<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MONTEREY PASTA COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
June 15, 1999
Dear Stockholder:
This year's annual meeting of stockholders will be held on Thursday,
July 22, 1999 at 10:00 a.m., local time, at the Hyatt Regency Monterey, One
Old Golf Course Road, Monterey, California.
The Notice of Annual Meeting of Stockholders and a Proxy Statement,
which describes the formal business to be conducted at the meeting, follows
this letter.
After reading the Proxy Statement, please promptly complete, sign,
and return the enclosed proxy in the prepaid envelope to ensure that your
shares will be represented. Your shares cannot be voted unless you date,
sign, and return the enclosed proxy or attend the annual meeting in person.
Regardless of the number of shares you own, your careful consideration of,
and vote on, the matters before our stockholders is important.
A copy of the Company's Annual Report to Stockholders has previously
been mailed to you. At the annual meeting we will review Monterey Pasta's
activities over the past year and our plans for the future.
The Board of Directors and management look forward to seeing you at
the annual meeting.
Very truly yours,
/s/ R. LANCE HEWITT
R. LANCE HEWITT
President and Chief Executive Officer
IMPORTANT: Please complete, date, sign and promptly mail the enclosed proxy
card in the accompanying postage-paid envelope to ensure that your shares are
represented at the meeting. If you attend the meeting, you may choose to vote
in person even if you have previously sent in your proxy card.
<PAGE>
MONTEREY PASTA COMPANY
1528 MOFFETT STREET
SALINAS, CALIFORNIA 93905
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 22, 1999
TO THE STOCKHOLDERS:
Please take notice that the annual meeting of the stockholders of
Monterey Pasta Company, a Delaware corporation (the "Company"), will be held
on Thursday, July 22, 1999, at 10:00 a.m., local time, at the Hyatt Regency
Monterey, One Old Golf Course Road, Monterey, California, for the following
purposes:
1. To elect six (6) directors to hold office for one-year terms and
until their respective successors are elected and qualified.
2. To consider and vote upon a proposal to ratify the appointment of
BDO Seidman, LLP as the Company's independent public accountants for the
fiscal year ending December 26, 1999.
3. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on June 11, 1999, are
entitled to notice of, and to vote at, this meeting and any adjournment or
postponement thereof. For ten days prior to the meeting, a complete list of
the stockholders entitled to vote at the meeting will be available for
examination by any stockholder for any purpose relating to the meeting during
ordinary business hours at the principal office of the Company.
By order of the Board of Directors
/s/ STEPHEN L. BRINKMAN
STEPHEN L. BRINKMAN
Secretary and Chief Financial Officer
Salinas, California
June 15, 1999
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. PROXIES ARE REVOCABLE,
AND ANY STOCKHOLDER MAY WITHDRAW HIS OR HER PROXY PRIOR TO THE TIME IT IS
VOTED, OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
MONTEREY PASTA COMPANY
1528 MOFFETT STREET
SALINAS, CALIFORNIA 93905
The accompanying proxy is solicited by the Board of Directors of Monterey
Pasta Company, a Delaware corporation ("Monterey Pasta" or the "Company"),
for use at its annual meeting of stockholders to be held on July 22, 1999, or
any adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. The date of this Proxy
Statement is June 15, 1999, the approximate date on which this Proxy
Statement and the accompanying form of proxy were first sent or given to
stockholders.
SOLICITATION AND VOTING OF PROXIES
This solicitation of proxies is made on behalf of the Board of Directors
of the Company and the cost of soliciting proxies will be borne by the
Company. In addition to soliciting stockholders by mail through its regular
employees, the Company will request banks and brokers, and other custodians,
nominees and fiduciaries, to solicit their customers who have stock of the
Company registered in the names of such persons and will reimburse them for
their reasonable, out-of-pocket costs. The Company may use the services of
its officers, directors, and others to solicit proxies, personally or by
telephone, without additional compensation.
On June 11, 1999, the Company had outstanding 12,890,094 shares of its
Common Stock, $.001 par value per share ("Common Stock"), all of which are
entitled to vote with respect to all matters to be acted upon at the annual
meeting. Each stockholder of record as of that date is entitled to one vote
for each share of Common Stock held by him or her on the proposals presented
in this Proxy Statement. The Company's Bylaws provide that a majority of all
of the shares of the stock entitled to vote, whether present in person or
represented by proxy, shall constitute a quorum for the transaction of
business at the meeting.
All valid proxies received before the meeting will be exercised. All
shares represented by a proxy will be voted, and where a stockholder
specifies by means of his or her proxy a choice with respect to any matter to
be acted upon, the shares will be voted in accordance with the specification
so made. If no choice is indicated on the proxy, the shares will be voted in
favor of the proposal. A stockholder giving a proxy has the power to revoke
his or her proxy at any time before the time it is exercised by delivering to
the Secretary of the Company a written instrument revoking the proxy or a
duly executed proxy with a later date, or by attending the meeting and voting
in person.
INFORMATION ABOUT MONTEREY PASTA COMPANY
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of May 28, 1999
with respect to the beneficial ownership of the Company's Common Stock by
(i) each director and director-nominee of the Company, (ii) the Chief
Executive Officer and the other highest compensated executive officer of the
Company whose salary and bonus for the fiscal year ended December 27, 1998
exceeded $100,000, (iii) all directors and executive officers of the Company
as a group, and (iv) each person or entity known by the Company to own more
than 5% of the Company's Common Stock.
-1-
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
---------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER (1) NUMBER OF SHARES PERCENTAGE OF CLASS
- ------------------------------------------------------ ---------------- -------------------
<S> <C> <C>
Clearwater Fund IV LLC 1,483,934 10.1%
611 Druid Road East, Suite 200
Clearwater, Florida 34616
Gruber and McBaine Capital Management (2) 1,646,700 11.2%
50 Osgood Place, Penthouse
San Francisco, CA 94133
Thomas E. Kees (3) 13,000 *
Van Tunstall (4) 77,300 *
Floyd R. Hill (5) 159,000 1.1%
James Wong (6) 15,000 *
R. Lance Hewitt (7) 147,000 1.0%
Charles B. Bonner (8) 124,727 *
Stephen L. Brinkman (9) 51,000 *
All Officers and Directors as a group (7 persons) (10) 587,027 4.0%
</TABLE>
- -------------------------
* Represents less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants held by that person
that are currently exercisable or will become exercisable within sixty (60)
days after May 28, 1999 are deemed outstanding, while such shares are not
deemed outstanding for purposes of computing percentage ownership of any
other person. Options granted under the Company's First Amended and
Restated 1993 Stock Option Plan (the "1993 Stock Option Plan") generally
become exercisable as the underlying shares vest. Unless otherwise
indicated in the footnotes below, the persons and entities named in the
table have sole voting and investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Unless otherwise indicated, the address of each of the individuals listed
in the table is: c/o Monterey Pasta Company, 1528 Moffett Street, Salinas,
CA 93905.
(2) John D. Gruber and J. Patterson McBaine are the only directors of, and hold
all executive offices of, Gruber and McBaine Capital Management ("GMCM"),
an investment advisor. GMCM, together with Messrs. Gruber, McBaine, and
Thomas O. Lloyd-Butler, are the general partners of Lagunitas Partners,
L.P. ("Lag"), a California investment limited partnership. As of May 28,
1999, GMCM had shared voting and investment power over 1,231,700 shares;
Mr. Gruber has sole voting and investment power over 206,700 shares and
shared voting and investment power over 1,231,700 shares; Mr. McBaine has
sole voting and investment power over 208,300 shares and shared voting and
investment power over 1,231,700 shares; Lag has sole voting and investment
power over 312,900 shares; and Mr. Butler has shared voting and investment
power over 1,231,700 shares.
-2-
<PAGE>
(3) Includes 5,000 shares subject to options granted under the 1993 Stock
Option Plan which are exercisable within sixty (60) days of May 28, 1999.
(4) Includes 15,000 shares subject to options granted under the 1993 Stock
Option Plan which are exercisable within sixty (60) days of May 28, 1999.
(5) Includes 59,000 shares subject to options granted under the 1993 Stock
Option Plan which are exercisable within sixty (60) days of May 28, 1999.
(6) Includes 15,000 shares subject to options granted under the 1993 Stock
Option Plan which are exercisable within sixty (60) days of May 28, 1999.
(7) Includes 132,000 shares subject to options granted under the 1993 Stock
Option Plan which are exercisable within sixty (60) days of May 28, 1999.
(8) Includes 71,000 shares subject to options granted under the 1993 Stock
Option Plan which are exercisable within sixty (60) days of May 28, 1999.
(9) Includes 33,000 shares subject to options granted under the 1993 Stock
Option Plan which are exercisable within sixty (60) days of May 28, 1999.
(10) Includes 330,000 shares subject to options granted under the 1993 Stock
Option Plan which are exercisable within sixty (60) days of May 28, 1999.
BOARD OF DIRECTORS
The Company's Bylaws authorize a nine member Board of Directors;
however, the Board currently consists of six directors. At each Annual
Meeting of Stockholders, directors are elected for a full term of one year to
succeed those directors whose terms expire on such Annual Meeting date.
Management's nominees for election to the Board of Directors, and
certain information with respect to their age and background, are set forth
below. If elected, the nominees will serve as directors until the Company's
Annual Meeting of Stockholders in 2000, and until their successors are
elected and qualified. Management knows of no reason why any nominee should
be unable or unwilling to serve. However, if any nominee declines to serve or
becomes unavailable for any reason, or if a vacancy occurs before the
election, the proxies may be voted for such substitute nominees as management
may designate.
If a quorum is present and voting, the nominees for director receiving
the highest number of votes will be elected as directors. Abstentions and
shares held by brokers that are present, but not voted because the brokers
were prohibited from exercising discretionary authority, i.e., "broker
non-votes," will be counted as present for the purposes of determining if a
quorum is present.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
Charles B. Bonner 57 Director 1995
R. Lance Hewitt 59 Chief Executive Officer, President 1997
and Director
Floyd R. Hill 55 Director 1995
Thomas E. Kees 48 Director 1998
Van Tunstall 53 Director 1997
James Wong 52 Director 1997
</TABLE>
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<PAGE>
CHARLES B. BONNER. Mr. Bonner served as a Director of the Company from
1993 through January 1995, and was reappointed as a Director effective
September 1995. Mr. Bonner is President of Pacific Resources, Inc., a mergers
and acquisitions advisory firm, a position he has held since September 1989.
Mr. Bonner also serves as a director for the following entities: Organic Food
Products, Everything Metal Imaginable, Inc., and Daystar Funds, L.P.
R. LANCE HEWITT. Mr. Hewitt joined the Company in June 1997 as
President and Director. He was named Chief Executive Officer in August 1997.
Mr. Hewitt was most recently President of Carriage House Fruit Company from
1995 to 1997. He was Chief Operating Officer of Ingro Mexican Foods from 1988
to 1995. Mr. Hewitt also served as Vice President of Marketing and Sales for
the Lawry's Foods division of Thomas J. Lipton, Inc., a subsidiary of
Unilever, and spent fifteen years with McCormick Schilling, Inc. in various
executive capacities.
FLOYD R. HILL. Mr. Hill co-founded the Company in 1989, served as its
Secretary/Treasurer and Chief Executive Officer until 1993, and served as a
Director of the Company from 1989 until 1994. Mr. Hill became a Director
again in January 1995. He also served as the Senior Vice President of
Production from August 1993 until November 1995. From 1969 until 1991, Mr. Hill
was employed by Eli Lilly & Co. in various marketing and product development
positions. Mr. Hill joined Organic Food Products in November 1995 as Chief
Operating Officer, and was promoted to Chief Executive Officer in December
1995, a position he held until April 1998. He is currently serving as an
independent consultant to Organic Food Products and is the owner and operator
of a motel in Tombstone, Arizona.
THOMAS E. KEES. Mr. Kees has served as President, Chief Executive
Officer, and Chairman of Legacy Brands, Inc. since September 1995. Legacy is
a licensing and marketing company for highly recognized food products such as
Mrs. Field's frozen desserts, Gumby food and beverage items and Mattel's
Extreme Dinosaurs. From 1994 to 1995 he was the Senior Vice President of
Retail Development at A.C. Nielsen where he founded and chaired the Nielsen
Retail Advisory Board. Mr. Kees served as Executive Vice President of Raley's
Supermarkets and Drug Centers, a regional sales operator of 85 Stores in
Northern California and Nevada, from 1992 to 1994.
VAN TUNSTALL. Mr. Tunstall was elected to the Company's Board of
Directors in February 1997. He has been an independent consultant with a
variety of companies since 1997. Mr. Tunstall was a senior executive with
Gilroy Foods, Inc., an international manufacturer of various food product
ingredients, from 1977 to 1995. He served as President and Chairman of the
Board of the Company from 1991 through 1995. Previously, Mr. Tunstall held
various positions with McCormick & Company, Inc.
JAMES WONG. Mr. Wong was elected to the Company's Board of Directors in
March 1997. He serves as Chairman and Chief Executive Officer of Directions
International, a U.S. based management consulting firm, which he founded in
1988. He has worked on five continents facilitating strategic alliances with
suppliers and joint venture partners to improve global market share and
profitability. Mr. Wong serves on the Boards of Directors for a variety of
profit and not-for-profit, privately held organizations.
BOARD MEETINGS AND COMMITTEES
The Company has an Audit Committee, a Compensation Committee and a
Nominating Committee.
The functions of the Audit Committee include: recommending to the Board,
subject to stockholder approval, the retention of independent public
accountants; reviewing and approving the planned scope, proposed fee
arrangements and results of the Company's annual audit; reviewing the
adequacy of accounting and financial controls; reviewing the independence of
the Company's independent public accountants; approving all assignments
-4-
<PAGE>
to be performed by the Company's independent public accountants; and
instructing the Company's independent public accountants, as deemed
appropriate, to undertake special assignments. The members of the Audit
Committee during fiscal year 1998 were Charles B. Bonner, Floyd R. Hill and
Thomas E. Kees. The Audit Committee held two meetings during the fiscal year
ended December 27, 1998.
The Compensation Committee's function is to review and recommend
executive compensation, including officer salary levels, incentive
compensation programs and stock option grants, and executive recruitment
matters. The members of the Compensation Committee are Van Tunstall and James
Wong. During the fiscal year ended December 27, 1998, the Compensation
Committee held four meetings. See "COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION" and "REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION."
In January 1998, the Board of Directors appointed a Nominating Committee
due to the resignations of Timothy J. Ryan, Robert Steel and Kenneth Steel,
Jr. from the Board of Directors. The Nominating Committee's function is to
research and propose potential candidates for the Company's Board of
Directors. The members of the Nominating Committee were Daniel Gallery and
Van Tunstall, until Mr. Gallery's resignation from the Board in August 1998.
No one has been named to replace Mr. Gallery.
During the fiscal year ended December 27, 1998, the Board of Directors
of the Company held five meetings. No director attended fewer than 80% of the
total number of meetings of the Board. Each director attended 100% of committee
meetings on which he was serving during that period.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning compensation of
(i) the Chief Executive Officer of the Company and (ii) the other most highly
compensated executive officer of the Company as of December 27, 1998 whose
total salary and bonus for the fiscal year ended December 27, 1998 exceeded
$100,000, for services in all capacities to the Company earned during the
fiscal years ended December 27, 1998, December 28, 1997, and December 29,
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------------ ------------------------
Securities
Name and Fiscal Underlying All
Principal Position Year Salary $ Bonus $ Other $ Options (#) Other $
- ----------------------- ------ ----------- ---------- --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
R. LANCE HEWITT 1998 $175,000(1) $61,250(1) $9,000(1) -(1) $ -
President and Chief 1997 $ 94,231(1) N/A $4,500(1) 100,000(1) N/A
Executive Officer 1996 N/A N/A N/A N/A N/A
STEPHEN L. BRINKMAN 1998 $115,293(2) $23,540(2) -(2) -(2) $ -
Chief Financial Officer 1997 $ -(2) $ -(2) -(2) 60,000(2) $ -
1996 N/A N/A N/A N/A N/A
</TABLE>
Notes:
(1) Mr. Hewitt was appointed President in June 1997 and Chief Executive
Officer in August 1997. He was eligible for a 35% bonus upon completing his
first full year of employment, which was paid in June 1998. For every year
thereafter he is eligible for a bonus of up to a maximum of 35% of his salary
annually for achieving agreed-upon income targets, as approved by the Board
of Directors, and an additional 25% of his salary for achieving certain
specific objectives for each fiscal period. He was eligible to vest and
vested 50,000 options in each year, because he was still employed by the
Company on both the first and second anniversaries of his May 26, 1997
employment agreement. Mr. Hewitt was also eligible to receive, at the
discretion of the Board of Directors, an additional 200,000 options during
the first two years of employment split as follows: 120,000 for achieving
agreed-upon business goals in the first year and 80,000 for achieving
business goals in the second year. The cycle for measurement of Mr. Hewitt's
eligibility for bonus, and those options tied to performance, was converted
to a fiscal
-5-
<PAGE>
year basis during the fourth quarter of 1998 by resolution of the Board of
Directors at its October 22, 1998 meeting. At its February 9, 1999 meeting,
the Board of Directors awarded options to purchase 32,000 shares of the
Company's Common Stock to Mr. Hewitt for performance in his first full year
of employment through the fiscal year ended December 27, 1998, based on the
new measurement cycle. The determination for the remainder of the options
will be made subsequent to 1999 fiscal year-end. Mr. Hewitt also receives an
auto allowance of $750 per month.
(2) Mr. Brinkman was appointed Chief Financial Officer in September 1997. He
was eligible for, and received, a 20% performance-based bonus upon completion
of his first full year of employment. For every year thereafter he is
eligible for a bonus of up to 20% based upon the achievement of performance
criteria agreed upon with the Chief Executive Officer. Mr. Brinkman was
granted options to purchase 60,000 shares of the Company's Common Stock in
1997. He vested options to purchase 10,000 shares upon his initial employment
date, options to purchase 10,000 shares on his first anniversary and options
to purchase 10,000 shares for achieving certain performance criteria in his
first full year of employment. In addition, he is eligible to vest options to
purchase 10,000 shares on his second anniversary of employment, options to
purchase 10,000 shares for achieving certain performance criteria in his
second full year of employment, options to purchase 5,000 shares on his third
anniversary of employment and options to purchase 5,000 shares for achieving
certain performance criteria in his third full year of employment. The cycle
for measurement of Mr. Brinkman's eligibility for bonus, and those options
tied to performance, was converted to a fiscal year basis during the fourth
quarter of 1998 at the direction of the Chief Executive Officer. He vested
options to purchase 3,000 shares for performance through fiscal year-end
1998, based on the new measurement cycle. The determination for the remainder
of the options will be made subsequent to 1999 fiscal year-end.
STOCK OPTIONS GRANTED IN LAST FISCAL YEAR
No grants of options to purchase Common Stock were made during the
fiscal year ended December 27, 1998 to the persons named in the Summary
Compensation Table. No options to purchase Common Stock were exercised during
the fiscal year ended December 27, 1998 by any person named in the Summary
Compensation Table.
OPTION EXERCISES AND YEAR-END VALUES FOR THE FISCAL YEAR-ENDED DECEMBER 27, 1998
The following table provides the specified information concerning
exercises of options to purchase the Company's Common Stock in the fiscal
year ended December 27, 1998, and unexercised options held as of December 27,
1998 by the persons named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at December 27, 1998 at December 27, 1998 ($)
------------------------------ ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
R. Lance Hewitt 50,000 50,000 0 0
Stephen L. Brinkman 30,000 30,000 0 0
</TABLE>
-6-
<PAGE>
COMPENSATION OF DIRECTORS
At the Company's 1995 Annual Meeting of Stockholders, the Company's
stockholders 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 director of the Company on October 19, 1994, the effective date
of the amendment and restatement of the 1993 Stock Option Plan, if such
non-employee director was serving at such time or for non-employee directors
appointed or elected after such date, upon the date of such appointment or
election, 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). The director options vest 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 director from the date
of grant. During the fiscal year ended December 27, 1998, the following
non-employee directors qualified to receive stock options to purchase shares
of the Company's Common Stock under the plan: Messrs. Gallery, Bonner, Hill,
Tunstall, Kees, and Wong.
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's 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 and vesting of such option, in its sole discretion. The exercise
price may 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 director or employee
from the date of grant. Directors are also reimbursed for out-of-pocket
travel expenses related to Board Meetings and receive a stipend of $1,000 for
each Board meeting attended.
CERTAIN TRANSACTIONS WITH MANAGEMENT
There were no reportable transactions with management or directors
during the fiscal year ended December 27, 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 27, 1998, executive compensation
was administered by the Compensation Committee comprised of two outside
directors of the Board of Directors, Daniel J. Gallery and Van Tunstall.
Mr. Gallery was replaced on the Compensation Committee by James Wong in
August 1998 upon Mr. Gallery's resignation from the Board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who
beneficially own more than 10% of the Company's Common Stock, to file with
the SEC initial reports of ownership and reports of changes in ownership.
Such persons are required by SEC regulations to furnish the Company with
copies of all reports they file under Section 16(a). To the Company's
knowledge, based solely on its review of the copies of such reports furnished
to the Company and written representations that no other reports were
required, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% stockholders were complied with during the
fiscal year ended December 27, 1998, with three exceptions: Mr. Tom Kees'
Form 4 report for August 1998 was filed one day late, the Form 5 for 1997 for
Mr. Ken Steel, a former CEO and Director was filed late, and Mr. Dan
Gallery's Form 4 for May 1998 was returned for corrections and subsequently
refiled after the original due date.
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<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE FOR
YEAR ENDED DECEMBER 27, 1998
The Compensation Committee is normally comprised of three non-employee
directors of the Company. The 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 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 stockholders. Because stock options will be
granted at the prevailing market price, they will only have value if the
Company's stock price increases over the exercise price. Therefore, the
Committee believes that stock options will serve to align the interests of
executive officers closely with other stockholders through 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.
During the fiscal year ended December 27, 1998, the Committee granted
options to all salaried employees and repriced all outstanding employee
(excluding officer-employees) options to $1.125, which was the fair market
value of a share of the Company's Common Stock on the date of the repricing.
The Committee also established a bonus plan for all salaried employees to be
paid based on achievement of quarterly and annual net income goals. In
addition, the Committee reviewed the performance goals for Mr. Hewitt and
established objectives for stock price and net income for fiscal 1999. The
Committee recommended, and in February 1999 the Board of Directors approved,
the conversion of Mr. Hewitt's performance evaluation period from his
employment anniversary to coincide with the fiscal year-end. In February
1999, Mr. Hewitt was also awarded additional options to purchase 32,000
shares of the Company's Common Stock based on the Company's 1998 financial
performance.
Mr. Timothy Ryan resigned from the Compensation Committee concurrent
with his resignation from the Board of Directors in December 1997. He was not
replaced on the Committee. Mr. Gallery resigned August 3, 1998, and was
replaced by Mr. Wong.
THE COMPENSATION COMMITTEE
James Wong
Van Tunstall
-8-
<PAGE>
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on the Company's Common Stock with the
cumulative total return of the Nasdaq Stock Market Index (U.S. Companies) and
peer issuers for the period commencing on December 31, 1993(1) and ending on
December 31, 1998.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM DECEMBER 31, 1993
THROUGH DECEMBER 31, 1998:
MONTEREY PASTA COMPANY, NASDAQ STOCK MARKET INDEX
(U.S. COMPANIES) AND PEER ISSUERS
[GRAPH]
<TABLE>
<CAPTION>
DEC. 30, 1994 DEC. 29, 1995 DEC. 31, 1996 DEC. 31, 1997 DEC. 31, 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Monterey Pasta Company $60.6 $ 44.7 $ 13.8 $ 12.2 $ 12.2
NASDAQ Stock Market (U.S.) $97.8 $138.3 $170.0 $208.3 $293.5
Peer Issuers $88.4 $ 89.4 $114.5 $131.2 $208.8
</TABLE>
- -----------
(1) Assumes that $100.00 was invested in the Company's Common Stock on
December 31, 1993, and that all dividends were reinvested. No dividends have
been declared on the Company's Common Stock. Stockholder returns over the
indicated period should not be considered indicative of future stockholder
returns.
-9-
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Six directors are to be elected to the Company's Board of Directors at
the 1999 Annual Meeting of Stockholders. Management has not yet identified
suitable candidates to serve as the seventh, eighth, and ninth directors. The
Board of Directors continues to evaluate prospective candidates. Management's
nominees for election are R. Lance Hewitt, Charles B. Bonner, Floyd R. Hill,
Thomas E. Kees, Van Tunstall, and James Wong. If elected, the nominees will
serve as directors until the Company's Annual Meeting of Stockholders in
2000, and until their successors are duly elected and qualified. If any of
the nominees decline to serve or become unavailable for any reason, or if a
vacancy occurs before the election (although management knows of no reason to
anticipate that this will occur), the proxies may be voted for such
substitute nominees as management may designate.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
If a quorum is present and voting, the six nominees for director
receiving the highest number of votes will be elected. Abstentions and broker
non-votes will be counted as present for purposes of determining if a quorum
is present. However, abstentions and broker non-votes will have no effect on
the outcome of the vote. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" MESSRS. BONNER, HEWITT, HILL, KEES, TUNSTALL, AND WONG.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected BDO Seidman, LLP as
the independent public accountants to audit the financial statements of the
Company for the fiscal year ending December 26, 1999. A representative of BDO
Seidman, LLP is expected to be present at the annual meeting with the
opportunity to make a statement if the representative desires to do so, and
is expected to be available to respond to appropriate questions.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast at the Annual
Meeting of Stockholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present and voting,
either in person or by proxy, is required for approval of this proposal.
Abstentions and broker non-votes will each be counted as present for purposes
of determining the presence of a quorum. However, abstentions and broker
non-votes will have no effect on the outcome of the vote. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF BDO
SEIDMAN, LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL
YEAR ENDING DECEMBER 26, 1999.
-10-
<PAGE>
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual
meeting of the stockholders of the Company must be received by the Company at
its offices at 1528 Moffett Street, Salinas, California 93905, no later than
February 15, 2000, and satisfy the conditions established by the Securities
and Exchange Commission for stockholder proposals to be included in the
Company's proxy statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board
of Directors intends to present or knows that others will present at the
meeting is as set forth above. If any other matter or matters are properly
brought before the meeting, or any adjournment or postponement thereof, it is
the intention of the persons named in the accompanying form of proxy to vote
the proxy on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ STEPHEN L. BRINKMAN
STEPHEN L. BRINKMAN
Secretary and Chief Financial Officer
June 15, 1999
-11-
<PAGE>
MONTEREY PASTA COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints R. Lance Hewitt and Stephen L. Brinkman, and
each of them, with full power of substitution to represent the under signed and
to vote all of the shares of stock in Monterey Pasta Company ("the Company")
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of said Company to be held at the Hyatt Regency Monterey, One Old Golf Course
Road, Monterey, California on Thursday, July 22, 1999 at 10:00 a.m., local time,
and at any adjournment thereof (1) as hereinafter specified upon the proposals
listed on the reverse side and as more particularly described in the Company's
Proxy Statement, receipt of which is hereby acknowledged, and (2) in their
discretion upon such other matters as may properly come before the meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1 AND 2.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
A vote FOR the following proposals is recommended by the Board of Directors:
1. Election of Directors
NOMINEES: Charles B. Bonner, Floyd R. Hill, Thomas E. Kees, Van Tunstall, James
Wong and R. Lance Hewitt
/ / FOR / / WITHHELD
/ / For all nominees except as noted above
2. To approve the selection of BDO Seidman, LLP as the Company's independent
public accountants for the current fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
MARK HERE
FOR ADDRESS
CHANGE AND / /
NOTE BELOW
Even if you are planning to attend the meeting in person, you are urged to sign
and mail the Proxy in the return envelope so that your stock may be represented
at the meeting.
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand on record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the above Proxy. If shares of stock are held on record by a
corporation, the Proxy should be executed by the President or Vice President and
the Secretary or Assistant Secretary, and the corporate seal should be affixed
thereto. Executors, administrators or other fiduciaries who execute the above
Proxy for a deceased stockholder should give their full title. PLEASE DATE THE
PROXY.
SIGNATURE(S)____________________________________________ DATE _________________
