SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
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|X| Definitive proxy statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LUCILLE FARMS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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LUCILLE FARMS, INC.
150 River Road, P.O. Box 517
Montville, New Jersey 07045
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held March 31, 2004
TO THE STOCKHOLDERS OF
LUCILLE FARMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of LUCILLE FARMS, INC., a Delaware corporation (the
"Company"), will be held on March 31, 2004, at 10:00 A.M., local time, at the
Embassy Suites Hotel, 909 Parsippany Blvd., Parsippany, New Jersey 07054, for
the following purposes:
1. To elect a board of six directors to serve until the next Annual
Meeting of Stockholders and until their successors are duly elected
and qualified.
2. To ratify the selection by the Board of Directors of Mahoney Cohen
& Company, CPA, P.C. as independent accountants of the Company for
the year ending March 31, 2004.
3. To transact such other business as may properly come before the
meeting or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on March 8, 2004
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting and any postponements or adjournments thereof.
Holders of stock representing a majority of the votes entitled to be
cast at the Annual Meeting must be present in person or by proxy in order for
the meeting to be held. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING,
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE REQUESTED TO MARK, SIGN AND DATE
THE ENCLOSED PROXY FORM AND RETURN IT IN THE ACCOMPANYING ENVELOPE. The giving
of such proxy will not affect your right to revoke such proxy before it is
exercised or to vote in person should you later decide to attend the meeting.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
/s/ Al Moussab
-------------------------------------
Al Moussab
Secretary
Montville, New Jersey
March 10, 2004
IT IS IMPORTANT THAT THE ENCLOSED PROXY FORM BE COMPLETED
AND RETURNED PROMPTLY
LUCILLE FARMS
150 River Road, P.O. Box 517
Montville, New Jersey 07045
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 31, 2004
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SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Lucille Farms, Inc., a Delaware corporation
("Lucille Farms" or the "Company"), of proxies to be voted at the Annual Meeting
of Stockholders to be held on March 31, 2004, at 10:00 A.M., local time, or at
any postponements or adjournments thereof (the "Annual Meeting"), at Embassy
Suites Hotel, 909 Parsippany Blvd., Parsippany, New Jersey 07054.
A form of proxy is enclosed for use at the Annual Meeting. The proxy
may be revoked by the person giving it at any time before it is voted by
delivering to the Company (Attention: Al Moussab, Inspector of Elections) a
written notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person. When a proxy is properly
executed and returned, the shares it represents will be voted at the Annual
Meeting in accordance with any instructions noted thereon. If no direction is
indicated, all shares represented by valid proxies received pursuant to this
solicitation (and not revoked prior to exercise) will be voted (i) for the
election of the nominees for directors named in this Proxy Statement, (ii) for
ratification of the selection by the Board of Directors of Mahoney Cohen &
Company, CPA, P.C. as independent accountants for the year ended March 31, 2004,
and (iii) in accordance with the judgment of the persons named in the proxy as
to such other matters as may properly come before the Annual Meeting
(collectively, the "Proposals").
The proxy solicitation materials are being mailed on or about March 15,
2004 to all stockholders entitled to vote at the Annual Meeting. The cost of
soliciting proxies will be borne by the Company. Regular employees, officers,
and directors of the Company may solicit proxies in person, by telephone, or by
mail. No additional compensation will be given to employees, officers, or
directors for such solicitation. The Company will request brokers and nominees
who hold stock in their names to furnish proxy solicitation materials to
beneficial owners of the shares and will reimburse such brokers and nominees for
their reasonable expenses incurred in forwarding proxy solicitation materials to
such beneficial owners.
Stockholders of record at the close of business on March 8, 2004 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. On
the Record Date, 3,137,937 shares of Common Stock were issued and outstanding,
each of which has one vote on each matter to come before the Annual Meeting. The
holders of stock representing a majority of the votes entitled to be cast at the
Annual Meeting, present in person or by proxy, will constitute as quorum for the
transaction of business at the Annual Meeting and any adjournments thereof.
All votes will be tabulated by the inspectors of election appointed for
the Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes each shall be
included in the determination of the number of shares present at the Annual
Meeting and for the purpose of determining whether a quorum is present.
Abstentions and broker non-votes shall not be counted in determining whether a
nominee is elected as a director of the Company. In determining whether the
other Proposals have been approved, abstentions shall be counted as votes
against the Proposal and broker non-votes shall not be counted either for or
against the Proposal.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
Six persons, five of whom are members of the present Board of
Directors, are nominees for election at the Annual Meeting to hold office until
the next annual meeting and until their respective successors are elected and
qualified. Unless authority to vote for any director is withheld in a proxy, it
is intended that each proxy will be voted for the six nominees named below.
It is expected that all nominees will be able and willing to serve as
directors. However, in the event that any nominee is unable or declines to serve
as a director at the time of the Annual Meeting, the proxies will be voted for
any nominee who shall be designated by the present Board of Directors to fill
the vacancy. The Board of Directors has no reason to believe that any of the
persons named will be unable or unwilling to serve as a director if elected.
Reason for Submission to Stockholders
This Proposal is being submitted to stockholders to satisfy the
requirements of the Delaware General Corporation Law.
Required Vote
Approval of the nominees for election to the Board will require the
affirmative vote of the holders of stock representing a plurality of the votes
present at the Annual Meeting in person or by proxy and entitled to vote.
The Board of Directors recommends that the stockholders vote for the
election of all nominees listed to the Board of Directors.
Nominees for Election to the Board of Directors
Name Age Present office or Position
---- --- --------------------------
Howard S. Breslow 64 Chairman of the Board
Jay M. Rosengarten 58 Director, Chief Executive Officer
Alfonso Falivene 61 Director, President
George Bell 60 Director
Ralph Singer 55 Director
Frank DiPasquale 47 Director
The following information is submitted concerning the nominees named
for election as directors based upon information received by the Company from
such persons.
Mr. Howard S. Breslow has been a director of the Company since April
1993. On October 24, 2002, he was elected as Chairman of the Board of Directors.
Mr. Breslow has been a practicing attorney in New York for more than 35 years
and has been a member of the law firm of Breslow & Walker, LLP New York, New
York for more than 30 years, which firm is counsel to the Company. Mr. Breslow
currently serves as a director of Excel Technology, Inc., a publicly held
company that markets photonics-based solutions, consisting of laser systems and
electro-optical components, primarily for industrial and scientific
applications, and BioLife Solutions, Inc., a publicly held company engaged in
the research, development and sale of cryopreservation solutions for use in
biological processing and preservation of cells and tissues.
2
Mr. Jay Rosengarten was appointed to the Board of Directors effective
February 1, 1998. On October 24, 2002, Mr. Rosengarten was elected Chief
Executive Office of the Company. Mr. Rosengarten, the former Board Chairman of
Shopwell, Chicago is an internationally recognized consultant, author and
lecturer on Consumer and Ethnic Marketing and Business Management. He has been
the keynote speaker at numerous national trade association meetings and major
corporate events. Mr. Rosengarten has a J.D. from Fordham University Law School.
Mr. Rosengarten is a non-active principal in the Rosengarten Group, a management
consulting firm. Mr. Rosengarten has been a principal in such firm from 1993 to
present.
Mr. Alfonso Falivene is a founder of the Company and has been a
director of the Company since inception in 1976. He served as Vice President and
Secretary of the Company until April 1993 when he was appointed President and
Chief Executive Officer. On October 24, 2002, Mr. Falivene ceased being CEO but
retained his position as President.
Mr. George Bell has been a director of the Company since August 2002.
Mr. Bell has been the President of National Provisions, Inc. a national
specialty food processing company based Florida since June 2001. Since 1994, Mr.
Bell has been the President of Miramar Pickle Company. Mr. Bell previously spent
over 25 years with Hebrew National, an internationally renowned meat processing
company, especially known for their frankfurters. His last position was Sr. Vice
President of Operations for the company.
Mr. Ralph Singer has been a director of the Company since August 2002.
Mr. Singer has been the Chairman of the Board of National Provisions, Inc. and
the Chairman of Miramar Pickle Company since September 2001. For the past 14
years, he has been Chairman and an officer of Jupiter Childcare, Inc. Also, he
was the Deputy Chairman of the Board of The Stirling Group, PLC in the U.K. Mr.
Singer has over twenty years experience as a successful entrepreneur.
Mr. Frank DiPasquale has worked for the National Grocers Association
since 1997, where he is Senior Vice President. Mr. DiPasquale was the head of
human resources management and operational services for all of Kmart's Super
Kmart Centers from 1992 to 1997. Mr. DiPasquale has a B.B.A. in Marketing
Management from Iona College in New York, a Graduate Degree in Leadership
Development from Hartford University in Connecticut and a Master's of Arts in
Human Resource Management/Organizational Development from Marist College in New
York. He is on the Advisory Board of Second Harvest, the National Skills
Standards and Western Michigan University's Food Marketing Program and the
Editorial Board at St. Joseph's University Food Marketing Program.
Director Compensation
The Company has not compensated its directors for their services in
such capacity.
Board Meetings
The Board of Directors held meetings or acted by unanimous consent on
five occasions during the fiscal year ended March 31, 2003. Meetings were
attended by all directors. All of the members of the Company's current Board of
Directors, except Messrs. Bell and Singer, attended last year's Annual Meeting
of Stockholders.
Board Committees
Audit Committee. The Board of Directors has an Audit Committee which
operates under a written charter adopted by the Board of Directors. A copy of
the Audit Committee Charter is attached to this Proxy Statement as Exhibit A.
The Audit Committee held one meeting during the year ended March 31, 2003. The
Audit Committee is comprised of Messrs. Breslow, Bell and Singer and each are
"independent directors" as defined under NASDAQ rules. Mr. Bell is qualified as
an audit committee financial expert within the meaning of the SEC regulations.
3
Compensation Committee. Management compensation for fiscal year 2003
was determined by the entire Board and reviewed and approved by the independent
members of the Board. Subsequent to such determination, the Board of Directors
formed a Compensation Committee which did not meet during 2003. The role of the
Compensation Committee is to evaluate the performance of the Company's executive
officers, and to determine and approve their compensation. The Compensation
Committee is comprised of Messrs. Breslow, Bell and Singer.
Nominating Committee. The Board of Directors has no standing nominating
committee. The Company believes that obtaining input from all of its directors
in connection with Board nominations enhances the nomination process. The
Company currently does not have a charter with regard to the nomination process.
The nominations of the directors standing for election or re-election at the
Meeting were unanimously recommended for selection by the independent directors,
and were unanimously approved by the Board of Directors.
The Company does not have a formal policy concerning stockholder
recommendations of nominees to the Board of Directors. The need for such a
policy has not arisen since, to date, the Company has not received any
recommendations from stockholders requesting that the Board of Directors
consider a candidate for inclusion among the Board's slate of nominees in the
Company's proxy statement. The absence of such a policy does not mean, however,
that a recommendation would not have been considered had one been received. The
Company will consider director candidates recommended by stockholders. Any
stockholder desiring to make such a recommendation should send the
recommendation, in writing, to the Corporate Secretary at the address of the
Company set forth on the first page of this Proxy Statement, no later than the
date by which stockholder proposals for action must be submitted. The
recommendation should include the recommended candidate's biographical data, and
should be accompanied by the candidate's written consent to nomination and to
serving as a director, if elected.
The Company's goal is to assemble a Board of Directors that brings to
the Company a variety of perspectives and skills derived from business and
professional experience. The Company does not have any formal rules or policies
regarding minimum qualifications for nominees, but expects that its candidates
be of the highest ethical character, share the values of the Company, have
reputations, both personal and professional, consistent with the image and
reputation of the Company, be highly accomplished in their respective field, and
possess the relevant expertise and experience necessary to assist the Board and
the Company to increase stockholder value.
The Board of Directors identifies nominees by first evaluating the
current members of the Board of Directors willing to continue in service.
Current members of the Board with skills and experience that are relevant to the
Company's business and who are willing to continue in service are considered for
re-nomination, balancing the value of continuity of service by existing members
of the Board with that of obtaining a new perspective. If any member of the
Board does not wish to continue in service or if the Board of Directors decides
not to re-nominate a member for re-election, the Board of Directors will seek to
identify nominees that possess the characteristics outlined above. Current
members of the Board of Directors are polled for suggestions. Research also may
be performed to identify qualified individuals. To date, the Company has not
engaged third parties to identify, evaluate, or assist in identifying potential
nominees, although the Company reserves the right in the future to retain a
third party search firm, if necessary.
In evaluating director nominees, the Board of Directors may consider the
following factors:
o the appropriate size and the diversity of the Company's Board of
Directors;
o the needs of the Company with respect to the particular talents and
experience of its directors;
o the knowledge, skills and experience of nominees, including experience
in technology, business, or finance, in light of prevailing business
conditions and the knowledge, skills and experience already possessed
by other members of the Board;
o familiarity with national and international business matters;
o experience with accounting rules and practices; and
o the need to satisfy governance and other standards set by the SEC and
NASDAQ.
The Board of Directors may also consider such other factors as it may deem to be
in the best interests of the Company and its stockholders.
4
Communicating with Directors
Stockholders may contact any of our directors or our Board as a group
by writing to them c/o Lucille Farms, Inc., 150 River Road, P.O. Box 517,
Montville, New Jersey 07045, Att: Al Moussab. All communications will be
received, processed and forwarded to the directors by the Corporate Secretary.
You will receive a written acknowledgement from the Corporate Secretary upon
receipt of your communication if you include a return address.
Audit Committee Report
The Company's management is responsible for preparing the Company's
financial statements, and the independent auditors are responsible for auditing
those financial statements. The Audit Committee is responsible for monitoring
and reviewing these processes on behalf of the Board of Directors.
The Audit Committee has reviewed and discussed the audited financial
statements with management. Management represented to the Audit Committee that
the Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles.
The Audit Committee discussed with the independent auditors matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees). In addition, the Audit Committee has
received the written disclosures and the letter from the independent auditors
required by Independence Standards Board Standard No. 1 (Independence
Discussions With Audit Committees), and has discussed with the independent
auditors the auditors' independence from the Company and its management. In
concluding that the auditors are independent, the Audit Committee considered,
among other factors, whether the nonaudit services provided by auditors were
compatible with their independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board subsequently
approved the recommendation) that the audited financial statements be included
in the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
2003 for filing with the Securities and Exchange Commission.
Audit Committee
Howard S. Breslow
George Bell
Ralph Singer
5
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 10, 2004, certain
information regarding beneficial ownership of common stock by (i) all persons
known by the Company to be the beneficial owner of more than 5% of the Company's
outstanding common stock, (ii) each director of the Company, (iii) each Named
Executive Officer (as defined in "Executive Compensation") and all executive
officers and directors of the Company as a group. Unless expressly indicated
otherwise, each stockholder exercises sole voting and investment power with
respect to the shares beneficially owned.
Amount and Nature of Percent of Common
Name and Address of 5% Owners Beneficial Ownership Stock
----------------------------- -------------------- ------------------
Gennaro Falivene 280,652 8.9%
Box 125
Swanton, VT 05488
Alfonso Falivene (1)(5) 618,098 19.7%
150 River Rd., P.O. Box 517
Montville, NJ 07045
The Estate of
Philip Falivene 200,017 6.4%
Box 125
Swanton, VT 05488
B&W Investment Associates 693,799(2) 18.1%
c/o Breslow and Walker
100 Jericho Quadrangle
Jericho, NY 11753
Howard S. Breslow 693,799(3) 18.1%
100 Jericho Quadrangle
Jericho, NY 11753
Jay M. Rosengarten 275,000(4) 3.8%
St. Albans Cooperative Creamery, Inc. 333,333 10.6%
140 Federal Street
St. Albans, VT 05478
All officers and
directors as a group 1,092,603(5) 34.8%
Shares of Common Stock subject to options and warrants currently exercisable or
exercisable within 60 days are deemed outstanding for computing the number of
shares and the percentage of the outstanding shares held by a person holding
such options and warrants, but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote and subject to
community property laws where applicable, the Company believes that the persons
named in the table have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
(1) Includes 7,500 shares owned by Mr. Falivene's wife and 20,000 shares owned
by one of his children.
(2) Includes 500,000 shares issuable under outstanding warrant.
(3) Represents all of the shares owned by B&W Investment Associates, a
partnership of which Howard S. Breslow, a director of the Company, is a
partner. Includes 500,000 shares issuable under outstanding warrant.
(4) Includes 275,000 shares issuable under outstanding options.
(5) Includes all of the shares owned by the Estate of Philip Falivene, of which
Alfonso Falivene is executor.
6
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of March 10, 2004 are as follows:
Name Age Present office or Position
---- --- --------------------------
Jay M. Rosengarten 58 Chief Executive Officer
Alfonso Falivene 61 President
Al Moussab 51 Chief Financial Officer and Secretary
Gennaro Falivene 73 Executive Vice President-Quality
Control
Set forth below is a biographical description of each of the Company's
executive officers who is not also a director, based on information supplied by
him.
Mr. Gennaro Falivene is a founder of the Company. He served as Vice
president and Treasurer of the Company from inception until April 1993 when he
was appointed Vice chairman of the Board and Executive Vice President-Quality
Control. Mr. Falivene was a director of the Company from inception in 1976 until
July 2002, when he resigned from the Board.
Mr. Al Moussab was appointed the Chief Financial Officer of the Company
in August 2002. Prior thereto, since joining the Company in March 2001, he was
the Company's Controller. From January 2000 until March 2001, Mr. Moussab was
the Controller for Fink Banking Company, a New York based producer of bread
supplying New York metropolitan area restaurants and the New York School system.
From 1996 until the end of 1999, Mr. Moussab served as the Controller of the
Academy Bus Company, the largest privately held bus company in the Northeast.
Officers are appointed by, and hold office at the pleasure of, the
Board of Directors. Officers serve at the discretion of the Board of Directors
and are elected at the annual meeting of the Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation paid
by the Company to the Chief Executive Officer and to each of its other executive
officers, other than the Chief Executive Officer, who received salary and bonus
payments in excess of $100,000 during the year ended March 31, 2003
(collectively, the "Named Executive Officers") .
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation
---------------------
Name and Principal Fiscal Other Annual
Positions Year Salary Bonus Compensation (1)
------------------ ---- ------ ----- ----------------
Jay M. Rosengarten, CEO 2003 $56,410 -- $3,768
Alfonso Falivene 2003 $106,000 -- $9,000
President 2002 106,000 -- 9,000
2001 110,000 -- 9,000
Gennaro Falivene 2003 106,000 -- 6,000
Executive Vice 2002 106,000 -- 7,000
President -- Quality 2001 106,000 5,000
Control
(1) Represents automobile allowances and/or automobile lease payments for the
benefit of such employee.
7
Option/SAR Grants in Year-Ended March 31, 2003
In the fiscal year ended March 31, 2003, the Company issued options to
purchase shares of Common Stock to each of the Named Executive Officers, as
follows:
Percent of
Number of Total Potential Realized Value
Securities Options/SARs at Assumed Annual Rates of
Underlying granted to Stock Price Appreciation
Name and Principal Options/SAR's Employees in Exercise or Base Expiration for Option Term
Positions granted (#)(1) Fiscal Year Price ($/Sh) Date 5% 10%
------------------ -------------- ------------- ---------------- ----------- --- ---
Jay M. Rosengarten,
Chief Executive Officer 250,000 91% $3.00 10/24/2012 $549,752 $875,388
Alfonso Falivene,
President - - - - - -
Gennaro Falivene,
Executive Vice President - - - - - -
--------------------------------------------------------------------------------
(1) Options to acquire shares of Common Stock.
Aggregated Options/SAR Exercises and Option/SAR Values for the Fiscal Year Ended
March 31, 2003
The following table provides information related to options exercised
by each of the Named Executive Officers during the year ended March 31, 2003
fiscal year and the number and value of options held at March 31, 2003. The
Company does not have any outstanding stock appreciation rights. None of the
options were in the money at year ended March 31, 2003.
Number of Securities Underlying Value of Unexercised in the
Unexercised Options/SAR at money Options/SAR At Fiscal
Fiscal Year End (#) Year End ($)(1)
-------------------------------- ----------------------------
Shares
Acquired On Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ -------- --- ----------- ------------- ----------- -------------
Jay M. Rosengarten - - 75,000 200,000 - -
Alfonso Falivene - - - - - -
Gennaro Falivene - - - - - -
-------------------
(1) The closing price for the Common Stock as reported on the Nasdaq on March
31, 2003 was $1.05.
Report of the Board of Directors on Executive Compensation
During the fiscal year ended March 31, 2003, the entire Board of
Directors held primary responsibility for determining executive compensation
levels. The goals of the Company's compensation program is to align compensation
with business objectives and performance and to enable the Company to attract,
retain and reward executive officers and other key employees who contribute to
the long term success of the Company.
The Chief Executive Officer's compensation for the fiscal year ended
March 31, 2003 was determined by the Board of Directors (without the vote of Mr.
Jay M. Rosengarten) based on the anticipated performance in fiscal 2003 and the
level of salaries of chief executive officers in a peer group consisting of
cheese manufacturers and/or food processors having sales levels comparable to
the Company.
8
BOARD OF DIRECTORS
Howard S. Breslow
Alfonso Falivene
Jay Rosengarten
Ralph Singer
George Bell
Employment Agreements
On October 24, 2002, the Company entered into an employment agreement
with Jay Rosengarten, pursuant to which Mr. Rosengarten was employed as the
Company's Chief Executive Officer, initially, and for a period of approximately
three (3) months (the "Wind Down Period"), on a part-time basis, during which
period of time Mr. Rosengarten wound down his consulting practice and devoted
not less than three (3) week days per week to the business of the Company, and
thereafter on a full-time basis, provided, however, that Mr. Rosengarten was
permitted to retain, as consulting clients, two food industry related trade
associations (the "Trade Associations") and two food industry related trade
clients (the "Trade Clients") and devote, on average, not more than an aggregate
of two (2) days per month in connection with such clients. During the Wind Down
Period, Mr. Rosengarten received a salary at the rate of $150,000 per annum.
Thereafter, until such time as he terminated his consulting relationship with
the Trade Clients (at which time he can devote, on average, not more than an
aggregate of one (1) day per month in connection with the Trade Associations),
his salary was at the rate of $200,000 per annum. Since January 1, 2003, at
which time Mr. Rosengarten terminated his consulting relationship with the Trade
Clients, his salary has been at the rate of $250,000 per annum. Pursuant to the
terms of the employment agreement, in addition to his salary, the Company
granted to Mr. Rosengarten, under the Company's 2002 Stock Option Plan, a
10-year option to purchase 250,000 shares of the Company's Common Stock at $3.00
per share, which option vested to the extent of 50,000 shares upon the
commencement of employment and the balance vests at the rate of 50,000 shares on
each of the next four anniversary dates thereof; provided, however, that such
vesting accelerates and all options vest in the event of a sale of all or
substantially all of the assets or all of the shares of capital stock of the
Company or the merger or consolidation of the Company with another entity where
the Company is not the surviving entity or becomes a wholly owned subsidiary of
another entity ( a "Change of Control Event"). In the event Mr. Rosengarten's
employment is terminated on account of his death, disability, or resignation or
for cause, the Company shall be obligated to pay his salary only up to the date
of termination. In the event his employment is terminated by the Company without
cause, the Company shall be required to continue to pay his salary for a period
of six (6) months; provided, however, that if such termination takes place
within two (2) years after a Change of Control Event, then the Company shall be
required to continue to pay his salary for a period of twelve (12) months. In
any case, Mr. Rosengarten shall have the affirmative obligation to seek
employment or reactivate his consulting business and mitigate the Company's
damages-i.e. to the extent that he earns monies from his employment or
consulting business, the same shall be applied to reduce the payments to be made
to Mr. Rosengarten under his employment agreement.
Compensation Committee Interlocks and Insider Participation
Management compensation for fiscal year 2003 was determined by the
entire Board and reviewed and approved by the independent members of the Board.
Subsequent to such determination, the Board of Directors formed a Compensation
Committee which did not meet during 2003. The role of the Compensation Committee
is to evaluate the performance of the Company's executive officers, and to
determine and approve their compensation. The Compensation Committee is
comprised of Messrs. Breslow, Bell and Singer.
During the year ended March 31, 2003, Messrs. Alfonso Falivene, Gennaro
Falivene, and Jay M. Rosengarten were each officers of the Company as well as
directors of the Company who participated in deliberations of the Company's
Board of Directors concerning executive officer compensation. Reference is made
to "Certain Relationships and Related Transactions".
9
Comparison of Cumulative Total Stockholder Return
The following chart compares the percentage change in the cumulative
total stockholder return of the Common Stock during the period from March 31,
1998 through the fiscal year ended March 31, 2003 with the cumulative total
return on the NASDAQ Composite Index and the Company Peer Group. The comparison
assumes $100 was invested in the Common Stock on March 31, 1998, and in each of
the stocks included in the NASDAQ Composite Index and the Company Peer Group.
[CHART]
Legend
CRSP Total Returns Index for:
-----------------------------
03/1998 03/1999 03/2000 03/2001 03/2002 03/2003
LUCILLE FARMS INC 100.0 260.0 420.0 190.0 157.6 79.2
Nasdaq Stock Market (US Companies) 100.0 135.0 250.9 100.5 101.3 74.3
NASDAQ Stocks (SIC 5140-5149 US Companies) 100.0 89.3 75.5 105.9 140.1 116.5
Groceries and Related Products
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.0 on 03/31/1998.
10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At March 31, 2003, Alfonso Falivene and Gennaro Falivene were indebted
to the Company in the amount of $30,167 and $30,166, respectively. Such
indebtedness was represented by promissory notes, dated as of June 1, 1992,
bearing interest at the rate of 9% per annum and payable annually. As of June 1,
2003, Messrs. Falivene repaid their indebtedness.
The Company leases a parcel of land adjacent to its Swanton Vermont
manufacturing facility. This parcel is owned by Alfonso Falivene, Gennaro
Falivene and the Estate of Philip Falivene. The space is used as an employee
parking lot and its use was required in conjunction with the construction of the
Company's whey drying facility. The lease is for a ten year period expiring July
2009. Rentals are $750 monthly for the first five years and $900 monthly for the
additional five year period. Rent expense for the years ended March 31, 2003,
2002, and 2001, was $9,000, $9,000 and $9,000, respectively. The lease contains
an option to purchase the property at fair market value at the end of the ten
year period. This lease was assigned to the Bank in conjunction with the whey
plant financing.
The Company leases a portion of its Montville, New Jersey offices from
Messrs. Alfonso Falivene, Gennaro Falivene, and the Estate of Philip Falivene,
the joint owners of the office condominium unit. During the fiscal years ended
March 31, 2003, 2002 and 2001, the Company paid approximately $14,000, $14,000
and $14,000, respectively, towards the rental of such offices. The Company
currently pays $1,200 per month rent for such premises on a month to month
basis. The Company also leases an additional 900 adjacent square feet for $750
per month on a month to month basis. These premises also are owned by Messrs.
Alfonso Falivene, Gennaro Falivene, and the Estate of Philip Falivene. This
space is used primarily for marketing operations. Rent expense for this space
was $9,000, $9,000 and $9,000, respectively, for the years ended March 31, 2003,
2002 and 2001.
Prior to joining the Company as CEO on October 24, 2002, the Company
had retained Jay Rosengarten as an independent consultant. Mr. Rosengarten had
been paid $50,000 per annum for his services.
The Company is the owner and beneficiary of life insurance policies on
the lives of Messrs. Alfonso and Gennaro Falivene, each in the amount of
$300,000. In the event of the death of any such insured, the Company has agreed
(subject to tender) to utilize the proceeds of such policy to purchase shares of
Common Stock from the deceased's estate at the market value of such shares on
the date of death.
On June 10, 2002, B&W Investment Associates, a partnership of which
Howard S. Breslow, a director of the Company, is a partner, purchased for
$25,000, a ten-year warrant to purchase 500,000 shares of Common Stock at $3.00
per share. This transaction took place in connection with the conversion into
equity and long term debt of outstanding accounts payable owed by the Company to
St. Albans Cooperative Creamery, Inc. and the revision of the pricing structure
for milk and milk by-products. In addition, Breslow & Walker, LLP, a law firm of
which Howard S. Breslow is a partner, received from the Company $95,558 for
legal services for the year-ended March 31, 2003.
11
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of Mahoney
Cohen & Company, CPA, P.C. to serve as the Company's independent accountants for
the fiscal year ending March 31, 2004 and proposes the ratification of such
decision.
Wiss & Company LLP informed the Company that it was resigning as the
Company's public accountants, effective immediately after its review of the
Company's Quarterly Report on Form 10-Q for the quarter ending September 30,
2003, because it was no longer auditing public companies.
Wiss & Company LLP has audited the Company's financial statements for
the fiscal year ended March 31, 2003. Representatives of Mahoney Cohen &
Company, CPA, P.C. are expected to be present at the Annual Meeting, with the
opportunity to make a statement if they desire to do so, and to respond to
appropriate questions.
During 2003, Wiss & Company LLP acted as the independent accountants
for the Company and its subsidiaries. The following table sets forth the
aggregate fees billed by Wiss & Company LLP for audit and review services
rendered in connection with the financial statements and reports for the fiscal
year ended March 31, 2003 and for other services rendered during the fiscal year
ended March 31, 2003 on behalf of the Company and its subsidiaries:
2003 2002
---- ----
Audit Fees $30,489 $53,100
Audit-related fees(a) $ 3,000 -0-
Tax fees -0- -0-
All other fees -0- -0-
--------- ---------
Total $33,489 $53,100
(a) Includes assistance with reviews of unaudited financial
statements.
Required Vote
The affirmative vote of the holders of stock representing a majority of
the votes present in person or represented by proxy at the Annual Meeting and
entitled to vote thereon is required for ratification of appointment of Mahoney
Cohen & Company, CPA, P.C. as independent accountants for the fiscal year ended
March 31, 2004.
The Board of Directors recommends a vote FOR the ratification of the
appointment of Mahoney Cohen & Company, CPA, P.C. as independent accountants for
the Company for the fiscal year ended March 31, 2004.
STOCKHOLDER PROPOSALS
Stockholder proposals for action at the Company's Annual Meeting of
Stockholders for the fiscal year ending March 31, 2004 must be submitted in
writing to the Company at its address set forth on the first page of this Proxy
Statement and received by the Company no later than June 1, 2004 in order that
they may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting. Stockholders who intend to present a proposal at the
Company's Annual Meeting of Stockholders for the fiscal year ending March 31,
2004 without inclusion of such proposal in the Company's proxy materials are
required to provide notice of such proposal to the Company no later than August
1, 2004. The Company reserves the right to reject, rule out of order, or take
other appropriate action with respect to any proposal that does not comply with
these and other applicable requirements.
12
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors, officers, and any persons holding more than ten percent
of the Common Stock to file reports of their initial ownership of the Common
Stock and any subsequent changes in that ownership with the Securities and
Exchange Commission ("SEC"). Specific filing deadlines of these reports have
been established, and we are required to disclose in this Proxy Statement any
failure to meet such deadlines during the fiscal year ended March 31, 2003.
Based solely on a review of such reports furnished to us, we believe all of
these filing requirements have been satisfied, except that George Bell and Ralph
Singer were late in filing each of their Form 3 statements.
The Board of Directors knows of no other matters to be submitted at the
Annual Meeting. If any other matters properly come before the Annual Meeting,
the persons named in the enclosed form of proxy will have the discretionary
authority to vote all proxies received with respect to such matters in
accordance with their judgment.
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of exhibits), will be furnished
without charge to any stockholder upon written request to Al Moussab, Chief
Financial Officer, 150 River Road, P.O. Box 517, Montville, NJ 07045.
Code of Ethics
The Company has a Code of Ethics that is applicable to all employees of
the Company, including the Company's executive officers. The Company will
provide an electronic or paper copy of the Code of Ethics free of charge upon
request. Requests may be made by calling Investor Relations at (973) 334-6030,
or by writing to Investor Relations at 150 River Road, P.O. Box 517, Montville,
New Jersey 07045.
Annual Report to Stockholders
The Annual Report to stockholders of the Company for the year ended
March 31, 2003, including audited consolidated financial statements, has been
mailed to the stockholders concurrently herewith, but such report is not
incorporated in this Proxy Statement and is not deemed to be a part of the proxy
solicitation material.
You should rely only on the information contained in this document to
vote your shares at the annual meeting. The Company has not authorized anyone to
provide information that is different from that which is contained in this
document. This document is dated March 10, 2004. You should not assume that the
information contained in this document is accurate as of any date other than the
date indicated, and you should not assume that the mailing of this document
creates any implication to the contrary.
BY ORDER OF THE BOARD
OF DIRECTORS
/s/ Al Moussab
---------------------------------
Al Moussab, Secretary
Montville, New Jersey
March 10, 2004
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPREICATED.
13
EXHIBIT A
LUCILLE FARMS, INC.
CHARTER OF THE AUDIT COMMITTEE
Purpose
The Audit Committee is appointed by the Board to assist the Board in monitoring
(1) the integrity of the financial statements of the Company, (2) the
independent public accounting firm's qualifications and independence, (3) the
performance of the Company's internal audit function and independent public
accountants, and (4) the compliance by the Company with legal and regulatory
requirements.
The Audit Committee shall prepare the report required by the rules of the
Securities and Exchange Commission to be included in the Company's annual proxy
statement.
COMMITTEE MEMBERSHIP
The Audit Committee shall consist of no fewer than three members of the Board of
Directors. The members of the Audit Committee shall meet the independence and
experience requirements of the NASDAQ Stock Market, Inc. ("NASDAQ") and
applicable Federal law.
The members of the Audit Committee shall be recommended and appointed by the
Board. Audit Committee members shall serve until their successor shall be duly
elected and qualified or their earlier resignation or removal.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Audit Committee shall have the sole authority to appoint or replace the
independent public accountants (subject, if applicable, to shareholder
ratification), and shall pre-approve all audit engagement fees and terms and all
significant non-audit engagements with the independent public accountants. The
Audit Committee shall consult with management but shall not delegate these
responsibilities.
The Audit Committee shall meet as often as it determines is necessary or
advisable, but not less frequently than quarterly. The Audit Committee may form
and delegate authority to subcommittees when appropriate.
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain special legal, accounting or other consultants to
advise the Committee. The Audit Committee may request any officer or employee of
the Company or the Company's outside counsel or independent public accountants
to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee. The Audit Committee shall meet with management,
the Chief Financial Officer and the independent public accountants in separate
executive sessions at least quarterly. The Audit Committee may also, to the
extent it deems necessary or appropriate, meet with the Company's investment
bankers or financial analysts who follow the Company.
The Audit Committee shall make regular reports to the Board. The Audit Committee
shall review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval. The Audit Committee shall
annually review the Audit Committee's own performance.
The Audit Committee, to the extent it deems necessary or appropriate, shall:
FINANCIAL STATEMENT AND DISCLOSURE MATTERS
1. Review and discuss with management and the independent public accountants
the annual audited financial statements, including disclosures made in
management's discussion and analysis, and recommend to the Board whether
the audited financial statements should be included in the Company's Form
10-K.
14
2. Review and discuss with management and the independent public accountants
the Company's quarterly financial statements, including disclosures made in
management's discussion and analysis and the results of the independent
public accountants' reviews of the quarterly financial statements, prior to
the filing of its Form 10-Q.
3. Discuss with management and the independent public accountants significant
financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including any
significant changes in the Company's selection or application of accounting
principles, any major issues as to the adequacy of the Company's internal
controls, any special audit steps adopted in light of material control
deficiencies, the development, selection and disclosure of critical
accounting estimates, and analyses of the effect of alternative
assumptions, estimates or GAAP methods on the Company's financial
statements.
4. Discuss with management the Company's earnings press releases, including
the use of "pro forma" or "adjusted" non--GAAP information, and financial
information and earnings guidance.
5. Discuss with management and the independent public accountants the effect
of regulatory and accounting initiatives as well as off--balance sheet
structures on the Company's financial statements.
6. Discuss with management the Company's major financial risk exposures and
the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies.
7. In connection with each periodic report of the Company, review management's
disclosure to the Committee required under ss.302 of the Sarbanes-Oxley Act
with respect to the Company's disclosure and internal controls, and the
content of the CEO and CFO certifications required by ss.302 and ss.906 of
the Act.
8. Review the Company's programs for compliance with the financial disclosure
requirements of applicable law.
9. Review with management, the Chief Financial Officer and the independent
public accountants the Company's processes to maintain an adequate system
of internal controls.
10. Discuss with the independent public accountants the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct
of the audit. In particular, discuss:
a) The adoption of, or changes to, the Company's significant auditing and
accounting principles and practices as suggested by the independent
public accountants, Chief Financial Officer or management.
b) The management letter provided by the independent public accountants
and the Company's response to that letter.
c) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
requested information, and any significant disagreements with
management.
OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT PUBLIC ACCOUNTANTS
11. Review the experience and qualifications of the senior members of the
independent public accounting team.
15
12. Obtain and review a report from the independent public accountants at least
annually regarding (a) the public accounting firm's internal quality
control procedures, (b) any material issues raised by the most recent
quality control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities within the
preceding five years respecting one or more independent audits carried out
by the firm, (c) any steps taken to deal with any such issues, and (d) all
relationships between the independent public accountants and the Company.
Evaluate the qualifications, performance and independence of the
independent public accountants, including considering whether the public
accounting firm's quality controls are adequate and whether the provision
of non-audit services is compatible with maintaining the public
accountant's independence, taking into account the opinions of management
and the Chief Financial Officer. The Audit Committee shall present its
conclusions to the Board and, if so determined by the Audit Committee,
recommend that the Board take additional action to satisfy itself of the
qualifications, performance and independence of the public accountant.
13. Recommend to the Board policies for the Company's hiring of employees or
former employees of the independent public accountants who were engaged on
the Company's account.
14. Meet with the independent public accountants prior to the audit to discuss
the planning and staffing of the audit.
Oversight of the Company's Internal Audit Function
15. Review and approve the appointment and replacement of the Company's Chief
Financial Officer.
16. Review the significant reports to management prepared by the Chief
Financial Officer and management's responses.
17. Discuss with the independent public accountant the responsibilities of the
Chief Financial Officer, budget and staffing and any recommended changes in
the planned scope of the internal audit.
COMPLIANCE OVERSIGHT RESPONSIBILITIES
18. Obtain from the independent public accountants assurance that Section 10A
of the Securities Exchange Act of 1934 has not been implicated.
19. Obtain reports from management, the Company's Chief Financial Officer and
the independent public accountants that the Company and its subsidiary are
in conformity with applicable legal requirements and the Company's Code of
Business Conduct and Ethics. Advise the Board with respect to the Company's
policies and procedures regarding compliance with applicable laws and
regulations and with the Company's Code of Business Conduct and Ethics.
20. Approve all related-party transactions entered into by the Company.
21. Establish procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls
or auditing matters that ensure that such complaints are treated as
confidential and anonymous.
22. Discuss with management and the independent public accountants any
correspondence with regulators or governmental agencies and any employee
complaints or published reports, which raise material issues regarding the
Company's financial statements or accounting policies.
23. Discuss with the Company's General Counsel legal matters that may have a
material impact on the financial statements or the Company's compliance
policies.
24. Reassess the Charter at least annually and present to the Board for its
formal review and approval any proposed changes.
25. Perform such other duties and responsibilities as may be assigned to the
Audit Committee by law, the Company's charter or bylaws or the Board.
16
Limitation of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements and disclosures are
complete and accurate and are id accordance with generally accepted accounting
principles and applicable rules and regulations. These are the responsibilities
of management and the independent public accountants.
17
PROXY
LUCILLE FARMS, INC.
150 River Road, P.O. Box 517
Montville, New Jersey 07045
This Proxy is solicited on behalf of the Board of Directors
The undersigned, acknowledging receipt of the proxy statement of
Lucille Farms, Inc. (the "Company"), dated March 10, 2004, hereby constitutes
and appoints Alfonso Falivene and Al Moussab and each or any of them, attorney,
agent, and proxy of the undersigned, with full power of substitution to each of
them, for and in the name, place, and stead of the undersigned, to appear and
vote all the shares of stock of the Company, standing in the name of the
undersigned on the books of the Company on March 8, 2004, at the Annual Meeting
of Stockholders of the Company, to be held at the Embassy Suites Hotel located
at 909 Parsippany Boulevard, Parsippany, New Jersey 07054, on March 31, 2004, at
10:00 a.m., local time, and all adjournments thereof.
When properly executed, this proxy will be voted as designated by the
undersigned.
If no choice is specified, this proxy will be voted (i) FOR the
election of the nominees for directors herein and (ii) FOR ratification of the
appointment of Mahoney Cohen & Company, CPA, P.C. as independent accountants for
the fiscal year ending March 31, 2004.
ELECTION OF DIRECTORS
|_| FOR all nominees listed below (except as written in on the line below)
Alfonso Falivene, Howard S. Breslow, Jay M. Rosengarten, George Bell,
Ralph Singer and Frank DiPasquale
|_| WITHHOLD AUTHORITY for all nominees listed above.
(Instruction: To withhold authority to vote for any individual nominee,
please write in name on line below)
_______________________________________________________________________
PROPOSAL TO RATIFY THE APPOINTMENT OF MAHONEY COHEN & COMPANY, CPA, P.C. AS
INDEPENDENT ACCOUNTANTS
|_| FOR |_| AGAINST |_| ABSTAIN
--------------------------------
Date
--------------------------------
Print Name
--------------------------------
Signature
--------------------------------
Signature, if held jointly
When shares are held by joint tenants, both should sign. When signing as
attorney, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE