SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
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[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Horizon Organic Holding Corporation
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HORIZON ORGANIC HOLDING CORPORATION
6311 Horizon Lane
Longmont, Colorado 80503
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1999
To the Stockholders of Horizon Organic Holding Corporation:
Notice Is Hereby Given that the Annual Meeting of Stockholders of Horizon
Organic Holding Corporation, a Delaware corporation (the "Company"), will be
held on Wednesday, May 12, 1999 at 3:00 p.m. local time at the Boulder
Theatre, 2034 14th Street, Boulder, Colorado 80302 for the following purposes:
1. To elect two directors to hold office until the 2002 Annual Meeting of
Stockholders.
2. To ratify the selection of KPMG LLP as independent auditors of the
Company for its fiscal year ending December 31, 1999.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof. The foregoing items of
business are more fully described in the Proxy Statement accompanying
this Notice.
The Board of Directors has fixed the close of business on March 31, 1999, as
the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of
Directors,
/s/ Don J. Gaidano
Don J. Gaidano
Assistant Secretary
Boulder, Colorado
April 12, 1999
All Stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please complete, date, sign
and return the enclosed proxy as promptly as possible in order to ensure your
representation at the meeting. A return envelope (which is postage prepaid if
mailed in the United States) is enclosed for that purpose. Even if you have
given your proxy, you may still vote in person if you attend the meeting.
Please note, however, that if your shares are held of record by a broker, bank
or other nominee and you wish to vote at the meeting, you must obtain from the
record holder a proxy issued in your name.
HORIZON ORGANIC HOLDING CORPORATION
6311 Horizon Lane
Longmont, Colorado 80503
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
May 12, 1999
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Horizon Organic Holding Corporation, a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders to be held on May 12, 1999, at
3:00 p.m. local time (the "Annual Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting. The Annual Meeting will be held at the
Boulder Theatre, 2034 14th Street, Boulder, Colorado 80302. The Company
intends to mail this proxy statement and accompanying proxy card on or about
April 12, 1999, to all stockholders entitled to vote at the Annual Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or
other regular employees for such services.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on March 31,
1999 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 31, 1999 the Company had outstanding and entitled
to vote 9,691,354 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual
Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter
has been approved.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Assistant Secretary of the Company at the Company's principal executive
office, 6311 Horizon Lane, Longmont, Colorado 80503, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
1
Stockholder Proposals
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2000 annual
meeting of stockholders pursuant to Rule 14a-8, of the Securities and Exchange
Commission and the Company's Bylaws is December 14, 1999. Unless a stockholder
who wishes to bring a matter before the stockholders at the Company's 2000
annual meeting of stockholders notifies the Company of such matter prior to
February 26, 2000, management will have discretionary authority to vote all
shares for which it has proxies in opposition to such matter.
2
Proposal 1
Election of Directors
The Company's Amended and Restated Certificate of Incorporation and Bylaws
provide that the Board of Directors shall be divided into three classes, each
class consisting of the directors assigned to such class in accordance with a
resolution adopted by the Board of Directors, with each class having a three-
year term. Vacancies on the Board may be filled only by persons elected by a
majority of the remaining directors. A director elected by the Board to fill a
vacancy (including a vacancy created by an increase in the Board of Directors)
shall serve for the remainder of the full term of the class of directors in
which the vacancy occurred and until such director's successor is elected and
qualified.
The Board of Directors is presently composed of eight members. There are two
directors in the class whose term of office expires in 1999. Each of the
nominees for election to this class is currently a director of the Company and
except for Mr. Gordon, were previously elected by the Company's stockholders.
If elected at the Annual Meeting, each of the nominees would serve until the
2002 annual meeting and until his or her successor is elected and has
qualified, or until such director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented
by executed proxies will be voted, if authority to do so is not withheld, for
the election of the three nominees named below. In the event that any nominee
should be unavailable for election as a result of an unexpected occurrence,
such shares will be voted for the election of such substitute nominee as
management may propose. Each person nominated for election has agreed to serve
if elected, and management has no reason to believe that any nominee will be
unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
Nominees for Election for a Three-year Term Expiring at the 2002 Annual
Meeting
Mark A. Retzloff, age 50, is a co-founder of the Company, and has served as
a director of the Company since December 1991. Mr. Retzloff has held several
positions with the Company, including President and Treasurer from December
1991 to May 1995, Vice President, Sales and Marketing and Treasurer from May
1995 to May 1997, Vice President, Sales from May 1997 to January 1999, and is
currently serving as the Company's Senior Vice President, Corporate
Development. Mr. Retzloff co-founded Alfalfa's, Inc., a natural foods
supermarket chain, and served as its President and Chairman of the Board of
Directors from July 1978 to June 1990. Mr. Retzloff also co-founded a national
chain of natural foods grocery stores under the trade name "Rainbow Grocery"
with which he was employed from 1974 through 1979. Mr. Retzloff has served on
the Board of Directors of the Organic Trade Association since September 1992
and as its President since September 1996. Mr. Retzloff received a B.S. degree
from the University of Michigan.
G. Irwin Gordon, age 48, has served as a director of the Company since July
28, 1998. Mr. Gordon has served as President and Chief Operating Officer of
Suiza Foods Corporation ("Suiza") since February 1998. Mr. Gordon joined Suiza
in August 1997 as its Executive Vice President and Chief Marketing Officer.
Prior to joining Suiza, Mr. Gordon served in various capacities for PepsiCo,
Inc. beginning in March 1983, including most recently as Senior Vice President
Global Branding for Frito Lay, from May 1996 until August 1997, Senior Vice-
President Marketing from September 1992 until April 1996, Region President--
Southern Europe from November 1991 until August 1992 and President and General
Manager of various international Frito Lay companies from 1985 until October
1991. Prior to joining PepsiCo in 1992, Mr. Gordon served in various
capacities at the Kellogg Company. Mr. Gordon received an Education Degree
from the University of British Columbia and a Management Certificate from
Stanford University.
3
The Board Of Directors Recommends
A Vote In Favor Of Each Named Nominee.
Directors Continuing in Office Until the 2000 Annual Meeting
Paul B. Repetto, age 62, a co-founder of the Company, has served as
Secretary and a director of the Company since December 1991. Mr. Repetto
served as the Company's Vice President, Operations from December 1991 until
December 1997, Vice President, Marketing from December 1997 until January
1999, and is currently serving as the Company's Senior Vice President,
Marketing. From 1988 to December 1991, Mr. Repetto served as President of
Westbrae/Little Bear Natural Foods, the main unit of Vestro Foods, a public
company marketing a wide variety of food products. Prior to 1988, Mr. Repetto
was President of Natural Protein Products, a natural snack company he
acquired. Prior to 1978, Mr. Repetto held senior positions with private
advertising agencies. Mr. Repetto has served on the Steering Committee of the
Organic Foods Alliance and on the Board of the Organic Foods Production
Association of North America, the predecessor organizations to the Organic
Trade Association. Mr. Repetto received a B.S. degree from the Massachusetts
Institute of Technology.
Clark Mandigo II, age 55, has served as a director of the Company since July
1996. Since 1991, Mr. Mandigo has been self-employed as a business consultant
and investor and has owned an interest in a Papa John's Pizza franchise since
April 1995. He currently serves as a director of Lone Star Steakhouse & Saloon
Inc., a retail restaurant chain and as a Trustee of Accolade Funds and U.S.
Global Investors Funds. Mr. Mandigo received a B.A. and a J.D. degree from the
University of Kansas.
Richard L. Robinson, age 69, has served as a director of the Company since
July 1996. Mr. Robinson has been the Chairman and Chief Executive Officer of
Robinson Dairy, Inc. since 1975. Mr. Robinson serves as a director of Asset
Investors, Inc. and U.S. Exploration, Inc. Mr. Robinson received a B.S. degree
from Colorado State University.
Directors Continuing in Office Until the 2001 Annual Meeting
Barnet M. Feinblum, age 51, has served as the President, Chief Executive
Officer and a director of the Company since May 1995. From July 1993 through
March 1995, Mr. Feinblum was the President of Natural Venture Partners, a
private investment company. From June 1992 until August 1993, Mr. Feinblum
served as the Vice Chairman of Celestial Seasonings, Inc., a large herbal tea
company ("Celestial"). From August 1976 until June 1992, Mr. Feinblum held
various positions with Celestial, including President, Chief Executive
Officer, Chief Operating Officer, Vice President--Finance and Chairman of the
Board of Directors. Mr. Feinblum currently serves on the Board of Directors of
Seventh Generation Inc. Mr. Feinblum received a B.S. degree from Cornell
University and a M.B.A. from the University of Colorado.
Thomas D. McCloskey, Jr., age 52, has served as a director of the Company
since April 1994 and served as Chairman of the Board of Directors from May
1994 until November 1997. Mr. McCloskey has served as Chairman of Cornerstone
Holdings, LLC (and predecessor corporation), an investment firm since 1981.
Mr. McCloskey received a B.A. degree from the University of Notre Dame and a
M.B.A. from The Wharton School of the University of Pennsylvania.
Marcus B. Peperzak, age 50, has served as a director of the Company since
April 1994 and Chairman of the Board of Directors since November 1997. Since
October 1973, Mr. Peperzak has held the position of Chief Executive Officer of
Aurora Dairy Corporation and its affiliates, one of the nation's largest
production dairy farms. Mr. Peperzak received a B.S. degree from the
University of California at Berkeley and completed the Harvard Business School
Agribusiness Executive Program.
Board Committees and Meetings
During the fiscal year ended December 31, 1998, the Board of Directors held
six meetings. The Board currently has three standing committees, the Audit
Committee, the Executive Committee and the Compensation Committee.
4
The Audit Committee makes recommendations to the Board regarding the
engagement of the Company's independent certified public accountants and
reviews the internal accounting procedures of the Company and the scope and
results of the Company's annual audit. The Audit Committee is composed of two
non-employee directors: Messrs. Clark and Robinson. It met one time during
such fiscal year.
The Executive Committee is authorized to make option grants of up to 30,000
shares per year, hire and terminate officers (other than the Company's Chief
Executive Officer or Chief Financial Officer) and approve certain banking
matters, including authorizing the Company to incur indebtedness. The
Executive Committee is composed of one employee director and one non-employee
director: Messrs. Feinblum and Peperzak. It met 4 times during such fiscal
year.
The Compensation Committee administers the Company's stock option plan,
including making recommendations to the Board with respect to awards
thereunder, and the Company's stock purchase plan. The Compensation Committee
is composed of three non-employee directors: Messrs. Mandigo, McCloskey and
Robinson. It met one time during such fiscal year.
During the fiscal year ended December 31, 1998, all directors except Mr.
McCloskey attended at least 75% of the aggregate of the meetings of the Board
and of the committees on which they served, held during the period for which
they were a director or committee member, respectively. Mr. McCloskey was
unable to attend two regular meetings of the Board held during the fiscal year
ended December 31, 1998.
5
Proposal 2
Ratification of Selection of Independent Auditors
The Board of Directors has selected KPMG LLP as the Company's certified
public accountants for the fiscal year ending December 31, 1999 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. KPMG LLP has
audited the Company's financial statements since December 28, 1996.
Representatives of KPMG LLP are expected to be present at the Annual Meeting,
will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG LLP as the Company's
independent auditors is not required by the Company's Bylaws or otherwise.
However, the Board is submitting the selection of KPMG LLP to the stockholders
for ratification as a matter of good corporate practice. If the stockholders
fail to ratify the selection, the Audit Committee and the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the
Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of KPMG LLP. Abstentions will be counted
toward the tabulation of votes cast on proposals presented to the stockholders
and will have the same effect as negative votes. Broker non-votes are counted
towards a quorum, but are not counted for any purpose in determining whether
this matter has been approved.
The Board Of Directors Recommends
A Vote In Favor Of Proposal 2.
6
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 15, 1999 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company
as a group; and (iv) all those known by the Company to be beneficial owners of
more than five percent of its Common Stock.
Number of Shares Percent Beneficially
Name of Beneficial Owner(1) Beneficially Owned(2) Owned(2)
- --------------------------- --------------------- --------------------
Suiza Foods Corporation............. 1,338,000 13.85%
2515 McKinney Avenue
Suite 1200
Dallas, TX 75201
G. Irwin Gordon(3).................. 1,338,207 13.85
2515 McKinney Avenue
Suite 1200
Dallas, TX 75201
Thomas D. McCloskey, Jr.(4)......... 974,723 10.07
McCloskey 1998 GRAT................. 721,000 7.47
Lord Abbett & Co.(5)................ 511,860 5.30
767 Fifth Avenue
New York, NY 10153-0203
Marcus B. Peperzak(6)............... 459,498 4.74
Paul B. Repetto(7).................. 395,065 4.08
Mark A. Retzloff(8)................. 361,407 3.73
Barnet M. Feinblum(9)............... 327,591 3.33
J. Thomas Clark(10)................. 149,540 1.54
Clark R. Mandigo II(11)............. 88,173 *
Richard L. Robinson(12)............. 50,051 *
Don J. Gaidano(13).................. 22,733 *
Jay C. Wilson(14)................... 13,334 *
All executive officers and directors
as a group (13 persons)(15)........ 4,180,322 41.98%
- --------
* Less than one percent.
(1) Unless otherwise set forth, all addresses are c/o the Company, 6311
Horizon Lane, Longmont, Colorado 80503.
(2) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise
indicated in the footnotes to this table and subject to community
property laws where applicable, the Company believes that each of the
stockholders named in this table has sole voting and investment power
with respect to the shares indicated as beneficially owned. Applicable
percentages are based on 9,662,656 shares of Common Stock outstanding as
of March 15, 1999 adjusted as required by rules promulgated by the SEC.
All warrants are currently exercisable and share amounts include stock
options exercisable within 60 days of March 15, 1999.
7
(3) Includes shares held by Suiza Foods Corporation. Mr. Gordon is the
President and Chief Operating Officer of Suiza Foods Corporation and
disclaims any beneficial ownership of the shares held by Suiza Foods
Corporation.
(4) Includes 721,000 shares held by the McCloskey 1998 GRAT, of which Mr.
McCloskey's children are the beneficiaries, 33,111 shares and warrants
to purchase 4,668 shares of Common Stock held by McCloskey Children's
Trust, of which Mr. McCloskey's children are the beneficiaries; 25,000
shares held by the McCloskey Trust, of which Mr. McCloskey is a trustee;
617 shares held by the Thomas D. McCloskey, Jr. and Bonnie P. McCloskey
Revocable Trust 1994, of which Mr. McCloskey is a trustee, and an
aggregate of 15,840 shares held in trusts by each of his four children
(collectively, the "Trust Shares"); and 155,280 shares held by McCloskey
Ventures LLC, of which Mr. McCloskey is a manager (the "LLC Shares").
Mr. McCloskey disclaims any beneficial interest in the Trust Shares and
the LLC shares, except to the extent of his pecuniary interest in the
LLC Shares arising from his role therein. Also includes 19,000 shares
subject to stock options.
(5) Based on a Schedule 13G filing as of February 16, 1999.
(6) Includes 54,467 shares held by Aurora Dairy Corporation Pension Plan
Trust, of which Mr. Peperzak is trustee. Also includes 22,000 shares
subject to stock options.
(7) Includes 1,980 shares held by his spouse and 25,625 shares subject to
stock options.
(8) Includes 14,000 shares held by his spouse, an aggregate of 42,000 shares
held in trust for his three children and 25,625 shares subject to stock
options.
(9) Includes 25,085 shares held by his spouse, 19,538 shares held by the
Feinblum Investment Management LLLP and 170,000 shares subject to stock
options.
(10) Includes an aggregate of 30,000 shares held in trust for his three
children and 19,000 shares subject to stock options. Mr. Clark is a
director of the Company until the Company's 1999 Annual Meeting of
Stockholders.
(11) Includes 60,730 shares held jointly with his spouse, an aggregate of
23,236 shares held in trust for his four children and 4,000 shares
subject to stock options.
(12) Includes 5,940 shares held in trust on behalf of Mr. Robinson's nieces
and nephews, of which Mr. Robinson is trustee and 4,000 shares subject
to stock options.
(13) Includes 1,700 shares held jointly with spouse and 7,500 shares subject
to stock options.
(14) Includes 2,500 shares subject to stock options.
(15) Includes 3,876,404 shares and 299,250 shares subject to stock options
and warrants to purchase 4,668 shares held by held by directors and
executive officers of the Company and entities affiliated with such
persons. See Notes 3, 4 and 6 through 14 above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except that Mr.
McCloskey reported an incorrect number shares due to improper reporting of
certain of his indirect holdings.
8
MANAGEMENT
Executive Officers
The following table sets forth certain information concerning the executive
officers of the Company as of March 31, 1999:
Name Age Position
---- --- --------
Marcus B. Peperzak............... 50 Chairman of the Board of Directors
President, Chief Executive Officer and
Barnet M. Feinblum............... 51 Director
Senior Vice President, Marketing, and
Paul B. Repetto.................. 62 Secretary and Director
Senior Vice President, Corporate
Mark A. Retzloff................. 50 Development and Director
Don J. Gaidano................... 50 Vice President, Finance &
Administration, Chief Financial
Officer, Treasurer and Assistant
Secretary
Kyle Joe Langley................. 42 Vice President, Sales
Jay C. Wilson.................... 50 Vice President, Operations
Don J. Gaidano has served as Vice President, Finance & Administration, Chief
Financial Officer, Treasurer and Assistant Secretary of the Company since May
1997. From April 1994 until April 1997, Mr. Gaidano worked as a private
financial consultant for food manufacturers and distributors. From 1974 until
April 1994, Mr. Gaidano held various positions with Bromar, Inc., a food
brokerage business, including Executive Vice President, Chief Financial
Officer, Controller, Corporate Secretary, Treasurer and a director. Mr.
Gaidano received a B.S. degree from the University of Santa Clara and is a
Certified Public Accountant.
Kyle Joe Langley has served as Vice President, Sales of the Company since
January 1999. From 1977 until 1998, Mr. Langley served in various capacities
at The Dannon Company, Inc., including most recently as Western Division
Manager from 1994 until 1998, Central Division Manager from 1992 until 1994,
Region Manager from 1988 until 1992, and District Manager from 1985 until
1988.
Jay C. Wilson has served as Vice President, Operations of the Company since
March 1998. From April 1996 until March 1998, Mr. Wilson served as Vice
President of Business Development at Dole Foods Hawaii, a division of Dole
Food Company, Inc. From January 1992 until April 1996, Mr. Wilson worked in
two divisions of Borden, Inc., as the Region Operations Manager for Meadow
Gold Dairies Western Region, and as President and General Manager of Meadow
Gold Dairies Hawaii. Mr. Wilson received a B.S. degree and a M.B.A. from the
University of Minnesota.
See "Proposal 1--Election of Directors" for the biographies of other
executive officers.
EXECUTIVE COMPENSATION
Compensation of Directors
Each non-employee director receives $1,000 for each Board meeting attended
and $500 for each Committee meeting attended on a date separate from any Board
meeting. These fees are paid in grants of shares of the Company's Common
Stock, calculated by dividing the relevant amount by the per-share price,
which will be equal to the fair market value of the Company's Common Stock as
reported on the NASDAQ National Market on the date of such meeting. Directors
also are reimbursed for certain expenses in connection with attendance at
Board and Committee meetings. In the fiscal year ended December 31, 1998, the
total compensation paid to non-employee directors was $9,000. In addition, the
Company granted options to Mr. Gordon covering 3,000 shares of the Company's
Common Stock at an exercise price of $14.875 per share.
Beginning with the 1999 Annual Stockholders Meeting, each non-employee
director will be entitled to receive a grant of options exercisable for 3,000
shares of the Company's Common Stock under the Company's
9
1998 Equity Incentive Plan (the "Plan") after each annual meeting of
stockholders at an exercise price equal to the fair market value of the
Company's Common Stock as reported on the NASDAQ National Market on the date
of such annual meeting. Additionally, each non-employee director elected to
serve as a director will receive an option grant exercisable for 3,000 shares
of the Company's Common Stock upon his or her appointment to the Board.
As of March 15, 1999, no options had been exercised by non-employee
directors under the Plan.
Compensation of Executive Officers
The following table shows for the fiscal years ended December 31, 1997 and
1998, compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer and its other four most highly compensated executive
officers at December 31, 1998 (the "Named Executive Officers"):
Summary Compensation Table
Long Term
Fiscal Year* Annual Compensation Compensation
------------ -------------------------- ------------
Securities All Other
Salary Bonus Underlying Compensation
Name and Principal Position ($)(1) ($)(1) Options(#) ($)(2)
- --------------------------- ------- ------- ---------- ------------
Barnet M. Feinblum......... 1998 140,000 96,040 -0- 4,819
President and Chief
Executive Officer 1997 125,000 44,109 40,000 3,577
Paul B. Repetto............ 1998 120,000 50,880 -0- 4,219
Senior Vice President,
Marketing and Secretary 1997 115,000 22,310 22,500 3,291
Mark A. Retzloff........... 1998 120,000 52,800 -0- 4,219
Senior Vice President,
Corporate Development 1997 115,000 30,878 22,500 3,291
Don J. Gaidano............. 1998 108,333 54,000 -0- 3,869
Vice President, Finance & 1997(3) 58,583 14,646 30,000 1,726
Administration,
Chief Financial Officer,
Treasurer and
Assistant Secretary
Jay C. Wilson.............. 1998(4) 83,333 45,800 10,000 360
Vice President, Operations
- --------
* As permitted by the rules promulgated by the SEC, no amounts are shown for
1996.
(1) Includes amounts, if any, deferred pursuant to Section 401(k) of the
Internal Revenue Code of 1986, as amended.
(2) Represents matching contributions made by the Company to the 401(k) Plan
and premiums for long-term disability insurance paid by the Company.
(3) Mr. Gaidano joined the Company in May 1997.
(4) Mr. Wilson joined the Company in March 1998.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under the Plan. As of
March 15, 1999, options to purchase a total of 418,688 shares were outstanding
under the Plan and options to purchase 302,325 shares remained available for
grant thereunder.
The following table sets forth for the Named Executive Officers certain
information regarding options granted for the fiscal year ended December 31,
1998:
10
Option Grants in Fiscal 1998
Potential Realizable
Value at Assumed
Annual Rates of
Number of Percent of Stock Price
Shares Total Options Appreciation
Underlying Granted to Exercise for Option Terms(3)
Options Employees in Price Expiration --------------------
Name Granted(1) Fiscal Year(2) ($/Share) Date 5% 10%
- ---- ---------- -------------- --------- ---------- --------- ----------
Barnet M. Feinblum...... -- -- -- -- -- --
Paul B. Repetto......... -- -- -- -- -- --
Mark A. Retzloff........ -- -- -- -- -- --
Don J. Gaidano.......... -- -- -- -- -- --
Jay Wilson.............. 10,000 15.1% $6.50 3/4/03 $82,958 $104,683
- --------
(1) 25% of the options vest and will become exercisable upon the first
anniversary of the grant date and will become exercisable as to the
remainder of the grant in three equal annual installments thereafter.
(2) Based on 66,250 total options granted in fiscal 1998.
(3) The potential realizable value is calculated assuming that the fair
market value of Common Stock on the date of the grant as determined by
the Board appreciates at the indicated annual rate compounded annually
for the entire term of the option and that the option is exercised and
the Common Stock received therefor is sold on the last day of the term of
the option for the appreciated price. The 5% and 10% rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission (the "SEC") and do not represent the Company's estimate or
projection of future increases in the price of its Common Stock.
Aggregated Option Exercises in Fiscal 1998 and Fiscal Year End Option Values
The following table sets forth for the Named Executive Officers the shares
acquired and the value realized on each exercise of stock options during the
fiscal year ended December 31, 1998 and the fiscal year end number and value
of unexercised options:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1998 December 31, 1998
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable(#)(1) Unexercisable($)(2)
- ---- --------------- ----------- ------------------- -------------------
Barnet M. Feinblum...... -- -- 165,000/45,000 $2,198,800/462,550
Paul B. Repetto......... -- -- 22,500/25,000 46,651/197,387
Mark A. Retzloff........ -- -- 22,500/25,000 46,651/197,387
Don J. Gaidano.......... -- -- 5,000/25,000 53,250/249,750
Jay C. Wilson........... -- -- 0/10,000 0/90,000
- --------
(1) Includes both "in-the-money" and "out-of-the-money" options. "In-the-
money" options are options with exercise prices below the market price of
the Company's Common Stock at December 31, 1998.
(2) Based on the fair market value of the Common Stock as of December 31,
1998 of $15.50 per share, minus the per share exercise price of "in-the-
money" unexercised options, multiplied by the number of shares
represented by such options.
Employment Agreements
Messrs. Feinblum, Repetto and Retzloff (each, an "Executive") have entered
into Amended Executive Employment Agreements (collectively, the "Employment
Agreements") with effective dates as of January 1, 1998. The Employment
Agreement with Mr. Feinblum provides that he will receive an annual salary of
$140,000, which may be adjusted annually by the Compensation Committee, and
the Employment Agreements with Messrs. Repetto and Retzloff provide that they
will each receive an annual salary of $120,000, which may
11
be adjusted annually by the Compensation Committee. Additionally, for the year
ended December 31, 1998, each Executive is eligible to receive incentive
bonuses in an amount up to 60% (90% for Mr. Feinblum) of his base salary and
the Compensation Committee may increase such percentages for the year ended
December 31, 1999. The Employment Agreements also provide that each Executive
will be entitled to (i) four weeks paid vacation, (ii) participation in any
employee benefit plans the Company makes available to its other employees,
(iii) life insurance in the minimum amount of $100,000, (iv) disability
insurance providing at least 60% of such Executive's base salary or $6,000 per
month ($7,000 per month for Mr. Feinblum), whichever amount is less, and (v)
reimbursement of reasonable business expenses. Mr. Feinblum's Employment
Agreement also provides that all 135,000 of the incentive stock options
granted to him under the stock option agreement dated June 1, 1995 are fully
vested and exercisable. All of the Employment Agreements expire on December
31, 2000. Mr. Repetto's Employment Agreement anticipates that he will retire
as an operating officer of the Company on December 31, 1999. Each Employment
Agreement provides that the Company may terminate the Executive at any time.
If the Executive is terminated without cause or if the Executive terminates
his Employment Agreement for cause, the Company is obligated to pay the
Executive's salary for a period equal to the longer of (i) twelve months after
the date of termination or (ii) the remainder of the employment period. In
such case, the Executive also is entitled to a pro rata incentive bonus for
the year in which termination occurs. The Employment Agreements also contain
noncompete provisions which prohibit the Executives, without the consent of
the Company, for a period of twenty-four months after the termination or
expiration of the Executive's employment with the Company from (i) owning more
than 5% of the outstanding stock of a publicly-traded competitive company;
(ii) owning any stock of a privately held competitive company; (iii)
participating in the financing, operation, management or control of any
competitive company; and (iv) soliciting employees of the Company.
REPORT OF THE COMPENSATION COMMITTEE(1)
The Compensation Committee
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is composed of at least two non-employee directors elected by the
Board of Directors. The Compensation Committee is responsible for providing
guidance and periodic monitoring for all corporate compensation, benefit,
perquisite, and employee equity programs. The Compensation specifically
reviews and approves the following matters within the following limitations:
(i) compensation, benefit, perquisite action for all corporate officers
(except a corporate officer only holding the office of secretary) ("Corporate
Officers"), (ii) all bonus plans, total bonus payments and individual awards
to all Corporate Officers, (iii) benefit plans including profit sharing and
pension program, (iv) perquisite programs and perquisites for Corporate
Officers, (v) employment agreements for all Corporate Officers and for all
others with base salaries in excess of $100,000. In addition, the Compensation
Committee makes recommendations to the Board of Directors regarding the grant
of options under the Company's stock option plans.
Base Salary
The Committee annually reviews each executive officer's base salary. When
reviewing base salaries, the Committee considers individual and corporate
performance, levels of responsibility, prior experience, breadth of knowledge
and competitive pay practices.
- --------
(1) Notwithstanding anything to the contrary set forth in any of the
Company's filings under the Securities Act of 1933, as amended (the
"Securities Act") or the Exchange Act that might incorporate future
filings by reference, including this Proxy Statement, in whole or in
part, the following Report of the Compensation Committee and the
Performance Graph shall not be incorporated by reference into any such
filings, and shall not be deemed soliciting material under the Securities
Act or the Exchange Act.
Bonuses
The Company paid bonuses to its Chairman of the Board of Directors, Chief
Executive Officer and four other executive officers in 1998, in amounts
ranging from $45,800 to $96,040. Such bonuses were based on the extent to
which the corporate goals described above were achieved, and represented from
approximately 42% to 69% of such officer's base salary.
12
Stock-Based Incentive Compensation
The Company adopted the 1998 Equity Incentive Plan (the "Plan") in order to
provide equity based performance incentives to its employees. The Plan
authorizes the Company to award incentive stock options and nonqualified stock
options to purchase Common Stock to officers and other employees of the
Company. The purpose of the Plan is to attract, retain and motivate officers
and employees. Stock options may be exercised at a purchase price as
recommended by the Compensation Committee and determined by the Board of
Directors, provided that the exercise price per share under the Plan is not
less than 100% of the fair market value on the date of grant for incentive
stock options and not less than 85% of the fair market value on the date of
grant for nonqualified stock options. Options to beneficial owners of 10% or
more of the Company's outstanding shares may be granted at an exercise price
per share of not less than 110% of fair market value. The grants are designed
to align the interests of the optionees with those of the stockholders and
provide each individual with a significant incentive to manage the Company
from the perspective of an owner with an equity stake in the business, even
though certain executive officers are already significant stockholders of the
Company (see "Security Ownership of Certain Beneficial Owners and
Management"). Moreover, the long-term vesting schedule encourage a long-term
commitment to the Company by its executive officers and other optionees. The
size of the option grant to each optionee is set at a level that the
Compensation Committee deems appropriate in order to create a meaningful
opportunity for stock ownership based upon the individual's current position
with the Company, but also takes into account the individual's potential for
future responsibility and promotion over the option vesting period, and the
individual's performance in recent periods. The Compensation Committee
periodically reviews the number of shares owned by, or subject to options held
by, each executive officer, and additional awards are considered based upon
past performance of the executive officer.
Chief Executive Officer Compensation
For the fiscal year ended December 31, 1998, Barnet M. Feinblum, President
and Chief Executive Officer of the Company received total cash payments of
$140,000 in salary and $96,000 as a bonus. The base salary of Mr. Feinblum was
set at an annual rate of $140,000 commencing January 1, 1998, which
represented an increase from his base salary of $125,000 in 1997. Mr.
Feinblum's base salary was increased largely on review of competitive salaries
in the industry.
Limitation on Deduction of Compensation Paid to Certain Executive Officers
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of no more than $1 million of
compensation paid to certain Named Executive Officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code. The statute containing this law
and the applicable proposed Treasury regulations offer a number of
transitional exceptions to this deduction limit for pre-existing compensation
plans, arrangements and binding contracts. As a result, the Compensation
Committee believes that at the present time it is quite unlikely that the
compensation paid to any Named Executive Officer in a taxable year which is
subject to the deduction limit will exceed $1 million. Therefore, the
Compensation Committee has not yet established a policy for determining which
forms of incentive compensation awarded to its Named Executive Officers shall
be designed to qualify as "performance-based compensation." The Compensation
Committee intends to continue to evaluate the effects of the statute and any
final Treasury regulations and to comply with Section 162(m) of the Code in
the future to the extent consistent with the best interest of the Company.
Conclusion
The Compensation Committee believes that the compensation programs of the
Company and the administration of those programs well serve the interest of
the Company's stockholders. These programs allow the Company to attract,
retain and motivate exceptional management talent and to compensate executives
in a manner that reflects their contributions to both the short and long-term
performance of the Company. The Company intends to continue to emphasize
programs that it believes will positively affect stockholder value.
13
Compensation Committee Members
Clark R. Mandigo II, Thomas D. McCloskey, Jr. and Richard L. Robinson
Compensation Committee Interlocks and Insider Participation
As noted above, the Compensation Committee consists of Messrs. Mandigo,
McCloskey and Robinson. None of the members of the Compensation Committee have
served as executive officers of the Company. See "Certain Relationships and
Related Transactions" for a description of certain transactions with these
board members. No executive officer of the Company serves as a member of the
Board of Directors or Compensation Committee of any entity that has one or
more executive officers serving as a member of the Company's Board or
Compensation Committee.
Performance Measurement Comparison
The following graph shows the total stockholder return on the Company's
Common Stock from July 2, 1998 (the date the Company became a public company)
until December 31, 1998, for (i) the Company's Common Stock, (ii) the NASDAQ
Stock Market index and (iii) the Russell 2000 Equity Index. The graph assumes
the investment of $100 in the Company's Common Stock and in each of the
indexes on July 2, 1998 and reinvestment of all dividends. The initial public
offering price of the Company's Common Stock was $11.00 per share.
[LINE GRAPH APPEARS HERE]
|-----------|-----------------------|-------------------|----------------------|
| | HORIZON ORGANIC | PEER GROUP | RUSSELL 2000 |
|-----------|-----------------------|-------------------|----------------------|
|07/02/1998 | 100.00 | 100.00 | 100.00 |
|-----------|-----------------------|-------------------|----------------------|
|12/31/1998 | 140.91 | 65.73 | 92.68 |
|-----------|-----------------------|-------------------|----------------------|
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Aurora Affiliates
Mr. Peperzak is a significant stockholder of Aurora Dairy Corporation
("Aurora"), Aurora Dairy Corporation of Colorado ("ADC-Colorado"), Aurora
Dairy Corporation of Texas ("ADC-Texas") and United States Dairy Company
L.L.C. (collectively, the "Aurora Affiliates").
Sublease. The Company subleased approximately 3,600 square feet of its
office space under its office lease to Aurora. The term of the sublease
expired on December 31, 1998. Aurora paid approximately $1,900 per month to
the Company for these subleased premises.
Cattle Sales and Exchanges. In fiscal 1997, the Idaho Dairy sold 531
conventional cows to ADC-Texas, 521 conventional cows to ADC-Colorado and 614
conventional cows to USDC for an approximate aggregate net purchase price of
$1.7 million, of which $250,000 was financed by the delivery of a subordinated
promissory note (the "Cattle Sale Subordinated Promissory Note") by ADC-
Colorado to the Company. The outstanding principal amount of the Cattle Sale
Subordinated Promissory Note was repaid in 1998. The Cattle Sale Subordinated
Promissory Note bore interest at prime plus one percent.
Dairy Herd Management Agreement. The Company recently entered into a Dairy
Herd Management and Supply Agreement with Aurora pursuant to which Aurora
agreed to manage Horizon's dairy herd, initially consisting of 1,050 head of
cattle, on a portion of Aurora's dairy farm located in Longmont, Colorado (the
"Longmont Dairy"). Unless earlier terminated by Horizon upon Aurora's failure
to perform any of its material obligations contained in the agreement, the
agreement will terminate on September 30, 2002. The Company has the option to
renew the agreement for up to an additional 18 months. Pursuant to the
agreement, the Company has agreed to pay Aurora the following amounts: (i) a
cattle reimbursement fee in the amount of $50.00 per head of cattle for the
first 1,050 head of cattle Horizon purchases from certain parties; (ii) a
monthly fee of $80,000 per month commencing October 1, 1999 through January
31, 2000 and a minimum monthly fee of $75,000 thereafter, calculated using a
formula based on the amount of milk shipped from the Longmont Dairy; and (iii)
a bonus if certain cost parameters are met. In addition, at the Company's
option, Aurora will raise heifers born to the dairy herd located on the
Longmont Dairy for a flat fee of $1.90 per day per calf. The Company also has
agreed to pay $135,000 for the facility improvements necessary to permit the
Longmont Dairy to function as an organic dairy.
McCloskey Canyon Ranch
The Company periodically houses and feeds certain of its cattle on a ranch
owned by an entity controlled by Mr. McCloskey. As consideration for such
housing and feeding, the Company paid such entity approximately $62,000 in
1998.
Directors' Affiliations with Company Processors and Customers
Robinson Dairy, which is one of the Company's milk processors, is controlled
by Richard L. Robinson, a director of the Company. The Company paid Robinson
Dairy approximately $1,049,000 in 1998 to process organic fluid milk. Clark's
Market, which purchases Horizon products through one of the Company's
distributors, is controlled by J. Thomas Clark, a director of the Company.
Guarantees
Under a continuing guarantee agreement, the Company agreed to pay Mr.
Peperzak a guarantee fee equal to one percent (1%) per annum for all debt he
personally guarantees for the Idaho Dairy. Mr. Peperzak received approximately
$29,000 from the Company in 1998. Mr. Peperzak was released from these
guarantees in 1998.
15
Indemnity Agreements
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided
for therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party
by reason of his position as a director, officer or other agent of the
Company, and otherwise to the full extent permitted under Delaware law and the
Company's Bylaws.
Management believes the terms of all of the foregoing transactions were fair
to the Company and were no less favorable to the Company than would have been
obtained from an unaffiliated third party in arms' length negotiations. All
future transactions with affiliates will be subject to the approval of the
Company's disinterested directors and will be on terms believed by such
directors to be no less favorable to the Company than those available from
unaffiliated third parties.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of
Directors,
/s/ Don J. Gaidano
Don J. Gaidano
Assistant Secretary
April 12, 1999
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December 31, 1998 is
available without charge upon written request to: Corporate Secretary, Horizon
Organic Holding Corporation, 6311 Horizon Lane, Longmont, Colorado 80503.
16
HORIZON ORGANIC HOLDING CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS--May 12, 1999
The undersigned hereby appoints Barnet M. Feinblum and Don J. Gaidano (the
"Proxies"), each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares
of Common Stock of Horizon Organic Holding Corporation, held of record by the
undersigned on March 31, 1999, at the ANNUAL MEETING OF STOCKHOLDERS to be held
on May 12, 1999, or any adjournment thereof.
(1) To elect two Directors to hold office until the 2002 Annual Meeting of
Stockholders and until their successors are elected.
Mark A. Retzloff G. Irwin Gordon
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
[_] FOR all nominees [_] WITHHOLD AUTHORITY
(except as marked below) to vote for nominees listed
--------------------------------------------------
(2) To ratify and approve the appointment of KPMG LLP, independent auditors of
the Company for its fiscal year ending December 31, 1999.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued and to be completed and signed on the reverse side)
(Continued from the other side)
(3) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy is solicited on behalf of the Company's Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH PROPOSAL.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE
VOTED IN FAVOR OF THE PROPOSALS.
Dated: , 1999
---------
Signed:
-----------------------------
Signature of Stockholder
Signed:
-----------------------------
Signature of Stockholder
Please vote, date and sign this
proxy as your name is printed
hereon. When signing as
attorney, executory
administrator, trustee,
guardian, etc. give full title
as such. If the stock is held
jointly, each owner should
sign. If a corporation, please
sign in full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.