<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-27499
VITAMINSHOPPE.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3659179
(State of incorporation) (I.R.S. Employer Identification No.)
444 MADISON AVENUE, SUITE 802, NEW YORK, NY 10022
(Address and zip code of principal executive offices)
(212) 308-6730
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X .
----- -----
<TABLE>
<S> <C>
Number of shares of Common Stock outstanding as of November 19, 1999: Class A common stock 7,277,574
Class B common stock 13,081,500
</TABLE>
<PAGE> 2
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1: Financial Statements
Statement of Stockholders' Equity
Notes to Financial Statements
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
ITEM 2: Changes in Securities and Use of Proceeds
ITEM 6: Exhibits and Reports on Form 8-K
Signatures
<PAGE> 3
ITEM 1.FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
VITAMINSHOPPE.COM, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
December 31, September 30,
1998 1999
------------------ -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ - $ 14,470
Accounts receivable 35 -
Prepaid expenses and other current assets 94 6,578
---------- ----------
Total current assets 129 21,048
Property and equipment, net 485 2,022
---------- ----------
Total assets $ 614 $ 23,070
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 824 $ 8,180
Note due to The Vitamin Shoppe 3,583 5,803
---------- ----------
Total current liabilities 4,407 13,983
Stockholders' Equity (Deficit):
Series A convertible preferred stock, $.01 par value; no
shares outstanding at December 31, 1998; 2,000,000
shares authorized, 1,775,260 shares issued and
outstanding at September 30, 1999 - 23,558
Class A common stock, $.01 par value; no shares issued or
outstanding; 30,000,000 shares authorized - -
Class B common stock, $.01 par value; no shares
outstanding at December 31, 1998; 15,000,000 shares
authorized, 13,081,500 shares outstanding at September
30, 1999 - 131
Additional paid in capital - (4,739)
Deferred stock-based compensation - (3,255)
Deficit (3,793) (6,608)
---------- ----------
Total stockholders' equity (deficit) (3,793) 9,087
---------- ----------
Total liabilities and stockholders' equity (deficit) $ 614 $ 23,070
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
1
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<TABLE>
<CAPTION>
VITAMINSHOPPE.COM, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------------------------------
1998 1999 1998 1999
------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 1,045 $ 3,743 $ 1,525 $ 8,046
Cost of goods sold 528 2,113 767 4,217
------------ ------------ ------------ ----------
Gross profit 517 1,630 758 3,829
------------ ------------ ------------ ----------
Operating expenses:
Marketing and sales expenses 905 5,966 1,297 10,333
Technology development expenses 78 950 273 1,669
General and administrative expenses 291 1,403 606 2,720
------------ ------------ ------------ ----------
Total operating expenses 1,274 8,319 2,176 14,722
------------ ------------ ------------ ----------
Loss from operations (757) (6,689) (1,418) (10,893)
Interest expense (income), net 33 (81) 60 140
------------ ------------ ------------ ----------
Net loss $ (790) $ (6,608) $ (1,478) $ (11,033)
============ ============ ============ ==========
Basic and diluted net loss per share (1) $ (0.06) $ (0.51) $ (0.11) $ (0.84)
============ ============ ============ ==========
Shares outstanding used to compute basic and diluted net
loss per share (1) 13,081,500 13,081,500 13,081,500 13,081,500
============ ============ ============ ==========
</TABLE>
(1) The number of shares used to compute the loss per share amounts includes
13,081,500 shares of Class B common stock issued in connection with the
Company's initial capitalization in June 1999, as if all shares were
outstanding for the entire periods presented.
The accompanying notes are an integral part of these financial statements.
2
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<TABLE>
<CAPTION>
VITAMINSHOPPE.COM, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Nine Months Ended
September 30,
-----------------------------------
1998 1999
--------------- ------------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,478) $ (11,033)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 10 136
Amortization of deferred stock-based compensation - 354
Changes in operating assets and liabilities:
Accounts receivable - 35
Prepaid expenses and other current assets - (6,484)
Accounts payable and accrued liabilities - 7,356
----------- -----------
Net cash used in operating activities (1,468) (9,636)
----------- -----------
Cash flows from investing activities:
Capital expenditures (104) (1,673)
----------- -----------
Net cash used in investing activities (104) (1,673)
----------- -----------
Cash flows from financing activities:
Increase in note due to The Vitamin Shoppe 1,572 2,220
Issuance of common stock - 1
Issuance of Series A convertible preferred stock - 23,558
----------- -----------
Net cash provided by financing activities 1,572 25,779
----------- -----------
Net increase in cash and cash equivalents - 14,470
Cash and cash equivalents - beginning of period - -
----------- -----------
Cash and cash equivalents - end of period $ - $ 14,470
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ - $ -
=========== ===========
Income taxes $ - $ -
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
VITAMINSHOPPE.COM, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Series A Class A Class B
convertible preferred
stock Common stock Common stock
---------------------- ----------------- ---------------------
Shares Amount Shares Amount Shares Amount
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 - $ - - $ - - $ -
Net loss through June 30, 1999 - - - - - -
Capitalization of the Company
by The Vitamin Shoppe on
June 30, 1999 - - - - 13,081,500 131
Net loss for the period from
July 1, 1999 through
September 30, 1999 - - - - - -
Sale of Series A convertible
preferred stock 1,775,260 23,558 - - - -
Deferred stock-based
compensation - - - - - -
Amortization of deferred
stock-based compensation - - - - - -
--------- -------- ------- ----- ----------- ----
Balance, September 30, 1999 1,775,260 $ 23,558 - $ - 13,081,500 $131
========= ======== ======= ===== =========== ====
</TABLE>
<TABLE>
<CAPTION>
Additional Deferred
Paid in stock-based Accumulated
Capital compensation Deficit Total
--------- -------------- --------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1998 $ - $ - $(3,793) $(3,793)
Net loss through June 30, 1999 - - (4,425) (4,425)
Capitalization of the Company
by The Vitamin Shoppe on
June 30, 1999 (8,348) - 8,218 1
Net loss for the period from
July 1, 1999 through
September 30, 1999 - - (6,608) (6,608)
Sale of Series A convertible
preferred stock - - - 23,558
Deferred stock-based
compensation 3,609 (3,609) - -
Amortization of deferred
stock-based compensation - 354 - 354
-------- -------- -------- -----
Balance, September 30, 1999 $(4,739) $(3,255) $(6,608) $ 9,087
======== ======== ======== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
VitaminShoppe.com, Inc. (the "Company" or "VitaminShoppe.com") is a leading
online source for products and content related to vitamins, nutritional
supplements and minerals. Until July 1999, the Company was wholly owned by
Vitamin Shoppe Industries Inc. ("The Vitamin Shoppe"). The Company commenced
operations effective October 1, 1997 as a division of The Vitamin Shoppe and
operated in the development stage until April 1998, when it began sales through
its website. The Company was incorporated in Delaware in May 1999 and
capitalized by The Vitamin Shoppe in June 1999. See Note 3.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements
The accompanying condensed balance sheet as of December 31, 1998, which has
been derived from audited financial statements, and the accompanying unaudited
condensed financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to those rules and regulations. Although the Company believes
that the disclosures made are adequate to ensure that the information presented
is not misleading, it is suggested that these condensed financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Prospectus dated October 8, 1999 filed with the Securities and
Exchange Commission.
The preparation of condensed financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of any contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Management's estimates and assumptions are reflective of, among other
things, prevailing market conditions, expected market conditions based on
published economic forecasts, current operating strategies and the availability
of capital, which are all subject to change. Changes to the aforementioned or
other conditions could in turn cause changes to such estimates and assumptions,
and as a result actual results could differ from the original estimates.
Results of operations for the interim period are not necessarily indicative of
the results to be expected for the year.
In the opinion of the Company, the accompanying condensed financial statements
contain all adjustments, which were normal and recurring adjustments, necessary
to present fairly the Company's financial position as of September 30, 1999 and
December 31, 1998 and its results of operations for the three and nine month
periods ended September 30, 1999 and 1998, cash flows for the nine month periods
ended September 30, 1999 and 1998 and changes in shareholders' equity for the
nine month period ended September 30, 1999.
Basis of Presentation
For all periods prior to July 1, 1999, the financial statements have been
prepared as if the Company operated as a stand-alone entity since inception.
Thus, the financial information related to those periods may not necessarily
reflect the financial position, results of operations or cash flows of the
Company in the future or what the balance sheets, results of operations or cash
flows of the Company would have been if it had actually been a separate,
stand-alone entity.
For the periods prior to July 1, 1999, the financial statements include
allocations of expenses incurred by The Vitamin Shoppe in support of the
Company. These allocations took into consideration personnel, business volume
5
<PAGE> 8
and other appropriate factors and generally included costs related to
fulfillment, marketing, administration, general management and other services
provided to the Company by The Vitamin Shoppe. Such allocated charges were
$260,000 for the third quarter 1998 and $786,000 and $541,000 for the nine
months ended September 30, 1999 and 1998. Interest expense shown in the
financial statements reflects interest at a rate of 8.75 percent per annum on
the average amounts due to The Vitamin Shoppe. Allocations of expenses are
estimates based on The Vitamin Shoppe management's best assessment of actual
expenses incurred on behalf of the Company. It is management's opinion that the
expenses charged to the Company were reasonable. In addition to these
allocations, The Vitamin Shoppe supplied the Company with inventory on an
exclusive basis at a charge of 100 percent of cost.
Effective July 1, 1999 the Company and The Vitamin Shoppe entered into several
intercompany agreements, which replace the expense allocations covering
inventory supply, fulfillment, marketing and administrative that were in effect
prior to July 1, 1999 and which cover additional rights and obligations
regarding trademark licenses, co-marketing and databases. Under the
intercompany agreements for inventory supply and fulfillment, The Vitamin
Shoppe supplies inventory to the Company at a cost equal to 105 percent of The
Vitamin Shoppe's product cost and fulfills customer orders at a cost equal to
105 percent of The Vitamin Shoppe's actual average unit cost per package, plus
actual shipping costs not paid directly by the Company. Each of these was
provided at 100 percent of cost under the allocation approach used prior to
July 1, 1999.
The rights and obligations which were added when the intercompany agreements
became effective July 1, 1999 include trademark licenses and co-marketing. The
trademark license agreement provides the Company with the exclusive right to
use The Vitamin Shoppe's trademarks in connection with its marketing and sale
of products and services in online commerce. Under this agreement, the Company
will pay The Vitamin Shoppe an annual royalty fee equal to $1 million plus a
percentage (which ranges from 5 percent to 1 percent depending upon volume) of
the Company's net sales of The Vitamin Shoppe (R) brand products, and other
products identified by or branded with The Vitamin Shoppe's trademarks. Under
the co-marketing agreements, The Vitamin Shoppe and the Company provide certain
advertising and promotional references to each other in their respective
catalogue, retail store and, on a limited basis, web businesses for mutually
agreed upon fees.
For the third quarter 1999, charges for services provided to the Company by The
Vitamin Shoppe were in accordance with the intercompany agreements and totaled
$1.2 million. Included in accounts payable and accrued expenses on the
accompanying balance sheet at September 30, 1999 are amounts due to The Vitamin
Shoppe related to these intercompany agreements for merchandise purchases and
expenses in the amounts of $1.2 million and $1.1 million, respectively.
By implementing the intercompany agreements, new charges were created that were
not provided for in the historical financial statements prior to July 1, 1999.
On a pro forma basis, had the trademark license and the supply and fulfillment
agreements been in place for all periods presented, the Company's net loss
would have been $1.1 million for the third quarter 1998, $2.1 million for the
nine months ended September 30, 1998 and $11.8 million for the nine months
ended September 30, 1999. For the third quarter 1999, the charges related to
these intercompany agreements are included in results of operations.
All merchandise purchases are made from The Vitamin Shoppe under the
intercompany supply agreement. Such purchases aggregated $2.1 million and
$528,000 for the third quarters 1999 and 1998 and $4.2 million and $767,000 for
the nine months ended September 30, 1999 and 1998.
Computation of Basic and Diluted Net Loss Per Share
Net loss per share has been calculated under Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share." SFAS No. 128 requires companies
to compute earnings per share under two different
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<PAGE> 9
methods (basic and diluted). Basic net loss per share is calculated by dividing
the net loss by the weighted average shares of common stock outstanding during
the period. Shares used for this computation consist of 13,081,500 shares of
Class B common stock issued in connection with the Company's initial
capitalization in June 1999 as if all shares were outstanding for all periods
presented. For the three months and nine months ended September 30, 1999,
diluted net loss per share is equal to basic net loss per share since potential
common shares from the conversion of the Series A preferred stock, stock
options and warrants are antidilutive. At September 30, 1999, securities, the
issuance or exercise of which may result in dilution, consisted of 2,732,119
shares of Class A common stock issuable upon conversion of the Series A
preferred stock, 32,703 shares of Series A convertible preferred stock issuable
upon the exercise of a warrant and 1,102,510 options to purchase shares of
Class A common stock. VitaminShoppe.com evaluated the requirements of the
Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 98 and
concluded that there are no other nominal issuances of common stock or
potential common stock required to be shown as outstanding for all periods as
outlined in SAB No. 98.
3. CAPITAL TRANSACTIONS
The Company was incorporated in May 1999 and was capitalized in June 1999. The
Company was capitalized by the issuance to The Vitamin Shoppe of 1,000 shares
of common stock, par value $.01 per share, for a purchase price of $1,000 and
the contribution by The Vitamin Shoppe of net liabilities of approximately $8.2
million. In July 1999, the Company effected a recapitalization through the
authorization of 30,000,000 shares of Class A common stock and 15,000,000
shares of Class B common stock and the issuance of 13,081,500 shares of Class B
common stock in exchange for the 1,000 shares of common stock previously issued
to The Vitamin Shoppe. The recapitalization has been retroactively reflected in
the accompanying financial statements. Prior to June 30, 1999, the Company was
operated as a division of The Vitamin Shoppe. In addition, the Company
authorized 5,000,000 shares of preferred stock. Holders of Class A common stock
are entitled to one vote per share, while holders of Class B common stock are
entitled to six votes per share.
On July 9, 1999, the Company issued $10 million in aggregate principal amount
of promissory notes due in June 2000. These notes were held by stockholders of
The Vitamin Shoppe or affiliates of these stockholders. As described below, in
July 1999 these notes were converted into shares of Series A convertible
preferred stock.
On July 27, 1999, the Company issued 1,775,260 shares of Series A convertible
preferred stock, par value $.01 per share, that were convertible into 2,732,119
shares of Class A common stock ($9.15 fair value per share) for gross proceeds
of $25 million. The proceeds (net of commissions and offering costs) of this
transaction were approximately $23.6 million. Of the gross proceeds, $10
million was paid through the conversion of promissory notes referred to in the
preceding paragraph into Series A convertible preferred stock. The remaining
shares were sold to the noteholders and other persons for cash consideration of
$15 million. The Company also issued warrants to purchase an equivalent of
32,703 shares of Class A common stock at a price of $9.15 per share,
subsequently amended to $11.00, to the placement agent in consideration for its
services in this transaction. The estimated fair value of the warrants issued
to the placement agent of approximately $86,000 was credited to additional
paid-in capital in the unaudited balance sheet. All shares of the Series A
convertible preferred stock converted into an aggregate of 2,732,119 shares of
the Class A common stock upon the closing of the Company's initial public
offering.
On July 27, 1999, the Company filed a Registration Statement on Form S-1, as
amended (File No. 333-83849) with the Securities and Exchange Commission to
offer shares of Class A common stock to the public. The offering was
consummated on October 8, 1999. See Note 6.
On September 9, 1999, the Company's Board of Directors approved a 1.539-for-1
stock split of its Class A common stock and Class B common stock, which was
effective on September 22, 1999. The respective share and
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<PAGE> 10
per-share amounts and conversion ratios included in the unaudited financial
statements and these footnotes reflect the stock split for all periods
presented.
4. STOCK BASED COMPENSATION
From June 14 to September 20, 1999, the Company granted stock options to
employees and directors at exercise prices that were treated as if they were
below the fair market value at the date of grant. In relation to these grants,
the Company will recognize deferred compensation expense of approximately $3.5
million ratably over the vesting term of three years. The Company recognized
compensation expense of $84,000 and $354,000 during the three and nine months
ended September 30, 1999. With respect to some of the options granted, vesting
was accelerated upon the consummation of the Company's initial public offering.
The Company will record approximately $697,000 of compensation expense in
connection with its initial public offering during the fourth quarter 1999.
5. INCOME TAXES
The Company's operating results through June 30, 1999 were included in the
consolidated income tax returns of The Vitamin Shoppe. Through June 30, 1999,
The Vitamin Shoppe has not allocated to the Company its share of income tax
liabilities or benefits attributable to the Company's operating results. The
Company's income tax provisions have been calculated on a separate return basis
and present the effect on operating results as if the Company had not been
included in the consolidated income tax return of The Vitamin Shoppe. Because
of the Company's operating losses since inception and the uncertainty of future
recoverability, and because The Vitamin Shoppe has not allocated any tax
benefits to the Company, the Company has not provided for income tax benefits
in the financial statements.
Since the capitalization of the Company on July 1, 1999, the Company is no
longer part of The Vitamin Shoppe's consolidated group. Losses generated after
the Company ceased to be part of The Vitamin Shoppe's consolidated group are
available to offset any future taxable income for 20 years. Deferred tax assets
normally recorded to reflect the future benefit may or may not be recorded,
depending on the Company's ability to demonstrate the likelihood of future
profitability.
For the third quarter 1999, the Company incurred a loss that, if utilized,
provides a future tax benefit of approximately $2.6 million at an effective tax
rate of 40 percent. Due to the uncertainty of the realization of these net
operating loss carryforwards in the future, the Company has provided a
valuation allowance to offset these deferred tax assets.
6. SUBSEQUENT EVENTS
On October 6, 1999, the Company granted to an employee an option to purchase
200,000 shares of its Class A common stock at an exercise price of $9.15 per
share, which will result in additional deferred stock based compensation of
$370,000 during the fourth quarter 1999 that will be amortized over the
vesting period of three years.
On October 8, 1999, the Company sold 4,545,455 shares of its Class A common
stock in an initial public offering at a price of $11.00 per share. The gross
proceeds from the offering were $50 million. The net proceeds were $45 million
after deducting the underwriting discounts and commissions of $3.5 million and
other offering expenses of $1.5 million.
On October 14, 1999, the Company granted to an employee an option to purchase
339,954 shares of its Class A common stock at an exercise price of $11.00 per
share.
On October 14, 1999, the Company granted to five directors an option to
purchase 192,375 shares of its Class A common stock at an exercise price of
$11.00 per share.
In connection with the initial public offering, the 1,775,260 shares of Series
A convertible preferred stock converted into 2,732,119 shares of Class A common
stock. The carrying amount of the Series A convertible preferred stock will be
credited to Class A common stock stated capital and to additional paid-in
capital.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for the historical information contained in this report, some statements
made herein are "Forward-Looking Statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These Forward-Looking Statements
reflect our expectations regarding our future growth, results of operations,
performance and business prospects and opportunities. Words such as
"anticipates," "believes," "plans," "expects," "estimates," and similar
expressions have been used to identify these Forward-Looking Statements, but
are not the exclusive means of identifying these statements. These statements
reflect our current beliefs and are based on information currently available to
us. Accordingly, these statements are subject to known and unknown risks,
uncertainties and other factors that could cause our actual growth, results,
performance and business prospects and liquidity to differ from those expressed
in, or implied by, these Forward-Looking Statements. These risks, uncertainties
and other factors are described in our Registration Statement on Form S-1, as
amended (File No. 333-83849), under the caption "Risk Factors". We are not
obligated to update or revise these Forward-Looking Statements to reflect new
events or circumstances.
OVERVIEW
As used in this document, "we," "our," "us" and the "Company" means
VitaminShoppe.com, Inc.
We began development of our online operations in October 1997 and launched our
website on April 7, 1998. For the period from our inception through the launch
of the website, our primary activities consisted of:
- developing the business model;
- developing strategic relationships;
- designing and developing our website;
- recruiting and training employees;
- negotiating advertising contracts with several major web
portals; and
- developing The VitaminShoppe.com brand.
Since the launch of the website, these operating activities have continued. We
have also focused on building sales momentum, promoting the brand, enhancing
the search and transactional features of our website, expanding customer
service operations, increasing the information content available to our
customers and building the infrastructure of the business.
We have a limited operating history on which to base an evaluation of our
business and prospects. Our prospects must be considered in light of the risks,
expenses and difficulties encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets such as
online commerce. In view of these factors, we believe that period-to-period
comparisons of our operating results should not be relied upon as an indication
of future performance.
We have incurred net losses of $14.8 million from inception through September
30, 1999. We believe that net losses will continue for the foreseeable future
as our advertising, marketing and technology expenditures increase. We also
believe that the rate at which losses will be incurred will increase
significantly from current levels.
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RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 ("THIRD QUARTER 1999") COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 1998 ("THIRD QUARTER 1998")
Net Sales. Net sales consist of product sales net of allowances for product
returns. Revenues are recognized when the related product is shipped. The level
of our sales depends on many factors, including:
- the number of customers that we are able to attract;
- the frequency of customers' purchases;
- the quantity and mix of products that customers purchase;
- the price that we charge for our products; and
- the level of customer returns that we experience.
Net sales for the third quarter 1999 totaled $3.7 million, an increase of $2.7
million or 258 percent from net sales of $1.0 million during the third quarter
1998. We have made enhancements to the website to improve navigation and the
overall user experience, and we have increased advertising expenditures. We
believe these factors have contributed to growth in our customer base and
continuation of a favorable repeat buying pattern.
Cost of Goods Sold. Cost of goods sold consists primarily of the costs of
products sold to customers. Vitamin Shoppe Industries Inc. ("The Vitamin
Shoppe") supplies inventory to us on an exclusive basis. Under our supply and
fulfillment agreement with The Vitamin Shoppe beginning July 1, 1999, we pay
The Vitamin Shoppe an amount equal to 105 percent of The Vitamin Shoppe's
product cost. Prior to that time, inventory was provided to us by The Vitamin
Shoppe at 100 percent of its product cost. As a result, cost of goods sold as a
percentage of sales is higher in the third quarter 1999 than in the past and we
expect that it will continue to be higher than in the past. In the future, we
may expand or increase the discounts we offer to our customers and may
otherwise alter our pricing structures and policies. These changes would
negatively affect our gross margins. In addition to pricing strategy, our gross
margins will fluctuate based on other factors, including:
- the cost of our products, including the extent of purchase volume
discounts that The Vitamin Shoppe is able to obtain from suppliers;
- promotions or special offers to attract new customers;
- the mix of The Vitamin Shoppe(R) brand products versus other branded
products that our customers purchase; and
- the mix of products within each brand category that our customers
purchase.
Cost of goods sold for the third quarter 1999 was $2.1 million or 56.5 percent
of net sales versus $0.5 million or 50.5 percent of net sales for the third
quarter 1998. The increase in cost of sales as a percent of net sales is
attributable to the implementation of our supply and fulfillment agreement with
The Vitamin Shoppe, the offering of promotional discount coupons to customers
during part of the third quarter 1999 and the sale of a lower proportion of The
Vitamin Shoppe(R) branded products versus other brands as a percent of total
sales in the third quarter 1999 as compared to the third quarter 1998. The
Vitamin Shoppe(R) brand of products carries a higher gross margin than other
brands.
Marketing and Sales Expenses. Marketing and sales expenses consist primarily of
advertising and promotional expenditures, merchandising, customer service,
distribution expenses, including order processing and fulfillment charges, net
shipping costs, equipment and supplies and payroll and related expenses for
personnel engaged in these activities. Some of these expenses represent charges
for services provided by The Vitamin Shoppe. Prior
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<PAGE> 13
to July 1, 1999 these charges were in the form of allocations based on The
Vitamin Shoppe's best estimate of actual expenses. As of July 1, 1999 various
intercompany agreements were put in place to cover these expenses. Under these
agreements The Vitamin Shoppe will continue to provide warehousing and
fulfillment services for customer orders on an exclusive basis. We pay The
Vitamin Shoppe for fulfillment services an amount equal to 105 percent of The
Vitamin Shoppe's actual average unit cost per package, multiplied by the number
of packages shipped to our customers, plus actual shipping costs that we do not
pay directly. While this amount is higher than the 100 percent cost of these
services to us under the historical allocation method, we believe that the
increase will not have a material effect on our results of operations because
our fulfillment costs have historically been less than 3 percent of our net
sales. Under the trademark license agreement with The Vitamin Shoppe which
provides us with the exclusive right to use The Vitamin Shoppe's trademarks,
including the logo and name, in connection with the marketing and sale of
products and services in online commerce, we pay an annual royalty fee equal to
$1 million plus an amount based on a percentage of net sales volume of The
Vitamin Shoppe(R) branded product. Prior to July 1, 1999, there was no royalty
fee charged by The Vitamin Shoppe.
Marketing and sales expenses increased by $5.1 million to $6.0 million or 159
percent of net sales for the third quarter 1999 from $0.9 million or 87 percent
of net sales for the third quarter 1998. The increase is largely attributable
to the implementation of our significant and ongoing marketing campaign which
began with online media and radio. In addition, we have added to our roster of
strategic relationships with web portals and health-oriented channels.
Subsequent to the third quarter 1998, agreements with Yahoo! (November 1998),
drkoop.com (March 1999), OnHealth (March 1999), InteliHealth (April 1999) and
America Online (September 1999 but began in October 1999) have been added to
the existing list which included Ask Dr. Weil (April 1998) and Infoseek (August
1998). Third quarter 1999 expenses include all but the America Online
agreement, which began in October. We expect marketing and sales expenses to
increase significantly during future periods, but they may vary considerably
from quarter to quarter, depending upon the timing of advertising campaigns.
Technology Development Expenses. Technology development expenses consist
primarily of consulting fees and payroll and related expenses for applications
development and information technology personnel, licensing and service
agreements, website hosting and communications charges and website content
development and design expenses. For the third quarter 1999 technology
development expenses increased by $0.9 million to $1 million from $0.1 million
for the third quarter 1998. As a percent of third quarter net sales, these
expenses were 25.4 percent in 1999 and 7.4 percent in 1998. Expenses increased
in the areas of technology development personnel and use of third-party service
providers, consultants and contract labor. The increase in expense and in our
overall investment in technology reflects our commitment to providing a
superior web commerce experience to our customers. We believe strongly that
ongoing technology-based enhancements to the website and the infrastructure
supporting the site will contribute significantly to customer satisfaction and
retention. Continued investment in technology development is therefore
anticipated, including improvements to the capabilities of the site and
expansion in the infrastructure necessary to support the site. We also expect
to continue to invest in the development of in-house expertise necessary to
effectively manage the technology of our business. In the third quarter 1999,
we successfully recruited a highly experienced Chief Technology Officer and a
Director of Technology Operations, as well as several other technology
professionals.
General and Administrative Expenses. General and administrative expenses
consist primarily of payroll and related expenses for executive and
administrative personnel, corporate facility expenses, professional services
expenses, travel and other general corporate expenses. General and
administrative expenses increased by $1.1 million to $1.4 million or 37.5
percent of net sales for the third quarter 1999 from $0.3 million or 27.8
percent of net sales for the third quarter 1998. This increase is primarily due
to the addition of personnel, professional fees and other expenses associated
with building our infrastructure. As we continue this building process, we
expect that our general and administrative expenses will continue to increase
during future periods.
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<PAGE> 14
Interest expense (income), net. Interest expense (income), net consists of
interest charges allocated from The Vitamin Shoppe and interest income earned
on cash and cash equivalents. Interest expense is charged at 8.75 percent per
annum on The Vitamin Shoppe's advances to the Company for a total of $127,000
in the third quarter 1999 and $33,000 in the third quarter 1998. Interest
income has been earned since the sale of Series A convertible preferred stock
on July 27, 1999 and amounts to $208,000 in the third quarter 1999.
Amortization of stock-based compensation. Amortization of deferred stock-based
compensation expense, included in general and administrative expenses, was $0.3
million in the third quarter 1999 as compared to zero in the third quarter
1998. Deferred compensation expense of $0.7 million will be recorded upon the
closing of our initial public offering due to the accelerated vesting of stock
options.
Intercompany agreements. The intercompany agreements cover rights and
obligations regarding trademark licenses, inventory supply and fulfillment,
promotional and co-marketing activities, databases and administrative services.
We incurred a total of $1.1 million of net expenses and $2.1 million of
merchandise purchases under the intercompany agreements with The Vitamin Shoppe
during the third quarter 1999. The intercompany agreements were not in place
during the third quarter 1998. During the third quarter 1998, allocations were
made by The Vitamin Shoppe for services provided to us. These allocations did
not include charges for the trademark license or co-marketing activities.
Further, inventory and fulfillment charges were allocated at the rate of 100
percent of cost rather than the 105 percent provided in the intercompany
agreements. Had the intercompany agreements been in place during the third
quarter 1998, our net loss would have been increased to $1.1 million.
Income taxes. The Company's operating results through June 30, 1999 were
included in the consolidated income tax returns of The Vitamin Shoppe. Through
June 30, 1999, The Vitamin Shoppe has not allocated to us our share of income
tax liabilities or benefits attributable to our operating results. Our income
tax provisions have been calculated on a separate return basis and present the
effect on operating results as if we had not been included in the consolidated
income tax return of The Vitamin Shoppe. Because of our operating losses since
inception and the uncertainty of future recoverability, and because The Vitamin
Shoppe has not allocated any tax benefits to us, we have not provided for
income tax benefits in the financial statements through June 30,1999.
Following our capitalization on July 1, 1999, we are no longer part of The
Vitamin Shoppe's consolidated group for income tax purposes. Losses generated
from July 1, 1999 forward will be available to offset any of our future taxable
income for 20 years from the time the losses are incurred. Deferred tax assets
normally recorded to reflect the future benefit may or may not be recorded,
depending on our ability to demonstrate the likelihood of future profitability.
For the third quarter 1999, we incurred a loss that, if utilized, provides a
future tax benefit of approximately $2.6 million at an effective tax rate of 40
percent. Due to the uncertainty of the realization of these net operating loss
carryforwards in the future, we have provided a valuation allowance to offset
these deferred tax assets.
NINE MONTHS ENDED SEPTEMBER 30, 1999 ("THE FIRST THREE QUARTERS 1999") COMPARED
TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 ("THE FIRST THREE QUARTERS 1998")
Net Sales. Our website was launched on April 7, 1998. Accordingly, there were
six months of sales during the first three quarters 1998 compared to a full
nine months in the first three quarters 1999. Net sales have increased by $6.5
million to $8 million or 428 percent for the first three quarters 1999 from
$1.5 million for the first three quarters 1998. During the first three quarters
1999, net sales grew at a compound average quarterly rate of 43 percent. We
believe that this growth in net sales is attributable to enhancements made to
our website to improve content, navigation and the overall user experience, and
to increased advertising expenditures.
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<PAGE> 15
Cost of Goods Sold. Cost of goods sold was $4.2 million or 52.4 percent of net
sales for the first three quarters 1999 versus $0.8 million or 50.3 percent of
net sales in the first three quarters 1998. The increase in cost of sales as a
percent of net sales is attributable to the implementation of the supply and
fulfillment agreement with The Vitamin Shoppe, the sale in 1999 of a lower
proportion of The Vitamin Shoppe (R) brand products which carry higher gross
margin rates than other brands and the offering of promotional discount coupons
to customers during the first three quarters 1999.
Marketing and Sales Expenses. For the first three quarters 1999, marketing and
sales expenses increased by $9 million to $10.3 million from $1.3 million in
the first three quarters 1998. As a percent of net sales, these expenses were
128 percent in 1999 and 82 percent in 1998. This increase is primarily due to
expenses associated with entering into strategic relationships with web portals
and health-oriented channels, including Ask Dr. Weil (April 1998), Infoseek
(August 1998), Yahoo! (November 1998), drkoop.com (March 1999), OnHealth (March
1999) and InteliHealth (April 1999). Third quarter 1999 expenses include all
but the America Online agreement, which began in October. Media expenses also
increased due to the implementation in the third quarter 1999 of our
significant and ongoing marketing campaign which began in radio and online
media and will expand further in online media, radio, television, print and
direct mail. We expect marketing and sales expenses to increase significantly
during future periods and possibly to vary considerably from quarter to
quarter, depending upon the timing of advertising campaigns.
Technology Development Expenses. Technology development expenses increased by
$1.4 million to $1.7 million in the first three quarters 1999 from $0.3 million
for the first three quarters 1998. Expenses have increased as a result of the
addition of technology development personnel and greater use of third-party
service providers, consultants and contract labor. We believe that continued
investment in technology development is critical to attaining our strategic
objectives and expect these expenses to increase significantly during future
periods.
General and Administrative Expenses. For the first three quarters 1999, general
and administrative expenses increased by $2.1 million to $2.7 million from $0.6
million for the first three quarters 1998. As we continue to build our
infrastructure, we expect that expenses associated with the addition of
personnel, facilities and professional and other fees will increase during
future periods.
Interest expense (income), net. In the first three quarters 1999, interest
expense (income), net included interest expense for the note due to The Vitamin
Shoppe of approximately $348,000, offset by interest income earned on invested
funds of $208,000. This compares to interest expense of $60,000 for the first
three quarters 1998.
Amortization of stock-based compensation. Amortization of deferred stock-based
compensation expense, included in general and administrative expenses, was $0.4
million for the first three quarters 1999 versus zero for the first three
quarters 1998. Deferred compensation expense of $0.7 million will be recorded
upon the closing of our initial public offering due to the accelerated vesting
of stock options.
Intercompany agreements. We incurred a total of $1.1 million of net expenses
and $2.1 million of merchandise purchases under the intercompany agreements
with The Vitamin Shoppe, all in the third quarter 1999. The intercompany
agreements were not in place during the first three quarters 1998 and the six
months ended June 30, 1999 but became effective on July 1, 1999. Had the
intercompany agreements been in place during the full first three quarters 1999
and 1998, our net loss would have been increased to $11.8 million in 1999 and
$2.1 million in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, our operations have not generated sufficient cash flow to
satisfy our current obligations. The Vitamin Shoppe funded these obligations
through June 1999. As of September 30, 1999, we had accounts payable and
accrued liabilities of $5.9 million and amounts payable to The Vitamin Shoppe
of $2.3 million due under the intercompany agreements. Also on June 30, 1999,
we issued a promissory note to The Vitamin Shoppe for approximately $5.8
million payable upon demand by The Vitamin Shoppe. This amount represents funds
advanced to us by The Vitamin Shoppe for operating losses and working capital
requirements through June 30, 1999. As of
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<PAGE> 16
September 30, 1999, our principal commitments consisted of obligations
outstanding under online marketing agreements with web portals and strategic
partners aggregating $16 million through February 2001 and a sublease agreement
for our office space aggregating $1.8 million through November 2003.
On July 9, 1999, we issued $10 million in aggregate principal amount of
promissory notes due in June 2000. These notes were held by stockholders of The
Vitamin Shoppe or affiliates of these stockholders. As discussed below, these
notes were converted into Series A convertible preferred stock.
In July 1999, we issued, for net proceeds of approximately $23.6 million,
1,775,260 shares of our Series A convertible preferred stock, par value $0.01
per share, that converted into an aggregate of 2,732,119 shares of Class A
common stock. Approximately $10 million of this amount was paid by the
conversion of promissory notes held by existing noteholders of The Vitamin
Shoppe and their affiliates.
During the first three quarters 1999, net cash used in operating activities was
$9.6 million, an increase of $8.2 million from the first three quarters 1998.
Net cash used in investing activities was $1.7 million during the first three
quarters 1999, an increase of $1.6 million from the first three quarters 1998.
During the first three quarters 1999, net cash provided by financing activities
was $25.8 million, which consisted of amounts funded by The Vitamin Shoppe, our
initial capitalization by The Vitamin Shoppe and the sale of our Series A
convertible preferred stock. We expect that cash flows from operating
activities will continue to be negative as we increase our marketing and sales
expenses to achieve our strategic goal of growing our customer base.
On October 8, 1999, we sold 4,545,455 shares of our Class A common stock in an
initial public offering at a price of $11.00 per share. The gross proceeds from
the offering were $50 million. The net proceeds were approximately $45 million
after deducting the underwriting discounts and commissions of $3.5 million and
other offering expenses of $1.5 million.
In connection with our initial public offering, the 1,775,260 shares of Series
A convertible preferred stock automatically converted into 2,732,119 shares of
Class A common stock. The carrying amount of the Series A convertible preferred
stock was credited to Class A common stock stated capital and to additional
paid-in capital.
We expect a significant increase in expenditures for online, traditional media
and direct advertising to promote the VitaminShoppe.com brand and to attract
and retain customers. We expect a substantial increase in our capital
expenditures and lease commitments consistent with our expected growth in
operations, infrastructure and personnel. We cannot assure you that we will
experience growth in our operations. During the next six months, we intend to
redesign our website to enhance its functionality. We expect to spend a
significant amount for capital expenditures and expenses in connection with the
redesign project. In addition, at some point we may need to establish our own
fulfillment and distribution centers either to acquire greater control over the
distribution process or to provide adequate supplies of products for our
customers. This would require significant investments in facilities and
equipment.
While we expect that the net proceeds of the initial public offering, in
conjunction with our available funds, will be sufficient to meet our expected
needs for working capital and capital expenditures for the next 12 months, a
need may develop to raise additional funds prior to the end of this period. We
cannot be certain that additional financing will be available to us when
required on favorable terms or at all.
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<PAGE> 17
YEAR 2000 COMPLIANCE
Many existing computer programs and systems use only two digits to identify a
year. These programs and systems were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
these computer applications could fail or create erroneous results by, at or
beyond the year 2000. Directly or through The Vitamin Shoppe, we use software,
computer technology and other services internally developed and provided by
third-party vendors that may fail due to the year 2000 problem. For example, we
are dependent upon the financial institutions involved in processing our
customers' credit card payments for online services and a third party that
hosts our web servers. We are also dependent upon telecommunications vendors to
maintain our network and the United States Postal Service and other third-party
carriers to deliver products to our customers.
Since inception, we have utilized third-party vendors to develop substantially
all of the systems for the operation of our website. These systems include the
software used to provide our online search and navigation capabilities, order
entry, transaction processing, fulfillment and customer service functions, as
well as firewall, security, monitoring and backup capabilities. As part of the
assessment of the year 2000 compliance of these systems, we have sought
assurances from these vendors that their software, computer technology and
other services are year 2000 compliant. Based upon our assessment, we believe
that the software is year 2000 compliant.
Directly or through The Vitamin Shoppe, we have also assessed the year 2000
compliance of internally developed and purchased software, which includes
software for use in order processing and fulfillment, including credit card
processing and distribution functions, accounting and database systems. Based
upon the results of this assessment, we developed and implemented a corrective
action plan with respect to internally developed software applications,
third-party software, third-party vendors and computer technology and services
that may fail to be year 2000 compliant. We are in the final stages of
completing the required corrective actions. At this time, the expenses
associated with the assessment and corrective action are expected to
approximate $0.4 million, largely borne by The Vitamin Shoppe. Failure of our
software and computer systems or those of our third-party suppliers to be year
2000 compliant could have a material adverse effect on us.
It is difficult for us to assess the year 2000 compliance of our general
infrastructure necessary to support our operations. For example, we depend on
the integrity and stability of the Internet to provide our services. We also
depend on the year 2000 compliance of the computer systems and financial
services used by consumers. Thus, the infrastructure necessary to support our
operations consists of a network of computers and telecommunications systems
located throughout the world and operated by numerous unrelated entities and
individuals, none of which individually has the ability to control or manage
the potential year 2000 issues that may impact the entire infrastructure. Our
ability to assess the reliability of this infrastructure is limited and relies
solely on generally available news reports, surveys and comparable industry
data. Based on these sources, we believe that most entities and individuals
that rely significantly on the Internet are reviewing and attempting to address
issues relating to year 2000 compliance, but it is not possible to predict
whether these efforts will be successful in reducing or eliminating the
potential negative impact of year 2000 issues.
A significant disruption in the ability of consumers to access the Internet or
portions of it or to use their credit cards would have an adverse effect on
demand for our products and services. Any failure of our material systems, our
vendors' material systems, our customers' computers or the Internet to be year
2000 compliant could have negative consequences for us which could include
difficulties in operating our website effectively, taking customer orders,
making product deliveries or conducting other fundamental parts of our
business.
At this time, we are in the process of developing some contingency plans that
will address certain situations that may result if our vendors are unable to
achieve year 2000 compliance. These plans currently relate to those parts of our
environment that are under our direct control such as the following functions:
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<PAGE> 18
- order entry, where we are developing a contingency process for taking
orders via our customer service representatives in the event that the
internet fails;
- interface to the fulfillment process, where we are developing plans to
manually create and deliver orders to the warehouse facilities for
packing and distribution; and
- core applications, where we have made arrangements for increased
monitoring and backup and availability of key programming personnel on
the critical days to make any necessary corrections.
The cost of implementing such plans, or others as necessary, could be
significant but cannot be estimated at this time.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income, which
is effective for fiscal years beginning after December 15, 1997. SFAS No. 130
establishes standards for reporting and display of comprehensive income. The
adoption of SFAS No. 130 as of January 1, 1998 did not have a material effect
on our financial statements or disclosures as we have no reconciling items.
Therefore, net loss and comprehensive loss are the same.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 requires that public companies
report information about operating segments in their annual financial
statements and in subsequent condensed financial statements of interim periods
issued to stockholders. This statement also requires that public companies
report certain information about their products and services, the geographic
areas in which they operate and their major customers. Adoption of this new
standard did not have an effect on our disclosures for all periods because we
currently operate as one segment.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
Reporting on the Costs of Start-Up Activities, which is effective for fiscal
years beginning after December 15, 1998. SOP 98-5 establishes accounting and
reporting standards for start-up activities and requires the costs of start-up
activities, including organization costs, to be expensed as incurred. We
adopted SOP 98-5 effective January 1, 1999, and its adoption did not have a
material effect on our financial statements.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is effective for fiscal years
beginning after June 15, 2000. SFAS No. 133 requires recognition of all
derivatives on the balance sheet at fair value. We have determined that the
adoption of this new standard will not have a material effect on our financial
statements or disclosures for all periods presented.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
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VITAMINSHOPPE.COM, INC.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The registrant incorporates Item 15 entitled "Recent Sales of
Unregistered Securities" in its Registration Statement on Form S-1 (File No.
333-83849) as originally filed with the Securities and Exchange Commission on
July 27, 1999 and as subsequently amended.
On October 8, 1999, our Registration Statement on Form S-1 (File No.
333-83849) was declared effective by the Securities and Exchange Commission.
Pursuant to the Registration Statement, we registered and sold 4,545,455 shares
of Class A common stock, par value $.01, at a price of $11.00 per share to an
underwriting syndicate. The managing underwriters were Thomas Weisel Partners
LLC, William Blair & Company and PaineWebber Incorporated. The offering has
terminated as a result of all of the shares offered being sold. The gross
proceeds from the offering were $50 million. The net proceeds were
approximately $45 million after deducting the underwriting discounts and
commissions of $3.5 million and other offering expenses of $1.5 million, which
was after the ending date of the reporting period.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit 10.1: Form of Non-Employee Director Stock Option
Agreement dated as of October 14, 1999 between the registrant
and Michael C. Brooks.
Exhibit 10.2: Form of Non-Employee Director Stock Option
Agreement dated as of October 14, 1999 between the registrant
and Martin L. Edelman.
Exhibit 10.3: Form of Non-Employee Director Stock Option
Agreement dated as of October 14, 1999 between the registrant
and M. Anthony Fisher.
Exhibit 10.4: Form of Non-Employee Director Stock Option
Agreement dated as of October 14, 1999 between the registrant
and David S. Gellman.
Exhibit 10.5: Form of Non-Employee Director Stock Option
Agreement dated as of October 14, 1999 between the registrant
and Stephen P. Murray.
Exhibit 10.6: Form of Nonqualified Stock Option Agreement
dated as of October 14, 1999 between the registrant and
Kathryn H. Creech.
Exhibit 27.1: Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K:
None.
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<PAGE> 20
VITAMINSHOPPE.COM, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VITAMINSHOPPE.COM, INC.
(Registrant)
Date: November 22, 1999 /s/ Kathryn H. Creech
---------------------
Kathryn H. Creech, President
and Chief Executive Officer
/s/ Ann M. Sardini
---------------------
Ann M. Sardini, Chief
Financial Officer, Treasurer
and Secretary
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EXHIBIT INDEX
Exhibit No. Description
10.1 Form of Non-Employee Director Stock Option Agreement
dated as of October 14, 1999 between the registrant
and Michael C. Brooks.
10.2 Form of Non-Employee Director Stock Option Agreement
dated as of October 14, 1999 between the registrant
and Martin L. Edelman.
10.3 Form of Non-Employee Director Stock Option Agreement
dated as of October 14, 1999 between the registrant
and M. Anthony Fisher.
10.4 Form of Non-Employee Director Stock Option Agreement
dated as of October 14, 1999 between the registrant
and David S. Gellman.
10.5 Form of Non-Employee Director Stock Option Agreement
dated as of October 14, 1999 between the registrant
and Stephen P. Murray.
10.6 Form of Nonqualified Stock Option Agreement dated as of
October 14, 1999 between the registrant and Kathryn H.
Creech.
27.1 Financial Data Schedule (EDGAR version only)
<PAGE> 1
EXHIBIT 10.1
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
This NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT (this
"AGREEMENT") dated as of October 14, 1999, between VITAMINSHOPPE.COM, INC., a
Delaware Corporation (the "CORPORATION"), and Michael C. Brooks, residing at
_________, _______, _____ _____ (the "PARTICIPANT").
W I T N E S S E T H:
WHEREAS, the Corporation desires, in connection with the
Participant's service as a Non-Employee Director of the Corporation, and in
accordance with the Stock Option Plan for Non-Employee Directors of
VitaminShoppe.com, Inc., effective as of August 1, 1999 (the "PLAN"), to provide
the Participant with an opportunity to acquire shares of the Corporation's Class
A Common Stock, $0.01 par value (the "CLASS A STOCK"), on favorable terms and to
thereby align his or her interest in the continued progress and success of the
Corporation's business with those of the Corporation's shareholders. Unless
otherwise defined herein, all capitalized terms used herein shall have the same
definitions as set forth under the Plan.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein set forth and other good and valuable consideration, the
Corporation and the Participant hereby agree as follows:
1. Confirmation of Grant of Option. Subject to the terms of
the Plan and this Agreement, the Corporation hereby grants to the Participant
the right to purchase (hereinafter referred to as the "OPTION") an aggregate of
38,475 shares of Class A Stock, subject to adjustment as provided in the Plan
(such shares, as adjusted, hereinafter being referred to as the "SHARES"). The
Option is not intended to qualify as an incentive stock option under Section 422
of the Internal Revenue Code of 1986, as amended.
2. Exercise Price. The exercise price for the purchase of the
Shares covered by the Option will be $11.00 per Share, which equals the Fair
Market Value of such Shares on the date such Options are deemed granted pursuant
to the Plan, subject to adjustment as provided in the Plan.
<PAGE> 2
3. Exercise of Option. The Option shall be exercisable on the
terms and conditions hereinafter set forth:
(a) The Option shall become exercisable as to the
following amounts of the number of Shares originally subject thereto (after
giving effect to any adjustment pursuant to the Plan), on the dates indicated:
(i) as to 12,825 Shares on or after October 14,
2000;
(ii) as to 12,825 Shares on or after October 14,
2001; and
(iii) as to 12,825 Shares on or after October 14,
2002.
(b) The Option may be exercised pursuant to the
provisions of this Section 3, by notice and payment (including, but not limited
to, by a "cashless" exercise) to the Corporation as provided in Section 12
hereof.
4. Term of Option. The term of the Option shall be a period of
ten (10) years from the date hereof, subject to earlier termination or
cancellation as provided in this Agreement. This Option, to the extent
unexercised, shall expire on the day immediately prior to the tenth anniversary
of the date hereof. The Participant shall not have any rights to dividends or
any other rights of a stockholder with respect to any shares of Class A Stock
subject to the Option until such shares shall have been issued to him or her (as
evidenced by the appropriate entry on the books of a duly authorized transfer
agent of the Corporation) provided that the date of issuance shall not be
earlier than the date this Option is exercised and payment of the full purchase
price of the shares of Class A Stock (with respect to which this Option is
exercised) is made to the Corporation.
5. Non-transferability of Option. The Option shall not be
assigned, transferred or otherwise disposed of, or pledged or hypothecated in
any way, and shall not be subject to execution, attachment or other process,
except as may be provided in the Plan. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the provisions of
the Plan, or any levy of execution, attachment or other process attempted upon
the Option, will be null and void and without effect. Any attempt to make any
such assignment, transfer, pledge, hypothecation or other disposition of the
Option or any attempt to make any such levy of execution, attachment or other
process will cause the Option to terminate immediately upon the happening of any
such event; provided, however, that any such termination of the Option under the
foregoing provisions of this Section 5 will not prejudice any rights or remedies
which the Corporation or any Parent or Subsidiary may have under this Agreement
or otherwise.
6. Exercise Upon Death. If the Participant dies while holding
an exercisable Option, such Option shall remain exercisable by his or her estate
(or other beneficiaries, as
2
<PAGE> 3
designated in writing by such Participant) until the end of the exercise period
under the Option, unless the Committee shall otherwise provide at the time of
the grant of the Option. At any time during the one year period following the
Participant's death, the Corporation shall have the right in its sole discretion
to purchase, and the estate or beneficiary of the deceased Participant shall
have the obligation to sell to the Corporation (i) any outstanding Option
exercisable by the estate or beneficiary at the then Fair Market Value of a
share of Class A Stock less the exercise price and (ii) any shares of Class A
Stock held of record or beneficially by the estate or beneficiary through the
exercise of an Option at their then Fair Market Value.
7. Exercise Upon Disability; Voluntary Termination. If the
Participant's service is terminated by reason of (i) Disability or (ii)
voluntary discontinuance of service, any then exercisable Option shall remain
exercisable until the end of the exercise period under such Option and all
Options not exercisable on the date of such termination shall be forfeited and
canceled.
8. Misconduct by Participant. If the Board of Directors
(excluding the Participant accused of such misconduct) determines that the
Participant has committed an act of embezzlement, fraud, dishonesty, nonpayment
of an obligation owed to the Corporation, breach of fiduciary duty or deliberate
disregard of the Corporation's rules resulting in loss, damage or injury to the
Corporation, or if the Participant makes an unauthorized disclosure of the
Corporation's trade secrets or confidential information, engages in any conduct
constituting unfair competition, induces any of the Corporation's customers to
breach a contract with the Corporation or induces any principal for whom the
Corporation acts as agent to terminate such agency relationship, neither the
Participant nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors shall provide
the Participant an opportunity to appear and present evidence on the Optionee's
behalf at a hearing before the Board of Directors or a committee of the Board of
Directors.
9. Exercise Upon Other Termination of Service. In the event
the Participant ceases to serve as a director of the Corporation for any reason
other than as described in Sections 6, 7 or 8 above, within ninety (90) days
after such cessation, the Participant may exercise his or her Option to the
extent that it was exercisable on the date of such termination. Notwithstanding
the foregoing, in no event may the Option be exercised after the term set forth
in Section 4 has expired. To the extent an Option was not exercisable at the
date of such termination, or the Participant does not exercise such Option
within the time specified above, the Option shall be forfeited and canceled.
10. Merger, Consolidation or Change in Control of Corporation.
(a) Upon the occurrence of a Liquidity Event or a Change in Control, the
Participant shall have the right immediately prior to the effective date of such
Liquidity Event (or, if later, within 10 days of the Optionee's notification of
such event) to exercise any Option granted and still outstanding (and not
otherwise expired) in whole or in part without regard to any installment or
vesting provision of this Agreement, provided that all conditions precedent to
the exercise of such Options, other than the passage of time, have occurred. The
Corporation, to the extent practicable, shall give
3
<PAGE> 4
advance notice to the Participant of any such Liquidity Event. All such Options
which are not so exercised shall be canceled and forfeited as of the effective
time of any such Liquidity Event (or, if later, at the end of the applicable
10-day notice period). If the Corporation engages in a Business Combination
which is not a Liquidity Event, the Corporation may, in connection with such
transaction, at its option elect one of the following: provide for (i) the
continuance of the Option granted hereunder (either by express provision or, if
the Corporation is the surviving corporation in the Business Combination, as a
consequence of the failure to address the treatment of options in the applicable
agreements), (ii) the substitution of new options for the Option granted
hereunder (which new options grant the Participant the right to purchase the
securities they would have received had they held Class A Stock immediately
prior to the Business Combination) or (iii) acceleration of any outstanding
Options in which case such Business Combination will be deemed a "Liquidity
Event" and Options treated in accordance with the preceding sentences of this
Section 10.
11. Registration. The Corporation may register or qualify the
shares covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
12. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by notice in the
manner set forth in Exhibit A hereto (the "NOTICE") and provision for payment to
the Corporation in accordance with the procedure prescribed herein. Each such
Notice shall:
(i) state the election to exercise the Option and
the number of Shares with respect to which it is being exercised;
(ii) contain a representation and agreement as to
investment intent, if required by the Committee with respect to such
Shares, in a form satisfactory to the Committee;
(iii) be signed by the Participant or the person or
persons entitled to exercise the Option and, if the Option is being
exercised by any person or persons other than the Participant, be
accompanied by proof satisfactory to the Committee of the right of such
other person or persons to exercise the Option;
(iv) include payment of the full purchase price for
the shares of Class A Stock to be purchased pursuant to such exercise of
the Option; and
(v) be received by the Corporation on or before
the date of the expiration of this Option. In the event the date of
expiration of this Option falls on a day which is not a regular business
day at the Corporation's executive office then such Notice must be received
at such office on or before the last regular business day prior to such
date of expiration.
4
<PAGE> 5
(b) Payment of the purchase price of any shares of
Class A Stock, in respect of which the Option shall be exercised, shall be
made by the Participant or such person or persons at the place specified by
the Corporation on the date the Notice is received by the Corporation (i)
by delivering to the Corporation a certified or bank cashier's check
payable to the order of the Corporation, (ii) by delivering to the
Corporation properly endorsed certificates of shares of Class A Stock (or
certificates accompanied by an appropriate stock power) with signature
guaranties by a bank or trust company, (iii) by having withheld from the
total number of shares of Class A Stock to be acquired upon the exercise of
this Option a specified number of such shares of Class A Stock, (iv) by any
form of "cashless" exercise or (v) by any combination of the above.
(c) The Option shall be deemed to have been
exercised on the date the Notice was received by the Corporation with
respect to any particular shares of Class A Stock if, and only if, the
preceding provisions of this Section 12 and the provisions of Section 13
hereof shall have been complied with. Anything in this Agreement to the
contrary notwithstanding, any Notice given pursuant to the provisions of
this Section 12 shall be void and of no effect if all of the preceding
provisions of this Section 12 (including this subsection (c)) and the
provisions of Section 13 shall not have been complied with.
(d) The certificate or certificates for shares of
Class A Stock as to which the Option shall be exercised will be registered
in the name of the Participant (or in the name of the Participant's estate
or other beneficiary, if the Option is exercised after the Participant's
death), or if the Option is exercised by the Participant and if the
Participant so requests in the Notice exercising the Option, will be
registered in the name of the Participant and another person jointly, with
right of survivorship, and will be delivered as soon as practical after the
date the Notice is received by the Corporation (accompanied by full payment
of the exercise price), but only upon compliance with all of the provisions
of this Agreement.
(e) If the Participant fails to accept delivery of
and pay for all or any part of the number of Shares specified in such
Notice, his or her right to exercise the Option with respect to such
undelivered Shares may be terminated in the sole discretion of the
Committee. The Option may be exercised only with respect to full Shares.
(f) The Corporation shall not be required to issue
or deliver any certificate or certificates for shares of its Class A Stock
purchased upon the exercise of any part of this Option prior to the payment
to the Corporation, upon its demand, of any amount requested by the
Corporation for the purpose of satisfying its liability, if any, to
withhold state or local income or earnings tax or any other applicable tax
or assessment (plus interest or penalties thereon, if any, caused by a
delay in making such payment) incurred by reason of the exercise of this
Option or the transfer of shares thereupon. Such payment shall be made by
the Participant in cash or, with the consent of the Corporation, by
tendering to the Corporation shares of Class A Stock equal in value to the
amount of the required withholding. In the alternative, the Corporation
may, at its option, satisfy such withholding requirements by withholding
from the
5
<PAGE> 6
shares of Class A Stock to be delivered to the Participant pursuant to an
exercise of this Option, a number of shares of Class A Stock equal in value to
the amount of the required withholding.
13. Approval of Counsel. The exercise of the Option and the
issuance and delivery of shares of Class A Stock pursuant thereto shall be
subject to approval by the Corporation's counsel of all legal matters in
connection therewith, including, but not limited to, compliance with the
requirements of the Securities Act of 1933 and the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Class A Stock may then be
listed.
14. Resale of Class A Stock. (a) If so requested by the
Corporation, upon any sale or transfer of the Class A Stock purchased upon
exercise of the Option, the Participant shall deliver to the Corporation an
opinion of counsel satisfactory to the Corporation to the effect that either (i)
the Class A Stock to be sold or transferred has been registered under the
Securities Act of 1933, and that there is in effect a current prospectus meeting
the requirements of Section 10(a) of the Securities Act which is being or will
be delivered to the purchaser or transferee at or prior to the time of delivery
of the certificates evidencing the Class A Stock to be sold or transferred or
(ii) such Class A Stock may then be sold without violating Section 5 of said
Act.
(b) The Class A Stock issued upon exercise of the Option
shall bear the following legend if required by counsel for the Corporation:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
TRANSFER OF SUCH SECURITIES MAY BE MADE UNLESS SUCH TRANSFER
IS MADE IN CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
15. Reservation of Shares. The Corporation shall at all times
during the term of the Option reserve and keep available such number of shares
of the Class A Stock as will be sufficient to satisfy the requirements of this
Agreement.
16. Nonguarantee. Nothing contained in this Agreement shall be
construed to confer any right with respect to continuation of service as a
director of the Corporation or nomination to serve as a director of the
Corporation, nor shall it interfere in any way with any rights which the
Participant or the Corporation may have to terminate his or her directorship at
any time.
17. Notices. Each notice relating to this Agreement shall be
in writing and delivered in person, by air courier or by certified mail to the
proper address. All notices to the Corporation or the Committee shall be
addressed to them at VitaminShoppe.com, Inc., 444
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<PAGE> 7
Madison Avenue, Suite 802, New York, NY 10022, Attn: President and Chief
Executive Officer. All notices to the Participant shall be addressed to the
Participant or such other person or persons at the Participant's address above
specified. Anyone to whom a notice may be given under this Agreement may
designate a new address by notice to that effect.
18. Benefits of Agreement. This Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Corporation. All
obligations imposed upon the Participant and all rights granted to the
Corporation under this Agreement shall be binding upon the Participant's heirs,
legal representatives, successors and assigns.
19. Severability. In case any provision of this Agreement
shall be held illegal or void, such illegality or invalidity shall not affect
the remaining provisions of this Agreement, but shall be fully severable, and
this Agreement shall be construed and enforced as if said illegal or invalid
provisions had never been inserted herein.
20. Governing Law. All questions pertaining to the validity,
construction and administration of this Agreement shall be determined in
accordance with the laws of the State of New York.
21. Incorporation of Terms of Plan. This Agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference.
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<PAGE> 8
IN WITNESS WHEREOF, the Corporation has caused this Agreement
to be executed in its name by its President and its corporate seal to be
hereunto affixed and attested by its Secretary or its Assistant Secretary and
the Participant has hereunto set his or her hand all as of the date, month and
year first above written.
ATTEST: VitaminShoppe.com, Inc.
By:
- ------------------------ ---------------------------------
Secretary Name: Kathryn H. Creech
Title: President and Chief Executive
Officer
---------------------------------
Michael C. Brooks
---------------------------------
Social Security Number
<PAGE> 9
EXHIBIT A
NON-EMPLOYEE DIRECTOR STOCK OPTION EXERCISE FORM
--------------------
Date
VitaminShoppe.com, Inc.
444 Madison Avenue, Suite 802
New York, NY 10168
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Non-Employee Director Stock
Option Agreement, dated October 14, 1999, whereby you have granted to me a stock
option to purchase 38,475 shares of the Class A Common Stock (the "CLASS A
STOCK") of VitaminShoppe.com, Inc. (the "CORPORATION"), I hereby notify you that
I elect to exercise my option to purchase ______________ of the shares covered
by such Option at the exercise price specified thereon. In full payment of the
price for the shares being purchased hereby:
1. I am delivering to you herewith:
(a) a certified or bank cashier's check payable
to the order of the Corporation in the amount of $_________; $_________ of this
amount is the purchase price of the shares, and the balance represents payment
of withholding taxes as follows: Federal $_________, State $_________ and Local
$_________ OR
(b) a certificate or certificates for [ ]
shares of Class A Stock of the Corporation, which have a Fair Market Value as of
the date hereof at least equal to the option exercise price, and a certified or
bank cashier's check, payable to the order of the Corporation, in the amount of
$_________, which represents payment of withholding taxes as follows: Federal
$_________, State $_________ and Local $_________. Any such stock certificate or
certificates are endorsed, or accompanied by an appropriate stock power, to the
order of the Corporation, with my signature guaranteed by a bank or trust
company or by a member firm of the National Association of Securities Dealers,
Inc.
<PAGE> 10
(c) OR
(d) Please retain __________ shares of Class A
Stock of the Corporation covered by the Option which have a Fair Market Value as
of the date hereof at least equal to the option exercise price. I am delivering
to you herewith a certified or bank cashier's check, payable to the order of the
Corporation, in the amount of $_________ which represents payment of withholding
taxes as follows: Federal $_________, State $_________ and Local $_________.
In the event the amounts designated above are insufficient for
the withholding of federal, state and local taxes, I hereby authorize the
Corporation to withhold in accordance with applicable law from any regular cash
compensation payable to me the balance of any taxes required to be withheld by
the Corporation under federal, state or local law as a result of my election
herein. Further, I acknowledge that I am purchasing these shares for investment
purposes only and not for resale.
Very truly yours,
---------------------------------
Michael C. Brooks
Address for notices,
reports, dividend checks
and other communications to
stockholders:
[ ]
[ ]
[ ]
<PAGE> 11
================================================================================
Stock Option Plan for Non-Employee Directors of
VitaminShoppe.com, Inc.
NON-EMPLOYEE DIRECTOR STOCK OPTION
Granted To
MICHAEL C. BROOKS
Participant
38,475 $11.00
- ------------------------ ------------------------
Number of Shares Price per Share
DATE GRANTED: October 14, 1999 EXPIRATION DATE: October 13, 2009
================================================================================
<PAGE> 1
EXHIBIT 10.2
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
This NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT (this
"AGREEMENT") dated as of October 14, 1999, between VITAMINSHOPPE.COM, INC., a
Delaware Corporation (the "CORPORATION"), and Martin L. Edelman, residing at
_________, _______, _____ _____ (the "PARTICIPANT").
W I T N E S S E T H:
WHEREAS, the Corporation desires, in connection with the
Participant's service as a Non-Employee Director of the Corporation, and in
accordance with the Stock Option Plan for Non-Employee Directors of
VitaminShoppe.com, Inc., effective as of August 1, 1999 (the "PLAN"), to provide
the Participant with an opportunity to acquire shares of the Corporation's Class
A Common Stock, $0.01 par value (the "CLASS A STOCK"), on favorable terms and to
thereby align his or her interest in the continued progress and success of the
Corporation's business with those of the Corporation's shareholders. Unless
otherwise defined herein, all capitalized terms used herein shall have the same
definitions as set forth under the Plan.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein set forth and other good and valuable consideration, the
Corporation and the Participant hereby agree as follows:
1. Confirmation of Grant of Option. Subject to the terms of
the Plan and this Agreement, the Corporation hereby grants to the Participant
the right to purchase (hereinafter referred to as the "OPTION") an aggregate of
38,475 shares of Class A Stock, subject to adjustment as provided in the Plan
(such shares, as adjusted, hereinafter being referred to as the "SHARES"). The
Option is not intended to qualify as an incentive stock option under Section 422
of the Internal Revenue Code of 1986, as amended.
2. Exercise Price. The exercise price for the purchase of the
Shares covered by the Option will be $11.00 per Share, which equals the Fair
Market Value of such Shares on the date such Options are deemed granted pursuant
to the Plan, subject to adjustment as provided in the Plan.
<PAGE> 2
3. Exercise of Option. The Option shall be exercisable on the
terms and conditions hereinafter set forth:
(a) The Option shall become exercisable as to the
following amounts of the number of Shares originally subject thereto (after
giving effect to any adjustment pursuant to the Plan), on the dates indicated:
(i) as to 12,825 Shares on or after October 14,
2000;
(ii) as to 12,825 Shares on or after October 14,
2001; and
(iii) as to 12,825 Shares on or after October 14,
2002.
(b) The Option may be exercised pursuant to the
provisions of this Section 3, by notice and payment (including, but not limited
to, by a "cashless" exercise) to the Corporation as provided in Section 12
hereof.
4. Term of Option. The term of the Option shall be a period of
ten (10) years from the date hereof, subject to earlier termination or
cancellation as provided in this Agreement. This Option, to the extent
unexercised, shall expire on the day immediately prior to the tenth anniversary
of the date hereof. The Participant shall not have any rights to dividends or
any other rights of a stockholder with respect to any shares of Class A Stock
subject to the Option until such shares shall have been issued to him or her (as
evidenced by the appropriate entry on the books of a duly authorized transfer
agent of the Corporation) provided that the date of issuance shall not be
earlier than the date this Option is exercised and payment of the full purchase
price of the shares of Class A Stock (with respect to which this Option is
exercised) is made to the Corporation.
5. Non-transferability of Option. The Option shall not be
assigned, transferred or otherwise disposed of, or pledged or hypothecated in
any way, and shall not be subject to execution, attachment or other process,
except as may be provided in the Plan. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the provisions of
the Plan, or any levy of execution, attachment or other process attempted upon
the Option, will be null and void and without effect. Any attempt to make any
such assignment, transfer, pledge, hypothecation or other disposition of the
Option or any attempt to make any such levy of execution, attachment or other
process will cause the Option to terminate immediately upon the happening of any
such event; provided, however, that any such termination of the Option under the
foregoing provisions of this Section 5 will not prejudice any rights or remedies
which the Corporation or any Parent or Subsidiary may have under this Agreement
or otherwise.
6. Exercise Upon Death. If the Participant dies while holding
an exercisable Option, such Option shall remain exercisable by his or her estate
(or other beneficiaries, as designated in writing by such Participant) until the
end of the exercise period under the Option,
2
<PAGE> 3
unless the Committee shall otherwise provide at the time of the grant of the
Option. At any time during the one year period following the Participant's
death, the Corporation shall have the right in its sole discretion to purchase,
and the estate or beneficiary of the deceased Participant shall have the
obligation to sell to the Corporation (i) any outstanding Option exercisable by
the estate or beneficiary at the then Fair Market Value of a share of Class A
Stock less the exercise price and (ii) any shares of Class A Stock held of
record or beneficially by the estate or beneficiary through the exercise of an
Option at their then Fair Market Value.
7. Exercise Upon Disability; Voluntary Termination. If the
Participant's service is terminated by reason of (i) Disability or (ii)
voluntary discontinuance of service, any then exercisable Option shall remain
exercisable until the end of the exercise period under such Option and all
Options not exercisable on the date of such termination shall be forfeited and
canceled.
8. Misconduct by Participant. If the Board of Directors
(excluding the Participant accused of such misconduct) determines that the
Participant has committed an act of embezzlement, fraud, dishonesty, nonpayment
of an obligation owed to the Corporation, breach of fiduciary duty or deliberate
disregard of the Corporation's rules resulting in loss, damage or injury to the
Corporation, or if the Participant makes an unauthorized disclosure of the
Corporation's trade secrets or confidential information, engages in any conduct
constituting unfair competition, induces any of the Corporation's customers to
breach a contract with the Corporation or induces any principal for whom the
Corporation acts as agent to terminate such agency relationship, neither the
Participant nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors shall provide
the Participant an opportunity to appear and present evidence on the Optionee's
behalf at a hearing before the Board of Directors or a committee of the Board of
Directors.
9. Exercise Upon Other Termination of Service. In the event
the Participant ceases to serve as a director of the Corporation for any reason
other than as described in Sections 6, 7 or 8 above, within ninety (90) days
after such cessation, the Participant may exercise his or her Option to the
extent that it was exercisable on the date of such termination. Notwithstanding
the foregoing, in no event may the Option be exercised after the term set forth
in Section 4 has expired. To the extent an Option was not exercisable at the
date of such termination, or the Participant does not exercise such Option
within the time specified above, the Option shall be forfeited and canceled.
10. Merger, Consolidation or Change in Control of Corporation.
(a) Upon the occurrence of a Liquidity Event or a Change in Control, the
Participant shall have the right immediately prior to the effective date of such
Liquidity Event (or, if later, within 10 days of the Optionee's notification of
such event) to exercise any Option granted and still outstanding (and not
otherwise expired) in whole or in part without regard to any installment or
vesting provision of this Agreement, provided that all conditions precedent to
the exercise of such Options, other than the passage of time, have occurred. The
Corporation, to the extent practicable, shall give advance notice to the
Participant of any such Liquidity Event. All such Options which are not so
exercised shall be canceled and forfeited as of the effective time of any such
Liquidity Event (or,
3
<PAGE> 4
if later, at the end of the applicable 10-day notice period). If the Corporation
engages in a Business Combination which is not a Liquidity Event, the
Corporation may, in connection with such transaction, at its option elect one of
the following: provide for (i) the continuance of the Option granted hereunder
(either by express provision or, if the Corporation is the surviving corporation
in the Business Combination, as a consequence of the failure to address the
treatment of options in the applicable agreements), (ii) the substitution of new
options for the Option granted hereunder (which new options grant the
Participant the right to purchase the securities they would have received had
they held Class A Stock immediately prior to the Business Combination) or (iii)
acceleration of any outstanding Options in which case such Business Combination
will be deemed a "Liquidity Event" and Options treated in accordance with the
preceding sentences of this Section 10.
11. Registration. The Corporation may register or qualify the
shares covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
12. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by notice in the
manner set forth in Exhibit A hereto (the "NOTICE") and provision for payment to
the Corporation in accordance with the procedure prescribed herein. Each such
Notice shall:
(i) state the election to exercise the Option and the
number of Shares with respect to which it is being exercised;
(ii) contain a representation and agreement as to
investment intent, if required by the Committee with respect to such
Shares, in a form satisfactory to the Committee;
(iii) be signed by the Participant or the person or
persons entitled to exercise the Option and, if the Option is being
exercised by any person or persons other than the Participant, be
accompanied by proof satisfactory to the Committee of the right of such
other person or persons to exercise the Option;
(iv) include payment of the full purchase price for
the shares of Class A Stock to be purchased pursuant to such exercise of
the Option; and
(v) be received by the Corporation on or before the
date of the expiration of this Option. In the event the date of
expiration of this Option falls on a day which is not a regular business
day at the Corporation's executive office then such Notice must be
received at such office on or before the last regular business day prior
to such date of expiration.
(b) Payment of the purchase price of any shares of Class
A Stock, in respect of which the Option shall be exercised, shall be made by the
Participant or such person or persons at the place specified by the Corporation
on the date the Notice is received by the
4
<PAGE> 5
Corporation (i) by delivering to the Corporation a certified or bank cashier's
check payable to the order of the Corporation, (ii) by delivering to the
Corporation properly endorsed certificates of shares of Class A Stock (or
certificates accompanied by an appropriate stock power) with signature
guaranties by a bank or trust company, (iii) by having withheld from the total
number of shares of Class A Stock to be acquired upon the exercise of this
Option a specified number of such shares of Class A Stock, (iv) by any form of
"cashless" exercise or (v) by any combination of the above.
(c) The Option shall be deemed to have been exercised on
the date the Notice was received by the Corporation with respect to any
particular shares of Class A Stock if, and only if, the preceding provisions of
this Section 12 and the provisions of Section 13 hereof shall have been complied
with. Anything in this Agreement to the contrary notwithstanding, any Notice
given pursuant to the provisions of this Section 12 shall be void and of no
effect if all of the preceding provisions of this Section 12 (including this
subsection (c)) and the provisions of Section 13 shall not have been complied
with.
(d) The certificate or certificates for shares of Class
A Stock as to which the Option shall be exercised will be registered in the name
of the Participant (or in the name of the Participant's estate or other
beneficiary, if the Option is exercised after the Participant's death), or if
the Option is exercised by the Participant and if the Participant so requests in
the Notice exercising the Option, will be registered in the name of the
Participant and another person jointly, with right of survivorship, and will be
delivered as soon as practical after the date the Notice is received by the
Corporation (accompanied by full payment of the exercise price), but only upon
compliance with all of the provisions of this Agreement.
(e) If the Participant fails to accept delivery of and
pay for all or any part of the number of Shares specified in such Notice, his or
her right to exercise the Option with respect to such undelivered Shares may be
terminated in the sole discretion of the Committee. The Option may be exercised
only with respect to full Shares.
(f) The Corporation shall not be required to issue or
deliver any certificate or certificates for shares of its Class A Stock
purchased upon the exercise of any part of this Option prior to the payment to
the Corporation, upon its demand, of any amount requested by the Corporation for
the purpose of satisfying its liability, if any, to withhold state or local
income or earnings tax or any other applicable tax or assessment (plus interest
or penalties thereon, if any, caused by a delay in making such payment) incurred
by reason of the exercise of this Option or the transfer of shares thereupon.
Such payment shall be made by the Participant in cash or, with the consent of
the Corporation, by tendering to the Corporation shares of Class A Stock equal
in value to the amount of the required withholding. In the alternative, the
Corporation may, at its option, satisfy such withholding requirements by
withholding from the shares of Class A Stock to be delivered to the Participant
pursuant to an exercise of this Option, a number of shares of Class A Stock
equal in value to the amount of the required withholding.
13. Approval of Counsel. The exercise of the Option and the
issuance and delivery of shares of Class A Stock pursuant thereto shall be
subject to approval by the
5
<PAGE> 6
Corporation's counsel of all legal matters in connection therewith, including,
but not limited to, compliance with the requirements of the Securities Act of
1933 and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Class A Stock may then be listed.
14. Resale of Class A Stock. (a) If so requested by the
Corporation, upon any sale or transfer of the Class A Stock purchased upon
exercise of the Option, the Participant shall deliver to the Corporation an
opinion of counsel satisfactory to the Corporation to the effect that either (i)
the Class A Stock to be sold or transferred has been registered under the
Securities Act of 1933, and that there is in effect a current prospectus meeting
the requirements of Section 10(a) of the Securities Act which is being or will
be delivered to the purchaser or transferee at or prior to the time of delivery
of the certificates evidencing the Class A Stock to be sold or transferred or
(ii) such Class A Stock may then be sold without violating Section 5 of said
Act.
(b) The Class A Stock issued upon exercise of the Option
shall bear the following legend if required by counsel for the Corporation:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
TRANSFER OF SUCH SECURITIES MAY BE MADE UNLESS SUCH TRANSFER
IS MADE IN CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
15. Reservation of Shares. The Corporation shall at all times
during the term of the Option reserve and keep available such number of shares
of the Class A Stock as will be sufficient to satisfy the requirements of this
Agreement.
16. Nonguarantee. Nothing contained in this Agreement shall be
construed to confer any right with respect to continuation of service as a
director of the Corporation or nomination to serve as a director of the
Corporation, nor shall it interfere in any way with any rights which the
Participant or the Corporation may have to terminate his or her directorship at
any time.
17. Notices. Each notice relating to this Agreement shall be
in writing and delivered in person, by air courier or by certified mail to the
proper address. All notices to the Corporation or the Committee shall be
addressed to them at VitaminShoppe.com, Inc., 444 Madison Avenue, Suite 802, New
York, NY 10022, Attn: President and Chief Executive Officer. All notices to the
Participant shall be addressed to the Participant or such other person or
persons at the Participant's address above specified. Anyone to whom a notice
may be given under this Agreement may designate a new address by notice to that
effect.
6
<PAGE> 7
18. Benefits of Agreement. This Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Corporation. All
obligations imposed upon the Participant and all rights granted to the
Corporation under this Agreement shall be binding upon the Participant's heirs,
legal representatives, successors and assigns.
19. Severability. In case any provision of this Agreement
shall be held illegal or void, such illegality or invalidity shall not affect
the remaining provisions of this Agreement, but shall be fully severable, and
this Agreement shall be construed and enforced as if said illegal or invalid
provisions had never been inserted herein.
20. Governing Law. All questions pertaining to the validity,
construction and administration of this Agreement shall be determined in
accordance with the laws of the State of New York.
21. Incorporation of Terms of Plan. This Agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference.
7
<PAGE> 8
IN WITNESS WHEREOF, the Corporation has caused this Agreement
to be executed in its name by its President and its corporate seal to be
hereunto affixed and attested by its Secretary or its Assistant Secretary and
the Participant has hereunto set his or her hand all as of the date, month and
year first above written.
ATTEST: VitaminShoppe.com, Inc.
By:
- ------------------ --------------------------------------
Secretary Name: Kathryn H. Creech
Title: President and Chief Executive
Officer
---------------------------------
Martin L. Edelman
---------------------------------
Social Security Number
<PAGE> 9
EXHIBIT A
NON-EMPLOYEE DIRECTOR STOCK OPTION EXERCISE FORM
--------------------
Date
VitaminShoppe.com, Inc.
444 Madison Avenue, Suite 802
New York, NY 10168
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Non-Employee Director Stock
Option Agreement, dated October 14, 1999, whereby you have granted to me a stock
option to purchase 38,475 shares of the Class A Common Stock (the "CLASS A
STOCK") of VitaminShoppe.com, Inc. (the "CORPORATION"), I hereby notify you that
I elect to exercise my option to purchase ______________ of the shares covered
by such Option at the exercise price specified thereon. In full payment of the
price for the shares being purchased hereby:
1. I am delivering to you herewith:
(a) a certified or bank cashier's check payable to
the order of the Corporation in the amount of $_________; $_________ of this
amount is the purchase price of the shares, and the balance represents payment
of withholding taxes as follows: Federal $_________, State $_________ and Local
$_________ OR
(b) a certificate or certificates for [ ]
shares of Class A Stock of the Corporation, which have a Fair Market Value as of
the date hereof at least equal to the option exercise price, and a certified or
bank cashier's check, payable to the order of the Corporation, in the amount of
$_________, which represents payment of withholding taxes as follows: Federal
$_________, State $_________ and Local $_________. Any such stock certificate or
certificates are endorsed, or accompanied by an appropriate stock power, to the
order of the Corporation, with my signature guaranteed by a bank or trust
company or by a member firm of the National Association of Securities Dealers,
Inc.
<PAGE> 10
(c) OR
(d) Please retain __________ shares of Class A
Stock of the Corporation covered by the Option which have a Fair Market Value as
of the date hereof at least equal to the option exercise price. I am delivering
to you herewith a certified or bank cashier's check, payable to the order of the
Corporation, in the amount of $_________ which represents payment of withholding
taxes as follows: Federal $_________, State $_________ and Local$__________.
In the event the amounts designated above are insufficient for
the withholding of federal, state and local taxes, I hereby authorize the
Corporation to withhold in accordance with applicable law from any regular cash
compensation payable to me the balance of any taxes required to be withheld by
the Corporation under federal, state or local law as a result of my election
herein. Further, I acknowledge that I am purchasing these shares for investment
purposes only and not for resale.
Very truly yours,
---------------------------------
Martin L. Edelman
Address for notices,
reports, dividend checks
and other communications to
stockholders:
[ ]
[ ]
[ ]
<PAGE> 11
================================================================================
Stock Option Plan for Non-Employee Directors of
VitaminShoppe.com, Inc.
NON-EMPLOYEE DIRECTOR STOCK OPTION
Granted To
MARTIN L. EDELMAN
Participant
38,475 $11.00
- ------------------------ ------------------------
Number of Shares Price per Share
DATE GRANTED: October 14, 1999 EXPIRATION DATE: October 13, 2009
================================================================================
<PAGE> 1
EXHIBIT 10.3
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
This NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT (this "AGREEMENT")
dated as of October 14, 1999, between VITAMINSHOPPE.COM, INC., a Delaware
Corporation (the "CORPORATION"), and M. Anthony Fisher, residing at _________,
_______, _____ _____ (the "PARTICIPANT").
W I T N E S S E T H:
WHEREAS, the Corporation desires, in connection with the Participant's
service as a Non-Employee Director of the Corporation, and in accordance with
the Stock Option Plan for Non-Employee Directors of VitaminShoppe.com, Inc.,
effective as of August 1, 1999 (the "PLAN"), to provide the Participant with an
opportunity to acquire shares of the Corporation's Class A Common Stock, $0.01
par value (the "CLASS A STOCK"), on favorable terms and to thereby align his or
her interest in the continued progress and success of the Corporation's business
with those of the Corporation's shareholders. Unless otherwise defined herein,
all capitalized terms used herein shall have the same definitions as set forth
under the Plan.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein set forth and other good and valuable consideration, the Corporation and
the Participant hereby agree as follows:
1. Confirmation of Grant of Option. Subject to the terms of the Plan
and this Agreement, the Corporation hereby grants to the Participant the right
to purchase (hereinafter referred to as the "OPTION") an aggregate of 38,475
shares of Class A Stock, subject to adjustment as provided in the Plan (such
shares, as adjusted, hereinafter being referred to as the "SHARES"). The Option
is not intended to qualify as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended.
2. Exercise Price. The exercise price for the purchase of the Shares
covered by the Option will be $11.00 per Share, which equals the Fair Market
Value of such Shares on the date such Options are deemed granted pursuant to the
Plan, subject to adjustment as provided in the Plan.
2
<PAGE> 2
3. Exercise of Option. The Option shall be exercisable on the terms
and conditions hereinafter set forth:
(a) The Option shall become exercisable as to the following
amounts of the number of Shares originally subject thereto (after giving effect
to any adjustment pursuant to the Plan), on the dates indicated:
(i) as to 12,825 Shares on or after October 14, 2000;
(ii) as to 12,825 Shares on or after October 14, 2001;
and
(iii) as to 12,825 Shares on or after October 14, 2002.
(b) The Option may be exercised pursuant to the provisions of
this Section 3, by notice and payment (including, but not limited to, by a
"cashless" exercise) to the Corporation as provided in Section 12 hereof.
4. Term of Option. The term of the Option shall be a period of ten
(10) years from the date hereof, subject to earlier termination or cancellation
as provided in this Agreement. This Option, to the extent unexercised, shall
expire on the day immediately prior to the tenth anniversary of the date hereof.
The Participant shall not have any rights to dividends or any other rights of a
stockholder with respect to any shares of Class A Stock subject to the Option
until such shares shall have been issued to him or her (as evidenced by the
appropriate entry on the books of a duly authorized transfer agent of the
Corporation) provided that the date of issuance shall not be earlier than the
date this Option is exercised and payment of the full purchase price of the
shares of Class A Stock (with respect to which this Option is exercised) is made
to the Corporation.
5. Non-transferability of Option. The Option shall not be assigned,
transferred or otherwise disposed of, or pledged or hypothecated in any way, and
shall not be subject to execution, attachment or other process, except as may be
provided in the Plan. Any assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions of the Plan, or any levy of
execution, attachment or other process attempted upon the Option, will be null
and void and without effect. Any attempt to make any such assignment, transfer,
pledge, hypothecation or other disposition of the Option or any attempt to make
any such levy of execution, attachment or other process will cause the Option to
terminate immediately upon the happening of any such event; provided, however,
that any such termination of the Option under the foregoing provisions of this
Section 5 will not prejudice any rights or remedies which the Corporation or any
Parent or Subsidiary may have under this Agreement or otherwise.
6. Exercise Upon Death. If the Participant dies while holding an
exercisable Option, such Option shall remain exercisable by his or her estate
(or other beneficiaries, as designated in writing by such Participant) until the
end of the exercise period under the Option,
3
<PAGE> 3
unless the Committee shall otherwise provide at the time of the grant of the
Option. At any time during the one year period following the Participant's
death, the Corporation shall have the right in its sole discretion to purchase,
and the estate or beneficiary of the deceased Participant shall have the
obligation to sell to the Corporation (i) any outstanding Option exercisable by
the estate or beneficiary at the then Fair Market Value of a share of Class A
Stock less the exercise price and (ii) any shares of Class A Stock held of
record or beneficially by the estate or beneficiary through the exercise of an
Option at their then Fair Market Value.
7. Exercise Upon Disability; Voluntary Termination. If the
Participant's service is terminated by reason of (i) Disability or (ii)
voluntary discontinuance of service, any then exercisable Option shall remain
exercisable until the end of the exercise period under such Option and all
Options not exercisable on the date of such termination shall be forfeited and
canceled.
8. Misconduct by Participant. If the Board of Directors (excluding
the Participant accused of such misconduct) determines that the Participant has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Corporation, breach of fiduciary duty or deliberate disregard of the
Corporation's rules resulting in loss, damage or injury to the Corporation, or
if the Participant makes an unauthorized disclosure of the Corporation's trade
secrets or confidential information, engages in any conduct constituting unfair
competition, induces any of the Corporation's customers to breach a contract
with the Corporation or induces any principal for whom the Corporation acts as
agent to terminate such agency relationship, neither the Participant nor his or
her estate shall be entitled to exercise any Option whatsoever. In making such
determination, the Board of Directors shall provide the Participant an
opportunity to appear and present evidence on the Optionee's behalf at a hearing
before the Board of Directors or a committee of the Board of Directors.
9. Exercise Upon Other Termination of Service. In the event the
Participant ceases to serve as a director of the Corporation for any reason
other than as described in Sections 6, 7 or 8 above, within ninety (90) days
after such cessation, the Participant may exercise his or her Option to the
extent that it was exercisable on the date of such termination. Notwithstanding
the foregoing, in no event may the Option be exercised after the term set forth
in Section 4 has expired. To the extent an Option was not exercisable at the
date of such termination, or the Participant does not exercise such Option
within the time specified above, the Option shall be forfeited and canceled.
10. Merger, Consolidation or Change in Control of Corporation. (a)
Upon the occurrence of a Liquidity Event or a Change in Control, the Participant
shall have the right immediately prior to the effective date of such Liquidity
Event (or, if later, within 10 days of the Optionee's notification of such
event) to exercise any Option granted and still outstanding (and not otherwise
expired) in whole or in part without regard to any installment or vesting
provision of this Agreement, provided that all conditions precedent to the
exercise of such Options, other than the passage of time, have occurred. The
Corporation, to the extent practicable, shall give advance notice to the
Participant of any such Liquidity Event. All such Options which are not so
exercised shall be canceled and forfeited as of the effective time of any such
Liquidity Event (or,
4
<PAGE> 4
if later, at the end of the applicable 10-day notice period). If the Corporation
engages in a Business Combination which is not a Liquidity Event, the
Corporation may, in connection with such transaction, at its option elect one of
the following: provide for (i) the continuance of the Option granted hereunder
(either by express provision or, if the Corporation is the surviving corporation
in the Business Combination, as a consequence of the failure to address the
treatment of options in the applicable agreements), (ii) the substitution of new
options for the Option granted hereunder (which new options grant the
Participant the right to purchase the securities they would have received had
they held Class A Stock immediately prior to the Business Combination) or (iii)
acceleration of any outstanding Options in which case such Business Combination
will be deemed a "Liquidity Event" and Options treated in accordance with the
preceding sentences of this Section 10.
11. Registration. The Corporation may register or qualify the shares
covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
12. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by notice in the
manner set forth in Exhibit A hereto (the "NOTICE") and provision for payment to
the Corporation in accordance with the procedure prescribed herein. Each such
Notice shall:
(i) state the election to exercise the Option and the
number of Shares with respect to which it is being exercised;
(ii) contain a representation and agreement as to
investment intent, if required by the Committee with respect to such
Shares, in a form satisfactory to the Committee;
(iii) be signed by the Participant or the person or
persons entitled to exercise the Option and, if the Option is being
exercised by any person or persons other than the Participant, be
accompanied by proof satisfactory to the Committee of the right of such
other person or persons to exercise the Option;
(iv) include payment of the full purchase price for the
shares of Class A Stock to be purchased pursuant to such exercise of the
Option; and
(v) be received by the Corporation on or before the date
of the expiration of this Option. In the event the date of expiration of
this Option falls on a day which is not a regular business day at the
Corporation's executive office then such Notice must be received at such
office on or before the last regular business day prior to such date of
expiration.
(b) Payment of the purchase price of any shares of Class A
Stock, in respect of which the Option shall be exercised, shall be made by the
Participant or such person or persons at the place specified by the Corporation
on the date the Notice is received by the
4
<PAGE> 5
Corporation (i) by delivering to the Corporation a certified or bank cashier's
check payable to the order of the Corporation, (ii) by delivering to the
Corporation properly endorsed certificates of shares of Class A Stock (or
certificates accompanied by an appropriate stock power) with signature
guaranties by a bank or trust company, (iii) by having withheld from the total
number of shares of Class A Stock to be acquired upon the exercise of this
Option a specified number of such shares of Class A Stock, (iv) by any form of
"cashless" exercise or (v) by any combination of the above.
(c) The Option shall be deemed to have been exercised on the
date the Notice was received by the Corporation with respect to any particular
shares of Class A Stock if, and only if, the preceding provisions of this
Section 12 and the provisions of Section 13 hereof shall have been complied
with. Anything in this Agreement to the contrary notwithstanding, any Notice
given pursuant to the provisions of this Section 12 shall be void and of no
effect if all of the preceding provisions of this Section 12 (including this
subsection (c)) and the provisions of Section 13 shall not have been complied
with.
(d) The certificate or certificates for shares of Class A Stock
as to which the Option shall be exercised will be registered in the name of the
Participant (or in the name of the Participant's estate or other beneficiary, if
the Option is exercised after the Participant's death), or if the Option is
exercised by the Participant and if the Participant so requests in the Notice
exercising the Option, will be registered in the name of the Participant and
another person jointly, with right of survivorship, and will be delivered as
soon as practical after the date the Notice is received by the Corporation
(accompanied by full payment of the exercise price), but only upon compliance
with all of the provisions of this Agreement.
(e) If the Participant fails to accept delivery of and pay for
all or any part of the number of Shares specified in such Notice, his or her
right to exercise the Option with respect to such undelivered Shares may be
terminated in the sole discretion of the Committee. The Option may be exercised
only with respect to full Shares.
(f) The Corporation shall not be required to issue or deliver
any certificate or certificates for shares of its Class A Stock purchased upon
the exercise of any part of this Option prior to the payment to the Corporation,
upon its demand, of any amount requested by the Corporation for the purpose of
satisfying its liability, if any, to withhold state or local income or earnings
tax or any other applicable tax or assessment (plus interest or penalties
thereon, if any, caused by a delay in making such payment) incurred by reason of
the exercise of this Option or the transfer of shares thereupon. Such payment
shall be made by the Participant in cash or, with the consent of the
Corporation, by tendering to the Corporation shares of Class A Stock equal in
value to the amount of the required withholding. In the alternative, the
Corporation may, at its option, satisfy such withholding requirements by
withholding from the shares of Class A Stock to be delivered to the Participant
pursuant to an exercise of this Option, a number of shares of Class A Stock
equal in value to the amount of the required withholding.
13. Approval of Counsel. The exercise of the Option and the issuance
and delivery of shares of Class A Stock pursuant thereto shall be subject to
approval by the
5
<PAGE> 6
Corporation's counsel of all legal matters in connection therewith, including,
but not limited to, compliance with the requirements of the Securities Act of
1933 and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Class A Stock may then be listed.
14. Resale of Class A Stock. (a) If so requested by the Corporation,
upon any sale or transfer of the Class A Stock purchased upon exercise of the
Option, the Participant shall deliver to the Corporation an opinion of counsel
satisfactory to the Corporation to the effect that either (i) the Class A Stock
to be sold or transferred has been registered under the Securities Act of 1933,
and that there is in effect a current prospectus meeting the requirements of
Section 10(a) of the Securities Act which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of the certificates
evidencing the Class A Stock to be sold or transferred or (ii) such Class A
Stock may then be sold without violating Section 5 of said Act.
(b) The Class A Stock issued upon exercise of the Option shall
bear the following legend if required by counsel for the Corporation:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO TRANSFER OF SUCH
SECURITIES MAY BE MADE UNLESS SUCH TRANSFER IS MADE IN CONNECTION WITH AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.
15. Reservation of Shares. The Corporation shall at all times during
the term of the Option reserve and keep available such number of shares of the
Class A Stock as will be sufficient to satisfy the requirements of this
Agreement.
16. Nonguarantee. Nothing contained in this Agreement shall be
construed to confer any right with respect to continuation of service as a
director of the Corporation or nomination to serve as a director of the
Corporation, nor shall it interfere in any way with any rights which the
Participant or the Corporation may have to terminate his or her directorship at
any time.
17. Notices. Each notice relating to this Agreement shall be in
writing and delivered in person, by air courier or by certified mail to the
proper address. All notices to the Corporation or the Committee shall be
addressed to them at VitaminShoppe.com, Inc., 444 Madison Avenue, Suite 802, New
York, NY 10022, Attn: President and Chief Executive Officer. All notices to the
Participant shall be addressed to the Participant or such other person or
persons at the Participant's address above specified. Anyone to whom a notice
may be given under this Agreement may designate a new address by notice to that
effect.
6
<PAGE> 7
18. Benefits of Agreement. This Agreement shall inure to the benefit
of and be binding upon each successor and assign of the Corporation. All
obligations imposed upon the Participant and all rights granted to the
Corporation under this Agreement shall be binding upon the Participant's heirs,
legal representatives, successors and assigns.
19. Severability. In case any provision of this Agreement shall be
held illegal or void, such illegality or invalidity shall not affect the
remaining provisions of this Agreement, but shall be fully severable, and this
Agreement shall be construed and enforced as if said illegal or invalid
provisions had never been inserted herein.
20. Governing Law. All questions pertaining to the validity,
construction and administration of this Agreement shall be determined in
accordance with the laws of the State of New York.
21. Incorporation of Terms of Plan. This Agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference.
7
<PAGE> 8
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed in its name by its President and its corporate seal to be hereunto
affixed and attested by its Secretary or its Assistant Secretary and the
Participant has hereunto set his or her hand all as of the date, month and year
first above written.
ATTEST: VitaminShoppe.com, Inc.
By:
- --------------------------------- ---------------------------------
Secretary Name: Kathryn H. Creech
Title: President and Chief Executive
Officer
---------------------------------
M. Anthony Fisher
---------------------------------
Social Security Number
<PAGE> 9
EXHIBIT A
NON-EMPLOYEE DIRECTOR STOCK OPTION EXERCISE FORM
--------------------
Date
VitaminShoppe.com, Inc.
444 Madison Avenue, Suite 802
New York, NY 10168
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Non-Employee Director Stock Option
Agreement, dated October 14, 1999, whereby you have granted to me a stock option
to purchase 38,475 shares of the Class A Common Stock (the "CLASS A STOCK") of
VitaminShoppe.com, Inc. (the "CORPORATION"), I hereby notify you that I elect to
exercise my option to purchase ______________ of the shares covered by such
Option at the exercise price specified thereon. In full payment of the price for
the shares being purchased hereby:
1. I am delivering to you herewith:
(a) a certified or bank cashier's check payable to the order of
the Corporation in the amount of $_________; $_________ of this amount is the
purchase price of the shares, and the balance represents payment of withholding
taxes as follows: Federal $_________, State $_________ and Local $_________ OR
(b) a certificate or certificates for [ ] shares of Class A
Stock of the Corporation, which have a Fair Market Value as of the date hereof
at least equal to the option exercise price, and a certified or bank cashier's
check, payable to the order of the Corporation, in the amount of $_________,
which represents payment of withholding taxes as follows: Federal $_________,
State $_________ and Local $_________. Any such stock certificate or
certificates are endorsed, or accompanied by an appropriate stock power, to the
order of the Corporation, with my signature guaranteed by a bank or trust
company or by a member firm of the National Association of Securities Dealers,
Inc.
<PAGE> 10
(c) OR
(d) Please retain __________ shares of Class A Stock of the
Corporation covered by the Option which have a Fair Market Value as of the date
hereof at least equal to the option exercise price. I am delivering to you
herewith a certified or bank cashier's check, payable to the order of the
Corporation, in the amount of $_________ which represents payment of withholding
taxes as follows: Federal $_________, State $_________ and Local $_________.
In the event the amounts designated above are insufficient for the
withholding of federal, state and local taxes, I hereby authorize the
Corporation to withhold in accordance with applicable law from any regular cash
compensation payable to me the balance of any taxes required to be withheld by
the Corporation under federal, state or local law as a result of my election
herein. Further, I acknowledge that I am purchasing these shares for investment
purposes only and not for resale.
Very truly yours,
---------------------------------
M. Anthony Fisher
Address for notices, reports, dividend checks and
other communications to stockholders:
[ ]
[ ]
[ ]
<PAGE> 11
================================================================================
Stock Option Plan for Non-Employee Directors of
VitaminShoppe.com, Inc.
NON-EMPLOYEE DIRECTOR STOCK OPTION
Granted To
M. ANTHONY FISHER
Participant
38,475 $11.00
- ------------------------ ------------------------
Number of Shares Price per Share
DATE GRANTED: October 14, 1999 EXPIRATION DATE: October 13, 2009
================================================================================
<PAGE> 1
EXHIBIT 10.4
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
This NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT (this "AGREEMENT")
dated as of October 14, 1999, between VITAMINSHOPPE.COM, INC., a Delaware
Corporation (the "CORPORATION"), and David S. Gellman, residing at _________,
_______, _____ _____ (the "PARTICIPANT").
W I T N E S S E T H:
WHEREAS, the Corporation desires, in connection with the Participant's
service as a Non-Employee Director of the Corporation, and in accordance with
the Stock Option Plan for Non-Employee Directors of VitaminShoppe.com, Inc.,
effective as of August 1, 1999 (the "PLAN"), to provide the Participant with an
opportunity to acquire shares of the Corporation's Class A Common Stock, $0.01
par value (the "CLASS A STOCK"), on favorable terms and to thereby align his or
her interest in the continued progress and success of the Corporation's business
with those of the Corporation's shareholders. Unless otherwise defined herein,
all capitalized terms used herein shall have the same definitions as set forth
under the Plan.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein set forth and other good and valuable consideration, the Corporation and
the Participant hereby agree as follows:
1. Confirmation of Grant of Option. Subject to the terms of the Plan
and this Agreement, the Corporation hereby grants to the Participant the right
to purchase (hereinafter referred to as the "OPTION") an aggregate of 38,475
shares of Class A Stock, subject to adjustment as provided in the Plan (such
shares, as adjusted, hereinafter being referred to as the "SHARES"). The Option
is not intended to qualify as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended.
2. Exercise Price. The exercise price for the purchase of the Shares
covered by the Option will be $11.00 per Share, which equals the Fair Market
Value of such Shares on the date such Options are deemed granted pursuant to the
Plan, subject to adjustment as provided in the Plan.
<PAGE> 2
3. Exercise of Option. The Option shall be exercisable on the terms
and conditions hereinafter set forth:
(a) The Option shall become exercisable as to the following
amounts of the number of Shares originally subject thereto (after giving effect
to any adjustment pursuant to the Plan), on the dates indicated:
(i) as to 12,825 Shares on or after October 14, 2000;
(ii) as to 12,825 Shares on or after October 14, 2001;
and
(iii) as to 12,825 Shares on or after October 14, 2002.
(b) The Option may be exercised pursuant to the provisions of
this Section 3, by notice and payment (including, but not limited to, by a
"cashless" exercise) to the Corporation as provided in Section 12 hereof.
4. Term of Option. The term of the Option shall be a period of ten
(10) years from the date hereof, subject to earlier termination or cancellation
as provided in this Agreement. This Option, to the extent unexercised, shall
expire on the day immediately prior to the tenth anniversary of the date hereof.
The Participant shall not have any rights to dividends or any other rights of a
stockholder with respect to any shares of Class A Stock subject to the Option
until such shares shall have been issued to him or her (as evidenced by the
appropriate entry on the books of a duly authorized transfer agent of the
Corporation) provided that the date of issuance shall not be earlier than the
date this Option is exercised and payment of the full purchase price of the
shares of Class A Stock (with respect to which this Option is exercised) is made
to the Corporation.
5. Non-transferability of Option. The Option shall not be assigned,
transferred or otherwise disposed of, or pledged or hypothecated in any way, and
shall not be subject to execution, attachment or other process, except as may be
provided in the Plan. Any assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions of the Plan, or any levy of
execution, attachment or other process attempted upon the Option, will be null
and void and without effect. Any attempt to make any such assignment, transfer,
pledge, hypothecation or other disposition of the Option or any attempt to make
any such levy of execution, attachment or other process will cause the Option to
terminate immediately upon the happening of any such event; provided, however,
that any such termination of the Option under the foregoing provisions of this
Section 5 will not prejudice any rights or remedies which the Corporation or any
Parent or Subsidiary may have under this Agreement or otherwise.
6. Exercise Upon Death. If the Participant dies while holding an
exercisable Option, such Option shall remain exercisable by his or her estate
(or other beneficiaries, as designated in writing by such Participant) until the
end of the exercise period under the Option,
2
<PAGE> 3
unless the Committee shall otherwise provide at the time of the grant of the
Option. At any time during the one year period following the Participant's
death, the Corporation shall have the right in its sole discretion to purchase,
and the estate or beneficiary of the deceased Participant shall have the
obligation to sell to the Corporation (i) any outstanding Option exercisable by
the estate or beneficiary at the then Fair Market Value of a share of Class A
Stock less the exercise price and (ii) any shares of Class A Stock held of
record or beneficially by the estate or beneficiary through the exercise of an
Option at their then Fair Market Value.
7. Exercise Upon Disability; Voluntary Termination. If the
Participant's service is terminated by reason of (i) Disability or (ii)
voluntary discontinuance of service, any then exercisable Option shall remain
exercisable until the end of the exercise period under such Option and all
Options not exercisable on the date of such termination shall be forfeited and
canceled.
8. Misconduct by Participant. If the Board of Directors (excluding
the Participant accused of such misconduct) determines that the Participant has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Corporation, breach of fiduciary duty or deliberate disregard of the
Corporation's rules resulting in loss, damage or injury to the Corporation, or
if the Participant makes an unauthorized disclosure of the Corporation's trade
secrets or confidential information, engages in any conduct constituting unfair
competition, induces any of the Corporation's customers to breach a contract
with the Corporation or induces any principal for whom the Corporation acts as
agent to terminate such agency relationship, neither the Participant nor his or
her estate shall be entitled to exercise any Option whatsoever. In making such
determination, the Board of Directors shall provide the Participant an
opportunity to appear and present evidence on the Optionee's behalf at a hearing
before the Board of Directors or a committee of the Board of Directors.
9. Exercise Upon Other Termination of Service. In the event the
Participant ceases to serve as a director of the Corporation for any reason
other than as described in Sections 6, 7 or 8 above, within ninety (90) days
after such cessation, the Participant may exercise his or her Option to the
extent that it was exercisable on the date of such termination. Notwithstanding
the foregoing, in no event may the Option be exercised after the term set forth
in Section 4 has expired. To the extent an Option was not exercisable at the
date of such termination, or the Participant does not exercise such Option
within the time specified above, the Option shall be forfeited and canceled.
10. Merger, Consolidation or Change in Control of Corporation. (a)
Upon the occurrence of a Liquidity Event or a Change in Control, the Participant
shall have the right immediately prior to the effective date of such Liquidity
Event (or, if later, within 10 days of the Optionee's notification of such
event) to exercise any Option granted and still outstanding (and not otherwise
expired) in whole or in part without regard to any installment or vesting
provision of this Agreement, provided that all conditions precedent to the
exercise of such Options, other than the passage of time, have occurred. The
Corporation, to the extent practicable, shall give advance notice to the
Participant of any such Liquidity Event. All such Options which are not so
exercised shall be canceled and forfeited as of the effective time of any such
Liquidity Event (or,
3
<PAGE> 4
if later, at the end of the applicable 10-day notice period). If the Corporation
engages in a Business Combination which is not a Liquidity Event, the
Corporation may, in connection with such transaction, at its option elect one of
the following: provide for (i) the continuance of the Option granted hereunder
(either by express provision or, if the Corporation is the surviving corporation
in the Business Combination, as a consequence of the failure to address the
treatment of options in the applicable agreements), (ii) the substitution of new
options for the Option granted hereunder (which new options grant the
Participant the right to purchase the securities they would have received had
they held Class A Stock immediately prior to the Business Combination) or (iii)
acceleration of any outstanding Options in which case such Business Combination
will be deemed a "Liquidity Event" and Options treated in accordance with the
preceding sentences of this Section 10.
11. Registration. The Corporation may register or qualify the shares
covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
12. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by notice in the
manner set forth in Exhibit A hereto (the "NOTICE") and provision for payment to
the Corporation in accordance with the procedure prescribed herein. Each such
Notice shall:
(i) state the election to exercise the Option and the
number of Shares with respect to which it is being exercised;
(ii) contain a representation and agreement as to
investment intent, if required by the Committee with respect to such
Shares, in a form satisfactory to the Committee;
(iii) be signed by the Participant or the person or
persons entitled to exercise the Option and, if the Option is being
exercised by any person or persons other than the Participant, be
accompanied by proof satisfactory to the Committee of the right of such
other person or persons to exercise the Option;
(iv) include payment of the full purchase price for the
shares of Class A Stock to be purchased pursuant to such exercise of the
Option; and
(v) be received by the Corporation on or before the date
of the expiration of this Option. In the event the date of expiration of
this Option falls on a day which is not a regular business day at the
Corporation's executive office then such Notice must be received at such
office on or before the last regular business day prior to such date of
expiration.
(b) Payment of the purchase price of any shares of Class A
Stock, in respect of which the Option shall be exercised, shall be made by the
Participant or such person or persons at the place specified by the Corporation
on the date the Notice is received by the
4
<PAGE> 5
Corporation (i) by delivering to the Corporation a certified or bank cashier's
check payable to the order of the Corporation, (ii) by delivering to the
Corporation properly endorsed certificates of shares of Class A Stock (or
certificates accompanied by an appropriate stock power) with signature
guaranties by a bank or trust company, (iii) by having withheld from the total
number of shares of Class A Stock to be acquired upon the exercise of this
Option a specified number of such shares of Class A Stock, (iv) by any form of
"cashless" exercise or (v) by any combination of the above.
(c) The Option shall be deemed to have been exercised on the
date the Notice was received by the Corporation with respect to any particular
shares of Class A Stock if, and only if, the preceding provisions of this
Section 12 and the provisions of Section 13 hereof shall have been complied
with. Anything in this Agreement to the contrary notwithstanding, any Notice
given pursuant to the provisions of this Section 12 shall be void and of no
effect if all of the preceding provisions of this Section 12 (including this
subsection (c)) and the provisions of Section 13 shall not have been complied
with.
(d) The certificate or certificates for shares of Class A Stock
as to which the Option shall be exercised will be registered in the name of the
Participant (or in the name of the Participant's estate or other beneficiary, if
the Option is exercised after the Participant's death), or if the Option is
exercised by the Participant and if the Participant so requests in the Notice
exercising the Option, will be registered in the name of the Participant and
another person jointly, with right of survivorship, and will be delivered as
soon as practical after the date the Notice is received by the Corporation
(accompanied by full payment of the exercise price), but only upon compliance
with all of the provisions of this Agreement.
(e) If the Participant fails to accept delivery of and pay for
all or any part of the number of Shares specified in such Notice, his or her
right to exercise the Option with respect to such undelivered Shares may be
terminated in the sole discretion of the Committee. The Option may be exercised
only with respect to full Shares.
(f) The Corporation shall not be required to issue or deliver
any certificate or certificates for shares of its Class A Stock purchased upon
the exercise of any part of this Option prior to the payment to the Corporation,
upon its demand, of any amount requested by the Corporation for the purpose of
satisfying its liability, if any, to withhold state or local income or earnings
tax or any other applicable tax or assessment (plus interest or penalties
thereon, if any, caused by a delay in making such payment) incurred by reason of
the exercise of this Option or the transfer of shares thereupon. Such payment
shall be made by the Participant in cash or, with the consent of the
Corporation, by tendering to the Corporation shares of Class A Stock equal in
value to the amount of the required withholding. In the alternative, the
Corporation may, at its option, satisfy such withholding requirements by
withholding from the shares of Class A Stock to be delivered to the Participant
pursuant to an exercise of this Option, a number of shares of Class A Stock
equal in value to the amount of the required withholding.
13. Approval of Counsel. The exercise of the Option and the issuance
and delivery of shares of Class A Stock pursuant thereto shall be subject to
approval by the
5
<PAGE> 6
Corporation's counsel of all legal matters in connection therewith, including,
but not limited to, compliance with the requirements of the Securities Act of
1933 and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Class A Stock may then be listed.
14. Resale of Class A Stock. (a) If so requested by the Corporation,
upon any sale or transfer of the Class A Stock purchased upon exercise of the
Option, the Participant shall deliver to the Corporation an opinion of counsel
satisfactory to the Corporation to the effect that either (i) the Class A Stock
to be sold or transferred has been registered under the Securities Act of 1933,
and that there is in effect a current prospectus meeting the requirements of
Section 10(a) of the Securities Act which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of the certificates
evidencing the Class A Stock to be sold or transferred or (ii) such Class A
Stock may then be sold without violating Section 5 of said Act.
(b) The Class A Stock issued upon exercise of the Option shall
bear the following legend if required by counsel for the Corporation:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO TRANSFER OF SUCH
SECURITIES MAY BE MADE UNLESS SUCH TRANSFER IS MADE IN CONNECTION WITH AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.
15. Reservation of Shares. The Corporation shall at all times during
the term of the Option reserve and keep available such number of shares of the
Class A Stock as will be sufficient to satisfy the requirements of this
Agreement.
16. Nonguarantee. Nothing contained in this Agreement shall be
construed to confer any right with respect to continuation of service as a
director of the Corporation or nomination to serve as a director of the
Corporation, nor shall it interfere in any way with any rights which the
Participant or the Corporation may have to terminate his or her directorship at
any time.
17. Notices. Each notice relating to this Agreement shall be in
writing and delivered in person, by air courier or by certified mail to the
proper address. All notices to the Corporation or the Committee shall be
addressed to them at VitaminShoppe.com, Inc., 444 Madison Avenue, Suite 802, New
York, NY 10022, Attn: President and Chief Executive Officer. All notices to the
Participant shall be addressed to the Participant or such other person or
persons at the Participant's address above specified. Anyone to whom a notice
may be given under this Agreement may designate a new address by notice to that
effect.
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<PAGE> 7
18. Benefits of Agreement. This Agreement shall inure to the benefit
of and be binding upon each successor and assign of the Corporation. All
obligations imposed upon the Participant and all rights granted to the
Corporation under this Agreement shall be binding upon the Participant's heirs,
legal representatives, successors and assigns.
19. Severability. In case any provision of this Agreement shall be
held illegal or void, such illegality or invalidity shall not affect the
remaining provisions of this Agreement, but shall be fully severable, and this
Agreement shall be construed and enforced as if said illegal or invalid
provisions had never been inserted herein.
20. Governing Law. All questions pertaining to the validity,
construction and administration of this Agreement shall be determined in
accordance with the laws of the State of New York.
21. Incorporation of Terms of Plan. This Agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference.
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<PAGE> 8
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed in its name by its President and its corporate seal to be hereunto
affixed and attested by its Secretary or its Assistant Secretary and the
Participant has hereunto set his or her hand all as of the date, month and year
first above written.
ATTEST: VitaminShoppe.com, Inc.
By:
- --------------------- ---------------------------------
Secretary Name: Kathryn H. Creech
Title: President and Chief Executive
Officer
---------------------------------
David S. Gellman
---------------------------------
Social Security Number
<PAGE> 9
EXHIBIT A
NON-EMPLOYEE DIRECTOR STOCK OPTION EXERCISE FORM
--------------------
Date
VitaminShoppe.com, Inc.
444 Madison Avenue, Suite 802
New York, NY 10168
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Non-Employee Director Stock Option
Agreement, dated October 14, 1999, whereby you have granted to me a stock option
to purchase 38,475 shares of the Class A Common Stock (the "CLASS A STOCK") of
VitaminShoppe.com, Inc. (the "CORPORATION"), I hereby notify you that I elect to
exercise my option to purchase ______________ of the shares covered by such
Option at the exercise price specified thereon. In full payment of the price for
the shares being purchased hereby:
1. I am delivering to you herewith:
(a) a certified or bank cashier's check payable to the order of
the Corporation in the amount of $_________; $_________ of this amount is the
purchase price of the shares, and the balance represents payment of withholding
taxes as follows: Federal $_________, State $_________ and Local $_________ OR
(b) a certificate or certificates for [ ] shares of Class A
Stock of the Corporation, which have a Fair Market Value as of the date hereof
at least equal to the option exercise price, and a certified or bank cashier's
check, payable to the order of the Corporation, in the amount of $_________,
which represents payment of withholding taxes as follows: Federal $_________,
State $_________ and Local $_________. Any such stock certificate or
certificates are endorsed, or accompanied by an appropriate stock power, to the
order of the Corporation, with my signature guaranteed by a bank or trust
company or by a member firm of the National Association of Securities Dealers,
Inc.
<PAGE> 10
(c) OR
(d) Please retain __________ shares of Class A Stock of the
Corporation covered by the Option which have a Fair Market Value as of the date
hereof at least equal to the option exercise price. I am delivering to you
herewith a certified or bank cashier's check, payable to the order of the
Corporation, in the amount of $_________ which represents payment of withholding
taxes as follows: Federal $_________, State $_________ and Local $_________.
In the event the amounts designated above are insufficient for the
withholding of federal, state and local taxes, I hereby authorize the
Corporation to withhold in accordance with applicable law from any regular cash
compensation payable to me the balance of any taxes required to be withheld by
the Corporation under federal, state or local law as a result of my election
herein. Further, I acknowledge that I am purchasing these shares for investment
purposes only and not for resale.
Very truly yours,
---------------------------------
David S. Gellman
Address for notices, reports, dividend checks and
other communications to stockholders:
[ ]
[ ]
[ ]
<PAGE> 11
================================================================================
Stock Option Plan for Non-Employee Directors of
VitaminShoppe.com, Inc.
NON-EMPLOYEE DIRECTOR STOCK OPTION
Granted To
DAVID S. GELLMAN
Participant
38,475 $11.00
- ------------------------ ------------------------
Number of Shares Price per Share
DATE GRANTED: October 14, 1999 EXPIRATION DATE: October 13, 2009
================================================================================
<PAGE> 1
EXHIBIT 10.5
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
This NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT (this "AGREEMENT")
dated as of October 14, 1999, between VITAMINSHOPPE.COM, INC., a Delaware
Corporation (the "CORPORATION"), and Stephen P. Murray, residing at _________,
_______, _____ _____ (the "PARTICIPANT").
W I T N E S S E T H:
WHEREAS, the Corporation desires, in connection with the Participant's
service as a Non-Employee Director of the Corporation, and in accordance with
the Stock Option Plan for Non-Employee Directors of VitaminShoppe.com, Inc.,
effective as of August 1, 1999 (the "PLAN"), to provide the Participant with an
opportunity to acquire shares of the Corporation's Class A Common Stock, $0.01
par value (the "CLASS A STOCK"), on favorable terms and to thereby align his or
her interest in the continued progress and success of the Corporation's business
with those of the Corporation's shareholders. Unless otherwise defined herein,
all capitalized terms used herein shall have the same definitions as set forth
under the Plan.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein set forth and other good and valuable consideration, the Corporation and
the Participant hereby agree as follows:
1. Confirmation of Grant of Option. Subject to the terms of the Plan
and this Agreement, the Corporation hereby grants to the Participant the right
to purchase (hereinafter referred to as the "OPTION") an aggregate of 38,475
shares of Class A Stock, subject to adjustment as provided in the Plan (such
shares, as adjusted, hereinafter being referred to as the "SHARES"). The Option
is not intended to qualify as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended.
2. Exercise Price. The exercise price for the purchase of the Shares
covered by the Option will be $11.00 per Share, which equals the Fair Market
Value of such Shares on the date such Options are deemed granted pursuant to the
Plan, subject to adjustment as provided in the Plan.
<PAGE> 2
3. Exercise of Option. The Option shall be exercisable on the terms
and conditions hereinafter set forth:
(a) The Option shall become exercisable as to the following
amounts of the number of Shares originally subject thereto (after giving effect
to any adjustment pursuant to the Plan), on the dates indicated:
(i) as to 12,825 Shares on or after October 14, 2000;
(ii) as to 12,825 Shares on or after October 14, 2001;
and
(iii) as to 12,825 Shares on or after October 14, 2002.
(b) The Option may be exercised pursuant to the provisions of
this Section 3, by notice and payment (including, but not limited to, by a
"cashless" exercise) to the Corporation as provided in Section 12 hereof.
4. Term of Option. The term of the Option shall be a period of ten
(10) years from the date hereof, subject to earlier termination or cancellation
as provided in this Agreement. This Option, to the extent unexercised, shall
expire on the day immediately prior to the tenth anniversary of the date hereof.
The Participant shall not have any rights to dividends or any other rights of a
stockholder with respect to any shares of Class A Stock subject to the Option
until such shares shall have been issued to him or her (as evidenced by the
appropriate entry on the books of a duly authorized transfer agent of the
Corporation) provided that the date of issuance shall not be earlier than the
date this Option is exercised and payment of the full purchase price of the
shares of Class A Stock (with respect to which this Option is exercised) is made
to the Corporation.
5. Non-transferability of Option. The Option shall not be assigned,
transferred or otherwise disposed of, or pledged or hypothecated in any way, and
shall not be subject to execution, attachment or other process, except as may be
provided in the Plan. Any assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions of the Plan, or any levy of
execution, attachment or other process attempted upon the Option, will be null
and void and without effect. Any attempt to make any such assignment, transfer,
pledge, hypothecation or other disposition of the Option or any attempt to make
any such levy of execution, attachment or other process will cause the Option to
terminate immediately upon the happening of any such event; provided, however,
that any such termination of the Option under the foregoing provisions of this
Section 5 will not prejudice any rights or remedies which the Corporation or any
Parent or Subsidiary may have under this Agreement or otherwise.
6. Exercise Upon Death. If the Participant dies while holding an
exercisable Option, such Option shall remain exercisable by his or her estate
(or other beneficiaries, as designated in writing by such Participant) until the
end of the exercise period under the Option,
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<PAGE> 3
unless the Committee shall otherwise provide at the time of the grant of the
Option. At any time during the one year period following the Participant's
death, the Corporation shall have the right in its sole discretion to purchase,
and the estate or beneficiary of the deceased Participant shall have the
obligation to sell to the Corporation (i) any outstanding Option exercisable by
the estate or beneficiary at the then Fair Market Value of a share of Class A
Stock less the exercise price and (ii) any shares of Class A Stock held of
record or beneficially by the estate or beneficiary through the exercise of an
Option at their then Fair Market Value.
7. Exercise Upon Disability; Voluntary Termination. If the
Participant's service is terminated by reason of (i) Disability or (ii)
voluntary discontinuance of service, any then exercisable Option shall remain
exercisable until the end of the exercise period under such Option and all
Options not exercisable on the date of such termination shall be forfeited and
canceled.
8. Misconduct by Participant. If the Board of Directors (excluding
the Participant accused of such misconduct) determines that the Participant has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Corporation, breach of fiduciary duty or deliberate disregard of the
Corporation's rules resulting in loss, damage or injury to the Corporation, or
if the Participant makes an unauthorized disclosure of the Corporation's trade
secrets or confidential information, engages in any conduct constituting unfair
competition, induces any of the Corporation's customers to breach a contract
with the Corporation or induces any principal for whom the Corporation acts as
agent to terminate such agency relationship, neither the Participant nor his or
her estate shall be entitled to exercise any Option whatsoever. In making such
determination, the Board of Directors shall provide the Participant an
opportunity to appear and present evidence on the Optionee's behalf at a hearing
before the Board of Directors or a committee of the Board of Directors.
9. Exercise Upon Other Termination of Service. In the event the
Participant ceases to serve as a director of the Corporation for any reason
other than as described in Sections 6, 7 or 8 above, within ninety (90) days
after such cessation, the Participant may exercise his or her Option to the
extent that it was exercisable on the date of such termination. Notwithstanding
the foregoing, in no event may the Option be exercised after the term set forth
in Section 4 has expired. To the extent an Option was not exercisable at the
date of such termination, or the Participant does not exercise such Option
within the time specified above, the Option shall be forfeited and canceled.
10. Merger, Consolidation or Change in Control of Corporation. (a)
Upon the occurrence of a Liquidity Event or a Change in Control, the Participant
shall have the right immediately prior to the effective date of such Liquidity
Event (or, if later, within 10 days of the Optionee's notification of such
event) to exercise any Option granted and still outstanding (and not otherwise
expired) in whole or in part without regard to any installment or vesting
provision of this Agreement, provided that all conditions precedent to the
exercise of such Options, other than the passage of time, have occurred. The
Corporation, to the extent practicable, shall give advance notice to the
Participant of any such Liquidity Event. All such Options which are not so
exercised shall be canceled and forfeited as of the effective time of any such
Liquidity Event (or,
3
<PAGE> 4
if later, at the end of the applicable 10-day notice period). If the Corporation
engages in a Business Combination which is not a Liquidity Event, the
Corporation may, in connection with such transaction, at its option elect one of
the following: provide for (i) the continuance of the Option granted hereunder
(either by express provision or, if the Corporation is the surviving corporation
in the Business Combination, as a consequence of the failure to address the
treatment of options in the applicable agreements), (ii) the substitution of new
options for the Option granted hereunder (which new options grant the
Participant the right to purchase the securities they would have received had
they held Class A Stock immediately prior to the Business Combination) or (iii)
acceleration of any outstanding Options in which case such Business Combination
will be deemed a "Liquidity Event" and Options treated in accordance with the
preceding sentences of this Section 10.
11. Registration. The Corporation may register or qualify the shares
covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
12. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by notice in the
manner set forth in Exhibit A hereto (the "NOTICE") and provision for payment to
the Corporation in accordance with the procedure prescribed herein. Each such
Notice shall:
(i) state the election to exercise the Option and the
number of Shares with respect to which it is being exercised;
(ii) contain a representation and agreement as to
investment intent, if required by the Committee with respect to such
Shares, in a form satisfactory to the Committee;
(iii) be signed by the Participant or the person or
persons entitled to exercise the Option and, if the Option is being
exercised by any person or persons other than the Participant, be
accompanied by proof satisfactory to the Committee of the right of such
other person or persons to exercise the Option;
(iv) include payment of the full purchase price for the
shares of Class A Stock to be purchased pursuant to such exercise of the
Option; and
(v) be received by the Corporation on or before the date
of the expiration of this Option. In the event the date of expiration of
this Option falls on a day which is not a regular business day at the
Corporation's executive office then such Notice must be received at such
office on or before the last regular business day prior to such date of
expiration.
(b) Payment of the purchase price of any shares of Class A
Stock, in respect of which the Option shall be exercised, shall be made by the
Participant or such person or persons at the place specified by the Corporation
on the date the Notice is received by the
4
<PAGE> 5
Corporation (i) by delivering to the Corporation a certified or bank cashier's
check payable to the order of the Corporation, (ii) by delivering to the
Corporation properly endorsed certificates of shares of Class A Stock (or
certificates accompanied by an appropriate stock power) with signature
guaranties by a bank or trust company, (iii) by having withheld from the total
number of shares of Class A Stock to be acquired upon the exercise of this
Option a specified number of such shares of Class A Stock, (iv) by any form of
"cashless" exercise or (v) by any combination of the above.
(c) The Option shall be deemed to have been exercised on the
date the Notice was received by the Corporation with respect to any particular
shares of Class A Stock if, and only if, the preceding provisions of this
Section 12 and the provisions of Section 13 hereof shall have been complied
with. Anything in this Agreement to the contrary notwithstanding, any Notice
given pursuant to the provisions of this Section 12 shall be void and of no
effect if all of the preceding provisions of this Section 12 (including this
subsection (c)) and the provisions of Section 13 shall not have been complied
with.
(d) The certificate or certificates for shares of Class A Stock
as to which the Option shall be exercised will be registered in the name of the
Participant (or in the name of the Participant's estate or other beneficiary, if
the Option is exercised after the Participant's death), or if the Option is
exercised by the Participant and if the Participant so requests in the Notice
exercising the Option, will be registered in the name of the Participant and
another person jointly, with right of survivorship, and will be delivered as
soon as practical after the date the Notice is received by the Corporation
(accompanied by full payment of the exercise price), but only upon compliance
with all of the provisions of this Agreement.
(e) If the Participant fails to accept delivery of and pay for
all or any part of the number of Shares specified in such Notice, his or her
right to exercise the Option with respect to such undelivered Shares may be
terminated in the sole discretion of the Committee. The Option may be exercised
only with respect to full Shares.
(f) The Corporation shall not be required to issue or deliver
any certificate or certificates for shares of its Class A Stock purchased upon
the exercise of any part of this Option prior to the payment to the Corporation,
upon its demand, of any amount requested by the Corporation for the purpose of
satisfying its liability, if any, to withhold state or local income or earnings
tax or any other applicable tax or assessment (plus interest or penalties
thereon, if any, caused by a delay in making such payment) incurred by reason of
the exercise of this Option or the transfer of shares thereupon. Such payment
shall be made by the Participant in cash or, with the consent of the
Corporation, by tendering to the Corporation shares of Class A Stock equal in
value to the amount of the required withholding. In the alternative, the
Corporation may, at its option, satisfy such withholding requirements by
withholding from the shares of Class A Stock to be delivered to the Participant
pursuant to an exercise of this Option, a number of shares of Class A Stock
equal in value to the amount of the required withholding.
13. Approval of Counsel. The exercise of the Option and the issuance
and delivery of shares of Class A Stock pursuant thereto shall be subject to
approval by the
5
<PAGE> 6
Corporation's counsel of all legal matters in connection therewith, including,
but not limited to, compliance with the requirements of the Securities Act of
1933 and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Class A Stock may then be listed.
14. Resale of Class A Stock. (a) If so requested by the Corporation,
upon any sale or transfer of the Class A Stock purchased upon exercise of the
Option, the Participant shall deliver to the Corporation an opinion of counsel
satisfactory to the Corporation to the effect that either (i) the Class A Stock
to be sold or transferred has been registered under the Securities Act of 1933,
and that there is in effect a current prospectus meeting the requirements of
Section 10(a) of the Securities Act which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of the certificates
evidencing the Class A Stock to be sold or transferred or (ii) such Class A
Stock may then be sold without violating Section 5 of said Act.
(b) The Class A Stock issued upon exercise of the Option shall
bear the following legend if required by counsel for the Corporation:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO TRANSFER OF SUCH
SECURITIES MAY BE MADE UNLESS SUCH TRANSFER IS MADE IN CONNECTION WITH AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.
15. Reservation of Shares. The Corporation shall at all times during
the term of the Option reserve and keep available such number of shares of the
Class A Stock as will be sufficient to satisfy the requirements of this
Agreement.
16. Nonguarantee. Nothing contained in this Agreement shall be
construed to confer any right with respect to continuation of service as a
director of the Corporation or nomination to serve as a director of the
Corporation, nor shall it interfere in any way with any rights which the
Participant or the Corporation may have to terminate his or her directorship at
any time.
17. Notices. Each notice relating to this Agreement shall be in
writing and delivered in person, by air courier or by certified mail to the
proper address. All notices to the Corporation or the Committee shall be
addressed to them at VitaminShoppe.com, Inc., 444 Madison Avenue, Suite 802, New
York, NY 10022, Attn: President and Chief Executive Officer. All notices to the
Participant shall be addressed to the Participant or such other person or
persons at the Participant's address above specified. Anyone to whom a notice
may be given under this Agreement may designate a new address by notice to that
effect.
6
<PAGE> 7
18. Benefits of Agreement. This Agreement shall inure to the benefit
of and be binding upon each successor and assign of the Corporation. All
obligations imposed upon the Participant and all rights granted to the
Corporation under this Agreement shall be binding upon the Participant's heirs,
legal representatives, successors and assigns.
19. Severability. In case any provision of this Agreement shall be
held illegal or void, such illegality or invalidity shall not affect the
remaining provisions of this Agreement, but shall be fully severable, and this
Agreement shall be construed and enforced as if said illegal or invalid
provisions had never been inserted herein.
20. Governing Law. All questions pertaining to the validity,
construction and administration of this Agreement shall be determined in
accordance with the laws of the State of New York.
21. Incorporation of Terms of Plan. This Agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference.
7
<PAGE> 8
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed in its name by its President and its corporate seal to be hereunto
affixed and attested by its Secretary or its Assistant Secretary and the
Participant has hereunto set his or her hand all as of the date, month and year
first above written.
ATTEST: VitaminShoppe.com, Inc.
By:
- ------------------------- ---------------------------------
Secretary Name: Kathryn H. Creech
Title: President and Chief Executive
Officer
---------------------------------
Stephen P. Murray
---------------------------------
Social Security Number
<PAGE> 9
EXHIBIT A
NON-EMPLOYEE DIRECTOR STOCK OPTION EXERCISE FORM
--------------------
Date
VitaminShoppe.com, Inc.
444 Madison Avenue, Suite 802
New York, NY 10168
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Non-Employee Director Stock Option
Agreement, dated October 14, 1999, whereby you have granted to me a stock option
to purchase 38,475 shares of the Class A Common Stock (the "CLASS A STOCK") of
VitaminShoppe.com, Inc. (the "CORPORATION"), I hereby notify you that I elect to
exercise my option to purchase ______________ of the shares covered by such
Option at the exercise price specified thereon. In full payment of the price for
the shares being purchased hereby:
1. I am delivering to you herewith:
(a) a certified or bank cashier's check payable to the order of
the Corporation in the amount of $_________; $_________ of this amount is the
purchase price of the shares, and the balance represents payment of withholding
taxes as follows: Federal $_________, State $_________ and Local $_________ OR
(b) a certificate or certificates for [ ] shares of Class A
Stock of the Corporation, which have a Fair Market Value as of the date hereof
at least equal to the option exercise price, and a certified or bank cashier's
check, payable to the order of the Corporation, in the amount of $_________,
which represents payment of withholding taxes as follows: Federal $_________,
State $_________ and Local $_________. Any such stock certificate or
certificates are endorsed, or accompanied by an appropriate stock power, to the
order of the Corporation, with my signature guaranteed by a bank or trust
company or by a member firm of the National Association of Securities Dealers,
Inc.
<PAGE> 10
(c) OR
(d) Please retain __________ shares of Class A Stock of the
Corporation covered by the Option which have a Fair Market Value as of the date
hereof at least equal to the option exercise price. I am delivering to you
herewith a certified or bank cashier's check, payable to the order of the
Corporation, in the amount of $_________ which represents payment of withholding
taxes as follows: Federal $_________, State $_________ and Local $_________.
In the event the amounts designated above are insufficient for the
withholding of federal, state and local taxes, I hereby authorize the
Corporation to withhold in accordance with applicable law from any regular cash
compensation payable to me the balance of any taxes required to be withheld by
the Corporation under federal, state or local law as a result of my election
herein. Further, I acknowledge that I am purchasing these shares for investment
purposes only and not for resale.
Very truly yours,
---------------------------------
Stephen P. Murray
Address for notices, reports, dividend checks and
other communications to stockholders:
[ ]
[ ]
[ ]
<PAGE> 11
================================================================================
Stock Option Plan for Non-Employee Directors of
VitaminShoppe.com, Inc.
NON-EMPLOYEE DIRECTOR STOCK OPTION
Granted To
STEPHEN P. MURRAY
Participant
38,475 $11.00
- ------------------------ ------------------------
Number of Shares Price per Share
DATE GRANTED: October 14, 1999 EXPIRATION DATE: October 13, 2009
================================================================================
<PAGE> 1
EXHIBIT 10.6
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT
Agreement made as of October 14, 1999 (the "Date of Grant")
between VitaminShoppe.com, Inc., a Delaware corporation (hereinafter referred to
as the "Corporation"), and Kathryn H. Creech (hereinafter referred to as the
"Employee").
W I T N E S S E T H
WHEREAS, the Corporation desires, in connection with the
employment of the Employee and in accordance with its Stock Option Plan for
Employees, effective as of July 1, 1999 (the "Plan"), to provide the Employee
with an opportunity to acquire Shares of the Corporation on favorable terms and
thereby increase her proprietary interest in the continued progress and success
of the business of the Corporation;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein set forth and other good and valuable consideration, the
Corporation and the Employee hereby agree as follows:
1. Definitions. Any capitalized term not defined herein shall
have the meaning set forth in the Employee's employment agreement.
2. Grant of Option. The Corporation hereby issues to the
Employee the right and option to purchase from the Corporation 339,954 shares of
the Corporation's Class A Common Stock, par value $.01 per share (the "Shares")
at an exercise price of $11.00 per share. In addition, the Employee shall have
the anti-dilution protection specified in Section 2(D)(3)(a) of her employment
agreement, as in effect on the date hereof. The Option is not intended to
qualify as an incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
3. Exercise of Option. The Option shall be exercisable on the
terms and conditions hereinafter set forth:
(a) The Option shall (A) become exercisable at a
rate of one-third (33-1/3%) on each of the first three anniversaries of the
Date of Grant, and (B) become exercisable earlier than in (A) above upon a
Change in Control or Employee's death or Disability to the extent provided in
the Employee's employment agreement, as in effect on the date hereof.
4. Term of Option. The term of the Option shall be a period of
ten (10) years from the Date of Grant, subject to earlier termination or
cancellation as provided in this Agreement. All Options, to the extent
unexercised, shall expire on the day immediately prior to the tenth anniversary
of the Date of Grant. The holder of the Option shall not have any rights to
dividends or any other rights of a stockholder with respect to any Shares
subject to the Option until such Shares shall have been issued to her (as
evidenced by the appropriate entry on the books of a duly
<PAGE> 2
authorized transfer agent of the Corporation), provided that the date of
issuance shall not be earlier than the date this Option is exercised and payment
of the full purchase price of the Shares (with respect to which this Option is
exercised) is made to the Corporation.
5. Non-Transferability of Option. The Option shall not be
assigned, transferred or otherwise disposed of, or pledged or hypothecated in
any way, and shall not be subject to execution, attachment or other process,
except as may be provided in the Plan. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the provisions of
the Plan, or any levy of execution, attachment or other process attempted upon
the Option, will be null and void and without effect. Any attempt to make any
such assignment, transfer, pledge, hypothecation or other disposition of the
Option or any attempt to make any such levy of execution, attachment or other
process will cause the Option to terminate immediately upon the happening of any
such event, provided, however, that any such termination of the Option under the
foregoing provisions of this Section 5 will not prejudice any rights or remedies
which the Corporation or any Parent or Subsidiary may have under this Agreement
or otherwise.
6. Exercise Upon Cessation of Employment. (a) If the Employee
at any time ceases to be an employee of the Corporation and of any Parent or
Subsidiary by reason of her discharge for Good Cause, at the time of such
termination of employment, the Option (whether or not then exercisable to any
extent) shall terminate and the Employee shall forfeit all rights hereunder. If,
however, the Employee ceases to be an Employee for any other reason (other than
death), any outstanding portion of an Option that has not become exercisable
shall terminate on the date of such termination of employment (unless provided
otherwise by the Board or the Committee, in its sole discretion, as applicable).
In no event, however, may the Option be exercised after the expiration of the
term provided in Section 4 hereof.
(b) The Option shall not be affected by any
change of duties or position of the Employee so long as she continues to be an
Employee except as described in Section 7 of the Plan; notwithstanding the
foregoing, if Employee elects to receive additional options pursuant to Section
2(D)(3)(b)(ii) of her employment agreement she will be deemed to have
irrevocably waived her right to have the vesting of her Options accelerate
pursuant to Section 7B of the Plan. If the Employee is granted a temporary leave
of absence, such leave of absence shall be deemed a continuation of her
employment by the Corporation or of any Parent or Subsidiary thereof for the
purposes of this Agreement, but only if and so long as the employing corporation
consents thereto.
7. Exercise Upon Death. If the Employee dies while she is
employed by the Corporation or by any Parent or Subsidiary and on or after the
first date upon which she would have
2
<PAGE> 3
been entitled to exercise the Option under the provisions of Section 3 hereof,
the Option may, but only to the extent exercisable (and not exercised) on the
date of her death, be exercised by the estate of the Employee (or by the person
or persons who acquire the right to exercise the Option by written designation
of the Employee) for the remainder of its original term, at the end of which
period the Option, to the extent not then exercised, shall terminate and the
estate or other beneficiaries shall forfeit all rights thereunder.
Notwithstanding the foregoing provisions of this Section 7, at any time during
the one year period following the date of death of the Employee, the
Corporation shall have the right in its sole discretion to purchase, and the
estate or beneficiary of the Employee shall have the obligation to sell to the
Corporation (i) any outstanding Option exercisable by the estate or beneficiary
for an amount equal to the Fair Market Value of a Share minus the exercise
price of such Option and (ii) any Shares held of record or beneficially by the
estate or beneficiary through the exercise of an Option at their then Fair
Market Value.
8. Registration. The Corporation may register or qualify the
shares covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
9. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by written notice
to the Secretary of the Corporation (the "Notice") with provision for payment to
the Corporation in accordance with the procedure prescribed herein. Each such
Notice shall:
(i) state the election to exercise the Option
and the number of Shares with respect to which it is being exercised;
(ii) contain a representation and agreement as to
investment intent, if required by counsel to the Corporation with
respect to such Shares, in a form satisfactory to such counsel;
(iii) be signed by the Employee or the person or
persons entitled to exercise the Option and, if the Option is being
exercised by any person or persons other than the Employee, be
accompanied by proof, satisfactory to counsel to the Corporation, of
the right of such other person or persons to exercise the Option;
3
<PAGE> 4
(iv) include payment of the full purchase price for
the shares of Common Stock to be purchased pursuant to such exercise of
the Option; and
(v) be received by the Corporation on or before the
date of the expiration of this Option. In the event the date of
expiration of this Option falls on a day which is not a regular
business day at the Corporation's executive office, such written Notice
must be received at such office on or before the last regular business
day prior to such date of expiration.
(b) Payment of the exercise price of an Option
shall be made (i) by delivering to the Corporation a certified or bank cashier's
check payable to the order of the Corporation, (ii) by delivering to the
Corporation properly endorsed certificates of shares of Common Stock (or
certificates accompanied by an appropriate stock power) with signature
guaranties by a bank or trust company, (iii) by having withheld from the total
number of shares of Common Stock to be acquired upon the exercise of this Option
a specified number of such shares of Common Stock, (iv) by any form of
"cashless" exercise, or (v) by any combination of the above.
(c) The Option shall be deemed to have been
exercised on the date the Notice was received by the Corporation with respect to
any particular shares of Common Stock if, and only if the preceding, provisions
of this Section 9 and the provisions of Section 10 hereof shall have been
complied with, and any Notice shall be void and of no effect if all of the
provisions of Section 9 and of Section 10 shall not have been complied with.
(d) The certificate or certificates for shares
of Common Stock as to which an Option is exercised will be registered in the
name of the Employee (or in the name of the Employee's estate or other
beneficiary), or if the Option is exercised by the Employee and the Employee so
requests in the Notice exercising the Option, will be registered in the name of
the Employee and another person jointly, with right of survivorship, and will be
delivered as soon as practicable after the date the Notice is received by the
Corporation (accompanied by full payment of the exercise price), but only upon
compliance with all of the provisions of this Agreement.
(e) If the Employee fails to accept delivery of
and pay for all or any part of the number of Shares specified in such Notice,
her right to exercise the Option with respect to such undelivered Shares may be
terminated in the sole discretion of the Committee. The Option may be exercised
only with respect to full Shares.
(f) The Corporation shall not be required to
issue or deliver any certificate or certificates for shares of its Common Stock
purchased upon the exercise of any part of this Option prior to the payment to
the Corporation, upon its demand, of any amount requested by the Corporation for
the purpose of satisfying its liability, if any, to withhold state or local
income or earnings tax or any other applicable tax or assessment (plus interest
or penalties thereon, if any, caused by a delay in making such payment) incurred
by reason of the exercise of this Option or the transfer of Shares thereupon.
Such payment shall be made by the Employee in cash or, with the consent of the
Corporation, by tendering to the Corporation shares of Common Stock equal in
value
4
<PAGE> 5
to the amount of the required withholding. In the alternative, the Corporation
may, at its option, satisfy such withholding requirements by withholding from
the Shares to be delivered to the Employee pursuant to an exercise of this
Option the number of Shares equal in value to the amount of the required
withholding.
10. Approval of Counsel. The exercise of the Option and the
issuance and delivery of shares of Common Stock pursuant thereto shall be
subject to approval by the Corporation's counsel of all legal matters in
connection therewith, including, but not limited to, compliance with the
requirements of the Securities Act and the Exchange Act, and the rules and
regulations thereunder, and the requirements of any stock exchange upon which
the Common Stock may then be listed.
11. Resale of Common Stock. (a) If so requested by the
Corporation, upon any sale or transfer of the Common Stock purchased upon
exercise of the Option, the Employee shall deliver to the Corporation an opinion
of counsel satisfactory to the Corporation to the effect that either (i) the
Common Stock to be sold or transferred has been registered under the Securities
Act, and that there is in effect a current prospectus meeting the requirements
of Section 10(a) of the Securities Act which is being or will be delivered to
the purchaser or transferee at or prior to the time of delivery of the
certificates evidencing the Common Stock to be sold or transferred, or (ii) such
Common Stock may then be sold without violating Section 5 of said Act.
(b) The Shares issued upon exercise of an Option
shall bear the following legend, if required by counsel for the Corporation:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
TRANSFER OF SUCH SECURITIES MAY BE MADE UNLESS SUCH TRANSFER
IS MADE IN CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
12. Reservation of Shares. Unless the Shares are readily
tradable on a generally recognized securities market, the Corporation shall at
all times during the term of the Option reserve and keep available such number
of Shares as will be sufficient to satisfy the requirements of this Agreement.
13. Confidential Information. During the employment of the
Employee by the Corporation and thereafter, the Employee shall not disclose to
anyone else, directly or indirectly, any proprietary or business sensitive
information concerning the business of the Corporation, its Parent or
Subsidiary, or use, or permit or assist, by acquiescence or otherwise, anyone
else to use, directly or indirectly, any such information. Such information
shall include all information to the extent not generally known to the public
which, if released to unauthorized persons, could be detrimental to
5
<PAGE> 6
the reputation or business interests of the Corporation, its Parent or
Subsidiary. Notwithstanding any provision in this Agreement to the contrary, the
right of the Employee to exercise the Option shall terminate upon a
determination by the Committee, in its sole discretion, that the Employee has
engaged in the foregoing conduct. The provisions of this Section 13 shall not
apply to such disclosure where the Employee is legally required to do so.
14. Employment. Nothing contained in this Agreement shall be
construed (a) as a contract of employment between the Employee and the
Corporation or any Parent or Subsidiary, (b) as a right of the Employee to be
continued in the employ of the Corporation or of any Parent or Subsidiary, or
(c) as a limitation of the right of the Corporation or of any Parent or
Subsidiary to discharge the Employee at any time, with or without cause.
15. Limitation of Action. The Employee and the Corporation
each acknowledges that every right of action accruing to her or it, as the case
may be, and arising out of or in connection with this Agreement against the
Corporation or a Parent or Subsidiary, on the one hand, or against the Employee,
on the other hand, shall, irrespective of the place where an action may be
brought, cease and be barred by the expiration of three years from the date of
the act or omission in respect of which such right of action arises.
16. Notices. Each notice relating to this Agreement shall be
in writing and delivered in person, by air courier or by certified mail to the
proper address. All notices to the Corporation or the Committee shall be
addressed to them at VitaminShoppe.com, Inc., c/o Vitamin Shoppe Industries,
Inc., 4700 Westside Avenue, North Bergen, New Jersey, Attn: President. All
notices to the Employee shall be addressed to (a) the Employee at 31 Cooper
Beech Road, Greenwich, Connecticut 06830 and (b) Louis L. Broudy, Esq., Broudy &
Associates, P.C., 230 Park Avenue, Suite 2400, New York, New York 10169. Anyone
to whom a notice may be given under this Agreement may designate a new address
by notice to that effect.
17. Benefits of Agreement. This Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Corporation. All
obligations imposed upon the Employee and all rights granted to the Corporation
under this Agreement shall be binding upon the Employee's heirs, legal
representatives, successors and assigns.
18. Severability. In the event that any one or more provisions
of this Agreement shall be deemed to be illegal or unenforceable, such
illegality or unenforceability shall not affect the validity and enforceability
of the remaining legal and enforceable provisions hereof, which shall be
construed as if such illegal or unenforceable provision or provisions had not
been inserted.
19. Governing Law. This Agreement will be construed and
governed in accordance with the laws of the State of New York.
20. Incorporation of Terms of Plan. This Agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference, and in the event of any conflict or
inconsistency between the provision of this Agreement
6
<PAGE> 7
and the Plan, the Plan shall govern. Notwithstanding the foregoing, in the event
of any conflict between the terms and provisions hereof and the terms and
provisions of the Employee's employment agreement (as in effect on the date
hereof), the terms of such employment agreement shall control.
IN WITNESS WHEREOF, the Corporation has caused this Agreement
to be executed in its name and its corporate seal to be hereunto affixed and the
Employee has hereunto set her hand all as of the date, month and year first
above written.
VitaminShoppe.com, Inc.
By:
----------------------------------------
Name: Jeffrey Horowitz
Title: Chairman of the Board of Directors
-------------------------------------------
Kathryn H. Creech
-------------------------------------------
Social Security Number
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 14,470
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,048
<PP&E> 2,179
<DEPRECIATION> 157
<TOTAL-ASSETS> 23,070
<CURRENT-LIABILITIES> 13,983
<BONDS> 0
0
23,558
<COMMON> 131
<OTHER-SE> (14,602)
<TOTAL-LIABILITY-AND-EQUITY> 23,070
<SALES> 8,046
<TOTAL-REVENUES> 8,046
<CGS> 4,217
<TOTAL-COSTS> 4,217
<OTHER-EXPENSES> 14,722
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> (11,033)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,033)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,300)
<EPS-BASIC> (.84)
<EPS-DILUTED> (.84)
</TABLE>
