INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
ALLOU HEALTH & BEAUTY CARE, INC.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
ALLOU HEALTH & BEAUTY CARE, INC.
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of security 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:
-------------------------------------------------------------
[_] 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>
ALLOU HEALTH & BEAUTY CARE, INC.
50 EMJAY BOULEVARD
BRENTWOOD, NEW YORK 11717
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 15, 1997
----------------------------------------
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders
(the "Meeting") of ALLOU HEALTH & BEAUTY CARE, INC., a Delaware corporation (the
"Company"), will be held in the Boardroom of the American Stock Exchange located
at 86 Trinity Place, New York, New York 10006, on Monday, September 15, 1997,
10:30 A.M., to consider and act upon the following:
1. The election of the seven (7) persons named in the
accompanying Proxy Statement to serve as the Board of
Directors of the Company until the next Annual Meeting of
Stockholders and until their successors are elected and
qualified;
2. Ratification of an amendment to the Company's 1996 Stock
Option Plan to permit grants to non- employee directors;
and
3. The transaction of such other business as may properly
come before the Meeting or any adjournments thereof.
Only stockholders of record of the Class A Common Stock, $.001 par
value, and the Class B Common Stock, $.001 par value, of the Company at the
close of business on August 1, 1997 are entitled to receive notice of and to
attend the Meeting. At least 10 days prior to the Meeting, a complete list of
the stockholders entitled to vote will be available for inspection by any
stockholder, for any purpose germane to the Meeting, during ordinary business
hours, at 1211 Avenue of the Americas, 17th floor, New York, New York 10036. If
you do not expect to be present, you are requested to fill in, date and sign the
enclosed Proxy, which is solicited by the Board of Directors of the Company, and
to mail it promptly in the enclosed envelope. In the event you decide to attend
the Meeting in person, you may, if you desire, revoke your Proxy and vote your
shares in person.
Dated: August 1, 1997
By Order of the Board of Directors
JACK JACOBS
Secretary
IMPORTANT
THE RETURN OF YOUR SIGNED PROXY AS PROMPTLY AS POSSIBLE WILL GREATLY FACILITATE
ARRANGEMENTS FOR THE MEETING. NO POSTAGE IS REQUIRED IF THE PROXY IS RETURNED IN
THE ENVELOPE ENCLOSED FOR YOUR CONVENIENCE AND MAILED IN THE UNITED STATES.
<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
50 EMJAY BOULEVARD
BRENTWOOD, NEW YORK 11717
----------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 15, 1997
----------------------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of ALLOU HEALTH & BEAUTY CARE, INC., a
Delaware corporation (the "Company"), to be voted at the Annual Meeting of
Stockholders of the Company (the "Meeting") which will be held in the Boardroom
of the American Stock Exchange, 86 Trinity Place, New York, New York 10006 on
Monday, September 15, 1997 at 10:30 A.M., local time, and any adjournment or
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders and in this Proxy Statement.
The principal executive offices of the Company are located at 50
Emjay Boulevard, Brentwood, New York 11717. The approximate date on which this
Proxy Statement and accompanying Proxy will first be sent or given to
stockholders is August 4, 1997.
A Proxy, in the accompanying form, which is properly executed, duly
returned to the Company and not revoked will be voted in accordance with the
instructions contained therein and, in the absence of specific instructions,
will be voted in favor of the proposal and in accordance with the judgment of
the person or persons voting the proxies on any other matter that may be brought
before the Meeting. Each such Proxy granted may be revoked at any time
thereafter by writing to the Secretary of the Company prior to the Meeting, by
execution and delivery of a subsequent proxy or by attendance and voting in
person at the Meeting, except as to any matter or matters upon which, prior to
such revocation, a vote shall have been cast pursuant to the authority conferred
by such Proxy. The cost of soliciting proxies will be borne by the Company.
Following the mailing of the proxy materials, solicitation of proxies may be
made by officers and employees of the Company, or anyone acting on their behalf,
by mail, telephone, telegram or personal interview.
VOTING SECURITIES
Stockholders of record as of the close of business on August 1, 1997
(the "Record Date") will be entitled to notice of, and to vote at, the Meeting
or any adjournments thereof. On the Record Date, there were 4,554,225
outstanding shares of Class A Common Stock, $.001 par value ("Class A Common
Stock"), and 1,200,000 outstanding shares of Class B Common Stock, $.001 par
value ("Class B Common Stock," together with the Class A Common Stock, are
hereinafter collectively referred to as, the "Common Stock"). Each holder of
Class A Common Stock is entitled to one vote for each share held by such holder
and each holder of Class B Common Stock is entitled to five votes for each share
held by such holder. By virtue of their holdings of Class A Common Stock and
Class B Common Stock, the officers and directors of the Company will be able to
pass the proposal being submitted at the Meeting. The presence, in person or by
proxy, of the holders of a majority of the outstanding shares of Common Stock is
necessary to constitute a quorum at the Meeting.
Proxies submitted that are voted to abstain with respect to the
matter will be considered cast with respect to that matter. Proxies subject to
broker non-votes with respect to such matter will not be considered cast with
respect to that matter.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of August 1, 1997 certain
information regarding the ownership of voting securities of the Company by each
stockholder known to the management of the Company to be (i) the beneficial
owner of more than 5% of the Company's outstanding Common Stock, (ii) the
directors during the last fiscal year and nominees for director of the Company,
(iii) the executive officers named in the Summary Compensation table herein
under "Executive Compensation" and (iv) all executive officers and directors as
a group. The Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP PERCENT OF
NAME AND ----------------------- ----------
PRINCIPAL POSITION CLASS B CLASS A CLASS B CLASS A
- ------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Victor Jacobs 621,750(1)(4) 70,850(5)(6) 50.37% 1.32%
Chairman of the Board and
Chief Executive Officer
Jack Jacobs 327,250(2)(4) 87,750(5)(8) 26.53% 1.36%
Vice President of Purchasing
and Secretary
Herman Jacobs 326,000(3)(4) 87,750(5)(7) 26.46% 1.36%
President and
Chief Operating Officer
Ramon Montes 25,000(4) 37,875(5)(9) 2.08% *
Executive Vice President
David Shamilzadeh --- 99,875(5)(10) --- 2.15%
Senior Vice President of
Finance and Chief Financial
Officer
Sol Naimark --- --- --- ---
Jeffrey Berg --- --- --- ---
Franklin Resources, Inc. --- 333,300(11) --- 7.32%
777 Mariners Island Boulevard
San Mateo, CA 94404
Heartland Advisors, Inc. --- 695,000(12) --- 15.27%
790 North Milwaukee Street
Milwaukee, WI 53202
Kenneth B. Dart --- 412,600(13) --- 9.06%
P.O. Box 31300-SMB
Grand Cayman
Cayman Islands, B.W.I.
Ross Financial Corporation --- 412,600(13) --- 9.06%
P.O. Box 31363-SMB
Grand Cayman
Cayman Islands, B.W.I.
2
<PAGE>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP PERCENT OF
NAME AND ----------------------- ----------
PRINCIPAL POSITION CLASS B CLASS A CLASS B CLASS A
- ------------------ ------- ------- ------- -------
T. Rowe Price Associates, Inc. --- 450,000(14) --- 9.89%
T. Rowe Price Small Cap Value Fund
100 E. Pratt Street
Baltimore, MD 21202
All directors 1,250,000(1)(2)(3) 270,600(4)(5)(6) 100% 7.93%
and officers as a (7)(8)(9)(10)
group (7 persons)
</TABLE>
- ------------------
* Less than 1%.
(1) Includes 18,000 shares of the Company's Class B Common Stock which may be
acquired pursuant to options granted under the Company's 1992 Stock Option
Plan (the "1992 Plan") and 16,250 shares of the Company's Class B Common
Stock which may be acquired pursuant to options granted under the Company's
1995 Stock Option Plan (the "1995 Plan").
(2) Includes 16,000 shares of the Company's Class B Common Stock which may be
acquired pursuant to options granted under the 1992 Plan and 17,500 shares
of the Company's Class B Common Stock which may be acquired pursuant to
options granted under the 1995 Plan.
(3) Includes 16,000 shares of the Company's Class B Common Stock which may be
acquired pursuant to options granted under the 1992 Plan and 16,250 shares
of the Company's Class B Common Stock which may be acquired pursuant to
options granted under the 1995 Plan.
(4) Shares of Class B Common Stock have five (5) votes per share. Assuming
exercise of all their respective options, Messrs. Victor Jacobs, Jack
Jacobs, Herman Jacobs and Ramon Montes and all directors and officers as a
group have the power to vote approximately 29.6%, 16.0%, 15.9%, 2.01% and
61.0% of the votes attributable to total outstanding stock of the Company,
respectively. The owners have sole voting and investment power with respect
to their respective shares.
(5) Except as otherwise stated in the notes below, only includes shares of the
Company's Class A Common Stock which may be acquired pursuant to options
granted under the Company's Amended and Restated 1989 Stock Option Plan
(the "1989 Plan"), the Company's 1991 Stock Option Plan (the "1991 Plan")
and the Company's 1996 Stock Option Plan (the "1996 Plan").
(6) Includes 10,100 shares of Class A Common Stock owned by Mr. Victor Jacobs.
(7) Includes 25,000 shares of Class A Common Stock owned by Mr. Herman Jacobs.
(8) Includes 25,000 shares of Class A Common Stock owned by Mr. Jack Jacobs.
(9) Includes 21,000 shares of Class A Common Stock owned by Mr. Ramon Montes.
(10) Includes 15,000 shares of Class A Common Stock owned by Mr. David
Shamilzadeh.
(11) The information contained herein with respect to these shares has been
obtained from Schedule 13G, dated February 11, 1997, filed by the
beneficial owner.
(12) The information contained herein with respect to these shares has been
obtained from Schedule 13G, dated February 14, 1997, filed by the
beneficial owner.
(13) The information contained herein with respect to these shares has been
obtained from Schedule 13D, dated May 14, 1997, filed by the beneficial
owners in a joint filing.
(14) The information contained herein with respect to these shares has been
obtained from Schedule 13G, dated February 10, 1997, filed by the
beneficial owners in a joint filing.
3
<PAGE>
ACTION TO BE TAKEN AT THE MEETING
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, seven (7) directors are to be elected to serve until
the next Annual Meeting of Stockholders and until their successors shall be duly
elected and qualified. The number of nominees was determined by the Board of
Directors pursuant to the Company's By-laws. Unless otherwise specified, all
proxies will be voted in favor of the seven nominees listed below as directors
of the Company.
All of the nominees were elected directors at the 1996 Annual Meeting
of Stockholders. The term of the current directors expires at the Meeting.
The Board of Directors has no reason to expect that any of the
nominees will be unable to stand for election at the date of the Meeting. In the
event that a vacancy among the original nominees occurs prior to the Meeting,
the proxies will be voted for a substitute nominee or nominees named by the
Board of Directors and for the remaining nominees. Directors are elected by a
plurality of the votes cast.
The following table sets forth information about each executive
officer, director and nominee for director of the Company.
YEAR FIRST
ELECTED OR
NAME AGE APPOINTED PRESENT POSITION WITH THE COMPANY
- ---- --- --------- ---------------------------------
Victor Jacobs 64 1985 Chairman of the Board of Directors
and Chief Executive Officer
Herman Jacobs 37 1985 President, Chief Operating Officer
and Director
Ramon Montes 51 1989 Executive Vice President and Director
David Shamilzadeh 51 1990 Senior Vice President of Finance,
Chief Financial Officer and Director
Jack Jacobs 34 1991 Vice President of Purchasing,
Secretary and Director
Sol Naimark 37 1991 Director
Jeffrey Berg 54 1994 Director
Victor Jacobs has served as Chairman of the Board since December
1985. He also served as Chief Executive Officer from December 1985 to April 1990
and was reelected Chief Executive Officer in October 1994.
Herman Jacobs has served as President of the Company since December
1985 and as Chief Operating Officer since February 1994. He also served as Chief
Financial Officer of the Company from December 1985 to April 1990.
Ramon Montes joined the Company in July 1986 as Sales Manager
becoming Vice President of Operations and Sales in April 1987 and a Director in
April 1988, he was elected Executive Vice President in February 1994.
David Shamilzadeh has served as the Chief Financial Officer of the
Company since April 1990 and was elected Senior Vice President for Finance in
February 1994. Prior to that time, he served as the Controller of the Company
from November 1988 to April 1990.
Jack Jacobs has served as Vice President of Purchasing since June
1986 and Secretary since January 1989.
Sol Naimark has been a PArtner At The Law Firm Of Naimark &
Tannenbaum for over five years.
Jeffrey Berg has served as President of Health Care Insights, a
financial and technology consulting firm, since March 1991. From February 1990
to March 1991, Dr. Berg worked as a financial analyst for William K. Woodruff &
Co., an investment bank.
4
<PAGE>
From June 1987 until January 1990 Dr. Berg served as Vice President of Research
for J.C. Bradford & Co., an investment bank. Dr. Berg has worked in research and
development for Johnson & Johnson Products, Inc. and General Foods Corporation.
Dr. Berg currently serves on the Board of Directors of Bio-Imaging Technologies,
Inc. And Biologix International Ltd.
Herman Jacobs and Jack Jacobs are brothers and sons of Victor Jacobs.
Directors who are not employed by the Company receive $1,000 for each
Board meeting attended and an additional $250 for each committee meeting
attended. Commencing with the election of directors at the Meeting (subject to
the ratification by the Company's stockholders of an amendment to the 1996 Plan
described in Proposal 2), each non-employee director will be granted an option
to purchase 5,000 shares of Class A Common Stock upon each election as a
director of the Company. See "Executive Compensation -- Non-employee Directors'
Options" and "Proposal 2 Approval of an Amendment to the 1996 Stock Option
Plan."
CERTAIN INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors is responsible for the management of the
Company. During the fiscal year ended March 31, 1997, the Board of Directors of
the Company held two meetings and acted by unanimous written consent on two
occasions. All of the directors attended both meetings of the Board. The Board
has established Audit, Stock Option and Compensation Committees. There is no
standing nominating committee.
The functions of the Audit Committee include the nomination of
independent auditors for appointment by the Board; meeting with the independent
auditors to review and approve the scope of their audit engagement; meeting with
the Company's financial management and the independent auditors to review
matters relating to internal accounting controls, the Company's accounting
practices and procedures and other matters relating to the financial condition
of the Company; and to report to the Board periodically with respect to such
matters. The Audit Committee currently consists of Sol Naimark, Jeffrey Berg and
David Shamilzadeh. The Audit Committee had informal discussions from time to
time during the fiscal year ended March 31, 1997.
The function of the Stock Option Committee is to administer the 1989
Plan, 1991 Plan, 1992 Plan, 1995 Plan and 1996 Plan. The Stock Option Committee
currently consists of Sol Naimark and Jeffrey Berg. The Stock Option Committee
met informally from time to time during the fiscal year ended March 31, 1997.
In June 1995, the Board of Directors established a Compensation
Committee. The function of the Compensation Committee is to review and recommend
to the Board of Directors the appropriate compensation of executive officers of
the Company. The Compensation Committee currently consists of Victor Jacobs,
Herman Jacobs, Jack Jacobs, David Shamilzadeh and Jeffrey Berg. The Compensation
Committee had informal discussions from time to time during the fiscal year
ended March 31, 1997.
SECTION 16(A) REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of the Company's Common Stock, to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than 10% shareholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a)
reports they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company during the one-year period ended
March 31, 1997, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long term compensation of the Company's chief executive officer and other four
most highly compensated executive officers of the Company for services in all
capacities to the Company and its subsidiaries during the Company's 1997, 1996
and 1995 fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
NAME AND PRINCIPAL FISCAL SECURITIES
POSITION YEAR SALARY ($) BONUS ($) UNDERLYING OPTIONS (#)
---------- ------ ---------- --------- ----------------------
<S> <C> <C> <C> <C>
Victor Jacobs 1997 300,000 48,407 --
Chairman of Board and 1996 300,000 -- 140,000(1)
Chief Executive Officer 1995 150,000 -- 100,000
Herman Jacobs 1997 300,000 48,407 --
President and 1996 300,000 -- 140,000(1)
Chief Operating Officer 1995 150,000 -- 100,000
Jack Jacobs 1997 300,000 48,407 --
Vice President of Purchasing and 1996 300,000 -- 140,000(1)
Secretary 1995 150,000 -- 100,000
Ramon Montes 1997 259,039 75,000 --
Executive Vice President 1996 240,371 75,000 20,000
1995 250,385 40,000 25,000
David Shamilzadeh 1997 233,592 -- --
Senior Vice President of Finance 1996 220,603 -- 20,000
and Chief Financial Officer 1995 220,558 -- 25,000
</TABLE>
- ----------------
(1) Options to purchase 100,000 shares of Class B Common Stock were granted to
each of Victor Jacobs, Herman Jacobs and Jack Jacobs on August 1, 1995
pursuant to the 1995 Nonqualified Stock Option Plan.
STOCK OPTION PLANS
In January 1989, the Company adopted the 1989 Plan, which was amended
and restated in November 1989; in May 1991, the Company adopted the 1991 Plan,
which was approved by stockholders in August 1991; in July 1992, the Company
adopted the 1992 Plan, which was adopted by the stockholders in October 1992; in
August 1995, the Company adopted the 1995 Plan, which the Company amended in
July 1996, and which was approved by stockholders in September 1996; in July
1996, the Company adopted the 1996 Plan, which was approved by stockholders in
September 1996; and the Company amended and restated the 1989 Plan, the 1991
Plan, the 1992 Plan, the 1995 Plan and the 1996 Plan (collectively, the "Plans")
as of October 1996. The 1989 Plan provides for the grant of options to purchase
an aggregate of 150,000 shares of the Company's Class A Common Stock. To date,
options to purchase all of the 150,000 shares have been granted under the 1989
Plan. The 1991 Plan provides for the grant of options to purchase an aggregate
of 650,000 shares of Class A Common Stock. To date, options to purchase all of
the 650,000 shares have been granted under the 1991 Plan. The 1992 Plan provides
for the grant of options to key employees of the Company to purchase an
aggregate 500,000 shares of the Company's Class B Common Stock. To date, options
to purchase all of the 500,000 shares have been granted under the 1992 Plan. The
1995 Plan provides for the grant of non-qualified options to purchase an
aggregate of 500,000 shares of the Company's Class B Common Stock. To date,
options to purchase all of the 500,000 shares have been granted under the 1995
Plan. The 1996 Plan provides for the grant of options to purchase an aggregate
of 1,000,000 shares of the Company's Class A Common Stock. To date, options to
purchase 315,600 of the 1,000,000 shares have been granted under the 1996 Plan.
6
<PAGE>
The Plans are each administered by a Stock Option Committee (the
"Committee") approved by the Board of Directors of the Company. The Committee
has the authority under the Plans to determine the terms of options granted
under such Plan, including, among other things, the individuals who shall
receive options, the times when they shall receive them, whether an incentive
stock option and/or non-qualified stock option shall be granted, the number of
shares to be subject to each option and the date each option shall become
exercisable. Options granted under the Plans may be designated as "incentive
stock options", under Section 422 of the Internal Revenue Code of 1986, as
amended, or non-qualified options, which do not meet such requirements.
The Committee may set the exercise price for the options, which must
be at least 100% of the fair market value of the Common Stock on the date of
grant (or, in the case of an incentive stock option granted to an optionee who
owns stock possessing more than 10% of the voting power of the Company's Common
Stock, 110% of the fair market value of the Common Stock on the date of grant).
The Committee may also set the period during which each option may be
exercised which shall not exceed 10 years from the date of grant (or in the case
of an incentive stock option granted to a stockholder who owns stock possessing
more than 10% of the voting power of the Common Stock, five years from the date
of grant). The Plans also provide that each employee who is an optionee shall
agree to remain in the employ of the Company for a term of at least one year.
The 1989 Plan will terminate on January 19, 1999, the 1991 Plan will terminate
on May 29, 2001, the 1992 Plan will terminate on July 9, 2002, the 1995 Plan
will terminate on July 31, 2005 and the 1996 Plan will terminate on July 9,
2006.
NON-EMPLOYEE DIRECTORS' OPTIONS
Commencing with the election of directors at the Meeting (subject to
the ratification by the Company's stockholders of an amendment to the 1996
Plan), each non-employee director (as defined in the 1996 Plan described in
Proposal 2), upon each election as a director of the Company, will be granted an
option to purchase 5,000 shares of Class A Common Stock under the 1996 Plan. The
Committee shall not have any discretion with respect to the selection of
directors who receive Non-Employee Director Options or the amount, the price or
the timing with respect thereto; and such Non-Employee Directors may not receive
any other award under the 1996 Plan. The exercise price of such Non-Employee
Director Option is the fair market value of the underlying shares of Class A
Common Stock on the date of grant, payable in cash. The options will have a term
of five years, subject to earlier termination if the director is removed for
cause, and may be exercised at any time during such term. See "Proposal 2 --
Approval of an Amendment to the 1996 Stock Option Plan."
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted in the fiscal year ended March 31, 1997 to
any of the executive officers listed on the summary compensation table.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
No options were exercised in the fiscal year ended March 31, 1997 by
any of the executive officers listed on the summary compensation table. The
following table contains information concerning the number and value, at March
31, 1997, held by Messrs. V. Jacobs, H. Jacobs, J. Jacobs, R. Montes and D.
Shamilzadeh. The Company does not use SARs as compensation.
<TABLE>
<CAPTION>
Number of Unexercised Options Value of Unexercised In-the-Money
at Fiscal Year End Options at Fiscal Year End
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Victor Jacobs 160,000 180,000(2) 17,000 70,000
Herman Jacobs 160,000 180,000(2) 17,000 70,000
Jack Jacobs 160,000 180,000(2) 17,000 70,000
Ramon Montes 85,000 35,000 58,750 7,500
David Shamilzadeh 59,000 60,500 8,625 7,500
</TABLE>
- ------------------
(1) Fair market value of the underlying securities (the closing price of the
Company's Common Stock on the American Stock Exchange) at fiscal year end
(March 31, 1996) minus the exercise price.
(2) Included in the totals for "Unexercised Options--Unexercisable" for Victor
Jacobs, Herman Jacobs and Jack Jacobs is an option to purchase 100,000
shares of Class B Common Stock that was granted pursuant to the Company's
1995 Stock Option Plan. The option is exercisable as to 100% of such shares
on the earlier of August 1, 2002 or as of the end of any fiscal year in
which the Company's earnings before interest and taxes increase at least
15% over the Company's earnings before interest and taxes for the fiscal
year ended March 31, 1995.
7
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
There were no long-term incentive plan awards by the Company during
the fiscal year ended March 31, 1997.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of
Victor, Herman and Jack Jacobs for a three-year term, commencing as of August 1,
1995, each of which provides for annual salaries of $300,000 and such increases
and bonuses as the Board of Directors may determine. Such agreements also
provide for each individual to receive in each year of the Agreement a bonus
equal to 3% of any increase in the Company's earnings before interest and taxes
compared to the prior fiscal year up to the first $2,000,000 of such increase,
2% of any increase greater than $2,000,000 but less than $3,000,000 and 1% of
any increase in excess of $3,000,000. Under each agreement, each individual was
granted options to purchase 100,000 shares of the Company's Class B Common Stock
at an exercise price of $5.80 under the Company's 1995 Nonqualified Stock Option
Plan.
The Company also entered into an employment agreement with Ramon
Montes for a three-year term, commencing as of June 30, 1996, and providing for
an annual salary of $225,000 and such increases and bonuses as the Board of
Directors may determine. Under the agreement, Mr. Montes will be granted the
option to purchase 75,000 shares of the Company's Class A Common Stock under the
Company's 1996 Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee, which was established in
June 1995, participate in all deliberations concerning executive compensation.
During the fiscal year ended March 31, 1997, the Board of Directors participated
in all deliberations concerning executive compensation. As of June 1997, the
Compensation Committee consisted of Victor Jacobs, Chairman of the Board and
Chief Executive Officer, Herman Jacobs, President and Chief Operating Officer,
Jack Jacobs, Vice President of Purchasing and Secretary, David Shamilzadeh,
Senior Vice President of Finance and Chief Financial Officer, and Jeffrey Berg.
No executive officer of the Company serves as a member of the board of directors
or compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors.
8
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative return to holders of the
Company's Common Stock for the five years ended March 31, 1997 with the Standard
& Poor's 500 Index and a peer group index(1) for the same period. The comparison
assumes $100 was invested on April 1, 1992 in the Company's Common Stock and in
each of the comparison groups, and assumes reinvestment of dividends. The
Company paid no dividends during the periods.
GRAPHICAL REPRESENTATION OF DATA BELOW
- --------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
Allou Health & Beauty 100 125.42 122.03 120.34 97.45 88.14
Care, Inc.
S&P 500 Index 100 115.23 116.93 135.13 178.51 213.89
Peer Group(1) 100 113.59 151.90 267.76 327.49 379.08
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(1) The peer group selected by the Company includes the Company, Bergen
Brunswig Corporation, Bindley Western Industries, Inc., Cardinal
Distribution Inc., Capstone Pharmacy Services Inc., Chronimed Inc., Avatex
Corp., Krelitz Industries Inc., McKesson Corporation, Moore Medical Corp.
and Owens & Minor Inc.
COMPENSATION COMMITTEE'S REPORT
CONCERNING EXECUTIVE COMPENSATION
OVERVIEW
Since June 1995, compensation determinations have been made by the
Compensation Committee, except for those decisions relating to the granting of
stock options which are made by the Stock Option Committee. The Company seeks to
provide executive compensation that will support the achievement of the
Company's financial goals while attracting and retaining talented executives and
rewarding superior performance. In performing this function, the Compensation
Committee reviews executive compensation surveys and other available information
and may from time to time consult with independent compensation consultants. The
Compensation Committee presently consists of Victor Jacobs, Herman Jacobs, Jack
Jacobs, David Shamilzadeh and Jeffrey Berg.
The Company seeks to provide an overall level of compensation to the
Company's executives that is competitive within the Company's industry and other
companies of comparable size and complexity. Compensation in any particular case
may vary from any industry average on the basis of annual and long-term Company
performance as well as individual performance. The Compensation Committee
exercises its discretion to set compensation where in its judgment external,
internal or individual circumstances warrant it.
In general, the Company compensates its executive officers through a
combination of base salary, annual incentive compensation in the form of cash
bonuses and long-term incentive compensation in the form of stock options. In
addition, executive officers participate in benefit plans, including medical,
dental and retirement plans, that are available generally to the Company's
employees.
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The Stock Option Committee of the Board of Directors administers the
1989 Plan, the 1991 Plan, the 1992 Plan, the 1995 Plan and the 1996 Plan. The
duties of such committee include the granting of stock options to executive
employees of the Company. The Stock Option Committee determines the number of
shares granted to individuals, as well as, among other things, the exercise
price and vesting periods of such options. The Compensation Committee has made
recommendations to the Stock Option Committee from time to time with respect to
the grant of stock options to executive officers, taking into account their
level of responsibility, compensation level, contribution to the Company's
performance and the future goals and the performance expected of them. However,
the final determination of the grant of options rests with the Stock Option
Committee.
EXECUTIVE OFFICER COMPENSATION
During the fiscal year ended March 31, 1997, the Company entered into
an employment agreement with Ramon Montes, which agreement is currently in
effect and expires in June 1999. See "Employment Agreements." The base salary,
bonus, benefits and conditions of this contract was determined through a review
of previous employment terms for this individual as well as a review of the
recent trends in the Company's revenues and profits. The Company believes that
the base salary level currently in effect is competitive to salary levels in
similarly situated companies.
During the fiscal year ended March 31, 1996, the Company entered into
employment contracts with Victor Jacobs, Herman Jacobs and Jack Jacobs, which
agreements are currently in effect and expire in July 1998. See "Employment
Agreements." The base salary, bonuses, benefits and conditions of these
contracts were determined through a review of previous employment terms for
these individuals as well as a review of the recent trends in the Company's
revenues and profits. The Company believes that the base salary levels currently
in effect are competitive to salary levels in similarly situated companies. In
addition, the Compensation Committee at the time decided to link such employees
compensation directly to the Company's earnings before interest and taxes.
Under the terms of such Employment Agreements, Victor Jacobs, Herman
Jacobs and Jack Jacobs were each granted options to purchase 100,000 shares of
Class B Common Stock, respectively. Such options were granted under the terms of
the 1995 Nonqualified Stock Option Plan. The Compensation Committee feels that
options and other stock-based performance compensation arrangements are an
effective incentive for managers to create value for stockholders since the
value of an option bears a direct relationship to the Company's stock price.
The Compensation Committee believes that linking executive
compensation to corporate performance results in a better alignment of
compensation with corporate goals and shareholder interests. As performance
goals are met or exceeded, resulting in increased value to shareholders,
executives are rewarded commensurately. The Compensation Committee believes that
compensation levels during fiscal 1997 adequately reflect the Company's
compensation goals and policies.
Respectfully submitted,
Victor Jacobs
Herman Jacobs
Jack Jacobs
David Shamilzadeh
Jeffrey Berg
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company purchases from and, on occasion, sells to various
entities that are controlled by the family of Mr. Victor Jacobs, the Company's
Chairman of the Board. During the fiscal year ended March 31, 1997, the Company
purchased products aggregating $1,357,687 from related parties and sold no
products to related parties. The prices that the Company charges for products
sold by the Company are comparable to prices the Company charges to unaffiliated
buyers for similar products. It has been and will continue to be the policy of
the Company that transactions between it and its directors, principal
stockholders and affiliates be on terms no less favorable to the Company than
could be obtained from unaffiliated persons.
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PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE 1996 STOCK OPTION PLAN
TO PERMIT GRANTS TO NON-EMPLOYEE DIRECTORS
GENERAL
On September 11, 1996, the stockholders of the Company adopted the
1996 Stock Option Plan (the "1996 Plan"). Pursuant to the 1996 Plan, employees
of the Company, which currently include five directors of the Company who are
employees, are eligible to receive grants of options that are intended to
qualify as incentive stock options, within the meaning of Section 422 of the
Code ("ISOs"), or that are nonqualified stock options ("NQSOs") to purchase an
aggregate of 1,000,000 shares of the Company's Class A Common Stock.
On June 30, 1997, the Board of Directors of the Company adopted,
subject to the approval of the Company's stockholders, an amendment to the 1996
Plan (the "Amended and Restated 1996 Plan"). The amendment to the 1996 Plan
provides for the grant of NQSOs to directors who are not employees of the
Company and, with respect to the award of options to non-employee directors, for
administration of the plan by the Board of Directors. There are currently two
directors who would become eligible to receive options pursuant to the proposed
amendment to the 1996 Plan.
The Board of Directors of the Company has determined that, commencing
with the election of directors at the Meeting (subject to the ratification by
the Company's stockholders of the amendment to the 1996 Plan) subject to
approval of this proposal, each non-employee director will be granted an option
to purchase 5,000 shares of Class A Common Stock upon each election as a
director of the Company. See "Executive Compensation -- Non-Employee Directors'
Options."
The Board of Directors believes that the adoption of the Amended and
Restated 1996 Plan will enable the Company to promote a close identity of
interest between the interests of the Company, its non-employee directors and
its stockholders, as well as provide a means to attract and retain outstanding
outside directors. Accordingly, the Board of Directors unanimously recommends
that stockholders ratify the adoption of the Amended and Restated 1996 Plan.
DESCRIPTION OF THE PLAN
The following summary of the Amended and Restated 1996 Plan is
qualified in its entirety by reference to Exhibit A to this Proxy Statement,
which contains a complete text of the Amended and Restated 1996 Plan. The
Amended and Restated 1996 Plan is administered by the Board of Directors or a
Stock Option Committee ( the "1996 Committee") consisting of at least two
non-employee directors. The Board of Directors and the 1996 Committee each have
the authority under the Amended and Restated 1996 Plan to determine, in
accordance with the provisions of the such plan, the terms of options granted
under the Amended and Restated 1996 Plan, including, among other things, the
individuals who will receive options, the times when they will receive them,
whether an ISO and/or an NQSO will be granted, the number of shares to be
subject to each option, and the date or dates each option will become
exercisable. Upon approval by the Company's stockholders of the amendment to the
1996 Plan, members of the 1996 Committee will be permitted to participate in the
Amended and Restated 1996 Plan.
Subject to certain limitations contained in the Amended and Restated
1996 Plan, options may be granted for terms to be established by the Board of
Directors or the 1996 Committee; however, no stock option may be granted after
10 years from the date of the Plan's adoption. The maximum number of shares
subject to stock options that may be granted to any individual during any
calendar year may not exceed 100,000 shares. Options may not be granted at a
price that is less than 100% of the fair market value on the date the options
are granted (110% in the case of persons owning more than 10% of the total
combined voting power of the Company, any of its subsidiaries or of a parent).
An optionee may, if provided for in the optionee's stock option contract, elect
to pay for the shares to be received upon exercise of his option in cash, shares
of Common Stock of the Company or any combination thereof. To date no options
have been granted under the 1996 Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the federal income tax
consequences under current tax law of incentive and nonqualified stock options.
It does not purport to cover all of the special rules, including special rules
relating to the exercise of an option with previously-acquired shares, or the
state or local income or other tax consequences inherent in the ownership and
exercise of stock options and the ownership and disposition of the underlying
shares or the ownership and disposition of restricted stock.
An optionee will not recognize taxable income for federal income tax
purposes upon the grant of a NQSO or an ISO.
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Upon the exercise of a NQSO, the optionee will recognize ordinary
income in an amount equal to the excess, if any, of the fair market value of the
shares acquired on the date of exercise over the exercise price thereof, and the
Company will generally be entitled to a deduction for such amount at that time.
If the optionee later sells shares acquired pursuant to the exercise of a NQSO,
he or she will recognize long-term or short-term capital gain or loss, depending
on the period for which the shares were held. Long-term capital gain is
generally subject to more favorable tax treatment than ordinary income or
short-term capital gain. Proposed legislation would treat long-term capital gain
even more favorably. There can be no assurance, however, that such proposed
legislation will be enacted.
Upon the exercise of an ISO, the optionee will not recognize taxable
income. If the optionee disposes of the shares acquired pursuant to the exercise
of an ISO more than two years after the date of grant and more than one year
after the transfer of the shares to him or her, the optionee will recognize
long-term capital gain or loss and the Company will not be entitled to a
deduction. However, if the optionee disposes of such shares within the required
holding period, all or a portion of the gain will be treated as ordinary income
and the Company will generally be entitled to deduct such amount.
In addition to the federal income tax consequences described above,
an optionee may be subject to the alternative minimum tax, which is payable to
the extent it exceeds the optionee's regular tax. For this purpose, upon the
exercise of an ISO, the excess of the fair market value of the shares over the
exercise price therefor is an adjustment which increases alternative minimum
taxable income. In addition, the optionee's basis in such shares is increased by
such excess for purposes of computing the gain or loss on the disposition of the
shares for alternative minimum tax purposes. If an optionee is required to pay
an alternative minimum tax, the amount of such tax which is attributable to
deferral preferences (including the ISO adjustment) is allowed as a credit
against the optionee's regular tax liability in subsequent years. To the extent
the credit is not used, it is carried forward.
VOTE REQUIRED FOR APPROVAL AND RECOMMENDATION
In accordance with the Delaware General Corporation Law and the
Company's Certificate of Incorporation, the affirmative vote of a majority of
the votes cast at the Meeting by the holders of the outstanding shares of Common
Stock entitled to vote thereon who are present in person or by proxy is required
to ratify the adoption of the Amended and Restated 1996 Stock Option Plan.
Abstentions and broker non-votes are not considered cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL
TO RATIFY THE ADOPTION OF THE AMENDED AND RESTATED 1996 STOCK OPTION PLAN.
ACCOUNTANTS
Mayer Rispler & Company served as the Company's independent auditors
for the fiscal year ended March 31, 1997, and it is expected that Mayer Rispler
& Company will act in that capacity for the fiscal year ending March 31, 1998. A
representative of Mayer Rispler & Company is expected to be present at the
Meeting with the opportunity to make a statement if he desires to do so and to
be available to respond to appropriate questions from shareholders.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998 Annual
Meeting must be received by the Company for inclusion in its proxy materials by
April 3, 1998.
OTHER MATTERS
Management does not intend to bring before the Meeting any matters
other than those specifically described above and knows of no matters other than
the foregoing to come before the Meeting. If any other matters or motions
properly come before the Meeting, it is the intention of the persons named in
the accompanying Proxy to vote such Proxy in accordance with their judgment on
such matters or motions, including any matters dealing with the conduct of the
Meeting.
By Order of the Board of Directors
Jack Jacobs
Secretary
August 1, 1997
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EXHIBIT A
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
of
ALLOU HEALTH & BEAUTY CARE, INC.
(as amended June 30, 1997)
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan")
is designed to provide an incentive to employees and directors (including
directors who are and are not employees) of and consultants to ALLOU HEALTH &
BEAUTY CARE, INC., a Delaware corporation (the "Company"), or any of its
Subsidiaries, as defined in Paragraph 19, and to offer an additional inducement
in obtaining the services of such individuals. The Plan provides for the grant
of "incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options ("NQSOs"), but the Company makes no warranty as to the qualification of
any option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Paragraph 12, the aggregate number of shares of Class A Common Stock, $.001 par
value per share, of the Company ("Class A Common Stock") for which options may
be granted under the Plan shall not exceed 1,000,000. Such shares of Class A
Common Stock may, in the discretion of the Board of Directors of the Company
(the "Board of Directors"), consist either in whole or in part of authorized but
unissued shares of Class A Common Stock or shares of Class A Common Stock held
in the treasury of the Company. Subject to the provisions of Paragraph 13, any
shares of Class A Common Stock subject to an option which for any reason
expires, is canceled or is terminated unexercised or which ceases for any reason
to be exercisable shall again become available for the granting of options under
the Plan. The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of Class A Common Stock as will be
sufficient to satisfy the requirements of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered
by a committee of the Board of Directors consisting of not less than two
Directors (the "Committee") or, only with respect to options granted to
directors who are not employees of the Company, by the Board of Directors. Each
member of the Committee shall be (a) a "disinterested person" within the meaning
of Rule 16b-3 (or any successor rule or regulation) promulgated under the
Securities Exchange Act of 1934 ("Rule 16b-3") until such time as the amendments
to Rule 16b-3 adopted by the Securities and Exchange Commission on May 30, 1996
in Release No. 34-37260 become effective with respect to the Plan (the "New Rule
Date") and (b) from and after the New Rule Date, a "non-employee director"
within the meaning of Rule 16b-3. A majority of the members of the Committee
shall constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present, and any acts approved in writing by
all members without a meeting, shall be the acts of the Committee. The Committee
and the Board of Directors, in their respective functions of administering the
Plan, are referred to as the "Administrators."
Subject to the express provisions of the Plan, the Administrators
shall have the authority, in its sole discretion: to determine the employees and
consultants who shall receive options; the times when they shall receive
options; whether an option granted to an employee shall be an ISO or a NQSO; the
number of shares of Class A Common Stock to be subject to each option; the term
of each option; the date each option shall become exercisable; whether an option
shall be exercisable in whole, in part or in installments, and, if in
installments, the number of shares of Class A Common Stock to be subject to each
installment; whether the installments shall be cumulative; the date each
installment shall become exercisable and the term of each installment; whether
to accelerate the date of exercise of any installment; whether shares of Class A
Common Stock may be issued on exercise of an option as partly paid, and, if so,
the dates when future installments of the exercise price shall become due and
the amounts of such installments; the exercise price of each option; the form of
payment of the exercise price; whether to restrict the sale or other disposition
of the shares of Class A Common Stock acquired upon the exercise of an option
and to waive any such restriction; whether to subject the exercise of all or any
portion of an option to the fulfillment of contingencies as specified in the
Contract (as described in Paragraph 11), including without limitations,
contingencies relating to entering into a covenant not to compete with the
Company and its Subsidiaries, to financial objectives for the Company, a
Subsidiary, a division, a product line or other category, and/or the period of
continued relationship of the optionee with the Company or its Subsidiaries, and
to determine whether such contingencies have been met; when an optionee is
Disabled (as defined in Paragraph 19); and to determine the amount, if any,
necessary to satisfy the obligation of the Company or a Subsidiary to withhold
taxes or other amounts with respect to the grant, exercise or disposition of an
option or the disposition of the underlying shares of Class A Common Stock; the
fair market value of a share of Class A Common Stock; to construe the respective
Contracts and the Plan; with the consent of the optionee, to cancel or modify an
option, provided that the modified provision is permitted to be included in an
option granted under the Plan on the date of the modification, and provided,
further, that in the case of a modification (within the meaning of Section
424(h) of the Code) of an ISO, such option as modified would be permitted to be
granted on the date of such mod-
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ification under the terms of the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; from and after the New Rule Date to approve
any provision that, under Rule 16b-3, requires the approval of the Board of
Directors, a committee of "non-employee directors" or the stockholders to be
exempt (unless otherwise specifically provided herein); and to make all other
determinations necessary or advisable for administering the Plan. The
determinations of the Administrators on the matters referred to in this
Paragraph 3 shall be conclusive. Any controversy or claim arising out of or
relating to the Plan, any option granted under the Plan or any Contract shall be
unilaterally determined by the Administrators in their sole discretion. No
member or former member of the Administrators shall be liable for any action,
failure to act or determination made in good faith with respect to the Plan or
any option granted hereunder.
4. ELIGIBILITY. The Administrators may, consistent with the purposes
of the Plan, grant options from time to time, to employees and directors
(including directors who are and are not employees) of, and consultants to, the
Company or any of its Subsidiaries. Options granted shall cover such number of
shares of Class A Common Stock as the Administrators may determine; provided,
however, that the maximum number of shares of Class A Common Stock for which
options may be granted to any individual during a calendar year under the Plan
is 100,000 (the "162(m) Maximum"); and provided, further, that the aggregate
market value (determined at the time the option is granted) of the shares of
Class A Common Stock for which any eligible employee may be granted ISOs under
the Plan or any other plan of the Company or a Subsidiary of the Company, which
are exercisable for the first time by such optionee during any calendar year
shall not exceed $100,000. The $100,000 ISO limitation shall be applied by
taking ISOs into account in the order in which they were granted. Any option (or
the portion thereof) granted in excess of such amount shall be treated as a
NQSO. Non-employee directors may only be granted NQSOs under the Plan.
5. EXERCISE PRICE. The exercise price of the shares of Class
A Common Stock under each option shall be determined by the Administrators;
provided, however, that the exercise price shall not be less than 100% of the
fair market value of the Class A Common Stock subject to such option on the date
of grant; and provided, further, that if, at the time an ISO is granted, the
optionee owns (or is deemed to own under Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, any of its Subsidiaries or a Parent, the exercise price of
such ISO shall not be less than 110% of the fair market value of the Class A
Common Stock subject to such ISO on the date of grant.
The fair market value of a share of Class A Common Stock on any day
shall be (a) if the principal market for the Class A Common Stock is a national
securities exchange, the average between the highest and lowest sales prices per
share of the Class A Common Stock on such day as reported by such exchange or on
a composite tape reflecting transactions on such exchange, (b) if the principal
market for the Class A Common Stock is not a national securities exchange and
the Class A Common Stock is quoted on The Nasdaq Stock Market ("Nasdaq"), and
(i) if actual sales price information is available with respect to the Class A
Common Stock, the average between the high and low sales prices per share of the
Class A Common Stock on such day on Nasdaq, or (ii) if such information is not
available, the average between the highest bid and the lowest asked prices for
the Class A Common Stock on such day on Nasdaq, or (c) if the principal market
for the Class A Common Stock is not a national securities exchange and the Class
A Common Stock is not quoted on Nasdaq, the average between the highest bid and
lowest asked prices per share for the Class A Common Stock on such day as
reported on the OTC Bulletin Board Service, National Quotation Bureau,
Incorporated or a comparable service; provided that if clauses (a), (b) and (c)
of this Paragraph are all inapplicable, or if no trades have been made or no
quotes are available for such day, the fair market value of a share of Class A
Common Stock shall be determined by the Administrators by any method consistent
with applicable regulations adopted by the Treasury Department relating to stock
options.
6. TERM. The term of each option granted pursuant to the Plan
shall be such term as is established by the Administrators, in their sole
discretion, as set forth in the applicable Contract; provided, however, that the
term of each ISO granted pursuant to the Plan shall be for a period not
exceeding 10 years from the date of grant thereof, and provided, further, that
if, at the time an ISO is granted, the optionee owns (or is deemed to own under
Section 424(d) of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, any of its Subsidiaries or
a Parent, the term of the ISO shall be for a period not exceeding five years
from the date of grant. Options shall be subject to earlier termination as
hereinafter provided.
7. EXERCISE. An option (or any part or installment thereof),
to the extent then exercisable, shall be exercised by giving written notice to
the Company at its principal office, stating which ISO or NQSO is being
exercised, specifying the number of shares of Class A Common Stock as to which
such option is being exercised and accompanied by payment in full of the
aggregate exercise price therefor (or the amount due on exercise if the Contract
permits installment payments) (a) in cash or by certified check or (b) if the
Contract so permits, with previously acquired shares of Class A Common Stock
having an aggregate fair market value, on the date of exercise, equal to the
aggregate exercise price of all options being exercised, or with any combination
of cash, certified check or shares of Class A Common Stock.
The Administrators may, in their discretion, permit payment of the
exercise price of an option by delivery by the optionee of
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a properly executed exercise notice, together with a copy of his irrevocable
instructions to a broker acceptable to the Administrators to deliver promptly to
the Company the amount of sale or loan proceeds sufficient to pay such exercise
price. In connection therewith, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms.
A person entitled to receive Class A Common Stock upon the exercise
of an option shall not have the rights of a stockholder with respect to such
shares of Class A Common Stock until the date of issuance of a stock certificate
to him for such shares; provided, however, that until such stock certificate is
issued, any option holder using previously acquired shares of Class A Common
Stock in payment of an option exercise price shall continue to have the rights
of a stockholder with respect to such previously acquired shares.
In no case may a fraction of a share of Class A Common Stock be
purchased or issued under the Plan.
8. TERMINATION OF RELATIONSHIP. Except as may otherwise be
expressly provided in the applicable Contract, any holder of an option whose
relationship with the Company (and its Subsidiaries) as an employee or a
consultant has terminated for any reason other than his death or Disability (as
defined in Paragraph 19) may exercise such option, to the extent exercisable on
the date of such termination, at any time within three months after the date of
termination, but not thereafter and in no event after the date the option would
otherwise have expired; provided, however, that if such relationship shall be
terminated either (a) for Cause (as defined in Paragraph 19), or (b) without the
consent of the Company, said option shall terminate immediately. Except as may
otherwise be expressly provided in the applicable Contract, options granted
under the Plan shall not be affected by any change in the status of the holder
so long as he continues to be an employee or a consultant of the Company or any
of the Subsidiaries (regardless of having changed from one to the other or
having been transferred from one corporation to another).
For purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the indi
vidual's right to reemployment is not guaranteed by statute or by contract, the
employment relationship shall be deemed to have terminated on the 91st day of
such leave. In addition, for pur poses of the Plan, an optionee's employment
with a Subsidiary of the Company shall be deemed to have terminated on the date
such corporation ceases to be a Subsidiary of the Company.
Nothing in the Plan or in any option granted under the Plan shall
confer on any individual any right to continue in the employ of, or as a
consultant to, the Company or any of its Subsidiaries, or interfere in any way
with any right of the Company or any of its Subsidiaries to terminate such
relationship at any time for any reason whatsoever without liability to the
Company or any of its Subsidiaries.
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may
otherwise be expressly provided in the applicable Contract, if an optionee dies
(a) while he is an employee of, or consultant to, the Company or any of its
Subsidiaries, (b) within three months after the termination of such relationship
(unless such termination was for Cause or without the consent of the Company) or
(c) within one year following the termination of such relationship by reason of
the optionee's Disability, his option may be exercised, to the extent
exercisable on the date of his death, by his Legal Representative (as defined in
Paragraph 19) at any time within one year after death, but not thereafter and in
no event after the date the option would otherwise have expired.
Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose relationship as an employee of, or consultant to,
has terminated by reason of his Disability may exercise his option, to the
extent exercisable upon the effective date of such termination, at any time
within one year after such date, but not thereafter and in no event after the
date the option would otherwise have expired.
10. COMPLIANCE WITH SECURITIES LAWS. The Administrators may
require, in its sole discretion, as a condition to the exercise of any option
that either (a) a Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Class A Common
Stock to be issued upon such exercise shall be effective and current at the time
of exercise, or (b) there is an exemption from registration under the Securities
Act for the issuance of shares of Class A Common Stock upon such exercise.
Nothing herein shall be construed as requiring the Company to register shares
subject to any option under the Securities Act or to keep any Registration
Statement effective or current.
The Administrators may require, in their sole discretion, as a
condition to the exercise of an option under the Plan, that the optionee execute
and deliver to the Company his representations and warranties, in form,
substance and scope satisfactory to the Administrators, which the Administrators
determine are necessary or convenient to facilitate the perfection of an
exemption from the
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registration requirements of the Securities Act, applicable state securities
laws or other legal requirements, including without limitation that (a) the
shares of Class A Common Stock to be issued upon the exercise of the option are
being acquired by the optionee for his own account, for investment only and not
with a view to the resale or distribution thereof, and (b) any subsequent resale
or distribution of shares of Class A Common Stock by such optionee will be made
only pursuant to (i) a Registration Statement under the Securities Act which is
effective and current with respect to the shares of Class A Common Stock being
sold, or (ii) a specific exemption from the registration requirements of the
Securities Act, but in claiming such exemption, the optionee shall prior to any
offer of sale or sale of such shares of Class A Common Stock provide the Company
with a favorable written opinion of counsel satisfactory to the Company, in
form, substance and scope sat isfactory to the Company, as to the applicability
of such exemption to the proposed sale or distribution.
In addition, if at any time the Administrators shall determine in
their discretion that the listing or qualification of the shares of Class A
Common Stock subject to such option on any securities exchange or under any
applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of an option, or the issuance of shares of Class A Common
Stock thereunder, such option may not be exercised in whole or in part unless
such listing, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Administrators.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by
an appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms and conditions not inconsistent herewith
as may be determined by the Administrators.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Not withstanding
any other provisions of the Plan, in the event of any change in the outstanding
Class A Common Stock by reason of a stock dividend, recapitalization, merger or
consolidation in which the Company is the surviving corporation, spin-off,
split-up, combination or exchange of shares or the like, the aggregate number
and kind of shares subject to the Plan, the aggregate number and kind of shares
subject to each outstanding option, the exercise price thereof and the 162(m)
Maximum shall be appropriately adjusted by the Board of Directors, whose
determination shall be conclusive. Such adjustment may provide for the
elimination of fractional shares, which might otherwise be subject to options
without payment therefor.
In the event of (a) the liquidation or dissolution of the Company or
(b) a merger in which the Company is not the surviving corporation or a
consolidation, any outstanding options shall terminate, unless other provision
is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was
adopted by the Board of Directors on July 10, 1996. No option may be granted
under the Plan after July 9, 2006. The Board of Directors, without further
approval of the Company's stockholders, may at any time suspend or terminate the
Plan, in whole or in part, or amend it from time to time in such respects as it
may deem advisable, including, without limitation, in order that ISOs granted
hereunder meet the requirements for "incentive stock options" under the Code, to
comply with the provisions of Rule 16b-3, Section 162(m) of the Code, or any
change in applicable law or to regulations or rulings of administrative
agencies; provided, however, that no amendment shall be effective without the
requisite prior or subsequent stockholder approval that would (a) except as
contemplated in Para graph 12, increase the maximum number of shares of Class A
Common Stock for which options may be granted under the Plan or the 162(m)
Maximum, (b) prior to the New Rule Date, materially increase the benefits to
participants under the Plan or (c) change the eligibility requirements for
individuals entitled to receive options hereunder. No termination, suspension or
amendment of the Plan shall, without the consent of the holder of an existing
option affected thereby, adversely affect his rights under such option. The
power of the Administrators to construe and administer any options granted under
the Plan prior to the termination or suspension of the Plan nevertheless shall
continue after such termination or during such suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under
the Plan shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the holder
thereof, only by him or his Legal Representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
15. WITHHOLDING TAXES. The Company or a Subsidiary may
withhold cash and/or, subject to any applicable limitations under Rule 16b-3,
shares of Class A Common Stock to be issued with respect thereto having an
aggregate fair market value on the exercise date equal to the amount which the
Administrators determine are necessary to satisfy the obligation of the Company
or any of its Subsidiaries to withhold Federal, state and local taxes or other
amounts incurred by reason of the grant or exercise of an option, its
disposition, or the disposition of the underlying shares of Class A Common
Stock. Alternatively, the Company may require the holder to pay to the Company
or a Subsidiary such amount, in cash, promptly upon demand. The Company shall
not be required
A-4
<PAGE>
to issue any shares of Class A Common Stock pursuant to any such option until
all required payments have been made. Fair market value of the shares of Class A
Common Stock shall be determined in accordance with Paragraph 5.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the certificates for shares of Class A Common Stock
issued upon exercise of an option under the Plan and may issue such "stop
transfer" instructions to its transfer agent in respect of such shares as it
determines, in its discretion, to be necessary or appropriate to (a) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act and applicable state securities laws, (b) implement the
provisions of the Plan or any agreement between the Company and the optionee
with respect to such shares of Class A Common Stock, or (c) permit the Company
to determine the occurrence of a "disqualifying disposition," as described in
Section 421(b) of the Code, of the shares of Class A Common Stock transferred
upon the exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the issuance
of shares of Class A Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares
of Class A Common Stock pursuant to the exercise of options under the Plan shall
be added to the general funds of the Company and used for such general corporate
purposes as the Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN
CONSTITUENT CORPORATIONS. Anything in this Plan to the contrary notwithstanding,
the Board of Directors may, without further approval by the stockholders,
substitute new options for prior options of a Constituent Corporation (as
defined in Paragraph 19) or assume the prior options of such Constituent
Corporation.
19. DEFINITIONS.
a. "Cause" shall mean (i) if there is a written
employment or consulting agreement between the optionee and the Company or any
of its Subsidiaries that defines termination of such relationship for cause,
cause as defined in such agreement, and (ii) in all other cases, cause as
defined by applicable state law.
b. "Constituent Corporation" shall mean any
corporation which engages with the Company or any of its Subsidiaries in a
transaction to which Section 424(a) of the Code applies (or would apply if the
option assumed or substituted were an ISO), or any Parent (as defined herein) or
any Subsidiary of such corporation.
c. "Disability" shall mean a permanent and total
disability within the meaning of Section 22(e)(3) of the Code.
d. "Legal Representative" shall mean the executor,
administrator or other person who at the time is entitled by law to exercise the
rights of a deceased or incapacitated optionee with respect to an option granted
under the Plan.
e. "Parent" shall have the same definition as
"parent corporation" in Section 424(e) of the Code.
f. "Subsidiary" shall have the same definition as
"subsidiary corporation" in Section 424(f) of the Code.
20. GOVERNING LAW; CONSTRUCTION. The Plan, such options as may
be granted hereunder, the Contracts and all related matters shall be governed
by, and construed in accordance with, the laws of the State of New York, without
regard to conflict of law provisions. Neither the Plan nor any Contract shall be
construed or interpreted with any presumption against the Company by reason of
the Company causing the Plan or Contract to be drafted. Whenever from the
context it appears appropriate, any term stated in either the singular or plural
shall include the plural and the singular, and any term stated in the masculine,
feminine or neuter shall include the masculine, feminine and neuter.
21. PARTIAL INVALIDITY. The invalidity, illegality or
unenforceability of any provision herein shall not affect the validity, legality
or enforceability of any other provision, all of which shall be valid, legal and
enforceable to the fullest extent permitted by applicable law.
22. STOCKHOLDER APPROVAL. The amendment to this Plan shall be
subject to approval by the affirmative vote of the majority of shares present in
person or represented by proxy and entitled to vote thereon at the next duly
held meeting of the Company's stockholders at which a quorum is present. No
options granted to non-employee directors pursuant to the amendment to the Plan
may be exercised prior to such approval, provided that the date of grant of any
options granted thereunder shall be determined as if the amendments to the Plan
had not been subject to such approval. Notwithstanding the foregoing, all grants
to others under the Plan shall remain valid.
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS - SEPTEMBER 15, 1997
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints, as proxies for the undersigned,
Victor Jacobs and Herman Jacobs and each of them, with full power of
substitution, to vote all shares of Common Stock of the undersigned in Allou
Health & Beauty Care, Inc. (the "Company") at the Annual Meeting of Stockholders
of the Company to be held at the Boardroom of the American Stock Exchange, 86
Trinity Place, New York, New York, 10006 on September 15, 1996, at 10:30 a.m.,
local time (the receipt of Notice of which meeting and the Proxy Statement
accompanying the same being hereby acknowledged by the undersigned), or at any
adjournments thereof, upon the matter described in the Notice of Meeting and
Proxy Statement and upon such other business as may properly come before such
meeting or any adjournments thereof, hereby revoking any proxies heretofore
given.
Each properly executed proxy will be voted in accordance with the
specifications made on the reverse side hereof. If no specifications are made,
the shares represented by this proxy will be voted "FOR" the listed nominees and
"FOR" the listed proposals.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
Please mark boxes [X] in blue or black ink.
1. Election of Directors:
(INSTRUCTION: To withhold authority for any individual nominee, strike a line
through the nominee's name in the list below)
FOR ALL NOMINEES [_] WITHHOLD AUTHORITY [_]
(except as marked to to vote for all nominees
the contrary below)
(Victor Jacobs, Herman Jacobs, Ramon
Montes, David Shamilzadeh, Jack Jacobs,
Sol Naimark, Jeffrey Berg)
2. Approval of an amendment to the Company's 1996 Stock Option Plan to
permit grants to non- employee directors.
FOR [_]
AGAINST [_]
ABSTAIN [_]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
NOTE: Please sign your name or names
exactly as set forth hereon. If signed as
attorney, executor, administrator,
trustee or guardian, please indicate the
capacity in which you are acting. Proxies
by corporations should be signed by a
duly authorized officer and should bear
the corporate seal.
Dated _____________________________, 1997
_________________________________________
Signature of Stockholder
_________________________________________
Print Name(s)
Please Sign and Return the Proxy Promptly
in the Enclosed Envelope.
