SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
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|_| 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 Rule 14a-11(c) or Rule 14a-12
LUCILLE FARMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
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|_| 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
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(4) Date Filed:
LUCILLE FARMS, INC.
150 River Road, P.O. Box 517
Montville, New Jersey 07045
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 20, 2002
TO THE STOCKHOLDERS OF
LUCILLE FARMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of LUCILLE FARMS, INC., a Delaware corporation (the
"Company"), will be held on December 20, 2002, at 10:00 A.M., local time, at the
Embassy Suites Hotel, 909 Parsippany Blvd., Parsippany, New Jersey 07405, for
the following purposes:
1. To approve the issuance of shares of common stock in
connection with a financing transaction with St. Albans
Cooperative Creamery, Inc.
2. To amend the Company's Certificate of Incorporation to
increase the authorized shares of common stock from 10,000,000
shares to 25,000,000 shares.
3. To approve the 2002 Stock Option Plan.
4. To elect a board of six directors to serve until the next
Annual Meeting of Stockholders and until their successors are
duly elected and qualified.
5. To ratify the selection by the Board of Directors of Wiss &
Company, LLP as independent accountant of the Company for the
year ending March 31, 2003.
6. To transact such other business as may properly come before
the meeting or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on October 30,
2002 as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting and any postponements or adjournments
thereof.
Holders of stock representing a majority of the votes entitled to be
cast at the Annual Meeting must be present in person or by proxy in order for
the meeting to be held. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING,
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE REQUESTED TO MARK, SIGN AND DATE
THE ENCLOSED PROXY FORM AND RETURN IT IN THE ACCOMPANYING ENVELOPE. The giving
of such proxy will not affect your right to revoke such proxy before it is
exercised or to vote in person should you later decide to attend the meeting.
All stockholders are cordially invited to attend the meeting..
By Order of the Board of Directors,
Albert N. Moussab
Secretary
Montville, New Jersey
December 2, 2002
IT IS IMPORTANT THAT THE ENCLOSED PROXY FORM BE COMPLETED
AND RETURNED PROMPTLY
PRELIMINARY COPY
LUCILLE FARMS
150 River Road, P.O. Box 517
Montville, New Jersey 07045
---------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 20, 2002
---------------
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Lucille Farms, Inc., a Delaware corporation
("Lucille Farms" or the "Company"), of proxies to be voted at the Annual Meeting
of Stockholders to be held on December 20, 2002, at 10:00 A.M., local time, or
at any postponements or adjournments thereof (the "Annual Meeting"), at Embassy
Suites Hotel, 909 Parsippany Blvd., Parsippany, New Jersey 07405.
A form of proxy is enclosed for use at the Annual Meeting. The proxy
may be revoked by the person giving it at any time before it is voted by
delivering to the Company (Attention: Albert N. Moussab, Inspector of Elections)
a written notice of revocation or a duly executed proxy bearing a later date or
by attending the Annual Meeting and voting in person. When a proxy is properly
executed and returned, the shares it represents will be voted at the Annual
Meeting in accordance with any instructions noted thereon. If no direction is
indicated, all shares represented by valid proxies received pursuant to this
solicitation (and not revoked prior to exercise) will be voted (i) to approve
the issuance of shares of the Company's common stock ("Common Stock") in
connection with a financing transaction (the "Financing Transaction") with St.
Albans Cooperative Creamery, Inc. ("St. Albans"), (ii) to amend the Company's
Certificate of Incorporation to increase the authorized shares of Common Stock
from 10,000,000 shares to 25,000,000 shares, (iii) to approve the 2002 Stock
Option Plan, (iv) for the election of the nominees for directors named in this
Proxy Statement, (v) for ratification of the selection by the Board of Directors
of Wiss & Company, LLP as independent accountant for the year ended March 31,
2003, and (vi) in accordance with the judgment of the persons named in the proxy
as to such other matters as may properly come before the Annual Meeting
(collectively, the "Proposals").
The proxy solicitation materials are being mailed on or about December
2, 2002 to all stockholders entitled to vote at the Annual Meeting. The cost of
soliciting proxies will be borne by the Company. Regular employees, officers,
and directors of the Company may solicit proxies in person, by telephone, or by
mail. No additional compensation will be given to employees, officers, or
directors for such solicitation. The Company will request brokers and nominees
who hold stock in their names to furnish proxy solicitation materials to
beneficial owners of the shares and will reimburse such brokers and nominees for
their reasonable expenses incurred in forwarding proxy solicitation materials to
such beneficial owners.
Stockholders of record at the close of business on October 30, 2002
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. On the Record Date, 3,284,775 shares of Common Stock were issued and
outstanding, each of which has one vote on each matter to come before the Annual
Meeting, and 583 shares of Series B Convertible Redeemable Preferred Stock
("Preferred Stock") were issued and outstanding, each of which has 1000.57 votes
on each Proposal. Except for the Financing Transaction Proposal (see Proposal
1), for which the shares of Common Stock and Preferred Stock issued to St.
Albans in the Financing Transaction shall not be voted nor considered in
calculating the vote, the holders of Common Stock and the holders of Preferred
Stock will vote together on the Proposals as if they held one class of stock.
The holders of stock representing a majority of the votes entitled to be cast at
the Annual Meeting, present in person or by proxy, will constitute as quorum for
the transaction of business at the Annual Meeting and any adjournments thereof.
All votes will be tabulated by the inspector(s) of election appointed
for the Annual Meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes. Abstentions and broker non-votes each
shall be included in the determination of the number of shares present at the
Annual Meeting and for the purpose of determining whether a quorum is present.
Abstentions and broker non-votes shall not be counted in determining whether a
nominee is elected as a director of the Company. In determining whether the
other Proposals have been approved, abstentions shall be counted as votes
against the Proposal and broker non-votes shall not be counted either for or
against the Proposal.
2
PROPOSAL NO. 1
APPROVAL OF THE ISSUANCE OF SHARES
OF COMMON STOCK
IN CONNECTION WITH THE
FINANCING TRANSACTION
Description of Financing Transaction
On May 16, 2002, Lucille Farms, Inc. entered into an agreement (the
"Financing Transaction") with St. Albans Cooperative Creamery, Inc. ("St.
Albans"), the Company's primary supplier of raw materials, pursuant to which St.
Albans (i) converted $1,000,000 of accounts payable owed by Lucille Farms to St.
Albans into 333,333 shares of Common Stock, (ii) converted $3,500,000 of
accounts payable owed by Lucille Farms to St. Albans into (A) preferred stock
convertible into 583,333 shares of Common Stock, which preferred stock (1)
automatically converts into such number of shares of Common Stock if the Common
Stock is $8.00 or higher for 30 consecutive trading days, and (2) may be
redeemed by Lucille Farms for $3,500,000, and (B) a 10-year warrant to purchase
583,333 shares of Common Stock (subject to adjustment under certain
circumstances to a maximum of 1,416,667 shares of Common Stock) at $.01 per
share, which warrant (1) may not be exercised for a period of three-years, (2)
terminates if, during such three-year period, Lucille Farms' Common Stock is
$8.00 or higher for 30 consecutive trading days, and, (3) in the event Lucille
Farms' Common Stock is not $8.00 or higher for 30 consecutive trading days
during such three-year period, may only be exercised on the same basis
percentage wise as the preferred shares are converted, (iii) converted an
additional $1,000,000 of accounts payable owed by Lucille Farms to St. Albans
into a convertible promissory note due on April 14, 2005, which note is
convertible into Common Stock at $6.00 per share at any time by St. Albans and,
at the option of Lucille Farms, automatically shall be converted into Common
Stock at $6.00 per share if the Common Stock is $8.00 or higher for a period of
30 consecutive trading days, and (iv) provided Lucille Farms with a pricing
structure for milk and milk by-products, for a minimum of one-year and a maximum
of four-years (subject to renegotiation at the expiration of the applicable
period), designed to produce profitability for Lucille Farms.
Reason for Submission to Stockholders
In August 2002, Nasdaq informed the Company that it evidenced
compliance with the terms of a previously granted exception from Nasdaq's
stockholder equity requirements, but had violated a Nasdaq stockholder approval
rule, Rule 4350, in connection with the Financing Transaction. Rule 4350
requires stockholder approval, prior to the issuance of securities, if such
issuance could result in a change of control. While the Company believes that
certain contractual restrictions prevents such result, Nasdaq takes the position
that the issuance of securities to St. Albans could potentially result in a
change of control of the Company. Notwithstanding such fact, Nasdaq determined
to continue the listing of Lucille Farms' Common Stock on the Nasdaq SmallCap
marketplace pursuant to an amended exception that requires Lucille Farms to file
a proxy statement with the Securities and Exchange Commission and Nasdaq, on or
before November 22, 2002, evidencing its intent to seek stockholder approval of
the Financing Transaction, and, thereafter, submit documentation to Nasdaq, by
December 31, 2002, evidencing that Lucille Farms, in fact, has obtained
stockholder approval of the Financing Transaction.
Required Vote
The affirmative vote of the holders of stock representing a majority of
the votes present in person or represented by proxy at the Annual Meeting and
entitled to vote thereon is required for the approval of the issuance of shares
of Common Stock in connection with the Financing Transaction, provided, however,
the shares of Common Stock and preferred stock issued to St. Albans in the
Financing Transaction shall not be entitled to vote nor shall they be considered
in calculating the vote.
The Board of Directors recommends a vote FOR the approval of the
issuance of shares of Common Stock in connection with the Financing Transaction.
3
PROPOSAL NO. 2
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE
AUTHORIZED SHARES OF COMMON STOCK
FROM 10,000,000 SHARES TO 25,000,000 SHARES
The Board of Directors has adopted a resolution authorizing an
amendment to the Company's certificate of incorporation to increase the
authorized number of shares of Common Stock from 10,000,000 shares to 25,000,000
shares. The proposed amendment is subject to approval by the Company's
stockholders. The Common Stock, including the additional shares proposed for
authorization, does not have preemptive or similar rights, which means that
current stockholders do not have a prior right to purchase any new issue of
Common Stock in order to maintain their proportionate ownership thereof. Thus,
the issuances of additional shares of Common Stock might dilute, under certain
circumstances, the ownership and voting rights of stockholders. Each of the
additional authorized shares of Common Stock will have the same rights and
privileges as the currently authorized Common Stock.
The proposed amendment will modify the first paragraph of Article
Fourth of the certificate of incorporation to read as follows:
"FOURTH: The aggregate number of share of all classes of stock which
the Corporation shall have authority to issue is Twenty Five Million Two Hundred
Fifty Thousand (25,250,000) shares consisting of:
1. Two Hundred Fifty Thousand (250,000) shares of preferred
stock, par value $.001 per share (hereinafter referred to as "Preferred Stock");
and
2. Twenty Five Million (25,000,000) shares of common stock,
par value $.001 per share (hereinafter referred to as "Common Stock")."
The Company is currently authorized to issue 10,250,000 shares of
capital stock, of which 10,000,000 shares are designated as Common Stock and
250,000 shares are designated as Preferred Stock. The proposed amendment would
increase the total number of shares of authorized capital stock to 25,250,000
shares and the number of shares of Common Stock authorized to 25,000,000. As of
November 1, 2002, 3,284,775 shares of Common Stock were issued and outstanding,
95,000 shares of Common Stock were reserved for issuance upon exercise of
outstanding stock options under the 1993 Stock Option Plan, 275,000 shares of
Common Stock, subject to stockholder approval of the 2002 Stock Option Plan,
were reserved for issuance upon exercise of outstanding stock options under the
2002 Stock Option Plan, 1,916,667 shares were reserved for issuance upon
exercise of outstanding warrants, 216,000 shares were reserved for issuance upon
the conversion of 216 outstanding shares of Series A Preferred Stock, and
583,333 shares were reserved for issuance upon the conversion of 583 outstanding
shares of Series B Preferred Stock. The proposed amendment would not change the
authorized number of shares of Preferred Stock. If the proposed amendment is
adopted, it will become effective upon the filing of the proposed amendment with
the Delaware Secretary of State.
Reasons for Increase in Authorized Shares of Common Stock
The Board of Directors believes that it is advisable and in the
Company's best interest to have available additional authorized but unissued
shares of Common Stock in an amount adequate to provide for the Company's future
needs. The increase in authorized Common Stock will not have any immediate
affect on the rights of existing stockholders. However, the additional shares
will be available for issuance from time to time by the Company at the
discretion of the Board of Directors without further authorization by vote of
the stockholders unless such authorization is otherwise required by applicable
law or regulation. These shares may be issued for any proper corporate purpose
including, without limitation, acquiring other businesses in exchange for shares
of Common Stock; entering into joint venture arrangements with other companies
in which Common Stock or the right to acquire Common Stock are part of the
consideration; stock splits or stock dividends; raising capital through the sale
of Common Stock; and attracting and retaining valuable employees by the issuance
of additional stock options or use of stock-based plans. Although the Company
may engage in the foregoing actions in the future, no such actions involving the
issuance of additional shares of Common Stock are pending as of the date hereof.
If the proposed amendment is approved, the Board of Directors would be able to
authorize the issuance of shares of Common Stock without the necessity, and
related costs and delays, of either calling a special stockholders' meeting or
waiting for the next regularly scheduled meeting of the stockholders in order to
increase the authorized shares of Common Stock.
4
The issuance of the additional shares of Common Stock could have the
effect of diluting earnings per share and book value per share, which could
adversely affect existing stockholders. Issuing additional shares of Common
Stock may also have the effect of delaying or preventing a change of control in
the Company. The authorized but unissued Common Stock could be issued in one or
more transactions that would make more difficult or costly, and less likely, a
takeover of the Company. The proposed amendment to the Certificate is not being
recommended in response to any specific effort of which the Company is aware to
obtain control, and the Board of Directors has no present intention to use the
additional shares of Common Stock in order to impede a takeover attempt.
Reason for Submission to Stockholders
This Proposal is being submitted to stockholders to satisfy the
requirements of the Delaware General Corporation Law.
Required Vote
The affirmative vote of the holders of stock representing a majority of
the votes entitled to be cast at the Annual Meeting is required for the approval
of the amendment to the certificate of incorporation to increase the authorized
shares of Common Stock.
The Board of Directors recommends a vote FOR the approval of the
amendment of the certificate of incorporation to increase the authorized shares
of Common Stock.
5
PROPOSAL NO. 3
APPROVAL OF THE 2002 STOCK OPTION PLAN
The Company believes that stock options and share ownership are
important factors in order for it to attract, retain and motivate key employees.
Therefore, the Company created the 2002 Stock Option Plan (the "Plan"). The Plan
was adopted by the Board of Directors in October 2002 and is effective as of
November 1, 2002, subject to approval by stockholders. The Plan currently allows
a maximum of 1,000,000 shares of Common Stock to be issued pursuant to the Plan.
To date, 275,000 options have been granted pursuant to the Plan, subject to
approval of the Plan by stockholders.
A summary of the Plan is set forth below. The summary does not purport
to be complete and is qualified in its entirety by the text of the Plan, a copy
of which is attached to this Proxy Statement as Annex A.
Summary of Plan
The Plan authorizes the granting of incentive stock options to the
Company's employees or employees of any of the Company's subsidiaries, and
non-statutory (non-qualified) stock options to the Company's employees,
directors and certain of the Company's consultants and advisors. Currently,
there are approximately 100 persons eligible to receive options under the Plan.
The options to be granted under the Plan and designated as incentive stock
options are intended to receive incentive stock option tax treatment pursuant to
Section 422 of the Internal Revenue Code.
The exercise price for options granted under the Plan is determined by
the Board of Directors or a committee designated by the Board and consisting of
three or more members. The exercise price for incentive stock options cannot be
less than 100% of the fair market value of the Common Stock on the date it is
granted, or 110% in the case of optionees who own more than 10% of the voting
power of all classes of the Company's stock. The exercise price for
non-qualified options may be less than 100% of the fair market value of the
Common Stock on the date the option is granted. The fair market value
(determined at the time the option is granted) of the Common Stock with respect
to which incentive options are first exercisable by any individual employee
during any calendar year cannot exceed $100,000.
No option granted under the Plan may be exercised after the expiration
of the option, which may not, in any case, exceed ten years from the date of
grant (five years in the case of incentive options granted to persons who own
more than 10% of the voting power of all classes of the Company's stock).
Options granted under the Plan are exercisable on such basis as is determined by
the Board of Directors.
If the Company liquidates, or if there is a merger, reorganization or
consolidation with any other corporation in which the Company is not the
surviving corporation or becomes a wholly-owned subsidiary of another
corporation, any unexercised options theretofore granted under the Plan shall
become exercisable for a ten-day period ending on the fifth day prior to such
liquidation, merger, reorganization or consolidation. If not exercised during
such period, all unexercised options shall be deemed cancelled unless the
surviving corporation in any such merger or consolidation elects to assume the
options under the Plan. Options granted under the Plan may not be transferred by
the participant other than by will or the laws of descent and distribution and
may be exercised during the holder's lifetime only by such holder.
If any of the Company's plan participants, prior to the exercise of
their options, cease to work for, or provide services to, the Company for any
reason other than disability, death, misconduct or voluntary resignation, the
options granted to such person shall automatically terminate three months from
the date of termination. If any of the Company's plan participants cease to work
for, or provide services to, the Company, by reason of disability, such person
may exercise any option held at any time within twelve months from the date of
termination, but only to the extent the holder had the right to exercise such
option at the date of termination. If any of the Company's plan participants die
while holding an outstanding option, such person's option rights may be
exercised by the person or persons to whom such rights under the option are
transferred by will or the laws of descent and distribution within twelve months
from the date of death. If any of the Company's plan participants cease to work
for, or provide services to, the Company by reason of misconduct or voluntary
resignation, such person's options shall immediately terminate, lapse and
expire.
6
The Plan provides that the Board of Directors, or a committee of the
Board, shall administer the Plan, and shall have the authority to interpret the
Plan and to prescribe, amend and rescind the rules and regulations relating
thereto. Unless previously terminated in certain circumstances, the Plan will
terminate October 30, 2012.
Federal Income Tax Consequences
The following is a brief summary of the federal income tax consequences
of certain transactions under the Plan based on Federal income tax laws. This
summary is not intended to be complete and does not describe state or local tax
consequences.
Tax Consequences to Participants
Non-qualified Stock Options. In general, (i) no income will be
recognized by an optionee at the time a non-qualified option is granted; (ii) at
the time of exercise of a non-qualified option, ordinary income will be
recognized by the optionee in an amount equal to the difference between the
price paid for the shares and the higher fair market value of the shares, if
unrestricted, on the date of exercise; and (iii) at the time of sale of shares
acquired pursuant to the exercise of a non-qualified option, appreciation (or
depreciation) in value of the shares after the date of exercise will be treated
as a capital gain (or loss).
Incentive Stock Options. Generally, no income will be recognized by an
optionee upon the grant or exercise of an incentive option. If shares of Common
Stock are issued to the optionee pursuant to the exercise of an incentive
option, and if no disqualifying disposition of such shares is made by such
optionee within two years after the date of grant or within one year after the
transfer of such shares to the optionee, then upon sale of such shares, any
amount realized in excess of the option price will be taxed to the optionee as a
capital gain and any loss sustained will be a capital loss.
If Common Stock acquired upon the exercise of an incentive option is
disposed of prior to the expiration of either holding period described above,
generally, the optionee will recognize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of such shares at the time of exercise (or, if less, the amount realized on the
disposition of such shares if a sale or exchange) over the option price paid for
such shares. Generally, any further gain (or loss) realized by the participant
will be taxed as a capital gain (or loss).
The Code imposes an "alternative minimum tax" on an individual's income
to the extent the amount of the alternative minimum tax exceeds the individual's
regular tax for the year. For purposes of computing the alternative minimum tax,
the excess of the fair market value (on the date of exercise) of the shares
received upon the exercise of an incentive option over the exercise price paid
is included in alternative minimum taxable income in the year the option is
exercised. If the shares are sold in the same year that the option is exercised,
the regular tax treatment and the alternative tax treatment will be the same.
Tax Consequences to the Company
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company will be entitled to a corresponding
deduction provided that, among other things, the income meets the test of
reasonableness, is an ordinary and necessary business expense, is not an "excess
parachute payment" within the meaning of Section 280G of the Code, and is not
disallowed by the $1 million limitation on certain executive compensation under
Section 162(m) of the Code.
7
Option Grants
Number of Shares To Number of Options
Be Issued Upon Remaining Available for
Exercise of Outstanding Weighted Average Exercise Future Issuance
Options Price of Outstanding Options Under the Plan
Equity compensation plan approved
by shareholders 95,000 $3.13 405,000
Equity compensation plan not
approved by shareholders(1) 275,000 $3.00 725,000
(1) Options issued subject to stockholder approval of the Plan at this meeting.
Reason for Submission to Stockholders
This Proposal is being submitted to stockholders to satisfy the
requirements of the Internal Revenue Code of 1986, as amended, and to satisfy
the requirements of the Nasdaq Stock Market.
Required Vote
The affirmative vote of the holders of stock representing a majority of
votes present in person or represented by proxy at the Annual Meeting and
entitled to vote thereon is required for the approval of the Plan.
The Board of Directors recommends a vote FOR the approval of the Plan.
8
PROPOSAL NO. 4
ELECTION OF DIRECTORS
Nominees
Six persons, all of whom are members of the present Board of Directors,
are nominees for election at the Annual Meeting to hold office until the next
annual meeting and until their respective successors are elected and qualified.
Unless authority to vote for any director is withheld in a proxy, it is intended
that each proxy will be voted for the six nominees named below.
It is expected that all nominees will be able and willing to serve as
directors. However, in the event that any nominee is unable or declines to serve
as a director at the time of the Annual Meeting, the proxies will be voted for
any nominee who shall be designated by the present Board of Directors to fill
the vacancy. The Board of Directors has no reason to believe that any of the
persons named will be unable or unwilling to serve as a director if elected.
Reason for Submission to Stockholders
This Proposal is being submitted to stockholders to satisfy the
requirements of the Delaware General Corporation Law.
Required Vote
Approval of the nominees for election to the Board will require the
affirmative vote of the holders of stock representing a plurality of the votes
present at the Annual Meeting in person or by proxy and entitled to vote.
The Board of Directors recommends that the stockholders vote for the
election of all nominees listed to the Board of Directors.
Nominees for Election to the Board of Directors
Name Age Present office or Position
---- --- --------------------------
Howard S. Breslow 63 Chairman of the Board
Jay M. Rosengarten 57 Director, Chief Executive Officer
Alfonso Falivene 60 Director, President
George Bell 59 Director
Ralph Singer 54 Director
Leon Berthiaume 44 Director
The following information is submitted concerning the nominees named
for election as directors based upon information received by the Company from
such persons.
Mr. Howard S. Breslow has been a director of the Company since April
1993. On October 24, 2002, he was elected as Chairman of the Board of Directors.
Mr. Breslow has been a practicing attorney in New York for more than 35 years
and has been a member of the law firm of Breslow & Walker, LLP New York, New
York for more than 30 years, which firm is counsel to the Company. Mr. Breslow
currently serves as a director of BioLife Solutions, Inc., a publicly held
company engaged in the research, development and sale of products for use in low
temperature medicine, Vikonics, Inc., a non-operating publicly held company
formerly engaged in the design and sale of computer-based security systems, and
Excel Technology, Inc., a publicly held company engaged in the development and
sale of laser products.
9
Mr. Jay Rosengarten was appointed to the Board of Directors effective
February 1, 1998. . On October 24, 2002, Mr. Rosengarten was elected Chief
Executive Office of the Company. Mr. Rosengarten, the former Board Chairman of
Shopwell, Chicago is an internationally recognized consultant, author and
lecturer on Consumer Marketing, Ethnic Marketing and Business Management. He has
been the keynote speaker at numerous national trade association meetings and
major corporate events. Mr. Rosengarten has a J.D., from Fordham University Law
School. Mr. Rosengarten is a principal in the Rosengarten Group, a management
consulting firm that currently is being wound down, a position he has held from
1993 to present
Mr. Alfonso Falivene is a founder of the Company and has been a
director of the Company since inception in 1976. He served as Vice President and
Secretary of the Company until April 1993 when he was appointed President and
Chief Executive Officer. On October 24, 2002, Mr. Falivene ceased being CEO but
retained his position a President.
Mr. George Bell has been a director of the Company since August 2002.
Mr. Bell is the President of National Provisions, Inc. a national specialty food
processing company based Florida. Mr. Bell previously spent over 25 years with
Hebrew National, an internationally renowned meat processing company, especially
known for their frankfurters. His last position was Sr. V.P. of Operations for
the company.
Mr. Ralph Singer has been a director of the Company since August 2002.
Mr. Singer is the Chairman of the Board of National Provisions, Inc. He is a
former Deputy Chairman of the Board of The Stirling Group, PLC in the U.K. Mr.
Singer brings over twenty years experience as a successful entrepreneur.
Mr. Leon Berthiaume has been a director of the Company since August
2002. Mr. Berthiaume graduated from the University of Vermont in 1980 with a
Bachelor of Science degree in Business Administration. Mr. Berthiaume is a
certified Public Accountant who worked for the largest Vermont accounting firm
for 4 years before joining the St. Albans Cooperative Creamery in 1984 as the
controller. Mr. Berthiaume was appointed General Manager in 1991 and is
responsible for overall Cooperative operations and the support and achievement
of the Cooperative's Mission Statement.
Board Meetings and Certain Committees
The Board of Directors held meetings or acted by unanimous consent on
four occasions during the fiscal year ended March 31, 2002. Meetings were
attended by all directors. The Company currently has no standing compensation or
nominating committees of the Board of Directors, or committees performing
similar functions. The Company has an audit committee currently consisting of
Howard S. Breslow, George Bell and Ralph Singer. The audit committee reviewed
the adequacy of the Company's internal controls, and meets periodically with
management and the Company's independent auditors. The audit committee met once
during the fiscal year ended March 31, 2002.
Audit Committee Report
In connection with the preparation and filing of the Lucille Farms,
Inc. Annual Report on Form 10-K for the fiscal year ended March 31, 2002:
(1) The Audit committee reviewed and discussed the audited financial
statements with management;
(2) The Audit Committee discussed with the independent auditors the
material required to be discussed by SAS 61 (as may be modified or
supplemented);
(3) The Audit Committee reviewed the written disclosures and the letter
from the independent accountants required by the Independence Standards Board
Standard No.1, as may be modified or supplemented, and discussed with the
independent accountant the independent accountant's independence; and
10
(4) Based on the review and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the 2002 Annual Report on Form 10-K.
All members of the Audit Committee are independent as defined in Rule
4200(a)(15) of the National Association of Securities Dealers listing standards.
Audit Committee
Howard S. Breslow
George Bell
Ralph Singer
11
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 23, 2002, certain
information regarding beneficial ownership of common stock and preferred stock
by (i) all persons known by the Company to be the beneficial owner of more than
5% of the Company's outstanding voting stock, (ii) each director of the Company,
(iii) each Named Executive Officer (as defined in "Executive Compensation") and
all executive officers and directors of the Company as a group. Unless expressly
indicated otherwise, each stockholder exercises sole voting and investment power
with respect to the shares beneficially owned.
Amount and Nature of
Beneficial Ownership Percent of Class
-------------------- ---------------------
Series B Common Series B
Name and Address of 5% Owners Common Stock Pfd. Stock Stock Pfd. Stock
- ----------------------------- ------------ ---------- ----------- ----------
Gennaro Falivene 327,417 10.0%
Box 125
Swanton, VT 05488
Alfonso Falivene (1) 464,917 14.2%
150 River Rd., P.O. Box 517
Montville, NJ 07045
The Estate of
Philip Falivene 200,017 6.1%
Box 125
Swanton, VT 05488
Stephen Katz (2) 85,750 2.6%
B&W Investment Associates 693,799(3) 5.9%
c/o Breslow and Walker
100 Jericho Quadrangle
Jericho, NY 11753
Howard S. Breslow 693,799(4) 5.9%
100 Jericho Quadrangle
Jericho, NY 11753
Jay M. Rosengarten 275,000(5) 2.3%
St. Albans Cooperative Creamery, Inc. 333,333 583(6) 10.1% 100%
140 Federal Street
St. Albans, VT 05478
All officers and
directors as a group 1,711,483(6) 52.1%
Shares of Common Stock subject to options and warrants currently exercisable or
exercisable within 60 days are deemed outstanding for computing the number of
shares and the percentage of the outstanding shares held by a person holding
such options and warrants, but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote and subject to
community property laws where applicable, the Company believes that the persons
named in the table have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
12
(1) Includes 7,500 shares owned by Mr. Falivene's wife and 20,000 shares owned
by one of his children. (2) Mr. Katz currently is a director of the
Company. Includes 40,000 shares owned by Mr. Katz's wife. (3) Includes
500,000 shares issuable under outstanding warrant.
(4) Represents all of the shares owned by B&W Investment Associates, a
partnership of which Howard S. Breslow, a director of the Company, is a
partner. Includes 500,000 shares issuable under outstanding warrant.
(5) Includes 275,000 shares issuable under outstanding options, 250,000 of
which are subject to the approval of the Company's 2002 Stock Option Plan
at this meeting.
(6) Convertible into 583,333 shares of Common Stock. St. Albans is entitled to
vote, on an "as converted" basis, on all matters to which holders of Common
Stock are entitled to vote.
13
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of November 1, 2002 are as follows:
Name Age Present office or Position
---- --- --------------------------
Jay M. Rosengarten 57 Chief Executive Officer
Alfonso Falivene 60 President
Albert N. Moussab 49 Chief Financial Officer and Secretary
Gennaro Falivene 72 Executive Vice President-Quality
Control
David McCarty 46 Vice President-Sales and Marketing
Set forth below is a biographical description of each of the Company's
executive officers who is not also a director, based on information supplied by
him.
Mr. Gennaro Falivene is a founder of the Company and has been a
director of the Company since inception in 1976. He served as Vice president and
Treasurer of the Company from inception until April 1993 when he was appointed
Vice chairman of the Board and Executive Vice president-Quality Control. Mr.
Falivene resigned from the Board in July, 2002.
Mr. Albert N. Moussab was appointed the Chief Financial Officer of the
Company in August 2002. Prior to this position, he was the Company's Controller
since joining the Company in March 2001. From January 2000 until March 2001, Mr.
Moussab was the Controller for Fink Banking Company, a New York based producer
of bread supplying the New York metropolitan area restaurants and New York
School system. From 1996 until the end of 1999, Mr. Moussab served as the
Controller of the Academy Bus Company, the largest privately held bus company in
the Northeast.
Mr. David McCarty has been Vice President-Marketing and Sales of the
Company since April 1993. From July 1991 to March 1993, Mr. McCarty was the Vice
President of Braff & Company, Inc., a New York City based marketing and public
relations firm that specializes in consumer products, particularly in the food
industry. Braff & Company, Inc. has represented a broad range of clients,
including The Dannon Company, Kraft General Foods and The Seagram Beverage
Company and has played an integral role in the start-up, launch and promotion of
such products as The Dove Bar and Micro Magic Foods. From February 1990 to July
1991, Mr. McCarty was the New York area Manager for Good Humor, a division of
Thomas J. Lipton, where he established a new distribution network, created a
sales promotion program and aided in reversing a sales decline and increasing
sales. From August 1986 to February 1990, Mr. McCarty was the Director of
Marketing of Braff & Company, Inc. From 1982 to 1986, Mr. McCarty was the
Director of Marketing (1985 and 1986) and National Sales Manager (1982--1985)
for Ginseng VP Corp., a "New Age" beverage corporation.
Officers are appointed by and hold office at the pleasure of the Board
of Directors. Officers serve at the discretion of the Board of Directors and are
elected at the annual meeting of the Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation paid
by the Company to the Chief Executive Officer and to each of its other executive
officers, other than the Chief Executive Officer, who received salary and bonus
payments in excess of $100,000 during the year ended March 31, 2002
(collectively, the "Named Executive Officers") .
14
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
Name and Principal Fiscal Other Annual
Positions Year Salary Bonus Compensation (1)
---- ------ ----- ----------------
Alfonso Falivene 2002 $106,000 -- $9,000
President 2001 106,000 -- 9,000
2000 110,000 -- 9,000
Gennaro Falivene 2002 106,000 -- 7,000
Executive Vice 2001 106,000 -- 5,000
President -- Quality 2000 108,000 5,000
Control
(1) Represents automobile allowances and/or automobile lease payments for the
benefit of such employee.
Option/SAR Grants in Year-Ended March 31, 2002
In the fiscal year ended March 31, 2002, the Company issued options to
purchase shares of Common Stock to each of the Named Executive Officers, as
follows:
Number of Securities Percent of Total
Underlying Options/SARs granted
Name and Principal Options/SAR's to Employees in Exercise or Base
Positions granted (#)(1) Fiscal Year Price ($/Sh) Expiration Date
--------- -------------- ----------- ------------ ---------------
Alfonso Falivene - - - -
Gennaro Falivene - - - -
- -----------------------------
(1) Options to acquire shares of Common Stock.
Aggregated Options/SAR Exercises and Option/SAR Values for the
Fiscal Year Ended March 31, 2002
The following table provides information related to options exercised
by each of the Named Executive Officers during the year ended March 31, 2002
fiscal year and the number and value of options held at March 31, 2002. The
Company does not have any outstanding stock appreciation rights. None of the
options were in the money at year ended March 31, 2002.
Number of Securities Underlying Value of Unexercised in the
Unexercised Options/SAR at money Options/SAR At Fiscal
Fiscal Year End (#) Year End ($)(1)
------------------- ---------------
Shares
Acquired On Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Alfonso Falivene - - - - - -
Gennaro Falivene - - - - - -
- -------------------
(1) The closing price for the Common Stock as reported on the Nasdaq on October
31, 2002 was $1.51.
15
Report of the Board of Directors on Executive Compensation
During the fiscal year ended March 31, 2002, the entire Board of
Directors held primary responsibility for determining executive compensation
levels. The goals of the Company's compensation program is to align compensation
with business objectives and performance and to enable the Company to attract,
retain and reward executive officers and other key employees who contribute to
the long term success of the Company.
The Chief Executive Officer's compensation for the fiscal year ended
March 31, 2002 was determined by the Board of Directors (without the vote of Mr.
Alfonso Falivene) based on the Company's performance in fiscal 2001, anticipated
performance in fiscal 2002, and the level of salaries of chief executive
officers in a peer group consisting of cheese manufacturers and/or food
processors having sales levels comparable to the Company.
BOARD OF DIRECTORS
Howard S. Breslow
Jay Rosengarten
Alfonso Falivene
Ralph Singer
George Bell
Leon Berthiaume
Employment Agreements
On October 24, 2002, the Company entered into an employment agreement
with Jay Rosengarten, pursuant to which Mr. Rosengarten was employed as the
Company's Chief Executive Officer, initially, and for a period of approximately
three (3) months (the "Wind Down Period"), on a part-time basis, during which
period of time Mr. Rosengarten is to wind down his consulting practice and
devote not less than three (3) week days per week to the business of the
Company, and thereafter on a full-time basis, provided, however, that Mr.
Rosengarten is permitted to retain, as consulting clients, two food industry
related trade associations (the "Trade Associations") and two food industry
related trade clients (the "Trade Clients") and devote, on average, not more
than an aggregate of two (2) days per month in connection with such clients.
During the Wind Down Period, Mr. Rosengarten will receive a salary at the rate
of $150,000 per annum. Thereafter, until such time as he terminates his
consulting relationship with the Trade Clients (at which time he can devote, on
average, not more than an aggregate of one (1) day per month in connection with
the Trade Associations), his salary will be at the rate of $200,000 per annum.
At such time as Mr. Rosengarten terminates his consulting relationship with the
Trade Clients, his salary shall be at the rate of $250,000 per annum. Pursuant
to the terms of the employment agreement, in addition to his salary, the Company
has granted to Mr. Rosengarten, under the Company's 2002 Stock Option Plan (the
"Plan"), subject to approval of such Plan by the Company's stockholders, a
10-year option to purchase 250,000 shares of the Company's Common Stock at $3.00
per share, which option vests to the extent of 50,000 shares upon the
commencement of employment and 50,000 shares on each of the next four
anniversary dates thereof; provided, however, that such vesting accelerates and
all options vest in the event of a sale of all or substantially all of the
assets or all of the shares of capital stock of the Company or the merger or
consolidation of the Company with another entity where the Company is not the
surviving entity or becomes a wholly owned subsidiary of another entity ( a
"Change of Control Event"). In the event Mr. Rosengarten's employment is
terminated on account of his death, disability, or resignation or for cause, the
Company shall be obligated to pay his salary only up to the date of termination.
In the event his employment is terminated by the Company without cause, the
Company shall be required to continue to pay his salary for a period of six (6)
months and that portion of any bonus which has accrued to the date of
termination; provided, however, that Mr. Rosengarten shall have the affirmative
obligation to seek employment or reactivate his consulting business and mitigate
the Company's damages-i.e. to the extent that he earns monies from his
employment or consulting business, the same shall be applied to reduce the
payment to be made to Mr. Rosengarten under his employment agreement; and
provided further that if such termination takes place within two (2) years after
a Change of Control Event, then the Company shall be required to continue to pay
his salary for a period of twelve (12) months.
16
Compensation of Directors
The Company has not compensated its directors for their services in such
capacity.
Compensation Committee Interlocks and Insider Participation
During the quarter ended June 30, 2002, Messrs. Alfonso Falivene, Gennaro
Falivene, and Stephen Katz were each officers of the Company as well as
directors of the Company who participated in deliberations of the Company's
Board of Directors concerning executive officer compensation. Reference is made
to "Certain Relationships and Related Transactions".
17
Comparison of Cumulative Total Stockholder Return
The following chart compares the percentage change in the cumulative
total stockholder return of the Common Stock during the period from March 31,
1997 through the fiscal year ended March 31, 2002 with the cumulative total
return on the NASDAQ Composite Index and the Company Peer Group. The comparison
assumes $100 was invested in the Common Stock on March 31, 1997, and in each of
the stocks included in the NASDAQ Composite Index and the Company Peer Group.
[chart omitted]
CRSP Total Returns Index for: 03/1997 03/1998 03/1999 03/2000 03/2001 03/2002
- ----------------------------- ------- ------- ------- ------- ------- -------
LUCILLE FARMS, INC. 100.0 55.6 144.4 233.3 105.6 87.6
Nasdaq Stock Market (US Companies) 100.0 151.6 204.8 380.4 152.2 153.3
NASDAQ Stocks (SIC 5140-4149 US Companies)
Groceries and Related Products 100.0 184.6 164.8 139.3 195.4 164.8
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.00 on 03/31/1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At November 1, 2002, Alfonso Falivene and Gennaro Falivene were
indebted to the Company in the amount of $30,167 and $30,166, respectively. Such
indebtedness is represented by promissory notes, dated as of June 1, 1992, with
the principal due on June 1, 2003. The notes bear interest at the rate of 9% per
annum, which interest is payable annually.
The Company leases a parcel of land adjacent to its facility. This
parcel is owned by Alfonso Falivene, Gennaro Falivene and the Estate of Philip
Falivene. The space is used as an employee parking lot and its use was required
in conjunction with the construction of the Company's whey drying facility. The
lease is for a ten year period expiring July 2009. Rentals are $750 monthly for
the first five years and $900 monthly for the additional five year period. Rent
expense for the years ended March 31, 2002, 2001, and 2000, was $9,000, $9,000
and $9,000, respectively. The lease contains an option to purchase the property
at fair market value at the end of the ten year period. This lease was assigned
to a bank in conjunction with the financing for the Company's whey drying
facility.
The Company leases a portion of its Montville, New Jersey offices from
Messrs. Alfonso Falivene, Gennaro Falivene, and the Estate of Philip Falivene,
the joint owners of the office condominium unit. During the fiscal years ended
March 31, 2000, 2001 and 2002, the Company paid approximately $14,000, $14,000
and $14,000, respectively, towards the rental of such offices. The Company
currently pays $1,200 per month rent for such premises on a month to month
basis. The Company also leases an additional 900 adjacent square feet for $750
monthly on a month to month basis. These premises also are owned by Messrs.
Alfonso Falivene, Gennaro Falivene, and the Estate of Philip Falivene. This
space is used primarily for marketing operations. Rent expense for this space
was $9,000, $9,000 and $9,000, respectively, for the years ended March 31, 2000,
2001 and 2002.
Prior to joining the Company as CEO on October 24, 2002, the Company
had retained Jay Rosengarten as an independent consultant. Mr. Rosengarten had
been paid $50,000 per annum for his services.
The Company is the owner and beneficiary of life insurance policies on
the lives of Messrs. Alfonso and Gennaro Falivene, each in the amount of
$300,000. In the event of the death of any such insured, the Company has agreed
(subject to tender) to utilize the proceeds of such policy to purchase shares of
Common Stock from the deceased's estate at the market value of such shares on
the date of death.
18
The Company purchased raw materials of $615,000 from an entity
affiliated with Dr. Mali Reddy, a former Company director.
On June 10, 2002, B&W Investment Associates, a partnership of which
Howard S. Breslow, a director of the Company, is a partner, acquired, for
$25,000, a ten year warrant to purchase 500,000 shares of Common Stock at $3.00
per share.
On August 23, 2002, Stephen M. Katz resigned as Chief Financial Officer
and Vice President-Finance and Administration, but continued to serve as a
director. The Company continues to utilize the services of Mr. Katz as an
independent consultant on a per diem basis.
19
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANT
The Board of Directors has selected the accounting firm of Wiss &
Company, LLP to serve as the Company's independent accountant for the fiscal
year ending March 31, 2003 and proposes the ratification of such decision.
Citrin Cooperman & Company LLP has informed the Company that it was
resigning as the Company's public accountant, effective immediately after its
review of the Company's Quarterly Report on Form 10-Q for the quarter ending
September 30, 2002, because it was no longer auditing public companies.
Citrin Cooperman & Company LLP has audited the Company's financial
statements for the fiscal year ended March 31, 2002. Representatives of Wiss &
Company, LLP are expected to be present at the Annual Meeting, with the
opportunity to make a statement if they desire to do so, and to respond to
appropriate questions.
During the fiscal year ended March 31, 2002, Citrin Cooperman & Company
LLP acted as the independent accountant for the Company and its subsidiaries.
The following table sets forth the aggregate fees billed or expected to be
billed by Citrin Cooperman & Company LLP for audit and review services rendered
in connection with the financial statements and reports for the fiscal year
ended March 31, 2002 and for other services rendered during the fiscal year
ended March 31, 2002 on behalf of the Company and its subsidiaries:
Audit Fees $48,100
Review Fees $ 5,000
-------
Total $53,100
Required Vote
The affirmative vote of the holders of stock representing a majority of
the votes present in person or represented by proxy at the Annual Meeting and
entitled to vote thereon is required for ratification of appointment of Wiss &
Company, LLP as independent accountant for the fiscal year ended March 31, 2003.
The Board of Directors recommends a vote FOR the ratification of the
appointment of Wiss & Company, LLP as independent accountant for the Company for
the fiscal year ended March 31, 2003.
STOCKHOLDER PROPOSALS
Stockholder proposals for action at the Company's Annual Meeting of
Stockholders for the fiscal year ended March 31, 2003 must be submitted in
writing to the Company at its address set forth on the first page of this Proxy
Statement and received by the Company no later than June 3, 2003 in order that
they may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting. Stockholders who intend to present a proposal at the
Company's Annual Meeting of Stockholders for the fiscal year ending March 31,
2003 without inclusion of such proposal in the Company's proxy materials are
required to provide notice of such proposal to the Company no later than August
18, 2003. The Company reserves the right to reject, rule out of order, or take
other appropriate action with respect to any proposal that does not comply with
these and other applicable requirements.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors, officers, and any persons holding more than ten percent
of the Common Stock to file reports of their initial ownership of the Common
Stock and any subsequent changes in that ownership with the Securities and
Exchange Commission ("SEC"). Specific filing deadlines of these reports have
been established, and we are required to disclose in this Proxy Statement any
failure to meet such deadlines during the fiscal year ended March 31, 2002.
Based solely on a review of such reports furnished to us, we believe all of
these filing requirements have been satisfied, except that Dr. Mali Reddy, a
former director of the Company, did not file Form 3 and Form 5.
20
The Board of Directors knows of no other matters to be submitted at the
Annual Meeting. If any other matters properly come before the Annual Meeting,
the persons named in the enclosed form of proxy will have the discretionary
authority to vote all proxies received with respect to such matters in
accordance with their judgment.
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of exhibits), will be furnished
without charge to any stockholder upon written request to Albert N. Moussab,
Chief Financial Officer, 150 River Road, P.O. Box 517, Montville, NJ 07045.
Annual Report to Stockholders
The Annual Report to stockholders of the Company for the year ended
March 31, 2002, including audited consolidated financial statements, has been
mailed to the stockholders concurrently herewith, but such report is not
incorporated in this Proxy Statement and is not deemed to be a part of the proxy
solicitation material.
You should rely only on the information contained in this document to
vote your shares at the annual meeting. The Company has not authorized anyone to
provide information that is different from that which is contained in this
document. This document is dated December 2, 2002. You should not assume that
the information contained in this document is accurate as of any date other than
the date indicated, and you should not assume that the mailing of this document
creates any implication to the contrary.
BY ORDER OF THE BOARD
OF DIRECTORS
Albert N. Moussab, Secretary
Montville, New Jersey
December 2, 2002
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPREICATED.
21
ANNEX A
2002 STOCK OPTION PLAN
LUCILLE FARMS, INC.
2002 STOCK OPTION PLAN
1. Purpose of Plan
The purpose of this 2002 Stock Option Plan (the "Plan") is to further
the growth and development of LUCILLE FARMS, INC. (the "Company") by encouraging
and enabling employees, including officers, directors of and consultants and
advisors to the Company, to obtain a proprietary interest in the Company through
the ownership of stock, thereby providing such persons with an added incentive
to continue in the employ or service of the Company and to stimulate their
efforts in promoting the growth, efficiency and profitability of the Company,
and affording the Company a means of attracting to its service persons of
outstanding quality.
2. Shares of Stock Subject to the Plan
Subject to the provisions of Section 12 hereof, an aggregate of
1,000,000 shares of the common stock, par value $.001 per share, of the Company
("Common Stock") shall be reserved for issuance upon the exercise of options
which may be granted from time to time in accordance with the Plan. Such shares
may be, in whole or in part, as the Board of Directors of the Company ("Board of
Directors") shall from time to time determine, authorized but unissued shares or
issued shares that have been reacquired by the Company. If, for any reason, an
option shall lapse, expire or terminate without having been exercised in full,
the unpurchased shares underlying these options shall (unless the Plan shall
have been terminated) again be available for the purpose of the Plan.
3. Administration
(a) The Board of Directors shall administer the Plan and, subject to
the provisions of the Plan, shall have authority in its discretion to determine
and designate from time to time those persons eligible for a grant of options
under the Plan, those persons to whom options are to be granted, the purchase
price of the shares covered by each option, the time or times at which options
shall be granted, and the manner in which said options are exercisable. In
making such determination, the Board of Directors may take into account the
nature of the services rendered by the respective persons, their present and
potential contributions to the Company's success and such other factors as the
Board of Directors in its sole discretion shall deem relevant. Subject to the
express provisions of the Plan, the Board of Directors shall also have authority
to interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of the instruments by
which options shall be evidenced, which shall not be inconsistent with the terms
of the Plan, and to make all other determinations necessary or advisable for the
administration of the Plan, all of which determinations shall be final, binding
and conclusive.
(b) The Board of Directors may, at its discretion, by resolution
adopted by the affirmative vote of a majority of the entire Board of Directors,
appoint from among its members a Stock Option Plan Committee (the "Committee").
Such Committee shall be composed of three or more directors and shall have and
may exercise any and all of the powers relating to the administration of the
Plan and the grant of options hereunder as are set forth above in Section 3(a),
as the Board of Directors shall confer and delegate. The Board of Directors
shall have the power at any time to fill vacancies in, to change the membership
of, or to discharge, such Committee. The Committee shall select one of its
members as its Chairman and shall hold its meetings at such time and at such
places as it shall deem advisable. A majority of such Committee shall constitute
a quorum and such majority shall determine its action. The Committee shall keep
minutes of its proceedings and shall report the same to the Board of Directors
at the meeting next succeeding. No director or member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any option granted thereunder.
4. Persons To Whom Shares May Be Granted
Options may be granted to persons who are, at the time of the grant,
employees (including officers) or directors of, or consultants or advisors to,
the Company or any subsidiary corporation (as defined in Section 425 of the
Internal Revenue Code of 1986, as amended (the "Code"), and herein referred to
as "Subsidiary"), including part-time employees, as the Board of Directors (or
Committee) shall select from time to time from among those nominated by the
Board of Directors (or Committee). For the purposes of this Plan, options may
only be granted to those consultants and advisors who shall render bona fide
services to the Company and such services must not be in connection with the
offer or sale of securities in a capital raising transaction. Subject to the
provisions hereinafter set forth, options granted under the Plan shall be
designated either (i) "Incentive Stock Options" (which term, as used herein,
shall mean options intended to be "incentive stock options" within the meaning
of Section 422 of the Code) or (ii) "Non-Incentive Stock Options" (which term,
as used herein, shall mean options not intended to be incentive stock options"
within the meaning of Section 422 of the Code). Each option granted to a person
who is solely a director of or a consultant or advisor to the Company or a
Subsidiary on the date of the grant shall be designated a Non-Incentive Stock
Option.
2
The Board of Directors (or Committee) may grant, at any time, new
options to a person who has previously received options whether such prior
options are still outstanding, have previously been exercised in whole or in
part, have expired, or are cancelled in connection with the issuance of new
options. The purchase price of the new options may be established by the Board
of Directors (or Committee) without regard to the existing option price.
5. Option Price
(a) The purchase price of the Common Stock underlying each option shall
be determined by the Board of Directors (or Committee), which determination
shall be final, binding and conclusive; provided, however, that in no event
shall the purchase price of Incentive Stock Options be less than 100% (110% in
the case of optionees who own more than 10% of the total combined voting power
of all classes of stock of the Company) of the fair market value of the Common
Stock on the date the option is granted. In determining such fair market value,
the Board of Directors (or Committee) shall consider (i) the closing price of
the Common Stock on the date on which the option is granted (if such Common
Stock is listed on a national securities exchange); (ii) the closing bid prices
as quoted by the National Quotation Bureau or a recognized dealer in the Common
Stock on the date of grant (if such Common Stock is not listed on such an
exchange); and (iii) such other factors as the Board of Directors (or Committee)
shall deem appropriate or which may be relevant under applicable federal tax
laws and Internal Revenue rules and regulations. For purposes of the Plan, the
date of grant of an option shall be the date on which the Board of Directors (or
Committee) shall by resolution duly authorize such option.
3
(b) The aggregate fair market value (as defined above), determined at
the time the Incentive Stock Options are granted, of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
an employee during any calendar year shall not exceed $100,000. Non-Incentive
Stock Options shall not be subject to the limitations of this paragraph 5(b).
6. Exercise of Options
(a) Subject to the provisions set forth in Sections 6, 9, 10 and 11
hereof, no option shall be exercisable unless the holder thereof shall have been
an employee (including an officer) or director of, or a consultant or advisor
to, the Company and/or a Subsidiary, from the date of the granting of the option
until the date of exercise.
(b) The number of shares that are issued pursuant to the exercise of an
option shall be charged against the maximum limitations on shares set forth in
Section 2 hereof.
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(c) The exercise of an option shall be made contingent upon receipt by
the Company from the holder thereof of (i) if deemed necessary by the Company, a
written representation and acknowledgement that at the time of such exercise it
is holder's then present intention to acquire the option shares for investment
and not with a view to distribution or resale thereof, that holder knows that
the Company is not obligated to register the option shares and that the option
shares may have to be held indefinitely unless an exemption from the
registration requirements of the Securities Act of 1933, as amended, is
available or the Company has registered the shares underlying the options,
that the Company may place a legend on the certificate(s) evidencing the option
shares reflecting the fact that they were acquired for investment and cannot be
sold or transferred unless registered under the Securities Act of 1933, as
amended, or unless counsel for the Company is satisfied that the circumstances
of the proposed transfer do not require such registration and (ii) payment in
full of the purchase price of the shares being purchased. Payment may be made
(a) in cash, (b) by certified check payable to the order of the Company in the
amount of such purchase price, (c) by delivery to the Company of shares of
Common Stock having a fair market value equal to such purchase price, (d) by
irrevocable instructions to a broker to sell shares of Common Stock to be issued
upon exercise of the option, provided such shares are registered and
transferable, and to deliver to the Company the amount of sale proceeds
necessary to pay such purchase price and to deliver the remaining cash proceeds,
less commissions and brokerage fees to the optionee, (e) on a "cashless" basis,
by stating in a written notice such intention and the aggregate of the number of
shares of Common Stock to be purchased and for which the right to purchase shall
be lost by the cancellation thereof in payment for the exercise price (the
"Aggregate Number"), in which case the number of shares of Common Stock issuable
upon such exercise shall equal the difference between the Aggregate Number and
the quotient that is obtained when the product of the Aggregate Number and the
then current exercise price per share is divided by the then current fair market
price per share (determined in accordance with Section 5(a) hereof);(f) by any
combination of the methods of payment described in (a) through (e) above, or (g)
such other means as determined by the Board of Directors, or Committee, in its
sole discretion, to be consistent with the purpose of the Plan.
(d) The Board of Directors (or Committee) shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to extend the period of time for which the option is
to remain exercisable following the cessation of optionee's relationship with
the Company as an employee (including an officer), director, consultant or
advisor by reason of termination without cause, disability, or death from the
limited period otherwise in effect for that option to such greater period of
time as the Board of Directors (or Committee) shall deem appropriate, but in no
event beyond the expiration of the option term.
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7. Term of Options
The period during which each option granted hereunder shall be
exercisable shall be determined by the Board of Directors (or Committee);
provided, however, that no option shall be exercisable for a period exceeding
ten (10) years (five (5) years for incentive stock options in the case of
optionees who own more than 10% of the total combined voting power of all
classes of stock of the Company) from the date the options are granted.
8. Non-Transferability of Options
No option granted pursuant to this Plan shall be subject to
anticipation, sale, assignment, pledge, encumbrance or charge or otherwise
transferable except by will or the laws of descent and distribution, and an
option shall be exercisable during the lifetime of the holder thereof only by
such holder.
9. Termination of Services
In the event that an employee, officer, director, consultant or advisor
shall cease to be an employee (including an officer) or director of, or a
consultant or advisor to, the Company or a Subsidiary, by reason of a
termination of such relationship without cause and other than by reason of
voluntary resignation, death, disability or retirement at age 65, then, subject
to Section 6(d) hereof, such holder may exercise such option at any time prior
to the expiration date of the option or within three months after the date of
termination, whichever is earlier, but only to the extent the holder had the
right to exercise such option on the date of termination. In the event that an
employee (including an officer) or director of, or a consultant or advisor to
the Company shall cease to be an employee (including an officer) or director of,
or a consultant or advisor to, the Company or a Subsidiary, by reason of a
termination of such relationship for cause or such person's voluntary
resignation, such options shall forthwith automatically terminate, lapse and
expire. So long as the holder of an option shall continue to be an employee
(including an officer) or director of, or a consultant or advisor to, the
Company or one or more of its Subsidiaries, such holder's option shall not be
affected by any change of duties or position. Absence on leave approved by the
Company or any Subsidiary shall not be considered an interruption of service for
any purpose under the Plan. The granting of an option in any one year shall not
give the holder of the option any rights to similar grants in future years or
any right to be retained in the employ or service of the Company or any of its
Subsidiaries or interfere in any way with the right of the Company or any such
Subsidiary to terminate such holder's employment or services at any time.
Notwithstanding the foregoing, no option may be exercised after ten years from
the date of its grant.
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10. Retirement or Disability of Holder of Option
If any person to whom an option has been granted under the Plan shall
cease to be an employee (including an officer) or director of, or a consultant
or advisor to, the Company or a Subsidiary, by reason of disability or
retirement at age 65, then, subject to Section 6(d) hereof, such holder may
exercise such option at any time prior to the expiration date of the option or
within three months (one year in the case of termination by reason of
disability) after the date of termination for such reason, whichever is earlier,
but only to the extent the holder had the right to exercise such option on the
date of termination. Notwithstanding the foregoing, no option may be exercised
after ten years from the date of its grant.
11. Death of Holder of Option
If any person to whom an option has been granted under the Plan shall
cease to be an employee (including an officer) or director of, or a consultant
or advisor to, the Company or a Subsidiary by reason of death, or a holder of an
option shall die within three months after termination by reason of retirement
at age 65 or otherwise, then, subject to Section 6(d) hereof, the option may be
exercised by the person or persons to whom the optionee's rights under the
option are transferred by will or by the laws of descent and distribution at any
time prior to the expiration date of the option or within three months from the
date of death, whichever is earlier, but only to the extent the holder of the
option had the right to exercise such option on the date of such termination.
Notwithstanding the foregoing, no option may be exercised after ten years from
the date of its grant.
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12. Adjustments Upon Changes in Capitalization
If the shares of Common Stock outstanding are changed in number, kind
or class by reason of a stock split, combination, merger, consolidation,
reorganization, reclassification, exchange or any capital adjustment, including
a stock dividend, or if any distribution is made to shareholders other than a
cash dividend and the Board of Directors deems it appropriate to make an
adjustment, then (i) the aggregate number and class of shares that may be issued
or transferred pursuant to Section 2, (ii) the number and class of shares which
are issuable under outstanding options, and (iii) the purchase price to be paid
per share under outstanding options, shall be adjusted as hereinafter provided.
Adjustments under this Section 12 shall be made in a proportionate and
equitable manner by the Board of Directors (or Committee), whose determination
as to what adjustments shall be made, and the extent thereof, shall be final,
binding and conclusive. In the event that a fraction of a share results from the
foregoing adjustment, said fraction shall be eliminated and the price per share
of the remaining shares subject to the option adjusted accordingly.
In the event of a liquidation of the Company, or a merger,
reorganization or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly owned subsidiary of another corporation, any unexercised options
theretofore granted under the Plan shall be deemed cancelled unless the
surviving corporation in any such merger, reorganization or consolidation
elected to assume the options under the Plan or to issue substitute options in
place thereof; provided, however, that, notwithstanding the foregoing, if such
options would otherwise be cancelled in accordance with the foregoing, the
optionee shall have the right, exercisable during a ten-day period ending on the
fifth day prior to such liquidation, reorganization, merger or consolidation, to
exercise the option in whole or in part. The granting of an option pursuant to
this Plan shall not affect in any way the right or power of the Company to make
adjustments, reorganizations, reclassifications or changes of its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
8
13. Vesting of Rights Under Options
Nothing contained in this Plan or in any resolution adopted or to be
adopted by the Board of Directors (or Committee) or the shareholders of the
Company shall constitute the vesting of any rights under any option. The vesting
of such rights shall take place only when a written agreement shall be duly
executed and delivered by and on behalf of the Company to the person to whom the
option shall be granted.
14. Rights as a Shareholder
A holder of an option shall have no rights of a shareholder with
respect to any shares covered by his option until the date of issuance of a
stock certificate to him for such shares.
15. Termination and Amendment
The Board of Directors may, at any time, terminate or suspend this Plan
or make such modifications or amendments thereto as it shall deem advisable;
provided, however, that no termination, modification or amendment shall
adversely affect the rights of a holder of an option previously granted under
the Plan.
16. Modification, Extension and Renewal of Options
Subject to the terms and conditions and within the limitations of the
Plan, the Board of Directors (or Committee) may modify, extend or renew
outstanding options granted under the Plan, or accept the surrender of
outstanding options (to the extent not theretofore exercised) and authorize the
granting of new options in substitution therefor. Notwithstanding the foregoing,
no modification of an option shall, without the consent of the holder thereof,
alter or impair any rights or obligations under any option theretofore granted
under the Plan.
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17. Indemnification
In addition to such other rights of indemnification as they may have as
members of the Board of Directors (or Committee), the members of the Board of
Directors (or Committee) administering the Plan shall be indemnified by the
Company against reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any action, suit or proceeding, except in relation
to matters as to which it shall be adjudged in such action, suit, or proceeding
that such member is liable for negligence or misconduct in the performance of
his duties, provided that within 60 days after institution of any such action,
suit or proceeding, the member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
18. Effective Date
The Plan shall become effective on November 1, 2002, subject to
stockholder approval, and shall terminate on the close of business on October
30, 2012 and no option may be granted under the Plan thereafter, but such
termination shall not affect any option theretofore granted.
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PRELIMINARY COPY
PROXY
LUCILLE FARMS, INC.
150 River Road, P.O. Box 517
Montville, New Jersey 07045
This Proxy is solicited on behalf of the Board of Directors
The undersigned, acknowledging receipt of the proxy statement of
Lucille Farms, Inc. (the "Company"), dated December 2, 2002, hereby constitutes
and appoints Jay Rosengarten and Alfonso Falivene and each or any of them,
attorney, agent, and proxy of the undersigned, with full power of substitution
to each of them, for and in the name, place, and stead of the undersigned, to
appear and vote all the shares of stock of the Company, standing in the name of
the undersigned on the books of the Company on October 30, 2002, at the Annual
Meeting of Stockholders of the Company, to be held at the Embassy Suites Hotel
located at 909 Parsippany Boulevard, Parsippany, New Jersey 07405, on December
20, 2002, at 10:00 a.m., local time, and all adjournments thereof.
When properly executed, this proxy will be voted as designated by the
undersigned.
If no choice is specified, this proxy will be voted (i) FOR the
proposal to approve the issuance of shares of Common Stock in connection with
the Financing Transaction, (ii) FOR the proposal to amend the Company's
Certificate of Incorporation to increase the authorized shares of common stock
from 10,000,000 shares to 100,000,000 shares, (iii) FOR the proposal to approve
the 2002 Stock Option Plan, (iv) FOR the election of the nominees for directors
herein, (v) FOR ratification of the appointment of Wiss & Company, LLP as
independent accountant for the fiscal year ending March 31, 2003.
Proposal to approve the issuance of shares of Common Stock iN connection with
the financing transaction
|_| FOR |_| AGAINST |_| ABSTAIN
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED SHARES OF COMMON STOCK FROM 10,000,000 SHARES TO 100,000,000 SHARES
|_| FOR |_| AGAINST |_| ABSTAIN
PROPOSAL TO APPROVE THE COMPANY'S 2002 STOCK OPTION PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
ELECTION OF DIRECTORS
|_| FOR all nominees listed below (except as written in on the line below)
Alfonso Falivene, Howard S. Breslow, Jay M. Rosengarten, George Bell,
Ralph Singer and Leon Berthiaume
|_| WITHHOLD AUTHORITY for all nominees listed above.
(Instruction: To withhold authority to vote for any individual nominee,
please write in name on line below)
- --------------------------------------------------------------------------------
PROPOSAL TO RATIFY THE APPOINTMENT OF WISS & COMPANY, LLP AS INDEPENDENT
ACCOUNTANT
|_| FOR |_| AGAINST |_| ABSTAIN
--------------------------------
Date
--------------------------------
Print Name
--------------------------------
Signature
--------------------------------
Signature, if held jointly
When shares are held by joint tenants, both should sign. When signing as
attorney, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
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