SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials Rule 14a-11(c) or Rule 14a-12
Weider Nutrition International, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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
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:
WEIDER NUTRITION INTERNATIONAL, INC.
2002 SOUTH 5070 WEST
SALT LAKE CITY, UTAH 84104-4726
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"1998 ANNUAL MEETING") of Weider Nutrition International, Inc., a Delaware
corporation (the "COMPANY"), to be held on Thursday, October 29, 1998, at 2:00
p.m., local time, at the Company's executive offices at 2002 South 5070 West,
Salt Lake City, Utah 84104.
At the 1998 Annual Meeting, you will be asked to consider and vote upon the
following matters, all of which are described more completely in the
accompanying Proxy Statement.
1. To elect the Company's Board of Directors;
2. To approve the Company's 1997 Equity Participation Plan, as amended;
and
3. To transact such other business as may properly come before the 1998
Annual Meeting or at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
NAMED IN THE PROXY STATEMENT AND FOR THE PROPOSAL TO APPROVE THE 1997 EQUITY
PARTICIPATION PLAN, AS AMENDED.
Only stockholders of record at the close of business on Friday, September 18,
1998 are entitled to notice of, and to vote at, the 1998 Annual Meeting.
Please review carefully the Proxy Statement. We hope you will attend the 1998
Annual Meeting. However, whether or not you plan to attend the 1998 Annual
Meeting, it is important that your shares are represented. Accordingly, please
complete, sign and date the enclosed proxy and return it in the enclosed prepaid
envelope. If you are present at the 1998 Annual Meeting you may, if you wish,
withdraw your proxy and vote in person.
Very truly yours,
RICHARD B. BIZZARO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Salt Lake City, Utah
September _____, 1998
WEIDER NUTRITION INTERNATIONAL, INC.
2002 SOUTH 5070 WEST
SALT LAKE CITY, UTAH 84104-4726
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 29, 1998
------------------------
To the Stockholders of WEIDER NUTRITION INTERNATIONAL, INC.:
The Annual Meeting of Stockholders (the "1998 ANNUAL MEETING") of Weider
Nutrition International, Inc., a Delaware corporation (the "COMPANY"), will be
held at the Company's executive offices at 2002 South 5070 West, Salt Lake City,
Utah, 84104 on Thursday, October 29, 1998, at 2:00 p.m., local time, for the
following purposes:
1. To elect the Company's Board of Directors;
2. To approve the Company's 1997 Equity Participation Plan, as amended;
and
3. To transact such other business as may properly come before the 1998
Annual Meeting or at any adjournments or postponements thereof.
The election of the Board of Directors and the proposal to approve the 1997
Equity Participation Plan, as amended, are more fully described in the
accompanying Proxy Statement which forms a part of this Notice.
The Board of Directors of the Company has fixed the close on Friday,
September 18, 1998 as the record date (the "RECORD DATE") for the determination
of stockholders entitled to notice of, and to vote at, the 1998 Annual Meeting
or any adjournments or postponements thereof. Only stockholders of record at the
close of business on the Record Date are entitled to notice of, and to vote at,
the 1998 Annual Meeting and any adjournments or postponements thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
NAMED IN THE PROXY STATEMENT AND FOR THE PROPOSAL TO APPROVE THE 1997 EQUITY
PARTICIPATION PLAN, AS AMENDED.
Whether or not you plan to attend the 1998 Annual Meeting, please complete,
sign, date and return promptly the enclosed form of proxy. A return envelope is
enclosed for your convenience and requires no postage for mailing in the United
States.
By Order of the Board of Directors,
ROBERT K. REYNOLDS
CHIEF OPERATING OFFICER
Salt Lake City, Utah
September ___, 1998
WEIDER NUTRITION INTERNATIONAL, INC.
2002 SOUTH 5070 WEST
SALT LAKE CITY, UTAH 84104-4726
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 29, 1998
------------------------
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Weider Nutrition
International, Inc., a Delaware corporation (the "COMPANY") in connection with
the solicitation of proxies on behalf of the Company's Board of Directors to be
voted at the 1998 Annual Meeting of Stockholders (the "1998 ANNUAL MEETING") to
be held on Thursday, October 29, 1998 at 2:00 p.m., local time at the Company's
executive offices at 2002 South 5070 West, Salt Lake City, Utah 84104, or at
such other time and place to which the 1998 Annual Meeting may be adjourned, for
the purposes set forth in the accompanying Notice of Meeting. This Proxy
Statement and Notice of Meeting and the related proxy card are first being
mailed to stockholders beginning on or about September _____, 1998.
RECORD DATE
The Board of Directors has fixed the close of business on Friday, September
18, 1998 as the record date (the "RECORD DATE") for the 1998 Annual Meeting.
Only stockholders of record at the close of business on the Record Date are
entitled to notice of, and to vote at, the 1998 Annual Meeting and any
adjournments or postponements thereof.
PROXIES
The proxies named on the enclosed proxy card were appointed by the Board of
Directors to vote the shares represented by the proxy card. Upon receipt by the
Company of a properly signed and dated proxy card, the shares represented
thereby will be voted in accordance with the instructions on the proxy card. If
a stockholder does not return a signed proxy card, his or her shares cannot be
voted by proxy. Stockholders are urged to mark the boxes on the proxy card to
show how their shares are to be voted. If a stockholder returns a signed proxy
card without marking the boxes, the shares represented by the proxy card will be
voted as recommended by the Board of Directors herein and on the proxy card, FOR
the election of the persons named under "ELECTION OF DIRECTORS" as nominees for
election as Directors of the Company (each a "NOMINEE" and, collectively, the
"NOMINEES") for terms to expire on the date of the next annual meeting of the
Company's stockholders following the 1998 Annual Meeting and FOR the proposal to
approve the Company's 1997 Equity Participation Plan, as amended by the First
Amendment thereto (the "Equity Plan"). The proxy card also confers discretionary
authority on the proxies to vote on any other matter not presently known to the
management that may properly come before the meeting or any adjournment thereof.
Any proxy delivered pursuant to this solicitation is revocable at the option of
the person(s) executing the same (i) upon receipt by the Company before the
proxy is voted of a duly executed proxy bearing a later date, (ii) by written
notice of revocation to the Secretary of the Company received before the proxy
is voted or (iii) by such person(s) voting in person at the 1998 Annual Meeting.
Duly executed proxies in the form enclosed, unless properly revoked, will be
voted at the 1998 Annual Meeting. The expenses incidental to the preparation and
mailing of this proxy material are being paid by the
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Company. The Company will reimburse banks, brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them in sending
proxy materials to stockholders. No solicitation currently is planned beyond the
mailing of this proxy material to stockholders and to brokerage firms, nominees,
custodians and fiduciaries, who may be requested to forward the proxy materials
to the beneficial owners of shares held of record by them.
VOTING SHARES AND QUORUM REQUIRED
On the Record Date, the Company had outstanding _________ shares of Class A
common stock, par value $.01 per share (the "CLASS A COMMON STOCK") and
_________ shares of Class B common stock, par value $.01 per share (the "CLASS B
COMMON STOCK", and together with the Class A Common Stock, the "COMMON STOCK").
Holders of Class A Common Stock on the Record Date (the "CLASS A COMMON
STOCKHOLDERS") are entitled to one vote per share on all matters submitted to a
vote of stockholders and holders of Class B Common Stock on the Record Date (the
"CLASS B COMMON STOCKHOLDERS," and together with the Class A Common
Stockholders, the "COMMON STOCKHOLDERS") are entitled to ten votes per share on
all matters submitted to a vote of stockholders. The presence in person or by
proxy of the holders of a majority of the issued and outstanding Common Stock
entitled to vote at the 1998 Annual Meeting, excluding Common Stock held by the
Company, is necessary to constitute a quorum at the 1998 Annual Meeting.
The affirmative vote of a plurality of the shares of Common Stock represented
in person or by proxy and entitled to vote at the 1998 Annual Meeting is
required to elect the Directors and the affirmative vote of a majority of the
shares of Common Stock represented and entitled to vote is required to approve
the proposal to approve the Equity Plan, as amended. Business that might have
been transacted at the 1998 Annual Meeting as originally called may be conducted
at any adjournment at which the requisite quorum is present.
Pursuant to the laws of the State of Delaware, the inspectors of the election
will not count shares represented by proxies that reflect abstentions or "BROKER
NON-VOTES" (I.E., shares held by brokers or nominees that are represented at the
1998 Annual Meeting, but with respect to which the broker or nominee is not
empowered to vote on a particular proposal) as votes cast with respect to the
election of Directors, and therefor, neither abstentions nor broker non-votes
will affect the election of Nominees receiving the plurality of votes. With
respect to all other proposals scheduled to come before the 1998 Annual Meeting,
abstentions with respect to a particular proposal will have the effect of a vote
against such proposal. Broker non-votes, however, will be treated as unvoted for
purposes of determining approval of such proposal and will not be counted as
votes for or against such proposal.
MATTERS TO BE VOTED UPON
PROPOSAL ONE--ELECTION OF DIRECTORS
The Nominees set forth below have been duly nominated to stand for election
as Directors of the Company to serve for a term of one year, or until their
successors are elected and qualified. Each of the Nominees has indicated a
willingness to serve as a member of the Board of Directors if elected. The Board
of Directors recommends a vote FOR each of the Nominees. If any of the Nominees
should become unavailable prior to the 1998 Annual Meeting, the proxy will be
voted for a substituted nominee or nominees designated by the Board of
Directors. The Board of Directors has no reason to believe that any
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such Nominees will be unable or unwilling to serve. The information provided
below with respect to the Nominees is as of the Record Date.
To be elected by the Common Stockholders:
NAME AGE POSITION
Eric Weider 34 Chairman of the Board
Richard B. Bizzaro 56 Chief Executive Officer, President and
Director
Robert K. Reynolds 41 Chief Operating Officer, Executive Vice
President, Secretary and Director
Ronald L. Corey 59 Director
Donald G. Drapkin 50 Director
Roger H. Kimmel 52 Director
George F. Lengvari 56 Director
Glenn W. Schaeffer 44 Director
ERIC WEIDER has been a director of the Company since June 1989, Chairman of
the Board of Directors since August 1996 and is currently President and Chief
Executive Officer of Weider Health and Fitness. Mr. Weider also serves as a
member of the board of directors of a number of public and private companies in
the United States and Canada, including Weider Health and Fitness and Mpact
Immedia Corporation.
Mr. Weider is also the President of the Joe Weider Foundation.
RICHARD B. BIZZARO has been Chief Executive Officer, President and a director
of the Company since June 1990. Prior to his appointment as Chief Executive
Officer and President of the Company, he was Vice President of Sales for Weider
Health and Fitness, responsible for sales at the Company and Weider Exercise
Equipment. Mr. Bizzaro has worked for the Company, Weider Health and Fitness or
one of the Weider Health and Fitness affiliates since 1983.
ROBERT K. REYNOLDS has been Executive Vice President, Chief Operating Officer
and Secretary of the Company since July 1992 and a director of the Company since
January 1994. Mr. Reynolds joined the Company in September 1990 as Chief
Financial Officer. Mr. Reynolds, a certified public accountant, is primarily
responsible for all domestic and international operations.
RONALD L. COREY has been a director of the Company since August 1996. Mr.
Corey has been president of the Club de Hockey Canadien Inc. (the Montreal
Canadiens) and the Molson Center Inc. since 1982. In addition, between 1985 and
1989, Mr. Corey held the position of Chairman of the Board and director of the
Montreal Port Corporation. Mr. Corey has served as director of numerous
companies, including Banque Laurentienne, Reno-Depot Inc. and Transamerica Life
Companies.
DONALD G. DRAPKIN has been a director of the Company since October 1997. Mr.
Drapkin has been a Director and Vice Chairman of MacAndrews & Forbes Holdings,
Inc. and various of its affiliates since March 1987. Prior to joining MacAndrews
& Forbes, Mr. Drapkin was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom in New York for more than five years. Mr. Drapkin also is a
director of the following corporations which file reports pursuant to the
Securities Exchange Act of 1934: Algos Pharmaceutical Corporation, Anthracite
Capital, Inc., BlackRock Asset Investors, Cardio Technologies, Inc., The
Cosmetic Center, Inc., Genta, Inc., The Molson Companies Limited, Playboy
Enterprises, Inc., Revlon Consumer Products Corporation, Revlon, Inc., and VIMRx
Pharmaceuticals Inc.
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ROGER H. KIMMEL has been a director of the Company since August 1996. Mr.
Kimmel has been a partner at the law firm of Latham & Watkins for more than five
years. Mr. Kimmel is a director of Algos Pharmaceutical Corporation, TSR Paging
Inc. and U.S. Dermatologics, Inc.
GEORGE F. LENGVARI has been a director of the Company since August 1996. Mr.
Lengvari has been Vice Chairman of Weider Health and Fitness since June 1995 and
Chairman of Weider Publications U.K. since September 1994. Prior to joining
Weider Health and Fitness, Mr. Lengvari was a partner for 22 years in the law
firm Lengvari Braman and is currently of counsel to the law firm LaPointe
Rosenstein. Mr. Lengvari currently serves as a member of the board of directors
of Weider Health and Fitness.
GLENN W. SCHAEFFER has been President, Chief Financial Officer and Treasurer
of Circus Circus Enterprises, Inc. ("CIRCUS CIRCUS") since April 1, 1995 and a
member of the Board of Directors of Circus Circus since March 4, 1996. Prior to
joining Circus Circus, Mr. Schaeffer was involved in an executive capacity in
the management and operation of Gold Strike Resorts. Mr. Schaeffer is a director
of Circus Circus and Del Webb Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED IN
THE PROXY STATEMENT AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
VOTED IN FAVOR OF SUCH NOMINEES UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON
THE PROXY.
PROPOSAL 2--APPROVAL OF THE 1997 EQUITY PARTICIPATION PLAN, AS AMENDED.
GENERAL
At the 1998 Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the approval of the 1997 Equity Participation Plan of
Weider Nutrition International, Inc., as amended by the First Amendment thereto
(the "Equity Plan"), as described herein. The Board of Directors and the
Company's stockholders previously approved the Equity Plan in 1997. The First
Amendment to the Plan was adopted by the Company's Board of Directors as of
September 8, 1998. A total of 1,646,000 shares of Class A Common Stock were
originally reserved for issuance under the Equity Plan when it was adopted in
1997, and subject to stockholder approval at the 1998 Annual Meeting, the
aggregate number of such shares reserved for issuance shall be increased to
2,496,000. As of September 1, 1998, Awards relating to approximately 1,443,000
shares of Class A Common Stock were outstanding under the Equity Plan.
Accordingly, an increase to the number of shares authorized under the Equity
Plan is needed to permit the Company to continue to grant Awards under the
Equity Plan to officers, directors, employees and consultants. By the terms of
the Equity Plan, the Equity Plan may be amended by the Board of Directors or the
committee appointed to administer the Equity Plan (the "Committee") from time to
time, including, among other matters, to increase the number of shares reserved
for issuance thereunder, subject to stockholder approval. On July 22, 1998, the
Board of Directors voted to increase by 850,000 shares the aggregate numbers of
the shares of Class A Common Stock which may be issued under the Equity Plan.
On September 8, 1998 the Board approved the First Amendment to the Equity Plan
to give effect to such increase, to revise the terms for options granted to
Independent Directors (as defined below) and to amend the Equity Plan in certain
other respects as reflected in the summary description of the Equity Plan set
forth below.
The principal purposes of the Equity Plan are to provide incentives to
officers, employees and consultants of the Company through the granting of
Awards, thereby stimulating their personal and active interest in the Company's
development and financial success, and inducing them to remain in the
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Company's employ. The Equity Plan is also intended to assist the Company in
attracting and retaining qualified non-employee directors by providing for the
automatic grant of non-qualified stock options to directors who are not
employees of the Company or of any subsidiary or parent corporation of the
Company ("Independent Directors").
DESCRIPTION OF THE 1997 EQUITY PARTICIPATION PLAN, AS AMENDED
ADMINISTRATION
The Committee administers the Equity Plan with respect to grants to employees
or consultants of the Company and the full Board of Directors administers the
Equity Plan with respect to options granted to Independent Directors. Subject to
the terms and conditions of the Equity Plan, the Committee has the authority to
select the employees and consultants to whom Awards are to be made, to determine
the number of shares to be subject thereto and the terms and conditions thereof
(including exercisability and vesting), and to make all other determinations and
to take all other actions necessary or advisable for the administration of the
Equity Plan with respect to grants or awards made to employees or consultants.
The Committee (and the Board of Directors) is also authorized to adopt, amend
and rescind rules relating to the administration of the Equity Plan.s
Notwithstanding the foregoing, the Board of Directors conducts the general
administration of the Equity Plan with respect to options granted to Independent
Directors.
ELIGIBILITY
Options, SARs, restricted stock and other Awards under the Equity Plan may be
granted to individuals who are employees or consultants of the Company (or any
Subsidiary) selected by the Committee for participation in the Equity Plan. In
addition, the Equity Plan provides for automatic grants of non-qualified stock
options to Independent Directors. The maximum number of shares which may be
subject to Awards granted under the Equity Plan to any individual in any fiscal
year of the Company cannot exceed 300,000.
INDEPENDENT DIRECTORS
The Equity Plan provides for (i) grants of non-qualified stock options to
purchase 20,000 shares of Class A Common Stock to each Independent Director at
the time of appointment or election to the Board of Directors (the date of the
Company's initial public offering with respect to Independent Directors then
serving as such), and (ii) subject to the Independent Director's continuing
service as such, grants of non-qualified stock options to purchase 7,000 shares
of Class A Common Stock to each Independent Director upon the date of each
annual meeting of the Company's stockholders that follows the first anniversary
of the initial grant. The exercise price of options granted to Independent
Directors is the fair market value of a share of Class A Common Stock on the
date of grant. Options granted to Independent Directors prior to July 22, 1998
shall become exercisable in equal annual installments on each of the first five
anniversaries of the date of the grant so long as the Independent Director
continues to serve as a director of the Company; options granted to Independent
Directors after such date shall become exercisable in equal annual installments
on each of the first three anniversaries of the date of the grant so long as the
Independent Director continues to serve as a director of the Company; provided,
however, to the extent permitted by Rule 16b-3, the Board of Directors may
accelerate the exercisability of options upon the occurrence of certain
specified extraordinary corporate transactions or events. See "-- MERGER,
CONSOLIDATION AND OTHER EVENTS." No portion of an option granted to any
Independent Director shall be exercisable after the eighth anniversary of the
date of grant, and in the event of the Independent Director's earlier
Termination of Directorship,
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his or her options shall expire 60 days after such Termination of Directorship;
provided, however, that if the Termination of Directorship is by reason of death
or disability, his or her options shall not expire until the first anniversary
of such Termination of Directorship.
AWARDS UNDER THE EQUITY PLAN
Each Award will be set forth in a separate agreement with the person
receiving the Award and will indicate the type, terms and conditions of the
Award.
NONQUALIFIED STOCK OPTIONS ("NQSOS"). NQSOs will provide for the right to
purchase Class A Common Stock at a specified price which, except with respect to
NQSOs intended to qualify as performance-based compensation under Section 162(m)
of the Code, may be less than fair market value on the date of grant (but not
less than par value), and usually will become exercisable (as determined by the
Committee) in one or more installments after the grant date, subject to the
participant's continued employment with the Company and/or subject to the
satisfaction of individual or Company performance targets established by the
Committee. NQSOs may be granted for any term (not exceeding eight years)
specified by the Committee.
INCENTIVE STOCK OPTIONS ("ISOS"). ISOs are designed to comply with certain
restrictions contained in the Internal Revenue Code of 1986, as amended (the
"Code"). Among such restrictions, ISOs must have an exercise price not less than
the fair market value of a share of Class A Common Stock on the date of grant,
may only be granted to employees, must expire within a specified period of time
following the Optionee's termination of employment; but may be subsequently
modified to disqualify them from treatment as ISOs. In the case of an ISO
granted to an individual who owns (or is deemed to own) at least 10% of the
total combined voting power of all classes of stock of the Company, the Equity
Plan provides that the exercise price must be at least 110% of the fair market
value of a share of Class A Common Stock on the date of grant and the ISO must
expire upon the fifth anniversary of the date of its grant. Subject to certain
Code limitations, ISOs will become exercisable as determined by the Committee.
RESTRICTED STOCK. Restricted Stock may be sold to employees and consultants
at various prices (but not below par value) and made subject to such
restrictions as may be determined by the Committee. Restricted stock, typically,
may be repurchased by the Company at the original purchase price if the
specified conditions or restrictions are not met. In general, restricted stock
may not be sold, or otherwise transferred or hypothecated, until restrictions
are removed or expire. Purchasers of restricted stock, unlike recipients of
options, will have voting rights and will receive dividends prior to the time
when the restrictions lapse.
DEFERRED STOCK. Deferred Stock may be awarded to employees and consultants,
typically without payment of consideration, but subject to vesting conditions
based on continued employment or on performance criteria established by the
Committee. Like restricted stock, deferred stock may not be sold, or otherwise
transferred or hypothecated, until vesting conditions are removed or expire.
Unlike restricted stock, deferred stock will not be issued until the deferred
stock award has vested, and recipients of deferred stock generally will have no
voting or dividend rights prior to the time when vesting conditions are
satisfied.
STOCK APPRECIATION RIGHTS. SARs may be granted to employees and consultants
in connection with stock options or other Awards, or separately. SARs granted in
connection with stock options or other Awards typically will provide for
payments to the holder based upon increases in the price of the Company's Class
A Common Stock over the exercise price of the related option or other Award, but
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alternatively may be based upon criteria such as book value. Except as required
by Section 162(m) of the Code with respect to an SAR intended to qualify as
performance-based compensation, there are no restrictions specified in the
Equity Plan on the amount of gain realizable from the exercise of SARs, although
restrictions may be imposed by the Committee in the SAR agreements. The
Committee may elect to pay SARs in cash or in Class A Common Stock or in a
combination of both.
DIVIDEND EQUIVALENTS. Dividend equivalents represent the value of the
dividends per share paid on Class A Common Stock and may be granted to employees
and consultants in connection with any number of shares subject to another Award
(such as an option or SAR) held by such individual. The Committee may elect to
pay Dividend Equivalents in cash or in Class A Common Stock or in a combination
of both.
PERFORMANCE AWARDS. Performance Awards may be granted by the Committee to
employees and consultants on an individual or group basis. Generally, these
Awards will be based upon specific performance targets and may be paid in cash
or in Class A Common Stock or in a combination of both. The value of Performance
Awards may be linked to market value, book value, net profits or other measure
of the value of Class A Common Stock, or other performance criteria over a
predetermined period.
STOCK PAYMENTS. Stock payments may be awarded by the Committee to employees
and consultants in the form of shares of Class A Common Stock or an option or
other right to purchase Class A Common Stock as part of a deferred compensation
arrangement or otherwise in lieu of or in addition to all or any part of
compensation, including bonuses, that would otherwise be payable in cash to the
employee or consultant.
MERGER, CONSOLIDATION AND OTHER EVENTS
The Equity Plan provides the Committee (the Board with respect to options
granted to Independent Directors) discretion to amend the terms (such as
exercise price, number shares and vesting) of outstanding Awards and future
grants that may be made under the Equity Plan upon the occurrence of a
recapitalization, stock split, reorganization, merger, consolidation,
liquidation, dissolution, or sale, transfer, exchange or other disposition of
all or substantially all of the assets of the Company or other similar corporate
event and provides further, that in any event, upon the occurrence of a
"Corporate Transaction" or a "Change in Control" (each as defined in the Equity
Plan) all outstanding Awards shall become immediately exercisable, vested or
payable, as applicable, unless such Award is otherwise assumed by a successor to
the Company or replaced by a similar right with respect to securities of the
successor entity or subject to other limitations imposed at the time of grant.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences, in general, of the grant and exercise of
Options under the Equity Plan are as follows:
ISOS. In general, a recipient will not recognize taxable income upon the
grant or exercise of an ISO, and the Company will not be entitled to any
business expense deduction with respect to the grant or exercise of an ISO.
(However, upon the exercise of an ISO, the excess of the fair market value on
the date of exercise of the shares received over the exercise price of the
option will be treated as an adjustment to alternative minimum taxable income.)
In order for the exercise of an ISO to qualify as an ISO, a recipient generally
must be an employee of the Company or a subsidiary (within the meaning of
Section 422 of the Code) from the date the ISO is granted through the date three
months before the date of exercise (one year
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preceding the date of exercise in the case of a recipient whose employment is
terminated due to disability). The employment requirement does not apply where a
recipient's employment is terminated due to his or her death.
If a recipient has held the shares acquired upon exercise of an ISO for at
least two years after the date of grant and for at least one year after the date
of exercise, when the recipient disposes of the shares, the difference, if any,
between the sales price of the shares and the exercise price of the option will
be treated as long-term capital gain or loss subject to reduced rates of tax. If
a recipient disposes of the shares prior to satisfying these holding period
requirements (a "Disqualifying Disposition"), the recipient will recognize
ordinary income (treated as compensation) at the time of the Disqualifying
Disposition, generally in an amount equal to the excess of the fair market value
of the shares at the time the option was exercised over the exercise price of
the option. The balance of the gain realized, if any, will be short-term or
long-term capital gain, depending upon whether the shares have been held for at
least twelve months after the date of exercise. If the Optionee sells the shares
in a Disqualifying Disposition at a price below the fair market value of the
shares at the time the option was exercised, the amount of ordinary income
(treated as compensation) will be limited to the amount realized on the sale
over the exercise price of the option. In general, if the Company and its
subsidiaries comply with applicable income reporting requirements, the Company
and its subsidiaries will be allowed a business expense deduction to the extent
an ISO recipient recognizes ordinary income.
NQSOS. In general, a recipient who receives an NQSO will recognize no income
at the time of the grant of the option. Upon exercise of an NQSO, a recipient
will recognize ordinary income (treated as compensation) in an amount equal to
the excess of the fair market value of the shares on the date of exercise over
the exercise price of the option. The basis in shares acquired upon exercise of
a nonqualified stock option will equal the fair market value of such shares at
the time of exercise, and the holding period of the shares (for capital gain
purposes) will begin on the date of exercise. In general, if the Company and its
subsidiaries comply with applicable income reporting requirements, they will be
entitled to a business expense deduction in the same amount and at the same time
as the recipient recognizes ordinary income. In the event of a sale of the
shares received upon the exercise of a nonqualified stock option, any
appreciation or depreciation after the exercise date generally will be taxed as
capital gain or loss, provided that any gain will be subject to reduced rates of
tax if the shares were held for more than twelve months.
The foregoing discussion assumes that at the time of exercise, the sale of
the shares for a profit would not subject a recipient to liability under Section
16 (b) of the Exchange Act. Special rules may apply with respect to persons who
may be subject to Section 16 (b) of the Exchange Act.
Generally, if a recipient delivers previously owned shares to pay the
exercise price, no gain or loss will be recognized in respect of the shares
delivered, and there will be a carryover basis and holding period for a like
number of shares acquired. If the option being exercised is an ISO and the
shares delivered were acquired upon exercise of an ISO and are delivered prior
to satisfaction of the ISO holding period requirements described above, the
delivery of shares will constitute a Disqualifying Disposition as to which the
rules described above will apply. If the option being exercised is an NQSO,
ordinary income (treated as compensation) will be recognized only on the
additional shares acquired and will be equal to the fair market value of the
shares on the date of exercise less any addition cash paid. Special rules apply
in computing the amount and character of a recipient's income (or loss) upon the
subsequent sale of shares acquired upon the exercise of an ISO where the
exercise price is paid by the delivery of previously owned shares.
8
EXCISE TAXES. Under certain circumstances, the accelerated vesting or
exercise of options in connection with a Change in Control or Corporate
Transaction might be deemed an "excess parachute payment" for purposes of the
golden parachute tax provisions of Section 280G of the Code. To the extent it is
so considered, the recipient may be subject to a 20% excise tax and the Company
may be denied a tax deduction.
SECTION 162(M) LIMITATION. In general, under Section 162(m), income tax
deductions of publicly held corporations may be limited to the extent total
compensation (including base salary, annual bonus, stock option exercises and
non-qualified benefits paid) for certain executive officers exceeds $1 million
(less the amount of any "excess parachute payments" as defined in Section 280G
of the Code) in any one year. However, under Section 162(m), the deduction limit
does not apply to certain "performance-based compensation" established by an
independent Committee that is adequately disclosed to, and approved by,
stockholders. Under a Section 162(m) transition rule for compensation plans of
corporations that are privately held and that become publicly held in an initial
public offering, options granted under the Equity Plan prior to the approval of
the Equity Plan by stockholders at the 1998 Annual Meeting will not be subject
to Section 162(m). The Company has attempted to structure the Equity Plan in
such a manner that, subject to obtaining stockholder approval for the Equity
Plan at the 1998 Annual Meeting, after such date, the remuneration attributable
to options and SARs that meet the other requirements of Section 162(m) will not
be subject to the $1 million limitation. The Company has not, however, requested
a ruling from the Internal Revenue Service or an opinion of counsel regarding
this issue.
The Committee may also designate as "Section 162(m) Participants" certain
employees whose compensation for a given fiscal year may be subject to the limit
on deductible compensation imposed by Section 162(m) of the Code. The Committee
may grant Awards to Section 162(m) Participants that vest or become exercisable
upon the attainment of performance targets which are related to one or more of
the following performance goals: (I) pre-tax income; (ii) operating income;
(iii) cash flow; (iv) earnings per share; (v) return on equity; (vi) return on
invested capital or assets; (vii) earnings before interest, taxes, depreciation
and amortization ("EBITDA"); (viii) market value of Class A Common Stock; and
(ix) cost reduction or savings.
SHARES ISSUED UNDER THE EQUITY PLAN
Since the inception of the Equity Plan through May 31, 1998, Mr. Bizzaro has
acquired options relating to 220,000 shares of Class A Common Stock at a
weighted average exercise price of $11.00; Mr. Reynolds has acquired options
relating to 120,000 shares of Class A Common Stock at a weighted average
exercise price of $11.00; Mr. Blair has acquired options relating to 80,000
shares of Class A Common Stock at a weighted average exercise price of $11.00;
and Mr. Young has acquired options relating to 80,000 shares of Class A Common
Stock at a weighted average exercise price of $11.00. In addition, as of May 31,
1998, all executive officers as a group have acquired options relating to a
total of 500,000 shares of Class A Common Stock at a weighted average exercise
price of $11.00; all current directors who are not executive officers of the
Company have acquired Options relating to a total of 80,000 shares of Class A
Common Stock at a weighted average exercise price of $11.38; and all employees
who are not executive officers have acquired Options relating to a total of
692,000 shares of Class A Common Stock at a weighted average exercise price of
$11.25. As Options granted under the Equity Plan are discretionary and are
determined by the Compensation Committee of the Board of Directors from time to
time, the number of shares of Class A Common Stock that will be acquired by
these persons in the future under the Equity Plan is not currently determinable.
In addition, since the value of options depends upon the future market price of
Class A Common Stock, the value of outstanding options is not presently
determinable.
9
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE EQUITY PLAN AS AMENDED BY
THE FIRST AMENDMENT, AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
VOTED IN FAVOR OF SUCH APPROVAL UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON
THE PROXY.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership
of Common Stock by each of the Directors and Nominees, the Company's Chief
Executive Officer, each of the Company's other most highly compensated executive
officers, all Directors and executive officers as a group, and each stockholder
who is known by the Company to own beneficially more than five percent of the
outstanding Common Stock, as of the Record Date. Unless otherwise indicated, the
address of each beneficial owner is c/o the Company, 2002 South 5070 West, Salt
Lake City, Utah 84104-4726.
SHARES BENEFICIALLY OWNED(1)
-------------------------------------------
NUMBER OF SHARES PERCENT PERCENT OF
---------------------- ------------------- TOTAL VOTING
NAME OF BENEFICIAL OWNER CLASS A CLASS B CLASS A CLASS B POWER
- ------------------------ --------- ---------- -------- ------- -------
DIRECTORS AND EXECUTIVE OFFICERS:
Eric Weider (2) .................. 3,600 -- * -- *
Richard B. Bizzaro ............... 495,745 -- 5.4% -- *
Robert K. Reynolds ............... 330,530 -- 3.6 -- *
Ronald L. Corey .................. 61,427 -- * -- *
Donald G. Drapkin ................ 8,000 -- * -- *
Roger H. Kimmel (3) .............. 6,000 -- * -- *
George F. Lengvari (4) ........... -- -- -- -- --
Glenn W. Schaeffer ............... 6,000 -- * -- *
Richard A. Blair ................. 45,679 -- * -- *
Stephen D. Young ................. 45,679 -- * -- *
Directors and executive
officers as a group (10 persons) 968,388 -- 10.5 -- *
OTHER PRINCIPAL STOCKHOLDERS:
Weider Health and Fitness ........ -- 15,687,432 -- 100% 94.4%
SAFECO Corp (5) .................. 1,123,200 -- 12.2 -- *
601 Union Street, Suite 2500
Seattle, WA 98101
AMVESCAP PLC (6) ................. 1,093,100 -- 11.9 -- *
11 Devonshire Square
London EC2M 4YR, England
Wellington Management Company,
LLP (7) ...................... 891,300 -- 9.7 -- *
75 State Street
Boston, MA 02109
Hornchurch Investments Limited ... (8751,572) -- 8.1 -- *
Atlantic House, 4-8 Circular Road
Douglas, Isle of Man
Loomis, Sayles & Company, L.P. ... (9553,900) -- 6.0 -- *
One Financial Center
Boston, MA 02111
10
The TCW Group, Inc. (10) ......... 538,900 -- 5.8 -- *
865 South Figueroa Street
Los Angeles, CA 90017
- -------------
* Represents less than 1%.
(1) For purposes of this table, a person or group is deemed to have
"BENEFICIAL OWNERSHIP" of any shares which such person has the right to acquire
within 60 days after the date of this Proxy Statement. For purposes of
calculating the percentage of outstanding shares held by each person named
above, any shares which such person has the right to acquire within 60 days
after the date of the Proxy Statement are deemed to be outstanding, but for the
purpose of calculating the percentage ownership of any other person.
(2) Does not include 15,687,432 shares of Class B Common Stock held by Weider
Health and Fitness. Mr. Weider is President and Chief Executive Officer of
Weider Health and Fitness. Mr. Weider disclaims beneficial ownership of such
shares.
(3) Does not include 2,000 shares of Class A Common Stock held in two trusts
for the benefit of the children of Mr. Kimmel, as to which shares Mr. Kimmel has
neither the power of disposition nor the power to vote. Mr. Kimmel disclaims
beneficial ownership of such shares.
(4) Does not include 50,000 shares of Class A Common Stock held by the Weider
Lengvari WNI Stock Trust, a trust organized under the laws of the United
Kingdom, which is administered by an independent trustee and of which Mr.
Lengvari becomes a beneficiary only if certain conditions are met. Mr. Lengvari
disclaims beneficial ownership of such shares. Does not include 172,426 shares
of Class A Common Stock held by Bayonne Settlement, a trust organized under the
laws of Jersey (U.K.), of which family members of George F. Lengvari are
included among the beneficiaries. Bayonne Settlement is administered by an
independent trustee and Mr. Lengvari has neither the power of disposition nor
the power to vote the shares. Mr. Lengvari disclaims beneficial ownership of
such shares.
(5) Based on Schedule 13G filed by SAFECO Corp.
(6) Based on Schedule 13G filed by AMVESCAP PLC.
(7) Based on Schedule 13G filed by Wellington Mgt. Company, LLP.
(8) Based on reports filed by Hornchurch Investments Limited.
(9) Based on Schedule 13G filed by Loomis, Sayles & Company L.P.
(10) Based on Schedule 13G filed by The TCW Group, Inc.
11
EXECUTIVE COMPENSATION
SUMMARY EXECUTIVE COMPENSATION TABLE
The following table sets forth certain information with respect to the
compensation paid by the Company for services rendered to the Company in all
capacities for the fiscal years ended May 31, 1998 and 1997 to its Chief
Executive Officer and to its other executive officers other than the Chief
Executive Officer (the "NAMED EXECUTIVE OFFICERS").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------- -----------------------
AWARDS
-----------------------
RESTRICTED OPTIONS
NAME AND PRINCIPAL 0THER ANNUAL STOCK AWARDS (# OF ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) (2)(3) SHARES) COMPENSATION(4)
-------- ---- ------ ----- --------------- ------------ ------- ---------------
RICHARD B. BIZZARO .............. 1998 $ 325,000 $ 140,000 -- -- -- $ 11,800
CHIEF EXECUTIVE OFFICER ......... 1997 300,000 356,146 $1,363,000 $5,452,095 220,000 11,800
AND PRESIDENT
ROBERT K. REYNOLD ............... 1998 250,000 125,000 -- -- -- 11,800
CHIEF OPERATING ................. 1997 230,000 237,430 909,000 3,634,730 120,000 11,800
OFFICER, EXECUTIVE VICE
PRESIDENT AND SECRETARY
RICHARD A. BLAIR ................ 1998 210,000 55,000 -- -- -- 11,800
EXECUTIVE VICE .................. 1997 175,000 118,715 172,000 904,442 80,000 11,800
PRESIDENT-- SALES AND
MARKETING
STEPHEN D. YOUNG ................ 1998 165,000 45,000 -- -- -- 4,000
EXECUTIVE VICE .................. 1997 133,333 106,844 172,000 904,442 80,000 4,000
PRESIDENT -- OPERATIONS
AND CHIEF FINANCIAL
OFFICER
(1) Represents cash payments made pursuant to management incentive
agreements (the "MANAGEMENT INCENTIVE AGREEMENTS") existing at the time of the
Company's initial public offering of class a common stock in may 1997. pursuant
to the terms of the management incentive agreements, certain employees of the
Company (the "RECIPIENTS") were granted performance units ("PERFORMANCE UNITS")
as incentive compensation. the performance units entitled the recipients to a
cash payment or, at the option of the company, shares of Class A Common Stock
upon the conversion of the performance unit. in accordance with the terms of the
management incentive agreements, the performance units were converted into cash
and class a common stock upon consummation of the Company's initial public
offering.
(2) Represents the dollar value on the date of grant of shares of Class A
Common Stock granted to certain recipients upon the conversion of performance
units.
12
(3) at May 31, 1998, messrs. Bizzaro, Reynolds, Blair and Young held 495,645,
330,430, 82,222 and 82,222 shares of Class A Common Stock, respectively, granted
to each of messrs. Bizzaro, Reynolds, Blair and Young upon the conversion of the
performance units. At May 31, 1998, the value of those restricted stock holdings
was $7,713,475, $5,142,317, $1,279,580 and $1,279,580, respectively. of the
82,222 shares of Class A Common Stock held by each of Mr. Blair and Mr. Young on
May 31, 1998, 36,543 shares were unvested. at May 31, 1997, messrs. Bizzaro,
Reynolds, Blair and Young held 495,645, 330,430, 82,222 and 82,222 shares of
Class A Common Stock, respectively, granted to each of Messrs. Bizzaro,
Reynolds, Blair and Young upon the conversion of the performance units. At may
31, 1997, the value of those restricted stock holdings was $6,319,474,
$4,212,983, $1,048,331 and $1,048,331, respectively. Of the 82,222 shares of
Class A Common Stock held by each of Mr. Blair and Mr. Young on May 31, 1997,
45,679 shares were unvested.
(4) Other compensation includes matching contributions to the Company's
401(k) plan. in addition, for messrs. Bizzaro, Reynolds and Blair, includes an
automobile allowance.
No options/sars were granted to or exercised by the named executive officers
during the fiscal year ended May 31, 1998.
The company entered into employment agreements with messrs. Bizzaro and
Reynolds that extend through May 31, 2002 and May 31, 2000, respectively. The
annual base salary for messrs. Bizzaro and Reynolds for fiscal 1999 is $350,000
and $270,000, respectively, and increases $25,000 and $20,000, respectively, in
each successive year. In addition, messrs. Bizzaro and Reynolds are eligible for
bonuses up to a maximum of 150% of their annual base salaries. Should messrs.
Bizzaro or Reynolds be terminated without cause they will receive an amount
equal to two times their base salary and bonus for the prior year for 24 months
and 12 months, respectively. The agreements contain customary confidentiality
and non-competition provisions.
The Company and messrs. Blair and Young (the "EXECUTIVES") entered into
employment agreements (the "EMPLOYMENT AGREEMENTS") effective June 1, 1994,
which, as of May 31, 1995, continue on a month- to-month basis until otherwise
renewed or terminated. Pursuant to the terms of the employment agreements, the
annual base salary for messrs. Blair and Young has been set at $210,000 and
$165,000, respectively. Each employment agreement provides that the company can
increase or decrease the executive's base salary, consistent with general salary
increases or decreases, as the case may be, or as appropriate in light of the
performance of the company and the executive. In addition to the base salary
that each executive receives pursuant to the employment agreements, each
executive is entitled to an annual bonus in an amount equal to a percentage of
the executive's base salary (prorated for a partial year) corresponding to a
percentage of the annual performance and profitability goal of the Company (as
set forth therein).
DIRECTOR COMPENSATION
Members of the Board of Directors who are not employees of the Company or any
subsidiary or parent corporation of the Company (the "INDEPENDENT DIRECTORS")
have received and will continue to receive an annual fee of approximately
$12,000, options to purchase 20,000 shares of Class A Common Stock upon
appointment or election to the Board of Directors and options to purchase 7,000
shares of Class A Common Stock upon each annual meeting of the company's
stockholders following the first anniversary of the date of appointment or
election to the board of directors, provided the independent director is still
serving as a director of the Company. Options granted to independent directors
will become exercisable over a
13
period specified by the Board of Directors so long as the independent director
continues to serve as a director of the Company. The Company will also reimburse
all directors for their reasonable expenses incurred in connection with their
activities as directors of the Company. Directors who are not independent
directors receive no compensation for serving on the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Weider, Kimmel and Lengvari, none of whom are officers of the
Company, are members of the Compensation Committee of the Board of Directors.
See "Certain Relationships and Related Party Transactions" for a description of
certain of their business relationships with the Company.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "COMPENSATION
COMMITTEE") is comprised of Messrs. Weider, Kimmel and Lengvari, none of whom
are officers of the Company. The Compensation Committee's duties include
determination of the Company's compensation and benefit policies and practices
for executive officers and key managerial employees. In accordance with rules
established by the Securities and Exchange Commission (the "COMMISSION"), the
Company is required to provide certain data and information in regard to the
compensation provided to the Company's Chief Executive Officer and the Named
Executive Officers. The Compensation Committee has prepared the following report
for inclusion in this Proxy Statement.
COMPENSATION POLICY AND COMPANY PERFORMANCE. The executive compensation
program's overall objective is to reward and retain executives with the level of
talent and ability required to prudently guide the Company's growth, maximize
the link between executive and stockholder interests through a stock option
plan, recognize individual contributions as well as overall business results and
maintain the Company's position as a leader in the nutritional supplements
market. To achieve these objectives, the Company has developed an overall
compensation strategy and specific compensation plans that tie a substantial
portion of an executive's compensation to performance.
The key elements of the Company's compensation program consist of fixed
compensation in the form of base salary and variable compensation in the forms
of bonus payments and stock option awards under the Company's 1997 Equity
Participation Plan (the "EQUITY PLAN"). An executive's annual base salary
represents the fixed component of such executive's total compensation and
variable compensation is intended to comprise a substantial portion of an
executive's total annual compensation. The Compensation Committee's policies
with respect to each of these elements, including the bases for the compensation
awarded to Mr. Bizzaro, the Company's Chief Executive Officer, are discussed
below. In addition, while the elements of compensation described below are
considered separately, the Compensation Committee takes into account the full
compensation package afforded by the Company to the individual, including
pension benefits, insurance and other benefits, as well as the programs
described below.
BASE SALARIES. A competitive base salary is necessary to the development and
retention of capable management and is consistent with the Company's long-term
goals. Base salaries for executives are determined based upon the Compensation
Committee's evaluation of the responsibilities of the position held and the
experience of the individual, and by reference to historical levels of salary
paid by the Company and general economic conditions. See "EXECUTIVE
COMPENSATION--SUMMARY EXECUTIVE COMPENSATION TABLE" and "EXECUTIVE
COMPENSATION--EMPLOYMENT AGREEMENTS."
14
BONUS PAYMENTS. Targeted cash bonus payments are awarded to executives in
recognition of contribu tions to the business during the prior year. An
executive's contributions to the business are measured, in part, by his or her
success in meeting certain goals established by such executive and the
Compensation Committee in consultation with the Chief Executive Officer and the
Chief Operating Officer. The Compensation Committee, at its discretion, may
grant bonuses following the end of a fiscal year in an aggregate amount of up to
9% of the Company's income before income taxes and bonuses for such fiscal year.
The aggregate amount of the bonuses awarded in any calendar year is determined
by reference to the terms of the executive employment agreements, the Company's
competitive position, assessment of progress in attaining long-term goals and
business performance considerations.
The specific cash bonus an executive receives is dependent on individual
performance and level of responsibility. Assessment of an individual's relative
performance is made annually based on a number of factors, including initiative,
business judgment, knowledge of the industry and management skills. See
"EXECUTIVE COMPENSATION-EMPLOYMENT AGREEMENTS."
AWARDS UNDER THE EQUITY PLAN. The other principal component of executives'
compensation is stock options, which are intended as a tool to attract, provide
incentive to and retain those executives who make the greatest contribution to
the business, and who can have the greatest effect on the long-term
profitability of the Company. The exercise price of the stock options is set at
a price equal to the market price of the Class A Common Stock at the time of the
grant. The options therefore do not have any value to the executive unless the
market price of the Class A Common Stock rises. The Compensation Committee
believes that these stock options more closely align the executives' interests
with those of its stockholders, and focus management on building profitability
and long-term stockholder value.
POLICY ON THE DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal
Revenue Code of 1986 as amended (the "CODE"), limits a public company's federal
income tax deduction for compensation paid in excess of $1,000,000 to any of its
five most highly compensated executive officers. However, certain
performance-based compensation, including awards of stock options, is excluded
from the $1,000,000 limit if specific requirements are met.
While the tax impact of any compensation arrangement is one factor which is
considered by the Compensation Committee, such impact is evaluated in light of
the compensation policies discussed above. The Compensation Committee's
compensation determinations have generally been designed to maximize the
Company's federal income tax deduction for possible application in future years.
However, from time to time compensation may be awarded which is not fully
deductible if it is determined that such award is consistent with the overall
design of the compensation program and in the best interests of the Company and
its stockholders.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Bizzaro's salary is determined
based upon his employment agreement and the competitive salary framework
described under "--BASE SALARIES," above. The minimum base salary and annual
increases set forth in Mr. Bizzaro's employment agreement were determined based
on the Board of Directors' judgment concerning his individual contributions to
the business, level of responsibility and career experience. Although none of
these factors were given a specific weight, primary consideration was given to
Mr. Bizzaro's individual contributions to the business. No particular formulas
or measures were used.
The amount of Mr. Bizzaro's 1998 bonus payment was established in accordance
with Mr. Bizzaro's employment agreement. The bonus amount fixed in Mr. Bizzaro's
employment agreement reflects Mr.
15
Bizzaro's level of responsibility within the Company and overall contributions
as Chief Executive Officer and President.
CONCLUSION. The Company has had, and continues to have, an appropriate and
competitive compensa tion program. The balance of a competitive base salary,
bonus payments and significant emphasis on long-term incentives is a foundation
designed to build stability and to support the Company's continued growth.
This report is submitted by the members of the Compensation Committee.
The Compensation Committee
of the Board of Directors
Eric Weider
Roger H. Kimmel
George F. Lengvari
THE PRECEDING "REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION"
AND THE "STOCK PERFORMANCE CHART" THAT APPEARS IMMEDIATELY HEREAFTER SHALL NOT
BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR INCORPORATED BY REFERENCE IN ANY
DOCUMENTS SO FILED.
STOCK PERFORMANCE CHART
As part of the executive compensation information presented in this Proxy
Statement, the Commission requires a comparison of stock performance for the
Company with stock performance of a broad equity market index and an appropriate
industry index. The following chart compares the cumulative total stockholder
return on the Class A Common Stock during the period from April 30, 1997 to May
31, 1998 with the cumulative total return on The New York Stock Exchange and a
peer group index of nutritional supplement companies. The comparison assumes
$100 was invested on April 30, 1997 (the effective date of the Company's initial
public offering) in the Class A Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends, if any. The stock performance
shown on the following chart is not necessarily indicative of future
performance.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
4/30/97 5/30/97 8/29/97 11/28/97 2/27/98 5/29/98
------- ------- ------- -------- ------- -------
WNI......................... 100 114.6 134.8 97.2 123.6 139.9
S&P 500..................... 100 107.2 116.7 121 132.6 135.9
Comparable Companies Index.. 100 125.4 158.5 172.5 327.8 303.1
CORPORATE GOVERNANCE
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board of
Directors. The Board of Directors meets on a regularly scheduled basis during
the year to review significant developments affecting the Company and to act on
matters requiring approval by the Board of Directors. It also holds
16
special meetings when an important matter requires action by the Board of
Directors between scheduled meetings. During fiscal 1998, the Board of Directors
met five times. Each Director attended at least 75% of the aggregate of the
total number of meetings of the Board of Directors held during fiscal 1998 and
the total number of meetings held during fiscal 1998 by all committees of the
Board of Directors on which that Director served.
The Company has established a standing Audit Committee of the Board of
Directors (the "AUDIT COMMITTEE"). The Audit Committee meets periodically with
management and the Company's independent auditors to review the activities of
each and to discuss audit matters, financial reporting and the adequacy of
internal corporate controls. Roger H. Kimmel, Ronald L. Corey and Glenn W.
Schaeffer currently serve on the Audit Committee. During fiscal 1998, the Audit
Committee met once.
The Company does not have a standing nominating committee. The functions
customarily attributable to a nominating committee are performed by the Board of
Directors as a whole. The Company will consider nominees recommended by
stockholders, although it has not actively solicited recommendations from
stockholders for nominees nor has it established any procedures for this purpose
for the 1998 Annual Meeting other than as set forth in the Bylaws. In the
future, stockholders wishing to recommend a person for consideration as a
nominee for election to the Board of Directors can do so in accordance with the
Bylaws by giving timely written notice to the Secretary of the Company, that
provides each such nominee's name, appropriate biographical information and any
other information that would be required in a proxy statement or other filings
required to be made in connection with solicitation of proxies for the election
of directors and the class and the number of shares of capital stock of the
Company that are owned beneficially or of record by the stockholder making the
nomination. Such notice should be accompanied by a written statement from each
nominee consenting to be named as a nominee and to serve as a director if
elected. To be timely, such notice must be delivered to, or if mailed, received
at, the Company's executive offices not less than 60 days nor more than 90 days
prior to the anniversary of the immediately preceding annual meeting of
stockholders; PROVIDED HOWEVER, that if the annual meeting is called for a date
that is not within 30 days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth day following the earlier of the day on which such
notice of the date of the annual meeting was mailed or public disclosure of the
date of the annual meeting was made.
The Company has established a standing Compensation Committee. The
Compensation Committee has the authority to approve any offers to potential
employees of the Company for positions of Senior Vice President or above, or
positions with compensation packages consisting of (a) annual salaries of
$100,000 or more or (b) grants of options to purchase 10,000 or more shares of
Common Stock. During fiscal 1998, the Compensation committee met four times.
Eric Weider, Roger H. Kimmel and George F. Lengvari have been appointed to the
Compensation Committee. See "REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION."
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
ADVERTISING AGREEMENT
The Company and Weider Publications are parties to an Advertising Agreement
(the "ADVERTISING AGREEMENT") under which the Company is obligated (pursuant to
an annually updated notification in connection with the Company's budget) to
purchase a minimum number of advertising pages in certain of the publications of
Weider Publications each month at a price below that charged to unaffiliated
third party
17
advertisers. The advertising the Company purchases under the Advertising
Agreement will be priced at the direct production cost per page (the "AD PAGE
RATE") for each publication for the first five years and at premiums to the Ad
Page Rate in subsequent years. The Ad Page Rate for each publication will be
determined on an annual basis in accordance with the terms of the Advertising
Agreement. The Ad Page Rate will not apply to any company or business acquired
by the Company after December 31, 1996. Should Weider Publications develop or
acquire new publications during the term of the Advertising Agreement, the
Company will have the right, but not the obligation, to purchase advertising in
such publications on terms similar to those covering Weider Publications'
existing publications. The Advertising Agreement has a ten-year term and is
subject to termination by either party if certain specified events occur,
including a change of control of Weider Health and Fitness or an initial public
offering of Weider Publications.
CERTAIN INTERNATIONAL ACQUISITIONS AND ROYALTY ARRANGEMENTS
In connection with its strategy to expand its nutritional supplements
business in international markets, the Company has acquired or licensed from
related parties certain assets and distribution rights. The Company has acquired
manufacturing capabilities in the United Kingdom, Spain and Canada and has
licensed international rights to use the Weider name and trademarks. The Company
now controls distribution rights for the Weider name and trademarks worldwide,
except for Australia, New Zealand, Japan and South Africa. Sales under these
license arrangements are subject to certain royalty arrangements; however, the
Company is not required to pay any royalties with respect to sales of its
products in the United States, Canada, Mexico, Spain or Portugal (the
"ROYALTY-FREE TERRITORIES").
The Company acquired assets of Weider Canada for $4.0 million in September
1996 ($3.0 million was paid in cash and $1.0 million was in the form of an
earnout to be paid $40,000 per month for 25 months). In connection with the
purchase of Weider Canada, on September 1, 1996, the Company agreed to lease a
24,623 square foot office and warehouse facility in Montreal from Ben Weider
(the "WEIDER CANADA LEASE"). The Weider Canada Lease has a two-year term and an
annual base rent of $98,492.
The Company obtained the exclusive right to use the Weider name and
trademarks outside of the Royalty-Free Territories throughout the world, with
the exceptions of Australia, New Zealand, Japan and South Africa, pursuant to a
sublicense agreement dated December 1, 1996 with Mariz Gestao E Investimentos
Limitada ("MARIZ"). Mariz is a company incorporated under the laws of Portugal
and owned by a trust of which the family members of George F. Lengvari, a
director of the Company, are included among the beneficiaries. Mariz obtained
its exclusive international rights to use the Weider name and trademarks
pursuant to a license agreement, effective June 1, 1994, between Mariz and Joe
Weider, Ben Weider, Weider Sports Equipment and Weider Health and Fitness (the
"LICENSORS"). Pursuant to the license agreement with Mariz, the Company is
required to make annual royalty payments to Mariz commencing on December 1, 1998
on sales of the Company's brands in existence on December 1, 1996 in countries
covered by the agreement. The royalty payments are to be equal to (i) 4% of
sales up to $33.0 million; (ii) 3.5% of sales greater than $33.0 million and
less than $66.0 million; (iii) 3.0% of sales from $66.0 million to $100.0
million; and (iv) 2.5% of sales over $100.0 million. In addition, the sublicense
agreement with Mariz includes an irrevocable buy-out option exercisable by the
Company after May 31, 2002 for a purchase price equal to the greater of $7.0
million or 6.5 times the aggregate royalties paid by the Company in the fiscal
year immediately preceding the date of the exercise of the option.
18
TRANSFER OF INTELLECTUAL PROPERTY
In July 1985, Weider Health and Fitness and Joe Weider entered into an
agreement pursuant to which Weider Health and Fitness was granted all rights,
title and interest in and to a system of weight training known as "The Weider
System" and the exclusive right to use of the name "Joe Weider" within the
continental United States. As consideration for such grants, Weider Health and
Fitness agreed to pay Joe Weider approximately $620,000 over seven years through
May 31, 1992 and $450,000 for each year thereafter for the rest of his lifetime
(of which $250,000 is paid by the Company). Weider Health and Fitness's right to
use the "The Weider System" and "Joe Weider" survives the death of Joe Weider.
Since the transfer by Joe Weider of such intellectual property to Weider Health
and Fitness in 1985, Weider Health and Fitness has developed approximately 80
related federal trademark registrations and approximately 108 related trademark
applications that are used in the nutritional supplements business.
Effective September 1, 1996, Weider Health and Fitness assigned to the
Company substantially all such intellectual property. Weider Health and Fitness
retained three trademarks used in both the Company's nutritional supplements
business and Weider Health and Fitness' body building and exercise equipment
divisions; however, Weider Health and Fitness entered into a Trademark and
License Agreement granting to the Company a perpetual, royalty-free, fully paid
license to use such trademarks for its nutritional supplements business. In
addition, each of Weider Nutrition, Schiff Products and American Nutrition Bars
assigned to the Company all trademarks it owned and either registered in the
United States or filed applications for registration in the United States for
the nutritional supplements business.
CERTAIN RELATIONSHIPS OF DIRECTORS
Eric Weider, Chairman of the Board of Directors of the Company, is currently
President, Chief Executive Officer and a director of Weider Health and Fitness.
Mr. Lengvari, a director of the Company, is currently Vice Chairman and a
director of Weider Health and Fitness. In addition, Mr. Lengvari's family
members are included among the beneficiaries under the Bayonne Settlement, a
trust that owns 1.9% of the Class A Common Stock. In addition, Mariz, a company
owned by a trust of which family members of Mr. Lengvari are included among the
beneficiaries, was granted the exclusive right to use the Weider name and
trademarks outside of the United States, Canada and Mexico. The Company has
sublicensed such rights from Mariz. See "-- Transfer of Intellectual Property."
Latham & Watkins, of which Roger H. Kimmel, a director of the Company, is a
partner, performed legal services for the Company during the fiscal year ended
May 31, 1998.
MANAGEMENT INCENTIVE AGREEMENTS
Prior to the IPO, the Company entered into Management Incentive Agreements
pursuant to which the Recipients were granted Performance Units as incentive
compensation. Simultaneously with the IPO, which triggered conversion under the
Management Incentive Agreements, the Company paid in cash and shares of Class A
Common Stock the vested portion of the Performance Units. In aggregate, the
Company paid approximately $2.96 million in cash and issued 972,247 shares of
Class A Common Stock.
The unvested portion of the Performance Units (represented by 182,716
unvested shares of Class A Common Stock as of the IPO date) vest, contingent
upon continued employment and/or other factors, over a five-year period at 20%
per year through May 2002. During fiscal 1998, 36,543 shares of Class A
19
Common Stock became issued and outstanding in accordance with the vesting
provisions of the Performance Units.
To facilitate the payment of individual income taxes incurred in connection
with the conversion of the Performance Units, the Company makes available to
each Recipient a loan in principal amount up to 30% of the conversion value of
the vested Performance Units held by each Recipient. These loans bear interest
at a rate of 8.0% per annum, are repayable five years from the borrowing date
and are secured by the Recipient's Class A Common Stock received upon
conversion. During fiscal 1998, the Company made loans to Messrs. Bizzaro,
Reynolds, Blair and Young in the aggregate amount of $2,044,536, $2,004,419,
$172,274 and $160,592, respectively. In June 1997, Messrs. Reynolds and Young
made principal repayments in the amounts of $642,000 and $70,000, respectively.
Accordingly, Messrs. Reynolds and Young had outstanding principal loan balances
at May 31, 1998 of $1,362,419 and $90,592, respectively.
OTHER MATTERS
OTHER BUSINESS FOR MEETING
The Board of Directors does not know of any matters that will be presented
for action at the 1998 Annual Meeting other than those described above and
matters incident to the conduct of the meeting. If, however, any other matters
not presently known to management should come before the 1998 Annual Meeting, it
is intended that the shares represented by the accompanying proxy will be voted
on such matters in accordance with the discretion of the holders of such proxy.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires directors, officers and persons
who beneficially own more than 10% of a registered class of stock of the Company
to file initial reports of ownership (Form 3) and reports of changes in
beneficial ownership (Forms 4 and 5) with the Commission and The New York Stock
Exchange. Such persons are also required under the rules and regulations
promulgated by the Commission to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that during the fiscal year ended May 31, 1998 the
Company's directors, officers and greater than 10% beneficial owners complied
with all applicable Section 16(a) filing requirements.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder of the Company who wishes to present a proposal at the next
annual meeting of stockholders of the Company, and who wishes to have such
proposal included in the Company's proxy statement for that meeting, must in
accordance with Rule 14a-8 of the Exchange Act, deliver a copy of such proposal
to the Company at 2002 South 5070 West, Salt Lake City, Utah 84104-4726,
Attention: Secretary, no later than August 1, 1998; however, if next year's
annual meeting of stockholders is held on a date more than 30 days before or
after the corresponding date of the 1998 Annual Meeting, any stockholder who
wishes to have a proposal included in the Company's proxy statement and proxy
for that meeting must deliver a copy of the proposal to the Company within a
reasonable time before the proxy solicitation is made. The Company reserves the
right to decline to include in the Company's proxy statement and proxy any
stockholder's proposal that does not comply with the rules of the Commission
and/or the Bylaws for inclusion therein.
20
See "CORPORATE GOVERNANCE--MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS"
and the Bylaws for notice procedures to recommend a person for nomination as a
director.
ANNUAL REPORT
The Company's 1998 Annual Report to Stockholders accompanies this Proxy
Statement. The 1998 Annual Report to Stockholders does not form any part of the
materials for the solicitation of proxies. Upon written request, the Company
will provide stockholders with a copy of its Annual Report on Form 10-K for the
year ended May 31, 1998 (the "FORM 10-K"), as filed with the Commission and any
amendments thereto, without charge. Please direct written requests for a copy of
the Form 10-K, and any amendments thereto, to: Weider Nutrition International,
Inc., 2002 South 5070 West, Salt Lake City, Utah 84104-4726.
BY ORDER OF THE BOARD OF DIRECTORS
WEIDER NUTRITION INTERNATIONAL, INC.
September _____, 1998
21
WEIDER NUTRITION INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING TO BE HELD ON OCTOBER 29, 1998
The undersigned hereby appoints each of Richard B. Bizzaro and Robert K.
Reynolds as attorneys and proxies, each with power of substitution, to vote all
shares of Class A common stock (the "Class A Common Stock") and Class B common
stock (the "Class B Common Stock," and together with the Class A Common Stock,
the "Common Stock") of Weider Nutrition International, Inc. (the "Company") that
the undersigned may be entitled to vote at the Annual Meeting of the
Stockholders of the Company to be held Thursday, October 29, 1998 at 2:00 p.m.,
local time at the Company's executive offices at 2002 South 5070 West, Salt Lake
City, Utah 84104, on the proposals set forth on the reverse side hereof and on
such other matters as may properly come before the meeting and any adjournment
or postponement thereof.
The proxy holders will vote the shares represented by this proxy in the
manner indicated on the reverse side hereof. Unless a contrary direction is
indicated, the proxy holders will vote such shares "FOR" the proposals set forth
on the reverse side hereof. If any further matters properly come before the
Annual Meeting, it is the intention of the persons named above to vote such
proxies in accordance with their best judgment.
(Continued and to be dated and signed on the reverse side)
The Board of Directors recommends a vote FOR the following proposals:
1. Election as directors of the Company until the next annual meeting and until
their successors are duly elected and qualified.
FOR all nominees WITHHOLD AUTHORITY to vote
listed below for all nominees listed below *EXCEPTIONS
[ ] [ ] [ ]
Nominees:Eric Weider, Richard B. Bizzaro, Robert K. Reynolds, Ronald L.
Corey, Donald G. Drapkin, Roger H. Kimmel, George F. Lengvari and Glenn
W. Schaeffer
(INSTRUCTIONS: To withhold authority for any individual nominee, mark the
"Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions:____________________________________________________________________
2. Approval of the 1997 Equity Participation Plan, as amended.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To transact such other business as may properly come FOR AGAINST ABSTAIN
before the Annual Meeting and any adjournments or [ ] [ ] [ ]
postponements thereof.
Change of Address and/or
comments mark here [ ]
Date:________________________________ , 1998
Signature:__________________________________
Signature:__________________________________
Note: Please sign exactly as name appears hereon. If a joint account, each joint
owner must sign. If signing for a corporation or partnership or as agent,
attorney or fiduciary, indicate the capacity in which you are signing.
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.)
APPENDIX
THE 1997 EQUITY PARTICIPATION PLAN
OF
WEIDER NUTRITION INTERNATIONAL, INC.
Weider Nutrition International, Inc., a Delaware corporation, has
adopted The 1997 Equity Participation Plan of Weider Nutrition International,
Inc. (the "Plan"), effective February 28, 1997, for the benefit of its eligible
employees, consultants and directors. The Plan consists of two plans, one for
the benefit of Employees (as such term is defined below) and consultants and one
for the benefit of Independent Directors (as such term is defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, Employees and
consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock and/or
rights which recognize such growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.
ARTICLE I
DEFINITIONS
1.1 GENERAL. Wherever the following terms are used in this Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise.
1.2 AWARD LIMIT. "Award Limit" shall mean 300,000 shares of Common
Stock.
1.3 BOARD. "Board" shall mean the Board of Directors of the Company.
1.4 CHANGE IN CONTROL. "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the following
transactions:
(a) any person or related group of persons (other than the Company
or a person that directly or indirectly controls, is controlled by, or is
under common control with, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d- 3 under the Exchange
Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's stockholders
which the Board does not recommend such stockholders to accept; or
(b) there is a change in the composition of the Board over a period
of thirty-six (36) consecutive months (or less) such that a majority of
the Board members (rounded up to the nearest whole number) ceases, by
reason of one or more proxy contests for the election of Board members, to
be comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been elected
or nominated for election as Board members during such period by at least
a majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
1.5 CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.6 COMMITTEE. "Committee" shall mean the Compensation Committee of
the Board, or another committee of the Board, appointed as provided in Section
9.1.
1.7 COMMON STOCK. "Common Stock" shall mean the Class A Common Stock
of the Company, par value $0.01 per share, and any equity security of the
Company issued or authorized to be issued in the future, but excluding any
preferred stock and any warrants, options or other rights to purchase Common
Stock. Debt securities of the Company convertible into Common Stock shall be
deemed equity securities of the Company.
1.8 COMPANY. "Company" shall mean Weider Nutrition International,
Inc., a Delaware corporation.
1.9 CORPORATE TRANSACTION. "Corporate Transaction" shall mean any of
the following stockholder-approved transactions to which the Company is a party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated, form a
holding company or effect a similar reorganization as to form whereupon
this Plan and all Options are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to clause (a), above; or
(c) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.
1.10 DEFERRED STOCK. "Deferred Stock" shall mean Common Stock
awarded under Article VII of this Plan.
1.11 DIRECTOR. "Director" shall mean a member of the Board.
1.12 DIVIDEND EQUIVALENT. "Dividend Equivalent" shall mean a right
to receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article VII of this Plan.
2
1.13 EMPLOYEE. "Employee" shall mean any officer or other employee
(as defined in accordance with Section 3401(c) of the Code) of the Company, or
of any corporation which is a Subsidiary.
1.14 EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.15 FAIR MARKET VALUE. "Fair Market Value" of a share of Common
Stock as of a given date shall be (i) the closing price of a share of Common
Stock on the principal exchange on which shares of Common Stock are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on the trading day previous to such date, or if shares were
not traded on the trading day previous to such date, then on the next preceding
date on which a trade occurred, or (ii) if Common Stock is not traded on an
exchange but is quoted on NASDAQ or a successor quotation system, the mean
between the closing representative bid and asked prices for the Common Stock on
the trading day previous to such date as reported by NASDAQ or such successor
quotation system; or (iii) if Common Stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the Fair Market Value
of a share of Common Stock as established by the Committee (or the Board, in the
case of Options granted to Independent Directors) acting in good faith;
PROVIDED, HOWEVER, that the Fair Market Value of a share of Common Stock as of
the date of the initial public offering of Common Stock shall equal the initial
public offering price (net of underwriting discounts and commissions) per share
of Common Stock.
1.16 GRANTEE. "Grantee" shall mean an Employee or consultant granted
a Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation
Right, or an award of Deferred Stock, under this Plan.
1.17 INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.
1.18 INDEPENDENT DIRECTOR. "Independent Director" shall mean a
member of the Board who (i) is not an Employee of the Company, and (ii) who is
not an employee or director of any parent corporation of the Company.
1.19 NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by the
Committee.
1.20 OPTION. "Option" shall mean a stock option granted under
Article III of this Plan. An Option granted under this Plan shall, as determined
by the Committee, be either a NonQualified Stock Option or an Incentive Stock
Option; PROVIDED, HOWEVER, that Options granted to Independent Directors and
consultants shall be Non-Qualified Stock Options.
1.21 OPTIONEE. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
3
1.22 PERFORMANCE AWARD. "Performance Award" shall mean a cash bonus,
stock bonus or other performance or incentive award that is paid in cash, Common
Stock or a combination of both, awarded under Article VII of this Plan.
1.23 PLAN. "Plan" shall mean The 1997 Equity Participation Plan of
Weider Nutrition International, Inc.
1.24 QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
1.25 RESTRICTED STOCK. "Restricted Stock" shall mean Common Stock
awarded under Article VI of this Plan.
1.26 RESTRICTED STOCKHOLDER. "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock under Article VI of
this Plan.
1.27 RULE 16B-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.
1.28 SECTION 162(M) PARTICIPANT. "Section 162(m) Participant" shall
mean any Employee designated by the Committee as an Employee whose compensation
for the fiscal year in which the Employee is so designated or a future fiscal
year may be subject to the limit on deductible compensation imposed by Section
162(m) of the Code.
1.29 STOCK APPRECIATION RIGHT. "Stock Appreciation Right" shall mean
a stock appreciation right granted under Article VIII of this Plan.
1.30 STOCK PAYMENT. "Stock Payment" shall mean (i) a payment in the
form of shares of Common Stock, or (ii) an option or other right to purchase
shares of Common Stock, as part of a deferred compensation arrangement or
otherwise, made in lieu of or in addition to all or any portion of the
compensation, including without limitation, salary, bonuses and commissions,
that would otherwise become payable to an Employee or consultant in cash,
awarded under Article VII of this Plan.
1.31 SUBSIDIARY. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
1.32 TERMINATION OF CONSULTANCY. "Termination of Consultancy" shall
mean the time when the engagement of an Optionee, Grantee or Restricted
Stockholder as a consultant to the Company or a Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement; but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to
4
Termination of Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a discharge for
good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Consultancy. Notwithstanding any other provision of
this Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate a consultant's service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
1.33 TERMINATION OF DIRECTORSHIP. "Termination of Directorship"
shall mean the time when an Optionee who is an Independent Director ceases to be
a Director for any reason, including, but not by way of limitation, a
termination by resignation, removal, failure to be elected, death or retirement.
The Board, in its sole and absolute discretion, shall determine the effect of
all matters and questions relating to Termination of Directorship with respect
to Independent Directors.
1.34 TERMINATION OF EMPLOYMENT. "Termination of Employment" shall
mean the time when the employee-employer relationship between an Optionee,
Grantee or Restricted Stockholder and the Company or any Subsidiary is
terminated for any reason, with or without cause, including, but not by way of
limitation, a termination by resignation, discharge, death, disability or
retirement; but excluding (i) terminations where there is a simultaneous
reemployment or continuing employment of an Optionee, Grantee or Restricted
Stockholder by the Company or any Subsidiary, (ii) at the discretion of the
Committee, terminations which result in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of the Committee,
terminations which are followed by the simultaneous establishment of a
consulting relationship by the Company or a Subsidiary with the former employee.
The Committee, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether a
particular leave of absence constitutes a Termination of Employment; PROVIDED,
HOWEVER, that, unless otherwise determined by the Committee in its discretion, a
leave of absence, change in status from an employee to an independent contractor
or other change in the employee- employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave of absence,
change in status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section. Notwithstanding any other provision of this Plan,
the Company or any Subsidiary has an absolute and unrestricted right to
terminate an Employee's employment at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 SHARES SUBJECT TO PLAN
(a) The shares of stock subject to Options, awards of Restricted
Stock, Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be Common Stock, initially shares of
the Company's Class A Common Stock, par value $0.01 per share. The aggregate
number of such shares which may be issued upon
5
exercise of such options or rights or upon any such awards under the Plan shall
not exceed one million six hundred forty-six thousand (1,646,000). The shares of
Common Stock issuable upon exercise of such options or rights or upon any such
awards may be either previously authorized but unissued shares or treasury
shares.
(b) The maximum number of shares which may be subject to Options,
awards of Restricted Stock, Performance Awards, Dividend Equivalents, awards of
Deferred Stock, Stock Payments or Stock Appreciation Rights granted under the
Plan to any individual in any fiscal year shall not exceed the Award Limit. To
the extent required by Section 162(m) of the Code, shares subject to Options
which are canceled continue to be counted against the Award Limit and if, after
grant of an Option, the price of shares subject to such Option is reduced, the
transaction is treated as a cancellation of the Option and a grant of a new
Option and both the Option deemed to be canceled and the Option deemed to be
granted are counted against the Award Limit. Furthermore, to the extent required
by Section 162(m) of the Code, if, after grant of a Stock Appreciation Right,
the base amount on which stock appreciation is calculated is reduced to reflect
a reduction in the Fair Market Value of the Company's Common Stock, the
transaction is treated as a cancellation of the Stock Appreciation Right and a
grant of a new Stock Appreciation Right and both the Stock Appreciation Right
deemed to be canceled and the Stock Appreciation Right deemed to be granted are
counted against the Award Limit.
2.2 ADD-BACK OF OPTIONS AND OTHER RIGHTS. If any Option, or other
right to acquire shares of Common Stock under any other award under this Plan,
expires or is canceled without having been fully exercised, or is exercised in
whole or in part for cash as permitted by this Plan, the number of shares
subject to such Option or other right but as to which such Option or other right
was not exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Furthermore, any shares subject to Options or other awards which are
adjusted pursuant to Section 10.3 and become exercisable with respect to shares
of stock of another corporation shall be considered cancelled and may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Shares of Common Stock which are delivered by the Optionee or Grantee or
withheld by the Company upon the exercise of any Option or other award under
this Plan, in payment of the exercise price thereof, may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1. If any
share of Restricted Stock is forfeited by the Grantee or repurchased by the
Company pursuant to Section 6.6 hereof, such share may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.
ARTICLE III
GRANTING OF OPTIONS
3.1 ELIGIBILITY. Any Employee or consultant selected by the
Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted an
Option. Each Independent Director of the Company shall be eligible to be granted
Options at the times and in the manner set forth in Section 3.4(d).
6
3.2 DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be granted
an Incentive Stock Option under this Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any then existing Subsidiary or parent corporation (within the meaning of
Section 422 of the Code) unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.
3.3 QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock
Option shall be granted to any person who is not an Employee.
3.4 GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:
(i) Select from among Employees and consultants (including
Employees or consultants who have previously received Options or other
awards under this Plan) such of them as in its opinion should be granted
Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected Employees or
consultants;
(iii) Subject to Section 3.3, determine whether such Options
are to be Incentive Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; PROVIDED, HOWEVER, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code.
(b) Upon the selection of an Employee or consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate. Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments or
other rights which have been previously granted to him under this Plan or
otherwise. An Option, the grant of which is conditioned upon such surrender, may
have an option price lower (or higher) than the exercise price of such
surrendered Option or other award, may cover the same (or a lesser or greater)
number of shares as such surrendered Option or other award, may contain such
other terms as the Committee deems appropriate, and shall be exercisable in
accordance with its terms,
7
without regard to the number of shares, price, exercise period or any other term
or condition of such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.
(d) During the term of the Plan, each person who is an Independent
Director as of the date of the consummation of the initial public offering of
Common Stock automatically shall be granted (i) an Option to purchase twenty
thousand (20,000) shares of Common Stock (subject to adjustment as provided in
Section 10.3) on the date of such initial public offering and (ii) an Option to
purchase seven thousand (7,000) shares of Common Stock (subject to adjustment as
provided in Section 10.3) on each anniversary of such date on which such
Independent Director is then serving as such. During the term of the Plan, a
person who is initially elected or appointed to the Board after the consummation
of the initial public offering of Common Stock and who is an Independent
Director at the time of such initial election or appointment automatically shall
be granted (i) an Option to purchase twenty thousand (20,000) shares of Common
Stock (subject to adjustment as provided in Section 10.3) on the date of such
initial election or appointment and (ii) an Option to purchase seven thousand
(7,000) shares of Common Stock (subject to adjustment as provided in Section
10.3) on each anniversary of such date on which such Independent Director is
then serving as such. Members of the Board who are employees of the Company who
subsequently retire from the Company and remain on the Board will not receive an
initial Option grant pursuant to clause (i) of the preceding sentence, but to
the extent that they are otherwise eligible, will receive, after Termination of
Employment, Options as described in clause (ii) of the preceding sentence on
each anniversary of the date of Termination of Employment. All the foregoing
Option grants authorized by this Section 3.4(d) are subject to stockholder
approval of the Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1 OPTION AGREEMENT. Each Option shall be evidenced by a written
Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board, in the case of Options granted to
Independent Directors) shall determine, consistent with this Plan, including
non-compete, non-disclosure, non-solicitation or similar provisions. Stock
Option Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2 OPTION PRICE. The price per share of the shares subject to each
Option shall be set by the Committee; PROVIDED, HOWEVER, that such price shall
be no less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law, and (i) in the case of
8
Incentive Stock Options and Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, such price shall
not be less than 100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted (or modified in the case of an Incentive Stock
Option); (ii) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code) such price shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date the Option is granted (or modified); and (iii)
in the case of Options granted to Independent Directors, such price shall equal
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted.
4.3 OPTION TERM. The term of an Option shall be set by the Committee
in its discretion but shall not exceed eight (8) years from the date the Option
is granted; PROVIDED, HOWEVER, that, (i) in the case of Options granted to
Independent Directors, the term shall be eight (8) years from the date the
Option is granted, without variation or acceleration hereunder, but subject to
Section 5.6, and (ii) in the case of Incentive Stock Options, the term shall not
be more than five (5) years from such date if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Optionee, or amend any other term or condition of such Option
relating to such a termination.
4.4 OPTION VESTING
(a) The period during which the right to exercise an Option in whole
or in part vests in the Optionee shall be set by the Committee and the Committee
may determine that an Option may not be exercised in whole or in part for a
specified period after it is granted; PROVIDED, HOWEVER, that, unless the
Committee otherwise provides in the terms of the Option or otherwise, no Option
shall be exercisable by any Optionee who is then subject to Section 16 of the
Exchange Act within the period ending six months and one day after the date the
Option is granted; and provided, further, that Options granted to Independent
Directors shall become exercisable in cumulative annual installments of 20% on
each of the first, second, third, fourth and fifth anniversaries of the date of
Option grant, without variation or acceleration hereunder except as provided in
Section 10.3(b). At any time after grant of an Option, the Committee may, in its
sole and absolute discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option (except an Option granted
to an Independent Director) vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the Committee
following the grant of the Option.
9
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.
4.5 CONSIDERATION. In consideration of the granting of an Option,
the Optionee shall agree, in the written Stock Option Agreement or otherwise, to
render faithful and efficient services to the Company or any Subsidiary with
such duties and responsibilities as the Company or the Subsidiary shall from
time to time prescribe, and, in addition, such written Stock Option Agreement
may contain non-compete, non-disclosure, non-solicitation or similar provisions.
Nothing in this Plan or in any Stock Option Agreement hereunder shall confer
upon any Optionee any right to continue in the employ of, or as a consultant
for, the Company or any Subsidiary, or as a director of the Company, or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Optionee at
any time for any reason whatsoever, with or without good cause.
ARTICLE V
EXERCISE OF OPTIONS
5.1 PARTIAL EXERCISE. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors) may require that, by the terms of the Option,
a partial exercise be with respect to a minimum number of shares.
5.2 MANNER OF EXERCISE. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his office:
(a) A written notice complying with the applicable rules established
by the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion;
(b) Such representations and documents as the Committee (or the
Board, in the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee or Board may, in
its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and
registrars;
10
(c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However, the
Committee (or the Board, in the case of Options granted to Independent
Directors), may in its discretion (i) allow a delay in payment up to thirty (30)
days from the date the Option, or portion thereof, is exercised; (ii) allow
payment, in whole or in part, through the delivery of shares of Common Stock
owned by the Optionee, duly endorsed for transfer to the Company with a Fair
Market Value on the date of delivery equal to the aggregate exercise price of
the Option or exercised portion thereof; (iii) allow payment, in whole or in
part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of a
notice that the Optionee has placed a market sell order with a broker with
respect to shares of Common Stock then issuable upon exercise of the Option, and
that the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option exercise
price; or (v) allow payment through any combination of the consideration
provided in the foregoing subparagraphs (ii), (iii), and (iv).
5.3 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed;
(b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body which the Committee or Board shall, in its absolute discretion, deem
necessary or advisable;
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee (or Board, in the case of
Options granted to Independent Directors) shall, in its absolute discretion,
determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee (or Board, in the case of Options
granted to Independent Directors) may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4 RIGHTS AS STOCKHOLDERS. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the
11
exercise of any part of an Option unless and until certificates representing
such shares have been issued by the Company to such holders.
5.5 OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee (or Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares. The Committee
may require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting such Option to such Employee or (ii) one
year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
5.6 LIMITATIONS ON EXERCISE OF OPTIONS GRANTED TO INDEPENDENT
DIRECTORS. No Option granted to an Independent Director may be exercised to any
extent by anyone after the first to occur of the following events:
(a) The expiration of twelve (12) months from the date of the
Optionee's death;
(b) The expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);
(c) The expiration of sixty (60) days from the date of the
Optionee's Termination of Directorship for any reason other than such Optionee's
death or his permanent and total disability, unless the Optionee dies within
said sixty-day period; or
(d) The expiration of eight (8) years from the date the Option was
granted.
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1 AWARD OF RESTRICTED STOCK
(a) The Committee may from time to time, in its absolute discretion:
(i) Select from among the Employees or consultants
(including Employees or consultants who have previously received other
awards under this Plan) such of them as in its opinion should be awarded
Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms
and conditions applicable to such Restricted Stock, consistent with this
Plan.
12
(b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Stock; PROVIDED, HOWEVER, that such purchase
price shall be no less than the par value of the Common Stock to be purchased,
unless otherwise permitted by applicable state law. In all cases, legal
consideration shall be required for each issuance of Restricted Stock.
(c) Upon the selection of an Employee or consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate.
6.2 RESTRICTED STOCK AGREEMENT. Restricted Stock shall be issued
only pursuant to a written Restricted Stock Agreement, which shall be executed
by the selected Employee or consultant and an authorized officer of the Company
and which shall contain such terms and conditions as the Committee shall
determine, consistent with this Plan.
6.3 CONSIDERATION. As consideration for the issuance of Restricted
Stock, in addition to payment of any purchase price, the Restricted Stockholder
shall agree, in the written Restricted Stock Agreement or otherwise, to render
faithful and efficient services to the Company or any Subsidiary with such
duties and responsibilities as the Company or the Subsidiary shall from time to
time prescribe, and, in addition, such written Restricted Stock Agreement may
contain non-compete, non-disclosure, non-solicitation or similar provisions.
Nothing in this Plan or in any Restricted Stock Agreement hereunder shall confer
on any Restricted Stockholder any right to continue in the employ of, or as a
consultant for, the Company or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Restricted Stockholder at any time
for any reason whatsoever, with or without good cause.
6.4 RIGHTS AS STOCKHOLDERS. Upon delivery of the shares of
Restricted Stock to the escrow holder pursuant to Section 6.7, the Restricted
Stockholder shall have, unless otherwise provided by the Committee, all the
rights of a stockholder with respect to said shares, subject to the restrictions
in his Restricted Stock Agreement, including the right to receive all dividends
and other distributions paid or made with respect to the shares; PROVIDED,
HOWEVER, that in the discretion of the Committee, any extraordinary
distributions with respect to the Common Stock shall be subject to the
restrictions set forth in Section 6.5.
6.5 RESTRICTION. All shares of Restricted Stock issued under this
Plan (including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance; PROVIDED, HOWEVER,
that, unless the Committee otherwise provides in the terms of the Restricted
Stock Agreement or otherwise, no share of Restricted Stock granted to a person
subject to Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months and one day have elapsed from the date on
which the Restricted Stock was issued, and PROVIDED, FURTHER, that by action
taken after the Restricted Stock is issued, the Committee may, on such terms and
conditions as it may determine to be appropriate, remove any or all of the
restrictions imposed by the terms of the Restricted Stock Agreement. Restricted
Stock may not be sold or encumbered until all
13
restrictions are terminated or expire. Unless provided otherwise by the
Committee, if no consideration was paid by the Restricted Stockholder upon
issuance, a Restricted Stockholder's rights in unvested Restricted Stock shall
lapse upon Termination of Employment or, if applicable, upon Termination of
Consultancy with the Company.
6.6 REPURCHASE OF RESTRICTED STOCK. The Committee shall provide in
the terms of each individual Restricted Stock Agreement that the Company shall
have the right to repurchase from the Restricted Stockholder the Restricted
Stock then subject to restrictions under the Restricted Stock Agreement
immediately upon a Termination of Employment or, if applicable, upon a
Termination of Consultancy between the Restricted Stockholder and the Company,
at a cash price per share equal to the price paid by the Restricted Stockholder
for such Restricted Stock; PROVIDED, HOWEVER, that provision may be made that no
such right of repurchase shall exist in the event of a Termination of Employment
or Termination of Consultancy without cause, or following a change in control of
the Company or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.
6.7 ESCROW. The Secretary of the Company or such other escrow holder
as the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Restricted Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
6.8 LEGEND. In order to enforce the restrictions imposed upon shares
of Restricted Stock hereunder, the Committee shall cause a legend or legends to
be placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Restricted Stock Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.
6.9 PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS
(a) Notwithstanding anything in the Plan to the contrary, the
Committee may grant Restricted Stock awards to a Section 162(m) Participant the
restrictions with respect to which lapse upon the attainment of performance
targets for the Company which are related to one or more of the following
performance goals: (i) pre-tax income, (ii) operating income, (iii) cash flow,
(iv) earnings per share, (v) return on equity, (vi) return on invested capital
or assets, (vii) earnings before interest, taxes, depreciation and amortization
("EBITDA"), (viii) market value of Common Stock, and (ix) cost reductions or
savings.
(b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
Restricted Stock awards which may be granted to one or more Section 162(m)
Participants, no later than ninety (90) days following the commencement of any
fiscal year in question or any other designated fiscal period (or such other
time as may be required or permitted by Section 162(m) of the Code), the
Committee shall, in writing, (i) designate one or more Section 162(m)
Participants, (ii) select the performance goal or goals applicable to the fiscal
year or other designated fiscal period, (iii) establish the various targets and
bonus amounts which may be earned for such fiscal year or other designated
fiscal period and (iv) specify the relationship between performance goals and
targets and the amounts to be earned by each Section 162(m) Participant for such
fiscal year or other designated fiscal period. Following the completion of
14
each fiscal year or other designated fiscal period, the Committee shall certify
in writing whether the applicable performance targets have been achieved for
such fiscal year or other designated fiscal period. In determining the amount
payable to a Section 162(m) Participant, the Committee shall have the right to
reduce (but not to increase) the amount payable at a given level of performance
to take into account additional factors that the Committee may deem relevant to
the assessment of individual or corporate performance for the fiscal year or
other designated fiscal period.
ARTICLE VII
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1 PERFORMANCE AWARDS. Any Employee or consultant selected by the
Commit tee may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to the market value, book value, net profits or
other measure of the value of Common Stock or other specific performance
criteria determined appropriate by the Committee, in each case on a specified
date or dates or over any period or periods determined by the Committee, or may
be based upon the appreciation in the market value, book value, net profits or
other measure of the value of a specified number of shares of Common Stock over
a fixed period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular Employee or
consultant.
7.2 DIVIDEND EQUIVALENTS. Any Employee or consultant selected by the
Commit tee may be granted Dividend Equivalents based on the dividends declared
on Common Stock, to be credited as of dividend payment dates, during the period
between the date an Option, Stock Appreciation Right, Deferred Stock or
Performance Award is granted, and the date such Option, Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests or expires, as
determined by the Committee. Such Dividend Equivalents shall be converted to
cash or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee. With respect
to Dividend Equivalents granted with respect to Options intended to be qualified
performance-based compensation for purposes of Section 162(m) of the Code, such
Dividend Equivalents shall be payable regardless of whether such Option is
exercised.
7.3 STOCK PAYMENTS. Any Employee or consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Fair Market Value, book value, net profits or other
measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee, determined on the date such Stock
Payment is made or on any date thereafter.
7.4 DEFERRED STOCK. Any Employee or consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the market value, book
value, net profits or other measure of the value of Common Stock or other
15
specific performance criteria determined to be appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee. Common Stock underlying a Deferred Stock award will not be
issued until the Deferred Stock award has vested, pursuant to a vesting schedule
or performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Grantee of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the award has
vested and the Common Stock underlying the award has been issued.
7.5 PERFORMANCE AWARD AGREEMENT, DIVIDEND EQUIVALENT AGREEMENT,
DEFERRED STOCK AGREEMENT, STOCK PAYMENT AGREEMENT. Each Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be
evidenced by a written agreement, which shall be executed by the Grantee and an
authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
7.6 TERM. The term of a Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment shall be set by the Committee in
its discretion, but shall not exceed eight (8) years from the date of grant.
7.7 EXERCISE UPON TERMINATION OF EMPLOYMENT. A Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment is exercisable
or payable only while the Grantee is an Employee or consultant; provided that
the Committee may determine that the Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment may be exercised or paid subsequent
to Termination of Employment or Termination of Consultancy without cause, or
following a change in control of the Company, or because of the Grantee's
retirement, death or disability, or otherwise.
7.8 PAYMENT ON EXERCISE. Payment of the amount determined under
Section 7.1 or 7.2 above shall be in cash, in Common Stock or a combination of
both, as determined by the Committee. To the extent any payment under this
Article VII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 5.3.
7.9 CONSIDERATION. In consideration of the granting of a Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment, the
Grantee shall agree, in a written agreement or otherwise, to render faithful and
efficient services to the Company or any Subsidiary with such duties and
responsibilities as the Company or the Subsidiary shall from time to time
prescribe, and, in addition, such written agreement may contain non-compete,
non-disclosure, non-solicitation or similar provisions. Nothing in this Plan or
in any agreement hereunder shall confer on any Grantee any right to continue in
the employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
16
7.10 PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS
(a) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any performance or incentive awards described in Article VII
to a Section 162(m) Participant that vest or become exercisable upon the
attainment of performance targets for the Company which are related to one or
more of the following performance goals: (i) pre-tax income, (ii) operating
income, (iii) cash flow, (iv) earnings per share, (v) return on equity, (vi)
return on invested capital or assets, (vii) earnings before interest, taxes,
depreciation and amortization ("EBITDA"), (viii) market value of Common Stock,
and (ix) cost reductions or savings.
(b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
performance or incentive awards described in Article VII which may be granted to
one or more Section 162(m) Participants, no later than ninety (90) days
following the commencement of any fiscal year in question or any other
designated fiscal period (or such other time as may be required or permitted by
Section 162(m) of the Code), the Committee shall, in writing, (i) designate one
or more Section 162(m) Participants, (ii) select the performance goal or goals
applicable to the fiscal year or other designated fiscal period, (iii) establish
the various targets and bonus amounts which may be earned for such fiscal year
or other designated fiscal period and (iv) specify the relationship between
performance goals and targets and the amounts to be earned by each Section
162(m) Participant for such fiscal year or other designated fiscal period.
Following the completion of each fiscal year or other designated fiscal period,
the Committee shall certify in writing whether the applicable performance
targets have been achieved for such fiscal year or other designated fiscal
period. In determining the amount earned by a Section 162(m) Participant, the
Committee shall have the right to reduce (but not to increase) the amount
payable at a given level of performance to take into account additional factors
that the Committee may deem relevant to the assessment of individual or
corporate performance for the fiscal year or other designated fiscal period.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
may be granted to any Employee or consultant selected by the Committee. A Stock
Appreciation Right may be granted (i) in connection and simultaneously with the
grant of an Option, (ii) with respect to a previously granted Option, or (iii)
independent of an Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with this Plan as the Committee shall
impose and shall be evidenced by a written Stock Appreciation Right Agreement,
which shall be executed by the Grantee and an authorized officer of the Company.
The Committee, in its discretion, may determine whether a Stock Appreciation
Right is to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code and Stock Appreciation Right Agreements evidencing
Stock Appreciation Rights intended to so qualify shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Without limiting the generality of the foregoing, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition of the grant of a Stock Appreciation Right to an Employee
or consultant that the Employee or
17
consultant surrender for cancellation some or all of the unexercised Options,
awards of Restricted Stock or Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments, or other rights
which have been previously granted to him under this Plan or otherwise. A Stock
Appreciation Right, the grant of which is conditioned upon such surrender, may
have an exercise price lower (or higher) than the exercise price of the
surrendered Option or other award, may cover the same (or a lesser or greater)
number of shares as such surrendered Option or other award, may contain such
other terms as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of such surrendered Option or
other award.
8.2 COUPLED STOCK APPRECIATION RIGHTS
(a) A Coupled Stock Appreciation Right ("CSAR") shall be related to
a particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.
(b) A CSAR may be granted to the Grantee for no more than the number
of shares subject to the simultaneously or previously granted Option to which it
is coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may impose.
8.3 INDEPENDENT STOCK APPRECIATION RIGHTS
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of shares of Common Stock as the Committee may
determine; provided, however, that unless the Committee otherwise provides in
the terms of the ISAR or otherwise, no ISAR granted to a person subject to
Section 16 of the Exchange Act shall be exercisable until at least six months
have elapsed from (but excluding) the date on which the Option was granted. The
exercise price per share of Common Stock subject to each ISAR shall be set by
the Committee. An ISAR is exercisable only while the Grantee is an Employee or
consultant; provided that the Committee may determine that the ISAR may be
exercised subsequent to Termination of Employment or Termination of Consultancy
without cause, or following a change in control of the Company, or because of
the Grantee's retirement, death or disability, or otherwise.
(b) An ISAR shall entitle the Grantee (or other person entitled to
exercise the ISAR pursuant to this Plan) to exercise all or a specified portion
of the ISAR (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR from the Fair
Market Value of a share of Common Stock on the date of exercise of the ISAR by
the number of
18
shares of Common Stock with respect to which the ISAR shall have been exercised,
subject to any limitations the Committee may impose.
8.4 PAYMENT AND LIMITATIONS ON EXERCISE
(a) Payment of the amount determined under Section 8.2(c) and 8.3(b)
above shall be in cash, in Common Stock (based on its Fair Market Value as of
the date the Stock Appreciation Right is exercised) or a combination of both, as
determined by the Committee. To the extent such payment is effected in Common
Stock it shall be made subject to satisfaction of all provisions of Section 5.3
above pertaining to Options.
(b) Grantees of Stock Appreciation Rights may be required to comply
with any timing or other restrictions with respect to the settlement or exercise
of a Stock Appreciation Right, including a window-period limitation, as may be
imposed in the discretion of the Board or Committee.
8.5 CONSIDERATION. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement or otherwise, to render faithful and efficient services to the
Company or any Subsidiary with such duties and responsibilities as the Company
or the Subsidiary shall from time to time prescribe, and, in addition, such
written Stock Appreciation Right Agreement may contain non-compete,
non-disclosure, non- solicitation or similar provisions. Nothing in this Plan or
in any Stock Appreciation Right Agreement hereunder shall confer on any Grantee
any right to continue in the employ of, or as a consultant for, the Company or
any Subsidiary or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Grantee at any time for any reason whatsoever, with or without good cause.
ARTICLE IX
ADMINISTRATION
9.1 COMPENSATION COMMITTEE. Prior to the Company's initial
registration of Common Stock under Section 12 of the Exchange Act, the
Compensation Committee shall consist of the entire Board. As soon as practicable
following such registration, the Compensation Committee (or another committee of
the Board assuming the functions of the Committee under this Plan) shall consist
solely of two or more Independent Directors appointed by and holding office at
the pleasure of the Board, each of whom is both a "non-employee director" as
defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m)
of the Code. Appointment of Committee members shall be effective upon acceptance
of appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
9.2 DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments are granted or awarded, and to adopt such rules for the
administration,
19
interpretation, and application of this Plan as are consistent therewith and to
interpret, amend or revoke any such rules. Notwithstanding the foregoing, the
full Board, acting by a majority of its members in office, shall conduct the
general administration of the Plan with respect to Options granted to
Independent Directors. Any such grant or award under this Plan need not be the
same with respect to each Optionee, Grantee or Restricted Stockholder. Any such
interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.
9.3 MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee shall
act by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.
9.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS.
Members of the Committee shall receive such compensation for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and deter minations made by
the Committee or the Board in good faith shall be final and binding upon all
Optionees, Grantees, Restricted Stockholders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan, Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, and all members of the Committee and the Board shall be fully
protected by the Company in respect of any such action, determination or
interpretation.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 NOT TRANSFERABLE. Options, Restricted Stock awards, Deferred
Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or pursuant to a QDRO, unless and until such rights or awards
have been exercised, or the shares underlying such rights or awards have been
issued, and all restrictions applicable to such shares have lapsed. No Option,
Restricted Stock award, Deferred Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment or interest or right
therein shall be liable for the debts, contracts or engagements of the Optionee,
Grantee or Restricted Stockholder or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any
20
other legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect, except to the
extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may exercise
an Option or other right or award (or any portion thereof) granted to him under
the Plan, unless it has been disposed of pursuant to a QDRO. After the death of
the Optionee or Grantee, any exercisable portion of an Option or other right or
award may, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Stock Option Agreement or other agreement, be exercised
by his personal representative or by any person empowered to do so under the
deceased Optionee's or Grantee's will or under the then applicable laws of
descent and distribution.
10.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. Except as
otherwise provided in this Section 10.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 10.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the Award
Limit, and no action of the Board or the Committee may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. No amendment, suspension or termination of this Plan shall, without the
consent of the holder of Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments, alter or impair any rights or obligations under any Options,
Restricted Stock awards, Deferred Stock awards, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments theretofore granted
or awarded, unless the award itself otherwise expressly so provides. No Options,
Restricted Stock, Deferred Stock, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments may be granted or awarded during any
period of suspension or after termination of this Plan, and in no event may any
Incentive Stock Option be granted under this Plan after the first to occur of
the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved
by the Company's stockholders under Section 10.4.
10.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION
OR LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS
(a) Subject to Section 10.3(d), in the event that the Committee (or
the Board, in the case of Options granted to Independent Directors) determines
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale,
transfer, exchange or other disposition of all or substantially all of the
assets of the Company (including, but not limited to, a Corporate Transaction),
or exchange of Common Stock or other securities of the Company, issuance of
warrants
21
or other rights to purchase Common Stock or other securities of the Company, or
other similar corporate transaction or event, in the Committee's sole discretion
(or in the case of Options granted to Independent Directors, the Board's sole
discretion), affects the Common Stock such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to an Option, Restricted Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent, Deferred Stock award or Stock Payment,
then the Committee (or the Board, in the case of Options granted to Independent
Directors) shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be
granted under the Plan, or which may be granted as Restricted Stock or
Deferred Stock (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares which
may be issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents, or Stock
Payments, and in the number and kind of shares of outstanding Restricted
Stock or Deferred Stock, and
(iii) the grant or exercise price with respect to any
Option, Performance Award, Stock Appreciation Right, Dividend Equivalent
or Stock Payment.
(b) Subject to Sections 10.3(b)(vii) and 10.3(d), in the event of
any Corporate Transaction or other transaction or event described in Section
10.3(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Committee (or the Board, in the case of Options
granted to Independent Directors) in its discretion is hereby authorized to take
any one or more of the following actions whenever the Committee (or the Board,
in the case of Options granted to Independent Directors) determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any option, right or other award under this Plan, to facilitate
such transactions or events or to give effect to such changes in laws,
regulations or principles:
(i) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in
the case of Options granted to Independent Directors) may provide, either
by the terms of the agreement or by action taken prior to the occurrence
of such transaction or event and either automatically or upon the
optionee's request, for either the purchase of any such Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock
Payment, or any Restricted Stock or Deferred Stock for an amount of cash
equal to the amount that could have been attained upon the exercise of
such option, right or award or realization of the optionee's rights had
such option, right or award been currently exercisable or payable or fully
vested or the replacement of such option, right or award with other rights
or property selected by the Committee (or the Board, in the case of
Options granted to Independent Directors) in its sole discretion;
22
(ii) In its sole and absolute discretion, the Committee (or
the Board, in the case of Options granted to Independent Directors) may
provide, either by the terms of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted
Stock or Deferred Stock or by action taken prior to the occurrence of such
transaction or event that it cannot be exercised after such event;
(iii) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in
the case of Options granted to Independent Directors) may provide, either
by the terms of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event, that for a specified period of time prior to such transaction or
event, such option, right or award shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in (i) Section
4.4 or (ii) the provisions of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted
Stock or Deferred Stock;
(iv) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in
the case of Options granted to Independent Directors) may provide, either
by the terms of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event, that upon such event, such option, right or award be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the
stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares
and prices; and
(v) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in
the case of Options granted to Independent Directors) may make adjustments
in the number and type of shares of Common Stock (or other securities or
property) subject to outstanding Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents, or Stock Payments, and in the
number and kind of outstanding Restricted Stock or Deferred Stock and/or
in the terms and conditions of (including the grant or exercise price),
and the criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future.
(vi) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee may provide either
by the terms of a Restricted Stock award or Deferred Stock award or by
action taken prior to the occurrence of such event that, for a specified
period of time prior to such event, the restrictions imposed under a
Restricted Stock Agreement or a Deferred Stock Agreement upon some or all
shares of Restricted Stock or Deferred Stock may be terminated, and, in
the case of Restricted Stock, some or all shares of such Restricted Stock
may cease to be subject to repurchase under Section 6.6 or forfeiture
under Section 6.5 after such event.
23
(vii) None of the foregoing discretionary actions taken
under this Section 10.3(b) shall be permitted with respect to Options
granted under Section 3.4(d) to Independent Directors to the extent that
such discretion would be inconsistent with the applicable exemptive
conditions of Rule 16b-3. In the event of a Corporate Transaction, to the
extent that the Board does not have the ability under Rule 16b-3 to take
or to refrain from taking the discretionary actions set forth in Section
10.3(b)(ii) above, no Option granted to an Independent Director may be
exercised following such Corporate Transaction unless such Option is, in
connection with such Corporate Transaction, either assumed by the
successor or survivor corporation (or parent or subsidiary thereof) or
replaced with a comparable right with respect to shares of the capital
stock of the successor or survivor corporation (or parent or subsidiary
thereof).
(viii) Notwithstanding the foregoing provisions of this
Section 10.3(b), in the event of any Change in Control or Corporate
Transaction, each outstanding Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, Stock Payment, Restricted Stock,
or Deferred Stock award shall, upon such Change in Control or immediately
prior to the effective date of the Corporate Transaction, automatically
become fully exercisable for all of the shares of Common Stock at the time
subject to such rights or fully vested, as applicable, and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock. However, an outstanding right shall not so accelerate if and to the
extent: (i) such right is, in connection with the Change in Control or
Corporate Transaction, either to be assumed by the successor or survivor
corporation (or parent thereof) or to be replaced with a comparable right
with respect to shares of the capital stock of the successor or survivor
corporation (or parent thereof) or (ii) the acceleration of exercisability
of such right is subject to other limitations imposed by the Committee at
the time of grant. The determination of comparability of rights under
clause (i) above shall be made by the Committee, and its determination
shall be final, binding and conclusive.
(c) Subject to Section 10.3(d) and 10.8, the Committee (or the
Board, in the case of Options granted to Independent Directors) may, in its
discretion, include such further provisions and limitations in any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock
Payment, or Restricted Stock or Deferred Stock agreement or certificate, as it
may deem equitable and in the best interests of the Company.
(d) With respect to Options, Stock Appreciation Rights and
performance or incentive awards described in Article VII which are granted to
Section 162(m) Participants and are intended to qualify as performance-based
compensation under Section 162(m)(4)(C), no adjustment or action described in
this Section 10.3 or in any other provision of the Plan shall be authorized to
the extent that such adjustment or action would cause the Plan to violate
Section 422(b)(1) of the Code or would cause such option or stock appreciation
right to fail to so qualify under Section 162(m)(4)(C), as the case may be, or
any successor provisions thereto. Furthermore, no such adjustment or action
shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Committee (or the Board, in the case of
Options granted to Independent Directors) determines that the option or other
award is not to comply with such exemptive conditions. The number of shares of
Common Stock subject to any option, right or award shall always be rounded to
the next whole number.
24
10.4 APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be submitted
for the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of this Plan. Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be granted
and Restricted Stock or Deferred Stock may be awarded prior to such stockholder
approval, provided that such Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments shall not be exercisable and such
Restricted Stock or Deferred Stock shall not vest prior to the time when this
Plan is approved by the stockholders, and provided further that if such approval
has not been obtained at the end of said twelve-month period, all Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments previously granted and all Restricted Stock or Deferred Stock
previously awarded under this Plan shall thereupon be canceled and become null
and void.
10.5 TAX WITHHOLDING. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Optionee,
Grantee or Restricted Stockholder of any sums required by federal, state or
local tax law to be withheld with respect to the issuance, vesting or exercise
of any Option, Restricted Stock, Deferred Stock, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment. The Committee (or the
Board, in the case of Options granted to Independent Directors) may in its
discretion and in satisfaction of the foregoing requirement allow such Optionee,
Grantee or Restricted Stockholder to elect to have the Company withhold shares
of Common Stock otherwise issuable under such Option or other award (or allow
the return of shares of Common Stock) having a Fair Market Value equal to the
sums required to be withheld.
10.6 LOANS. The Committee may, in its discretion, extend one or more
loans to Employees in connection with the exercise or receipt of an Option,
Performance Award, Stock Appre ciation Right, Dividend Equivalent or Stock
Payment granted under this Plan, or the issuance of Restricted Stock or Deferred
Stock awarded under this Plan. The terms and conditions of any such loan shall
be set by the Committee.
10.7 FORFEITURE PROVISIONS. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide, in the terms of Options or other
awards made under the Plan, or to require the recipient to agree by separate
written instrument, that (i) any proceeds, gains or other economic benefit
actually or constructively received by the recipient upon any receipt or
exercise of the award, or upon the receipt or resale of any Common Stock
underlying such award, must be paid to the Company, and (ii) the award shall
terminate and any unexercised portion of such award (whether or not vested)
shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified date, or
within a specified time period following receipt or exercise of the award, or
(b) the recipient at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee (or
the Board, as applicable).
10.8 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND
PERFORMANCE-BASED COMPENSATION. Notwithstanding any other provision of this
Plan, this Plan, and any Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment granted, or
25
Restricted Stock or Deferred Stock awarded, to any individual who is then
subject to Section 16 of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that
are requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan, Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents, Stock Payments, Restricted Stock and
Deferred Stock granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option, Stock Appreciation
Right or performance or incentive award described in Article VII which is
granted to a Section 162(m) Participant and is intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
10.9 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary or (ii) to grant or assume options or other rights
otherwise than under this Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, partnership,
limited liability company, firm or association.
10.10 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this
Plan and the issuance and delivery of shares of Common Stock and the payment of
money under this Plan or under Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments granted or Restricted Stock or
Deferred Stock awarded hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, the Plan,
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
10.11 TITLES. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this Plan.
26
10.12 GOVERNING LAW. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
* * * * * * *
I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of Weider Nutrition International, Inc. and approved by the
Company's stockholders on February 28, 1997.
Executed on this ____ day of _______________, 1997.
_________________________
Secretary
27
FIRST AMENDMENT TO THE
1997 EQUITY PARTICIPATION PLAN OF WEIDER NUTRITION INTERNATIONAL, INC.
Weider Nutrition International, Inc., a corporation organized under the
laws of the State of Delaware (the "Corporation"), adopted the 1997 Equity
Participation Plan of Weider Nutrition International, Inc. (the "Plan")
effective as of February 28, 1997. In order to increase the number of shares
available for issuance under the Plan, to revise the terms for options granted
to Independent Directors and to amend the Plan in certain other respects, this
First Amendment to the Plan has been adopted by the Corporation, effective as
set forth herein; provided, however, that in the event the stockholders of the
Corporation do not approve this First Amendment to the Plan by the first
anniversary of such date, the amendment to Section 2.1(a) provided herein shall
be null and void and of no effect.
1. Effective as of September 8, 1998, Section 1.18 of the Plan is hereby
amended in its entirety to read as follows:
"1.18 INDEPENDENT DIRECTOR. "Independent Director" shall mean a member of
the Board who is not (I) an Employee or (ii) an employee of any parent
corporation of the Company."
2. Subject to stockholder approval, effective as of July 22, 1998, Section
2.1(a) of the Plan is hereby amended in its entirety to read as follows:
"(a) The shares of stock subject to Options, awards of Restricted Stock,
Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be Common Stock, initially shares of
the Company's Class A Common Stock, par value $0.01 per share. The aggregate
number of such shares which may be issued upon exercise of such Options or
rights or upon any such awards under the Plan shall not exceed two million four
hundred ninety-six thousand (2,496,000). The shares of Common Stock issuable
upon exercise of such Options or rights or upon any such awards may be either
previously authorized but unissued shares or treasury shares."
3. Effective as of September 8, 1998, Section 3.4(d) of the Plan is
amended in its entirety to read as follows:
"(d) During the term of the Plan, a person who is initially appointed or
elected to the Board and who is an Independent Director at the time of such
initial appointment or election shall be granted (i) an Option to
purchase twenty thousand (20,000) shares of Common Stock (subject to adjustment
as provided in Section 10.3) on the date of such initial appointment or election
and (ii) an Option to purchase seven thousand (7,000) shares of Common Stock
(subject to adjustment as provided in Section 10.3) on the date of each annual
meeting of stockholders after the first anniversary of such initial appointment
or election as of which the Independent Director is serving as a Director of the
Company. Members of the Board who are Employees who subsequently retire from the
Company (or a Subsidiary) and remain on the Board will not receive an initial
Option grant pursuant to clause (i) of the preceding sentence, but to the extent
that they are otherwise eligible, will receive, after Termination of Employment,
Options as described in clause (ii) of the preceding sentence."
4. Effective as of September 8, 1998, Section 4.4(a) of the Plan is
amended in its entirety to read as follows:
"(a) The period during which the right to exercise an Option in whole or
in part vests in the Optionee shall be set by the Committee and the Committee
may determine that an Option may not be exercised in whole or in part for a
specified period after it is granted; PROVIDED, HOWEVER, that, unless the
Committee otherwise provides in the terms of the Option or otherwise, no Option
shall be exercisable by any Optionee who is then subject to Section 16 of the
Exchange Act within the period ending six months and one day after the date the
Option is granted; and provided further, that options granted to Independant
Directors shall become exercisable in cumulative annual installments of
one-third on each of the first, second and third anniversaries of the date of
Option grant. At any time after grant of an Option, the Committee (the Board
with respect to Independent Directors) may, in its sole and absolute discretion
and subject to whatever terms and conditions it selects, accelerate the period
during which an Option vests."
5. Effective as of February 27, 1997, Section 9.1 of the Plan is amended
in its entirety to read as follows:
"9.1 COMMITTEE. Prior to the Company's initial registration of Common
Stock under Section 12 of the Exchange Act, the Committee shall consist of the
entire Board. As soon as practicable following such registration, the Committee
shall be the Compensation Committee of the Board; provided, however, that with
respect to each Section 162(m) Participant, the "Committee" hereunder shall mean
a committee of solely two or more Independent Directors appointed by and holding
office at the pleasure of the Board, each of whom is an "outside director" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board."
Executed at Salt Lake City, Utah this ____ day of _________, 1998.
WEIDER NUTRITION INTERNATIONAL, INC.
By:
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[Name]
[Title]