<PAGE>
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 (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 240.14a-11(c) or 240.14a-12
RED OAK HEREFORD FARMS, INC.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
___________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
___________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
___________________________________________________________________________
5) Total fee paid:
___________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
RED OAK HEREFORD FARMS, INC.
2010 Commerce Drive
Red Oak, Iowa 51566
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 22, 2000
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Red Oak Hereford Farms, Inc. (the
"Company") will be held at the Red Coach Inn, Highway 34, Red Oak, Iowa, on
Monday, May 22, 2000, at 10:30 a.m. (local time) for the following purposes:
(1) to elect nine directors to hold office until the Annual Meeting of
Shareholders in 2001, and until their successors are elected and qualified;
(2) to consider and vote upon a proposal to amend the Company's Amended
and Restated Certificate of Incorporation to increase the number of shares of
Common Stock that the Company is authorized to issue from 50,000,000 shares to
100,000,000 and the number of Preferred Stock from 5,000,000 to 10,000,000;
(3) to consider and vote upon a proposal to approve the Company's 2000
Stock Option Plan;
(4) to transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on April 14, 2000
will be entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Peter Hudgins
Peter Hudgins
Secretary
May 2, 2000
Red Oak, Iowa
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WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, YOU ARE
URGED TO SIGN, MARK, DATE, AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ADDRESSED REPLY ENVELOPE, WHICH IS FURNISHED FOR YOUR CONVENIENCE. THIS
ENVELOPE NEEDS NO POSTAGE IF MAILED WITHIN THE UNITED STATES.
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<PAGE>
RED OAK HEREFORD FARMS, INC.
2010 Commerce Drive
Red Oak, Iowa 51566
712-623-9224
-------------------
PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS
May 22, 2000
-------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Red Oak Hereford Farms, Inc. (the
"Company") to be used in voting at the Annual Meeting of Shareholders to be held
on Monday, May 22, 2000, at 10:30 a.m., at the Red Coach Inn, Highway 34, Red
Oak, Iowa, or at any adjournment or adjournments thereof. This Proxy Statement,
the Notice, the Proxy, and the Company's 1999 Annual Report have been mailed on
or before May 2, 2000 to each shareholder of record at the close of business
April 14, 2000.
You are requested to sign, mark, and complete the enclosed Proxy and
return it in the addressed reply envelope which is furnished for your
convenience. If any matters that are not specifically set forth on the proxy
card and in this Proxy Statement properly come before the Annual Meeting, the
proxy intends to vote on such matters in accordance with his reasonable business
judgement.
Proxies in the form enclosed, if duly signed, marked, and received in
time for voting, will be voted in accordance with the directions of the
shareholders. The giving of a Proxy does not preclude the right to vote in
person should the shareholder so desire. A shareholder may revoke a Proxy by
giving notice to the Secretary of the Company in writing at the address of the
principal executive offices or in open meeting, but such revocation shall not
affect any vote previously taken.
The expense of soliciting Proxies for the Annual meeting, including the
cost of preparing, assembling, and mailing the Notice, Proxy, and Proxy
Statement, will be paid by the Company. The solicitation will be made by the use
of the mails and through brokers and banking institutions and may also be made
by officers and regular employees of the Company. Proxies may be solicited by
personal interview, mail, telephone, and possibly by facsimile transmission.
As hereinafter used, and unless otherwise provided, the term "Executive
Officers" refers to the President and Chief Executive Officer, Chief Operating
Officer, and the Vice President and Chief Financial Officer.
1
<PAGE>
VOTING SECURITIES
General
Each holder of record of the Company's Common Stock, par value $0.001
per share, at the close of business on April 14, 2000, is entitled to one vote
per share on matters that come before the Annual Meeting.
The presence, in person or by proxy, of shareholders entitled to cast
at least a majority of the votes which all shareholders are entitled to cast on
a particular matter constitutes a quorum to take action at a shareholders'
meeting. Shares which are present, or represented by a proxy, will be counted
for quorum purposes regardless of whether the holder of the shares or proxy
fails to vote on a matter ("Abstentions") or whether a broker with discretionary
authority fails to exercise its discretionary authority to vote shares with
respect to the matter ("Broker Non-Votes"). The affirmative vote of at least a
majority of the votes cast at the Annual Meeting of Shareholders by all
shareholders entitled to vote thereon is required to adopt any proposal. For
voting purposes, only shares voted either for or against the adoption of
proposal or the election of directors, and neither Abstentions not Broker
Non-Votes, will be counted as voting in determining whether a proposal is
approved or a director is elected. As a consequence, Abstentions and Broker
Non-Votes will have no effect on the adoption of a proposal or the election of a
director.
At the close business on April 14, 2000, there were 16,019,165 shares
of the Company's Common Stock entitled to vote at the Annual Meeting.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth, as of April 14, 2000, the shares of the
Company's Common Stock held by shareholders of the Company who were known by the
Company to own beneficially more than 5% of its outstanding Common Stock, by the
Directors and nominees, and by all Directors and Executive Officers of the
Company as a group:
2
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<TABLE>
<CAPTION>
Amount and Nature Percentage of Shares
Name of Of Beneficial Owned by Beneficial
Title of Class Beneficial Owner Ownership (1) Owners and Management
- --------------- ------------------------------- -------------------------- ----------------------------------
<S> <C> <C> <C>
Common Gordon Reisinger 6,812,653 (2) 38%
Rural Route 3
Red Oak, Iowa 51566
Common Cimarron Investments, LP 2,433,333 15%
Rural Route 3
Red Oak, Iowa 51566
Common John Derner 8,646,655 (3) 45%
2353 213th Avenue
Milford, Iowa 51351
Common JKSBM, LP 2,175,000 14%
2353 213th Avenue
Milford, Iowa 51351
Common Charles Kolbe 1,112,154 (4) 7%
Common Dwayne Lewis 95,333 (5) *
Common Charles Wilson 1,397,625 (6) 8%
Common Marius Morin 0 *
Common Johan Smit 325,000 (7) 2%
Common Jack Holden 45,334 (8) *
Common Ron Daggett 92,334 (9) *
Common All Officers and Directors as 18,738,688 (10) 81%
a Group: (12 persons)
</TABLE>
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* Represents less than 1%
(1) Beneficial ownership has been determined pursuant to Rule 13(d)-3 (d) (1)
under the Securities Exchange Act of 1934, as amended.
(2) Includes 512,820 shares owned by Cimarron Properties which is owned and
controlled by Gordon Reisinger and 2,433,333 shares owned by Cimarron
Investments, LP, a family partnership controlled by Mr. Reisinger. Also,
includes 1,880,000 stock options held by Mr. Reisinger.
3
<PAGE>
(3) Includes 2,175,000 shares owned by JKSBM, a family limited partnership,
which is owned and controlled by Mr. Derner, and 512,821 shares owned by
Derner's of Milford, a company controlled by Mr. Derner and 265,000 shares
owned by the Derner Foundation which Mr. Derner controls. Also, includes
1,380,000 stock options held by Mr. Derner, 326,000 Common Stock purchase
warrants and 311,000 Series B Preferred Stock convertible into 1,555,000
shares of Common Stock.
(4) Includes 512,821 shares owned by Wall Lake Cattle Company, a company
controlled by Mr. Kolbe. Mr. Kolbe also holds 60,000 stock options.
(5) Includes options to purchase 5,000 shares of Common Stock and warrants to
purchase 13,333 shares of Common Stock.
(6) Includes 48,750 shares of Common Stock, 220,000 shares of Series B
Preferred Stock convertible into 1,100,000 shares of Common Stock and 3,900
Series C Stock which is convertible into Common Stock at a ratio of five to
one and 229,375 warrants to purchase Common Stock.
(7) Includes 1,000 shares of Common Stock and 54,000 shares of Series B
Preferred Stock convertible into 270,000 shares of Common Stock and 54,000
warrants.
(8) Includes options to purchase 5,000 shares of Common Stock and warrants to
purchase 13,334 shares of Common Stock.
(9) Includes 17,000 shares of Common Stock held jointly with Mr. Daggett's
spouse. Also includes warrants to purchase 30,334 shares of Common Stock
jointly held and options to purchase 5,000 shares of Common Stock. Also
includes 7,000 Series B Preferred shares convertible into 35,000 shares of
Common Stock and 7,000 warrants.
(10) Includes warrants to purchase 740,476 shares of Common Stock, options to
purchase 3,520,000 shares of Common Stock, 449,600 shares of Series B
Preferred Stock and 3,900 shares of Series C Preferred Stock both
convertible into Common Stock at a ratio of 5 to 1.
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Annual Meeting, nine persons will be elected to the Board of
Directors to serve for one year.
Listed below are the nominees for the Board of Directors. Any Proxy not
specifically marked will be voted by the named proxies for the election of the
nominees named below, except as otherwise instructed by the shareholders. It is
not contemplated that any of the nominees will be unable or unwilling to serve
as a Director, but if that should occur, the Board of Directors reserves the
right to nominate another person.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
FOLLOWING NOMINEES:
4
<PAGE>
NOMINEES FOR DIRECTORS
Johan Alexander Smit, Director, age 46. Mr. Smit is Managing Director
of Smitfort Steel. As director of Smitfort-Staal BV, Mr. Smit manages a
worldwide steel company. He attended the London School of Economics and received
his Masters in Business Administration from the University of Neyerrode. Mr.
Smit is an honorary member of the Dutch Export Federation, a board member of
Business Club Zwijndrecht (ovz) and a supervisory board member of the Dutch
Trading Company.
Gordon Reisinger, Director and President, age 60. Prior to its
acquisition by the Company, Mr. Reisinger was the managing partner and a 33.33%
owner in Midland Cattle Company, which he formed in 1987. Midland is a cattle
trader, which buys and sells feeder cattle nationwide, including cattle for the
Companies Hereford programs. Mr. Reisinger has managed the Eldora Livestock
auction his father built in 1939 and has been active in family farming and
cattle operations, cattle feeding, commercial and farmer feedlot quality-control
auditing, and nationwide cattle brokering his entire life. Mr. Reisinger holds a
Bachelor's Degree in Animal Science from Iowa State University.
John Derner, Director and Vice President, age 49. Mr. Derner owns and
manages an 8,000 head cattle feedlot and a large row crop operation in West Lake
Okoboji, Iowa. Mr. Derner also owns a manufacturing company, Shell Rock
Products, Inc., which manufactures and distributes numerous ornamental concrete
products nationwide.
Charles Kolbe, Director and Chairman of the Board, age 58. Mr. Kolbe
owns a family farming and cattle feeding operation in Lake View, Iowa. In
addition to farming and cattle feeding operations, Mr. Kolbe has been active in
the financial world, having held positions as a director and principal of banks
in Iowa and Minnesota. Mr. Kolbe was a co-founder and 33.33% owner of Midland
prior to its acquisition by the Company. He is on the executive committee of the
Iowa Cattleman's Association, Iowa Beef Industry Council and the National
Livestock and Meat Board. He is past President of the Iowa Cattleman's
Association and past Chairman of the Iowa Beef Industry Council.
Jack B. Holden, Director, age 35. Mr. Holden manages his family's
Hereford operation, Holden Herefords, on a 2,000-acre ranch near Valier,
Montana. Mr. Holden is active in the National Cattleman's Beef Association,
Montana Stockgrowers and its Seedstock Committee. He is also active in the
American Hereford Association and the Montana Farm Bureau. He serves as Director
of the Montana Hereford Association, and Vice President and Director of the
Pondera County Canal and Reservoir Company.
Dwayne Lewis, Director, age 68. Mr. Lewis operates Lewis Feedlot. He
currently runs approximately 17,000 cattle in this operation. He has been active
in the Nebraska Livestock Feeders Association and chaired the Environmental
Committee for the National Feeders Association. He has been a member of National
Cattlemen's Beef Association and Nebraska Cattlemen's Association.
Mr. Lewis' quarterhorse operation is recognized as one of the top
stables in the United States. He has served as President of the Nebraska
Quarterhorse Association and a member of the Board of Directors of the American
Quarterhorse Association.
Along with his cattle feeding and quarterhorse operations, Mr. Lewis
and his two sons operate 3,500 acres of irrigated farmland. He has also served
as Chairman of the Board of Gibbon Bank for twelve years. His community service
included twenty years as a member and term as President of the local School
Board in his district near Kearney, Nebraska.
Ron Daggett, Director, age 53. Mr. Daggett served as a First Vice
President, Sales for Dean Witter from 1994 to 1997. For the past three years,
Mr. Daggett has served as First Vice President, Sales for First Union
Securities.
5
<PAGE>
Marius Morin, Director, age 42. Mr. Morin has been a management
consultant for international business development programs for the past fifteen
years.
Charles Wilson, Director, age 81. Mr. Wilson is Chairman, President,
and CEO of Wilson Concrete Company. He has been President and CEO of the company
since 1949. Mr. Wilson holds BS Degrees in both Civil and General Engineering
from Iowa State University. Wilson has received numerous awards including the
PCI (Precast/Prestressed Concrete Institute) Medal of Honor, an award given only
eleven times in the last forty years and the Corporate Partner of the Year Award
for his support of the Mid-American Counsel and the Nischa Nimat District of the
Boy Scouts.
During the fiscal year ended December 31, 1999, six scheduled meetings
of the Board of Directors were held.
The Company issues each director 1,000 shares of Common Stock for
attendance at each meeting of the Board of Directors.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than ten percent of the Common Stock, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of the Common Stock and other equity securities of the Company.
Officers, directors, and greater than ten-percent shareholders are required
under regulations promulgated by the Securities and Exchange Commission to
furnish the Company with copies of all Section 16(a) forms which they file.
Certain Directors and Executive Officers have inadvertently omitted
filing Form 3 or Form 4's within the required time period. The Forms 3 and 4 for
each Director and Executive Officer either has been filed or is in the process
of being filed.
The Directors and Executive Officers include: Gordon Reisinger, John
Derner, Charles Kolbe, Dwayne Lewis, Jack Holden, Ron Daggett, Marius Morin,
Johan Smit, and Pete Hudgins.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has a standing Audit Committee.
The Committee is charged with the responsibility of reviewing reports from the
Company's independent certified public accountants, keeping the Board informed
with respect to the Company's accounting policies, and the adequacy of internal
controls, making recommendations regarding the selection of the Company's
independent certified public accountants and reviewing the scope of their audit.
The Audit Committee was created by corporate resolution by the Board of
Directors on January 29, 1999. The Audit Committee members currently consist of
Ron Daggett and Chuck Kolbe. The Audit Committee has held one meeting during the
last fiscal year ended December 31, 1999.
6
<PAGE>
The Board of Directors has a standing Compensation Committee, the
function of which is to review and make recommendations with respect to
compensation of the President, Chief Executive Officer, and the other key
executive officers of the Company, including salary, bonus, and benefits under
the various compensation plans maintained by the Company. The Compensation
Committee members are Gordon Reisinger, Charles Kolbe, John Derner, and Charles
Wilson. During the fiscal year ended December 31, 1999, there was one meeting of
the Compensation Committee.
The Board of Directors has a standing Nominating Committee charged with
the responsibility of making its recommendations annually to the Board with
respect to those persons for whose election as Directors by the shareholders'
proxies shall be solicited by the Board of Directors and the filling of any
vacancy among the shareholder-elected Directors. The Nominating Committee will
consider shareholder recommendations of nominees for election to the Board if
the recommendations are accompanied by comprehensive written information
relating to the recommended individual's business experience and background and
by a consent executed by the recommended individual stating that he or she
desires to be considered as a nominee, and, if nominated or elected, that he or
she will serve as a Director. Recommendations should be sent to the Secretary of
the Company by December 1, 2000, to consider and recommend the candidates to be
nominated for election at the next meeting.
EXECUTIVE OFFICERS (Not Also Directors):
Harley Dillard, Vice President and Chief Financial Officer. Mr. Dillard
worked in public accounting and then with Monfort of Colorado in several
capacities, including plant Controller for the Monfort Greeley Slaughter Plant
and Controller for the Monfort Portion Foods Division. He gained more consumer
product experience as Controller and Director of Finance for the Denver
Coca-Cola Franchise. From 1984 until 1996, Mr. Dillard held positions with
Robertson Associates Manufacturing, Inc., ("RAMI") an aluminum
beverage-packaging manufacturer. Mr. Dillard joined RAMI as Controller and was
promoted to Vice President and Chief Financial Officer. Since 1996 until he
joined the Company, Mr. Dillard was General Manager of Cruisin Cuisine/WP&G
Distributing, a privately held manufacturer and distributor of wholesale food
products. Mr. Dillard is a Certified Public Accountant.
Pete Hudgins, Vice President - Special Projects. Mr. Hudgins' lifelong
cattle industry experience began with his participation as the fifth generation
of a commercial Hereford ranching and buying business in Texas. His
entrepreneurial activities in real estate development, oil and gas, and niche
cattle marketing bring a unique skill profile to the special projects of
building a unique proprietary branded beef business. Among his responsibilities
are investor, customer, and producer relations, which draw on substantial cattle
organization and capital formation experience. He also coordinates projects with
Mr. Reisinger and other management in various areas of the enterprise.
John Schiering, Chief Operating Officer, Red Oak Farms, Inc. Mr.
Schiering was appointed to his position in January of 2000. Since 1995, he has
been a management consultant working primarily on confectionery projects. From
1985 to 1995, he was Vice President and General Manager of Borden Candy
Products. Mr. Schiering holds a B.A. degree from Brown University and J.D.
degree from the New England School of Law. Mr. Schiering is admitted to practice
law in the Commonwealth of Massachusetts.
7
<PAGE>
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Compensation Policies Applicable To Executive Officers
The purpose of the Company's executive compensation program is to
attract, retain, and motivate qualified executives to manage the business of the
Company so as to maximize profits and shareholder value. Executive compensation
in the aggregate is made up principally of the executive's annual base salary, a
bonus which may be awarded under the Company's Management Incentive Plan and
awards of Company stock or stock options under the Company's 1997 and 1998 Stock
Option Plans. The Company's Compensation Committee (the "Committee") annually
considers and makes recommendations to the Board of Directors as to executive
compensation including changes in base salary and bonuses.
Consistent with the above-noted purpose of the executive compensation
program, it is the policy of the Committee, in recommending the aggregate annual
compensation of executive officers of the Company, to consider the overall
performance of the Company, the performance of the division of the Company for
which the executive has responsibility and the individual contribution and
performance of the executive. The performance of the Company and of the function
for which the executive has responsibility are significant factors in
determining aggregate compensation although they are not necessarily
determinative. While shareholders' total return is important and is considered
by the Committee, it is subject to the vagaries of the public market place and
the Company's compensation program focuses on the Company's strategic plans,
corporate performance measures, and specific corporate goals, which should lead
to improved performance. The corporate performance measures, which the Committee
considers, include sales, earnings, return on equity, and comparisons of sales
and earnings with prior years, with budgets, and with the Company's competitors
and peer group.
The Compensation Committee does not rely on any fixed formula or
specific numerical criteria in determining an executive's aggregate
compensation. It considers both corporate and personal performance criteria,
competitive compensation levels, the economic environment and changes in the
cost of living as well as the recommendations of management. The Committee
exercises business judgment based on all of these criteria and the purpose of
the executive compensation program.
Compensation Committee
Gordon Reisinger
Charles Kolbe
Ron Daggett
Compensation Committee Interlocks
The Compensation Committee consists of Mr. Gordon Reisinger, who is the
Chief Executive Officer of the Company, Mr. Charles Kolbe who is an employee of
the Company and Mr. Ron Daggett who is an outside director.
8
<PAGE>
Summary Compensation Table
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Long-term Compensation
---------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------------------------------------
(1)
Name and Principal Other Annual Restricted Number of LTIP All Other
Position Year Salary Bonus Compensation Stock Awards Options Payouts Compensation
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gordon Reisinger 1999 $ 120,000 -0- $16,667 $3,500 -0- -0- $451
Chief Executive 1998 $ 120,000 -0- $53,333 $97,970 -0- -0- -0-
Officer/President/ 1997 $ 100,000 $ 106,802 -0- -0- 5,000 -0- $121,500
Director
Harley Dillard 1999 $ 125,000 -0- -0- -0- 60,000 -0- -0-
Treasurer/Chief 1998 $ 110,000 -0- -0- $25,000 140,000 -0- -0-
Financial Officer
</TABLE>
- --------------------------------------------------------------------------------
(1) Values of Restricted Stock Awards shown in the Summary Compensation Table
are based on the average market price of the Company's Common Stock on the
date of the grant.
Option Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
% of Total Potential Realization
Options Value at Assumed
Granted to Exercise Annual Rates of Stock
Options Employees Price Per Expiration Price Appreciation for
Name Granted in Fiscal Yr. Share Date Option Terms(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5% 10%
Harley Dillard, CFO 60,000 100% $1.50 2009 $56,600 $143,436
</TABLE>
(1) Amounts reported in the column represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration of
their term, assuming the specified compounded rates of appreciation of the
Common Stock over the term of the options. These numbers are calculated based on
rules promulgated by the Commission and do not represent the Company's estimate
of future Common Stock price. Actual gains, if any, on stock option exercises
and Common Stock holdings are dependent on the timing of such exercise and the
future market price of the Common Stock. There can be no assurance that the
rates of appreciation assumed in this table can be achieved or that the amounts
reflected will be received by the individuals. This table does not take into
account any appreciation in the price of the Common stock from the date of grant
to the present date. The values shown are net of the exercise price, but do not
include deductions for taxes or other expenses associated with the exercise.
9
<PAGE>
PROPOSAL 2-APPROVAL OF INCREASE IN THE AUTHORIZED
SHARES OF COMMON STOCK
On February 4, 2000, the Company's Board of Directors adopted and
recommended that the shareholders of the Company approve an amendment to Article
IV of the Company's Amended and Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock of the Company from
50,000,000 shares to 100,000,000 shares and to increase the number of Preferred
Stock from 5,000,000 to 10,000,000. The proposed amendment would replace Article
IV in its entirety as follows:
Article IV The aggregate number of shares, which this corporation shall
have authority to issue, are 110,000,000 shares. 100,000,000 shares of
Common Stock having a par value of $.001 per share and 10,000,000
shares of Preferred Stock having a par value of $.001 per share. Stock
of the corporation shall be of two classes, common and preferred, and
both shall be issued in such classes and have such rights, preferences
and designations as determined by the Board of Directors of the
corporation. Fully paid stock of this corporation shall not be liable
to any further call or assessment.
The Company is currently authorized to issue 50,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock. As of April 14, 2000, the
record date for the Annual Meeting, 16,019,165 shares of Common Stock were
issued and outstanding and 1,412,190 shares of Preferred Stock were issued or to
be issued.
The Board of Directors of the Company believes that it is advisable to
have available authorized but unissued shares of Common Stock and Preferred
Stock in an amount adequate to provide for the future needs of the Company. The
additional shares will be available for issuance from time to time by the
Company in the discretion of the Board of Directors, without further shareholder
action (except as may be required for a particular transaction by applicable law
or requirements of regulatory agencies), for any proper corporate purpose
including, among other things, future acquisitions, stock dividends, stock
splits, convertible debt financing and equity financings. Holders of Common
Stock do not have preemptive rights with respect to the future issuance of any
shares of Common Stock.
The Company has no present plans, understandings or agreements for the
issuance or use of the proposed additional shares of Common Stock or Preferred
Stock, other than for possible issuance in the future in connection with the
Company's stock option plans. The additional authorized shares of Common Stock
and Preferred Stock will allow the Company to maintain the flexibility to issue
shares of Common Stock or Preferred Stock in the future without the potential
expense or delay incident to obtaining the approval of the Company's
shareholders by means of a special meeting of shareholders at such time.
Issuing additional shares of Common Stock or Preferred Stock may have
the effect of diluting the stock ownership of persons seeking to obtain control
of the Company and, accordingly, making a change in control of the Company
difficult. The Company is not aware of any attempt to obtain control of the
Company.
If the proposed amendment to the Company's Amended and Restated
Certificate of Incorporation is approved, a Certificate of Amendment will be
filed with the Secretary of State of Nevada as promptly as practicable
thereafter. The amendment would be effective upon the date of filing.
10
<PAGE>
The affirmative vote of a majority of the outstanding shares of Common
Stock present, or represented and entitled to vote at the Meeting is required to
approve the amendment to the Certificate of Incorporation.
The Board of Directors recommends that shareholders vote FOR the
proposed amendment to the Amended and Restated Certificate of Incorporation.
PROPOSAL 3-APPROVAL OF THE 2000
STOCK OPTION PLAN
In February 2000, the Board of Directors adopted a proposal to create
the Company's 2000 Stock Option Plan (the "SOP") subject to shareholder
approval. The reason for the new plan is to ensure that sufficient shares are
available for issuance, which would support the Company's efforts to attract and
retain highly qualified employees.
The vote of a majority of the shares of Common Stock represented at the
Annual Meeting (excluding broker non-votes) in person or by proxy is required to
approve the SOP.
The description that follows is an overview of the material provisions
of the SOP. The description, however, does not purport to be a complete
description of all the provisions of the SOP. Any shareholder that wants to
obtain a copy of the actual plan document may do so upon written request to the
Corporate Secretary at the Company's executive offices in Red Oak, Iowa.
Description of the SOP and Option Terms
The purpose of the SOP is to enable the Company to offer to its key
employees, officers, directors, consultants and sales representatives whose
past, present and/or potential contribution to the Company have been or will be
important to the success of the Company. The Board of Directors believes that
the proposed SOP will help the Company attract and retain highly qualified
employees.
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The SOP provides for the granting of stock options to key employees,
officers, directors, consultants and sales representatives who are deemed to
have rendered or able to render significant services to the Company, and who are
deemed to have contributed or to have the potential to contribute to the success
of the Company. The stocks subject to options under the SOP are shares of the
authorized but unissued or reacquired Common Stock. A participant is not
required to exercise any stock options, which are granted to such participant
pursuant to SOP. The number of shares of Common Stock available under the SOP is
2,000,000.
The SOP is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee shall automatically award employees a
specific number of options on the date of the grant.
The Committee may also grant to the Holder (concurrently with the grant
of an Incentive Stock Option and at or after the time of grant in the case of a
Nonqualified Stock Option) a Stock Reload Option up to the amount of shares of
Stock held by the Holder for a least six months and used to pay all or part of
the exercise price of an Option and, if any, withheld by the Company as payment
for withholding taxes. Such Stock Reload Option shall have an exercise price
equal to the Fair Market Value as of the date of the Stock Reload Option grant.
Unless the Committee determines otherwise, a Stock Reload Option may be
exercised commencing one year after it is granted and shall expire on the date
of expiration of the Option to which the Reload Option is related.
Stock appreciation rights may be granted to participants who have been,
or are being granted, options under the SOP. In the case of nonqualified stock
options, a stock appreciation right may be granted either at or after the time
of the grant of such nonqualified stock option. In the case of an Incentive
Stock Option, a stock appreciated right may be granted only at the time of the
grant of such incentive option.
Shares of Restricted Stock may be awarded either alone or in addition
to other awards granted under the SOP. The Committee shall determine the
eligible persons to whom, and the time or times at which, grants of Restricted
Stock will be awarded, the number of shares to be awarded, the price (if any) to
be paid by the Holder, the time or times within which such awards may be subject
to forfeiture (the "Restriction Period"), the vesting schedule and rights to
acceleration thereof, and all other terms and conditions of the awards.
Shares of Deferred Stock may be awarded either alone or in addition to
other awards granted under the SOP. The Committee shall determine the eligible
persons to whom and the time or times at which grants of Deferred Stock shall be
awarded, the number of shares of Deferred Stock to be awarded to any person, the
duration of the period (the "Deferral Period") during which and the conditions
under which, receipt of the shares will be deferred, and all the other terms and
conditions of the awards.
Other Stock-Based Awards may be awarded, subject to limitations under
applicable law, that are denominated or payable, in value in whole or in part by
reference to, or otherwise based on, or related to, shares of Common Stock, as
deemed by the Committee to be consistent with the purposes of the Plan,
including, without limitation, purchase rights, shares of Common Stock awarded
which are not subject to any restrictions or conditions, convertible or
exchangeable debentures, or other rights convertible into shares of Common Stock
and awards valued by reference to the value of securities of or the performance
of specified subsidiaries. Other Stock-Based Awards may be awarded either alone
or in addition to or in tandem with any other awards under this Plan or any
other plan of the Company.
The Committee shall determine the eligible persons to whom and the time
or times at which grants of such other stock-based awards shall be made, the
number of shares of Common Stock to be awarded pursuant to such awards, and all
other terms and conditions of the awards.
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If (i) any person or entity other than the Company and/or any
shareholders of the Company as of the Effective Date acquire securities of the
Company (in one or more transactions) having 25% or more of the total voting
power of all the Company's securities then outstanding and (ii) the Board of
Directors of the Company does not authorize or otherwise approve such
acquisition, then, the vesting periods of any and all Options and other awards
granted and outstanding under the Plan shall be accelerated and all such Options
and awards will immediately and entirely vest, and the respective holders
thereof will have the immediate right to purchase and/or receive any and all
Stock subject to such Options and awards on the terms set forth in this Plan and
the respective agreements respecting such Options and awards.
Under present tax law, the Federal income tax treatment of options
granted under the SOP is generally as described below. Local and state tax
authorities may also tax incentive compensation awarded under the SOP.
Incentive Stock Options. With respect to options, which qualify as
incentive stock options, a grantee will not recognize income for Federal income
tax purposes at the time options are granted or exercised. If the grantee
disposes of shares acquired by exercise of the options before the expiration of
two years from the date the options are granted or within one year after the
issuance of shares upon exercise of the options, the grantee will recognize in
the year of disposition (a) ordinary income, to the extent that the lesser of
either (1) the fair market value of the shares on the date of option exercise or
(2) the amount realized on disposition, exceeds the option price, and (b)
capital gain (or loss), to the extent that the amount realized on disposition
differs from the fair market value of the shares on the date of option exercise.
If the shares are sold after expiration of these holding periods, the grantee
will realize capital gain or loss (assuming the shares are held as capital
assets) equal to the difference between the amount realized on disposition and
the option price.
Non-Qualified Stock Options. With respect to options which do not
qualify as incentive stock options, the grantee will recognize no income upon
grant of the option and, upon exercise, will recognize ordinary income to the
extent of the difference between the amount paid by the grantee for the shares
and the fair market value of the shares on the date of option exercise. Upon a
subsequent disposition of the shares received under the option, the grantee will
recognize capital gain or loss, as the case may be, to the extent of the
difference between the fair market value of the shares at the time of exercise
the amount realized on the disposition (assuming the shares are held as capital
assets.)
Except as described below, the Company will be entitled to a deduction
for Federal income tax purposes at the same time and in the same amount. As a
grantee is required to recognize ordinary income as described above. To the
extent a grantee realizes capital gains as described above, the Company will not
be entitled to any deduction for Federal income tax purposes. Effective as of
the passage of the Revenue Reconciliation Act of 1993, under Section 162 of the
Internal Revenue Code, companies can no longer deduct compensation over $1
million paid to their chief executive officer and their four other most highly
compensated officers, including compensation unless a plan meets certain
requirements.
With respect to accounting consideration, there is no charge to the
Company's operations in connection with the grant or exercise of an option to
employees or directors under the SOP. Unless the fair market value of the shares
at the date of the grant exceeds the exercise price of the option, in which case
there will be a charge to operations at the dates the option becomes exercisable
in the amount of such excess. If there is no charge to the Company's operations,
any material tax benefit received by the Company upon exercise of a
non-qualified stock option or as a result of a disqualifying disposition of
shares obtained upon exercise of incentive stock options is reflected as a
credit to capital in excess of par value and not as income. Earnings per share
(diluted) may be affected by the SOP by the effect on the calculation, as
prescribed under generally accepted accounting principles, of the number of
outstanding shares of Common Stock of the Company. This calculation reflects the
potential dilutive effect, using the treasury stock method, of outstanding stock
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options anticipated to be exercised even though shares have not yet been issued
upon exercise of these options. When shares are actually issued as a result of
the exercise of stock options, dilution of earnings per share (primary) may
result.
The SOP shall be effective as of the date on which the Company's
shareholders approved the SOP.
Unless terminated by the Board, this Plan shall continue to remain
effective until such time no further awards may be granted and all awards
granted under the Plan are no longer outstanding. Notwithstanding the foregoing,
grants of Incentive Stock Options may only be during the ten-year period
following the Effective Date.
As of April 14, 2000, there were approximately forty persons eligible
to receive stock options under the SOP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 2000
STOCK OPTION PLAN.
Certain Relationships and Related Party Transactions
Mr. Gordon Reisinger is paid an annual salary of $120,000 as President
of the Company. Mr. Reisinger was also paid a consulting fee of $16,667 in 1999.
Mr. Reisinger is part owner of a company that leases an office building to the
Company. The lease payments made in 1999 were $48,000. He was also issued 3,000
shares of Common Stock for his services as a director. In February 2000, Mr.
Reisinger was granted options to purchase 500,000 shares of Common Stock. During
1999, the Company purchased cattle totaling $389,881 from Mr. Reisinger and a
company owned by Mr. Reisinger. During 1999, the Company provided an automobile
for Mr. Reisinger. Compensation to Mr. Reisinger for vehicle costs totaled $451
in 1999.
Mr. John Walker, Mr. Reisinger's son-in-law, works for the Company. He
buys and sells cattle and was paid $60,000 for his services in 1999. Mr. Walker
and his wife, Mrs. Kathy Walker, own an entity that buys cattle from the
Company. During 1999, cattle purchases by Mr. and Mrs. Walker from the Company
were approximately $849,016. In order to insure a sufficient supply of Hereford
cattle, the Company enterer into financing arrangements, i.e., repurchase
agreements, with related parties during 1999. The Company's agreement with the
related party is that the Company retains the benefit from any gains on the
cattle and the risk of any losses. In addition, the Company reimburses the
related party for any costs incurred on the cattle, such as grain, vet, yardage,
etc., as well as pays interest on the funds advanced by the related party to
"purchase" the cattle and to pay other expenses related to the cattle. The
cattle are purchased by the Company for meat processing. During 1999, the
Company paid $448,342 under this arrangement. Mrs. Walker works as a part-time
bookkeeper for the Company and for those services the Company paid $5,400 in
1999.
Mr. Todd Reisinger, Mr. Reisinger's son, was a meat salesman for the
Company and was paid $27,500 in 1999.
Mr. Charles Kolbe, a director and employee of the Company, received
3,000 shares as director fees in 1999. Mr. Kolbe also received consulting fees
from the Company totaling $16,667 in 1999. Mr. Kolbe also received $60,000 for
work performed for the Company. During 1999, the Company purchased cattle
totaling $302,305 from Mr. Kolbe and Mr. Kolbe's company purchased cattle from
the Company totaling $199,369.
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Mr. Reisinger, Mr. Walker, and Mr. Kolbe are owners of a trucking
business that transported cattle for the Company. During 1999, this entity was
paid $148,403 for its services.
Mr. Reisinger and Mr. Walker are part owners of a trucking company that
transports cattle for the Company. During 1999, this entity was paid $8,927.
Mr. Dwayne Lewis, a director of the Company, was issued 3,000 shares of
Common Stock for services as a director. During 1999, the Company sold cattle to
his entity totaling $1,507,130 and purchased cattle totaling $12,073,894.
Mr. John Derner was paid a consulting fee of $16,667 from the Company
in 1999. He was also paid a salary of $60,000 as an employee. He was issued
3,000 shares of Common Stock for his services as a director of the Company. Mr.
Derner is an owner of an entity that purchases cattle from the Company. In 1999,
such purchases totaled approximately $860,088. Also during 1999, the Company
purchased cattle totaling $4,743,111 from a company owned by Mr. Derner. Mr.
Derner also provided an airplane for the use by the Company. The Company pays
Mr. Derner rent on the airplane. The Company makes payments for the pilot, fuel,
and expenses to third parties. The total of rent expense paid for 1999 was
$21,000.
Messrs. Holden and Daggett each were issued 3,000 shares of Common
Stock for their services as directors of the Company. Mr. Smit was issued 1,000
shares of Common Stock for his services as a director during 1999.
Mr. Harley Dillard, the Company's Chief Financial Officer, received
compensation in 1999 totaling $125,000. Mr. Dillard was also granted options to
purchase 60,000 shares of Common Stock during 1999.
Mr. John Schiering, the Chief Operating Officer of Red Oak Farms, Inc.,
the Company's wholly-owned subsidiary, has an employment agreement that provides
for a monthly salary of $11,250. The initial term of the agreement is six months
effective January 1, 2000. The agreement may be renewed upon the mutual consent
of both parties for an additional two years. Mr. Schiering commutes from his
home in Carmel, Indiana. The Company pays his transportation costs and his
living expenses while in Red Oak. Upon the signing of the agreement, Mr.
Schiering was granted options to purchase 25,000 shares of Common Stock. The
options were granted and vested on January 1, 2000, and will expire on January
1, 2001. In the event Mr. Schiering is terminated without cause, he will be
entitled to his regular pro-rated salary for a one hundred and twenty day period
following notice of termination.
Mr. Pete Hudgins was paid $61,333 during 1999 in salary. The Company
provided Mr. Hudgins with an automobile. Compensation to Mr. Hudgins for vehicle
costs totaled $1,610 in 1999. During 1999, Mr. Hudgins and another employee of
the Company sold cattle to the Company totaling $158,984.
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PERFORMANCE GRAPH
Comparison of three-year cumulative total return among Red Oak Hereford
Farms, Inc. (HERF) and The Bloomberg Food-Meat Products Group (FMP*).
Total Return
Stock Price Plus Reinvested Dividends
----------------------------------------------------------
HERF FMP*
----------------------------------------------------------
12/31/96 $ 2.00 $ 12.39
12/31/97 $ 5.00 $ 17.82
12/31/98 $ 0.75 $ 13.74
12/31/99 $ 1.25 $ 8.81
----------------------------------------------------------
* Based on information from the Bloomberg Food-Meat Products Group, as
available from Bloomberg, which includes the following companies, but from
which the company has been excluded:
Hormel Foods Corporation, Iowa Beef Packers Inc., Smithfield Foods Inc.,
Thorn Apple Valley Inc., Fresh Foods Inc., Doughtie's Foods Inc.,
Cattleman's Inc., Rymer Foods Inc., and Agri-Foods International Inc.
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INDEPENDENT PUBLIC ACCOUNTANTS
The intention of the Board of Directors is to select HLB Gross Collins,
P.C. for the 2000 fiscal year as the Company's certifying accountants. HLB Gross
Collins, P.C. will be available to answer questions at the Annual Meeting and
make any statement, if they so choose.
On December 4, 1998, BDO Seidman, LLP resigned as the Company's
certifying accountants. During the most recent fiscal year for which BDO
Seidman, LLP issued a report (1997), there was no disagreements with BDO
Seidman, LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure or any reportable events.
BDO Seidman, LLP's report on the financial statements for the fiscal year ended
December 31, 1999, contained no adverse opinion or disclaimer of opinion and was
not qualified as to audit scope or accounting principles.
On January 18, 1999, the Company retained HLB Gross Collins, P.C. as
the Company's certifying accountants.
OTHER BUSINESS
The Board of Directors does not know of any other business to come
before the Annual Meeting. However, if any additional matters are presented at
the meeting, it is the intention of the persons named in the accompanying Proxy
to vote such Proxy in accordance with their judgment on such matters.
PROPOSALS FOR THE 2001 ANNUAL MEETING
Shareholders of the Company are entitled to submit proposals on matters
appropriate for shareholder action consistent with regulations of the Securities
and Exchange Commission ("SEC") and the Company's By-Laws. Should a shareholder
wish to have a proposal considered for inclusion in the proxy statement for the
Company's 2001 Annual Meeting, under Rule 14a-8 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), such proposal must be received by the
Company on or before December 1, 2000.
In connection with the Company's 2001 Annual Meeting and pursuant to
Rule 14a-4 under the Exchange Act, if the shareholder's notice is not received
by the Company on or before February 7, 2001, the Company (through management
proxy holders) may exercise discretionary voting authority when the proposal is
raised at the annual meeting without any reference to the matter in the proxy
statement.
The above summary, which sets forth only the procedures by which
business may be properly brought before and voted upon at he Company's Annual
Meeting, is qualified in its entirety by reference to the Company's By-Laws.
All shareholder proposals and notices should be directed to the
Secretary of the Company at 2010 Commerce Drive, Red Oak, Iowa 51566.
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ANNUAL REPORT ON FORM 10-K FILED WITH
SECURITIES AND EXCHANGE COMMISSION
A copy of the Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 1999 may be obtained, without charge, by any shareholder,
upon written request directed to Peter Hudgins, Secretary, Red Oak Hereford
Farms, Inc., 2010 Commerce Drive, Red Oak, Iowa 51566.
/s/ Peter Hudgins
By Order of the Board of Directors
Peter Hudgins
Secretary
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This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder(s), if no direction is made, this Proxy
will be voted "FOR" the nominees of the Board of Directors in the election of
directors, "FOR" the proposal to amend the Company's Amended and Restated
Certificate of Incorporation as described in the proxy statement, and "FOR" the
approval of the Company's 2000 Stock Option Plan. This proxy also delegates
discretionary authority to vote with respect to any other business which may
properly come before the meeting or any adjournment or postponement thereof.
THE UNDERSIGNED HEREBY ACKOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT FURNISHED IN CONNECTION THERE WITH, AND HEREBY
RATIFIES ALL THAT THE SAID ATTORNEY AND PROXY MAY DO BY VIRTUE HEREOF.
Dated: _________________, 2000
-------------------------------
(Shareholder's Signature)
-------------------------------
(Shareholder's Signature)
Note: Please mark, date, and sign this proxy card and return it in the enclosed
envelope. Please sign as your name appears below. If shares are registered in
more than one name, all owners should sign. If signing in a fiduciary or
representative capacity, please give full title and attach evidence of
authority. Corporations please sign with full corporate name by a duly
authorized officer and affix corporate seal.
<PAGE>
FRONT
RED OAK HEREFORD FARMS, INC.
2010 COMMERCE DRIVE, RED OAK, IA 51566
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of RED OAK HEREFORD FARMS, INC. (the "Company")
hereby appoints PETER HUDGINS as the attorney-in-fact and proxy of the
undersigned, with the powers the undersigned would possess if personally
present, and with full power of substitution, to vote all shares of Common Stock
of the Company at the Annual Meeting of shareholders of the Company to be held
on Monday, May 22, 2000 at 10:30 a.m. at the Red Coach Inn, Highway 34, Red Oak,
Iowa 51566, and any adjournment or postponement thereof, upon all subjects that
may properly come before the meeting, including the matters described in the
proxy statement furnished herewith, subject to any directions indicated below.
Proposal 1 - Election of Directors:
[ ] FOR all nine nominees listed below.
[ ] WITHHOLD AUTHORITY to vote for all nine nominees for director listed below
[ ] FOR all nine nominees for director listed below, except WITHHOLD AUTHORITY
to vote for the nominee(s) whose name(s) is (are) lined through.
Nominees: Gordon Reisinger, John Derner, Ron Daggett, Charles Wilson,
Dwayne Lewis, Jack Holden, Charles Kolbe, Johan Smit, and Marius Morin.
PROPOSAL 2 - Amendment to the Company's Amended and Restated Certificate of
Incorporation as described in the proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 3 - Approval of the Company's 2000 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 4 - TO transact such other business as may properly come before the
meeting and any adjournments thereof.
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