SCHEDULE 14A
(Rule 14a-101)
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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant
to Rule 14a-11(c) or Rule 14a-12
Allou Health & Beauty Care, Inc.
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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<PAGE>
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
50 Emjay Boulevard
Brentwood, New York 11717
----------------------------------------
Notice of Annual Meeting of Stockholders
September 15, 1998
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NOTICE IS HEREBY GIVEN that the 1998 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 Tuesday, September 15, 1998,
10:00 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. The approval of an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of
the Company's Class A Common Stock, par value $.001 per share,
from 10,000,000 to 15,000,000; 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 July 29, 1998 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: July 29, 1998
By Order of the Board of Directors
/s/ 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, 1998
----------------------------------------
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
Tuesday, September 15, 1998 at 10:00 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
July 31, 1998.
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 July 29, 1998
(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 ________ 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.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of July 8, 1998 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. Unless
otherwise noted, 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. Unless otherwise noted,
the address of each beneficial owner named below is the Company's corporate
address.
<TABLE>
<CAPTION>
Amount and Nature
Name and of Beneficial Ownership(1) Percent of
Principal Position ----------------------- ----------
------------------ Class B Class A Class B Class A
------- ------- ------- -------
<S> <C> <C> <C> <C>
Victor Jacobs.................................. 763,000(2)(3) 99,600(4)(5) 55.5% 2.1%
Chairman of the Board and
Chief Executive Officer
Jack Jacobs.................................... 469,750(3)(6) 116,500(4)(7) 34.1 2.5
Vice President of Purchasing and Secretary
Herman Jacobs.................................. 467,250(3)(8) 116,500 (4)(9) 34.0 2.5
President and
Chief Operating Officer
Ramon Montes................................... 25,000(3) 59,750(4)(10) * *
Executive Vice President
David Shamilzadeh.............................. -- 122,500(4)(11) -- 1.3
Senior Vice President of Finance and
Chief Financial Officer
Sol Naimark.................................... -- 5,000 -- *
Director
Jeffrey Berg................................... -- 5,000 -- *
Director
Heartland Advisors, Inc........................ -- 807,700 (12) -- 17.4
T. Rowe Price Associates, Inc.................. -- 450,000 (13) -- 9.7
T. Rowe Price Small Cap Value Fund, Inc........ -- 450,000 (13) --
Franklin Resources, Inc........................ -- 425,900 (14) -- 9.2
Kenneth B. Dart................................ -- 331,600 (15) -- 7.1
Ross Financial Corporation..................... -- 331,600 (15) -- 7.1
STS Inc........................................ -- 331,600 (15) -- 7.1
All directors and officers as a group
(7 persons)................................ 1,725,000(16) 524,850(4)(17) 100.0 10.4
</TABLE>
- -------------------
* Less than 1%.
(1) Pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), includes shares of Common Stock
that may be purchased within 60 days of July 15, 1998 upon exercise of
outstanding options.
(2) Includes 175,500 shares of the Company's Class B Common Stock that may
be acquired by Mr. Victor Jacobs upon the exercise of outstanding stock
options.
(3) 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 33.7%, 21.2%, 21.1%,
1.7% and 66.8% 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.
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<PAGE>
(4) Except as otherwise stated in the notes below, only includes shares of
the Company's Class A Common Stock that may be acquired upon the
exercise of outstanding stock options.
(5) Includes 10,100 shares of Class A Common Stock owned by Mr. Victor
Jacobs.
(6) Includes 176,000 shares of the Company's Class B Common Stock that may
be acquired by Mr. Jack Jacobs upon the exercise of outstanding stock
options.
(7) Includes 25,000 shares of Class A Common Stock owned by Mr. Jack
Jacobs.
(8) Includes 173,250 shares of the Company's Class B Common Stock that may
be acquired by Mr. Herman Jacobs upon the exercise of outstanding stock
options.
(9) Includes 25,000 shares of Class A Common Stock owned by Mr. Herman
Jacobs.
(10) Includes 21,000 shares of Class A Common Stock owned by Mr. Ramon
Montes.
(11) Includes 15,000 shares of Class A Common Stock owned by Mr. David
Shamilzadeh.
(12) The information contained herein with respect to these shares has been
obtained from Schedule 13G, dated January 27, 1998, filed by the
beneficial owner. The address of the beneficial owner is 790 North
Milwaukee Street, Milwaukee, Wisconsin 53202.
(13) The information contained herein with respect to these shares has been
obtained from Schedule 13G, dated February 9, 1998, filed by the
beneficial owners in a joint filing. Based upon information included in
such Schedule, the Company believes that T. Rose Price Associates, Inc.
has sole dispositive power with respect to such shares and T. Rowe
Price SmallCap Value Fund, Inc. has sole voting power with respect to
such shares. The address of the beneficial owner is 100 E. Pratt
Street, Baltimore, Maryland 21202.
(14) The information contained herein with respect to these shares has been
obtained from Schedule 13G, dated January 26, 1998, filed by the
beneficial owner. The address of the beneficial owner is 777 Mariners
Island Boulevard, San Mateo, California 94404.
(15) The information contained herein with respect to these shares has been
obtained from Schedule 13D, dated June 1, 1998, filed by the beneficial
owners in a joint filing. Based upon information included in such
Schedule, the Company believes that Kenneth B. Dart, Ross Financial
Corporation and STS Inc. share voting and dispositive power with
respect to such shares. The address of the beneficial owner is P.O. Box
31300-SMB, Grand Cayman, Cayman Islands, B.W.I.(
(16) Includes 524,750 shares of Class B Common Stock that may be acquired
upon the exercise of outstanding stock options.
(17) Includes 96,100 shares of Class A Common Stock.
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<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 1997 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.
<TABLE>
<CAPTION>
Year First
Elected or
Name Age Appointed Present Position with the Company
- ---- --- --------- ---------------------------------
<S> <C> <C> <C>
Victor Jacobs................ 66 1985 Chairman of the Board of Directors and
Chief Executive Officer
Herman Jacobs................ 38 1985 President, Chief Operating Officer and
Director
Ramon Montes................. 52 1989 Executive Vice President and Director
David Shamilzadeh............ 52 1990 Senior Vice President of Finance, Chief
Financial Officer and Director
Jack Jacobs.................. 35 1991 Vice President of Purchasing, Secretary
and Director
Sol Naimark.................. 38 1991 Director
Jeffrey Berg................. 55 1994 Director
</TABLE>
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.
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<PAGE>
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. 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. Such directors are also granted an option to purchase 5,000 shares of
Class A Common Stock upon each election as a director of the Company.
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, 1998, the Board of Directors of
the Company held two meetings. All of the directors attended such 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 held three meetings and had informal
discussions from time to time during the fiscal year ended March 31, 1998.
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
held two meetings and met informally from time to time during the fiscal year
ended March 31, 1998.
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
-5-
<PAGE>
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, 1998.
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, 1998, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with,
except that each of the directors and executive officers of the Company failed
to timely file one such report with respect to one transaction.
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<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 1998, 1997
and 1996 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........................ 1998 300,000 -- 105,000(1)
Chairman of Board and 1997 300,000 48,407 --
Chief Executive Officer 1996 300,000 -- 140,000(2)
Herman Jacobs........................ 1998 300,000 -- 105,000(1)
President and 1997 300,000 48,407 --
Chief Operating Officer 1996 300,000 -- 140,000(2)
Jack Jacobs.......................... 1998 300,000 -- 110,000(1)
Vice President of Purchasing and 1997 300,000 48,407 --
Secretary 1996 300,000 -- 140,000(2)
Ramon Montes......................... 1998 249,231 75,000 27,500
Executive Vice President 1997 259,039 75,000 --
1996 240,371 75,000 20,000
David Shamilzadeh.................... 1998 249,231 75,000 103,500
Senior Vice President of Finance and 1997 233,592 -- --
Chief Financial Officer 1996 220,603 -- 20,000
</TABLE>
(1) Options to purchase 65,000, 65,000 and 70,000 shares of Class B Common
Stock were granted to Victor Jacobs, Herman Jacobs and Jack Jacobs,
respectively. The remainder of such options were granted to purchase
Class A Common Stock.
(2) Options to purchase 100,000 shares of Class B Common Stock were granted
to Victor Jacobs, Herman Jacobs and Jack Jacobs, respectively. The
remainder of such options were granted to purchase Class A Common
Stock.
Stock Option Plans
In January 1989, the Company adopted the 1989 Stock Option Plan (the
"1989 Plan"), which was amended and restated in November 1989; in May 1991, the
Company adopted the 1991 Stock Option Plan (the "1991 Plan"), which was approved
by stockholders in August 1991; in July 1992, the Company adopted the 1992 Stock
Option Plan (the "1992 Plan"), which was adopted by the stockholders in October
1992; in August 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan"), which the Company amended in July 1996,
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<PAGE>
and which was approved by stockholders in September 1996; in July 1996, the
Company adopted the 1996 Stock Option Plan (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 125,500 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 630,050 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 413,600 of the 1,000,000
shares have been granted under the 1996 Plan.
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
Each non-employee director (as defined in the 1996 Plan), upon each
election as a director of the Company, is granted an option to purchase 5,000
shares of Class A Common Stock under the 1996 Plan. The Committee does 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 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.
-8-
<PAGE>
Option Grants in Last Fiscal Year
The following table set forth options were granted in the fiscal year
ended March 31, 1998 to any of the executive officers listed on the summary
compensation table.
<TABLE>
<CAPTION>
Number Percent of
of total option Potential realizable
securities granted to value at assumed
underlying employees Per share annual rates of stock
options in sexercise Expiration price valuation for
Name granted fiscal year price date option term
---- ------- ----------- ----- ---- -----------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Victor Jacobs................. 40,000 3.5% $6.47 5/9/02 $41,126 $143,469
65,000 (1) 5.7 $6.47 5/9/02 66,830 233,139
Herman Jacobs................. 40,000 3.5 $6.47 5/9/02 41,126 143,469
65,000 (1) 5.7 $6.47 5/9/02 66,830 233,139
Jack Jacobs................... 40,000 3.5 $6.47 5/9/02 41,126 143,469
70,000 (1) 6.2 $6.47 5/9/02 71,971 251,072
Ramon Montes.................. 25,000 2.2 $5.88 5/9/02 40,579 89,669
2,500 0.2 $6.00 5/9/02 3,745 8,654
David Shamilzadeh............. 25,000 2.2 $5.88 5/9/02 40,579 89,669
78,500 6.9 $5.88 5/9/02 127,418 281,560
</TABLE>
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(1) Shares of Class B Common Stock issuable upon the exercise of such options.
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
No options were exercised in the fiscal year ended March 31, 1998 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, 1998, 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...................... 265,000 115,000 $534,100 $200,100
Herman Jacobs...................... 265,000 115,000 510,100 200,100
Jack Jacobs........................ 267,500 117,500 515,175 205,175
Ramon Montes....................... 38,750 33,750 75,875 70,875
David Shamilzadeh.................. 107,500 91,000 179,335 166,835
</TABLE>
- ------------------
(1) Fair market value of the underlying securities (the closing price of
the Company's Class A Common Stock on the American Stock Exchange) at
fiscal year end (March 31, 1998) minus the exercise price.
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, 1998.
-9-
<PAGE>
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, 1998, the Board of Directors participated
in all deliberations concerning executive compensation. As of June 1998, 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.
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<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, 1998 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, 1993 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
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Allou Health & Beauty Care, 100.00 97.30 95.95 77.70 70.27 91.69
Inc.
S&P 500 Index 100.00 101.47 117.27 154.92 185.63 274.73
Peer Group(1) 100.00 133.73 235.74 288.32 333.74 561.15
</TABLE>
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(1) The peer group selected by the Company includes Bergen Brunswig
Corporation, Bindley Western Industries, Inc., Cardinal Distribution Inc.,
Pharmarcia Inc. (formerly Capstone Pharmacy Services, Inc.), Chronimed
Inc., Avatex Corp., McKesson Corporation, Moore Medical Corp. and Owens &
Minor Inc.
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<PAGE>
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.
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
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<PAGE>
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 1998 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, 1998, the Company purchased
products aggregating $4,443,634 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.
In April, May and June 1998, Messrs. Victor Jacobs, Herman Jacobs and
Jack Jacobs collectively loaned an aggregate of $3 million (the "Bridge
Financing") on an unsecured basis to the Company's wholly-owned subsidiary, The
Fragrance Counter, Inc. ("The Fragrance Counter"). Amounts loaned under the
Bridge Financing accrue interest at the rate of 8-3/4% per annum. Interest under
the Bridge Financing becomes due and payable in October 1998. Principal under
the Bridge Financing becomes due in October 1998, but the Jacobs have agreed
that such principal will not become payable until the Company receives consent
to such payment from the lenders under its credit facility. In exchange for the
Bridge Financing, the Jacobs also received a warrant to purchase 17.65 shares of
the common stock (15%) of The Fragrance Counter at an exercise price per share
equal to $150,000. Prior to approving the Bridge Financing,
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<PAGE>
the Company's Board of Directors received a fairness opinion from Hambro
America, stating that the transaction was fair, from a financial point of view,
to the Company.
Proposal 2
APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED
CLASS A COMMON STOCK
On July 14, 1998, the Board of Directors adopted a resolution by
unanimous written consent approving a proposal to amend Article Fourth of the
Company's Certificate of Incorporation to increase the number of shares of Class
A Common Stock which the Company is authorized to issue from 10,000,000 to
15,000,000. The Board of Directors determined that such amendment is advisable
and directed that the proposed amendment be considered at the Meeting.
Purposes and Effects of Increasing the Number of Authorized Shares of Common
Stock
The proposed amendment would increase the number of shares of Common
Stock which the Company is authorized to issue from 10,000,000 to 15,000,000.
The additional 5,000,000 shares will be a part of the existing class of Class A
Common Stock and, if and when issued, will have the same rights and privileges
as the shares of Class A Common Stock presently issued and outstanding. Each
share of Class A Common Stock entitles the holder to one vote. The holders of
Common Stock of the Company are not entitled to preemptive rights or cumulative
voting.
Reference is made to the proposed amendment to Article Fourth of the
Company's Certificate of Incorporation which is set forth under the heading
"Proposed New Article Fourth to the Company's Certificate of Incorporation" in
Exhibit A to this Proxy Statement.
The Company has no present plans, arrangements or understandings for
the issuance or use of the proposed additional shares of Common Stock. However,
the Board of Directors believes that the adoption of the proposed amendment is
advantageous to the Company and its shareholders. The proposed amendment would
provide additional authorized shares of Common Stock that could be used from
time to time, without further action or authorization by the shareholders
(except as may be required by law or by any stock exchange on which the
Company's securities may then be listed), for corporate purposes which the Board
of Directors may deem desirable, including, without limitation, stock splits,
stock dividends or other distributions, financings, acquisitions, stock grants,
stock options and employee benefit plans.
The authority possessed by the Board of Directors to issue Common Stock
could also potentially be used to discourage attempts by others to obtain
control of the Company through merger, tender offer, proxy contest or otherwise
by making such attempts more difficult or costly to achieve.
If the proposed amendment is adopted, there would be 9,717,995
authorized shares of Class A Common Stock that are not outstanding or reserved
for issuance. As of the July 10, 1998, the Company had 4,651,155 shares of Class
A Common Stock issued and 630,850 shares of Class A Common Stock reserved for
future issuance upon the exercise of certain options.
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<PAGE>
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 outstanding shares of Common Stock entitled to vote thereon is required to
adopt the Proposed Amendment. Abstentions and broker non-votes are not
considered cast.
The Board of Directors recommends that shareholders vote FOR this
proposal.
ACCOUNTANTS
Mayer Rispler & Company, P.C. served as the Company's independent
auditors for the fiscal year ended March 31, 1998, and it is expected that Mayer
Rispler & Company, P.C. will act in that capacity for the fiscal year ending
March 31, 1999. A representative of Mayer Rispler & Company, P.C. 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
If a stockholder intends to present a proposal at the Company's 1999
Annual Meeting of Stockholders and desires that the proposal be included in the
Company's Proxy Statement and form of proxy for that meeting, the proposal must
be in compliance with Rule 14a-8 under the Exchange Act and received at the
Company's principal executive offices not later than April 2, 1999. As to any
proposal that a stockholder intends to present to stockholders without inclusion
in the Company's Proxy Statement for the Company's 1999 Annual Meeting of
Stockholders, the proxies named in management's proxy for that meeting will be
entitled to exercise their discretionary authority on that proposal unless the
Company receives notice of the matter to be proposed not later than June 16,
1999. Even if proper notice is received on or prior to June 16, 1999, the
proxies named in management's proxy for that meeting may nevertheless exercise
their discretionary authority with respect to such matter by advising
stockholders of such proposal and how they intend to exercise their discretion
to vote on such matter, unless the stockholder making the proposal solicits
proxies with respect to the proposal to the extent required by Rule 14a-4(c)(2)
under the Exchange Act.
OTHER MATTERS
Management does not intend to bring before the Meeting any matters
other than those specifically described above, and no other matters were
proposed to be presented by June 16, 1998. 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 discretion on
such matters or motions, including any matters dealing with the conduct of the
Meeting.
By Order of the Board of Directors
/s/ Jack Jacobs
Secretary
July 29, 1998
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<PAGE>
Exhibit A
---------
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ALLOU HEALTH & BEAUTY CARE, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is Allou Health & Beauty Care, Inc.
2. The Certificate of Incorporation of the Corporation
(hereinafter called the "Certificate of Incorporation") is hereby amended by (i)
deleting the number 13,200,000 in the first sentence of Article Fourth and
inserting the number 18,200,000 in its place and (ii) deleting the number
10,000,000 in clause (i) of the first sentence of Article Fourth and inserting
the number 15,000,000 in its place.
3. The amendments of the Certificate of Incorporation herein
certified have been duly adopted in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware.
Dated: ___________, 1998
-------------------------------
Herman Jacobs, President and
and Chief Operating Officer
Attest:
- -----------------------
Jack Jacobs, Secretary
<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS - SEPTEMBER 15, 1998
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, 1998, at 10:00 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 approval of an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of the
Company's Class A Common Stock, par value $.001 per share, from
10,000,000 to 15,000,000.
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 --------------------------------------- , 1998
---------------------------------------------
Signature of Stockholder
---------------------------------------------
Print Name(s)
Please sign and return the proxy promptly in the enclosed envelope.
