2. No gain or loss will be recognized by holders of MPC California Common Stock
as a result of the exchange of such shares for shares of MPC Delaware
Common Stock pursuant to the Merger.
3. The tax basis of the shares of MPC Delaware Common Stock received by each
holder of MPC California Common Stock will equal the tax basis of such
shareholder's shares of MPC California Common Stock exchanged in the
Merger.
4. Assuming that the shares of MPC California Common Stock are held as capital
assets, the holding period for the shares of MPC Delaware Common Stock
received by each holder of MPC California Common Stock will include the
holding period for the shares of MPC California Common Stock of such
shareholder exchanged in the Merger.
Except as set forth above, we express no opinion as to the tax consequences to
any party, whether Federal, state, local or foreign, of the Merger, or of any
transactions related to the Merger or contemplated by the Merger Agreement.
This opinion is furnished to you for your exclusive use solely in connection
with the transaction contemplated by the Merger Agreement and is not to
<PAGE>
The Directors and Officers
of Monterey Pasta Company
June , 1996
Page 5
be relied upon for a nother purpose, or relied upon by any other person or
entity, without our prior written approval.
Very truly yours,
GRAHAM & JAMES LLP
Enclosures
Our File: 34954.9
<PAGE>
MONTEREY PASTA COMPANY
FIRST AMENDED AND RESTATED 1993 STOCK OPTION PLAN
<PAGE>
MONTEREY PASTA COMPANY
FIRST AMENDED AND RESTATED 1993 STOCK OPTION PLAN
PAGE
----
ARTICLE 1. ESTABLISHMENT. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Establishment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purpose.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 3. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Administration by Board and/or Committee. . . . . . . . . . . . . . . 2
3.2 Limitation of Authority With Respect to Outside Director Options. . . 3
3.3 Authority of Officers.. . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Disinterested Administration. . . . . . . . . . . . . . . . . . . . . 3
3.5 Compliance with Section 162(m). . . . . . . . . . . . . . . . . . . . 3
ARTICLE 4. STOCK SUBJECT TO PLAN. . . . . . . . . . . . . . . . . . . . . 3
4.1 Shares Subject to Option. . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Effect of Change in Stock Subject to Plan.. . . . . . . . . . . . . . 4
ARTICLE 5. EMPLOYEE OPTIONS . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 Employee Options Authorized.. . . . . . . . . . . . . . . . . . . . . 4
5.2 Eligibility for Employee Options. . . . . . . . . . . . . . . . . . . 4
5.3 Section 162(m) Limitation.. . . . . . . . . . . . . . . . . . . . . . 4
5.4 Terms and Conditions of Employee Options. . . . . . . . . . . . . . . 5
5.5 Standard Forms of Agreement for Employee Options. . . . . . . . . . . 7
ARTICLE 6. OUTSIDE DIRECTOR OPTIONS . . . . . . . . . . . . . . . . . . . 7
6.1 Outside Director Options Authorized.. . . . . . . . . . . . . . . . . 7
6.2 Eligibility for Outside Director Options. . . . . . . . . . . . . . . 7
6.3 Terms and Conditions of Outside Director Options. . . . . . . . . . . 7
6.4 Shareholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . 9
i
<PAGE>
ARTICLE 7. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 9
7.1 Transfer of Control.. . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2 Authority to Vary Terms.. . . . . . . . . . . . . . . . . . . . . . . 10
7.3 Fair Market Value Limitation on Incentive Stock Options.. . . . . . . 10
7.4 Provision of Information. . . . . . . . . . . . . . . . . . . . . . . 11
7.5 Options Non-Transferable. . . . . . . . . . . . . . . . . . . . . . . 11
7.6 Termination or Amendment of Plan or Options.. . . . . . . . . . . . . 11
7.7 Continuation of Initial Plan as to Outstanding Options. . . . . . . . 11
ii
<PAGE>
MONTEREY PASTA COMPANY
FIRST AMENDED AND RESTATED 1993 STOCK OPTION PLAN
ARTICLE 1.
ESTABLISHMENT
1.1 ESTABLISHMENT. On August 31, 1993, the Monterey Pasta Company 1993
Employee Incentive Stock Option Plan (the "Initial Plan") was adopted. The
Initial Plan is hereby amended and restated in its entirety and renamed the
Monterey Pasta Company First Amended and Restated 1993 Stock Option Plan (the
"Plan"), effective October __, 1994 (the "Effective Date").
1.2 PURPOSE. The purpose of the Plan is to attract, retain and reward
persons providing services to a Participating Company, and to motivate such
persons to contribute to the growth and profits of the Participating Company
Group in the future. The Plan consists of an Employee Stock Option component
plan, providing for the grant of stock options to eligible employees and
consultants, and an Outside Director Stock Option component plan, providing for
the automatic grant of stock options to nonemployee directors of the Company.
1.3 TERM. All Options shall be granted, if at all, within ten (10) years
from August 31, 1993.
ARTICLE 2.
DEFINITIONS
2.1 DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "COMPANY" means Monterey Pasta Company and any successor
corporation thereto.
(d) "EMPLOYEE OPTION" means an option to purchase Stock granted
pursuant to the terms and conditions of Article 5 below.
(e) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
1.
<PAGE>
(f) "INCENTIVE STOCK OPTION" means an incentive stock option as
described in section 422 of the Code.
(g) "NONSTATUTORY STOCK OPTION" means a stock option which shall
not be treated as an incentive stock option as described in section 422 of the
Code.
(h) "OPTION" means an Employee Option or an Outside Director
Option.
(i) "OPTIONEE" means a person who has received one or more
Options.
(j) "OUTSIDE DIRECTOR" means a person who is (i) a member of the
Board and (ii) not an employee of a Participating Company.
(k) "OUTSIDE DIRECTOR OPTION" means an option to purchase Stock
automatically granted pursuant to the terms and conditions of Article 6 below.
(l) "PARENT CORPORATION" and "SUBSIDIARY CORPORATION" shall have
the meaning given to such terms in sections 424(e) and 424(f) of the Code,
respectively.
(m) "PARTICIPATING COMPANY" means the Company or any present or
future parent or subsidiary corporation of the Company, all of whom are
collectively referred to as the "PARTICIPATING COMPANY GROUP."
(n) "RULE 16b-3" means Rule 16b-3 as promulgated under the
Exchange Act and amended from time to time or any successor rule or regulation.
(o) "SECTION 162(m)" means section 162(m) of the Code, as amended
by the Revenue Reconciliation Act of 1993 (P.L. 103-66), and the regulations
promulgated thereunder.
(p) "STOCK" means the authorized but unissued common stock of the
Company.
(q) "TEN PERCENT OWNER OPTIONEE" means an Optionee who at the time
the Option is granted owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of a Participating Company
within the meaning of section 422(b)(6) of the Code.
ARTICLE 3.
ADMINISTRATION
3.1 ADMINISTRATION BY BOARD AND/OR COMMITTEE. The Plan shall be
administered by the Board and/or by a duly appointed committee of the Board
having such powers as shall be specified by the Board. Any subsequent references
herein to the Board shall
2.
<PAGE>
also mean the committee if such committee has been appointed and, unless the
powers of the committee have been specifically limited, the committee shall have
all of the powers of the Board granted herein, including, without limitation,
the power to terminate or amend the Plan at any time, subject to the terms of
the Plan and any applicable limitations imposed by law. All questions of
interpretation of the Plan or of any Options granted under the Plan shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan and/or any Option.
3.2 LIMITATION OF AUTHORITY WITH RESPECT TO OUTSIDE DIRECTOR OPTIONS.
Notwithstanding any provision herein to the contrary, the Board shall have no
authority, discretion, or power to select the Outside Directors of the Company
who will receive Outside Director Options under the Plan, to set the exercise
price of Outside Director Options granted under the Plan, to determine the
number of shares of Stock to be granted under an Outside Director Option or the
time at which such options are to be granted, to establish the duration of
Outside Director Options, or alter any other terms or conditions specified in
the Plan with respect to Outside Director Options, except in the sense of
administering the Plan subject to the provisions of the Plan.
3.3 AUTHORITY OF OFFICERS. Any officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, or election which is the responsibility of or which is
allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or election.
3.4 DISINTERESTED ADMINISTRATION. With respect to the participation in
the Plan of employees who are also officers or directors of the Company subject
to Section 16 of the Exchange Act, the Plan shall be administered by the Board
in compliance with the "disinterested administration" requirement of Rule 16b-3.
3.5 COMPLIANCE WITH SECTION 162(M). In the event a Participating Company
becomes a "publicly held corporation" as defined in paragraph (2) of Section
162(m), the Company may establish a committee of outside directors meeting the
requirements of Section 162(m) to approve the grant of Employee Options which
might reasonably be anticipated to result in the payment of employee
remuneration that would otherwise exceed the limit on employee remuneration
deductible for income tax purposes pursuant to Section 162(m).
ARTICLE 4.
STOCK SUBJECT TO PLAN
4.1 SHARES SUBJECT TO OPTION. Options shall be for the purchase of
Stock, subject to adjustment as provided in Section 4.2. The maximum number of
shares of Stock which may be issued under the Plan shall be one million two
hundred thousand (1,200,000) shares. In the event that any outstanding Option
for any reason expires or is terminated or canceled or shares of Stock subject
to repurchase are repurchased by the
3.
<PAGE>
Company, the shares allocable to the unexercised portion of such Option, or such
repurchased shares, may again be subject to an Option grant. Notwithstanding the
foregoing, any such shares shall be made subject to a new Option only if the
grant of such new Option and the issuance of such shares pursuant to such new
Option would not cause the Plan or any Option granted under the Plan to
contravene Rule 16b-3.
4.2 EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan, to
the Section 162(m) limitation set forth in Section 5.3 below, to the automatic
grant of Outside Director Options as provided in Section 6.3(a) below, and to
any outstanding Options and in the exercise price of any outstanding Options in
the event of a stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or like change in the capital
structure of the Company. In the event a majority of the shares which are of the
same class as the shares that are subject to outstanding Options are exchanged
for, converted into, or otherwise become (whether or not pursuant to a Transfer
of Control (as defined in Section 7.1 below)) shares of another corporation (the
"New Shares"), the Company may unilaterally amend the outstanding Options to
provide that such Options are exercisable for New Shares. In the event of any
such amendment, the number of shares and the exercise price of the outstanding
Options shall be adjusted in a fair and equitable manner.
ARTICLE 5.
EMPLOYEE OPTIONS
5.1 EMPLOYEE OPTIONS AUTHORIZED. Employee Options may be either
Incentive Stock Options or Nonstatutory Stock Options.
5.2 ELIGIBILITY FOR EMPLOYEE OPTIONS. Employee Options may be granted
only to employees (including officers and directors who are also employees) of
the Participating Company Group or to individuals (excluding Outside Directors)
who are rendering services as consultants, advisors, or other independent
contractors to the Participating Company Group. For purposes of the foregoing
sentence, "employees" shall include prospective employees to whom Employee
Options are granted in connection with written offers of employment with the
Participating Company Group and "consultants" or "advisors" shall include
prospective consultants or advisors to whom Employee Options are granted in
connection with written consulting or advising offers with the Participating
Company Group. The Board shall, in its sole discretion, determine which eligible
persons shall be granted Employee Options. An individual who is rendering
services as a consultant, advisor, or other independent contractor or who is a
prospective employee, consultant, or advisor may only be granted a Nonstatutory
Stock Option. Eligible persons may be granted more than one Employee Option.
5.3 SECTION 162(M) LIMITATION. Subject to adjustment as provided in
Section 4.2, no person shall be granted within any fiscal year of the Company
Employee Options which in the aggregate cover more than sixty thousand (60,000)
shares; provided,
4.
<PAGE>
however, that the foregoing limit shall be ninety thousand (90,000) shares with
respect to Options granted to any person during the first fiscal year of such
person's employment with the Company.
5.4 TERMS AND CONDITIONS OF EMPLOYEE OPTIONS. Subject to the provisions
of the Plan, the Board shall determine for each Employee Option (which need not
be identical) the number of shares of Stock for which the Employee Option shall
be granted, the exercise price of the Employee Option, the timing and terms of
exercisability and vesting of the Employee Option, the time of expiration of the
Employee Option, the effect of the Optionee's termination of employment or
service, whether the Employee Option is to be treated as an Incentive Stock
Option or as a Nonstatutory Stock Option, the method for satisfaction of any tax
withholding obligation arising in connection with the Employee Option, including
by the withholding or delivery of shares of Stock, and all other terms and
conditions of the Employee Option not inconsistent with the Plan. Employee
Options granted pursuant to the Plan shall be evidenced by written agreements
specifying the number of shares of Stock covered thereby, in such form as the
Board shall from time to time establish, which agreements may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
(a) EMPLOYEE OPTION EXERCISE PRICE. The exercise price for each
Employee Option shall be established in the sole discretion of the Board;
provided, however, that (i) the exercise price per share for an Employee Option
shall be not less than the fair market value, as determined by the Board, of a
share of Stock on the date of the granting of the Employee Option and (ii) no
Incentive Stock Option granted to a Ten Percent Owner Optionee shall have an
exercise price per share less than one hundred ten percent (110%) of the fair
market value, as determined by the Board, of a share of Stock on the date of the
granting of the Incentive Stock Option. Notwithstanding the foregoing, an
Employee Option (whether an Incentive Stock Option or a nonstatutory stock
option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Employee Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying with the
provisions of section 424(a) of the Code.
(b) EMPLOYEE OPTION EXERCISE PERIOD. The Board shall have the
power to set, including by amendment of an Employee Option, the time or times
within which each Employee Option shall be exercisable or the event or events
upon the occurrence of which all or a portion of each Employee Option shall be
exercisable and the term of each Employee Option; provided, however, that (i) no
Incentive Stock Option shall be exercisable after the expiration of ten (10)
years after the date such Incentive Stock Option is granted, and (ii) no
Incentive Stock Option granted to a Ten Percent Owner Optionee shall be
exercisable after the expiration of five (5) years after the date such Incentive
Stock Option is granted.
(c) PAYMENT OF EMPLOYEE OPTION EXERCISE PRICE
5.
<PAGE>
(i) FORMS OF PAYMENT AUTHORIZED. Payment of the exercise
price for the number of shares of Stock being purchased pursuant to any Employee
Option shall be made (1) in cash, by check, or cash equivalent, (2) by tender to
the Company of shares of the Company's common stock owned by the Optionee having
a value, as determined by the Board (but without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company), not less
than the exercise price, (3) by the Optionee's recourse promissory note in a
form approved by the Company, (4) by the assignment of the proceeds of a sale of
some or all of the shares being acquired upon the exercise of the Employee
Option (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System), or (5) by any combination thereof. The
Board may at any time or from time to time, by adoption of or by amendment to
either of the standard forms of stock option agreement described in Section 5.6,
or by other means, grant Employee Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price
and/or which otherwise restrict one (1) or more forms of consideration.
(ii) TENDER OF COMPANY STOCK. Notwithstanding the
foregoing, an Employee Option may not be exercised by tender to the Company of
shares of the Company's common stock to the extent such tender of stock would
constitute a violation of the provisions of any law, regulation and/or agreement
restricting the redemption of the Company's stock. Unless otherwise provided by
the Board, an Employee Option may not be exercised by tender to the Company of
shares of the Company's common stock unless such shares of the Company's stock
either have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company.
(iii) PROMISSORY NOTES. No promissory note shall be
permitted if an exercise using a promissory note would be a violation of any
law. Any permitted promissory note shall be due and payable not more than four
(4) years after the Employee Option is exercised, and interest shall be payable
at least annually and be at least equal to the minimum interest rate necessary
to avoid imputed interest pursuant to all applicable sections of the Code. The
Board shall have the authority to permit or require the Optionee to secure any
promissory note used to exercise an Employee Option with the shares of Stock
acquired on exercise of the Employee Option and/or with other collateral
acceptable to the Company. Unless otherwise provided by the Board, in the event
the Company at any time is subject to the regulations promulgated by the Board
of Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's securities,
any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.
(iv) ASSIGNMENT OF PROCEEDS OF SALE. The Company reserves,
at any and all times, the right, in the Company's sole and absolute discretion,
to establish, decline to approve and/or terminate any program and/or procedures
for the exercise of
6.
<PAGE>
Employee Options by means of an assignment of the proceeds of a sale of some or
all of the shares of Stock to be acquired upon such exercise.
5.5 STANDARD FORMS OF AGREEMENT FOR EMPLOYEE OPTIONS.
(a) INCENTIVE STOCK OPTIONS. Unless otherwise provided for by the
Board at the time an Employee Option is granted, an Employee Option designated
as an "Incentive Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of incentive stock option agreement attached
hereto as EXHIBIT A and incorporated herein by reference.
(b) NONSTATUTORY STOCK OPTIONS. Unless otherwise provided for by
the Board at the time an Employee Option is granted, an Employee Option
designated as a "Nonstatutory Stock Option" shall comply with and be subject to
the terms and conditions set forth in the form of nonstatutory stock option
agreement attached hereto as EXHIBIT B and incorporated herein by reference.
(c) STANDARD TERM FOR EMPLOYEE OPTIONS. Except as provided in
Section 5.4(b) or otherwise provided for by the Board in the grant of an
Employee Option, any Employee Option granted hereunder shall have a term of ten
(10) years.
ARTICLE 6.
OUTSIDE DIRECTOR OPTIONS
6.1 OUTSIDE DIRECTOR OPTIONS AUTHORIZED. Outside Director Options shall
be Nonstatutory Stock Options.
6.2 ELIGIBILITY FOR OUTSIDE DIRECTOR OPTIONS. Outside Director Options
may be granted only to Outside Directors.
6.3 TERMS AND CONDITIONS OF OUTSIDE DIRECTOR OPTIONS. Outside Director
Options granted pursuant to the Plan shall be evidenced by written agreements
specifying the number of shares of Stock covered thereby, in substantially the
form attached hereto as EXHIBIT C (the "Outside Director Option Agreement"),
which written agreement may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
(a) AUTOMATIC GRANT OF OPTIONS. Subject to execution by each
Outside Director of the appropriate Option Agreement, Outside Director Options
shall be granted automatically and without further action of the Board, as
follows:
(i) On the Effective Date, each person serving as an
Outside Director shall be granted an Outside Director Option to purchase ten
thousand (10,000) shares of Stock.
7.
<PAGE>
(ii) Each person who is newly appointed or elected as an
Outside Director after the Effective Date shall be granted an Outside Director
Option to purchase ten thousand (10,000) shares of Stock upon the date of such
initial appointment or election.
(iii) Each Outside Director shall be granted an Outside
Director Option to purchase ten thousand (10,000) shares of Stock on each
anniversary of his or her Anniversary Date (as defined below).
(iv) The Anniversary Date of each Outside Director shall be
(1) if the Outside Director held office as an Outside Director on the Effective
Date, the Effective Date and (2) for each other Outside Director, the date upon
which he or she was first granted an Outside Director Option under the Plan.
(v) Notwithstanding the foregoing, any Outside Director may
elect not to receive an Outside Director Option granted pursuant to this Section
6.3(a) by delivering written notice of such election to the Board (1) in the
case of an initial Outside Director Option grant, no later than the Effective
Date or, if later, the date upon which such Outside Director commences service
on the Board, or (2) in the case of an anniversary Outside Director Option
grant, no later than six (6) months prior to the applicable Anniversary Date.
(vi) Notwithstanding any other provision of the Plan, no
Outside Director Option shall be granted to any individual on his or her
Anniversary Date when he or she is no longer serving as an Outside Director of
the Company on such Anniversary Date.
(b) OUTSIDE DIRECTOR OPTION EXERCISE PRICE. The exercise price
per share of Stock subject to an Outside Director Option shall be the fair
market value of a share of Stock on the date of the granting of the Outside
Director Option. For purposes of this Section 6.3(b), where there is a public
market for the Stock, the fair market value per share of Stock shall be the mean
of the bid and asked prices of the Stock on the date of the granting of the
Outside Director Option, as reported in the Wall Street Journal (or, if not so
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system) or, in the event the Stock is
listed on the NASDAQ National Market System or a national or regional securities
exchange, the fair market value per share of Stock shall be the closing price on
such National Market System or exchange on the date of the granting of the
Outside Director Option, as reported in the Wall Street Journal. If the date of
the granting of an Outside Director Option does not fall on a day on which the
Stock is trading on NASDAQ, the NASDAQ National Market System or other national
or regional securities exchange, the date on which the Outside Director Option
exercise price per share shall be established shall be the last day on which the
Stock was so traded prior to the date of the granting of the Outside Director
Option.
8.
<PAGE>
(c) EXERCISE PERIOD AND EXERCISABILITY OF OUTSIDE DIRECTOR
OPTIONS. An Outside Director Option granted pursuant to the Plan shall have a
term of ten (10) years. Outside Director Options granted pursuant to the Plan
shall become exercisable in two (2) approximately equal annual installments
commencing one (1) year after the date of grant as provided in the appropriate
form of Outside Director Option Agreement.
(d) PAYMENT OF OPTION EXERCISE PRICE. Payment of the exercise
price for the number of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check, or in cash equivalent, (ii) by the
assignment of the proceeds of a sale of some or all of the shares being acquired
upon the exercise of an Option (including, without limitation, through an
exercise complying with the provisions of Regulation T as promulgated from time
to time by the Board of Governors of the Federal Reserve System), or (iii) by
any combination thereof. The Company reserves, at any and all times, the right,
in the Company's sole and absolute discretion, to establish, decline to approve
and/or terminate any program and/or procedure for the exercise of Options by
means of an assignment of the proceeds of a sale of some or all of the shares of
Stock to be acquired upon such exercise.
6.4 SHAREHOLDER APPROVAL. Any Outside Director Option granted pursuant
to the Plan shall be subject to obtaining shareholder approval of the Plan on or
before the date of the first annual meeting of shareholders after the Effective
Date. Notwithstanding the foregoing, shareholder approval shall not be necessary
in order to grant any Outside Director Option granted on the Effective Date;
provided, however, that the exercise of any such Outside Director Option shall
be subject to obtaining shareholder approval of the Plan.
ARTICLE 7.
GENERAL PROVISIONS
7.1 TRANSFER OF CONTROL. A "Transfer of Control" shall be deemed to have
occurred in the event any of the following occurs with respect to the Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Company of all or substantially all of the stock of the Company where the
shareholders of the Company before such sale or exchange do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such sale or exchange;
(b) a merger or consolidation in which the Company is not the
surviving corporation;
(c) a merger or consolidation in which the Company is the
surviving corporation where the shareholders of the Company before such merger
or consolidation
9.
<PAGE>
do not retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company after such merger or consolidation;
(d) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange, or transfer to one (1)
or more subsidiary corporations (as defined in Section 2.1 above) of the
Company); or
(e) a liquidation or dissolution of the Company.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the "Acquiring Corporation"), shall either assume the Company's rights
and obligations under outstanding Options or substitute options for the
Acquiring Corporation's stock for such outstanding Options. In the event the
Acquiring Corporation elects not to assume or substitute for such outstanding
Options in connection with the Transfer of Control, any unexercisable and/or
unvested portion of the outstanding Options shall be immediately exercisable and
vested as of the date thirty (30) days prior to the date of the Transfer of
Control. The exercise and/or vesting of any Option that was permissible solely
by reason of this Section 7.1 shall be conditioned upon the consummation of the
Transfer of Control. Any Options which are neither assumed or substituted for by
the Acquiring Corporation in connection with the Transfer of Control nor
exercised as of the date of the Transfer of Control shall terminate and cease to
be outstanding effective as of the date of the Transfer of Control.
7.2 AUTHORITY TO VARY TERMS. The Board shall have the authority from
time to time to vary the terms of the standard forms of stock option agreement
described in Section 5.5 and Section 6.3 either in connection with the grant or
amendment of an individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
such revised or amended standard form or forms of stock option agreement shall
be in accordance with the terms of the Plan. Such authority shall include, but
not by way of limitation, the authority to grant Options which are immediately
exercisable subject to the Company's right to repurchase any unvested shares of
Stock acquired by an Optionee on exercise of an Option in the event such
Optionee's service to the Participating Company Group is terminated for any
reason, with or without cause.
7.3 FAIR MARKET VALUE LIMITATION ON INCENTIVE STOCK OPTIONS. To the
extent that the aggregate fair market value (determined at the time the
Incentive Stock Option is granted) of the stock for which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year (under the Plan and any other stock option plan of the Participating
Company Group) exceeds One Hundred Thousand Dollars ($100,000), such options
shall be treated as Nonstatutory Stock Options. This paragraph shall be applied
by taking Incentive Stock Options into account in the order in which they were
granted.
10.
<PAGE>
7.4 PROVISION OF INFORMATION. Each Optionee shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company's common shareholders.
7.5 OPTIONS NON-TRANSFERABLE. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution.
7.6 TERMINATION OR AMENDMENT OF PLAN OR OPTIONS. The Board, including
any duly appointed committee of the Board, may terminate or amend the Plan or
any Option at any time; provided, however, that without the approval of the
Company's shareholders, there shall be (a) no increase in the total number of
shares of Stock covered by the Plan (except by operation of the provisions of
Section 4.2), (b) no change in the class of persons eligible to receive
Incentive Stock Options and (c) no expansion in the class of persons eligible to
receive Nonstatutory Stock Options. Furthermore, the provisions of the Plan
addressing eligibility for Outside Director Options and the amount, price and
timing of grants of Outside Director Options shall not be amended more than once
every six (6) months, other than to comport to changes in the Code, or the rules
thereunder. In addition to the foregoing, the approval of the Company's
shareholders shall be sought for any amendment to the Plan or an Option for
which the Board deems shareholder approval necessary in order to comply with
Rule 16b-3. In any event, no amendment may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such amendment is required to enable an Option designated as an Incentive
Stock Option to qualify as an Incentive Stock Option.
7.7 CONTINUATION OF INITIAL PLAN AS TO OUTSTANDING OPTIONS.
Notwithstanding any other provision of the Plan to the contrary, the terms of
the Initial Plan shall remain in effect and apply to Options granted pursuant to
the Initial Plan.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Monterey Pasta Company First Amended and Restated 1993 Stock
Option Plan was duly adopted by the Board of Directors of the Company on the day
of October, 1994.
----------------------------------
11.
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PLAN HISTORY
8/31/93 Board of Directors adopted the Initial Plan with a share reserve
of 315,000 shares.
8/31/93 Shareholders approved the Initial Plan with a share reserve of
315,000 shares.
1/12/94 Board of Directors adopted an amendment to the Initial Plan
increasing the share reserve to 950,000 shares.
10/__/94 Board of Directors adopted the Plan with a share reserve of
1,200,000 shares.
__/__/94 Shareholders approve Plan with a share reserve of 1,200,000
shares.
<PAGE>
EXHIBIT A
STANDARD FORM OF
MONTEREY PASTA COMPANY
INCENTIVE STOCK OPTION AGREEMENT
(EMPLOYEE OPTION)
<PAGE>
MONTEREY PASTA COMPANY
INCENTIVE STOCK OPTION AGREEMENT
(EMPLOYEE OPTION)
Monterey Pasta Company granted to the individual named below an option
to purchase certain shares of common stock of the Company, in the manner and
subject to the provisions of this Option Agreement.
1. DEFINITIONS:
(a) "Optionee" shall mean _____________
(b) "Date of Option Grant" shall mean ___________
(c) "Number of Option Shares" shall mean _____ shares of common
stock of the Company as adjusted from time to time pursuant to paragraph 9
below.
(d) "Exercise Price" shall mean $_____ per share as adjusted from
time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the Initial Vesting Date.
(f) "Initial Vesting Date" shall be the date occurring one (1)
year after (check one):
__ the Date of Option Grant.
__ ________________________________ (specify other date).
(g) Determination of "Vested Ratio":
Vested Ratio
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, 1/3
provided the Optionee is
continuously employed by
a Participating Company from
the Date of Option Grant until
1
<PAGE>
the Initial Vesting Date
PLUS
For each full year 1/3
of the Optionee's
continuous employment by a
Participating Company from the
Initial Vesting Date
In no event shall the Vested
Ratio exceed 1/1.
(h) "Option Term Date" shall mean the date ten (10) years after
the Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Monterey Pasta Company, a California
corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii)
any present or future parent and/or subsidiary corporation of the Company
while such corporation is a parent or subsidiary of the Company. For
purposes of this Option Agreement, a parent corporation and a subsidiary
corporation shall be as defined in sections 424(e) and 424(f) of the Code,
respectively.
(l) "Participating Company Group" shall mean at any point in time
all corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Monterey Pasta Company First Amended and
Restated 1993 Stock Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be an
incentive stock option as described in section 422 of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisors regarding the
tax effects of this Option and the requirements necessary to obtain favorable
income tax treatment under section 422 of the Code, including, but not
limited to, holding period requirements. (NOTE: If the aggregate Exercise
Price of the Option (that is, the Exercise Price multiplied by the Number of
Option Shares) plus the aggregate exercise price of any other incentive stock
options held by the Optionee ( whether granted pursuant to the Plan or any
other stock option plan of the Participating Company Group) is greater than
$100,000, the Optionee
2
<PAGE>
should contact the Chief Financial Officer of the
Company to ascertain whether the entire Option qualifies as an incentive
stock option.)
3. ADMINISTRATION. All questions of interpretation concerning
this Option Agreement shall be determined by the Board of Directors of the
Company (the "Board") and/or by a duly appointed committee of the Board
having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such
committee has been appointed and, unless the powers of the committee have
been specifically limited, the committee shall have all of the powers of the
Board granted in the Plan, including, without limitation, the power to
terminate or amend the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law. All determinations by the Board
shall be final and binding upon all persons having an interest in the Option.
Any officer of a Participating Company shall have the authority to act on
behalf of the Company with respect to any matter, right, obligation, or
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such
matter, right, obligation, or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. Except as provided in paragraph 4(f)
below, the Option shall first become exercisable on the Initial Exercise
Date. The Option shall be exercisable on and after the Initial Exercise Date
and prior to the termination of the Option in the amount equal to the Number
of Option Shares multiplied by the Vested Ratio as set forth in paragraph 1
above less the number of shares previously acquired upon exercise of the
Option. In no event shall the Option be exercisable for more shares than the
Number of Option Shares. In addition to the foregoing, in the event that the
adoption of the Plan or any amendment of the Plan is subject to the approval
of the Company's shareholders in order for the Option to comply with the
requirements of Rule 16b-3, promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Option shall not be exercisable
prior to such shareholder approval if the Optionee is subject to Section
16(b) of the Exchange Act, unless the Board, in its sole discretion, approves
the exercise of the Option prior to such shareholder approval.
(b) METHOD OF EXERCISE. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option,
the number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must
be delivered in person, by certified or registered mail, return receipt
requested, or by facsimile transmission to the Chief Financial Officer of the
Company, or other authorized representative of the Participating Company
Group, prior to the termination of the Option as set forth in paragraph 6
below, accompanied by full payment of the Exercise Price for the number of
shares being purchased.
(c) PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price for the
number of shares for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company of shares of
the Company's common stock owned by the Optionee having a value not less than
the Exercise Price, which either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company,
(iii) by Immediate Sales Proceeds, as defined below, or (iv) by any combination
of the foregoing. Notwithstanding the foregoing, the Option may not be
exercised by tender to the Company of shares of the Company's common stock to
the extent such tender of stock would constitute a violation of the provisions
of any law, regulation and/or agreement restricting the redemption of the
Company's common stock. "Immediate Sales Proceeds" shall mean the assignment in
form acceptable to the Company of the proceeds of a sale of some or all of the
shares acquired upon the exercise of the Option pursuant to a program and/or
procedure approved by the Company (including, without limitation, through an
exercise complying with the provisions of Regulation T as promulgated from time
to time by the Board of Governors of the Federal Reserve System). The Company
reserves, at any and all times, the right, in the Company's sole and absolute
discretion, to decline to approve any such program and/or procedure.
(d) TAX WITHHOLDING. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes payroll withholding and otherwise agrees to make adequate
provision for foreign, federal and state tax withholding obligations of the
Company, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of
the Option, (ii) the transfer, in whole or in part, of any shares acquired on
exercise of the Option, (iii) the operation of any law or regulation providing
for the imputation of interest, or (iv) the lapsing of any restriction with
respect to any shares acquired on exercise of the Option.
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in
the name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of the shares upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal or state law with respect to such securities. The Option may not be
exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect
with respect to the shares issuable upon exercise of the Option or (ii) in
the opinion of legal counsel to the Company, the shares issuable upon
exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities
Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE
UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY
NOT BE ABLE TO EXERCISE THE
4
<PAGE>
OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning
this restriction should be directed to the Chief Financial Officer of the
Company. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and
to make any representation or warranty with respect thereto as may be
requested by the Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be
exercised during the lifetime of the Optionee only by the Optionee and may
not be assigned or transferred in any manner except by will or by the laws of
descent and distribution. Following the death of the Optionee, the Option,
to the extent unexercised and exercisable by the Optionee on the date of
death, may be exercised by the Optionee's legal representative or by any
person empowered to do so under the deceased Optionee's will or under the
then applicable laws of descent and distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may
no longer be exercised on the first to occur of (a) the Option Term Date as
defined above, (b) the last date for exercising the Option following
termination of employment as described in paragraph 7 below, or (c) upon a
Transfer of Control to the extent provided in paragraph 8 below.
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. Except as provided in this
paragraph 7(a), the Option shall terminate and may not be exercised after the
Optionee ceases to be an employee of the Participating Company Group.
(i) DEATH OR DISABILITY. If the Optionee ceases to be an
employee of the Participating Company Group by reason of the Optionee's death
or disability within the meaning of section 422(c) of the Code, the Option,
to the extent unexercised and exercisable by the Optionee on the date on
which the Optionee ceased to be an employee, may be exercised by the Optionee
(or the Optionee's legal representative) at any time prior to the expiration
of twelve (12) months from the date on which the Optionee's employment
terminated, but in any event no later than the Option Term Date. The
Optionee's employment shall be deemed to have terminated on account of death
if the Optionee dies within three (3) months after the Optionee's termination
of employment.
(ii) TERMINATION FOR CAUSE. If the Optionee ceases to be an
employee of the Participating Company Group by reason of termination for
cause, the Option shall terminate and cease to be exercisable on the
effective date of such termination. "Termination for cause" shall mean
discharge for (1) conviction of a felony, (2) any material act of fraud,
dishonesty or other malfeasance, or (3) willful, improper disclosure of
confidential information
5
<PAGE>
regarding a Participating Company.
(iii) OTHER TERMINATION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason except death,
disability within the meaning of section 422(c) of the Code or termination
for cause, the Option, to the extent unexercised and exercisable by the
Optionee on the date on which the Optionee ceased to be an employee, may be
exercised by the Optionee within three (3) months after the date on which the
Optionee's employment terminated, but in any event no later than the Option
Term Date.
(b) EMPLOYEE AND TERMINATION OF EMPLOYMENT DEFINED. For purposes
of this paragraph 7, the term "employee" shall mean any person, including
officers and directors, employed by a Participating Company or performing
services for a Participating Company as a consultant, advisor or other
independent contractor. For purposes of this paragraph 7, the Optionee's
employment shall be deemed to have terminated either upon an actual
termination of employment or service or upon the Optionee's employer ceasing
to be a Participating Company. The Optionee's employment shall not be deemed
to have terminated merely because of a change in the capacity in which the
Optionee serves as an employee, provided that there is no interruption or
termination of the Optionee's service as an employee.(THE OPTIONEE IS
CAUTIONED THAT IF THE OPTION IS EXERCISED MORE THAN THREE(3) MONTHS AFTER THE
DATE ON WHICH THE OPTIONEE'S EMPLOYMENT (OTHER THAN AS A DIRECTOR,
CONSULTANT, ADVISOR OR OTHER INDEPENDENT CONTRACTOR) TERMINATED, THE OPTION
MAY CEASE TO BE AN INCENTIVE STOCK OPTION. THE OPTIONEE SHOULD CONSULT WITH
THE OPTIONEE'S OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF ANY SUCH
DELAYED EXERCISE.)
(c) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 4(f) above, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in
any event no later than the Option Term Date. The Company makes no
representation as to the tax consequences of any such delayed exercise. The
Optionee should consult with the Optionee's own tax advisors as to the tax
consequences to the Optionee of any such delayed exercise.
(d) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit
under Section 16(b) of the Exchange Act, the Option shall remain exercisable
until the earliest to occur of (i) the tenth (10th) day following the date on
which the Optionee would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Optionee's termination of
employment, or (iii) the Option Term Date. The Company makes no
representation as to the tax consequences of any such delayed exercise. The
Optionee should consult with the Optionee's own tax advisors as to the
consequences to the Optionee of any such delayed exercise.
6
<PAGE>
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to
terminate if the Optionee takes any military leave, sick leave, or other bona
fide leave of absence approved by the Company of ninety (90) days or less.
In the event of a leave in excess of ninety (90) days, the Optionee's
employment shall be deemed to terminate on the ninety-first (91st) day of the
leave unless the Optionee's right to reemployment with the Participating
Company Group remains guaranteed by statute or contract. Notwithstanding the
foregoing, however, a leave of absence shall be treated as employment for
purposes of determining the Optionee's Vested Ratio if and only if the leave
of absence is designated by the Company as (or required by law to be) a leave
for which vesting credit is given.
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. An "Ownership
Change" shall be deemed to have occurred in the event any of the following
occurs with respect to the Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Company of all or substantially all of the stock of the Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange, or transfer to one
(1) or more subsidiary corporations (as defined in paragraph 1(k) above) of
the Company); or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change described in
(a) or (b) above in which the shareholders of the Company before such
Ownership Change do not retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the Company after such
transaction or in which the Company is not the surviving corporation or any
Ownership Change described in (c) or (d) above.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the
case may be (the "Acquiring Corporation"), shall either assume the Company's
rights and obligations under this Option Agreement or substitute an option
for the Acquiring Corporation's stock for the Option. In the event the
Acquiring Corporation elects not to assume the Company's rights and
obligations under this Option Agreement or substitute for the Option in
connection with the Transfer of Control, any unexercisable and/or unvested
portion of the Option shall be immediately exercisable and vested as of the
date thirty (30) days prior to the date of the Transfer of Control. The
exercise and/or vesting of any portion of the Option that was permissible
solely by reason of this paragraph 8 shall be conditioned upon the
consummation of the Transfer of Control. The Option shall terminate and
cease to be outstanding effective as of the date of the Transfer of Control
to the extent that the Option is neither assumed or substituted for by the
Acquiring Corporation in connection with the Transfer of Control nor
exercised as of the date of the Transfer of Control.
7
<PAGE>
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares
of stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of
the shares which are of the same class as the shares that are subject to the
Option are exchanged for, converted into, or otherwise become (whether or not
pursuant to an Ownership Change) shares of another corporation (the "New
Shares"), the Company may unilaterally amend the Option to provide that the
Option is exercisable for New Shares. In the event of any such amendment,
the number of shares and the exercise price shall be adjusted in a fair and
equitable manner.
10. RIGHTS AS A SHAREHOLDER OR EMPLOYEE. The Optionee shall have
no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate or certificates for the
shares for which the Option has been exercised. No adjustment shall be made
for dividends or distributions or other rights for which the record date is
prior to the date such certificate or certificates are issued, except as
provided in paragraph 9 above. Nothing in the Option shall confer upon the
Optionee any right to continue in the employ of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's employment at any time.
11. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The Optionee
shall dispose of the shares acquired pursuant to the Option only in
accordance with the provisions of this Option Agreement. In addition, the
Optionee shall promptly notify the Chief Financial Officer of the Company if
the Optionee disposes of any of the shares acquired pursuant to the Option
within one(1) year from the date the Optionee exercises all or part of the
Option or within two (2) years of the date of grant of the Option. Until such
time as the Optionee disposes of such shares in a manner consistent with the
provisions of this Option Agreement, the Optionee shall hold all shares
acquired pursuant to the Option in the Optionee's name(and not in the name of
any nominee) for the one-year period immediately after the exercise of the
Option and the two-year period immediately after grant of the Option. At any
time during the one-year or two-year periods set forth above, the Company may
place a legend or legends on any certificate or certificates representing
shares acquired pursuant to the Option requesting the transfer agent for the
Company's stock to notify the Company of any such transfers. The obligation
of the Optionee to notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the certificate or
certificates pursuant to the preceding sentence.
12. LEGENDS. The Company may at any time place legends
referencing any applicable federal, state or foreign securities law
restrictions on all certificates representing shares of stock subject to the
provisions of this Option Agreement. The Optionee shall, at the request of
the Company, promptly present to the Company any and all certificates
representing shares acquired pursuant to the Option in the possession of the
Optionee in order to carry out the provisions of this paragraph.
8
<PAGE>
13. BINDING EFFECT. This Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
14. TERMINATION OR AMENDMENT. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan and/or the
Option at any time; provided, however, that no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such amendment is required to enable the
Option to qualify as an Incentive Stock Option.
15. INTEGRATED AGREEMENT. This Option Agreement constitutes the
entire understanding and agreement of the Optionee and the Participating
Company Group with respect to the subject matter contained herein, and there
are no agreements, understandings, restrictions, representations, or
warranties among the Optionee and the Company other than those as set forth
or provided for herein. To the extent contemplated herein, the provisions of
this Option Agreement shall survive any exercise of the Option and shall
remain in full force and effect.
16. APPLICABLE LAW. This Option Agreement shall be governed by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
the State of California.
MONTEREY PASTA COMPANY
By: Norman E. Dean
--------------------------
Title: President and Chief
-------------------------
Executive Officer
-------------------------
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.
Date: _____________________ ______________________________________________
[Employee Name], Optionee
9
<PAGE>
EXHIBIT B
STANDARD FORM OF
MONTEREY PASTA COMPANY
NONSTATUTORY STOCK OPTION AGREEMENT
(EMPLOYEE OPTION)
<PAGE>
MONTEREY PASTA COMPANY
NONSTATUTORY STOCK OPTION AGREEMENT
(EMPLOYEE NAME)
Monterey Pasta Company granted to the individual named below an option to
purchase certain shares of common stock of the Company, in the manner and
subject to the provisions of this Option Agreement.
1. DEFINITIONS:
(a) "Optionee" shall mean _____________
(b) "Date of Option Grant" shall mean ___________
(c) "Number of Option Shares" shall mean _____ shares of common
stock of the Company as adjusted from time to time pursuant to paragraph 9
below.
(d) "Exercise Price" shall mean $_____ per share (the closing
price of the common stock of the Company on _______, as adjusted from time to
time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the Initial Vesting Date.
(f) "Initial Vesting Date" shall be the date occurring one (1)
year after (check one):
/ / the Date of Option Grant.
/ / ________________________________ (other date).
(g) Determination of "Vested Ratio":
<TABLE>
<CAPTION>
Vested Ratio
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, 1/3
provided the Optionee is
continuously employed by
a Participating Company from
the Date of Option Grant until
the Initial Vesting Date
1
<PAGE>
PLUS
For each full year 1/3
of the Optionee's
continuous employment by a
Participating Company from the
Initial Vesting Date
In no event shall the Vested
Ratio exceed 1/1.
</TABLE>
(h) "Option Term Date" shall mean the date ten (10) years after
the Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(j) "Company" shall mean Monterey Pasta Company, a California
corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and
(ii) any present or future parent and/or subsidiary corporation of the Company
while such corporation is a parent or subsidiary of the Company. For purposes
of this Option Agreement, a parent corporation and a subsidiary corporation
shall be as defined in sections 424(e) and 424(f) of the Code, respectively.
(l) "Participating Company Group" shall mean at any point in
time all corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Monterey Pasta Company First Amended
and Restated 1993 Stock Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be a
nonstatutory stock option and shall not be treated as an incentive stock option
as described in section 422(b) of the Code.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all
persons having an interest in the Option. Any officer of a
2
<PAGE>
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. Except as provided in paragraph 4(f)
below, the Option shall first become exercisable on the Initial Exercise Date.
The Option shall be exercisable on and after the Initial Exercise Date and prior
to the termination of the Option in the amount equal to the Number of Option
Shares multiplied by the Vested Ratio as set forth in paragraph 1 above less the
number of shares previously acquired upon exercise of the Option. In no event
shall the Option be exercisable for more shares than the Number of Option
Shares. In addition to the foregoing, in the event that the adoption of the
Plan or any amendment of the Plan is subject to the approval of the Company's
shareholders in order for the Option to comply with the requirements of
Rule 16b-3, promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Option shall not be exercisable prior to such
shareholder approval if the Optionee is subject to Section 16(b) of the Exchange
Act, unless the Board, in its sole discretion, approves the exercise of the
Option prior to such shareholder approval.
(b) METHOD OF EXERCISE. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
or by facsimile transmission to the Chief Financial Officer of the Company, or
other authorized representative of the Participating Company Group, prior to the
termination of the Option as set forth in paragraph 6 below, accompanied by full
payment of the Exercise Price for the number of shares being purchased.
(c) PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price
for the number of shares for which the Option is being exercised shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's common stock owned by the Optionee having a value not
less than the Exercise Price, which either have been owned by the Optionee for
more than six (6) months or were not acquired, directly or indirectly, from the
Company, (iii) by Immediate Sales Proceeds, as defined below, or (iv) by any
combination of the foregoing. Notwithstanding the foregoing, the Option may not
be exercised by tender to the Company of shares of the Company's common stock to
the extent such tender of stock would constitute a violation of the provisions
of any law, regulation and/or agreement restricting the redemption of the
Company's common stock. "Immediate Sales Proceeds" shall mean the assignment in
form acceptable to the Company of the proceeds of a sale of some or all of the
shares acquired upon the exercise of the Option pursuant to a program and/or
procedure approved by the Company (including, without limitation, through an
exercise complying with the provisions of Regulation T as promulgated from time
to time by the Board of Governors of
3
<PAGE>
the Federal Reserve System). The Company reserves, at any and all times, the
right, in the Company's sole and absolute discretion, to decline to approve any
such program and/or procedure.
(d) TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes payroll withholding and otherwise agrees to make
adequate provision for foreign, federal and state tax withholding obligations of
the Company, if any, which arise in connection with the Option, including,
without limitation, obligations arising upon (i) the exercise, in whole or in
part, of the Option, (ii) the transfer, in whole or in part, of any shares
acquired on exercise of the Option, (iii) the operation of any law or regulation
providing for the imputation of interest, or (iv) the lapsing of any restriction
with respect to any shares acquired on exercise of the Option.
(e) CERTIFICATE REGISTRATION. The certificate or certificates
for the shares as to which the Option shall be exercised shall be registered in
the name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of the shares upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal or state law with respect to such securities. The Option may not be
exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations. In addition, no Option may be exercised unless (i) a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED
THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE
SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning this
restriction should be directed to the Chief Financial Officer of the Company.
As a condition to the exercise of the Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
(g) FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised
during the lifetime of the Optionee only by the Optionee and may not be assigned
or transferred in any manner except by will or by the laws of descent and
distribution. Following the death of the Optionee, the Option, to the extent
unexercised and exercisable by the Optionee on the date of death, may be
exercised by the Optionee's legal representative or by any person empowered to
4
<PAGE>
do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
to the extent provided in paragraph 8 below.
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. Except as provided in this
paragraph 7(a), the Option shall terminate and may not be exercised after the
Optionee ceases to be an employee of the Participating Company Group.
(i) DEATH OR DISABILITY. If the Optionee ceases to be
an employee of the Participating Company Group by reason of the Optionee's death
or disability within the meaning of section 422(c) of the Code, the Option, to
the extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee (or the
Optionee's legal representative) at any time prior to the expiration of twelve
(12) months from the date on which the Optionee's employment terminated, but in
any event no later than the Option Term Date. The Optionee's employment shall
be deemed to have terminated on account of death if the Optionee dies within
three (3) months after the Optionee's termination of employment.
(ii) TERMINATION FOR CAUSE. If the Optionee ceases to be
an employee of the Participating Company Group by reason of termination for
cause, the Option shall terminate and cease to be exercisable on the effective
date of such termination. "Termination for cause" shall mean discharge for (1)
conviction of a felony, (2) any material act of fraud, dishonesty or other
malfeasance, or (3) willful, improper disclosure of confidential information
regarding a Participating Company.
(iii) OTHER TERMINATION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason except death,
disability within the meaning of section 422(c) of the Code or termination for
cause, the Option, to the extent unexercised and exercisable by the Optionee on
the date on which the Optionee ceased to be an employee, may be exercised by the
Optionee within three (3) months after the date on which the Optionee's
employment terminated, but in any event no later than the Option Term Date.
(b) EMPLOYEE AND TERMINATION OF EMPLOYMENT DEFINED. For
purposes of this paragraph 7, the term "employee" shall mean any person,
including officers and directors, employed by a Participating Company or
performing services for a Participating Company as a consultant, advisor or
other independent contractor. For purposes of this paragraph 7, the Optionee's
employment shall be deemed to have terminated either upon an actual termination
of employment or service or upon the Optionee's employer ceasing to be a
Participating Company. The Optionee's employment shall not be deemed to have
terminated merely because of a change
5
<PAGE>
in the capacity in which the Optionee serves as an employee, provided that there
is no interruption or termination of the Optionee's service as an employee.
(c) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 4(f) above, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date.
(d) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Optionee's termination of employment, or
(iii) the Option Term Date.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to terminate
if the Optionee takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company of ninety (90) days or less. In the event of
a leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. An "Ownership Change"
shall be deemed to have occurred in the event any of the following occurs with
respect to the Company:
(a) the direct or indirect sale or exchange by the shareholders
of the Company of all or substantially all of the stock of the Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially all
of the assets of the Company (other than a sale, exchange, or transfer to one
(1) or more subsidiary corporations (as defined in paragraph 1(k) above) of the
Company); or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change described
in (a) or (b) above in which the shareholders of the Company before such
Ownership Change do not retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the
6
<PAGE>
Company after such transaction or in which the Company is not the
surviving corporation or any Ownership Change described in (c) or (d) above.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the "Acquiring Corporation"), shall either assume the Company's rights
and obligations under this Option Agreement or substitute an option for the
Acquiring Corporation's stock for the Option. In the event the Acquiring
Corporation elects not to assume the Company's rights and obligations under this
Option Agreement or substitute for the Option in connection with the Transfer of
Control, any unexercisable and/or unvested portion of the Option shall be
immediately exercisable and vested as of the date thirty (30) days prior to the
date of the Transfer of Control. The exercise and/or vesting of any portion of
the Option that was permissible solely by reason of this paragraph 8 shall be
conditioned upon the consummation of the Transfer of Control. The Option shall
terminate and cease to be outstanding effective as of the date of the Transfer
of Control to the extent that the Option is neither assumed or substituted for
by the Acquiring Corporation in connection with the Transfer of Control nor
exercised as of the date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price shall be adjusted in a fair and equitable manner.
10. RIGHTS AS A SHAREHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. LEGENDS. The Company may at any time place legends referencing
any applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this paragraph.
7
<PAGE>
12. BINDING EFFECT. This Option Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
13. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
14. INTEGRATED AGREEMENT. This Option Agreement constitutes the
entire understanding and agreement of the Optionee and the Participating Company
Group with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
15. APPLICABLE LAW. This Option Agreement shall be governed by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
MONTEREY PASTA COMPANY
By: Norman E. Dean
------------------------------
Title: President and Chief
Executive Officer
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.
Date:
----------------------------------- -------------------------------------
[ Employee Name], Optionee
8
<PAGE>
EXHIBIT C
STANDARD FORM OF
MONTEREY PASTA COMPANY
NONSTATUTORY STOCK OPTION AGREEMENT
(OUTSIDE DIRECTOR OPTION)
<PAGE>
MONTEREY PASTA COMPANY
NONSTATUTORY STOCK OPTION AGREEMENT
(OUTSIDE DIRECTOR OPTION)
Monterey Pasta Company granted to the individual named below an option to
purchase certain shares of common stock of the Company in the manner and subject
to the provisions of this Option Agreement.
1. Definitions:
(a) "Optionee" shall mean __________________________.
(b) "Date of Option Grant" shall mean ______________.
(c) "Number of Option Shares" shall mean ___________
_______ shares of common stock of the Company as adjusted from time to time
pursuant to paragraph 9 below.
(d) "Exercise Price" shall mean $________ per share as adjusted
from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the Initial Vesting Date.
(f) "Initial Vesting Date" shall be the date occurring one (1)
year after the Date of Option Grant.
(g) Determination of "Vested Ratio"
<TABLE>
<CAPTION>
VESTED RATIO
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided 1/2
the Optionee has continuously served
as a director of the Company from
the Date of Option Grant until the
Initial Vesting Date
PLUS
For each full year of the Optionee's 1/2
continuous service as a director of the
Company from the Initial Vesting Date
In no event shall the Vested Ratio
exceed 1/1.
</TABLE>
1.
<PAGE>
(h) "Option Term Date" shall mean the date ten (10) years after
the Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(j) "Company" shall mean Monterey Pasta Company, a California
corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii)
any present or future parent and/or subsidiary corporation of the Company while
such corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code, respectively.
(l) "Participating Company Group" shall mean at any point in
time all corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Monterey Pasta Company First Amended and
Restated 1993 Stock Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be a nonstatutory
stock option and shall not be treated as an incentive stock option as described
in section 422(b) of the Code.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein
to the Board shall also mean the committee if such committee has been
appointed and, unless the powers of the committee have been specifically
limited, the committee shall have all of the powers of the Board granted in
the Plan, including, without limitation, the power to terminate or amend the
Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law. All determinations by the Board shall be final
and binding upon all persons having an interest in the Option. Any officer of
a Participating Company shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, or election which is
the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. Except as provided in paragraph 4(f) below,
the Option shall first become exercisable on the Initial Exercise Date. The
Option shall be exercisable on and after the Initial Exercise Date and prior to
the termination of the Option in the amount equal to the Number of Option Shares
multiplied by the Vested Ratio as set forth in paragraph 1 above less the number
of shares previously acquired upon exercise of the Option. In no event shall the
Option be exercisable for more shares than the Number of Option Shares. In
addition to the foregoing, in the event that the adoption of the Plan or any
amendment of the Plan is subject to the approval of the
2.
<PAGE>
Company's shareholders in order for the Option to comply with the requirements
of Rule 16b-3, promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Option shall not be exercisable prior to such
shareholder approval if the Optionee is subject to Section 16(b) of the Exchange
Act.
(b) METHOD OF EXERCISE. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
or by facsimile transmission to the Chief Financial Officer of the Company, or
other authorized representative of the Participating Company Group, prior to the
termination of the Option as set forth in paragraph 6 below, accompanied by full
payment of the Exercise Price for the number of shares being purchased.
(c) PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price for
the number of shares for which the Option is being exercised shall be made (i)
in cash, by check, or cash equivalent, (ii) by Immediate Sales Proceeds, as
defined below, or (iii) by any combination of the foregoing. "Immediate Sales
Proceeds" shall mean the assignment in form acceptable to the Company of the
proceeds of a sale of some or all of the shares acquired upon the exercise of
the Option pursuant to a program and/or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve any such program and/or procedure.
(d) TAX WITHHOLDING. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes payroll withholding and otherwise agrees to make adequate
provision for foreign, federal and state tax withholding obligations of the
Company, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of
the Option, (ii) the transfer, in whole or in part, of any shares acquired on
exercise of the Option, (iii) the operation of any law or regulation providing
for the imputation of interest, or (iv) the lapsing of any restriction with
respect to any shares acquired on exercise of the Option.
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in the
name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of the shares upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal or state law with respect to such securities. The Option may not be
exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations. In addition, no Option may be exercised unless (i) a registration
statement under the Securities Act of 1933, as amended (the
3.
<PAGE>
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning this
restriction should be directed to the Chief Financial Officer of the Company. As
a condition to the exercise of the Option, the Company may require the Optionee
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution. Following the death of the Optionee, the Option, to the extent
unexercised and exercisable by the Optionee on the date of death, may be
exercised by the Optionee's legal representative or by any person empowered to
do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
service as described in paragraph 7 below, or (c) upon a Transfer of Control to
the extent provided in paragraph 8 below.
7. TERMINATION OF SERVICE AS A DIRECTOR
(a) TERMINATION OF DIRECTOR STATUS. Except as provided in this
paragraph 7(a), the Option shall terminate and may not be exercised after the
Optionee ceases to be a director of the Company.
(i) DEATH OR DISABILITY. If the Optionee ceases to be a
director of the Company by reason of the Optionee's death or disability within
the meaning of section 422(c), the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee ceased to be a
director, may be exercised by the Optionee (or the Optionee's legal
representative) at any time prior to the expiration of twelve (12) months from
the date the Optionee's service as a director of the Company terminated, but in
any event no later than the Option Term Date. The Optionee's service as a
director of the Company shall be deemed to have terminated on account of death
if the Optionee dies within three (3) months after the Optionee's termination of
service as a director of the Company.
4.
<PAGE>
(ii) REMOVAL FOR CAUSE. If the Optionee ceases to be a
director of the Company by reason of removal for cause, the Option shall
terminate and cease to be exercisable on the effective date of such removal.
"Removal for cause" shall mean removal for (1) conviction of a felony, (2) any
material act of fraud, dishonesty or other malfeasance, (3) gross abuse of
authority or discretion with respect to a Participating Company, or (4) willful,
improper disclosure of confidential information regarding a Participating
Company.
(iii) OTHER TERMINATION. If the Optionee ceases to be a
director of the Company for any reason except death, disability or removal for
cause, the Option, to the extent unexercised and exercisable by the Optionee on
the date on which the Optionee ceased to be a director, may be exercised by the
Optionee within three (3) months from the date the Optionee's service as a
director of the Company terminated, but in any event no later than the Option
Term Date.
(b) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above is prevented by the provisions of paragraph 4(f) above, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Term Date.
(c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (lOth) day following the date on which the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (19Oth) day after the Optionee's termination of employment, or (iii)
the Option Term Date.
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. An "Ownership Change" shall
be deemed to have occurred in the event any of the following occurs with respect
to the Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Company of all or substantially all of the stock of the Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange, or transfer to one (1)
or more subsidiary corporations (as defined in paragraph 1(k) above) of the
Company); or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change described
in (a) or (b) above in which the shareholders of the Company before such
Ownership Change do not retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the Company after such
transaction or in which the Company is not the surviving corporation, or any
Ownership Change described in (c) or (d) above.
5.
<PAGE>
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the "Acquiring Corporation"), shall either assume the Company's rights
and obligations under this Option Agreement or substitute an option for the
Acquiring Corporation's stock for the Option. In the event the Acquiring
Corporation elects not to assume the Company's rights and obligations under this
Option Agreement or substitute for the Option in connection with the Transfer of
Control, any unexercisable and/or unvested portion of the Option shall be
immediately exercisable and vested as of the date thirty (30) days prior to the
date of the Transfer of Control. The exercise and/or vesting of any portion of
the Option that was permissible solely by reason of this paragraph 8 shall be
conditioned upon the consummation of the Transfer of Control. The Option shall
terminate and cease to be outstanding effective as of the date of the Transfer
of Control to the extent that the Option is neither assumed or substituted for
by the Acquiring Corporation in connection with the Transfer of Control nor
exercised as of the date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price shall be adjusted in a fair and equitable manner.
10. RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any shares covered by the Option until the date of
the issuance of a certificate or certificates for the shares for which the
Option has been exercised. No adjustment shall be made for dividends or
distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above.
11. LEGENDS. The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this paragraph.
12. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
13. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
6.
<PAGE>
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
14. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
15. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
MONTEREY PASTA COMPANY
By:
-----------------------------------
Title:
--------------------------------
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.
Date:
------------------------------
7.
<PAGE>
MONTEREY PASTA COMPANY
353 Sacramento Street, Suite 500
San Francisco, CA 94111
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock acknowledges receipt of the Notice
of Special Meeting of Shareholders of Monterey Pasta Company, and the
accompanying Proxy Statement dated June 21, 1996, and revoking any proxy
heretofore given, hereby constitutes and appoints Marshall Stevens and
Carolyn Mar and each of them, with full power of substitution, as proxies to
appear and vote all of the shares of Common Stock of Monterey Pasta Company,
a California corporation, standing in the name of the undersigned which the
undersigned could vote if personally present and acting at the Special
Meeting of Shareholders of Monterey Pasta Company, to be held at the Holiday
Inn Financial District, Coit Room, 750 Kearny Street, San Francisco,
California, on Thursday, July 25, 1996, at 9:00 a.m. or at any adjournment
or postponement thereof, upon the following items as set forth in the Notice
of Special Meeting and Proxy Statement and to vote according to their
discretion on all other matters which may be properly presented for action at
the meeting or at any adjournment or postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 and 3 LISTED
BELOW. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1,
2 and 3 LISTED BELOW. NOTE: THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT
OF A VOTE AGAINST PROPOSALS 1, 2 and 3. NO OTHER BUSINESS WILL BE TRANSACTED
AT THIS MEETING.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
ADDRESS CHANGE: PLEASE MARK ADDRESS BOX ON REVERSE SIDE.
<PAGE>
1. TO AUTHORIZE THE COMPANY TO CHANGE THE COMPANY'S STATE OF INCORPORATION FROM
CALIFORNIA TO DELAWARE.
/ / FOR / / AGAINST / / ABSTAIN
2. TO APPROVE AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK FROM
20,000,000 to 70,000,000 SHARES, AN INCREASE OF 50,000,000 SHARES.
/ / FOR / / AGAINST / / ABSTAIN
3. TO APPROVE AN AMENDMENT TO THE COMPANY'S FIRST AMENDED AND RESTATED 1993
STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON
STOCK RESERVED FOR ISSUANCE THEREUNDER FROM 1,200,000 TO 1,740,000 SHARES,
AN INCREASE OF 540,000 SHARES.
/ / FOR / / AGAINST / / ABSTAIN
[ ]Please sign exactly as name appears to the
left. When shares are held by joint
tenants, both should sign. When signing as
attorney, executor, administrator, trustee
or guardian, please give full title as
such. If a corporation, please sign in
full corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
[ ]authorized person.
Dated: 1996
------------, ----------------------------- / / Address Change
Signature (Pleas mark this
box if you have
an address
change.)
-----------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL
BE VOTED IN THE MANNER DIRECTED HERETO BY
THE ABOVE-REFERENCED SHAREHOLDER. IF NO
DIRECTION IS MADE THIS PROXY WILL BE VOTED
"FOR" PROPOSALS 1, 2 AND 3.
