<PAGE>
PRELIMINARY COPY
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-
6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NUTRAMAX PRODUCTS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3)Filing party:
(4) Date filed:
<PAGE>
PRELIMINARY COPY
NUTRAMAX PRODUCTS, INC.
51 BLACKBURN DRIVE
GLOUCESTER, MASSACHUSETTS 01930
November 24, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
NutraMax Products, Inc. (the "Company") to be held on Wednesday, December 23,
1998, at 10:00 a.m., local time, at the Ocean View Inn, 171 Atlantic Road,
Gloucester, Massachusetts 01930 (the "Annual Meeting").
The Annual Meeting has been called for the purpose of (i) electing five
Directors, each to hold office until the next annual meeting of stockholders,
(ii) approving the issuance of up to an aggregate of 1,441,860 shares of the
Company's common stock to certain stockholders of the Company in a private
placement transaction (the "Private Placement Proposal") and (iii) voting upon
such other business as may properly come before the Annual Meeting or any
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on November 23, 1998
as the record date for determining stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournments or postponements thereof.
The Board of Directors of the Company recommends that you vote "FOR" the
election of the five nominees of the Board of Directors of the Company and
"FOR" the approval of the Private Placement Proposal.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
Very truly yours,
/s/ Donald E. Lepone
-----------------------------
Donald E. Lepone
President and Chief Executive
Officer
<PAGE>
NUTRAMAX PRODUCTS, INC.
51 BLACKBURN DRIVE
GLOUCESTER, MASSACHUSETTS 01930
(978) 283-1800
----------------
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, DECEMBER 23, 1998
----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of NutraMax
Products, Inc. (the "Company") will be held on Wednesday, December 23, 1998,
at 10:00 a.m., local time, at the Ocean View Inn, 171 Atlantic Road,
Gloucester, Massachusetts 01930 (the "Annual Meeting") for the purpose of
considering and voting upon:
1. The election of five Directors, each to hold office until the next
annual meeting of stockholders and until his successor is elected and
qualified;
2. The approval of the issuance of up to an aggregate of 1,441,860 shares
of the Company's common stock to certain stockholders of the Company in a
private placement transaction; and
3. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on November 23, 1998
as the record date for determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournments or postponements thereof.
Only holders of common stock of record at the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.
In the event there are not sufficient votes with respect to the foregoing
proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies.
By Order of the Board of Directors
Eugene M. Schloss, Jr.
Secretary
Gloucester, Massachusetts
November 24, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
NUTRAMAX PRODUCTS, INC.
51 BLACKBURN DRIVE
GLOUCESTER, MASSACHUSETTS 01930
(978) 283-1800
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, DECEMBER 23, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of NutraMax Products, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders of
the Company to be held on Wednesday, December 23, 1998, at 10:00 a.m., local
time, at the Ocean View Inn, 171 Atlantic Road, Gloucester, Massachusetts
01930, and any adjournments or postponements thereof (the "Annual Meeting").
At the Annual Meeting, all of the stockholders of the Company will be asked
to consider and vote upon the following matters:
1. The election of five Directors, each to hold office until the next
annual meeting of stockholders and until his successor is elected and
qualified;
2. The approval of the issuance of up to 1,441,860 shares of common
stock, par value $.001 per share, of the Company (the "Common Stock") to
certain stockholders of the Company in a private placement transaction (the
"Private Placement Proposal"); and
3. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.
The Notice of the Annual Meeting, Proxy Statement and Proxy Card are first
being mailed to stockholders of the Company on or about November 24, 1998 in
connection with the solicitation of proxies for the Annual Meeting. The Board
of Directors has fixed the close of business on November 23, 1998 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting (the "Record Date"). Only holders of Common Stock
of record at the close of business on the Record Date will be entitled to
notice of and to vote at the Annual Meeting. As of the Record Date, there were
5,672,503 shares of the Company's Common Stock outstanding and entitled to
vote at the Annual Meeting and 329 stockholders of record. Each holder of a
share of Common Stock outstanding as of the close of business on the Record
Date will be entitled to one vote for each share held of record for each
matter properly submitted at the Annual Meeting. Unless otherwise indicated,
references to the Company in this Proxy Statement include its various
subsidiaries.
The presence, in person or by proxy, of one-third of the total number of
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. A quorum being present, the
affirmative vote of a plurality of the votes cast is necessary to elect a
nominee as a Director of the Company. To approve the Private Placement
Proposal, the affirmative vote of the holders of a majority of the votes cast
at the Annual Meeting is required. Shares that reflect abstentions or "broker
non-votes" (i.e., shares represented at the meeting held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote such shares and with respect to which the
broker or nominee does not have discretionary voting power to vote such
shares) will be counted for purposes of determining whether a quorum is
present for the transaction of business at the meeting. However, abstentions
and broker non-votes will have no effect on the outcome of the approval of the
Private Placement Proposal. With respect to the election of Directors, votes
may only be cast in favor of or withheld from each nominee; votes that are
withheld will be excluded entirely from the vote and will have no effect.
<PAGE>
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE. SHARES OF COMMON STOCK
REPRESENTED BY PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY AND NOT
REVOKED WILL BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE
INSTRUCTIONS CONTAINED THEREIN. IF INSTRUCTIONS ARE NOT GIVEN THEREIN,
PROPERLY EXECUTED PROXIES WILL BE VOTED "FOR" THE ELECTION OF THE FIVE
NOMINEES FOR DIRECTOR LISTED IN THIS PROXY STATEMENT AND "FOR" THE APPROVAL OF
THE PRIVATE PLACEMENT PROPOSAL. IT IS NOT ANTICIPATED THAT ANY OTHER MATTERS
WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED,
PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS.
Any properly completed proxy may be revoked at any time before it is voted
on any matter (without, however, affecting any vote taken prior to such
revocation) by giving written notice of such revocation to the Secretary of
the Company, or by signing and duly delivering a proxy bearing a later date,
or by attending the Annual Meeting and voting in person.
The Annual Report of the Company for the fiscal year ended October 3, 1998
(the "Annual Report") is being mailed to stockholders of the Company
concurrently with this Proxy Statement. The Annual Report, however, is not a
part of the proxy solicitation material.
PROPOSAL I--ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of five members.
All Directors are elected annually and serve until the next annual meeting of
stockholders and until the election and qualification of their successors. At
the Annual Meeting, five Directors will be elected to serve until the next
annual meeting. The Board of Directors has nominated Donald M. Gleklen,
Bernard J. Korman, Donald E. Lepone, Dennis M. Newnham and David M. Schulte
for re-election. Unless otherwise specified in the proxy, it is the intention
of the persons named in the proxy to vote the shares represented by each
properly executed proxy for the re-election of Messrs. Gleklen, Korman,
Lepone, Newnham and Schulte as Directors. Each of the nominees has agreed to
stand for re-election and to serve if re-elected as a Director. However, if
any of the persons nominated by the Board of Directors fails to stand for re-
election or is unable to accept re-election, the proxies will be voted for the
election of such other person or persons as the Board of Directors may
recommend.
A quorum being present, the affirmative vote of a plurality of the votes
cast is necessary to elect a nominee as a Director of the Company. THE BOARD
OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
"FOR" THE RE-ELECTION OF THE FIVE NOMINEES OF THE BOARD OF DIRECTORS AS
DIRECTORS OF THE COMPANY.
PROPOSAL II--APPROVAL OF THE PRIVATE PLACEMENT PROPOSAL
GENERAL
On November 6, 1998, the Company entered into stock purchase agreements with
Cape Ann Investors, L.L.C. ("Cape Ann"), the Company's largest stockholder,
Donald E. Lepone, the Chief Executive Officer, President and a Director of the
Company, and Bernard J. Korman, the Chairman of the Board of the Company (Cape
Ann, Mr. Lepone and Mr. Korman are collectively referred to herein as the
"Purchasers"), pursuant to which the Purchasers agreed to purchase in a
private placement (the "Private Placement") an aggregate of 1,441,860 shares
of Common Stock at a price per share of $4.30, for an aggregate purchase price
of approximately $6,200,000. The purchase price of $4.30 per share represented
a premium of 11% to the closing price per share of $3.875 on October 21, 1998,
the date on which the Board agreed in principle to the terms of the Private
Placement. The closing price per share of Common Stock on November 11, 1998
was $4.75.
The purpose of the Private Placement is to raise additional capital so that
the Company can pay down approximately $4,500,000 of indebtedness outstanding
under its senior credit facilities and to provide the
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Company with additional working capital. Due to its recent financial results,
the Company has had difficulty complying with certain financial covenants set
forth in the Company's senior credit facilities. The Private Placement is
intended to provide significant improvement in the Company's working capital
and to enable the Company to negotiate amendments to the financial covenants
contained in the Company's existing senior and subordinated credit agreements
(the "Credit Facility Amendments") sufficient to permit the Company to operate
without likelihood of default in the foreseeable future. Consummation of the
Private Placement is conditioned upon, among other things, the approval by the
stockholders of the Company of the Private Placement Proposal at the Annual
Meeting and the agreement by the Company's senior and subordinated lenders
(collectively, the "Lenders") to the Credit Facility Amendments on terms
reasonably satisfactory to the Company and the Purchasers.
TERMS OF THE PROPOSED ISSUANCE
On November 6, 1998, the Company entered into a Stock Purchase Agreement
(the "1998 Stock Purchase Agreement") with Cape Ann pursuant to which Cape Ann
agreed to purchase 1,162,790 shares of Common Stock at a price per share of
$4.30, for an aggregate purchase price of approximately $5,000,000. As of
November 1, 1998, Cape Ann and certain related parties owned an aggregate of
1,321,893 shares of Common Stock, representing approximately 22.5% of the
total outstanding shares, including 215,425 shares of Common Stock that may be
purchased upon exercise of warrants held by Cape Ann that are currently
exercisable (the "Warrants"). Upon consummation of the Private Placement, Cape
Ann and such related parties will own 2,484,683 shares of Common Stock,
representing approximately 33.9% of the total outstanding shares (including
the Warrants). In addition, pursuant to agreements previously entered into
between the Company and Cape Ann and confirmed in the 1998 Stock Purchase
Agreement, Cape Ann may purchase from time to time in the open market or in
privately negotiated transactions up to 146,700 shares of Common Stock. If
Cape Ann were to acquire such shares and exercise the Warrants following
consummation of the Private Placement, Cape Ann and such related parties would
own 2,631,383 shares of Common Stock, representing approximately 35.9% of the
total shares then outstanding.
The 1998 Stock Purchase Agreement contains certain provisions (the
"Standstill Provisions") that limit the ability of Cape Ann or its affiliates
to (i) acquire additional shares of Common Stock (subject to the right to
purchase additional shares described above and to purchase shares to maintain
its percentage interest in the Company) without the consent of the Company,
(ii) transfer any shares of Common Stock except in certain circumstances,
(iii) form, join in or otherwise participate in a group with respect to shares
of Common Stock, (iv) solicit proxies or written consents of the stockholders
of the Company or participate in a solicitation of such stockholders, (v) seek
to call or call a special meeting of the stockholders of the Company, make a
stockholder proposal at a meeting of the Company's stockholders or (except as
described below) nominate a candidate for director of the Company, (vi)
commence a tender offer for shares of Common Stock, or (vii) make a bid for
the Company, any of the shares of Common Stock or any substantial portion of
its assets. Consistent with the provisions of agreements previously entered
into between Cape Ann and the Company, the provisions of the 1998 Stock
Purchase Agreement provide that, notwithstanding the foregoing, so long as
Cape Ann owns at least 5% of the outstanding shares of Common Stock, Cape Ann
(i) shall have the right to designate one director to serve on the Board of
Directors of the Company and (ii) shall vote its shares of Common Stock in
favor of the directors nominated by the Board of Directors of the Company. In
addition, the 1998 Stock Purchase Agreement preserves the registration rights
granted to Cape Ann by the Company pursuant to agreements previously entered
into between Cape Ann and the Company, including with respect to the shares of
Common Stock to be purchased by Cape Ann in the Private Placement.
Concurrently with the execution of the 1998 Stock Purchase Agreement, the
Company entered into Stock Purchase Agreements with each of Messrs. Lepone and
Korman. Pursuant to the Stock Purchase Agreement with Mr. Lepone, Mr. Lepone
agreed to purchase 46,512 shares of Common Stock at a price per share of
$4.30, for an aggregate purchase price of approximately $200,000. As of
November 1, 1998, Mr. Lepone owned 510,537 shares of Common Stock,
representing approximately 9.0% of the total outstanding shares, and held
options to acquire an additional 500,000 shares of Common Stock (all of which
currently are exercisable). Upon
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consummation of the Private Placement, Mr. Lepone will own 557,049 shares of
Common Stock (excluding his options), representing approximately 7.8% of the
total outstanding shares. Pursuant to the Stock Purchase Agreement with Mr.
Korman, Mr. Korman agreed to purchase 232,558 shares of Common Stock at a
price per share of $4.30, for an aggregate purchase price of approximately
$1,000,000. As of November 1, 1998, Mr. Korman owned 277,073 shares of Common
Stock, representing approximately 4.9% of the total outstanding shares, and
held options to acquire an additional 28,000 shares of Common Stock (16,800 of
which currently are exercisable). Upon consummation of the Private Placement,
Mr. Korman will own 509,631 shares of Common Stock (excluding his options),
representing approximately 7.2% of the total outstanding shares. Each of the
Stock Purchase Agreements for Messrs. Lepone and Korman provide registration
rights to Messrs. Lepone and Korman on terms substantially similar to those
provided to Cape Ann in the 1998 Stock Purchase Agreement.
USE OF PROCEEDS FROM THE PRIVATE PLACEMENT
The Company has agreed with its Lenders that the net proceeds of the Private
Placement will be used (i) to pay down approximately $4,500,000 of
indebtedness outstanding under the Company's revolving credit facility, (ii)
for working capital and general corporate purposes, and (iii) to pay expenses
associated with the Private Placement, estimated to be approximately $200,000.
EFFECT UPON EXISTING HOLDERS OF COMMON STOCK
Consummation of the Private Placement will result in a significant increase
in the number of shares of Common Stock outstanding. As of November 1, 1998,
there were 5,672,503 shares of Common Stock outstanding and upon consummation
of the Private Placement there would be 7,114,363 shares of Common Stock
outstanding. As a result, the voting power and percentage ownership interest
in the Company of each of the Company's current stockholders other than the
Purchasers would be diluted upon consummation of the Private Placement.
INTERESTS OF CERTAIN PERSONS
Cape Ann currently is the largest stockholder of the Company, holding
approximately 22.5% of the outstanding shares of Common Stock as of November
1, 1998 (including shares issuable upon exercise of the Warrants).
Consummation of the Private Placement would result in Cape Ann increasing its
holdings to approximately 33.9% of the outstanding shares and under certain
circumstances Cape Ann could further increase its holdings to approximately
35.9%. See "--Terms of the Proposed Issuance." David M. Schulte, a director of
the Company, is the President of Chilmark II, L.L.C., which is the General
Partner of Chilmark Fund II, L.P. Chilmark Fund II, L.P. is the Managing
Member of Cape Ann. In addition, each of Mr. Lepone and Mr. Korman serves on
the Board of Directors of the Company and Mr. Lepone is the President and
Chief Executive Officer of the Company. Upon consummation of the Private
Placement, Cape Ann, Mr. Lepone and Mr. Korman will collectively own 3,551,363
shares of Common Stock, representing approximately 48.5% of the total
outstanding shares. Under certain circumstances described under "--Terms of
the Proposed Issuance" above, Cape Ann could increase its holdings resulting
in Cape Ann, Mr. Lepone and Mr. Korman collectively owning 50.5% of the total
outstanding shares. In addition, if Messrs. Lepone and Korman exercise that
portion of their stock options that is currently exercisable, they would
acquire an additional 516,800 shares in the aggregate, resulting in Cape Ann,
Mr. Lepone and Mr. Korman collectively owning 53.7% of the total outstanding
shares. Cape Ann, Mr. Lepone and Mr. Korman have advised the Company that they
are not acting as a group and have no agreement to act in concert with respect
to acquiring, holding or disposing of shares of Common Stock except to the
extent that each has separately agreed to acquire shares in the Private
Placement and to vote the shares of Common Stock currently held by such
stockholder in favor of the Private Placement Proposal.
BOARD OF DIRECTORS RECOMMENDATION; REASONS FOR THE PRIVATE PLACEMENT
Based primarily on its consideration of the factors referred to below, the
Board of Directors of the Company believes that the consummation of the
Private Placement is in the best interests of the Company and its
stockholders.
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Among the factors considered by the Board in approving the Private Placement
was the Board's view that the proceeds of the Private Placement are necessary
to support the Company's near term working capital requirements and to satisfy
the requirements of the Company's Lenders. See "--General" and "--Use of
Proceeds from the Private Placement." If the Private Placement Proposal is not
approved and the Private Placement is not consummated, the Credit Facility
Amendments will not become effective and the Company will be in default under
the terms of its existing credit facilities, and such default could have a
material adverse effect on the Company's business, operations and financial
condition.
In reaching its determination, the Board also considered the purchase price
to be paid for the shares of Common Stock to be issued in the Private
Placement and its relationship to the recent trading prices of the Common
Stock (the purchase price of $4.30 per share represented a premium of 11% to
the closing price per share of $3.875 on October 21, 1998, the date on which
the Board agreed in principle to the terms of the financing) as well as the
fact that such shares will not be freely transferable upon issuance. In
addition, with respect to the shares of Common Stock to be issued to Cape Ann,
the Board considered the restrictions imposed on Cape Ann's ownership of
Common Stock by the Standstill Provisions contained in the 1998 Stock Purchase
Agreement and similar provisions contained in agreements previously entered
into between Cape Ann and the Company. See "Certain Relationships and Related
Transactions."
NASDAQ VOTING REQUIREMENTS
The Common Stock is listed on the Nasdaq Stock Market's SmallCap Market, the
market rules of which require stockholder approval prior to the issuance of
securities in connection with a transaction other than a public offering
involving the sale or issuance by the Company of Common Stock (or securities
convertible into or exercisable for Common Stock) equal to 20% or more of the
Common Stock or 20% or more of the voting power outstanding before the
issuance for less than the greater of book or market value of the stock. The
Nasdaq market rules also require stockholder approval prior to an issuance of
securities that will result in a change in control of the Company and in
certain other circumstances which may be implicated by the consummation of the
Private Placement. Accordingly, the Company has determined to seek stockholder
approval of the Private Placement Proposal. Stockholder approval is not
otherwise required as a matter of Delaware law or other applicable laws or
rules.
VOTE REQUIRED
To approve the Private Placement Proposal, the affirmative vote of the
holders of a majority of the votes cast by stockholders at the Annual Meeting
is required. THE BOARD OF DIRECTORS BELIEVES THAT THE PRIVATE PLACEMENT
PROPOSAL IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, AND
ACCORDINGLY, RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PRIVATE PLACEMENT
PROPOSAL.
INFORMATION REGARDING DIRECTORS
The Board of Directors of the Company held six meetings during Fiscal 1998.
During Fiscal 1998, each of the incumbent Directors attended at least 75% of
the total number of meetings of the Board of Directors and of the committees
of which he was a member. The Board of Directors has established an Audit
Committee and a Compensation and Stock Option Committee. The Audit Committee
reviews the financial statements of the Company and the scope of the annual
audit, monitors the Company's internal financial and accounting controls and
recommends to the Board of Directors the appointment of independent certified
public accountants. Messrs. Korman, Gleklen and Newnham were members of the
Audit Committee during all of Fiscal 1998. The Audit Committee met one time
during Fiscal 1998. The Compensation and Stock Option Committee recommends the
compensation levels of officers and employees of the Company to the Board of
Directors and is responsible for administering the Company's 1988 Stock Option
Plan (the "1988 Option Plan") and the Company's 1996 Stock Option Plan (the
"1996 Stock Option Plan"). Messrs. Korman, Gleklen and Newnham were members of
the
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Compensation and Stock Option Committee during all of Fiscal 1998. Mr. Schulte
became a member of the Compensation and Stock Option Committee effective
February 24, 1998. The Compensation and Stock Option Committee met three times
during Fiscal 1998. The Board of Directors does not have a nominating
committee.
Directors who are officers or employees of the Company receive no
compensation for service as Directors. Non-employee Directors each receive
$2,500 for their service as Directors for each in-person meeting which they
attend. In addition, in 1991 each non-employee Director received options under
the 1988 Option Plan to purchase 25,000 shares of Company Common Stock at
$6.00 per share, vesting in equal installments over the subsequent five years
beginning on the first anniversary of the grant date. In 1996, each non-
employee director received options under the 1996 Stock Option Plan to
purchase shares of Company Common Stock at $9.875 per share (Mr. Korman,
28,000 shares; Mr. Gleklen, 17,500 shares; Mr. Newnham, 17,500 shares), one-
fifth of which vested on the grant date and the remaining four-fifths of which
vest ratably over four years beginning on the first anniversary of the grant
date. All Directors are reimbursed for expenses incurred in connection with
attendance at meetings.
Set forth below is certain information regarding the Directors of the
Company, including the five Directors who have been nominated for re-election
at the Annual Meeting, based on information furnished by them to the Company.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
---- --- --------------
<S> <C> <C>
Donald M. Gleklen....................................... 62 1990
Bernard J. Korman....................................... 67 1990
Donald E. Lepone........................................ 54 1987
Dennis M. Newnham....................................... 58 1987
David M. Schulte........................................ 52 1997
</TABLE>
The principal occupation and business experience during at least the last
five years for each Director of the Company is set forth below.
MR. GLEKLEN has been a Director of the Company since 1990. Mr. Gleklen is
also President of Jocard Financial Services (financial consulting services), a
position he has held since September 1994, and he has been Chairman and Chief
Executive Officer of Intellihealth, Inc. since July 1996 (provider of health
care information to consumers). Mr. Gleklen served as Senior Vice President of
Corporate Development of MEDIQ Incorporated from 1985 to March 1994. Mr.
Gleklen also served as Managing Partner of Brobyn Capital Partners (venture
capital) from March 1994 to September 1994 and he currently serves as a
Director of New West Eyeworks, Inc. (retail eyewear stores) and Lason, Inc.
(provider of laser printing and imaging services). He also is the President
and Chief Executive Officer of The Maine Merchant Bank, a position he has held
since September 1997.
MR. KORMAN has been Chairman of the Board of Directors of the Company since
August 1990. Mr. Korman served as President, Chief Executive Officer, and a
Director of MEDIQ Incorporated from 1977 to 1995. Mr. Korman is a Director of
Kapson Senior Quarters Corp. (assisted living services), The New America High
Income Fund, Inc. (financial services), The Pep Boys, Inc. (automotive
supplies), Today's Man, Inc. (retail men's clothing sales), Omega, Inc. and
Kranzco Realty Trust (real estate investment trust). Health Care Investors,
Inc. (real estate investment trust) InnoServ Technologies, Inc. (medical
equipment support services) and Kranzco Realty Trust (real estate investment
trust).
MR. LEPONE has been President, Chief Executive Officer and a Director of the
Company since 1987.
MR. NEWNHAM has been a Director of the Company since 1987. Mr. Newnham has
been President and Chief Executive Officer of Tsumura International since
March 1996. Before joining Tsumura International, Mr. Newnham was Chairman,
President and Chief Executive Officer of Adirondack Beverages, Inc. from March
1995 to December 1995. Mr. Newnham was a venture capital consultant from March
1994 to March 1995. Mr. Newnham previously served as President and Chief
Executive Officer of Lea & Perrins, Inc. (manufacturer of
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condiments) from 1983 to February 1994. Mr. Newnham is also a director of
United Water Resources (a holding company for water related businesses).
MR. SCHULTE has been Managing Member of Chilmark Partners, L.L.C., a
merchant banking firm in Chicago, and its predecessor, since 1984. Chilmark
Partners, L.L.C. controls the general partner of Chilmark Fund II, L.P., an
investment partnership.
EXECUTIVE OFFICERS
The names and ages of all executive officers of the Company and the
principal occupation and business experience during at least the last five
years for each are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert F. Burns......... 49 Vice President, Chief Financial Officer and Treasurer
Donald E. Lepone........ 54 President and Chief Executive Officer
James W. McGrath, Jr.... 54 Vice President of Regulatory Affairs and Technical Services
Richard C. Zakin........ 41 Vice President of Marketing
</TABLE>
MR. BURNS is a certified public accountant and has been Vice President,
Chief Financial Officer and Treasurer of the Company since August 1994. From
1984 to August 1994, Mr. Burns served as Vice President of Finance for Tetley,
Inc. (tea and coffee manufacturer), a subsidiary of Allied-Lyons PLC.
MR. LEPONE has been President and Chief Executive Officer of the Company
since 1987.
MR. MCGRATH has been Vice President of Regulatory Affairs and Technical
Services for the Company since August 1994, and was Vice President of
Operations for the Company from July 1993 to August 1994. He served as
Director of Quality Assurance and Quality Control for the Company from
September 1992 to June 1993. Mr. McGrath previously served as Director of
Quality Assurance for Circa Pharmaceutical Co., Inc. (pharmaceutical
manufacturer) from May 1991 to July 1992. He also served as Vice President of
Technical Services for Nice-Pak Products (pharmaceutical and consumer products
manufacturer) from March 1990 to May 1991.
MR. ZAKIN has been Vice President of Marketing for the Company since June
1993. He served as Vice President and General Manager of the Company from
September 1992 to June 1993 and Vice President of Marketing for the Company
from July 1990 to September 1992.
Each of the executive officers holds his respective office until the regular
annual meeting of the Board of Directors following the annual meeting of
stockholders and until his successor is elected and qualified or until his
earlier resignation or removal.
OTHER KEY EMPLOYEES
In addition to the Directors and executive officers listed above, the
following individuals are also expected to make significant contributions to
the business of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Michael C. Bill......... 45 Vice President and General Manager, Ophthalmics Division
William A. Gelinas...... 50 Vice President and General Manager, Oral Care Division
William Muth, Jr........ 50 Vice President and General Manager, Adhesive Coatings Division
Dan L. Williams......... 47 Vice President and General Manager, First Aid Division
David J. Radeke......... 44 Vice President and General Manager, Personal Care Division
</TABLE>
7
<PAGE>
EXECUTIVE COMPENSATION
The following sections of this Proxy Statement set forth and discuss the
compensation paid or awarded during the last three years to the Company's
Chief Executive Officer, the three other current executive officers of the
Company who earned in excess of $100,000 during Fiscal 1998 and another
executive officer of the Company who would have been one of the four most
highly compensated executive officers of the Company for Fiscal 1998 had his
employement with the Company not terminated prior to October 3, 1998.
SUMMARY COMPENSATION TABLE
The following table shows for each of the last three fiscal years
compensation paid by the Company to the Chief Executive Officer and the four
most highly compensated executive officers who earned in excess of $100,000
during Fiscal 1998.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ SECURITIES ------------
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1)($) BONUS($)(3) OPTIONS(#) COMPENSATION
- --------------------------- ---- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Donald E. Lepone........ 1998 336,337 -- -- 5,230(5)
President and Chief Ex-
ecutive Officer 1997 324,000 -- -- 5,088
1996 309,375 200,000 -- 4,928
Richard C. Zakin........ 1998 199,385 -- 20,000 3,230(6)
Vice President of Mar-
keting 1997 184,000 35,000 50,000 2,988
1996 167,000 47,500 -- 2,733
Robert F. Burns......... 1998 154,308 -- 5,000 2,543(7)
Vice President, Chief
Financial Officer and 1997 146,000 21,000 25,000 2,538
Treasurer 1996 136,000 22,000 -- 2,268
James W. McGrath, Jr.... 1998 131,807 20,000(4) 20,000 2,230(8)
Vice President of Regu-
latory Affairs and 1997 124,000 17,000 25,000 2,230
Technical Services 1996 116,000 12,000 -- 1,968
John J. Manheimer....... 1998 107,802(2) -- -- 1,665(9)
Vice President of Sales 1997 164,000 25,000 35,000 2,688
1996 152,000 30,000 -- 2,508
</TABLE>
- --------
(1) Includes all voluntary pre-tax contributions to the NutraMax Products,
Inc. Employee's Savings Plan (the "401(k) Plan").
(2) Represents actual salary earned by Mr. Manheimer during Fiscal 1998. Mr.
Manheimer's employment with the Company was terminated on January 20,
1998. Mr. Manheimer's annual salary for Fiscal 1998 was $163,500.
(3) As of the date of this Proxy Statement, the Compensation and Stock Option
Committee has not completed its review of executive officer performance
for Fiscal 1998, and accordingly has not yet made determinations as to the
cash bonuses, if any, to be awarded to the Company's executive officers.
(4) Represents a special cash bonus awarded to Mr. McGrath in connection with
his completion of the ISO 9000 certification project for the Company's
First Aid Products division.
(5) Includes approximately $5,000 representing the Company's contributions to
the 401(k) Plan account ("Company 401(k) Plan Contributions") of Mr.
Lepone and $230 of group life insurance expenses paid by the Company
("Group Life Insurance Expenses") on behalf of Mr. Lepone.
(6) Includes approximately $3,000 of Company 401(k) Plan Contributions and
$230 of Group Life Insurance Expenses.
(7) Includes approximately $2,300 of Company 401(k) Plan Contributions and
$230 of Group Life Insurance Expenses.
(8) Includes approximately $2,000 of Company 401(k) Plan Contributions and
$230 of Group Life Insurance Expenses.
(9) Includes approximately $1,600 of Company 401(k) Plan Contributions and $65
of Group Life Insurance Expenses.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END VALUES
The following table sets forth the shares acquired and the value realized
upon exercise of stock options during Fiscal 1998 by the Chief Executive
Officer and each other executive officer named in the Summary Compensation
Table and certain information concerning the number and value of unexercised
options.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END(#) OPTIONS AT FY-END(#)(1)
ACQUIRED VALUE -------------------------- -------------------------
ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald E. Lepone........ -- -- 500,000 0 -- --
Richard C. Zakin........ -- -- 40,000 50,000 -- --
John J. Manheimer....... -- -- 0(2) 0(2) -- --
Robert F. Burns......... -- -- 19,000 21,000 -- --
James W. McGrath, Jr. .. -- -- 22,000 33,000 -- --
</TABLE>
- --------
(1) Equal to the market value of shares covered by in-the-money options as of
the end of the Company's fiscal year on October 3, 1998 less the aggregate
option exercise price. Options are in-the-money if the market value of the
shares covered thereby is greater than the option exercise price.
(2) Mr. Manheimer's outstanding options expired upon termination of his
employment with the Company on January 20, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the options granted in Fiscal 1998 to the
Chief Executive Officer and each other executive officer named in the Summary
Compensation Table:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
OF SHARE PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------------------------------------------- --------------------
NUMBER OF
SHARES UNDERLYING PERCENT OF TOTAL
OPTIONS OPTIONS GRANTED
GRANTED (#) (1) TO EMPLOYEES EXERCISE OR BASE EXPIRATION
NAME 10%($) IN FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
- ---- ----------------- ---------------- ---------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Donald E. Lepone........ -- -- -- -- -- --
Richard C. Zakin........ 20,000 25% $12.625(2) 3/30/03 69,761 154,154
John J. Manheimer....... -- -- -- -- -- --
Robert F. Burns......... 5,000 6% $13.250(3) 12/31/02 18,304 40,446
James W. McGrath, Jr.... 15,000 19% $12.625(2) 3/30/03 52,321 115,615
........................ 5,000 6% $13.250(3) 12/31/02 18,304 40,446
</TABLE>
- --------
(1) One-fifth of each option vested on the grant date and the remaining four-
fifths vests ratably over four years beginning on the first anniversary of
the grant date.
(2) Represents the closing market price of the Company's Common Stock on the
grant date of March 30, 1998.
(3) Represents the closing market price of the Company's Common Stock on the
grant date of December 31, 1997.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors of the
Company currently consists of Bernard J. Korman, Donald M. Gleklen, Dennis M.
Newnham and David M. Schulte, each of whom is an outside director. The
Compensation and Stock Option Committee approves the Company's compensation
policies and procedures, establishes compensation levels for executive
officers and administers the Company's Stock Option Plans. Mr. Lepone does not
participate in Compensation and Stock Option Committee deliberations
concerning his compensation but makes general recommendations to, and reviews
with, the Compensation and Stock Option Committee the compensation of
executives and management other than himself.
9
<PAGE>
GENERAL
The compensation arrangements of the Company reflect the philosophy of the
Compensation and Stock Option Committee, and the Board of Directors as a
whole, that a significant portion of the annual compensation of the Company's
Chief Executive Officer and other executive officers should be linked to the
Company's performance. The Company's compensation programs are designed to
provide competitive financial rewards for successfully meeting the Company's
strategic and operating objectives, with the purposes of retaining personnel
and supporting a performance-oriented environment. Where applicable, the
Compensation and Stock Option Committee takes into account any employment
agreement between an executive officer and the Company. See "Employment
Agreements" below.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The compensation of the Company's Chief Executive Officer and other
executive officers is comprised of annual salary and cash and stock incentives
based on annual and long-term performance of the Company.
Base Salary. The annual base salary and base salary adjustments for
executive officers are determined by the Compensation and Stock Option
Committee in its discretion and are targeted according to the salaries of
executives holding similar offices and having similar responsibilities within
the private label health and personal care products industry. The Compensation
and Stock Option Committee also considers factors such as industry experience
and executive retention. Based upon the foregoing criteria, the base salary
for Mr. Lepone was established pursuant to his employment agreement as
described below under "Employment Agreements." Generally, salary adjustments
for executive officers (whether determined annually with respect to such
officers or pursuant to employment agreements) are determined by evaluating
the competitive marketplace (including the Company's industry segment), the
performance of the Company, the performance of the executive officer and any
change in the responsibilities assumed by the executive officer. While many
aspects of performance can be measured in financial terms, the Compensation
Committee also evaluates the success of executive officers in areas of non-
financial performance, such as the development and implementation of
objectives and plans. Salary adjustments are normally determined and made on
an annual basis. Salary adjustments for the Chief Executive Officer were
established pursuant to his employment agreement. See "Employment Agreements"
below.
Cash Bonuses. The Company has an incentive compensation plan (the
"Compensation Plan") pursuant to which the Company's executive officers are
awarded cash bonuses based upon individual performance and the Company's
achievement of certain internal financial objectives. The Compensation Plan
provides for annual cash bonuses ranging from 2% to 60% of the executive
officer's base salary, with executive officers becoming entitled to receive a
percentage of their bonus potential based upon the percentage achievement of
the Company's internal operating objectives and, with respect to executive
officers other than the Chief Executive Officer, also on such executive
officers' individual performance. These internal financial objectives include
pre-tax income targets, product line sales growth targets (for sales and
marketing executives), productivity objectives (for operations executives),
material price targets (for purchasing managers) and timely information
reporting and working capital control objectives (for financial managers). The
Chief Executive Officer's bonus is determined solely by the Company's
achievement of pre-tax income targets while bonuses for all other executive
officers are determined by the Company's achievement of pre-tax income targets
and the achievement by such officers of their individual performance targets.
Executive officers other than the Chief Executive Officer may receive bonuses
even if the Company does not achieve the pre-tax income targets. Through the
Compensation Plan, a significant portion of each executive officer's annual
total compensation is placed at risk in order to provide an incentive toward
sustained high performance. As of the date of this report, the Compensation
and Stock Option Committee has not completed its review of executive officer
performance for Fiscal 1998, and accordingly, has not yet made determinations
as to the cash bonuses, if any, to be awarded to the Company's executive
officers. Although the Compensation and Stock Option Committee does not
typically award cash bonuses other than pursuant to the Compensation Plan, the
Compensation and Stock Option Committee retains the authority to award a cash
bonus to any executive officer that the Committee, in its discretion, deems
appropriate in view of the circumstances. In this regard, Mr. McGrath was
granted a $20,000 cash bonus during Fiscal 1998 in connection with his
completion of the ISO 9000 certification project for the Company's First Aid
Products division.
10
<PAGE>
Equity Incentives. Equity incentive awards are designed to attract and
retain executives who can make significant contributions to the Company's
success, reward executives for such significant contributions and give
executives a longer-term incentive to increase stockholder value. The size and
frequency of equity and equity-based incentive awards are determined by the
Compensation and Stock Option Committee in its discretion, taking into account
individual performance and responsibilities, and in most cases, without any
specific performance measures. The Compensation and Stock Option Committee
may, however, impose specific performance measures on stock option grants. The
Compensation and Stock Option Committee also may grant stock options for
executive retention purposes in amounts that the Compensation Committee and
Stock Option, in its discretion, deems necessary and appropriate in order to
retain highly qualified executives. To ensure that high levels of performance
occur over the long-term, stock options granted to executives typically vest
over a period of five years. All outstanding options have been granted with an
exercise price equal to 100% of the fair market value of the Company's Common
Stock on the grant date. Any value received by an executive officer from a
stock option grant and any increase in the value of stock received as a bonus
depends entirely on increases in the price of the Company's Common Stock.
Since the adoption of the 1988 Option Plan, the Company's executive officers
have all been granted options to acquire shares of the Company's Common Stock.
During Fiscal 1998, Mr. Zakin, Burns and McGrath received options to purchase
20,000, 5,000 and 20,000 shares of Common Stock, respectively. One-fifth of
each option vested on the grant date and the remaining four-fifths vests
ratably over four years beginning on the first anniversary of the grant date.
Mr. Manheimer received no options for Fiscal 1998 as his employment with the
Company was terminated on January 20, 1998.
Other Compensation. The Company provides executive officers and management
with health, retirement and other benefits under plans that are generally
available to the Company's employees.
Compensation of the Chief Executive Officer. Mr. Lepone's base salary, base
salary adjustments and performance targets for the award of any cash bonuses
are governed by Mr. Lepone's employment agreement. Any increases in Mr.
Lepone's compensation are determined by the Compensation and Stock Option
Committee based upon an analysis of his performance during the year and the
Company's overall performance. Under the terms of his employment agreement,
which expires on November 30, 1998, Mr. Lepone received an annual base salary
of $336,337 for Fiscal 1998. Mr. Lepone also participates in the Compensation
Plan, as described above. In addition, pursuant to the terms of his employment
agreement, Mr. Lepone was granted options to acquire at $11.00 per share, up
to 500,000 shares of the Company's Common Stock under the 1988 Option Plan.
These options are fully vested.
Federal Tax Regulations Limiting Deductibility of Certain Compensation. As a
result of Section 162(m) of the Code, a company's deduction of executive
compensation may be limited to the extent that a "covered employee" (i.e., the
chief executive officer or one of the four highest compensated officers who is
employed on the last day of the company's taxable year and whose compensation
is reported in the summary compensation table in the company's proxy
statement) receives compensation in excess of $1 million in such taxable year
of the company (other than performance-based compensation that otherwise meets
the requirements of Section 162(m) of the Code).
COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS
Bernard J. Korman
Donald M. Gleklen
Dennis M. Newnham
David M. Schulte
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Lepone, Chief Executive Officer and President of the Company, makes
general recommendations to and reviews with the Compensation and Stock Option
Committee the compensation of executives and management other than himself.
11
<PAGE>
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock, based
on the market price of the Company's Common Stock and assuming reinvestment of
dividends, with the total return of companies within the Russell 2000 Index
and the companies within the NASDAQ Pharmaceutical Index prepared by Research
Data Group, Inc. The calculation of total cumulative return assumes a $100
investment in the Company's Common Stock, the Russell 2000 Index and the
NASDAQ Pharmaceutical Index on September 30, 1993. The comparisons in this
line graph are historical and are not intended to forecast or be indicative of
possible future performance of the Common Stock of the Company.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------------------------
9/93 9/94 9/95 9/96 9/97 9/98
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NUTRAMAX PRODUCTS, INC................ 100.00 69.17 66.67 61.67 94.17 38.33
RUSSELL 2000.......................... 100.00 102.56 126.66 143.20 190.84 157.54
NASDAQ PHARMACEUTICAL................. 100.00 86.90 128.33 154.68 172.59 149.39
</TABLE>
EMPLOYMENT AGREEMENTS
On November 28, 1993, Mr. Lepone entered into an employment agreement with
the Company (the "Lepone Employment Agreement"), pursuant to which Mr. Lepone
serves as President and Chief Executive Officer of the Company through
November 30, 1998. Under the Lepone Employment Agreement, Mr. Lepone received
a base salary of $265,000 through November 30, 1994. Thereafter, the Lepone
Employment Agreement provides that such base salary shall be increased at an
annual rate of the greater of 5% or the annual rate of inflation as described
in the Consumer Price Index "All Cities--All Consumers" prepared by the Bureau
of Labor Statistics of the United States Department of Labor, or by such
greater amount as the Company and Mr. Lepone may otherwise agree. For Fiscal
1998 Mr. Lepone's salary was $336,337. Pursuant to the Lepone Employment
Agreement, Mr. Lepone is entitled to receive a cash bonus if certain
performance criteria are satisfied (as discussed above under "Report of the
Compensation and Stock Option Committee of the Board of
12
<PAGE>
Directors on Executive Compensation") ranging from 20% to 60% of his base
salary. In the event Mr. Lepone's employment is terminated without cause, he
is entitled to receive a sum equal to the compensation then due him for the
balance of the term of the Lepone Employment Agreement at the annual rate of
compensation to which he is entitled as of the date of such termination. Mr.
Lepone is subject to certain non-competition provisions during the term of his
employment and, in certain circumstances, for a period of one year subsequent
to his leaving the Company. The Lepone Employment Agreement terminates as of
November 30, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In order to finance in part the Company's acquisition of certain assets
related to the first aid products business of American White Cross, Inc., on
September 11, 1997, pursuant to the terms of a Stock Purchase Agreement dated
as of August 12, 1997, as amended (the "1997 Stock Purchase Agreement"), by
and between the Company and Cape Ann, Cape Ann purchased 846,154 shares of
Common Stock from the Company for an aggregate purchase price of $11,000,000.
The 1997 Stock Purchase Agreement contains provisions substantially similar to
those contained in the 1998 Stock Purchase Agreement that place limitations on
Cape Ann's ownership of Common Stock, including the Standstill Provisions. On
August 7, 1998, the Company and Cape Ann entered into an amendment to the 1997
Stock Purchase Agreement in order to permit Cape Ann and its affiliates to
purchase up to an additional 245,000 shares of Common Stock in the open market
or in privately negotiated transactions.
On October 29, 1997, the Company offered to purchase up to an aggregate of
450,000 shares of the Company's then outstanding Common Stock within a price
range of $11.00 per share to $12.75 per share pursuant to a modified Dutch
auction issuer tender offer (the "Tender Offer"). Upon completion of the
Tender Offer on November 28, 1997, the Company purchased and retired an
aggregate of 250,668 shares of outstanding Common Stock at a purchase price of
$12.75 per share. In order to finance the Tender Offer, the Company issued an
equivalent number of shares of Common Stock in a private placement transaction
to Cape Ann, Bernard J. Korman, Donald E. Lepone and Donald M. Gleklen at a
$12.75 per share purchase price. The Company undertook the Tender Offer in
order to provide added market liquidity for the existing stockholders of the
Company.
The Company currently proposes to issue an aggregate of 1,441,860 shares of
Common Stock to Cape Ann, Mr. Lepone and Mr. Korman for an aggregate purchase
price of approximately $6,200,000. See Proposal II--"Approval of the Private
Placement Proposal".
13
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the Common
Stock of the Company as of November 23, 1998 by (i) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each of the Company's Directors and executive officers, (iii) each
of the named executive officers in the Summary Compensation Table, and (iv)
all of the Company's executive officers and Directors as a group.
<TABLE>
<CAPTION>
SHARES
DIRECTORS, EXECUTIVE OFFICERS BENEFICIALLY PERCENT OF
AND 5% STOCKHOLDERS OWNED(1) CLASS(2)
- ----------------------------- ------------ ----------
<S> <C> <C>
Cape Ann Investors, L.L.C.(3).......................... 1,321,893 22.5%
Chilmark Fund II, L.P.
Chilmark II, L.L.C.
Chilmark Partners, L.L.C.
David M. Schulte
875 North Michigan Avenue, Suite 2100
Chicago, Illinois 60611
Warburg, Pincus Counselors, Inc.(4).................... 596,100 10.5%
466 Lexington Avenue
New York, NY 10017
Wellington Management Company, LLP(5).................. 581,000 10.2%
75 State Street
Boston, Massachusetts 02109
Robert Fleming Inc.(6)................................. 364,000 6.4%
320 Park Avenue, 11th Floor
New York, NY 10022
Marvin Schwartz(7)..................................... 341,000 6.0%
c/o Neuberger & Berman, LLC
605 Third Avenue
New York, New York 10158
Robert F. Burns(8)..................................... 25,200 *
Donald M. Gleklen(9)................................... 38,007 *
Bernard J. Korman(10).................................. 293,873 5.2%
Donald E. Lepone(11)................................... 1,010,537 16.4%
James W. McGrath, Jr.(12).............................. 20,508 *
Dennis M. Newnham(13).................................. 12,500 *
Richard C. Zakin(14)................................... 158,270 2.8%
All directors and executive officers as a group (8 per-
sons)(15)............................................. 2,880,788 44.2%
</TABLE>
- --------
* Less than 1%.
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Exchange Act. Accordingly, a beneficial owner of a security includes any
person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares the power to vote
such security or the power to dispose of such security. The amounts set
forth above as beneficially owned include shares owned, if any, by
spouses and relatives living in the same home as to which beneficial
ownership may be disclaimed. The amounts set forth as beneficially owned
include shares of Common Stock which such persons had the right to
acquire within 60 days of November 23, 1998, pursuant to stock options.
14
<PAGE>
(2) Percentages are calculated on the basis of 5,672,503 shares of Common
Stock outstanding of November 1, 1998.
(3) Includes 215,425 shares deemed to be beneficially owned which are
purchasable upon exercise of the Warrants. The above information is based
on copies of a statement on Schedule 13D/A filed with the SEC on November
9, 1998, which indicates that Cape Ann Investors, L.L.C. has shared
voting and dispositive power with respect to 1,316,893 shares, and that
Chilmark Fund II, L.P., Chilmark II, L.L.C., Chilmark Partners, L.L.C.
and David M. Schulte have shared voting and dispositive power with
respect to all 1,321,893 shares.
(4) The above information is based on copies of a statement on Schedule 13G
filed with the SEC on February 8, 1996, which indicates that Warburg,
Pincus Counselors, Inc. has sole voting power with respect to 430,100
shares, shared voting power with respect to 81,100 shares and sole
dispositive power with respect to all 596,100 shares.
(5) The above information is based on copies of a statement on Schedule 13G/A
filed with the SEC on February 10, 1998, which indicates that Wellington
Management Company has shared voting power with respect to 345,000 shares
and shared dispositive power with respect to all 581,000 shares.
(6) The above information is based on copies of a statement on Schedule 13G/A
filed with the SEC on February 19, 1998, which indicates that Robert
Fleming, Inc. has shared voting and dispositive power with respect to all
364,000 shares.
(7) The above information is based on copies of a statement on Schedule 13D
filed with the SEC on October 27, 1997, which indicates that Marvin
Schwartz has sole voting power and dispositive power with respect to
79,600 shares and shared dispositive power with respect to 261,400
shares.
(8) Includes 25,000 shares deemed to be beneficially owed by Mr. Burns which
are subject to options previously granted pursuant to the 1988 Option
Plan and 1996 Option Plan.
(9) Includes 10,500 shares deemed to be beneficially owed by Mr. Gleklen
which are subject to options previously granted pursuant to the 1996
Option Plan.
(10) Includes 16,800 shares deemed to be beneficially owed by Mr. Korman which
are subject to options previously granted pursuant to the 1996 Option
Plan.
(11) Includes 500,000 shares deemed to be beneficially owned by Mr. Lepone
which are subject to options previously granted pursuant to the 1988
Option Plan.
(12) Includes 20,000 shares deemed to be beneficially owned by Mr. McGrath
which are subject to options previously granted pursuant to the 1988
Option Plan and 1996 Option Plan.
(13) Includes 10,500 shares deemed to be beneficially owed by Mr. Newnham
which are subject to options previously granted pursuant to the 1996
Option Plan.
(14) Includes 54,000 shares deemed to be beneficially owned by Mr. Zakin which
are subject to options previously granted pursuant to the 1988 Option
Plan and 1996 Option Plan.
(15) Includes an aggregate of 636,800 shares deemed to be beneficially owned
by executive officers and directors which are subject to options.
Includes 1,321,893 shares as to which David M. Schulte has shared voting
and dispositive power, including 215,425 shares deemed to be beneficially
owned which are purchasable upon exercise of the Warrants. (see Note (3)
above).
15
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's executive officers and Directors and beneficial owners of more
than 10% of its Common Stock are required under Section 16(a) of the Exchange
Act to file reports of ownership and changes in ownership with the SEC. Copies
of those reports must also be furnished to the Company. Based solely on a
review of the copies of reports furnished to the Company, and written
representations that no other reports were required, the Company believes that
during Fiscal 1998 the following individuals who are either a Director,
officer or greater than 10% beneficial owner of the Company's Common Stock
failed to file on a timely basis all reports required by Section 16(a):
Messrs. Lepone, Burns, Zakin and McGrath, each of whom inadvertently reported
late certain transactions in the Company's Common Stock. In addition, Mr.
Schulte, Cape Ann and the Chilmark entities inadvertently failed to timely
file a Form 4 relating to August 1998 purchases of Common Stock that were
otherwise disclosed in an amendment to a Schedule 13D filed by such persons
with the SEC. Following the inadvertent delinquency, a Form 4 properly
disclosing these purchases was filed with the SEC.
EXPENSES OF SOLICITATION
The Company will pay the entire expense of soliciting proxies for the Annual
Meeting. In addition to solicitations by mail, certain Directors, officers and
regular employees of the Company (who will receive no compensation for their
services other than their regular compensation) may solicit proxies by
telephone, telegram or personal interview. Banks, brokerage houses,
custodians, nominees and other fiduciaries have been requested to forward
proxy materials to the beneficial owners of shares held of record by them and
such custodians will be reimbursed for their expenses. All costs incurred with
respect to the Annual Meeting will be borne by the Company. The Company has
engaged D.F. King & Co., Inc., a professional soliciting organization, to
assist the Company in the solicitation of proxies. D.F. King & Co., Inc. will
receive reasonable and customary compensation for such services, plus
reimbursement for certain out-of-pocket expenses.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholder proposals intended to be presented at the next annual meeting
must be received by the Company on or before July 27, 1999 in order to be
considered for inclusion in the Company's proxy statement and form of proxy
for that meeting. Any such proposal should be mailed to: Secretary, NutraMax
Products, Inc., 51 Blackburn Drive, Gloucester, Massachusetts 01930.
Subject to Rule 14a-4 of the Exchange Act, proxies solicited by the Board of
Directors in connection with the next annual meeting of stockholders will
confer upon such proxies discretionary authority to vote on any stockholder
proposal presented at such annual meeting (other than a proposal included in
the Company's proxy statement) if notice of such stockholder proposal is not
received by the Company on or prior to October 10, 1999. If notice of such a
stockholder proposal is timely given, proxies solicited by the Board of
Directors in connection with the next annual meeting of stockholders may,
under certain circumstances prescribed in Rule 14a-4, confer upon such proxies
discretionary authority to vote on such stockholder proposal.
INDEPENDENT ACCOUNTANTS
The firm of Deloitte & Touche LLP served as the Company's independent public
accountants for Fiscal 1998 and will serve in such capacity for Fiscal 1999. A
representative of Deloitte & Touche LLP will be present at the Annual Meeting
and will be given the opportunity to make a statement if he or she so desires.
The representative will be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are duly presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
16
<PAGE>
PROXY CARD
NUTRAMAX PRODUCTS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF NUTRAMAX PRODUCTS, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, DECEMBER 23, 1998
The undersigned hereby constitutes and appoints Donald E. Lepone, Robert F.
Burns and Eugene M. Schloss, Jr., and each of them, as Proxies of the
undersigned, with full power to appoint his substitute, and authorizes each of
them to represent and to vote all shares of common stock of NutraMax Products,
Inc. (the "Company") held of record by the undersigned as of the close of
business on November 23, 1998, at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Ocean View Inn, 171 Atlantic Road,
Gloucester, Massachusetts 01930 at 10:00 a.m., local time, on Wednesday,
December 23, 1998, and at any adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF THE FIVE NOMINEES OF THE BOARD OF
DIRECTORS LISTED IN PROPOSAL I AND "FOR" THE FOR THE ISSUANCE OF AN AGGREGATE
OF 1,441,860 SHARES OF THE COMPANY'S COMMON STOCK TO CERTAIN STOCKHOLDERS OF
THE COMPANY IN A PRIVATE PLACEMENT TRANSACTION AS DESCRIBED IN PROPOSAL II. IN
THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF. A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE
BOARD OF DIRECTOR'S RECOMMENDATIONS NEED ONLY SIGN AND DATE THIS PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE.
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of the Annual Meeting of Stockholders, the Proxy Statement with respect
thereto and the Company's 1998 Annual Report to Stockholders, and hereby
revoke(s) any proxy or proxies heretofore given. This proxy may be revoked at
any time before it is exercised.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE (WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED STATES).
PLEASE SIGN YOUR NAME EXACTLY AS SHOWN. WHERE THERE IS MORE THAN ONE HOLDER,
EACH SHOULD SIGN. WHEN SIGNING AS AN ATTORNEY, ADMINISTRATOR, EXECUTOR,
GUARDIAN OR TRUSTEE, PLEASE ADD YOUR TITLE AS SUCH. IF EXECUTED BY A
CORPORATION OR PARTNERSHIP, THE PROXY SHOULD BE SIGNED BY A DULY AUTHORIZED
PERSON, STATING HIS OR HER TITLE OR AUTHORITY.
<PAGE>
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<S> <C>
[ X ] PLEASE MARK YOUR
VOTES AS IN THIS |
EXAMPLE. --- |
| | 9288
------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
PROPOSAL I. Election of five FOR ALL
Directors, for a one year term. FOR WITHHOLD EXCEPT
[ ] [ ] [ ] PROPOSAL II. The issuance of up to an
NOMINEES: Donald M. Gleklen, aggregate of 1,441,860 shares of the
Bernard J. Korman, Donald E. Company's common stock to certain
Lepone, Dennis M. Newnham and David stockholders of the Company in a private
M. Schulte placement transaction.
If you do not wish your shares
voted FOR a particular nominee, FOR WITHHOLD
mark the FOR ALL EXCEPT box and [ ] [ ]
strike a line through that
nominee's name. Your shares will be
voted for the remaining nominee(s).
PROPOSAL III. To consider and act upon
such other business as may properly come
before the meeting and any adjournments
or postponements thereof.
</TABLE>
<TABLE>
<S> <C>
HAS YOUR ADDRESS CHANGED?
________________________________________
________________________________________
SIGNATURE(S) ___________________________________________________DATE___________ ________________________________________
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
</TABLE>
