<PAGE>
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 / /
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
HENRY SCHEIN(REGISTERED)
------------------------------------------------------------------------
(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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO HENRY SCHEIN(REGISTERED)]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1999
------------------------------
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Henry Schein, Inc. (the "Company"), to be held at 4:00 p.m., on Wednesday, May
26, 1999 at the Huntington Hilton, 598 Broadhollow Road, Melville, New York.
The Annual Meeting will be held for the following purposes:
1. To elect 12 directors of the Company for terms expiring in 2000.
2. To amend the Company's 1994 Stock Option Plan to increase the number of
shares issuable under the Plan and to permit the grant of options to
certain consultants to the Company and its subsidiaries.
3. To ratify the selection of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ending December 25, 1999.
4. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only stockholders of record at the close of business on April 8, 1999 are
entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
Whether or not you expect to attend the meeting in person, please complete,
date and sign the enclosed proxy exactly as your name appears thereon and
promptly return it in the envelope provided, which requires no postage if mailed
in the United States.
STANLEY M. BERGMAN
Chairman, Chief Executive Officer
and President
Melville, New York
April 22, 1999
<PAGE>
HENRY SCHEIN, INC.
135 DURYEA ROAD
MELVILLE, NEW YORK 11747
------------------------------
PROXY STATEMENT
------------------------------
The Board of Directors of Henry Schein, Inc. (the "Company") has fixed the
close of business on April 8, 1999 as the record date for determining the
holders of the Company's common stock, par value $.01 per share (the "Common
Stock"), entitled to notice of and to vote at the 1999 Annual Meeting of
Stockholders (the "Annual Meeting"). As of that date, 40,639,898 shares of
Common Stock were outstanding, each entitled to one vote. The Notice of Annual
Meeting, this Proxy Statement and the form of proxy are first being mailed to
stockholders of record of the Company on or about April 26, 1999. A copy of the
Company's 1998 Annual Report to Stockholders is being mailed with this Proxy
Statement but is not incorporated herein by reference.
Abstentions are counted as votes cast on proposals presented to
stockholders, whereas broker non-votes are not considered votes cast and the
shares represented by broker non-votes on any proposal are considered present
but not eligible to vote on such proposal. Abstentions and broker non-votes will
have no effect on the election of directors (Proposal 1), which is by plurality
vote, but abstentions will, in effect, be votes against the proposed amendments
to the Company's 1994 Stock Option Plan (Proposal 2) and the ratification of the
selection of independent public accountants (Proposal 3), as these items require
the affirmative vote of a majority of the shares present and eligible to vote on
such matters.
The expense of this proxy solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone, telegraph or other means by directors or employees of the Company or
its subsidiaries without additional compensation. The Company will reimburse
brokerage firms and other nominees, custodians and fiduciaries for costs
incurred by them in mailing proxy materials to the beneficial owners of shares
held of record by such persons. In addition, the Company has retained Georgeson
& Company, Inc. of New York, New York, a proxy solicitation organization, to
assist in the solicitation of proxies. The fee of such organization in
connection herewith is estimated to be $12,000, plus reasonable out-of-pocket
expenses.
The enclosed proxy is solicited by the Board of Directors of the Company.
It may be revoked at any time prior to its exercise by giving written notice of
revocation to the Secretary of the Company, by executing a subsequent proxy and
delivering it to the Secretary of the Company, or by attending the meeting and
voting in person. Attendance at the Annual Meeting will not in and of itself
constitute revocation of a proxy.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information regarding beneficial
ownership of the Company's Common Stock as of April 8, 1999 by (i) each person
known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer named in the Summary Compensation Table on page 12 of
this Proxy Statement and (iv) all directors and executive officers as a group.
Unless otherwise indicated, each person in the table has sole voting and
investment power as to the shares shown.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
---------------------
PERCENT
NAME AND ADDRESS (1) NUMBER OF CLASS
- ------------------------------------------------------------------------ --------- --------
<S> <C> <C>
Stanley M. Bergman (2).................................................. 6,242,452 15.4%
Marvin H. Schein, Individually and as Trustee (3)....................... 6,242,452 15.4%
Leslie J. Levine, as Trustee (4)........................................ 2,510,006 6.2%
Pamela Schein (5)....................................................... 1,617,503 4.0%
Irving Shafran and Judith Shafran, as Trustees (5)...................... 1,617,503 4.0%
Marion Bergman, as Trustee (6).......................................... 856,564 2.1%
Lawrence O. Sneag, as Trustee (7)....................................... 856,564 2.1%
Barry J. Alperin (8).................................................... 7,166 *
Gerald A. Benjamin (9).................................................. 82,193 *
James P. Breslawski (10)................................................ 131,102 *
Leonard A. David (11)................................................... 36,183 *
Larry M. Gibson (12).................................................... 406,550 1.0%
Bruce J. Haber (13)..................................................... 414,788 1.0%
Pamela Joseph (14)...................................................... 340,180 *
Donald J. Kabat (15).................................................... 6,966 *
Mark E. Mlotek (16)..................................................... 49,545 *
Steven Paladino (17).................................................... 90,894 *
AMVESCAP PLC (18)....................................................... 2,116,812 5.2%
Marsh & McLennan Companies, Inc. (19)................................... 5,410,527 13.3%
Directors and Executive Officers as a Group (17 persons) (20)........... 7,357,889 17.7%
</TABLE>
- ------------------------------
* Represents less than 1%.
(1) Unless otherwise indicated, the address for each person is c/o Henry Schein,
Inc., 135 Duryea Road, Melville, New York 11747.
(2) Represents 11,432 shares that Mr. Bergman owns directly and has the power to
vote and the power to dispose of in accordance with the HSI Agreement (as
defined herein), 856,564 shares over which Marion Bergman, Mr. Bergman's
wife, has voting and dispositive power, subject to the HSI Agreement, as
trustee under certain trusts established by Mr. Bergman for his benefit
and/or the benefit of his family members, and 5,374,456 shares held by
certain other stockholders that are parties to the HSI Agreement. All of the
foregoing shares are required by the HSI Agreement to be voted for certain
nominees for election as directors of the Company selected by Mr. Bergman in
accordance with the HSI Agreement. See "ELECTION OF DIRECTORS--Certain
Voting Arrangements."
(3) Represents 592,382 shares that Mr. Schein owns directly, and has the power
to vote and the power to dispose of in accordance with the HSI Agreement,
2,510,006 shares owned by trusts for the benefit of Mr. Schein and members
of his family and/or charities of which Mr. Schein and Leslie J. Levine are
co-trustees, as to which Mr. Schein shares the power to vote and to dispose
of in accordance with the HSI Agreement, and 3,140,064 additional shares
held by certain stockholders that are parties to the HSI Agreement.
Mr. Schein has the right to nominate certain of the members of the Board of
Directors in accordance with the HSI Agreement. All of the 6,242,452 shares
of Common Stock that are subject to the HSI Agreement are required to be
voted for the nominees for election as directors selected in accordance with
the HSI Agreement. See "ELECTION OF DIRECTORS--Certain Voting Arrangements."
2
<PAGE>
(4) Mr. Levine holds such shares as co-trustee of trusts for the benefit of
Marvin H. Schein and members of his families and/or charities. Mr. Levine
shares the power to vote and to dispose of such shares in accordance with
the HSI Agreement. All of such shares must be voted for the nominees for
election as directors selected in accordance with the HSI Agreement. See
"ELECTION OF DIRECTORS--Certain Voting Arrangements."
(5) The shares are owned by a revocable trust established by Ms. Schein of which
Mr. Shafran and Ms. Shafran are co-trustees. Mr. Shafran and Ms. Shafran, as
trustees, have the power to dispose of such shares in accordance with the
HSI Agreement. Ms. Schein has the power to vote and dispose of such shares
upon her revocation of the trust, subject to the HSI Agreement. All of such
shares are required to be voted for the nominees for election as directors
selected in accordance with the HSI Agreement. See "ELECTION OF
DIRECTORS--Certain Voting Arrangements."
(6) Ms. Bergman holds such shares as a trustee or co-trustee of trusts
established by Stanley M. Bergman for the benefit of Mr. Bergman and/or his
family members. Ms. Bergman has the power to vote and to dispose of such
shares in accordance with the HSI Agreement. All of such shares must be
voted for the nominees for election as directors selected in accordance with
the HSI Agreement. See "ELECTION OF DIRECTORS--Certain Voting Arrangements."
(7) Mr. Sneag holds such shares as a trustee or co-trustee of trusts established
by Stanley M. Bergman for the benefit of Mr. Bergman and/or his family
members. Mr. Sneag has the power to vote and to dispose of such shares in
accordance with the HSI Agreement. All of such shares must be voted for the
nominees for election as directors selected in accordance with the HSI
Agreement. See "ELECTION OF DIRECTORS--Certain Voting Arrangements."
(8) Represents 1,000 shares owned directly and options to purchase 6,166 shares
that either are exercisable or will become exercisable within 60 days.
(9) Represents 21,660 shares owned directly and options to purchase 60,533
shares that either are exercisable or will become exercisable within
60 days.
(10) Includes 114,602 shares that Mr. Breslawski has the power to vote and
dispose of in accordance with the HSI Agreement and must be voted for the
nominees for election as directors selected in accordance with the HSI
Agreement. In addition, Mr. Breslawski owns options to purchase 16,500
shares of Common Stock that either are or will become exercisable within
60 days, which shares will be subject to the HSI Agreement upon issuance.
See "ELECTION OF DIRECTORS--Certain Voting Arrangements."
(11) Represents 5,620 shares owned directly and options to purchase 30,563
shares that either are exercisable or will become exercisable within
60 days.
(12) Represents 374,850 shares owned directly and options to purchase 31,700
shares that either are exercisable or will become exercisable within
60 days.
(13) Represents 27,193 shares owned directly, including 24,474 shares subject to
a Restricted Stock Agreement, and options to purchase 387,595 shares that
either are exercisable or will become exercisable within 60 days.
(14) Ms. Joseph has the power to dispose of such shares in accordance with the
HSI Agreement. All of such shares are required to be voted for the nominees
for election as directors selected in accordance with the HSI Agreement.
See "ELECTION OF DIRECTORS--Certain Voting Arrangements."
(15) Represents 800 shares owned directly and options to purchase 6,166 shares
that either are exercisable or will become exercisable within 60 days.
(16) Represents 1,612 shares owned directly, options to purchase 43,133 shares
that either are exercisable or will become exercisable within 60 days, and
4,800 shares that Mr. Mlotek has the power to vote as trustee of trusts for
certain third parties.
(17) Includes 21,360 shares that Mr. Paladino has the power to dispose of in
accordance with the HSI Agreement and must be voted for the nominees for
election as directors selected in accordance with the HSI Agreement. In
addition, Mr. Paladino owns options to purchase 69,534 shares that either
are exercisable or will become exercisable within 60 days, which shares
will be subject to the HSI Agreement upon issuance. See "ELECTION OF
DIRECTORS--Certain Voting Arrangements."
3
<PAGE>
(18) The principal addresses of AMVESCAP PLC are 11 Devonshire Square, London
EC2M 4YR, England and 1315 Peachtree Street, N.E., Atlanta, Georgia 30309.
The information regarding the stock holdings of AMVESCAP PLC and its
affiliate is based on a Schedule 13G filed with the Securities and Exchange
Commission on February 10, 1999. The Schedule 13G was filed jointly by
AMVESCAP PLC and its subsidiaries, AVZ, Inc., AIM Management Group Inc.,
AMVESCAP Group Services, Inc., INVESCO, Inc., INVESCO North American
Holdings, Inc., INVESCO Capital Management, Inc., INVESCO Funds Group,
Inc., INVESCO Management & Research, Inc., INVESCO Realty Advisors, Inc.
and INVESCO (NY) Asset Management, Inc. According to the Schedule 13G,
AMVESCAP, indirectly through its subsidiaries, has shared voting and
dispositive power over the shares shown in the table.
(19) The principal address of Putnam Investments, Inc. is One Post Office
Square, Boston, Massachusetts 02109. Information regarding the
stockholdings of Putnam Investments, Inc. and its affiliates is based on a
Schedule 13G filed by Putnam Investments, Inc. with the Securities and
Exchange Commission on February 18, 1999 on behalf of itself, its parent
holding company, Marsh & McLennan Companies, Inc., and its subsidiaries
Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc.
According to the Schedule 13G, Putnam Investments, Inc., through these
registered investment advisor subsidiaries, has shared voting and
dispositive power over the shares shown in the table, which are
beneficially owned by clients of such investment advisors. Marsh & McLennan
Companies, Inc. and Putnam Investments, Inc., disclaim beneficial ownership
of all of these shares.
(20) Includes (a) all shares described in the preceding notes (2) through (17),
and (b) 17,690 shares, and options to purchase 94,356 shares that either
are exercisable or will become exercisable within 60 days, held by other
executive officers.
4
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Twelve directors are to be elected at the Annual Meeting to serve until the
2000 Annual Meeting of Stockholders and until their successors are elected and
qualified. The Board of Directors has approved the persons named below as
nominees and the enclosed proxy, if executed and returned, will be voted for the
election of all of such persons except to the extent the proxy is specifically
marked to withhold such authorities with respect to one or more of such persons
as provided therein. Each of the nominees currently serves as a director and was
elected by the stockholders at the 1998 Annual Meeting. All of the nominees have
consented to be named and, if elected, to serve. 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 may be voted in the discretion of the persons acting
pursuant to the proxy for the election of other nominees. Directors will be
elected by plurality vote. Set forth below is certain information concerning the
nominees:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Stanley M. Bergman................................... 49 Chairman, Chief Executive Officer, President and
Director
James P. Breslawski.................................. 45 Executive Vice President and Director
Bruce J. Haber....................................... 46 Executive Vice President, President of the Medical
Group and Director
Gerald A. Benjamin................................... 46 Senior Vice President--Administration and Director
Steven Paladino...................................... 42 Senior Vice President, Chief Financial Officer and
Director
Leonard A. David..................................... 50 Vice President--Human Resources, Special Counsel and
Director
Mark E. Mlotek....................................... 43 Vice President, General Counsel, Secretary and
Director
Barry J. Alperin..................................... 58 Director
Pamela Joseph........................................ 56 Director
Donald J. Kabat...................................... 63 Director
Marvin H. Schein..................................... 57 Director
Irving Shafran....................................... 55 Director
</TABLE>
STANLEY M. BERGMAN has been Chairman, Chief Executive Officer, and
President since 1989 and a director of the Company since 1982. Mr. Bergman held
the position of Executive Vice President of the Company and Schein
Pharmaceutical, Inc. from 1985 to 1989 and Vice President of Finance and
Administration of the Company from 1980 to 1985. Mr. Bergman is a certified
public accountant.
JAMES P. BRESLAWSKI has been an Executive Vice President of the Company
since 1990, with primary responsibility for the North American Dental Group, the
Veterinary Group and corporate creative services, and a director of the Company
since 1990. Between 1980 and 1990, Mr. Breslawski held various positions with
the Company, including Chief Financial Officer, Vice President of Finance and
Administration and Controller. Mr. Breslawski is a certified public accountant.
BRUCE J. HABER became an Executive Vice President of the Company and
President of the Medical Group in August 1997 in connection with its acquisition
of Micro Bio-Medics, Inc. ("MBM"), and became a director of the Company in
November 1997. He had been the President of MBM since 1983 and a director of MBM
since 1981.
GERALD A. BENJAMIN has been Senior Vice President of Administration since
January 1993, including responsibility for the worldwide human resource
function, and has been a director of the Company since September 1994. Prior to
holding his current position, Mr. Benjamin was the Company's Vice President of
5
<PAGE>
Customer Satisfaction from 1993 to 1998, Vice President of Distribution
Operations from 1990 to December 1992, and Director of Materials Management from
1988 to 1990. Before joining the Company in 1988, Mr. Benjamin was employed for
13 years in various management positions at Estee Lauder, where his last
position was Director of Materials Planning and Control.
STEVEN PALADINO has been Senior Vice President and Chief Financial Officer
of the Company since April 1993 and has been a director of the Company since
December 1992. From 1990 to April 1993, Mr. Paladino served as Vice President
and Treasurer and from 1987 to 1990 served as Corporate Controller of the
Company. Before joining the Company in 1987, Mr. Paladino was employed as a
public accountant for seven years and most recently was with the international
accounting firm of BDO Seidman, LLP. Mr. Paladino is a certified public
accountant.
LEONARD A. DAVID has been Vice President of Human Resources and Special
Counsel since January 1995. Mr. David held the office of Vice President, General
Counsel and Secretary from 1990 to January 1995 and practiced corporate and
business law for eight years prior to joining the Company in 1990. Mr. David has
been a director of the Company since September 1994.
MARK E. MLOTEK joined the Company in December 1994 as Vice President,
General Counsel and Secretary and became a director of the Company in September
1995. Prior to joining the Company, Mr. Mlotek was a partner in the law firm of
Proskauer Rose LLP, specializing in mergers and acquisitions, corporate
reorganizations and tax law from 1989 until he joined the Company.
BARRY J. ALPERIN has been a director of the Company since May 1996.
Mr. Alperin has been a private consultant since August 1995. Mr. Alperin served
as Vice Chairman of Hasbro, Inc. from 1990 through July 1995. Mr. Alperin served
as Co-Chief Operating Officer of Hasbro, Inc. from 1989 through 1990 and as its
Senior Vice President and Executive Vice President from 1985 through 1989.
Mr. Alperin currently serves as a director for Seaman Furniture Company, Inc., a
furniture retailing company, and K'nex Industries, Inc., a wholesale toy
company.
PAMELA JOSEPH has been a director of the Company since September 1994. For
the past five years, Ms. Joseph has been a self-employed artist and is President
of Anderson Ranch Arts Center. Ms. Joseph is also a trustee of Alfred
University.
DONALD J. KABAT has been a director of the Company since May 1996.
Mr. Kabat is President of D.K. Consulting Services, Inc. and served as Chief
Financial Officer of Central Park Skaters, Inc. from September 1992 to September
1995. From 1970 to 1992, Mr. Kabat was a partner in Andersen Consulting, an
affiliate of Arthur Andersen, LLP.
MARVIN H. SCHEIN has been a director of the Company since September 1994
and has provided consulting services to the Company since 1982. Mr. Schein
founded Schein Dental Equipment Corp., a subsidiary of the Company, and served
as its President for 16 years. Prior to founding Schein Dental Equipment Corp.,
Mr. Schein held various management and executive positions with the Company.
IRVING SHAFRAN has been a director of the Company since September 1994 and
was nominated by Pamela Schein as her designee for director of the Company.
Mr. Shafran has been an attorney in private practice for the past 25 years. From
1991 through December 1995, Mr. Shafran was a partner in the law firm of
Anderson Kill Olick and Oshinsky, PC.
CERTAIN VOTING ARRANGEMENTS
The Amended and Restated HSI Agreement dated as of February 16, 1994, as
amended (the "HSI Agreement"), among certain stockholders of the Company, which
was entered into in connection with the Company's reorganization, provides that
from January 1, 1999 until the earliest of (i) January 1, 2004, (ii) the first
date on which Marvin H. Schein and his family group no longer beneficially own
at least 25% of the outstanding Common Stock that they owned immediately after
the reorganization, or (iii) the date on which certain changes in the Company's
management occur, Stanley M. Bergman has the right to designate the nominees for
election to the Board of Directors; provided, however, that if Marvin H. Schein
does not approve such nominees, Mr. Bergman and Mr. Schein will each select that
number of nominees (of which one must be an
6
<PAGE>
Independent Nominee, as defined in the HSI Agreement), equal to one-half of the
entire Board, rounded down to the nearest whole number and the remaining nominee
(if there is an odd number of directors) will be elected by the two independent
nominees. The parties to the HSI Agreement, who have the right to vote
approximately 15.4% of outstanding shares of Common Stock eligible to vote at
the 1999 Annual Meeting, are required to vote for all such nominees. If any
director previously nominated pursuant to the HSI Agreement ceases to hold
office, the individual who nominated such director shall have the right to
nominate his or her successor.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 26, 1998 ("fiscal 1998"), the Board
of Directors held five meetings.
The Company has an Executive Committee, which currently consists of Messrs.
Bergman, Benjamin, Breslawski, Paladino and Schein. The Executive Committee may
exercise all of the powers and authority of the Board of Directors, except that
it does not have the power or authority to adopt, approve or recommend to
stockholders any action or matter that is required by Delaware law to be
submitted to the stockholders for approval, or to adopt, amend or repeal any
bylaw of the Company. The Executive Committee did not meet in fiscal 1998.
The Board of Directors has an Audit Committee, which currently consists of
Messrs. Alperin and Kabat. The Audit Committee oversees the Company's financial
reporting process on behalf of the Board of Directors. In fulfilling its
responsibility, the Audit Committee recommends to the Board of Directors,
subject to stockholder approval, the selection of the Company's independent
public accountants. The Audit Committee also reviews the Company's consolidated
financial statements and the adequacy of the Company's internal controls. The
Audit Committee meets with the independent public accountants to discuss the
results of their audit of the Company, their evaluation of the Company's
internal controls and the overall quality of the Company's financial reporting.
The Audit Committee held two meetings in fiscal 1998.
The Board of Directors has a Compensation Committee, which currently
consists of Messrs. Alperin and Kabat. The Compensation Committee makes
recommendations regarding the compensation and benefit policies and procedures
of the Company. The Compensation Committee held four meetings during fiscal
1998.
The Board of Directors has a Stock Option Committee which currently
consists of Messrs. Alperin and Kabat. The Stock Option Committee determines
grants under the Company's 1994 Stock Option Plan. The Stock Option Committee
held four meetings during fiscal 1998.
COMPENSATION OF DIRECTORS
In fiscal 1998, Messrs. Alperin and Kabat each received a $25,000 annual
retainer and an additional $1,000 per board meeting and $500 per committee
meeting attended (or $750 if such committee meeting was held on a day other than
a day on which a board meeting was held), and were granted options to purchase
1,500 shares of the Company's Common Stock. Directors are reimbursed for their
out-of-pocket expenses in attending board meetings and committee meetings.
PROPOSAL 2
AMENDMENT OF 1994
STOCK OPTION PLAN
The Company maintains the Henry Schein, Inc. 1994 Stock Option Plan, as
amended ("Stock Option Plan"), for the benefit of key employees of the Company
and its subsidiaries. The proposed amendments to the Stock Option Plan, which
was unanimously adopted by the Board of Directors on April 6, 1999, subject to
stockholder approval at the 1999 Annual Meeting, would (i) increase the number
of shares of Common Stock issuable upon the exercise of Class B Options granted
under the Stock Option Plan by approximately 3.1% of the currently outstanding
shares of Common Stock, or 1,250,000 shares, and (ii) permit the grant of
options to Consultants (as defined below) to the Company and its subsidiaries.
The proposed amendments would not change
7
<PAGE>
the number of shares of Common Stock issuable upon the exercise of Class A
Options, the maximum number of which have been issued.
If the proposed amendments are approved, the first sentence of
Section 5(b) of the Stock Option Plan would read in its entirety as follows:
Subject to adjustment as provided in this Section 5, the
maximum aggregate number of Shares that may be issued under
the Plan shall be 5,179,635 shares of Common Stock, of which a
maximum of 237,897 of such Shares shall be covered by Class A
Options and the balance of such Shares shall be covered by
Class B Options.
The Board of Directors believes that it is desirable to increase the total
number of shares available under the Stock Option Plan in order to attract,
motivate and retain key employees (and, pursuant to the proposed amendments,
Consultants) of the Company and its subsidiaries, including in connection with
acquisitions by the Company of other corporations or businesses. Amendments to
the Stock Option Plan adopted by the Company's stockholders in 1997 and 1998
increased the number of shares of Common Stock issuable under the Stock Option
Plan by an aggregate of 3,250,000 shares. Of the options granted under the Stock
Option Plan that were outstanding on April 8, 1998, options with respect to
approximately 1,462,525 shares had been granted in connection with acquisitions
by the Company, and options with respect to an aggregate of 1,910,600 shares had
been granted under the Company's annual compensation programs. Only an aggregate
of approximately 30,000 shares remain available under the Stock Option Plan for
future option grants. Of the total options to purchase shares of Common Stock
that were outstanding as of April 8, 1999, options to purchase 3,373,000 shares
of Common Stock had been granted under the Stock Option Plan (including those
granted in connection with acquisitions), and options to purchase an additional
1,425,000 shares of Common Stock had been granted upon the Company's assumption
of options that had been issued by acquired public companies prior to their
acquisition by the Company. The aggregate number of shares subject to
outstanding options that were not granted in connection with acquisitions was
equal to approximately 4.7% of the shares of Common Stock outstanding on that
date.
Similarly, the Board of Directors believes that amending the Stock Option Plan
to permit the grant of options to key consultants would assist the Company in
attracting, motivating and retaining consultants whose services are important to
the growth and success of the Company and its subsidiaries. As is the case with
key employees, the grant of options to key consultants would also help align the
interests of such consultants with those of the Company's stockholders. The
proposed amendments would permit the grant of options to "Consultants", which
term would be defined as follows:
"Consultant" means any natural person (or any wholly-owned
corporate alter ego of any natural person) who is not an
employee of the Company and who provides key bona fide
consulting or advisory services to the Company, as determined
by the Committee, which services are not in connection with
the offer and sale of securities in a capital-raising
transaction.
Consultants would not be entitled to receive options intended to qualify as
incentive stock options under Section 422 of the Internal Revenue Code of 1986
(the "Code"). The shares issuable upon the exercise of options granted to
consultants would count against the aggregate number of shares that may be
issued under the Stock Option Plan discussed above. The other provisions of the
Stock Option Plan relating to options granted to key employees, including,
without limitation, the consequences of termination of employment with the
Company on the exercisability of such options, would also be amended to apply on
a parallel basis to options granted to Consultants.
Description of the Stock Option Plan
The purpose of the Stock Option Plan is to enable the Company and its
designated subsidiaries to attract, retain and motivate key employees (and, if
the proposed amendments are adopted, Consultants) who are important to the
success and growth of the Company and to create a mutuality of interest between
the such individuals and the stockholders of the Company by granting such
individuals options to purchase Common Stock. Under the Stock Option Plan, as
currently constituted, 3,929,635 shares of Common Stock may be issued
8
<PAGE>
pursuant to the exercise of options granted thereunder. The Stock Option Plan
provides for two classes of options: Class A Options, which have an exercise
price of $4.21 per share, and Class B Options, which have exercise prices of not
less than the fair market value of the Common Stock at the time of grant.
Class A Options to purchase an aggregate of 170,000 shares of Common Stock were
outstanding as of April 8, 1999, and Class B Options to purchase an aggregate of
3,203,000 shares of Common Stock were outstanding as of such date. If options
are canceled, expire or terminate unexercised, the shares of Common Stock
covered by such options are again available for the grant of options, except
that the number of shares that may be issued pursuant to the exercise of
Class A Options is reduced by the number of Class A Options that are canceled,
expire or are terminated. Both incentive stock options and non-qualified stock
options may be issued under the Stock Option Plan.
The maximum number of shares of Common Stock with respect to which options
may be granted under the Stock Option Plan to any participant in any fiscal year
cannot exceed 100,000 shares. To the extent that shares for which options are
permitted to be granted to a participant during a year are not covered by a
grant of an option in such year, such shares shall automatically increase the
number of shares of Common Stock available for grant of options to such
participant in the subsequent year.
The Stock Option Plan is to be administered by the Company's Board of
Directors or by a committee of two or more directors appointed by the Board (the
"Committee"), each of whom qualifies as a non-employee director within the
meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), and as an outside director within the meaning of
Section 162(m) of the Code. The Stock Option Plan is currently administered by
the Stock Option Committee of the Board of Directors. The committee has the full
authority and discretion, subject to the terms of the Stock Option Plan, to
determine those individuals who are eligible to be granted options and the
amount and type of options. Terms and conditions of options are set forth in
written option agreements, consistent with the terms of the Stock Option Plan.
No option shall be granted under the Stock Option Plan on or after
September 30, 2004 (the tenth anniversary of the effective date of the Stock
Option Plan), but options granted prior to such date may extend beyond that
date.
The Stock Option Plan provides that it may be amended by the Company's
Board of Directors or the Committee, except that no amendment may, without the
approval of stockholders of the Company, (i) increase the total number of shares
of Common Stock which may be acquired upon exercise of options granted under the
Stock Option Plan, (ii) change the types of employees (or, if the proposed
amendments are adopted, consultants or other advisors) eligible to participate
in the Stock Option Plan, (iii) effect any change that would require stockholder
approval under Rule 16b-3 under the Exchange Act, (iv) effect any change that
would require stockholder approval under Section 162(m) of the Code or (v)
reduce the purchase price of an outstanding option below the fair market value
of a share of Common Stock on the date of such amendment.
The options entitle the holder to purchase a specified number of shares of
Common Stock, subject to vesting provisions, at a price set by the Committee at
the time of grant, subject to certain limitations. The term of each option will
be specified by the Committee upon grant, but may not exceed ten years from the
date of grant (five years in the case of incentive stock options granted to
owners of 10% or more of the Company's outstanding voting stock). The Committee
will determine the time or times at which each option may be exercised. Options
may be exercisable in installments, and the exercisability of options may be
accelerated in some cases, including upon a change of control of the Company (as
defined in the Stock Option Plan).
Under the Stock Option Plan, the Committee may grant incentive stock
options that qualify under Section 422 of the Code or non-qualified stock
options. Incentive stock options are subject to certain requirements under the
Stock Option Plan, as well as under the Code. As noted above, Consultants would
not be eligible to receive incentive stock options.
A participant may elect to exercise one or more of his or her options by
giving written notice to the Committee of such election at any time. The
participant shall specify the number of options to be exercised and provide
payment in full of the aggregate purchase price for the shares of Common Stock
for which options are being exercised. Payment may be made (i) in cash or by
check, bank draft or money order, (ii) if so permitted by the Committee, through
delivery of unencumbered shares of Common Stock, a promissory note or a
combination of cash and either of the foregoing, or (iii) on such other terms
and conditions as may be acceptable to the Committee or as set forth in the
participant's option agreement.
9
<PAGE>
The following outstanding options have been granted under the Stock Option
Plan to each of the Named Executive Officers, all current executive officers as
a group and all other employees, respectively:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NAME NUMBER OF SHARES EXERCISE PRICE
- --------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Stanley M. Bergman....................................... -- --
James Breslawski......................................... 45,500 $29.58
Bruce J. Haber........................................... 59,728 $25.06
Larry M. Gibson.......................................... 63,800 $28.17
Steven Paladino.......................................... 107,700 $18.67
Executive Officers as a Group (12 people)................ 1,077,362 $14.29
All Other Employees...................................... 2,536,638 $30.52
</TABLE>
A copy of the Stock Option Plan, marked to show the proposed amendments, is
available upon request from the Company.
Certain Federal Income Tax Consequences. The principal Federal income tax
consequences with respect to stock options granted pursuant to the Stock Option
Plan are summarized below:
Incentive Stock Options. Options granted under the Stock Option Plan may
be incentive stock options as defined in the Code, provided that such options
satisfy the requirements under the Code therefor. In general, neither the grant
nor the exercise of an incentive stock option will result in taxable income to
the optionee or a deduction to the Company. The sale of Common Stock received
pursuant to the exercise of an option which satisfied all the requirements of an
incentive stock option, as well as the holding period requirement described
below, will result in a long-term capital gain or loss to the optionee equal to
the difference between the amount realized on the sale and the option price and
will not result in a tax deduction to the Company. To receive incentive stock
option treatment, the optionee must not dispose of the Common Stock purchased
pursuant to the exercise of an option either (i) within two years after the
option is granted, or (ii) within one year after the date of exercise. In
addition, if the Common Stock is held for more than 18 months after the date of
exercise, the optionee will be taxed at the lowest rate applicable to capital
gains for such optionee.
If all requirements for incentive stock option treatment other than the
holding period rules are satisfied, the recognition of income by the optionee is
deferred until disposition of the Common Stock, but, in general, any gain (in an
amount equal to the lesser of (i) the fair market value of the Common Stock on
the date of exercise (or, with respect to officers and directors, the date that
sale of such stock would not create liability ("Section 16(b) liability") under
Section 16(b) of the Exchange Act minus the option price or (ii) the amount
realized on the disposition minus the option price) is treated as ordinary
income. Any remaining gain is treated as long-term or short-term capital gain,
at the applicable rate, depending on the optionee's holding period for the stock
disposed of. The Company generally will be entitled to a deduction at that time
equal to the amount of ordinary income realized by the optionee.
The Stock Option Plan provides that an optionee may, if permitted by the
Committee, pay for Common Stock received upon the exercise of an option
(including an incentive stock option) with other shares of Common Stock. In
general, an optionee's transfer of stock acquired pursuant to the exercise of an
incentive stock option to acquire other stock in connection with the exercise of
an incentive stock option, may result in ordinary income if the transferred
stock has not met the minimum statutory holding period necessary for favorable
tax treatment as an incentive stock option. For example, if an optionee
exercises an incentive stock option and uses the stock so acquired to exercise
another incentive stock option with the two-year or one-year holding periods
discussed above, the optionee may realize ordinary income under the rules
summarized above.
Non-Qualified Stock Options. An optionee will realize no income at the
time he or she is granted a non-qualified stock option. Such conclusion is
predicated on the assumption that, under existing Treasury Department
regulations, a non-qualified stock option, at the time of its grant, has no
readily ascertainable fair market value. Ordinary income will be realized when a
non-qualified stock option is exercised. The amount of such income will be equal
to the excess of the fair market value on the exercise date of the shares of
Common Stock issued to an optionee over the option price. The optionee's holding
period with respect to the shares acquired will begin on the date of exercise.
10
<PAGE>
The tax basis of the stock acquired upon the exercise of any option will be
equal to the sum of (i) the exercise price of such option and (ii) the amount
included in income with respect to such option. Any gain or loss on a subsequent
sale of the stock will be either long-term or short-term capital gain or loss
and subject to taxation at the applicable rate, depending on the optionee's
holding period for the stock disposed of. The Company generally will be entitled
to a deduction for Federal income tax purposes at the same time and in the same
amount as the optionee is considered to have realized ordinary income in
connection with the exercise of the option.
Certain Other Tax Issues. In addition, (i) any entitlement to a tax
deduction on the part of the Company is subject to applicable Federal tax rules
(including, without limitation, Code Section 162(m) regarding the $1,000,000
limitation on deductible compensation), (ii) the exercise of an option may have
implications in the computation of alternative minimum taxable income, and (iii)
in the event that the exercisability or vesting of any option is accelerated
because of a change in control, such option (or a portion thereof), either alone
or together with certain other payments, may constitute parachute payments under
Section 280G of the Code, which excess amounts may be subject to excise taxes.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES
OF THE COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AND ENTITLED TO
VOTE AT THE ANNUAL MEETING IS REQUIRED TO APPROVE THE PROPOSED AMENDMENTS TO THE
STOCK OPTION PLAN.
11
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning annual and long-term
compensation of the Company's Chief Executive Officer and the other four most
highly paid executive officers (collectively, the "Named Executive Officers")
for the fiscal years ended December 28, 1996, December 27, 1997 and December 26,
1998.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------------- ----------------------------------
OTHER ANNUAL RESTRICTED STOCK LTIP OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($)(3) (#) ($) ($)(4)
- -------------------------- ---- ------- ------- ------------ ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley M. Bergman ....... 1998 544,050 313,000 19,300 -- -- -- 38,678
Chairman, Chief 1997 519,050 358,230 19,343 -- -- -- 37,057
Executive
Officer and President 1996 504,050 298,523 19,343 -- -- -- 37,023
James P. Breslawski ...... 1998 312,500 65,000 15,000 -- 17,500 -- 21,151
Executive Vice President 1997 296,400 87,500 14,400 -- 15,000 -- 21,156
1996 285,000 65,000 14,400 -- -- -- 20,970
Bruce J. Haber ........... 1998 416,000 200,000 7,000 -- 7,400 -- 27,137
Executive Vice 1997(1) 167,671 65,000 666 -- -- -- 214
President;
President of Medical 1996 -- -- -- -- -- -- --
Group
Larry M. Gibson .......... 1998 215,000 172,000 3,529 -- 10,500 -- --
President-- 1997(2) 170,322 75,000 2,553 -- -- -- --
Practice Management 1996 -- -- -- -- -- -- --
Technologies Group
Steven Paladino .......... 1998 250,000 92,500 15,000 -- 16,500 -- 17,977
Senior Vice President 1997 233,200 80,000 14,400 -- 14,000 -- 16,732
and Chief Financial
Officer 1996 220,000 62,500 14,400 -- -- -- 16,264
</TABLE>
- ------------------
(1) Represents compensation received by Mr. Haber after he became an executive
officer in August 1997 in connection with the Company's acquisition of MBM.
Does not include an aggregate of $3,000,000 (subject to increase if certain
excise taxes are imposed as a result of a change in control of the Company)
that is payable to Mr. Haber over a five-year period, subject to
acceleration (including upon a change in control) in respect of the
termination of his prior employment agreement with MBM, or the grant of
options to purchase 42,928 shares of Common Stock under the Stock Option
Plan and the grant of shares of restricted Common Stock with an aggregate
fair market value of $1,000,000 on the date of grant that were made to
Mr. Haber upon the commencement of his employment with the Company under the
terms of his employment agreement with the Company. The options vest over a
three-year period, and the restricted stock vests over a ten-year period, in
each case contingent upon Mr. Haber's continued employment with the Company,
subject to certain exceptions (including, in the case of the restricted
stock, to the Company's failure to renew Mr. Haber's employment agreement at
the end of the then applicable term). Vesting will automatically vest upon
the occurrence of certain events. Pursuant to the merger agreement with MBM,
all outstanding options to purchase shares of MBM common stock outstanding
on the merger date (including Mr. Haber's) were converted into options to
purchase shares of Common Stock.
(2) Represents compensation received by Mr. Gibson after he became an executive
officer in February 1997 in connection with the Company's acquisition of
Dentrix Dental Systems, Inc. ("Dentrix"). Does not include the grant of
options to purchase 42,300 shares of Common Stock under the Stock Option
Plan that was made to Mr. Gibson upon the commencement of his employment
under the terms of his employment agreement with the Company.
(3) At the end of fiscal 1998, Mr. Haber held 24,464 shares of restricted Common
Stock, with an aggregate value of $981,618.
(4) The 1996 amounts shown in this column represent (i) profit sharing
contributions of $6,000 made by the Company on each of the then employed
Named Executive Officers' behalf, (ii) ESOP contributions made by the
Company on each such executive's behalf of $4,500, and (iii) excess life
insurance premiums and SERP contributions of $1,740 and $24,783 for
Mr. Bergman, $1,020 and $9,450 for Mr. Breslawski and $514 and
12
<PAGE>
$5,250 for Mr. Paladino, respectively. The 1997 amounts shown in this column
represent (i) profit sharing contributions made by the Company on each
executive's behalf of $6,400, (ii) ESOP contributions of $4,800 made by the
Company on behalf of Mr. Bergman, Mr. Breslawski and Mr. Paladino, and
(iii) excess life insurance premiums and SERP contributions of $723 and
$25,134 for Mr. Bergman, $408 and $9,548 for Mr. Breslawski, and $408 and
$5,124 for Mr. Paladino, respectively, and excess life insurance premiums of
$214 for Mr. Haber. The 1998 amounts shown in this column represent
(i) profit sharing contributions made by the Company of $2,511 for
Mr. Bergman, $1,442 for Mr. Breslawski, $1,154 for Mr. Paladino, and $320
for Mr. Haber, respectively, (ii) matching contributions under The Company's
401(k) plan of $3,515 for Mr. Bergman, $1,730 for Mr. Breslawski, $1,615 for
Mr. Paladino and $2,688 for Mr. Haber, (iii) ESOP contributions of $4,227
for Mr. Bergman, $2,236 for Mr. Breslawski, $1,942 for Mr. Paladino and
$2,032 for Mr. Haber, and (iv) excess life insurance premiums and SERP
contributions of $696 and $27,729 for Mr. Bergman, $478 and $15,264 for
Mr. Breslawski, $816 and $21,280 for Mr. Haber and $478 and $12,788 for
Mr. Paladino, respectively.
OPTION GRANTS IN FISCAL 1998
The following table sets forth information with respect to the options
granted during fiscal 1998 to each of the Named Executive Officers and their
potential value at the end of the option terms assuming certain levels of
appreciation of the Common Stock.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT
ASSUMED ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE APPRECIATION
SECURITIES TOTAL OPTIONS EXERCISE FOR
UNDERLYING GRANTED TO OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ------------------------------------- ---------- ------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stanley M. Bergman................... -- -- -- -- -- --
James P. Breslawski.................. 17,500 1.2 39.875 3/17/08 438,850 1,112,133
Bruce J. Haber....................... 7,400 0.5 39.875 3/17/08 185,571 470,274
Larry M. Gibson...................... 10,500 0.7 39.875 3/17/08 263,310 667,250
Steven Paladino...................... 16,500 1.2 39.875 3/17/08 413,773 1,048,582
</TABLE>
- ------------------
(1) Each of these options was granted on March 17, 1998 and becomes exercisable
as to one-third of the shares subject to such options on each of the first,
second and third anniversaries of the date of grant, subject to acceleration
under certain circumstances.
(2) The dollar amounts under these columns are the result of calculations at the
hypothetical rates of 5% and 10% set by the Securities and Exchange
Commission and are not intended to forecast possible future appreciation, if
any, of the Company's Common Stock price.
AGGREGATED FISCAL 1998 YEAR-END OPTION VALUES
The following table summarizes the number of all shares subject to options
held by the Named Executive Officers at the end of fiscal 1998, and their value
at that date if they were in-the-money. No stock options were exercised in
fiscal 1998.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS AT 12/26/98(1)
UNDERLYING UNEXERCISED --------------------------------------------------
OPTIONS AT 12/26/98 EXERCISABLE UNEXERCISABLE
------------------------------------ ----------------------- -----------------------
NAME EXERCISABLE (#) UNEXERCISABLE (#) SHARES (#) TOTAL ($) SHARES (#) TOTAL ($)
- --------------------------------- --------------- ----------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stanley M. Bergman............... -- -- -- -- -- --
James P. Breslawski.............. 5,000 27,500 5,000 77,825 27,500 160,026
Bruce J. Haber................... 385,198 41,742 385,198 4,944,834 41,742 580,004
Larry M. Gibson.................. 14,100 38,700 14,100 185,063 38,700 372,752
Steven Paladino.................. 59,367 25,833 59,367 1,742,442 25,833 149,399
</TABLE>
- ------------------
(1) Represents the difference between the aggregate exercise prices of such
options and the aggregate fair market value of the shares issuable upon
exercise.
13
<PAGE>
EMPLOYMENT AND OTHER AGREEMENTS
The Company and Stanley M. Bergman entered into an employment agreement,
dated as of January 1, 1992 (the "Employment Agreement"), providing for his
continued employment as Chairman of the Board, President and Chief Executive
Officer until December 31, 1999. The Employment Agreement provides Mr. Bergman
with a base salary of $559,050 for 1999. In addition, the Employment Agreement
provides for incentive compensation to be determined by the Compensation
Committee of the Board of Directors (or, if there is no Compensation Committee,
the Board of Directors). The Compensation Committee awarded incentive
compensation of $313,000 to Mr. Bergman for 1998. Based on the range of
incentive compensation provided for in the employment agreement, it is
anticipated that incentive compensation will be in the range of $85,000 to
$485,000 in 1999. The Employment Agreement also provides that Mr. Bergman will
continue to participate in all benefit, welfare and perquisite plans, policies
and programs generally available to either the Company's employees or the
Company's senior executive officers. The Company provides Mr. Bergman with the
use of an automobile and expenses related thereto, and other miscellaneous
benefits. If Mr. Bergman's employment with the Company is terminated by the
Company without cause or is terminated by Mr. Bergman following a material
breach by the Company of the Employment Agreement which is not cured during the
requisite period for cure of such breach, Mr. Bergman will receive all amounts
then owed to him as salary and deferred compensation and any benefits accrued
and owed to him or his beneficiaries under the then applicable benefit plans,
programs and policies of the Company. In addition, Mr. Bergman will receive, as
severance pay, 100% of his then annual base salary and a payment equal to the
account balance or accrued benefit Mr. Bergman would have been credited with
under each pension plan maintained by the Company, in each case assuming the
Company would have continued contributions until the natural expiration of the
Employment Agreement, less Mr. Bergman's vested account balance or accrued
benefits under each pension plan. Unless the Employment Agreement is terminated
for cause or pursuant to Mr. Bergman's voluntary resignation, the Company will
continue the participation of Mr. Bergman and his family in the health and
medical plans, policies and programs in effect with respect to senior executive
officers of the Company and their families. Coverage for Mr. Bergman and his
spouse will continue from the end of Mr. Bergman's employment until their
respective deaths, and coverage for his children will continue until their
attainment of the age of twenty-one.
The Company entered into an employment agreement with Bruce J. Haber, dated
March 7, 1997, pursuant to which Mr. Haber became an Executive Vice President of
the Company and President of the Company's Medical Group upon the completion of
the Company's acquisition of MBM on August 1, 1999. Mr. Haber's employment
agreement, which will expire on July 31, 2002, provides for base salary of
$400,000, subject to annual increases, determined by the Board of Directors, of
not less than the percentage increase in the cost of living over the previous
year, and annual incentive compensation, subject to the achievement of
performance targets established by the Board of Directors, of at least $200,000.
For 1998, Mr. Haber's base salary was $416,000 and the Compensation Committee
awarded Mr. Haber a bonus of $200,000. The agreement also provides for annual
option grants under the Stock Option Plan with a value, calculated using the
Black-Scholes method, of $170,000 (subject to cost of living adjustments) on the
date of grant, subject to the achievement of the incentive compensation
performance targets set by the Compensation Committee for the relevant year. The
employment agreement also provides that Mr. Haber will continue to participate
in all benefit, welfare and perquisite plans, policies and programs generally
available to either the Company's employees or the Company's senior executive
officers. The Company provides Mr. Haber with an automobile allowance and other
miscellaneous benefits. If Mr. Haber's employment with the Company is terminated
by the Company without cause or is terminated by Mr. Haber following a material
breach by the Company of the Employment Agreement that is not cured during the
requisite period for cure of such breach, Mr. Haber will receive all amounts
then owed to him as salary and deferred compensation and any benefits accrued
and owed to him or his beneficiaries under the then applicable benefit plans,
programs and policies of the Company and a pro rated bonus for the year in which
the termination of his employment occurs. In addition, Mr. Haber will receive,
as severance pay, his base salary for the remaining term of the Employment
Agreement (but in no event for less than 18 months). The Company also will
continue the participation of Mr. Haber and his family in the health and medical
plans, policies and programs in effect with respect to senior executive officers
of the Company and their families, subject to certain conditions. If
Mr. Haber's Employment Agreement is not extended by the Company at the end of
its five-year term, Mr. Haber will be entitled to receive his base salary for an
additional one-year period.
14
<PAGE>
The Company entered into an employment agreement with Larry Gibson, dated
February 27, 1997, pursuant to which Mr. Gibson became the President of the
Company's Practice Management Technologies Group in connection with the
Company's acquisition of Dentrix. Mr. Gibson's employment agreement, which will
expire on February 27, 2000, provides for base salary of $190,000, subject to
annual increases, determined by the Board of Directors, of not less than the
percentage increase in the cost of living over the previous year, and annual
incentive compensation, subject to the achievement of performance targets
established by the Board of Directors. For 1998, Mr. Gibson's base salary was
$215,000 and the Compensation Committee awarded Mr. Gibson a bonus of $172,000.
The employment agreement also provides that Mr. Gibson will continue to
participate in all benefit, welfare and perquisite plans, policies and programs
generally available to either Dentrix's employees or the Company's senior
executive officers. The Company provides Mr. Gibson with an automobile allowance
and other miscellaneous benefits.
The Company has entered into agreements with the Named Executive Officers
other than Mr. Haber which provide, among other things, that if the executive's
employment is terminated by the Company without cause or by the executive for
good reason, respectively, and a change in control of the Company had not
occurred during the two year period immediately preceding such termination, the
Company will (i) pay to the executive severance pay equal to one month's base
salary and automobile allowance for each month the executive had been employed
by the Company, with a minimum of six months and a maximum of twelve months,
subject to offset for remuneration from subsequent employment, and (ii)
continued participation in all benefit, welfare and perquisite plans, policies
and programs accorded senior executive officers of the Company generally for a
period of one year. If the executive is terminated within two years following a
change in control of the Company that was not approved by a supermajority of the
Board of Directors, the executive's severance pay will equal three times the
severance pay the executive would have received had no change of control
occurred, plus three times the amount of executive's bonus for the year
preceding the year of termination, without offset for remuneration from
subsequent employment, but capped at an amount that, when added to all other
payments received by such executive that were contingent upon such change in
control, does not cause such payment to be treated as a "parachute payment"
under the Code.
The Company has entered into an agreement with Mr. Haber which provides
that, if his employment is terminated by the Company or by him without cause or
for good reason, respectively, within two years after a change in control of the
Company that was not approved by a supermajority of the Board of Directors, the
Company will pay to Mr. Haber severance pay equal to (i) three months' base
salary and automobile allowance for each month he has been employed by the
Company or MBM, with a minimum of eighteen months and a maximum of thirty-six
months, and (ii) three times the amount of the bonus, if any, received by
Mr. Haber for the last full fiscal year, without offset for remuneration for
subsequent employment but capped at an amount that, when added to all other
payments received by Mr. Haber that were contingent upon such change in control,
does not cause such payment to be treated as a "parachute payment" under the
Code.
In September 1994, the Company, Schein Pharmaceutical, Inc. and Marvin
Schein, a director and principal stockholder of the Company, agreed to terminate
a lifetime consulting agreement entered into in 1982 between the Company's
predecessor and Mr. Schein, and the Company and Mr. Schein agreed to continue
the consulting arrangement on the terms set forth in a new lifetime consulting
agreement (the "Consulting Agreement"). The current Consulting Agreement
modified certain of the terms of the 1982 agreement, including the elimination
of a provision limiting Mr. Schein's compensation to $100,000 per annum if the
Company's pre-tax income were less than $3.5 million for two consecutive years.
The 1982 agreement provided, and the current Consulting Agreement provides, for
Mr. Schein's consulting services to the Company with respect to the marketing of
dental supplies and equipment, from time to time. The Consulting Agreement
currently provides for initial compensation of $283,200 per year, increasing
$25,000 every fifth year beginning in 2003. The Consulting Agreement also
provides that Mr. Schein will participate in all benefit, compensation, welfare
and perquisite plans, policies and programs generally available to either the
Company's employees or the Company's senior executive officers, excluding the
Stock Option Plan, that Mr. Schein's spouse, and his children until they attain
the age of 21, will be covered by the Company's health plan, and that the
Company will provide Mr. Schein with the use of an automobile and expenses
related thereto. The Consulting Agreement was originally entered into as part of
a recapitalization of the Company's predecessor in 1982 among Mr. Schein and its
other stockholders, and to secure for the Company the consulting services of
Mr. Schein, who had served the Company in various executive capacities for more
than twenty years.
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee, the members of which also serve as the Stock
Option Committee, has responsibility for the philosophy, competitive strategy,
design, and administration of the Company's compensation program for its
executive officers (including the Named Executive Officers). The Compensation
Committee seeks to ensure that the executive officer compensation program is
competitive in level and structure with the programs of comparably-sized
businesses and that it is supportive of the Company's financial and operating
objectives and aligned with the financial interests of the Company's
stockholders. The Company and the Compensation Committee have retained the
services of an independent executive compensation consulting firm for advice
regarding the competitive structure and administration of the officer
compensation program.
Philosophy and Program Components
The Company's executive officer compensation program is structured to
enable the Company to attract and retain the caliber of officers needed to
ensure the Company's continued growth and profitability and to competitively
compensate them based on their and the Company's performance and on the
longer-term value they create for the Company's stockholders. The components of
the officer compensation program consist of base salary, annual bonuses paid
under the Company's annual Performance Incentive Plan, and periodic grants of
stock options.
The Company measures the competitiveness of its compensation program
relative to the practices of other companies with annual revenues comparable to
those of the Company. The Committee has adopted a philosophy which would seek to
set salaries so as to be competitive within the 50th to 75th percentiles of
practices at companies with annual revenues comparable to those of the Company.
The philosophy also aims to structure annual Performance Incentive Plan award
opportunities so that an officer's salary plus annual bonus will fall within the
50th to 75th percentiles of competitive practices, assuming the Company's
achievement of annual financial performance targets established by the Committee
at the start of the year, and the achievements of the individual officer,
evaluated against pre-established goals and objectives. Stock option grants
would similarly be administered with reference to the 50th and 75th percentiles
of option granting practices for companies of comparable revenue size.
Base Salary
The Company annually reviews officer salaries and makes adjustments as
warranted based on competitive practices and the individual's performance.
Salary increases are generally approved during the first quarter of the calendar
year retroactive to January 1 of the year. Mr. Haber and Mr. Gibson each has an
employment agreement with the Company which provides for an initial base salary
and certain annual cost of living increases, as well as such discretionary
increases, if any, as may be approved. The 1998 annual salaries of the Named
Executive Officers, excluding Mr. Bergman, the Company's Chief Executive
Officer, were increased by an average of 5.4% over annualized 1997 levels. The
Committee was advised by its consultant that such officers' average 1998
salaries approximated the 75th percentile of competitive practices.
Mr. Bergman's 1998 salary was increased pursuant to the terms of his employment
agreement and approximated the 25th percentile of competitive practice.
Annual Incentive Compensation
Annual incentive compensation for each of the Named Executive Officers
other than Mr. Bergman for each year is paid under the Company's Performance
Incentive Plan for such year ("PIP"), each of which is designed to reward the
achievement of pre-established corporate, business unit and individual
performance goals so as to compensate the Company's senior officers for both
their individual performance and team financial results. At the beginning of
each year, the Chief Executive Officer determines which officers will
participate in the PIP for that year and such officers are notified of their
participation. The Chief Executive Officer determines that year's PIP
performance goals for those officers who report directly to him and determines
goals for other participants in consultation with their supervisors. The
performance goals are reviewed at mid-year to ensure their continued relevance.
During the first quarter of the subsequent year, the Chief Executive
Officer reviews the relevant financial, operating and personal performance
achievements of the Company, its business units, and the participating officers
against the PIP performance goals that had been established, and submits
proposed PIP awards for the
16
<PAGE>
participating officers to the Compensation Committee, which must approve such
awards. PIP awards for 1998 performance for the Named Executive Officers other
than Mr. Bergman were based on (1) the Company's 1998 earnings per share
measured against pre-established standards, (2) achievement of financial goals
in their respective areas of responsibility, and (3) achievement of individual
objectives. Mr. Haber's and Mr. Gibson's employment agreements each provides for
a minimum incentive compensation award, subject to satisfaction of his PIP
performance goals.
PIP payments for 1998 for the Named Executive Officers other than
Mr. Bergman ranged from 21% to 80% of salary and averaged 47%. The Committee's
compensation consultant has advised that the average 1998 salary plus 1998 bonus
for these four executive officers approximated the 60th percentile of annual
cash compensation at businesses of comparable size.
Stock Options
The Company and the Compensation Committee believe that stock options
directly align the long-term financial interests of the Company's officers and
stockholders and intend to make grants on an annual basis. The Committee's
compensation consultant provides it with competitive 50th and 75th percentile
option granting guidelines, reflecting option granting practices of companies of
comparable size, which are used in determining the size of the Company's stock
option grants. In March 1999, the Committee granted options to purchase an
aggregate of approximately 591,000 shares, including the following options
granted to the Named Executive Officers, for 1998 at an exercise price of $21.50
per share: Mr. Breslawski, 13,000 shares, Mr. Gibson, 11,000 shares,
Mr. Paladino, 22,500 shares, and, pursuant to the terms of his employment
agreement, Mr. Haber, 9,400 shares. The option grants shown above under the
caption "Option Grants in Fiscal 1998" represent options granted in March 1998
and were discussed in last year's Compensation Committee report.
The Chief Executive Officer
Mr. Bergman's 1998 salary of $544,050 was set in accordance with the terms
of his employment contract and was 4.8% higher than his 1997 salary. The
contract also provides that Mr. Bergman's bonus be within a specified range
based on the Company's performance as determined by the Committee. The Committee
awarded Mr. Bergman an annual bonus of $313,000 with respect to 1998
performance. In making its bonus determination, the Committee evaluated the
Company's 1998 earnings per share measured in relation to pre-established
performance standards and the average bonuses earned by the Corporation's
executive officers (including the Named Executive Officers) in relation to their
target bonus opportunities.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code prohibits the Company from
deducting annual compensation in excess of $1 million paid to any of the Named
Executive Officers, unless such compensation is performance-based and paid
pursuant to criteria approved by the stockholders. Since the 1998 compensation
paid to each of the Named Executive Officers does not exceed $1 million, all of
these payments will be tax deductible by the Company. The Committee will
continue to consider 162(m) in making its compensation decisions so as to ensure
the deductibility of future compensation paid to Named Executive Officers.
THE COMPENSATION COMMITTEE
Barry J. Alperin
Donald J. Kabat
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers and directors are required under the
Exchange Act to file reports of ownership of Common Stock of the Company with
the Securities and Exchange Commission. Copies of those reports must also be
furnished to the Company. Based solely on a review of the copies of reports
furnished to the Company and written representations that no other reports were
required, the Company believes that during fiscal 1998 the executive officers
and directors of the Company timely complied with all applicable filing
requirements, except that Bruce J. Haber inadvertently filed one Statement of
Changes in Beneficial Ownership reporting his exercise of certain stock options
after the date by which such report was due.
17
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on $100
invested on November 3, 1995, the date of the initial public offering of the
Common Stock, through the end of the Company's 1998 fiscal year with the
cumulative total return on $100 invested for the same period in the Nasdaq Stock
Market (U.S. Companies) Composite Index and a group of eleven distribution
companies selected by the Company as appropriate for this purpose after
discussions with a number of investment analysts who follow the Common Stock and
are familiar with the Company's business (the "Peer Group Index"). The companies
in the Peer Group Index are Allegiance Corporation, Global DirectMail Corp.,
Graham Field Health Products, Owens & Minor, Inc., Patterson Dental Company, PSS
World Medical Inc., U.S. Office Products Co., Vallen Corporation, and VWR
Scientific Products Corp. Two companies that were previously included in the
Peer Group Index, Gulf South Medical Supply, Inc. and Viking Office Products,
Inc., are no longer publicly traded companies and, consequently, are no longer
included in the Peer Group Index.
[GRAPHIC]
<TABLE>
<CAPTION>
November 3, 1995 December 30, 1995 December 28, 1996 December 27, 1997 December 26, 1998
<S> <C> <C> <C> <C> <C>
Henry Schein, Inc. 100.00 129.67 151.65 147.80 176.37
Peer Group Index 100.00 111.05 119.60 124.49 209.01
NASDAQ Market Index 100.00 101.13 125.67 153.73 216.50
</TABLE>
18
<PAGE>
PROPOSAL 3
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
selected BDO Seidman, LLP as independent auditors for the Company for the year
ending December 25, 1999, subject to ratification of such selection by the
stockholders at the Annual Meeting. If the stockholders do not ratify the
selection of BDO Seidman, LLP, another firm of independent public accountants
will be selected by the Board of Directors. Representatives of BDO Seidman, LLP
will be present at the Annual Meeting, will have an opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions from stockholders in attendance.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES
OF THE COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AND ENTITLED TO
VOTE AT THE ANNUAL MEETING IS REQUIRED TO RATIFY THE SELECTION OF BDO SEIDMAN,
LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR THE YEAR ENDING DECEMBER 25,
1999.
VOTING OF PROXIES AND OTHER MATTERS
The Board of Directors recommends that an affirmative vote be cast in favor
of each of the proposals listed on the proxy card.
The Board of Directors knows of no other matter that may be brought before
the meeting that requires submission to a vote of the stockholders. If any other
matters are properly brought before the meeting, however, the persons named in
the enclosed proxy or their substitutes will vote in accordance with their best
judgment on such matters.
A complete list of stockholders entitled to vote at the Annual Meeting will
be available for inspection beginning May 16, 1999 at the Company's headquarters
located at 135 Duryea Road, Melville, New York 11747.
STOCKHOLDER PROPOSALS
Eligible stockholders wishing to have a proposal for action by the
stockholders at the 2000 Annual Meeting included in the Company's proxy
statement must submit such proposal at the principal offices of the Company not
later than December 4, 1999. It is suggested that any such proposals be
submitted by certified mail, return receipt requested. Under the Company's
Amended and Restated Certificate of Incorporation, as amended, a stockholder
proposal not included in the Company's proxy statement may not be brought before
the 2000 Annual Meeting unless notice and a full description of such proposal
(including all information that would be required in connection with such
proposal under the SEC's proxy rules if such proposal were the subject of a
proxy solicitation and the written consent of each nominee for election to the
Board of Directors named therein (if any) to serve if elected) and the name,
address and number of shares of Common Stock held of record or beneficially by
the person proposing to bring such proposal before the 2000 Annual Meeting as of
the record date for such meeting is delivered in person or mailed to the Company
and received by it not later than April 12, 2000; provided, however, that such
notice need not be received more than 75 days prior to the date of the 2000
Annual Meeting. Under the SEC's proxy rules, proxies solicited by the Board of
Directors for the 2000 Annual Meeting may be voted at the discretion of the
persons named in such proxies (or their substitutes) with respect to any
shareholder proposal not included in the Company's proxy statement if the
Company does not receive notice of such proposal on or before February 28, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
STANLEY M. BERGMAN
Chairman, Chief Executive Officer
and President
Melville, New York
April 22, 1999
19
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APPENDIX
--------
(For the Information of the Commission and Not Part of
Henry Schein, Inc.'s Definitive Proxy Statement)
<PAGE>
Note: This document shows the text of the Henry Schein, Inc. 1994
Stock Option Plan, including all previously adopted
amendments, marked to show the changes that would be effected
if the proposed amendments to be submitted to stockholders at
Henry Schein, Inc.'s Annual Meeting to be held on May 26, 1999
are approved. Additions are shown in bold, single underscored
text, deletions are shown by strikethrough.
HENRY SCHEIN, INC.
1994 STOCK OPTION PLAN
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C>
1. Purposes of the Plan..................................................................................... 1
2. Definitions.............................................................................................. 1
3. Effective Date/Expiration of Plan........................................................................ 5
4. Administration........................................................................................... 5
(a) Duties of the Committee..................................................................... 5
(b) Advisors.................................................................................... 6
(c) Indemnification............................................................................. 6
(d) Meetings of the Committee................................................................... 6
5. Shares; Adjustment Upon Certain Events................................................................... 7
(a) Shares to be Delivered; Fractional Shares................................................... 7
(b) Number of Shares............................................................................ 7
(c) Individual Participant Limitations.......................................................... 7
(d) Adjustments; Recapitalization, etc.......................................................... 7
6. Awards and Terms of Options.............................................................................. 9
(a) Grant....................................................................................... 9
(b) Exercise Price.............................................................................. 9
(c) Number of Shares............................................................................ 9
(d) Exercisability.............................................................................. 9
(e) Special Rule for Incentive Options.......................................................... 10
(f) Acceleration of Exercisability on Change of Control......................................... 10
(g) Exercise of Options......................................................................... 12
7. Effect of Termination of Employment or Termination of Consultancy........................................ 12
(a) Death, Disability, Retirement, etc.......................................................... 12
(b) Cause or Voluntary Termination.............................................................. 13
(c) Other Termination........................................................................... 13
8. Nontransferability of Options............................................................................ 14
9. Rights as a Stockholder.................................................................................. 14
10. Determinations........................................................................................... 14
11. Termination, Amendment and Modification.................................................................. 14
12. Non-Exclusivity.......................................................................................... 15
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
13. Use of Proceeds.......................................................................................... 15
14. General Provisions....................................................................................... 16
(a) Right to Terminate Employment or Consultancy................................................ 16
(b) Purchase for Investment..................................................................... 16
(c) Trusts, etc................................................................................. 16
(d) Notices..................................................................................... 16
(e) Severability of Provisions.................................................................. 16
(f) Payment to Minors, Etc...................................................................... 17
(g) Headings and Captions....................................................................... 17
(h) Controlling Law............................................................................. 17
15. Issuance of Stock Certificates;
Legends and Payment of Expenses.......................................................................... 17
(a) Stock Certificates.......................................................................... 17
(b) Legends..................................................................................... 17
(c) Payment of Expenses......................................................................... 17
16. Listing of Shares and Related Matters.................................................................... 17
17. Withholding Taxes........................................................................................ 18
18. Section 16(b) of the Act................................................................................. 18
</TABLE>
<PAGE>
HENRY SCHEIN, INC.
1994 STOCK OPTION PLAN
1. Purposes of the Plan
The purposes of this Henry Schein, Inc. 1994 Stock Option Plan, as
amended and restated effective March 1, 1999, are to enable Henry Schein, Inc.
and its Subsidiaries (as defined herein) to attract, retain and motivate the key
executives and consultants who are important to the success and growth of the
business of HSI and to create a long-term mutuality of interest between the Key
Employees and Consultants (each as defined herein) and the stockholders of HSI
by granting the Key Employees and Consultants options (which, in the case of Key
Employees, may be either incentive stock options (as defined herein) or non-
qualified stock options and, in the case of Consultants, shall be non-qualified
options) to purchase HSI Common Stock (as defined herein).
2. Definitions
(a) "Acquisition Event" means a merger or consolidation in which HSI is
not the surviving entity, or any transaction that results in the acquisition of
all or substantially all of HSI's outstanding Common Stock by a single person or
entity or by a group of persons and/or entities acting in concert, or the sale
or transfer of all or substantially all of HSI's assets.
(b) "Act" means the Securities Exchange Act of 1934.
(c) "Board" means the Board of Directors of HSI.
(d) "Cause" has the meaning set forth in Section 7(b).
(e) "Change of Control" has the meaning set forth in Section 6(f).
(f) "Class A Option" means an Option evidenced by a Class A Option
Agreement.
(g) "Class A Option Agreement" has the meaning set forth in Section
6(a).
(h) "Class B Option" means an Option evidenced by a Class B Option
Agreement.
(i) "Class B Option Agreement" has the meaning set forth in Section
6(a).
(j) "Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
(k) "Committee" means such committee, if any, appointed by the Board to
administer the Plan, consisting of two or more directors as may be appointed
from time to time by the Board, each of whom shall qualify as a "non-employee
director" within the meaning of Rule 16b -3 promulgated under the Act and as an
"outside director" as defined under Section 162(m) of the Code. If the Board
does not appoint a committee for this purpose, "Committee" means the Board.
(l) "Common Stock" means the voting common stock of HSI, par value
$.01, any Common Stock into which the Common Stock may be converted and any
Common Stock resulting from any reclassification of the Common Stock.
(m) "Company" means HSI and its Subsidiaries, any of whose employees or
consultants are Participants in the Plan.
(n) "Consultant" means any individual (or any wholly-owned corporate
alter ego of any individual) who provides key bona fide consulting or advisory
services to the Company, as determined by the Committee, which services are not
in connection with the offer and sale of securities in a capital-raising
transaction.
(o) "Corporate Transaction" has the meaning set forth in Section
6(f)(i).
(p) "Disability" means a permanent and total disability, as determined
by the Committee in its sole discretion, provided that in no event shall any
disability that is not a permanent and total disability within the meaning of
Section 22(e)(3) of the Code be treated as a Disability. A Disability shall be
deemed to occur at the time of the determination by the Committee of the
Disability.
(q) "Effective Date" has the meaning set forth in Section 3.
(r) "Fair Market Value" means the value of a Share (as defined herein)
on a particular date, determined as follows:
(i) If the Common Stock is listed or admitted to trading on
such date on a national securities exchange or quoted through the National
Association of Securities Dealers' Automated Quotation ("NASDAQ") National
Market System, the closing sales price of a Share as reported on the
relevant composite transaction tape, if applicable, or on the principal
such exchange (determined by trading value in the Common Stock) or through
the National Market System, as the case may be, on such date, or in the
absence of reported sales on such day, the mean between the reported bid
and asked prices reported on such composite transaction tape or exchange or
through the National Market System, as the case may be, on such date; or
(ii) If the Common Stock is not listed or quoted as described
in the preceding clause, but bid and asked prices are quoted through
NASDAQ, the mean between the bid and asked prices as quoted by the National
Association of Securities Dealers through NASDAQ on such date; or
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<PAGE>
(iii) If the Common Stock is not listed or quoted on a
national securities exchange or through NASDAQ or, if pursuant to (i) and
(ii) above the Fair Market Value is to be determined based upon the mean of
the bid and asked prices and the Committee determines that such mean does
not properly reflect the Fair Market Value, by such other method as the
Committee determines to be reasonable and consistent with applicable law;
or
(iv) If the Common Stock is not publicly traded, such amount
as is set by the Committee in good faith.
(s) "HSI" means Henry Schein, Inc.
(t) "HSI Agreement" means the Amended and Restated HSI Agreement dated
as of February 16, 1994 among HSI and certain other parties.
(u) "HSI Closing" means the closing of the HSI Public Offering.
(v) "HSI Public Offering" means an initial public offering of shares of
HSI Common Stock at a Market Capitalization which is not less than the Minimum
Market Capitalization then in effect and as a result of which at least 20% of
the common equity of HSI will be publicly held by at least 300 holders and such
shares of HSI Common Stock will be listed or admitted to trading on the New York
Stock Exchange or the American Stock Exchange or quoted on The NASDAQ National
Market or is on such terms and conditions as are approved by Marvin Schein prior
to the effective date thereof.
(w) "Incentive Stock Option" means any Option which is intended to
qualify as an "incentive stock option" as defined in Section 422 of the Code.
(x) "Incumbent Board" has the meaning set forth in Section 6(f)(ii).
(y) "Key Employee" means any person who is an executive officer or
other valuable staff, managerial, professional or technical employee of the
Company, as determined by the Committee, including those individuals described
in Section 5(d)(iv). A Key Employee may, but need not, be an officer or director
(with the exception of a non -employee director) of the Company.
(z) "Market Capitalization" means (i) the per share initial pubic
offering price, multiplied by (ii) the number of shares outstanding immediately
prior to the HSI Closing less the aggregate number of shares issued pursuant to
the 1994 Stock Purchase Agreement between HSI and the HSI Employee Stock
Ownership Plan (the "HSI ESOP") or held by the HSI ESOP which are outstanding on
such date.
(aa) "Minimum Market Capitalization" means $48,000,000 on August 15,
1992, which amount shall increase on each day thereafter as follows:
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<PAGE>
From August 15, 1992 until the 1st anniversary thereof: $15,123 per day;
From the 1st anniversary thereof until the 2nd anniversary thereof: $16,862
per day;
From the 2nd anniversary thereof until the 3rd anniversary thereof: $18,802
per day;
From the 3rd anniversary thereof until the 4th anniversary thereof: $20,964
per day;
From the 4th anniversary thereof until the 5th anniversary thereof: $23,375
per day;
From the 5th anniversary thereof until the 6th anniversary thereof: $26,063
per day;
From the 6th anniversary thereof until the 7th anniversary thereof: $29,060
per day; and
Thereafter: $32,402 per day.
(bb) "Option" means the right to purchase one Share at a prescribed
purchase price on the terms specified in the Plan. An Option may be an Incentive
Stock Option or a non -qualified option.
(cc) "Option Agreement" means a Class A Option Agreement or Class B
Option Agreement.
(dd) "Outstanding HSI Voting Securities" has the meaning set forth in
section 6(f)(i).
(ee) "Person" means an individual, entity or group within the meaning
of Section 13d-3 or 14d-1 of the Act.
(ff) "Plan" means the Henry Schein, Inc. 1994 Stock Option Plan.
(gg) "Participant" means a Key Employee or Consultant of the Company
who is granted Options under the Plan.
(hh) "Purchase Price" means purchase price per Share.
(ii) "Securities Act" means the Securities Act of 1933, as amended.
(jj) "Share" means a share of Common Stock.
(kk) "Subsidiary" means any "subsidiary corporation" within the meaning
of Section 424(f) of the Code. An entity shall be deemed a Subsidiary of HSI
only for such periods as the requisite ownership relationship is maintained.
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<PAGE>
(ll) "Substantial Stockholder" means any Participant who at the time of
grant owns directly or is deemed to own by reason of the attribution rules set
forth in Section 424(d) of the Code, Shares possessing more than 10% of the
total combined voting power of all classes of stock of HSI.
(mm) "Termination of Employment" means termination of the relationship
with HSI and its Subsidiaries so that an individual is no longer an employee or
director of HSI or any of its Subsidiaries. In the event an entity shall cease
to be a Subsidiary of HSI, any individual who is not otherwise an employee of
HSI or another Subsidiary of HSI shall incur a Termination of Employment at the
time the entity ceases to be a Subsidiary. A Termination of Employment shall not
include a leave of absence approved for purposes of the Plan by the Committee.
(nn) "Termination of Consultancy" means termination of the relationship
with HSI and its Subsidiaries so that an individual is no longer a Consultant of
HSI or any of its Subsidiaries. In the event an entity shall cease to be a
Subsidiary of HSI, any individual who is not otherwise a Consultant of HSI or
another Subsidiary of HSI shall incur a Termination of Consultancy at the time
the entity ceases to be a Subsidiary; provided, that if a Consultant becomes a
Key Employee upon his Termination of Consultancy, the Committee, in its sole
discretion, may determine that no Termination of Consultancy shall be deemed to
occur until such later time as such Consultant ceases to be either a Key
Employee or a Consultant. A Termination of Consultancy shall not include a leave
of absence approved for purposes of the Plan by the Committee.
3. Effective Date/Expiration of Plan
The Plan became effective as of September 30, 1994 (the "Effective
Date"), and is amended and restated in the form set forth herein effective as of
July 1, 1995. Grants of Options under the Plan may be made on and after the
Effective Date. No Option shall be granted under the Plan on or after the tenth
anniversary of the Effective Date, but Options previously granted may extend
beyond that date.
4. Administration
(a) Duties of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full authority to interpret the Plan and to
decide any questions and settle all controversies and disputes that may arise in
connection with the Plan; to establish, amend, and rescind rules for carrying
out the Plan; to administer the Plan, subject to its provisions; to select
Participants in, and grant Options under, the Plan; to determine the terms,
exercise price and form of exercise payment for each Option granted under the
Plan; to determine which Options granted under the Plan to Key Employees shall
be Incentive Stock Options; to prescribe the form or forms of instruments
evidencing Options and any other instruments required under the Plan (which need
not be uniform) and to change such forms from time to time; and to make all
other determinations
-5-
<PAGE>
and to take all such steps in connection with the Plan and the Options as the
Committee, in its sole discretion, deems necessary or desirable; provided, that
all such determinations shall be in accordance with the express provisions, if
any, contained in the HSI Agreement or the Plan. The Committee shall not be
bound to any standards of uniformity or similarity of action, interpretation or
conduct in the discharge of its duties hereunder, regardless of the apparent
similarity of the matters coming before it. The determination, action or
conclusion of the Committee in connection with the foregoing shall be final,
binding and conclusive.
(b) Advisors. The Committee may designate the Secretary of HSI, other
employees of the Company or competent professional advisors to assist the
Committee in the administration of the Plan, and may grant authority to such
persons to execute Option Agreements (as defined herein) or other documents on
behalf of the Committee; provided, that no Consultant may exercise any option
agreement granting options to such Consultant. The Committee may employ such
legal counsel, consultants and agents as it may deem desirable for the
administration of the Plan, and may rely upon any opinion received from any such
counsel or consultant and any computation received from any such consultant or
agent. Expenses incurred by the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company.
(c) Indemnification. No officer, member or former member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it. To the maximum extent
permitted by applicable law or the Certificate of Incorporation or By-Laws of
HSI and to the extent not covered by insurance, each officer, member or former
member of the Committee or of the Board shall be indemnified and held harmless
by HSI against any cost or expense (including reasonable fees of counsel
reasonably acceptable to HSI) or liability (including any sum paid in settlement
of a claim with the approval of HSI), and advanced amounts necessary to pay the
foregoing at the earliest time and to the fullest extent permitted, arising out
of any act or omission to act in connection with the Plan, except to the extent
arising out of such officer's, member's or former member's own fraud or bad
faith. Such indemnification shall be in addition to any rights of
indemnification the officers, members or former members may have as directors
under applicable law or under the Certificate of Incorporation or By-Laws of
HSI or any Subsidiary of HSI.
(d) Meetings of the Committee. The Committee shall select one of its
members as a Chairman and shall adopt such rules and regulations as it shall
deem appropriate concerning the holding of its meetings and the transaction of
its business. Any member of the Committee may be removed at any time either with
or without cause by resolution adopted by the Board, and any vacancy on the
Committee may at any time be filled by resolution adopted by the Board. All
determinations by the Committee shall be made by the affirmative vote of a
majority of its members. Any such determination may be made at a meeting duly
called and held at which a majority of the members of the Committee were in
attendance in person or through telephonic communication. Any determination set
forth in writing and signed by all of the members of the Committee shall be as
fully effective as if it had been made by a majority vote of the members at a
meeting duly called and held.
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<PAGE>
5. Shares; Adjustment Upon Certain Events
(a) Shares to be Delivered; Fractional Shares. Shares to be issued
under the Plan shall be made available at the discretion of the Board, either
from authorized but unissued Shares or from issued Shares reacquired by HSI and
held in treasury. No fractional Shares will be issued or transferred upon the
exercise of any Option. In lieu thereof, HSI shall pay a cash adjustment equal
to the same fraction of the Fair Market Value of one Share on the date of
exercise.
(b) Number of Shares. Subject to adjustment as provided in this Section
5, the maximum aggregate number of Shares that may be issued under the Plan
shall be 5,179,635 shares of Common Stock of which a maximum of 237,897 of such
Shares shall be covered by Class A Options and the balance of such Shares shall
be covered by Class B Options. If Options are for any reason canceled, or expire
or terminate unexercised, the Shares covered by such Options shall again be
available for the grant of Options, subject to the foregoing limit, provided
that the number of shares covered by Class A Options shall be reduced by that
number of Class A Options that are cancelled, expire or are terminated.
(c) Individual Participant Limitations. The maximum number of Shares
subject to any Option which may be granted under this Plan to each Participant
on or after the HSI Public Offering shall not exceed 100,000 Shares (subject to
any adjustment pursuant to Section 5(d)) during each fiscal year of HSI during
the entire term of the Plan. To the extent that Shares for which Options are
permitted to be granted to a Participant pursuant to Section 5(c) during a
fiscal year are not covered by a grant of an Option to a Participant issued in
such fiscal year, such Shares shall automatically increase the number of Shares
available for grant of Options to such Participant in the subsequent fiscal year
during the term of the Plan.
(d) Adjustments; Recapitalization, etc. The existence of the Plan and
the Options granted hereunder shall not affect in any way the right or power of
the Board or the stockholders of HSI to make or authorize any adjustment,
recapitalization, reorganization or other change in HSI's capital structure or
its business, any merger or consolidation of HSI, any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting Common
Stock, the dissolution or liquidation of HSI or any of its Subsidiaries, or any
sale or transfer of all or part of its assets or business or any other corporate
act or proceeding. If and whenever HSI takes any such action, however, the
following provisions, to the extent applicable, shall govern:
(i) If and whenever HSI shall effect a stock split, stock
dividend, subdivision, recapitalization or combination of Shares or other
changes in HSI's Common Stock, (x) the Purchase Price (as defined herein)
per Share and the number and class of Shares and/or other securities with
respect to which outstanding Options thereafter may be exercised, and (y)
the total number and class of Shares and/or other securities that may be
issued under this Plan, shall be proportionately adjusted by the Committee.
The Committee may also make such other adjustments as it deems necessary to
take into consideration any other event (including, without limitation,
accounting changes) if the Committee determines that such adjustment is
appropriate to avoid distortion in the operation of the Plan.
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(ii) Subject to Section 5(d)(iii), if HSI merges or
consolidates with one or more corporations, then from and after the
effective date of such merger or consolidation, upon exercise of Options
theretofore granted, the Participant shall be entitled to purchase under
such Options, in lieu of the number of Shares as to which such Options
shall then be exercisable but on the same terms and conditions of exercise
set forth in such Options, the number and class of Shares and/or other
securities or property (including cash) to which the Participant would have
been entitled pursuant to the terms of the agreement of merger or
consolidation if, immediately prior to such merger or consolidation, the
Participant had been the holder of record of the total number of Shares
receivable upon exercise of such Options (whether or not then exercisable).
(iii) In the event of an Acquisition Event, the Committee may,
in its discretion, and without any liability to any Participant, terminate
all outstanding Options as of the consummation of the Acquisition Event by
delivering notice of termination to each Participant at least 20 days prior
to the date of consummation of the Acquisition Event; provided that, during
the period from the date on which such notice of termination is delivered
to the consummation of the Acquisition Event, each Participant shall have
the right to exercise in full all of the Options that are then outstanding
(without regard to limitations on exercise otherwise contained in the
Options). If an Acquisition Event occurs and the Committee does not
terminate the outstanding Options pursuant to the preceding sentence, then
the provisions of Section 5(d)(ii) shall apply.
(iv) Subject to Sections 5(b) and (c), the Committee may grant
Options under the Plan in substitution for options held by employees or
consultants of another corporation who concurrently become employees or
consultants of the Company as the result of a merger or consolidation of
the employing or engaging corporation with the Company, or as the result of
the acquisition by the Company of property or stock of the employing or
engaging corporation. The Company may direct that substitute awards be
granted on such terms and conditions as the Committee considers appropriate
in the circumstances.
(v) If, as a result of any adjustment made pursuant to the
preceding paragraphs of this Section 5, any Participant shall become
entitled upon exercise of an Option to receive any securities other than
Common Stock, then the number and class of securities so receivable
thereafter shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect
to the Common Stock set forth in this Section 5, as determined by the
Committee in its discretion.
(vi) Except as hereinbefore expressly provided, the issuance
by HSI of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash, property, labor or services, upon
direct sale, upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or other securities, and in any case whether
or not for fair value, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number and class of Shares
and/or other securities or property subject to Options theretofore granted
or the Purchase Price per Share.
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6. Awards and Terms of Options
(a) Grant. The Committee may grant Options, including, in the case of
grants to Key Employees, Options intended to be Incentive Stock Options, to Key
Employees and Consultants of the Company. Each Option shall be evidenced by a
Class A Option agreement ("Class A Option Agreement") or Class B Option
agreement ("Class B Option Agreement"), as applicable, in substantially the form
attached hereto as Exhibit 1 and Exhibit 2, respectively.
(b) Exercise Price. The Purchase Price deliverable upon the exercise of
an Option shall be determined by the Committee, subject to the following: (i) in
the case of Class A Options (A) prior to the HSI Public Offering, the Purchase
Price shall not be less than $416.67 per Share, and (B) on or after the HSI
Public Offering, the Purchase Price shall not be less than the Fair Market Value
per Share on the date the Option is granted, and (ii) in the case of Class B
Options or Incentive Stock Options, the Purchase Price shall not be less than
100% (110% for an Incentive Stock Option granted to a Substantial Stockholder)
of the Fair Market Value per Share on the date the Class B Option or Incentive
Stock Option is granted.
(c) Number of Shares. The Option Agreement shall specify the number of
Options granted to the Participant, as determined by the Committee in its sole
discretion, subject to Section 5(c) hereof.
(d) Exercisability. At the time of grant, the Committee shall specify
when and on what terms the Options granted shall be exercisable. In the case of
Options not immediately exercisable in full, the Committee may at any time
accelerate the time at which all or any part of the Options may be exercised and
may waive any other conditions to exercise, subject to the terms of the Option
Agreement and the Plan, and provided that the Committee may not accelerate the
exercise date prior to the HSI Closing. No Option shall be exercisable after the
expiration of ten (10) years from the date of grant (five (5) years in the case
of an Incentive Stock Option granted to a Substantial Stockholder). Each Option
shall be subject to earlier termination as provided in Section 7 below.
(e) Special Rule for Incentive Options. If required by Section 422 of
the Code, to the extent the aggregate Fair Market Value of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by a
Key Employee during any calendar year (under all plans of his or her employer
corporation and its parent and subsidiary corporations) exceeds $100,000, such
Options shall not be treated as Incentive Stock Options. Nothing in this special
rule shall be construed as limiting the exercisability of any Option, unless the
Committee expressly provides for such a limitation at time of grant.
(f) Acceleration of Exercisability on Change of Control. Upon a Change
of Control (as defined herein) of HSI all Options theretofore granted and not
previously exercisable shall become fully exercisable. For this purpose, a
"Change of Control" shall be deemed to have occurred upon:
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(i) an acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d -3 promulgated under the Act) of 20% or
more of either (A) the then outstanding Shares or (B) the combined voting
power of the then outstanding voting securities of HSI entitled to vote
generally in the election of directors (the "Outstanding HSI Voting
Securities"); excluding, however, the following: (w) any acquisition
directly from the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company, (x) any acquisition by the
Company, (y) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or (z) any acquisition by any
corporation pursuant to a reorganization, merger, consolidation or similar
corporate transaction (in each case, a "Corporate Transaction"), if,
pursuant to such Corporate Transaction, the conditions described in clauses
(A), (B) and (C) of paragraph (iii) of this Section 6 are satisfied; or
(ii) a change in the composition of the Board such that the
individuals who, as of the Effective Date hereof, constitute the Board (the
Board as of the date hereof shall be hereinafter referred to as the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided that for purposes of this Subsection any individual
who becomes a member of the Board subsequent to the date hereof whose
election, or nomination for election by HSI's stockholders, was approved by
a vote of at least a majority of those individuals who are members of the
Board and who are also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such individual
were a member of the Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a -11 of Regulation 14A promulgated under the Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of the
Incumbent Board; or
(iii) the approval by the stockholders of HSI of a Corporate
Transaction or, if consummation of such Corporate Transaction is subject,
at the time of such approval by stockholders, to the consent of any
government or governmental agency, the obtaining of such consent (either
explicitly or implicitly by consummation); excluding, however, such a
Corporate Transaction pursuant to which (A) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of
the outstanding Shares and Outstanding HSI Voting Securities immediately
prior to such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares of
common stock of the corporation resulting from such Corporate Transaction
and the combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors, in
substantially the same proportions as their ownership, immediately prior to
such Corporate Transaction, of the outstanding Shares and Outstanding HSI
Voting Securities, as the case may be, (B) no Person (other than the
Company, any employee benefit plan (or related trust) of the Company or the
corporation resulting from such Corporate Transaction and any Person
beneficially owning, immediately prior to such Corporate Transaction,
directly or indirectly, 20% or more of the outstanding Shares or
Outstanding HSI Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 20% or more of, respectively,
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the outstanding shares of common stock of the corporation resulting from
such Corporate Transaction or the combined voting power of the then
outstanding securities of such corporation entitled to vote generally in
the election of directors and (C) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction; or
(iv) the approval of the stockholders of HSI of (A) a complete
liquidation or dissolution of HSI or (B) the sale or other disposition of
all or substantially all of the assets of HSI; excluding, however, such a
sale or other disposition to a corporation with respect to which, following
such sale or other disposition, (x) more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors will be
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the outstanding Shares and Outstanding HSI Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to
such sale or other disposition, of the outstanding Shares and Outstanding
HSI Voting Securities, as the case may be, (y) no Person (other than the
Company and any employee benefit plan (or related trust) of the Company or
such corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of the
outstanding Shares or Outstanding HSI Voting Securities, as the case may
be) will beneficially own, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors and (z) individuals who were members of the Incumbent Board
will constitute at least a majority of the members of the board of
directors of such corporation.
(g) Exercise of Options.
(i) A Participant may elect to exercise one or more Options by
giving written notice to the Committee at any time subsequent to an HSI Closing
of such election and of the number of Options such Participant has elected to
exercise, accompanied by payment in full of the aggregate Purchase Price for the
number of shares for which the Options are being exercised.
(ii) Shares purchased pursuant to the exercise of Options
shall be paid for at the time of exercise as follows:
(A) in cash or by check, bank draft or money order
payable to the order of HSI;
(B) if so permitted by the Committee: (x) through the
delivery of unencumbered Shares (including Shares being acquired pursuant
to the Options then being exercised), provided such Shares (or such
Options) have been owned by the Participant for such period as may be
required by applicable accounting standards to avoid a charge to
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earnings, (y) through a combination of Shares and cash as provided above,
(z) by delivery of a promissory note of the Participant to HSI, such
promissory note to be payable on such terms as are specified in the Option
Agreement (except that, in lieu of a stated rate of interest, the Option
Agreement may provide that the rate of interest on the promissory note will
be such rate as is sufficient, at the time the note is given, to avoid the
imputation of interest under the applicable provisions of the Code), or by
a combination of cash (or cash and Shares) and the Participant's promissory
note; provided, that, if the Shares delivered upon exercise of the Option
is an original issue of authorized Shares, at least so much of the exercise
price as represents the par value of such Shares shall be paid in cash or
by a combination of cash and Shares; or
(C) on such other terms and conditions as may be
acceptable to the Committee and in accordance with applicable law. Upon
receipt of payment, HSI shall deliver to the Participant as soon as
practicable a certificate or certificates for the Shares then purchased.
7. Effect of Termination of Employment or Termination of Consultancy
(a) Death, Disability, Retirement, etc. Except as otherwise provided in
the Participant's Option Agreement, upon Termination of Employment or
Termination of Consultancy, all outstanding Options then exercisable and not
exercised by the Participant prior to such Termination of Employment or
Termination of Consultancy (and any Options not previously exercisable but made
exercisable by the Committee at or after the Termination of Employment or
Termination of Consultancy) shall remain exercisable by the Participant to the
extent not theretofore exercised for the following time periods (subject to
Section 6(d)):
(i) In the event of the Participant's death, such Options
shall remain exercisable (by the Participant's estate or by the person
given authority to exercise such Options by the Participant's will or by
operation of law) for a period of one (1) year from the date of the
Participant's death, provided that the Committee, in its discretion, may at
any time extend such time period to up to three (3) years from the date of
the Participant's death.
(ii) In the event the Participant retires at or after age 65
(or, with the consent of the Committee or under an early retirement policy
of the Company, before age 65), or if the Participant's employment
terminates due to Disability, such Options shall remain exercisable for one
(1) year from the date of the Participant's Termination of Employment,
provided that the Committee, in its discretion, may at any time extend such
time period to up to three (3) years from the date of the Participant's
Termination of Employment or Termination of Consultancy.
(b) Cause or Voluntary Termination. Upon the Termination of Employment
or Termination of Consultancy of a Participant for Cause (as defined herein) or
by the Participant in violation of an agreement between the Participant and HSI
or any of its Subsidiaries, or if it is discovered after such Termination of
Employment or Termination of Consultancy that such
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Participant had engaged in conduct that would have justified a Termination of
Employment or Termination of Consultancy for Cause, all outstanding Options
shall immediately be canceled. Termination of Employment or Termination of
Consultancy shall be deemed to be for "Cause" for purposes of this Section 7(b)
if (i) the Participant shall have committed fraud or any felony in connection
with the Participant's duties as an employee or consultant (as applicable) of
HSI or any of its Subsidiaries, or willful misconduct or any act of disloyalty,
dishonesty, fraud or breach of trust or confidentiality as to HSI or any of its
Subsidiaries or the commission of any other act which causes or may reasonably
be expected to cause economic or reputational injury to HSI or any of its
Subsidiaries or (ii) such termination is or would be deemed to be for Cause
under any employment or consulting agreement between HSI or any of its
Subsidiaries and the Participant.
(c) Other Termination. In the event of Termination of Employment or
Termination of Consultancy for any reason other than as provided in Section 7(a)
or in 7(b), all outstanding Options not exercised by the Participant prior to
such Termination of Employment or Termination of Consultancy shall remain
exercisable (to the extent exercisable by such Participant immediately before
such termination) for a period of three (3) months after such termination,
provided that the Committee in its discretion may extend such time period to up
to one (1) year from the date of the Participant's Termination of Employment or
Termination of Consultancy, and provided further that no Options that were not
exercisable during the period of employment shall thereafter become exercisable.
8. Nontransferability of Options
No Option shall be transferable by the Participant otherwise than by
will or under applicable laws of descent and distribution, and during the
lifetime of the Participant may be exercised only by the Participant or his or
her guardian or legal representative. In addition, no Option shall be assigned,
negotiated, pledged or hypothecated in any way (whether by operation of law or
otherwise), and no Option shall be subject to execution, attachment or similar
process. Upon any attempt to transfer, assign, negotiate, pledge or hypothecate
any Option, or in the event of any levy upon any Option by reason of any
execution, attachment or similar process contrary to the provisions hereof, such
Option shall immediately become null and void.
9. Rights as a Stockholder
A Participant (or a permitted transferee of an Option) shall have no
rights as a stockholder with respect to any Shares covered by such Participant's
Option until such Participant (or Transferee) shall have become the holder of
record of such Shares, and no adjustments shall be made for dividends in cash or
other property or distributions or other rights in respect to any such Shares,
except as otherwise specifically provided for in this Plan.
10. Determinations
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Each determination, interpretation or other action made or taken
pursuant to the provisions of this Plan by the Committee shall be final,
conclusive and binding for all purposes and upon all persons, including, without
limitation, the Participants, HSI and its Subsidiaries, directors, officers and
other employees of HSI and its Subsidiaries, and the respective heirs,
executors, administrators, personal representatives and other successors in
interest of each of the foregoing.
11. Termination, Amendment and Modification
The Plan shall terminate at the close of business on the tenth
anniversary of the Effective Date, unless terminated sooner as hereinafter
provided, and no Option shall be granted under the Plan on or after that date.
The termination of the Plan shall not terminate any outstanding Options which by
their terms continue beyond the termination date of the Plan. At any time prior
to the tenth anniversary of the Effective Date, the Board or the Committee may
amend or terminate the Plan or suspend the Plan in whole or in part.
Notwithstanding the foregoing, however, no such amendment may, without the
approval of the stockholders of HSI, (i) increase the total number of Shares
which may be acquired upon exercise of Options granted under the Plan; (ii)
change the types of employees, consultants or other advisors eligible to be
Participants under the Plan; (iii) effect any change that would require
stockholder approval under Rule 16b -3 (or any successor provision) promulgated
under the Act; (iv) effect any change that would require stockholder approval
under Section 162(m) of the Code; or (v) reduce the Purchase Price of any
outstanding Options to an amount less than 100% of the Fair Market Value per
share on the date of such amendment.
Nothing contained in this Section 11 shall be deemed to prevent the
Board or the Committee from authorizing amendments of outstanding Options of
Participants, including, without limitation, the reduction of the Purchase Price
specified therein (or the granting or issuance of new Options at a lower
Purchase Price upon cancellation of outstanding Options), so long as all options
outstanding at any one time shall not call for issuance of more Shares than the
remaining number provided for under the Plan and so long as the provisions of
any amended Options would have been permissible under the Plan if such Option
had been originally granted or issued as of the date of such amendment with such
amended terms.
Notwithstanding anything to the contrary contained in this Section 11,
(i) no termination, amendment or modification of the Plan may, without the
consent of the Participant or the transferee of such Participant's Option, alter
or impair the rights and obligations arising under any then outstanding Option,
and (ii) neither the Board nor the Committee may make any determination or
interpretation or take any other action which would cause any member of the
Committee to cease to be a "disinterested person" with regard to the Plan for
purposes of Rule 16b-3 under the Act or an "outside director" with regard to
the Plan as defined under Code Section 162(m).
No Options may be granted hereunder and all outstanding Options shall
terminate on January 1, 2000 if the HSI Closing has not occurred by such date.
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12. Non-Exclusivity
Subject to the express provisions contained in the HSI Agreement,
neither the adoption of the Plan by the Board nor the submission of the Plan to
the stockholders of HSI for approval shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting or
issuance of stock options, Shares and/or other incentives otherwise than under
the Plan, and such arrangements may be either generally applicable or limited in
application.
13. Use of Proceeds
The proceeds of the sale of Shares subject to Options under the Plan
are to be added to the general funds of HSI and used for its general corporate
purposes as the Board shall determine.
14. General Provisions
(a) Right to Terminate Employment or Consultancy. Neither the adoption
of the Plan nor the grant of Options shall impose any obligations on the Company
to continue the employment or engagement as a consultant of any Participant, nor
shall it impose any obligation on the part of any Participant to remain in the
employ of the Company, subject however to the provisions of any agreement
between the Company and the Participant.
(b) Purchase for Investment. If the Board determines that the law so
requires, the holder of an Option granted hereunder shall, upon any exercise or
conversion thereof, execute and deliver to HSI a written statement, in form
satisfactory to HSI, representing and warranting that such Participant is
purchasing or accepting the Shares then acquired for such Participant's own
account and not with a view to the resale or distribution thereof, that any
subsequent offer for sale or sale of any such Shares shall be made either
pursuant to (i) a registration statement on an appropriate form under the
Securities Act, which registration statement shall have become effective and
shall be current with respect to the Shares being offered and sold, or (ii) a
specific exemption from the registration requirements of the Securities Act, and
that in claiming such exemption the holder will, prior to any offer for sale or
sale of such Shares, obtain a favorable written opinion, satisfactory in form
and substance to HSI, from counsel approved by HSI as to the availability of
such exception.
(c) Trusts, etc. Nothing contained in the Plan and no action taken
pursuant to the Plan (including, without limitation, the grant of any Option
thereunder) shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between HSI and any Participant or the executor,
administrator or other personal representative or designated beneficiary of such
Partici pant, or any other persons. Any reserves that may be established by HSI
in connection with the Plan shall continue to be part of the general funds of
HSI, and no individual or entity other than
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HSI shall have any interest in such funds until paid to a Participant. If and to
the extent that any Participant or such Participant's executor, administrator,
or other personal representative, as the case may be, acquires a right to
receive any payment from HSI pursuant to the Plan, such right shall be no
greater than the right of an unsecured general creditor of HSI.
(d) Notices. Each Participant shall be responsible for furnishing the
Committee with the current and proper address for the mailing to such
Participant of notices and the delivery to such Participant of agreements,
Shares and payments. Any notices required or permitted to be given shall be
deemed given if directed to the person to whom addressed at such address and
mailed by regular United States mail, first class and prepaid. If any item
mailed to such address is returned as undeliverable to the addressee, mailing
will be suspended until the Participant furnishes the proper address.
(e) Severability of Provisions. If any provisions of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions of the Plan, and the Plan shall be construed and
enforced as if such provisions had not been included.
(f) Payment to Minors, Etc. Any benefit payable to or for the benefit
of a minor, an incompetent person or other person incapable of receipting
therefor shall be deemed paid when paid to such person's guardian or to the
party providing or reasonably appearing to provide for the care of such person,
and such payment shall fully discharge the Committee, the Company and their
employees, agents and representatives with respect thereto.
(g) Headings and Captions. The headings and captions herein are
provided for reference and convenience only. They shall not be considered part
of the Plan and shall not be employed in the construction of the Plan.
(h) Controlling Law. The Plan shall be construed and enforced according
to the laws of the State of New York.
15. Issuance of Stock Certificates;
Legends and Payment of Expenses
(a) Stock Certificates. Upon any exercise of an Option and payment of
the exercise price as provided in such Option, a certificate or certificates for
the Shares as to which such Option has been exercised shall be issued by HSI in
the name of the person or persons exercising such Option and shall be delivered
to or upon the order of such person or persons.
(b) Legends. Certificates for Shares issued upon exercise of an Option
shall bear such legend or legends as the Committee, in its discretion,
determines to be necessary or appropriate to prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act
or to implement the provisions of any agreements between HSI and the Participant
with respect to such Shares.
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(c) Payment of Expenses. The Company shall pay all issue or transfer
taxes with respect to the issuance or transfer of Shares, as well as all fees
and expenses necessarily incurred by the Company in connection with such
issuance or transfer and with the administration of the Plan.
16. Listing of Shares and Related Matters
If at any time the Board shall determine in its sole discretion that
the listing, registration or qualification of the Shares covered by the Plan
upon any national securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the award or sale of Shares
under the Plan, no Shares will be delivered unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained, or otherwise provided for, free of any conditions not acceptable to
the Board.
17. Withholding Taxes
Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option, HSI shall have the right to require the
Participant or such other person to pay to HSI the amount of any taxes which HSI
may be required to withhold before delivery to such Participant or other person
of cash or a certificate or certificates representing such Shares.
Upon the disposition of Shares acquired pursuant to the exercise of an
Incentive Stock Option, HSI shall have the right to require the payment of the
amount of any taxes which are required by law to be withheld with respect to
such disposition.
Unless otherwise prohibited by the Committee or by applicable law, a
Participant may satisfy any such withholding tax obligation by any of the
following methods, or by a combination of such methods: (a) securing payment in
cash or property in lieu of withholding; (b) authorizing HSI to withhold from
the Shares otherwise payable to such Participant (1) one or more of such Shares
having an aggregate Fair Market Value, determined as of the date the withholding
tax obligation arises, less than or equal to the amount of the total withholding
tax obligation or (2) cash in an amount less than or equal to the amount of the
total withholding tax obligation; or (c) delivering to HSI previously acquired
Shares (none of which Shares may be subject to any claim, lien, security
interest, community property right or other right of spouses or present or
former family members, pledge, option, voting agreement or other restriction or
encumbrance of any nature whatsoever) having an aggregate Fair Market Value,
determined as of the date the with holding tax obligation arises, less than or
equal to the amount of the total withholding tax obligation. A Participant's
election to pay his or her withholding tax obligation (in whole or in part) by
the method described in (b)(1) above is irrevocable once it is made, may be
disapproved by the Committee and, if made by any director, officer or other
person who is subject to Section 16(b) of the Act, must be made (x) only during
the period beginning on the third business day fol lowing the date of release of
HSI's quarterly or annual summary statement of sales and earnings and ending on
the twelfth business day fol-
-17-
<PAGE>
lowing the date of such release; (y) not less than six months prior to the date
such Participant's withholding tax obligation arises; or (z) during any other
period in which a withholding election may be made under the provisions of Rule
16b -3.
18. Section 16(b) of the Act
All elections and transactions under the Plan by persons subject to
Section 16 of the Act involving Shares are intended to comply with all exemptive
conditions under Rule 16b-3. The Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the Act, as it may deem necessary or proper for the administration and
operation of the Plan and the transaction of business thereunder.
-18-
<PAGE>
PROXY HENRY SCHEIN, INC.
135 DURYEA ROAD, MELVILLE, NEW YORK 11747
This Proxy is solicited on behalf of the Board of Directors
The undersigned, having duly received the Notice of Annual Meeting of
Stockholders and the Proxy Statement, dated April 22, 1999, hereby appoints
Stanley M. Bergman and Mark E. Mlotek, as proxies (each with the power to act
alone and with the power of substitution and revocation), to represent the
undersigned and to vote, as designated below, all shares of Common Stock of
Henry Schein, Inc. held of record by the undersigned on April 8, 1999, at the
Annual Meeting of Stockholders to be held at 4:00 p.m. on Wednesday, May 26,
1999 at the Huntington Hilton, 598 Broadhollow Road, Melville, New York and at
any adjournments or postponements thereof. The undersigned hereby revokes any
previous proxies with respect to the matters covered by this Proxy.
HENRY SCHEIN, INC.'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING
PROPOSALS
1. PROPOSAL TO ELECT TWELVE DIRECTORS FOR TERMS EXPIRING AT THE 1999 ANNUAL
MEETING.
<TABLE>
<S> <C>
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees listed below
</TABLE>
Stanley M. Bergman, James P. Breslawski, Bruce J. Haber, Gerald A. Benjamin,
Leonard A. David, Mark E. Mlotek, Steven Paladino, Barry J. Alperin, Pamela
Joseph, Donald J. Kabat, Marvin H. Schein and Irving Shafran
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THAT
NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.
-----------------------------------------------------------------------------
2. PROPOSAL TO APPROVE AMENDMENTS OF THE 1994 STOCK OPTION PLAN
/ / FOR / / AGAINST / / ABSTAIN
(See reverse side)
<PAGE>
3. PROPOSAL TO RATIFY THE APPOINTMENT OF BDO SEIDMAN, LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 25, 1999
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON
THE PROXY BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ELECTION OF ALL NOMINEES FOR DIRECTOR LISTED IN PROPOSAL 1 AND
FOR PROPOSALS 2 AND 3.
Please sign exactly as names
appear on this Proxy. Where shares
are held by joint tenants, both
should sign. If 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 person. If a
partnership, please sign in
partnership name by an authorized
person.
Dated: ___________________________
__________________________________
(Signature)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
