<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
Commission file number 000-23731
NUTRACEUTICAL INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 87-0515089
(State of incorporation) (IRS Employer Identification No.)
1400 Kearns Boulevard, 2nd Floor, Park City, Utah 84060
(Address of principal executive office) (Zip code)
(435) 655-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES NO X
--- ---
At March 30, 1998 the registrant had 11,756,148 shares of common stock
outstanding.
<PAGE>
NUTRACEUTICAL INTERNATIONAL CORPORATION
INDEX
Description Page No.
Part I. Financial Information
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets - 3
September 30, 1997 and December 31, 1997
Condensed Consolidated Statements of Operations - 4
Three Months Ended December 31, 1996 and 1997
Condensed Consolidated Statements of Cash Flows - 5
Three Months Ended December 31, 1996 and 1997
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
Part II. Other Information
Item 2. Use of Proceeds 15
Item 4. Submission of Matters to a Vote of Security-Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NUTRACEUTICAL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
-----------------------------------
1997 (1) 1997
ASSETS
<S> <C> <C>
Current assets:
Cash $ 4,415 $ 711
Accounts receivable, net 8,001 8,724
Inventories, net 20,753 25,255
Prepaid expenses and other assets 1,018 799
Deferred income taxes 897 896
------------ ------------
Total current assets 35,084 36,385
Property, plant, and equipment, net 10,711 10,597
Goodwill, net 42,008 41,703
Other assets, net 2,307 2,135
------------ ------------
$ 90,110 $ 90,820
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 7,085 $ 5,651
Current portion of capital lease obligations 181 151
Accounts payable 6,932 8,089
Accrued expenses 5,270 4,707
------------ ------------
Total current liabilities 19,468 18,598
Long-term debt 52,860 52,796
Capital lease obligations 133 120
Deferred income taxes, net 1,295 1,500
------------ ------------
Total liabilities 73,756 73,014
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock 93 93
Additional paid-in capital 9,609 9,609
Subscriptions receivable (55) (35)
Retained earnings 6,707 8,139
------------ ------------
Total stockholders' equity 16,354 17,806
------------ ------------
$ 90,110 $ 90,820
============ ============
</TABLE>
(1) The condensed consolidated balance sheet as of September 30, 1997 has been
taken from the audited financial statements at that date.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
NUTRACEUTICAL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended December 31,
----------------------------------
1996 1997
<S> <C> <C>
Net sales $ 22,365 $ 25,857
Cost of sales 11,803 13,857
----------- -----------
Gross profit 10,562 12,000
----------- -----------
Operating expenses:
Selling, general and administrative 6,817 7,771
Amortization of intangibles 349 332
----------- -----------
7,166 8,103
----------- -----------
Income from operations 3,396 3,897
Interest expense, net 1,705 1,568
----------- -----------
Income before provision for income taxes 1,691 2,329
Provision for income taxes 668 897
----------- -----------
Net income $ 1,023 $ 1,432
=========== ===========
Net income per common share:
Basic earnings per common share $ 0.11 $ 0.15
Diluted earnings per common share $ 0.10 $ 0.14
Weighted average common shares outstanding:
Basic earnings per common share 9,308,583 9,308,583
Diluted earnings per common share 10,477,862 10,565,905
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
NUTRACEUTICAL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Three months ended December 31,
-----------------------------------
1996 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,023 $ 1,432
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 916 1,114
Amortization of debt issuance costs 201 211
Changes in assets and liabilities:
Accounts receivable (1,952) (723)
Inventories 1 (4,502)
Prepaid expenses and other assets 327 219
Deferred income taxes 236 204
Other assets (3) --
Accounts payable 610 1,157
Accrued expenses (134) (563)
------- -------
Net cash provided by (used in) operating activities 1,225 (1,451)
------- -------
Cash flows from investing activities:
Purchases of property and equipment (712) (668)
------- -------
Net cash used in investing activities (712) (668)
------- -------
Cash flows from financing activities:
Proceeds from revolving credit facility -- 1,500
Payments on long-term debt (500) (3,062)
Principal payments on capital lease obligations (47) (43)
Receipts of subscriptions receivable -- 20
------- -------
Net cash used in financing activities (547) (1,585)
------- -------
Net decrease in cash (34) (3,704)
Cash at beginning of period 2,321 4,415
------- -------
Cash at end of period $ 2,287 $ 711
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
NUTRACEUTICAL INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands, except per share data)
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all necessary adjustments (consisting of normal
recurring accruals) to present fairly the financial position of Nutraceutical
International Corporation (the Company) and its subsidiaries as of December 31,
1997, the results of its operations for the three months ended December 31, 1996
and 1997, and its cash flows for the three months ended December 31, 1996 and
1997, in conformity with generally accepted accounting principles for interim
financial information applied on a consistent basis. The results for the three
months ended December 31, 1997 are not necessarily indicative of the results to
be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. Accordingly, these financial statements should be read in
conjunction with the Company's Registration Statement on Form S-1, as amended,
which was filed with the Securities and Exchange Commission and became effective
on February 11, 1998.
2. INVENTORIES, NET
Inventories, net of reserves for obsolete and slow moving inventory, are
comprised of the following:
September 30, December 31,
1997 1997
------------- ------------
Raw materials $ 10,090 $ 11,698
Work-in process 3,064 4,326
Finished goods 7,599 9,231
------------- ------------
$ 20,753 $ 25,255
============= ============
6
<PAGE>
NUTRACEUTICAL INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands, except per share data)
3. NEW ACCOUNTING STANDARDS
The Company has adopted SFAS No. 128, Earnings per Share. SFAS No. 128 is
effective for financial periods ending after December 15, 1997 and requires
restatement of all prior-period earnings per share (EPS) data presented. Under
this statement, both "basic" EPS and "diluted" EPS are presented on the face of
the income statement. As required under SFAS No. 128, both basic EPS and diluted
EPS for the three months ended December 31, 1997 and 1996 have been calculated
giving effect to the Company's stock reclassification and stock split which
occurred subsequent to December 31, 1997 (Note 4). The following table provides
a reconciliation of both net income and the number of common shares used in the
computations of basic EPS, which utilizes the weighted average number of common
shares outstanding without regard to potential common shares, and diluted EPS,
which includes all such shares:
For the Three Months Ended
December 31,
1996 1997
----------- -----------
Net income (Numerator) $ 1,023 $ 1,432
Weighted average common shares (Denominator):
Basic weighted average common shares 9,308,583 9,308,583
Add: Dilutive effect of stock options and warrants 1,169,279 1,257,322
----------- -----------
Diluted weighted average common shares 10,477,862 10,565,905
=========== ===========
Net income per common share:
Basic $ 0.11 $ 0.15
Diluted $ 0.10 $ 0.14
4. SUBSEQUENT EVENTS
On December 10, 1997, the Company filed a Registration Statement on Form S-1
with the Securities and Exchange Commission to offer for sale 3,330,000 shares
of common stock (Common Stock) at a par value of $0.01 per share (the Offering)
which became effective on February 11, 1998. In connection with the consummation
of the Offering, the Company reclassified all of its outstanding shares of
capital stock (including entitled
7
<PAGE>
NUTRACEUTICAL INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands, except per share data)
preferential amounts) into a single class of Common Stock and authorized a
single class of undesignated preferred stock. Upon the reclassification and
consummation of the Offering, the Company effected a 7.5291-for-one stock split
of all of the outstanding shares of Common Stock and a corresponding adjustment
to the number of shares issuable upon exercise of all outstanding warrants and
options. After giving effect to the reclassification and stock split, the
Company had a total of 9,308,583 shares of Common Stock outstanding. The
reclassification and stock split have been retroactively reflected in the
balance sheets as of September 30, 1997 and December 31, 1997.
The Company sold an additional 2,144,618 shares of Common Stock in the Offering.
Warrants were also exercised to purchase 302,947 shares of Common Stock. After
consummation of the Offering, the Company had a total of 11,756,148 shares of
Common Stock outstanding. The net proceeds to the Company from the sale of
shares of Common Stock was approximately $33,396 which was primarily used to
repay existing indebtedness.
On February 25, 1998, the Company replaced its existing credit agreement, under
which the Company had outstanding borrowings of $60,178 (before unamortized
discount of $2,454), with a new credit agreement (the New Credit Agreement). The
Company expects to realize an extraordinary loss on the early extinguishment of
the existing credit agreement of approximately $3,126, net of tax, during the
three months ended March 31, 1998. The New Credit Agreement makes $70,000 of
revolving credit borrowings available to the Company.
In connection with the Offering, the Company approved the Nutraceutical
International Corporation 1998 Stock Incentive Plan (the 1998 Stock Plan). The
1998 Stock Plan provides for the issuance of the following types of incentive
awards: stock options, stock appreciation rights, restricted stock, performance
grants and other types of awards. Options granted under the 1998 Stock Plan may
be subject to time vesting and certain other restrictions. An aggregate of
1,050,000 shares of Common Stock have been reserved for issuance under the 1998
Stock Plan, subject to certain adjustments reflecting changes in the Company's
capitalization. At the consummation of the offering, options to purchase an
aggregate of approximately 250,000 shares of Common Stock were granted to
certain employees.
8
<PAGE>
NUTRACEUTICAL INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands, except per share data)
In connection with the Offering, the Company also approved the Nutraceutical
International Corporation Employee Stock Discount Purchase Plan (the Stock
Purchase Plan). The Stock Purchase Plan is intended to give employees desiring
to do so a convenient means of purchasing shares of Common Stock through payroll
deductions. The Company has reserved 750,000 shares of Common Stock for issuance
in connection with the Stock Purchase Plan.
In connection with the Offering, the Company also approved the Nutraceutical
International Corporation Non-Employee Director Stock Option Plan (the Director
Option Plan). The Director Option Plan is intended to encourage stock ownership
by certain Directors of the Company and to provide those individuals with an
additional incentive to manage the Company in the shareholders' best interest
and to provide a form of compensation that will attract and retain highly
qualified individuals as members of the Board of Directors. Under the Director
Option Plan, 150,000 shares of Common Stock have been reserved for issuance by
the Company, subject to certain adjustments reflecting changes in the Company's
capitalization.
The Company has executed a lease for a new facility in the Ogden, Utah area in
which it will consolidate certain distribution and other operations. The Company
will initially lease approximately 252,000 square feet and has options (which
are subject to certain contingencies) to lease an additional 63,000 square feet.
The Company expects to expend $2,500 to $3,500 in upgrading the facilities and
installing tenant improvements during calendar year 1998.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The following discussion and analysis should be read in conjunction with the
response to Part I, Item 1 of this report.
The Company was formed in 1993 by key members of the current management team and
Bain Capital, Inc. to effect a consolidation strategy in the highly fragmented
vitamin, mineral, herbal and other nutritional supplements industry (the VMS
Industry). The Company purchased Solaray, Inc. in October 1993 with a view
toward using it as a platform for future acquisitions of businesses in the VMS
Industry. In fiscal 1995, the Company completed three additional acquisitions
with the purchases of Premier One Products, Inc. in October 1994, Makers of KAL,
Inc. in January 1995 and Monarch Nutritional Laboratories, Inc. in September
1995.
Results of Operations
The following table sets forth certain consolidated statement of operations data
as a percentage of net sales for the periods indicated:
Three months ended December 31,
----------------------------------
1996 1997
Net sales 100.0% 100.0%
Cost of sales 52.8% 53.6%
----------- ------------
Gross profit 47.2% 46.4%
Selling, general and administrative 30.5% 30.0%
Amortization of intangibles 1.5% 1.3%
----------- ------------
Income from operations 15.2% 15.1%
Interest expense, net 7.6% 6.1%
----------- ------------
Income before provision for income taxes 7.6% 9.0%
Provision for income taxes 3.0% 3.5%
----------- ------------
Net income 4.6% 5.5%
=========== ============
Adjusted EBITDA (1) 19.6% 19.7%
=========== ============
(1)See "- Adjusted EBITDA."
Comparison of the Three Months Ended December 31, 1997 to the Three Months
Ended December 31, 1996
Net Sales. Net sales increased by $3.5 million, or 15.6%, to $25.9 million for
the three months ended December 31, 1997 (first quarter of fiscal 1998) from
$22.4 million for the three months ended December 31, 1996 (first quarter of
fiscal 1997). The increase in net sales was primarily the result of increased
sales volume and, to a lesser extent, minimal
10
<PAGE>
increases in the prices of the Company's products. Such price increases did not
contribute significantly to revenue growth. The Company believes that the
increased volume was primarily attributable to industry growth as well as to the
success of the Company's new product introductions.
Gross Profit. Gross profit increased by $1.4 million, or 13.6%, to $12.0
million for the first quarter of fiscal 1998 from $10.6 million for the first
quarter of fiscal 1997. This increase in gross profit was primarily attributable
to growth in sales volume. As a percentage of net sales, gross profit decreased
to 46.4% for the first quarter of fiscal 1998 from 47.2% for the first quarter
of fiscal 1997. This decrease in gross profit as a percentage of net sales was
primarily attributable to increased discounts associated with the timing of
recurring seasonal promotions which were more significant during the current
year.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.0 million, or 14.0%, to $7.8 million
for the first quarter of fiscal 1998 from $6.8 million for the first quarter of
fiscal 1997. As a percentage of net sales, selling, general and administrative
expenses decreased to 30.0% for the first quarter of fiscal 1998 from 30.5%
for the first quarter of fiscal 1997. This decrease in selling, general and
administrative expenses as a percentage of net sales was primarily attributable
to the Company's efforts to implement incentive and cost control programs during
periods of sales increase.
Amortization of Intangibles. Amortization of intangibles was $0.3 million for
the first quarter of fiscal 1998 and $0.3 million for the first quarter of
fiscal 1997. As a percentage of net sales, amortization of intangibles decreased
to 1.3% for the first quarter of fiscal 1998 from 1.5% for the first quarter
of fiscal 1997. This decrease in amortization of intangibles as a percentage of
net sales was primarily attributable to the increase in net sales.
Interest Expense, Net. Interest expense decreased by $0.1 million, or 8.0%, to
$1.6 million for the first quarter of fiscal 1998 from $1.7 million for the
first quarter of fiscal 1997. As a percentage of net sales, interest expense
decreased to 6.1% for the first quarter of fiscal 1998 from 7.6% for the first
quarter of fiscal 1997. This decrease in interest expense was primarily
attributable to decreased indebtedness associated with the Company's revolving
credit facility.
Provision for Income Taxes. The Company's effective tax rate decreased to 38.5%
for the first quarter of fiscal 1998 from 39.5% for the first quarter of fiscal
1997. In each fiscal quarter, the effective tax rate is higher than statutory
rates primarily due to the non-deductibility for tax purposes of goodwill
amortization arising from the Solaray acquisition. The impact of Solaray
goodwill on the effective tax rate for the first quarter of fiscal 1998
decreased compared to the first quarter of fiscal 1997 as a result of the
Company's higher income before provision for taxes.
11
<PAGE>
Adjusted EBITDA
Adjusted EBITDA (earnings before interest expense, taxes, depreciation and
amortization) is a widely used and commonly reported standard measure utilized
by analysts and investors in the VMS Industry. The following Adjusted EBITDA
information can provide additional information for determining the ability of
the Company to meet its debt service requirements and for other comparative
analyses of the Company's operating performance relative to other nutritional
supplement companies:
Three months ended December 31,
----------------------------------
1996 1997
Net income $ 1,023 $ 1,432
Provision for income taxes 668 897
Interest expense, net (1) 1,705 1,568
Depreciation and amortization 916 1,114
Certain non-recurring items (2) 75 75
----------- -----------
Adjusted EBITDA $ 4,387 $ 5,086
=========== ===========
(1) Includes amortization of capitalized debt issuance costs.
(2) Represents management fees paid to Bain Capital, Inc. pursuant to the
Restated Advisory Agreement which was terminated in connection with the
Offering. The Company does not expect to incur such recurring management
fees following the Offering.
The Company's Adjusted EBITDA increased $0.7 million to $5.1 million for the
first quarter of fiscal 1998 from $4.4 million for the first quarter of fiscal
1997. Adjusted EBITDA as a percentage of net sales increased to 19.7% from 19.6%
for the same periods. The successful implementation of the Company's operating
improvements contributed to this increase in EBITDA.
Seasonality
The Company believes that its business is characterized by minor seasonality.
Historically, the Company has recorded higher sales volume during the second and
third quarters due to increased interest in health-related products among
consumers following the holiday season and in anticipation of the summer months.
The Company does not believe the impact of seasonality on its results of
operations is material. In addition, the Company's sales of premium bulk
formulations are characterized by periodic shipments to certain customers and
can vary from quarter to quarter.
Liquidity and Capital Resources
The Company had working capital of $17.8 million as of December 31, 1997,
compared to $15.6 million as of September 30, 1997. This increase was primarily
the result of increases in inventory and accounts receivable due to higher sales
levels and decreases in
12
<PAGE>
the current portion of long-term debt, related to debt repayments, and accrued
expenses offset by a decrease in cash and an increase in accounts payable.
Net cash provided by (used in) operating activities for the three months ended
December 31, 1997 was ($1.5) million compared to $1.2 million for the comparable
period in fiscal 1997. Net cash provided by operating activities decreased
primarily due to increases in inventory and accounts receivable related to
higher sales levels and a decrease in accrued expenses, partially offset by
increases in accounts payable and net income.
Net cash used in investing activities was $0.7 million for the three months
ended December 31, 1997 compared to $0.7 million for the comparable period in
fiscal 1997. Investing activities during these periods relate entirely to
capital expenditures.
Net cash used in financing activities was $1.6 million for the three months
ended December 31, 1997 compared to $0.5 million for the comparable period in
fiscal 1997. Net cash used in financing activities increased primarily due to
principal payments on long term debt.
The Company's credit agreement at December 31, 1997, consisted of three
components: a Term A Loan in the amount of $34.4 million, a Term B Loan in the
amount of $15.0 million (before unamortized discount of $2.4 million) and a
Revolving Credit Facility in the amount of $10.7 million. In connection with the
Offering, the Company negotiated the New Credit Agreement under which the
indebtedness existing at December 31, 1997 was refinanced. The New Credit
Agreement provides for revolving credit borrowings of $70.0 million with
scheduled maturity in 2003. The Company's initial borrowings under the New
Credit Agreement were $31.5 million.
A key component of the Company's business strategy is to seek to make additional
acquisitions, which will likely require that the Company obtain additional
financing, which could include the incurrence of substantial additional
indebtedness. The Company believes that based on current levels of operations
and anticipated growth, borrowings under the New Credit Agreement, together with
cash flows from operations, will be sufficient to make anticipated capital
expenditures and fund working capital needs for fiscal 1998.
Recent Financial Accounting Standards Board Statements
SFAS No. 128 changes the method of calculating EPS. The statement requires the
presentation of basic EPS and diluted EPS on the face of the statement of
operations. SFAS No. 128 is effective for financial statements issued for
periods ended after December 15, 1997 and requires restatement of all
prior-period EPS data presented.
13
<PAGE>
Inflation
Inflation affects the cost of raw materials, goods and services used by the
Company. In recent years, inflation has been modest. The competitive environment
somewhat limits the ability of the Company to recover higher costs resulting
from inflation by raising prices. Overall product prices have generally been
stable and the Company seeks to mitigate the adverse effects of inflation
primarily through improved productivity and cost containment programs. The
Company does not believe that inflation has had a material impact on its results
of operations for the periods presented.
Forward Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the Securities Act). Such
forward-looking statements are based on the beliefs of the Company's management
as well as on assumptions made by and information currently available to the
Company at the time such statements were made. When used in this MD&A, the words
"anticipate," "believe," "estimate," "expect," "intends" and similar
expressions, as they relate to the Company are intended to identify
forward-looking statements, which include statements relating to, among other
things, (i) the ability of the Company to continue to successfully compete in
the nutritional supplements market; (ii) the anticipated benefits from new
product introductions; (iii) the continued effectiveness of the Company's sales
and marketing strategy; and (iv) the ability of the Company to continue to
successfully develop and launch new products. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the matters discussed herein and certain economic and business factors, some of
which may be beyond the control of the Company.
14
<PAGE>
PART II - OTHER INFORMATION
Item 2. Use of Proceeds
On February 25, 1998, the Company completed the Offering. The net proceeds to
the Company from the Offering were approximately $33.4 million. The Company also
replaced its existing credit agreement in connection with the Offering. The
Company used the net proceeds of the Offering, together with borrowings under
the New Credit Agreement and all available cash resources of the Company at such
date, to repay all indebtedness under the existing credit agreement
(approximately $60.6 million including accrued interest) as well as fees
totaling approximately $2.2 million in connection with (i) the termination of an
advisory agreement with Bain Capital, Inc. and services rendered in connection
with the Offering, (ii) prepayment penalties under the existing credit agreement
resulting from replacing such agreement and (iii) origination fees arising from
the establishment of the New Credit Agreement.
Item 4. Submission of Matters to a Vote of Security-Holders.
Pursuant to Section 228 of the General Corporation Law of the State of Delaware,
on January 8, 1998, the stockholders of the Company, by written consent without
a meeting, adopted resolutions approving the Restated Certificate of
Incorporation and the Amended and Restated Bylaws of the Company. Votes (not
reflecting reclassification, stock splits or the Offering) cast for the above
matters: 997,777.78 against: 0 abstaining: 0.
Pursuant to Section 228 of the General Corporation Law of the State of Delaware,
on January 8, 1998, the stockholders of the Company, by written consent without
a meeting, adopted resolutions:
1. Approving a form of Indemnification Agreement for directors and
officers of the Company.
2. Appointing Price Waterhouse LLP as the Company's outside independent
accounting firm.
3. Approving the adoption of the Nutraceutical International Corporation
1998 Stock Incentive Plan.
4. Approving the adoption of the Nutraceutical International Corporation
Employee Stock Discount Purchase Plan.
15
<PAGE>
5. Approving the adoption of the Nutraceutical International Corporation
Non-Employee Director Stock Option Plan.
6. Electing as directors the following persons:
(i) Matthew S. Levin and Bruce R. Hough to serve until the annual
meeting of stockholders in 1998,
(ii) Geoffrey S. Rehnert and Jeffrey A. Hinrichs to serve until the
annual meeting of stockholders in 1999, and
(iii) Robert C. Gay and Frank W. Gay II to serve until the annual
meeting of stockholders in 2000.
Votes (not reflecting reclassification, stock splits or the Offering) cast
for the above matters: 997,777.78 against: 0 abstaining: 0.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation
3.2 Amended and Restated By-Laws
10.1 Transaction Services Agreement between the Company and Bain Capital,
Inc.
10.2 Termination Agreement between the Company and Bain Capital, Inc.
10.3 Nutraceutical International Corporation 1998 Stock Incentive Plan
10.4 Nutraceutical International Corporation Employee Stock Discount
Purchase Plan
10.5 Nutraceutical International Corporation Non-Employee Director Stock
Option Plan
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NUTRACEUTICAL INTERNATIONAL CORPORATION
(Registrant)
Dated: March 30, 1998 By: /s/ Leslie M. Brown, Jr.
-------------- -------------------------
Leslie M. Brown, Jr.
Senior Vice President, Finance and
Chief Financial Officer
17
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
NUTRACEUTICAL INTERNATIONAL CORPORATION
ARTICLE I - Name
----------------
The name of the corporation is Nutraceutical International Corporation
(hereinafter referred to as the "Corporation").
ARTICLE II - Registered Office
------------------------------
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle
19805. The name of the registered agent of the Corporation at that address is
The Prentice-Hall Corporation System, Inc.
ARTICLE III - Purpose
---------------------
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware (the "Delaware General Corporation Law").
ARTICLE IV - Capital Stock
--------------------------
Part A. General. The maximum number of shares of capital stock that the
Corporation is authorized to have outstanding at any one time is 55,000,000
shares, consisting of: (i) 5,000,000 shares of Preferred Stock, par value $0.01
per share (the "Preferred Stock"); and (ii) 50,000,000 shares of Common Stock,
par value $0.01 per share (the "Common Stock").
Part B. Preferred Stock. Authority is hereby expressly vested in the
Board of Directors of the Corporation (each member thereof, a "Director," and
collectively, the "Board of Directors" or the "Board"), without further action
by the Corporation's stockholders, subject to the provisions of this ARTICLE IV
and to the limitations prescribed by law, to authorize the issuance from time to
time of one or more series of Preferred Stock. The authority of the Board of
Directors with respect to each series shall include, but not be limited to, the
determination or fixing of the following by resolution or resolutions adopted by
the affirmative vote of a majority of the total number of the Directors then in
office:
<PAGE>
(1) The designation of such series;
(2) The dividend rate of such series, the conditions and dates upon which
such dividends shall be payable, the relation which such dividends shall bear to
the dividends payable on any other class or classes or series of the
Corporation's capital stock and whether such dividends shall be cumulative or
non-cumulative;
(3) Whether the shares of such series shall be subject to redemption for
cash, property or rights, including securities of any other corporation, by the
Corporation or upon the happening of a specified event and, if made subject to
any such redemption, the times or events, prices, rates, adjustments and other
terms and conditions of such redemptions;
(4) The terms and amount of any sinking fund provided for the purchase or
redemption of the shares of such series;
(5) Whether or not the shares of such series shall be convertible into, or
exchangeable for, at the option of either the holder or the Corporation or upon
the happening of a specified event, shares of any other class or classes or of
any other series of the same class of the Corporation's capital stock and, if
provision be made for conversion or exchange, the times or events, prices,
rates, adjustments and other terms and conditions of such conversions or
exchanges;
(6) The restrictions, if any, on the issue or reissue of any additional
Preferred Stock;
(7) The rights of the holders of the shares of such series upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; and
(8) The provisions as to voting, optional and/or other special rights and
preferences, if any, including, without limitation, the right to elect one or
more Directors.
Part C. Common Stock. Except as otherwise provided by the Delaware
General Corporation Law or this Restated Certificate of Incorporation (the
"Restated Certificate"), and subject to the rights of holders of any series of
Preferred Stock, the holders of record of Common Stock shall share ratably in
all dividends payable in cash, stock or otherwise and other distributions,
whether in respect of liquidation or dissolution (voluntary or involuntary) or
otherwise and, are subject to all the powers, rights, privileges, preferences
and priorities of any series of Preferred Stock as provided herein or in any
resolution or resolutions adopted by the Board of Directors pursuant to
authority expressly vested in it by the provisions of Section B of this ARTICLE
IV.
(1) The Common Stock shall not be convertible into, or exchangeable for,
shares of any other class or classes or of any other series of the same of the
Corporation's capital stock.
(2) No holder of Common Stock shall have any preemptive, subscription,
redemption, conversion or sinking fund rights with respect to the Common Stock,
or to any obligations convertible (directly or indirectly) into stock of the
Corporation whether now or hereafter authorized.
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(3) Except as otherwise provided by the Delaware General Corporation Law,
or the Restated Certificate and subject to the rights of holders of any series
of Preferred Stock, all of the voting power of the stockholders of the
Corporation shall be vested in the holders of the Common Stock, and each holder
of Common Stock shall have one vote for each share held by such holder on all
matters voted upon by the stockholders of the Corporation.
Part D. Reclassification and Stock Split.
(1) Reclassification. Immediately upon the filing of this Restated
Certificate with the Secretary of State of the State of Delaware (the "Effective
Time"), (A) each share of Non-Voting Common Stock, par value $.01, of the
Corporation outstanding immediately prior to the Effective Time shall be,
without further action by the Corporation or any of the holders thereof,
reclassified into one share of Common Stock and (B) each share of Class A Non-
Voting Common Stock, par value $.01 per share, Class A Common Stock, par value
$.01 per share, and Class P Common Stock, par value $.01 per share, of the
Corporation (the "Accruing Common") outstanding immediately prior to the
Effective Time shall be, without further action by the Corporation or any of the
holders thereof, reclassified into one share of Common Stock plus an additional
number of shares of Common Stock equal to the sum of the Unreturned Original
Cost and Unpaid Yield (as such terms are defined in the Corporation's
Certificate of Incorporation as in effect immediately prior to the Effective
Time) on such outstanding share of Accruing Common as of the Effective Date
divided by the Public Offering Price. The fraction resulting from dividing the
sum of the Unreturned Original Cost and Unpaid Yield of each outstanding share
of Accruing Common by the Public Offering Price is referred to herein as the
"Conversion Factor". Each certificate representing outstanding shares of
Accruing Common shall automatically represent from and after the Effective Time
that number of shares of Common Stock equal to the number of shares shown on the
face of the certificate plus such additional number of shares equal to the
number of shares shown on the face of the certificate multiplied its respective
Conversion Factor. For purpose of this Part D of this ARTICLE IV, "Public
Offering Price" shall mean the initial public offering price per share of Common
Stock set forth on the cover page of the Corporation's Prospectus included in
the Registration Statement on Form S-1, as amended (Registration No. 333-41909)
(the "Registration Statement"), relating to the initial public offering of the
Corporation's Common Stock and in the form first used to confirm sales of the
Common Stock, without deduction for any underwriting discounts or commissions or
any expenses incurred by the Corporation in connection with the initial public
offering and as adjusted so as to not give effect to the stock split described
in the following paragraph.
(2) Stock Split. At the Effective Time and immediately following the
reclassification of the Accruing Common set forth above (the
"Reclassification"), each share of Common Stock outstanding at the Effective
Time (after giving effect to the Reclassification) shall be, without further
action by the Corporation or any of the holders thereof, changed and converted
into a number of shares of Common Stock equal to that number determined by
multiplying each outstanding share of Common Stock by 7.5291 (the "Stock
Split Factor"). Each certificate then outstanding representing shares of Common
Stock (including those certificates that represent shares of Common Stock as a
result of the Reclassification) shall automatically represent from and after the
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<PAGE>
Effective Time that number of shares of Common Stock equal to the number of
shares shown on the face of the certificate multiplied by the Stock Split
Factor.
(3) Fractional Shares. Notwithstanding the foregoing, in the event that
the conversion of the Common Stock described in (1) and (2) above would result
in any holder of shares of Common Stock holding a share of Common Stock that is
not an integral multiple of one, the effect of the conversion shall be such that
the shares of Common Stock issued as a result of the Reclassification shall be
the integral multiple of one closest to the product of the Stock Split Factor
and the number of shares of Common Stock held by such holder, with fractions of
0.50 and greater being rounded up to the next higher integral multiple of one
and fractions less than 0.50 being rounded down to the next lower integral
multiple of one. No consideration will be paid in lieu of fractions that are
rounded down and no consideration shall be due from holders of Common Stock in
lieu of fractions that are rounded up.
ARTICLE V - Existence
---------------------
The Corporation is to have perpetual existence.
ARTICLE VI - By-laws
--------------------
In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors of the Corporation is
expressly authorized to make, alter, amend, change, add to or repeal the By-laws
of the Corporation by the affirmative vote of a majority of the total number of
Directors then in office. Any alteration or repeal of the By-laws of the
Corporation by the stockholders of the Corporation shall require the affirmative
vote of at least a majority of the voting power of the then outstanding shares
of capital stock of the Corporation entitled to vote on such alteration or
repeal, subject to ARTICLE IX hereof and ARTICLE VII of the Corporation's By-
laws.
ARTICLE VII - Stockholders and Directors
----------------------------------------
Part A. Stockholder Action. Election of Directors need not be by written
ballot unless the By-laws of the Corporation so provide. Subject to any rights
of holders of any series of Preferred Stock, from and after the date on which
the Common Stock of the Corporation is registered pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (i) any action required
or permitted to be taken by the stockholders of the Corporation must be effected
at an annual or special meeting of stockholders of the Corporation and may not
be effected in lieu thereof by any consent in writing by such stockholders, (ii)
special meetings of stockholders of the Corporation may be called only by either
the Board of Directors pursuant to a resolution adopted by the affirmative vote
of the majority of the total number of Directors then in office or by the chief
executive officer of the Corporation and (iii) advance notice of stockholder
nominations of persons for election to the Board of Directors of the Corporation
and of business to be brought before any annual meeting of the stockholders by
the stockholders of the Corporation shall be given in the manner provided in the
By-laws of the Corporation.
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<PAGE>
Part B. Number of Directors and Term of Office. Subject to any rights of
holders of any series of Preferred Stock to elect additional Directors under
specified circumstances, the number of Directors which shall constitute the
Board of Directors of the Corporation shall be fixed from time to time in the
manner set forth in the By-laws of the Corporation. The Directors of the
Corporation shall be divided into three classes: Class I, Class II and Class
III. Membership in such class shall be as nearly equal in number as possible.
The term of office of the initial Class I Directors shall expire at the annual
election of Directors by the stockholders of the Corporation in 1998, the term
of office of the initial Class II Directors shall expire at the annual election
of Directors by the stockholders of the Corporation in 1999 and the term of
office of the initial Class III Directors shall expire at the annual election of
Directors by the stockholders of the Corporation in 2000, or thereafter when
their respective successors in each case are elected by the stockholders and
qualified, subject however, to prior death, resignation, retirement,
disqualification or removal from office for cause. At each succeeding annual
election of Directors by the stockholders of the Corporation beginning in 1998,
the Directors chosen to succeed those whose terms then expire shall be
identified as being of the same class as the Directors they succeed and shall be
elected for a term expiring at the third succeeding annual election of Directors
by the stockholders of the Corporation, or thereafter when their respective
successors in each case are elected by the stockholders and qualified. If the
number of Directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of Directors in each class as
nearly equal as possible, and any additional Director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
shall a decrease in the number of Directors shorten the term of any incumbent
Director.
Part C. Removal and Resignation. No Director may be removed from office
without cause and without the affirmative vote of the holders of a majority of
the voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of Directors voting
together as a single class; provided, however, that if the holders of any class
or series of capital stock are entitled by the provisions of this Restated
Certificate (it being understood that any references to this Restated
Certificate shall include any duly authorized certificate of designation) to
elect one or more Directors, such Director or Directors so elected may be
removed without cause only by the vote of the holders of a majority of the
outstanding shares of that class or series entitled to vote. Any Director may
resign at any time upon written notice to the Corporation.
Part D. Vacancies and Newly Created Directorships. Subject to any rights of
holders of any series of Preferred Stock to fill such newly created
Directorships or vacancies, any newly created Directorships resulting from any
increase in the authorized number of Directors and any vacancies in the Board of
Directors resulting from death, resignation, disqualification or removal from
office for cause shall, unless otherwise provided by law or by resolution
approved by the affirmative vote of a majority of the total number of Directors
then in office, be filled only by resolution approved by the affirmative vote of
a majority of the total number of Directors then in office. Any Director so
chosen shall hold office until the next election of the class for which such
Director shall have been chosen, and until his successor shall have been duly
elected and qualified, unless he shall resign, die, become disqualified or be
removed for cause.
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<PAGE>
Part E. Effectiveness. The provisions of this ARTICLE VII shall terminate
and be of no further force and effect in the event that the initial public
offering of the Corporation's Common Stock as contemplated by the Corporation's
Prospectus included in the Registration Statement is not consummated within 30
days of the Effective Time.
ARTICLE VIII - General Provisions
---------------------------------
Part A. Dividends. The Board of Directors shall have authority from time to
time to set apart out of any assets of the Corporation otherwise available for
dividends a reserve or reserves as working capital or for any other purpose or
purposes, and to abolish or add to any such reserve or reserves from time to
time as said board may deem to be in the interest of the Corporation; and said
Board shall likewise have power to determine in its discretion, except as herein
otherwise provided, what part of the assets of the Corporation available for
dividends in excess of such reserve or reserves shall be declared in dividends
and paid to the stockholders of the Corporation.
Part B. Issuance of Stock. The shares of all classes of stock of the
Corporation may be issued by the Corporation from time to time for such
consideration as from time to time may be fixed by the Board of Directors of the
Corporation, provided that shares of stock having a par value shall not be
issued for a consideration less than such par value, as determined by the Board.
At any time, or from time to time, the Corporation may grant rights or options
to purchase from the Corporation any shares of its stock of any class or classes
to run for such period of time, for such consideration, upon such terms and
conditions, and in such form as the Board of Directors may determine. The Board
of Directors shall have authority, as provided by law, to determine that only a
part of the consideration which shall be received by the Corporation for the
shares of its stock which it shall issue from time to time, shall be capital;
provided, however, that, if all the shares issued shall be shares having a par
value, the amount of the part of such consideration so determined to be capital
shall be equal to the aggregate par value of such shares. The excess, if any, at
any time, of the total net assets of the Corporation over the amount so
determined to be capital, as aforesaid, shall be surplus. All classes of stock
of the Corporation shall be and remain at all times nonassessable.
The Board of Directors is hereby expressly authorized, in its discretion,
in connection with the issuance of any obligations or stock of the Corporation
(but without intending hereby to limit its general power so to do in other
cases), to grant rights or options to purchase stock of the Corporation of any
class upon such terms and during such period as the Board of Directors shall
determine, and to cause such rights to be evidenced by such warrants or other
instruments as it may deem advisable.
Part C. Inspection of Books and Records. The Board of Directors shall have
power from time to time to determine to what extent and at what times and places
and under what conditions and regulations the accounts and books of the
Corporation, or any of them, shall be open to the inspection of the
stockholders; and no stockholder shall have any right to inspect any account or
book or document of the Corporation, except as conferred by the laws of the
State of Delaware, unless and until authorized so to do by resolution of the
Board of Directors or of the stockholders of the Corporation.
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<PAGE>
Part D. Location of Meetings, Books and Records. Except as otherwise
provided in the By-laws, the stockholders of the Corporation and the Board of
Directors may hold their meetings and have an office or offices outside of the
State of Delaware and, subject to the provisions of the laws of said State, may
keep the books of the Corporation outside of said State at such places as may,
from time to time, be designated by the Board of Directors.
ARTICLE IX - Amendments
-----------------------
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate in the manner now or
hereinafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation. Notwithstanding anything contained in this Restated Certificate to
the contrary, Parts A, B and C of ARTICLE IV, ARTICLE VII, ARTICLE X, and this
ARTICLE IX of this Restated Certificate shall not be altered, amended or
repealed and no provision inconsistent therewith shall be adopted without the
affirmative vote of the holders of at least 66 2/3% of the voting power of the
then outstanding shares of capital stock of the Corporation entitled to vote on
such alteration, amendment or repeal, voting together as a single class (other
than any alteration or amendment to Part A of ARTICLE IV that increases the
authorized number of shares of Preferred Stock or Common Stock).
ARTICLE X - Liability
---------------------
Part A. Limitation of Liability.
(1) To the fullest extent permitted by the Delaware General Corporation Law
as it now exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto), and except
as otherwise provided in the Corporation's By-laws, no Director of the
Corporation shall be liable to the Corporation or its stockholders for monetary
damages arising from a breach of fiduciary duty owed to the Corporation or its
stockholders.
(2) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
Part B. Right to Indemnification. Each person who was or is made a party or
is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding"), by reason of the
fact that he or she is or was a Director or officer of the Corporation or, while
a Director or officer of the Corporation, is or was serving at the request of
the Corporation as a Director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (an "indemnitee"), whether the basis of
such proceeding is alleged action in an official capacity as a Director or
officer or in any other capacity while serving as a Director or officer, shall
be indemnified and held harmless
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<PAGE>
by the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including attorneys' fees,
judgments, fines, excise exercise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a Director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided in Part C of this ARTICLE X with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Part B of this ARTICLE X shall be a contract
right and shall include the obligation of the Corporation to pay the expenses
incurred in defending any such proceeding in advance of its final disposition
(an "advance of expenses"); provided, however, that, if and to the extent that
the Delaware General Corporation Law requires, an advance of expenses incurred
by an indemnitee in his or her capacity as a Director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (an "undertaking"),
by or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Part B or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same or lesser scope and effect
as the foregoing indemnification of Directors and officers.
Part C. Procedure for Indemnification. Any indemnification of a Director or
officer of the Corporation or advance of expenses under Part B of this ARTICLE X
shall be made promptly, and in any event within forty-five days (or, in the case
of an advance of expenses, twenty days), upon the written request of the
Director or officer. If a determination by the Corporation that the Director or
officer is entitled to indemnification pursuant to this ARTICLE X is required,
and the Corporation fails to respond within sixty days to a written request for
indemnity, the Corporation shall be deemed to have approved the request. If the
Corporation denies a written request for indemnification or advance of expenses,
in whole or in part, or if payment in full pursuant to such request is not made
within forty-five days (or, in the case of an advance of expenses, twenty days),
the right to indemnification or advances as granted by this ARTICLE X shall be
enforceable by the Director or officer in any court of competent jurisdiction.
Such person's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in any
such action shall also be indemnified by the Corporation. It shall be a defense
to any such action (other than an action brought to enforce a claim for the
advance of expenses where the undertaking required pursuant to Part B of this
ARTICLE X, if any, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
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<PAGE>
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct. The procedure
for indemnification of other employees and agents for whom indemnification is
provided pursuant to Part B of this ARTICLE X shall be the same procedure set
forth in this Part C for Directors or officers, unless otherwise set forth in
the action of the Board of Directors providing indemnification for such employee
or agent.
Part D. Insurance. The Corporation may purchase and maintain insurance on
its own behalf and on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation or was serving at the request of the
Corporation as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss asserted against him or her and incurred by him or her in any
such capacity, whether or not the Corporation would have the power to indemnify
such person against such expenses, liability or loss under the Delaware General
Corporation Law.
Part E. Service for Subsidiaries. Any person serving as a Director,
officer, employee or agent of another corporation, partnership, limited
liability company, joint venture or other enterprise, at least 50% of whose
equity interests are owned by the Corporation (a "subsidiary" for this ARTICLE
X) shall be conclusively presumed to be serving in such capacity at the request
of the Corporation.
Part F. Reliance. Persons who after the date of the adoption of this
provision become or remain Directors or officers of the Corporation or who,
while a Director or officer of the Corporation, become or remain a Director,
officer, employee or agent of a subsidiary, shall be conclusively presumed to
have relied on the rights to indemnity, advance of expenses and other rights
contained in this ARTICLE X in entering into or continuing such service. The
rights to indemnification and to the advance of expenses conferred in this
ARTICLE X shall apply to claims made against an indemnitee arising out of acts
or omissions which occurred or occur both prior and subsequent to the adoption
hereof.
Part G. Non-Exclusivity of Rights. The rights to indemnification and to the
advance of expenses conferred in this ARTICLE X shall not be exclusive of any
other right which any person may have or hereafter acquire under this Restated
Certificate or under any statute, by-law, agreement, vote of stockholders or
disinterested Directors or otherwise.
Part H. Merger or Consolidation. For purposes of this ARTICLE X, references
to the "Corporation" shall include, in addition to the resulting Corporation,
any constituent Corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its Directors,
officers and employees or agents, so that any person who is or was a Director,
officer, employee or agent of such constituent Corporation, or is or was serving
at the request of such constituent Corporation as a Director, officer, employee
or agent of another Corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this ARTICLE X with
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respect to the resulting or surviving Corporation as he or she would have with
respect to such constituent Corporation if its separate existence had continued.
ARTICLE XI - Business Combinations
----------------------------------
The Corporation expressly elects to be governed by Section 203 of the
Delaware General Corporation Law. Notwithstanding the terms of Section 203 of
the Delaware General Corporation Law, none of Bain Capital, Inc. and its
affiliates (the "Bain Entities") and F.W. Gay and Sons and its partners (the
"Gay Entities") shall be deemed at any time and without regard to the percentage
of voting stock of the Corporation owned by the Bain Entities or the Gay
Entities to be an "interested stockholder" as such term is defined in Section
203(c)(5) of the Delaware General Corporation Law.
* * * * *
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EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
NUTRACEUTICAL INTERNATIONAL CORPORATION
A Delaware Corporation
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The registered office of Nutraceutical
International Corporation (the "Corporation") in the State of Delaware shall be
located at 1013 Centre Road, in the City of Wilmington, County of New Castle
19805. The name of the Corporation's registered agent at such address shall be
The Prentice-Hall Corporation System, Inc. The registered office and/ or
registered agent of the Corporation may be changed from time to time by action
of the Board of Directors.
Section 2. Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Annual Meeting. An annual meeting of the stockholders shall
be held each year within 150 days after the close of the immediately preceding
fiscal year of the Corporation or at such other time specified by the Board of
Directors for the purpose of electing Directors and conducting such other proper
business as may come before the annual meeting. At the annual meeting,
stockholders shall elect Directors and transact such other business as properly
may be brought before the annual meeting pursuant to ARTICLE II, Section 11
hereof.
Section 2. Special Meetings. Special meetings of the stockholders may
only be called in the manner provided in the Restated Certificate of
Incorporation.
Section 3. Place of Meetings. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting. If no designation is made,
or if a special meeting be otherwise called, the place of meeting shall be the
principal executive office of the Corporation. If for any reason any annual
meeting shall not be held during any year, the business thereof may be
transacted at any special meeting of the stockholders.
<PAGE>
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than 10 nor more than 60 days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the Board of Directors, the chairman of the board, the president or the
secretary, and if mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
stockholder at his, her or its address as the same appears on the records of the
Corporation. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the Corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock entitled to vote, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders, except as otherwise
provided by the General Corporation Law of the State of Delaware or by the
Restated Certificate of Incorporation. If a quorum is not present, the holders
of a majority of the shares present in person or represented by proxy at the
meeting, and entitled to vote at the meeting, may adjourn the meeting to another
time and/or place. When a specified item of business requires a vote by a class
or series (if the Corporation shall then have outstanding shares of more than
one class or series) voting as a class, the holders of a majority of the shares
of such class or series shall constitute a quorum (as to such class or series)
for the transaction of such item of busi ness.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
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Section 8. Vote Required. When a quorum is present, the affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless (i) by express provisions of an applicable law or of
the Restated Certificate of Incorporation a different vote is required, in which
case such express provision shall govern and control the decision of such
question, or (ii) the subject matter is the election of Directors, in which case
Section 2 of ARTICLE III hereof shall govern and control the approval of such
subject matter.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware, the Restated Certificate of
Incorporation of the Corporation or any amendments thereto or these By-laws,
every stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of common stock held by such
stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Business Brought Before an Annual Meeting. At an annual
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before an
annual meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (ii)
brought before the meeting by or at the direction of the Board of Directors or
(iii) otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
that in the event that less than 70 days' notice or prior public announcement of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the date on which such notice of the date of
the annual meeting was mailed or such public announcement was made. A
stockholder's notice to the secretary shall set forth as to
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each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of the Corporation which are beneficially owned by the stockholder and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in these By-laws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this section. The
presiding officer of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this section; if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted. For purposes of this
section, "public announcement" shall mean disclosure in a press release reported
by Dow Jones News Service, Associated Press or a comparable national news
service. Nothing in this section shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
ARTICLE III
-----------
Directors
---------
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. In
addition to such powers as are herein and in the Restated Certificate of
Incorporation expressly conferred upon it, the Board of Directors shall have
and may exercise all the powers of the Corporation, subject to the provisions of
the laws of Delaware, the Restated Certificate of Incorporation and these By-
laws.
Section 2. Number, Election and Term of Office. Subject to any rights of
the holders of any series of Preferred Stock to elect additional Directors under
specified circumstances, the number of Directors which shall constitute the
Board of Directors shall be fixed from time to time by resolution adopted by the
affirmative vote of a majority of the total number of Directors then in office.
The Directors shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote in the
election of Directors; provided that, whenever the holders of any class or
series of capital stock of the Corporation are entitled to elect one or more
Directors pursuant to the provisions of the Restated Certificate of
Incorporation of the Corporation (including, but not limited to, for purposes of
these By-laws, pursuant to any duly authorized certificate of designation), such
Directors shall be elected by a plurality of the votes of such class or series
present in person or represented by proxy at the meeting and entitled to vote in
the election of such Directors. The Directors shall be elected and shall hold
office only in the manner provided in the Restated Certificate of Incorporation.
Section 3. Removal and Resignation. No Director may be removed from
office without cause and without the affirmative vote of the holders of a
majority of the voting power of the then outstanding shares of capital stock
entitled to vote generally in the election of Directors voting
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together as a single class; provided, however, that if the holders of any class
or series of capital stock are entitled by the provisions of the Restated
Certificate of Incorporation (it being understood that any references to the
Restated Certificate of Incorporation shall include any duly authorized
certificate of designation) to elect one or more Directors, such Director or
Directors so elected may be removed without cause only by the vote of the
holders of a majority of the outstanding shares of that class or series entitled
to vote. Any Director may resign at any time upon written notice to the
Corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the total number of Directors may be filled only in the
manner provided in the Restated Certificate of Incorporation.
Section 5. Nominations.
(a) Only persons who are nominated in accordance with the procedures
set forth in these By-laws shall be eligible to serve as Directors. Nominations
of persons for election to the Board of Directors of the Corporation may be made
at a meeting of stockholders (i) by or at the direction of the Board of
Directors or (ii) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice provided for in this By-law, who is
entitled to vote generally in the election of Directors at the meeting and who
shall have complied with the notice procedures set forth below in Section 5(b).
(b) In order for a stockholder to nominate a person for election to
the Board of Directors of the Corporation at a meeting of stockholders, such
stockholder shall have delivered timely notice of such stockholder's intent to
make such nomination in writing to the secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation (i) in the case of an annual
meeting, not less than 60 nor more than 90 days prior to the first anniversary
of the preceding year's annual meeting; provided, however, that in the event
that the date of the annual meeting is changed by more than 30 days from such
anniversary date, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the earlier of the
day on which notice of the date of the meeting was mailed or public disclosure
of the meeting was made, and (ii) in the case of a special meeting at which
Directors are to be elected, not later than the close of business on the 10th
day following the earlier of the day on which notice of the date of the meeting
was mailed or public announcement of the meeting was made. Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes to
nominate for election as a Director at such meeting all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including such person's written consent
to being named in the proxy statement as a nominee and to serving as a Director
if elected); (ii) as to the stockholder giving the notice (A) the name and
address, as they appear on the Corporation's books, of such stockholder and (B)
the class and number of shares of the Corporation which are beneficially owned
by such stockholder and also which are owned of record by such stockholder; and
(iii) as to the beneficial owner, if any, on whose behalf the nomination is
made, (A) the name and address of such person and (B) the class and
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number of shares of the Corporation which are beneficially owned by such person.
At the request of the Board of Directors, any person nominated by the Board of
Directors for election as a Director shall furnish to the secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee.
(c) No person shall be eligible to serve as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
section. The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by this section, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded. A
stockholder seeking to nominate a person to serve as a Director must also comply
with all applicable requirements of the Exchange Act, and the rules and
regulations thereunder with respect to the matters set forth in this section.
Section 6. Annual Meetings. The annual meeting of the Board of Directors
shall be held without other notice than this By-law immediately after, and at
the same place as, the annual meeting of stockholders.
Section 7. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the Board of Directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the Board of Directors may be called by the
chairman of the board, the president (if the president is a Director) or, upon
the written request of at least a majority of the Directors then in office, the
secretary of the Corporation on at least 24 hours notice to each Director,
either personally, by telephone, by mail or by telecopy.
Section 8. Chairman of the Board, Quorum, Required Vote and Adjournment.
The Board of Directors shall elect, by the affirmative vote of a majority of the
total number of Directors then in office, a chairman of the board, who shall
preside at all meetings of the stockholders and Board of Directors at which he
or she is present and shall have such powers and perform such duties as the
Board of Directors may from time to time prescribe. If the chairman of the
board is not present at a meeting of the stockholders or the Board of Directors,
the president (if the president is a Director and is not also the chairman of
the board) shall preside at such meeting, and, if the president is not present
at such meeting, a majority of the Directors present at such meeting shall elect
one of their members to so preside. A majority of the total number of Directors
then in office shall constitute a quorum for the transaction of business.
Unless by express provision of an applicable law, the Restated Certificate of
Incorporation or these By-laws a different vote is required, the vote of a
majority of Directors present at a meeting at which a quorum is present shall be
the act of the Board of Directors. If a quorum shall not be present at any
meeting of the Board of Directors, the Directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
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Section 9. Committees. The Board of Directors may, by resolution passed
by a majority of the total number of Directors then in office, designate one or
more committees, each committee to consist of one or more of the Directors of
the Corporation, which to the extent provided in such resolution or these By-
laws shall have, and may exercise, the powers of the Board of Directors in the
management and affairs of the Corporation, except as otherwise limited by law.
The Board of Directors may designate one or more Directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the Board
of Directors. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
Section 10. Committee Rules. Each committee of the Board of Directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the Board of
Directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. Unless otherwise provided in such a
resolution, in the event that a member and that member's alternate, if
alternates are designated by the Board of Directors, of such committee is or are
absent or disqualified, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in place of any such absent or disqualified member.
Section 11. Communications Equipment. Members of the Board of Directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
and speak with each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
Section 12. Waiver of Notice and Presumption of Assent. Any member of the
Board of Directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 13. Action by Written Consent. Unless otherwise restricted by the
Restated Certificate of Incorporation, any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
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ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the Corporation shall be elected by
the Board of Directors and shall consist of a chairman of the board, a chief
executive officer, a president, one or more vice-presidents, a secretary, a
chief financial officer and such other officers and assistant officers
as may be deemed necessary or desirable by the Board of Directors. Any number
of offices may be held by the same person. In its discretion, the Board of
Directors may choose not to fill any office for any period as it may deem
advisable, except that the offices of president and secretary shall be filled as
expeditiously as possible.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the Board of Directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as convenient.
Vacancies may be filled or new offices created and filled at any meeting of the
Board of Directors. Each officer shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the Board of
Directors may be removed by the Board of Directors at its discretion, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise may be filled by the
Board of Directors.
Section 5. Compensation. Compensation of all executive officers shall be
approved by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of his or her also being a Director of the
Corporation.
Section 6. Chairman of the Board. The chairman of the board shall preside
at all meetings of the stockholders and of the Board of Directors and shall have
such other powers and perform such other duties as may be prescribed to him or
her by the Board of Directors or provided in these By-laws.
Section 7. Chief Executive Officer. The chief executive officer shall
have the powers and perform the duties incident to that position. Subject to
the powers of the Board of Directors and the chairman of the board, the chief
executive officer shall be in the general and active charge of the entire
business and affairs of the Corporation, and shall be its chief policy making
officer. The chief executive officer shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or provided in
these By-laws. The chief executive officer is authorized to execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where
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the signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. Whenever the
president is unable to serve, by reason of sickness, absence or otherwise, the
chief executive officer shall perform all the duties and responsibilities and
exercise all the powers of the president.
Section 8. The President. The president of the Corporation shall, subject
to the powers of the Board of Directors, the chairman of the board and the chief
executive officer, have general charge of the business, affairs and property of
the Corporation, and control over its officers, agents and employees. The
president shall see that all orders and resolutions of the Board of Directors
are carried into effect. The president is authorized to execute bonds, mortgages
and other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the Corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the chairman of the board, the chief executive officer, the Board
of Directors or as may be provided in these By-laws.
Section 9. Vice-Presidents. The vice-president, or if there shall be more
than one, the vice-presidents in the order determined by the Board of Directors
or the chairman of the board, shall, in the absence or disability of the
president, act with all of the powers and be subject to all the restrictions of
the president. The vice-presidents shall also perform such other duties and have
such other powers as the Board of Directors, the chairman of the board, the
chief executive officer, the president or these By-laws may, from time to time,
prescribe. The vice-presidents may also be designated as executive vice-
presidents or senior vice-presidents, as the Board of Directors may from time to
time prescribe.
Section 10. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the Board of Directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose or shall ensure that
his or her designee attends each such meeting to act in such capacity. Under the
chairman of the board's supervision, the secretary shall give, or cause to be
given, all notices required to be given by these By-laws or by law; shall have
such powers and perform such duties as the Board of Directors, the chairman of
the board, the chief executive officer, the president or these By-laws may, from
time to time, prescribe; and shall have custody of the corporate seal of the
Corporation. The secretary, or an assistant secretary, shall have authority to
affix the corporate seal to any instrument requiring it and when so affixed, it
may be attested by his or her signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
or her signature. The assistant secretary, or if there be more than one, any of
the assistant secretaries, shall in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors, the
chairman of the board, the chief executive officer, the president, or secretary
may, from time to time, prescribe.
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Section 11. The Chief Financial Officer. The chief financial officer shall
have the custody of the corporate funds and securities; shall keep full and
accurate all books and accounts of the Corporation as shall be necessary or
desirable in accordance with applicable law or generally accepted accounting
principles; shall deposit all monies and other valuable effects in the name and
to the credit of the Corporation as may be ordered by the chairman of the board
or the Board of Directors; shall cause the funds of the Corporation to be
disbursed when such disbursements have been duly authorized, taking proper
vouchers for such disbursements; and shall render to the Board of Directors, at
its regular meeting or when the Board of Directors so requires, an account of
the Corporation; shall have such powers and perform such duties as the Board of
Directors, the chairman of the board, the chief executive officer, the president
or these By-laws may, from time to time, prescribe. If required by the Board of
Directors, the chief financial officer shall give the Corporation a bond (which
shall be rendered every six years) in such sums and with such surety or sureties
as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of the office of chief financial officer and for the restoration
to the Corporation, in case of death, resignation, retirement or removal from
office of all books, papers, vouchers, money and other property of whatever kind
in the possession or under the control of the chief financial officer belonging
to the Corporation.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these By-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the Board of Directors.
Section 13. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may by resolution delegate the powers and
duties of such officer to any other officer or to any Director, or to any other
person selected by it.
ARTICLE V
---------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by, or in the name of the Corporation by the
chairman of the board, the chief executive officer or the president and the
secretary or an assistant secretary of the Corporation, certifying the number of
shares owned by such holder in the Corporation. If such a certificate is
countersigned (i) by a transfer agent or an assistant transfer agent other than
the Corporation or its employee or (ii) by a registrar, other than the
Corporation or its employee, the signature of any such chairman of the board,
chief executive officer, president, secretary or assistant secretary may be
facsimiles. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or certificates
shall cease to be such officer or officers of the Corporation whether because of
death, resignation or otherwise before such certificate or certificates have
been delivered by the Corporation, such certificate or certificates may
neverthe-
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less be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have been
used thereon had not ceased to be such officer or officers of the Corporation.
All certificates for shares shall be consecutively numbered or otherwise
identified. The name of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
books of the Corporation. Shares of stock of the Corporation shall only be
transferred on the books of the Corporation by the holder of record thereof or
by such holder's attorney duly authorized in writing, upon surrender to the
Corporation of the certificate or certificates for such shares endorsed by the
appropriate person or persons, with such evidence of the authenticity of such
endorsement, transfer, authorization and other matters as the Corporation may
reasonably require, and accompanied by all necessary stock transfer stamps. In
that event, it shall be the duty of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate or certificates and
record the transaction on its books. The Board of Directors may appoint a bank
or trust company organized under the laws of the United States or any state
thereof to act as its transfer agent or registrar, or both in connection with
the transfer of any class or series of securities of the Corporation.
Section 2. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Corporation
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or certificates,
or his or her legal representative, to give the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made against the
Corporation on account of the loss, theft or destruction of any such certificate
or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than 60 nor less than 10 days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be the close of business on the next day preceding
the day on which notice is first given. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than 60 days
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prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 5. Registered Stockholders. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications and otherwise to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 6. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
Board of Directors. Any call made by the Board of Directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the Corporation may proceed to collect the
amount due in the same manner as any debt due the Corporation.
ARTICLE VI
----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the certificate of , if any, may be declared by the
Board of Directors at any regular or special meeting, in accordance with
applicable law. Dividends may be paid in cash, in property or in shares of the
capital stock, subject to the provisions of the Restated Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or any other purpose
and the Directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts or other orders for
the payment of money by or to the Corporation and all notes and other evidences
of indebtedness issued in the name of the Corporation shall be signed by such
officer or officers, agent or agents of the Corporation, and in such manner, as
shall be determined by resolution of the Board of Directors or a duly authorized
committee thereof.
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Section 3. Contracts. In addition to the powers otherwise granted to
officers pursuant to ARTICLE IV hereof, the Board of Directors may authorize any
officer or officers, or any agent or agents, of the Corporation to enter into
any contract or to execute and deliver any instrument in the name of and on
behalf of the Corporation, and such authority may be general or confined to
specific instances.
Section 4. Loans. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or of its subsidiaries, including any officer or employee who is a
Director of the Corporation or its subsidiaries, whenever, in the judgment of
the Directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the Board
of Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this section shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the Corporation at common law
or under any statute.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 6. Corporate Seal. The Board of Directors may provide a corporate
seal which shall be in the form of a circle and shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in any
other Corporation held by the Corporation shall be voted by the chief executive
officer, the president or a vice-president, unless the Board of Directors
specifically confers authority to vote with respect thereto, which authority may
be general or confined to specific instances, upon some other person or officer.
Any person authorized to vote securities shall have the power to appoint
proxies, with general power of substitution.
Section 8. Inspection of Books and Records. The Board of Directors shall
have power from time to time to determine to what extent and at what times and
places and under what conditions and regulations the accounts and books of the
Corporation, or any of them, shall be open to the inspection of the
stockholders; and no stockholder shall have any right to inspect any account or
book or document of the Corporation, except as conferred by the laws of the
State of Delaware, unless and until authorized so to do by resolution of the
Board of Directors or of the stockholders of the Corporation.
Section 9. Section Headings. Section headings in these By-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
-13-
<PAGE>
Section 10. Inconsistent Provisions. In the event that any provision of
these By-laws is or becomes inconsistent with any provision of the Restated
Certificate of Incorporation, the General Corporation Law of the State of
Delaware or any other applicable law, the provision of these By-laws shall not
be given any effect to the extent of such inconsistency but shall otherwise be
given full force and effect.
ARTICLE VII
-----------
AMENDMENTS
----------
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make,
alter, amend, change, add to or repeal these By-laws by the affirmative vote of
a majority of the total number of Directors then in office. Any alteration or
repeal of these By-laws by the stockholders of the Corporation shall require the
affirmative vote of a majority of the outstanding shares of the Corporation
entitled to vote on such alteration or repeal; provided, however, that Section
11 of ARTICLE II and Sections 2, 3, 4 and 5 of ARTICLE III and this ARTICLE VII
of these By-laws shall not be altered, amended or repealed and no provision
inconsistent therewith shall be adopted without the affirmative vote of the
holders of at least 66% of the outstanding shares of the Corporation entitled
to vote on such alteration or repeal.
-14-
<PAGE>
EXHIBIT 10.1
TRANSACTION SERVICES AGREEMENT
------------------------------
This Transaction Services Agreement (this "Agreement") is made and
entered into as of February 25, 1998, by and between Nutraceutical International
Corporation, a Delaware corporation (the "Company"), and Bain Capital, Inc., a
Delaware corporation ("Bain").
WHEREAS, the Company desires to retain Bain and Bain desires to
perform for the Company and its subsidiaries and parent certain services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Term. This Agreement shall be in effect for an initial term
commencing on the date hereof and ending on the earlier to occur of (a) February
15, 2001 and (b) the first day on which Bain and its affiliates cease to own at
least 5% of the Company's Common Stock (the "Term"). The Term shall be
automatically extended thereafter on a year to year basis unless the Company or
Bain provides written notice of its desire to terminate this Agreement to the
other party 90 days prior to the expiration of the Term or any extension
thereof.
2. Services. Bain shall perform or cause to be performed such services
for the Company and its subsidiaries and parent as directed by the Company,
which may include, without limitation, the following:
(a) identification, support, negotiation and analysis of acquisitions
and dispositions by the Company or its subsidiaries or parent;
(b) support, negotiation and analysis of financing alternatives,
including, without limitation, in connection with acquisitions, capital
expenditures and refinancing of existing indebtedness; and
(c) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing
agreements.
4. Transaction Fees.
(a) The Company hereby agrees to pay to Bain or its designees on the
closing date of the consummation of the Company's initial public offering
for services rendered in connection therewith and certain other management
services. Such fees shall be payable by wire transfer in an amount equal to
$375,000 to Bain or its designees plus reasonable and documented out-of-
pocket expenses.
<PAGE>
(b) In addition, during the term of this Agreement, the Company shall
pay to Bain or its designees a transaction fee in connection with the
consummation of each acquisition, divestiture or financing (without
duplication) by the Company or its subsidiaries or parent that is generated
by Bain or for which the Company requests Bain to perform services pursuant
hereto, in an amount equal to 1.0% of the aggregate value of such
transaction, plus reasonable and documented out-of-pocket expenses incurred
in connection with performing services for the Company, when and as
incurred.
5. Personnel. Bain shall provide and devote to the performance of this
Agreement such partners, employees and agents of Bain as Bain shall deem
appropriate to the furnishing of the services required.
6. Liability. Neither Bain nor any of its affiliates, partners,
employees or agents shall be liable to the Company or its subsidiaries or
affiliates for any loss, liability, damage or expense arising out of or in
connection with the performance of services contemplated by this Agreement,
unless such loss, liability, damage or expense shall be proven to result
directly from gross negligence, willful misconduct or bad faith on the part of
Bain, its affiliates, partners, employees or agents acting within the scope of
their employment or authority.
7. Indemnity. The Company and its subsidiaries and parent shall
defend, indemnify and hold harmless each of Bain, its affiliates, partners,
employees and agents from and against any and all loss, liability, damage or
expenses arising from any claim by any person with respect to, or in any way
related to, the performance of services contemplated by this Agreement
(including attorneys' fees) (collectively, "Claims") resulting from any act or
omission of Bain, its affiliates, partners, employees or agents, other than for
Claims which shall be proven to be the direct result of gross negligence, bad
faith or willful misconduct by Bain, its affiliates, partners, employees or
agents. The Company and its subsidiaries and parent shall defend at its own cost
and expense any and all suits or actions (just or unjust) which may be brought
against the Company, its subsidiaries and parent and Bain, its officers,
directors, affiliates, partners, employees or agents or in which Bain, its
affiliates, partners, employees or agents may be impleaded with others upon any
Claims, or upon any matter, directly or indirectly, related to or arising out of
this Agreement or the performance hereof by Bain, its affiliates, partners,
employees or agents, except that if such damage shall be proven to be the direct
result of gross negligence, bad faith or willful misconduct by Bain, its
affiliates, partners, employees or agents, then Bain shall reimburse the Company
and its subsidiaries and parent for the costs of defense and other costs
incurred by the Company and its subsidiaries and parent.
8. Notices. All notices hereunder shall be in writing and shall be
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:
2
<PAGE>
To the Company:
Nutraceutical International Corporation
1400 Kearns Boulevard, 2nd Floor
Park City, Utah 84060
Attention: Chief Executive Officer
To Bain:
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attention: Robert C. Gay
9. Assignment. Neither party may assign any obligations hereunder to
any other party without the prior written consent of the other party (which
consent shall not be unreasonably withheld); provided that Bain may, without
consent of the Company, assign its rights and obligations under this Agreement
to any of its affiliates (but only if such affiliate is a person or entity
(excluding any Bain portfolio companies) controlled by Bain, or in the case of
an affiliate which is a partnership, Bain is the ultimate general partner of
such partnership). The assignor shall remain liable for the performance of any
assignee.
10. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties.
11. Counterparts. This Agreement may be executed and delivered by each
party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
12. Entire Agreement; Modification; Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party. All issues concerning this agreement shall be governed by and construed
in accordance with the laws of the State of Illinois, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of Illinois.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NUTRACEUTICAL INTERNATIONAL CORPORATION
By: /s/ Frank W. Gay
-----------------------------------
Its: Chief Executive Officer
----------------------------------
BAIN CAPITAL, INC.
By: /s/ Robert Gay
-----------------------------------
Its: Managing Director
----------------------------------
4
<PAGE>
Exhibit 10.2
TERMINATION AGREEMENT
This Termination Agreement (this "Agreement") is made and entered into
as of February 25, 1998, by and between Nutraceutical International Corporation,
a Delaware corporation (the "Company"), and Bain Capital, Inc., a Delaware
corporation ("Bain"), and terminates that certain Advisory Agreement dated as of
January 31, 1995, by and between the Company and Bain (the "Advisory
Agreement").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Termination. The Company and Bain hereby agree to terminate the
Advisory Agreement and that no further consideration or services are to be
tendered pursuant thereto, other than as set forth herein.
2. Termination Fee. The Company hereby agrees to pay to Bain or its
designees on the date hereof a fee for agreeing to terminate the Advisory
Agreement in consideration of foregone revenues to Bain thereunder. Such fees
shall be payable by wire transfer in an amount equal to $625,000 to Bain or its
designees.
3. Liability. Neither Bain nor any of its affiliates, partners,
employees or agents shall be liable to the Company or its subsidiaries or
affiliates for any loss, liability, damage or expense arising out of or in
connection with the performance of services under the Advisory Agreement, unless
such loss, liability, damage or expense shall be proven to result directly from
gross negligence, willful misconduct or bad faith on the part of Bain, its
affiliates, partners, employees or agents acting within the scope of their
employment or authority.
4. Indemnity. The Company and its subsidiaries and parent shall
defend, indemnify and hold harmless each of Bain, its affiliates, partners,
employees and agents from and against any and all loss, liability, damage or
expenses arising from any claim by any person with respect to, or in any way
related to, the performance of services under the Advisory Agreement (including
attorneys' fees) (collectively, "Claims") resulting from any act or omission of
Bain, its affiliates, partners, employees or agents, other than for Claims which
shall be proven to be the direct result of gross negligence, bad faith or
willful misconduct by Bain, its affiliates, partners, employees or agents. The
Company and its subsidiaries and parent shall defend at its own cost and expense
any and all suits or actions (just or unjust) which may be brought against the
Company, its subsidiaries and parent and Bain, its officers, directors,
affiliates, partners, employees or agents or in which Bain, its affiliates,
partners, employees or agents may be impleaded with others upon any Claims, or
upon any matter, directly or indirectly, related to or arising out of the
Advisory Agreement or the performance thereof by Bain, its affiliates, partners,
employees or agents, except that if such damage shall be proven to be the direct
result of gross negligence, bad faith or willful misconduct by Bain, its
affiliates, partners, employees or agents, then Bain shall reimburse the Company
and its
<PAGE>
subsidiaries and parent for the costs of defense and other costs incurred by the
Company and its subsidiaries and parent.
5. Notices. All notices hereunder shall be in writing and shall be
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:
To the Company:
Nutraceutical International Corporation
1400 Kearns Boulevard, 2nd Floor
Park City, Utah 84060
Attention: Chief Executive Officer
To Bain:
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attention: Robert C. Gay
6. Assignment. Neither party may assign any obligations hereunder to
any other party without the prior written consent of the other party (which
consent shall not be unreasonably withheld); provided that Bain may, without
consent of the Company, assign its rights and obligations under this Agreement
to any of its affiliates (but only if such affiliate is a person or entity
(excluding any Bain portfolio companies) controlled by Bain, or in the case of
an affiliate which is a partnership, Bain is the ultimate general partner of
such partnership). The assignor shall remain liable for the performance of any
assignee.
7. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties.
8. Counterparts. This Agreement may be executed and delivered by
each party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
9. Entire Agreement; Modification; Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party. All issues concerning this agreement shall be governed by and construed
in accordance with the laws of the State of Illinois, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State
2
<PAGE>
of Illinois or any other jurisdiction) that would cause the application of the
law of any jurisdiction other than the State of Illinois.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Termination
Agreement as of the date first written above.
NUTRACEUTICAL INTERNATIONAL
CORPORATION
By: /s/ Frank W. Gay
__________________________________
Its: Chief Executive Officer
__________________________________
BAIN CAPITAL, INC.
By: /s/ Robert Gay
__________________________________
Its: Managing Director
__________________________________
4
<PAGE>
EXHIBIT 10.3
NUTRACEUTICAL INTERNATIONAL CORPORATION
1998 STOCK INCENTIVE PLAN
-------------------------
ARTICLE 1
Identification of the Plan
1.1 Title. The plan described herein shall be known as the 1998
Stock Incentive Plan (the "Plan").
1.2 Purpose. The purpose of this Plan is (i) to compensate certain
officers and employees of Nutraceutical International Corporation (the
"Company") and its Subsidiaries for services rendered by such persons after the
date of adoption of this Plan to the Company or any Subsidiary; (ii) to provide
certain officers and employees of the Company and its Subsidiaries with
significant additional incentive to promote the financial success of the
Company; and (iii) to provide an incentive which may be used to induce able
persons to enter into or remain in the employment of the Company or any
Subsidiary.
1.3 Effective Date. The Plan shall become effective upon its approval
by the Board of Directors and the stockholders of the Company (the "Effective
Date").
1.4 Defined Terms. Certain capitalized terms used herein have the
meanings as set forth in Section 10.1 of the Plan.
ARTICLE 2
Administration of the Plan
2.1 Initial Administration. This Plan shall initially be
administered by the Board of Directors. The Board of Directors shall delegate
the administration of the Plan to a Compensation Committee (the "Committee") in
the event that such a committee is established by the Board of Directors and is
comprised of persons appointed by the Board of Directors of the Company in
accordance with the provisions of Section 2.3. The Board shall exercise full
power and authority regarding the administration of the Plan until such
administration is delegated to the Committee. Unless the context otherwise
requires, references herein to the Committee shall be deemed to refer to the
Board of Directors until the administration of the Plan has been delegated to
the Committee.
2.2 Committee's Powers. The Committee shall have full power and
authority to prescribe, amend and rescind rules and procedures governing
administration of this Plan. The Committee shall have full power and authority
(i) to interpret the terms of this Plan, the terms of the Awards and the rules
and procedures established by the Committee and (ii) to determine the meaning of
or requirements imposed by or rights of any person under this Plan, any Award or
any rule or
<PAGE>
procedure established by the Committee. Each action of the Committee which is
within the scope of the authority delegated to the Committee by this Plan or by
the Board shall be binding on all persons.
2.3 Committee Membership. The Committee shall be composed of two or
more members of the Board, each of whom is an "outside director" as defined in
Section 162(m) of the Code and a "Non-Employee Director," as defined in
Securities and Exchange Commission Rule 16b-3, as amended ("Rule 16b-3"), or any
successor rules or government pronouncements. The Board shall have the power to
determine the number of members which the Committee shall have and to change the
number of membership positions on the Committee from time to time. The Board
shall appoint all members of the Committee. The Board may from time to time
appoint members to the Committee in substitution for, or in addition to, members
previously appointed and may fill vacancies, however caused, on the Committee.
Any member of the Committee may be removed from the Committee by the Board at
any time with or without cause.
2.4 Committee Procedures. The Committee shall hold its meetings at
such times and places as it may determine. The Committee may make such rules and
regulations for the conduct of its business as it shall deem advisable. Unless
the Board or the Committee expressly decides to the contrary, a majority of the
members of the Committee shall constitute a quorum and any action taken by a
majority of the Committee members in attendance at a meeting at which a quorum
of Committee members are present shall be deemed an act of the Committee.
2.5 Indemnification. No member of the Committee shall be liable, in
the absence of bad faith, for any act or omission with respect to his or her
service on the Committee under this Plan. Service on the Committee shall
constitute service as a director of the Company so that the members of the
Committee shall be entitled to indemnification and reimbursement as directors of
the Company for any action or any failure to act in connection with service on
the Committee to the full extent provided for at any time in the Company's
Certificate of Incorporation and By-Laws, or in any insurance policy or other
agreement intended for the benefit of the Company's directors.
ARTICLE 3
Persons Eligible to Receive Awards
A person shall be eligible to be granted an Award only if on the
proposed Granting Date for such Award such person is an employee of the Company
or any Subsidiary, excluding non-management directors of the Company, or has
rendered or is expected to render advisory or consulting services to the Company
or any Subsidiary within a twelve-month period of the Granting Date. A person
eligible to be granted an Award is herein called a "Grantee."
-2-
<PAGE>
ARTICLE 4
Grant of Awards
4.1 Power to Grant Awards.
(a) The Committee is authorized under the Plan to enter into any type
of arrangement with any Grantee that is consistent with the provisions of the
Plan and that by its terms involves the issuance or potential issuance of (i)
shares of Common Stock, par value $.01 per share, of the Company ("Common
Stock") or (ii) a Derivative Security (as such term is defined in Rule 16a-1
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as such Rule may be amended from time to time) with an exercise or
conversion right at a price related to Common Stock or with a value derived from
the value of the shares of Common Stock. The entering into of any such
arrangement is referred to herein as the grant of an "Award."
(b) Awards are not restricted to any specified form or structure and
may include, without limitation, sales or bonuses of stock, restricted stock,
restricted stock unit, stock options, reload stock options, stock purchase
warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, limited stock appreciation
rights, phantom stock, dividend equivalents, performance units or performance
shares, and an Award may consist of one or more such security or benefit.
4.2 Granting Date. An Award shall be deemed to have been granted
under this Plan on the date (the "Granting Date") which the Committee designates
as the Granting Date at the time it approves such Award, provided that the
Committee may not designate a Granting Date with respect to any Award which is
earlier than the date on which the granting of such Award is approved by the
Committee.
4.3 Award Terms Which The Committee May Determine. The Committee
shall have the power to determine the Grantee to whom Awards are granted, the
number of Shares subject to each Award, the number of Awards granted to each
Grantee and the time at which each Award is granted. Except as otherwise
expressly provided in this Plan, the Committee shall also have the power to
determine, at the time of the grant of each Award, all terms and conditions
governing the rights and obligations of the holder with respect to such Award.
With respect to any Award granted under this Plan that is an option to purchase
Common Stock of the Company (an "Option"), the Committee shall have the power to
determine: (a) the purchase price per Share or the method by which the purchase
price per Share will be determined; (b) the length of the period during which
the Option may be exercised and any limitations on the number of Shares
purchasable with the Option at any given time during such period; (c) the times
at which the Option may be exercised; (d) any conditions precedent to be
satisfied before the Option may be exercised, such as vesting period; (e) any
restrictions on resale of any Shares purchased upon exercise of the Option; (f)
the extent to which the Option may be transferable; and (g) whether the Option
will constitute an Incentive Stock Option.
4.4 Award Agreement. No person shall have any rights under any Award
unless and until the Company and the person to whom such Award is granted have
executed and delivered
-3-
<PAGE>
an agreement expressly granting the Award to such person and containing
provisions setting forth the terms of the Award (an "Award Agreement").
4.5 Limitation on Shares Issuable to any Grantee. The aggregate
number of Shares that may relate to Awards granted to a Grantee during any
calendar year (including those already exercised by the Grantee) shall not
exceed 100,000 shares, as adjusted pursuant to Article 8 of this Plan.
ARTICLE 5
Award Terms
5.1 Plan Provisions Control Terms. The terms of this Plan shall
govern all Awards. In the event any provision of any Award Agreement conflicts
with any term in this Plan as constituted on the Granting Date of such Award,
the term in this Plan as constituted on the Granting Date of the Award shall
control. Except as provided in Article 8, the terms of any Award may not be
changed after the Granting Date of such Award without the express approval of
the Company and the Award Holder.
5.2 Term Limitation. No Incentive Stock Option may be granted under
this Plan which is exercisable more than ten years after its Granting Date. This
Section 5.2 shall not be deemed to limit the term which the Committee may
specify for any Awards (including Options) granted under the Plan which are not
intended to be Incentive Stock Options.
5.3 Transfer of Awards. An Award granted pursuant to this Plan may be
transferable as provided in the Award Agreement. It shall be a condition
precedent to any transfer of any Award that the transferee executes and delivers
an agreement acknowledging such Award has been acquired for investment and not
for distribution and is and shall remain subject to this Plan and the Award
Agreement. The "Holder" of any Award shall mean (i) the initial grantee of such
Award or (ii) any permitted transferee.
5.4 $100,000 Per Year Limit on Incentive Stock Options. No Grantee
may be granted Incentive Stock Options if the value of the Shares subject to
those options which first become exercisable in any given calendar year (and the
value of the Shares subject to any other Incentive Stock Options issued to the
Grantee under the Plan or any other plan of the Company or its Subsidiaries
which first become exercisable in such year) exceeds $100,000. For this purpose,
the value of Shares shall be determined on the Granting Date. Any Incentive
Stock Options issued in excess of the $100,000 limit shall be treated as Options
that are not Incentive Stock Options. Incentive Stock Options shall be taken
into account in the order in which they were granted.
5.5 No Right to Employment Conferred. Nothing in this Plan or (in the
absence of an express provision to the contrary) in any Award Agreement (i)
confers any right or obligation on any person to continue in the employ of the
Company or any Subsidiary or (ii) affects or shall affect in any way any
person's right or the right of the Company or any Subsidiary to terminate such
person's employment with the Company or any Subsidiary at any time, for any
reason, with or without cause.
-4-
<PAGE>
ARTICLE 6
Regulatory Compliance
6.1 Taxes. The Company or any Subsidiary shall be entitled, if the
Committee deems it necessary or desirable, to withhold from an Award Holder's
salary or other compensation (or to secure payment from the Award Holder in lieu
of withholding) all or any portion of any withholding or other tax due from the
Company or any Subsidiary with respect to any Shares deliverable under such
Holder's Award or the Committee may (but need not) permit payment of such
withholding by the Company's retention of Shares which would otherwise be
transferred to the Award Holder upon exercise of the Option. In the event any
Common Stock is retained by the Company to satisfy all or any part of the
withholding, the part of the withholding deemed to have been satisfied by such
Common Stock shall be equal to the product derived by multiplying the Per Share
Market Value as of the date of exercise by the number of Shares retained by the
Company. The number of Shares retained by the Company in satisfaction of
withholding shall not be a number which when multiplied by the Per Share Market
Value as of the date of exercise would result in a product greater than the
withholding amount. No fractional Shares shall be retained by the Company in
satisfaction of withholding. Notwithstanding Article 7, unless the Board shall
otherwise determine, for each Share retained by the Company in satisfaction of
all or any part of the withholding amount, the aggregate number of Shares
subject to this Plan shall be increased by one Share. The Company may defer
delivery under a Holder's Award until indemnified to its satisfaction with
respect to such withholding or other taxes.
6.2 Securities Law Compliance. Each Award shall be subject to the
condition that such Award may not be exercised if and to the extent the
Committee determines that the sale of securities upon exercise of the Award may
violate the Securities Act or any other law or requirement of any governmental
authority. The Company shall not be deemed by any reason of the granting of any
Award to have any obligation to register the Shares subject to such Option under
the Securities Act or to maintain in effect any registration of such Shares
which may be made at any time under the Securities Act. An Award shall not be
exercisable if the Committee or the Board determines there is non-public
information material to the decision of the Holder to exercise such Award which
the Company cannot for any reason communicate to such Holder.
ARTICLE 7
Shares Subject to the Plan
-5-
<PAGE>
Except as provided in Section 6.1 and Article 8, an aggregate of
1,050,000 Shares of Common Stock shall be subject to this Plan. Except as
provided in Section 6.1 and Article 8, the Awards shall be limited so that the
sum of the following shall not as of any given time exceed 1,050,000 Shares: (i)
all Shares subject to Awards outstanding under this Plan at the given time and
(ii) all Shares which shall have been issued by the Company by reason of the
exercise at or prior to the given time of any of the Options. The Common Stock
issued under the Plan may be either authorized and unissued shares, shares
reacquired and held in the treasury of the Company, or both, all as from time to
time determined by the Board. In the event any Award shall expire or be
terminated before it is fully exercised, then all Shares formerly subject to
such Award as to which such Award was not exercised shall be available for any
Award subsequently granted in accordance with the provisions of this Plan. No
fractional Shares will be eligible to be issued under the Plan.
In the event of a change in the Shares as presently constituted, which
is limited to a change of all of its authorized shares with par value into the
same number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be the Shares within
the meaning of the Plan.
ARTICLE 8
Adjustments to Reflect Organic Changes
The Board shall appropriately and proportionately adjust the number
and kind of Shares subject to outstanding Awards, the price for which Shares may
be purchased upon the exercise of outstanding Awards, and the number and kind of
Shares available for Awards subsequently granted under this Plan to reflect any
stock dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in the capitalization of the Company which the
Board determines to be similar, in its substantive effect upon this Plan or the
Awards, to any of the changes expressly indicated in this sentence. The Board
may (but shall not be required to) make any appropriate adjustment to the number
and kind of Shares subject to outstanding Awards, the price for which Shares may
be purchased upon the exercise of outstanding Awards, and the number and kind of
Shares available for Awards subsequently granted under this Plan to reflect any
spin-off, spin-out or other distribution of assets to stockholders or any
acquisition of the Company's stock or assets or other change which the Board
determines to be similar, in its substantive effect upon this Plan or the
Awards, to any of the changes expressly indicated in this sentence. The
Committee shall have the power to determine the amount of the adjustment to be
made in each case described in the preceding two sentences, but no adjustment
approved by the Committee shall be effective until and unless it is approved by
the Board. In the event of any reorganization, reclassification, consolidation,
merger or sale of all or substantially all of the Company's assets which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock, the Board may (but shall not be
required to) substitute the per share amount of such stock, securities or assets
for Shares upon any subsequent exercise of any Award.
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ARTICLE 9
Amendment and Termination of the Plan
9.1 Amendment. Except as provided in the following two sentences, the
Board shall have complete power and authority to amend this Plan at any time and
no approval by the Company's stockholders or by any other person, committee or
other entity of any kind shall be required to make any amendment approved by the
Board effective. So long as the Common Stock is eligible for trading on the
Nasdaq National Market, the Board shall obtain stockholder approval for those
amendments of the Plan required to be so approved pursuant to the By-laws of the
National Association of Securities Dealers. The Board shall not, without the
affirmative approval of the Company's stockholders, amend the Plan in any manner
which would cause any outstanding Incentive Stock Options to no longer qualify
as Incentive Stock Options. No termination or amendment of this Plan may,
without the consent of the Holder of any Award prior to termination or the
adoption of such amendment, materially and adversely affect the rights of such
Holder under such Award.
9.2 Termination. The Board shall have the right and the power to
terminate this Plan at any time, provided that no Incentive Stock Options may be
granted after the tenth anniversary of the adoption of this Plan. No Award shall
be granted under this Plan after the termination of this Plan, but the
termination of this Plan shall not have any other effect. Any Award outstanding
at the time of the termination of this Plan may be exercised after termination
of this Plan at any time prior to the Expiration Date of such Award to the same
extent such Award would have been exercisable had this Plan not terminated.
ARTICLE 10
Definitions and Other Provisions of the Plan
10.1 Definitions. Each term defined in this Section 10.1 has the
meaning indicated in this Section 10.1 whenever such term is used in this Plan:
"Award" has the meaning such term is given in Section 4.1 of this
Plan.
"Award Agreement" has the meaning such term is given in Section 4.4 of
this Plan.
"Board of Directors" and "Board" both mean the Board of Directors of
the Company as constituted at the time the term is applied.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" has the meaning such term is given in Section 2.1 of this
Plan.
"Common Stock" means the issued or issuable Common Stock, par value
$.01 per share, of the Company.
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"Company" as applied as of any given time shall mean Nutraceutical
International Corporation, a Delaware corporation, except that if prior to the
given time any corporation or other entity has acquired all or a substantial
part of the assets of the Company (as herein defined) and has agreed to assume
the obligations of the Company under this Plan, or is the survivor in a merger
or consolidation to which the Company was a party, such corporation or other
entity shall be deemed to be the Company at the given time.
"Expiration Date" as applied to any Award means the date specified in
the Award Agreement between the Company and the Holder as the expiration date of
such Award. If no expiration date is specified in the Award Agreement relating
to any Award, then the Expiration Date of such Award shall be the day prior to
the tenth anniversary of the Granting Date of such Award. Notwithstanding the
preceding sentences, if the person to whom any Incentive Stock Option is granted
owns, on the Granting Date of such Option, stock possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company (or of any parent or Subsidiary of the Company in existence on the
Granting Date of such Option), and if no expiration date is specified in the
Award Agreement relating to such Option, then the Expiration Date of such Option
shall be the day prior to the fifth anniversary of the Granting Date of such
Option.
"Grantee" has the meaning such term is given in Article 3 of this
Plan.
"Granting Date" has the meaning such term is given in Section 4.2 of
this Plan.
"Holder" has the meaning such term is given in Section 5.3 of this
Plan.
"Incentive Stock Option" means an incentive stock option, as defined
in Code Section 422, which is granted pursuant to this Plan.
"Option" has the meaning such term is given in Section 4.3 of this
Plan.
"Plan" has the meaning such term is given in Section 1.1 of this Plan.
"Securities Act" at any given time shall consist of: (i) the
Securities Act of 1933 as constituted at the given time; (ii) any other law or
laws promulgated prior to the given time by the United States Government which
are in effect at the given time and which regulate or govern any matters at any
time regulated or governed by the Securities Act of 1933; (iii) all regulations,
rules, registration forms and other governmental pronouncements issued under the
laws specified in clauses (i) and (ii) of this sentence which are in effect at
the given time; and (iv) all interpretations by any governmental agency or
authority of the things specified in clause (i), (ii) or (iii) of this sentence
which are in effect at the given time. Whenever any provision of this Plan
requires that any action be taken in compliance with any provision of the
Securities Act, such provision shall be deemed to require compliance with the
Securities Act as constituted at the time such action takes place.
"Share" means a share of Common Stock.
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"Subsidiary" means any corporation in which the Company owns, directly
or indirectly, 50% or more of the total combined voting power of all classes of
securities of such corporation.
10.2 Headings. Section headings used in this Plan are for convenience
only, do not constitute a part of this Plan and shall not be deemed to limit,
characterize or affect in any way any provisions of this Plan. All provisions in
this Plan shall be construed as if no headings had been used in this Plan.
10.3 Severability.
(a) General. Whenever possible, each provision in this Plan and in
every Award at any time granted under this Plan shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Plan or any Award at any time granted under this Plan is held to be
prohibited by or invalid under applicable law, then (i) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (ii) all other provisions of
this Plan and every Award at any time granted under this Plan shall remain in
full force and effect.
(b) Incentive Stock Options. Whenever possible, each provision in
this Plan and in every Award at any time granted under this Plan which is
evidenced by an Award Agreement which expressly states such Option is intended
to constitute an Incentive Stock Option under Code Section 422 (an "intended
ISO") shall be interpreted in such manner as to entitle such intended ISO to the
tax treatment afforded by the Code to Options which do constitute Incentive
Stock Options under Code Section 422, but if any provision of this Plan or any
intended ISO at any time granted under this Plan is held to be contrary to the
requirements necessary to entitle such intended ISO to the tax treatment
afforded by the Code to Options which do constitute Incentive Stock Options
under Code Section 422, then (i) such provision shall be deemed to have
contained from the outset such language as shall be necessary to entitle such
intended ISO to the tax treatment afforded by the Code to Options which do
constitute Incentive Stock Options under Code Section 422, and (ii) all other
provisions of this Plan and such intended ISO shall remain in full force and
effect. If any Award Agreement covering an intended ISO granted under this Plan
does not explicitly include any terms required to entitle such intended ISO to
the tax treatment afforded by the Code to Options which do constitute Incentive
Stock Options under Code Section 422, then all such terms shall be deemed
implicit in the intention to afford such treatment to such Option and such
Option shall be deemed to have been granted subject to all such terms.
10.4 No Strict Construction. No rule of strict construction shall be
applied against the Company, the Committee or any other person in the
interpretation of any of the terms of this Plan, any Award or any rule or
procedure established by the Committee.
10.5 Choice of Law. This Plan and all documents contemplated hereby,
and all remedies in connection therewith and all questions or transactions
relating thereto, shall be construed in accordance with and governed by the
internal laws of the State of Delaware.
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10.6 Tax Consequences. Tax consequences from the purchase and sale of
Shares may differ among grantees under the Plan. Each grantee of an Award should
discuss specific tax questions regarding participation in the Plan with his or
her own tax advisor.
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EXHIBIT 10.4
NUTRACEUTICAL INTERNATIONAL CORPORATION
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
-------------------------------------
1. Title. The plan described herein shall be known as the Nutraceutical
International Corporation Employee Stock Discount Purchase Plan (the "Plan").
The Plan will be maintained by the Nutraceutical International Corporation (the
"Company") and any of its subsidiaries that may adopt the Plan from time to time
in accordance with the procedures set forth in Section 23 hereof (each such
adopting subsidiary referred to herein as a "Covered Entity") with the Company's
consent.
2. Purpose. The purpose of the Plan is to give employees wishing to do so a
convenient means of purchasing at a discount shares of the Company's Common
Stock, par value $.01 per share (the "Shares"), through payroll deductions. The
Company believes that ownership of Shares by employees will foster greater
employee interest in the Company's growth and development. The Plan is intended
to qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code").
3. Shares Reserved for the Plan. There shall be reserved for issuance and
purchase by employees of the Company under this Plan an aggregate of 750,000
Shares, subject to adjustment as provided in Section 17 hereof. Shares subject
to the Plan may be shares now or hereafter authorized and unissued or shares
already authorized, issued and owned by the Company. The right to purchase
shares pursuant to the Plan shall be made available by a series of quarterly
offerings to employees eligible to participate in the Plan pursuant to Section 8
hereof. If and to the extent that any right to purchase reserved Shares shall
not be exercised by any employee for any reason or if such right to purchase
shall terminate as provided herein, Shares that have not been so purchased under
the Plan shall again become available for the purposes of the Plan during the
remaining term of the Plan.
4. Effective Date. The Plan shall become effective on the date of the
consummation of the initial public offering of the Company's Common Stock (the
"Effective Date").
5. The Plan Year. The Plan shall operate on a fiscal year beginning on the
first day of October in each year and ending on the 30th day of September. This
fiscal year is referred to herein as the "Plan year." The initial Plan year
shall begin on the Effective Date.
6. Plan Quarters. The Plan year shall be divided into four Plan quarters
ending December 31, March 31, June 30 and September 30. Each such quarter is
referred to herein as a "Plan quarter."
7. Plan Administration. The Plan shall initially be administered by the
Board of Directors. The Board of Directors shall delegate the administration of
the Plan to a Compensation Committee (the "Committee") in the event that such a
committee is established by the Board of Directors. As Plan administrator, the
Committee shall have complete control of the administration of the Plan, which
includes the determination of employees, eligibility for participation in
accordance
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with the standards set forth in Section 8 hereof, the interpretation of
provisions of the Plan, the adoption of any rules or regulations which may be
necessary, advisable or desirable in the operation of the Plan including rules
governing the participation of officers and directors in the Plan in order to
exempt transactions under the Plan in accordance with Rule 16b of the Securities
and Exchange Commission, and the delegation of certain of the duties of the
Committee to an agent to facilitate the purchase and transfer of Shares and to
otherwise assist in the administration of the Plan. The Committee shall control
the general administration of the Plan with all powers necessary to enable it to
carry out its duties in that respect, except that, if for any reason a Committee
shall not have been appointed, all authority and duties of the Committee under
this Plan shall be vested in and exercised by the Board of Directors of the
Company.
8. Eligibility. Any employee of the Company who is a United States resident
or who is a United States citizen temporarily on location at a facility outside
of the United States and any Covered Entity (as defined in Section 23 hereof)
shall be eligible to participate in the Plan on the day next following the
twelve-month anniversary of such employee's employment provided such employee
would not own, immediately after the exercise of any right granted hereunder,
stock possessing five percent (5%) or more of the combined voting power or value
of all classes of capital stock of the Company. The Committee shall determine
which employees are eligible to participate in the Plan in accordance with the
standards set forth in this Section.
9. Election to Participate; Payroll Deductions and Lump Sum Contributions.
An eligible employee may elect to participate in the Plan on any day within the
Plan quarter in which such employee becomes eligible to participate, and
thereafter as of the first day of any Plan quarter, by correctly completing and
returning to the Company an enrollment form authorizing a specified payroll
deduction to be made from each subsequent paycheck for the purchase of Shares
under this Plan (the "payroll deduction"). The minimum allowable payroll
deduction is $25.00 per payroll period. All payroll deductions shall be made
regularly and in equal amounts and shall be credited on the records of the
Company in the name of the eligible employee. Such credit shall constitute only
a bookkeeping entry by the Company and no interest will be paid or due on any
money paid into this Plan or credited to such eligible employee. Employees who
elect to participate in the Plan are referred to herein as "participating
employees."
A participating employee will be deemed to have authorized the same payroll
deduction for each subsequent payroll period provided that he or she is eligible
to participate during each subsequent payroll period. A participating employee
may increase or decrease his or her payroll deduction as of the first day of the
first full payroll period of any Plan quarter by filing the required form, in
the time and manner prescribed by the Committee.
Upon the request of any participating employee, the Company shall suspend
making any payroll deduction with respect to such employee as soon as
practicable after the employee notifies the Company of such request. In such
event, the earliest date upon which payroll deductions may be resumed with
respect to such employee shall be the first day of the Plan quarter occurring
immediately after the first full Plan quarter that follows the suspension of the
employee's payroll deductions.
A participating employee may elect to make a lump sum contribution to the
Plan, not more than once per plan quarter. Such election must be made no later
than the 10th business day preceding the end of such plan quarter and payment
must be made no later than 5 business days thereafter.
In the event that an employee ceases to be a participating employee, or if
for any reason the Company does not invest the aggregate amount of payroll
deductions or contributions of a participating
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<PAGE>
employee, the amount of payroll deductions not theretofore invested shall be
returned to such employee.
10. Limitation of Number of Shares That an Employee May Purchase. A
participant shall be allocated the number of Shares which may be purchased with
such participant's contributions; provided, that in any Plan quarter a
participant may only contribute an amount less than or equal to 15% of such
participant's gross pay from the Company (including salary and bonus) for the
immediately prior Plan quarter, which amount may be paid through payroll
deduction pursuant to Section 9 or by one or more lump sum contributions.
Notwithstanding the foregoing, no right to purchase Shares under this Plan shall
permit an employee to purchase stock under all employee stock purchase plans (as
defined in Section 423 of the Code) of the Company at a rate which in aggregate
exceeds $25,000 of fair market value of such stock (determined at the time the
right is granted) for each calendar year in which the right is outstanding at
any time. In addition, the total number of Shares purchased under the Plan shall
not exceed 750,000 and if, for any purchase date, the number of Shares to be
purchased with participants' cash account balances, when aggregated with all
prior purchases under the Plan, would exceed 750,000 Shares, allocations to
participants for such purchase date shall be reduced pro rata in accordance with
their respective cash account balances, so that the total allocations shall not
cause the total Shares purchased under the Plan to exceed 750,000 Shares.
11. Accounting for Participant Contributions. The Committee will cause to
be established a "cash account" and a "Share account" for each participant under
the Plan for bookkeeping purposes. As soon as practicable on or after the last
day of each Plan quarter, but in no case later than the fifteenth day of the
month immediately following the end of the Plan quarter, the Committee will
credit each participant's cash account with such participant's payroll
deductions during the Plan quarter ("credited payroll deductions"). The date of
crediting of such credited payroll deductions is referred to herein as the
"deduction crediting date." The Company shall not be required to pay or accrue
interest on the cash balances in participants' cash accounts or on the value of
participants' Share accounts.
12. Share Purchases. The Committee will use the entire balance of funds in
participants' cash accounts to purchase Shares to be allocated to participants'
Share accounts within the first 15 working days following each deduction
crediting date. The cost per Share to participants will be 90% of the lower of
the closing price for the Shares on the Nasdaq National Market ("Nasdaq") on the
first or the last day of the Plan quarter with respect to which such purchase
relates; provided that if the first or last day of the Plan quarter is a day on
which Nasdaq is closed, the price for such day shall be determined as of the
last preceding day on which Nasdaq is open.
13. Allocation of Shares. As soon as practicable after all necessary Shares
have been purchased by the Committee (or its agent) for the benefit of
participants, the Committee will allocate such Shares to participants' Share
accounts (the date of such allocation to be referred to as the "Share allocation
date") in the following manner:
(a) The Committee will allocate full Shares and fractional Shares to the
Share accounts of the individual participants to the extent of the balances in
their respective cash accounts, subject to the limitations set forth in Section
10. The cash accounts will be charged with the cost
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to participants of all Shares so allocated. No cash balances will remain in the
participants' cash accounts immediately after each Share allocation date;
(b) Until certificates are issued, no person shall have any right to sell,
assign, mortgage, pledge, hypothecate or otherwise encumber any of the Shares
allocated to a participant's Share account.
14. Issuance of Share Certificates. Share certificates for the number of
whole Shares in each participant's Share account may be issued to participants
only upon the receipt by the Committee (or its agent) of a participant's written
request indicating the number of Shares (to a maximum of the number of full
Shares in the participant's Share account) for which the participant wishes to
receive certificates. Such request shall be made on a form at the time
prescribed by the Committee and filed with the Committee (or its agent). Share
certificates shall be issued to the participant as soon as practicable after the
end of a Plan quarter.
15. Restrictions on Transfer. Unless the Shares purchased hereunder are
covered by an effective registration statement under the Securities Act of 1933,
as amended (the "Securities Act").
(a) Restrictive Legend. The certificates representing the Shares shall bear
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER."
(b) Opinion of Counsel. The participant may not sell, transfer or
dispose of any Shares (except pursuant to an effective registration statement
under the Securities Act) without first delivering to the Company an opinion of
counsel reasonably acceptable in form and substance to the Company that
registration under the Securities Act or any applicable state securities law is
not required in connection with such transfer.
16. Expenses. The Company or the Covered Entity will bear the costs
associated with administering the Plan and purchasing Shares. No expenses
attributable to a participant's sale of Shares, however, will be borne by the
Company or the Covered Entity.
17. Cash Dividends, Share Splits and Distributions.
(a) Cash Dividends. Cash dividends attributable to Shares allocated
to participants' Share accounts as of the record date for which such cash
dividends are declared will be credited to participants' cash accounts as of the
dividend payment date and applied to Share
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purchases and allocations on the next Share allocation date in accordance with
the methods set forth in Sections 12 and 13 hereof.
(b) Share Distributions and Share Splits. Share distributions and Share
splits attributable to Shares allocated to participants' Share accounts as of
the Share distribution record date or the Share split effective date will be
credited directly to participants' Share accounts as of the record date and the
effective date, respectively, of such Share distributions and such Share splits.
(c) Share Rights and Warrants. The Company may, from time to time, in the
exercise of its sole discretion, declare Share rights or warrants with respect
to Shares. Following and as of the record date for determining those
shareholders of record entitled to receive Share rights or warrants with respect
to their Shares, the Company shall issue, and the Committee shall allocate, such
Share rights and/or warrants directly to the appropriate participants as though
the Shares allocated to the account of each such participant were held of record
by such participant. Certificates representing such Share rights or warrants, if
any such certificates have been authorized by the Board of Directors of the
Company, may be issued to participants pursuant to the procedures set forth in
Section 14 of this Plan.
(d) Change in Common Stock. In the event of a reorganization,
recapitalization, stock split, merger, consolidation or other increase or change
in the common stock of the Company, the Committee may make appropriate changes
in the number and type of Shares that at the time of such event remain available
for purchase under this Plan.
18. Voting Rights. Holders of Shares have the right to vote on matters
affecting the Company. If one of these matters is submitted to the shareholders
for a vote, then following the record date for any shareholder meeting at which
such vote is to occur, the Committee shall advise the Company of the number of
participants for whom Shares are held in Share accounts on such record date, and
the Company shall furnish the Committee (or its agent) with sufficient sets of
its proxy soliciting materials to deliver one set to each such participant. The
Committee shall thereupon forward one set to each participant for whom allocated
Shares are being held and request voting instructions. Upon receipt of voting
instructions, the Committee shall vote the Shares (including any fractional
Shares) as instructed. The Committee shall not vote any Share allocated to a
participant's Share account unless voting instructions have been received from
the participant.
19. Records and Reports to Participants. The Committee shall cause to be
maintained true and accurate books of account, and a record of all transactions
under the Plan, and such accounts, books and records relating thereto shall be
open to inspection and audit by such person or persons designated by the
Company. At least annually, but in all cases on or before March 31 of each year,
the Committee shall file with the Chief Financial Officer of the Company a
written report setting forth all receipts and disbursements and other
transactions effected on behalf of the Plan during the last preceding Plan year,
including a description of all Shares purchased together with the cost of all
such Shares. Such report shall also disclose any liabilities of the Plan and
shall show, as of the close of the Plan year, the value of each active cash
account and Share account of each participant together with the record of Share
certificates delivered to each of the participants during such Plan year. The
Committee shall have the right to maintain one or more bank
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accounts for funds contributed to the Plan, and to make deposits in and
withdrawals therefrom in connection with its administration of the Plan.
An annual report shall be rendered to each participant in the Plan annually
within 90 days after the close of the Plan year, showing for the Plan year just
ended:
(a) the amounts of employee payroll deductions made for each participant;
(b) the amounts of cash dividends credited to such participant's cash
account;
(c) the number of Shares acquired for such participant's Share account
(including the amounts of Share distributions or Share splits so allocated or
credited);
(d) the cost to the participant per Share of Shares purchased for such
participant;
(e) the number of Shares, if any, for which certificates were delivered to
such participant; and
(f) the beginning and ending balances in the participant's Share and cash
accounts.
20. Termination of Employment. Settlement of the accounts of participants
whose employment has terminated shall be made as of the beginning of the Plan
quarter following the Plan quarter in which termination of employment occurred.
As promptly as practicable after the close of the Plan quarter in which
termination of employment occurred, the Committee will deliver to such former
participant a certificate for the number of full Shares allocated to such
participant's account and not previously distributed, together with a check for
(i) any remaining cash balance and (ii) the value of any fractional Shares
allocated to such participant's account.
In the event of a participant's death, settlement will be made to the
participant's duly appointed legal representative after the satisfaction of any
applicable legal requirements.
21. Amendment and Termination of the Plan. Subject to the provisions of
Section 423 of the Code and Rule 16b-3 under the Securities Exchange Act of
1934, as amended ("Exchange Act"), the Board of Directors may amend this Plan in
any respect; provided, that no amendment may affect any participant's right to
the benefit of contributions made by such participant prior to the date of the
amendment.
The Board of Directors reserves the right to terminate or temporarily
suspend this Plan at the end of any Plan quarter. In the event of termination or
suspension of the Plan, the Committee will make an allocation of Shares to the
Share accounts of the participants in the usual manner. As soon as practicable,
the Committee will distribute to or on behalf of each participant all of the
Shares held in such participant's Share account plus an amount of cash equal to
the balance in such participant's cash account.
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22. Limitation on Sale of Shares. No Shares will be sold under the Plan to
any employee residing or employed in any jurisdiction where the sale of such
Shares is not permitted under the applicable laws.
23. Adopting Subsidiaries. Any subsidiary of the Company may adopt the Plan
on behalf of its employees either unilaterally or by collective bargaining by
filing with the Company a certified copy of a resolution of the Board of
Directors (or other appropriate authorization satisfactory to the Secretary of
the Company) of the subsidiary providing for such subsidiary's adoption of the
Plan and a certified copy of a resolution of the Board of Directors of the
Company consenting to such adoption. Each such adopting subsidiary is referred
to herein as a "Covered Entity."
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EXHIBIT 10.5
NUTRACEUTICAL INTERNATIONAL CORPORATION
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
---------------------------------------
1. Name and Purpose. This plan shall be called the Nutraceutical
International Corporation Non-Employee Director Stock Option Plan (the "Plan").
The Plan is intended to encourage stock ownership by Non-Employee Directors (as
defined below) of Nutraceutical International Corporation, a Delaware
corporation (the "Company"), to provide such directors with an additional
incentive to manage the Company effectively and to contribute to its success,
and to provide a form of compensation which will attract and retain highly
qualified individuals as members of the Board of Directors of the Company.
2. Effective Date and Term of the Plan. The Plan shall become effective
on the date of the consummation of the initial public offering of the Company's
Common Stock, par value $.01 per share (the "Effective Date"). Options may not
be granted under the Plan after the tenth (10th) anniversary of the Effective
Date (the "Term"); provided, however, that all options outstanding as of that
date shall remain or become exercisable pursuant to their terms and the terms of
the Plan.
3. Administration. The Plan shall initially be administered by the Board
of Directors of the Company (the "Board"). The Board shall delegate the
administration of the Plan to a committee of the Board (the "Committee") in the
event such a committee is established by the Board for such purpose and that
committee is composed solely of two or more "Non-Employee Directors" (as such
term is defined under Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")). Each member of the Committee shall be eligible
to participate in the Plan; however, grants made to a member of the Committee
must be approved by the full Board with such member abstaining. References
herein to the Committee shall be deemed to refer to the Board in the event that
the administration of the Plan has not been delegated to the Committee.
The Committee may, from time to time, establish such regulations,
provisions and procedures, within the terms of the Plan, as in the opinion of
its members may be advisable in the administration of the Plan. A majority of
the Committee shall constitute a quorum, and the acts of a majority of a quorum
at any meeting, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted pursuant to the Plan shall be final and
binding upon the Company and any optionee. No member of the Board of Directors
of the Company or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any option granted pursuant
thereto.
4. Stock Available for Options. Subject to the adjustments as provided in
Subsection 7(f), the aggregate number of shares of Common Stock, par value $.01
per share, of the Company (the "Common Stock") reserved for purposes of the Plan
shall be 150,000 shares of authorized and unissued shares or issued shares
reacquired by the Company (the "Shares").
<PAGE>
Determinations as to the number of Shares that remain available for issuance
under the Plan shall be made in accordance with such rules and procedures as the
Committee shall determine from time to time. If any outstanding option under
the Plan expires or is terminated for any reason before the end of the Term of
the Plan, the shares allocable to the unexercised portion of such option shall
become available for the grant of other options under the Plan. No shares
delivered to the Company in full or partial payment upon exercise of an option
pursuant to Subsection 7(c) or in full or partial payment of any withholding tax
liability permitted under Section 10 shall become available for the grant of
other options under the Plan.
5. Participation. Subject to the limitations contained in this Section 5,
any director of the Company who is not a contractual nor common law employee of
the Company or any of its subsidiaries (a "Non-Employee Director") will be
eligible to be granted options to purchase shares of the issued or issuable
Common Stock in accordance and consistent with the terms and conditions of the
Plan. An optionee may hold more than one option, but only on the terms and
subject to the restrictions hereafter set forth. Except as provided herein,
terms and conditions of options granted to a director at any given time need not
be the same for any other grant of options.
6. Option Grants.
(a) Discretionary Grants. The Committee shall be authorized to
determine from time to time the directors (among the Non-Employee
Directors) to be granted options, the number of shares of Common Stock
subject to such options, and the terms and conditions of the options to be
granted. All options granted under this Subsection (a) must be approved by
either the Board or the Committee prior to such grant.
(b) Non-Statutory Stock Options. All options granted under the Plan
shall be non-statutory options not intended to qualify under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"). Each option
granted under the Plan shall provide that such option will not be treated
as an "incentive stock option," as that term is defined in Section 422(b)
of the Code.
7. Terms and Conditions of Options of the Plan. Options granted under
this Plan shall be evidenced by agreements in such form as the Committee shall
from time to time approve, which agreements shall comply with and be subject to
the following conditions:
(a) Term of Options. The term of each option shall be for a period of
not greater than ten (10) years from the date of grant of the option.
(b) Option Price. The exercise price of each option shall be equal to
one hundred percent (100%) of the Fair Market Value of the shares of Common
Stock on the date of the grant of the option. If the shares are traded in
the over-the-counter market, the Fair Market Value per share shall be the
closing price on the national market list as quoted in the National
Association of Securities Dealers Automated Quotation System ("Nasdaq") on
the day the option is granted or if no sale of shares is reflected in
Nasdaq on that day, on the next
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<PAGE>
preceding day on which there was a sale of shares reflected in Nasdaq. If
the shares are not traded in the over-the-counter market but are listed
upon an established stock exchange or exchanges, such Fair Market Value
shall be deemed to be the closing price of the shares on such stock
exchange or exchanges on the day the option is granted or if no sale of the
shares shall have been made on any stock exchange on that day, on the next
preceding day on which there was a sale of the shares.
(c) Medium of Payment. The option price shall be payable to the
Company either (i) in United States dollars in cash or by check, bank
draft, or money order payable to the order of the Company or (ii) if
permitted by the Board, through the delivery of shares of the Common Stock
with a Fair Market Value on the date of the exercise equal to the option
price, provided such shares are utilized as payment to acquire at least 100
shares of Common Stock, or (iii) by a combination of (i) and (ii) above.
Fair Market Value will be determined in the manner specified in Subsection
7(b) except as to the date of determination.
(d) Exercise of Options. Except as provided herein, the Committee
shall have the authority to determine, at the time of grant of each option
pursuant to Subsection 6(a), the times at which an option may be exercised
and any conditions precedent to the exercise of an option. An option shall
be exercisable upon written notice to the Chief Financial Officer of the
Company, as to any or all shares covered by the option, until its
termination or expiration in accordance with its terms or the provisions of
the Plan. Notwithstanding the foregoing, an option shall not at any time
be exercisable with respect to less than 100 shares unless the remaining
shares covered by an option are less than 100 shares. The purchase price
of the shares purchased pursuant to an option shall be paid in full upon
delivery to the optionee of certificates for such shares. Exercise by an
optionee's heir, personal representative or permitted transferee shall be
accompanied by evidence of his or her authority to act, in a form
reasonably satisfactory to the Company.
(e) Termination of Service as Director.
(i) Termination of Service for any Reason Other than Death or
Permanent Disability. In the event an optionee shall cease to serve
the Company as a director for any reason other than such optionee's
death or Permanent Disability, each option held by such optionee
shall, to the extent rights to purchase shares under the option have
become vested at the time such optionee ceases to serve as a director,
remain exercisable, in whole or in part, by the optionee, subject to
prior expiration according to its terms and other limitations imposed
by the Plan, for a period of one (1) year following the optionee's
cessation of service as a director of the Company. If the optionee
dies after such cessation of service, the optionee's options shall be
exercisable in accordance with Subsection 7(e)(ii) hereof.
(ii) Termination of Service for Death or Permanent Disability.
If an optionee ceases to be a director by reason of death or Permanent
Disability, each option held by such optionee shall immediately become
exercisable and shall remain
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<PAGE>
exercisable, in whole or in part, by (in the case of Permanent
Disability) the optionee or the optionee's guardian or attorney-in-
fact or (in the case of death) the personal representative of the
optionee's estate or by any person or persons who have acquired the
option directly from the optionee during the shorter of the following
periods: (i) the term of the option, or (ii) a period of two (2) years
from the death or Permanent Disability of such optionee. If an
optionee dies or a Permanent Disability occurs during the extended
exercise period following cessation of service specified in Subsection
7(e)(i) above, such option may be exercised any time within the longer
of such extended period or one (1) year after death or Permanent
Disability, subject to the prior expiration of the term of the option.
For purposes of this Subsection 7(e)(ii), "Permanent Disability" shall
mean a determination by the Social Security Administration or any
similar successor agency that an optionee is "permanently disabled,"
and the date on which a Permanent Disability is deemed to have
occurred shall be the date on which such determination by such agency
shall have been made.
(f) Adjustment in Shares Covered by Option. The number of shares
covered by each outstanding option, and the purchase price per share
thereof, shall be proportionately adjusted for any increase or decrease in
the number of issued and outstanding shares resulting from a split in or
combination of shares or the payment of a stock dividend on the shares or
any other increase or decrease in the number of such shares effected
without receipt of consideration by the Company.
If the Company shall be the surviving corporation in any merger or
consolidation or if the Company is merged into a wholly-owned subsidiary
solely for purposes of changing the Company's state of incorporation, each
outstanding option shall pertain to and apply to the securities to which a
holder of the number of shares subject to the option would have been
entitled to receive in such transaction.
In the event of a Change in Control, only if provided in the option
agreement, any option awarded under this Plan to the extent not previously
exercisable shall immediately become fully exercisable. The Committee in
its sole discretion may direct the Company to cash out all outstanding
options on the basis of the Change in Control Price as of the date a Change
in Control occurs or such other date as the Committee may determine prior
to the Change in Control. For purposes of this Plan, a "Change in Control"
means the occurrence of any of the following: (i) when any "person" as
defined in Section 3(a)(9) of the Exchange Act and as used in Sections
13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of
the Exchange Act but excluding the Company and any subsidiary, any of the
Company's existing stockholders prior to the Effective Date and any
employee benefit plan sponsored or maintained by the Company or any
subsidiary (including any trustee of such plan acting as trustee), directly
or indirectly, becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act, as amended from time to time), after
the Effective Date, of securities of the Company representing 20 percent or
more of the combined voting power of the Company's then outstanding
securities; (ii) when, during any period of 24 consecutive months during
the existence of the Plan, the individuals who, at the beginning
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<PAGE>
of such period, constitute the Board of Directors of the Company (the
"Incumbent Directors") cease for any reason other than death to constitute
at least a majority thereof; provided, however, that a director who was not
a director at the beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified as Incumbent
Directors either actually (because they were directors at the beginning of
such 24 month period) or by prior operation of this provision; or (iii) the
approval by the stockholders of the Company of a transaction involving the
acquisition of the Company by an entity other than the Company or a
subsidiary through purchase of assets, by merger, or otherwise. For
purposes of this Plan, "Change in Control Price" means the highest price
per share of Common Stock paid in any transaction reported on the Nasdaq
National Market or paid or offered in any bona fide transaction related to
a Change in Control at any time during the 60-day period immediately
preceding the occurrence of the Change in Control, in each case as
determined by the Committee.
In the event of a change in the shares as presently constituted, which
is limited to a change of all of its authorized shares with par value into
the same number of shares with a different par value or without par value,
the shares resulting from any such change shall be deemed to be the shares
within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Any such adjustment may provide for the elimination of any fractional share
which might otherwise become subject to an option.
Except as expressly provided in this Subsection 7(f), the optionee
shall have no rights by reason of any split or combination of shares of
stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class
or by reason of any dissolution, liquidation, merger, or consolidation or
spinoff of assets or stock of another corporation, and any issue by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of
stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or assets.
(g) Rights of a Stockholder. An optionee shall have no rights as a
stockholder with respect to any shares covered by his or her option until
the date on which the optionee becomes the holder of record of such shares.
No adjustment shall be made for dividends, distributions, or other rights
for which the record date is prior to the date on which he or she shall
have become the holder of record thereof, except as provided in Subsection
7(f).
-5-
<PAGE>
(h) Postponement of Delivery of Shares and Representations. The
Company, in its discretion, may postpone the issuance and/or delivery of
shares upon any exercise of an option until completion of the registration
or other qualification of such shares under any state and/or federal law,
rule or regulation as the Company may consider appropriate, and may require
any person exercising an option to make such representations, including a
representation that it is the optionee's intention to acquire shares for
investment and not with a view to distribution thereof, and furnish such
information as it may consider appropriate in connection with the issuance
or delivery of the shares in compliance with applicable laws, rules, and
regulations. In such event no shares shall be issued to such holder unless
and until the Company is satisfied with the accuracy of any such
representations.
(i) Transferability. If provided in the option agreement, the options
granted pursuant to the Plan may be transferable by a Non-Employee
Director. The Committee shall have the sole discretion to determine to
what extent, if any, the options granted pursuant to the Plan are
transferable by a Non-Employee Director.
(j) Other Provisions. The option agreements authorized under the Plan
shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the option, as the Committee shall deem
advisable.
8. Adjustments in Shares Available for Options. The adjustments in
number and kind of shares and the substitution of shares, affecting outstanding
options in accordance with Subsection 7(f) hereof, shall also apply to the
number and kind of shares issuable upon the exercise of options to be granted
pursuant to Section 6 and the number and kind of shares reserved for issuance
pursuant to the Plan, but not yet covered by options.
9. Amendment of the Plan. The Board, insofar as permitted by law, shall
have the right from time to time, with respect to any shares at the time not
subject to options, to suspend or discontinue the Plan or revise or amend it in
any respect whatsoever. So long as the Common Stock is eligible for trading on
the Nasdaq National Market, the Board shall obtain stockholder approval for
those revisions or amendments of the Plan required to be so approved pursuant to
the By-laws of the National Association of Securities Dealers. If the Plan is
amended so that the exemption provided by Rule 16b-3 as a result of the Plan
being approved by the stockholders of the Company is no longer available for
options granted under Subsections 6(b) or 6(c) hereof, all options subsequently
granted thereunder must be approved by either the Board or the Committee prior
to such grant.
10. Withholding of Taxes. The Company shall have the right to deduct from
any payment to be made pursuant to this Plan, or to otherwise require, prior to
the issuance or delivery of any shares of Common Stock, payment by the optionee
of any federal, state, or local taxes required by law to be withheld. Unless
otherwise prohibited by the Committee, an optionee may satisfy any such
withholding tax obligation by any of the following means or by a combination of
such means:
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<PAGE>
(a) tendering a cash payment;
(b) authorizing the Company to withhold from the shares otherwise
issuable to the optionee a number of shares having a Fair Market Value as
of the "Tax Date," less than or equal to the amount of withholding tax
obligation; or
(c) delivering to the Company unencumbered shares owned by the
optionee having a Fair Market Value, as of the Tax Date, less than or equal
to the amount of the withholding tax obligation.
The "Tax Date" shall be the date that the amount of tax to be withheld is
determined. Fair Market Value shall be determined in the manner specified in
Subsection 7(b), except as to the date of determination. An optionee's election
to pay the withholding tax obligation by either of (b) or (c) above shall be
irrevocable, may be disapproved by the Committee, and must be made either six
(6) months prior to the Tax Date or during the period beginning on the third
business day following the date of release of the Company's quarterly or annual
summary statement of sales and earnings and ending on the twelfth business day
following such date.
11. Right of Board of Directors or Stockholders to Terminate Director's
Service. Nothing in this Plan or in the grant of any option hereunder shall in
any way limit or affect the right of the Board of Directors or the stockholders
of the Company to remove any director or otherwise terminate his or her service
as a director, pursuant to the law, the Restated Certificate of Incorporation,
or Amended and Restated By-laws of the Company.
12. Application of Funds. The proceeds received by the Company from the
sale of stock pursuant to options will be used for general corporate purposes.
13. No Obligation to Exercise Option. The granting of an option shall
impose no obligation on the optionee to exercise such option.
14. Construction. This Plan shall be construed under the laws of the
State of Delaware.
-7-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
NUTRACEUTICAL INTERNATIONAL CORPORATION'S FINANCIAL POSITION AS OF DECEMBER 31,
1996 AND DECEMBER 31, 1997 AND THE RESULTS OF ITS OPERATIONS FOR THE THREE
MONTHS ENDED DECEMBER 31, 1996 AND 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1997
<PERIOD-START> OCT-01-1996 OCT-01-1997
<PERIOD-END> DEC-31-1996 DEC-31-1997
<CASH> 2,287 711
<SECURITIES> 0 0
<RECEIVABLES> 9,995 9,565
<ALLOWANCES> 835 841
<INVENTORY> 17,422 25,255
<CURRENT-ASSETS> 30,483 36,385
<PP&E> 12,783 16,374
<DEPRECIATION> (3,020) (5,777)
<TOTAL-ASSETS> 86,407 90,820
<CURRENT-LIABILITIES> 9,639 18,598
<BONDS> 0 0
0 0
0 0
<COMMON> 93 93
<OTHER-SE> 13,020 17,713
<TOTAL-LIABILITY-AND-EQUITY> 86,407 90,820
<SALES> 22,365 25,857
<TOTAL-REVENUES> 22,365 25,857
<CGS> 11,803 13,857
<TOTAL-COSTS> 11,803 13,857
<OTHER-EXPENSES> 7,166 8,103
<LOSS-PROVISION> 35 106
<INTEREST-EXPENSE> 1,705 1,568
<INCOME-PRETAX> 1,691 2,329
<INCOME-TAX> 668 897
<INCOME-CONTINUING> 1,023 1,432
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,023 1,432
<EPS-PRIMARY> 0.11 0.15
<EPS-DILUTED> 0.10 0.14
</TABLE>
