SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / 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 Rule 14a-11(c) or Rule 14a-12
LANDEC CORPORATION
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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[LANDEC LOGO]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 14, 1999
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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 14, 1999, 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 three directors to serve for a term of two years and until their
successors are duly elected and qualified;
2. To amend the Company's 1995 Employee Stock Purchase Plan to provide for an
annual increase, commencing on November 1, 1999, in the number of shares
reserved for issuance thereunder equal to the lesser of: (i) 225,000 shares,
(ii) 1.5% of the outstanding shares of Common Stock of the Company or (iii)
a number of shares determined by the Board of Directors;
3. To ratify the appointment of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending October 31, 1999; and
4. 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 16, 1999
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 26, 1999
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 LOGO]
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 14, 1999
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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 14,
1999 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 26, 1999
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, 1998, 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
the approval of the amendment to the 1995 Employee Stock Purchase Plan, and 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.
The Company announced in its 10-Q filed for its quarter ended July 31, 1998
that if the shareholders who are interested in raising a proposal at the
Company's 1999 Annual Meeting do not notify the Company of a proposal on or
before January 13, 1999, management may use its discretionary voting authority
to vote on such proposal, even if the matter is not discussed in the proxy
statement for the 1999 Annual Meeting of Shareholders. Since the Company was not
notified of any proposal on or before January 13, 1999, management intends to
use its discretionary voting authority to vote on any proposal that may be
brought at the 1999 Annual Meeting.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on February 16, 1999,
are entitled to notice of and to vote at the meeting. As of the record date,
13,251,615 shares of the Company's Common Stock, par value $0.001 per share,
were issued and outstanding.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR THE COMPANY'S ANNUAL MEETING
OF SHAREHOLDERS IN YEAR 2000
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 2000 Annual Meeting of Shareholders must
be received by its Chief Financial Officer no later than October 30, 1999, in
order that they may be considered for inclusion in the proxy statement and form
of proxy relating to that meeting.
Also, if a shareholder does not notify the Company on or before January 11,
2000, of a proposal for the 2000 Annual Meeting of Shareholders, management
intends to use its discretionary voting authority to vote on such proposal, even
if the matter is not discussed in the proxy statement for the 2000 Annual
Meeting of Shareholders.
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
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two year terms, with Class I directors elected in odd-numbered years (E.G.,
1999) and the Class II directors elected in even numbered years (E.G., 2000).
Accordingly, at the Annual Meeting, three Class I directors will be elected.
The Board of Directors has nominated the three persons named below to serve
as Class I directors until the next odd-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 three 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
three nominees for director receiving the greatest number of votes cast at the
Annual Meeting will be elected.
NOMINEES FOR CLASS I DIRECTORS
The names of the nominees for the Company's Class I directors and certain
other information about them as of January 4, 1999 are set forth below:
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- --------------------------------------- --- --------------------------------------------------- ---------------
Ray F. Stewart, Ph.D................... 45 Senior Vice President, Intellicoat Corporation, a 1986
subsidiary of the Company
Stephen E. Halprin..................... 60 General Partner of OSCCO Ventures 1988
Richard S. Schneider, Ph.D............. 57 General Partner of Domain Partners II, L.P. 1991
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.
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. 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 1991 through June 1998, Dr. Schneider was a general partner of
Domain Associates, L.L.C. and since June 1991, has been a general partner of the
general partner of 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
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of Directors of a number of privately-held life science companies. Dr. Schneider
received a Ph.D. in chemistry from the University of Wisconsin, Madison.
CLASS II DIRECTORS--DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
OF SHAREHOLDERS
The names of the Company's Class II directors and certain information about
them as of January 4, 1999 are set forth below:
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- --------------------------------------- --- --------------------------------------------------- ---------------
Gary T. Steele......................... 50 President, Chief Executive Officer and Chairman of 1991
the Board of Directors of the Company
Kirby L. Cramer........................ 62 Chairman Emeritus of Hazleton Laboratories 1994
Corporation
Richard Dulude......................... 65 Private Investor 1996
Damion E. Wicker, M.D.................. 38 General Partner of Chase Capital Partners 1997
Except as set forth below, each of the Class II directors has been engaged
in the principal occupation set forth next to his name above during the past
five years.
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. He also serves as a director of Immunex Corporation, Unilab
Corporation, Sonosite, Inc. and Ragen Mackenzie Group, Inc. 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 and completed the Senior Executive Program at The Sloan
School of Management at MIT.
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 Vitex and several 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.
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BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held a total of five meetings during the fiscal year
ended October 31, 1998. 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 six meetings during
fiscal year 1998. 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, Richard Dulude, and Richard S. Schneider and held
three meetings during fiscal year 1998. The function of the Compensation
Committee is to review and set the compensation of the Company's Chief Executive
Officer and certain of its most highly compensated officers, including salary,
bonuses and other incentive plans, stock options and other forms of
compensation, to administer the Company's stock plans and approve stock option
awards and to oversee the career development of senior management.
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 1998. The function of the Nominating Committee is to recommend
qualified candidates for election as officers and directors of the Company.
Shareholders wishing to recommend candidates for consideration by the Nominating
Committee may do so by writing to the Secretary of the Company and providing the
candidate's name, biographical data and qualifications.
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,
1998.
COMPENSATION OF DIRECTORS
For fiscal year ended on October 31, 1998, 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, such nonemployee director (including directors who were not
eligible for a First Option) will be granted an additional option to purchase
10,000 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. On April 15, 1998, shareholders approved repricing of 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. As a result, the following nonemployee directors had the following number
of options repriced: Mr. Cramer (5,000 shares), Mr. Dulude (24,000 shares), Mr.
Halprin (5,000 shares), Dr. Schneider (5,000 shares), and Dr. Wicker (20,000
shares).
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Subject to their election to the Board of Directors by the shareholders at
the Annual Meeting, Mr. Halprin and Dr. Schneider, as well as Messrs. Cramer and
Dulude and Dr. Wicker 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. As of January 29, 1999, 2,410,560 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 61,520, 67,000, 31,956, 31,956
and 53,478 shares of the Company's Common Stock, respectively. (These numbers
include the replacement options granted under the repricing program, which are
treated as newly granted options.)
In fiscal year 1998, nonemployee directors of the Company were offered the
opportunity to purchase up to $200,000 of Common Stock of the Company at the
closing price of the Company's Common Stock on the date of subscription. The
shares are subject to a right of repurchase, at cost, by the Company, which will
lapse at the rate of 1/12th of the total number of shares purchased at the end
of each month following the date of purchase. Under this program, the following
number of Common Stock of the Company was purchased by each nonemployee
director: Mr. Cramer (43,480 shares), Mr. Dulude (12,903 shares), Mr. Halprin
(40,000 shares), and Dr. Schneider (12,903 shares).
The Company has a consulting agreement with Mr. Dulude, a nonemployee
outside director, pursuant to which he earned $30,000 per year in 1997 and 1998
and will earn $1,000 per year beginning on May 1, 1999 until terminated and
pursuant to which he was granted stock options to purchase 4,000 shares of the
Company's Common Stock.
REQUIRED VOTE
The three Class I 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 AMENDMENT TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, shareholders are being asked to approve an amendment
to the 1995 Employee Stock Purchase Plan (the "Purchase Plan") to provide for an
annual increase, commencing on November 1, 1999, in the number of shares
reserved for issuance thereunder equal to the lesser of: (i) 225,000 shares,
(ii) 1.5% of the outstanding shares of Common Stock of the Company or (iii) a
number of shares determined by the Board of Directors. A total of 300,000 are
currently reserved for issuance pursuant to the Purchase Plan. As of January 31,
1999, 169,526 shares were available for future issuance under the Purchase Plan.
The proposed amendment to the Purchase Plan was approved by the Board of
Directors in February 1999.
The Company implemented the Purchase Plan in 1995 as an incentive to its
employees and executives as a means to promote increased shareholder value. The
purpose of the Purchase Plan is to provide employees of the Company with an
opportunity to purchase Common Stock of the Company through accumulated payroll
deductions. Management believes that stock ownership is one of the prime methods
of attracting and retaining key personnel responsible for the continued
development and growth of the Company's business.
The following is a summary of the principal provisions of the Purchase Plan,
but it is not intended to be a complete description of all of the terms and
provisions of the Purchase Plan. A copy of the Purchase
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Plan will be furnished to any shareholder upon written request to the Chief
Financial Officer of the Company at the principal executive offices of the
Company in Menlo Park, California.
DESCRIPTION OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in December 1995 and approved by the
shareholders in January 1996. A total of 300,000 shares of Common Stock has been
reserved for issuance under the Purchase Plan. The Purchase Plan, which is
intended to qualify under Section 423 of the Code, is implemented by a series of
offering periods of twelve (12) months duration with new offering periods (other
than the first offering period) commencing on June 1 and December 1 of each
year. Each offering period consists of two consecutive purchase periods of six
months duration with the last day of such period being designated a purchase
date.
The Purchase Plan may be administered by the Board of Directors or by a
committee appointed by the Board. Employees (including officers and employee
directors) of the Company, or of any majority-owned subsidiary designated by the
Board, are eligible to participate if they are employed by the Company or any
such subsidiary for at least 20 hours per week and more than five months per
year.
The Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions, which may not exceed 10% of an employee's
compensation, at a price equal to the lower of 85% of the fair market value of
the Company's Common Stock at the beginning of the offering period or on the
purchase date. If the fair market value of the Common Stock on a purchase date
is less than the fair market value at the beginning of the offering period, a
new 12 month offering period will automatically begin on the first business day
following the purchase date with a new fair market value.
In the event that insufficient shares are available under the Purchase Plan
for a full allocation of shares to all participants during a given Offering
Period, the Board, in its discretion, shall make a pro rata allocation of the
shares remaining available for issuance and return to each participant any cash
remaining in his or her account.
Employees may end their participation in the offering at any time during the
offering period, and an employee's participation ends automatically upon
termination of employment with the Company.
The Purchase Plan provides that in the event of a merger of the Company with
or into another corporation or a sale of substantially all of the Company's
assets, each right to purchase stock under the plan will be assumed or an
equivalent right substituted by the successor corporation, unless the Board of
Directors shortens the offering period so that an employee's right to purchase
stock under the plan will be exercised automatically prior to the merger or sale
of assets.
The Board of Directors has the power to amend or terminate the Purchase Plan
as long as such action does not adversely affect any outstanding rights to
purchase stock thereunder. If not terminated earlier, the Purchase Plan will
have a term of ten years.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is a general summary as of the date of this Proxy Statement of
the United States federal income tax consequences associated with participation
in the Purchase Plan. The federal tax laws may change and the federal, state and
local tax consequences for any participant will depend upon his or her
individual circumstances. All participants are advised to seek the advice of a
tax advisor regarding the tax consequences of participation in the Purchase
Plan.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of section 423 of the Internal Revenue Code (the
"Code"). Under these provisions, no income will be taxable to a participant at
the time of grant of the option or purchase of shares. A participant may become
liable for tax upon disposition of the shares acquired, as summarized below.
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IF THE SHARES ARE SOLD OR DISPOSED OF (INCLUDING BY WAY OF GIFT) MORE THAN
TWO YEARS AFTER THE OFFERING DATE (THE FIRST DAY OF THE OFFERING PERIOD DURING
WHICH SHARES WERE PURCHASED). In this event, the lesser of (a) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price of the shares subject to the option (herein referred to as the
"OPTION PRICE") or (b) 15% of the fair market value of the shares on the first
day of the Offering Period, will be treated as ordinary income to the
participant. Any further gain or loss upon such disposition will be treated as
long-term capital gain or loss. If the shares are sold and the sale price is
less than the Option Price, no ordinary income is recognized and the participant
has a capital loss for the difference.
IF THE SHARES ARE SOLD OR DISPOSED OF (INCLUDING BY WAY OF GIFT) BEFORE THE
EXPIRATION OF THE HOLDING PERIOD DESCRIBED ABOVE. In this event, the excess of
the fair market value of the shares on the Purchase Date over the Option Price
will be treated as ordinary income to the participant. This excess will
constitute ordinary income in the year of sale or other disposition even if no
gain is realized on the sale or a gift of the shares is made. The balance of any
gain will be treated as capital gain and will be treated as long-term capital
gain if the shares have been held more than one year. Even if the amount
realized upon disposition of the shares is less than their fair market value on
the Purchase Date, the same amount of ordinary income is attributed to a
participant and a capital loss is recognized equal to the difference between the
sales price and the value of the shares on such Purchase Date.
SPECIAL CONSIDERATIONS FOR DIRECTORS AND OFFICERS SUBJECT TO SECTION 16(B)
LIABILITY. In the case of a participant who is subject to Section 16(b) of the
Exchange Act, the Purchase Date for purposes of calculating such participant's
compensation income and beginning of the capital gain holding period may be
deferred for up to six months under certain circumstances. Such individuals
should consult with their personal tax advisors prior to buying or selling
shares under the Purchase Plan.
The ordinary income reported under the rules described above, added to the
actual purchase price of the shares, determines the tax basis of the shares for
the purpose of determining capital gain or loss on a sale or exchange of the
shares.
TAX TREATMENT OF THE COMPANY. The Company will be entitled to a deduction
for federal income tax purposes to the extent that a participant recognizes
ordinary income on a disqualifying disposition of the shares, but not if a
participant meets the holding period requirements.
PURCHASE PLAN ACTIVITY
Participation in the Purchase Plan is voluntary and is dependent upon each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases under the
Purchase Plan are not determinable. The following table sets forth certain
information regarding shares purchased during fiscal year 1998 under the
Purchase Plan by each of the
8
Named Executive Officers (i.e., the Company's Chief Executive Officer and four
other highest paid executives), all current executive officers as a group and
all non-executive officer employees as a group:
DOLLAR
VALUE ($) NUMBER OF SHARES
NAME AND POSITION (1) PURCHASED
- --------------------------------------------------------------------------------- ----------- -----------------
Gary T. Steele .................................................................. 33,777 8,094
CEO, President and Chairman of the Board
David D. Taft ................................................................... 23,603 5,656
Chief Operating Officer
A. Wayne Tamarelli, Ph.D. ....................................................... 29,153 6,986
Senior Vice President
Thomas Crowley .................................................................. 11,505 2,757
President and CEO of Intellicoat Corporation
Ray F. Stewart .................................................................. 23,548 5,643
Senior VP of Intellicoat Corporation
All executive officers as a group (8 persons).................................... 183,362 43,939
Non-executive officer employees as a group (approximately 133 persons)........... 361,119 86,535
- ------------------------
(1) Average price of shares purchased. The purchase price paid by each
participant in the Purchase Plan is at least 15% below the market value. See
"Description of the 1995 Employee Stock Purchase Plan."
REASON FOR THE AMENDMENT
Recent accounting pronouncements have altered the accounting treatment in
the case of a shortfall of shares reserved for issuance under an employee stock
purchase plan. As a result, if a shortfall occurs during a purchase period, the
Company is unable to seek shareholder approval for an increase without incurring
significant compensation charges. Therefore, the Board of Directors has approved
the amendment to the Purchase Plan which would automatically increase the shares
reserved for issuance under the Purchase Plan according to a pre-set formula and
provides that it be approved by the shareholders at this Annual Meeting. While
such an amendment minimizes the likelihood of a shortfall and resulting
compensation charge, the Purchase Plan will require periodic monitoring to
ensure that no shortfall occurs. As amended, the number of shares reserved for
issuance under the Purchase Plan would be increased automatically at the
beginning of each fiscal year, commencing on November 1, 1999, by an amount
equal to the lesser of (i) 225,000 shares, (ii) 1.5% of the outstanding shares
of the Company on such date or (iii) a number of shares determined by the Board
of Directors. If a shortfall occurs, the Company will make a pro rata allocation
of the shares remaining available for purchase in as uniform a manner as shall
be practicable and as it shall determine to be equitable.
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 a majority of the required quorum is required
to approve the amendment to the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO
THE PURCHASE PLAN TO PROVIDE FOR AN AUTOMATIC ANNUAL INCREASE IN THE NUMBER
OF SHARES AVAILABLE FOR ISSUANCE THEREUNDER.
9
PROPOSAL NO. 3
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, 1999, 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, 1997 and 1998. 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, 1999.
EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth certain information with regard to executive
officers of Landec Corporation. Ages are as of January 4, 1999.
Gary T. Steele (age 50) 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 60) 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 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 45) is the founder of the Company and has served
as Senior Vice President of Intellicoat Corporation, a subsidiary of the
Company, 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,
10
plastic electrodes, sensors and synthetic polymer chemistry, and led the
development and commercialization of several new product lines.
Thomas F. Crowley (age 54) 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 57) 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 Chairman of the Synthetic Organic Chemical Manufacturers'
Association, Chairman of the Chemical Industry Council of New Jersey, and
Chairman of the Metropolitan New York Paint and Coatings Association.
Joy T. Fry (age 39) 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 44) 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 50) has been Vice President of Commercial Development for
Intelimer Polymer Systems of the Company 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.
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 15, 1999 as to (i) each person who is known by the
Company to beneficially own more than five
11
percent of the Company's Common Stock, (ii) each director, (iii) each Named
Executive Officer and (iv) all current directors and executive officers as a
group.
5% SHAREHOLDERS, DIRECTORS, SHARES BENEFICIALLY OWNED(1)
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) 5.2%
333 South Hope Street
Los Angeles, CA 90071 (3)
Chase Venture Capital Associates, L.P...................................... 1,352,033(6) 10.2%
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, NY 10128 (5)
Domain Partners II, L.P; Domain Associates................................. 832,653(8) 6.3%
One Palmer Square, Suite 515
Princeton, NJ 08542 (7)
Michael Williams........................................................... 1,342,347 10.1%
306 N. Main Street
Monticello, IN 47960 (9)
Zesiger Capital Group LLC.................................................. 1,375,800(11) 10.4%
320 Park Avenue, 30th Floor
New York, NY 10022 (10)
Gary T. Steele............................................................. 355,843(12) 2.6%
Chairman of the Board of Directors, Chief Executive Officer and President
David D. Taft, Ph.D........................................................ 224,879(13) 1.7%
Chief Operating Officer
A. Wayne Tamarelli......................................................... 454,638 3.4%
Senior Vice President; Chairman of the Board of Directors and Chief
Executive Officer of Dock Resins Corporation
Thomas F. Crowley.......................................................... 20,892(14) *
President and Chief Executive Officer of Intellicoat Corporation
Ray F. Stewart, Ph.D....................................................... 266,300(15) 2.0%
Director; Senior Vice President of Intellicoat Corporation
Damion E. Wicker, M.D., Director........................................... 1,352,033(16) 10.2%
Kirby L. Cramer, Director.................................................. 100,000(17) *
Richard Dulude, Director................................................... 51,903(18) *
Stephen E. Halprin, Director............................................... 92,439(19) *
Richard S. Schneider, Ph.D., Director...................................... 832,653(20) 6.3%
All directors and executive officers as a group (13 persons)............... 4,013,008(21) 28.5%
- ------------------------
* Less than 1%
(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 15, 1999, 13,250,875 shares were issued and outstanding.
12
(3) This information is based on a Schedule 13G filed with the Securities and
Exchange Commission (the "SEC") on February 11, 1999 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 &
Management Company each has sole dispositive power with respect to 690,000
shares and has 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
19, 1999 by Chase Venture Capital Associates, L.P.
(6) This number includes 33,260 shares subject to outstanding stock options
exercisable on or before March 16, 1999, which are owned by Damion E.
Wicker, M.D., a director of the Company, who is a general partner of Chase
Venture Capital Associates, L.P. Also includes 11,956 shares subject to
outstanding options exercisable on or before March 16, 1999, owned by
Mitchell Blutt, who is a consultant to the Company and 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
9, 1999.
(8) This number includes 793,951 shares owned by Domain Partners II, L.P. and
3,478 shares owned by Domain Associates, L.L.C. Dr. Schneider, who is a
director of the Company, is a general partner of the general partner of
Domain Partners II, L.P. Dr. Schneider disclaims beneficial ownership of the
Domain Partners II, L.P. shares, except to the extent of his pecuniary
interest in such shares. Pursuant to a letter agreement with Domain
Associates, L.L.C., Dr. Schneider has beneficial ownership of 835 shares of
the shares owned by Domain Associates, L.L.C. This includes 12,903 held in a
Trust of which Dr. Schneider is a beneficial owner and 292 owned directly by
Dr. Schneider. This also includes 22,029 shares owned by Dr. Schneider which
are subject to outstanding stock options exercisable on or before March 16,
1999.
(9) 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.
(10) This information is based on a Schedule 13G/A filed with the SEC on January
21, 1999 by Zesiger Capital Group LLC.
(11) Zesiger Capital Group LLC has sole voting power with respect to 781,000
shares, sole dispositive power with respect to 1,375,800 shares and has no
shared voting or dispositive power.
(12) Includes 235,052 shares subject to outstanding stock options exercisable on
or before March 16, 1999.
(13) Includes 1,739 shares owned by his children. Also includes 200,093 shares
subject to outstanding stock options exercisable on or before March 16,
1999.
(14) Includes 7,812 shares subject to outstanding stock options exercisable on
or before March 16, 1999.
(15) Includes 26,868 shares owned by Dr. Stewart's minor children. Also includes
15,299 shares subject to outstanding stock options exercisable on or before
March 16, 1999.
(16) This number includes 33,260 shares subject to outstanding stock options
exercisable on or before March 16, 1999. Also includes 11,956 shares subject
to outstanding options exercisable on or before March 16, 1999, owned by
Mitchell Blutt who is a consultant to the Company and a general partner of
Chase Venture Capital Associates, L.P. Also includes 1,306,817 shares owned
by Chase Venture Capital Associates, L.P., where Dr. Wicker is a general
partner. Dr. Wicker disclaims beneficial ownership in the shares owned by
Chase Venture Capital Associates and its affiliate except to the extent of
his pecuniary interest therein.
(17) Includes 56,520 shares subject to outstanding stock options exercisable on
or before March 16, 1999.
13
(18) Includes 39,000 shares subject to outstanding stock options exercisable on
or before March 16, 1999.
(19) Includes 20,033 shares owned by OSCCO III, L.P. of which Mr. Halprin is a
general partner. Also includes 21,087 shares subject to outstanding stock
options exercisable on or before March 16, 1999. Mr. Halprin disclaims
beneficial ownership in the shares owned by OSCCO III, L.P. except to the
extent of his pecuniary interest therein.
(20) This number includes 793,951 shares owned by Domain Partners II, L.P. and
3,478 shares owned by Domain Associates, L.L.C. Dr. Schneider, who is a
director of the Company, is a general partner of the general partner of
Domain Partners II, L.P. Dr. Schneider disclaims beneficial ownership of the
Domain Partners II, L.P. shares, except to the extent of his pecuniary
interest in such shares. Pursuant to a letter agreement with Domain
Associates, L.L.C., Dr. Schneider has beneficial ownership of 835 shares of
the shares owned by Domain Associates, L.L.C. This includes 12,903 held in a
Trust of which Dr. Schneider is a beneficial owner and 292 owned directly by
Dr. Schneider. This also includes 22,029 shares owned by Dr. Schneider which
are subject to outstanding stock options exercisable on or before March 16,
1999.
(21) Includes an aggregate of 831,904 shares held by directors and executive
officers which are issuable upon exercise of options exercisable on or
before March 16, 1999. 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 797,429 shares owned by Domain Partners II, L.P.
and Domain Associates (of which Dr. Schneider, a director of the Company, is
a general partner). Also includes 20,033 shares owned by OSCCO III, L.P. of
which Mr. Halprin 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 three non-employee 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
14
analysis, employee compensation training, and periodic pay reviews, the Company
strives to ensure that 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. At a subsequent meeting of the full Board of Directors, the Committee
presents for adoption its findings on the compensation of each individual
executive.
COMPENSATION OF EXECUTIVE OFFICERS
During the fiscal year that ended on October 31, 1998, the Company's
executive compensation program was comprised of the following key components:
base salary, annual bonus, and equity-based incentives.
BASE SALARY
The Compensation Committee annually reviews the salaries of the Company's
executives. When setting base salary levels, in a manner consistent with the
objectives outlined above, the Committee considers competitive market conditions
for executive compensation, Company performance and individual performance.
ANNUAL BONUS
The Company's cash bonus program seeks to motivate executives to work
effectively to achieve the Company's financial performance objectives and to
reward them when objectives are met. Fiscal year 1998 executive bonus payments
for Messrs. Taft, Greene, Stewart and Tamarelli were based upon certain
components of the Company's revenues, margins and market share.
EQUITY-BASED INCENTIVE COMPENSATION
Stock options are an important component of the total compensation of
executives. The Company believes that stock options align the interests of each
executive with those of the shareholders. They also provided executives a
significant, long-term interest in the Company's success and help retain key
executives in a competitive market for executive talent.
The Company's 1996 Stock Option Plan authorizes the Committee to grant stock
options to executives. 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. The option grants generally utilize four-year vesting
periods to encourage executives to continue contributing to the Company, and
they expire ten years from the date of grant.
15
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Company's CEO's compensation plan includes the same elements and
performance measures as the plans of the Company's other executive officers. 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.
Mr. Steele's salary for fiscal year 1998 was $306,730, compared to $258,533
for fiscal year 1997. He did not receive any bonus for 1998, compared to $75,000
for fiscal year 1997. This reflects Mr. Steele's performance against
pre-determined goals and objectives for the fiscal year as well as his role in
the attainment of the Company's overall objectives.
RESTRICTED STOCK
In fiscal year 1998, the Company offered officers and directors of the
Company an opportunity to purchase up to $200,000 of Common Stock of the Company
at the closing price of the Company's Common Stock on the date of subscription.
The shares are subject to a right of repurchase, at cost, by the Company, which
will lapse at the rate of 1/12th of the total number of shares purchased at the
end of each month following the date of purchase. Pursuant to this program, Mr.
Steele purchased 12,697 shares of the Company's Common Stock; Mr. Crowley,
10,323 shares; Mr. Stokes, 8,888 shares; and Mr. Tamarelli, 51,613 shares. The
Company believes that investments by management in restricted stock help to
align the interests of management with the interest of the shareholders of the
Company and to retain the service of management.
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.
STOCK OPTION REPRICING
In December, 1997, the Company repriced the exercise price of approximately
36% of the outstanding common stock options held by the Company's employees
(including executives). Each new option contained the same terms as the
surrendered option except that (i) the exercise price was reduced to the higher
of $5.00 per shares or the trading price of the Company's Common Stock at the
close of business on January 14, 1998 (I.E., $4/share) and (ii) the vesting
schedule for each new option began on December 4, 1997. As a result of this
repricing program, options to purchase 694,100 shares were exchanged. The
following numbers of options held by the executive officers were repriced: Mr.
Steele (350,000 shares), Mr. Taft (45,000 shares), Mr. Stewart (10,000 shares),
Ms. Fry (50,000 shares), Mr. Green (50,000 shares) and Mr. Stokes (50,000
shares).
The Company repriced these employee stock options in an effort to retain
employees at a time when a significant percentage of stock options had exercise
prices that were above fair market value. The Company believes that stock
options are a valuable tool in compensating and retaining employees and
non-employee directors.
16
TEN-YEAR OPTION REPRICINGS
The following table sets forth certain information as of October 31, 1998
with respect to the repricing of certain stock options held by the Company's
executive officers.
NUMBER OF
SECURITIES MARKET EXERCISE
UNDERLYING PRICE OF PRICE AT LENGTH OF
OPTIONS/ STOCK AT TIME OF ORIGINAL
SAR'S TIME OF REPRICING NEW OPTION TERM
REPRICED OR REPRICING OR OR EXERCISE REMAINING AT
AMENDED AMENDMENT AMENDMENT PRICE DATE OF
NAME AND PRINCIPAL POSITION DATE (#) ($) ($) ($) REPRICING
- ------------------------------------------- --------- ----------- ------------- ----------- ----------- ----------------
Gary T. Steele............................. 1/14/98 350,000 $ 4.00 $ 12.00 $ 5.00 8 yrs 230 days
CEO, President and Chairman of the Board
David D. Taft.............................. 1/14/98 45,000 $ 4.00 $ 7.6250 $ 5.00 8 yrs 358 days
Chief Operating Officer
Ray F. Stewart, Ph.D....................... 1/14/98 10,000 $ 4.00 $ 7.6250 $ 5.00 8 yrs 358 days
Senior VP of Intellicoat Corporation
Joy T. Fry................................. 1/14/98 50,000 $ 4.00 $ 7.6250 $ 5.00 8 yrs 358 days
VP of Finance and Administration and
Chief Financial Officer
Lawrence C. Greene......................... 1/14/98 50,000 $ 4.00 $ 7.6250 $ 5.00 8 yrs 358 days
VP of Manufacturing
Guy J. Stokes.............................. 1/14/98 50,000 $ 4.00 $ 8.250 $ 5.00 8 yrs 309 days
VP of Commercial Development
COMPENSATION COMMITTEE
/s/ KIRBY L. CRAMER /s/ RICHARD DULUDE /s/ RICHARD S. SCHNEIDER, PH.D.
- --------------------------- --------------------------- ---------------------------------
Kirby L. Cramer Richard Dulude Richard S. Schneider, Ph.D.
Chairman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither Mr. Cramer nor Mr. Dulude 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, 1998 were in excess of $100,000 (the "Named Executive Officers") for
17
services rendered in all capacities to the Company for that fiscal year, as well
as the compensation earned by each such individual for the Company's two
preceding fiscal years.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------- ----------------------------------------
FISCAL SALARY ($) BONUS ($) STOCK RESTRICTED ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ---------- --------- OPTIONS (#) STOCK COMPENSATION
- -------------------------------------------------- ------ ----------- AWARD (#) ($)
(1) (2) --------- ------------
(3) (4)
Gary T. Steele.................................... 1998 306,730 0 450,000(5) 12,697 2,444
Chief Executive Officer, President 1997 258,333 75,000 350,000 0 3,830
and Chairman of the Board 1996 238,884 50,060 0 0 3,830
David D. Taft..................................... 1998 225,385 23,000 145,000(6) 0 1,313
Chief Operating Officer 1997 205,000 25,000 45,000 0 830
1996 199,719 0 0 0 830
A. Wayne Tamarelli................................ 1998 178,077 40,500 0 51,613 330
Senior Vice President; Chief Executive Officer 1997 92,069(8) 0 0 0 12,193
and Chairman of the Board of Dock Resins
Corporation(7)
Thomas F. Crowley................................. 1998 177,115 0 25,000 10,323 545
President and Chief Executive Officer of 1997 165,000 0 500,000(10) 0 830
Intellicoat Corporation(9)
Ray F. Stewart.................................... 1998 163,077 10,000 10,000(11) 0 2,098
Senior Vice President of Intellicoat 1997 154,167 0 460,000(12) 0 830
Corporation(9) 1996 151,154 0 0 0 830
- ------------------------
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Includes bonuses earned in the indicated year and paid in the subsequent
year. Excludes bonuses paid in the indicated year but earned in the
preceding year.
(3) Subject to a right of repurchase, at cost, by the Company, which will lapse
at the rate of 1/12th of the total number of shares purchased at the end of
each month following the date of purchase. It is anticipated that there will
be no dividend paid on these shares.
(4) 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.
(5) Includes repriced options to purchase 350,000 shares of the Company's common
stock, which are treated as newly granted at the time of repricing.
(6) Includes repriced options to purchase 45,000 shares of the Company's common
stock, which are treated as newly granted at the time of repricing.
(7) Dock Resins Corporation is a subsidiary of the Company.
(8) Mr. Tamarelli became the Senior Vice President of the Company in April,
1997, and the stated amount represents the compensation earned from April to
the end of fiscal year 1997.
(9) Intellicoat Corporation is a subsidiary of the Company.
(10) Represents Intellicoat Corporation stock options.
(11) Includes repriced options to purchase 10,000 shares of the Company's common
stock, which are treated as newly granted at the time of repricing.
(12) Includes 450,000 shares of options to purchase the common stock of
Intellicoat Corporation.
18
STOCK OPTION GRANTS IN FISCAL YEAR 1998
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, 1998 and the value of all options held by
such executive officers on October 31, 1998.
INDIVIDUAL GRANTS
---------------------------- GRANT DATE
NUMBER OF % OF TOTAL 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(2)......................... 100,000 6.39% $ 5.00 12/4/2007 129,307
350,000(3) 23.77% $ 5.00 1/14/2008 392,953
David D. Taft............................. 100,000(4) 6.79% $ 5.00 12/4/2007 129,305
45,000(5) 3.06% $ 5.00 1/14/2008 32,356
A. Wayne Tamarelli(6)..................... 0 0 n/a n/a
Thomas F. Crowley(7)...................... 25,000 1.70% $ 5.00 12/4/2007 32,356
Ray F. Stewart(8)......................... 10,000 0.68% $ 5.00 1/14/2008 7,190
- ------------------------
* 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 to employees for the fiscal
year ended October 31, 1998 is 1,472,350 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 3.91 years of grant. Other
assumptions used for the valuations are: interest rate (risk-free rate of
return) of 5.62%; annual dividend yield of 0%; and volatility of 44%. 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.
(2) An option to purchase 89,000 shares was granted pursuant to the 1988 Stock
Option Plan, and an option to purchase 361,000 shares was granted pursuant
to the 1996 Stock Option Plan.
(3) Represents a replacement option to purchase 350,000 shares, granted on
January 14, 1998 pursuant to the option repricing program.
(4) Granted pursuant to the 1996 Stock Option Plan.
(5) Represents a replacement option to purchase 45,000 shares, granted pursuant
to the 1988 Stock Option Plan, on January 14, 1998 pursuant to the option
repricing program.
(6) Mr. Tamarelli did not receive any option to purchase the Common Stock of
Landec.
(7) Granted pursuant to the 1996 Stock Option Plan.
(8) Represents a replacement option to purchase 10,000 shares, granted pursuant
to the 1988 Stock Option Plan, on January 14, 1998 pursuant to the option
repricing program.
19
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
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 1998
of options to purchase Common Stock of the Company.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL AT FISCAL
YEAR-END YEAR-END
SHARES VALUE (#) ($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE ($) (1) UNEXERCISABLE (2) UNEXERCISABLE
- -------------------------------------------------- ------------ --------- ----------------- -----------------
Gary T. Steele.................................... 100,000 335,800 208,512/437,139 602,303/19,912
David D. Taft..................................... 0 0 183,539/117,982 500,797/7,966
Wayne Tamarelli................................... 0 0 0 0
Thomas Crowley.................................... 0 0 5,208/19,792 0
Ray F. Stewart.................................... 6,956 23,358 12,807/11,106 26,789/7,966
- ------------------------
(1) Based on the closing price of the Company's Common Stock as reported on the
Nasdaq National Market System on October 31, 1998 of $3.938 per share minus
the exercise price of the in-the-money options.
(2) No stock appreciation rights (SARs) were outstanding during fiscal year
1998.
20
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 $100 $100
10/31/96 $74 $111 $111
10/31/97 $41 $144 $142
10/31/98 $33 $173 $115
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 10/31/98
------------- ----------- ----------- -----------
Landec Corporation....................................................... 100 73.96 40.63 32.82
Standard & Poor's 500 Index.............................................. 100 110.89 143.80 172.74
Nasdaq Industrial Index.................................................. 100 111.05 141.84 115.02
- ------------------------
(1) February 15, 1996 for Landec Corporation.
21
EMPLOYMENT CONTRACTS, CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1997, in connection with the purchase of Dock Resins Corporation,
the Company entered into an employment agreement with Dr. Tamarelli, for a term
of five years. Under this employment agreement, Dr. Tamarelli was and will be
employed as Senior Vice President of the Company and Chairman and Chief
Executive Officer of Dock Resins Corporation until April 2002. Furthermore,
Landec agreed to take such actions as necessary to elect Dr. Tamarelli to the
Board of Directors of Dock Resins Corporation. Also, 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 September 1997, in connection with the merger of the Company's
subsidiary, Intellicoat Corporation, with Fielder's Choice Hybrids, the Company
entered into an employment agreement with Michael Williams, President of the
Fielder's Choice, for a term of two years. Under this employment agreement, Mr.
Williams was and will be employed as Senior Vice President of Intellicoat
Corporation and President of the Fielder's Choice Direct Division of Intellicoat
Corporation, until September 1999. Also, in the case of involuntary termination
other than for cause or Mr. William's resignation for cause, salary will
continue to be paid through September 1999.
In addition, on November 1, 1998, the Company made a secured loan of
$500,000 to Mr. Williams, who owns more than 5% of the Company's Common Stock.
The loan carries an interest rate of 7.5% per annum and is due and payable
before July 31, 2000.
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, 1998 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 Dr. Schneider, Dr. Tamarelli, and Messrs. Halprin and Stewart
filed an amended Form 4 late to correct the previously filed Form 4.
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
22
LANDEC CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED IN FEBRUARY 1999)
The following constitute the provisions of the 1995 Employee Stock Purchase
Plan of Landec Corporation.
1. PURPOSE. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company. It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of
1986, as amended. The provisions of the Plan shall, accordingly, be construed so
as to extend and limit participation in a manner consistent with the
requirements of that section of the Code.
2. DEFINITIONS.
(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) "COMPENSATION" shall mean all regular straight time gross earnings,
excluding payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions and other compensation.
(f) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company, 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.
(g) "CONTRIBUTIONS" shall mean all amounts credited to the account of a
participant pursuant to the Plan.
(h) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(i) "EMPLOYEE" shall mean any person, including an Officer, who is
customarily employed for at least twenty (20) hours per week and more than
five (5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "PURCHASE DATE" shall mean the last day of each Offering Period of
the Plan.
(l) "OFFERING DATE" shall mean the first business day of each Offering
Period of the Plan, except that in the case of an individual who becomes an
eligible Employee after the first business day of an Offering Period but
prior to the first business day of the last calendar quarter of such
Offering Period, the term "Offering Date" shall mean the first business day
of the calendar quarter coinciding with or next succeeding the day on which
that individual becomes an eligible Employee.
Options granted after the first business day of an Offering Period will
be subject to the same terms as the options granted on the first business
day of such Offering Period except that they will have a different grant
date (thus, potentially, a different exercise price) and, because they
expire at the same time as the options granted on the first business day of
such Offering Period, a shorter term.
23
(m) "OFFERING PERIOD" shall mean a period of twelve (12) months
commencing on January 1 and July 1 of each year, except for the first
Offering Period as set forth in Section 4(a).
(n) "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.
(o) "PLAN" shall mean this Employee Stock Purchase Plan.
(p) "PURCHASE PERIOD" shall mean a period of six (6) months within an
Offering Period, except for the first Purchase Period as set forth in
Section 4(b).
(q) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period
under the Plan, provided that such person was not eligible to participate in
such Offering Period as of any prior Offering Date, and further, subject to
the requirements of Section 5(a) and the limitations imposed by Section
423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after
the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would
own stock and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary of the Company, or (ii)
if such option would permit his or her rights to purchase stock under all
employee stock purchase plans (described in Section 423 of the Code) of the
Company and its Subsidiaries to accrue at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) of fair market value of such stock (determined at
the time such option is granted) for each calendar year in which such option
is outstanding at any time.
4. OFFERING PERIODS AND PURCHASE PERIODS.
(a) The Plan shall be implemented by a series of Offering Periods, of
twelve (12) months duration with new Offering Periods commencing on or about
December 1 and June 1 of each year (or at such other time or times as may be
determined by the Board of Directors). The first Offering Period shall
commence on the beginning of the effective date of the Registration
Statement on Form S-1 for the initial public offering of the Company's
Common Stock and continue until December 31, 1996 and the second Offering
Period shall commence on January 1, 1997 and continue until November 30,
1996. The Plan shall continue until terminated in accordance with Section 20
hereof. The Board of Directors of the Company shall have the power to change
the duration and/or the frequency of Offering Periods with respect to future
offerings without shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering
Period to be affected.
(b) PURCHASE PERIODS. Each Offering Period shall consist of two (2)
consecutive purchase periods of six (6) months duration, except as set forth
below. The last day of each Purchase Period shall be the "Purchase Date" for
such Purchase Period. A Purchase Period commencing on December 1 shall end
on the next May 31. A Purchase Period commencing on June 1 shall end on the
next November 30; provided, however, the first Purchase Period shall
commence on the IPO Date and shall end on June 30, 1996; the second Purchase
Period shall commence on July 1, 1996 and shall end on December 31, 1996;
and the third Purchase Period shall commence on January 1, 1997 and end on
May 31, 1997. The Board of Directors of the Company shall have the power to
change the duration and/or frequency of Purchase Periods with respect to
future purchases without shareholder approval if
24
such change is announced at least fifteen (15) days prior to the scheduled
beginning of the first Purchase Period to be affected.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by
the Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be not less than 1% and not more than 10%) to be
paid as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following the
Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Date of the offering to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in
Section 10.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
(a) The participant shall elect to have payroll deductions made on each
payday during the Offering Period in an amount not less than one percent
(1%) and not more than ten percent (10%) of such participant's Compensation
on each such payday; provided that the aggregate of such payroll deductions
during the Offering Period shall not exceed ten percent (10%) of the
participant's aggregate Compensation during said Offering Period. All
payroll deductions made by a participant shall be credited to his or her
account under the Plan. A participant may not make any additional payments
into such account.
(b) A participant may discontinue his or her participation in the Plan
as provided in Section 10, or, on one occasion only during the Offering
Period, may decrease the rate of his or her Contributions during the
Offering Period by completing and filing with the Company a new subscription
agreement. The change in rate shall be effective as of the beginning of the
next calendar month following the date of filing of the new subscription
agreement, if the agreement is filed at least ten (10) business days prior
to such date and, if not, as of the beginning of the next succeeding
calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased to 0% at such time during any Offering
Period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such
Offering Period equal $21,250. Payroll deductions shall re-commence at the
rate provided in such participant's subscription Agreement at the beginning
of the first Offering Period which is scheduled to end in the following
calendar year, unless terminated by the participant as provided in Section
10.
7. GRANT OF OPTION.
(a) On the Offering Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase
on each Purchase Date a number of shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to
such Purchase Date and retained in the participant's account as of the
Purchase Date by the lower of (i) eighty-five percent (85%) of the fair
market value of a share of the Company's Common Stock on the Offering Date,
or (ii) eighty-five percent (85%) of the fair market value of a share of the
Company's Common Stock on the Purchase Date; provided however, that the
maximum number of shares an Employee may purchase during each Purchase
Period shall be determined at the Offering Date by dividing $12,500 by the
fair market value of a share of the Company's Common Stock on the Offering
Date, and provided further that such purchase shall be subject to the
limitations set forth in
25
Sections 3(b) and 12. The fair market value of a share of the Company's
Common Stock shall be determined as provided in Section 7(b).
(b) The option price per share of the shares offered in a given Offering
Period shall be the lower of: (i) 85% of the fair market value of a share of
the Common Stock of the Company on the Offering Date; or (ii) 85% of the
fair market value of a share of the Common Stock of the Company on the
Purchase Date. The fair market value of the Company's Common Stock on a
given date shall be determined by the Board in its discretion based on the
closing price of the Common Stock for such date (or, in the event that the
Common Stock is not traded on such date, on the immediately preceding
trading date), as reported by the National Association of Securities Dealers
Automated Quotation (Nasdaq) National Market or, if such price is not
reported, the mean of the bid and asked prices per share of the Common Stock
as reported by Nasdaq or, in the event the Common Stock is listed on a stock
exchange, the fair market value per share shall be the closing price on such
exchange on such date (or, in the event that the Common Stock is not traded
on such date, on the immediately preceding trading date), as reported in The
Wall Street Journal. For purposes of the Offering Date under the first
Offering Period under the Plan, the fair market value of a share of the
Common Stock of the Company shall be the Price to Public as set forth in the
final prospectus filed with the Securities and Exchange Commission pursuant
to Rule 424 under the Securities Act of 1933, as amended.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in paragraph 10, his or her option for the purchase of shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full shares subject to the option will be purchased at the
applicable option price with the accumulated Contributions in his or her
account. The shares purchased upon exercise of an option hereunder shall be
deemed to be transferred to the participant on the Purchase Date. During his or
her lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. DELIVERY. As promptly as practicable after each Purchase Date of each
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his or her option. Any cash remaining to the credit of a participant's account
under the Plan after a purchase by him or her of shares at the termination of
each Purchase Period, or which is insufficient to purchase a full share of
Common Stock of the Company, shall be carried over to the next Purchase Period
if the Employee continues to participate in the Plan, or if the Employee does
not continue to participate, shall be returned to said participant.
10. VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time
prior to each Purchase Date by giving written notice to the Company. All of
the participant's Contributions credited to his or her account will be paid
to him or her promptly after receipt of his or her notice of withdrawal and
his or her option for the current period will be automatically terminated,
and no further Contributions for the purchase of shares will be made during
the Offering Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to a Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her
account will be returned to him or her or, in the case of his or her death,
to the person or persons entitled thereto under Section 15, and his or her
option will be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as an
Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be
deemed to have elected to withdraw from the Plan and the Contributions
credited to his or her account will be returned to him or her and his or her
option terminated.
26
(d) A participant's withdrawal from an offering will not have any effect
upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. AUTOMATIC WITHDRAWAL. If the fair market value of the shares on the
first Purchase Date of an Offering Period is less than the fair market value of
the shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period.
12. INTEREST. No interest shall accrue on the Contributions of a
participant in the Plan.
13. STOCK.
(a) Subject to adjustment upon changes in capitalization of the Company
as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 300,000 shares, plus an annual increase to be added on the first
day of each fiscal year (commencing on November 1, 1999), equal to the
lesser of: (i) 225,000 shares, (ii) 1.5% of the outstanding shares of the
Company on such date or (iii) a number of shares determined by the Board of
Directors. If the total number of shares which would otherwise be subject to
options granted pursuant to Section 7(a) on the Offering Date of an Offering
Period exceeds the number of shares then available under the Plan (after
deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of Contributions, if necessary.
(b) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant
and his or her spouse.
14. ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. The composition of the committee shall be in accordance with the
requirements to obtain or retain any available exemption from the operation of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such shares and cash.
In addition, a participant may file a written designation of a beneficiary
who is to receive any cash from the participant's account under the Plan in
the event of such participant's death prior to the Purchase Date of the
Offering Period. If a participant is married and the designated beneficiary
is not the spouse, spousal consent shall be required for such designation to
be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event
of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's
death, the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the
27
participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is
known to the Company, then to such other person as the Company may
designate.
16. TRANSFERABILITY. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.
17. USE OF FUNDS. All Contributions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
18. REPORTS. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees
promptly following each Purchase Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
19. 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 option
under the Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but have
not yet been placed under option (collectively, the "Reserves"), as well as
the price per share of Common Stock covered by each option under the Plan
which has not yet been exercised, 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 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 issue 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 Offering Period will terminate
immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board. 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, each option under the Plan 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 Board determines, in the exercise of its sole discretion and in lieu of
such assumption or substitution, to shorten the Offering Period then in
progress by setting a new Purchase Date (the "New Purchase Date"). If the
Board shortens the Offering Period then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall
notify each participant in writing, at least ten (10) days prior to the New
Purchase Date, that the Purchase Date for his or her option has been changed
to the New Purchase Date and that his or her option will be exercised
automatically on the New Purchase Date, unless prior to such date he or she
has withdrawn from the Offering Period as provided in Section 10. For
purposes of this paragraph, an option granted under the Plan shall be deemed
to be assumed if, following the sale of assets or merger, the option confers
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the right to purchase, for each share of option stock subject to the option
immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale
of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders
were offered a choice of consideration, the type of consideration chosen by
the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if such consideration received in the sale of assets
or merger was not solely common stock of the successor corporation or its
parent (as defined in Section 424(e) of the Code), the Board may, with the
consent of the successor corporation and the participant, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in fair market value
to the per share consideration received by holders of Common Stock and the
sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the
event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of
shares of its outstanding Common Stock, and in the event of the Company
being consolidated with or merged into any other corporation.
20. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time terminate or
amend the Plan. Except as provided in Section 19, no such termination may
affect options previously granted, nor may an amendment make any change in
any option theretofore granted which adversely affects the rights of any
participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Exchange Act, or under Section 423 of the Code (or any successor
rule or provision or any applicable law or regulation), the Company shall
obtain shareholder approval in such a manner and to such a degree as so
required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the
Board (or its committee) shall be entitled to change the Offering Periods,
limit the frequency and/or number of changes in the amount withheld during
an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding
in excess of the amount designated by a participant in order to adjust for
delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each participant properly correspond
with amounts withheld from the participant's Compensation, and establish
such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the
Plan.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, 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.
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
29
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon 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
twenty (20) years unless sooner terminated under Section 20.
24. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
30
1999 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 26, 1999, 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 14, 1999 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 IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF
DIRECTION, THIS PROXY WILL BE VOTED FOR THE THREE NOMINEES FOR ELECTION, TO APPROVE THE AMENDMENT TO THE 1995 EMPLOYEE STOCK
PURCHASE PLAN AND FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING OCTOBER 1, 1999.
/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 and 3.
1. Election of Directors
FOR all Nominees: Ray F. Stewart, Ph.D., Stephen E. Halprin, Richard S. Schneider, Ph.D. / / FOR / / WITHHOLD
For all nominees except as noted:
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided
below)
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CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
2. To amend the Company's 1995 Employee Stock Purchase Plan to provide for an annual increase, commencing on November 1, 1999,
in the number of shares reserved for issuance thereunder equal to the lesser of: (i) 225,000 shares, (ii) 1.5% of the
outstanding shares of Common Stock of the Company or (iii) a number of shares determined by the Board of Directors; and
/ / FOR / / AGAINST / / ABSTAIN
3. To ratify the appointment of Ernst & Young LLP as independent auditors of the Company for the fiscal year ending October 31,
1999;
/ / 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
