SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
LANDEC CORPORATION
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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)(1)
and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
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previously. Identify the previous filing by registration statement number,
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[LANDEC INTELLIGENT MATERIALS LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 15, 1998
TO THE SHAREHOLDERS OF LANDEC CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Landec
Corporation (the "Company") will be held on Wednesday, April 15, 1998, at 5:00
p.m., local time, at Hyatt Rickeys Hotel, 4219 El Camino Real, Palo Alto, 94306
for the following purposes:
1. To elect directors to serve for a term expiring at the Annual Meeting of
Shareholders held in the second year following the year of their election
or until their successors are elected and qualified;
2. To approve and ratify amendments to the Company's 1996 Stock Option Plan
to increase the number of shares of Common Stock reserved for issuance
thereunder by 750,000 shares to an aggregate total of 1,500,000 shares;
3. To approve and ratify amendments to the Company's 1995 Directors' Stock
Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 200,000 shares to an aggregate of 400,000 shares,
to change the subsequent option grants made to each nonemployee director
to 5,000 shares for the 1997 Annual Meeting and 10,000 shares annually
thereafter, and to reprice the exercise price of all options previously
granted under the 1995 Directors' Stock Option Plan;
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending October 31, 1998; and
5. To transact such other business as may properly come before the meeting
or any postponement or adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on February 19, 1998
are entitled to notice of and to vote at the meeting and any adjournment(s)
thereof.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if such shareholder returned a proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ TAE HEA NAHM
TAE HEA NAHM
SECRETARY
Menlo Park, California
February 27, 1998
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF
RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON. THANK YOU FOR ACTING PROMPTLY.
[LANDEC INTELLIGENT MATERIALS LOGO]
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 15, 1998
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Landec Corporation ("Landec" or the "Company"), a California corporation, for
use at the Annual Meeting of Shareholders to be held on Wednesday, April 15,
1998 at 5:00 p.m., local time, or at any postponement or adjournment(s) thereof,
for the purposes set forth herein and in the accompanying Notice of Annual
Meeting of Shareholders. The Annual Meeting will be held at Hyatt Rickeys Hotel,
4219 El Camino Real, Palo Alto, CA 94306-4405. The telephone number at that
location is (650) 493-8000.
The Company's principal executive offices are located at 3603 Haven Avenue,
Menlo Park, California 94025. The Company's telephone number at that location is
(650) 306-1650.
SOLICITATION
These proxy solicitation materials were mailed on or about February 27, 1998
to all shareholders entitled to vote at the meeting. The costs of soliciting
these proxies will be borne by the Company. These costs will include the
expenses of preparing and mailing proxy materials for the Annual Meeting and
reimbursement paid to brokerage firms and others for their expenses incurred in
forwarding solicitation material regarding the Annual Meeting to beneficial
owners of the Company's Common Stock. The Company may conduct further
solicitation personally, telephonically or by facsimile through its officers,
directors and regular employees, none of whom will receive additional
compensation for assisting with the solicitation.
The Company will provide a copy of the Company's Annual Report on Form 10-K
for the year ended October 31, 1997, including financial statements and
financial statement schedules (but not exhibits), without charge to each
shareholder upon written request to Joy T. Fry, Chief Financial Officer, Landec
Corporation, 3603 Haven Avenue, Menlo Park, CA 94025 (telephone number: (650)
306-1650). Exhibits to the Annual Report may be obtained on written request to
Ms. Fry and payment of the Company's reasonable expenses in furnishing such
exhibits.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Joy T. Fry, Inspector of Elections) a written notice of revocation or a duly
executed proxy bearing a later date or by attending the meeting of shareholders
and voting in person.
VOTING
Holders of Common Stock are entitled to one vote per share on all matters.
Votes cast in person or by proxy at the Annual Meeting will be tabulated by
the Inspector of Elections with the assistance of the Company's transfer agent.
The Inspector of Elections will also determine whether or not a quorum is
present. The affirmative vote of a majority of shares represented and voting at
a duly held meeting at which a quorum is present is required under California
law for approval of proposals presented to shareholders, which shares voting
affirmatively must also constitute at least a
majority of the required quorum. In general, California law also provides that a
quorum consists of a majority of the shares entitled to vote, represented either
in person or by proxy. The Inspector of Elections will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as not voting for purposes of determining the approval
of any matter submitted to the shareholders for a vote. Any proxy which is
returned using the form of proxy enclosed and which is not marked as to a
particular item will be voted for the election of directors, for ratification of
the appointment of the designated independent auditors, and as the proxy holders
deem advisable on other matters that may come before the meeting, as the case
may be, with respect to the item not marked. If a broker indicates on the
enclosed proxy or its substitute that it does not have discretionary authority
as to certain shares to vote on a particular matter ("broker non-votes"), those
shares will not be considered as voting with respect to that matter. While there
is no definitive specific statutory or case law authority in California
concerning the proper treatment of abstentions and broker non-votes, the Company
believes that the tabulation procedures to be followed by the Inspector of
Elections are consistent with the general statutory requirements in California
concerning voting of shares and determination of a quorum.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on February 19, 1998,
are entitled to notice of and to vote at the meeting. As of the record date,
12,727,671 shares of the Company's Common Stock, par value $0.001 per share,
were issued and outstanding.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1999 Annual Meeting of Shareholders must
be received by Joy T. Fry of the Company no later than October 30, 1998, in
order that they may be considered for inclusion in the proxy statement and form
of proxy relating to that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Company's bylaws currently provide for not less than four or more than
seven directors, and the Company's Articles of Incorporation provide for the
classification of the Board of Directors into two classes serving staggered
terms. The Company's Board of Directors currently consists of seven persons,
including three Class I directors and four Class II directors. Each Class I and
Class II director is elected for two year terms, with Class I directors elected
in odd-numbers years (E.G., 1997) and the Class II directors elected in even
numbered years (E.G., 1998). Accordingly, at the Annual Meeting, four Class II
directors will be elected.
The Board of Directors has nominated the four persons named below to serve
as Class II directors until the next even-numbered year Annual Meeting during
which their successors will be elected and qualified. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's four nominees named below, all of whom are presently directors of the
Company. In the event that any nominee of the Company 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. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them in such a manner as will assure the election of as many of the nominees
listed below as possible, and, in such event, the specific nominees to be voted
for will be determined by the proxy holders. Assuming a quorum is present, the
four nominees for director receiving the greatest number of votes cast at the
Annual Meeting will be elected.
2
NOMINEES FOR CLASS II DIRECTORS
The names of the nominees for the Company's Class II directors and certain
information about them as of January 31, 1998 are set forth below:
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------------- --- ----------------------------------------------------------- ---------------
Gary T. Steele 49 President, Chief Executive Officer and Chairman of the 1991
Board of Directors of the Company
Kirby L. Cramer 61 Director 1994
Richard Dulude 64 Director 1996
Damion E. Wicker, M.D. 37 Director 1997
Except as set forth below, each of the nominees has been engaged in the
principal occupation set forth next to his name above during the past five
years. There is no family relationship between any director or executive officer
of the Company.
Gary T. Steele has served as President, Chief Executive Officer and a
director since September 1991 and as Chairman of the Board of Directors since
January 1996. Mr. Steele has over 18 years of experience in the biotechnology,
instrumentation and material science fields. From 1985 to 1991, Mr. Steele was
President and Chief Executive Officer of Molecular Devices Corporation, a
bioanalytical instrumentation company. From 1981 to 1985, Mr. Steele was Vice
President, Product Development and Business Development at Genentech, Inc., a
biomedical company focusing on pharmaceutical drug development. Mr. Steele has
also worked with McKinsey and Co. and Shell Oil Company. Mr. Steele received a
B.S. from Georgia Institute of Technology and an M.B.A. from Stanford
University.
Kirby L. Cramer has served as a director since December 1994. Since April
1987, Mr. Cramer has been Chairman Emeritus of Hazleton Laboratories Corporation
and a director of a number of medical and financial companies. He also serves as
a director of Immunex Corporation, Advanced Technology Laboratories, Inc.,
Pharmaceutical Product Development, Inc., and Unilab Corporation. Mr. Cramer
received a B.A. from Northwestern University and an M.B.A. from the University
of Washington.
Richard Dulude has served as a director since May 1996. Mr. Dulude retired
as Vice Chairman of Corning Inc. in 1993 after a 36 year career in which he held
various general management positions in Corning's telecommunications, materials,
consumer and international businesses, including positions as Chairman and Chief
Executive Officer of SIECOR Corporation and Chairman and Chief Executive Officer
of Corning-Vitro Corporation. Mr. Dulude is currently a director of Raychem
Corporation, AMBAC, Inc., and HCIA, Inc. Mr. Dulude received a B.S. from
Syracuse University.
Damion E. Wicker, M.D. has served as a director since February 1997. Dr.
Wicker has been a general partner of Chase Capital Partners, responsible for
medical venture capital investments since January 1997. From April 1993 to
December 1996, Dr. Wicker was a principal of Chase Capital Partners. From June
1991 to April 1993, Dr. Wicker served as a founder and president of Adams
Scientific, a biotechnology diagnostic company specializing in monoclonal and
DNA probes for detection of infectious diseases. Dr. Wicker currently serves on
the board of directors of Hepatix and Vitex, privately-held companies. Dr.
Wicker received a B.S. from the Massachusetts Institute of Technology, an M.D.
from the Johns Hopkins University School of Medicine, and an M.B.A. from the
Wharton School of the University of Pennsylvania.
3
CLASS I DIRECTORS--DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
OF SHAREHOLDERS
The names of the Company's Class I directors and certain other information
about them as of January 31, 1998 are set forth below:
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------------- --- ----------------------------------------------------------- ---------------
Ray F. Stewart, Ph.D. 44 Senior Vice President, Intellicoat Corporation, a 1986
subsidiary of the Company
Stephen E. Halprin 59 Director 1988
Richard S. Schneider, Ph.D. 57 Director 1991
Except as set forth below, each of the Class I directors has been engaged in
the principal occupation set forth next to his name above during the past five
years.
Ray F. Stewart, Ph.D. is the founder of the Company and has served as a
director since the Company's inception in 1986. Since November 1996, he has also
served as Senior Vice President of Intellicoat Corporation, a wholly-owned
subsidiary of the Company. From the Company's inception to November 1996, he
served as the Vice President, Technology for Landec. Dr. Stewart has over 16
years of experience in the material science industry. Prior to founding Landec,
Dr. Stewart worked at Raychem Corporation. While at Raychem Corporation from
1979 to 1986, Dr. Stewart managed development efforts in the areas of adhesives,
plastic electrodes, sensors and synthetic polymer chemistry, and led the
development and commercialization of several new product lines. Dr. Stewart
received a B.S. from Northern Arizona University and a Ph.D. in organic
chemistry from the University of Minnesota.
Stephen E. Halprin has served as a director since April 1988. Since 1971,
Mr. Halprin has been a general partner of OSCCO Ventures. Mr. Halprin has been
an active member of the venture community since 1968 and serves on the Board of
Directors of Hybrid Networks, Inc. and a number of privately-held technology
companies. Mr. Halprin received a B.S. from the Massachusetts Institute of
Technology and an M.B.A. from Stanford University.
Richard S. Schneider, Ph.D. has served as a director since September 1991.
Since October 1990, Dr. Schneider has been a general partner of Domain
Associates and Domain Partners II, L.P. Dr. Schneider has over 25 years of
product development experience in the fields of medical devices and
biotechnology. Prior to his pursuing a career in venture capital, Dr. Schneider
was Vice President of Product Development at Syva/Syntex Corporation and
President of Biomedical Consulting Associates. He is a member of the Board of
Directors of Fusion Medical Technologies, Inc. and a number of privately-held
life science companies. Dr. Schneider received a Ph.D. in chemistry from the
University of Wisconsin, Madison.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held a total of seven meetings during the fiscal year
ended October 31, 1997. The Board of Directors has an Audit Committee, a
Compensation Committee and a Nominating Committee.
The Audit Committee of the Board of Directors currently consists of
directors Stephen E. Halprin and Richard Dulude and held five meetings during
fiscal year 1997. The Audit Committee recommends engagement of the Company's
independent auditors and is primarily responsible for approving the services
performed by the Company's independent auditors and for reviewing and evaluating
the Company's accounting principles and its system of internal accounting
controls.
The Compensation Committee of the Board of Directors currently consists of
directors Kirby L. Cramer and Richard S. Schneider and held five meetings during
fiscal year 1997. The Compensation Committee establishes the compensation for
the Company's executive officers, including the Company's Chief Executive
Officer.
4
The Nominating Committee was formed in December 1997 and currently consists
of Kirby L. Cramer, Stephen E. Halprin, and Damion E. Wicker. It did not meet in
fiscal year 1997.
No incumbent director attended fewer than 75% of the aggregate number of
meetings of the Board of Directors and meetings of the committees of the Board
of Directors on which he serves held during the fiscal year ended October 31,
1997.
COMPENSATION OF DIRECTORS
For fiscal year ended on October 31, 1997, directors did not receive any
cash fees for services provided in that capacity but were reimbursed for
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors and committees thereof.
Nonemployee directors of the Company are automatically granted options to
purchase shares of the Company's Common Stock pursuant to the terms of the
Company's 1995 Directors' Stock Option Plan (the "Directors' Plan"). Under the
Directors' Plan, each nonemployee director who has not previously been granted
an equivalent option under any stock option plan of the Company will be granted
a nonstatutory stock option to purchase 20,000 shares of Common Stock (the
"First Option") on the date on which the optionee first becomes a nonemployee
director of the Company. Thereafter, on the date of each annual meeting of the
shareholders at which each optionee is re-elected to be a nonemployee director,
such nonemployee director (including directors who were not eligible for a First
Option) will be granted an additional option to purchase 5,000 shares of Common
Stock (a "Subsequent Option") if, on such date, he or she shall have served on
the Company's Board of Directors for at least six months prior to the date of
such annual meeting. The First Option and each Subsequent Option are fully
vested and exercisable on the date of grant. Options granted under the
Directors' Plan have an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant with a term of ten years. In
December 1997, the Board of Directors amended the Directors' Plan, subject to
shareholder approval, (i) to change the number of shares granted pursuant to the
Subsequent Option to each nonemployee director to 5,000 shares for the 1997
Annual Meeting and 10,000 shares annually thereafter; (ii) to increase the
number of shares of Common Stock reserved for issuance thereunder by 200,000
shares to an aggregate total of 400,000 shares; and (iii) to reprice the
exercise price of all options previously granted under the Directors' Plan to
the greater of the closing price of the Company's stock on April 15, 1998 or
$5.00 per share.
Upon joining the Board in February, 1997, Dr. Wicker was automatically
granted an option to purchase 20,000 shares of Common Stock, with an exercise
price of $7.625 per share, pursuant to the Directors' Plan. Subject to their
election to the Board of Directors by the shareholders at the Annual Meeting and
further subject to shareholder approval of the proposed amendment to the
Directors' Plan, Messrs. Cramer, Dulude, Halprin and Drs. Wicker and Schneider
will each be automatically granted an option to purchase 10,000 shares of Common
Stock on the date of the Annual Meeting pursuant to the Directors' Plan. If
shareholders approve the repricing of outstanding options, the exercise price
for options previously granted pursuant to the Directors' Plan will be the
greater of the closing price of the Company's Common Stock on April 15, 1998 or
$5.00 per share. As of January 30, 1998, 2,438,105 shares issuable pursuant to
options to purchase the Company's Common Stock were outstanding. As of the same
date, Messrs. Cramer, Dulude, Halprin, Schneider, and Wicker, nonemployee
directors, had been granted options to purchase 46,520, 29,000, 16,956, 16,956,
and 23,478 shares of the Company's Common Stock, respectively.
The Company entered into a two-year consulting agreement with Mr. Dulude, a
nonemployee outside director, on May 1, 1996, pursuant to which he will be paid,
at the earlier of April 30, 1998 or the termination of the agreement, $30,000
per year and pursuant to which he was granted stock options to purchase 4,000
shares of the Company's Common Stock.
5
REQUIRED VOTE
The four Class II director nominees receiving the highest number of
affirmative votes of shares of the Company's Common Stock present at the Annual
Meeting in person or by proxy and entitled to vote shall be elected as
directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
EACH OF THE NOMINEES LISTED ABOVE.
PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO THE 1996 STOCK OPTION PLAN
At the Annual Meeting, shareholders are being asked to approve amendments to
the 1996 Stock Option Plan (the "1996 Plan") to increase the number of shares of
Common Stock reserved for issuance thereunder by 750,000 shares to an aggregate
of 1,500,000 shares.
GENERAL
The Company's 1996 Plan was adopted by the Board of Directors in November
1996 to supplement the 1988 Stock Option Plan which, upon the adoption of the
1996 Plan, had few shares available for grant remaining thereunder and which
will expire in accordance with its stated termination date of July 1998. The
Board of Directors initially reserved 750,000 shares of Common Stock for
issuance under the 1996 Plan. In December 1997, the Board of Directors amended
the 1996 Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 750,000 shares to a total of 1,500,000 shares, which
amendment is the subject of this proposal. The Board also repriced the exercise
price of the options granted under the 1996 Plan through an option exchange
program. Under this program, all employees of the Company, other than
consultants, holding outstanding options to purchase Common Stock of the Company
were offered an opportunity to exchange their outstanding options for new
options whose exercise price equaled the trading price of the Company's Common
Stock at the close of business on January 14, 1998 with a floor of $5.00 per
share, provided that such employees agreed to surrender and cancel their old
options and forfeit all vesting of the old options. For those who participated
in the option exchange program, the new date of grant is and the new vesting
commencement date commenced on December 4, 1997. Twenty-eight employees chose to
participate in the option exchange program.
Options granted under the 1996 Plan may be either "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or nonstatutory stock options at the discretion of the
Board of Directors and as reflected in the terms of the written option
agreement.
The 1996 Plan is not a qualified deferred compensation plan under Section
401(a) of the Code, and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
As of January 30, 1998, options for 656,000 shares were outstanding under
the 1996 Plan, no shares had been issued pursuant to the exercise of options
granted under the 1996 Plan, and 94,000 shares remained available for future
grants. Shares subject to options granted under the 1996 Plan that lapse
unexercised will generally become available for reissuance under the 1996 Plan
at the time of such lapse. As of January 30, 1998, the aggregate fair market
value of all shares of Common Stock subject to outstanding options under the
1996 Plan was $3,075,328 based on the closing sale price of $4.688 for the
Company's Common Stock as reported on the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") National Market System on such
date. The actual benefits, if any, to the holders of stock options issued under
the 1996 Plan are not determinable prior to exercise as the value, if any, of
such stock options to their holders is represented by the difference between the
market price of a share of the Company's Common Stock on the date of exercise
and the exercise price of a holder's stock option, as set forth below. Grant
information with respect to options to purchase Common Stock of the Company
6
granted in the fiscal year ended October 31, 1997 under the Company's 1996 Plan
to all employees and the Named Executive Officers is set forth under
"Compensation of Executive Officers--Stock Option Grants in Fiscal Year 1997."
During the fiscal year that ended October 31, 1997, options to purchase 261,000
shares of Common Stock were granted under the Company's 1996 Plan to the
Company's current executive officers as a group. During the same period, no
options were granted under the 1996 Plan to directors who are not executive
officers or to employees who are not executive officers. From October 31, 1997
through January 30, 1998, options to purchase 295,000 shares of Common Stock
were granted to the Company's current executive officers.
MATERIAL AMENDMENT
The Board of Directors believes that in order to attract and retain highly
qualified employees and consultants and to provide such employees and
consultants with adequate incentives through their proprietary interest in the
Company, it is necessary to amend the 1996 Plan to reserve an additional 750,000
shares of Common Stock for issuance under the 1996 Plan. At the Annual Meeting,
the shareholders are being asked to approve this amendment to the 1996 Plan.
PURPOSE
The purposes of the 1996 Plan are to attract and retain the best available
personnel for the Company, to provide additional incentive to the employees,
officers, directors and consultants of the Company, and to promote the success
of the Company's business.
ADMINISTRATION
The 1996 Plan may be administered by the Board of Directors or by a
committee (or subcommittee in certain instances) of the Board of Directors. The
1996 Plan is currently being administered by the Board of Directors and the
Compensation Committee of the Board of Directors (the "Administrator"). The
Compensation Committee, which meets the definition of "outside directors" under
Code Section 162(m) and "non-employee directors" under Section 16 of the
Exchange Act, has the exclusive authority to grant stock options and purchase
rights and otherwise administer the 1996 Plan with respect to the Company's
executive officers and more narrowly to "covered employees" described in Code
Section 162(m) (generally the Company's highest paid executive officers).
Members of the Board of Directors receive no additional compensation for their
services in connection with the administration of the 1996 Plan. All questions
of interpretation of the 1996 Plan are determined by the Board of Directors or
its committee, and its decisions are final and binding upon all participants.
ELIGIBILITY
The 1996 Plan provides that options may be granted to employees (including
officers and directors who are also employees) and consultants of the Company.
Incentive stock options may be granted only to employees. The Administrator
selects the optionees and determines the number of shares and the exercise price
to be associated with each option. In making such determination, the
Administrator takes into account the duties and responsibilities of the
optionee, the value of the optionee's services, the optionee's present and
potential contribution to the success of the Company, and other relevant
factors. As of December 31, 1997, there were approximately 104 employees
eligible to participate in the 1996 Plan.
The 1996 Plan provides that the maximum number of shares of Common Stock
which may be granted under options to any one employee under the 1996 Plan
during any fiscal year is 500,000, subject to adjustment as provided in the 1996
Plan. There is also a limit on the aggregate market value of shares subject to
all incentive stock options that may be granted to an optionee during any
calendar year.
7
TERMS OF OPTIONS
The terms of options granted under the 1996 Plan are determined by the
Administrator. Each option is evidenced by a stock option agreement between the
Company and the optionee and is subject to the following additional terms and
conditions:
(a) EXERCISE OF THE OPTION. The optionee must earn the right to exercise
the option by continuing to work for the Company. The Administrator determines
when options are exercisable. An option is exercised by giving written notice of
exercise to the Company specifying the number of full shares of Common Stock to
be purchased, and by tendering payment of the purchase price to the Company. The
method of payment of the exercise price of the shares purchased upon exercise of
an option is determined by the Administrator.
(b) EXERCISE PRICE. The exercise price of options granted under the 1996
Plan is determined by the Administrator, and must be at least equal to the fair
market value of the shares on the date of grant, in the case of incentive stock
options, and 85% of the fair market value of the shares on the date of grant, in
the case of nonstatutory stock options, as determined by the Administrator,
based upon the closing price on the NASDAQ National Market System on the date of
grant. Incentive stock options granted to shareholders owning more than 10% of
the Company's outstanding stock are subject to the additional restriction that
the exercise price on such options must be at least 110% of the fair market
value on the date of the grant. Nonstatutory stock options granted to a "covered
employee" under Section 162(m) of the Code are subject to the additional
restriction that the exercise price on such options must be at least 100% of the
fair market value on the date of grant.
In December 1997, all employees of the Company, other than consultants, who
hold outstanding options to purchase Common Stock of the Company were offered an
opportunity to exchange their outstanding for new options by January 14, 1998.
The exercise price of new options is the trading price of the Company's Common
Stock at the close of business on January 14, 1998 with a floor of $5.00 per
share. The holders of such repriced options agreed to surrender and cancel their
old options and forfeit all vesting of the old options. For those who
participated in the option exchange program, the new date of grant is and the
new vesting commencement date commenced on December 4, 1997.
(c) TERMINATION OF EMPLOYMENT. If the optionee's employment or consulting
relationship with the Company is terminated for any reason other than death or
total and permanent disability, options under the 1996 Plan may be exercised not
later than thirty days (or such other period after, not exceeding three months
in the case of incentive stock options or six months in the case of nonstatutory
stock options, as determined by the Administrator) after the date of such
termination to the extent the option was exercisable on the date of such
termination. In no event may an option be exercised by any person after its
termination date.
(d) DISABILITY. If an optionee is unable to continue his or her employment
or consulting relationship with the Company as a result of total and permanent
disability, options may be exercised within six months (or such other period of
time not exceeding twelve months as determined by the Administrator) after the
date of termination and may be exercised only to the extent the option was
exercisable on the date of termination, but in no event may the option be
exercised after its termination date.
(e) DEATH. If an optionee should die while employed or retained by the
Company, and such optionee has been continuously employed or retained by the
Company since the date of grant of the option, the option may be exercised
within six months after the date of death (or such other period of time, not
exceeding six months, as determined by the Administrator) by the optionee's
estate or by a person who acquired the right to exercise the option by bequest
or inheritance to the extent the right to exercise what would have accrued had
the optionee continued living and remained employed or retained by the Company
for three months after the date of death, but in no event may the option be
exercised after its termination date.
8
If an optionee should die within thirty days (or such other period of time
not exceeding three months as determined by the Administrator) after the
optionee has ceased to be continuously employed or retained by the Company, the
option may be exercised within six months after the date of death by the
optionee's estate or by a person who acquired the right to exercise the option
by bequest or inheritance to the extent that the optionee was entitled to
exercise the option at the date of termination, but in no event may the option
be exercised after its termination date.
(f) OPTION TERMINATION DATE. Incentive stock options granted under the
1996 Plan expire ten years from the date of grant unless a shorter period is
provided in the option agreement. Incentive stock options granted to
shareholders owning more than 10% of the Company's outstanding stock may not
have a term of more than five years.
(g) NONTRANSFERABILITY OF OPTIONS. Incentive stock options are
nontransferable by the optionee, other than by will or the laws of descent and
distribution, and are exercisable only by the optionee during his or her
lifetime or, in the event of death, by a person who acquires the right to
exercise the option by bequest or inheritance or by reason of the death of the
optionee. In the case of nonstatutory stock options, the Administrator may at
its discretion, in certain circumstances, allow the transferability of such
options.
(h) ACCELERATION OF OPTIONS. In the event of a merger of the Company with
or into another corporation or sale of substantially all of the Company's
assets, the Administrator may either effect a substitution or assumption of
options or give written notice of the acceleration of the optionee's right to
exercise his or her outstanding options in part or in full at any time within
fifteen days of such notice.
(i) OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1996 Plan as may be
determined by the Administrator.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization, such as a
stock split or dividend, that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the option price, the number of
shares subject to each option, the annual limitation on grants to employees, as
well as the number of shares available for issuance under the 1996 Plan. In the
event of the proposed dissolution or liquidation of the Company, all outstanding
options automatically terminate unless otherwise provided by the Administrator.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1996 Plan at any time or from time to
time or may terminate it without approval of the shareholders; provided,
however, that shareholder approval is required for any amendment to the 1996
Plan that: (i) increases the number of shares that may be issued under the 1996
Plan, (ii) modifies the standards of eligibility, or (iii) modifies the
limitation on grants to employees described in the 1996 Plan or results in other
changes which would require shareholder approval to qualify options granted
under the 1996 Plan as performance-based compensation under Section 162(m) of
the Code. However, no action by the Board of Directors or shareholders may alter
or impair any option previously granted under the 1996 Plan, unless mutually
agreed otherwise between the optionee and the Board of Directors. The 1996 Plan
shall terminate in November 2006, provided that any options then outstanding
under the 1996 Plan shall remain outstanding until they expire by their terms.
FEDERAL INCOME TAX ASPECTS OF THE 1996 PLAN
The following is a brief summary of the federal income tax consequences of
transactions under the 1996 Option Plan based on federal income tax laws in
effect on the Record Date. This summary is not intended to be exhaustive and
does not address all matters which may be relevant to a particular optionee
based on his or her specific circumstances. The summary addresses only current
federal income tax law and
9
expressly does not discuss the income tax law of any state, municipality or
non-U.S. taxing jurisdiction or gift, estate or other tax laws other than
federal income tax law. The Company advises all optionees to consult their own
tax advisors concerning tax implications of option grants and exercises and the
disposition of stock acquired upon such exercises under the 1996 Option Plan.
There are no federal income tax consequences to the optionee or the Company
upon the grant of an option. Generally, there are no federal income tax
consequences to the optionee or the Company upon the exercise of an ISO (except
that the alternative minimum tax may apply). Upon exercise of an NSO, the
optionee normally will recognize taxable ordinary income equal to the excess of
the fair market value of the stock on the date of exercise over the option
exercise price. Generally, with respect to employees, the Company is required to
withhold from regular wages or supplemental wage payments an amount based on the
ordinary income recognized. Subject to the requirement of reasonableness and the
provisions of Section 162(m) of the Code, the Company will generally be entitled
to a business expense deduction equal to the taxable ordinary income realized by
the optionee. Optionees who are employees generally may elect to satisfy the
withholding tax obligation by payment of the taxes in cash or out of the current
earnings paid to the optionee.
If an optionee holds the stock acquired upon exercise of an ISO for at least
two years from the date on which the option is granted and at least one year
from the date of exercise of the option, any gain or loss on a disposition of
such stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (i) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(ii) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss, upon the disqualifying disposition will
be a capital gain or loss, which will be long-term or short-term depending on
whether the stock was held for more than one year. To the extent the optionee
recognizes ordinary income by reason of a disqualifying disposition, the Company
will generally be entitled (subject to the requirement of reasonableness and the
provisions of Section 162(m) of the Code) to a corresponding business expense
deduction in the tax year in which the disqualifying disposition occurs.
Upon disposition of the stock acquired upon exercise of an NSO, the optionee
will recognize a capital gain or loss equal to the difference between the
selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long-term or short-term, depending on whether the stock was held for
more than one year.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present at the Annual Meeting in person or by proxy and
entitled to vote and constituting at least a majority of the required quorum is
required to approve the amendments to the 1996 Plan to increase the number of
shares reserved thereunder by 750,000 shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF
AMENDMENTS TO THE 1996 PLAN TO INCREASE THE SHARES RESERVED FOR
ISSUANCE THEREUNDER BY 750,000 SHARES.
PROPOSAL NO. 3
APPROVAL OF AMENDMENTS TO THE 1995 DIRECTORS' STOCK OPTION PLAN
At the Annual Meeting, the Company's shareholders are being asked to approve
amendments to the 1995 Directors' Stock Option Plan (the "Directors' Option
Plan") to increase the number of shares of Common Stock reserved for issuance
thereunder by 200,000 shares to an aggregate total of 400,000 shares, to change
the number of shares granted pursuant to the Subsequent Option to each
nonemployee director to 5,000 shares for the 1997 Annual Meeting and to 10,000
shares thereafter, and to reprice the exercise
10
price of all options previously granted under the Directors' Option Plan to the
greater of the closing price of the Company's stock on April 15, 1998 or $5.00
per share.
GENERAL AND PURPOSE
The Directors' Option Plan was adopted by the Board of Directors in December
1995 and approved by the shareholders in January 1996. The Board initially
reserved a total of 200,000 shares of Common Stock for issuance thereunder. The
Directors' Option Plan provides for the grant of nonstatutory stock options to
nonemployee directors of the Company. The Directors' Option Plan is designed to
work automatically and not to require administration; however, to the extent
administration is necessary, it will be provided by the Board of Directors.
The purpose of the Directors' Option Plan is to provide an incentive for
directors to continue to serve the Company as directors and to assist the
Company in recruiting highly qualified individuals when vacancies occur on the
Board of Directors.
GRANT AND EXERCISE OF OPTION
The Directors' Option Plan provides that each person who becomes a
nonemployee director after the effective date of the Directors' Option Plan
shall be automatically granted a "First Option" to purchase 20,000 shares of
Common Stock on the date on which such person first becomes a nonemployee
director, whether through election by the shareholders of the Company or
appointment by the Board of Directors to fill a vacancy, unless such person has
previously been granted an equivalent option by the Company to purchase shares
under any stock option plan of the Company. A "Subsequent Option" to purchase is
automatically granted to each nonemployee director on the date of each annual
meeting of the shareholders at which such director is elected, provided that on
that date the nonemployee director has served on the Board of Directors for at
least six months. The options vest in full on the date of grant.
The Directors' Option Plan provides for neither a maximum nor a minimum
number of shares subject to options that may be granted to any one nonemployee
director, but does provide for the number of shares that may be included in any
grant and the method of making a grant. No option granted under the Directors'
Option Plan is transferable by the optionee other than by will or the laws of
descent or distribution or pursuant to the terms of a qualified domestic
relations order (as defined by the Internal Revenue Code of 1986), and each
option is exercisable, during the lifetime of the optionee, only by such
optionee.
MATERIAL AMENDMENTS
The Board of Directors believe that in order to attract and retain qualified
outside directors and to provide such outside directors with adequate incentive
through their proprietary interest in the Company, it is necessary to amend the
Directors' Option Plan to change the number of shares granted to each
nonemployee director pursuant to the Subsequent Option to 5,000 shares for the
1997 Annual Meeting of Shareholders and 10,000 shares on the date of each annual
meeting of the shareholders thereafter, to increase the number of shares of
Common Stock reserved for issuance thereunder by 200,000 shares to an aggregate
total of 400,000 shares and to reprice the exercise price of all stock options
previously granted under the Directors' Option Plan to the greater of the
closing price of the Company's Common Stock on April 15, 1998 or $5.00 per
share. At the Annual Meeting of Shareholders, the shareholders are being asked
to approve the above amendments to the Directors' Option Plan.
EXERCISE PRICE AND TERM OF OPTIONS
The exercise price of all stock options granted under the Directors' Option
Plan shall be equal to the fair market value of a share of the Company's Common
Stock on the date of grant of the option, which is defined to be the closing
sale price of the Company's Common Stock on an exchange or the NASDAQ National
Market System on the date of grant. Options granted under the Directors' Option
Plan have a term of ten years unless terminated sooner.
11
MERGER OR SALE OF ASSETS
In the event of a dissolution or liquidation of the Company, a sale of all
or substantially all of the assets of the Company, a merger of the Company with
or into another corporation in which the Company is not the surviving
corporation or any other capital reorganization in which more than 50% of the
shares of the Company entitled to vote are exchanged, each nonemployee director
will have either (i) a reasonable time within which to exercise their options,
prior to the effectiveness of such dissolution, liquidation, sale, merger or
reorganization, at the end of which time the options will terminate, or (ii) the
right to exercise the options, including any part of the options that would not
otherwise be exercisable, or receive substitute options with comparable terms,
as to an equivalent number of shares of stock of the corporation succeeding the
Company or acquiring its business by reason of such dissolution, liquidation,
sale, merger or reorganization.
AMENDMENT AND TERMINATION
The Board of Directors may at any time amend or terminate the Directors'
Option Plan, except that such termination cannot affect options previously
granted without the agreement of any optionee so affected. Notwithstanding the
foregoing, the provisions regarding the grant of options under the Directors'
Option Plan may be amended only once in any six-month period, other than to
comply with the changes in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.
If not terminated earlier, the Directors' Option Plan will expire in 2005.
FEDERAL INCOME TAX ASPECTS OF THE DIRECTORS' OPTION PLAN
The following is a brief summary of the federal income tax consequences of
transactions under the Director's Option Plan based on federal income tax laws
in effect on the Record Date. This summary is not intended to be exhaustive and
does not address all matters which may be relevant to a particular optionee
based on his or her specific circumstances. The summary addresses only current
federal income tax law and expressly does not discuss the income tax law of any
state, municipality or non-U.S. taxing jurisdiction or gift, estate or other tax
laws other than federal income tax law. The Company advises all optionees to
consult their own tax advisors concerning tax implications of option grants and
exercises and the disposition of stock acquired upon such exercises under the
Directors' Option Plan.
Options granted under the Directors' Option Plan are nonstatutory stock
options. An optionee will not recognize any taxable income at the time he or she
is granted a nonstatutory option. However upon its exercise, the optionee will
recognize ordinary income for tax purposes measured by the excess of the then
fair market value of the shares on the date of exercise over the option exercise
price. Because the optionee is a director of the Company, the date of taxation
(and the date of measurement of taxable ordinary income) may be deferred unless
the optionee files an election with the Internal Revenue Service under Section
83(b) of the Code. Upon disposition of such shares by the optionee, the optionee
will recognize a capital gain or loss equal to the difference between the
selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long-term or short-term, depending on whether the stock was held for
more than one year. The Company will be entitled to a tax deduction in the
amount and at the time that the optionee recognizes ordinary income with respect
to shares acquired upon exercise of a nonstatutory stock option.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Company's Common
Stock present at the Annual Meeting in person or by proxy and entitled to vote
and constituting at least a majority of the required quorum is required to
approve adoption of the amendments to the Directors' Option Plan to change the
number of shares granted to each nonemployee director at each annual meeting
pursuant to the Subsequent Option to 5,000 shares for the 1997 Annual Meeting
and 10,000 shares thereafter, to increase the number of shares reserved
thereunder by 200,000 shares, and to reprice the exercise price of
12
all stock options previously granted under the Directors' Option Plan to the
greater of the closing price of the Company's Common Stock on April 15, 1998 or
$5.00 per share.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AMENDMENTS TO THE 1995
DIRECTORS' STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES RESERVED
THEREUNDER BY 200,000 SHARES, TO CHANGE THE NUMBER OF SHARES GRANTED TO
EACH NONEMPLOYEE DIRECTOR AT EACH ANNUAL MEETING PURSUANT TO THE
SUBSEQUENT OPTION TO 5,000 SHARES FOR THE 1997 ANNUAL MEETING
AND 10,000 SHARES THEREAFTER, AND TO REPRICE THE EXERCISE
PRICE OF ALL STOCK OPTIONS PREVIOUSLY GRANTED UNDER
THE 1995 DIRECTORS' STOCK OPTION PLAN.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP,
independent auditors to audit the financial statements of the Company for the
fiscal year ending October 31, 1998, and recommends that the shareholders vote
for ratification of this appointment. In the event the shareholders do not
ratify such appointment, the Board of Directors will reconsider its selection.
Ernst & Young LLP has audited the Company's financial statements for the fiscal
years ending October 31, 1994, 1995, 1996 and 1997. Representatives of Ernst &
Young LLP are expected to be present at the meeting with the opportunity to make
a statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
REQUIRED VOTE
The ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors requires the affirmative vote of the holders of a majority
of the shares of the Company's Common Stock present at the Annual Meeting in
person or by proxy and entitled to vote and constituting a majority of the
required quorum.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING OCTOBER 31, 1998.
EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth certain information with regard to executive
officers of Landec Corporation. Ages are as of January 31, 1998.
Gary T. Steele (age 49) has been President and Chief Executive Officer of
the Company since 1991 and Chairman of the Board of Directors since January
1996. Mr. Steele has over 18 years of experience in the biotechnology,
instrumentation and material science fields. From 1985 to 1991, Mr. Steele was
President and Chief Executive Officer of Molecular Devices Corporation, a
bioanalytical instrumentation company. From 1981 to 1985, Mr. Steele was Vice
President, Product Development and Business Development at Genentech, Inc., a
biomedical company focusing on pharmaceutical drug development. Mr. Steele has
also worked with McKinsey and Co. and Shell Oil Company.
David D. Taft, Ph.D. (age 59) has been Chief Operating Officer of the
Company since 1993. Dr. Taft also served as a director of the Company from June
1990 through December 1995. From February 1986 to April 1993, Dr. Taft was Vice
President and Group Manager of the Manufacturing Group at Raychem Corporation.
From July 1983 to January 1986, Dr. Taft was Group Manager of the Telecom Group
at Raychem Corporation and was appointed to the position of Vice President in
October 1984. Dr. Taft has
13
over 25 years of experience in the specialty chemical industry in research and
development, sales and marketing, manufacturing and general management. Prior to
joining Raychem Corporation, Dr. Taft was Executive Vice President of the
Chemical Products Division and a Director of Henkel Corporation, a chemical
manufacturing company. Dr. Taft was also an executive with General Mills
Chemicals.
Ray F. Stewart, Ph.D (age 44) is the founder of the Company and has served
as Senior Vice President of Intellicoat Corporation since November 1996. From
the Company's inception to November 1996 he served as the Vice President,
Technology of Landec Corporation. He has also served as a director of Landec
since 1986. Dr. Stewart has over 16 years of experience in the material science
industry. Prior to founding Landec, Dr. Stewart worked at Raychem Corporation
from 1979 to 1986. While at Raychem Corporation, Dr. Stewart managed development
efforts in the areas of adhesives, plastic electrodes, sensors and synthetic
polymer chemistry, and led the development and commercialization of several new
product lines.
Thomas F. Crowley (age 53) has been President and Chief Executive Officer of
Intellicoat Corporation, a subsidiary of the Company, since November, 1996. From
1991 to 1995, Mr. Crowley was President and Chief Executive Officer of Broadcast
Partners, a satellite communications firm serving farmers throughout North
America with its FarmDayta information service. Broadcast Partners was a joint
venture of Pioneer Hybrid, Farmland Industries and Illinois Farm Bureau and was
sold to Data Transmission Network, Inc. in May 1996.
A. Wayne Tamarelli, Ph.D. (age 56) has been Senior Vice President of the
Company since April 1997, when the Company acquired Dock Resins Corporation,
where he has served as the Chairman and Chief Executive Officer since 1983. Dr.
Tamarelli has over 30 years of experience in specialty chemicals, advanced
materials, and process licensing. He was formerly employed by Exxon Corporation,
and later by Engelhard Corporation as Senior Vice President where he managed
groups of worldwide businesses in chemicals, environmental protection products,
and energy conservation technologies. Previously he was a professor at
Carnegie-Mellon University. Dr. Tamarelli has been involved in leadership
positions in a number of industry, community and civic organizations, including
serving as a Chairman of the Synthetic Organic Chemical Manufacturers'
Association, Chairman of the Chemical Industry Council of New Jersey, Chairman
of the Metropolitan New York Paint and Coatings Association.
Joy T. Fry (age 38) has been Chief Financial Officer and Vice President of
Finance and Administration of the Company since 1992. From February until
December 1992, Ms. Fry served as Controller and Director of Administration of
the Company. From 1987 to 1992, Ms. Fry was Controller of the Network Adapter
Division and Corporate Planning Manager at 3Com Corporation, a publicly-held
network computing company. Prior to joining 3Com Corporation, Ms. Fry was a
Manager with Arthur Young & Company.
Larry Greene (age 43) has been Vice President of Manufacturing of the
Company since 1996. From 1995 to 1996, Mr. Greene served as General Manager of
the Company's QuickCast business line. From 1993 to 1995, Mr. Greene served as
Vice President of Product Development for Landec, and from 1987 to 1993 he held
a variety of product development and commercial development positions for the
Company. Prior to joining Landec, Mr. Greene was Manager of the Asia Pacific
Region for Zoecon Corporation, a manufacturer of consumer and animal healthcare
products, where he was responsible for product development, marketing and
technology licensing in Japan, Taiwan, Korea and China.
Guy J. Stokes (age 49) has been Vice President of Commercial Development of
the Company for specialty polymers since October 1996. From 1995 to September
1996, he was a general partner and director of Resin Technology Incorporated in
Daytona Beach, Florida, a developer of thermoset products. From 1976 to 1995,
Mr. Stokes held a variety of sales, marketing and general management positions
at Hexcel Corporation including Business Manager of the Resins Product Division
and of Advanced Tooling Products at Hexcel.
14
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of January 30, 1998 as to (i) each person who is known by the
Company to beneficially own more than five percent of the Company's Common
Stock, (ii) each of the Company's directors, (iii) each of the executive
officers named in the Summary Compensation Table of this proxy and (iv) all
directors and executive officers as a group.
SHARES BENEFICIALLY OWNED(1)
5% SHAREHOLDERS, DIRECTORS, NAMED EXECUTIVE OFFICERS, ------------------------------------
AND DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP NUMBER PERCENT OF TOTAL(2)
- ------------------------------------------------------------------------------ --------------- -------------------
The Capital Group Companies, Inc.; Capital Research & Management; SMALLCAP
World Fund, Inc............................................................. 690,000(4) 5.42%
333 South Hope Street
Los Angeles, CA 90071 (3)
Chase Venture Capital Associates, L.P......................................... 1,306,817(6) 10.27%
380 Madison Avenue, 12th Floor
New York, NY 10128 (5)
Domain Partners II, L.P; Domain Associates.................................... 797,572(8) 6.27%
One Palmer Square, Suite 515
Princeton, NJ 08542 (7)
Hambrecht & Quist Capital Management.......................................... 656,492(9) 5.16%
50 Rowes Wharf, 4th Floor
Boston, MA 02110
Michael Williams.............................................................. 1,342,247 10.55%
306 N. Main Street
Monticello, IN 47960 (10)
Zesiger Capital Group LLC..................................................... 1,381,600(12) 10.86%
320 Park Avenue, 30th Floor
New York, NY 10022 (11)
Gary T. Steele................................................................ 285,517(13) 2.20%
Chairman of the Board of Directors,
Chief Executive Officer and President
David D. Taft, Ph.D........................................................... 175,509(14) 1.36%
Chief Operating Officer
Ray F. Stewart, Ph.D.......................................................... 298,000(15) 2.34%
Director; Senior Vice President of Intellicoat Corporation
Thomas Crowley................................................................ 2,424(16) *
President and Chief Executive Officer of Intellicoat Corporation
Joy T. Fry.................................................................... 75,296(17) *
Chief Financial Officer and Vice President of Finance and Administration
Damion E. Wicker, M.D., Director.............................................. 1,329,280(18) 10.43%
Kirby L. Cramer, Director..................................................... 20,434(19) *
Richard Dulude, Director...................................................... 25,000(20) *
Stephen E. Halprin, Director.................................................. 43,063(21) *
Richard S. Schneider, Ph.D., Director......................................... 810,184(22) 6.36%
All directors and executive officers as a group (13 persons).................. 3,538,780(23) 26.45%
- ------------------------
* Less than 1%
15
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) As of January 30, 1998, 12,722,906 shares were issued and outstanding.
(3) This information is based on a Schedule 13G filed with the Securities and
Exchange Commission (the "SEC") on February 10, 1998 by: The Capital Group
Companies, Inc., Capital Research & Management, and SMALLCAP World Fund,
Inc.
(4) The above-described beneficial owners report voting and dispositive powers
as follows. The Capital Group Companies, Inc. and Capital Research and
Management Company each have sole dispositive power with respect to 690,000
shares and have no voting power. SMALLCAP World, Inc. reports sole voting
power with respect to 690,000 shares and no shared voting power or
dispositive power.
(5) This information is based on a Schedule 13G filed with the SEC on February
21, 1997 by Chase Venture Capital Associates, L.P.
(6) Chase Venture Capital Associates, L.P. reports voting and dispositive power
as follows: sole voting and dispositive power with respect to 1,306,817
shares, and shared voting and dispositive power with respect to 11,956
shares. This number does not include 22,463 shares subject to outstanding
stock options exercisable on or before March 31, 1998, which are owned by
Damion E. Wicker, M.D., a director of the Company. He is a general partner
of Chase Venture Capital Associates, L.P.
(7) This information is based on a Schedule 13G filed with the SEC on February
12, 1997 by Domain Partners II, L.P. and Domain Associates.
(8) This number includes 793,951 shares owned by Domain Partners II, L.P. and
3,621 shares owned by Domain Associates. This number does not include 292
shares owned by Richard S. Schneider, Ph.D. or 12,320 shares owned by Dr.
Schneider which are subject to outstanding stock options exercisable on or
before March 31, 1998. Dr. Schneider, who is a director of the Company, is
a general partner of Domain Partners II, L.P. and a general partner of
Domain Associates.
(9) This information is based on information provided by the NASDAQ On-Line
Service, dated September 30, 1997.
(10) Mr. Williams is President of Fielder's Choice Hybrids, a division of
Intellicoat Corporation and Senior Vice President of Intellicoat
Corporation, a subsidiary of the Company.
(11) This information is based on a Schedule 13G/A filed with the SEC on
February 10, 1998 by Zesiger Capital Group LLC.
(12) Zesiger Capital Group LLC has sole voting power with respect to 853,000
shares, sole dispositive power with respect to 1,381,600 shares and has no
shared voting or dispositive power.
(13) Includes 282,535 shares subject to outstanding stock options exercisable on
or before March 31, 1998.
(14) Includes 579 shares owned by his wife and 1,160 shares owned by his
children. Also includes 156,379 shares subject to outstanding stock options
exercisable on or before March 31, 1998.
(15) Includes 20,868 shares owned by Dr. Stewart's minor children. Also includes
16,277 shares subject to outstanding stock options exercisable on or before
March 31, 1998. Excludes 288,281 shares subject to outstanding Intellicoat
Corporation stock options exercisable on or before March 31, 1998.
(16) Includes 1,562 shares subject to outstanding stock options exercisable on
or before March 31, 1998. Excludes 166,666 shares subject to outstanding
Intellicoat Corporation stock options exercisable on or before March 31,
1998.
(17) Includes 59,959 shares subject to outstanding stock options exercisable on
or before March 31, 1998.
16
(18) Includes 1,306,817 shares owned by Chase Venture Capital Associates, L.P.,
of which Dr. Wicker is a general partner. Dr. Wicker disclaims beneficial
ownership of shares held by Chase Venture Capital Associates, L.P. except
to the extent of his pecuniary interest in such shares. Also includes
22,463 shares subject to outstanding stock options exercisable on or before
March 31, 1998.
(19) Represents 20,434 shares subject to outstanding stock options exercisable
on or before March 31, 1998.
(20) Represents 25,000 shares subject to outstanding stock options exercisable
on or before March 31, 1998.
(21) Includes 20,033 shares owned by OSCCO III, L.P. of which Mr. Halprin is a
general partner. Also includes 10,290 shares subject to outstanding stock
options exercisable on or before March 31, 1998.
(22) Includes 797,572 shares held by Domain Partners II, L.P. and Domain
Associates. Dr. Schneider is a general partner of both entities and
disclaims beneficial ownership of shares held by such entities except to
the extent of his pecuniary interest in such shares. Also includes 12,320
shares subject to outstanding stock options exercisable on or before March
31, 1998.
(23) Includes an aggregate of 655,312 shares held by officers and directors
which are issuable upon exercise of options exercisable on or before March
31, 1998. Also includes 1,306,817 shares owned by Chase Venture Capital
Associates, L.P., (of which Dr. Wicker, a director of the Company, is a
general partner) and 797,572 shares owned by Domain Partners II, L.P. and
Domain Associates (of which Dr. Schneider, a director of the Company, is a
general partner).
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH IN THIS PROXY SHALL NOT BE INCORPORATED BY REFERENCE INTO
ANY SUCH FILINGS.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
GENERAL
The Company's executive compensation policies are determined by the
Compensation Committee (the "Committee") of the Board of Directors. The
Committee is comprised of two nonemployee directors.
The objective of the Company's executive compensation program is to align
executive compensation with the Company's business objectives and performance,
and to enable the Company to attract, retain and reward executives who
contribute to the long-term business success of the Company. The Company's
executive compensation program is based on the same four basic principles that
guide compensation decisions for all employees of the Company:
- The Company compensates for demonstrated and sustained performance.
- The Company compensates competitively.
- The Company strives for equity and fairness in the administration of
compensation.
- The Company believes that each employee should understand how his or her
compensation is determined.
The Company believes in compensating its executives for demonstrated and
sustained levels of performance in their individual jobs. The achievement of
higher levels of performance and contribution are rewarded by higher levels of
compensation. In order to ensure that it compensates its executives
competitively, the Company regularly compares its compensation practices to
those of other companies of comparable size within similar industries. Through
the use of independent compensation surveys and analysis, employee compensation
training, and periodic pay reviews, the Company strives to ensure that
17
compensation is administered equitably and fairly and that a balance is
maintained between how executives are paid relative to other employees and
relative to executives with similar responsibilities in comparable companies.
The Committee meets at least twice annually. Additionally, the Committee may
hold special meetings to approve the compensation program of a newly hired
executive or an executive whose scope of responsibility has significantly
changed. Each year, the Committee meets with the Chief Executive Officer ("CEO")
regarding executive compensation projections for the next three years and
proposals for executive compensation for the next operating year. Compensation
plans are based on compensation surveys and assessments as to the demonstrated
and sustained performance of the individual executives. The Committee then
independently reviews the performance of the CEO and the Company, and develops
the annual compensation plan for the CEO based on competitive compensation data
and the Committee's evaluation of the CEO's demonstrated and sustained
performance and its expectation as to his future contributions in leading the
Company. The Committee presents for adoption its findings on the compensation of
each individual executive at a subsequent meeting of the full Board of
Directors.
COMPENSATION OF EXECUTIVE OFFICERS
During the fiscal year that ended on October 31, 1997, the Company's
executive compensation program was comprised of the following key components:
BASE SALARY.
The Company sets the base salaries of its executives at the levels of
comparably sized companies engaged in similar industries.
EQUITY-BASED INCENTIVES.
Stock options are an important component of the total compensation of
executives and are designed to align the interests of each executive with those
of the shareholders. Each year the Committee considers the grant to executives
of stock option awards under the Company's stock option plans. The Committee
believes that stock options provide added incentive for the executives to
influence the strategic direction of the Company, and to create and increase
value for customers, shareholders and employees. The option grants generally
utilize four-year vesting periods to encourage executives to continue
contributing to the Company. The number of shares owned by, or subject to
options held by, each executive officer is periodically reviewed and additional
awards are considered based upon past performance of the executive and the
relative holdings of other executives in the Company and at other companies in
the comparable industry. In the fiscal year that ended on October 31, 1997, the
Company granted incentive stock options under its 1996 Stock Option Plan and
1988 Stock Option Plan to the following six executive officers: Messrs. Greene
(50,000 shares), Steele (350,000 shares), Stewart (10,000 shares), Stokes
(50,000 shares), Taft (45,000 shares) and Ms. Fry (50,000 shares). In addition,
Thomas Crowley (President and Chief Executive Officer of Intellicoat
Corporation, the Company's subsidiary) and Ray F. Stewart, Ph.D. (Senior Vice
President of Intellicoat Corporation) were granted options to purchase 500,000
and 450,000 shares of common stock of Intellicoat Corporation, respectively.
BONUS AWARDS PAID IN FISCAL YEAR 1997.
In November 1997, the Committee approved a bonus for the CEO in recognition
of his efforts in contributing to the Company's fiscal 1997 performance. In
November 1996, the Committee approved bonuses for certain executive officers
earned in fiscal year 1996, which were paid in fiscal year 1997.
18
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER.
The Compensation Committee evaluates the performance of the Company's CEO,
sets his base compensation and determines bonuses and awards stock or option
grants, if any.
The fiscal 1997 compensation of Gary T. Steele, the Company's CEO and
President, consisted of base salary and a bonus. The CEO's base salary for
fiscal year 1997 was established by the Committee at a level comparable to the
base salaries of comparably sized companies engaged in similar industries. As
with other executive officers of the Company, the amounts of the CEO's bonus
awards are based on attainment of a combination of corporate and individual
performance objectives. Mr. Steele's fiscal 1997 year-end bonus of $75,000, or
25 percent of his base salary, reflects the Committee's judgment as to Mr.
Steele's personal performance during the fiscal year as well as his role in the
attainment of the Company's overall objectives.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION.
The Committee has considered the impact of Section 162(m) of the Internal
Revenue Code, which section disallows a deduction for any publicly held
corporation for individual compensation exceeding $1 million in any taxable year
for the CEO and four other most highly compensated executive officers, unless
such compensation meets the requirements for the "performance-based" exception
to the general rule. Since the cash compensation paid by the Company to each of
its executive officers is expected to be below $1 million, the Committee
believes that this section will not affect the tax deductions available to the
Company. It will be the Committee's policy to qualify, to the extent reasonable,
the executive officers' compensation for deductibility under applicable tax law.
COMPENSATION COMMITTEE
Kirby L. Cramer
Richard S. Schneider, Ph.D.
19
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither Mr. Cramer nor Dr. Schneider has been an officer or employee of the
Company or any of its subsidiaries.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation earned
by the Company's Chief Executive Officer and the four other highest-paid
executive officers whose salary and bonus for the fiscal year ended on October
31, 1997 were in excess of $100,000 (collectively, the "Named Executive
Officers") for services rendered in all capacities to the Company for that
fiscal year.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------- ----------------------------
FISCAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS COMPENSATION($)
- --------------------------------------------- ------ --------- -------- ---------- ---------------
(1) (2)
Gary T. Steele .............................. 1997 258,333 75,000 350,000 3,830
Chief Executive Officer, President and 1996 238,884 50,060 -- 3,830
Chairman of the Board 1995 219,423 15,050 34,782 3,830
David D. Taft ............................... 1997 205,000 25,000 45,000 830
Chief Operating Officer 1996 199,719 -- -- 830
1995 188,061 20,060 31,304 830
Ray F. Stewart .............................. 1997 154,167 -- 460,000(4) 830
Senior Vice President, Intellicoat 1996 151,154 -- -- 830
Corporation(3) 1995 129,000 60 13,913 830
Thomas Crowley .............................. 1997 165,000 -- 500,000(5) 830
President and Chief Executive Officer,
Intellicoat Corporation(3)
Joy T. Fry .................................. 1997 137,500 25,000 50,000 830
Vice President, Finance and Administration 1996 123,646 -- -- 830
and Chief Financial Officer 1995 109,041 7,560 24,347 830
- ------------------------
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Comprised of premiums paid by the Company under the Company's group term
life insurance policy. For Mr. Steele, also includes premiums paid by the
Company under the Company's disability insurance policy.
(3) Intellicoat Corporation is a subsidiary of the Company.
(4) Includes 450,000 shares of options to purchase the common stock of
Intellicoat Corporation.
(5) Represents Intellicoat Corporation stock options.
20
STOCK OPTION GRANTS IN FISCAL YEAR 1997
The following table sets forth information for the Named Executive Officers
with respect to grants of options to purchase Common Stock of the Company made
in the fiscal year ended October 31, 1997 and the value of all options held by
such executive officers on October 31, 1997.
INDIVIDUAL GRANTS
------------------------------
NUMBER OF % OF TOTAL GRANT DATE VALUE
SECURITIES OPTIONS/SARS ------------------
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED* FISCAL YEAR** ($/SH) DATE ($)(1)
- ------------------------------------ ------------- --------------- ----------- ------------ ------------------
Gary T. Steele...................... 350,000(2) 32.71% 12.00 11/18/2006 1,068,925
David D. Taft....................... 45,000(3) 4.20% 7.625 1/6/2007 124,244
Ray F. Stewart...................... 10,000(4) 0.93% 7.625 1/6/2007 27,610
Thomas Crowley...................... 0(5) -- -- -- --
Joy T. Fry.......................... 50,000(3) 4.67% 7.625 1/6/2007 138,048
- ------------------------
* Stock options granted pursuant to both the 1988 and 1996 Stock Option Plans
generally vest in 2.08% increments monthly commencing 30 days from the date
of the grant, becoming fully vested on the fourth anniversary of the date of
the grant. The stock option grants to Mr. Steele vest over a ten-year
period.
** Total number of options granted by the Company for the fiscal year ended
October 31, 1997 is 1,070,300 shares.
(1) The Company uses a Black-Scholes model of option valuation to determine
grant date present value. The Company does not advocate or necessarily agree
that the Black-Scholes model can properly determine the value of an option.
Calculations for the Named Executive Officers are based on a 4.33 year
expected option life which reflects the Company's experience that its
options, on average, are exercised within 4.33 years of grant. Other
assumptions used for the valuations are: interest rate (risk-free rate of
return) of 6.16%; annual dividend yield of 0%; and volatility of 40%. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent upon a number of factors, including the future performance of the
Common Stock, overall market conditions and the timing of option exercises,
if any. The exercise price of the option grants to Mr. Steele was above the
market price of the Company's Common Stock on the date of grant ($8.25).
(2) 89,000 shares of such options were granted pursuant to the 1988 Stock Option
Plan and 261,000 shares of such options were granted pursuant to the 1996
Stock Option Plan.
(3) Granted pursuant to the 1988 Stock Option Plan.
(4) Granted pursuant to the 1988 Stock Option Plan. Mr. Stewart was also granted
options to purchase 450,000 shares of the common stock of Intellicoat
Corporation, where he serves as Senior Vice President, pursuant to the 1996
Intellicoat Stock Plan.
(5) Mr. Crowley was granted options to purchase 500,000 shares of the common
stock of Intellicoat Corporation, where he serves as President and Chief
Executive Officer, pursuant to the 1996 Intellicoat Stock Plan.
21
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for the executive officers named
in the Summary Compensation Table with respect to exercises in fiscal year 1997
of options to purchase Common Stock of the Company. During the fiscal year that
ended on October 31, 1997, no shares were acquired by the Named Executive
Officers upon exercise of options.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE- MONEY OPTIONS AT
OPTIONS AT 10/31/97 10/31/97
NAME (EXERCISABLE/UNEXERCISABLE)(1) (EXERCISABLE/UNEXERCISABLE)(2)
- --------------------------------------------- --------------------------- ---------------------------
Gary T. Steele............................... 287,498/358,153 $1,161,784/$73,254
David D. Taft................................ 152,494/49,027 $609,247/$46,176
Ray F. Stewart............................... 16,077/14,792 $54,766/$22,901
Thomas Crowley(3)............................ -(3)- -(3)-
Joy T. Fry................................... 61,319/51,243 $210,598/$37,794
- ------------------------
(1) No stock appreciation rights (SARs) were outstanding during fiscal year
1997.
(2) Based on the closing price of the Company's Common Stock as reported on the
NASDAQ National Market System on October 31, 1997 of $4.875 per share minus
the exercise price of the in-the-money options.
(3) Mr. Crowley was not granted any Landec stock options during fiscal year
1997.
22
PERFORMANCE GRAPH
The following graph summarizes cumulative total shareholder return data
(assuming reinvestment of dividends) for the period since the Company's stock
was first registered under Section 12 of the Securities Exchange Act of 1934
(February 15, 1996). The graph assumes that $100 was invested (i) on February
15, 1996 in the Common Stock of Landec Corporation at a price per share of
$12.00, the price at which such stock was first offered to the public on that
date, (ii) on January 31, 1996 in the Standard & Poor's 500 Stock Index and
(iii) on January 31, 1996 in the NASDAQ Industrial Index. The stock price
performance on the following graph is not necessarily indicative of future stock
price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
LANDEC CORPORATION S&P 500 INDEX NASDAQ INDUSTRIAL INDEX
1/31/96 $100.00 $100.00 $100.00
10/31/96 $73.96 $110.89 $111.05
10/31/97 $40.63 $143.80 $141.84
The following description data are supplied in accordance with Rule 304(d)
of Regulation S-T:
1/31/96(1) 10/31/96 10/31/97
------------- ----------- -----------
Landec Corporation....................................................... 100 73.96 40.63
Standard & Poor's 500 Index.............................................. 100 110.89 143.80
NASDAQ Industrial Index.................................................. 100 111.05 141.84
- ------------------------
(1) February 15, 1996 for Landec Corporation.
23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1997, the Company entered into an employment agreement with Dr.
Tamarelli providing that, in the case of involuntary termination other than for
cause or Dr. Tamarelli's resignation for cause, salary will continue to be paid
through April 2002.
In August 1997, the Company and Intellicoat Corporation entered into an
employment agreement with Mr. Williams providing that, in the case of
involuntary termination other than for cause or a constructive termination,
salary will continue to be paid through August 2002, certain bonuses will be
paid out on a pro-rata basis, and, if Mr. Williams is an employee at the time of
such termination, certain benefits will continue to be paid through the earlier
of two years from the termination date or August 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file with the Securities and Exchange Commission (the "SEC") initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and holders of more than
ten percent of the Company's Common Stock are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely upon review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended October 31, 1997 all Section
16(a) filing requirements applicable to the Company's officers, directors and
holders of more than ten percent of the Company's Common Stock were complied
with, except that (1) Drs. Wicker and Tamarelli, Chase Venture Capital
Associates L.P. (a more than ten percent shareholder of the Company), and
Messrs. Blutt, Hannon and Baron (who are affiliates of Chase Venture Capital
Associates, L.P.) filed Form 3's late; and (2) Chase Venture Capital Associates
and Mr. Blutt filed Form 4's late.
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, then the persons
named in the enclosed form of proxy will vote the shares they represent in such
manner as the Board may recommend.
It is important that the proxies be returned promptly and that your shares
be represented. Shareholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ TAE HEA NAHM
TAE HEA NAHM
SECRETARY
Dated: February 27, 1998
24
LANDEC CORPORATION
1996 STOCK OPTION PLAN
(As Amended in April 1998)
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and
Consultants of the Company and to promote the success of the Company's
business.
Options granted hereunder may be either Incentive Stock Options (as
defined under Section 422 of the Code) or Nonstatutory Stock Options, at the
discretion of the Board and as reflected in the terms of the written option
agreement.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" shall mean the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "AFFILIATE" shall mean an entity other than a Subsidiary (as
defined below) in which the Company owns an equity interest.
(c) "APPLICABLE LAWS" shall have the meaning set forth in Section 4(a)
below.
(d) "BOARD" shall mean the Board of Directors of the Company.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(f) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan, if one is appointed.
(g) "COMMON STOCK" shall mean the Common Stock of the Company.
(h) "COMPANY" shall mean Landec Corporation, a California corporation.
(i) "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services; PROVIDED that the term Consultant shall not
include directors who are not compensated for their services or are paid only
a director's fee by the Company.
(j) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean
the absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Administrator; PROVIDED that such
leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute. For
purposes of this Plan, a change in status from an
-25-
Employee to a Consultant or from a Consultant to an Employee will not
constitute a termination of employment.
(k) "DIRECTOR" shall mean a member of the Board.
(l) "EMPLOYEE" shall mean any person (including any Named Executive,
Officer or Director) employed by the Company or any Parent, Subsidiary or
Affiliate of the Company. The payment by the Company of a director's fee to
a Director shall not be sufficient to constitute "employment" of such
Director by the Company.
(m) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sales price for such stock as quoted on such system on the date of
determination (if for a given day no sales were reported, the closing bid on
that day shall be used), as such price is reported in The Wall Street Journal
or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the bid and asked prices for the Common Stock or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(o) "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code,
as designated in the applicable written option agreement.
(p) "NAMED EXECUTIVE" shall mean any individual who, on the last day
of the Company's fiscal year, is the chief executive officer of the Company
(or is acting in such capacity) or among the four highest compensated
officers of the Company (other than the chief executive officer). Such
officer status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.
(q) "NONSTATUTORY STOCK OPTION" shall mean an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
-26-
(r) "OFFICER" shall mean a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "OPTION" shall mean a stock option granted pursuant to the Plan.
(t) "OPTIONED STOCK" shall mean the Common Stock subject to an Option.
(u) "OPTIONEE" shall mean an Employee or Consultant who receives an
Option.
(v) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(w) "PLAN" shall mean this 1996 Stock Option Plan.
(x) "RULE 16b-3" shall mean Rule 16b-3 promulgated under the Exchange
Act as the same may be amended from time to time, or any successor provision.
(y) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.
(z) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 14 of
the Plan, the maximum aggregate number of shares that may be optioned and
sold under the Plan is 1,500,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares that were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. Notwithstanding any other
provision of the Plan, shares issued under the Plan and later repurchased by
the Company shall not become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) COMPOSITION OF ADMINISTRATOR.
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3,
and by the legal requirements relating to the administration of incentive
stock option plans, if any, of applicable securities laws and the Code
(collectively, the "APPLICABLE LAWS"), grants under the Plan may (but need
not) be made by different administrative bodies with respect to Directors,
Officers who are not directors and Employees who are neither Directors nor
Officers.
-27-
(ii) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS. With
respect to grants of Options to Employees or Consultants who are also
Officers or Directors of the Company, grants under the Plan shall be made by
(A) the Board, if the Board may make grants under the Plan in compliance with
Rule 16b-3 and Section 162(m) of the Code as it applies so as to qualify
grants of Options to Named Executives as performance-based compensation, or
(B) a Committee designated by the Board to make grants under the Plan, which
Committee shall be constituted in such a manner as to permit grants under the
Plan to comply with Rule 16b-3, to qualify grants of Options to Named
Executives as performance-based compensation under Section 162(m) of the Code
and otherwise so as to satisfy the Applicable Laws.
(iii) ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With respect
to grants of Options to Employees or Consultants who are neither Directors
nor Officers of the Company, the Plan shall be administered by (A) the Board
or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(iv) GENERAL. If a Committee has been appointed pursuant to
subsection (ii) or (iii) of this Section 4(a), such Committee shall continue
to serve in its designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of any Committee and
appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies (however
caused) and remove all members of a Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws and,
in the case of a Committee appointed under subsection (ii), to the extent
permitted by Rule 16b-3 and to the extent required under Section 162(m) of
the Code to qualify grants of Options to Named Executives as
performance-based compensation.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m) of the Plan;
(ii) to select the Employees and Consultants to whom Options may
from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
-28-
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but
not limited to, the share price and any restriction or limitation, or any
vesting acceleration or waiver of forfeiture restrictions regarding any
Option and/or the shares of Common Stock relating thereto, based in each case
on such factors as the Administrator shall determine, in its sole discretion);
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. ELIGIBILITY.
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options may be granted
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees, PROVIDED, HOWEVER, that Employees of an Affiliate shall not be
eligible to receive Incentive Stock Options. An Employee or Consultant who
has been granted an Option may, if he or she is otherwise eligible, be
granted an additional Option or Options.
(b) TYPE OF OPTION. Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(c) NO EMPLOYMENT RIGHTS. The Plan shall not confer upon any Optionee
any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier
to occur of its adoption by the Board or its approval by the shareholders
of the Company as described in Section 20 of the Plan. It shall continue
in effect for a term of ten (10) years unless sooner terminated under
Section 16 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated
in the Option Agreement; PROVIDED, HOWEVER, that in the case of an
Incentive Stock Option, the term shall be no more than ten (10) years from
the date of grant thereof or such shorter term as may be provided in the
Option Agreement. However, in the case of an Incentive Stock Option
granted to
-29-
an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as
provided in this Plan, the maximum number of Shares which may be subject to
options granted to any one Employee under this Plan for any fiscal year of
the Company shall be 500,000.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined
by the Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date of grant; or
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, is a Named Executive of the Company, the per share Exercise
Price shall be no less than 100% of the Fair Market Value on the date of
grant; or
(B) granted to any person other than a Named Executive, the
per Share exercise price shall be no less than 85% of the Fair Market Value
per Share on the date of grant.
(iii) Notwithstanding anything to the contrary in subsections
9(a)(i) or 9(a)(ii) above, in the case of an Option granted on or after the
effective date of registration of any class of equity security of the Company
pursuant to Section 12 of the Exchange Act and prior to six months after the
termination of such registration, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(b) Permissible Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of (1) cash, (2) check, (3) authorization from the Company
to retain from the total number of Shares as to which the Option is exercised
that
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number of Shares having a Fair Market Value on the date of exercise equal to
the exercise price for the total number of Shares as to which the Option is
exercised, (4) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds required to pay the exercise price, (5) any
combination of the foregoing methods of payment, or (6) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws. In making its determination as to the type
of consideration to accept, the Administrator shall consider if acceptance of
such consideration may be reasonably expected to benefit the Company.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of
any consideration and method of payment allowable under Section 9(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to
the Optioned Stock, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 14 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In the event
of termination of an Optionee's Continuous Status as an Employee or
Consultant, such Optionee may, but only within thirty (30) days (or such
other period of time, not exceeding three (3) months in the case of an
Incentive Stock Option or six (6) months in the case of a Nonstatutory Stock
Option, as is determined by the Administrator, with such determination in the
case of an Incentive Stock Option being made at the time of grant of the
Option) after the date of such termination (but in no event later than the
date of expiration of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that he or she was
entitled to exercise it at the date of such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of such
termination, or if the optionee does not exercise
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such Option (which he or she was entitled to exercise) within the time
specified herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 10(b) above, in
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his or her total and permanent disability (as
defined in Section 22(e)(3) of the Code), he or she may, but only within six
(6) months (or such other period of time not exceeding twelve (12) months as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) from
the date of such termination (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement),
exercise his or her Option to the extent he or she was entitled to exercise
it at the date of such termination. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he does not
exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his
death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, at any time within six (6) months (or
such other period of time, not exceeding six (6) months, as is determined by
the Administrator, with such determination in the case of an Incentive Stock
Option being made at the time of grant of the Option) following the date of
death (but in no event later than the date of expiration of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by
a person who acquired the right to exercise the Option by bequest or
inheritance but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous Status
as an Employee or Consultant three (3) months (or such other period of time
as is determined by the Administrator as provided above) after the date of
death, subject to the limitation set forth in Section 5(b); or
(ii) within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time
of grant of the Option) after the termination of Continuous Status as an
Employee or Consultant, the Option may be exercised, at any time within six
(6) months following the date of death (but in no event later than the date
of expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.
(e) RULE 16b-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
11. WITHHOLDING TAXES. As a condition to the exercise of Options granted
hereunder, the Optionee shall make such arrangements as the Administrator may
require for the satisfaction
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of any federal, state, local or foreign withholding tax obligations that may
arise in connection with the exercise, receipt or vesting of such Option.
The Company shall not be required to issue any Shares under the Plan until
such obligations are satisfied.
12. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this paragraph. When an Optionee incurs tax
liability in connection with an Option which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay
the Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, or (c) if permitted by the Administrator, in
its discretion, by surrendering to the Company Shares that (i) in the case of
Shares previously acquired from the Company, have been owned by the Optionee
for more than six months on the date of surrender, and (ii) have a fair
market value on the date of surrender equal to or less than the applicable
taxes, or (d) by electing to have the Company withhold from the Shares to be
issued upon exercise of the Option that number of Shares having a fair market
value equal to the amount required to be withheld. For this purpose, the
fair market value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined (the "TAX
DATE").
Any surrender by an Officer or Director of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but
such Optionee shall be unconditionally obligated to tender back to the
Company the proper number of Shares on the Tax Date.
13. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution; PROVIDED that the
Administrator may in its discretion grant
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transferable Nonstatutory Stock Options pursuant to option agreements
specifying (i) the manner in which such Nonstatutory Stock Options are
transferable and (ii) that any such transfer shall be subject to the
Applicable Laws. The designation of a beneficiary by an Optionee will not
constitute a transfer. An Option may be exercised, during the lifetime of
the Optionee, only by the Optionee or a transferee permitted by this
Section 13.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the shareholders
of the Company, the number of shares of Common Stock covered by each
outstanding Option, the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, the maximum number of shares of Common Stock for
which Options may be granted to any employee under Section 8 of the Plan, and
the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number
of issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of Common
Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option.
(b) CORPORATE TRANSACTIONS. In the event of the proposed dissolution
or liquidation of the Company, the Option will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Administrator. The Administrator may, in the exercise of its sole discretion
in such instances, declare that any Option shall terminate as of a date fixed
by the Administrator and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. In the event of a
proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the Option shall
be assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless
the Administrator determines, in the exercise of its sole discretion and in
lieu of such assumption or substitution, that the Optionee shall have the
right to exercise the Option as to some or all of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
If the Administrator makes an Option exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee that the Option shall be exercisable for a period
of fifteen (15) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
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15. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the
Administrator; PROVIDED HOWEVER that in the case of any Incentive Stock
Option, the grant date shall be the later of the date on which the
Administrator makes the determination granting such Incentive Stock Option or
the date of commencement of the Optionee's employment relationship with the
Company. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval
of the shareholders of the Company in the manner described in Section 20 of
the Plan:
(i) any increase in the number of Shares subject to the Plan,
other than an adjustment under Section 14 of the Plan;
(ii) any change in the designation of the class of persons
eligible to be granted Options; or
(iii) any change in the limitation on grants to employees as
described in Section 8 of the Plan or other changes which would require
shareholder approval to qualify options granted hereunder as
performance-based compensation under Section 162(m) of the Code.
(b) SHAREHOLDER APPROVAL. If any amendment requiring shareholder
approval under Section 16(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section
12 of the Exchange Act, such shareholder approval shall be solicited as
described in Section 20 of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
17. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
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As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
of the aforementioned relevant provisions of law.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company
of any liability in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
19. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
20. SHAREHOLDER APPROVAL.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such shareholder approval shall be obtained in the
manner and to the degree required under applicable federal and state law and
the rules of any stock exchange upon which the Shares are listed.
(b) In the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval
of the shareholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act
and the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 20(b) hereof, then the Company shall, at or prior
to the first annual meeting of shareholders held subsequent to the later of
(1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an Option
hereunder to an officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the
Plan substantially the same information that would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment
were then being solicited) by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is furnished;
and
(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is
first sent or given to shareholders.
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LANDEC CORPORATION
1995 DIRECTORS' STOCK OPTION PLAN
(AS AMENDED IN APRIL 1998)
1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock
Option Plan are to attract and retain the best available personnel for
service as Directors of the Company, to provide additional incentive to the
Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be "nonstatutory stock options".
2. Definitions. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Landec Corporation, a California corporation.
(e) "CONTINUOUS STATUS AS A DIRECTOR" shall mean the absence of any
interruption or termination of service as a Director.
(f) "DIRECTOR" shall mean a member of the Board.
(g) "EMPLOYEE" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient in and of itself to constitute "employment" by the Company.
(h) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "OPTION" shall mean a stock option granted pursuant to the Plan.
All options shall be nonstatutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).
(j) "OPTIONED STOCK" shall mean the Common Stock subject to an Option.
(k) "OPTIONEE" shall mean an Outside Director who receives an Option.
(l) "OUTSIDE DIRECTOR" shall mean a Director who is not an Employee.
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(m) "PARENT" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(n) "PLAN" shall mean this 1995 Directors' Stock Option Plan.
(o) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(p) "SUBSIDIARY" shall mean a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 400,000 Shares (the "Pool") of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. If Shares which were acquired upon
exercise of an Option are subsequently repurchased by the Company, such
Shares shall not in any event be returned to the Plan and shall not become
available for future grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall
be automatic and nondiscretionary and shall be made strictly in accordance
with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each person who becomes an Outside Director after the
effective date of the Plan, other than any person who has previously been
granted an equivalent option by the Company to purchase shares under any
stock option plan of the Company, shall be automatically granted an Option to
purchase 20,000 Shares (the "First Option") on the date on which such person
first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board of Directors to fill
a vacancy.
(iii) Each Outside Director shall automatically be granted (i)
with respect to the Annual Meeting of the Company's shareholders taking place
in March 1997, an Option to purchase 5,000 Shares on the date of such meeting
provided that, as of such date, such Outside Director shall have served on
the Board for at least six (6) months, and (ii) with respect to all subsequent
Annual Meetings of the Company's shareholders, an Option to purchase 10,000
Shares (a "Subsequent Option") on the date of each such Annual Meeting of
the Company's shareholders immediately following which such Outside Director
is serving on the Board, provided that, on such date, he or she shall have
served on the Board for at least six (6) months prior to the date of such
Annual Meeting.
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(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, in the event that a grant would cause the number of Shares subject to
outstanding Options plus the number of Shares previously purchased upon
exercise of Options to exceed the Pool, then each such automatic grant shall
be for that number of Shares determined by dividing the total number of
Shares remaining available for grant by the number of Outside Directors
receiving an Option on such date on the automatic grant date. Any further
grants shall then be deferred until such time, if any, as additional Shares
become available for grant under the Plan through action of the shareholders
to increase the number of Shares which may be issued under the Plan or
through cancellation or expiration of Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any grant of an Option made before the Company has obtained
shareholder approval of the Plan in accordance with Section 17 hereof shall
be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 17 hereof.
(vi) The terms of each First Option granted hereunder shall be as
follows:
(1) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof.
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option, determined
in accordance with Section 8 hereof.
(3) the First Option shall be exercisable in full on the
date of grant of the Option.
(vii) The terms of each Subsequent Option granted hereunder
shall be as follows:
(1) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth
in Section 9 hereof.
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Subsequent Option,
determined in accordance with Section 8 hereof.
(3) the Subsequent Option shall be exercisable in full on
the date of grant of the Subsequent Option.
(c) POWERS OF THE BOARD. Subject to the provisions and restrictions
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of
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relevant information and in accordance with Section 8(b) of the Plan, the
fair market value of the Common Stock; (ii) to determine the exercise price
per share of Options to be granted, which exercise price shall be determined
in accordance with Section 8(a) of the Plan; (iii) to interpret the Plan;
(iv) to prescribe, amend and rescind rules and regulations relating to the
Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan.
(e) SUSPENSION OR TERMINATION OF OPTION. If the President or his or
her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the
Outside Director accused of such misconduct). If the Board of Directors
(excluding the Outside Director accused of such misconduct) determines an
Optionee has committed an act of embezzlement, fraud, dishonesty, nonpayment
of an obligation owed to the Company, breach of fiduciary duty or deliberate
disregard of the Company rules resulting in loss, damage or injury to the
Company, or if an Optionee makes an unauthorized disclosure of any Company
trade secret or confidential information, engages in any conduct constituting
unfair competition, induces any Company customer to breach a contract with
the Company or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the Optionee nor his or her
estate shall be entitled to exercise any option whatsoever. In making such
determination, the Board of Directors (excluding the Outside Director accused
of such misconduct) shall act fairly and shall give the Optionee an
opportunity to appear and present evidence on Optionee's behalf at a hearing
before the Board or a committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4(b) hereof. An Outside Director who has been granted an
Option may, if he or she is otherwise eligible, be granted an additional
Option or Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate his or her directorship at any time.
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on the
earlier to occur of its adoption by the Board of Directors or its approval by
the shareholders of the Company. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 13 of the Plan.
7. TERM OF OPTIONS. The term of each Option shall be ten (10) years
from the date of grant thereof.
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8. EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.
(b) FAIR MARKET VALUE. The fair market value shall be determined by
the Board; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid
and asked prices of the Common Stock in the over-the-counter market on the
date of grant, as reported in The Wall Street Journal (or, if not so
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation ("Nasdaq") System) or, in the event the Common
Stock is traded on the Nasdaq National Market or listed on a stock exchange,
the fair market value per Share shall be the closing price on such system or
exchange on the date of grant of the Option, as reported in The Wall Street
Journal. With respect to any Options granted hereunder concurrently with the
initial effectiveness of the Plan, the fair market value shall be the Price
to Public as set forth in the final prospectus relating to such initial
public offering.
(c) FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of
cash, check, other Shares of Common Stock having a fair market value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised (which, if acquired from the Company,
shall have been held for at least six months), or any combination of such
methods of payment and/or any other consideration or method of payment as
shall be permitted under applicable corporate law.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be exercisable
prior to shareholder approval of the Plan in accordance with Section 17
hereof has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after
exercise
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of the Option. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
(b) TERMINATION OF STATUS AS A DIRECTOR. If an Outside Director
ceases to serve as a Director, he or she may, but only within ninety (90)
days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to
exercise it at the date of such termination. Notwithstanding the foregoing,
in no event may the Option be exercised after its term set forth in Section 7
has expired. To the extent that such Outside Director was not entitled to
exercise an Option at the date of such termination, or does not exercise such
Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above, in
the event a Director is unable to continue his or her service as a Director
with the Company as a result of his or her total and permanent disability (as
defined in Section 22(e)(3) of the Internal Revenue Code), he or she may, but
only within six (6) months (or such other period of time not exceeding twelve
(12) months as is determined by the Board) from the date of such termination,
exercise his or her Option to the extent he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no
event may the Option be exercised after its term set forth in Section 7 has
expired. To the extent that he or she was not entitled to exercise the
Option at the date of termination, or if he or she does not exercise such
Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(i) During the term of the Option who is, at the time of his or
her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months following the date of death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee continued living and
remained in Continuous Status as Director for six (6) months (or such lesser
period of time as is determined by the Board) after the date of death.
Notwithstanding the foregoing, in no event may the Option be exercised after
its term set forth in Section 7 has expired.
(ii) Within three (3) months after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within six (6)
months following the date of death, by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the date of
termination. Notwithstanding the foregoing, in no event may the option be
exercised after its term set forth in Section 7 has expired.
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10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder).
The designation of a beneficiary by an Optionee does not constitute a
transfer. An Option may be exercised during the lifetime of an Optionee only
by the Optionee or a transferee permitted by this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the shareholders
of the Company, the number of shares of Common Stock covered by each
outstanding Option, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock
covered by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion
of any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock
subject to an Option.
(b) CORPORATE TRANSACTIONS. In the event of (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of the
Company's assets, (iii) a merger or consolidation in which the Company is not
the surviving corporation, or (iv) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote
are exchanged, the Company shall give to the Eligible Director, at the time
of adoption of the plan for liquidation, dissolution, sale, merger,
consolidation or reorganization, either a reasonable time thereafter within
which to exercise the Option prior to the effectiveness of such liquidation,
dissolution, sale, merger, consolidation or reorganization, at the end of
which time the Option shall terminate, or the right to exercise the Option
(or receive a substitute option with comparable terms) as to an equivalent
number of shares of stock of the corporation succeeding the Company or
acquiring its business by reason of such liquidation, dissolution, sale,
merger, consolidation or reorganization.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom
an Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
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(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule
16b-3 under the Exchange Act (or any other applicable law or regulation), the
Company shall obtain approval of the shareholders of the Company to Plan
amendments to the extent and in the manner required by such law or
regulation. Notwithstanding the foregoing, the provisions set forth in
Section 4 of this Plan (and any other Sections of this Plan that affect the
formula award terms required to be specified in this Plan by Rule 16b-3)
shall not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall
not affect Options already granted to such Optionee and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the
Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, state securities laws, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance. As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such
Shares, if, in the opinion of counsel for the Company, such a representation
is required by any of the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan. Inability of the
Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company
of any liability in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option
hereunder. If such shareholder approval is obtained at a duly held
shareholders' meeting, it may be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of the Company present or
represented and entitled to vote thereon. If such shareholder approval is
obtained by written consent, it may be obtained by the written consent of the
holders of a majority of the outstanding shares of the Company. Options may
be granted, but not exercised, before such shareholder approval.
-44-
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
LANDEC CORPORATION
1998 ANNUAL MEETING OF SHAREHOLDERS
P The undersigned shareholder of Landec Corporation, a California corporation, hereby acknowledges receipt of the Notice of
R Annual Meeting of Shareholders and Proxy Statement, each dated February 27, 1998, and hereby appoints Gary T. Steele and Joy
O T. Fry, and each of them, with full power to each of substitution, as proxies and attorneys-in-fact, on behalf and in the
X name of the undersigned, to represent the undersigned at the Annual Meeting of Shareholders of Landec Corporation to be held
Y on April 15, 1998 at 5:00 p.m. local time, at Hyatt Rickeys Hotel, 4219 El Camino Real, Palo Alto, California 94306, and at
any adjournment or postponement thereof, and to vote all shares of Common Stock which the undersigned would be entitled to
vote if then and there personally present, on the matters set forth on the reverse side.
This Proxy will be voted as directed or, if no contrary direction is indicated, will be voted as follows: (1) FOR the
Election of Directors in the manner described in the Proxy Statement, (2) FOR the proposal to approve amendments to the 1996
Stock Option Plan to increase the number of shares of Common Stock reserved for issuance thereunder by 750,000 shares, (3)
FOR the proposal to approve amendments to the 1995 Directors' Stock Option Plan to increase the number of shares of Common
Stock reserved for issuance thereunder by 200,000 shares, to change the subsequent option grants made to each nonemployee
director to 5,000 shares for the 1997 Annual Meeting and to 10,000 shares annually thereafter, and to reprice the exercise
price of all options previously granted under the 1995 Directors' Stock Option Plan, and (4) FOR the proposal to ratify the
selection of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending October 1, 1998.
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder(s). The Board of
Directors unanimously recommends a vote FOR all nominees for directors and proposals 2, 3 and 4.
1. Election of Directors
Nominees: Gary T. Steele, Kirby L. Cramer, Richard Dulude, Damion E. Wicker, M.D. / / FOR / / WITHHELD
For all nominees except as noted:
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
2. To approve amendments to the 1996 Stock Option Plan to increase the number of shares of Common Stock reserved for issuance
thereunder by 750,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve amendments to the 1995 Directors' Stock Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 200,000 shares, to change the subsequent option grants made to each nonemployee director to 5,000 for
the 1997 Annual Meeting and to 10,000 shares annually thereafter and to reprice the exercise price of all options previously
granted under the 1995 Directors' Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. To ratify the appointment of Ernst & Young LLP as independent auditors of the Company for the fiscal year ending October 31,
1998.
/ / FOR / / AGAINST / / ABSTAIN
and in their discretion, the proxies are authorized to vote on such other business as may properly come before the meeting or
any adjournment hereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE. Please sign exactly as name appears hereon. Where
shares are held by joint tenants, both should sign. When signing as attorney, executor, 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.
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(Signature of Shareholder)
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(Date)
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(Signature of Shareholder)
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(Date)
