<PAGE> 1
United States Securities and Exchange Commission
Washington, D.C. 20549
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 Under Rule 14a-12.
NUTRACEUTIX, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registrant 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:
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NUTRACEUTIX, INC.
8340 - 154TH AVENUE N.E.
REDMOND, WASHINGTON 98052
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2000
------------------------
To the Stockholders of Nutraceutix, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
NUTRACEUTIX, INC. (the "Company"), a Delaware corporation, will be held at the
Edgewater Hotel, Pier 67, 2411 Alaskan Way, Seattle, Washington on Wednesday,
May 24, 2000 at 10:00 a.m., Pacific Daylight Savings time. The purposes of the
Annual Meeting will be:
1. To elect one director to serve as the Class 2 director on the
Company's Board of Directors for a three-year term (Proposal No. 1);
2. To approve an amendment to the Nutraceutix, Inc. 1995 Amended Stock
Option Plan to increase the aggregate number of shares of the Company's
Common Stock that may be issued thereunder from three million (3,000,000)
to four million (4,000,000) shares; and
3. To consider and act upon any other matter which may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 14, 2000,
as the record date for determining the stockholders entitled to notice of, and
to vote at, the meeting or any adjournment thereof. Only holders of record of
Common Stock of the Company at the close of business on the record date will be
entitled to notice of, and to vote at, the meeting and any adjournment thereof.
All stockholders are cordially invited to attend the Annual Meeting. A
review of the Company's operations for the year ended December 31, 1999 will be
presented. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD, WHICH YOU MAY REVOKE AT ANY TIME PRIOR
TO ITS USE. A prepaid, self-addressed envelope is enclosed for your convenience.
Your shares will be voted at the meeting in accordance with your proxy. If you
attend the meeting, you may revoke your proxy and vote in person.
By Order of the Board of Directors
/s/ William D. St. John
William D. St. John
President and Chairman of the Board
Redmond, Washington
April 14, 2000
<PAGE> 3
NUTRACEUTIX, INC.
8340 - 154TH AVENUE N.E.
REDMOND, WASHINGTON 98052
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2000
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying Annual Report to Stockholders,
the Notice of Annual Meeting and the proxy card are being furnished to the
stockholders of Nutraceutix, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Company's Board of Directors
for use at the Company's 2000 Annual Meeting of Stockholders (the "Annual
Meeting") to be held at the Edgewater Hotel, Pier 67, 2411 Alaskan Way, Seattle,
Washington, on May 24, 2000 at 10:00 a.m., Pacific Daylight Savings Time, and
any adjournment thereof. All expenses of the Company associated with this
solicitation will be borne by the Company. The solicitation of proxies by mail
may be followed by personal solicitation of certain stockholders by officers or
regular employees of the Company.
The two persons named as proxies on the enclosed proxy card, William D. St.
John and Steven H. Moger, were designated by the Board of Directors. All
properly executed proxies will be voted (except to the extent that authority to
vote has been withheld) and where a choice has been specified by the stockholder
as provided in the proxy card, it will be voted in accordance with the
specification so made. Proxies submitted without specification will be voted FOR
Proposal No. 1 to elect the nominee as a Class 2 director and FOR Proposal No. 2
to approve the proposed amendment to the Company's 1995 Amended Stock Option
Plan.
A proxy may be revoked by a stockholder prior to its exercise by written
notice to the Secretary of the Company, by submission of another proxy bearing a
later date or by voting in person at the Annual Meeting. Such notice or later
proxy will not affect a vote on any matter taken prior to the receipt thereof by
the Company.
These proxy materials and the accompanying Annual Report to Stockholders
are being mailed on or about April 14, 2000 to stockholders of record on April
14, 2000 of the Company's Common Stock. The principal executive office and
mailing address of the Company is 8340 - 154th Avenue N.E., Redmond, Washington
98052.
VOTING AT THE MEETING
The shares of Common Stock constitute the only class of securities entitled
to notice of and to vote at the Annual Meeting. In accordance with the Company's
Bylaws, the stock transfer records were compiled on April 14, 2000, the record
date set by the Board of Directors for determining the stockholders entitled to
notice of, and to vote at, the Annual Meeting and any adjournment thereof. On
April 14, 2000, there were 17,486,812 shares of Common Stock outstanding and
entitled to vote.
Each share of Common Stock outstanding on the record date is entitled to
one vote per share at the Annual Meeting. Shares registered in the names of
brokers or other "street name" nominees for which proxies are voted on some but
not all matters will be considered to be voted only as to those matters actually
voted, and will not be considered "shares present" as to the matters with
respect to which a beneficial holder has not provided voting instructions
(commonly referred to as "broker non-votes"). For purposes of determining the
existence of a quorum, abstentions from voting identified as such on the proxy
card and broker non-votes are treated as present at the Annual Meeting. With
respect to tabulating the vote necessary for stockholder action on each of the
Proposals at the Annual Meeting, abstentions and broker non-votes will have no
effect on the votes. If a quorum (consisting of a majority of the shares of
Common Stock outstanding as of the record date) is present at the Annual
Meeting, the nominee for the director position who receives the greatest number
of votes cast by the shares of Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote shall be elected. Approval of
the proposed amendment to the Company's 1995 Amended Stock Option Plan will
require a majority of votes cast by the stockholders in favor of Proposal No. 2.
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PROPOSAL NO. 1:
ELECTION OF DIRECTOR
In accordance with the Company's Bylaws, the Board of Directors shall
consist of no less than 4 and no more than 12 directors, the specific number to
be determined by resolution adopted by the Board of Directors. The size of the
Board is currently set at five persons, and the Board of Directors is divided
into three classes, with staggered three-year terms. Class 1 and Class 3 each
consists of two directors, and Class 2 consists of one director. One Class 2
director will be elected at the Annual Meeting.
The Class 1 directors, Arthur S. Pearson and Carl W. Schafer, have been
elected to a term that expires in 2002. The Class 3 directors, William D. St.
John and Daniel B. Ward, have been elected to terms that expire in 2001.
NOMINEE FOR DIRECTOR (PROPOSAL NO. 1)
The name and certain information concerning the person to be nominated by
the Board of Directors at the Annual Meeting is set forth below. THE BOARD OF
DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE NOMINEE
NAMED BELOW. Shares represented by proxies will be voted for the election of the
person named below unless authority has been withheld in the proxy. The nominee
has consented to serve as a director. The Board of Directors has no reason to
believe that the nominee will be unable to serve as director. In the event of
the death or unavailability of the nominee, the proxy holders will have
discretionary authority under the proxy to vote for a suitable substitute
nominee as the Board of Directors may recommend. Proxies may not be voted for
more than one nominee. The Board of Directors has nominated the person named in
the following table:
<TABLE>
<CAPTION>
NAME AGE HAS BEEN A DIRECTOR SINCE
---- --- -------------------------
<S> <C> <C>
Herbert L. Lucas......................................... 73 1995
</TABLE>
Herbert L. Lucas has served as a member of the Company's Board of Directors
since 1995, and as a director of BioTechniques Laboratories, Inc., ("BTL") a
subsidiary of the Company since 1983. Mr. Lucas was with Carnation
International, a multinational food processing company, from 1963 to 1981,
rising to the position of President and Director. Mr. Lucas serves on the board
of several corporations and non-profit institutions, including the Wellington
Trust Company, Boston, The J. Paul Getty Trust, Los Angeles, and the Winrock
International Institute for Agricultural Development, Morrilton, Arkansas. Mr.
Lucas received his BA from Princeton University in 1950 and MBA from the Harvard
University School of Business Administration in 1952.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held seven (7) meetings and took action pursuant to
one (1) unanimous written consent during the year ended December 31, 1999.
During 1999, the members of the Compensation Committee were Mr. Lucas, Mr.
Pearson, Mr. Schafer and Mr. Ward. The Compensation Committee is responsible for
setting the compensation of the President and consults with the President
regarding the compensation of other corporate officers. The Compensation
Committee did not meet during 1999. During 1999, the members of the Audit
Committee were Mr. Lucas, Mr. Pearson, Mr. Schafer and Mr. Ward. The Audit
Committee held two meetings during 1999.
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PROPOSAL NO. 2:
APPROVAL OF THE PROPOSED AMENDMENT TO THE
1995 AMENDED STOCK OPTION PLAN
The Board of Directors of the Company proposes that the stockholders
approve an amendment to the 1995 Amended Stock Option Plan (the "Plan") to
increase by one million (1,000,000) the number of shares reserved for issuance
thereunder. The Plan was made effective as of April 6, 1995. On June 20, 1997,
the stockholders approved an amendment to the Plan increasing the number of
shares subject to the Plan from 2,000,000 to 3,000,000 shares of the Company's
Common Stock. Of the 3,000,000 shares reserved for issuance under the Plan,
545,948 shares remained available for issuance as of the Company's latest fiscal
year-end. The purpose of the Plan is to enhance the Company's ability to attract
and retain employees, officers, directors and consultants by affording them the
opportunity to own stock in the Company. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE PLAN.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000, certain information
furnished to the Company with respect to ownership of the Company's Common Stock
of (i) each director and director nominee, (ii) the Chief Executive Officer,
(iii) all persons known by the Company to be beneficial owners of more than five
percent (5%) of the Company's Common Stock, and (iv) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
NUMBER PERCENT OF
OF SHARES
STOCKHOLDER SHARES OUTSTANDING(1)
----------- --------- --------------
<S> <C> <C>
Archer-Daniels-Midland Company............................. 1,920,000 10.98%
4666 Faries Parkway
Decatur, IL 62526
Brian Jackson.............................................. 1,045,000 5.98%
80 Whitehorn Drive
Miami Springs, FL 33166-5057
William D. St. John(2)..................................... 1,390,148 7.95%
Herbert L. Lucas(3)........................................ 628,824 3.60%
Arthur S. Pearson(4)....................................... 50,000 *
Carl W. Schafer(5)......................................... 250,000 1.43%
Daniel B. Ward(6).......................................... 223,000 1.28%
All Directors and Executive Officers as a group (8
persons)(7).............................................. 2,932,275 16.77%
</TABLE>
- ---------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting and investment power
with respect to shares. Except as otherwise indicated, the stockholders
identified in this table have sole voting and investment power with regard
to the shares shown as beneficially owned by them. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable within
60 days of March 31, 2000 are deemed outstanding for computing the
percentage ownership of the person holding such options or warrants, but are
not deemed outstanding for computing the percentage of any other person.
(2) Includes 257,166 shares subject to options exercisable as of May 30, 2000,
of which 90,000 shares are subject to options held by Patricia A. St. John,
Mr. St. John's wife.
(3) Includes 210,000 shares subject to options exercisable as of May 30, 2000.
(4) Includes 30,000 shares subject to options exercisable as of May 30, 2000.
(5) Includes 240,000 shares subject to options exercisable as of May 30, 2000.
(6) Includes 210,000 shares subject to options exercisable as of May 30, 2000.
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(7) Includes 1,113,833 shares subject to options exercisable as of May 30, 2000,
including shares of Common Stock and options beneficially owned by Mr. Moger
and Mr. Johnson.
DIRECTORS AND EXECUTIVE OFFICERS
The following table identifies the current directors and executive officers
of the Company, the positions which they hold, and the year in which they began
serving in their respective capacities. Officers of the Company are elected by
the Board of Directors immediately following each Annual Meeting of the
Company's stockholders to hold office until their successors are elected and
qualified.
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION(S) WITH COMPANY POSITION HELD SINCE
---- --- -------------------------------- -------------------
<S> <C> <C> <C>
William D. St. John............. 48 President, Chairman of the Board, 1995
Director (Class 3, exp. 2001)
Patricia A. St. John............ 48 Vice President of Administration, 1997
Secretary and Treasurer
Steven H. Moger................. 36 Vice President of Operations 1997
Lyndon C. Johnson............... 43 Vice President of Sales and Marketing 1998
Herbert L. Lucas................ 73 Director (Class 2, exp. 2000) 1995
Arthur S. Pearson............... 72 Director (Class 1, exp. 2002) 1998
Carl W. Schafer................. 64 Director (Class 1, exp. 2002) 1995
Daniel B. Ward.................. 72 Director (Class 3, exp. 2001) 1995
</TABLE>
For information on the business background of Mr. Lucas, See "Nominee For
Director" above.
William D. St. John has served as the Company's President and Chairman of
the Board since 1995, and as President and Chairman of the Board of BTL, a
subsidiary of the Company, for the past 16 years. From 1986 to 1989, Mr. St.
John was CEO of Ecova, Inc., a leader in bioremediation. Prior to joining Ecova,
he was a Manager of Northwest Bio-engineering, which developed proprietary
enzymatic systems for the conversion of organic waste streams into animal feed
and fertilizers. He was previously employed as a consultant to Tempa, Inc., an
Alaska-based manufacturer of animal feed concentrates, and as a scientist for
both the Department of Fisheries/Food Science, University of Washington and the
Food and Drug Administration. Mr. St. John received his B.Sc. from Seattle
University in 1973 and MS in Micro/Molecular Biology from Ohio State University
in 1975.
Patricia A. St. John has served in various management positions at BTL for
the past 15 years, including eleven years as Director of Corporate Relations. In
December of 1997, Mrs. St. John was promoted to Vice President of Administration
of the Company. From 1986 to 1988 Mrs. St. John was the Director of Corporate
Relations for Ecova, Inc. a leader in bio-remediation. Prior to these positions,
Mrs. St. John held administrative positions with the May's Drug Store chain. She
is the wife of William D. St. John.
Steven H. Moger has served in various financial management positions for
BTL for the past 13 years. From 1993 to 1997, Mr. Moger served as the
Controller/General Manager of the Company. In December of 1997 Mr. Moger was
promoted to Vice President of Operations/General Manager. Mr. Moger received his
BA in Accounting from Western Washington University in 1986 and obtained his CPA
in 1989.
Lyndon C. Johnson has served in various management positions in the
nutrition industry during the last fifteen years. Mr. Johnson was named Vice
President of Sales and Marketing of the Company in August of 1998. From July of
1997 to August of 1998, Mr. Johnson was with Olympian Laboratories, Inc., as
Vice President of Sales and Marketing. From 1991 to 1997, he was Vice President
for Weider Nutrition International, Mass Market Division and National Sales
Manager of Health Food and Private Label Division. From 1982 to 1990, Mr.
Johnson was the Area Director/General Manager of the western regional market of
Nutri/System Weight Loss Centers. Mr. Johnson attended the University of Utah.
Arthur S. Pearson was elected to the Board of Directors in December, 1998
to fill a vacancy created by the resignation of Dr. Gilbert S. Omenn. Since
1981, Mr. Pearson has managed Arthur S. Pearson Associates, Management
Consultants. From 1977 to 1981, Mr. Pearson was Corporate Vice President of
Advertising of
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Standard Brands/Nabisco. Prior thereto, he served in senior marketing positions
at Bristol Myers Co. from 1963-1977; his last position was Director of Marketing
Services of the Clariol division. From 1960 to 1963, Mr. Pearson was Director of
Marketing Research, Ralston Purina.
Carl W. Schafer has served as a member of the Board of Directors since
1995. He has served as President of the Atlantic Foundation since 1990 and from
1987 to 1990 was a principal of Rockefeller & Co., Inc. Prior thereto, he was
the Financial Vice President, Treasurer and Chief Financial Officer of Princeton
University. Mr. Schafer was also chairman of the Investment Advisory Committee
of the Howard Hughes Medical Institute from 1985 to 1992. Mr. Schafer joined
Princeton in 1969 after serving as a principal staff assistant to the Committee
on Appropriations, U.S. House of Representatives. Mr. Schafer serves as a
director and/or trustee of a number of corporations and foundations, including
Frontier Oil Corporation, the Paine Webber and Guardian groups of mutual funds,
Evans Systems, Inc., Harbor Branch Institution, Electronic Clearing House, Inc.,
Roadway Express, Inc. and Labor Ready, Inc.
Daniel B. Ward has served as a member of the Company's Board of Directors
since 1995 and as a director of BTL since 1983. Since 1977 he has had his own
financial consulting firm which specializes in mergers and acquisitions. From
1976 to 1977, Mr. Ward was Vice President of Finance for Norfin, Inc., a
business machine manufacturer. From 1972 to 1975 he was Regional Director of the
Small Business Administration and from 1966 to 1972 was Director of the
Washington State Department of Commerce and Economic Development. Mr. Ward
received his BA from Princeton University in 1950.
Officers serve at the discretion of the Company's Board of Directors.
William D. St. John and Patricia A. St. John are husband and wife. No other
family relationship exists among any directors or executive officers of the
Company or the nominees for election to the Company's Board of Directors.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows all the cash compensation paid by the Company to
the President, the Vice President of Sales and Marketing and the Vice President
of Operations, as well as certain other compensation paid during the fiscal
years indicated. No other officer earned total salary and bonus in excess of
$100,000 for the periods indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------- -------------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
--------------------------- ---- ------- ----- ------------ -------------------
<S> <C> <C> <C> <C> <C>
William D. St. John,.............. 1999 175,000(1) 8,000(2) -0- 35,000
President 1998 148,500(1) 8,000(2) 36,015(3) 20,000
1997 119,000 8,000(2) 62,411(3) 30,000
Lyndon C. Johnson,................ 1999 150,000 -0- -0- -0-
VP Sales & Marketing 1998 50,576(4) -0- -0- 200,000
Steven H. Moger,.................. 1999 110,000(5) -0- -0- 20,000
VP Operations 1998 87,500(5) -0- 12,833(6) 10,000
1997 60,000(5) -0- 29,473(6) 30,000
</TABLE>
- ---------------
(1) Mr. St. John received an annual base salary of $119,000 until April 1998.
From April 1998 to May 1998, his annual salary was $150,000. In October
1998, his annual salary was increased to $175,000.
(2) Consists of premiums paid by the Company for key-man life insurance and term
insurance.
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<PAGE> 8
(3) Other Annual Compensation consists of commissions. Mr. St. John received a
commission on the Company's gross sales, as follows: 0.65% on all sales,
additional 2.0% over $150,000 All commissions payable to Mr. St. John on the
Company's sales terminated in May 1998.
(4) Mr. Johnson's date of hire was August 31, 1998.
(5) Mr. Moger received an annual base salary of $60,000 until April 1998. From
April 1998 to October 1998, his annual salary was $90,000. In October 1998,
his annual salary was increased to $110,000.
(6) Mr. Moger received a commission on the Company's gross sales as follows:
0.225% on all sales, additional 0.4% over $150,000. Mr. Moger also received
an additional 12% commission on sales of COBACTIN microbial feed additives
for dairy, BIOPOWER silage inoculant and private label manufacturing for
product sales made directly by Mr. Moger. All commissions payable to Mr.
Moger on the Company's sales terminated in May 1998.
The following table sets forth all individual grants of stock options made
by the Company during the fiscal year ended December 31, 1999 to Mssrs. St.
John, Moger and Johnson. Mr. St. John, Mr. Moger and Mr. Johnson did not
exercise any options during 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL EXERCISE
SECURITIES OPTIONS GRANTED TO OR BASE
UNDERLYING OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR(1) ($/SHARE) DATE
---- ------------------ ------------------ --------- ----------
<S> <C> <C> <C> <C>
William D. St. John........................ 35,000 23.2% $0.50 9/24/09
Steven H. Moger............................ 20,000 13.3% $0.50 9/24/09
Lyndon C. Johnson.......................... -0- -0- -0- -0-
</TABLE>
- ---------------
(1) Based on stock options representing an aggregate of 150,652 shares of Common
Stock granted to employees during the fiscal year ended December 31, 1999.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
The Company has a three year employment contract with its President,
William D. St. John, which commenced on April 1, 1998, and which is renewable
for an additional three-year period unless either party gives 180 days notice to
the other. The employment agreement provides for an initial base annual salary
of not less than $150,000. As of October 1, 1998, the base salary paid to Mr.
St. John increased from $150,000 to $175,000.
The Company has a three-year employment contract with Lyndon C. Johnson as
its Vice President of Sales and Marketing. The employment agreement commenced on
September 8, 1998. The employment agreement provides for an initial base salary
of $150,000 plus commissions and bonus not to exceed fifty percent (50%) of the
base salary. The bonus is earned if certain sales levels, profitability and
other objectives are met as determined on an annual basis by the Compensation
Committee. There was no commission or bonus earned or paid to Mr. Johnson in
1999.
6
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DIRECTOR COMPENSATION
COMPENSATION OF DIRECTORS
The Company pays no additional remuneration to employees of the Company who
serve as directors. All directors are entitled to reimbursement for expenses
incurred in traveling to and from meetings of the Company's Board of Directors.
Effective September 24, 1999 and further clarified on March 27, 2000, the Board
of Directors adopted the following compensation plan for nonemployee directors
("Eligible Directors"): (a) on October 1, 1999, and October 1 of each year
thereafter, each Eligible Director is granted an option exercisable for 30,000
shares of the Company's Common Stock at an exercise price equal to the closing
price of the Company's Common Stock on the date of grant, which option shall be
fully vested as of the date of grant, (b) on October 1 of the first year of
service, each new Eligible Director is granted an option for 2,500 shares for
each whole month of service prior to October 1, (c) in the event an Eligible
Director resigns prior to October 1 in any year, such eligible Director is
granted an option on October 1 of the year of resignation for 2,500 shares for
each whole month of service completed prior to the date of resignation, and (d)
each Eligible Director receives a quarterly cash retainer paid in arrears in the
amount of $3,750 for services as a Director. On October 1, 1999, Mr. Lucas, Mr.
Schafer, Mr. Pearson and Mr. Ward were each granted nonqualified stock options
exercisable for 30,000 shares of the Company's common stock at a price of $0.56
per share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Until May 1998, William D. St. John and Steven H. Moger received certain
commissions on the Company's gross sales. Mr. St. John received $36,015 in total
commission payments in 1998. Mr. Moger received $12,833 in total commission
payments in 1998. All commissions payable to Mr. St. John and Mr. Moger on the
Company's sales terminated in May 1998. See "Executive Compensation -- Summary
Compensation Table" above. During fiscal year 1998, Archer-Daniels-Midland
Company, through its Protein Specialties Group, sold approximately $114,000 of
products to the Company. Archer-Daniels-Midland Company is a beneficial owner of
more than five percent (5%) of the Company's Common Stock and engages in the
processing of agricultural commodities to make various food, feed and beverage
products. See "Security Ownership of Certain Beneficial Owners and Management
Table" above. In March of 1999, Brian Jackson purchased 625,000 shares of the
Company's Common Stock and in connection therewith delivered a promissory note
in favor of the Company in the principal amount of $140,625, payable in monthly
installments of $15,625. There was no interest payable on the principal amount
except in the event of default. The obligation under the promissory note was
secured by a pledge of 350,000 shares of the Common Stock. The note was paid in
full on December 15, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's directors and
executive officers and persons who own more than ten percent of the outstanding
shares of the Company's Common Stock ("ten percent stockholders") to file with
the SEC initial reports of beneficial ownership and reports of changes in
beneficial ownership of shares of Common Stock and other equity securities of
the Company. To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company or otherwise in its files and on written
representations from its directors, executive officers and ten percent
shareholders that no other reports were required, during the fiscal year ended
December 31, 1999. The Company's officers, directors and ten percent
stockholders complied with all applicable Section 16(a) filing requirements,
other than a late filing of its initial report on Form 3 by
Archer-Daniels-Midland Company and a late filing by Arthur S. Pearson who
acquired shares of Common Stock in two transactions which should have been
reported currently on Form 4, but which were instead reported on Form 5 for
year-end 1999.
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<PAGE> 10
SUMMARY OF 1995 AMENDED STOCK OPTION PLAN
The following description of the Nutraceutix, Inc. 1995 Amended Stock
Option Plan (the "Plan") is only a summary and is qualified in its entirety by
reference to the Plan, a copy of which has been filed as an exhibit to the
Company's Registration Statement on Form 10-SB, as filed with the Securities and
Exchange Commission on July 27, 1998. A copy of the Plan may be obtained by
sending a written request to the Company's Secretary at the address shown on the
last page of this Proxy Statement.
General. The principal purposes of the Plan are to attract and retain the
services of certain key employees, officers, directors, agents, consultants and
independent contractors of the Company and to encourage such individuals to
increase their equity position in the Company. The Plan is not subject to the
provisions of the Employee Retirement Income Security Act of 1974. The Plan
provides for the grant of both incentive stock options and nonqualified stock
options. The Plan is intended to benefit stockholders by enabling the Company to
attract and retain personnel of the highest caliber by offering them the
opportunity to share in the increase in the value of the Common Stock to which
such personnel have contributed.
Stock Subject to the Plan. Subject to adjustment from time to time as
provided in the Plan, the Plan currently allows for the issuance of an aggregate
maximum of three million (3,000,000) shares of the Company's Common Stock, of
which 545,948 shares remain available for future option grants as of the
Company's latest fiscal year-end. If the proposed amendment is approved by the
stockholders, the number of shares of Common Stock available for issuance under
the Plan will be increased by one million (1,000,000) shares for a total
aggregate of four million (4,000,000) shares. Shares issued pursuant to the Plan
will be drawn from authorized but unissued shares or subsequently acquired
shares.
Shares of Company Common Stock that cease to be subject to an option award,
including, without limitation, in connection with the cancellation of an option
will be available for issuance in connection with future grants of options under
the Plan.
Eligibility to Receive Options. Awards of incentive stock options may be
granted under the Plan to those officers, directors and employees who are
employed by the Company at the time of grant. Awards of nonqualified stock
options may also be granted to any employee, director, officer, agent,
consultant or independent contractor of the Company.
Terms and Conditions of Options. Options granted under the Plan may be
incentive stock options (ISOs) or nonqualified stock options (NSOs). The per
share option price for each option granted under the Plan will be determined by
the Plan Administrator, but will not be less than 100% of the fair market value
per share of the Common Stock on the date of grant with respect to ISOs and not
less than 85% of the fair market value per share of the Common Stock on the date
of grant with respect to NSOs. Grants of incentive stock options to any
individual during any calendar year which exceed the limitation on value as
prescribed by the Internal Revenue Code, as amended (the "Code"), shall only to
the extent required, be treated as nonqualified stock options.
The exercise price for shares purchased under options may be paid in cash,
by bank certified or cashier's check or personal check (at the Plan
Administrator's discretion) or by withholding or delivering shares of Company
Common Stock which have been held for at least six months. The Company may
require the Optionee to pay any applicable withholding taxes that the Company is
required to withhold with respect to the grant or exercise of any option. The
withholding tax may be paid in cash or, subject to applicable law, the Plan
Administrator may permit the Optionee to satisfy such obligations by the
withholding of Common Stock.
The term of each option shall be fixed by the Plan Administrator, and if
not so established, the term shall be 10 years from date of grant. The options
generally vest over three years. The options generally will be exercisable for
ninety (90) days after termination of service other than terminations for cause
or for one year after termination of services as a result of total disability or
death.
TRANSFERABILITY. Except as expressly provided in the Plan, options are not
transferable. In general, no option may be transferred except by will or by
applicable laws of descent and distribution.
8
<PAGE> 11
ADJUSTMENT OF AWARDS. In the event of a recapitalization, stock split,
stock dividend or other material alteration in the capital structure of the
Company, the Plan Administrator shall, with respect to each outstanding option,
proportionately adjust the number and class of shares of Common Stock and/or the
exercise price per share so as to preserve the rights of the Optionee prior to
the event.
CORPORATE TRANSACTIONS. In the event of a material change in capital
structure that is not deemed subject to adjustment as set forth above, or in the
event of a liquidation or dissolution of the Company or a sale or transfer of
all or substantially all of its assets, or a merger or consolidation which
results in the shareholders holding less than a majority of stock in the
surviving corporation, all options will become immediately exercisable without
regard to any contingent vesting provision.
ADMINISTRATION. The Plan will be administered by the Company's Board of
Directors or an authorized committee comprised of members of the Board of
Directors. The composition of any committee responsible for administering the
Plan with respect to directors of the Company who are subject to Section 16 of
the Exchange Act will comply with the requirements of Rule 16b-3 promulgated
under Section 16(b) of the Exchange Act, or any successor provision.
AMENDMENT AND TERMINATION. The Plan may be suspended, amended or terminated
by the Board of Directors at any time, subject to the terms of the Plan. The
Board of Directors may amend the Plan, as it deems advisable; however, to the
extent required for compliance with Section 422 of the Code, stockholder
approval is required for any amendment that will (a) increase the total number
of shares as to which options may be granted under the Plan, (b) modify the
class of persons eligible to receive options, or (c) otherwise require
stockholder approval under applicable law or regulation.
BENEFITS TO BE AWARDED IN 2000 UNDER THE PROPOSED
AMENDMENT TO THE PLAN
Non-employee directors receive an automatic option grant for 30,000 shares
of the Company's Common Stock on October 1 of each year. In 1999, the Company's
four non-employee directors were awarded, in the aggregate, a total of 120,000
option shares. If the stockholders approve the proposed amendment, it is
anticipated that they will receive a total of 120,000 option shares under the
Plan during fiscal year 2000. Other than these non-employee director awards,
option grants under the Plan to employees and consultants are discretionary, and
therefore awards under the Plan during fiscal 2000 are not presently
determinable. For purposes of comparison with options awarded in 1999, See
"Executive Compensation -- Option Grants in Last Fiscal Year" which presents
information about awards made under the Plan to the Named Executive Officers (as
defined under "Executive Compensation"). In addition to the Named Executive
Officers, approximately 20 non-executive employees received awards under the
Plan in 1999 totaling 75,652 shares. Executive officers as a group (3 persons)
received option awards in 1999 totaling 75,000 shares under the Plan. As of
March 31, 2000, the Company employed 59 full-time employees. Subject to approval
by the stockholders of the proposed amendment to the Plan, it is anticipated
that the total number of persons receiving awards in 2000 under the Plan may be
greater as the result of the continued desire to attract and retain high-caliber
employees. On March 31, 2000, the closing price of the Company Common Stock as
quoted by the NASDAQ National Market system was $0.875 per share.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PLAN
The following is a summary of U.S. federal income tax consequences to the
Company and Optionees of options awarded under the Plan based on the federal
income tax laws in effect on the date of this Prospectus. This summary is not
intended to be exhaustive and does not discuss the tax consequences of a
participant's death or the provision of any income tax laws of any municipality,
state or foreign country in which an Optionee may reside.
Nonqualified Stock Options. With respect to NSO's: (i) no income is
recognized by the Optionee at the time the option is granted; (ii) generally, at
exercise, ordinary income is recognized by the Optionee in an amount equal to
the difference between the fair market value of the shares on the date of
exercise and the
9
<PAGE> 12
option exercise price paid for the shares; the Company may be entitled to a tax
deduction in the same amount; and (iii) upon disposition of the shares, any
subsequent appreciation or depreciation in the value of the shares is treated as
long-term or short-term capital gain or loss. In the case of an Optionee who is
also an employee at the time of grant, any income recognized upon exercise of an
NSO will constitute wages for which withholding will be required.
Incentive Stock Options. No income is recognized by the Optionee upon the
grant or exercise of an ISO (unless the alternative minimum tax rules apply). If
the Optionee holds the shares acquired upon exercise of an ISO ("ISO Shares")
for more than one year after the date the option was exercised and for more than
two years after the date the option was granted, then (i) upon the resale of
such shares, the difference between the amount realized on sale and the option
exercise price will be long-term capital gain or loss, and (ii) no deduction
will be allowed to the Company for federal income tax purposes.
If the ISO Shares are disposed of before the expiration of either holding
period described above (a "disqualifying disposition"), generally (i) the
Optionee will recognize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares on the date
of exercise (or, if less, the amount realized on the disposition of the shares)
over the option exercise price paid for such shares, and (ii) the Company may be
entitled to a tax deduction in the same amount.
Alternative Minimum Tax. The exercise of an ISO granted under the Plan may
subject the Optionee to the alternative minimum tax ("AMT") under Section 55 of
the Code. In computing alternative minimum taxable income, shares acquired upon
exercise of an ISO ("ISO Shares") are treated as if they had been acquired by
the Optionee pursuant to a NSO. See "Nonqualified Stock Options," above.
If a disqualifying disposition of ISO Shares occurs in the same calendar
year as exercise of the ISO, there is no AMT adjustment with respect to those
shares. Also, upon a sale of ISO Shares that is not a disqualifying disposition,
alternative minimum taxable income is reduced in the year of sale by the excess
of the fair market value of the ISO Shares on the date of exercise over the
amount paid for the ISO Shares.
If an Optionee pays AMT in excess of his or her regular tax liability, the
amount of such AMT relating to ISO Shares may be carried forward as a credit
against any subsequent years' regular tax in excess of the AMT.
Miscellaneous
The maximum tax rate applicable to ordinary income is 39.6%. Long-term
capital gain will be taxed at a maximum rate of 20%. In order to receive
long-term capital gain treatment, the stock must be held for more than one year.
Capital gains may be offset by capital losses and up to $3,000 of capital losses
may be offset annually against ordinary income.
Payment for option shares may in some cases be made by delivering shares of
the Company's Common Stock or by certain other methods if at the time of grant
the Optionee's agreement so provides. If an Optionee makes payment of the option
price other than by cash or check, special rules will apply.
Section 162(m) of the Code limits the deductibility (under certain
circumstances) of compensation that exceeds $1,000,000 annually that is paid by
the Company to its president and to its four most highly compensated officers
(other than the president) as determined at the end of the Company's tax year.
Section 162(m) and the regulations thereunder provide certain exclusions from
the amounts included in the $1,000,000 limitation, including compensation that
is "qualified performance-based compensation" within the meaning of the
regulations.
The Plan is not qualified under Section 401 of the Code. In addition, the
Plan is not subject to any of the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be included in the Company's Proxy
Statement for its 2001 Annual Meeting of Stockholders must be received by the
Company at its principal executive office no later than
10
<PAGE> 13
December 24, 2000. According to the Company's Bylaws, proposals by stockholders
intended to be presented at the Company's 2001 Annual Meeting of Stockholders
must be received by the Company at its principal executive office not less than
75 and not more than 90 days prior to the meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP was retained as the Company's independent accountants
for the fiscal year ending December 31, 1999 and is selected as the Company's
independent accountants for the fiscal year ending December 31, 2000.
A representative of Grant Thornton LLP is expected to be present at the
Annual Meeting. The representative will be given an opportunity to make a
statement on behalf of their firm if such representative so desires, and will be
available to respond to appropriate stockholder questions.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware
of any other matters which may come before the Annual Meeting. It is the
intention of the persons named in the enclosed proxy card to vote the proxy in
accordance with their best judgment if any other matters do properly come before
the Annual Meeting.
Please return the enclosed proxy card as soon as possible. Unless a quorum
consisting of a majority of the outstanding shares entitled to vote is
represented at the Annual Meeting, no business can be transacted. Therefore,
please be sure to date and sign your proxy card exactly as your name appears on
your stock certificate and return it in the enclosed postage prepaid return
envelope. Please act promptly to insure that you will be represented at this
important meeting.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, ON THE WRITTEN REQUEST OF ANY
BENEFICIAL OWNER OF SHARES OF THE COMPANY'S COMMON STOCK ENTITLED TO VOTE AT THE
ANNUAL MEETING, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB AS FILED
WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION FOR THE COMPANY'S FISCAL YEAR
ENDED DECEMBER 31, 1999. WRITTEN REQUESTS SHOULD BE MAILED TO THE SECRETARY,
NUTRACEUTIX, INC., 8340 -- 154TH AVENUE N.E., REDMOND, WASHINGTON 98052.
By the Order of the Board of
Directors:
/s/ WILLIAM D. ST. JOHN
William D. St. John
President and Chairman of the Board
Dated: April 14, 2000.
11
<PAGE> 14
APPENDIX
TO
PROXY STATEMENT
NUTRACEUTIX, INC.
1995 AMENDED STOCK OPTION PLAN
AMENDMENT NO. 1
TO
NUTRACEUTIX, INC.
1995 STOCK OPTION PLAN
The Nutraceutix, Inc. 1995 Stock Option Plan (the "Plan") is hereby amended
to reflect the increase in amount of stock subject to the plan from 2,000,000 to
3,000,000 (Section 3) as set forth on Exhibit A attached hereto.
The date of the adoption of such amendment by the Board of Directors is
April 21, 1997. The date of adoption of such amendment by Shareholders is June
20, 1997.
NUTRACEUTIX, INC.
1995 AMENDED STOCK OPTION PLAN
SECTION 1. Purpose. The purpose of the Nutraceutix, Inc. 1995 Stock Option
Plan (this "Plan") is to provide a means whereby selected employees, directors
(subject to the restrictions contained in Sections 2 and 4), officers, agents,
consultants and independent contractors of Nutraceutix, Inc. (the "Company") or
of any parent or subsidiary (as defined in subsection 5.7 and referred to
hereinafter as "related corporations") thereof, may be granted incentive stock
options and/or nonqualified stock options to purchase the Common Stock (as
defined in Section 3) of the Company, in order to attract and retain the
services or advice of such employees, directors, officers, agents, consultants
and independent contractors and to provide added incentive to them by
encouraging stock ownership in the Company.
SECTION 2. Administration. This Plan shall be administered by the Board of
Directors of the Company (the "Board") or, in the event the Board shall appoint
and/or authorize a committee to administer this Plan, by such committee. The
administrator of this Plan shall hereinafter be referred to as the "Plan
Administrator."
In the event a member of the Board (or the committee) may be eligible,
subject to the restrictions set forth in Section 4, to participate in or receive
or hold options under this Plan, no member of the Board or the committee shall
vote with respect to the granting of an option hereunder to himself or herself,
as the case may be, and, if state corporate law does not permit a committee to
grant options to directors, then any option granted under this Plan to a
director for his or her services as such shall be approved by the full board.
The foregoing notwithstanding, in the event the Company shall register any
of its equity securities pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") , and any directors are
eligible to receive options under this Plan, then the following provisions shall
apply to the administration of the Plan with respect to grants made to
directors. The Plan Administrator shall be constituted at all times so as to
meet the requirements of Section 16(b) of the Exchange Act, as amended from time
to time. Currently, the Plan Administrator shall be the Board, a majority of
which Board and a majority of which directors acting in the matter are
disinterested, or may be a committee which consists solely of not less than
three disinterested directors of the Company. In the event the Plan
Administrator is a committee and state corporate law does not permit a committee
to grant options to directors, then directors shall not be eligible to receive
options under this Plan as compensation for their services as directors. The
members of any committee serving as Plan Administrator shall be appointed by the
Board for such term as the Board may determine. The Board may from time to time
remove members from, or add members to, the committee. Vacancies on the
committee, however caused, may be filled by the Board. If at any time an
insufficient number of disinterested directors is available to serve on such
committee, interested directors may
A-1
<PAGE> 15
serve on the committee; however, during such time, no options shall be granted
under this Plan to any person if the granting of such option would not meet the
requirements of Section 16(b) of the Exchange Act.
For purposes of this Section 2, a disinterested director is a member of the
Board who meets the definition of "disinterested person" as set forth in the
rules and regulations promulgated under Section 16(b) of the Exchange Act, as
amended from time to time. Currently, a disinterested director for purposes of
this Section 2 is a member of the Board who is not, during the one year prior to
service as an administrator of a plan, or during such service, granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any of its affiliates, other than grants or awards that, pursuant to Rule
sec. 240.16b-3(c)(2)(i) under the Exchange Act, will not cause the director to
cease to be a "disinterested person," as defined in that rule.
2.1 Procedures. The Board shall designate one of the members of the Plan
Administrator as chairman. The Plan Administrator may hold meetings at such
times and places as it shall determine. The acts of a majority of the members of
the Plan Administrator present at meetings at which a quorum exists, or acts
reduced to or approved in writing by all Plan Administrator members, shall be
valid acts of the Plan Administrator.
2.2 Responsibilities. Except for the terms and conditions explicitly set
forth in this Plan, the Plan Administrator shall have the authority, in its
discretion, to determine all matters relating to the options to be granted under
this Plan, including selection of the individuals to be granted options, the
number of shares to be subject to each option, the exercise price, and all other
terms and conditions of the options. Grants under this Plan need not be
identical in any respect, even when made simultaneously. The interpretation and
construction by the Plan Administrator of any terms or provisions of this Plan
or any option issued hereunder, or of any rule or regulation promulgated in
connection herewith, shall be conclusive and binding on all interested parties,
so long as such interpretation and construction with respect to incentive stock
options corresponds to the requirements of Internal Revenue Code (the "Code")
Section 422, the regulations thereunder, and any amendments thereto.
2.3 Section 16(b) Compliance and Bifurcation of Plan. It is the intention
of the Company that this Plan comply in all respects with Rule 16b-3 under the
Exchange Act and, if any Plan provision is later found not to be in compliance
with such Section, the provision shall be deemed null and void, and in all
events the Plan shall be construed in favor of its meeting the requirements of
Rule 16b-3. Notwithstanding anything in the Plan to the contrary, the Board, in
its absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to participants who are officers
and directors subject to Section 16(b) of the Exchange Act without so
restricting, limiting or conditioning the Plan with respect to other
participants.
SECTION 3. Stock Subject to This Plan. The stock subject to this Plan shall
be the Company's Common Stock (the "Common Stock")presently authorized but
unissued or subsequently acquired by the Company. Subject to adjustment as
provided in Section 7 hereof, the aggregate amount of Common Stock to be
delivered upon the exercise of all options granted under this Plan shall not
exceed 2,000,000 shares as such Common Stock was constituted on the effective
date of this Plan. If any option granted under this Plan shall expire, be
surrendered, exchanged for another option, cancelled or terminated for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall thereupon again be available for purposes of this Plan, including
for replacement options which may be granted in exchange for such surrendered,
cancelled or terminated options.
SECTION 4. Eligibility. An incentive stock option may be granted only to
any-individual who, at the time the option is granted, is an employee of the
Company or any related corporation. A nonqualified stock option may be granted
to any employee, director, officer, agent, consultant or independent contractor
of the Company or any related corporation, whether an individual or an entity.
If required by Section 16(b) of the Exchange Act in order to establish a
disinterested Plan Administrator, the members of the Board who are not also
employees of the Company shall not be eligible to receive options under this
Plan once the Company has
A-2
<PAGE> 16
registered any of its equity securities pursuant to Section 12(b) or 12 (g) of
the Exchange Act. Any party to whom an option is granted under this Plan shall
be referred to hereinafter as an "Optionee."
SECTION 5. Terms and Conditions of Options. options granted under this Plan
shall be evidenced by written agreements which shall contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan. Notwithstanding the
foregoing, options shall include or incorporate by reference the following terms
and conditions:
5.1 Number of Shares and Price. The maximum number of shares that may be
purchased pursuant to the exercise of each option and the price per share at
which such option is exercisable (the "exercise price") shall be as established
by the Plan Administrator, provided that the Plan Administrator shall act in
good faith to establish the exercise price which shall be not less than the fair
market value per share of the Common Stock at the time the option is granted
with respect to incentive stock options and not less than 85% of the fair market
value per share of the Common Stock at the time the option is granted with
respect to nonqualified stock options and also provided that, with respect to
incentive stock options granted to greater than 10% shareholders, the exercise
price shall be as required by Section 6.
5.2 Term and Maturity. Subject to the restrictions contained in section 6
with respect to granting incentive stock options to greater than 10%
shareholders, the term of each incentive stock option shall be as established by
the Plan Administrator and, if not so established, shall be 10 years from the
date it is granted but in no event shall the term of any incentive stock option
exceed 10 years. The term of each nonqualified stock option shall be as
established by the Plan Administrator, and if not so established, shall be 10
years. To ensure that the Company or related corporation will achieve the
purpose and receive the benefits contemplated in this Plan, any option granted
to any Optionee hereunder shall, unless the condition of this sentence is waived
or modified in the agreement evidencing the option or by resolution adopted by
the Plan Administrator, be exercisable according to the following schedule:
<TABLE>
<CAPTION>
PERIOD OF OPTIONEE'S
CONTINUOUS RELATIONSHIP
WITH THE COMPANY OR RELATED
CORPORATION FROM THE DATE PORTION OF TOTAL OPTION
THE OPTION IS GRANTED WHICH IS EXERCISABLE
--------------------------- -----------------------
<S> <C>
after 6 months........................................... 16.66%
after 12 months.......................................... 33.33%
after 24 months.......................................... 66.67%
after 36 months.......................................... 100%
</TABLE>
5.3 Exercise. Subject to the vesting schedule described in subsection
5.2 above and to any additional holding period required by applicable law, each
option may be exercised in whole or in part; provided, however, that no fewer
than 100 shares (or the remaining shares then purchasable under the option, if
less than 100 shares) may be purchased upon any exercise of option rights
hereunder and that only whole shares will be issued pursuant to the exercise of
any option. During an Optionee's lifetime, any incentive stock options granted
under this Plan are personal to him or her and are exercisable solely by such
Optionee. Options shall be exercised by delivery to the Company of notice of the
number of shares with respect to which the option is exercised, together with
payment of the exercise price.
5.4 Payment of Exercise Price. Payment of the option exercise price shall
be made in full at the time the notice of exercise of the option is delivered to
the Company and shall be in cash, bank certified or cashier's check or personal
check (unless at the time of exercise the Plan Administrator in a particular
case determines not to accept a personal check) for the Common Stock being
purchased.
The Plan Administrator can determine at the time the option is granted for
incentive stock options, or at any time before exercise for nonqualified stock
options, that additional forms of payment will be permitted. To the extent
permitted by the Plan Administrator and applicable laws and regulations
(including, but not limited to, federal tax and securities laws and regulations
and state corporate law), an option may be exercised by delivery of shares of
stock of the Company held by an Optionee having a fair market value equal to the
exercise price, such fair market value to be determined in good faith by the
Plan Administrator; provided,
A-3
<PAGE> 17
however, that payment in stock held by an Optionee shall not be made unless the
stock shall have been owned by the Optionee for a period of at least six months.
5.5 Withholding Tax Requirement. The Company or any related corporation
shall have the right to retain and withhold from any payment of cash or Common
Stock under the Plan the amount of taxes required by any government to be
withheld or otherwise deducted and paid with respect to such payment. At its
discretion, the Company may require an Optionee receiving shares of Common Stock
to reimburse the Company for any such taxes required to be withheld by the
Company and withhold any distribution in whole or in part until the Company is
so reimbursed. In lieu thereof, the Company shall have the right to withhold
from any other cash amounts due or to become due from the Company to the
Optionee an amount equal to such taxes or retain and withhold a number of shares
having a market value not less than the amount of such taxes required to be
withheld by the Company to reimburse the Company for any such taxes and cancel
(in whole or in part) any such shares so withheld. If required by Section 16(b)
of the Exchange Act, the election to pay withholding taxes by delivery of shares
held by any person who at the time of exercise is subject to Section 16(b) of
the Exchange Act, shall be made either six months prior to the date the option
exercise becomes taxable or during the quarterly 10-day window period required
under section 16(b) of the Exchange Act for exercises of stock appreciation
rights.
5.6 Nontransferability of Option. Options granted under this Plan and the
rights and privileges conferred hereby may not be transferred, assigned, pledged
or hypothecated in any manner (whether by operation of law or otherwise) other
than by will or by the applicable laws of descent and distribution, and shall
not be subject to execution, attachment or similar process. Any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of any option under
this Plan or of any right or privilege conferred hereby, contrary to the Code or
to the provisions of this Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby shall be null and void.
5.7 Termination of Relationship. If the Optionee's relationship with the
Company or any related corporation ceases for any reason other than termination
for cause, death or total disability, and unless by its terms the option sooner
terminates or expires, then the Optionee may exercise, for a three-month period,
that portion of the Optionee's option which is exercisable at the time of such
cessation, but the Optionee's option shall terminate at the end of the
three-month period following such cessation as to all shares for which it has
not theretofore been exercised, unless such provision is waived in the agreement
evidencing the option or by resolution adopted by the Plan Administrator within
90 days of such cessation. The Plan Administrator shall have sole discretion in
a particular circumstance to extend the exercise period following such cessation
beyond that specified above. If, however, in the case of an incentive stock
option, the Optionee does not exercise the Optionee's option within three months
after cessation of employment, the option will no longer qualify as an incentive
stock option under the Code. If, in the case of an incentive stock option, an
Optionee's relationship with the Company or related corporation changes (i.e.,
from employee to nonemployee, such as a consultant), such change hall constitute
a termination of an Optionee's employment with the Company or related
corporation and the Optionee's incentive stock option shall terminate in
accordance with this subsection 5.7.
If an Optionee is terminated for cause, any option granted hereunder shall
automatically terminate as of the first discovery by the Company of any reason
for termination for cause, and such Optionee shall thereupon have no right to
purchase any shares pursuant to such option. "Termination for cause" shall mean
dismissal for dishonesty, conviction or confession of a crime punishable by law
(except minor violations), fraud, misconduct or disclosure of confidential
information. If an Optionee's relationship with the Company or any related
corporation is suspended pending an investigation of whether or not the Optionee
shall be terminated for cause, all Optionee's rights under any option granted
hereunder likewise shall be suspended during the period of investigation.
If an Optionee's relationship with the Company or any related corporation
ceases because of a total disability, the Optionee's option shall not terminate
or, in the case of an incentive stock option, cease to be treated as an
incentive stock option until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates and expires). As used in
this Plan, the term "total disability" refers to a mental or physical impairment
of the Optionee which is expected to result in death or which has lasted or is
expected
A-4
<PAGE> 18
to last for a continuous period of 12 months or more and which causes the
Optionee to be unable, in the opinion of the Company and two independent
physicians, to perform his or her duties for the Company and to be engaged in
any substantial gainful activity. Total disability shall be deemed to have
occurred on the first day after the Company and the two independent physicians
have furnished their opinion of total disability to the Plan Administrator.
For purposes of this subsection 5.7, a transfer of relationship between or
among the Company and/or any related corporation shall not be deemed to
constitute a cessation of relationship with the Company or any of its related
corporations. For purposes of this subsection 5.7, with respect to incentive
stock options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in,
at the time of the granting of the option, an unbroken chain of corporations
ending with the Company, if stock possessing 50% or more of the total combined
voting power of all classes of stock of each of the corporations other than the
Company is owned by one of the other corporations in such chain. When referring
to a parent corporation, the term "related corporation" shall mean any
corporation in an unbroken chain of corporations ending with the Company if, at
the time of the granting of the option, 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 such chain.
5.8 Death of Optionee. If an Optionee dies while he or she has a
relationship with the Company or any related corporation or within the
three-month period (or 12-month period in the case of totally disabled
Optionees) following cessation of such relationship, any option held by such
Optionee may be exercised within one year after his or her death by the personal
representative of his or her estate or by the person or persons to whom the
Optionee's rights under the option shall pass by will or by the applicable laws
of descent and distribution.
5.9 Status of Shareholder. Neither the Optionee nor any party to which the
Optionee's rights and privileges under the option may pass shall be, or have any
of the rights or privileges of, a shareholder of the Company with respect to any
of the shares issuable upon the exercise of any option granted under this Plan
unless and until such option has been exercised.
5.10 Continuation of Employment. Nothing in this Plan or in any option
granted pursuant to this Plan shall confer upon any Optionee any right to
continue in the employ of the Company or of a related corporation, or to
interfere in any way with the right of the Company or of any such related
corporation to terminate his or her employment or other relationship with the
Company at any time.
5.11 Modification and Amendment of Option. Subject to the requirements of
Code Section 422 with respect to incentive stock options and to the terms and
conditions and within the limitations of this Plan, the Plan Administrator may
modify or amend outstanding options granted under this Plan. The modification or
amendment of an outstanding option shall not, without the consent of the
Optionee, impair or diminish any of his or her rights or any of the obligations
of the Company under such option. Except as otherwise provided in this Plan, no
outstanding option shall be terminated without the consent of the Optionee.
Unless the Optionee agrees otherwise, any changes or adjustments made to
outstanding incentive stock options granted under this Plan shall be made in
such a manner so as not to constitute a "modification" as defined in Code
Section 425(h) and so as not to cause any incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as defined
in Code Section 422(b).
5.12 Limitation on Value for Incentive Stock Options. As to all incentive
stock options granted under the terms of this Plan, to the extent that the
aggregate fair market value (determined at the time the incentive stock option
is granted) of the stock with respect to which incentive stock options are
exercisable for the first time by the Optionee during any calendar year (under
this Plan and all other incentive stock option plans of the Company, a related
corporation or a predecessor corporation) exceeds $100,000, such options shall
be
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treated as nonqualified stock options. The previous sentence shall not apply if
the Internal Revenue Service publicly rules, issues a private ruling to the
Company, any Optionee, or any legatee, personal representative or distributes of
an Optionee or issues regulations changing or eliminating such annual limit.
SECTION 6. Greater Than 10% Shareholders.
6.1 Exercise Price and Term of Incentive Stock Options. If incentive stock
options are granted under this Plan to employees who own more than 10% of the
total combined voting power of all classes of stock of the Company or any
related corporation, the term of such incentive stock options shall not exceed
five years and the exercise price shall be not less than 110% of the fair market
value of the Common Stock at the time the incentive stock option is granted.
This provision shall control notwithstanding any contrary terms contained in an
option agreement or any other document.
6.2 Attribution Rule. For purposes of subsection 6.1, in determining stock
ownership, an employee shall be deemed to own the stock owned, directly or
indirectly, by or for his or her brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by or
for its shareholders, partners or beneficiaries. If an employee or a person
related to the employee owns an unexercised option or warrant to purchase stock
of the Company, the stock subject to that portion of the option or warrant which
is unexercised shall not be counted in determining stock ownership. For purposes
of this Section 6, stock owned by an employee shall include all stock actually
issued and outstanding immediately before the grant of the incentive stock
option to the employee.
SECTION 7. Adjustments Upon Changes in Capitalization. The aggregate number
and class of shares for which options may be granted under this Plan, the number
and class of shares covered by each outstanding option and the exercise price
per share thereof (but not the total price), and each such option, shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split-up or consolidation
of shares or any like capital adjustment, or the payment of any stock dividend.
7.1 Effect of Liquidation, Reorganization or Change in Control.
7.1.1 Cash, Stock or Other Property for Stock. Except as provided in
subsection 7.1.2, upon a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation,
reorganization (other than a mere reincorporation or the creation of a holding
company) or liquidation of the Company, as a result of which the shareholders of
the Company receive cash, stock or other property in exchange for or in
connection with their shares of Common Stock, any option granted hereunder shall
terminate, but the Optionee shall have the right immediately prior to any such
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to exercise such Optionee's option in whole or in
part whether or not the vesting requirements set forth in the option agreement
have been satisfied.
7.1.2 Conversion of Options on Stock for Stock Exchange. If the
shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted hereunder shall be converted into options
to purchase shares of Exchange Stock unless the Company and the corporation
issuing the Exchange Stock, in their sole discretion, determine that any or all
such options granted hereunder shall not be converted into options to purchase
shares of Exchange Stock but instead shall terminate in accordance with the
provisions of subsection 7.1.1. The amount and price of converted options shall
be determined by adjusting the amount and price of the options granted hereunder
in the same proportion as used for determining the number of shares of Exchange
Stock the holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or
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<PAGE> 20
reorganization. The converted options shall be fully vested whether or not the
vesting requirements set forth in the option agreement have been satisfied.
7.2 Fractional Shares. In the event of any adjustment in the number of
shares covered by any option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.
7.3 Determination of Board to Be Final. All Section 7 adjustments shall be
made by the Board, and its determination as to what adjustments shall be made,
and the extent thereof, shall be final, binding and conclusive. Unless an
Optionee agrees otherwise, any change or adjustment to an incentive stock option
shall be made in such a manner so as not to constitute a "modification" as
defined in Code Section 425(h) and so as not to cause his or her incentive stock
option issued hereunder to fail to continue to qualify as an incentive stock
option as defined in Code Section 422(b).
SECTION 8. Securities Regulation. Shares shall not be issued with respect
to an option granted under this Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance,
including the availability of an exemption from registration for the issuance
and sale of any shares hereunder. Inability of the Company to obtain from any
regulatory body having jurisdiction, the authority deemed by the Company's
counsel to be necessary for the lawful issuance and sale of any shares hereunder
or the unavailability of an exemption from registration for the issuance and
sale of any shares hereunder shall relieve the Company of any liability in
respect of the non-issuance or sale of such shares as to which such requisite
authority shall not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order against
any shares of stock may be placed on the official stock books and records of the
Company, and a legend indicating that the stock may not be pledged, sold or
otherwise transferred unless an opinion of counsel is provided (concurred in by
counsel for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Plan Administrator may also require such
other action or agreement by the Optionees as may from time to time be necessary
to comply with the federal and state securities laws. THIS PROVISION SHALL NOT
OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
HEREUNDER.
Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities
exchange, all stock issued hereunder if not previously listed on such exchange
shall be authorized by that exchange for listing thereon prior to the issuance
thereof.
SECTION 9. Amendment and Termination.
9.1 Board Action. The Board may at any time suspend amend or terminate
this Plan, provided that except as set forth in Section 7, the approval of the
Company's shareholders is necessary within 12 months before or after the
adoption by the Board of any amendment which will:
(a) increase the number of shares which are to be reserved for the
issuance of options under this Plan;
(b) permit the granting of stock options to a class of persons other
than those presently permitted to receive stock options under this Plan; or
(c) require shareholder approval under applicable law, including
Section 16(b) of the Exchange Act.
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<PAGE> 21
Any amendments made to this Plan which would constitute "modifications" to
incentive stock options outstanding on the date of such amendments, shall not be
applicable to such outstanding incentive stock options but shall have
prospective effect only.
9.2 Automatic Termination. Unless sooner terminated by the Board, this
Plan shall terminate ten years from the earlier of (a) the date on which this
Plan is adopted by the Board or (b) the date on which this Plan is approved by
the shareholders of the Company. No option may be granted after such termination
or during any suspension of this Plan. The amendment or termination of this Plan
shall not, without the consent of the option holder, alter or impair any rights
or obligations under any option theretofore granted under this Plan.
SECTION 10. Effectiveness of This Plan. This Plan shall become effective
upon adoption by the Board so long as it is approved by the holders of a
majority of the Company's outstanding shares of voting capital stock at any time
within 12 months before or after the adoption of this Plan.
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<PAGE> 22
PROXY
NUTRACEUTIX, INC.
PROXY CARD
ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NUTRACEUTIX, INC.
The undersigned stockholder of record of Nutraceutix, Inc., a Delaware
corporation (the "Company"), hereby appoints William D. St. John and Steven H.
Moger, or either of them acting in absence of the other, with full power of
substitution, as proxy to cast all votes which the undersigned stockholder is
entitled to cast at the Annual Meeting of Stockholders to be held at 10:00 a.m.
PDT on May 24, 2000, at the Edgewater Hotel, Pier 67, 2411 Alaskan Way, Seattle,
Washington, or any adjournments or postponements thereof upon the matters listed
herein and in their discretion upon such other matters as may properly come
before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. UNLESS DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEE LISTED IN PROPOSAL 1, AND "FOR"
THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S AMENDED 1995 STOCK OPTION PLAN,
AND IN ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF THE BOARD OF
DIRECTORS AS TO OTHER MATTERS. The undersigned hereby acknowledges receipt of
the Company's Proxy Statement and hereby revokes any proxy or proxies previously
given. PLEASE SIGN, DATE AND RETURN THIS PROXY CARD TODAY IN THE ENCLOSED
PRE-ADDRESSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
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<PAGE> 23
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<S> <C>
Please mark
your votes
as indicated
in this example. [X]
NUTRACEUTIX, INC.
Proxy for Annual Meeting
of Stockholders to be Held May 24, 2000
2. PROPOSAL 2--Amendment of the FOR AGAINST ABSTAIN
FOR WITHHOLD Nutraceutix, Inc. [ ] [ ] [ ]
nominee AUTHORITY 1995 Amended Stock Option Plan
named for nominee
below named below To approve an amendment to the
Nutraceutix, Inc. 1995 Amended
1. PROPOSAL 1--Election of Class 2 Director Stock Option Plan to increase
the aggregate number of shares of
Mr. Herbert L. Lucas [ ] [ ] the Company's Common Stock that
may be issued thereunder from
THE BOARD OF DIRECTORS UNANIMOUSLY RECOM- 3,000,000 to 4,000,000 shares.
MENDS A VOTE FOR THE NOMINEE NAMED ABOVE.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOM-
MENDS A VOTE FOR PROPOSAL 2.
3. Upon such other matters as may properly
come before, or incident to the conduct
of, the Annual Meeting, the Proxy holders
shall vote in such manner as they deter-
mine to be in the best interest of the
Company. Management is not presently
aware of any such matters to be
presented for action at the meeting.
I DO DO NOT
[ ] [ ] PLAN TO ATTEND THE MEETING.
Signature(s)__________________________________________________________________________________________Date_________________________
Please sign above exactly as your name appears on the Proxy Card. If shares are registered in more than one name, all such persons
should sign. A corporation should sign in its full corporate name by a duly authorized officer, stating his/her title. Trustee(s),
guardian(s), executors(s) and administrator(s) should sign in their official capacity, giving their full title as such. If a
partnership, please sign in the partnership name by authorized person(s). If you receive more than one Proxy Card, please sign and
return all such cards in the accompanying envelope. Please return promptly in the enclosed envelope which requires no postage if
mailed in the U.S.A.
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</TABLE>
