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 Rule 14a-11(c) or Rule 14a-12
WOODROAST SYSTEMS, 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
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions 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:
WOODROAST SYSTEMS, INC.
10250 Valley View Road, Suite 145
Eden Prairie, Minnesota 55344-3542
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1997
TO THE SHAREHOLDERS OF WOODROAST SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Woodroast Systems, Inc., a Minnesota corporation, will be held on Tuesday, May
20, 1997, at 10:00 a.m. (Minneapolis time), at the Ramada Plaza Hotel
Minneapolis, 12201 Ridgedale Drive, Minnetonka, Minnesota, for the following
purposes:
1. To elect three directors of the Company for the coming year.
2. To approve an amendment to the Company's 1994 Stock Plan to
increase the number of shares of Common Stock reserved for
issuance thereunder from 250,000 to 750,000 shares.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only holders of record of Woodroast Systems, Inc.'s Common Stock at the
close of business on April 10, 1997 are entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof.
Each of you is invited to attend the Annual Meeting in person if
possible. Whether or not you plan to attend in person, please mark, date and
sign the enclosed proxy, and mail it promptly. A return envelope is enclosed for
your convenience.
By Order of the Board of Directors
Mark D. Dacko
SECRETARY
April 18, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING,
PLEASE SIGN THE PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
WOODROAST SYSTEMS, INC.
10250 Valley View Road, Suite 145
Eden Prairie, Minnesota 55344-3542
PROXY STATEMENT
SOLICITATION OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Woodroast Systems, Inc., a Minnesota corporation (the "Company" or
"Woodroast"), for use at the Annual Meeting of Shareholders of the Company (the
"Annual Meeting") to be held on Tuesday, May 20, 1997, at 10:00 a.m.
(Minneapolis time), at the Ramada Plaza Hotel Minneapolis, 12201 Ridgedale
Drive, Minnetonka, Minnesota, and any adjournment thereof. This Proxy Statement
and the accompanying form of proxy are being mailed to shareholders on or about
April 18, 1997. The Company's Annual Report to Shareholders for the fiscal year
ended December 29, 1996 is being mailed to shareholders concurrently with the
Proxy Statement.
The expense of the solicitation of proxies for the Annual Meeting,
including the cost of mailing, has been or will be borne by the Company.
Arrangements will be made with brokerage houses and other custodian nominees and
fiduciaries to send proxies and proxy materials to their principals and the
Company will reimburse them for their expense in so doing. In addition to
solicitation by mail, proxies may be solicited by telephone, telegraph or
personally.
VOTING AND REVOCATION OF PROXY
Only holders of record of the Company's Common Stock at the close of
business on April 10, 1997, the record date for the Annual Meeting (the "Record
Date"), are entitled to notice of and to vote at the Annual Meeting. On the
Record Date, there were 4,242,397 shares of Common Stock outstanding. Each share
of Common Stock entitles the holder thereof to one vote upon each matter to be
presented at the Annual Meeting. A quorum, consisting of a majority of the
outstanding shares of the Common Stock entitled to vote at the Annual Meeting,
must be present in person or represented by proxy before action may be taken at
the Annual Meeting.
Each proxy returned to the Company will be voted in accordance with the
instructions indicated thereon. If no instructions are indicated, the proxy will
be voted FOR the election of the nominees for the Board of Directors named in
this Proxy Statement. While the Board of Directors knows of no other matters to
be presented at the Annual Meeting or any adjournment thereof, all proxies
returned to the Company will be voted on any such matter in accordance with the
judgment of the proxy holders.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by (a)
giving written notice of such revocation to the Secretary of the Company, (b)
giving another written proxy bearing a later date, or (c) attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will not
in and of itself constitute a revocation of a proxy).
Votes cast by proxy or in person at the Annual Meeting will determine
if a quorum is present. If an executed proxy card is returned and the
shareholder has abstained from voting on any matter, the shares represented by
such proxy will be considered present at the meeting for purposes of determining
a quorum and for purposes of calculating the vote, but will not be considered to
have been voted in favor of such matter. If an executed proxy card is returned
by a broker holding shares in street name which indicates that the broker does
not have discretionary authority as to certain shares to vote on one or more
matters, such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be represented at the
meeting for purposes of calculating the vote with respect to such matter.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Board of Directors of the Company currently consists of two
directors. Each director is elected for a term of one year or until his or her
successor is elected. Shareholders will be asked at the Annual Meeting to elect
three directors. The Board has nominated the three individuals named below to
serve as directors of the Company. Each of the nominees named below, other than
Ralph J. Guarino, is now a director of the Company and collectively they
comprise the entire Board. All nominees have indicated a willingness to serve if
elected. Unless authority is withheld, all proxies received in response to this
solicitation will be voted FOR the election of the nominees named below. If any
nominee becomes unable to serve prior to the Annual Meeting, the proxies
received in response to this solicitation will be voted for a replacement
nominee selected in accordance with the best judgment of the proxy holders named
therein.
The names and ages of the nominees, and their principal occupations and
tenure as directors, are set forth below based upon information furnished to the
Company by such nominees.
NAME POSITIONS WITH THE COMPANY AGE DIRECTOR SINCE
- ---- -------------------------- --- --------------
Sheldon F. Jacobs Chairman of the Board and Chief 52 1987
Executive Officer
Ralph J. Guarino Director 50 Nominee
Byron L. Frank Director 52 1994
SHELDON F. JACOBS has been the Chief Executive Officer and Chairman of
the Board of the Company since its formation in 1987 and was also its President
and Chief Financial Offier until 1996. From 1980 to 1987, Mr. Jacobs worked
toward the development of the Shelly's Woodroast concept, from engineering and
patenting the design of the Woodroast ovens to introducing the Original
Woodroast Cooking to existing restaurants and testing consumer response. In
1974, Mr. Jacobs was a co-founder of J.Y.J. Corporation, a liquidation company
that was eventually merged into C.O.M.B. Company. He served as its president
from 1974 to 1980. In 1980 Mr. Jacobs sold his interest in J.Y.J. Corporation.
RALPH J. GUARINO joined the Company in November 1996 as its President,
Chief Operating Officer and Chief Financial Officer. Mr. Guarino brings over 25
years of restaurant operations experience to the Company. From July 1992 until
that time Mr. Guarino served as Senior Vice President, Chief Operating Officer
and member of the Board of Directors for The Italian Oven, Inc., a 100-unit
chain of full-service, moderately-priced Italian family restaurants based in
Latrobe, Pennsylvania. He became President in February 1993. During his
four-year tenure at that company, he oversaw The Italian Oven, Inc.'s initial
public offering of common stock, the opening of 18 additional company-owned
units and 71 franchised units, as well as the sale of over 250 franchises. The
Italian Oven, Inc. filed a voluntary petition for reorganization under Chapter
11 of the United States Bankruptcy Code on October 21, 1996. He served as Senior
Vice President, Chief Financial Officer and member of the Board of Directors for
Boston Chicken, Inc., a restaurant and prepared food chain based in Boston,
Massachusetts, from 1990 until 1992.
BYRON L. FRANK has served as a director of the Company since February
1994. From 1988 to the present, Mr. Frank has served as Corporate Vice President
of Family Partners, Ltd., a private investment firm. He runs the day-to-day
operations of Family Partners, Ltd., which includes investment in equities,
debt, real estate and banking. Prior to joining Family Partners, Ltd., Mr. Frank
was a partner at Laventhol and Horwath from 1980 to 1988. Mr. Frank is also a
director of World Satellite Network.
The Company knows of no arrangements or understandings between a
director or nominee and any other person pursuant to which he has been selected
as a director or nominee. There is no family relationship between any of the
nominees, directors or executive officers of the Company.
VOTE REQUIRED
The affirmative vote of the holders of the greater of (a) a majority of
the outstanding shares of Common Stock of the Company present and entitled to
vote on the election of directors or (b) a majority of the voting power of the
minimum number of shares entitled to vote that would constitute a quorum for
transaction of business at the meeting, is required for election to the Board of
each of the three nominees named above. A shareholder who abstains with respect
to the election of directors is considered to be present and entitled to vote on
the election of directors at the meeting, and is in effect casting a negative
vote, but a shareholder (including a broker) who does not give authority to a
Proxy to vote, or withholds authority to vote, on the election of directors,
shall not be considered present and entitled to vote on the election of
directors.
All shares represented by proxies will be voted FOR the election of the
foregoing nominees unless a contrary choice is specified. If any nominee should
withdraw or otherwise become unavailable for reasons not presently known, the
proxies which would have otherwise been voted for such nominee will be voted for
such substitute nominee as may be selected by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS AS SET FORTH IN PROPOSAL 1.
BOARD COMMITTEES AND ACTIONS
During fiscal 1996, the Board of Directors met eleven times. The Board
of Directors does not have a compensation committee, audit committee or a
nominating committee. The full Board acts upon matters which otherwise would be
acted upon by these committees.
EXECUTIVE COMPENSATION
The following table shows, for fiscal years 1996, 1995 and 1994, the
cash compensation paid by the Company, as well as certain other compensation
paid or accrued for those years, to its chief executive officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------- ------------------
Awards
Common Stock
Salary Bonus Underlying Options
Name and Principal Position Year ($) ($) (#)
- --------------------------- ---- -------- -------- ------------------
<S> <C> <C> <C> <C>
Sheldon F. Jacobs 1996 $100,000 $100,000 200,000
Chairman of the Board and 1995 70,000 108,777 --
Chief Executive Officer 1994 51,154 -- --
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the number of individual grants of stock
options made during fiscal year 1996 to the executive officer named in the
Summary Compensation Table:
<TABLE>
<CAPTION>
Number of Shares Percent of Total
Underlying Options Granted Exercise or
Options to Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Share)(1) Date
- ---- ----------- ---------------- ------------ ----------
<S> <C> <C> <C> <C>
Sheldon F. Jacobs 100,000 21.1% $5.50 5/29/2001
Sheldon F. Jacobs 100,000 21.1% $5.00 5/29/2006
</TABLE>
(1) The fair market value of the Company's Common Stock on the date of
grant was $4.88. Options become exercisable in five equal 20% annual
increments beginning on the first anniversary of the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table summarizes information with respect to options held
by the executive officer named in the Summary Compensation Table, and the value
of the options held by such person at the end of fiscal 1996. No options were
exercised by the executive officers named in the Summary Compensation Table
during fiscal 1996.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised in-the-
Options at FY-End(#) Money Options at FY-End($)
------------------------------ ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sheldon F. Jacobs 0 200,000 $0 $0
</TABLE>
EMPLOYMENT AGREEMENTS
In February 1994, the Company and Mr. Jacobs entered into a three-year
employment agreement pursuant to which Mr. Jacobs served the Company as Chief
Executive Officer. Such agreement expired in February 1997. Mr. Jacobs and the
Company are currently negotiating the terms of a new employment agreement.
Pursuant the terms of the 1994 agreement, Mr. Jacobs received an annual
base salary of $100,000 during 1996. The amount of Mr. Jacobs' base salary could
be increased each year by the Board of Directors and Mr. Jacobs also had the
opportunity to earn performance-related bonuses, including stock options issued
pursuant to the Company's 1994 Stock Plan. Under the agreement, Mr. Jacobs was
not permitted to disclose confidential information about the Company and agreed
not to compete with the Company for a three-year period after any termination of
employment. The Company was permitted to terminate Mr. Jacobs' employment for
"good cause," or upon "disability," as defined in the agreement, or in the event
of death. Mr. Jacobs was permitted to terminate his employment upon 60 days'
written notice to the Board of Directors. If either Mr. Jacobs had terminated
his employment for "good cause," as defined in the agreement, or was terminated
by the Company without "good cause," Mr. Jacobs would have been entitled to
receive his base salary and benefits until the earlier of (a) Mr. Jacobs'
full-time reemployment or self-employment or (b) the expiration of the
agreement.
Effective September 5, 1996, the Company and Mr. Guarino entered into a
five-year employment agreement pursuant to which Mr. Guarino serves the Company
as President and Chief Operating Officer. Pursuant to such agreement, Mr.
Guarino receives an annual base salary of $175,000, which amount may be
increased each year by the Board of Directors. Mr. Guarino also has the
opportunity to earn performance-related bonuses of up to 20% of his base salary
beginning in 1997. Mr. Guarino was granted options to purchase 150,000 shares of
common stock at an exercise price of $4.375 per share, which was the fair market
value of the Company's Common Stock on the date of grant. Such options vest
ratably over five years on May 1, 1997 and on each anniversary of that date
thereafter and expire on September 5, 2006. Under the agreement, Mr. Guarino may
not disclose confidential information about the Company and has agreed not to
compete with the Company for a one-year period after any termination of
employment. The Company may terminate Mr. Guarino's employment for "good cause,"
upon "disability," as defined in the agreement, or in the event of death. Mr.
Guarino may terminate his employment upon 30 days' written notice to the Board
of Directors or for "good reason," as defined in the agreement. If either Mr.
Guarino terminates his employment for "good reason" or is terminated by the
Company without "good cause," Mr. Guarino is entitled to receive a lump sum
payment of one year's base salary.
Effective January 15, 1997, the Company and Mr. Gionta entered into a
five-year employment agreement pursuant to which Mr. Gionta serves the Company
as Vice President - Operations. Mr. Gionta receives an annual base salary of
$125,000 pursuant to the agreement. The amount of the base salary must be
reviewed annually and may be increased on the recommendation of the President
and Chief Executive Officer and as approved by the Board. Mr. Gionta was granted
options to purchase 50,000 shares of common stock at an exercise price of $5.375
per share, which was the fair market value of the Company's Common Stock on the
date of grant. Such options vest ratably over five years on January 15, 1998 and
on each anniversary of that date thereafter and expire on November 18, 2006.
Under the agreement, Mr. Gionta may not disclose confidential information about
the Company and has agreed not to compete with the Company for a one-year period
after any termination of employment. The Company may terminate Mr. Gionta's
employment for "good cause," upon "disability" (as defined in the agreement), or
in the event of death. Mr. Gionta may terminate his employment upon 30 days'
written notice to the Board of Directors or for "good reason" (as defined in the
agreement). If Mr. Gionta terminates his employment for "good reason" or is
terminated by the Company without "good cause," Mr. Gionta is entitled to
receive a lump sum payment of nine months' base salary.
DIRECTOR COMPENSATION
Directors receive no fees for serving as directors. Non-employee
directors of the Company are reimbursed for out-of-pocket expenses incurred on
behalf of the Company.The Company's 1994 Stock Plan provides for automatic
grants of stock options for the purchase of 5,000 shares of Common Stock to each
non-employee director of the Company upon his or her election or re-election to
the Board. These options are fully vested at the date of grant, have an exercise
price equal to the fair market value of the Company's Common Stock at the date
of grant, and are exercisable for a period of ten years from the date of grant.
The following table summarizes options granted to directors of the
Company during the 1996 fiscal year.
<TABLE>
<CAPTION>
Number of Shares Exercise or
Underlying Options Base Price Expiration
Name Granted(#) ($/Share) Vesting Date Date
- ---- ------------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Byron L. Frank 5,000 $5.00 05/29/96 05/29/2006
Byron L. Frank 50,000 4.53 11/26/96 11/26/2006
Lee M. Cohn (1) 5,000 5.00 05/29/96 05/29/2006
</TABLE>
- -----------
(1) Mr. Cohn resigned as a director on November 15, 1996.
CERTAIN TRANSACTIONS
During 1996 the Company made advances to Mr. Jacobs, of which the
largest aggregate amount outstanding was $120,165. In December 1996, the Company
awarded a bonus to Mr. Jacobs in the amount of $100,000, which was applied to
repay all outstanding advances.
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table sets forth, as of March 25, 1997, the number of
shares of Common Stock beneficially owned by each person known to the Company to
be the beneficial owner of more than five percent of the outstanding shares of
the Company's common stock, by each executive officer of the Company named in
the Summary Compensation Table herein, by each director and director nominee,
and by all directors and executive officers as a group.
NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
- ---------------- ------------------ -------
Sheldon F. Jacobs 1,189,999(1) 27.8
10250 Valley View Road, Suite 145
Eden Prairie, MN 55344
Perkins Capital Management, Inc. 376,000(2) 8.9
730 East Lake Street
Wayzata, MN 55397-1769
Steven T. Newby 345,500(3) 8.1
6116 Executive Blvd., Suite 701
Rockville, MD 20852
Ralph J. Guarino 32,500(4) *
Byron L. Frank 22,001(5) *
All directors and executive officers
as a group (four persons) 1,245,500(6) 28.7
- -----------------
* Less than one percent.
(1) Includes 40,000 shares issuable upon exercise of options exercisable
within 60 days of the Record Date.
(2) Based on the most recent Schedule 13G filed with the Securities and
Exchange Commission (the "SEC").
(3) Based on the most recent Schedule 13D filed with the SEC.
(4) Includes 30,000 shares issuable upon exercise of options exercisable
within 60 days of the Record Date.
(5) Includes 20,001 shares issuable upon exercise of options exercisable
within 60 days of the Record Date.
(6) Includes 90,001 shares issuable upon exercise of options exercisable
within 60 days of the Record Date.
PROPOSAL TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE
UNDER THE COMPANY'S 1994 STOCK PLAN
(PROPOSAL 2)
In February 1994, the Board of Directors and the shareholders of the
Company adopted the 1994 Stock Plan (the "Plan"). The Plan provides for the
granting of awards in the form of stock options, restricted stock, stock
appreciation rights and deferred stock to key employees and non-employees,
including directors of and consultants to the Company and any subsidiary, to
purchase up to a maximum of 250,000 shares of Common Stock. Options that are
granted under the Plan may be either options that qualify as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended ("Incentive Stock Options"), or those that do not qualify as
Incentive Stock Options ("Non-Qualified Stock Options"). The Plan may be
administered by the Board of Directors, or a committee designated by the Board,
which determines the persons who are to receive awards under the Plan, the type
of award to be granted, the number of shares subject to each award and, if an
option, the exercise price of each option.
An amendment to the Plan was adopted by the Board of Directors in
February 1995 and approved by the shareholders in May 1995 providing for
automatic grants of Non-Qualified Stock Options to non-employee directors of the
Company. Non-employee directors receive Non-Qualified Stock Options to purchase
5,000 shares upon their election to the Board and automatic annual grants of
options to purchase 5,000 shares upon reelection to the Board at any special or
annual meeting. These options vest immediately upon the date granted, have an
exercise price equal to the fair market value of the Company's Common Stock on
the date granted and are exercisable for a period of ten years.
On May 29, 1996, the Board of Directors approved an amendment to the
Plan to increase the number of shares reserved for issuance from 250,000 to
750,000, subject to approval by the Company's shareholders. A complete text of
the Plan is set forth as Annex A to this Proxy Statement. The brief summary of
the Plan which follows is qualified in its entirety by reference to the complete
text. At December 29, 1996, 497,002 options had been granted under the Plan and
were outstanding.
GENERAL
The purpose of the Plan is to advance the interests of the Company by
furnishing a variety of economic incentives designed to attract, retain and
motivate executives, key employees, non-employee directors and consultants to
the Company and enable such individuals to participate in the long-term success
and growth of the Company.
The Plan provides that the Board of Directors or by a committee
composed of at least two disinterested members of the Board may grant awards in
the following forms: (a) stock options; (b) stock appreciation rights; (c)
restricted stock; or (d) deferred stock awards. The Plan is currently
administered by the entire Board rather than by a committee. Awards may be
granted to officers, non-employee directors, key employees of the Company or its
subsidiaries, and consultants to the Company selected from time to time by the
Board.
The number of shares of Common Stock which may be issued under the Plan
if this amendment is approved may not exceed 750,000 shares, subject to
adjustment in the event of a merger, recapitalization or other corporate
restructuring. This represents approximately 17.7% of the 4,242,397 shares of
Common Stock outstanding on April 11, 1997. On April 11, 1997, the closing sale
price of the Common Stock as reported by NASDAQ was $2.19 per share.
STOCK OPTIONS
Under the Plan, the Board may grant non-qualified and incentive stock
options to eligible participants to purchase shares of Common Stock from the
Company, except that no incentive stock options may be granted thereunder after
February 1, 2004. The Plan confers on the Board discretion, with respect to any
such stock option, to determine the number and purchase price of the shares
subject to the option, the term of each option and the time or times during its
term when the option becomes exercisable. The purchase price for incentive stock
options may not be less than the fair market value of the shares subject to the
option on the date of grant. The number of shares subject to an option will be
reduced proportionately to the extent that the optionee exercises a related SAR.
The term of an incentive stock option may not exceed 10 years from the date of
grant. Any option shall become immediately exercisable for a period not to
exceed 60 days in the event of specified changes in corporate ownership or
control. The Board may accelerate the exercisability of any option or may
determine to cancel stock options in order to make a participant eligible for
the grant of an option at a lower price.
The option price may be paid in cash, check or, in some cases, by
delivery of unrestricted shares of Common Stock valued at their fair market
value at the time of purchase or by withholding from the shares issuable upon
exercise of the option shares of Common Stock valued at their fair market value
or as otherwise authorized by the Board.
In the event that an optionee ceases to be an employee or director of
or consultant to the Company for any reason, including retirement, disability or
death, any stock option or unexercised portion thereof which was otherwise
exercisable on the date of termination of employment shall expire at the time or
times established by the Board, subject to limitations set forth in the Plan.
STOCK APPRECIATION RIGHTS
A stock appreciation right ("SAR") is a right to receive, without
payment to the Company, a number of shares, cash or any combination thereof, the
amount of which is determined pursuant to the formula described below. A SAR may
be granted with respect to any stock option granted under the Plan, or alone. A
SAR granted with respect to any stock option may be granted concurrently with
the grant of such option or at such later time as determined by the Board and as
to all or any portion of the shares subject to the option, except that a SAR
granted with respect to an incentive stock option may be granted only at the
time of grant of the option.
The Plan confers on the Board discretion to determine the number of
shares as to which a SAR will relate as well as the duration and exercisability
of a SAR. In the case of a SAR granted with respect to a stock option, the
number of shares of Common Stock to which the SAR pertains will be reduced in
the same proportion that the holder exercises the related option. Unless
otherwise provided by the Board, a SAR will be exercisable for the same time
period as the stock option to which it relates is exercisable. Any SAR shall
become immediately exercisable in the event of specified changes in corporate
ownership or control. The Board may accelerate the exercisability of any SAR.
Upon exercise of a SAR, the holder is entitled to receive an amount
which is equal to the aggregate amount of the appreciation in the shares of
Common Stock as to which the SAR is exercised. For this purpose, the
"appreciation" in the shares consists of the amount by which the fair market
value of the shares of Common Stock on the exercise date exceeds the purchase
price of the shares under the option. The Board may pay the amount of this
appreciation to the holder of the SAR by the delivery of Common Stock, cash, or
any combination of Common Stock and cash.
RESTRICTED STOCK
Restricted stock consists of the sale or transfer by the Company to an
eligible participant of one or more shares of Common Stock which are subject to
restrictions on their sale or other transfer by the participant. The price at
which restricted stock will be sold will be determined by the Board, and it may
vary from time to time and among participants and may be less than the fair
market value of the shares at the date of sale. All shares of restricted stock
will be subject to such restrictions as the Board may determine. Subject to
these restrictions and the other requirements of the Plan, a participant
receiving restricted stock shall have all of the rights of a shareholder as to
those shares.
Subject to the provisions of the award agreement, upon termination of
employment of the participant for any reason during the restriction period, all
shares still subject to restriction are forfeited. The Board may waive
restrictions in the case of hardship, such as termination of employment due to
death, disability, or retirement (but not for cause). All restrictions shall
immediately lapse in the event of specified changes in corporate ownership or
control.
DEFERRED STOCK AWARDS
Deferred stock awards consist of the transfer by the Company to an
eligible participant of shares of Common Stock, without payment, as additional
compensation for services to the Company at the expiration of a deferral period.
The number of shares transferred pursuant to any deferred stock award and the
length of the deferral period will be determined by the Board, which may
condition the grant of deferred stock upon the attainment of specified
performance goals.
Subject to the provisions of the award agreement, upon termination of
employment of the participant for any reason during the deferral period, the
deferred stock in question is forfeited. The Board may waive the remainder of
the deferral period in hardship cases, such as termination of employment due to
death, disability, or retirement (but not for cause).
NON-TRANSFERABILITY OF MOST AWARDS
No stock option, SAR, or restricted stock granted under the Plan will
be transferable by its holder, except by will or the laws of descent and
distribution in the event of the holder's death. During a participant's
lifetime, an award may be exercised only by him or her or by his or her guardian
or legal representative. Subject to the provisions of the Plan and the award
agreement, deferred stock awards may not be transferred during the deferral
period.
AMENDMENT OF THE PLAN
The Board of Directors may amend or discontinue the Plan at any time.
However, no such amendment or discontinuance may, subject to adjustment in the
event of a merger, recapitalization, or other corporate restructuring, (a)
impair, without the consent of the recipient thereof, an award previously
granted, or (b) without shareholder approval, cause the Plan to no longer comply
with rules promulgated by the SEC pursuant to Section 16 of the Securities
Exchange Act of 1934, Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code") or any other regulatory requirements. Certain Plan
amendments require shareholder approval, including amendments which would
materially increase benefits accruing to participants, increase the number of
securities issuable under the Plan, or change the requirements for eligibility
under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion sets forth certain United States income tax
considerations in connection with the ownership of Common Stock. These tax
considerations are stated in general terms and are based on the Code, as
amended, regulations thereunder and judicial and administrative interpretations
thereof. This discussion does not address state or local tax considerations with
respect to the ownership of Common Stock. Moreover, the tax considerations
relevant to ownership of the Common Stock may vary depending on a holder's
particular status.
Under existing Federal income tax provisions, a participant who
receives a stock option or a SAR under the Plan or who purchases or receives
shares of restricted stock under the Plan which are subject to restrictions
which create a "substantial risk of forfeiture" (within the meaning of section
83 of the Code) will not normally realize any income, nor will the Company
normally receive any deduction for federal income tax purposes, in the year such
award is granted. A participant who receives a stock award under the Plan
consisting of shares of Common Stock will realize ordinary income in the year of
the award in an amount equal to the fair market value of the shares of Common
Stock covered by the award on the date it is made, and the Company will be
entitled to a deduction equal to the amount the participant is required to treat
as ordinary income. A participant who receives a cash award will realize
ordinary income in the year the award is paid equal to the amount thereof, and
the amount of the cash will be deductible by the Company.
When a non-qualified stock option granted pursuant to the Plan is
exercised, the participant will realize ordinary income measured by the
difference between the aggregate purchase price of the shares of Common Stock as
to which the option is exercised and the aggregate fair market value of shares
of the Common Stock on the exercise date, and the Company will be entitled to a
deduction in the year the option is exercised equal to the amount the
participant is required to treat as ordinary income.
Options which qualify as incentive stock options are entitled to
special tax treatment. Under existing federal income tax law, if shares
purchased pursuant to the exercise of such an option are not disposed of by the
optionee within two years from the date of granting of the option or within one
year after the transfer of the shares to the optionee, whichever is longer, then
(i) no income will be recognized to the optionee upon the exercise of the
option; (ii) any gain or loss will be recognized to the optionee only upon
ultimate disposition of the shares and, assuming the shares constitute capital
assets in the optionee's hands, will be treated as long-term capital gain or
loss; (iii) the optionee's basis in the shares purchased will be equal to the
amount of cash paid for such shares; and (iv) the Company will not be entitled
to a federal income tax deduction in connection with the exercise of the option.
The Company understands that the difference between the option price and the
fair market value of the shares acquired upon exercise of an incentive stock
option will be treated as an "item of tax preference" for purposes of the
alternative minimum tax. In addition, incentive stock options exercised more
than three months after retirement are treated as non-qualified options.
The Company further understands that if the optionee disposes of the
shares acquired by exercise of an incentive stock option before the expiration
of the holding period described above, the optionee must treat as ordinary
income in the year of that disposition an amount equal to the difference between
the optionee's basis in the shares and the lesser of the fair market value of
the shares on the date of exercise or the selling price. In addition, the
Company will be entitled to a deduction equal to the amount the participant is
required to treat as ordinary income.
If the exercise price of an option is paid by surrender of previously
owned shares, the basis of the shares received in replacement of the previously
owned shares is carried over. If the option is a nonstatutory option, the gain
recognized on exercise is added to the basis. If the option is an incentive
stock option, the optionee will recognize gain if the shares surrendered were
acquired through the exercise of an incentive stock option and have not been
held for the applicable holding period. This gain will be added to the basis of
the shares received in replacement of the previously owned shares.
When a stock appreciation right granted pursuant to the Plan is
exercised, the participant will realize ordinary income in the year the right is
exercised equal to the value of the appreciation which he is entitled to receive
pursuant to the formula described above, and the Company will be entitled to a
deduction in the same year and in the same amount.
A participant who receives restricted stock subject to restrictions
which create a "substantial risk of forfeiture" (within the meaning of section
83 of the Internal Revenue Code) will normally realize taxable income on the
date the shares become transferable or no longer subject to substantial risk of
forfeiture or on the date of their earlier disposition. The amount of such
taxable income will be equal to the amount by which the fair market value of the
shares of Common Stock on the date such restrictions lapse (or any earlier date
on which the shares are disposed of) exceeds their purchase price, if any. A
participant may elect, however, to include in income in the year of purchase or
grant the excess of the fair market value of the shares of Common Stock (without
regard to any restrictions) on the date of purchase or grant over its purchase
price. The Company will be entitled to a deduction for compensation paid in the
same year and in the same amount as income is realized by the employee.
AMENDED PLAN BENEFITS
The following table sets forth grants of options that have been made to
the following individuals or groups of individuals listed, which options are
subject to approval of the proposal to increase the number of shares of Common
Stock reserved for issuance under the plan from 250,000 to 750,000.
NAME AND POSITION NUMBER OF UNITS
----------------- ---------------
Sheldon F. Jacobs
Chairman of the Board and
Chief Executive Officer 200,000
Executive Group 250,000(1)
Non-Executive Director Group 50,000
Non-Executive Officer Employee Group --
(1) Includes the options to purchase 200,000 shares of Common Stock
reported as having been granted to Mr. Jacobs on the first line of this
table.
The option grants listed in the preceding table include the following
specific grants:
* On May 29, 1996, Mr. Sheldon Jacobs, the Chairman and Chief Executive
Officer, was granted options to purchase 200,000 shares of Common
Stock. Of those options, 100,000 become exercisable in five equal 20%
annual increments beginning on the first anniversary of the date of
grant, have an exercise price of $5.50 per share and expire on May 29,
2001. The other 100,000 options become exercisable in five equal 20%
annual increments beginning on the first anniversary of the date of
grant, have an exercise price of $5.00 per share and expire on May 29,
2006.
* On November 18, 1996, Mr. Alex Gionta, the Company's Vice President -
Operations, was granted options to purchase 50,000 shares of Common
Stock. The options become exercisable in five equal 20% annual
increments beginning on January 15, 1998, have an exercise price of
$5.375 per share and expire on November 18, 2006.
* On November 26, 1996, Mr. Byron Frank, a non-management Director of the
Company, was granted options to purchase 50,000 shares of Common Stock.
The options became exercisable on November 26, 1996, have an exercise
price of $4.53 per share and expire on November 26, 2006.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE WITH
SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's Common Stock was registered under Section 12(g) of the
Securities Exchange Act of 1934 (the "1934 Act") in 1995 and, upon such
registration, its directors, executive officers, and persons holding more than
10% of outstanding Common Stock became subject to the requirement to file
reports concerning their initial ownership of Common Stock and any subsequent
changes in that ownership.
Mr. Sheldon Jacobs, the Company's Chairman and Chief Executive Officer
and a holder of more than 10% of the outstanding Common Stock, filed a Form 5
with the SEC on March 4, 1997 which was due on February 12, 1997. Mr. Byron
Frank, a Director of the Company, filed a Form 5 with the SEC on February 28,
1997 which was due on February 12, 1997. Mr. Ralph Guarino, the Company's
President and Chief Operating Officer, filed a Form 3 on November 20, 1996 which
was due on September 15, 1996. Other than as specifically disclosed herein, the
Company believes that the filing requirements have been satisfied by all
directors, executive officers and beneficial owners of more than 10% of the
Common Stock. In making this disclosure, the Company has relied solely on
written representations of such persons and copies of the reports that they have
filed with the Securities and Exchange Commission.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Lund Koehler Cox &
Company PLLP, independent public accountants, to serve as auditors for the
Company for the fiscal year ending December 28, 1997. Lund Koehler Cox & Company
PLLP has served as the Company's auditors since 1993. A representative of Lund
Koehler Cox & Company PLLP is expected to be present at this year's Annual
Meeting of Shareholders and will have an opportunity to make a statement and/or
respond to appropriate questions from shareholders.
PROPOSALS OF SHAREHOLDERS
Any shareholder wishing to have a proposal considered for inclusion in
the Company's 1998 proxy solicitation materials must set forth such proposal in
writing and file it with the Secretary of the Company no later than December 19,
1997.
OTHER BUSINESS
At the date of this Proxy Statement, management knows of no other
business that may properly come before the Annual Meeting. However, if any other
matters properly come before the meeting, the persons named in the enclosed form
of proxy will vote the proxies received in response to this solicitation in
accordance with their best judgment on such matters.
By Order of the Board of Directors
Mark D. Dacko
SECRETARY
Eden Prairie, Minnesota
April 18, 1997
ANNEX A
WOODROAST SYSTEMS, INC.
1994 STOCK PLAN, AS AMENDED
THROUGH MAY 29, 1996
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the Woodroast Systems, Inc. 1994 Stock Plan
(the "Plan"). The purpose of the Plan is to enable Woodroast Systems, Inc. (the
"Company") and its Subsidiaries to retain and attract executives, key employees,
and consultants who contribute to the Company's success by their ability,
ingenuity and industry, and to enable such individuals to participate in the
long-term success and growth of the Company by giving them a proprietary
interest in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
a. "Board" means the Board of Directors of the Company.
b. "Cause" means a felony conviction of a participant or the
failure of a participant to contest prosecution for a felony,
or a participant's willful misconduct or dishonesty, any of
which is directly and materially harmful to the business or
reputation of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the Committee referred to in Section 2 of
the Plan. If at any time no Committee shall be in office, then
the functions of the Committee specified in the Plan shall be
exercised by the Board.
e. "Company" means Woodroast Systems, Inc., a corporation
organized under the laws of the State of Minnesota (or any
successor corporation).
f. "Deferred Stock" means an award made pursuant to Section 8
below of the right to receive Stock at the end of a specified
deferral period.
g. "Disability" means permanent and total disability as
determined by the Committee.
h. "Disinterested Person" shall have the meaning set forth in
Rule 16b-3 as promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, or any
successor definition adopted by the Commission.
i. "Early Retirement" means retirement, with consent of the
Committee at the time of retirement, from active employment
with the Company and any Subsidiary or Parent Corporation of
the Company.
j. "Fair Market Value" means the value of the Stock on a given
date as determined by the Committee in accordance with the
applicable Treasury Department regulations under Section 422A
of the Code with respect to "incentive stock options."
k. "Incentive Stock Option" means any Stock Option intended to be
and designated as an "Incentive Stock Option" within the
meaning of Section 422A of the Code.
l. "Non-Employee Director" means any member of the Board who is
not an employee of the Company, any Parent Corporation or
Subsidiary.
m. "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option, and is intended to be and is
designated as a "Non-Qualified Stock Option."
n. "Normal Retirement" means retirement from active employment
with the Company, any Subsidiary or Parent Corporation of the
Company on or after age 65.
o. "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the
Company if each of the corporations (other than the Company)
owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations
in the chain.
p. "Restricted Stock" means an award of shares of Stock that are
subject to restrictions under Section 7 below.
q. "Retirement" means Normal Retirement or Early Retirement.
r. "Stock" means the Common Stock, $.005 par value per share, of
the Company.
s. "Stock Appreciation Right" means the right pursuant to an
award granted under Section 6 below to surrender to the
Company all or a portion of a Stock Option in exchange for an
amount equal to the difference between (i) the Fair Market
Value, as of the date such Stock Option or such portion
thereof is surrendered, of the shares of Stock covered by such
Stock Option or such portion thereof, and (ii) the aggregate
exercise price of such Stock Option or such portion thereof.
t. "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5 below.
u. "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company
if each of the corporations (other than the last corporation
in the unbroken chain) owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one
of the other corporations in the chain.
SECTION 2. Administration.
The Plan shall be administered by the Board of Directors or by a
Committee of not less than two directors, all of whom are Disinterested Persons,
who shall be appointed by the Board of Directors of the Company and who shall
serve at the pleasure of the Board.
The Committee shall have the power and authority to grant to eligible
persons, pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock
Appreciation Rights, (iii) Restricted Stock, or (iv) Deferred Stock awards.
In particular, the Committee shall have the authority:
(a) to select the officers and other key employees of the Company
or its Subsidiaries, and consultants and other persons having
a contractual relationship with the Company or its
Subsidiaries, to whom Stock Options, Stock Appreciation
Rights, Restricted Stock and/or Deferred Stock awards may from
time to time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock or Deferred Stock awards, or a
combination of the foregoing, are to be granted hereunder;
(c) to determine the number of shares to be covered by each such
award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder
(including, but not limited to, any restriction on any Stock
Option or other award and/or the shares of Stock relating
thereto) and to amend such terms and conditions (including,
but not limited to, any amendment which accelerates the
vesting of any award); and
(e) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to
an award under this Plan shall be deferred either
automatically or at the election of the participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to the President and/or the Chief Executive Officer of
the Company for the purpose of selecting employees who are not officers of the
Company for purposes of (i) above.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 250,000 shares, subject to increase or
decrease in the event of any adjustment required in the paragraph below. Such
shares may consist, in whole or in part, of authorized and unissued shares.
Subject to paragraph (b) (iv) of Section 6 below, if any shares that have been
optioned cease to be subject to Options, or if any shares subject to any
Restricted Stock or Deferred Stock award granted hereunder are forfeited or such
award otherwise terminates without a payment being made to the participant, such
shares shall again be available for distribution in connection with future
awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split (reverse or other), other change
in corporate structure affecting the Stock, or spinoff or other distribution of
assets to shareholders, such substitution or adjustment shall be made in the
aggregate number of shares reserved for issuance under the Plan, in the number
and option price of shares subject to outstanding options granted under the
Plan, and in the number of shares subject to Restricted Stock or Deferred Stock
awards granted under the Plan as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number of shares subject to
any award shall always be a whole number. Such adjusted option price shall also
be used to determine the amount payable by the Company upon the exercise of any
Stock Appreciation Right associated with any Option.
SECTION 4. Eligibility.
Officers, other key employees of the Company or its Subsidiaries,
Non-Employee Directors, consultants and other persons having a contractual
relationship with the Company or its Subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company and its Subsidiaries are eligible to be granted Stock Options, Stock
Appreciation Rights, Restricted Stock or Deferred Stock awards under the Plan.
The optionees and participants under the Plan shall be selected from time to
time by the Committee, in its sole discretion, from among those eligible, and
the Committee shall determine, in its sole discretion, the number of shares
covered by each award.
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after February 1, 2004.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options (in each
case with or without Stock Appreciation Rights). To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422A of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Option as
an Incentive Stock Option, provided the optionee consents in writing to the
modification or amendment.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant and
may, except as provided in this paragraph, be less than the Fair Market Value of
the Stock on the date of the grant of the Option but in no event less than 50%
of Fair Market Value, unless the Committee receives an opinion of legal counsel
that a lesser amount will not prevent the Plan from satisfying the requirements
of Rule 16b-3. In no event shall the option price per share of Stock purchasable
under an Incentive Stock Option be less than 100% of the Fair Market Value of
the Stock on the date of the grant of the option. If an employee owns or is
deemed to own (by reason of the attribution rules applicable under Section
425(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation or Subsidiary and an Incentive
Stock Option is granted to such employee, the option price shall be no less than
110% of the Fair Market Value of the Stock on the date the option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 425(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time. Installment exercise restrictions may be based upon the lapse of time,
the attainment of specified performance goals, or a combination of each.
Notwithstanding the foregoing, unless the Stock Option Agreement provides
otherwise, any Stock Option granted under this Plan shall be exercisable in
full, without regard to any installment exercise provisions, for a period
specified by the Company, but not to exceed sixty (60) days, prior to the
occurrence of any of the following events: (i) dissolution or liquidation of the
Company other than in conjunction with a bankruptcy of the Company or any
similar occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be the
surviving entity or (iii) the transfer of substantially all of the assets of the
Company or 75% or more of the outstanding Stock of the Company.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the exercise
of a Non-Qualified Stock Option, Restricted Stock or Deferred Stock subject to
an award hereunder (based, in each case, on the Fair Market Value of the Stock
on the date the option is exercised, as determined by the Committee), provided,
however, that, in the case of an Incentive Stock Option, the right to make a
payment in the form of already owned shares may be authorized only at the time
the option is granted, and provided further that in the event payment is made in
the form of shares of Restricted Stock or a Deferred Stock award, the optionee
will receive a portion of the option shares in the form of, and in an amount
equal to, the Restricted Stock or Deferred Stock award tendered as payment by
the optionee. If the terms of an option so permit, an optionee may elect to pay
all or part of the option exercise price by having the Company withhold from the
shares of Stock that would otherwise be issued upon exercise that number of
shares of Stock having a Fair Market Value equal to the aggregate option
exercise price for the shares with respect to which such election is made. No
shares of Stock shall be issued until full payment therefor has been made. An
optionee shall generally have the rights to dividends and other rights of a
shareholder with respect to shares subject to the option when the optionee has
given written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in paragraph (a) of Section
12.
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) Termination by Death. If an optionee's employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, the
Stock Option may thereafter be immediately exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at or
after grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of one year (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.
(g) Termination by Reason of Disability. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after one year (or such shorter period as the
Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422A of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after one year (or such shorter period as Committee shall specify at
grant) from the date of such termination of employment or the expiration of the
stated term of the option, whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422A of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee, if
an optionee's employment by the Company, any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, any Stock
Option held by such optionee may thereafter be exercised to the extent it was
exercisable at such termination, but may not be exercised after three months (or
such shorter period as the Committee shall specify at grant) from the date of
such termination of employment or the expiration of the stated term of the
option, whichever period is the shorter; provided, however, that if the
optionee's employment is terminated for Cause, all rights under the Stock Option
shall terminate and expire upon such termination.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Common Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company, any Subsidiary or Parent Corporation is exercisable for the first
time by an optionee during any calendar year shall not exceed $100,000.
(k) Non-Employee Directors. Each Non-Employee Director who, on or after
the date this provision of the Plan is approved by shareholders, is elected or
reelected to the Board at any annual or special meeting of the shareholders of
the Company shall automatically be granted a Stock Option to purchase 5,000
shares of Stock at an option price per share equal to 100% of the Fair Market
Value of a share of Stock on the date of the grant of the Stock Option. All such
Stock Options shall be designated as Non-Qualified Stock Options and shall be
subject to the same terms and provisions as are then in effect with respect to
the grant of Non-Qualified Stock Options to officers and key employees of the
Company, except that (i) the term of each such Stock Option shall be equal to
ten years, which term shall expire six months after termination of service as a
Director (or such shorter or longer period as the Committee shall specify at or
after grant) and (ii) each such Stock Option shall become exercisable in full
immediately. Upon termination of the Non-Employee Director's service as a
Director of the Company, the unvested portion of a Stock Option held by such
Director shall not be exercisable. Subject to the foregoing, all provisions of
the Plan not inconsistent with the foregoing shall apply to Stock Options
granted to Non-Employee Directors.
SECTION 6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of the option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related Stock Option shall not be reduced until the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in
accordance with paragraph (b) of this Section 6, by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in paragraph (b) of this Section 6. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
applicable regulations relating to the exercise of Stock Appreciation Rights by
optionees subject to reporting responsibilities under Section 16 of the
Securities and Exchange Act of 1934, and to such terms and conditions, not
inconsistent with the provisions of the Plan, as shall be determined from time
to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to which
they relate shall be exercisable in accordance with the provisions of
Section 5 and this Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive up to, but not more than, an
amount in cash or shares of Stock equal in value to the excess of the
Fair Market Value of one share of Stock over the option price per share
specified in the related option multiplied by the number of shares in
respect of which the Stock Appreciation Right shall have been
exercised, with the Committee having the right to determine the form of
payment.
(iii) Stock Appreciation Rights shall be transferable only
when and to the extent that the underlying Stock Option would be
transferable under Section 5 of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right is
related shall be deemed to have been exercised for the purpose of the
limitation set forth in Section 3 of the Plan on the number of shares
of Stock to be issued under the Plan, but only to the extent of the
number of shares issued or issuable under the Stock Appreciation Right
at the time of exercise based on the value of the Stock Appreciation
Right at such time.
(v) A Stock Appreciation Right granted in connection with an
Incentive Stock Option may be exercised only if and when the market
price of the Stock subject to the Incentive Stock Option exceeds the
exercise price of such Option.
SECTION 7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in
respect of shares of Restricted Stock awarded under the Plan. Such
certificate shall be registered in the name of the participant, and
shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such award, substantially in the
following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Woodroast Systems,
Inc. 1994 Stock Plan and an Agreement entered into between the
registered owner and the Company."
(ii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the participant shall
not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock awarded under the Plan. Within these limits, the
Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.
(ii) Except as provided in paragraph (c) (i) of this Section
7, the participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including the
right to vote the shares and the right to receive any cash dividends.
The Committee, in its sole discretion, may permit or require the
payment of cash dividends to be deferred and, if the Committee so
determines, reinvested in additional shares of Restricted Stock (to the
extent shares are available under Section 3 and subject to paragraph
(f) of Section 12). Certificates for shares of unrestricted Stock shall
be delivered to the grantee promptly after, and only after, the period
of forfeiture shall have expired without forfeiture in respect of such
shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement and
paragraph (c) (iv) of this Section 7, upon termination of employment
for any reason during the Restriction Period, all shares still subject
to restriction shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause),
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in part
any or all remaining restrictions with respect to such participant's
shares of Restricted Stock.
(v) Notwithstanding the foregoing, all restrictions with
respect to any participant's shares of Restricted Stock shall lapse, on
the date determined by the Committee, prior to, but in no event more
than sixty (60) days prior to, the occurrence of any of the following
events: (i) dissolution or liquidation of the Company, other than in
conjunction with a bankruptcy of the Company or any similar occurrence,
(ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be
the surviving entity or (iii) the transfer of substantially all of the
assets of the Company or 75% or more of the outstanding Stock of the
Company.
SECTION 8. Deferred Stock Awards.
(a) Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the officers and key employees of the Company and Subsidiaries to whom and the
time or times at which Deferred Stock shall be awarded, the number of Shares of
Deferred Stock to be awarded to any participant or group of participants, the
duration of the period (the "Deferral Period") during which, and the conditions
under which, receipt of the Stock will be deferred, and the terms and conditions
of the award in addition to those contained in paragraph (b) of this Section 8.
The Committee may also condition the grant of Deferred Stock upon the attainment
of specified performance goals. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.
(b) Terms and Conditions.
(i) Subject to the provisions of this Plan and the award
agreement, Deferred Stock awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral
Period. At the expiration of the Deferral Period (or Elective Deferral
Period, where applicable), share certificates shall be delivered to the
participant, or his legal representative, in a number equal to the
shares covered by the Deferred Stock award.
(ii) Amounts equal to any dividends declared during the
Deferral Period with respect to the number of shares covered by a
Deferred Stock award will be paid to the participant currently or
deferred and deemed to be reinvested in additional Deferred Stock or
otherwise reinvested, all as determined at the time of the award by the
Committee, in its sole discretion.
(iii) Subject to the provisions of the award agreement and
paragraph (b) (iv) of this Section 8, upon termination of employment
for any reason during the Deferral Period for a given award, the
Deferred Stock in question shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause)
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in part
any or all of the remaining deferral limitations imposed hereunder with
respect to any or all of the participant's Deferred Stock.
(v) A participant may elect to further defer receipt of the
award for a specified period or until a specified event (the "Elective
Deferral Period"), subject in each case to the Committee's approval and
to such terms as are determined by the Committee, all in its sole
discretion. Subject to any exceptions adopted by the Committee, such
election must generally be made prior to completion of one half of the
Deferral Period for a Deferred Stock award (or for an installment of
such an award).
(vi) Each award shall be confirmed by, and subject to the
terms of, a Deferred Stock agreement executed by the Company and the
participant.
SECTION 9. Transfer, Leave of Absence. etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
SECTION 10. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted Stock, Deferred Stock or other stock-based award theretofore granted,
without the optionee's or participant's consent, or (ii) which without the
approval of the stockholders of the Company would cause the Plan to no longer
comply with rules promulgated by the Securities and Exchange Commission under
authority granted in Section 16 of the Securities Exchange Act of 1934, as
amended, Section 422A of the Code or any other regulatory requirements.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent. The
Committee may also substitute new Stock Options for previously granted options,
including previously granted options having higher option prices.
SECTION 11. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
SECTION 12. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock opt ion under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan pursuant
to any Restricted Stock, Deferred Stock or other stock-based awards shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted Stock,
Deferred Stock and other stock-based awards under the Plan (other than Stock
options) are not required to make any payment or provide consideration other
than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
subsidiary to terminate the employment of any of its employees at any time.
(d) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 12(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
(e) The reinvestment of dividends in additional Restricted Stock (or in
Deferred Stock or other types of Plan awards) at the time of any dividend
payment shall only be permissible if the Committee (or the Company's chief
financial officer) certifies in writing that under Section 3 sufficient shares
are available for such reinvestment (taking into account then outstanding Stock
Options and other Plan awards).
SECTION 13. Effective Date of Plan.
The Plan shall be effective on February 4, 1994 (the date of approval
by the Board of Directors), subject to approval by a vote of the holders of a
majority of the stock present and entitled to vote and shall expire (unless
terminated earlier) as of February 1, 2004. Awards may be granted under the Plan
prior to shareholder approval, provided such awards are made subject to
shareholder approval.
PROXY
WOODROAST SYSTEMS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 20, 1997
The undersigned, revoking all prior proxies, hereby appoints Sheldon F. Jacobs
and Byron L. Frank, or either of them, as proxy or proxies, with full power of
substitution and revocation, to vote all shares of Common Stock of Woodroast
Systems, Inc. of record in the name of the undersigned at the close of business
on April 10, 1997, at the Annual Meeting of Shareholders to be held on Tuesday,
May 20, 1997, or at any adjournment thereof, upon the following matters:
(1) ELECTION OF
DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed
below) below.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the FOR box and strike a line through the nominee's name in the list
below.)
SHELDON F. JACOBS RALPH J. GUARINO BYRON L. FRANK
(2) To approve an amendment to the Company's 1994 Stock Plan to increase the
number of shares of Common Stock reserved for issuance threunder from
250,000 shares to 750,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
AND FOR THE AMENDMENT TO THE 1994 STOCK PLAN.
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and acknowledges receipt of the Notice and Proxy Statement
relating to the Annual Meeting of Shareholders.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. When properly
executed, this proxy will be voted on the proposals set forth herein as directed
by the shareholder, but if no direction is made in the space provided, this
proxy will be voted FOR the election of all nominees for director and FOR the
proposal to increase the number of shares reserved for issuance under the
Company's 1994 Stock Plan.
Dated: __________________________, 1997.
x_______________________________________
Signature
x_______________________________________
Signature if jointly held
Please sign exactly as name(s) are shown
at left. When signing as executor,
administrator, trustee, or guardian,
give full title as such; when shares
have been issued in names of two or more
persons, all should sign.
PLEASE MARK, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
