INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Darling International Inc.
-------------------------------------------
(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:
N/A
-------------------------------
/ / 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>
DARLING INTERNATIONAL INC.
251 O'Connor Ridge Boulevard
Suite 300
Irving, Texas 75038
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 20, 1997
The enclosed proxy is solicited by the Board of Directors of Darling
International Inc. (the "Company"). This Proxy Statement and the accompanying
form of proxy, Notice of Annual Meeting of Stockholders and letter to
stockholders are first being mailed to stockholders of the Company on or about
April 25, 1997, in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Annual Meeting of Stockholders (the
"Meeting") to be held at The Mansion on Turtle Creek, 2821 Turtle Creek, Dallas,
Texas, on Tuesday, May 20, 1997, at 10:00 a.m.
SOLICITATION OF PROXIES
The expense of the solicitation of proxies will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may be
made by the directors, officers and employees of the Company by other means,
including telephone, telegraph or in person. No special compensation will be
paid to directors, officers or employees for the solicitation of proxies. To
solicit proxies, the Company also will request the assistance of banks,
brokerage houses and other custodians, nominees or fiduciaries, and, upon
request, will reimburse such organizations or individuals for their reasonable
expenses in forwarding soliciting materials to beneficial owners and in
obtaining authorization for the execution of proxies. The Company will also use
the services of the proxy solicitation firm of Corporate Investor
Communications, Inc. to assist in the solicitation of its proxies. For such
services the Company will pay a fee that is not expected to exceed $5,000, plus
out-of-pocket expenses.
PURPOSE OF MEETING
At the Meeting, action will be taken to (1) elect five directors to
hold office until the next annual meeting of stockholders and until their
successors shall have been elected and qualified and (2) amend the 1994 Employee
Flexible Stock Option Plan (the "1994 Plan") (a) to increase the number of
shares of Common Stock, par value $.01 per share, of the Company (the "Common
Stock"), issuable thereunder from 500,000 to 684,066, which additional 184,066
shares are authorized but unissued shares under the 1993 Flexible Stock Option
Plan (the "1993 Plan") (no further options will be issued under the 1993
Flexible Stock Option Plan); (b) to clarify which directors of the Company may
serve on the Compensation and Management Development Committee (the
"Compensation Committee") which administers the 1994 Plan; (c) to set an upper
limit on the number of options that may be granted to any individual under the
1994 Plan in any calendar year; and (d) to increase the upper limit on the
number of shares of Common Stock of the Company that are issuable under the 1994
Plan to any individual in any calendar year. The Board of Directors does not
know of any other matter that is to come before the Meeting. If any other
matters are properly presented for consideration, however, the persons
authorized by the enclosed proxy will have discretion to vote on such matters in
accordance with their best judgment.
Stockholders are urged to sign the accompanying form of proxy,
solicited on behalf of the Board of Directors of the Company, and, immediately
after reviewing the information contained in this Proxy Statement and in the
Annual Report outlining the Company's operations for the fiscal year ended
December 28, 1996, return it in the envelope provided for that purpose. If the
accompanying proxy card is properly signed and returned to the Company prior to
the Meeting, it will be voted at the Meeting and any adjournment or adjournments
thereof in the manner specified therein. If no directions are given but proxies
are executed in the manner set forth therein, such proxies will be voted FOR the
election of the nominees for director set forth in this Proxy Statement and FOR
the amendments to the 1994 Plan.
REVOCATION OF PROXY
Any stockholder returning the accompanying proxy may revoke such proxy
at any time prior to its exercise by giving written notice to the Secretary of
the Company of such revocation, voting in person at the Meeting, or executing
and delivering to the Secretary of the Company a later-dated proxy.
QUORUM AND VOTING REQUIREMENTS
Only stockholders of record as of the close of business on April 11,
1997 (the "Record Date"), are entitled to notice of and to vote at the Meeting
or any adjournments thereof. As of the close of business on the Record Date,
there were 5,167,494 shares of the Company's Common Stock, issued and
outstanding and entitled to vote. The Common Stock constitutes the only class of
capital stock of the Company issued and outstanding. Each stockholder of record
on the Record Date is entitled to one vote for each share of Common Stock held.
A majority of the outstanding shares of Common Stock, represented in person or
by proxy, will constitute a quorum at the Meeting; however, if a quorum is not
present or represented at the Meeting, the stockholders entitled to vote
thereat, present in person or represented by proxy, have the power to adjourn
the Meeting from time to time, without notice, other than by announcement at the
Meeting, until a quorum is present or represented. At any such adjourned Meeting
at which a quorum is present or represented, any business may be transacted that
might have been transacted at the original Meeting.
Each share of Common Stock may be voted to elect up to five individuals
(the number of directors to be elected) as directors of the Company and to
approve or disapprove the amendments to the 1994 Plan. To be elected, each
nominee must receive a plurality of all votes cast with respect to such position
as director. It is intended that, unless authorization to vote for one or more
nominees for director is withheld, proxies will be voted FOR the election of all
of the nominees named in this Proxy Statement. For all other matters being
submitted to stockholders at the Meeting, the affirmative vote of a majority of
all votes cast is required for approval.
Votes cast by proxy or in person will be counted by two persons
appointed by the Company to act as inspectors for the Meeting. The election
inspectors will treat shares represented by proxies that reflect abstentions as
shares that are present and entitled to vote for the purpose of determining the
presence of a quorum. Abstentions will have no effect on the outcome of the
election of directors. For all other matters being submitted to the stockholders
at the Meeting, abstention votes will have the effect of a vote against such
matters.
Broker non-votes occur where a broker holding stock in street name
votes the shares on some matters but not others. Brokers are permitted to vote
on routine, non-controversial proposals in instances where they have not
received voting instructions from the beneficial owner of the stock but are not
permitted to vote on non-routine matters. The missing votes on non-routine
matters are deemed to be "broker non-votes." The election inspectors will treat
broker non-votes as shares that are present and entitled to vote for the purpose
of determining the presence of a quorum. However, for the purpose of determining
the outcome of any matter as to which the broker or nominee has indicated on the
proxy that it does not have discretionary authority to vote, those shares will
be treated as not present and not entitled to vote with respect to that matter
(even though those shares are considered entitled to vote for quorum purposes
and may be entitled to vote on other matters).
<PAGE>
Proposal No. 1
ELECTION OF DIRECTORS
The current Board of Directors consists of five members and two
unfilled vacancies. At the Meeting, five directors, to hold office until the
next annual meeting of stockholders and until their successors have been elected
and qualified, are to be elected. Each of the nominees has consented to serve as
a director if elected. If any of the nominees shall become unable or unwilling
to stand for election as a director (an event not now anticipated by the Board
of Directors), proxies will be voted for such substitute as shall be designated
by the Board of Directors. The following table sets forth for each nominee for
election as a director of the Company, his age, principal occupation, position
with the Company, if any, and certain other information.
<TABLE>
<S> <C> <C> <C>
Name Age Principal Occupation Director Since
--------------------------- ----- --------------------------------------------- --------------
Craig Scott Bartlett, Jr. 64 Mr. Bartlett has served as a March 1994
banking consultant since 1990. Since
December 1994 Mr. Bartlett has
served as a director, and from
February 1992 to December 1994 as Sr
Vice President and Chief Credit
Officer of MTB Bank, a private
banking firm.
From 1984 to 1990, Mr. Bartlett was
Executive Vice President, Senior
Lending Officer and Chairman, Credit
Policy Committee, of National
Westminster Bank, USA. Mr. Bartlett
served as a member of the Advisory
Board of the Montclair Division of
Collective Federal Savings Bank until
April 1996, and serves as a director
of Western Systems Company Inc.; NVR
Inc.; Harvard Industries,
Incorporated; Ocean View Capital
Inc.; Bucyrus International Inc.; The
Bibb Company; and Janus, Inc..
Fredric J. Klink 63 Mr. Klink has been a partner at the law firm April 1995
of Dechert Price & Rhoads for more than five
years. Mr. Klink's law practice
concentrates on mergers and acquisitions,
securities, and international work. He
received his LL.B. from Columbia Law School
in 1960.
Dennis B. Longmire 52 Dr. Longmire has served as Chairman of the March 1995
Board and Chief Executive Officer of the
Company since March 1995. Prior to that,
Dr. Longmire was President of Premiere
AgriTechnologies, a wholly owned subsidiary
of Archer-Daniels-Midland Co. ("A.D.M.").
From 1969 to January 1994, at which time
Central Soya Co., Inc. ("Central") was
acquired by A.D.M., Dr. Longmire was
employed by Central, where he held various
management positions, including Group Vice
President for Feed.
Denis J. Taura 57 In October 1991, Mr. Taura founded D. Taura December 1993
& Associates, a management consulting firm,
of which Mr. Taura serves as chairman. From
January 1995 through October 1996, Mr. Taura
was also affiliated with Zolfo Cooper LLC, a
management consulting firm. From 1972 to
October 1991, Mr. Taura was a partner with
KPMG Peat Marwick. Mr. Taura serves as a
director of Best Products Co., Inc.;
Healthcare America Inc; and Geonex
Corporation.
Bruce Waterfall 59 Mr. Waterfall is President and co-founder of March 1995
Morgens, Waterfall, Vintiadis & Company,
Inc. Mr. Waterfall has been a professional
money manager and analyst for more than
twenty-five years. Mr. Waterfall serves as
a director of Geonex Corporation and Irish
Food Processors.
</TABLE>
Meetings and Committees of the Board of Directors
During the fiscal year ended December 28, 1996, the Board of Directors
held four regular meetings and twelve special meetings, nine of which were
teleconference meetings. Each of the directors attended at least 75% of all
meetings held by the Board of Directors and all meetings of each committee of
the Board of Directors on which such director served during the fiscal year
ended December 28, 1996.
The Board of Directors has an audit committee (the "Audit Committee")
and the Compensation Committee. The Board of Directors does not have a
nominating committee.
The Audit Committee currently consists of Messrs. Taura (Chairman),
Bartlett and Klink. The Audit Committee met two times during the fiscal year
ended December 28, 1996. The functions of the Audit Committee are (i) to review
the audit plans, scope, fees, and audit results of the Company's independent
auditors; (ii) to review internal audit reports on the adequacy of internal
audit controls; (iii) to review non-audit services and fees; and (iv) to review
the scope of the internal auditors' plans, the results of their audits, and the
effectiveness of the Company's program of correcting audit findings. The Audit
Committee also recommends to the Board of Directors the independent auditors to
perform the annual audit of the Company's financial statements.
The Compensation Committee currently consists of Mr. Bartlett
(Chairman), Dr. Longmire (ex officio), Mr. Taura and Mr. Waterfall. The
Compensation Committee met two times during the fiscal year ended December 28,
1996. The functions of the Compensation Committee are (i) to review and
recommend to the Board of Directors the direct and indirect compensation and
employee benefits of the Company's executive officers; (ii) to review and
administer the Company's incentive, bonus, and employee benefit plans, including
the 1993 Plan, the 1994 Plan, and the Non-Employee Directors Stock Option Plan
(the "Directors Plan"); (iii) to review the Company's policies relating to
employee and executive compensation; and (iv) to review management's long-range
planning for executive development and succession. The Compensation Committee
also performs the functions of the nominating committee of the Board of
Directors.
Compensation of Directors
Non-employee members of the Board of Directors are paid a $40,000
annual retainer, plus a fee of $1,500 for each board meeting, $1,500 for each
committee meeting personally attended, and $500 for each meeting telephonically
attended during a calendar year after having attended six board or committee
meetings, as applicable, during such year.
Under the Directors Plan, each incumbent director who was a
disinterested person within the meaning of Rule 16b-3(c)(2)(i) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), was granted an option to
purchase 5,000 shares of Common Stock on the tenth business day of July 1995 and
will be granted an identical option on the tenth business day of July of each
year thereafter. New directors are granted an option to purchase 7,000 shares of
Common Stock on the day they are first elected to and duly qualify as a member
of the Board of Directors. The per share exercise price of each option granted
under the Directors Plan is equal to the fair market value per share of the
Company's Common Stock on the date of grant of the options relating thereto.
Twenty-five percent of the shares subject to each option vest on the date that
is six months following the date of grant and 25% of the shares vest on each of
the first, second and third anniversaries of the date of grant thereafter. An
option may be exercised only with respect to that portion of shares that has
vested. Options to purchase an aggregate of 150,000 shares of Common Stock may
be granted under the Directors Plan. The Directors Plan is administered by the
Compensation Committee.
If while unexercised options remain outstanding under the Directors
Plan, any of the following events occur, all options granted under the Directors
Plan become exercisable in full, whether or not they are otherwise exercisable:
(1) any entity other than the Company makes a tender or exchange offer for
shares of the Company's Common Stock pursuant to which purchases are made; (2)
the stockholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation or to sell all or
substantially all of the assets or adopt a plan of liquidation; (3) the
beneficial ownership of securities representing more than 15% of the combined
voting power of the Company is acquired by any person; or (4) during any period
of two consecutive years, the individuals who at the start of such period were
members of the Board of Directors cease to constitute at least a majority
thereof, unless the election of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at the
start of such period. In the case of a merger, where the Company is the
surviving entity and in which there is a reclassification of the shares of
Common Stock, each option shall become exercisable for the kind and amount of
shares of stock or other securities receivable upon such reclassification or
merger.
EXECUTIVE OFFICERS
The executive officers of the Company serve at the discretion of the
Board of Directors and are chosen annually by the Board at its first meeting
following the annual meeting of stockholders. The following table sets forth the
names and ages of the executive officers of the Company and all positions held
with the Company by each individual.
<TABLE>
<S> <C> <C>
Name Age Title
- -------------------- --- -------------------------------------------------
Dennis B. Longmire..................52 Chairman of the Board and Chief Executive Officer
Kenneth A. Ghazey (1)...............40 President and Chief Operating Officer
Douglas P. Anderson.................50 Executive Vice President
Omer A. Dreiling, II................43 Vice President - Southwest Division
James A. Ransweiler.................54 Vice President - Great Lakes Division
Robert E. McMullen.................51 President - International Processing Corp.
Robert L. Willis....................57 Vice President - Midwest Division
John R. Witt........................46 Vice President and Chief Financial Officer
Joseph R. Weaver, Jr................50 General Counsel and Secretary
<FN>
(1) Kenneth A. Ghazey served as President and Chief Operating Officer from
January 1993 to September 1996 and ceased employment December 1996. Upon
the execution of a Separation Agreement dated September 24, 1996 between
Mr. Ghazey and the Company, the Company formed a new position titled Office
of the Chairman, consisting of eight members: Dr. Longmire, Messrs.
Anderson, Dreiling, Ransweiler, Willis, Witt, McMullen and Weaver. James B.
Stevens, the former President of International Processing Corp., served as
a member of the Office of the Chairman but resigned from the such position
when he was replaced by Mr. McMullen as President of International
Processing Corp.
</FN>
</TABLE>
For a description of the business experience of Dr. Longmire,
see "Election of Directors."
Douglas P. Anderson has served as Executive Vice President since
December 1995 and member of the Office of the Chairman since September 1996.
Prior to December 1995, he served as Vice President of Marketing and Operations
since August 1991. From June 1990 to August 1991, Mr. Anderson served as Vice
President of Operations. Mr. Anderson is a director of the National Renderers
Association and was Vice Chairman of the Fats and Proteins Research Foundation.
Omer A. Dreiling, II has served as Vice President of the Company's
Southwest Division since 1986 and member of the Office of the Chairman since
September 1996. Mr. Dreiling is a past president of the Southwest Meat
Association and has served as a director of the Texas Renderers Association.
James A. Ransweiler has served as Vice President of the Company's Great
Lakes Division since August 1986, except for the period from January 1989 to
June 1990 when he served as Special Projects Coordinator. Mr. Ransweiler has
also served as a member of the Office of the Chairman since September 1996.
Robert E. McMullen has served as President of International Processing
Corp. since February 1997 and as a member of the Office of the Chairman since
February 1997. From 1991 to February 1997, he served as Regional Manager of
International Processing Corp. From 1982 to 1991, he worked in management
positions at International Bakerage.
Robert L. Willis has served as Vice President of the Company's Midwest
Division since August 1986 and member of the Office of the Chairman since
September 1996. From August 1983 to August 1986, he served as Assistant Division
Manager of the Company's Midwest Division.
John R. Witt has served as Vice President and Chief Financial Officer
of the Company since January 1996 and as a member of the Office of the Chairman
since September 1996. He served as Secretary of the Company from June 1996 to
April 1997. From March 1992 to May 1995, Mr. Witt served as Chief Financial
Officer of Intertrans Corporation, an international freight forwarding company.
From May 1995 to December 1995, he served as Chief Financial Officer of Fritz
Air Freight Division.
Joseph R. Weaver, Jr. has served as General Counsel of the Company
since March 1997, as a member of the Office of the Chairman since March 1997 and
as Secretary of the Company since April 1997. From May 1994 to March 1997, he
served as Secretary and General Counsel of AAF-McQuay, Inc. From January 1990 to
April 1994, Mr. Weaver served as Assistant General Counsel of AAF-McQuay, Inc.,
then known as Snyder General Corporation.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
annual and long-term compensation for services in all capacities for fiscal
years 1996, 1995 and 1994 paid to Dennis B. Longmire, the Company's Chief
Executive Officer, the other four most highly compensated executive officers of
the Company who were serving as such at December 28, 1996, and Kenneth A.
Ghazey, who served as the Company's President and Chief Operating Officer but
officially ceased employment as of December 31, 1996 (hereinafter collectively
referred to as the "Named Officers"):
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE (1)
Long-Term
Annual Compensation Compensation
------------------------ ------------
<S> <C> <C> <C> <C> <C>
Number of
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus Options Compensation
- ------------------------------- ---- -------- -------- ---------- ---------------
Dennis B. Longmire, 1996 $390,000 $117,000 -- --
Chairman and Chief Executive 1995 292,500 261,495 180,000 --
Officer 1994 -- -- -- --
Kenneth A. Ghazey, 1996 350,000 105,000 --
President, Secretary and 1995 350,000 312,900 -- $372,882 (2)
Chief Operating Officer 1994 350,000 263,760 --
22,883 (3)
18,522 (3)
Douglas P. Anderson, 1996 206,500 51,625 -- --
Executive Vice President 1995 196,500 121,830 -- --
1994 190,000 41,420 -- --
James A. Ransweiler, 1996 184,000 28,646 -- --
Vice President 1995 175,000 114,100 -- --
1994 170,000 41,420 -- --
Omer A. Dreiling, II, 1996 176,000 60,014 -- --
Vice President 1995 160,000 112,000 -- --
1994 145,500 67,244 -- --
Robert L. Willis 1996 184,000 46,000 -- 37,716 (4)
Vice President 1995 175,000 92,786 -- --
1994 170,000 68,009 -- --
<FN>
(1) No information is provided for fiscal years 1995 and 1994 for any Named
Officer who was not an executive officer of the Company during the
applicable fiscal year.
(2) Amount represents compensation paid to Mr. Ghazey pursuant to the terms of a
Separation Agreement, dated September 25, 1996 between Mr. Ghazey and the
Company in respect of his resignation of employment with the Company
($350,000) and premiums paid by the Company with respect to split-dollar
life insurance ($22,882).
(3) Amounts represent premiums paid by the Company with respect to split-dollar
life insurance.
(4) Amount represents payment of legal fees under a letter agreement between Mr.
Willis and the Company whereby the Company agreed to pay for legal expenses
for Mr. Willis in connection with a certain legal matter. However, if it is
determined under the General Corporation Law of the State of Delaware that
Mr. Willis was not entitled to this indemnification by the Company for his
legal expenses in connection with the matter, he is required to reimburse
the Company.
</FN>
</TABLE>
Option Grants
The following table sets forth certain information regarding options
granted to the Named Officers during the fiscal year ended December 28, 1996:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Number of Percent of Potential Realizable Value at
Securities Total Options Exercise Assumed Annual Rates of Stock
Underlying Granted to Price Expiration Price Appreciation for Option
Options Employees in Per Share Date Term (1)
Granted Fiscal Year 5% 10%
--------------- ---------------- ----------- ----------- ---------------------------------
Dennis B. Longmire - - - - - -
Kenneth A. Ghazey - - - - - -
Douglas P. Anderson - - - - - -
James A. Ransweiler - - - - - -
Omer A. Dreiling, II - - - - - -
Robert L. Willis - - - - - -
<FN>
(1)"Potential Realizable Value" is disclosed in response to Securities and
Exchange Commission rules, which require such disclosure for
illustrative purposes only, and is based on the difference between the
potential market value of shares issuable (based upon assumed
appreciation rates) upon exercise of such options and the exercise price
of such options. The values disclosed are not intended to be, and should
not be interpreted by investors as, representations or projections of
future value of the Company's stock or of the stock price.
</FN>
</TABLE>
Option Exercises and Year-End Options Values
The following table sets forth certain information with respect to
options exercised during the fiscal year ended December 28, 1996 by each of the
Named Officers and the value of unexercised options held by each of the Named
Officers at December 28, 1996:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Options Exercised in Fiscal 1996
------------------------------------
<S> <C> <C> <C> <C>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at December 28, 1996
Acquired on December 28, 1996 Exercisable (E)
Exercise Value Realized Exercisable (E) Unexercisable(U)(1)
Unexercisable (U)
----------- -------------- ----------------------- -------------------------
Dennis B. Longmire --- --- 60,000(E) $ 892,499 (E)
120,000(U) 1,785,001 (U)
Kenneth A. Ghazey --- --- 74,176(E) 1,515,408 (E)
49,450(U) 1,010,272 (U)
Douglas P. Anderson --- --- 32,966(E) 673,504 (E)
21,978(U) 449,002 (U)
James A. Ransweiler --- --- 32,966(E) 673,504 (E)
21,978(U) 449,002 (U)
Omer A. Dreiling, II --- --- 32,966(E) 673,504 (E)
21,978(U) 449,002 (U)
Robert L. Willis 32,966 616,528 0 (E) 0 (U)
21,978(U) 449,002 (U)
<FN>
(1)Based on the difference between the closing price of the Common Stock
on December 27, 1996 ($29.00 per share) and the exercise price of the
option.
</FN>
</TABLE>
Employment Agreements
Dr. Longmire is party to an Employment Agreement with the Company dated
March 31, 1995 (the "Longmire Agreement") for an initial term expiring on March
31, 1998. Pursuant to the Longmire Agreement, Dr. Longmire receives annual base
salary compensation of $390,000 and is entitled to receive incentive
compensation based on the Company's attaining or exceeding certain financial
performance goals. In addition, Dr. Longmire is entitled to receive such stock
options as may be approved by the Board of Directors. The Longmire Agreement
will terminate in the event of Dr. Longmire's death or disability and may be
terminated by the Company upon written notice. If the Company terminates Dr.
Longmire's employment without "cause" (as defined in the Longmire Agreement), he
will be entitled to receive his base salary through the end of the term of his
employment and incentive compensation through the end of the year in which his
employment is terminated. If the Company terminates Dr. Longmire's employment
for "cause" (as defined in the Longmire Agreement), he will be entitled to
receive his base salary to the date of the notice of termination.
Severance Agreements
The Company has entered into severance agreements with Messrs.
Anderson, Ransweiler, Dreiling, Willis and Witt which provide for severance
compensation equal to one year's compensation to the officer in the event of a
termination of the officer's employment resulting from a change in control of
the Company, including voluntary termination resulting from a change in the
officer's responsibilities.
Mr. Ghazey was a party to an Employment Agreement with the Company
dated December 29, 1993 and amended and restated September 26, 1995 (the "Ghazey
Agreement") for a term which expired on December 31, 1996. Pursuant to the
Ghazey Agreement, Mr. Ghazey received annual base salary compensation of
$350,000 and incentive compensation based on the Company's attaining or
exceeding certain financial performance goals.
The Company and Mr. Ghazey entered into a Separation Agreement, dated
September 24, 1996 (the "Separation Agreement") which terminated the Ghazey
Agreement and whereby his employment was terminated as of December 31, 1996.
Pursuant to the Separation Agreement, Mr. Ghazey received a termination payment
of $350,000 and bonus of $105,000 under the Company's Annual Incentive Plan for
the year 1996.
On March 14, 1997, the Company bought back unexercised options for
123,626 shares of Common Stock, which options had been awarded to Mr. Ghazey
under the 1993 Plan, as permitted by the terms of the 1993 Plan for
$1,660,297.10. Such amount is equal to the difference between the closing market
price on March 14, 1997 of the shares of Common Stock as quoted on the National
Market of the National Association of Securities Dealers Automated Quotation
System (the "Nasdaq National Market"), which was $22.00 per share, and the
exercise price of such options, equal to $8.57 per share, multiplied by the
number of shares underlying the options (123,626 shares).
Stock Option Plans
1993 Plan. The Board of Directors has suspended the 1993 Plan and no further
options are to be issued under such plan. Officers and other key employees of
the Company and its subsidiaries were eligible to receive options under the 1993
Plan. In December 1993, the Company granted options covering 494,500 shares of
Common Stock to seven members of the Company's management pursuant to the 1993
Plan. The exercise price of these options is $8.57 per share. These options
vested 20% on the date of grant and vest 20% on each anniversary date thereof.
The vesting schedule for the options granted under the 1993 Plan is accelerated
by one year upon the termination of a grantee's employment. The options granted
pursuant to the 1993 Plan are intended to be incentive stock options to the
maximum extent permissible under the Internal Revenue Code of 1986, as amended
(the "Code") and nonqualified stock options to the extent not incentive stock
options. 184,066 of the shares covered by these options, which are proposed to
be transferred to the 1994 Plan pursuant to Proposal No. 2 herein, remain under
the 1993 Plan because of (i) the Company's buyback of Mr. Ghazey's unexercised
options which were granted under the 1993 Plan and (ii) forfeitures of options
granted under the 1993 Plan by certain former employees of the Company.
1994 Plan. For a description of the terms and conditions of the 1994 Plan, see
the disclosure set forth under Proposal No. 2 herein.
Directors Plan. For a description of the terms and conditions of the
Directors Plan, see the disclosure set forth under Proposal No. 1 herein.
Annual Incentive Plan
The Annual Incentive Plan is administered by the Compensation Committee
and provides incentive cash bonuses to corporate and division executives. In
1996, the Annual Incentive Plan was tied principally to actual levels of cash
flow at the corporate or division level relative to budgets established at the
beginning of the year.
The total amount of incentive compensation under the program is subject
to boundaries established by formula and expressed in terms of a percentage of
base salary. For 1996 and prior years, a "target" bonus was paid when corporate
or division objectives were achieved at the 100% level, no bonus was paid below
the 80% level and a maximum bonus was paid when 125% of the corporate or
division budget was achieved. The 1997 incentive compensation program has not
yet been finalized.
Pension Plan Table
The following table illustrates the approximate annual pension that the
Named Officers would receive under the Salaried Employee's Retirement Plan (the
"Retirement Plan") if the plan remains in effect and a Named Officer retired at
age 65. However, because of changes in the tax laws or future adjustments to
benefit plan provisions, actual pension benefits could differ significantly from
the amounts set forth in the table.
Estimated Annual Pension
(Years of Service)
Average Annual Salary
During the Last 5 Years 15 20 25 30 35
------------------------- -------- ------- ------- -------- -------
$150,000 $40,500 $54,000 $67,500 $71,250 $75,000
175,000 47,250 63,000 78,750 83,125 87,500
200,000 54,000 72,000 90,000 95,000 100,000
235,840 63,677 84,902 106,128 112,024 117,920
The above amounts do not reflect the compensation limitations for plans
qualified under the Code, effective January 1, 1994. Effective January 1, 1994,
annual compensation in excess of $150,000 ($235,840 for 1993) is not taken into
account when calculating benefits under the Retirement Plan. Such limitation
will not, however, operate to reduce plan benefits accrued as of December 31,
1993.
If the Named Officers remain employees of the Company until they reach
age 65, the years of credited service for Messrs. Longmire, Anderson,
Ransweiler, Dreiling and Willis will be as follows: Longmire, 13 years;
Anderson, 22 years; Ransweiler, 23 years; Dreiling, 35 years; and Willis, 29
years.
The Retirement Plan is a non-contributory defined benefit plan. Office
and supervisory employees of the Company, not covered under another plan,
automatically become participants in the plan on the earlier of January 1 or
July 1 following completion of 1,000 hours of service in a consecutive
twelve-month period. Upon meeting the eligibility requirement, employees are
recognized as a participant from the date of commencement of their service with
the Company. Eligible employees become fully vested in their benefits after
completing five years of service. Benefits under the Plan are calculated on
"average monthly pay" based upon the highest 60 consecutive months of the latest
120 months (and subject to the limitations discussed above) and the years of
service completed.
The basic pension benefit is equal to 45% of the employee's average
monthly pay, reduced proportionally for years of service less than 25 years. The
multiple is increased 0.5% per year for years of service in excess of 25 years
to a maximum of 15 additional years.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Mr. Bartlett (Chairman), Dr.
Longmire (ex officio), Mr. Taura and Mr. Waterfall, each of whom is a director
of the Company.
REPORT OF THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee and the performance
graph that appears immediately after such report shall not be deemed to be
soliciting material or to be filed with the Securities and Exchange Commission
under the Securities Act of 1933 or the Securities Exchange Act of 1934 or
incorporated by reference in any document so filed.
The Company's executive compensation program is designed to attract,
motivate, reward and retain the executive officers needed to achieve the
Company's business objectives, to increase its profitability and to provide
value to its stockholders.
The program has been structured and implemented to provide competitive
compensation opportunities and various incentive awards based on Company and
individual performance.
The Company's executive compensation program is composed of three
principal components: base salary, short term incentive awards and long term
incentive awards.
Base Salaries
The base salaries of the Named Officers are set forth in the Summary
Compensation Table located on page 9 of the Proxy Statement.
The base salaries of Dr. Longmire and Mr. Ghazey for 1996 were established
pursuant to their employment agreements with the Company, which were established
and reviewed by the Compensation Committee. (1)
Executive positions are grouped by grades which are part of the Company's
overall salary structure. The base salaries of senior executives, except those
established by employment agreements, are reviewed to determine if adjustment is
necessary based on competitive practices and economic conditions. Salaries are
adjusted within grade ranges based on individual performance and changes in job
content and responsibilities.
Short Term Incentive Awards
The short-term program, or Annual Incentive Plan, consists of an
opportunity for the award of an annual incentive cash bonus in addition to the
payment of base salary.
In 1996, the Company's Annual Incentive Plan for corporate and division
executives was tied principally to actual levels of cash flow at the corporate
or division level relative to budgets established at the beginning of the year.
The total amount of incentive compensation under the short-term program
is subject to boundaries established by formula and expressed in terms of a
percentage of base salary. A "target" bonus is paid when corporate or division
objectives are achieved at the 100% level, no bonus is paid below the 80% level
and a maximum bonus is paid when 125% of the corporate or division budget is
achieved.
Under their employment agreements, Dr. Longmire and Mr. Ghazey were
entitled to receive an annual bonus of up to 90% of their annual base salary
under terms consistent with the Annual Incentive Plan. In fiscal 1996, the
Company met a predetermined threshold established for the payment of cash
incentive awards. Dr. Longmire and Mr. Ghazey were each paid bonuses equal to
30% of their 1996 base salaries. Under the Annual Incentive Plan, other senior
executives are entitled to receive annual bonuses of up to 75% of their base
salaries. These senior executives were paid bonuses averaging 25.0% of their
1996 base salaries.
Long Term Incentive Awards
In connection with a Company financial restructuring consummated in
December 1993, long term incentive awards in the form of stock options were
granted to certain executive officers of the Company under the 1993 Plan. No
options were granted under the 1993 Plan in fiscal 1996.
Under the 1994 Plan, stock options are awarded based on an individual's
level of responsibility within his or her area, such individual's executive
development potential and competitive market norms. Options granted under the
1994 Plan are granted at 100% of the market value of the stock on the date of
grant. During fiscal 1996, 125,900 options were granted under the 1994 Plan.
April 23, 1997
Craig Scott Bartlett, Jr.
Denis J. Taura
Bruce Waterfall
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the change in the cumulative
total stockholder return on the Company's Common Stock with the cumulative total
return of the Nasdaq Stock Market - U.S. Index, the Dow Jones Industrial
Pollution Control/Waste Management Index, and the Dain Bosworth Food Index for
the period from September 14, 1994 to December 28, 1996, assuming the investment
of $100 on September 14, 1994 and the reinvestment of dividends.
The stock price performance shown on the graph only reflects the change
in the Company's stock price relative to the noted indices and is not
necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
DARLING COMMON STOCK
NASDAQ STOCK MARKET- U.S.
DOW JONES INDUSTRIAL POLLUTION CONTROL/WASTE MANAGEMENT INDEX
DAIN BOSWORTH FOOD INDEX
(performance graph is shown in this space in paper version of proxy re above)
The Common Stock first became eligible for trading on the Nasdaq Stock
Market on September 8, 1994 and, accordingly, total return is measured from the
closing price on September 14, 1994, the first date on which the stock traded on
the Nasdaq Stock Market.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table and the notes thereto set forth certain information
with respect to the beneficial ownership of shares of Common Stock, as of April
11, 1997, by each person or group within the meaning of Rule 13(d)-3 under the
Exchange Act who is known to the management of the Company to be the beneficial
owner of more than five percent of the outstanding Common Stock of the Company:
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Ownership (1) of Class
Phoenix Partners............................... 86,980 1.68%
Betje Partners................................. 30,384 0.59%
Phaeton International N.V...................... 60,783(2) 1.18%
Morgens Waterfall Vintiadis Investments N.V.... 60,783 1.18%
Morgens Waterfall Income Partners.............. 77,729 1.50%
Morgens, Waterfall, Vintiadis & Company, Inc... 238,204(3) 4.60%
Restart Partners L.P........................... 466,940 9.01%
Restart Partners II, L.P....................... 685,339 13.21%
Restart Partners III, L.P...................... 481,979 9.30%
Restart Partners IV, L.P....................... 300,123 5.80%
Restart Partners V, L.P........................ 50,000 0.97%
MWV Employee Retirement Plan Group Trust....... 23,373 0.45%
The Common Fund for Non-Profit Organizations... 147,037 2.84%
Edwin H. Morgens............................... 2,410,667(4) 46.04%
Bruce Waterfall ............................... 2,396,294(5) 45.69%
(collectively the "MW Group")
MW Group
10 East 50th Street
New York, NY 10022........................ 2,419,667(6) 46.13%
Oppenheimer & Co., Inc.
Oppenheimer Group, Inc.
Oppenheimer Tower, 6th Floor
World Financial Center
New York, NY 10281........................ 551,493 10.67%
Intermarket Corp.
667 Madison Ave.
New York, NY 10021............................ 615,768 11.91%
----------------
(1) Except as otherwise indicated in footnotes 2, 3, 4, 5 and 6 hereto, the
entities named in this table have sole voting and investment power with
respect to all shares of capital stock shown as beneficially owned by
them.
(2) Phaeton International N.V. does not directly own any of the Common
Stock or options described in footnote 6 hereto but may be deemed to
indirectly beneficially own 60,783 shares of Common Stock, assuming
exercise of the options, by virtue of its 100% ownership of Morgens
Waterfall Vintiadis Investments N.V.
(3) Morgens Waterfall Vintiadis & Company, Inc. does not directly own any
of the Common Stock or options described in footnote 6 hereto but may
be deemed to indirectly beneficially own 238,204 shares of Common
Stock, assuming exercise of the options, by virtue of contracts with
Morgens Waterfall Vintiadis Investments N.V., The Common Fund for
Non-Profit Organizations and Betje Partners pursuant to which Morgens
Waterfall Vintiadis & Company, Inc. provides investment advisory
services.
(4) Edwin H. Morgens does not directly own any of the Common Stock or
options described in footnote 6 hereto but may be deemed to indirectly
beneficially own 2,410,667 shares of Common Stock, assuming exercise of
the options, by virtue of his positions as general partner of Phoenix
Partners and Morgens Waterfall Income Partners; as Chairman of the
Board of Directors and Secretary of Morgens Waterfall Vintiaids &
Company, Inc.; as Chairman of the Board of Directors and Secretary of
Prime, Inc., as general partner of each of Prime Group, L.P., Prime
Group II, L.P., Prime Group III, L.P., Prime Group IV, L.P. and Prime
Group V, L.P., as general partners of Restart Partners L.P., Restart
Partners II, L.P., Restart Partners III, L.P., Restart Partners IV,
L.P. and Restart Partners V, L.P., respectively; and as trustee of MWV
Employee Retirement Plan Group Trust.
(5) Bruce Waterfall directly owns options for 9,000 shares. He may be
deemed to indirectly beneficially own 2,387,294 shares of Common Stock,
assuming exercise of the options described in footnote 6 hereto, by
virtue of his positions as general partner of Phoenix Partners and
Morgens Waterfall Income Partners; as President, Assistant Secretary
and a Director of Morgens Waterfall Vintiadis & Company, Inc.; as
President and a Director of Prime, Inc. (which is the general partner
of each of Prime Group, L.P., Prime Group II, L.P., Prime Group III,
L.P., Prime Group IV, L.P. and Prime Group V, L.P.), as general partner
of each of Prime Group, L.P., Prime Group II, L.P., Prime Group III,
L.P., Prime Group IV, L.P. and Prime Group V, L.P., as general partners
of Restart Partners L.P., Restart Partners II, L.P., Restart Partners
III, L.P., Restart Partners IV, L.P. and Restart Partners V, L.P.,
respectively.
(6) Includes options, which are immediately exercisable, in the following
amounts for each entity: Phoenix Partners (2,166 options); Betje Partners
(774 options); Phaeton International (1,540 options); Morgens Waterfall
Vintiadis Investments N.V. (1,540 options); Morgens Waterfall Income
Partners (2,338 options); Morgens, Waterfall, Vintiadis & Company, Inc.
(6,738 options); Restart Partners L.P. (14,049 options); Restart Partners
II, L.P. (20,620 options); Restart Partners III, L.P. (14,500 options);
Restart Partners IV, L.P. (9,029 options); MWV Employee Retirement Plan
Group Trust (560 options); The Common Fund for Non-Profit Organizations
(4,424 options); Edwin H. Morgens (70,000 options); Bruce Waterfall (78,440
options).
Security Ownership of Management
The following table and the notes thereto set forth certain information
with respect to the beneficial ownership of shares of Common Stock of the
Company, as of April 11, 1997, by each nominee for director, each Named Officer
and by all executive officers and directors as a group:
<TABLE>
<S> <C> <C> <C> <C> <C>
Common Former Class A Unexercised Common Stock Percent of
Name of Individual Stock Owned Options(1) Plan Options(2) Beneficially Owned(3) Common Stock Owned
- ------------------ ----------- --------------- ------------- -------------------- ------------------
Craig Scott Bartlett, Jr. 0 5,000 9,000 14,000 *
Kenneth A. Ghazey (4) 0 20,000 0 20,000 *
Fredric J. Klink 30,000 0 9,000 39,000 *
Denis J. Taura 10,000 10,000 9,000 29,000 *
Douglas P. Anderson 4 0 43,955 43,959 *
Omer A. Dreiling, II 0 0 43,955 43,955 *
Dennis B. Longmire 0 0 120,000 120,000 2.27%
James A. Ransweiler 0 0 43,955 43,955 *
Bruce Waterfall (5) 2,317,854 69,440 9,000 2,396,294 45.69%
Robert L. Willis 8,109 0 10,989 19,098 *
John R. Witt 0 0 9,000 9,000 *
Joseph R. Weaver, Jr. 0 0 2,500 2,500 *
All executive officers and
directors 2,365,967 84,440 310,354 2,760,762 49.64%
as a group (12 persons) (6)
- ------------------
<FN>
* Represents less than one percent of the Common Stock outstanding.
(1) These Class A options were canceled and the numbers represent options to
purchase shares of Common Stock.
(2) Represents options that have vested and are exercisable as of June 10, 1997.
(3) Except as otherwise indicated in the columns "Former Class A Options" and
footnote 1 thereto and "Unexercised Plan Options" and footnote 2 thereto
and in footnote 5 hereto, the persons named in this table have sole voting
and investment power with respect to all shares of capital stock shown as
beneficially owned by them.
(4) Kenneth A. Ghazey served as President and Chief Operating Officer from
January 1993 to September 1996, at which time he ceased performing such
duties, and he officially ceased employment as of December 31, 1996.
(5) Based on his management positions with the MW Group, Mr. Waterfall may be
deemed to indirectly beneficially own 2,388,294 of the securities listed,
assuming exercise of all of the options. See footnote 5 to "Security
Ownership of Certain Beneficial Owners" table above.
(6) This number does not include Kenneth A. Ghazey, who ceased employment
with the Company as of December 31, 1996.
</FN>
</TABLE>
<PAGE>
Proposal No. 2
PROPOSAL TO APPROVE CERTAIN AMENDMENTS
TO THE DARLING 1994 PLAN
The Board unanimously recommends the approval of amendments to
Darling's 1994 Plan: (1) to increase the number of shares of Common Stock
available thereunder from 500,000 to 684,066; (2) to clarify which directors of
the Company may serve on the Compensation Committee which administers the 1994
Plan; (3) to set an upper limit on the number of options that may be granted to
any individual under the 1994 Plan in any calendar year; and (4) to increase the
upper limit on the number of shares of Common Stock of the Company that are
issuable under the 1994 Plan to any individual in any calendar year.
General
The Board adopted the 1994 Plan in July of 1994 and the Company's
shareholders approved the 1994 Plan at the June 7, 1995 annual meeting of
stockholders. Under the 1994 Plan, the Compensation Committee may grant options
to officers and other key employees of the Company and its subsidiaries. The
purpose of the 1994 Plan is to attract, retain and motivate officers and key
employees of the Company, and to encourage them to have a financial interest in
the Company.
The number of grantees and the number of shares of Common Stock subject
to options awarded to each grantee may vary from year to year. The maximum
number of shares of Common Stock for which an individual may receive awards of
options is limited to 100,000 shares of Common Stock over a one-year period,
although this Proposal No. 2 includes a provision to amend the 1994 Plan to
increase this number to 200,000. The Company estimates that approximately 70
employees of the Company and its subsidiaries will be eligible to receive
options under the 1994 Plan, including the Chief Executive Officer and the other
most highly compensated current executive officers named in the Summary
Compensation Table.
The shares of Common Stock may be unissued shares or treasury shares.
If there is a stock split, stock dividend, recapitalization, or other relevant
change affecting the Company's shares of Common Stock, appropriate adjustments
will be made by the Committee in the number of shares that may be issued in the
future and in the number of shares and price under all outstanding grants made
before the event. If shares of Common Stock under an option are not issued,
those shares of Common Stock will again be available for inclusion in future
grants. The awards authorized under the 1994 Plan are subject to applicable tax
withholding by the Company.
To exercise an option, an optionee may pay the exercise price in cash,
or if permitted by the Committee, by delivering other shares of Common Stock.
Grants Under the Plan
Options for Employees. The Committee may grant employees options
qualifying as incentive stock options under Section 422 of the Code and
non-qualified stock options. The exercise price of an incentive stock option
will be equal to the fair market value of the Common Stock on the date of grant.
With respect to any individual who owns 10% or more of the stock of the Company
(a "10% Owner"), the exercise price for an incentive stock option will be equal
to 110% of the fair market value of the Common Stock on the date of grant. For
purposes of the 1994 Plan, fair market value means, on any date, the mean
between the bid and asked price for the Common Stock as reported on the Nasdaq
National Market on such date. As of April 9, 1997, the fair market value of the
Common Stock was $23.00 per share.
The term of each option will be fixed by the Committee but may not
exceed ten years from the date of grant. With respect to a 10% Owner, the term
of incentive stock options may not exceed five years from the date of grant. The
Committee will determine the time or times when each option may be exercised.
Options may be made exercisable in installments, and the exercisability of
options may be accelerated by the Committee.
Termination of Employment. In the event of termination of employment by
reason of long-term disability or death, any option held by an employee may
thereafter be exercised in full for a period of one year or anytime prior to the
expiration date of the option, whichever is the shorter period, subject in each
case to the stated term of the option. In the event of an employee's termination
of employment for cause, any options held by him will be forfeited. In the event
of an employee's termination of employment for any reason other than long-term
disability, death or cause, any options held by him will be exercisable, to the
extent exercisable at the date of termination, for a period of thirty days.
Change in Control Provisions. If while unexercised options remain
outstanding under the 1994 Plan, any of the following events occur, all options
granted under the 1994 Plan become exercisable in full, whether or not they are
otherwise exercisable: (1) any entity other than the Company makes a tender or
exchange offer for shares of the Company's Common Stock pursuant to which
purchases are made; (2) the stockholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into another corporation
or to sell all or substantially all of the assets or adopt a plan of
liquidation; (3) the beneficial ownership of securities representing more than
15% of the combined voting power of the Company is acquired by any person; or
(4) during any period of two consecutive years, the individuals who at the start
of such period were members of the Board of Directors cease to constitute at
least a majority thereof, unless the election of each new director was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the start of such period. In the case of a merger, where the
Company is the surviving entity and in which there is a reclassification of the
shares of Common Stock, each option shall become exercisable for the kind and
amount of shares of stock or other securities receivable upon such
reclassification or merger.
Other Information. Awards under the 1994 Plan are not transferable
except by will or the laws of descent and distribution and may be exercised only
by the grantee during his or her lifetime. The Board may terminate or suspend
the 1994 Plan at any time but such termination or suspension will not affect any
options then outstanding under the 1994 Plan. The 1994 Plan may be terminated at
any time by action of the Board of Directors, but awards granted prior to such
termination will continue in effect until they expire in accordance with their
terms. The Board or the Committee may also amend the 1994 Plan as it deems
advisable; however, it is presently intended that all material amendments to the
1994 Plan will be submitted to the shareholders for their approval to the extent
required by Rule 16b-3 promulgated under the Exchange Act, as time to time in
effect, and under the Code. The Committee may amend the term of any award or
option theretofore granted retroactively or prospectively, but no such amendment
will adversely affect any such award or option without the holder's consent.
Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax
consequences to the Company and participants in the 1994 Plan based on federal
income tax laws currently in effect.
Non-qualified Stock Options. An individual who receives a non-qualified
stock option will not recognize income upon its grant; however, such individual
may recognize ordinary income upon the exercise of such option, in which event
the Company will receive a tax deduction equal to the amount of income
recognized, provided that any applicable withholding requirements are satisfied.
Generally, the amount of such ordinary income and deduction is the excess, if
any, of the fair market value on the exercise date of the shares of Common Stock
acquired over the aggregate price paid. Any ordinary income recognized by an
individual upon the exercise of a non-qualified stock option will increase his
tax basis for the shares of Common Stock received. Upon a subsequent sale or
exchange of such shares of Common Stock, the individual will recognize capital
gain or loss to the extent of the difference between the selling price of such
shares of Common Stock and his tax basis in such shares of Common Stock. Such
gain or loss will be long-term or short-term capital gain or loss, depending on
the individual's holding period for such shares of Common Stock.
If the holder of a non-qualified stock option pays the exercise price,
in whole or in part, with previously acquired shares of Common Stock, the holder
will recognize ordinary income in the amount by which the fair market value of
the shares of Common Stock received exceeds the exercise price. The individual
will not recognize gain or loss with respect to the previously acquired shares
of Common Stock that are delivered to the Company. The shares of Common Stock
received by the holder equal in number to the previously acquired shares of
Common Stock exchanged therefor will have the same basis and holding period for
capital gain purposes as the previously acquired shares of Common Stock. Shares
of Common Stock received by the holder of the non-qualified stock option in
excess of the number of previously acquired shares of Common Stock will have a
basis equal to the fair market value of such additional shares as of the date
ordinary income is recognized. The holding period for such additional shares of
Common Stock will commence as of the date of exercise.
Incentive Stock Options. An employee will not receive income upon
either the grant of an incentive stock option or upon the exercise of the
incentive stock option. The employee will recognize gain or loss, depending on
his basis in the shares of Common Stock (which is generally equal to the
exercise price paid for the shares), upon the sale or other disposition of the
shares of Common Stock acquired upon exercise. If certain statutory holding
periods are met, such gain or loss will be long-term capital gain or loss and
the Company will not be entitled to any federal income tax deduction. If the
holding periods are not met, the employee may be required to recognize ordinary
income and the Company will be entitled to a tax deduction equal to the amount
of ordinary income, if any, recognized, provided that applicable withholding
requirements are satisfied.
Incentive stock options will be treated as non-qualified stock options
to the extent that the aggregate fair market value of the shares of Common Stock
(determined at the time the options are granted) with respect to which incentive
stock options are exercisable for the first time by an individual during a
calendar year (whether as a result of acceleration of exercisability or
otherwise) exceeds $100,000.
An employee who exercises an incentive stock option may be subject to
an alternative minimum tax since, for purposes of the alternative minimum tax,
the option will be treated as a non-qualified stock option. Accordingly, the
taxable event for alternative minimum tax purposes will generally occur on the
exercise of the option.
Other Matters. The 1994 Plan is intended to comply with Section 162(m)
of the Code which was enacted as part of the Omnibus Budget Reconciliation Act
of 1993. Section 162(m) of the Code prohibits a publicly-held corporation, such
as the Company, from claiming a deduction on its federal income tax return for
compensation in excess of $1 million paid for a given fiscal year to the chief
executive officer (or person acting in that capacity) and the four most highly
compensated officers of the corporation, other than the chief executive officer,
at the end of the corporation's fiscal year. Upon approval of the proposed
amendment of the 1994 Plan by the shareholders, options awarded under the 1994
Plan covering the additionally authorized shares of Common Stock will qualify as
performance-based compensation, as defined in Code Section 162(m) and the
regulations issued by the Department of the Treasury under this Section. As
such, the income attributable to such options will not be subject to the
deduction limit of Code Section 162(m).
Prior Grants Under 1994 Plan
A total of 500,000 shares of Common Stock was originally authorized for
issuance pursuant to the 1994 Plan. Options covering a total of 490,800 shares
of Common Stock have been granted under the 1994 Plan. During the Company's 1996
fiscal year, options covering a total of 125,900 shares of Common Stock were
granted under the 1994 Plan. Of those options covering the 125,900 shares of
Common Stock, options covering 37,500 shares were granted to executive officers
(as a group) and options covering 88,400 shares were granted to employees (as a
group).
The following table sets forth all grants of options made under the
1994 Plan to executive officers and employees of the Company. No directors who
are not executive officers received options under the 1994 Plan.
<TABLE>
<CAPTION>
1994 PLAN AWARDS
<S> <C> <C>
Number of Shares of Common Average Exercise Price
Stock Subject to Options Per Share of Options
Name of Individual or Group Received Received
---------------------------- ----------------------
Dennis B. Longmire
Chairman and Chief Executive Officer............ 180,000 $14.125
Kenneth A. Ghazey
President, Secretary and Chief Operating Officer. 0 -
Douglas P. Anderson
Executive Vice President......................... 0 -
James A. Ransweiler
Vice President................................... 0 -
Omer A. Dreiling, II
Vice President................................... 0 -
Robert L. Willis
Vice President.................................. 0 -
Robert E. McMullen
President-International Processing Corp........ 22,500 $27.208
James A. Ransweiler
Vice President-Great Lakes Division........... 0 -
John R. Witt
Vice President and Chief Financial Officer..... 30,000 $29.533
Joseph R. Weaver, Jr.
General Counsel and Secretary.................. 10,000 $22.000
All Current Executive Officers as a Group............ 242,500 $16.874
All Current Directors who are not Executive
Officers, 0 -
as a Group......................................
All Employees, including all Current Officers who
are not Executive Officers, as a Group.......... 248,300 $20.308
</TABLE>
REASONS FOR PROPOSAL
(1)......Since only 9,200 more shares are available for issuance under the 1994
Plan, the Compensation Committee and the Board of Directors of the Company
believe it would be desirable to have more shares of Common Stock available
under the 1994 Plan for incentive purposes. They therefore recommend that the
Company's shareholders approve an amendment to the 1994 Plan to make an
additional 184,066 shares of Common Stock (all of which are either unissued
shares or treasury shares) available for issuance thereunder. These 184,066
shares of Common Stock are those shares that remained unissued under the 1993
Plan under which no further options will be issued. The Compensation Committee
and the Board of Directors of the Company have not specified any grantees of the
additional 184,066 proposed shares of Common Stock under the 1994 Plan. This
amendment, which would amend Section 1.4 of the 1994 Plan entitled "Stock
Subject to the Plan" by striking the number "500,000" in the second sentence and
inserting in its place the number "684,066", will allow the 1994 Plan to remain
in effect and should address the need for available shares, for a number of
years.
(2)......The Board of Directors and the Compensation Committee recommend that
the Company's shareholders approve an amendment to the 1994 Plan which would
amend Section 1.2 entitled "Administration" to strike the second sentence which
reads "Such [Compensation] Committee shall be comprised of two (2) or more
directors, each of whom shall be 'disinterested persons,' as defined in Rule
16b-3(c)(2)(i), promulgated under the Securities Exchange Act of 1934, as
amended (the 'Exchange Act')" and replace it with the following sentence:
"Such Committee shall be comprised of two (2) or more
directors, each of whom shall satisfy both the definition of
'Non-Employee Director' contained in Rule 16b-3(b)(3) (as
effective on November 1, 1996) or any successor definition
adopted by the Securities and Exchange Commission, and the
definition of 'Outside Director' contained in Treas. Regs.
section 1.162-27(e)(3) or any successor definition adopted by
the Treasury Department."
This amendment, which clarifies which directors of the Company may serve on the
Compensation Committee which administers the 1994 Plan, is desirable in order to
conform the 1994 Plan to the current state of the securities laws and the
treasury regulations.
(3) The Board of Directors and the Compensation Committee recommend that the
Company's shareholders approve an amendment to the 1994 Plan which would amend
Section 1.4 entitled "Stock Subject to the Plan" to add the following sentence:
"The aggregate number of options that may be granted to any individual hereunder
within any one calendar year shall not exceed 200,000 options." and to add the
following language to the end of the final sentence: ", provided that any
options that lapse or terminate shall count against the per individual
limitation in the immediately preceding sentence." Such amendment is desirable
because it also conforms the 1994 Plan to the treasury regulations to ensure
that taxable compensation received by employees upon exercise of options will be
fully deductible by the Company.
(4) The Board of Directors and the Compensation Committee recommend that the
Company's shareholders approve an amendment to the 1994 Plan which would amend
Section 1.4 entitled "Stock Subject to the Plan" to increase the number of
shares issuable under the 1994 Plan to any individual in any calendar year from
100,000 to 200,000. This change would amend Section 1.4 by striking "100,000" in
the third sentence and replacing it with "200,000". This amendment is desirable
because, currently Dr. Longmire holds options covering 180,000 shares of Common
Stock. Out of these 180,000 options, options covering 120,000 shares of Common
Stock are currently vested and exercisable. If he exercises all of such options,
the Company would have to issue more than 100,000 shares and would thus violate
Section 1.4 which limits the number of shares issuable to any individual in any
calendar year to 100,000. Thus, to prevent a violation of the 1994 Plan, this
amendment is desirable and recommended.
In all other respects, the provisions of the 1994 Plan will remain the same.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires that Company directors,
executive officers and persons who own more than 10% of the Common Stock file
initial reports of ownership and reports of changes in ownership of Common Stock
with the Securities and Exchange Commission. Officers, directors and
stockholders who own more than 10% of the Common Stock are required by the
Securities and Exchange Commission to furnish the Company with copies of all
Section 16(a) reports they file.
To the Company's knowledge, based solely on the review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all reports required by Section 16(a) of the Exchange Act
were filed on a timely basis except for the following: (1) a Form 5 for a grant
of options received by Denis Taura from the Company; and (2) a Form 5 for a
grant of options received by Craig Scott Bartlett, Jr. from the Company. The
following forms were not filed, although the transactions were subsequently
reported on a Form 5: (1) two Form 4s for four dispositions of shares of Common
Stock of the Company by Robert Willis; and (2) (a) a Form 3 for Jim Stevens and
(b) a Form 4 for an acquisition of shares of Common Stock of the Company by Jim
Stevens. Other than the aforementioned late filings and late transactions, all
Section 16(a) filing requirements applicable to its officers, directors and 10%
stockholders were complied with.
INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of its Audit Committee, has
appointed KPMG Peat Marwick LLP as the Company's independent auditors for the
fiscal year ending January 3, 1998. A representative of KPMG Peat Marwick LLP
will be present at the Meeting to answer any appropriate questions and to make a
statement if he desires to do so.
PROPOSALS FOR STOCKHOLDER ACTION
I. ELECTION OF DIRECTORS
The nominees for election as directors are Craig Scott Bartlett, Jr.,
Fredric J. Klink, Dennis B. Longmire, Denis J. Taura, and Bruce Waterfall.
Information concerning the nominees is set forth in the section captioned
"Election of Directors."
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
II. PROPOSAL TO APPROVE CERTAIN AMENDMENTS
TO THE DARLING 1994 PLAN
The Board of Directors recommends that the Company's shareholders
approve amendments to the 1994 Plan (1) to make an additional 184,066 shares of
Common Stock (all of which are shares which remained available for issuance
under the 1993 Plan) available for issuance thereunder; (2) to clarify which
directors of the Company may serve on the Compensation Committee which
administers the 1994 Plan; (3) to set an upper limit on the number of options
that may be granted to any individual under the 1994 Plan in any calendar year;
and (4) to increase the upper limit on the number of shares of Common Stock of
the Company that are issuable under the 1994 Plan to any individual in any
calendar year.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS.
OTHER MATTERS
The management of the Company is not aware of any other matters to be
presented for action at the Meeting; however, if any such matters are properly
presented for action, it is the intention of the persons named in the enclosed
form of proxy to vote in accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 annual
meeting of stockholders of the Company must be received by the Secretary of the
Company at the Company's principal executive office no later than January 1,
1998, in order to be included in the proxy statement and form of proxy for such
meeting.
By Order of the Board of Directors
/s/ Joseph R. Weaver, Jr.
-----------------------------
Secretary
April 25, 1997
Irving, Texas
STOCKHOLDERS ARE URGED, REGARDLESS OF THE NUMBER OF SHARES OF COMMON STOCK
OF THE COMPANY OWNED, TO DATE, SIGN AND RETURN THE ENCLOSED PROXY. YOUR
COOPERATION IN GIVING THESE MATTERS YOUR IMMEDIATE ATTENTION AND IN RETURNING
YOUR PROXY PROMPTLY IS APPRECIATED.
=====================
1 Pursuant to each of their employment agreements, Dr. Longmire and Mr. Ghazey
receive their base salary and a bonus equal to a percentage of their salary,
which percentage depends on achievement by the Company of certain budgeted
earnings targets.
<PAGE>
PROXY
DARLING INTERNATIONAL INC
Proxy Solicited on Behalf of the Board of Directors of the Company
for the Annual Meeting of Stockholders to be held on May 20, 1997
The undersigned hereby appoints Dennis B. Longmire and Joseph R. Weaver,
Jr., or either of them, his true and lawful agents and proxies with full power
of substitution in each, to represent the undersigned at the annual meeting of
stockholders of Darling International Inc., to be held at The Mansion on Turtle
Creek, 2821 Turtle Creek, Dallas, Texas 75219, on Tuesday, May 20, 1997, and at
any adjournments thereof, on all matters coming before said meeting.
You are encouraged to specify your choices by marking the appropriate
boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. Proxies cannot vote
your shares unless you sign and return this card.
(Continued, and to be signed on reverse side) SEE REVERSE SIDE
<PAGE>
/X/ Please mark votes as in this example.
1. Proposal No. 1: Election of Directors
Nominees: Craig Scott Bartlett, Jr., Fredric J. Klink,
Dennis B. Longmire, Denis J. Taura and Bruce Waterfall
For / / Withheld / /
/ /
--------------------------------------
for all nominees except as noted above
2. Proposal No. 2: Amendments to 1994 Employee Flexible Stock Option Plan
For / / Withheld / / Abstain / /
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly coome before the meeting.
MARK HERE FOR CHANGE OF ADDRESS / /
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
Signature: Date: Signature: Date:
---------------- ------- ----------------- ------
