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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NUTRACEUTICAL INTERNATIONAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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NUTRACEUTICAL INTERNATIONAL CORPORATION
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1400 Kearns Boulevard, 2nd Floor
Park City, Utah 84060
January 28, 1999
Fellow Stockholders:
It is my pleasure to invite you to Nutraceutical International
Corporation's 1999 Annual Meeting of Stockholders.
===================================================
DATE: THURSDAY, FEBRUARY 25, 1999
TIME: 10:00 A.M.
PLACE: THE YARROW HOTEL
1800 PARK AVENUE
PARK CITY, UT 84060
===================================================
At our Annual Meeting, you will have the opportunity to vote to:
* Elect two directors; and
* Ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent certified public accountants for the fiscal year ending
September 30, 1999.
In addition to the formal items of business, we will review the major
developments of 1998 and answer any questions which you may have about the
Company or its activities.
This letter is your notice of the Annual Meeting and is being sent to
stockholders of record as of the close of business on January 8, 1999, who are
the only holders entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, EVEN IF
YOU PLAN TO ATTEND THE MEETING. IF YOU DO ATTEND THE MEETING, YOU MAY PERSONALLY
VOTE, WHICH WILL REVOKE YOUR SIGNED PROXY. YOU MAY ALSO REVOKE YOUR PROXY AT ANY
TIME BEFORE THE MEETING BY FOLLOWING THE INSTRUCTIONS IN THE PROXY STATEMENT.
We look forward to seeing you at the meeting.
Sincerely,
/s/ FRANK W. GAY II
Frank W. Gay II
Chairman of the Board and
Chief Executive Officer
<PAGE>
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PROXY STATEMENT FOR THE
NUTRACEUTICAL INTERNATIONAL CORPORATION
1999 ANNUAL MEETING OF STOCKHOLDERS
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
*WHERE CAN I GET MORE INFORMATION?................................................................................................ 1
PROXY STATEMENT FOR THE NUTRACEUTICAL INTERNATIONAL CORPORATION
1999 ANNUAL MEETING OF STOCKHOLDERS.......................................................................................... 2
*INFORMATION ABOUT THE ANNUAL MEETING AND VOTING.................................................................................. 2
*About this Proxy Statement.................................................................................................. 2
*Number of Votes............................................................................................................. 2
*The Quorum Requirement...................................................................................................... 2
*Voting By Proxy............................................................................................................. 2
*Revoking Your Proxy......................................................................................................... 3
*Voting in Person............................................................................................................ 3
*Approving the Proposals..................................................................................................... 3
-Proposal I......................................................................................................... 3
-Proposal II........................................................................................................ 3
-The Effect of Broker Non-Votes..................................................................................... 3
*The Cost of Soliciting Proxies.............................................................................................. 3
*PROPOSALS........................................................................................................................ 4
*Proposal I: Electing Directors......................................................................................... 4
*Proposal II: Ratifying the Appointment of PricewaterhouseCoopers LLP as the Company's
Independent Certified Public Accountants for the Fiscal Year Ending
September 30, 1999......................................................................................... 4
*THE BOARD OF DIRECTORS........................................................................................................... 5
-Director Nominees (Class I Directors).............................................................................. 5
-Class II Directors (term expiring at the 2000 Annual Meeting)...................................................... 5
-Class III Directors (term expiring at the 2001 Annual Meeting)..................................................... 5
*Committees of the Board..................................................................................................... 6
*Director Compensation....................................................................................................... 6
*Compensation Committee Interlocks and Insider Participation................................................................. 6
*Certain Relationships and Related Transactions.............................................................................. 7
-Transaction Services Agreement..................................................................................... 7
-Indemnification of Directors and Officers.......................................................................... 7
-Agreements Among Securityholders................................................................................... 7
*Compliance with Section 16(a) Beneficial Ownership Reporting Requirements in 1998........................................... 7
*PRINCIPAL STOCKHOLDERS........................................................................................................... 8
*MANAGEMENT COMPENSATION.......................................................................................................... 9
*General..................................................................................................................... 9
*Summary Compensation Table.................................................................................................. 9
*Option Grants in Last Fiscal Year........................................................................................... 9
*Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values...........................................10
-Stock Plans........................................................................................................10
The 1995 Stock Plan.......................................................................................10
1998 Stock Incentive Plan.................................................................................10
Employee Stock Purchase Plan..............................................................................11
Non-Employee Director Stock Option Plan...................................................................11
401(k) Plan...............................................................................................11
*COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..........................................................................12
*PERFORMANCE GRAPH................................................................................................................13
*SUBMISSION OF STOCKHOLDERS' PROPOSALS AND ADDITIONAL INFORMATION.................................................................14
</TABLE>
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WHERE CAN I GET MORE INFORMATION?
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. You can also obtain copies of the documents
at prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-
0330 for further information on the operation of the public reference
facilities.
Enclosed with this Proxy is a copy of Nutraceutical's Annual Report on Form
10-K for the fiscal year ended September 30, 1998, along with its accompanying
financial statements and schedules. If you would like copies of any other
recently filed documents, please direct your request to Investor Relations,
Nutraceutical International Corporation, 1400 Kearns Boulevard, 2/nd/ Floor,
Park City, Utah 84060.
<PAGE>
PROXY STATEMENT FOR THE
NUTRACEUTICAL INTERNATIONAL CORPORATION
1999 ANNUAL MEETING OF STOCKHOLDERS
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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
ABOUT THIS PROXY STATEMENT
We have sent you this Proxy Statement and the enclosed proxy card because
Nutraceutical's Board of Directors is soliciting your proxy to vote at the 1999
Annual Meeting of Stockholders. This Proxy Statement summarizes the information
which you will need in order to vote intelligently at the Annual Meeting.
However, you need not attend the Annual Meeting in order to vote your shares.
You may instead simply complete, sign and return the enclosed proxy card to
register your vote.
We sent this Proxy Statement and the enclosed proxy card on January 28,
1999 to all stockholders who owned Nutraceutical common stock at the close of
business on January 8, 1999, who are the only stockholders entitled to vote at
the Annual Meeting. For ten days prior to the Annual Meeting, a list of
Nutraceutical's stockholders will be open for examination at Nutraceutical's
headquarters by any stockholder for any reason relating to the meeting. As of
the record date, there were 11,670,475 shares of Nutraceutical common stock
outstanding.
NUMBER OF VOTES
Each share of Nutraceutical common stock entitles you to one vote on each
proposal at the Annual Meeting. The enclosed proxy card indicates the number of
shares of Nutraceutical common stock that you own.
THE QUORUM REQUIREMENT
At the Annual Meeting, inspectors of election will determine whether there
is a quorum present. A quorum is required to conduct any business at the
meeting. For a quorum to be present, the holders of a majority of the
outstanding shares of common stock must be present in person or by proxy. If
you mark your proxy card "abstain," or if your proxy is held in street name by
your broker and it is not voted on all proposals, your proxy will nonetheless be
counted as present for purposes of determining a quorum.
VOTING BY PROXY
Whether or not you plan to attend the Annual Meeting, please complete, sign
and date, and return the enclosed proxy card in the envelope provided.
Returning the proxy card will not affect your right to attend the Annual Meeting
and vote.
If you fill out your proxy card properly and return it in time to vote,
your proxy will vote your shares as you have directed. If you sign the proxy
card but do not make any specific indications of how you wish to vote, your
proxy will vote your shares
. "FOR" the election of the two nominees for Class I Director; and
. "FOR" ratifying the appointment of PricewaterhouseCoopers LLP as the
Company's independent certified public accountants for the fiscal year ending
September 30, 1999.
If any other matter is presented at the Annual Meeting, your proxy will
vote in accordance with his best judgement. We know of no matters to be
addressed at the Annual Meeting beyond those described in this Proxy Statement.
2
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REVOKING YOUR PROXY
If you give a proxy, you may revoke it at any time before it is exercised.
You may revoke your proxy in the following ways:
. You may send in another proxy with a later date.
. You may notify Nutraceutical's Vice President of Legal Affairs in
writing before the Annual Meeting.
. You may attend the meeting and vote in person.
VOTING IN PERSON
If you plan to attend the Annual Meeting and vote in person, we will give
you a ballot when you arrive. However, if your shares are held in the name of
your broker, bank, or other nominee, you must bring an account statement or
letter from the nominee indicating that you are the beneficial owner of the
shares on January 8, 1999, the record date for voting.
APPROVING THE PROPOSALS
PROPOSAL I: ELECTING TWO CLASS I DIRECTORS
At the Annual Meeting, the two nominees for Director receiving the greatest
number of votes cast in person or by proxy will be elected. If you are present
and do not vote, or if you send in your proxy marked "withheld," your vote will
have no impact on the election of those directors as to whom you have withheld
votes.
PROPOSAL II: RATIFYING THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 1999
In order to be approved, all other matters to be voted on, including
ratifying the appointment of independent accountants, require the affirmative
vote of a majority of the shares entitled to vote at the meeting, cast either in
person or by proxy. If you attend the meeting but do not vote, or if you send
in your proxy marked "abstain," your abstention will have no impact on the
appointment of independent accountants.
THE EFFECT OF BROKER NON-VOTES
Under the rules of the Nasdaq Stock Market, if your broker holds your
shares in its name, the broker will be entitled to vote your shares on the
Proposals even if it does not receive instructions from you. If your broker
does not vote your shares on either of the proposals, such "broker non-votes"
will not be counted for purposes of determining whether the proposal has
received enough affirmative votes to be approved.
THE COST OF SOLICITING PROXIES
Nutraceutical will pay all of the costs of soliciting these proxies. In
addition to mailing proxy solicitation material, our directors and employees may
also solicit proxies in person, by telephone or by other electronic means of
communication. Nutraceutical will not compensate these directors and employees
additionally for this solicitation, but Nutraceutical may reimburse them for any
out-of-pocket expenses which they incur in the process of soliciting the
proxies. We will arrange for brokers and other custodians, nominees and
fiduciaries to forward the solicitation materials to their principals, and
Nutraceutical will reimburse them for any out-of-pocket expenses which they
reasonably incur in the process of forwarding the materials.
3
<PAGE>
PROPOSALS
The Board of Directors is soliciting your vote with respect to each of the
following proposals. The Company does not expect any other matters to come
before the meeting; however, if another matter is voted upon, your proxy will
vote your shares in accordance with his best judgment. The Board of Directors
recommends that you vote "FOR" each of the following proposals:
PROPOSAL I: ELECTING DIRECTORS
The Board has nominated Messrs. Jeffrey A. Hinrichs and Matthew S. Levin as
Class I directors to be elected at the 1999 Annual Meeting. Each nominee is
currently serving as one of our directors. Certain information regarding these
nominees and each of the other directors is set forth below under the caption
"The Board of Directors." If you re-elect them, they will hold office until the
Annual Meeting in 2002 or until their successors have been elected.
We know of no reason why either of these nominees may be unable to serve as
a director. If a nominee is unable to serve, your proxy may vote for another
nominee proposed by the Board. If any director resigns, dies or is otherwise
unable to serve out a complete term, or the Board increases the number of
directors, the Board may fill the vacancy through a majority vote of those
serving at that time.
PROPOSAL II: RATIFYING THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 1999
The Board has appointed PricewaterhouseCoopers LLP as the independent
certified public accountants for Nutraceutical. If this appointment is
approved, PricewaterhouseCoopers LLP will audit the books and accounts for
Nutraceutical for the year ending September 30, 1999. PricewaterhouseCoopers
audited the financial statements of Nutraceutical for the year ended September
30, 1998. We expect representatives of PricewaterhouseCoopers LLP to attend the
Annual Meeting, where they will have the opportunity to make a statement if they
wish, and where they will be available to answer any relevant questions that you
may have.
If the appointment of PricewaterhouseCoopers LLP as independent
accountants for fiscal 1999 is not ratified by stockholders, the adverse vote
will be considered a direction to the Board to consider other accountants for
next year. However, because of the difficulty in making any substitution of
auditors so long after the beginning of the current year, the appointment for
fiscal 1999 will stand unless the Board finds other good reason for making the
change.
4
<PAGE>
THE BOARD OF DIRECTORS
The Board of Directors of Nutraceutical oversees the business and other
affairs of Nutraceutical and monitors the performance of management. In
accordance with corporate governance principles, the Board does not involve
itself in the day-to-day operations of Nutraceutical. The directors keep
themselves informed through discussions with the Chairman, other key executives
and our principal external advisors (such as legal counsel, independent
accountants, investment bankers, and other consultants), by reading reports and
other materials that we send them and by participating in Board meetings.
There are currently eight directors on Nutraceutical's Board. They are
divided into three classes, and the term of service for each class expires in a
different year, with each director serving a term of three years until a
successor is elected and qualified. Mr. Bruce R. Hough does not intend to seek
reelection as a director upon the expiration of his term at the 1999 Annual
Meeting.
The Board held four meetings and took action through written consent in
place of a meeting three additional times in fiscal 1998. All of the directors
attended 50% or more of the Board meetings during their period of service.
DIRECTOR NOMINEES (CLASS I DIRECTORS)
Jeffrey A. Hinrichs, age 41, has served as the Executive Vice President and
Chief Operating Officer of Nutraceutical since 1994. Before he joined
Nutraceutical, Mr. Hinrichs served as President of Solaray, now a subsidiary of
Nutraceutical, from 1993 to 1994. Prior to his tenure as President, Mr.
Hinrichs served as Chief Financial Officer as well as in other management
positions with Solaray from 1984 to 1993.
Matthew S. Levin, age 32, served as a Director of the Company from its
inception through January 1995 and also has served from December 1996 to the
present. Mr. Levin is a principal with Bain Capital. Mr. Levin joined Bain
Capital in 1992, and attended the Harvard Business School from 1994 to 1996.
From 1988 to 1991, Mr. Levin was a consultant with Bain & Company, Inc.
CLASS II DIRECTORS (TERM EXPIRING AT THE 2000 ANNUAL MEETING)
Geoffrey S. Rehnert, age 41, has served as a director of the Company since
its inception. He has been a Managing Director of Bain Capital since 1993, a
general partner of Bain Capital Venture Capital since 1987 and a general partner
of Bain Capital Partners since 1986. Mr. Rehnert also serves as a director of
Kollmorgen Corp., a manufacturer of electric motors; ICON Health and Fitness,
Inc., a manufacturer and distributor of home health equipment; FTD, Inc., a
floral services company; and several privately held companies.
Alexander Gordon Bearn, M.D., age 76, has served as a director of the
Company since May 18, 1998. Dr. Bearn is currently an Executive Officer of the
American Philosophical Society and serves on the board of directors of various
companies, including Profile Diagnostic Services, Inc. and Biogen, Inc. Dr.
Bearn is an emeritus former Trustee of the Rockefeller University and the Helen
Hay Whitney Foundation and a member of the Board of Trustees/Directors of the
Howard Hughes Medical Institute and Vasomedical, Inc. In addition, Dr. Bearn
has served on numerous medical, governmental and scientific boards throughout
his distinguished career, including the National Institute of Arthritis,
Metabolism and Digestive Diseases.
CLASS III DIRECTORS (TERM EXPIRING AT THE 2001 ANNUAL MEETING)
Frank W. Gay II, age 53, has served as the Chairman of the Board of
Directors of the Company since its inception and as Chief Executive Officer
since 1994. Mr. Gay has been a partner of F.W. Gay & Sons, a private equity
investment group, from 1967 to present.
Robert C. Gay, age 47, has served as a Director of the Company since its
inception. He has been a Managing Director of Bain Capital, Inc., a private
equity firm, since 1993, and has been a general partner of Bain Capital Venture
Capital since 1989. He is also Vice Chairman of the Board of Directors of IHF
Capital, parent of ICON Health and Fitness Inc., a manufacturer and distributor
of home health equipment. In addition, Mr. Gay serves as a director of
5
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American Pad & Paper Company, an office supply manufacturer; Cambridge
Industries, Inc., a manufacturer of automotive parts; GS Technologies
Corporation, a manufacturer of specialty steel products; and Physio-Control
International Corporation, a manufacturer of defibrillators and vital sign
assessment devices.
Jon Steven Young, age 37, has served as a director of the Company since May
18, 1998. Mr. Young is a professional athlete who has played quarterback for
the San Francisco 49'ers since 1987. He founded the Forever Young Foundation,
as well as the Sports Education and Values Foundation (which is a Licensed
Education Arm of the US Olympic Committee). Mr. Young is affiliated with the
Anasazi Foundation, a non-profit group. Mr. Young also currently serves as an
educational consultant to Sun MicroSystems Corporation.
COMMITTEES OF THE BOARD
The Board has two standing committees: the Compensation Committee and the
Audit Committee.
The Compensation Committee includes two independent directors, who make
decisions regarding salaries, incentive compensation, stock option grants and
other matters involving executive officers and key Nutraceutical Employees. The
Compensation Committee is authorized to provide a general review of and make
decisions regarding Nutraceutical's compensation and benefit plans, ensuring
that they meet corporate objectives. In addition, the Compensation Committee
reviews the Chief Executive Officer's recommendations on the compensation of all
Nutraceutical officers and Nutraceutical's compensation policies and practices
and makes decisions regarding such compensation. The present members of the
Compensation Committee are Messrs. Gay II, Rehnert and Levin. The Compensation
Committee met two times following its formation during fiscal 1998.
Nutraceutical's Audit Committee makes recommendations to the Board
regarding the independent accountants to be nominated for election by the
stockholders. The Committee reviews the independence of the accountants,
approves the scope of the annual audit activities of the accountants, approves
the audit fee for the accountants, and reviews the audit results.
PricewaterhouseCoopers LLP currently serves as Nutraceutical's independent
accountants. The present members of the Audit Committee are Messrs. Gay II,
Young and Dr. Bearn. The Audit Committee did not meet during fiscal 1998
because it was not formed until after the Company's Initial Public Offering in
February 1998.
Nutraceutical has no nominating committee. The entire Board is responsible
for filling vacancies which occur on the Board and for recommending candidates
for election as directors at the Annual Meeting.
DIRECTOR COMPENSATION
Directors who are employees of the Company or are affiliated with its
significant stockholders do not receive a salary or an annual retainer for their
services. The Company pays non-employee directors not otherwise affiliated with
the Company or its significant stockholders ("Non-Employee Directors") a
quarterly cash retainer of $5,000. In addition, the Company reimburses all
Directors for reasonable expenses incurred in attending Board meetings. Under
the Company's 1998 Non-Employee Director Stock Option Plan, each of the Non-
Employee Directors has been granted options to purchase 10,000 shares of common
stock upon his initial election or appointment to the Board. See "Non-Employee
Director Stock Option Plan." Messrs. Gay, Rehnert and Levin have not been
granted any options and are not compensated by the Company for their service as
members of the Board. Directors do not receive any additional compensation for
committee participation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Robert C. Gay, Rehnert and Levin, directors of the Company, have
professional affiliations with Bain Capital. Messrs. Robert C. Gay and Frank W.
Gay II are brothers.
6
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transaction Services Agreement
Nutraceutical is party to a transaction services agreement with Bain
Capital, pursuant to which Bain Capital may provide advisory services in
connection with certain transactions (whether debt or equity) by Nutraceutical
or any of Nutraceutical's subsidiaries in exchange for a transaction fee of 1.0%
of the aggregate value of the transaction. Nutraceutical will not have to pay
any recurring annual management fees under the agreement. Pursuant to the
agreement, Bain Capital will provide advisory services and personnel support to
help Nutraceutical with the identification, structuring, negotiating and
financial analysis of the transactions. We believe that the terms of the
agreement are at least as favorable for Nutraceutical as those that we could
negotiate with a third party.
Indemnification of Directors and Officers
Nutraceutical has agreed to provide indemnification for its directors and
executive officers beyond the indemnification provided for in Nutraceutical's
Amended and Restated Certificate of Incorporation and By-laws.
Agreements Among Securityholders
Nutraceutical and certain stockholders are parties to a Registration
Agreement providing for the registration of certain shares of common stock in
future periods.
COMPLIANCE WITH SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS IN
1998
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers, and greater-than-10% stockholders to file
reports with the SEC regarding changes in their beneficial ownership of
Nutraceutical common stock and to provide Nutraceutical with copies of the
reports. Based on our review of these reports and of certifications furnished
to us, we believe that all of these reporting persons complied with their filing
requirements for 1998, except that Frank W. Gay II, Bruce R. Hough, Jeffrey A.
Hinrichs, William T. Logan, Leslie M. Brown, Jr. and Stanley E. Soper, who
purchased shares in the Company's Initial Public Offering, filed late Form 4s
with respect to such purchases.
7
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PRINCIPAL STOCKHOLDERS
The table below sets forth certain information regarding the equity
ownership of the Company as of September 30, 1998 by: (i) each person or entity
who beneficially owns five percent or more of a class of capital stock; (ii)
each Director and each of the named executive officers; and (iii) all directors
and executive officers of the Company as a group. Unless otherwise stated, each
of the persons named in the table has sole or shared voting and investment power
with respect to the securities beneficially owned by it or him as set forth
opposite its or his name.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK(a)
---------------------------
NUMBER OF PERCENT OF
NAME SHARES CLASS
---- ----------- ------------
<S> <C> <C>
5% STOCKHOLDERS
Bain Capital Funds (b)(c)....................................... 4,791,116 41.0
Heller Financial, Inc. (d)(e)................................... 690,446 5.6
DIRECTORS AND OFFICERS
Frank W. Gay II................................................. 1,065,986 9.0
Bruce R. Hough.................................................. 137,201 1.2
Jeffrey A. Hinrichs............................................. 248,199 2.1
William T. Logan................................................ 150,344 1.3
Leslie M. Brown, Jr............................................. 18,315 *
Stanley E. Soper................................................ 10,283 *
Robert C. Gay (f)............................................... 4,791,116 41.0
Geoffrey S. Rehnert (f)......................................... 4,791,116 41.0
Matthew S. Levin (f)............................................ 325,167 2.8
Alexander Gordon Bearn, M.D..................................... 2,500 *
Jon Steven Young................................................ 2,500 *
All executive officers and directors as a group (nine persons).. 6,426,444 53.5
</TABLE>
- --------------------------
* represents less than 1% of the total.
(a) Calculation of percentage of beneficial ownership assumes the exercise of
all warrants and options exercisable within 60 days of the date hereof only
by the respective named stockholder.
(b) Includes 2,082,606 shares of common stock held by Bain Capital Fund IV,
L.P. ("Fund IV"); 2,383,343 shares of common stock held by Bain Capital
Fund IV-B, L.P. ("Fund IV-B"); 157,036 shares of common stock held by BCIP
Associates ("BCIP"); and 168,131 shares of common stock held by BCIP Trust
Associates, L.P. ("BCIP Trust" and collectively with Fund IV, Fund IV-B and
BCIP, the "Bain Capital Funds").
(c) The address of such person is Two Copley Place, Boston, Massachusetts
02116.
(d) The address of Heller Financial, Inc. is 500 West Monroe, Suite 1200,
Chicago, Illinois 60661.
(e) Represents warrants to purchase shares of common stock.
(f) All of the shares shown are held by the Bain Capital Funds.
8
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MANAGEMENT COMPENSATION
GENERAL
Executive officers of the Company are elected by and serve at the
discretion of the Board. The following table shows information concerning the
compensation paid or accrued for the fiscal year ended September 30, 1998 for
the Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company as of the end of fiscal 1998 (the "Named
Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY (a) BONUS COMPENSATION (b) OPTIONS
- ------------------------------------- ---- --------- ------ ----------------- ----------
<S> <C> <C> <C> <C> <C>
Frank W. Gay II...................... 1998 $236,250 63,750 9,315 32,000
Chief Executive Officer
Bruce R. Hough....................... 1998 160,000 12,000 7,446 10,000
President
Jeffrey A. Hinrichs.................. 1998 165,000 30,937 7,933 30,000
Executive Vice President and Chief
Operating Officer
William T. Logan..................... 1998 130,000 20,800 6,500 10,000
Senior Vice President, Marketing
and Sales
Leslie M. Brown, Jr.................. 1998 105,635 24,300 5,282 25,000
Senior Vice President, Finance and
Chief Financial Officer
</TABLE>
- ----------------------
(a) May include amounts earned in a fiscal year but deferred at the named
executive officer's election pursuant to the Company's 401(k) Plan.
(b) Includes matching contributions made by the Company under its 401(k) Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information regarding stock options granted by
the Company to the Named Executives during the Company's last fiscal year:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTION EXERCISE MARKET OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED OR PRICE ON FOR OPTION TERM (b)
OPTIONS IN FISCAL BASE PRICE DATE OF EXPIRATION -----------------------------
NAME GRANTED YEAR ($/SHARE) GRANT DATE (a) 5% 10%
- ---------------------- ----------- ---------- ----------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank W. Gay II....... 32,000 10.2% $17.50 $17.50 2/20/08 $352,181 $892,496
Bruce R. Hough........ 10,000 3.2 17.50 17.50 2/20/08 110,057 278,905
Jeffrey A. Hinrichs... 30,000 9.6 17.50 17.50 2/20/08 330,170 836,715
William T. Logan...... 10,000 3.2 17.50 17.50 2/20/08 110,057 278,905
Leslie M. Brown, Jr... 25,000 8.0 17.50 17.50 2/20/08 275,141 697,262
- ----------------------
</TABLE>
(a) Options may expire earlier pursuant to the terms of the 1998 Stock
Incentive Plan.
9
<PAGE>
(b) Amounts reflect certain assumed rates of appreciation set forth in the
SEC's executive compensation disclosure rules. Actual gains, if any, on
stock option exercises depend on future performance of the Company's stock
and overall market conditions. At an annual rate of appreciation of 5% per
year for the option term, the price of the common stock would be
approximately $28.51 per share at the Expiration Date. At an annual rate of
appreciation of 10% per year for the option term, the price of the common
stock would be approximately $45.39 per share at the Expiration Date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table shows information for the Named Executives concerning
stock option exercises during the Company's last fiscal year and options
outstanding at the end of the last fiscal year:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END AT FY-END (a)
SHARES ACQUIRED -------------------------- -------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------- ---------------- --------------- -------------------------- -------------------------
<S> <C> <C> <C> <C>
Frank W. Gay II........ 0 $0 182,205/38,023 $611,417/67,936
Bruce R. Hough......... 0 0 31,946/16,424 110,787/27,697
Jeffrey A. Hinrichs.... 0 0 37,631/37,544 122,283/40,762
William T. Logan....... 0 0 1,250/8,750 0/0
Leslie M. Brown, Jr.... 0 0 11,595/24,699 18,195/6,067
- -----------------------
</TABLE>
(a) Assumes a fair market value of the common stock at September 30, 1998 equal
to $7.06 per share.
Stock Plans
The 1995 Stock Plan. Nutraceutical's 1995 Stock Option Plan (the "1995
Stock Plan") authorizes grants of stock options and sales of any class or
classes of common stock to current or future employees, directors, consultants
or advisors of the Company or its subsidiaries. Under the 1995 Stock Plan, the
Company is authorized to grant stock options for up to an aggregate of 225,873
shares of common stock, subject to adjustment to prevent any dilution or
expansion of the rights of participants. Currently, non-qualified options to
purchase an aggregate of 173,921 shares of common stock are outstanding under
the 1995 Stock Plan. The exercise prices of the options granted under the 1995
Stock Plan range from approximately $4.91 per share to $9.30 per share. The
Company does not anticipate granting any additional options under the 1995 Stock
Plan. The Board and stockholders of the Company approved the 1995 Stock Plan.
1998 Stock Incentive Plan. Nutraceutical's 1998 Stock Incentive Plan (the
"1998 Stock Incentive 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 that the Compensation Committee
deems consistent with the purposes of the 1998 Stock Incentive Plan. The 1998
Stock Incentive Plan is administered by the Compensation Committee. Certain
employees, advisors and consultants of the Company are eligible to participate
in the 1998 Stock Incentive Plan. The Committee selects the participants and
determines the terms and conditions of the awards under the 1998 Stock Incentive
Plan. The Board and stockholders of the Company approved the 1998 Stock
IncentivePlan.
An aggregate of 1,050,000 shares of Nutraceutical common stock was reserved
for issuance under the 1998 Stock Incentive Plan. The 1998 Stock Incentive Plan
provides that each Participant will be limited to receiving awards relating to
no more than 100,000 shares of common stock per year.
Options granted under the 1998 Stock Incentive Plan may be either incentive
stock options ("ISOs") or non-qualified stock options ("NQOs"), as determined by
the Committee. The options may also be subject to time vesting and certain other
restrictions. This is at the sole discretion of the Committee. The Board may
generally amend the 1998 Stock Incentive Plan at any time. To do this, the
Board does not need the approval of Nutraceutical's stockholders, but its
decisions will be subject to applicable federal securities and tax law
limitations (including regulations of the Nasdaq National Market).
10
<PAGE>
Employee Stock Purchase Plan. The Nutraceutical International Corporation
Employee Stock Discount Purchase Plan (the "Stock Purchase Plan") is intended to
give employees a convenient means of purchasing shares of common stock through
payroll deductions and quarterly elections, if they wish to do so. The Stock
Purchase Plan provides an incentive to participate by permitting purchases at a
discounted price. We believe that ownership of stock by employees will foster
greater employee interest in the success, growth and development of the Company.
Subject to certain restrictions, each of Nutraceutical's employees who is a
U.S. resident or a U.S. citizen temporarily on location at a facility outside of
the United States will be eligible to participate in the Stock Purchase Plan if
he or she has been employed by Nutraceutical for more than one year. We have
reserved 750,000 shares of common stock for issuance through the Stock Purchase
Plan. Each eligible employee is entitled to purchase a maximum number of shares
per quarter equal to 15% of his or her gross pay for the immediately prior
quarter divided by the purchase price per share. Employees may elect to
participate and purchase stock on a quarterly basis. Each participating
employee contributes to the Stock Purchase Plan by making a lump sum
contribution or by choosing a payroll deduction in any specified amount, with a
minimum deduction of $25 per payroll period. A participating employee may
increase or decrease the amount of his or her payroll deduction (including a
change to a zero deduction) as of the beginning of any calendar quarter and may
suspend deductions at any time. The Company credits elected contributions to
participants' accounts at the end of each calendar quarter. In addition,
employees may make lump sum contributions during a quarter, which will enable
them to purchase the maximum number of shares available for purchase during that
quarter.
The Company uses each participating employee's contributions to purchase
shares for his or her share account within 30 days after the last day of each
calendar quarter. The cost per share will be 90% of the lower of (i) the closing
price of Nutraceutical's common stock on the Nasdaq National Market on the first
trading day of the calendar quarter or (ii) the closing price of Nutraceutical's
common stock on the Nasdaq National Market on the last trading day of the
calendar quarter. The number of shares purchased on each employee's behalf and
deposited in his or her share account will be based on the amount accumulated in
the participant's cash account and the purchase price for shares in that
calendar quarter. The shares purchased for the employees under the Stock
Purchase Plan carry full rights to receive any dividends declared. Pursuant to
the Stock Purchase Plan, the Company will automatically use any dividends
attributable to shares in the employee's share account to purchase additional
shares for that employee's share account. The Company will credit share
distributions to the employee's share account as of the record date, and will
credit share splits as of the effective date. The participating employee will
fully own all shares in his or her share account, and he or she may withdraw
them for sale (or otherwise) by written request. Subject to applicable federal
securities and tax laws, the Board of Directors has the right to amend or to
terminate the Stock Purchase Plan. Amendments to the Stock Purchase Plan will
not affect any participating employee's right to the benefit of the
contributions he or she has made prior to the date of any such amendment. If the
Stock Purchase Plan is terminated, the Committee will be required to distribute
all shares held in each participating employee's share account, plus an amount
of cash equal to the balance in each participating employee's cash account.
Non-Employee Director Stock Option Plan. The 1998 Non-Employee Director
Stock Option Plan (the "Director Option Plan") is intended to encourage stock
ownership by certain Nutraceutical directors, to provide those individuals with
an additional incentive to manage the Company in the shareholders' best
interests and to provide a form of compensation that will attract and retain
highly qualified individuals as members of the Board.
Under the Director Option Plan, the Committee or the full Board may make
discretionary grants of options and determine the terms and conditions of such
options. The Director Option Plan provides for the granting of options to non-
employee directors, as defined, covering an aggregate of 150,000 shares of
common stock of the Company, subject to certain adjustments reflecting changes
in the Company's capitalization. Although each member of the Committee is
eligible to participate in the Director Option Plan, the full Board must approve
grants made to a member of the Committee, with the involved member abstaining
from the vote. Nutraceutical is under no obligation to retain as a director any
director to whom it has granted an option.
401(k) Plan. Nutraceutical has a 401(k) defined contribution profit sharing
plan which covers substantially all employees. Under the plan, employees can
contribute up to 15% of their compensation, not to exceed the prescribed annual
statutory limit ($10,000 for calendar 1998). The Company makes matching and
discretionary contributions to the plan which approximate 5% of all eligible
employees' salaries.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
UNDER THE RULES OF THE SEC, THIS COMPENSATION COMMITTEE REPORT IS NOT
DEEMED TO BE INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING
THIS PROXY STATEMENT BY REFERENCE INTO ANY FILINGS WITH THE SEC.
The following report has been submitted by the Compensation Committee of
the Board:
The Compensation Committee was established by the Board in February 1998 in
connection with the Company's initial public offering. The Compensation
Committee is currently comprised of Messrs. Gay II, Rehnert and Levin.
The Compensation Committee is responsible (i) for reviewing the
recommendations of the Company's Chief Executive Officer on compensation levels
of all other officers of the Company and (ii) adopting and changing compensation
policies and practices of the Company and reporting its recommendations to the
full Board. In addition, the Compensation Committee is responsible for the
administration of the Company's stock plans. In reviewing the Company's
compensation programs, the Compensation Committee intends to adhere to a
compensation philosophy that (i) attracts and retains qualified executives who
will add to the long-term success of the Company, (ii) contributes to the
achievement of operational and strategic objectives, and (iii) is commensurate
with each executive's performance, level of responsibility and overall
contribution to the success of the Company. In making its recommendations to the
full Board concerning adjustments to compensation levels, the Compensation
Committee intends to consider the financial condition and operational
performance of the Company during the prior year. The Compensation Committee
expects the Company's executive compensation program to consist of three
principal components: (i) base salary; (ii) annual bonus; and (iii) long-term
equity incentives. The Committee has set forth below a discussion as to how such
compensation was determined.
Base Salary. The base salary for Fiscal 1998 for each of the executive
officers of the Company was determined based on the expected level of
responsibility of each and competitive market conditions. Such salaries were
initially established by the Chief Executive Officer and Matthew S. Levin and
subsequently approved by the full Board.
Annual Bonus. Each of the executive officers of the Company were and are
eligible to earn a bonus based upon their performance during the applicable
period and the Company's performance generally.
Long-Term Equity Incentives. Prior to the completion of the IPO, the
Company adopted the 1998 Stock Incentive Plan. Under the 1998 Stock Incentive
Plan, the Compensation Committee was granted broad authority to award equity-
based compensation arrangements to any eligible employee, consultant or advisor
of the Company. Since the ultimate value of stock options bears a direct
relationship to market price of the common stock, the Committee believes that
awards under the 1998 Stock Incentive Plan are an effective incentive for the
Company's management to create value for the Company's stockholders. As of
September 30, 1998, the Board had awarded options to purchase an aggregate of
267,847 shares of common stock under the 1998 Stock Incentive Plan.
The foregoing report has been approved by all members of the Compensation
Committee.
Frank W. Gay II (Chairman)
Geoffrey S. Rehnert
Matthew S. Levin
12
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return since the common stock became publicly traded on February 19, 1998. The
graph assumes that the value of the investment in the Company's common stock at
its initial public offering price of $17.50 per share and each index was $100.00
on February 19, 1998.
Comparison of the Cumulative Total Return Among Neutraceutical
International Corporation, the NASDAQ Stock Market (U.S.) Index and
the Adams, Harkness & Hill Healthy Living Index
[PERFORMANCE GRAPH APPEARS HERE]
FEBRUARY 19, 1998 SEPTEMBER 30, 1998
----------------- ------------------
Nutraceutical International Corporation (1) $100 $ 40
NASDAQ Stock Market (U.S.) $100 $106
Adams, Harkness & Hill Healthy Living Index $100 $ 53
- --------------------
(1) The closing sale price of the common stock on September 30, 1998 was $7.06
per share, as reported by the Nasdaq National Market.
13
<PAGE>
SUBMISSION OF STOCKHOLDERS' PROPOSALS AND ADDITIONAL INFORMATION
Proposals of stockholders intended to be eligible for inclusion in the
Company's proxy statement and proxy card relating to the 2000 annual meeting of
stockholders of the Company must be received by the Company on or before the
close of business December 31, 1999. Such proposals should be submitted by
certified mail, return receipt requested.
The By-Laws provide that a stockholder wishing to present a nomination for
election of a director or to bring any other matter before an annual meeting of
stockholders must give written notice to the Company's Secretary not less than
60 days nor more than 90 days prior to the meeting and that such notice must
meet certain other requirements. Any stockholder interested in making such a
nomination or proposal should request a copy of the provisions of the By-Laws
from the Secretary of the Company.
14
<PAGE>
NUTRACEUTICAL INTERNATIONAL CORPORATION
PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD FEBRUARY 25, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Frank W. Gay II and Bruce R.
Hough, and each or any of them, proxies of the undersigned, with full power of
substitution, to vote all of the shares of Nutraceutical International
Corporation, a Delaware corporation (the "Company") which the undersigned may be
entitled to vote at the Annual Meeting of Stockholders of the Company to be held
at The Yarrow Hotel, 1800 Park Ave., Park City, UT 84060 on Thursday, February
25,1999 at 10:00 a.m. (Mountain time) or at any adjournment or postponement
thereof, as shown on the voting side of this card.
--------------------
SEE REVERSE SIDE
--------------------
<PAGE>
[X] Please mark your votes as in this example.
This proxy will be voted as specified. If a choice is not specified, this
proxy will be voted FOR the nominees for Class I Directors and FOR Proposal
2.
1. Election of All Nominees for Class I Directors Listed Hereon.
Nominees: Jeffrey A. Hinrichs
Matthew S. Levin
FOR WITHHELD
[_] [_]
For all nominees listed hereon, except vote withheld from the following
nominee(s):
_____________________________________________________________
2. Ratify the appointment of PricewaterhouseCoopers LLP as the independent
accountants of the Company for the 1999 fiscal year.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment
or postponement thereof.
This proxy should be dated, signed by the stockholder exactly as the
stockholder's name appears hereon and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate.
Please sign exactly as name(s) appear hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
_________________________________________
_________________________________________
Signature(s) Date
<PAGE>
January 28, 1999
To Our Shareholders:
Fiscal 1998 has seen accomplishments and challenges for Nutraceutical
International Corporation during its first year as a public company. Among the
highlights for the year:
. REVENUE GROWTH: Revenues grew to $104.7 million and net income reached $2.6
million, with Adjusted EBITDA at $19.4 million.
. COMPLETION OF INITIAL PUBLIC OFFERING: This significant step allowed us to
pay down a substantial portion of our debt, build a stronger financial
foundation and provide stock ownership opportunities to our employees and the
public.
. ACQUISITION OF ACTION LABS: This acquisition allowed the company to increase
its presence on the East Coast.
. SIGNING A FAVORABLE LEASE AGREEMENT FOR APPROXIMATELY 300,000 SQUARE FEET OF
SPACE: This new space will eventually house a new distribution, bottling and
bulk manufacturing facility and administrative offices in Ogden, Utah, where
most of the company's employees are located. The company is currently moving
its Utah distribution operations into part of this newly remodeled facility
and intends to continue to consolidate its operations.
Most importantly, the company has continued to expand profitably in spite of an
overall slowing of the nutritional supplement industry. This overall slowing
appears to be the result of numerous factors, including the lack of any recent
"hit" products in the industry and a possible slow-down in repeat purchases by
newer health food supplement users. In addition, mass market manufacturers and
retailers are attempting to increase market share and more fully participate in
the success of health food stores with new supplement lines and heavy
advertising. We monitor these factors in light of our stated strategies in
order to keep Nutraceutical competitive. We continue to believe that our core
strategy should be to focus on the health food channel, where margins are
stronger because dedicated supplement customers demand a wide product selection,
high potency ingredients and educational support.
As a result of this focus, we believe that we have improved our position in
health food stores. For example, in a recent survey conducted by HSR: HEALTH
SUPPLEMENT FOOD RETAILER, health food stores chose Nutraceutical's premier
brand, "Solaray," as the leading dietary supplement line in the nation. In the
same survey, our overall ranking (i.e., the number of categories in which we
ranked in the top three) was much higher than that of the nearest competitor.
Our customers and our nearly 500 employees deserve to be recognized for this
accomplishment.
We are optimistic about the outstanding talents of our management team, the work
ethic and dedication of our employees, the loyalty of our customers and the
quality of our products. We continue to believe in our strategy and in the
opportunities that lie ahead in this industry. We look forward to your continued
support.
Sincerely,
Frank W. Gay II
Chairman and CEO
- --------------------------------------------------------------------------------
The Securities and Exchange Commission (SEC) encourages companies to
disclose forward looking information so that investors can better understand a
company's future prospects and make informed investment decisions. Due to
changing market conditions, product competition, the nature of product
development, regulatory approval processes, and the uncertainty associated with
acquiring additional businesses, the achievement of forward-looking statements
contained in the foregoing message are subject to risks and uncertainties. For
further details and a discussion of these risks and uncertainties, see
Nutraceutical's SEC filings, including its most recent Form 10-K dated December
29, 1998.
