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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
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<S> <C>
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
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<TABLE>
<C> <S>
NUTRACEUTICAL INTERNATIONAL CORPORATION
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/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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NUTRACEUTICAL INTERNATIONAL CORPORATION
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1400 Kearns Boulevard, 2(nd) Floor
Park City, Utah 84060
January 28, 2000
To our Stockholders:
You are cordially invited to the 2000 Annual Meeting of Stockholders
("Annual Meeting") for Nutraceutical International Corporation ("Nutraceutical"
or the "Company").
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- ------------------------------------------
- ------------------------------------------
DATE: TUESDAY, FEBRUARY 29,
2000
TIME: 9:00 A.M.
PLACE: PARK CITY MARRIOTT
1895 SIDEWINDER DRIVE
PARK CITY, UT 84060
- ------------------------------------------
- ------------------------------------------
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At the 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, 2000.
In addition to the formal items of business, Nutraceutical will review the
major developments of fiscal 1999 and answer questions that you may have about
the Company and 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 10, 2000, 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
("PROXY").
We look forward to seeing you at the meeting.
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Sincerely,
Frank W. Gay II
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
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PROXY STATEMENT FOR THE
NUTRACEUTICAL INTERNATIONAL CORPORATION
2000 ANNUAL MEETING OF STOCKHOLDERS
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TABLE OF CONTENTS
<TABLE>
<S> <C>
WHERE CAN I GET MORE INFORMATION?........................... i
PROXY STATEMENT FOR THE NUTRACEUTICAL INTERNATIONAL
CORPORATION
2000 ANNUAL MEETING OF STOCKHOLDERS....................... 1
- -INFORMATION ABOUT THE ANNUAL MEETING AND VOTING............ 1
*About this Proxy Statement............................. 1
*Number of Votes........................................ 1
*The Quorum Requirement................................. 1
*Voting by Proxy........................................ 1
*Revoking Your Proxy.................................... 2
*Voting In Person....................................... 2
*Approving the Proposals................................ 2
-Proposal I......................................... 2
-Proposal II........................................ 2
-The Effect of Broker Non-Votes..................... 2
*The Cost of Soliciting Proxies......................... 2
- -PROPOSALS.................................................. 3
*Proposal I: Electing Directors....................... 3
*Proposal II: Ratifying the Appointment of
PricewaterhouseCoopers LLP as the
Company's Independent Certified Public
Accountants for the Fiscal Year
Ending September 30, 2000.................. 3
- -THE BOARD OF DIRECTORS..................................... 3
-Class II Directors (Nominated for Election)........ 4
-Class III Directors (Term Expiring at the 2001
Annual Meeting)..................................... 4
-Class I Directors (Term Expiring at the 2002 Annual
Meeting)............................................ 5
*Committees of the Board................................ 5
*Director Compensation.................................. 5
*Compensation Committee Interlocks and Insider
Participation.......................................... 6
*Certain Relationships and Related Transactions......... 6
-Transaction Services Agreement..................... 6
-Indemnification of Directors and Officers.......... 6
-Agreements Among Securityholders................... 6
*Compliance With Section 16(a) Beneficial Ownership
Reporting Requirements in 1999......................... 6
- -PRINCIPAL STOCKHOLDERS..................................... 7
- -MANAGEMENT COMPENSATION.................................... 8
*General................................................ 8
*Summary Compensation Table............................. 8
*Option Grants in Last Fiscal Year...................... 8
*Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year End Option Values.......................... 9
-Stock Plans........................................ 9
1995 Stock Plan................................... 9
1998 Stock Incentive Plan......................... 9
Employee Stock Purchase Plan...................... 9
Non-Employee Director Stock Option Plan........... 10
401(k) Plan....................................... 11
- -COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.... 11
- -PERFORMANCE GRAPH.......................................... 12
- -SUBMISSION OF STOCKHOLDERS' PROPOSALS AND ADDITIONAL
INFORMATION............................................... 13
</TABLE>
<PAGE>
WHERE CAN I GET MORE INFORMATION?
Nutraceutical files annual, quarterly and special reports, proxy statements
and other information with the SEC. Nutraceutical's 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 Nutraceutical files 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 may also
obtain copies of any document Nutraceutical files 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, 1999, along with the
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,
2nd Floor, Park City, Utah 84060.
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PROXY STATEMENT FOR THE
NUTRACEUTICAL INTERNATIONAL CORPORATION
2000 ANNUAL MEETING OF STOCKHOLDERS
---------------------
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
PROXY STATEMENT
You have been sent this Proxy Statement and the enclosed proxy card because
Nutraceutical's Board of Directors is soliciting your proxy to vote at the 2000
Annual Meeting of Stockholders. This Proxy Statement summarizes the information
that you will need in order to vote 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.
This Proxy Statement and the enclosed proxy card were sent on January 28,
2000 to all stockholders who owned Nutraceutical common stock at the close of
business on January 10, 2000, 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 11,797,718 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 Annual
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 vote is held in street name by
your broker and it is not voted on all proposals, your proxy vote 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,
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
shares will be voted as you have directed. If you sign the proxy card but do not
make any specific indications of how you wish to vote, a proxy representative
will vote your shares:
- "FOR" the election of the two nominees for Class II Director; and
- "FOR" ratifying the appointment of PricewaterhouseCoopers LLP as the
Company's independent certified public accountants for the fiscal year
ending September 30, 2000.
If any other matter is presented at the Annual Meeting, your shares will be
voted in accordance with the proxy representative's best judgement. Presently,
the Company knows of no matters to be addressed at the Annual Meeting beyond
those described in this Proxy.
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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 Assistant 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, you will be
given 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 10, 2000, the record date for voting.
APPROVING THE PROPOSALS
PROPOSAL I: ELECTING TWO CLASS II 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, 2000
In order to be approved, all other matters to be voted on, including
ratifying the appointment of independent certified public 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, Nutraceutical's 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 that they incur in the process
of soliciting the proxies. Nutraceutical 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 that they reasonably incur in the process of forwarding the materials.
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PROPOSALS
The Nutraceutical Board of Directors (referred to collectively as "Board"
and individually as "Director") 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 shares will
be voted in accordance with your proxy representative's best judgment. The Board
recommends that you vote "FOR" each of the following proposals:
PROPOSAL I: ELECTING DIRECTORS
The Board has nominated Michael D. Burke and James D. Stice, Ph.D., as
Class II directors to be elected at the Annual Meeting. Certain information
regarding these nominees and each of the other directors is set forth below
under the caption "The Board of Directors." If you elect them, Mr. Burke and
Mr. Stice will hold office until the annual meeting in 2003, or until their
successors have been elected.
The Company knows of no reason why any 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, 2000
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 of Nutraceutical
for the year ending September 30, 2000. PricewaterhouseCoopers LLP audited the
financial statements of Nutraceutical for the year ended September 30, 1999. The
Company expects 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 certified
public accountants for fiscal 2000 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 2000 will stand unless the Board finds other good reason for making the
change.
THE BOARD OF DIRECTORS
The Board 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. Board members keep themselves informed through discussions with
the chairman of the Board, other key executives and the Company's principal
external advisors (such as legal counsel, independent certified public
accountants, investment bankers and other consultants) by reading reports and
other materials that are sent to them and by participating in Board meetings.
As of September 30, 1999, seven individuals were serving on the Board. Board
members 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,
or until a successor is elected. Mr. Geoffrey S. Rehnert, who was serving as a
Class II Director, resigned from the Board effective December 1, 1999. Alexander
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Gordon Bearn, M.D., has not been nominated for re-election as a Director upon
the expiration of his term at the Annual Meeting.
The Board held two meetings during fiscal 1999. Incumbent Board members
participated in 75 percent or more of the aggregate of (i) the total number of
Board meetings held during their periods of service and (ii) the total number of
meetings held by Board committees on which they served during their periods of
service.
CLASS II DIRECTORS (NOMINATED FOR ELECTION)
MICHAEL D. BURKE, age 55, is director, president and chief executive officer
of EOTT Energy Corp., a company engaged in the purchasing, gathering,
transporting, trading, storage and resale of crude oil, refined petroleum
products, natural gas liquids and related activities. Prior to joining EOTT
Energy Corp., Mr. Burke served as president and chief executive officer of M.D.
Burke & Co., a venture capital and management consulting firm. Mr. Burke was
previously associated with Tesoro Petroleum Corporation as president and chief
executive officer from 1992 to 1995. From 1980 to 1992, Mr. Burke held a number
of senior executive positions with Texas Eastern Corp., including group vice
president-products and president/chief executive officer of TEPPCO Partners,
L.P. Mr. Burke received a masters degree in business administration from the
University of Texas.
JAMES D. STICE, PH.D., age 40, is the Distinguished Teaching Professor of
Accounting in the School of Accountancy at Brigham Young University ("BYU").
Professor Stice has been at BYU since 1988. He has co-authored three accounting
textbooks and published numerous professional and academic articles. In
addition, Professor Stice has been involved in executive education for Ernst &
Young, BankAmerica Corporation, International Business Machines Corporation, and
AngloGold Limited. Professor Stice received a Ph.D. in Accounting from the
University of Washington.
CLASS III DIRECTORS (TERM EXPIRING AT THE 2001 ANNUAL MEETING)
FRANK W. GAY II, age 54, 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. Mr. Gay received a masters degree in
business administration from Harvard Business School.
ROBERT C. GAY, age 48, has served as a Director of the Company since its
inception. He has been a Managing Director of Bain Capital, Inc. ("Bain"), a
private equity firm, since 1993 and has been a general partner of Bain Capital
Venture Capital since 1989. He is Co-Chairman of the Board of Directors of
American Pad & Paper Company and the 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 Cambridge Industries, Inc., a manufacturer of automotive parts; GS
Technologies Corporation, a manufacturer of specialty steel products; and
Alliance Laundry, a manufacturer of industrial laundry equipment. Before joining
Bain, Mr. Gay was an executive vice president of General Electric Credit Capital
Markets Group and a principal and vice president in Kidder Peabody's Merchant
Banking Group. He also taught economics at Harvard University and was a manager
at McKinsey & Company. Mr. Gay received a Ph.D. in Business Economics from
Harvard University.
J. STEVEN YOUNG, age 38, 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,
the Sport, Education and Values Foundation and is the host of the Children's
Miracle Network Annual Broadcast. Mr. Young currently serves as a director of
PowerBar Inc. and found.com. He is also the corporate spokesperson for several
high profile companies, including
4
<PAGE>
Nike, VISA and Novell. He also currently serves as an educational consultant to
Sun MicroSystems Corporation. Mr. Young received a J.D. from Brigham Young
University.
CLASS I DIRECTORS (TERM EXPIRING AT THE 2002 ANNUAL MEETING)
JEFFREY A. HINRICHS, age 42, has served as a Director of the Company,
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. Mr. Hinrichs is a
graduate of Weber State University.
MATTHEW S. LEVIN, age 33, 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. Mr. Levin joined Bain in 1992
before attending the Harvard Business School from 1994 to 1996. From 1988 to
1991, Mr. Levin was a consultant with Bain & Company, Inc.
COMMITTEES OF THE BOARD
The Board has two standing committees: the Compensation Committee and the
Audit Committee.
The Compensation Committee includes two independent Board Members, 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 to ensure
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. Present members of the
Compensation Committee are Messrs. Gay II and Levin. The Compensation Committee
met three times during fiscal 1999. Mr. Rehnert served on the Compensation
Committee until December 1, 1999, at which time he resigned from the Board.
The Audit Committee makes recommendations to the Board regarding the
independent certified public 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
certified public accountants. Present members of the Audit Committee are Dr.
Bearn and Messrs. Gay II and Young. The Audit Committee met one time during
fiscal 1999.
Nutraceutical has no nominating committee. The 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 the initial election or appointment to the Board. See
"Non-Employee Director Stock Option Plan." Messrs. Robert C. Gay 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 currently receive any
additional compensation for committee participation.
5
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Robert C. Gay and Levin, Board members, have a professional
affiliation with Bain. Messrs. Robert C. Gay and Frank W. Gay II are brothers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTION SERVICES AGREEMENT
Nutraceutical is party to a transaction services agreement with Bain,
pursuant to which Bain 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 up to one percent of the
aggregate value of each transaction. Nutraceutical is not required to pay any
recurring annual management fees under the agreement. Pursuant to the agreement,
Bain will provide advisory services and personnel support to help Nutraceutical
with the identification, structuring, negotiating and financial analysis of
potential transactions. The Company believes that the terms of the agreement are
at least as favorable for Nutraceutical as those that could be negotiated with a
third party.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nutraceutical has agreed to provide indemnification for its Board members
and executive officers beyond the indemnification provided for in
Nutraceutical's Amended and Restated Certificate of Incorporation and Bylaws.
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
1999
Section 16(a) of the Securities Exchange Act of 1934 requires
Nutraceutical's Directors, executive officers and greater-than-ten-percent
stockholders to file reports with the SEC regarding changes in beneficial
ownership of Nutraceutical common stock and to provide Nutraceutical with copies
of the reports. Based on the Company's review of these reports and of
certifications furnished to us, the Company believes that all of these reporting
persons complied with the filing requirements for 1999, except that Leslie M.
Brown, Jr., Jeffrey A. Hinrichs and William T. Logan, who purchased shares
through the Company's Employee Stock Discount Purchase Plan and/or received
stock option grants, filed late Form 5s with respect to such transactions.
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PRINCIPAL STOCKHOLDERS
The table below sets forth certain information regarding the equity
ownership of the Company as of September 30, 1999 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.
<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 40.6
Heller Financial, Inc. (d)(e)............................... 690,446 5.5
DIRECTORS AND OFFICERS
Frank W. Gay II............................................. 1,030,986 8.6
Bruce R. Hough.............................................. 90,685 *
Jeffrey A. Hinrichs......................................... 255,778 2.2
Gary M. Hume................................................ 6,350 *
Leslie M. Brown, Jr......................................... 22,565 *
William T. Logan............................................ 152,219 1.3
Robert C. Gay (f)........................................... 4,791,116 40.6
Matthew S. Levin (f)........................................ 325,167 2.8
Alexander Gordon Bearn, M.D................................. 5,000 *
J. Steven Young............................................. 5,000 *
All executive officers and directors as a group (nine
persons).................................................. 6,359,699 52.4
</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 of the table
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 Bain Capital Funds is Two Copley Place, Boston, Massachusetts
02116.
(d) The address of Heller Financial, Inc. is 500 West Monroe, 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.
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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, 1999 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 1999 (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.......................... 1999 $270,000 $137,500 $6,400 0
CHIEF EXECUTIVE OFFICER 1998 236,250 63,750 9,315 32,000
Bruce R. Hough........................... 1999 160,000 30,000 6,831 0
PRESIDENT 1998 160,000 12,000 7,446 10,000
Jeffrey A. Hinrichs...................... 1999 191,250 60,000 7,817 9,000
EXECUTIVE VICE PRESIDENT 1998 165,000 30,937 7,933 30,000
AND CHIEF OPERATING OFFICER
Leslie M. Brown, Jr...................... 1999 139,904 39,520 5,960 9,000
SENIOR VICE PRESIDENT, FINANCE AND 1998 105,635 24,300 5,282 25,000
CHIEF FINANCIAL OFFICER
William T. Logan......................... 1999 133,750 16,200 5,701 5,000
SENIOR VICE PRESIDENT, MARKETING AND
SALES 1998 130,000 20,800 6,500 10,000
</TABLE>
- ------------------------
(a) May include amounts earned in a fiscal year but deferred at the named
executive officer's election pursuant to the Company's 401(k) Plan.
(b) Includes matching contributions made by the Company under its 401(k) Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information regarding stock options granted by the
Company to the Named Executives during the Company's last fiscal year:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS MARKET APPRECIATION FOR
UNDERLYING GRANTED EXERCISE OR PRICE ON OPTION TERM(b)
OPTIONS IN FISCAL BASE PRICE DATE OF EXPIRATION -------------------
NAME GRANTED YEAR ($/SHARE) GRANT DATE(a) 5% 10%
- ---- ---------- ---------- ----------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank W. Gay II........... 0 0.0% $0.00 $0.00 N/A 0 0
Bruce R. Hough............ 0 0.0% $0.00 $0.00 N/A 0 0
Jeffrey A. Hinrichs....... 9,000 5.6% $5.00 $5.00 12/17/08 28,300 71,718
Leslie M. Brown, Jr....... 9,000 5.6% $5.00 $5.00 12/17/08 28,300 71,718
William T. Logan.......... 5,000 3.1% $5.00 $5.00 12/17/08 15,722 39,844
</TABLE>
- ------------------------
(a) Options may expire earlier pursuant to the terms of the 1998 Stock Incentive
Plan.
(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
$8.14 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 $12.97 per share at the expiration date.
8
<PAGE>
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
SHARES OPTIONS AT FY-END AT FY-END(a)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Frank W. Gay II................. 0 $ 0 207,428/12,800 $79,376/0
Bruce R. Hough.................. 0 0 42,120/6,250 16,179/0
Jeffrey A. Hinrichs............. 0 0 57,550/26,625 19,050/0
Leslie M. Brown, Jr............. 0 0 21,794/23,500 0/0
William T. Logan................ 0 0 4,375/10,625 0/0
</TABLE>
- ------------------------
(a) Assumes a fair market value of the common stock at September 30, 1999 equal
to $3.88 per share.
STOCK PLANS
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. As of September 30, 1999, non-qualified options to
purchase an aggregate of 158,862 shares of common stock were outstanding under
the 1995 Stock Plan. The Company does not anticipate granting any additional
options under 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.
Options granted under the 1998 Stock Incentive Plan may be either incentive
stock options or non-qualified stock options, as determined by the Compensation
Committee. The options may also be subject to time vesting and certain other
restrictions at the sole discretion of the Compensation 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).
In aggregate, 1,050,000 shares of Nutraceutical common stock were 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. As of September 30, 1999,
non-qualified options to purchase an aggregate of 394,576 shares of common stock
were outstanding under the 1998 Stock Incentive Plan.
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
9
<PAGE>
discounted price. The Company believes 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
the employee has been employed by Nutraceutical for more than one year. The
Company has 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 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
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 the employee's 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 the employee's 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 account shares and may withdraw them for sale (or otherwise) by
written request. Subject to applicable federal securities and tax laws, the
Board 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 that have been made prior to the date of any
such amendment. If the Stock Purchase Plan is terminated, the Compensation
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 Compensation 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, for up to 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
Compensation Committee is eligible to participate in the Director Option Plan,
the full Board must approve grants made to a member of the Compensation
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.
10
<PAGE>
401(K) PLAN. Nutraceutical has a 401(k) defined contribution profit sharing
plan that covers substantially all employees. Under the plan, employees may
contribute up to 15% of their compensation, not to exceed the prescribed annual
statutory limit ($10,000 for calendar 1999). The Company makes matching and
discretionary contributions to the plan which approximate 4% of all plan
participants' salaries and wages.
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 and Levin. Mr. Rehnert served
on the Compensation Committee until December 1, 1999, at which time he resigned
from the Board.
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. In fiscal 1999, the base salary for each executive officer of
the Company was determined based on the expected level of responsibility of the
executive officer and competitive market conditions.
ANNUAL BONUS. Each executive officer of the Company is eligible to earn a
bonus based upon individual performance during the fiscal year and the Company's
performance generally.
LONG-TERM EQUITY INCENTIVES. Prior to the completion of Nutraceutical's
initial public offering, 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 Compensation 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.
The foregoing report has been approved by all members of the Compensation
Committee.
<TABLE>
<S> <C>
/s/ FRANK W. GAY II
- ------------------------------------------- /s/ MATTHEW S. LEVIN
Frank W. Gay II -------------------------------------------
CHAIRMAN Matthew S. Levin
</TABLE>
11
<PAGE>
PERFORMANCE GRAPH
The following graph shows 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
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NUTRACEUTICAL NASDAQ ADAMS, HARKNESS &
<S> <C> <C> <C>
International Stock Market Hill Healthy
Corporation (U.S.) Index Living Index
Feb 19 1998 $100 $100 $100
9/98 $40 $99 $64
9/99 $22 $160 $50
</TABLE>
- ------------------------
(1) The closing sale price of the common stock on September 30, 1999 was $3.88
per share, as reported by the Nasdaq National Market.
12
<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 2001 annual meeting of
stockholders of the Company must be received by the Company on or before the
close of business December 31, 2000. Such proposals should be submitted by
certified mail, return receipt requested.
Nutraceutical's bylaws 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 Nutraceutical's bylaws from the Secretary of the Company.
13
<PAGE>
NUTRACEUTICAL INTERNATIONAL CORPORATION
PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD FEBRUARY 29, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Frank W. Gay II and
Leslie M. Brown, Jr., and each or any of them, proxies of the undersigned
("Proxy Representatives"), 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
to be held at the Park City Marriott, 1895 Sidewinder Drive, Park City, Utah
84060 on Tuesday, February 29, 2000 at 9:00 a.m. (Mountain Standard Time) or at
any adjournment or postponement thereof, as shown on the voting side of this
card.
------------------------------
SEE REVERSE SIDE
------------------------------
/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 II Directors and FOR Proposal 2.
1. Election of all nominees for Class II Directors listed hereon.
<TABLE>
<S> <C>
Nominees: Michael D. Burke
James D. Stice
/ / FOR / / WITHHELD
</TABLE>
For all nominees listed hereon, except vote withheld from the following
nominee(s):
----------------------------------------------------------------------------
<PAGE>
2. Ratification of PricewaterhouseCoopers LLP as the Company's independent
certified public accountants for the fiscal year ending September 30, 2000.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the Proxy Representatives 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
