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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] 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.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
<PAGE>
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
50 EMJAY BOULEVARD
BRENTWOOD, NEW YORK 11717
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 14, 1999
----------------------------------------
NOTICE IS HEREBY GIVEN that the 1999 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 14, 1999,
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. Approval of the amendment to the Company's 1996 Stock Option
Plan, which provides for an additional 1,000,000 shares of the
Company's Class A Common Stock to be issued to employees
(including officers and directors) of the Company, as more
fully set forth in the Proxy Statement 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 19, 1999 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 26, 1999
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 14, 1999
----------------------------------------
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 14, 1999 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 30, 1999.
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 19, 1999
(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 5,443,560
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.
VOTING PROCEDURES
The directors will be elected by the affirmative vote of a plurality of
the shares of Common Stock present in person or represented by proxy at the
Meeting, provided a quorum exists. A quorum is established if, as of
<PAGE>
the Record Date, at least a majority of the outstanding shares of Common Stock
are present in person or represented by proxy at the Annual Meeting. The
approval of the Amended and Restated 1996 Stock Option Plan will be decided by
the affirmative vote of a majority of the shares of Common Stock cast with
respect thereto, provided a quorum exists. Votes will be counted and certified
by one or more Inspectors of Election. In accordance with Delaware law,
abstentions and "broker non-votes" (i.e. proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares as to a matter with respect to
which the brokers or nominees do not have discretionary power to vote) will be
treated as present for purposes of determining the presence of a quorum. For
purposes of determining approval of a matter presented at the meeting,
abstentions will be deemed present and entitled to vote and will, therefore,
have the same legal effect as a vote "against" a matter presented at the
meeting. Broker non- votes will be deemed not entitled to vote on the subject
matter as to which the non-vote is indicated and will, therefore, have no legal
effect on the vote on that particular matter.
The enclosed proxies will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies may be revoked as noted above.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of May 12, 1999 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 and (iii) 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.
AMOUNT AND NATURE
NAME AND OF BENEFICIAL OWNERSHIP(A) PERCENT OF
PRINCIPAL POSITION CLASS B CLASS A CLASS B CLASS A
------------------ ------- ------- ------- -------
Victor Jacobs 883,500(b) 114,600 49.2% 2.1%
CHAIRMAN OF THE BOARD OF
DIRECTORS AND CHIEF EXECUTIVE
OFFICER
Jack Jacobs 583,500(c) 131,500(f) 27.9 2.4
VICE PRESIDENT OF PURCHASING,
SECRETARY AND DIRECTOR
Herman Jacobs 583,500(d) 131,500(g) 27.9 2.4
PRESIDENT, CHIEF OPERATING
OFFICER
AND DIRECTOR
David Shamilzadeh --- 202,475(h) --- 3.7
SENIOR VICE PRESIDENT OF FINANCE
AND
CHIEF FINANCIAL OFFICER AND
DIRECTOR
Ramon Montes 25,000 204,750(i) 1.3 3.7
EXECUTIVE VICE PRESIDENT AND
DIRECTOR
Sol Naimark --- 10,000(j) --- *
DIRECTOR
Jeffrey Berg --- 10,000(j) --- *
DIRECTOR
Franklin Resources, Inc. --- 457,000(k) --- 8.5
777 Mariners Island Boulevard
San Mateo, CA 94404
T. Rowe Price Associates, Inc. --- 302,300(l) --- 5.6
T. Rowe Price Small Cap Value
Fund
100 E. Pratt Street
Baltimore, MD 21202
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<PAGE>
AMOUNT AND NATURE
NAME AND OF BENEFICIAL OWNERSHIP(A) PERCENT OF
PRINCIPAL POSITION CLASS B CLASS A CLASS B CLASS A
------------------ ------- ------- ------- -------
All directors 2,075,500(b)(c)(d) 804,825(e)(f) 100.0% 13.3%
and officers as a (g)(h)(i)(j)
group (7 persons)
- -------------------------------
* Less than 1%.
(a) Pursuant to Rule 13d-3 promulgated under the Exchange Act, includes
shares of common stock that may be purchased within 60 days of April 1,
1999 upon exercise of outstanding options.
(b) Includes 143,000 shares of our Class B common stock that may be
acquired pursuant to options granted under our 1992 Stock Option Plan
and 152,500 shares of our Class B common stock which may be acquired
pursuant to options granted under our 1995 Stock Option Plan.
(c) Includes 141,000 shares of our Class B common stock that may be
acquired pursuant to options granted under the 1992 Plan and 148,750
shares of our Class B common stock which may be acquired pursuant to
options granted under the 1995 Plan.
(d) Includes 141,000 shares of our Class B common stock that may be
acquired pursuant to options granted under the 1992 Plan and 148,750
shares of our Class B common stock which may be acquired pursuant to
options granted under the 1995 Plan.
(e) Includes 58,250 shares of our Class A common stock that may be acquired
pursuant to options granted under the 1991 Plan and 46,250 shares of
our Class A common stock which may be acquired under the 1996 Plan.
(f) Includes 60,250 shares of our Class A common stock that may be acquired
pursuant to options granted under the 1991 Plan and 46,250 shares of
our Class A common stock which may be acquired under the 1996 Plan.
(g) Includes 60,250 shares of our Class A common stock that may be acquired
pursuant to options granted under the 1991 Plan and 46,250 shares of
our Class A Common Stock which may be acquired under the 1996 Plan.
(h) Includes 101,250 shares of our Class A common stock that may be
acquired pursuant to options granted under the 1991 Plan and 86,125
shares of our Class A common stock which may be acquired under the 1996
plan.
(i) Includes 120,000 shares of our Class A common stock that may be
acquired pursuant to options granted under the 1991 Plan and 63,750
shares of our Class A common stock which may be acquired under the 1996
plan.
(j) Includes 10,000 shares of our Class A common stock that may be acquired
pursuant to options granted under the 1989 Plan.
(k) The information contained herein with respect to these shares has been
obtained from Schedule 13G, dated January 26, 1999, filed by the
beneficial owner.
(l) The information contained herein with respect to these shares has been
obtained from Schedule 13G, dated February 5, 1999, filed by the
beneficial owners in a joint filing.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company purchases from and, on occasion, sells to various entities
that are controlled by the family of Victor Jacobs, the Chairman of the Board.
During the fiscal year ended March 31, 1999, the Company purchased products
aggregating $1.4 million from these parties and sold no products to these
parties. The Company believes that these purchases were made on terms that were
at least as favorable to the Company as those that could have been obtained from
unrelated third parties.
In April 1999 the Company sold a majority interest in its former
subsidiary The Fragrance Counter, Inc., an internet retailer of prestige
fragrances and cosmetics. In this transaction, the Company sold approximately
2.7 million shares of Series A preferred stock of The Fragrance Counter for an
aggregate purchase price of $20.2 million of which $11.3 million was paid in
cash and $8.9 million is to be paid under promissory notes that become due
within one year from closing. The Fragrance Counter issued approximately 5.3
million additional shares of Series A preferred stock for an aggregate of $25.0
million in cash. As a result of this transaction, the Company's ownership of The
Fragrance Counter has been reduced from approximately 83% to approximately 13%
of the shares of its capital stock. On the closing date of this transaction, in
addition to the $4.0 million received as the cash portion of the purchase price
of the Company's shares, the Company received $6.4 million in cash from The
Fragrance Counter as repayment of loans previously made. The Company entered
into a services and supply agreement with The Fragrance Counter under which the
Company has agreed to supply The Fragrance Counter with fragrances, cosmetics
and upscale health and beauty products as well as supply The Fragrance Counter
with services which include warehousing, order processing, receiving, etc. for
150 days from the date of closing. In consideration for the services provided,
The Fragrance Counter pays the Company's actual cost for providing such
services. Each of Victor Jacobs, Herman Jacobs and Jack Jacobs are shareholders
of The Fragrance Counter.
Except as stated above, the prices that the Company charges affiliated
parties are comparable to prices the Company charges to unaffiliated buyers for
similar products. It has been and will continue to be the Company's policy that
transactions between the Company and its directors, principal stockholders and
affiliates be on terms no less favorable to the Company than could be obtained
from unaffiliated persons.
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 1998 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
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<PAGE>
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.
Our directors and executive officers are as set forth in the
table below:
NAME AGE POSITION
- ---- --- --------
Victor Jacobs.......... 65 Chairman of the Board of Directors and Chief
Executive Officer
Herman Jacobs.......... 38 President, Chief Operating Officer and Director
David Shamilzadeh...... 52 Senior Vice President of Finance, Chief Financial
Officer and Director
Jack Jacobs............ 35 Vice President of Purchasing, Secretary and
Director
Ramon Montes........... 52 Executive Vice President and Director
Sol Naimark............ 38 Director
Jeffrey Berg........... 55 Director
VICTOR JACOBS has served as Chairman of the Board of Directors since
December 1985. He also served as Chief Executive Officer of Allou from December
1985 to April 1990 and was reelected in October 1994 and has served as Chief
Executive Officer since then.
HERMAN JACOBS has been President of Allou since December 1985 and Chief
Operating Officer since February 1994.
DAVID SHAMILZADEH has been Chief Financial Officer of Allou since April
1990 and Senior Vice President of Finance since February 1994.
JACK JACOBS has been Vice President of Purchasing of Allou since June
1986, and Secretary of Allou since January 1989.
RAMON MONTES has been Executive Vice President of Allou since February
1994.
SOL NAIMARK has been a partner at the law firm of Naimark and
Tennenbaum 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., Biologix International Ltd., IMX
Pharmaceuticals, and Dexterity Surgical.
Herman Jacobs and Jack Jacobs are brothers and sons of Victor Jacobs.
Directors who are not employed by Allou receive $1,000 for each Board
meeting attended and an additional $250 for each committee meeting attended.
Furthermore, each non-employee director is granted an option to purchase 5,000
shares of Class A Common Stock upon each election as a director of Allou.
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<PAGE>
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, 1999, the board of directors
held three meetings. All of the directors attended all 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
our financial management and the independent auditors to review matters relating
to internal accounting controls, our accounting practices and procedures and
other matters relating to our financial condition; 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 in fiscal 1999. All members of the committee attended all
meetings.
The function of the stock option committee is to administer the
Company's stock option plans. The stock option committee currently consists of
Sol Naimark and Jeffrey Berg. The stock option committee did not meet in fiscal
1999.
The function of the compensation committee is to review and recommend
to the board of directors the appropriate compensation of our executive
officers. The compensation committee currently consists of Victor Jacobs, Herman
Jacobs, Jack Jacobs, David Shamilzadeh and Jeffrey Berg. The compensation
committee did not meet in fiscal 1999.
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, 1999, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with.
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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 1999, 1998
and 1997 fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------- -------------------
NAME AND PRINCIPAL FISCAL SECURITIES
POSITION YEAR SALARY ($) BONUS ($) UNDERLYING OPTIONS (#)
---------- ------ ---------- --------- ----------------------
<S> <C> <C> <C> <C>
Victor Jacobs........................ 1999 300,000 -- --
CHAIRMAN OF BOARD AND 1998 300,000 -- --
CHIEF EXECUTIVE OFFICER 1997 300,000 48,407 --
Herman Jacobs........................ 1999 300,000 -- --
PRESIDENT AND 1998 300,000 -- --
CHIEF OPERATING OFFICER 1997 300,000 48,407 --
Jack Jacobs.......................... 1999 300,000 -- --
VICE PRESIDENT OF PURCHASING AND 1998 300,000 -- --
SECRETARY 1997 300,000 48,407 --
Ramon Montes......................... 1999 289,558 75,000 --
EXECUTIVE VICE PRESIDENT 1998 249,231 75,000 --
1997 259,039 75,000 --
David Shamilzadeh.................... 1999 290,000 75,000 --
SENIOR VICE PRESIDENT OF FINANCE AND 1998 249,231 75,000 --
CHIEF FINANCIAL OFFICER 1997 233,592 -- --
</TABLE>
STOCK OPTION PLANS
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, 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 1991 Plan, the 1992 Plan, the 1995 Plan and the 1996 Plan (collectively, the
"Plans") as of October 1996. 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
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<PAGE>
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 952,200 of the
1,000,000 shares have been granted under the 1996 Plan. On July 21, 1999, the
Board of Directors of the Company adopted, subject to the approval of the
Company's stockholders, the Amended and Restated 1996 Stock Option Plan. For a
description of the Amended 1996 Plan, see proposal 2 (the "Amended 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 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 and may be
exercised at any time during such term.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth options that were granted in the fiscal
year ended March 31, 1999 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 EXERCISE EXPIRATION PRICE VALUATION FOR
NAME GRANTED FISCAL YEAR PRICE DATE OPTION TERM
---- ---------- ----------- --------- ---------- ---------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Victor Jacobs........... 65,000 11.6 $4.40 10/12/03 $40,651 $126,191
Herman Jacobs........... 65,000 11.6 4.40 10/12/03 40,651 126,191
Jack Jacobs............. 65,000 11.6 4.40 10/12/03 40,651 126,191
David Shamilzadeh....... 60,000 5.4 4.40 10/12/03 37,524 116,484
Ramon Montes............ 30,000 5.4 4.40 10/12/03 18,762 58,242
</TABLE>
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
No options were exercised in the fiscal year ended March 31, 1999 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, 1999, 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(1)
------------------ -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Victor Jacobs.............. 375,000 135,000 $657,044 $424,406
Herman Jacobs.............. 371,250 133,750 669,619 424,406
Jack Jacobs................ 371,250 133,750 669,619 424,406
Ramon Montes............... 251,250 153,750 299,738 752,016
David Shamilzadeh.......... 174,875 108,125 2,225,113 679,836
- ------------------
</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, 1999) 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, 1999.
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<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, 1998,
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee participate in all
deliberations concerning executive compensation. During the fiscal year ended
March 31, 1999, 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.
PERFORMANCE GRAPH
The following graph compares the cumulative return to holders of the
Company's Common Stock for the five years ended March 31, 1999 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, 1994 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.
[GRAPHIC PRESENTING DATA PROVIDED BELOW]
1994 1995 1996 1997 1998 1999
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Allou Health & Beauty Care, Inc. 100.00 98.61 79.86 72.22 94.44 118.75
S&P 500 Index 100.00 115.57 152.67 182.93 270.74 320.71
Peer Group(1) 100.00 173.59 211.34 244.40 418.53 452.95
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(1) The peer group selected by the Company includes Bergen Brunswig
Corporation, Bindley Western Industries, Inc., Cardinal Health Inc.,
Chronimed Inc., Avatex Corp., McKesson Corporation, Moore Medical
Corp., and Owens & Minor Inc. Holdings Co. Pharmerica Inc. is not
included in the peer group as it was in the 1998 Proxy Statement
because it was acquired by another company.
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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
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, 1999, the Company entered into
employment contracts with Victor Jacobs, Herman Jacobs and Jack Jacobs, which
agreements are currently in effect and expire in July 2001. 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 Board of Directors decided to link such employees' compensation
directly to the Company's earnings before interest and taxes.
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.
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The Compensation Committee believes that compensation levels during fiscal 1999
adequately reflect the Company's compensation goals and policies.
Compensation Committee
Victor Jacobs
Herman Jacobs
Jack Jacobs
David Shamilzadeh
Jeffrey Berg
PROPOSAL 2
APPROVAL OF THE AMENDED AND RESTATED 1996 STOCK OPTION PLAN
GENERAL
On July 21, 1999, the Board of Directors of the Company
adopted, subject to the approval of the Company's stockholders, the Amended and
Restated 1996 Stock Option Plan (the " Amended 1996 Plan"). Pursuant to the
Amended 1996 Plan, the maximum number of shares of Class A Common Stock of the
Company for which options may be granted to employees of the Company shall be
increased from 1,000,000 to 2,000,000. Furthermore, the Amended 1996 Plan was
amended to eliminate references to changes in Rule 16b-3, which at the time the
plan was adopted had a future effective date, which has since past.
The Board of Directors believes that the adoption of the
Amended 1996 Plan will enable the Company to retain employees of outstanding
ability. Accordingly, the Board of Directors unanimously recommends that
stockholders ratify the adoption of the Amended 1996 Plan.
DESCRIPTION OF THE PLAN
The following summary of the Amended 1996 Plan is qualified in
its entirety by reference to Exhibit A to this Proxy Statement, which contains a
complete text of the Amended 1996 Plan. The Amended 1996 Plan is administered by
a Stock Option Committee (the "1996 Committee"), consisting of at least two
non-employee directors selected by the Board of Directors. The 1996 Committee
has the authority under the Amended 1996 Plan to determine, in accordance with
the provisions of the Amended 1996 Plan, the terms of options granted under the
Amended 1996 Plan, including, among other things, the individuals who will
receive options, the times when they will receive them, whether a Nonqualified
Stock Option ("NQSO") and/or an Incentive Stock Option ("ISO") will be granted,
the number of shares to be subject to each option, and the date or dates each
option will become exercisable.
Subject to certain limitations contained in the Amended 1996
Plan, options may be granted for terms to be established by the 1996 Committee;
provided, however, that the term of an ISO cannot exceed 10 years (5 years if
the optionee owns or is deemed to own more than 10% of the total combined voting
power of the Company, any of its subsidiaries or a parent). ISOs 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 cases where the optionee owns or is deemed
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to own 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. No stock option may be granted after July 9, 2006, 10
years from the date the original 1996 Stock Option Plan was adopted.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the federal income tax
consequences under current tax law of NQSOs and ISOs. 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.
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.
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 from 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSAL TO APPROVE THE ADOPTION OF THE AMENDED AND RESTATED 1996 STOCK
OPTION PLAN.
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ACCOUNTANTS
Mayer Rispler & Company, P.C. served as the Company's independent
auditors for the fiscal year ended March 31, 1999, and it is expected that Mayer
Rispler & Company, P.C. will act in that capacity for the fiscal year ending
March 31, 2000. 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 2000
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 3, 2000. As to any
proposal that a stockholder intends to present to stockholders without inclusion
in the Company's Proxy Statement for the Company's 2000 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 3,
2000. Even if proper notice is received on or prior to June 3, 2000, 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.
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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, 1999. 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
Jack Jacobs
SECRETARY
July 26, 1999
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EXHIBIT A
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
OF
ALLOU HEALTH & BEAUTY CARE, INC.
(AS AMENDED THROUGH JULY 21, 1999)
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 2,000,000. Such shares of Class A
Common Stock may, in the discretion of the Board of Directors of the Company
(the "Board of Direc tors"), 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 "non-employee director" within the meaning of
Rule 16b-3 (or any successor rule or regulation) promulgated under the
Securities Exchange Act of 1934 ("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 their sole discretion: to determine
the employees, directors 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
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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 modification under the terms of the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; 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, in their sole
discretion, 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 and
consultants 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, in their sole discretion; 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
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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 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
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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
individual'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 or as a
director 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, the Company 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 registration requirements of the Securities Act, applicable
state securities laws or other legal requirements, including without limitation
that (a) the shares of
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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 satisfactory 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, in their sole discretion.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.
Notwithstanding 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 in which the Company is the surviving corporation,
consolidation, 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 and amended on July 21, 1999.
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 Paragraph 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) change the eligibility
requirements for individuals entitled to receive options hereunder or (c) make
any change for which applicable law requires stockholder approval. 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
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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 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 Com pany 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 Corpo
ration.
19. DEFINITIONS.
a. "Cause" shall mean (i) in the case of an
employee or consultant, if there is a written employment or consulting agreement
between the optionee and the Company, any of its Subsidiaries or a Parent which
defines termination of such relationship for cause, cause as defined in such
agreement, (ii) in the absence of such agreement, cause as defined in the
Contract, or (iii) in the absence of (i) and (ii), (A) the commission of fraud
or embezzlement on the part of the optionee, (B) the conviction of such optionee
of, or the
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<PAGE>
pleading by such optionee of guilty or no contest to any felony or any crime
involving moral turpitude, or (C) a material failure by such optionee to
discharge his duties, responsibilities and obligations to the Company, any of
its Subsidiaries or a Parent that is not promptly cured after notice thereof
from the Company.
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 and shall also include an
unincorporated entity that would qualify as a "subsidiary corporation" if it had
been incorporated.
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 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, if the amendment to the Plan is
not approved by a vote of the stockholders of the Company on or before July 20,
2000, the amendment and any options granted thereunder shall terminate, but the
Plan as in effect prior to the amendment shall remain in full force and effect.
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ALLOU HEALTH & BEAUTY CARE, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS - SEPTEMBER 14, 1999
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 14, 1999, 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 the Company's Amended and Restated 1996 Stock Option Plan.
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 , 1999
Signature of Stockholder
Print Name(s)
Please sign and return the proxy promptly in the enclosed envelope.
