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SCHEDULE 14A
(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 (AMENDMENT NO. )
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
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
EPL TECHNOLOGIES, INC.
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(Name of Registrant as Specified in its Charter)
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(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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[EPL TECHNOLOGIES, INC. LETTERHEAD]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders (the "Annual Meeting") of EPL
Technologies, Inc. (the "Company") will be held on Monday, July 21, 1997, at
9:30 A.M. (local time) at the Top of the Tower, 1717 Arch Street, Philadelphia,
Pennsylvania for the following purposes:
1. to elect three directors to serve for the ensuing year and until
their respective successors shall have been duly elected and
qualified;
2. to consider and act upon a proposal to amend the Company's 1994
Stock Incentive Plan (the "Plan") to increase the number of shares
of Common Stock reserved for issuance under the Plan to 4,500,000;
3. to consider and act upon a proposal to amend the Company's
Articles of Incorporation to increase the authorized number of
shares of Board Designated Preferred Stock to 4,000,000; and
4. to transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on June 6, 1997
as the record date for the Annual Meeting. Only holders of record at that time
of the Company's Common Stock, $0.001 par value per share, Series A Preferred
Stock, par value $1.00 per share, Series B Preferred Stock, par value $0.01 per
share, and Series C Preferred Stock, par value $0.01 per share, are entitled to
notice of, and are entitled to vote at, the Annual Meeting and any adjournment
or postponement thereof. A complete list of shareholders entitled to vote at
the Annual Meeting will be available for inspection upon written demand, during
normal business hours by any shareholder of the Company prior to the Annual
Meeting, beginning two days after the date of this notice, at the Company's
address shown above.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, a Proxy Statement and a proxy accompany this notice.
It is expected that these materials are first being sent to shareholders on or
about June 20, 1997.
The right to vote your stock at the Annual Meeting is an important
shareholder right and should be exercised by you in person or by proxy
regardless of the number of shares held. The Board of Directors sincerely
hopes you will be able to be present at the Annual Meeting but requests in any
event that you SIGN and DATE your proxy and mail it in the enclosed envelope
promptly. The return of the enclosed proxy will not affect your right to vote
in person at the Annual Meeting. The prompt return of your proxy will
eliminate the need for further solicitation, with its attendant expense to the
Company.
Timothy B. Owen
Secretary
June 20, 1997
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[EPL TECHNOLOGIES, INC. LETTERHEAD]
PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held July 21, 1997
This Proxy Statement and the accompanying proxy are being furnished in
connection with the solicitation of proxies by the Board of Directors (the
"Board") of EPL Technologies, Inc. (the "Company"), to be voted at its Annual
Meeting of Shareholders (the "Annual Meeting") which will be held at 9:30 A.M.
(local time) on July 21, 1997 at the Top of the Tower, 1717 Arch Street,
Philadelphia, Pennsylvania and at any adjournment or postponement thereof, for
the purposes set forth in the accompanying notice of the Annual Meeting. It is
expected that this Proxy Statement, the foregoing notice and the enclosed proxy
are to be first mailed to shareholders entitled to vote on or about June 20,
1997. Such mailing also includes the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 ("fiscal 1996"), its report on Form
10-Q for the quarter ended March 31, 1997 and a letter from the Company's Chief
Executive Officer. The Annual Report and such other materials are not to be
considered a part of the Company's proxy solicitation materials.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, shareholders will be asked: (i) to elect three
directors to serve for the ensuing year and until their respective successors
shall have been duly elected and qualified; (ii) to approve an amendment to the
Company's 1994 Stock Incentive Plan (the "Plan") which would increase the
number of shares of Common Stock reserved for issuance under the Plan to
4,500,000; (iii) to approve an amendment to the Company's Articles of
Incorporation which would increase the authorized number of shares of Board
Designated Preferred Stock to 4,000,000; and (iv) to transact such other
business as may properly come before the Annual Meeting or any adjournment or
postponement thereof. The Board recommends a vote in favor of (i.e., "FOR")
items (i) - (iii) described above.
QUORUM AND VOTING RIGHTS
The presence in person or by proxy of the holders of a majority of the
votes entitled to be cast by the outstanding shares of Common Stock, $0.001 par
value per share (the "Common Stock"), the shares of Series A Convertible
Preferred Stock, $1.00 par value per share (the "A Preferred Stock"), the
shares of Series B Convertible Preferred Stock, $0.01 par value per share
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(the "B Preferred Stock"), and the shares of Series C Convertible Preferred
Stock, $0.01 par value (the "C Preferred Stock"), is necessary to constitute a
quorum for consideration of the matters to be voted upon at the Annual Meeting,
other than the proposed amendment to the Company's Articles of Incorporation
(the "Articles Amendment"). With respect to the Articles Amendment, the
presence in person or by proxy of the holders of a majority of the votes
entitled to be cast by each class of Common Stock, A Preferred Stock, B
Preferred Stock and C Preferred Stock is necessary to constitute a quorum.
Only shareholders of record at the close of business on June 6,
1997 (the "Record Date") will be entitled to notice of, and to vote at, the
Annual Meeting. As of the Record Date, there were outstanding 16,151,034
shares of the Company's Common Stock, 2,373,000 shares of A Preferred Stock,
531,915 shares of B Preferred Stock and 144,444 shares of C Preferred Stock.
Each share of A Preferred Stock is convertible into 1.333 shares of Common
Stock and holders of A Preferred Stock are entitled to one vote per share for
each share of Common Stock into which such A Preferred Stock is convertible.
Each share of B Preferred Stock and C Preferred Stock is convertible into one
share of Common Stock and holders of the B Preferred Stock and C Preferred
Stock are entitled to one vote per share for each share of Common Stock into
which such B Preferred Stock and C Preferred Stock is convertible. Thus, as of
the Record Date, there were a total outstanding of 19,991,393 shares of the
Company's capital stock entitled to vote. The holders as of the Record Date of
the Company's Common Stock, the A Preferred Stock, the B Preferred Stock and C
Preferred Stock will vote together as a class on all matters presented at the
Annual Meeting, other than the Articles Amendment, on which each of the Common
Stock, the A Preferred Stock, the B Preferred Stock and the C Preferred Stock
will vote as separate classes.
VOTING AND SOLICITATION OF PROXIES
A shareholder who submits a proxy may revoke it at any time before the
proxy is exercised. A proxy may be revoked prior to exercise by (a) filing
with the Company a written revocation of the proxy, (b) appearing at the Annual
Meeting and casting a vote contrary to that indicated on the proxy or (c)
submitting a duly executed proxy bearing a later date. Returning a signed
proxy will not affect a shareholder's right to attend the Annual Meeting and
vote in person. When a proxy is returned properly signed, the shares
represented will be voted in accordance with the instructions provided therein.
Broker non-votes will not be counted as votes cast and will have no effect on
the results of a vote, although they will count towards the presence of a
quorum. Abstentions will have the effect of a "no" vote, and will count
towards the presence of quorum. In the absence of instructions, the shares
represented at the Annual Meeting by proxy will be voted "FOR" the nominees of
the Board in the election of directors, "FOR" the amendment to the Plan, and
"FOR" the amendment to the Company's Articles of Incorporation.
The expense of this proxy solicitation will be borne by the Company.
In addition to solicitation by mail, proxies may be solicited in person or by
telephone or facsimile by officers
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or other regular employees of the Company who will not receive any additional
compensation for such efforts. The Company will reimburse reasonable expenses
incurred by record holders of Common Stock or any series of preferred stock
("Preferred Stock") who are brokers, dealers, banks, voting trustees or other
nominees for mailing proxy materials to any beneficial owners of such stock,
upon request of such record holders.
VOTE REQUIRED FOR ELECTION OF DIRECTORS
AND APPROVAL OF OTHER PROPOSALS
To be elected a director, a nominee for election must receive the
favorable vote of a majority of the shares of Common Stock and Preferred Stock
(on an as-converted basis), voting together as a class, represented in person
or by proxy at the Annual Meeting. Shareholders entitled to vote will not have
cumulative voting rights. Approval of the proposal to amend the Plan requires
the favorable vote of a majority of the shares of Common Stock and Preferred
Stock (on an as-converted basis), voting together as a class, represented in
person or by proxy and entitled to vote at the Annual Meeting. Approval of the
proposal to amend the Company's Articles of Incorporation requires the
favorable vote of a majority of the shares of each of the Common Stock, the A
Preferred Stock, the B Preferred Stock and the C Preferred Stock, each voting
as a separate class, represented in person or by proxy and entitled to vote at
the Annual Meeting.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Board of Directors, the size of which the Board sets from time to
time at between three (3) and seven (7) members, currently consists of three (3)
members: Paul L. Devine, Robert D. Mattei and Ronald W. Cantwell. The Board
proposes that the three current directors, listed below as nominees, be
re-elected as directors of the Company to hold office until the next annual
meeting of shareholders and until such director's successor is duly elected and
qualified. The board expects shortly hereafter to set the size of the board at
four (4) members and elect a fourth director once a suitable candidate has been
identified and elected by the Board. Each nominee has consented to be named as
a nominee and, to the present knowledge of the Company, is willing to serve as a
director, if elected. Should any of the nominees not remain a candidate at the
end of the Annual Meeting (a situation which is not expected), proxies with
respect to which no contrary direction is made will be voted in favor of those
who remain as candidates and may be voted for substitute nominees.
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The nominees, their ages at the Record Date and certain other
information about them is set forth below:
Position(s) with
Name Age the Company Director Since
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Paul L. Devine 42 Chairman of the Board and 1992
Chief Executive Officer
Robert D. Mattei 58 Director 1988
Ronald W. Cantwell 53 Director 1997
PAUL L. DEVINE - Mr. Devine was appointed Chairman and Chief
Executive Officer of the Company in March 1992. From 1989 to 1992, Mr. Devine
was involved as a business consultant in the identification and targeting of
acquisitions for various public companies. During this time, he also served as
a director and chief executive officer of various companies, including three
United Kingdom (U.K.) subsidiaries of Abbey Home Healthcare, Inc., a U.S.
public health care group. Prior to this he was the Chief Executive Officer of
Leisure Time International, PLC from 1986 to 1989. He is a graduate of London
University and holds Bachelors and Masters degrees in curriculum research.
Throughout his business career, he has been intimately involved in the design
and implementation of new product strategies, in financial services,
health/hygiene services and food processing.
ROBERT D. MATTEI - Mr. Mattei is an investor and entrepreneur.
Mr. Mattei has been self-employed in various aspects of the food service
industry for over 20 years. As a restaurateur, Mr. Mattei has developed,
operated and sold many successful operations. Mr. Mattei currently owns three
restaurants and acts as an industry consultant, involved primarily in the
development of restaurant concepts. Mr. Mattei has been a member of the Board
of the Company since February 1988, was Secretary of the Company from February
1988 to March 1993 and is also a member of the Audit, Compensation and 1994
Stock Incentive Plan Administration Committees.
RONALD W. CANTWELL - Mr. Cantwell currently serves as
President of Trilon Dominion Partners L.L.C., and has done so since its
inception in June 1995. Prior to this, Mr. Cantwell served as President of The
Catalyst Group, Inc., where he executed a variety of merchant banking
activities and developed and directed the strategic plan for a diverse mix of
utility assets. In addition, he was involved in advising numerous mergers,
acquisitions and restructuring matters for The Edper Group, the principal
investor in The Catalyst Group. Prior to joining The Catalyst Group, Mr.
Cantwell spent nineteen years in the practice of public accounting, most
recently with Ernst & Young, where he was a tax partner and headed the
Dallas-based Mergers and Acquisitions practice. Mr. Cantwell was elected to
fill a vacancy on the Board in May 1997 and is a member of the Compensation and
1994 Stock Incentive Plan Administrative Committees.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board held two meetings during fiscal 1996 and also acted
by unanimous written consent. The Board currently has an Audit Committee, a
Compensation Committee and the 1994 Stock Incentive Plan Administration
Committee, but does not have a nominating committee. During 1996, the Audit
Committee was comprised of Mr. Mattei and a former director, Dr. Rainer
Bichlbauer, and the Compensation Committee and the 1994 Stock Incentive Plan
Administration Committee were comprised of Mr. Mattei and a former director, Mr.
William Hopke. Dr. Bichlbauer resigned from the Board in May 1997 and Mr. Hopke
resigned in December 1996. Following the resignation of Mr. Hopke, Mr. Cantwell
was appointed to the Compensation Committee and the 1994 Stock Incentive Plan
Administration Committee. The Audit Committee, the Compensation Committee and
the 1994 Stock Incentive Plan Administration Committee each held one meeting in
fiscal 1996 and also acted by unanimous written consent. Each incumbent
director who served on the Board during fiscal 1996 attended over 75% of the
aggregate number of meetings of the Board and of the committees on which such
director served.
The Audit Committee has authority to recommend the appointment
of the Company's independent auditors and review the results and scope of
audits, internal accounting controls and tax and other accounting-related
matters. The Compensation Committee sets compensation policies applicable to
executive officers and approves salaries, bonuses and other compensation
matters for executive officers of the Company. The 1994 Stock Incentive Plan
Administration Committee administers the Plan. The Board as a whole
administers the Company's 1993 Non-Qualified Stock Option Plan.
COMPENSATION OF DIRECTORS
With the exception of payments to Mr. Devine, in his capacity
as Chief Executive Officer of the Company, no cash compensation was paid to any
director of the Company during fiscal 1996. In May 1996, in accordance with the
terms of the Plan, director Robert D. Mattei and former directors Bichlbauer and
Hopke, were each granted an option to acquire 15,000 shares of Common Stock at
an exercise price of $7.625 per share for their services as members of the
various committees of the Board described above. Also, in May 1997, Mr. Mattei
and Dr. Bichlbauer were each granted an option to acquire 15,000 shares of
Common Stock at an exercise price of $5.25 per share for their services as
members of such committees. Because Mr. Hopke served for part of fiscal 1996,
he was granted an option to acquire 10,000 shares of Common Stock at an exercise
price of $5.25 per share for his services during 1996 as a member of such
committees. These options are, and subsequent options so granted will be vested
and exercisable at any time until the expiration of the five year period ending
after the date of grant. Under the terms of the Plan, each non-employee
director will receive a grant of 15,000 shares of Common Stock at an exercise
price equal to the fair market value of the shares on May 4th of each year.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE NOMINEES PRESENTED.
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SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information as of the
Record Date regarding the beneficial ownership of all directors, nominees for
directors, executive officers named in the summary compensation table, all
directors and executive officers as a group, and each person known to the
Company to be a beneficial owner of more than five percent of any class of the
Company's outstanding capital stock. Each beneficial owner has sole voting and
investment power with respect to the shares indicated as beneficially owned,
except as noted.
Name and Address Number of Percent Percent Percent Percent
of Beneficial Owner Shares (1) of Common Series A Series B Series C
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Trilon Dominion Partners, L.L.C. 5,425,106(2) 28.75% 82.7% 0 0
Lancer Partners, L.P. 3,819,411(3) 22.90 0 100% 0
Quaestus S.A. 413,333(4) 2.50 10.50 0 0
Willbro Nominees 144,444(5) 0 0 0 100%
Paul L. Devine 1,340,833(6) 7.78 2.1 0 0
Robert D. Mattei 428,965(7) 2.64 0 0 0
Ronald W. Cantwell 0 0 0 0 0
Howard S. Kravitz 270,000(8) 1.65 0 0 0
Derrick W. Lyon 200,000(9) 1.22 0 0 0
Directors and executive officers
as a group (nine persons) 3,087,298(10) 16.64 2.1 0 0
Total number of shares outstanding 16,151,034 100.0%
common
Preferred (as converted) Series A 3,164,000 100.0%
Series B 531,915 100%
Series C 144,444 100%
(1) Unissued shares of Common Stock of each owner subject to currently
exercisable options or other rights to acquire securities exercisable
within 60 days of the Record Date are included in the totals listed and
are deemed to be outstanding for the purpose of computing the
percentage of Common Stock owned by such owner. Any securities not
outstanding that are subject to the exercise of options or warrants or
through the conversion of any security are deemed to be outstanding for
the purpose of computing the percentage of outstanding securities by
such person but are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person. The
effect of this calculation is to increase the stated total ownership
percentage currently controlled.
(2) Includes 2,717,333 shares of Common Stock which may be acquired by (i)
converting 1,963,000 shares of A Preferred Stock into 2,617,333 shares
of Common Stock and (ii) exercising warrants to acquire 100,000 shares
of Common Stock. The address for Trilon Dominion Partners, L.L.P. is
245 Park Avenue, Suite 2820, New York, NY 10017.
(3) Includes 468,085 shares of Common Stock which may be acquired by
converting 468,085 shares of B Preferred Stock. It also includes
1,070,332 shares of Common Stock, and 63,830 shares of Common Stock
which may be acquired by converting 63,830 shares of B Preferred Stock
into shares of Common Stock, both held by funds other than Lancer
Partners, L.P., but which are commonly managed in a group that includes
Lancer Partners, L.P. The address for Lancer Partners, L.P. is 200 Park
Avenue, 39th floor, New York, NY 10017.
(4) Includes 413,333 shares of Common Stock which may be acquired by (i)
converting 250,000 shares of A Preferred
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Stock into 333,333 shares of Common Stock and (ii) exercising warrants
to acquire 80,000 shares of Common Stock. The address for Quaestus
S.A. is 38a Route de Malagnou, CH-1208, Geneva, Switzerland.
(5) Includes 144,444 shares of Common Stock issuable upon conversion of C
Preferred Stock. The address for Willbro Nominees is 6 Broadgate,
London, U.K.
(6) Includes 1,080,000 shares of Common Stock which may be acquired by (i)
converting 50,000 shares of A Preferred Stock into 66,667 shares of
Common Stock, (ii) exercising options to acquire 1,000,000 shares of
Common Stock and (iii) exercising warrants to acquire 13,333 shares of
Common Stock. The address for Mr. Devine is c/o 2 International Plaza,
Suite 245, Philadelphia, PA 19113-1507.
(7) Includes 95,000 shares of Common Stock which may be acquired by
exercising options to acquire 95,000 shares of Common Stock and 20,000
shares of Common Stock owned by Mr. Mattei's wife, as to which he
disclaims beneficial ownership.
(8) Includes 205,000 shares of Common Stock which may be acquired by
exercising outstanding options.
(9) Represents 200,000 shares of Common Stock which may be acquired by
exercising outstanding options.
(10) Includes 2,400,000 shares of Common Stock which may be acquired by (i)
converting 50,000 shares of A Preferred Stock into 66,667 shares of
Common Stock, (ii) exercising options to acquire 2,320,000 shares of
Common Stock and (iii) exercising warrants to acquire 13,333 shares of
Common Stock.
* indicates less than one percent of class.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth
the aggregate compensation (cash and non-cash, plan and non-plan) paid by the
Company during fiscal 1996 for services rendered to the Company in all
capacities by the Chief Executive Officer and certain other executive officers
(collectively, the "Named Executive Officers"):
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Long Term
Compensation
Annual Compensation Awards
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Salary Bonus Other Compensation Options/SARs
Name and Principal Position Year ($) ($) ($) (#)
- --------------------------- ---- --- --- ----------- ---
Paul L. Devine, 1996 $225,000 $210,798 $ 0 500,000
Chairman, President and Chief 1995 56,250 100,000 120,000(1) 200,000
Executive Officer 1994 0 0 160,000(1) 0
Howard S. Kravitz, 1996 $109,264 0 0 0
Director Engineering and 1995 109,264 0 0 50,000
Technical Services 1994 106,618 0 0 0
Derrick W. Lyon, 1996 0 0 184,000(2) 100,000
Chief Executive Officer, EPL 1995 0 0 36,000(2) 100,000
Technologies (Europe) Limited
(1) Until December 1994, to secure the services of Mr. Devine as Chairman
and CEO of the Company, the Company operated under a draft consulting
agreement which the Company submitted to Kingsway Holdings PLC, of
which Paul L. Devine was a controlling shareholder. This agreement in
draft form recited that it ran from January 1, 1993 to December 31,
1994. Although never signed, the parties continued to operate as
though the agreement were in effect in 1995 with Mr. Devine providing
services as an independent contractor until September 1995. Effective
October 1, 1995 Mr. Devine signed an employment agreement with the
Company, to serve as Chairman of the Board of Directors, President and
Chief Executive Officer. The 1995 agreement was to have expired in
December 1997, but was replaced by a new agreement dated January 1,
1997. See "Employment and Consulting Contracts".
(2) Includes payments made to DWL Associates Ltd. for the provision of
consulting and advisory services by Mr. Lyon. See " - Employment and
Consulting Contracts." Amounts assume an exchange rate of L1:$1.60.
No other executive officers are presented in the Summary Compensation
Table because no other officer of the Company during fiscal year 1996 earned
salary and bonus of more than $100,000 for such year.
Stock Options Granted in Last Fiscal Year. The following table sets
forth information concerning individual grants of stock options made by the
Company during fiscal 1996 to each of the Named Executive Officers.
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Individual Grants
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% of
Number Total Potential Realizable Value at
of Shares Options Assumed Annual Rates of
Underlying Granted to Exercise Stock Price Application for
Options Employees or Base Option Term (5 years)(1)
Granted in Fiscal Price Expiration ----------------------------
Name (#) Year Per Share Date 0% 5% 10%
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Paul L. Devine(2) 300,000 16.62% $ 4.00 3/7/01 $ 0 $331,538 $732,612
200,000 11.08 4.063 12/4/01 0 224,429 496,039
Derrick W. Lyon(2) 100,000 5.54 4.063 12/4/01 0 112,214 248,019
(1) The dollar amounts under these columns are the result of calculations
at 5% and 10% annual growth rates set by the Securities and Exchange
Commission, compounded annually for the five year term of the options,
and therefore are not intended to forecast possible future
appreciation, if any, of the price of Common Stock.
(2) Options were granted pursuant to the Plan.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year
End Option Values. The following table sets forth information concerning stock
options granted to each of the Named Executive Officers during fiscal 1996 and
the number of unexercised options at the end of fiscal 1996 and the value of
such options:
Number of Shares Value of Unexercised
Underlying Unexercised Options at In-The-Money Options at
December 31, 1996 December 31, 1996(1)
----------------------------------- -----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------
Paul L. Devine 1,000,000 0 $3,450,000 $0
Howard S. Kravitz 205,000 0 1,021,563 0
Derrick W. Lyon 200,000 0 606,350 0
(1) The fair market value of "in-the-money" options was calculated on the
basis of the difference between the exercise price of the options held
and the closing price of a share of Common Stock on the Nasdaq
SmallCap market on December 31, 1996, which was $ 6.063, multiplied by
the number of options held.
EMPLOYMENT AND CONSULTING CONTRACTS
Mr. Devine and the Company are parties to an employment
agreement dated as of January 1, 1997 which provides that Mr. Devine is to
serve as the Company's Chairman of the Board, President and Chief Executive
Officer. The agreement provides for a rolling three year term. The Agreement
provides for a base salary to be fixed by the Board which, as of January 1,
1997, was $275,000 per year. Pursuant to the agreement the Company will
maintain life insurance on Mr. Devine's life with a face amount equal to at
least $1,000,000, for which Mr. Devine may designate a beneficiary. Under the
agreement Mr. Devine also will be entitled to receive a retirement benefit if
he remains continuously employed (as defined) by the Company until age fifty.
Generally, if Mr. Devine retires at age 65, the retirement benefit to be
received
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annually will be equal to 50% of his average annual base salary and bonus
during the final three years of his employment (less benefits from any other
defined benefit pension plan of the Company). The percentage of Mr. Devine's
average annual base salary and bonus will be reduced or increased by 6% for
each year by which Mr. Devine elects to have such retirement benefit commence
earlier or later than his 65th birthday. The agreement also provides that Mr.
Devine is entitled to participate in all benefit plans and arrangements of the
Company and may also receive bonuses, if any, as determined by the Board of
Directors. The agreement also provides certain disability and death benefits
to Mr. Devine, as well as severance payments approximately equal to Mr.
Devine's average salary and bonus for the previous three years, to continue for
three years if Mr. Devine is terminated under certain conditions.
Additionally, Mr. Devine is entitled to receive a payment of approximately
three times his "base amount" (as defined in the Internal Revenue Code of 1986)
in the event of a "change of control" of the Company (as defined in the
agreement). The agreement also contains certain customary provisions regarding
confidentiality and non-competition.
Mr. Kravitz was a party to an employment agreement pursuant to
which he served as the Company's Vice-President - Sales and Marketing. Notice
that the Company did not desire to renew this contract was served on January
30, 1996, and thus, salary payments currently are being made on a
month-to-month basis at the equivalent annual rate of $109,264. Mr. Kravitz
remains employed by the Company as its Director - Engineering and Technical
Services.
The Company entered into a Consulting Agreement with DWL
Associates Ltd, an entity controlled by Mr. Lyon, for the provision of
consulting and advisory services by Mr. Lyon. The agreement, which was signed
as part of the acquisition by the Company of Bakery Packaging Services Limited
in September 1995, has an original term of two years, expiring September 30,
1997. Annual fees of L.90,000 ($144,000 at an exchange rate of $1.60) per
annum are payable under this agreement plus the reimbursement of directly
incurred expenses.
1994 STOCK INCENTIVE PLAN
The Company's 1994 Stock Incentive Plan was adopted by the
shareholders on July 21, 1994, and modified by the shareholders to increase the
shares issuable thereunder and to make certain other changes on July 22, 1996.
The Plan is intended as an additional incentive to certain employees, certain
consultants or advisors and non-employee members of the Board of Directors to
enter into or remain in the employ of the Company or to serve on the Board of
Directors by providing them with an additional opportunity to increase their
proprietary interest in the Company and to align their interests with those of
the Company's shareholders generally through the receipt of options to purchase
Common Stock and has been structured to comply with the applicable provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended and Rule 16b-3
thereunder. The Plan provides for the grant of incentive stock options within
the meaning of the Internal Revenue Code of 1986, as amended, and non-qualified
stock options and the award of shares of Common Stock. The particular terms of
each option grant or stock award are set forth in a separate agreement between
the Company and the optionee or award recipient. The main terms are the Plan are
set out in Proposal No 2 below.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee during
fiscal 1996 were Mr. Robert D. Mattei and Mr. William J. Hopke, neither of whom
were officers of the Company during such period. Following Mr. Hopke's
resignation from the Board in December 1996, Mr. Cantwell was elected to
replace Mr. Hopke as a member of the committee in May 1997. Neither the
members of the Compensation Committee nor any of their affiliates (except as
disclosed under Certain Relationships and Related Transactions below), entered
into any transactions with the Company during fiscal 1996.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee sets compensation policies
applicable to executive officers and has the authority to approve salaries and
bonuses and other compensation matters for the Company's executive officers.
The Committee reviews the overall performance of the Company and its executive
officers based on the Company's financial and operating performance. The
Committee's compensation policy generally reflects the basic principles that
compensation should reflect the financial performance of the Company and a
portion of an executive officer's compensation should provide long-term
incentives that will tie long-term rewards for the executive officers to
increases in shareholder value. Company philosophy regarding base salary is
to maintain it at a competitive level sufficient to recruit individuals
possessing the skills necessary to achieve the Company's vision and mission
over the long term. The Committee monitors salary levels for comparable
executives. The Committee, in its discretion, may award bonuses to employees,
based on Company performance and each employee's performance goals. The intent
of a bonus is to motivate and reward performance of employees measured against
specific goals and in light of the competitive compensation practices of
comparable companies. The goals vary with each employee's responsibilities
rather than being fixed by reference to overall measures of Company
performance. Finally, stock options are viewed as a fundamental element in the
total compensation program and, in keeping with the Company's basic philosophy,
emphasize long term Company performance as measured by the creation and
enhancement of shareholder value, fostering a community of interest between
shareholders and employees. The specific determination of the number of
options to be granted, however, is not based upon any specific criteria.
Although options may be granted at any price, options generally have been
granted at the fair market value of the underlying shares on the date of grant.
The Committee also relies on recommendations of management regarding option
grants. The compensation for the Company's Chief Executive Officer is based
on, among other factors, his ability to obtain necessary financing to fund the
Company's operations, expand sales growth opportunities, integrate various
operations and continue to guide the Company in its expanding role in servicing
the fresh-cut produce industry. In evaluating the performance of the Company's
executive officers, including the Chief Executive Officer, the Committee noted
that the Company's fiscal 1996 sales increased by 229% over fiscal 1995
results, total assets grew from $10,041,197 to $15,215,422, the acquisitions of
Pure Produce, Inc. and Crystal Specialty Films, Inc. were completed, EPL
Flexible Packaging Limited was set up and acquired some of the assets of
Printpack (St Helens) Limited, and NewCornCo LLC was formed with Underwood
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Ranches as a partner. The satisfaction of defined performance criteria and
qualitative criteria, including, management skills and leadership ability, are
the bases upon which the committee evaluates compensation decisions for its
executive officers, including the Chief Executive Officer.
QUALIFYING EXECUTIVE COMPENSATION FOR DEDUCTIBILITY UNDER APPLICABLE PROVISIONS
OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended,
provides that a publicly held corporation generally may not deduct compensation
for its chief executive officer or for each of certain other executive officers
to the extent that such compensation exceeds $1,000,000 for the executive or
does not qualify as a "performance based" compensation arrangement. The
Committee intends to consider taking such actions as may be appropriate to
qualify compensation received by such executives upon exercise of options
granted under the Company's stock option plans for deductibility under Section
162(m), although it has not done so in the past. The Committee notes that base
salary and bonus levels are expected to remain below the $1,000,000 limitation
in the foreseeable future.
This report is furnished by the Compensation Committee of the Board of
Directors.
June 20, 1996
Robert D. Mattei
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STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in cumulative total
stockholder return on the Common Stock since December 30, 1994 with the
cumulative total return on the Nasdaq Composite (US) Index and the Nasdaq
Industrial Index over the same period. The comparison assumes $100 was
invested on December 30, 1994 in the Common Stock and in each of the indices
and assumes reinvestment of dividends, if any, from that date to December 31,
1996. The Company has not paid cash dividends on the Common Stock. Historic
stock prices are not indicative of future stock price performance.(1)
[GRAPH]
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TOTAL RETURN ANALYSIS
12/30/94 12/29/95 12/31/96
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EPL TECHNOLOGIES $ 100 $ 620 $ 970
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NASDAQ INDUSTRIAL $ 100 $ 128 $ 148
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NASDAQ COMPOSITE (US) $ 100 $ 140 $ 172
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(1) Since July 1996, the Common Stock has traded on the Nasdaq Small Cap
Market tier of the Nasdaq Stock Market. From September 1995 to July 1996, the
Common Stock traded on the National Association of Securities Dealers "bulletin
board". Prior to September 1995, the Common Stock traded on the National
Association of Securities Dealers "pink sheets."
This Stock Performance Graph shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or under the Securities Exchange Act of 1934 (the "Exchange
Act"), except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under the
Securities Act or the Exchange Act and is not to be deemed to be soliciting
material.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company currently obtains all of its requirements for
certain raw materials from Jungbunzlauer, Inc., a U.S. subsidiary of
Jungbunzlauer Holding AG, a former shareholder of the Company. In the year
ended December 31, 1996, these purchases totaled $35,280. Dr. Rainer G.
Bichlbauer, a director of the Company from July 1994 to May 1997, serves as
Director of Finance and marketing of Jungbunzlauer Holding AG. Effective May
28, 1997, Jungbunzlauer Holding AG sold its remaining shares of the Company to
two existing Company shareholders and Dr. Bichlbauer resigned from the Board.
PROPOSAL NO. 2 - AMENDMENT
TO THE COMPANY'S 1994 STOCK INCENTIVE PLAN
On July 21, 1994, the Company's shareholders approved the
Plan, which provided for the granting of options for the cash purchase of an
aggregate of 1,500,000 shares of common stock, subject to certain adjustments,
for employees (including employees who are members of the Board) and certain
consultants or advisors of the Company or any Affiliate (as defined). On July
22, 1996 the Company's shareholders ratified an amendment to the Plan, which
increased the number of shares of Common Stock reserved for issuance under the
Plan to 3,000,000. On May 9, 1997, the Board adopted, found advisable and
recommended to the shareholders a further amendment to the Plan, pursuant to
the terms and conditions of the Plan. The amendment, which is subject to
shareholder approval, would increase the number of shares of Common Stock
reserved for issuance under the Plan to 4,500,000. If the shareholders do not
approve the amendment, the amendment will not be effective.
The purpose of the Plan is to provide such eligible persons
with additional incentive to devote themselves to the future success of the
Company or an Affiliate and to attract, retain and motivate individuals upon
whom the Company's sustained growth and financial success depend, by providing
such persons with an opportunity to acquire or increase their proprietary
interest in the Company.
The Plan is intended as an additional incentive to certain
employees, certain consultants or advisors and non-employee members of the
Board of Directors to enter into or remain in the employ of the Company or to
serve on the Board of Directors by providing them with an additional
opportunity to increase their proprietary interest in the Company and to align
their interests with those of the Company's shareholders generally through the
receipt of options to purchase Common Stock and has been structured to comply
with the applicable provisions of Section 16(b) of the Securities Exchange Act
of 1934, as amended and Rule 16b-3 thereunder.
The Plan is administered by the 1994 Stock Incentive Plan
Administration Committee appointed by the Board (the "Plan Committee"), which
is currently comprised of Robert D. Mattei and Ronald Cantwell. Options
granted under the Plan may be designated by the Plan Committee as "incentive
stock options" ("ISO's") within the meaning of Section 422(b)
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of the Internal Revenue Code of 1986, as amended, or may be designated by the
Plan Committee as options not intended to be ISO's ("non-qualified stock
options").
Options for 2,434,500 shares have been granted under the Plan.
The Board of Directors believes that, in light of the Company's recent growth
and the increase in employees eligible to receive options, an increase in the
maximum number of shares subject to options under the Plan is appropriate. The
Company has found that the use of options has enabled it to retain talented and
experienced individuals at salary levels below that which might otherwise be
required if options were not offered as part of the compensation package.
Moreover, options provide more or less of an economic benefit to option holders
depending on the market value of the Company's Common Stock, thereby
constituting a particularly effective incentive to option holders to endeavor
to improve the Company's performance. The Board of Directors believes that
increasing the number of shares issuable under the Plan to 4,500,000 will
provide a sufficient number of shares for option grants over the next few
years.
The material features of the Plan, as amended by the proposed
amendment, are as follows:
1. Number of Shares. The aggregate maximum number of shares for
which options to purchase shares of Common Stock may be granted under the Plan
is 4,500,000 shares, subject to adjustment upon the occurrence of stock
dividends, stock splits, recapitalization or certain other capital adjustments
that cause an increase or decrease in the number of issued and outstanding
shares of Common Stock. As of June 6, 1997, the aggregate market value of the
1,500,000 shares of Common Stock for which such additional options might now be
granted was $8,625,000.
2. Administration. The employees and certain consultants or
advisors of the Company to whom options may be granted, the timing of grants
for all eligible recipients and the option price for options granted to such
eligible persons, including non-employee members of the Board of Directors, are
as set forth in the Plan. Subject to the foregoing and other provisions of the
Plan, the Plan is administered by the Board of Directors of the Company if all
members of the Board of Directors are "Disinterested Directors" (as defined).
If any of the members of the Board of Directors are not Disinterested
Directors, the Board of Directors shall designate a committee composed of two
or more directors, each of whom is a Disinterested Director, to operate and
administer the Plan in its stead or designate two committees to operate and
administer the Plan in its stead, a Disinterested Director Committee to operate
and administer the Plan with respect to the Company's "Section 16 Officers" (as
defined) and the directors who are not members of the Disinterested Director
Committee, and another committee composed of two or more directors (which may
include directors who are not Disinterested Directors) to operate and
administer the Plan with respect to persons other than Section 16 Officers or
directors or designate a Disinterested Director Committee to operate and
administer the Plan with respect to the Company's Section 16 Officers and
directors (other than those directors serving on the Disinterested Director
Committee) and itself operate and administer the Plan with respect to persons
other than Section 16 Officers or directors. Such provisions are
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designed to permit the Plan Committee to meet the requirements of Rule 16b-3
under the Securities Exchange Act of 1934, as amended. The Plan Committee
currently consists of Robert D. Mattei and Ronald Cantwell, which administers
the Plan.
3. Eligibility. Employees, certain consultants or advisors and
non-employee directors of the Company and its Affiliates (as defined) are
eligible to receive options under the Plan, but the non-employee directors may
only receive a defined amount of non-qualified stock options, with vesting,
exercise price and other provisions as described in Paragraph 11 below. On
December 31, 1996, the number of employees eligible to participate in the Plan
was approximately 111 and two persons were eligible to participate in the Plan
as non-employee directors.
4. Term of Plan. The Plan provides that no option may be granted
under it after May 4, 1999.
5. Term of Option. All options (other than those for
non-employee directors, as further described in Paragraph 11 below) terminate
on the earliest of: (a) expiration of the option term specified in the
document granting the option, which for an ISO shall not exceed (i) five years
from the date of grant (or such shorter period as the Plan Committee may
select) or (ii) five years from the date of grant if the optionee owns,
directly or by attribution under the Code, shares possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or of its Affiliates (as defined); (b) the expiration of three months
(or such shorter period as the Plan Committee may select) from the date an
optionee's employment terminates for any reason other than a "Change of
Control", death or disability; (c) a finding by the Plan Committee that the
optionee has breached his employment or service contract with the Company or
has been engaged in any sort of disloyalty to the Company; (d) the expiration
of one year from the date on which the optionee's employment terminates due to
such optionee's disability or death; (e) the date set by the Plan Committee to
be an accelerated expiration date in the event of the liquidation or
dissolution of the Company or other "Change of Control"; and (f) the date set
by the Plan Committee to be an accelerated expiration date in the event of a
change in the financial accounting treatment for options from that in effect on
the date the Plan was adopted adversely affects the Company, or may adversely
affect the Company in the foreseeable future.
All options granted to date under the Plan were immediately
exercisable as of the date of grant.
Notwithstanding the foregoing, the Plan Committee may extend the
period during which an option may be exercised to a date no later than the date
of expiration of the term specified in the option document.
In addition, the non-qualified stock options granted or to be granted
to non-employee directors and described in Paragraph 11 below have further
limitations on their term, as described in Paragraph 11.
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6. Option Price. The option price per share may be less than,
equal to or greater than the fair market value of the Common Stock subject to
the option on the date the option is granted; provided, however, that the
option price per share for an ISO shall be 100% of the fair market value of the
Common Stock on the date the option is granted, and provided, further, that if
an ISO is granted to an optionee who then owns, directly or by attribution
under the Code, shares possessing more than 10% of the total combined voting
power of all classes of stock of the Company or an Affiliate (as defined), then
the option price per share will be at least 110% of the fair market value of
the Common Stock subject to the option on the date the option is granted. The
Plan defines such fair market value, if the Common Stock is listed on a
national securities exchange or included in the Nasdaq National Market, the
last reported sales price thereof on the relevant date or, if not so listed or
included, as the mean between the closing "bid" and "asked" prices or the mean
between the highest and lowest quoted selling prices of the Common Stock, as
reported in customary financial reporting services, on the date the option is
granted.
7. Special Rules for Certain Shareholders. If an ISO is granted
to an optionee who then owns, directly or by attribution under the Code, shares
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or an Affiliate (as defined), then the term of the option
will not exceed five years and the option price per share will be at least 110%
of the fair market value of the Common Stock subject to the option on the date
the option is granted. Such restrictions do not apply to non-qualified stock
options granted to such an optionee, which are governed by the rules described
in Paragraphs 5 and 6 above.
8. Payment. An option holder may pay for shares covered by an
option in cash or by certified check or by such other mode of payment as the
Plan Committee may approve, including payment through a broker in accordance
with certain federal laws, or payment in whole or in part of unencumbered
shares of the Company's Common Stock, based on the fair market value of such
Common Stock at the time of payment. Notwithstanding the foregoing, the Board
of Directors, in its sole discretion, may refuse to accept shares of Common
Stock in payment of the option exercise price.
9. Option Document; Restriction on Transferability. All options
will be evidenced by a written option document containing provisions consistent
with the Plan. No option granted under the Plan may be transferred, except by
will or by the laws of descent and distribution or pursuant to certain other
laws.
10. Provisions Relating to a "Change of Control". In the event of
a "Change of Control", the Plan Committee may take whatever action with respect
to outstanding options it deems necessary or desirable, including accelerating
the expiration date of the options to a date no earlier than 30 days after
notice of such acceleration is given to holders of options. In addition, in
the event of a Change of Control, all options granted pursuant to the Plan will
become immediately exercisable in full.
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A Change of Control will occur under the Plan upon requisite
shareholder (or, if such approval is not required, Board of Directors) approval
of a plan of liquidation or dissolution or the sale of substantially all of the
assets of the Company. Subject to certain exceptions, a Change of Control will
also occur upon requisite approval by the Company's and the other constituent
corporation's stockholders (or, if such approval is not required, by the
applicable boards of directors) of the merger or consolidation of the Company
with or into such other constituent corporation. In addition, a Change of
Control will occur if certain entities, persons or groups specified in the Plan
(not including persons owning in excess of 20% of the outstanding Common Stock
at the time of the adoption of the Plan by the Board of Directors and the
shareholders) have become beneficial owners of our have obtained voting control
over more than 50% of the Company's outstanding Common Stock, or on the first
date upon which a majority of the Board of Directors consists of persons who
have been members of the Board of Directors for less than 24 months, unless the
nomination for election of each new director who was not a director at the
beginning of such period was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period.
11. Special Provisions for Grant of Options to Non-Employee
Directors. Options will be granted to non-employee directors and will become
exercisable under the Plan only in accordance with the following terms:
A. Each non-employee director will be granted,
commencing on May 4, 1995 and on each May 4th thereafter on which such person
remains a non-employee director, an option to purchase up to 15,000 shares of
Common Stock on a prorata basis.
B. Each such option granted to a non-employee director will
be a non-qualified stock option, so that the optionee shall have the right to
exercise the option with respect to 100% of the shares covered by such option
on the date of grant. The option exercise price shall be equal to the fair
market value of the underlying shares on the date the option is granted, as
determined by the Plan Committee.
C. Each such option granted to a non-employee director
will be exercisable until the first to occur of (i) expiration of five years
from the date of grant; (ii) expiration of five years from the date the
optionee's service with the Company or its Affiliates (as defined) terminates
for any reason other than death or disability; (iii) expiration of five years
from the date the optionee's service with the Company terminates by reason of
death or disability; and (iv) the date of a "Change of Control."
D. In no event shall (i) the exercise price of the
option be less than the fair market value of the shares subject to the option
on the date of grant; and (ii) payment of the exercise price for the option in
whole or in part in shares of Common Stock held by the optionee for more than
one year be restricted. The option document for such options may contain such
other restrictions and terms as are permitted by and consistent with the Plan
and as the Plan Committee shall determine.
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12. Amendments to the Option Document and the Plan. Subject to
the provisions of the Plan, the Board of Directors may amend an option
document, subject to the optionee's consent if the amendment is not favorable
to the optionee. The Board of Directors may amend the Plan from time to time
in such manner as it may deem advisable. Nevertheless, the Board of Directors
may not, without obtaining approval of a vote of a majority of the outstanding
voting stock of the Company, within twelve months before or after adoption of
the Plan or any amendment thereto, change the class of individuals eligible to
receive an ISO, extend the expiration date of the Plan, decrease the minimum
exercise price of an ISO granted under the Plan or increase the maximum number
of shares as to which options may be granted. In addition, the provisions of
the Plan that determine (i) which non-employee directors shall be granted
options under the special provisions applicable to them, (ii) the number of
option shares subject to options so granted; (iii) the exercise price for such
options; and (iv) the timing of the annual grants of such options shall not be
amended more than once every six months, other than to comport with changes in
the Code or the Employee Retirement Income Security Act of 1974, as amended, if
applicable.
13. Tax Aspects of the Plan. The following discussion is intended
to summarize briefly the general principles of Federal income tax law
applicable to options granted under the Plan. A recipient of an ISO will not
recognize taxable income upon either the grant or exercise of the ISO. The
option holder will recognize long-term capital gain or loss on a disposition of
the shares acquired upon exercise of an ISO, provided the option holder does
not dispose of those shares within two years from the date the ISO was granted
or within one year after the shares were transferred to such option holder.
Currently, for regular federal income tax purposes, long-term capital gain is
taxed at a maximum rate of 28%, while ordinary income may be subject to a
maximum rate of 39.6%. If the option holder satisfies both of the foregoing
holding periods, then the Company will not be allowed a deduction by reason of
the grant or exercise of an ISO.
As a general rule, if the option holder disposes of the shares before
satisfying both holding period requirements (a "disqualifying disposition"),
the gain recognized by the option holder on the disqualifying disposition will
be taxed as ordinary income to the extent of the difference between (a) the
lesser of the fair market value of the shares on the date of exercise or the
amount received for the shares in the disqualifying disposition, and (b) the
adjusted basis of the shares, and the Company will be entitled to a deduction
in that amount. The gain (if any) in excess of the amount recognized as
ordinary income on a disqualifying disposition will be long-term or short-term
capital gain, depending on the length of time the option holder held the shares
prior to the disposition.
The amount by which the fair market value of a share at the time of
exercise exceeds the option price will be included in the computation of such
option holder's "alternative minimum taxable income" in the year the option
holder exercises the ISO. Currently the alternative minimum tax rate is 28%.
If an option holder pays alternative minimum tax with respect to the exercise
of an ISO, then the amount of such tax paid will be allowed as a credit against
regular tax liability in subsequent years. The option holder's basis in the
shares for purposes of the
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alternative minimum tax will be adjusted when income is included in alternative
minimum taxable income.
A recipient of a non-qualified stock option will not recognize taxable
income at the time of grant, and the Company will not be allowed a deduction by
reason of the grant. Such an option holder will recognize ordinary income in
the taxable year in which the option holder exercises the option, in an amount
equal to the excess of the fair market value of the shares received upon
exercise at the time of exercise of such options over the exercise price of the
option, and the Company will be allowed a deduction in that amount. Upon
disposition of the shares subject to the option, an option holder will
recognize long-term or short-term capital gain or loss, depending upon the
length of time the shares were held prior to disposition, equal to the
difference between the amount realized on disposition and the option holder's
basis in the shares subject to the option (which basis ordinarily is the fair
market value of the shares subject to the option on the date the option was
exercised).
Whenever the Company proposes or is required to deliver or transfer
shares in connection with the exercise of an option under the Plan, the Company
has the right to require the option holder to remit or otherwise make available
to the Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for such shares or to take whatever action it deems
necessary to protect its interests with respect to tax liabilities in
connection with the issuance of such shares.
The Board of Directors believes that the grant of stock options will
provide significant incentives to directors and employees who contribute
materially to the Company's future success.
The favorable vote of a majority of the Company's shares of Common
Stock, A Preferred Stock, B Preferred Stock and C Preferred Stock present in
person or by proxy or entitled to vote at the Annual Meeting is required for
approval of the amendment to the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UNDER THE
PLAN.
PROPOSAL NO. 3 - AMENDMENT
TO THE COMPANY'S ARTICLES OF INCORPORATION
On July 22, 1996 shareholders authorized a new class of
2,000,000 shares of preferred stock, which the Board may issue from time to
time in one or more classes or series, with such designations, preferences and
privileges as the Board may determine in its discretion. As of the date of this
Proxy Statement, the Board has designated 531,915 shares of B Preferred Stock
and 144,444 shares of C Preferred Stock out of the 2,000,000 shares originally
available for issuance. Consequently, 1,323,641 shares of Board Designated
Preferred Stock remain available for issuance. On May 9, 1997 the Board
adopted, found advisable and recommended to the shareholders, a resolution to
amend the Company's Articles of Incorporation in the form
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attached as Exhibit A. The amendment, which is subject to shareholder
approval, increases this class to 4,000,000 shares of Board Designated
Preferred Stock, of which 3,323,641 would be immediately available for
issuance. If the shareholders do not approve the amendment, the amendment will
not be effective.
The basic purpose of the proposed amendment is to afford the Company
increased flexibility, as permitted by the Colorado Business Corporation Act,
in structuring its future capitalization to meet financing needs for expansion
and growth and for other corporate purposes which the Board may deem desirable,
including, without limitation, future public offerings or private placements,
acquisitions, employee benefit plans, stock splits, stock dividends, stock
options or other distributions, by permitting the issuance of shares on terms
that can be specifically adapted to a particular situation promptly and
economically by the Board, without solicitation of proxies, further action or
authorization by the shareholders. The Board has no immediate plans for
issuing any additional shares other than shares currently reserved for
issuance. If the proposed amendment is approved, however, shares of such
preferred stock, or other shares of capital stock authorized in the Company's
Articles of Incorporation and not then outstanding, may be issued by the
Company without further authorization by the shareholders. With respect to
such preferred stock, such shares may be issued up to the full amount of the
shares authorized and previously unissued with such designations, preferences,
voting rights, limitations and other special rights and such other terms as the
Board may determine.
Adoption of the amendment could, however, make more difficult, and
therefore discourage, attempts to acquire or alter control of the Company, even
though some shareholders of the Company may deem such change of control
desirable. The authority to issue additional shares on terms set by the Board
could be used to create voting impediments or other hindrances to frustrate
persons seeking to effect a merger or otherwise take control of the Company or
could be used to issue shares in a private placement to one or more persons
sympathetic to management and opposed to any takeover bid.
The Board has no knowledge of any present effort to accumulate the
Company's securities or to obtain control of the Company. The Board has no
plans at the present time to submit to shareholders for approval, or take any
other action with respect to any proposals, other than the proposed amendment
to the Company's Articles of Incorporation set forth in this Proxy Statement,
that might be deemed to have an anti-takeover effect. In the judgment of the
Board, there are now no provisions in the Company's Articles of Incorporation,
its Bylaws or any other agreement or plan to which the Company is a party that
could be viewed as having, to a significant extent, such an effect other than
the existing classes of Preferred Stock. There is no inter-relationship
between the existing provisions and the proposed amendment.
The proposed amendment to the Company's Articles of Incorporation will
become effective if it receives the affirmative votes of the holders of a
majority of the outstanding shares of each of the classes of the Company's
Common Stock, A Preferred Stock, B Preferred Stock and C Preferred Stock. The
resolution proposed by the Board for adoption by the shareholders
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is set forth as Exhibit A to this Proxy Statement and is incorporated in this
Proxy Statement by reference.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO INCREASE THE AUTHORIZED CAPITAL OF THE COMPANY BY 2,000,000 SHARES
OF PREFERRED STOCK.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, independent auditors, audited the financial
statements of the Company for the year ended December 31, 1996.
Representatives of Deloitte & Touche LLP are expected to attend the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions. The
Board has selected Deloitte & Touche LLP as the independent auditors to audit
the Company's financial statements for the fiscal year ending December 31,
1997.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT 1934
Section 16(a) of the Securities Exchange Act 1934 requires the
Company's directors, officers (including a person performing a principal
policy-making function) and persons who own more than 10% of a registered class
of the Company's equity securities ("10% Holders") to file with the Securities
and Exchange Commission ("SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Directors, officers and 10% Holders are required by SEC regulations
to furnish the Company with copies of all of the Section 16(a) reports they
file. Based solely upon a review of the copies of the forms furnished to the
Company and the representations made by the reporting persons to the Company,
the Company believes that during fiscal 1996 its directors, officers and 10%
Holders complied with all filing requirements under Section 16(a) of the
Exchange Act, except (i) Trilon Dominion Partners, L.L.C. inadvertently failed
to file a Form 4 relating to one transaction, which was subsequently reported
on Form 5 in February 1997, and (ii) Lancer Partners, L.P. was inadvertently
late in filing a Form 4 relating to one transaction.
SHAREHOLDER PROPOSALS - 1998 ANNUAL MEETING
Proposals of shareholders intended to be presented at the
annual meeting of shareholders in 1998 must be received by February 21, 1998 in
order to be considered for inclusion in the Company's Proxy Statement and form
of proxy relating to that annual meeting. Shareholder proposals should be
directed to the Company's Secretary, at the address of the Company set forth on
the first page of this Proxy Statement.
OTHER MATTERS
The Board knows of no matter, other than as referred to in
this Proxy Statement, which will be presented at the Annual Meeting. However,
if other matters properly come before the Annual Meeting, or any adjournment or
postponement thereof, the person or persons voting the proxies will vote them
in accordance with their judgment in such matters.
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ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON
SOLICITED BY THIS PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A
COPY OF THE FINANCIAL STATEMENTS, EXHIBITS AND SCHEDULES THAT ARE ATTACHED TO
THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION FOR ITS MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUEST
SHOULD BE DIRECTED TO THE ATTENTION OF THE COMPANY'S SECRETARY AT THE ADDRESS
OF THE COMPANY APPEARING ON THE FIRST PAGE OF THIS PROXY STATEMENT OR FAXED TO
THE COMPANY AT (610) 521-5985.
By order of the Board of Directors,
Timothy B. Owen
Secretary
June 20, 1997
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EXHIBIT A
RESOLVED, that Paragraph A. of Article V of the Articles of Incorporation of
the Company be amended and restated to read in its entirety as follows:
The Corporation shall have the authority to issue fifty
million (50,000,000) shares of common stock with a par value
$0.001 per share, three million two hundred fifty thousand
(3,250,000) shares of Series A 10% Cumulative Convertible
Preferred Stock with a par value of $1.00 per share ("Series A
Preferred Stock"), 531,915 shares of Series B 10% Cumulative
Convertible Preferred Stock with a par value of $0.01 per
share ("Series B Preferred Stock"), 144,444 shares of Series C
10% Cumulative Convertible Preferred Stock with a par value of
$0.01 per share ("Series C Preferred Stock") and three
million, three hundred twenty-three thousand, six hundred
forty-one (3,323,641) shares of preferred stock with a par
value of $0.01 per share ("Board Designated Preferred Stock").
The Board of Directors of the Corporation may determine, in
whole or in part, the preferences, limitations, and relative
rights of the Board Designated Preferred Stock, within the
limits set forth in Section 7-106-101 of the Colorado Business
Corporation Act, of any class of the Board Designated
Preferred Stock, before the issuance of any shares of that
class, or one or more series within a class of the Board
Designated Preferred Stock before the issuance of any shares
of that series. The Board of Directors may issue, in one or
more classes or series, shares of the Board Designated
Preferred Stock with full, limited, multiple, fractional or no
voting rights, and with such designations, preferences,
qualifications, privileges, limitations, restrictions,
options, conversion rights, or other special or relative
rights as shall be fixed from time to time by the Board of
Directors, except for and subject to, in each case, the limits
set forth in Section 7-106-101 of the Colorado Business
Corporation Act and in accordance with the provisions and
requirements of Section 7-106-102 of the Colorado Business
Corporation Act.
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Appendix A
EPL TECHNOLOGIES, INC.
1994 STOCK INCENTIVE PLAN(AS AMENDED)
1. Purpose. EPL Technologies, Inc. (the "Company") hereby adopts
the EPL Technologies, Inc. 1994 Stock Incentive Plan (the "Plan"), as amended.
The Plan is intended to recognize the contributions made to the Company by all
employees (including employees who are members of the Board of Directors) of
the Company or any Affiliate (as defined below), and certain consultants or
advisors to the Company or an Affiliate, to provide such persons with
additional incentive to devote themselves to the future success of the Company
or an Affiliate, and to improve the ability of the Company or an Affiliate to
attract, retain, and motivate individuals upon whom the Company's sustained
growth and financial success depend, by providing such persons with an
opportunity to acquire or increase their proprietary interest in the Company
through receipt of rights to acquire the Company's Common Stock, par value
$0.001 per Share (the "Common Stock") and through the transfer or issuance of
Common Stock subject to conditions of forfeiture. In addition, the Plan is
intended as an additional incentive to certain directors of the Company who are
not employees of the Company or an Affiliate to serve on the Board of Directors
and to devote themselves to the future success of the Company by providing them
with an opportunity to acquire or increase their proprietary interest in the
Company through the receipt of rights to acquire Common Stock.
28
2. Definitions. Unless the context clearly indicates otherwise,
the following terms shall have the following meanings:
(a) "Affiliate" means a corporation which is a parent
corporation or a subsidiary corporation with respect to the Company within the
meaning of Section 424(e) or (f) of the Code.
(b) "Award" shall mean a transfer of Common Stock subject
to conditions of forfeiture made pursuant to the terms of the Plan.
(c) "Award Agreement" shall mean the agreement between
the Company and a Grantee with respect to an Award made pursuant to the Plan.
(d) "Awardee" shall mean a person to whom an Award has been
granted pursuant to the Plan.
(e) "Board of Directors" means the Board of Directors
of the Company.
(f) "Change of Control" shall have the meaning as set
forth in Section 10 of the Plan.
(g) "Code" means the Internal Revenue Code of 1986, as
amended.
(h) "Committee" shall have the meaning set forth in
Section 3 of the Plan.
(i) "Company" means EPL Technologies, Inc., a Colorado
corporation.
(j) "Disability" shall have the meaning set forth in
Section 22(e)(3) of the Code.
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(k) "Disinterested Director" shall mean a member of the
Board of Directors of the Company who is "disinterested" within the meaning of
Rule 16b-3.
(l) "Fair Market Value" shall have the meaning set forth
in Subsection 8(b) of the Plan.
(m) "Grantee" shall mean a person to whom an Option or an
Award has been granted pursuant to the Plan.
(n) "ISO" means an Option granted under the Plan which is
intended to qualify as an "incentive stock option" within the meaning of
Section 422(b) of the Code.
(o) "Non-qualified Stock Option" means an Option granted
under the Plan which is not intended to qualify, or otherwise does not qualify,
as an "incentive stock option" within the meaning of Section 422(b) of the
Code.
(p) "Option" means either an ISO or a Non-qualified Stock
Option granted under the Plan.
(q) "Optionee" means a person to whom an Option has been
granted under the Plan, which Option has not been exercised and has not expired
or terminated.
(r) "Option Document" means the document described in
Section 8 or Section 9 of the Plan, as applicable, which sets forth the terms
and conditions of each grant of Options.
(s) "Option Price" means the price at which Shares may be
purchased upon exercise of an Option, as calculated pursuant to Subsection 8(b)
or Subsection 9(a) of the Plan.
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(t) "Restricted Stock" means Common Stock subject to
conditions of forfeiture and transfer granted to any person pursuant to an
Award under the Plan.
(u) "Rule 16b-3" means Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended.
(v) "Section 16 Officer" means any person who is an "officer"
within the meaning of Rule 16a-1(f) promulgated under the Securities Exchange
Act of 1934, as amended, or any successor rule.
(w) "Shares" means the shares of Common Stock of the
Company which are the subject of Options or granted as Awards under the Plan.
3. Administration of the Plan. The Plan shall be administered by
the Board of Directors of the Company if all members of the Board of Directors
are Disinterested Directors; provided, however, that if all members of the
Board of Directors are Disinterested Directors, the Board of Directors may
designate a committee or committee(s) of the Board of Directors composed of two
or more directors to administer the Plan with respect to the Section 16
Officers, directors, and/or key employees. If any of the members of the Board
of Directors are not Disinterested Directors, the Board of Directors shall (i)
designate a committee composed of two or more of directors, each of whom is a
Disinterested Director (the "Disinterested Director Committee"), to operate and
administer the Plan in its stead, (ii) designate two committees to operate and
administer the Plan in its stead, a
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Disinterested Director Committee to operate and administer the Plan with
respect to the Company's Section 16 Officers and the directors who are not
members of the Disinterested Director Committee, and another committee composed
of two or more directors (which may include directors who are not Disinterested
Directors) to operate and administer the Plan with respect to persons other
than Section 16 Officers or directors or (iii) designate a Disinterested
Director Committee to operate and administer the Plan with respect to the
Company's Section 16 Officers and directors (other than those directors serving
on the Disinterested Director Committee) and itself operate and administer the
Plan with respect to persons other than Section 16 Officers or directors. Any
of such committees designated by the Board of Directors, and the Board of
Directors itself in its administrative capacity with respect to the Plan, is
referred to as the "Committee." With the exception of the timing of grants of
Options, the price at which Shares may be purchased, and the number of Shares
covered by Options granted to each member of the Disinterested Director
Committee, all of which shall be as specifically set forth in Section 9, the
other provisions set forth herein, as it pertains to members of the
Disinterested Director Committee, shall be administered by the Board of
Directors.
(a) Meetings. The Committee shall hold meetings at such
times and places as it may determine, shall keep minutes of its meetings, and
shall adopt, amend and revoke such rules or
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32
procedures as it may deem proper; provided, however, that it may take action
only upon the agreement of a majority of the whole Committee. Any action which
the Committee shall take through a written instrument signed by a majority of
its members shall be as effective as though it had been taken at a meeting duly
called and held. The Committee shall report all actions taken by it to the
Board of Directors.
(b) Grants and Awards. Except with respect to Options
granted to members of the Disinterested Director Committee pursuant to Section
9, the Committee shall from time to time at its discretion direct the Company
to grant Options or Awards pursuant to the terms of the Plan. The Committee
shall have plenary authority to (i) determine the persons to whom, the times at
which, and the price at which Options shall be granted, (ii) determine the type
of Option to be granted and the number of Shares subject thereto, (iii)
determine the persons to whom, and the times at which, Awards of Restricted
Stock shall be granted, the number of Shares awarded, and the purchase price
per Share, if any, and (iv) approve the form and terms and conditions of the
Option Documents and Award Agreements; all subject, however, to the express
provisions of the Plan. Notwithstanding the foregoing, no person may be
granted Options to acquire more than two hundred thousand (200,000) Shares in
any calendar year. In making such determinations, the Committee may take into
account the nature of the Grantee's services and responsibilities, the
Grantee's present and potential contribution to the Company's
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33
success and such other factors as it may deem relevant. Notwithstanding the
foregoing, grants of Options to members of the Disinterested Director Committee
shall be made exclusively in accordance with Section 9. The interpretation and
construction by the Committee of any provisions of the Plan or of any Option or
Award granted under it shall be final, binding and conclusive.
(c) Exculpation. No member of the Board of Directors
shall be personally liable for monetary damages for any action taken or any
failure to take any action in connection with the administration of the Plan or
the granting of Options or Awards under the Plan, provided that this Subsection
3(c) shall not apply to (i) any breach of such member's duty of loyalty to the
Company or, an Affiliate, or the Company's stockholders, (ii) acts or omissions
not in good faith or involving intentional misconduct or a knowing violation of
law, (iii) acts or omissions that would result in liability under applicable
law, and (iv) any transaction from which the member derived an improper
personal benefit.
(d) Indemnification. Service on the Committee shall
constitute service as a member of the Board of Directors of the Company. Each
member of the Committee shall be entitled, without further action on his part,
to indemnity from the Company and limitation of liability to the fullest extent
provided by applicable law and by the Company's Certificate of Incorporation
and/or By-laws in connection with or arising out of any action, suit or
proceeding with respect to the administration of the Plan
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34
or the granting of Options and Awards thereunder in which he or she may be
involved by reason of his or her being or having been a member of the
Committee, whether or not he or she continues to be such member of the
Committee at the time of the action, suit or proceeding.
4. Options and Awards under the Plan. Options under the Plan may
be in the form of a Non-qualified Stock Option, an ISO, or a combination
thereof, at the discretion of the Committee. Awards under the Plan shall be in
the form of Restricted Stock.
5. Eligibility. All employees, certain consultants or advisors,
and members of the Board of Directors shall be eligible to receive Options and
Awards hereunder. However, members of the Disinterested Director Committee may
receive Options only pursuant to Section 9 and are not eligible to receive
Awards.
6. Shares Subject to Plan. The aggregate maximum number of
Shares for which Awards or Options may be granted pursuant to the Plan is four
million, five hundred thousand (4,500,000), subject to adjustment as provided
in Section 11 of the Plan. The Shares shall be issued from authorized and
unissued Common Stock or Common Stock held in or hereafter acquired for the
treasury of the Company. If an Option terminates or expires without having
been fully exercised for any reason, or if Shares granted pursuant to an Award
have been conveyed back to the Company pursuant to the terms of an Award
Agreement, the Shares for which the Option was not exercised or the Shares that
were conveyed
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35
back to the Company may again be the subject of one or more Options or Awards
granted pursuant to the Plan.
7. Term of the Plan. The Plan is effective as of May 5, 1994,
the date on which it was adopted by the Board of Directors, subject to the
approval of the Plan on or before May 4, 1995 by a majority of the votes cast at
a duly called meeting of the shareholders at which a quorum representing a
majority of all outstanding voting stock of the Company is, either in person or
by proxy, present and voting, by the unanimous consent in writing of the
shareholders or by a method and in a degree that would be treated as adequate
under applicable state law in the case of an action requiring shareholder
approval. No Option or Award may be granted under the Plan after May 4, 1999.
If the Plan is not so approved on or before May 4, 1995, all Options and Awards
granted under the Plan shall be null and void.
8. Option Documents and Terms. Each Option granted under the
Plan shall be a Non-qualified Stock Option unless the Option shall be
specifically designated at the time of grant to be an ISO for federal income
tax purposes. To the extent any Option designated an ISO is determined for any
reason not to qualify as an incentive stock option within the meaning of
Section 422 of the Code, such Option shall be treated as a Non-qualified Stock
Option for all purposes under the provisions of the Plan. Options granted
pursuant to the Plan shall be evidenced by the
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36
Option Documents in such form as the Committee shall from time to time approve,
which Option Documents shall comply with and be subject to the following terms
and conditions and such other terms and conditions as the Committee shall from
time to time require which are not inconsistent with the terms of the Plan.
However, the provisions of this Section 8 shall not be applicable to Options
granted to members of the Disinterested Director Committee, except as otherwise
provided in Subsection 9(c).
(a) Number of Option Shares. Each Option Document shall
state the number of Shares to which it pertains. An Optionee may receive more
than one Option, which may include Options which are intended to be ISO's and
Options which are not intended to be ISO's, but only on the terms and subject
to the conditions and restrictions of the Plan.
(b) Option Price. Each Option Document shall state the
Option Price which, for a Non-qualified Stock Option, may be less than, equal
to, or greater than the Fair Market Value of the Shares on the date the Option
is granted and, for an ISO, shall be at least 100% of the Fair Market Value of
the Shares on the date the Option is granted as determined by the Committee in
accordance with this Subsection 8(b); provided, however, that if an ISO is
granted to an Optionee who then owns, directly or by attribution under Section
424(d) of the Code, shares possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or an Affiliate,
then the Option Price shall be at least 110% of the Fair Market Value of the
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37
Shares on the date the Option is granted. If the Common Stock is traded in a
public market, then the Fair Market Value per share shall be, if the Common
Stock is listed on a national securities exchange or included in the NASDAQ
National Market System, the last reported sale price thereof on the relevant
date, or, if the Common Stock is not so listed or included, the mean between
the last reported "bid" and "asked" prices thereof on the relevant date, as
reported on NASDAQ or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines.
(c) Exercise. No Option shall be deemed to have been
exercised prior to the receipt by the Company of written notice of such
exercise and of payment in full of the Option Price for the Shares to be
purchased. Each such notice shall specify the number of Shares to be purchased
and shall (unless the Shares are covered by a then current registration
statement or a Notification under Regulation A under the Securities Act of
1933, as amended (the "Act")), contain the Optionee's acknowledgment in form
and substance satisfactory to the Company that (a) such Shares are being
purchased for investment and not for distribution or resale (other than a
distribution or resale which, in the opinion of counsel satisfactory to the
Company, may be made without violating the registration provisions of the Act),
(b) the Optionee has been advised and understands that (i) the Shares have not
been registered under the Act and are
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"restricted securities" within the meaning of Rule 144 under the Act and are
subject to restrictions on transfer and (ii) the Company is under no obligation
to register the Shares under the Act or to take any action which would make
available to the Optionee any exemption from such registration, (c) such Shares
may not be transferred without compliance with all applicable federal and state
securities laws, and (d) an appropriate legend referring to the foregoing
restrictions on transfer and any other restrictions imposed under the Option
Documents may be endorsed on the certificates. Notwithstanding the foregoing,
if the Company determines that issuance of Shares should be delayed pending (A)
registration under federal or state securities laws, (B) the receipt of an
opinion of counsel satisfactory to the Company that an appropriate exemption
from such registration is available, (C) the listing or inclusion of the Shares
on any securities exchange or an automated quotation system or (D) the consent
or approval of any governmental regulatory body whose consent or approval is
necessary in connection with the issuance of such Shares, the Company may defer
exercise of any Option granted hereunder until any of the events described in
this sentence has occurred.
(d) Medium of Payment. An Optionee shall pay for Shares
(i) in cash, (ii) by certified or cashier's check payable to the order of the
Company, or (iii) by such other mode of payment as the Committee may approve,
including payment through a broker in accordance with procedures permitted by
Regulation T of
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the Federal Reserve Board. Furthermore, the Committee may provide in an Option
Document that payment may be made in whole or in part in shares of the
Company's Common Stock held by the Optionee. If payment is made in whole or in
part in shares of the Company's Common Stock, then the Optionee shall deliver
to the Company certificates registered in the name of such Optionee
representing the shares owned by such Optionee, free of all liens, claims and
encumbrances of every kind and having an aggregate Fair Market Value on the
date of delivery that is at least as great as the Option Price of the Shares
(or relevant portion thereof) with respect to which such Option is to be
exercised by the payment in shares of Common Stock, endorsed in blank or
accompanied by stock powers duly endorsed in blank by the Optionee. In the
event that certificates for shares of the Company's Common Stock delivered to
the Company represent a number of shares of Common Stock in excess of the
number of shares of Common Stock required to make payment for the Option Price
of the Shares (or relevant portion thereof) with respect to which such Option
is to be exercised by payment in shares of Common Stock, the stock certificate
issued to the Optionee shall represent (i) the Shares in respect of which
payment is made, and (ii) such excess number of shares of Common Stock.
Notwithstanding the foregoing, the Committee may impose from time to time such
limitations and prohibitions on the use of shares of the Common Stock to
exercise an Option as it deems appropriate.
(e) Termination of Options.
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(i) No Option shall be exercisable after the first to
occur of the following:
(A) Expiration of the Option term specified
in the Option Document, which, in the case of an ISO, shall not occur after (1)
five years from the date of grant, or (2) five years from the date of grant of
an ISO if the Optionee on the date of grant owns, directly or by attribution
under Section 424(d) of the Code, shares possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or of
an Affiliate;
(B) Except to the extent otherwise provided
in an Optionee's Option Document, a finding by the Committee, after full
consideration of the facts presented on behalf of both the Company and the
Optionee, that the Optionee has breached his or her employment or service
contract with the Company or an Affiliate, or has been engaged in disloyalty to
the Company or an Affiliate, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the course
of his or her employment or service, or has disclosed trade secrets or
confidential information of the Company or an Affiliate. In such event, in
addition to immediate termination of the Option, the Optionee shall
automatically forfeit all Shares for which the Company has not yet delivered
the share certificates upon refund by the Company of the Option Price.
Notwithstanding anything herein to the contrary, the Company may withhold
delivery of share certificates pending the resolution of
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any inquiry that could lead to a finding resulting in a forfeiture;
(C) The date, if any, set by the Board of
Directors as an accelerated expiration date in the event of the liquidation or
dissolution of the Company; or
(D) The occurrence of such other event or
events as may be set forth in the Option Document as causing an accelerated
expiration of the Option.
(E) The date, if any, set by the Committee as
an accelerated expiration date in the event of a change in the required
financial accounting treatment for stock options from that in effect on May 5,
1994 that adversely affects or may adversely affect the Company in the
foreseeable future.
(ii) Notwithstanding the foregoing, the Committee
may extend the period during which all or any portion of an Option may be
exercised to a date no later than the Option term specified in the Option
Document pursuant to Subsection 8(e)(i)(A), provided that any change pursuant
to this Subsection 8(e)(ii) which would cause an ISO to become a Non-qualified
Stock Option may be made only with the consent of the Optionee.
(iii) Notwithstanding anything to the contrary
contained in the Plan or an Option Document, an ISO shall be treated as a
Non-qualified Stock Option to the extent such ISO is exercised at any time
after the expiration of the time period permitted under the Code for the
exercise of an ISO.
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(f) Transfers. No Option granted under the Plan may be
transferred, except by will or by the laws of descent and distribution. During
the lifetime of the person to whom an Option is granted, such Option may be
exercised only by such person. Notwithstanding the foregoing, a Non-qualified
Stock Option may be transferred pursuant to the terms of a "qualified domestic
relations order," within the meaning of Sections 401(a)(13) and 414(p) of the
Code or within the meaning of Title I of the Employee Retirement Income
Security Act of 1974, as amended.
(g) Limitation on ISO Grants. To the extent that the
aggregate fair market value of stock with respect to which ISOs issued under
the Plan and incentive stock options issued under any other incentive stock
option plan of the Company or its Affiliates are exercisable for the first time
by any individual during any calendar year exceeds $100,000, such ISOs shall be
treated as Non-qualified Stock Options issued under the Plan. For purposes of
this subsection 8(i), the fair market value of stock shall be determined as of
the date of grant of the ISO or other incentive stock option.
(h) Other Provisions. Subject to the provisions of the
Plan, the Option Documents shall contain such other provisions including,
without limitation, provisions authorizing the Committee to accelerate the
exercisability of all or any portion of an Option granted pursuant to the Plan,
additional restrictions upon the exercise of the Option or additional
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43
limitations upon the term of the Option, as the Committee shall deem advisable.
(i) Amendment. Subject to the provisions of the Plan,
the Committee shall have the right to amend Option Documents issued to an
Optionee, subject to the Optionee's consent if such amendment is not favorable
to the Optionee, except that the consent of the Optionee shall not be required
for any amendment made pursuant to Subsection 8(e)(i)(E) or Section 10 of the
Plan, as applicable.
9. Special Provisions Relating to Grants of Options to members of
the Disinterested Director Committee. Options granted pursuant to the Plan to
members of the Disinterested Director Committee and other
non-employee/executive directors shall be granted, without any further action
by the Committee, in accordance with the terms and conditions set forth in this
Section 9. Options granted pursuant to this Section 9 shall be evidenced by
Option Documents in such form as the Committee shall from time to time approve,
which Option Documents shall comply with and be subject to the following terms
and conditions and such other terms and conditions as the Committee shall from
time to time require which are not inconsistent with the terms of the Plan.
(a) Timing of Grants; Number of Shares Subject to
Options; Exercisability of Options; Option Price. Each member of the
Disinterested Director Committee shall be granted annually, commencing on May
4, 1995 and on each May 4th thereafter ("Grant
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44
Date"), an Option to purchase fifteen thousand (15,000) Shares. The initial
Option grant under this Section 9 to each person who becomes a member of the
Disinterested Director Committee after May 4, 1995, shall be for the purchase
of a number of Shares equal to fifteen thousand (15,000) times the "Allocation
Fraction" (which cannot exceed one). The numerator of the Allocation Fraction
shall be equal to the number of months (a partial month of service shall equal
a full month of service) in the period which commences on the date a person's
service as a member of the Disinterested Director Committee commenced and ends
on the immediately following Grant Date, and the denominator shall be twelve
(12). Each such Option shall be a Non-qualified Stock Option, immediately
exercisable on the date of grant, over a period of five (5) years. The Option
Price shall be equal to the Fair Market Value of the Shares on the date the
Option is granted.
(b) Termination of Options Granted Pursuant to Section 9.
All Options granted pursuant to this Section 9 shall be exercisable until the
first to occur of the following:
(i) Expiration of five (5) years from the
date of grant;
(ii) Expiration of five (5) years from
the date the Optionee's service as a director terminates for any reason other
than Disability or death;
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(iii) Expiration of five (5) years from the
date the Optionee's service as a director terminates due to the Optionee's
Disability or death; or
(iv) The date of a Change of Control.
(c) Applicability of Provisions of Section 8 to Options
Granted Pursuant to Section 9. The following provisions of Section 8 shall be
applicable to Options granted pursuant to this Section 9: Subsection
8(a)(provided that all Options granted pursuant to this Section 9 shall be
Non-qualified Stock Options); the last sentence of Subsection 8(b); Subsection
8(c); Subsection 8(d) (provided that Option Documents relating to Options
granted pursuant to this Section 9 shall provide that payment may be made in
whole or in part in shares of Company Common Stock); Subsection 8(f); and
Subsection 8(h).
10. Change of Control. In the event of a Change of Control, the
Committee may take whatever action it deems necessary or desirable with respect
to the Options and Awards outstanding (other than Options granted pursuant to
Section 9), including, without limitation, accelerating the expiration or
termination date in the respective Option Documents to a date no earlier than
thirty (30) days after notice of such acceleration is given to the Optionees.
In addition to the foregoing, in the event of a Change of Control, Options
granted pursuant to the Plan and held by Optionees who are employees or members
of the Board of Directors at the time of a Change of Control shall become
immediately exercisable in full and the restrictions
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46
applicable to Restricted Stock awarded to Awardees who are employees or members
of the Board of Directors at the time of a Change of Control shall immediately
lapse and the Restricted Stock held by the Company shall be delivered to the
Grantees. Any amendment to this Section 10 which diminishes the rights of
Optionees, other than the acceleration of the expiration or termination date to
a date no earlier than thirty (30) days after notice of such acceleration,
shall not be effective with respect to Options outstanding at the time of
adoption of such amendment, whether or not such outstanding Options are then
exercisable.
A "Change of Control" shall be deemed to have occurred upon
the earliest to occur of the following events: (i) the date the shareholders
of the Company (or the Board of Directors, if shareholder action is not
required) approve a plan or other arrangement pursuant to which the Company
will be dissolved or liquidated, or (ii) the date the shareholders of the
Company (or the Board of Directors, if shareholder action is not required)
approve a definitive agreement to sell or otherwise dispose of substantially
all of the assets of the Company, or (iii) the date the shareholders of the
Company (or the Board of Directors, if shareholder action is not required) and
the shareholders of the other constituent corporation (or its board of
directors if shareholder action is not required) have approved a definitive
agreement to merge or consolidate the Company with or into such other
corporation, other than, in either case, a merger or consolidation of the
Company in which holders of shares of the
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Company's Common Stock immediately prior to the merger or consolidation will
have at least a majority of the ownership of common stock of the surviving
corporation (and, if one class of common stock is not the only class of voting
securities entitled to vote on the election of directors of the surviving
corporation, a majority of the voting power of the surviving corporation's
voting securities) immediately after the merger or consolidation, which common
stock (and, if applicable, voting securities) is to be held in the same
proportion as such holders' ownership of Common Stock of the Company
immediately before the merger or consolidation, or (iv) the date any entity,
person or group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Securities Exchange Act of 1934, as amended, other than the Company or any
of its subsidiaries or any employee benefit plan (or related trust) sponsored
or maintained by the Company or any of its subsidiaries shall have become the
beneficial owner of, or shall have obtained voting control over, more than
twenty percent (20%) of the outstanding Shares of the Company's Common Stock,
or (v) the first day after the date this Plan is effective when directors are
elected such that a majority of the members of the Board of Directors shall
have been members of the Board of Directors for less than one (1) year, unless
the nomination for election of each new director who was not a director at the
beginning of such one (1) year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period.
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11. Adjustments on Changes in Capitalization.
(a) In the event that the outstanding Shares are changed by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination or exchange of shares and the
like (not including the issuance of Common Stock on the conversion of other
securities of the Company which are outstanding on the date of grant and which
are convertible into Common Stock) or dividends payable in Shares, an equitable
adjustment shall be made by the Committee in the aggregate number of shares
available under the Plan and in the number of Shares and price per Share
subject to outstanding Options. Unless the Committee makes other provisions
for the equitable settlement of outstanding options, if the Company shall be
reorganized, consolidated, or merged with another corporation, or if all or
substantially all of the assets of the Company shall be sold or exchanged, an
Optionee shall at the time of issuance of the stock under such corporate event
be entitled to receive upon the exercise of his or her Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as he or she would have been entitled to receive upon the occurrence of any
such corporate event as if he or she had been, immediately prior to such event,
the holder of the number of shares covered by his or her Option.
(b) Any adjustment under this Section 11 in the number of
Shares subject to Options shall apply proportionately to only the unexercised
portion of any Option granted hereunder. If
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fractions of a Share would result from any such adjustment, the adjustment
shall be revised to the next lower whole number of Shares.
(c) The Committee shall have authority to determine the
adjustments to be made under this Section, and any such determination by the
Committee shall be final, binding and conclusive.
12. Terms and Conditions of Awards. Awards granted pursuant to the
Plan shall be evidenced by written Award Agreements in such form as the
Committee shall from time to time approve, which Award Agreements shall comply
with and be subject to the following terms and conditions and such other terms
and conditions which the Committee shall from time to time require which are
not inconsistent with the terms of the Plan. The Committee may, in its sole
discretion, shorten or waive any term or condition with respect to all or any
portion of any Award. Notwithstanding the foregoing, all restrictions shall
lapse or terminate with respect to Restricted Stock upon the death or
Disability of the Awardee.
(a) Number of Shares. Each Award Agreement shall state
the number of shares of Common Stock to which it pertains.
(b) Purchase Price. Each Award Agreement shall specify
the purchase price, if any, which applies to the Award. If the Board specifies
a purchase price, the Awardee shall be required to make payment on or before
the date specified in the
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Award Agreement. An Awardee shall pay for such Shares (i) in cash, (ii) by
certified check payable to the order of the Company, or (iii) by such other
mode of payment as the Committee may approve.
(c) In the case of an Award which provides for a transfer
of Shares without any payment by the Grantee, the transfer shall take place on
the date specified in the Award Agreement. In the case of an Award which
provides for a payment, the transfer shall take place on the date the initial
payment is delivered to the Company, unless the Committee or the Award
Agreement otherwise specifies. Stock certificates evidencing Shares
transferred pursuant to an Award shall be issued in the sole name of the
Grantee. Notwithstanding the foregoing, as a precondition to a transfer, the
Company may require an acknowledgment by the Grantee as required with respect
to Options under Section 8.
(d) Forfeiture Conditions. The Committee may specify in
an Award Agreement any conditions under which the Grantee of that Award shall
be required to convey to the Company the Shares covered by the Award. Upon the
occurrence of any such specified condition, the Grantee shall forthwith
surrender and deliver to the Company the certificates evidencing such Shares as
well as completely executed instruments of conveyance. The Committee, in its
discretion, may provide that certificates for Shares transferred pursuant to an
Award be held in escrow by the Company's Treasurer, together with an undated
stock power
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executed by the Awardee Company or an appropriate officer of the Company until
such time as each and every forfeiture condition has lapsed and that the
Grantee be required, as a condition of the transfer, to deliver to such escrow
agent stock powers covering the transferred Shares duly endorsed by the
Grantee. Stock certificates evidencing Shares subject to forfeiture shall bear
a legend to the effect that the Common Stock evidenced thereby is subject to
repurchase or conveyance to the Company in accordance with an Award made under
the Plan and that the Shares may not be sold or otherwise transferred.
(e) Lapse of Conditions. Upon termination or lapse of
each and every forfeiture condition, the Company shall cause certificates
without the legend referring to the Company's repurchase right (but with any
other legends that may be appropriate) evidencing the Shares covered by the
Award to be issued to the Grantee upon the Grantee's surrender of the legended
certificates held by him to the Company.
(f) Rights as Shareholder. Upon payment of the purchase
price, if any, for Shares covered by an Award and compliance with the
acknowledgment requirement of subsection 13(c), the Grantee shall have all of
the rights of a shareholder with respect to the Shares covered thereby,
including the right to vote the Shares and receive all dividends and other
distributions paid or made with respect thereto, except to the extent otherwise
provided by the Committee or in the Award Agreement.
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(g) Lapse of Restrictions. Upon the expiration or termination
of the Restricted Period and the satisfaction of any other conditions
prescribed by the Committee time as provided for in the Plan, the restrictions
applicable to the Restricted Stock shall lapse and a stock certificate for the
number of shares of Common Stock with respect to which the restrictions have
lapsed shall be delivered, free of all such restrictions, except any that may
be imposed by law or pursuant to any shareholders agreement then in effect, to
the Awardee or the beneficiary or estate, as the case may be. The Company
shall not be required to deliver any fractional share of Common Stock but will
pay, in lieu thereof, the fair market value (determined as of the date the
restrictions lapse) of such fractional share to the Awardee or the Awardee's
beneficiary or estate, as the case may be. The Award may provide for the lapse
of restrictions on transfer and forfeiture conditions in installments.
(h) Section 83(b) Elections. An Awardee who files an election
with the Internal Revenue Service to include the fair market value of any
Restricted Stock in gross income while they are still subject to restrictions
shall promptly furnish the Company with a copy of such election together with
the amount of any federal, state, local or other taxes required to be withheld
to enable the Company to claim an income tax deduction with respect to such
election.
(i) Upon a finding by the Committee, after full consideration
of the facts presented on behalf of both the
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Company and the Awardee, that the Awardee has breached his or her employment or
service contract with the Company or an Affiliate, or has been engaged in
disloyalty to the Company or an Affiliate, including, without limitation,
fraud, embezzlement, theft, commission of a felony or proven dishonesty in the
course of his or her employment or service, or has disclosed trade secrets or
confidential information of the Company or an Affiliate, Awardee shall
automatically forfeit all Restricted Stock for which (1) the Company has not
yet delivered the Share certificates to the Awardee; (ii) the Restricted Period
has not expired or (iii) any restrictions applicable to the Restricted Stock
have not lapsed. Notwithstanding anything herein to the contrary, the Company
may withhold delivery of Restricted Stock certificates pending the resolution
of any inquiry that could lead to a finding resulting in a forfeiture.
(j) Amendment. Subject to the provisions of the Plan, the
Committee shall have the right to amend Awards issued to an Awardee, subject to
the Awardee's consent if such amendment is not favorable to the Awardee, except
that the consent of the Awardee shall not be required for any amendment made
pursuant to Section 10 of the Plan.
13. Amendment of the Plan. The Board of Directors of the Company
may amend the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an ISO or increase the maximum number of shares
as to
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which Options may be granted without obtaining approval, within twelve months
before or after such action, by vote of a majority of the votes cast at a duly
called meeting of the shareholders at which a quorum representing a majority of
all outstanding voting stock of the Company is, either in person or by proxy,
present and voting on the matter, by the unanimous consent in writing of the
shareholders, or by a method and in a degree that would be treated as adequate
under applicable state law in the case of an action requiring shareholder
approval. In addition, the provisions of Section 9 that determine (i) which
directors shall be granted Options pursuant to Section 9; (ii) the amount of
Shares subject to Options granted pursuant to Section 9; (iii) the price at
which shares subject to Options granted pursuant to Section 9 may be purchased
and (iv) the timing of grants of Options pursuant to Section 9 shall not be
amended more than once every six months, other than to comport with changes in
the Code or the Employee Retirement Income Security Act of 1974, as amended.
No amendment to the Plan shall adversely affect any outstanding Option or
Award, however, without the consent of the Grantee.
14. No Commitment to Retain. The grant of an Option or Award
pursuant to the Plan shall not be construed to imply or to constitute evidence
of any agreement, express or implied, on the part of the Company or any
Affiliate to retain the Grantee in the employ of the Company or an Affiliate
and/or as a member of the Company's Board of Directors or in any other
capacity.
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15. Withholding of Taxes. Whenever the Company proposes or is
required to deliver or transfer Shares in connection with the exercise of an
Option or Award, the Company shall have the right to (a) require the recipient
to remit or otherwise make available to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements prior to
the delivery or transfer of any certificate or certificates for such Shares or
(b) take whatever other action it deems necessary to protect its interests with
respect to tax liabilities. The Company's obligation to make any delivery or
transfer of Shares shall be conditioned on the Grantee's compliance, to the
Company's satisfaction, with any withholding requirement.
16. Interpretation. The Plan is intended to enable transactions
under the Plan with respect to directors and officers (within the meaning of
Section 16(a) under the Securities Exchange Act of 1934, as amended) to satisfy
the conditions of Rule 16b-3; to the extent that any provision of the Plan
would cause a conflict with such conditions or would cause the administration
of the Plan as provided in Section 3 to fail to satisfy the conditions of Rule
16b-3, such provision shall be deemed null and void to the extent permitted by
applicable law. This section shall not be applicable if no class of the
Company's equity securities is then registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.
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PROXY
EPL TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS PAUL L. DEVINE AND TIMOTHY B.
OWEN, EACH OF THEM ACTING INDIVIDUALLY, AS THE ATTORNEY AND PROXY OF THE
UNDERSIGNED AND EACH WITH THE POWER TO APPOINT HIS SUBSTITUTE, AND HEREBY
AUTHORIZES THEM TO REPRESENT AND TO VOTE IN THE NAME AND STEAD OF THE
UNDERSIGNED AS DESIGNATED BELOW, ALL THE SHARES OF EPL TECHNOLOGIES, INC. HELD
OF RECORD BY THE UNDERSIGNED ON JUNE 6, 1997, WHICH THE UNDERSIGNED WOULD BE
ENTITLED TO VOTE AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 21,
1997, OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF, IF PERSONALLY PRESENT.
1 - ELECTION OF DIRECTORS:
WITHHOLD
NAME VOTE FOR AUTHORITY TO VOTE
---- -------- -----------------
PAUL L. DEVINE _______ _______
ROBERT D. MATTEI _______ _______
RONALD W. CANTWELL _______ _______
2 - PROPOSAL TO AMEND THE 1994 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF
SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UNDER THE PLAN TO 4,500,000.
_______ FOR _______ AGAINST _______ ABSTAIN
3 - PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF BOARD DESIGNATED PREFERRED STOCK TO 4,000,000, WHICH
THE BOARD OF DIRECTORS MAY ISSUE FROM TIME TO TIME IN ONE OR MORE CLASSES
OR SERIES, WITH SUCH DESIGNATIONS, PREFERENCES AND PRIVILEGES AS THE BOARD
OF DIRECTORS MAY DETERMINE IN ITS DISCRETION.
_______ FOR _______ AGAINST _______ ABSTAIN
4 - UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR
ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER AS DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" PROPOSALS 1, 2 AND 3. THIS PROXY ALSO DELEGATES
DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND
PROXY STATEMENT OF EPL TECHNOLOGIES, INC.
________________________________ _____________________________
PRINT SHAREHOLDER NAME SIGNATURE OF SHAREHOLDER
________________________________ _____________________________
DATE SIGNATURE OF SHAREHOLDER
PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS ON YOUR STOCK CERTIFICATE, DATE
AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE. WHEN SIGNING AS
ATTORNEY-IN-FACT, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE ADD YOUR
TITLE AS SUCH. WHEN SIGNING AS JOINT TENANTS, ALL PARTIES IN THE JOINT TENANCY
MUST SIGN. IF SHAREHOLDER IS A CORPORATION OR PARTNERSHIP, PLEASE HAVE A DULY
AUTHORIZED OFFICER OR PARTNER SIGN IN FULL CORPORATE OR PARTNERSHIP NAME.
PLEASE RETURN THIS PROXY TO EPL TECHNOLOGIES, INC., 2 INTERNATIONAL PLAZA,
SUITE 245, PHILADELPHIA, PA, 19113-1507 PRIOR TO JULY 14, 1997 SO THAT YOUR
VOTES MAY BE COUNTED AT THE ANNUAL MEETING.