SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
WEIDER NUTRITION INTERNATIONAL, INC.
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
WEIDER NUTRITION INTERNATIONAL, INC.
2002 SOUTH 5070 WEST
SALT LAKE CITY, UTAH 84104-4726
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"1998 ANNUAL MEETING") of WEIDER NUTRITION INTERNATIONAL, INC., a Delaware
corporation (the "COMPANY"), to be held on Thursday, October 29, 1998, at 2:00
p.m., local time, at the Company's executive offices at 2002 South 5070 West,
Salt Lake City, Utah 84104.
At the 1998 Annual Meeting, you will be asked to consider and vote upon the
following matters, all of which are described more completely in the
accompanying Proxy Statement.
1. To elect the Company's Board of Directors;
2. To approve the Company's 1997 Equity Participation Plan, as amended;
and
3. To transact such other business as may properly come before the 1998
Annual Meeting or at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
NAMED IN THE PROXY STATEMENT AND FOR THE PROPOSAL TO APPROVE THE 1997 EQUITY
PARTICIPATION PLAN, AS AMENDED.
Only stockholders of record at the close of business on Friday, September 18,
1998 are entitled to notice of, and to vote at, the 1998 Annual Meeting.
Please review carefully the Proxy Statement. We hope you will attend the 1998
Annual Meeting. However, whether or not you plan to attend the 1998 Annual
Meeting, it is important that your shares are represented. Accordingly, please
complete, sign and date the enclosed proxy and return it in the enclosed prepaid
envelope. If you are present at the 1998 Annual Meeting you may, if you wish,
withdraw your proxy and vote in person.
Very truly yours,
/s/RICHARD B. BIZZARO
RICHARD B. BIZZARO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Salt Lake City, Utah
October 2, 1998
WEIDER NUTRITION INTERNATIONAL, INC.
2002 SOUTH 5070 WEST
SALT LAKE CITY, UTAH 84104-4726
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 29, 1998
------------------------
To the Stockholders of
WEIDER NUTRITION INTERNATIONAL, INC.:
The Annual Meeting of Stockholders (the "1998 ANNUAL MEETING") of WEIDER
NUTRITION INTERNATIONAL, INC., a Delaware corporation (the "COMPANY"), will be
held at the Company's executive offices at 2002 South 5070 West, Salt Lake City,
Utah, 84104 on Thursday, October 29, 1998, at 2:00 p.m., local time, for the
following purposes:
1. To elect the Company's Board of Directors;
2. To approve the Company's 1997 Equity Participation Plan, as amended;
and
3. To transact such other business as may properly come before the 1998
Annual Meeting or at any adjournments or postponements thereof.
The election of the Board of Directors and the proposal to approve the 1997
Equity Participation Plan, as amended, are more fully described in the
accompanying Proxy Statement which forms a part of this Notice.
The Board of Directors of the Company has fixed the close of business on
Friday, September 18, 1998 as the record date (the "RECORD DATE") for the
determination of stockholders entitled to notice of, and to vote at, the 1998
Annual Meeting or any adjournments or postponements thereof. Only stockholders
of record at the close of business on the Record Date are entitled to notice of,
and to vote at, the 1998 Annual Meeting and any adjournments or postponements
thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
NAMED IN THE PROXY STATEMENT AND FOR THE PROPOSAL TO APPROVE THE 1997 EQUITY
PARTICIPATION PLAN, AS AMENDED.
Whether or not you plan to attend the 1998 Annual Meeting, please complete,
sign, date and return promptly the enclosed form of proxy. A return envelope is
enclosed for your convenience and requires no postage for mailing in the United
States.
By Order of the Board of Directors,
/s/ROBERT K. REYNOLDS
ROBERT K. REYNOLDS
CHIEF OPERATING OFFICER
Salt Lake City, Utah
October 2, 1998
WEIDER NUTRITION INTERNATIONAL, INC.
2002 SOUTH 5070 WEST
SALT LAKE CITY, UTAH 84104-4726
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 29, 1998
------------------------
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Weider Nutrition
International, Inc., a Delaware corporation (the "COMPANY"), in connection with
the solicitation of proxies on behalf of the Company's Board of Directors to be
voted at the 1998 Annual Meeting of Stockholders (the "1998 ANNUAL MEETING") to
be held on Thursday, October 29, 1998 at 2:00 p.m., local time, at the Company's
executive offices at 2002 South 5070 West, Salt Lake City, Utah 84104, or at
such other time and place to which the 1998 Annual Meeting may be adjourned, for
the purposes set forth in the accompanying Notice of Meeting. This Proxy
Statement and Notice of Meeting and the related proxy card are first being
mailed to stockholders beginning on or about October 7, 1998.
RECORD DATE
The Board of Directors has fixed the close of business on Friday, September
18, 1998 as the record date (the "RECORD DATE") for the 1998 Annual Meeting.
Only stockholders of record at the close of business on the Record Date are
entitled to notice of, and to vote at, the 1998 Annual Meeting and any
adjournments or postponements thereof.
PROXIES
The proxies named on the enclosed proxy card were appointed by the Board of
Directors to vote the shares represented by the proxy card. Upon receipt by the
Company of a properly signed and dated proxy card, the shares represented
thereby will be voted in accordance with the instructions on the proxy card. If
a stockholder does not return a signed proxy card, his or her shares cannot be
voted by proxy. Stockholders are urged to mark the boxes on the proxy card to
show how their shares are to be voted. If a stockholder returns a signed proxy
card without marking the boxes, the shares represented by the proxy card will be
voted as recommended by the Board of Directors herein and on the proxy card, FOR
the election of the persons named under "ELECTION OF DIRECTORS" as nominees for
election as Directors of the Company (each a "NOMINEE" and, collectively, the
"NOMINEES") for terms to expire on the date of the next annual meeting of the
Company's stockholders following the 1998 Annual Meeting and FOR the proposal to
approve the Company's 1997 Equity Participation Plan, as amended by the First
Amendment thereto (the "Equity Plan"). The proxy card also confers discretionary
authority on the proxies to vote on any other matter not presently known to the
management that may properly come before the meeting or any adjournment thereof.
Any proxy delivered pursuant to this solicitation is revocable at the option of
the person(s) executing the same (i) upon receipt by the Company before the
proxy is voted of a duly executed proxy bearing a later date, (ii) by written
notice of revocation to the Secretary of the Company received before the proxy
is voted or (iii) by such person(s) voting in person at the 1998 Annual Meeting.
Duly executed proxies in the form enclosed, unless properly revoked, will be
voted at the 1998 Annual Meeting. The expenses incidental to the preparation and
mailing of this proxy material are being paid by the Company. The Company will
reimburse banks, brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to
stockholders. No solicitation currently is planned beyond the mailing of this
proxy material to stockholders and to brokerage firms, nominees, custodians and
fiduciaries, who may be requested to forward the proxy materials to the
beneficial owners of shares held of record by them.
VOTING SHARES AND QUORUM REQUIRED
On the Record Date, the Company had outstanding 9,224,406 shares of Class A
common stock, par value $.01 per share (the "CLASS A COMMON STOCK") and
15,687,432 shares of Class B common stock, par value $.01 per share
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(the "CLASS B COMMON STOCK", and together with the Class A Common Stock, the
"COMMON STOCK"). Holders of Class A Common Stock on the Record Date (the "CLASS
A COMMON STOCKHOLDERS") are entitled to one vote per share on all matters
submitted to a vote of stockholders and holders of Class B Common Stock on the
Record Date (the "CLASS B COMMON STOCKHOLDERS," and together with the Class A
Common Stockholders, the "COMMON STOCKHOLDERS") are entitled to ten votes per
share on all matters submitted to a vote of stockholders. The presence in person
or by proxy of the holders of a majority of the issued and outstanding Common
Stock entitled to vote at the 1998 Annual Meeting, excluding Common Stock held
by the Company, is necessary to constitute a quorum at the 1998 Annual Meeting.
The affirmative vote of a plurality of the shares of Common Stock represented
in person or by proxy and entitled to vote at the 1998 Annual Meeting is
required to elect the Directors and the affirmative vote of a majority of the
shares of Common Stock represented and entitled to vote is required to approve
the proposal to approve the Equity Plan, as amended. Business that might have
been transacted at the 1998 Annual Meeting as originally called may be conducted
at any adjournment at which the requisite quorum is present.
Pursuant to the laws of the State of Delaware, the inspectors of the election
will not count shares represented by proxies that reflect abstentions or "BROKER
NON-VOTES" (I.E., shares held by brokers or nominees that are represented at the
1998 Annual Meeting, but with respect to which the broker or nominee is not
empowered to vote on a particular proposal) as votes cast with respect to the
election of Directors, and therefor, neither abstentions nor broker non-votes
will affect the election of Nominees receiving the plurality of votes. With
respect to all other proposals scheduled to come before the 1998 Annual Meeting,
abstentions with respect to a particular proposal will have the effect of a vote
against such proposal. Broker non-votes, however, will be treated as unvoted for
purposes of determining approval of such proposal and will not be counted as
votes for or against such proposal.
MATTERS TO BE VOTED UPON
PROPOSAL ONE--ELECTION OF DIRECTORS
The Nominees set forth below have been duly nominated to stand for election
as Directors of the Company to serve for a term of one year, or until their
successors are elected and qualified. Each of the Nominees has indicated a
willingness to serve as a member of the Board of Directors if elected. The Board
of Directors recommends a vote FOR each of the Nominees. If any of the Nominees
should become unavailable prior to the 1998 Annual Meeting, the proxy will be
voted for a substituted nominee or nominees designated by the Board of
Directors. The Board of Directors has no reason to believe that any such
Nominees will be unable or unwilling to serve. The information provided below
with respect to the Nominees is as of the Record Date.
To be elected by the Common Stockholders:
NAME AGE POSITION
---- --- --------
Eric Weider 34 Chairman of the Board
Richard B. Bizzaro 56 Chief Executive Officer, President and
Director
Robert K. Reynolds 41 Chief Operating Officer, Executive Vice
President, Secretary and Director
Ronald L. Corey 59 Director
Donald G. Drapkin 50 Director
Roger H. Kimmel 52 Director
George F. Lengvari 56 Director
Glenn W. Schaeffer 44 Director
ERIC WEIDER has been a director of the Company since June 1989, Chairman of
the Board of Directors since August 1996 and is currently President and Chief
Executive Officer of Weider Health and Fitness. Mr. Weider also serves as a
member of the board of directors of a number of public and private companies in
the United States and Canada, including Weider Health and Fitness and Mpact
Immedia Corporation. Mr. Weider is also the President of the Joe Weider
Foundation.
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RICHARD B. BIZZARO has been Chief Executive Officer, President and a director
of the Company since June 1990. Prior to his appointment as Chief Executive
Officer and President of the Company, he was Vice President of Sales for Weider
Health and Fitness, responsible for sales at the Company and Weider Exercise
Equipment. Mr. Bizzaro has worked for the Company, Weider Health and Fitness or
one of the Weider Health and Fitness affiliates since 1983.
ROBERT K. REYNOLDS has been Executive Vice President, Chief Operating Officer
and Secretary of the Company since July 1992 and a director of the Company since
January 1994. Mr. Reynolds joined the Company in September 1990 as Chief
Financial Officer. Mr. Reynolds, a certified public accountant, is primarily
responsible for all domestic and international operations.
RONALD L. COREY has been a director of the Company since August 1996. Mr.
Corey has been president of the Club de Hockey Canadien Inc. (the Montreal
Canadiens) and the Molson Center Inc. since 1982. In addition, between 1985 and
1989, Mr. Corey held the position of Chairman of the Board and director of the
Montreal Port Corporation. Mr. Corey has served as director of numerous
companies, including Banque Laurentienne, Reno-Depot Inc. and Transamerica Life
Companies.
DONALD G. DRAPKIN has been a director of the Company since October 1997. Mr.
Drapkin has been a Director and Vice Chairman of MacAndrews & Forbes Holdings,
Inc. and various of its affiliates since March 1987. Prior to joining MacAndrews
& Forbes, Mr. Drapkin was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom in New York for more than five years. Mr. Drapkin also is a
director of the following corporations which file reports pursuant to the
Securities Exchange Act of 1934: Algos Pharmaceutical Corporation, Anthracite
Capital, Inc., BlackRock Asset Investors, Cardio Technologies, Inc., The
Cosmetic Center, Inc., Genta, Inc., The Molson Companies Limited, Playboy
Enterprises, Inc., Revlon Consumer Products Corporation, Revlon, Inc., and VIMRx
Pharmaceuticals Inc.
ROGER H. KIMMEL has been a director of the Company since August 1996. Mr.
Kimmel has been a partner at the law firm of Latham & Watkins for more than five
years. Mr. Kimmel is a director of Algos Pharmaceutical Corporation, TSR Paging
Inc. and U.S. Dermatologics, Inc.
GEORGE F. LENGVARI has been a director of the Company since August 1996. Mr.
Lengvari has been Vice Chairman of Weider Health and Fitness since June 1995 and
Chairman of Weider Publications U.K. since September 1994. Prior to joining
Weider Health and Fitness, Mr. Lengvari was a partner for 22 years in the law
firm Lengvari Braman and is currently of counsel to the law firm LaPointe
Rosenstein. Mr. Lengvari currently serves as a member of the board of directors
of Weider Health and Fitness.
GLENN W. SCHAEFFER has been President, Chief Financial Officer and Treasurer
of Circus Circus Enterprises, Inc. ("CIRCUS CIRCUS") since April 1, 1995 and a
member of the Board of Directors of Circus Circus since March 4, 1996. Prior to
joining Circus Circus, Mr. Schaeffer was involved in an executive capacity in
the management and operation of Gold Strike Resorts. Mr. Schaeffer is a director
of Circus Circus and Del Webb Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED IN
THE PROXY STATEMENT AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
VOTED IN FAVOR OF SUCH NOMINEES UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON
THE PROXY.
PROPOSAL 2--APPROVAL OF THE 1997 EQUITY PARTICIPATION PLAN, AS AMENDED
GENERAL
At the 1998 Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the approval of the 1997 Equity Participation Plan of
Weider Nutrition International, Inc., as amended by the First Amendment thereto
(the "Equity Plan"), as described herein. The Board of Directors and the
Company's stockholders previously approved the Equity Plan in 1997. The First
Amendment to the Plan was adopted by the Company's Board of Directors as of
September 8, 1998. A total of 1,646,000 shares of Class A Common Stock were
originally reserved for issuance under the Equity Plan when it was adopted in
1997, and subject to stockholder approval at the
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1998 Annual Meeting, the aggregate number of such shares reserved for issuance
shall be increased to 2,496,000. As of September 1, 1998, Awards relating to
approximately 1,443,000 shares of Class A Common Stock were outstanding under
the Equity Plan. Accordingly, an increase to the number of shares authorized
under the Equity Plan is needed to permit the Company to continue to grant
Awards under the Equity Plan to officers, directors, employees and consultants.
By the terms of the Equity Plan, the Equity Plan may be amended by the Board of
Directors or the committee appointed to administer the Equity Plan (the
"Committee") from time to time, including, among other matters, to increase the
number of shares reserved for issuance thereunder, subject to stockholder
approval. On July 22, 1998, the Board of Directors voted to increase by 850,000
shares the aggregate numbers of the shares of Class A Common Stock which may be
issued under the Equity Plan. On September 8, 1998 the Board approved the First
Amendment to the Equity Plan to give effect to such increase, to revise the
terms for options granted to Independent Directors (as defined below) and to
amend the Equity Plan in certain other respects as reflected in the summary
description of the Equity Plan set forth below.
The principal purposes of the Equity Plan are to provide incentives to
officers, employees and consultants of the Company through the granting of
Awards, thereby stimulating their personal and active interest in the Company's
development and financial success, and inducing them to remain in the Company's
employ. The Equity Plan is also intended to assist the Company in attracting and
retaining qualified non-employee directors by providing for the automatic grant
of non-qualified stock options to directors who are not employees of the Company
or of any subsidiary or parent corporation of the Company ("Independent
Directors").
DESCRIPTION OF THE 1997 EQUITY PARTICIPATION PLAN, AS AMENDED
ADMINISTRATION
The Committee administers the Equity Plan with respect to grants to employees
or consultants of the Company and the full Board of Directors administers the
Equity Plan with respect to options granted to Independent Directors. Subject to
the terms and conditions of the Equity Plan, the Committee has the authority to
select the employees and consultants to whom Awards are to be made, to determine
the number of shares to be subject thereto and the terms and conditions thereof
(including exercisability and vesting), and to make all other determinations and
to take all other actions necessary or advisable for the administration of the
Equity Plan with respect to grants or awards made to employees or consultants.
The Committee (and the Board of Directors) is also authorized to adopt, amend
and rescind rules relating to the administration of the Equity Plan.
Notwithstanding the foregoing, the Board of Directors conducts the general
administration of the Equity Plan with respect to options granted to Independent
Directors.
ELIGIBILITY
Options, SARs, restricted stock and other Awards under the Equity Plan may be
granted to individuals who are employees or consultants of the Company (or any
Subsidiary) selected by the Committee for participation in the Equity Plan. In
addition, the Equity Plan provides for automatic grants of non-qualified stock
options to Independent Directors. The maximum number of shares which may be
subject to Awards granted under the Equity Plan to any individual in any fiscal
year of the Company cannot exceed 300,000.
INDEPENDENT DIRECTORS
The Equity Plan provides for (i) grants of non-qualified stock options to
purchase 20,000 shares of Class A Common Stock to each Independent Director at
the time of appointment or election to the Board of Directors (the date of the
Company's initial public offering with respect to Independent Directors then
serving as such), and (ii) subject to the Independent Director's continuing
service as such, grants of non-qualified stock options to purchase 7,000 shares
of Class A Common Stock to each Independent Director upon the date of each
annual meeting of the Company's stockholders that follows the first anniversary
of the initial grant. The exercise price of options granted to Independent
Directors is the fair market value of a share of Class A Common Stock on the
date of grant. Options granted to Independent Directors prior to July 22, 1998
shall become exercisable in equal annual installments on each of the first five
anniversaries of the date of the grant so long as the Independent Director
continues to serve as a director of the Company; options granted to Independent
Directors after such date shall become exercisable in equal
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annual installments on each of the first three anniversaries of the date of the
grant so long as the Independent Director continues to serve as a director of
the Company; provided, however, to the extent permitted by Rule 16b-3, the Board
of Directors may accelerate the exercisability of options upon the occurrence of
certain specified extraordinary corporate transactions or events. See "--
MERGER, CONSOLIDATION AND OTHER EVENTS." No portion of an option granted to any
Independent Director shall be exercisable after the eighth anniversary of the
date of grant, and in the event of the Independent Director's earlier
Termination of Directorship, his or her options shall expire 60 days after such
Termination of Directorship; provided, however, that if the Termination of
Directorship is by reason of death or disability, his or her options shall not
expire until the first anniversary of such Termination of Directorship.
AWARDS UNDER THE EQUITY PLAN
Each Award will be set forth in a separate agreement with the person
receiving the Award and will indicate the type, terms and conditions of the
Award.
NONQUALIFIED STOCK OPTIONS ("NQSOS"). NQSOs will provide for the right to
purchase Class A Common Stock at a specified price which, except with respect to
NQSOs intended to qualify as performance-based compensation under Section 162(m)
of the Code, may be less than fair market value on the date of grant (but not
less than par value), and usually will become exercisable (as determined by the
Committee) in one or more installments after the grant date, subject to the
participant's continued employment with the Company and/or subject to the
satisfaction of individual or Company performance targets established by the
Committee. NQSOs may be granted for any term (not exceeding eight years)
specified by the Committee.
INCENTIVE STOCK OPTIONS ("ISOS"). ISOs are designed to comply with certain
restrictions contained in the Internal Revenue Code of 1986, as amended (the
"Code"). Among such restrictions, ISOs must have an exercise price not less than
the fair market value of a share of Class A Common Stock on the date of grant,
may only be granted to employees, must expire within a specified period of time
following the Optionee's termination of employment; but may be subsequently
modified to disqualify them from treatment as ISOs. In the case of an ISO
granted to an individual who owns (or is deemed to own) at least 10% of the
total combined voting power of all classes of stock of the Company, the Equity
Plan provides that the exercise price must be at least 110% of the fair market
value of a share of Class A Common Stock on the date of grant and the ISO must
expire upon the fifth anniversary of the date of its grant. Subject to certain
Code limitations, ISOs will become exercisable as determined by the Committee.
RESTRICTED STOCK. Restricted Stock may be sold to employees and consultants
at various prices (but not below par value) and made subject to such
restrictions as may be determined by the Committee. Restricted stock, typically,
may be repurchased by the Company at the original purchase price if the
specified conditions or restrictions are not met. In general, restricted stock
may not be sold, or otherwise transferred or hypothecated, until restrictions
are removed or expire. Purchasers of restricted stock, unlike recipients of
options, will have voting rights and will receive dividends prior to the time
when the restrictions lapse.
DEFERRED STOCK. Deferred Stock may be awarded to employees and consultants,
typically without payment of consideration, but subject to vesting conditions
based on continued employment or on performance criteria established by the
Committee. Like restricted stock, deferred stock may not be sold, or otherwise
transferred or hypothecated, until vesting conditions are removed or expire.
Unlike restricted stock, deferred stock will not be issued until the deferred
stock award has vested, and recipients of deferred stock generally will have no
voting or dividend rights prior to the time when vesting conditions are
satisfied.
STOCK APPRECIATION RIGHTS. SARs may be granted to employees and consultants
in connection with stock options or other Awards, or separately. SARs granted in
connection with stock options or other Awards typically will provide for
payments to the holder based upon increases in the price of the Company's Class
A Common Stock over the exercise price of the related option or other Award, but
alternatively may be based upon criteria such as book value. Except as required
by Section 162(m) of the Code with respect to an SAR intended to qualify as
performance-based compensation, there are no restrictions specified in the
Equity Plan on the amount of gain realizable from the exercise of SARs, although
restrictions may be imposed by the Committee in the SAR agreements. The
Committee may elect to pay SARs in cash or in Class A Common Stock or in a
combination of both.
5
DIVIDEND EQUIVALENTS. Dividend equivalents represent the value of the
dividends per share paid on Class A Common Stock and may be granted to employees
and consultants in connection with any number of shares subject to another Award
(such as an option or SAR) held by such individual. The Committee may elect to
pay Dividend Equivalents in cash or in Class A Common Stock or in a combination
of both.
PERFORMANCE AWARDS. Performance Awards may be granted by the Committee to
employees and consultants on an individual or group basis. Generally, these
Awards will be based upon specific performance targets and may be paid in cash
or in Class A Common Stock or in a combination of both. The value of Performance
Awards may be linked to market value, book value, net profits or other measure
of the value of Class A Common Stock, or other performance criteria over a
predetermined period.
STOCK PAYMENTS. Stock payments may be awarded by the Committee to employees
and consultants in the form of shares of Class A Common Stock or an option or
other right to purchase Class A Common Stock as part of a deferred compensation
arrangement or otherwise in lieu of or in addition to all or any part of
compensation, including bonuses, that would otherwise be payable in cash to the
employee or consultant.
MERGER, CONSOLIDATION AND OTHER EVENTS
The Equity Plan provides the Committee (the Board with respect to options
granted to Independent Directors) discretion to amend the terms (such as
exercise price, number shares and vesting) of outstanding Awards and future
grants that may be made under the Equity Plan upon the occurrence of a
recapitalization, stock split, reorganization, merger, consolidation,
liquidation, dissolution, or sale, transfer, exchange or other disposition of
all or substantially all of the assets of the Company or other similar corporate
event and provides further, that in any event, upon the occurrence of a
"Corporate Transaction" or a "Change in Control" (each as defined in the Equity
Plan) all outstanding Awards shall become immediately exercisable, vested or
payable, as applicable, unless such Award is otherwise assumed by a successor to
the Company or replaced by a similar right with respect to securities of the
successor entity or subject to other limitations imposed at the time of grant.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences, in general, of the grant and exercise of
Options under the Equity Plan are as follows:
ISOS. In general, a recipient will not recognize taxable income upon the
grant or exercise of an ISO, and the Company will not be entitled to any
business expense deduction with respect to the grant or exercise of an ISO.
(However, upon the exercise of an ISO, the excess of the fair market value on
the date of exercise of the shares received over the exercise price of the
option will be treated as an adjustment to alternative minimum taxable income.)
In order for the exercise of an ISO to qualify as an ISO, a recipient generally
must be an employee of the Company or a subsidiary (within the meaning of
Section 422 of the Code) from the date the ISO is granted through the date three
months before the date of exercise (one year preceding the date of exercise in
the case of a recipient whose employment is terminated due to disability). The
employment requirement does not apply where a recipient's employment is
terminated due to his or her death.
If a recipient has held the shares acquired upon exercise of an ISO for at
least two years after the date of grant and for at least one year after the date
of exercise, when the recipient disposes of the shares, the difference, if any,
between the sales price of the shares and the exercise price of the option will
be treated as long-term capital gain or loss subject to reduced rates of tax. If
a recipient disposes of the shares prior to satisfying these holding period
requirements (a "Disqualifying Disposition"), the recipient will recognize
ordinary income (treated as compensation) at the time of the Disqualifying
Disposition, generally in an amount equal to the excess of the fair market value
of the shares at the time the option was exercised over the exercise price of
the option. The balance of the gain realized, if any, will be short-term or
long-term capital gain, depending upon whether the shares have been held for at
least twelve months after the date of exercise. If the Optionee sells the shares
in a Disqualifying Disposition at a price below the fair market value of the
shares at the time the option was exercised, the amount of ordinary income
(treated as compensation) will be limited to the amount realized on the sale
over the exercise price of the option. In general,
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if the Company and its subsidiaries comply with applicable income reporting
requirements, the Company and its subsidiaries will be allowed a business
expense deduction to the extent an ISO recipient recognizes ordinary income.
NQSOS. In general, a recipient who receives an NQSO will recognize no income
at the time of the grant of the option. Upon exercise of an NQSO, a recipient
will recognize ordinary income (treated as compensation) in an amount equal to
the excess of the fair market value of the shares on the date of exercise over
the exercise price of the option. The basis in shares acquired upon exercise of
a nonqualified stock option will equal the fair market value of such shares at
the time of exercise, and the holding period of the shares (for capital gain
purposes) will begin on the date of exercise. In general, if the Company and its
subsidiaries comply with applicable income reporting requirements, they will be
entitled to a business expense deduction in the same amount and at the same time
as the recipient recognizes ordinary income. In the event of a sale of the
shares received upon the exercise of a nonqualified stock option, any
appreciation or depreciation after the exercise date generally will be taxed as
capital gain or loss, provided that any gain will be subject to reduced rates of
tax if the shares were held for more than twelve months.
The foregoing discussion assumes that at the time of exercise, the sale of
the shares for a profit would not subject a recipient to liability under Section
16 (b) of the Exchange Act. Special rules may apply with respect to persons who
may be subject to Section 16 (b) of the Exchange Act.
Generally, if a recipient delivers previously owned shares to pay the
exercise price, no gain or loss will be recognized in respect of the shares
delivered, and there will be a carryover basis and holding period for a like
number of shares acquired. If the option being exercised is an ISO and the
shares delivered were acquired upon exercise of an ISO and are delivered prior
to satisfaction of the ISO holding period requirements described above, the
delivery of shares will constitute a Disqualifying Disposition as to which the
rules described above will apply. If the option being exercised is an NQSO,
ordinary income (treated as compensation) will be recognized only on the
additional shares acquired and will be equal to the fair market value of the
shares on the date of exercise less any addition cash paid. Special rules apply
in computing the amount and character of a recipient's income (or loss) upon the
subsequent sale of shares acquired upon the exercise of an ISO where the
exercise price is paid by the delivery of previously owned shares.
EXCISE TAXES. Under certain circumstances, the accelerated vesting or
exercise of options in connection with a Change in Control or Corporate
Transaction might be deemed an "excess parachute payment" for purposes of the
golden parachute tax provisions of Section 280G of the Code. To the extent it is
so considered, the recipient may be subject to a 20% excise tax and the Company
may be denied a tax deduction.
SECTION 162(M) LIMITATION. In general, under Section 162(m), income tax
deductions of publicly held corporations may be limited to the extent total
compensation (including base salary, annual bonus, stock option exercises and
non-qualified benefits paid) for certain executive officers exceeds $1 million
(less the amount of any "excess parachute payments" as defined in Section 280G
of the Code) in any one year. However, under Section 162(m), the deduction limit
does not apply to certain "performance-based compensation" established by an
independent Committee that is adequately disclosed to, and approved by,
stockholders. Under a Section 162(m) transition rule for compensation plans of
corporations that are privately held and that become publicly held in an initial
public offering, options granted under the Equity Plan prior to the approval of
the Equity Plan by stockholders at the 1998 Annual Meeting will not be subject
to Section 162(m). The Company has attempted to structure the Equity Plan in
such a manner that, subject to obtaining stockholder approval for the Equity
Plan at the 1998 Annual Meeting, after such date, the remuneration attributable
to options and SARs that meet the other requirements of Section 162(m) will not
be subject to the $1 million limitation. The Company has not, however, requested
a ruling from the Internal Revenue Service or an opinion of counsel regarding
this issue.
The Committee may also designate as "Section 162(m) Participants" certain
employees whose compensation for a given fiscal year may be subject to the limit
on deductible compensation imposed by Section 162(m) of the Code. The Committee
may grant Awards to Section 162(m) Participants that vest or become exercisable
upon the attainment of performance targets which are related to one or more of
the following performance goals: (i) pre-tax income; (ii) operating income;
(iii) cash flow; (iv) earnings per share; (v) return on equity; (vi) return on
invested capital or assets;
7
(vii) earnings before interest, taxes, depreciation and amortization ("EBITDA");
(viii) market value of Class A Common Stock; and (ix) cost reduction or savings.
SHARES ISSUED UNDER THE EQUITY PLAN
Since the inception of the Equity Plan through May 31, 1998, Mr. Bizzaro has
acquired options relating to 220,000 shares of Class A Common Stock at a
weighted average exercise price of $11.00; Mr. Reynolds has acquired options
relating to 120,000 shares of Class A Common Stock at a weighted average
exercise price of $11.00; Mr. Blair has acquired options relating to 80,000
shares of Class A Common Stock at a weighted average exercise price of $11.00;
and Mr. Young has acquired options relating to 80,000 shares of Class A Common
Stock at a weighted average exercise price of $11.00. In addition, as of May 31,
1998, all executive officers as a group have acquired options relating to a
total of 500,000 shares of Class A Common Stock at a weighted average exercise
price of $11.00; all current directors who are not executive officers of the
Company have acquired Options relating to a total of 80,000 shares of Class A
Common Stock at a weighted average exercise price of $11.38; and all employees
who are not executive officers have acquired Options relating to a total of
692,000 shares of Class A Common Stock at a weighted average exercise price of
$11.25. As Options granted under the Equity Plan are discretionary and are
determined by the Compensation Committee of the Board of Directors from time to
time, the number of shares of Class A Common Stock that will be acquired by
these persons in the future under the Equity Plan is not currently determinable.
In addition, since the value of options depends upon the future market price of
Class A Common Stock, the value of outstanding options is not presently
determinable.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE EQUITY PLAN AS AMENDED BY
THE FIRST AMENDMENT, AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
VOTED IN FAVOR OF SUCH APPROVAL UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON
THE PROXY.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership
of Common Stock by each of the Directors and Nominees, the Company's Chief
Executive Officer, each of the Company's other most highly compensated executive
officers, all Directors and executive officers as a group, and each stockholder
who is known by the Company to own beneficially more than five percent of the
outstanding Common Stock, as of the Record Date. Unless otherwise indicated, the
address of each beneficial owner is c/o the Company, 2002 South 5070 West, Salt
Lake City, Utah 84104-4726.
Shares Beneficially Owned(1)
---------------------------------------------------
Number of Shares Percent Percent of
------------------------- --------------------- Total Voting
Name of Beneficial Owner Class A Class B Class A Class B Power
- ------------------------ ------- ------- ------- ------- -----
Directors and Executive Officers:
Eric Weider (2) ........................... 3,600 -- * -- *
Richard B. Bizzaro ........................ 495,745 -- 5.4% -- *
Robert K. Reynolds ........................ 330,530 -- 3.6 -- *
Ronald L. Corey ........................... 61,427 -- * -- *
Donald G. Drapkin ......................... 8,000 -- * -- *
Roger H. Kimmel (3) ....................... 6,000 -- * -- *
George F. Lengvari (4) .................... -- -- -- -- --
Glenn W. Schaeffer ........................ 6,000 -- * -- *
Richard A. Blair .......................... 45,679 -- * -- *
Stephen D. Young .......................... 45,679 -- * -- *
Directors and executive officers
as a group (10 persons) .................. 968,388 -- 10.5 -- *
Other Principal Stockholders:
Weider Health and Fitness ................. -- 15,687,432 -- 100% 94.4%
SAFECO Corp (5) ........................... 1,123,200 -- 12.2 -- *
601 Union Street, Suite 2500
Seattle, WA 98101
AMVESCAP PLC (6) .......................... 1,093,100 -- 11.9 -- *
11 Devonshire Square
London EC2M 4YR, England
Wellington Management Company,
LLP (7) ............................... 891,300 -- 9.7 -- *
75 State Street
Boston, MA 02109
Hornchurch Investments Limited (8) ........ 751,572 -- 8.1 -- *
Atlantic House, 4-8 Circular Road
Douglas, Isle of Man
Loomis, Sayles & Company, L.P. (9) ........ 553,900 -- 6.0 -- *
One Financial Center
Boston, MA 02111
The TCW Group, Inc. (10)
865 South Figueroa Street
Los Angeles, CA 90017 ................. 538,900 -- 5.8 -- *
* Represents less than 1%.
9
(1) For purposes of this table, a person or group is deemed to have
"BENEFICIAL OWNERSHIP" of any shares which such person has the right to acquire
within 60 days after the date of this Proxy Statement. For purposes of
calculating the percentage of outstanding shares held by each person named
above, any shares which such person has the right to acquire within 60 days
after the date of the Proxy Statement are deemed to be outstanding, but for the
purpose of calculating the percentage ownership of any other person.
(2) Does not include 15,687,432 shares of Class B Common Stock held by Weider
Health and Fitness. Mr. Weider is President and Chief Executive Officer of
Weider Health and Fitness. Mr. Weider disclaims beneficial ownership of such
shares.
(3) Does not include 2,000 shares of Class A Common Stock held in two trusts
for the benefit of the children of Mr. Kimmel, as to which shares Mr. Kimmel has
neither the power of disposition nor the power to vote. Mr. Kimmel disclaims
beneficial ownership of such shares.
(4) Does not include 50,000 shares of Class A Common Stock held by the Weider
Lengvari WNI Stock Trust, a trust organized under the laws of the United
Kingdom, which is administered by an independent trustee and of which Mr.
Lengvari becomes a beneficiary only if certain conditions are met. Mr. Lengvari
disclaims beneficial ownership of such shares. Does not include 172,426 shares
of Class A Common Stock held by Bayonne Settlement, a trust organized under the
laws of Jersey (U.K.), of which family members of George F. Lengvari are
included among the beneficiaries. Bayonne Settlement is administered by an
independent trustee and Mr. Lengvari has neither the power of disposition nor
the power to vote the shares. Mr. Lengvari disclaims beneficial ownership of
such shares.
(5) Based on Schedule 13G filed by SAFECO Corp.
(6) Based on Schedule 13G filed by AMVESCAP PLC.
(7) Based on Schedule 13G filed by Wellington Mgt. Company, LLP.
(8) Based on reports filed by Hornchurch Investments Limited.
(9) Based on Schedule 13G filed by Loomis, Sayles & Company L.P.
(10) Based on Schedule 13G filed by The TCW Group, Inc.
10
EXECUTIVE COMPENSATION
SUMMARY EXECUTIVE COMPENSATION TABLE
The following table sets forth certain information with respect to the
compensation paid by the Company for services rendered to the Company in all
capacities for the fiscal years ended May 31, 1998 and 1997 to its Chief
Executive Officer and to its other executive officers other than the Chief
Executive Officer (the "NAMED EXECUTIVE OFFICERS").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------- -----------------------
AWARDS
-----------------------
RESTRICTED OPTIONS
OTHER ANNUAL STOCK AWARDS (# OF ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) (2)(3) SHARES) COMPENSATION(4)
- --------------------------- ---- ------ ----- --------------- ------ ------- ---------------
Richard B. Bizzaro .............. 1998 $325,000 $140,000 -- -- -- $ 11,800
Chief Executive Officer ......... 1997 300,000 356,146 $ 1,363,000 $ 5,452,095 220,000 11,800
and President
Robert K. Reynolds .............. 1998 250,000 125,000 -- -- -- 11,800
Chief Operating Officer, ........ 1997 230,000 237,430 909,000 3,634,730 120,000 11,800
Executive Vice President
and Secretary
Richard A. Blair ................ 1998 210,000 55,000 -- -- -- 11,800
Executive Vice President ........ 1997 175,000 118,715 172,000 904,442 80,000 11,800
and General Manager--Sales
and Marketing
Stephen D. Young
Executive Vice President
- --Operations and Chief .......... 1998 165,000 45,000 -- -- -- 4,000
Financial Officer ............... 1997 133,333 106,844 172,000 904,442 80,000 4,000
(1) Represents cash payments made pursuant to management incentive
agreements (the "MANAGEMENT INCENTIVE AGREEMENTS") existing at the time of the
Company's initial public offering of Class A Common Stock in May 1997. Pursuant
to the terms of the Management Incentive Agreements, certain employees of the
Company (the "RECIPIENTS") were granted performance units ("PERFORMANCE UNITS")
as incentive compensation. The Performance Units entitled the Recipients to a
cash payment or, at the option of the Company, shares of Class A Common Stock
upon the conversion of the Performance Unit. In accordance with the terms of the
Management Incentive Agreements, the Performance Units were converted into cash
and Class A Common Stock upon consummation of the Company's initial public
offering.
(2) Represents the dollar value on the date of grant of shares of Class A
Common Stock granted to certain Recipients upon the conversion of Performance
Units.
(3) At May 31, 1998, Messrs. Bizzaro, Reynolds, Blair and Young held
495,645, 330,430, 82,222 and 82,222 shares of Class A Common Stock,
respectively, granted to each of Messrs. Bizzaro, Reynolds, Blair and Young upon
the conversion of the Performance Units. At May 31, 1998, the value of those
restricted stock holdings was $7,713,475, $5,142,317, $1,279,580 and $1,279,580,
respectively. Of the 82,222 shares of Class A Common Stock held by each of Mr.
Blair and Mr. Young on May 31, 1998, 36,543 shares were unvested. At May 31,
1997, Messrs. Bizzaro, Reynolds, Blair and Young held 495,645, 330,430, 82,222
and 82,222 shares of Class A Common Stock, respectively, granted to each of
Messrs. Bizzaro, Reynolds, Blair and Young upon the conversion of the
Performance Units. At May 31, 1997, the value of those restricted stock holdings
was $6,319,474, $4,212,983, $1,048,331 and
11
$1,048,331, respectively. Of the 82,222 shares of Class A Common Stock held by
each of Mr. Blair and Mr. Young on May 31, 1997, 45,679 shares were unvested.
(4) Other compensation includes matching contributions to the Company's
401(k) plan. In addition, for Messrs. Bizzaro, Reynolds and Blair, includes an
automobile allowance.
No options/SARs were granted to or exercised by the Named Executive
Officers during the fiscal year ended May 31, 1998.
The Company entered into employment agreements with Messrs. Bizzaro and
Reynolds that extend through May 31, 2002 and May 31, 2000, respectively. The
annual base salary for Messrs. Bizzaro and Reynolds for fiscal 1999 is $350,000
and $270,000, respectively, and increases $25,000 and $20,000, respectively, in
each successive year. In addition, Messrs. Bizzaro and Reynolds are eligible for
bonuses up to a maximum of 150% of their annual base salaries. Should Messrs.
Bizzaro or Reynolds be terminated without cause they will receive an amount
equal to two times their base salary and bonus for the prior year for 24 months
and 12 months, respectively. The agreements contain customary confidentiality
and non-competition provisions.
The Company and Messrs. Blair and Young (the "EXECUTIVES") entered into
employment agreements (the "EMPLOYMENT AGREEMENTS") effective June 1, 1994,
which, as of May 31, 1995, continue on a month-to-month basis until otherwise
renewed or terminated. Pursuant to the terms of the Employment Agreements, the
annual base salary for Messrs. Blair and Young has been set at $210,000 and
$165,000, respectively. Each Employment Agreement provides that the Company can
increase or decrease the Executive's base salary, consistent with general salary
increases or decreases, as the case may be, or as appropriate in light of the
performance of the Company and the Executive. In addition to the base salary
that each Executive receives pursuant to the Employment Agreements, each
Executive is entitled to an annual bonus in an amount equal to a percentage of
the Executive's base salary (prorated for a partial year) corresponding to a
percentage of the annual performance and profitability goal of the Company (as
set forth therein).
DIRECTOR COMPENSATION
Members of the Board of Directors who are not employees of the Company or
any subsidiary or parent corporation of the Company (the "INDEPENDENT
DIRECTORS") have received and will continue to receive an annual fee of
approximately $12,000, options to purchase 20,000 shares of Class A Common Stock
upon appointment or election to the Board of Directors and options to purchase
7,000 shares of Class A Common Stock upon each annual meeting of the Company's
stockholders following the first anniversary of the date of appointment or
election to the Board of Directors, provided the Independent Director is still
serving as a director of the Company. Options granted to Independent Directors
will become exercisable in equal annual installments in each of the first three
anniversaries of the date of grant so long as the Independent Director continues
to serve as a director of the Company. The Company will also reimburse all
directors for their reasonable expenses incurred in connection with their
activities as directors of the Company. Directors who are not Independent
Directors receive no compensation for serving on the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Weider, Kimmel and Lengvari, none of whom are officers of the
Company, are members of the Compensation Committee of the Board of Directors.
See "Certain Relationships and Related Party Transactions" for a description of
certain of their business relationships with the Company.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "COMPENSATION
COMMITTEE") is comprised of Messrs. Weider, Kimmel and Lengvari, none of whom
are officers of the Company. The Compensation Committee's duties include
determination of the Company's compensation and benefit policies and practices
for executive officers and key managerial employees. In accordance with rules
established by the Securities and Exchange Commission (the "COMMISSION"), the
Company is required to provide certain data and information in regard to the
compensation
12
provided to the Company's Chief Executive Officer and the Named Executive
Officers. The Compensation Committee has prepared the following report for
inclusion in this Proxy Statement.
COMPENSATION POLICY AND COMPANY PERFORMANCE. The executive compensation
program's overall objective is to reward and retain executives with the level of
talent and ability required to prudently guide the Company's growth, maximize
the link between executive and stockholder interests through a stock option
plan, recognize individual contributions as well as overall business results and
maintain the Company's position as a leader in the nutritional supplements
market. To achieve these objectives, the Company has developed an overall
compensation strategy and specific compensation plans that tie a substantial
portion of an executive's compensation to performance.
The key elements of the Company's compensation program consist of fixed
compensation in the form of base salary and variable compensation in the forms
of bonus payments and stock option awards under the Company's 1997 Equity
Participation Plan (the "EQUITY PLAN"). An executive's annual base salary
represents the fixed component of such executive's total compensation and
variable compensation is intended to comprise a substantial portion of an
executive's total annual compensation. The Compensation Committee's policies
with respect to each of these elements, including the bases for the compensation
awarded to Mr. Bizzaro, the Company's Chief Executive Officer, are discussed
below. In addition, while the elements of compensation described below are
considered separately, the Compensation Committee takes into account the full
compensation package afforded by the Company to the individual, including
pension benefits, insurance and other benefits, as well as the programs
described below.
BASE SALARIES. A competitive base salary is necessary to the development and
retention of capable management and is consistent with the Company's long-term
goals. Base salaries for executives are determined based upon the Compensation
Committee's evaluation of the responsibilities of the position held and the
experience of the individual, and by reference to historical levels of salary
paid by the Company and general economic conditions. See "EXECUTIVE
COMPENSATION--SUMMARY EXECUTIVE COMPENSATION TABLE" and "EXECUTIVE
COMPENSATION--EMPLOYMENT AGREEMENTS."
BONUS PAYMENTS. Targeted cash bonus payments are awarded to executives in
recognition of contributions to the business during the prior year. An
executive's contributions to the business are measured, in part, by his or her
success in meeting certain goals established by such executive and the
Compensation Committee in consultation with the Chief Executive Officer and the
Chief Operating Officer. The Compensation Committee, at its discretion, may
grant bonuses following the end of a fiscal year in an aggregate amount of up to
9% of the Company's income before income taxes and bonuses for such fiscal year.
The aggregate amount of the bonuses awarded in any calendar year is determined
by reference to the terms of the executive employment agreements, the Company's
competitive position, assessment of progress in attaining long-term goals and
business performance considerations.
The specific cash bonus an executive receives is dependent on individual
performance and level of responsibility. Assessment of an individual's relative
performance is made annually based on a number of factors, including initiative,
business judgment, knowledge of the industry and management skills. See
"EXECUTIVE COMPENSATION-EMPLOYMENT AGREEMENTS."
AWARDS UNDER THE EQUITY PLAN. The other principal component of executives'
compensation is stock options, which are intended as a tool to attract, provide
incentive to and retain those executives who make the greatest contribution to
the business, and who can have the greatest effect on the long-term
profitability of the Company. The exercise price of the stock options is set at
a price equal to the market price of the Class A Common Stock at the time of the
grant. The options therefore do not have any value to the executive unless the
market price of the Class A Common Stock rises. The Compensation Committee
believes that these stock options more closely align the executives' interests
with those of its stockholders, and focus management on building profitability
and long-term stockholder value.
POLICY ON THE DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal
Revenue Code of 1986 as amended (the "CODE"), limits a public company's federal
income tax deduction for compensation paid in excess of $1,000,000 to any of its
five most highly compensated executive officers. However, certain
performance-based compensation, including awards of stock options, is excluded
from the $1,000,000 limit if specific requirements are met.
13
While the tax impact of any compensation arrangement is one factor which is
considered by the Compensation Committee, such impact is evaluated in light of
the compensation policies discussed above. The Compensation Committee's
compensation determinations have generally been designed to maximize the
Company's federal income tax deduction for possible application in future years.
However, from time to time compensation may be awarded which is not fully
deductible if it is determined that such award is consistent with the overall
design of the compensation program and in the best interests of the Company and
its stockholders.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Bizzaro's salary is determined
based upon his employment agreement and the competitive salary framework
described under "--BASE SALARIES," above. The minimum base salary and annual
increases set forth in Mr. Bizzaro's employment agreement were determined based
on the Board of Directors' judgment concerning his individual contributions to
the business, level of responsibility and career experience. Although none of
these factors were given a specific weight, primary consideration was given to
Mr. Bizzaro's individual contributions to the business. No particular formulas
or measures were used.
The amount of Mr. Bizzaro's 1998 bonus payment was established in accordance
with Mr. Bizzaro's employment agreement. The bonus amount fixed in Mr. Bizzaro's
employment agreement reflects Mr. Bizzaro's level of responsibility within the
Company and overall contributions as Chief Executive Officer and President.
CONCLUSION. The Company has had, and continues to have, an appropriate and
competitive compensation program. The balance of a competitive base salary,
bonus payments and significant emphasis on long-term incentives is a foundation
designed to build stability and to support the Company's continued growth. This
report is submitted by the members of the Compensation Committee.
The Compensation Committee
of the Board of Directors
Eric Weider
Roger H. Kimmel
George F. Lengvari
THE PRECEDING "REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION"
AND THE "STOCK PERFORMANCE CHART" THAT APPEARS IMMEDIATELY HEREAFTER SHALL NOT
BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR INCORPORATED BY REFERENCE IN ANY
DOCUMENTS SO FILED.
14
STOCK PERFORMANCE CHART
As part of the executive compensation information presented in this Proxy
Statement, the Commission requires a comparison of stock performance for the
Company with stock performance of a broad equity market index and an appropriate
industry index. The following chart compares the cumulative total stockholder
return on the Class A Common Stock during the period from April 30, 1997 to May
31, 1998 with the cumulative total return on The New York Stock Exchange and a
peer group index of nutritional supplement companies. The comparison assumes
$100 was invested on April 30, 1997 (the effective date of the Company's initial
public offering) in the Class A Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends, if any. The stock performance
shown on the following chart is not necessarily indicative of future
performance.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
4/30/97 5/30/97 8/29/97 11/28/97 2/27/98 5/29/98
------- ------- ------- -------- ------- -------
WNI......................... 100 114.6 134.8 97.2 123.6 139.9
S&P 500..................... 100 107.2 116.7 121 132.6 135.9
Comparable Companies Index.. 100 125.4 158.5 172.5 327.8 303.1
CORPORATE GOVERNANCE
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board of
Directors. The Board of Directors meets on a regularly scheduled basis during
the year to review significant developments affecting the Company and to act on
matters requiring approval by the Board of Directors. It also holds special
meetings when an important matter requires action by the Board of Directors
between scheduled meetings. During fiscal 1998, the Board of Directors met five
times. Each Director attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors held during fiscal 1998 and the total
number of meetings held during fiscal 1998 by all committees of the Board of
Directors on which that Director served.
The Company has established a standing Audit Committee of the Board of
Directors (the "AUDIT COMMITTEE"). The Audit Committee meets periodically with
management and the Company's independent auditors to review the activities of
each and to discuss audit matters, financial reporting and the adequacy of
internal corporate controls. Roger H. Kimmel, Ronald L. Corey and Glenn W.
Schaeffer currently serve on the Audit Committee. During fiscal 1998, the Audit
Committee met two times.
The Company does not have a standing nominating committee. The functions
customarily attributable to a nominating committee are performed by the Board of
Directors as a whole. The Company will consider nominees recommended by
stockholders, although it has not actively solicited recommendations from
stockholders for nominees nor has it established any procedures for this purpose
for the 1998 Annual Meeting other than as set forth in the Bylaws. In the
future, stockholders wishing to recommend a person for consideration as a
nominee for election to
15
the Board of Directors can do so in accordance with the Bylaws by giving timely
written notice to the Secretary of the Company, that provides each such
nominee's name, appropriate biographical information and any other information
that would be required in a proxy statement or other filings required to be made
in connection with solicitation of proxies for the election of directors and the
class and the number of shares of capital stock of the Company that are owned
beneficially or of record by the stockholder making the nomination. Such notice
should be accompanied by a written statement from each nominee consenting to be
named as a nominee and to serve as a director if elected. To be timely, such
notice must be delivered to, or if mailed, received at, the Company's executive
offices not less than 60 days nor more than 90 days prior to the anniversary of
the immediately preceding annual meeting of stockholders; PROVIDED HOWEVER, that
if the annual meeting is called for a date that is not within 30 days before or
after such anniversary date, notice by the stockholder in order to be timely
must be so received not later than the close of business on the tenth day
following the earlier of the day on which such notice of the date of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made.
The Company has established a standing Compensation Committee. The
Compensation Committee has the authority to approve any offers to potential
employees of the Company for positions of Senior Vice President or above, or
positions with compensation packages consisting of (a) annual salaries of
$100,000 or more or (b) grants of options to purchase 10,000 or more shares of
Common Stock. During fiscal 1998, the Compensation committee met four times.
Eric Weider, Roger H. Kimmel and George F. Lengvari have been appointed to the
Compensation Committee.
See "REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION."
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
ADVERTISING AGREEMENT
The Company and Weider Publications are parties to an Advertising Agreement
(the "ADVERTISING AGREEMENT") under which the Company is obligated (pursuant to
an annually updated notification in connection with the Company's budget) to
purchase a minimum number of advertising pages in certain of the publications of
Weider Publications each month at a price below that charged to unaffiliated
third party advertisers. The advertising the Company purchases under the
Advertising Agreement will be priced at the direct production cost per page (the
"AD PAGE RATE") for each publication for the first five years and at premiums to
the Ad Page Rate in subsequent years. The Ad Page Rate for each publication will
be determined on an annual basis in accordance with the terms of the Advertising
Agreement. The Ad Page Rate will not apply to any company or business acquired
by the Company after December 31, 1996. Should Weider Publications develop or
acquire new publications during the term of the Advertising Agreement, the
Company will have the right, but not the obligation, to purchase advertising in
such publications on terms similar to those covering Weider Publications'
existing publications. The Advertising Agreement has a ten-year term and is
subject to termination by either party if certain specified events occur,
including a change of control of Weider Health and Fitness or an initial public
offering of Weider Publications.
CERTAIN INTERNATIONAL ACQUISITIONS AND ROYALTY ARRANGEMENTS
In connection with its strategy to expand its nutritional supplements
business in international markets, the Company has acquired or licensed from
related parties certain assets and distribution rights. The Company has acquired
manufacturing capabilities in the United Kingdom, Spain and Canada and has
licensed international rights to use the Weider name and trademarks. The Company
now controls distribution rights for the Weider name and trademarks worldwide,
except for Australia, New Zealand, Japan and South Africa. Sales under these
license arrangements are subject to certain royalty arrangements; however, the
Company is not required to pay any royalties with respect to sales of its
products in the United States, Canada, Mexico, Spain or Portugal (the
"ROYALTY-FREE TERRITORIES").
The Company acquired assets of Weider Canada for $4.0 million in September
1996 ($3.0 million was paid in cash and $1.0 million was in the form of an
earnout to be paid $40,000 per month for 25 months). In connection with the
purchase of Weider Canada, on September 1, 1996, the Company agreed to lease a
24,623 square foot office and warehouse facility in Montreal from Ben Weider
(the "WEIDER CANADA LEASE"). The Weider Canada Lease has a two-year term and an
annual base rent of $98,492.
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The Company obtained the exclusive right to use the Weider name and
trademarks outside of the Royalty-Free Territories throughout the world, with
the exceptions of Australia, New Zealand, Japan and South Africa, pursuant to a
sublicense agreement dated December 1, 1996 with Mariz Gestao E Investimentos
Limitada ("MARIZ"). Mariz is a company incorporated under the laws of Portugal
and owned by a trust of which the family members of George F. Lengvari, a
director of the Company, are included among the beneficiaries. Mariz obtained
its exclusive international rights to use the Weider name and trademarks
pursuant to a license agreement, effective June 1, 1994, between Mariz and Joe
Weider, Ben Weider, Weider Sports Equipment and Weider Health and Fitness (the
"LICENSORS"). Pursuant to the license agreement with Mariz, the Company is
required to make annual royalty payments to Mariz commencing on December 1, 1998
on sales of the Company's brands in existence on December 1, 1996 in countries
covered by the agreement. The royalty payments are to be equal to (i) 4% of
sales up to $33.0 million; (ii) 3.5% of sales greater than $33.0 million and
less than $66.0 million; (iii) 3.0% of sales from $66.0 million to $100.0
million; and (iv) 2.5% of sales over $100.0 million. In addition, the sublicense
agreement with Mariz includes an irrevocable buy-out option exercisable by the
Company after May 31, 2002 for a purchase price equal to the greater of $7.0
million or 6.5 times the aggregate royalties paid by the Company in the fiscal
year immediately preceding the date of the exercise of the option.
TRANSFER OF INTELLECTUAL PROPERTY
In July 1985, Weider Health and Fitness and Joe Weider entered into an
agreement pursuant to which Weider Health and Fitness was granted all rights,
title and interest in and to a system of weight training known as "The Weider
System" and the exclusive right to use of the name "Joe Weider" within the
continental United States. As consideration for such grants, Weider Health and
Fitness agreed to pay Joe Weider approximately $620,000 over seven years through
May 31, 1992 and $450,000 for each year thereafter for the rest of his lifetime
(of which $250,000 is paid by the Company). Weider Health and Fitness's right to
use the "The Weider System" and "Joe Weider" survives the death of Joe Weider.
Since the transfer by Joe Weider of such intellectual property to Weider Health
and Fitness in 1985, Weider Health and Fitness has developed approximately 80
related federal trademark registrations and approximately 108 related trademark
applications that are used in the nutritional supplements business.
Effective September 1, 1996, Weider Health and Fitness assigned to the
Company substantially all such intellectual property. Weider Health and Fitness
retained three trademarks used in both the Company's nutritional supplements
business and Weider Health and Fitness' body building and exercise equipment
divisions; however, Weider Health and Fitness entered into a Trademark and
License Agreement granting to the Company a perpetual, royalty-free, fully paid
license to use such trademarks for its nutritional supplements business. In
addition, each of Weider Nutrition, Schiff Products and American Nutrition Bars
assigned to the Company all trademarks it owned and either registered in the
United States or filed applications for registration in the United States for
the nutritional supplements business.
CERTAIN RELATIONSHIPS OF DIRECTORS
Eric Weider, Chairman of the Board of Directors of the Company, is currently
President, Chief Executive Officer and a director of Weider Health and Fitness.
Mr. Lengvari, a director of the Company, is currently Vice Chairman and a
director of Weider Health and Fitness. In addition, Mr. Lengvari's family
members are included among the beneficiaries under the Bayonne Settlement, a
trust that owns 1.9% of the Class A Common Stock. In addition, Mariz, a company
owned by a trust of which family members of Mr. Lengvari are included among the
beneficiaries, was granted the exclusive right to use the Weider name and
trademarks outside of the United States, Canada and Mexico. The Company has
sublicensed such rights from Mariz. See "-- Transfer of Intellectual Property."
Latham & Watkins, of which Roger H. Kimmel, a director of the Company, is a
partner, performed legal services for the Company during the fiscal year ended
May 31, 1998.
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MANAGEMENT INCENTIVE AGREEMENTS
Prior to the IPO, the Company entered into Management Incentive Agreements
pursuant to which the Recipients were granted Performance Units as incentive
compensation. Simultaneously with the IPO, which triggered conversion under the
Management Incentive Agreements, the Company paid in cash and shares of Class A
Common Stock the vested portion of the Performance Units. In aggregate, the
Company paid approximately $2.96 million in cash and issued 972,247 shares of
Class A Common Stock.
The unvested portion of the Performance Units (represented by 182,716
unvested shares of Class A Common Stock as of the IPO date) vest, contingent
upon continued employment and/or other factors, over a five-year period at 20%
per year through May 2002. During fiscal 1998, 36,543 shares of Class A Common
Stock became issued and outstanding in accordance with the vesting provisions of
the Performance Units.
To facilitate the payment of individual income taxes incurred in connection
with the conversion of the Performance Units, the Company makes available to
each Recipient a loan in principal amount up to 30% of the conversion value of
the vested Performance Units held by each Recipient. These loans bear interest
at a rate of 8.0% per annum, are repayable five years from the borrowing date
and are secured by the Recipient's Class A Common Stock received upon
conversion. During fiscal 1998, the Company made loans to Messrs. Bizzaro,
Reynolds, Blair and Young in the aggregate amount of $2,044,536, $2,004,419,
$172,274 and $160,592, respectively. In June 1997, Messrs. Reynolds and Young
made principal repayments in the amounts of $642,000 and $70,000, respectively.
Accordingly, Messrs. Reynolds and Young had outstanding principal loan balances
at May 31, 1998 of $1,362,419 and $90,592, respectively.
OTHER MATTERS
OTHER BUSINESS FOR MEETING
The Board of Directors does not know of any matters that will be presented
for action at the 1998 Annual Meeting other than those described above and
matters incident to the conduct of the meeting. If, however, any other matters
not presently known to management should come before the 1998 Annual Meeting, it
is intended that the shares represented by the accompanying proxy will be voted
on such matters in accordance with the discretion of the holders of such proxy.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires directors, officers and persons
who beneficially own more than 10% of a registered class of stock of the Company
to file initial reports of ownership (Form 3) and reports of changes in
beneficial ownership (Forms 4 and 5) with the Commission and The New York Stock
Exchange. Such persons are also required under the rules and regulations
promulgated by the Commission to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that during the fiscal year ended May 31, 1998 the
Company's directors, officers and greater than 10% beneficial owners complied
with all applicable Section 16(a) filing requirements.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any stockholder of the Company who wishes to present a proposal at the next
annual meeting of stockholders of the Company, and who wishes to have such
proposal included in the Company's proxy statement for that meeting, must in
accordance with Rule 14a-8 of the Exchange Act, deliver a copy of such proposal
to the Company at 2002 South 5070 West, Salt Lake City, Utah 84104-4726,
Attention: Secretary, no later than August 1, 1999; however, if next year's
annual meeting of stockholders is held on a date more than 30 days before or
after the corresponding date of the 1998 Annual Meeting, any stockholder who
wishes to have a proposal included in the Company's proxy statement and proxy
for that meeting must deliver a copy of the proposal to the Company within a
reasonable time before the proxy solicitation is made. The Company reserves the
right to decline to include in the Company's proxy
18
statement and proxy any stockholder's proposal that does not comply with the
rules of the Commission and/or the Bylaws for inclusion therein.
New Commission rules regarding stockholder proposals became effective on June
29, 1998. Pursuant to these new rules, if the Company has not received notice no
later than August 22, 1999 of any matter a stockholder intends to propose for a
vote at the 1999 annual meeting of stockholders, then a proxy solicited by the
Board of Directors may be voted on such matter in the discretion of the proxy
holder, without discussion of the matter in the proxy statement soliciting such
proxy and without such matter appearing as a separate item on the proxy card.
See "CORPORATE GOVERNANCE--MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS"
and the Bylaws for notice procedures to recommend a person for nomination as a
director.
ANNUAL REPORT
The Company's 1998 Annual Report to Stockholders accompanies this Proxy
Statement. The 1998 Annual Report to Stockholders does not form any part of the
materials for the solicitation of proxies. Upon written request, the Company
will provide stockholders with a copy of its Annual Report on Form 10-K for the
year ended May 31, 1998 (the "FORM 10-K"), as filed with the Commission and any
amendments thereto, without charge. Please direct written requests for a copy of
the Form 10-K, and any amendments thereto, to: Weider Nutrition International,
Inc., 2002 South 5070 West, Salt Lake City, Utah 84104-4726.
BY ORDER OF THE BOARD OF DIRECTORS
WEIDER NUTRITION INTERNATIONAL, INC.
October 2, 1998
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WEIDER NUTRITION INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING TO BE HELD ON OCTOBER 29, 1998
The undersigned hereby appoints each of Richard B. Bizzaro and Robert K.
Reynolds as attorneys and proxies, each with power of substitution, to vote all
shares of Class A common stock (the "Class A Common Stock") and Class B common
stock (the "Class B Common Stock," and together with the Class A Common Stock,
the "Common Stock") of Weider Nutrition International, Inc. (the "Company") that
the undersigned may be entitled to vote at the Annual Meeting of the
Stockholders of the Company to be held Thursday, October 29, 1998 at 2:00 p.m.,
local time at the Company's executive offices at 2002 South 5070 West, Salt Lake
City, Utah 84104, on the proposals set forth on the reverse side hereof and on
such other matters as may properly come before the meeting and any adjournment
or postponement thereof.
The proxy holders will vote the shares represented by this proxy in the
manner indicated on the reverse side hereof. Unless a contrary direction is
indicated, the proxy holders will vote such shares "FOR" the proposals set forth
on the reverse side hereof. If any further matters properly come before the
Annual Meeting, it is the intention of the persons named above to vote such
proxies in accordance with their best judgment.
(Continued and to be dated and signed on the reverse side)
The Board of Directors recommends a vote FOR the following proposals:
1. Election as directors of the Company until the next annual meeting and until
their successors are duly elected and qualified.
FOR all nominees WITHHOLD AUTHORITY to vote
listed below for all nominees listed below *EXCEPTIONS
[ ] [ ] [ ]
Nominees: Eric Weider, Richard B. Bizzaro, Robert K. Reynolds, Ronald L.
Corey, Donald G. Drapkin, Roger H. Kimmel, George F. Lengvari and
Glenn W. Schaeffer
(INSTRUCTIONS: To withhold authority for any individual nominee, mark the
"Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions:_________________________________________________________________
2. Approval of the 1997 Equity Participation Plan, as amended
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To transact such other business as may properly come before
the Annual Meeting and any adjournment postponements thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Change of Address and/or
comments mark here [ ]
Date:_________________________________, 1998
Signature: _________________________________
Signature:__________________________________
Note: Please sign exactly as name appears hereon. If a joint account, each joint
owner must sign. If signing for a corporation or partnership or as agent,
attorney or fiduciary, indicate the capacity in which you are signing.
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.) Votes must be indicated (X) in Black or Blue ink. [ ]