SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.)
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 Rule 14a-11(c) or Rule 14a-12
NBTY, INC.
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(Name of Registrant as Specified in Its Charter)
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(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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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"NBTY Logo"
PROXY STATEMENT
for
April 29, 2002
Annual Meeting of Stockholders
of NBTY, Inc.
NBTY, Inc.
90 Orville Drive
Bohemia, New York 11716
Scott Rudolph
Chairman of the Board and
Chief Executive Officer
"NBTY Logo"
March 25, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of NBTY, Inc. to be held on April 29, 2002, at 10:00 A.M.,
local time, at the Wyndham Windwatch Hotel,
1717 Motor Parkway, Hauppauge, New York. On the following pages you will
find information about the meeting, together with a Proxy Statement and a
Proxy Card.
At the meeting we will review NBTY's operations, discuss the
financial statements for the fiscal year ended September 30, 2001, and
report on our results of operations for the six month period ended March
31, 2002, as well as our plans for the future. A question and answer
session for stockholders will follow.
Your vote is important to us. If you cannot be with us in person,
please be sure to vote your shares by Proxy. This may be accomplished by:
(i) signing and dating the enclosed Proxy Card and returning it in the
postage-paid return envelope; (ii) voting your shares over the Internet; or
(iii) voting your shares by telephone. Your prompt return of the Proxy Card
or vote over the Internet or by telephone will help us avoid additional
solicitation costs. If you attend the meeting, you may continue to have
your shares voted as instructed in the Proxy Card or you may withdraw your
Proxy at the meeting and vote your shares in person. Instructions for
voting over the Internet or by telephone accompany this Proxy Statement.
Sincerely,
Scott Rudolph,
Chairman of the Board and
Chief Executive Officer
NBTY, INC.
90 Orville Drive, Bohemia, New York 11716
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SUMMARY OF PROPOSALS TO BE CONSIDERED BY STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of
NBTY, Inc. (the "Company") will be held at the Wyndham Windwatch Hotel,
1717 Motor Parkway, Hauppauge, New York 11788 on April 29, 2002, at 10:00
A.M., local time, for the purpose of considering and taking action on the
following:
(1) to re-elect Scott Rudolph, Murray Daly and Nathan Rosenblatt,
and to elect Peter White, to Class II of the Board of
Directors, to serve until the 2005 Annual Meeting of
Stockholders or until their respective successors are duly
elected and qualified;
(2) to adopt the NBTY, Inc. Year 2002 Stock Option Plan;
(3) to ratify the Board of Directors' designation of
PricewaterhouseCoopers LLP as independent certified public
accountants to audit the consolidated financial statements of
the Company for the fiscal year ending September 30, 2002; and
(4) to transact such other business as may properly come before
the meeting or any adjournment thereof.
Stockholders who were owners of NBTY, Inc. stock at the close of
business on March 11, 2002 (record date) may attend and vote at the meeting
or may vote by Proxy (i) by signing and dating the enclosed Proxy Card and
returning it to the Company; (ii) over the Internet or (iii) by telephone.
This summary is qualified in its entirety by the detailed information
contained within the enclosed Proxy Statement.
We look forward to seeing you at the meeting.
Cordially,
Scott Rudolph
Chairman of the Board and
Chief Executive Officer
Bohemia, New York
March 25, 2002
NBTY, INC.
90 Orville Drive, Bohemia, New York 11716
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING THE SOLICITATION
The Proxy Statement and enclosed Proxy Card are being furnished to
all holders of record of the common stock, par value $.008 per share (the
"Common Stock"), of NBTY, Inc. (the "Company"), as of March 11, 2002, in
connection with a solicitation of Proxies by the Board of Directors of the
Company for use at the Annual Meeting of Stockholders to be held on April
29, 2002, and at any adjournments thereof (the "Meeting"). The persons
named as Proxies were selected by the Board of Directors of the Company.
The Company anticipates first sending this Proxy Statement and the
enclosed Proxy Card to its registered stockholders on or about March 25,
2002. The Company's Annual Report to Stockholders, which includes financial
statements for the fiscal year ended September 30, 2001, has been mailed
together with this Proxy Statement to the stockholders entitled to vote at
the Meeting. The Annual Report is not to be regarded as Proxy soliciting
material.
The enclosed Proxy Card provides that each stockholder may specify
that his or her shares (i) be voted "FOR" the election of the named
nominees to the Company's Board of Directors or to "WITHHOLD AUTHORITY" as
to all nominees or any individual nominee or nominees; (ii) be voted "FOR,"
"AGAINST" or "ABSTAIN" from voting with respect to the adoption of the
NBTY, Inc. Year 2002 Stock Option Plan; and (iii) be voted "FOR," "AGAINST"
or "ABSTAIN" from voting with respect to the Board of Directors'
designation of PricewaterhouseCoopers LLP as independent certified public
accountants to audit the consolidated financial statements of the Company
for the fiscal year ending September 30, 2002. Except with respect to
broker "non-votes," where a signed Proxy Card is returned, but no choice is
specified, the shares will be voted "FOR" the election of each named
nominee to the Company's Board of Directors, "FOR" the adoption of the
NBTY, Inc. Year 2002 Stock Option Plan and "FOR" the ratification of
PricewaterhouseCoopers LLP as the Company's independent certified public
accountants. Under the General Corporation Law of the State of Delaware,
the state in which the Company is incorporated, an abstaining vote or a
broker "non-vote" is deemed to be "present" for quorum purposes but is not
deemed to be a "vote cast" at the Meeting. As a result, abstentions and
broker "non-votes" are not included in the tabulation of the voting results
on the election of directors or issues requiring approval of a majority of
the votes cast. Abstentions and broker "non-votes" will have no impact on
the election of the directors, as the directors are to be elected by a
plurality of the votes cast at the Meeting. However, abstentions and broker
"non-votes" will have the same effect as votes "AGAINST" any proposal, the
approval of which requires a majority vote "FOR" the proposal by the
holders of shares of Common Stock present, in person or represented by
Proxy, at the Meeting (at which a quorum is present). A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote
on a particular proposal because the nominee does not have discretionary
voting power with respect to that proposal and has not received
instructions from the beneficial owner.
All shares entitled to vote and represented by properly executed
Proxies received prior to the Meeting, and not revoked, will be voted at
the Meeting in accordance with the instructions indicated on those Proxies.
If no instructions are indicated on a properly executed Proxy, the shares
represented by that Proxy will be voted as recommended by the Board of
Directors.
If any other matters are properly presented at the Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Meeting to another time or place, the persons named in the
enclosed Proxy Card will have discretion to vote on those matters in
accordance with their best judgment to the same extent as the person
signing the Proxy Card would be entitled to vote. The Company does not
currently anticipate that any other matters will be raised at the Meeting
or that the Meeting will be adjourned.
Any Proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. A Proxy may be revoked (i)
by filing with the Secretary of the Company, at or before the taking of the
vote at the Meeting, a written notice of revocation or a duly executed
Proxy Card, in either case later dated than the prior Proxy relating to the
same shares, or (ii) by attending the Meeting and voting in person
(although attendance at the Meeting will not itself revoke a Proxy). Any
written notice of revocation or subsequent Proxy Card must be sent to NBTY,
Inc., 90 Orville Drive, Bohemia, New York 11716, Attention: Secretary, or
hand delivered to the Secretary, at or before the taking of the vote at the
Meeting. Instructions for voting on the Internet or by telephone may be
found in the Proxy Voting Instructions accompanying the Proxy Card.
The Company has fixed the close of business on March 11, 2002 as the
record date for determining the holders of its Common Stock who will be
entitled to notice of and to vote at the Meeting. On March 11, 2002, the
Company had issued and outstanding approximately 65,983,962 shares of its
Common Stock which were the only outstanding shares of the capital stock of
the Company. Holders of the Company's Common Stock are entitled to one vote
for each share owned of record. Shares representing a majority of the votes
entitled to be cast by the holders of the outstanding shares of Common
Stock must be represented in person or by Proxy at the Meeting in order for
a quorum to be present.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Amended and Restated By-Laws provide that the members
of the Board of Directors of the Company shall be divided into three
classes and that the number of directors constituting the Board of
Directors shall from time to time be fixed and determined by a vote of a
majority of the Company's entire Board of Directors serving at the time of
such vote. The Board of Directors is now comprised of eleven members, with
Class I consisting of three members, Class II consisting of four members
and Class III consisting of four members, who shall serve until the end of
each respective three-year term, or until their successors are duly elected
and qualified. The Board of Directors has nominated (i) Scott Rudolph,
Murray Daly and Nathan Rosenblatt for re-election to Class II, and (ii)
Peter White for election to Class II.
Directors are elected by a plurality of the votes cast at the Meeting
by the holders of the shares present in person or represented by Proxy at
the Meeting at which a quorum is present. "Plurality" means that the
individuals who receive the largest number of votes cast are elected as
directors up to the maximum number of directors to be chosen at the
Meeting. Consequently, any shares not voted (whether by abstention,
withholding authority or broker "non-vote") have no impact in the election
of directors.
Stockholders of the Company do not have cumulative voting rights with
respect to the election of directors. It is the intention of the persons
named in the enclosed Proxy Card to vote such proxy "FOR" the election of
the named nominees for Class II directorships unless authorization is
withheld on the Proxy Card. Should any nominee be unable or unwilling to
serve as a director, which is not anticipated, it
2
is intended that the named Proxies will vote for the election of such other
person or persons as they, in their discretion, may choose.
Information as to Director Nominees and Directors
The following table provides information as of March 1, 2002 with
respect to each of the Company's Directors and Director nominees.
Name and year first
became a Director Principal Occupation during
of the Company Age the past Five Years
- ------------------- --- ---------------------------
CLASS II-Term Expiring at the 2002 Annual Meeting of Stockholders
<s> <c> <c>
Scott Rudolph 44 The Chairman of the Board of Directors and
1986 Chief Executive Officer of the Company.
He served as the Chairman of the Board of
Directors of Dowling College, Long Island, New
York from 1997 through 2000. Currently, he is
the Vice Chairman of the Dowling College
Board. He joined the Company in 1986. He is
the son of Arthur Rudolph.
Murray Daly 74 Formerly a Vice President of J. P. Egan Office
1971 Equipment Co., is a consultant to the
office equipment industry.
Nathan Rosenblatt 44 President and Chief Executive Officer of
1994 Ashland Maintenance Corp., a commercial
maintenance organization located in Long
Island City, New York.
Peter White 47 President and Chief Executive Officer of I. J.
2001 White Corp., a company based in
Farmingdale, New York, engaged in the
worldwide engineering and manufacturing of
conveying systems for the food industry. Mr.
White previously was elected by the Board of
Directors to fill the vacancy on the Board
created by the resignation of Bud Solk.
CLASS I-Term Expiring at the 2003 Annual Meeting of Stockholders
Aram Garabedian 66 Elected a State Senator of the State of Rhode
1971 Island in 2000 and had been a State
Representative in that State's legislature
from 1972 through 1978 and 1998 through 2000.
Since 1988, he has been a real estate property
manager and developer in Rhode Island and is
the President of Bliss Properties, Inc. He was
associated with the Company and its
predecessor, Arco Pharmaceuticals, Inc., for
20 years in a sales capacity and as an
officer.
Bernard G. Owen 74 He currently serves as Chairman of Wood-Hew
1971 Travel and had been associated with
Pitkin, Owen Insurance Agency.
Alfred Sacks 74 President of Al Sacks, Inc., an insurance
1971 consulting firm.
3
CLASS III-Term Expiring at the 2004 Annual Meeting of Stockholders
Arthur Rudolph 74 Founded the Company in 1971 and served as the
1971 Company's Chief Executive Officer and
Chairman of the Board of Directors since that
date until his resignation in September 1993.
Mr. Rudolph is now a consultant to the Company.
He is a member of the Board of Directors and he
is the father of Scott Rudolph.
Glenn Cohen 42 President of Save-on Sprinkler Co.
1988
Michael L. Ashner 49 President and Chief Executive Officer of
1998 Winthrop Financial Associates, a real
estate investment banking firm affiliated with
Apollo Real Estate, since 1995. From 1984 to
1995, he was President and a principal of
National Property Investors, a real estate
investment banking firm also affiliated with
Apollo Real Estate. He is a director of
Nexthealth, Inc., Great Bay Hotel & Casino
Co., Inc., and Burnham Pacific Properties,
Inc. He has a B.A. degree in philosophy and
government from Cornell University and a J.D.
degree from the University of Miami School of
Law.
Michael C. Slade 52 Senior Vice President-Strategic Planning and
1998 Secretary of the Company. He was the
President and an owner of Nutrition
Headquarters Corp., Nutro Labs, Inc. and Lee
Nutrition, Inc., which companies were acquired
by the Company in 1998. He is a member of the
Board of Trustees of North Shore-LIJ Health
System and Franklin Hospital. He is also a
member of the Board of Directors of North
Shore-LIJ Research Institute.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RE-ELECTION OF SCOTT
RUDOLPH, MURRAY DALY AND NATHAN ROSENBLATT, AND THE ELECTION OF PETER
WHITE, TO CLASS II OF THE BOARD OF DIRECTORS. IN THE EVENT THAT ANY NOMINEE
NAMED AS A CLASS II DIRECTOR IS UNABLE TO SERVE (WHICH IS NOT ANTICIPATED),
THE PERSONS NAMED IN THE PROXY MAY VOTE FOR ANOTHER NOMINEE OF THEIR
CHOICE.
Committees of the Board of Directors
During the fiscal year ended September 30, 2001, the Board of
Directors had four standing committees: (i) an Audit Committee; (ii) a
Compensation and Stock Option Committee; (iii) a Nominating Committee; and
(iv) a Strategic Planning Committee.
The Audit Committee is comprised entirely of non-employee Directors
and recommends to the Board independent auditors to audit the Company's
financial statements; reviews the audit with the auditors and management;
reviews the Company's dealings with Directors and their affiliates; reviews
the Company's legal affairs; and consults with the auditors and management
regarding risk management and the adequacy of financial and accounting
procedures and controls. In carrying out its responsibilities, the
4
Committee meets with the independent auditors in executive session, without
members of management present.
The Compensation and Stock Option Committee is comprised entirely of
non-employee Directors and is responsible for developing compensation
policies, including stock options, consistent with and linked to the
Company's strategies. In addition, this Committee evaluates, in
consultation with all outside Directors, the performance of the Company's
Chief Executive Officer and recommends his compensation and that of all
executive management to the Board annually; reviews and approves all other
officers' compensation; and recommends to the Board the fees of outside
Directors. The Committee's report on executive compensation can be found on
page 11.
The Nominating Committee establishes criteria for Board membership,
searches for and screens candidates to fill vacancies on the Board,
recommends an appropriate slate of candidates for election each year and,
in this regard, evaluates the performance of individual Directors, assesses
the overall performance of the Board and considers issues regarding the
composition and size of the Board. Stockholders wishing to nominate
Director candidates for consideration may do so by writing to the
Secretary, NBTY, Inc., 90 Orville Drive, Bohemia, New York 11716 and
providing the candidate's name, biographical data and qualifications.
The Strategic Planning Committee may exercise the broad powers and
authority granted to it under the Company's Amended and Restated By-Laws,
including such things as evaluating potential acquisitions, exploring new
marketing areas and assisting in the formulation of major policy
objectives.
The chart below sets forth the composition of the Board's committees
as of March 1, 2002, as well as the number of committee meetings each
Director attended in the fiscal year ended
September 30, 2001.
Number of Committee
Meetings Attended
Compensation Strategic in Fiscal Year
Audit and Stock Nominating Planning Ended
Member Committee Option Committee Committee Committee September 30, 2001
- ----------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
Glenn Cohen * 1
Murray Daly * 1
Aram Garabedian * 4
Bernard G. Owen * 1
Nathan Rosenblatt * * 5
Arthur Rudolph * * * 8
Scott Rudolph * * 7
Alfred Sacks * 1
Michael L. Ashner * 4
Michael C. Slade * 6
<FN>
- --------------------
* Member
</FN>
During the fiscal year ended September 30, 2001, the Board convened
four regular board meetings. No special board meetings were held. The Audit
Committee, the Compensation and Stock Option Committee, the Nominating
Committee and the Strategic Planning Committee convened 4, 1, 1 and 6
times, respectively, during the fiscal year ended September 30, 2001. Each
of the Directors attended all of the Board meetings and the meetings of the
Committees of which they were members.
5
Compensation of Directors
During the fiscal year ended September 30, 2001, each outside
Director earned an annual retainer of $20,000 for a total of $180,000 for
services rendered as Directors. This retainer has been increased to $30,000
for the fiscal year ending September 30, 2002. Each Director is entitled to
reimbursement for out-of-pocket expenses to attend meetings. Any Director
who also is an officer of the Company does not receive additional
compensation for his services as a Director.
The Company does not offer a pension plan to its outside Directors.
Principal Stockholders and Security Ownership of Directors and Executive
Officers
The following table sets forth the number of shares of Common Stock
beneficially owned as of March 1, 2002 by (i) each Director of the Company;
(ii) the executive officers named in the Summary Compensation Table set
forth below; (iii) the Directors and executive officers as a group; and
(iv) each person or entity known by the Company to beneficially own more
than five percent of the outstanding shares of the Company's Common Stock.
Number of Shares
Beneficially Percentage
Directors Owned (a)(b)(c) Ownership
-------------------------------------------------------------
<s> <c> <c>
Scott Rudolph(d) 13,735,326 20.8
Arthur Rudolph(d) 2,056,893 3.1
Aram Garabedian 60,000 *
Bernard G. Owen 73,500 *
Alfred Sacks 100,000 *
Murray Daly 60,000 *
Glenn Cohen 60,000 *
Nathan Rosenblatt 30,000 *
Michael L. Ashner 135,000 *
Michael C. Slade(e) 2,312,698 3.5
Peter J. White 2,000 *
Other Named Executive Officers
------------------------------
<s> <c> <c>
Harvey Kamil 1,931,432 2.9
William Shanahan 167,000 *
James P. Flaherty 120,963 *
Directors and Executive Officers
--------------------------------
<s> <c> <c>
All Directors and Executive Officers
as a group (14 persons)(d)(e) 20,844,812 31.6
Other
-----
<s> <c> <c>
Morgan Stanley Dean Witter & Co.(f)(g) 4,353,099 6.6
Barclays Global Investors, N.A.(f)(h) 3,913,339(i) 5.9
NBTY, Inc. Employees'
Stock Ownership Plan 3,063,146 4.6
(footnotes on following page)
6
<FN>
- --------------------
(a) Each stockholder shown on the table has sole voting and investment
power with respect to the shares beneficially owned.
(b) Each named person or group is deemed to be the beneficial owner of
securities which may be acquired within 60 days through the exercise
or conversion of options, if any, and such securities are deemed to
be outstanding for the purpose of computing the percentage
beneficially owned by such person or group. Such securities are not
deemed to be outstanding for the purpose of computing the percentage
of class beneficially owned by any other person or group.
Accordingly, the indicated number of shares includes shares issuable
upon exercise of options (including employee stock options) and any
other beneficial ownership of securities held by such person or
group.
(c) Includes shares beneficially owned under the Company's Employees'
Stock Ownership Plan as of December 31, 2000. More recent information
was not available to the Company as of the date of this Proxy
Statement.
(d) Includes shares held in a Trust created by Arthur Rudolph for the
benefit of Scott Rudolph and others.
(e) Includes shares held in a Trust for the benefit of Ruth Slade, the
wife of Michael C. Slade. Mr. Slade is a trustee of this Trust.
(f) Based upon current Schedule 13G reported information.
(g) As disclosed in its most recent Schedule 13G filing with the SEC,
Morgan Stanley Dean Witter & Co.'s business address is 1585 Broadway,
New York, New York 10036.
(h) As disclosed in its most recent Schedule 13G filing with the SEC,
Barclays Global Investors, N.A.'s business address is 45 Freemont
Street, San Francisco, California 94105.
(i) Includes 3,512,199 shares beneficially owned by Barclays Global
Investors, N.A., and 401,140 shares beneficially owned by Barclays
Global Fund Advisors, an affiliate of Barclays Global Investors, N.A.
An asterisk (*) in the above table means percentage ownership of less than
one percent.
</FN>
--------------------
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning total
compensation earned or paid to the Chief Executive Officer and the four
other most highly compensated executive officers of the Company who served
in such capacities as of September 30, 2001 for services rendered to the
Company during each of the last three fiscal years.
Long-Term
Compensation Awards All Other
Fiscal Annual Compensation ------------------------- Compensation:
Name and Year ----------------------- Restricted Stock Pension Plan and
Principal Position Ended Salary ($) Bonus ($) Stock ($) Options (#) 401(k) Plan ($)(a)
------------------ ------ ---------- --------- ---------- ----------- ------------------
<s> <c> <c> <c> <c> <c> <c>
Scott Rudolph 2001 634,024 500,000 - 500,000 3,400.00
Chairman of the Board 2000 621,792 425,000 - 1,000,000 6,607.43
and Chief Executive 1999 609,600 500,000 - 260,000 7,116.94
Officer
Harvey Kamil 2001 317,012 225,000 - 125,000 3,400.00
President and 2000 310,896 200,000 - 250,000 6,607.43
Chief Financial Officer 1999 304,800 225,000 - 250,000 7,116.94
Michael C. Slade 2001 306,346 50,000 - 70,000 3,200.00
Senior Vice President 2000 295,916 50,000 - 30,000 6,407.43
Strategic Planning 1999 275,000 - - - 4,895.79
7
Long-Term
Compensation Awards All Other
Fiscal Annual Compensation ------------------------- Compensation:
Name and Year ----------------------- Restricted Stock Pension Plan and
Principal Position Ended Salary ($) Bonus ($) Stock ($) Options (#) 401(k) Plan ($)(a)
------------------ ------ ---------- --------- ---------- ----------- ------------------
<s> <c> <c> <c> <c> <c> <c>
James Flaherty 2001 194,519 75,000 - - 1,500.00
Vice President 2000 185,000 75,000 - 30,000 4,841.81
Marketing & Advertising 1999 174,700 75,000 - 20,000 7,116.88
William Shanahan 2001 171,981 75,000 - - 3,200.00
Vice President 2000 165,000 70,000 - 20,000 6,407.43
Information Technology 1999 152,000 60,000 - 20,000 7,116.88
<FN>
- --------------------
(a) Includes matching contributions to the Company's Defined Contribution
Savings Plan and contributions to the Company's Employees' Stock
Ownership Plan by the Company on behalf of the officers. The
Company's Defined Contribution Savings Plan and the Employees' Stock
Ownership Plan are maintained on a calendar year basis. As of the
date of this Proxy Statement, the Company has not yet allocated to
any of the officers the contributions made by the Company to the
Company's Employees' Stock Ownership Plan for the calendar year 2001.
</FN>
Employment and Consulting Agreements
Scott Rudolph, Chairman of the Board and Chief Executive Officer of
the Company, entered into an employment agreement with the Company
effective February 1, 1994, as amended, which terminates in January 2004.
During the term of the employment agreement, the salary payable to Mr.
Rudolph shall be fixed by the Board of Directors of the Company, provided
that in no event will his salary be at a rate lower than $600,000 per year.
In addition, Mr. Rudolph shall be eligible to receive bonuses, certain
fringe benefits accorded other executives of the Company and annual cost of
living index increases, as set forth in his employment agreement.
Harvey Kamil, President and Chief Financial Officer of the Company,
entered into an employment agreement with the Company effective February 1,
1994, as amended, which terminates in January 2004. During the term of the
employment agreement, the salary payable to Mr. Kamil shall be fixed by the
Board of Directors of the Company, provided that in no event will his
salary be at a rate lower than $300,000 per year. In addition, Mr. Kamil
shall be eligible to receive bonuses, certain fringe benefits accorded
other executives of the Company and annual cost of living index increases,
as set forth in his employment agreement.
Each of the above agreements also provides for the immediate
acceleration of the payment of compensation for the term of the contract
and the registration for sale of all issued stock, stock options and shares
underlying stock options in the event of certain changes of control, or
involuntary (i) termination of employment, (ii) reduction of compensation
or (iii) diminution of responsibilities or authority.
Effective January 1, 1997, the Company entered into a consulting
agreement with Rudolph Management Associates, Inc. for the services of
Arthur Rudolph, a Director and the founder of the Company. The agreement
has been renewed for successive one-year terms to provide services through
December 31, 2002 with the consulting fee fixed by the Board of Directors
of the Company, provided that in no event will the consulting fee be at a
rate lower than $400,000 per year. Pursuant to the consulting agreement,
Mr. Rudolph will receive certain fringe benefits accorded to other
executives of the Company.
8
Option Grants in Last Fiscal Year
The following table shows the stock option grants made to the
executive officers named in the Summary Compensation Table during the last
fiscal year. There were 4,000,000 stock options authorized for issuance
under the NBTY, Inc. Year 2000 Incentive Stock Option Plan (the "Plan")
approved by the stockholders. A total of 805,000 stock options were granted
to employees in the fiscal year ended September 30, 2001. There are 907,500
shares remaining available for issuance under the Plan.
OPTIONS GRANTED IN FISCAL YEAR
ENDED SEPTEMBER 30, 2001
Individual Grants Potential Realizable
----------------------------------------- Value at
% of Assumed Annual
Total Rates of Stock
Number of Options Price
Securities Granted Exercise Appreciation
Underlying Employee or Base for Option Term(1)
Options in Fiscal Price Expiration -------------------------
Name Granted(#) Year ($/Sh)(2)(3) Date(4) 5% 10%
---- ---------- --------- ------------ ---------- -- ---
<s> <c> <c> <c> <c> <c> <c>
Scott Rudolph 500,000 62.1 5.47 2/1/11 $1,719,699 $4,357,979
Harvey Kamil 125,000 15.5 5.47 2/1/11 429,925 1,089,495
Michael C. Slade 70,000 8.7 5.47 2/1/11 240,758 610,117
James Flaherty - - - - - -
William Shanahan - - - - - -
<FN>
- --------------------
<F1> Potential realizable value assumes that the Company's Common Stock
appreciates at the annual rate shown (compounded annually) from the
date of grant until the option expires. These numbers are calculated
based on the Securities and Exchange Commission's requirements and do
not represent an estimate by the Company of future stock price
growth.
<F2> The exercise price and tax withholding obligations may be paid in
cash and/or, subject to certain conditions or restrictions, by
delivery of already owned shares or pursuant to a cashless exercise
procedure under which the optionee provides irrevocable instructions
to a brokerage firm to sell the purchased shares and to remit to the
Company, out of the sale proceeds, an amount equal to the exercise
price plus all applicable withholding taxes.
<F3> Options were granted at an exercise price equal to the average of the
high and low sales prices of a share of the Company's Common Stock on
The Nasdaq Stock Market on the date of grant.
<F4> Stock options have a ten-year term.
</FN>
9
Aggregated Option Exercises in the Fiscal Year Ended September 30, 2001
and Fiscal Year-End Option Values
The following table shows information concerning the exercise of
stock options by each of the executive officers named in the Summary
Compensation Table during the fiscal year ended September 30, 2001 and the
value of all remaining exercisable options at September 30, 2001, on a
pre-tax basis.
Number of Securities Value of Unexercised
Shares Value Underlying Unexercised In-The-Money
Acquired on Realized Options at 9/30/01 (#) Options at 9/30/01 ($)
Name Exercise (#) ($)(a) Exercisable(b) Exercisable
---- ------------ -------- ---------------------- ----------------------
<s> <c> <c> <c> <c>
Scott Rudolph - - 2,810,000 20,639,950
Harvey Kamil - - 525,000 3,912,913
Michael C. Slade - - 100,000 756,941
James Flaherty - - 30,000 218,550
William Shanahan - - 70,000 538,090
<FN>
- --------------------
(a) Calculated by subtracting the exercise price from the market value of
the Common Stock as of the exercise date.
(b) The securities underlying the options are shares of Common Stock.
</FN>
Employees' Stock Ownership Plan
The Company has an Employees' Stock Ownership Plan (the "Stock
Ownership Plan") pursuant to which the Company can elect to make
contributions of cash and/or Common Stock to a related trust for the
benefit of certain employees.
All employees of the Company, including officers, over the age of
twenty-one and who have been employed by the Company for at least one year
are eligible to participate in the Stock Ownership Plan.
Contributions are made on a voluntary basis by the Company. There is
no minimum contribution required.
There are no contributions required by an eligible employee. All
contributions are made by the Company at the rate of up to 15% of the
Company's annual payroll, at the discretion of the Company. Each eligible
employee receives an account or share in the trust and a portion of the
cash and/or shares of Common Stock contributed to the Stock Ownership Plan
each year are credited to his or her account.
Once an associate is eligible to participate in the Stock Ownership
Plan, a portion of the stock and/or cash in his or her account becomes
"vested" each year, as follows:
Number of Years Percentage of Shares
Of Service Earned Each Year
--------------- --------------------
<s> <c>
Less than 2 0%
2, but less than 3 20%
3, but less than 4 20%
4, but less than 5 20%
5, but less than 6 20%
6 or more 20%
10
Defined Contribution Savings Plan
The Company has adopted a Defined Contribution Savings Plan qualified
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code"). The employees of the Company who have completed six months of
service and have attained the age of twenty and one-half may elect to
contribute to this plan in accordance with the Company's guidelines. Each
year the Board of Directors will vote to determine the amount, if any, of
matching contributions up to a maximum equal to the lesser of 2% percent of
each employee's annual gross compensation or the amount contributed, if
any, by each employee.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Overview
The Compensation and Stock Option Committee of the Board of Directors
(the "Compensation Committee") oversees the Company's executive
compensation programs. The Compensation Committee is composed of three non-
employee Directors. The Compensation Committee reviews and approves the
compensation philosophy and program design, and individual officer base
salary, annual cash bonus and stock option grants. Among other
responsibilities, the Compensation Committee reviews and approves various
officer and general employee compensation and benefits policies and
practices.
Executive Officer Compensation Policies
Compensation packages generally include base salary, stock options,
executive benefits, and in certain years, a performance bonus. Factors
considered have typically included the results of the performance review of
each executive officer's performance and an evaluation of the significance
of the executive's contribution to the Company. The compensation packages
have been designed to attract and retain experienced and well-qualified
executive officers who will enhance the performance of the
Company.
The Compensation Committee believes that Company tenure and the level
of responsibility undertaken by individual executives should be
appropriately reflected in the establishment of base salary amounts.
Additionally, the Compensation Committee believes that the performance-
based bonus structure is of key importance. Accordingly, for executives in
charge of sales divisions, a material portion of total bonus eligibility is
tied to year-to-year improvement in financial and operational indicators
measured at the divisional level. For executives in charge of corporate
departments, bonuses are based in large part on improvements in the
performance of that division. The Compensation Committee believes that
these standards serve to align the interests of executives with those of
stockholders.
The Company has attempted to set the base salary of its officers to
be competitive within the nutritional supplement industry. In addition,
base salaries have reflected the Company's operating philosophy, strategic
direction and cost-conscious orientation. The Company conducts performance
reviews to determine and adjust each executive officer's base salary.
During the past 10 years, stock options have generally been a component of
officers' total compensation. Since stock options, when granted, are
exercisable pursuant to the terms of the Company's stock option plans over
a ten-year period, their ultimate value is dependent on the long-term
appreciation of the Company's stock price. Such stock options are intended
to increase officers' equity interests in the Company, providing executives
with the
11
opportunity to share in the future value they are responsible for creating.
In addition to the standard benefits package offered to its officers, the
Company provides company cars to all of its officers. The Company's
compensation philosophy for its officers is similar to that of all
employees.
The Compensation Committee has determined generally to retain base
salary, stock options, benefits and performance bonuses as components in
the Company's executive compensation packages. In setting the compensation
levels for executive officers, the Compensation Committee is guided by the
following considerations:
- compensation levels should be competitive with compensation
generally being paid to executives in other nutritional
supplement companies;
- a significant portion of the officer's compensation may be
awarded in the form of stock options to closely link tockholder
and executive interests and to encourage stock ownership by
executive officers;
- each individual officer's compensation should, to the extent
possible, reflect the performance of the Company as a whole, the
performance of the officer's business unit, and the performance
of the individual executive; and
- executive compensation should reflect the Company's unique,
entrepreneurial and cost-conscious orientation.
Summary
The Compensation Committee is committed to attracting, motivating and
retaining individuals who will help the Company meet the increasing
challenges of the nutritional supplement industry. The Compensation
Committee recognizes its responsibility to the Company's stockholders to
increase the value of the Company's Common Stock and intends to continue to
review, establish and implement compensation policies that are consistent
with competitive practices, are based on the Company's and the officers'
performance and permit the Company to attract, motivate and retain
executives who will lead the Company.
The Compensation Committee annually establishes the base salaries,
subject to the approval of the Board of Directors, and incentive
compensation which will be paid to the Company's officers. In setting
compensation, the Compensation Committee generally takes into account a
number of factors, including the Company's results of operations and other
Company performance measures, competitive compensation data, comparisons of
salaries, incentive compensation terms and responsibilities among the
Company's officers, the desired proportion of incentive compensation in the
officer's total compensation package and qualitative factors bearing on an
individual's experience, responsibilities, management and leadership
abilities and job performance. The Compensation Committee does not
generally assign greater weight to any one or more such factors than to
others.
Section 162(m) of the Code limits the Company to a deduction for
federal income tax purposes of no more than $1 million of compensation paid
to certain executive officers in a taxable year. Compensation above $1
million may be deducted if it is "performance-based compensation" within
the meaning of the Code. The Compensation Committee has determined that the
Executive Bonus Plan and stock options granted by the Compensation
Committee under the Company's stock option plans with an exercise price at
least equal to the fair market value of the Company's Common Stock on the
date of grant shall be treated as "performance-based compensation."
12
Chief Executive Officer Compensation
Scott Rudolph was the Company's Chief Executive Officer during the
fiscal year ended September 30, 2001. Mr. Rudolph's compensation for the
fiscal year ended September 30, 2001 was comprised of base salary, bonus,
stock options and contributions by the Company to its Defined Contribution
Savings Plan and the Stock Ownership Plan. In determining Mr. Rudolph's
compensation, the Compensation Committee considered (i) the compensation of
Chief Executive Officers in other publicly held and similarly sized
companies operating in the Company's industry, (ii) the Company's revenue
growth and performance against its business plan and (iii) Mr. Rudolph's
individual performance. In particular, the Compensation Committee
considered Mr. Rudolph's significant contributions to the operations of the
Company, including, among others, Mr. Rudolph's identifying and
facilitating corporate acquisitions as well as integrating the acquisitions
into the Company.
COMPENSATION AND STOCK OPTION COMMITTEE
Arthur Rudolph, Chairman
Alfred Sacks
Glenn Cohen
The foregoing report of the Compensation Committee is not "soliciting
material" and shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be
deemed filed under such Acts.
REPORT OF THE AUDIT COMMITTEE
The following is the report of the Audit Committee with respect to
the Company's audited financial statements for the fiscal year ended
September 30, 2001.
The Audit Committee has reviewed and discussed the Company's audited
financial statements for the fiscal year ended September 30, 2001 with
management. The Audit Committee has discussed with PricewaterhouseCoopers
LLP, the Company's independent accountants, the matters required to be
discussed by Statement of Auditing Standards No. 61, Communication with
Audit Committees, as modified or supplemented, which includes, among other
items, matters related to the conduct of the audit of the Company's
financial statements. The Audit Committee has also received written
disclosures and the letter from PricewaterhouseCoopers LLP required by
Independence Standards Board Standard No. 1, as modified or supplemented,
which relates to the accountant's independence from the Company and its
related entities, and has discussed with PricewaterhouseCoopers LLP their
independence from the Company.
The Audit Committee acts pursuant to the Audit Committee Charter, a
copy of which is attached hereto as Appendix A. Each of the members of the
Audit Committee qualifies as an "independent" Director under the current
listing standards of the National Association of Securities Dealers.
The accounting firm of PricewaterhouseCoopers LLP served as the
Company's independent auditor for the fiscal year ended September 30, 2001.
As stated in Proposal Three, the Board has selected PricewaterhouseCoopers
LLP to serve as the Company's independent auditors for the fiscal year
ending September 30, 2002.
13
Audit services performed by PricewaterhouseCoopers LLP consisted of
the examination of the Company's financial statements and services related
to filings with the Securities and Exchange
Commission. All fees paid to PricewaterhouseCoopers LLP and all services
provided by PricewaterhouseCoopers LLP were reviewed and considered for
independence by the Audit Committee.
Fiscal Year 2001 Audit Firm Fee Summary
During the fiscal year ended September 30, 2001, the Company retained
PricewaterhouseCoopers LLP to provide services and paid its fees as
follows:
<s> <c>
U.S. Audit $250,000
U.K. Audit 49,840
U.S. Quarterly Reviews 20,400
U.K. Quarterly Reviews 25,200
Financial Information
Systems Design and Implementation None
Expenses 20,485
All Other 464,679
Based on the review and discussion referred to above, the Audit
Committee recommended to the Company's Board of Directors that the
Company's audited financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 2001.
AUDIT COMMITTEE
Aram Garabedian, Chairman
Michael L. Ashner
Nathan Rosenblatt
The foregoing report of the Audit Committee is not "soliciting
material" and shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be
deemed filed under such Acts.
PROPOSAL TWO
NBTY, INC. YEAR 2002 STOCK OPTION PLAN
Stockholders are being asked to approve the NBTY, Inc. Year 2002
Stock Option Plan (the "2002 Stock Option Plan") under which options to
purchase 1,500,000 shares of the Company's Common Stock will be reserved
for issuance under the 2002 Stock Option Plan. The 2002 Stock Option Plan
has been approved by the Company's Board of Directors, subject to approval
by stockholders. The Summary of the 2002 Stock Option Plan set forth below
is qualified in its entirety by reference to the 2002 Stock Option Plan
attached hereto as Appendix B.
14
Summary of the 2002 Stock Option Plan
Purpose
The purpose of the 2002 Stock Option Plan is to advance the interests
of the Company by providing key employees, directors and certain other
persons with opportunities to participate in the ownership of the Company
and its future growth through (a) the grant of options which qualify as
"incentive stock options" ("ISOs") under Section 422(b) of the Code; and
(b) the grant of options which do not qualify as ISOs under the Code ("Non-
Qualified Options").
Eligibility
Employees, officers, directors, consultants and advisors of the
Company and its subsidiaries whom the Board of Directors (or a committee
appointed by the Board of Directors) deems to have the potential to
contribute to the continued growth, development and future financial
success of the Company and/or any of its subsidiaries shall be eligible to
receive awards under the 2002 Stock Option Plan.
Administration
The 2002 Stock Option Plan is to be administered by the Board of
Directors or a committee appointed by the Board of Directors. All questions
of interpretation or application of the 2002 Stock Option Plan are
determined in the sole discretion of the Board of Directors or its
committee, and decisions are final and binding upon all participants.
Members of the Board of Directors receive no additional compensation for
their services in connection with the administration of the 2002 Stock
Option Plan.
Stock Options
The 2002 Stock Option Plan permits the granting of non-transferable
ISOs and Non-Qualified Options.
The option exercise price for each share of Common Stock covered by
an ISO shall not be less than the fair market value per share of Common
Stock on the date of grant (in the case of a 10% or greater stockholder,
the exercise price for each share of Common Stock shall not be less than
110% of the fair market value).
The term of each option will be fixed by the Board of Directors or
its committee but may not exceed ten years from the date of grant (five
years in the case of a 10% or greater stockholder). The Board of Directors
or its committee will determine the time or times each option may be
exercised. Options may be made exercisable in installments and the
exercisability of options may be accelerated by the Board of Directors or
its committee.
When exercisable, options may be exercised by the payment of the
exercise price in cash, by payment through a broker-dealer sale and
remittance procedure, or by a combination of such methods of payment.
In the event an optionee's employment with the Company is terminated
by the optionee or the Company or is terminated due to the optionee's death
or disability, the optionee (except in the case where the optionee is
terminated by the Company for cause and the Board of Directors (or its
committee) cancels the optionee's options) or the optionee's estate,
personal representative or beneficiary, as the case
15
may be, shall be able to exercise the optionee's options within certain
time periods. For more details regarding the treatment of options under the
2002 Stock Option Plan in the event an optionee's employment with the
Company is terminated, please refer to the 2002 Stock Option Plan attached
hereto as Appendix B.
An optionee's rights with respect to the options granted pursuant to
the 2002 Stock Option Plan shall be adjusted in the event of a stock
dividend, stock split, recapitalization or reorganization. In the event of
a change in control in the Company, the 2002 Stock Option Plan provides
that the Board of Directors or its committee may take certain actions to
protect the rights of holders of options issued under the 2002 Stock Option
Plan. For more details regarding the adjustments to be made or actions to
be taken in the event of (i) a change in the Company's capitalization, (ii)
a Company reorganization or (iii) a change in the control of the Company,
please refer to the 2002 Stock Option Plan attached hereto as Appendix B.
Certain United States Federal Income Tax Information
The following is only a brief summary of the effect of federal income
taxation upon the optionee and the Company under the 2002 Stock Option Plan
based upon the Code. This summary does not purport to be complete and does
not discuss the income tax laws of any municipality, state or country
outside the United States in which an optionee may reside or to which an
optionee may be subject.
If an option granted under the 2002 Stock Option Plan is an ISO, the
optionee will recognize no income upon grant of the ISO and will incur no
tax liability due to the exercise, other than potential alternative minimum
tax consequences. The Company will not be allowed a deduction for federal
income tax purposes as a result of the exercise of an ISO regardless of the
applicability of the alternative minimum tax. Upon the sale or exchange of
the shares at least two years after grant of the ISO and one year after
exercise by the optionee, any gain (or loss) will be treated as a long-term
capital gain (or loss). If these holding periods are not satisfied, the
optionee will recognize ordinary income equal to the difference between the
exercise price and the lower of the fair market value of the stock at the
date of the option exercise or the sale price of the stock. The Company
will be entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Any gain (or loss) recognized on such a
premature disposition of the shares in excess of the amount treated as
ordinary income will be characterized as a capital gain (or loss).
If an option granted under the 2002 Stock Option Plan is a Non-
Qualified Option, the optionee generally will recognize no income on the
date the Non-Qualified Option is granted. The optionee will, however,
recognize ordinary income on the date the Non-Qualified Option is exercised
in an amount generally equal to the excess of the fair market value of the
acquired shares on the date of exercise over the aggregate exercise price.
Any gain or loss recognized on the later disposition of the stock will be a
capital gain or loss. The optionee's holding period with respect to the
stock begins on the date the Non-Qualified Option is exercised and if the
stock is held for at least one year, any gain (or loss) will be treated as
a long-term capital gain (or loss) upon sale or exchange. The Company will
be entitled to a deduction equal to the amount of ordinary income
recognized by the optionee at the time the Non-Qualified Option is
exercised.
Vote Required for Adoption of the 2002 Stock Option Plan
Under Delaware law, a majority vote "FOR" Proposal Two by the holders
of shares of Common Stock present, in person or represented by Proxy, at
the Meeting (at which a quorum is present) is required to adopt the 2002
Stock Option Plan. Shares of Common Stock that are voted as an abstention
or are broker "non-votes" shall be treated as voting against adoption of
the 2002 Stock Option Plan.
16
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THE 2002 STOCK
OPTION PLAN.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP as
independent auditors of the Company to audit its consolidated financial
statements for the fiscal year ending September 30, 2002, and has
determined that it would be desirable to request that the stockholders
ratify such appointment.
PricewaterhouseCoopers LLP has served the Company and its
subsidiaries as independent auditors for many years. Representatives of
PricewaterhouseCoopers LLP will be present at the Meeting, will have an
opportunity to make a statement if they desire to do so and will respond to
appropriate questions from stockholders.
Vote Required for Ratification of Appointment of Independent Auditors
Stockholder approval is not required for the appointment of
PricewaterhouseCoopers LLP since the Board of Directors has the
responsibility for selecting auditors. However, the appointment is being
submitted for ratification at the Meeting. Under Delaware law, a majority
vote "FOR" Proposal Three by the holders of shares of Common Stock present,
in person or represented by Proxy, at the Meeting (at which a quorum is
present) is required to ratify the decision by the Board of Directors to
appoint PricewaterhouseCoopers LLP as the Company's independent auditors.
No determination has been made as to what action the Board of Directors
would take if stockholders do not ratify the appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS.
17
Performance Graph
The following graph illustrates, for the period from September 30,
1996 (Base Year) through September 30, 2001, the cumulative total
stockholder return of $100 invested in (1) the Company's Common Stock, (2)
the Nasdaq Stock Market (U.S.) Index and (3) the Nasdaq Health Services
Index.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG NBTY, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ HEALTH SERVICES INDEX
Sept-96 Sept-97 Sept-98 Sept-99 Sept-00 Sept-01
------- ------- ------- ------- ------- -------
<s> <c> <c> <c> <c> <c> <c>
NBTY, INC. 100 128.03 143.18 138.64 118.75 239.27
NASDAQ STOCK MARKET (U.S.) INDEX 100 137.28 139.45 227.82 302.48 123.63
NASDAQ HEALTH SERVICES INDEX 100 101.12 68.02 62.95 73.02 89.72
<FN>
- --------------------
* $100 Invested on 9/30/96 in stock or index-including reinvestment of
dividends.Fiscal year ending September 30.
</FN>
NASDAQ
Fiscal year ended Fiscal year ended
September 30, 2001 September 30, 2000
------------------ ------------------
High Low High Low
---- --- ---- ---
<s> <c> <c> <c> <c>
First Quarter 6.97 3.94 12.50 6.75
Second Quarter 8.50 4.38 16.00 9.94
Third Quarter 13.40 8.00 19.06 5.94
Fourth Quarter 17.76 10.55 7.88 5.75
2002 High Low
---- ---- ---
<s> <c> <c>
First Quarter 14.07 6.70
On March 1, 2002, the closing sale price of the Common Stock was
$15.04. There were approximately 754 record holders of Common Stock as of
March 1, 2002. The Company believes that there were in excess of 13,000
beneficial holders of Common Stock as of March 1, 2002.
18
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than ten percent of the
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and
greater than ten-percent stockholders are required by SEC regulations 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, or
written representations that no Forms 5 were required, the Company believes
that during the fiscal year ended September 30, 2001, its officers,
directors and greater than ten percent beneficial owners complied with all
applicable Section 16(a) filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has had, and in the future may continue to have, business
transactions with firms affiliated with certain of the Company's directors
and officers. Each such transaction is in the ordinary course of the
Company's business.
During the fiscal year ended September 30, 2001, the following
transactions occurred:
A. Gail Radvin, Inc., a corporation wholly-owned by Gail Radvin,
received commissions from the Company totaling $501,000 on
account of sales in certain foreign countries and had trade
receivable balances of approximately $3,142,000 as of September
30, 2001. Gail Radvin is the sister of Arthur Rudolph (a
Director) and the aunt of Scott Rudolph (Chairman and Chief
Executive Officer).
B. The Company retained the services of Arthur Rudolph, a Director
and founder of the Company, by entering into a consulting
agreement with Rudolph Management Associates, Inc. providing
for a minimum annual fee of $400,000, which agreement has been
renewed through December 31, 2002.
EXPENSES OF SOLICITATION
All expenses of this solicitation, including the cost of preparing
and mailing this Proxy Statement, will be borne by the Company. In addition
to solicitation by use of the mails, Proxies and voting instruments may be
solicited by directors, officers and employees of the Company in person or
by telephone, telegram or other means of communication. Such directors,
officers and employees will not be additionally compensated but may be
reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. Arrangements will also be made with brokers, custodians,
nominees and fiduciaries for forwarding Proxy solicitation materials to
beneficial owners of shares held of record by such brokers, custodians,
nominees and fiduciaries, and the Company will reimburse such brokers,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred in connection therewith.
PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act,
stockholders may present proper proposals for inclusion in the Company's
Proxy Statement and Proxy Card and for consideration at the next Annual
Meeting of its stockholders by submitting their proposals to the Company in
a timely manner. In order to be so included for the next Annual Meeting,
stockholder proposals must be received by the Company no later than
December 31, 2002, and must otherwise comply with the requirements of Rule
19
14a-8. In addition, the Company's Amended and Restated By-laws establish an
advance notice procedure with regard to certain matters, including
stockholder proposals not included in the Company's Proxy Statement, to be
brought before an Annual Meeting of Stockholders. In general, notice must
be received by the Secretary of the Company not less than 70 days nor more
than 120 days prior to the anniversary date of the immediately preceding
Annual Meeting and must contain specified information concerning the
matters to be brought before such meeting and concerning the stockholder
proposing such matters. If the date of the Annual Meeting is more than 30
days earlier or more than 60 days later than such anniversary date, notice
must be received not earlier than the 120th day prior to such annual
meeting and not later than the close of business on the later of the 70th
day prior to such Annual Meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made. If a
stockholder who has notified the Company of his or her intention to present
a proposal at an Annual Meeting does not appear or send a qualified
representative to present his or her proposal at such meeting, the Company
need not present the proposal for a vote at such meeting.
OTHER MATTERS
The Board of Directors knows of no other matters that will be
presented for consideration at the Annual Meeting. If any other matters are
properly brought before the meeting, it is the intention of the persons
named in the accompanying Proxy Card to vote on such matters in accordance
with their best judgment.
A copy of the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 2001, as filed with the SEC, excluding exhibits,
may be obtained by stockholders without charge by written request addressed
to: Secretary, 90 Orville Drive, Bohemia, New York 11716 or may be accessed
on the Internet at: http://www.NBTY.com.
BY ORDER OF THE BOARD OF DIRECTORS,
Scott Rudolph
Chairman of the Board and
Chief Executive Officer
March 25, 2002
20
APPENDIX A
NBTY, INC.
AUDIT COMMITTEE CHARTER
-----------------------
Purpose
The primary purpose of the Audit Committee (the "Committee") is to
assist the Board of Directors (the "Board") in fulfilling its
responsibility to oversee management's conduct of the Company's financial
reporting process, including by overviewing the financial reports and other
financial information provided by the Company to any governmental or
regulatory body, the public or other users thereof, the Company's systems
of internal accounting and financial controls and the annual independent
audit of the Company's financial statements.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all
books, records, facilities and personnel of the Company and to retain
outside counsel, auditors or other experts for this purpose. The Board and
the Committee are in place to represent the Company's shareholders;
accordingly, the outside auditor is ultimately accountable to the Board and
the Committee.
The Committee shall review the adequacy of this Charter on an annual
basis.
Membership
The Committee shall be comprised of not less than three members of
the Board, and the Committee's composition will meet the requirements of
the Audit Committee Policy of the NASD.
Accordingly, all of the members will be Directors:
1. who have no relationship to the Company that may interfere with
the exercise of their independence from management and the
Company; and
2. who are financially literate or who become financially literate
within a reasonable period of time after appointment to the
Committee. In addition, at least one member of the Committee
will have accounting or related financial management expertise.
Meetings
The Audit Committee shall meet at least two times annually, or more
frequently as circumstances dictate.
Key Responsibilities
The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the outside auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes that financial
management, including the internal audit staff, as well as the outside
auditors, have more time, knowledge and more detailed information on the
Company than do Committee members; consequently, in carrying out its
oversight responsibilities, the Committee is not providing any expert or
special assurance as to the Company's financial statements or any
professional certification as to the outside auditor's work.
The following functions shall be the common recurring activities of
the Committee in carrying out its oversight function. These functions are
set forth as a guide with the understanding that the Committee may diverge
from this guide as appropriate given the circumstances.
* The Committee shall review with management and the outside
auditors the audited financial statements to be included in the
Company's Annual Report on Form 10-K (or the Annual Report to
Shareholders if distributed prior to the filing of Form 10-K)
and review and consider with the outside auditors the matters
required to be discussed by Statement of Auditing Standards
("SAS") No. 61.
* As a whole, or through the Committee chair, the Committee shall
review with the outside auditors the Company's interim financial
results to be included in the Company's quarterly reports to be
filed with the Securities and Exchange Commission and the
matters required to be discussed by SAS No. 61; this review will
occur prior to the Company's filing of the
Form 10-Q.
* The Committee shall discuss with management and the outside
auditors the quality and adequacy of the Company's internal
controls.
* The Committee shall:
* request from the outside auditors annually, a formal
written statement delineating all relationships between
the auditor and the Company consistent with Independence
Standards Board Standard Number 1;
* discuss with the outside auditors any such disclosed
relationships and their impact on the outside auditor's
independence; and
* recommend that the Board take appropriate action to oversee
the independence of the outside auditor.
* The Committee, subject to any action that may be taken by the
full Board, shall have the ultimate authority and responsibility
to select (or nominate for shareholder approval), evaluate and,
where appropriate, replace the outside auditor.
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APPENDIX B
NBTY, INC.
YEAR 2002 STOCK OPTION PLAN
---------------------------
Section 1
Title
This Plan shall be known as the "NBTY, Inc. Year 2002 Stock Option
Plan."
Section 2
Purpose
The purpose of the Plan is to advance the interests of NBTY, Inc., a
Delaware corporation (the "Company"), by providing key employees, directors
and certain other persons with opportunities to participate in the
ownership of the Company and its future growth through (a) the grant of
options which qualify as "incentive stock options" ("ISOs") under Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"); and
(b) the grant of options which do not qualify as ISOs ("Non-Qualified
Options"). Both ISOs and Non-Qualified Options are referred to hereafter
individually as an "Option" and collectively as "Options".
Section 3
Administration
3.1 The Plan shall be administered by the Board of Directors of
the Company (the "Board") or by a committee designated by the Board (the
"Committee"), which Committee shall be constituted in such a manner as to
satisfy applicable laws and to permit such grants and related transactions
under the Plan to be exempt from Section 16(b) of the Securities Exchange
Act of 1934, as amended, in accordance with Rule 16b-3 thereunder. Once
appointed, such Committee shall continue to serve in its capacity until
otherwise directed by the Board.
3.2 Subject to ratification of the grant or authorization of each
Option by the Board (if so required by applicable state law), and subject
to the terms of the Plan, the Committee shall have the authority to (i)
determine to whom (from among the class of persons eligible under Section 4
to receive Options) Options shall be granted; (ii) determine the time or
times at which Options shall be granted; (iii) determine the purchase price
of shares subject to each Option, which prices shall not be less than the
minimum price specified in Section 7; (iv) determine whether each Option
granted shall be an ISO or a Non-Qualified Option; (v) determine (subject to
the terms contained herein) the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi) determine any
other provisions applicable to the Option and the shares of Common Stock
issuable upon exercise thereof; (vii) interpret the Plan and prescribe and
rescind rules and regulations relating to it; and (viii) make all other
determinations necessary or advisable for administration of the Plan.
3.3 The interpretation and construction by the Committee of any
provisions of the Plan or of any Option granted under it shall be final and
conclusive unless otherwise determined by the Board. The Committee may from
time to time adopt such rules and regulations for carrying out the Plan as
it may deem advisable.
3.4 No member of the Board (or its Committee) or any officer,
director, employee or agent of the Company shall be liable for any action
or determination made in good faith with respect to the Plan or any Option
granted under it.
Section 4
Eligibility
4.1 The Board (or its Committee) may grant Options to those
employees, officers, directors, consultants and advisors of the Company or
any of its subsidiaries whom the Board (or its Committee), in its sole
discretion, identifies as being in a position which enables such
individuals to contribute to the continued growth, development and future
financial success of the Company or any of its subsidiaries.
4.2 A director, officer or other person who is not also an
employee of the Company shall not be eligible to receive an ISO.
4.3 The granting of any Option to any individual shall neither
entitle that individual to, nor disqualify that individual from,
participation in any other grant of Options.
Section 5
Stock Reserved For Options
5.1 Subject to adjustment as provided in Section 14, the maximum
number of shares of Common Stock of the Company, par value $0.008 per share
(the "Common Stock"), to be reserved for issuance upon the exercise of
Options granted under the Plan shall be 1,500,000 shares of Common Stock.
5.2 Any and all of the shares subject to Options under the Plan
may be authorized but unissued shares of Common Stock, or issued shares of
Common Stock that have been or shall have been reacquired by the Company,
as the Board (or its Committee) may from time to time determine.
5.3 If any Option granted under the Plan shall expire or terminate
for any reason without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part, the unpurchased shares
subject to such Option shall again be available for grants of Options under
the Plan unless the Plan shall have been terminated.
Section 6
Granting of Options
6.1 Subject to the limitations of the Plan, the Board (or its
Committee) may, after consultation with and consideration of the
recommendations of management and the Board (in the case of the Committee),
select those individuals to be granted Options ("Optionees") and determine
the time when each such Option shall be granted and such other terms of
each Option. The Board (or its Committee) shall clearly designate and
identify each Option at the time it is granted as either an ISO or a Non-
Qualified Option, as the case may be. The date of grant of an Option under
the Plan will be the date specified by the Board (or its Committee) at the
time it grants the Option; provided, however, that such date shall not be
prior to the date on which the Board (or its Committee) acts to approve the
grant.
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6.2 The Board (or its Committee) may grant both ISOs and Non-
Qualified Options to the same employee, and the exercise of one such Option
does not in any way affect the employee's right to exercise the other.
6.3 The grant of any Option under the Plan shall be evidenced by
the execution of a written Option Agreement ("Option Agreement") between
the Company and the Optionee. Such Option Agreement shall set forth the
date of grant of the Option, the exercise price, the term of the Option,
the designation of the Option as an ISO or Non-Qualified Option, and the
time or times and the conditions upon the happening of which the Option
shall become exercisable. Such Option Agreement shall also set forth the
restrictions, if any, with respect to which the shares of Common Stock to
be purchased thereunder shall be subject, the restrictions, if any, on the
repurchase of the shares of Common Stock by the Company, and such other
terms and conditions as the Board (or its Committee) shall determine which
are consistent with the provisions of the Plan and applicable laws and
regulations.
Section 7
Option Price
7.1 The exercise price per share specified in the Option Agreement
relating to each Non-Qualified Option granted under the Plan shall be
determined by the Board (or its Committee), without regard to the
provisions of Section 7.2 and 7.3 hereof.
7.2 The exercise price per share specified in the Option Agreement
relating to each ISO granted under the Plan shall not be less than the fair
market value per share of Common Stock on the date of such grant. In the
case of an ISO to be granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, the price per share specified in the Option Agreement
relating to such ISO shall not be less than one hundred ten percent (110%)
of the fair market value per share of Common Stock on the date of grant.
For purposes of determining stock ownership under this paragraph, the rules
of Section 424(d) of the Code shall apply.
7.3 Each eligible employee may be granted Options treated as ISOs
only to the extent that, in the aggregate under this Plan and all incentive
stock option plans of the Company, ISOs do not become exercisable for the
first time by such employee during any calendar year with respect to stock
having a fair market value (determined at the time the ISOs were granted)
in excess of $100,000. The Company intends to designate any Options granted
in excess of such limitation as Non-Qualified Options.
7.4 "Fair market value" shall be determined as of the last
business day for which the prices or quotes discussed in this sentence are
available prior to the date such Option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Common Stock on
the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the NASDAQ Stock Market, if the Common Stock is not then traded on
a national securities exchange; or (iii) the closing bid price (or average
of bid prices) last quoted (on that date) by an established quotation
service for over-the-counter securities, if the Common Stock is not
reported on the NASDAQ Stock Market.
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Section 8
Term of Options
8.1 Subject to earlier termination as provided in paragraphs 10
and 11 or in the Option Agreement, the Board (or its Committee), in its
sole discretion, shall prescribe the period during which Options may be
exercised; provided that an ISO shall not be exercisable more than ten
years from the date of grant in the case of ISOs generally and provided
further that ISOs granted to an employee owning stock possessing more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Company, as determined under Section 7.2, shall not be
exercisable more than five years from the date of grant.
8.2 In the Option Agreement, the Board (or its Committee), in its
sole discretion, may prescribe any conditions or events upon which the
period during which an Option may be exercised may be shortened or
terminated.
Section 9
Exercise of Options
9.1. Subject to the provisions of Sections 10 and 11, the Board (or
its Committee), in its sole discretion, shall prescribe in the Option
Agreement the manner in which, the number and size of installments (which
need not be equal) for which, and the contingencies upon which an Option
may be exercised during its term.
9.2 Once an installment becomes exercisable it shall remain
exercisable until expiration or termination of the Option.
9.3 Each Option or installment may be exercised at any time or
from time to time, in whole or in part, for up to the total number of whole
shares with respect to which it is then exercisable. If an Optionee does
not purchase all the shares that the Optionee shall be entitled to purchase
in any given installment, the Optionee's right to purchase the remaining
shares shall continue until expiration or termination of such Option. No
less than 100 shares may be purchased at one time unless the number
purchased is the total number that may be then purchased under the Option.
9.4 The Board (or its Committee) shall have the right to
accelerate the date that any installment of any Option becomes exercisable;
provided that the Board (or its Committee) shall not, without the consent
of an Optionee, accelerate the permitted exercise date of any installment
of any Option granted to any employee as an ISO (and not previously
converted into a Non-Qualified Option pursuant to paragraph 15) if such
acceleration would violate the annual vesting limitation contained in
Section 422(d) of the Code, as described in paragraph 7.3.
Section 10
Termination of Employment
10.1 Unless otherwise specified in the Option Agreement relating to
such ISO, if an ISO Optionee ceases to be employed by the Company
(including retirement) other than by reason of death or disability as
defined in Section 11, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of
(a) ninety (90) days after the date of termination of his or her
employment, or (b) their specified expiration dates, except to the extent
that such ISOs (or
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unexercised installments thereof) have been converted into Non-Qualified
Options pursuant to Section 15 hereof.
10.2 For purposes of this Section 10, employment shall be
considered as continuing uninterrupted during any bona fide leave of
absence (such as those attributable to illness, military obligations or
governmental service) provided that the period of such leave does not
exceed ninety (90) days or, if longer, any period during which such
Optionee's right to reemployment is guaranteed by statute. A bona fide
leave of absence with the written approval of the Board (or its Committee)
shall not be considered an interruption of employment under this Section
10, provided that such written approval contractually obligates the Company
to continue the employment of the Optionee after the approved period of
absence.
10.3 Nothing in the Plan (or, unless specifically provided therein,
in any Option Agreement) shall be deemed to give any grantee of any Option
the right to be retained in employment by the Company for any period of
time.
10.4 The Board (or its Committee), in its sole discretion, shall
determine the extent, if any, to which the grantee of a Non-Qualified
Option may exercise said Option upon his or her termination of employment
with the Company. If not otherwise specified in an Option Agreement, a Non-
Qualified Option must be exercised no later than the thirtieth (30th) day
after the Optionee's termination of employment with the Company.
Section 11
Death or Disability
11.1 Unless otherwise specified in the Option Agreement relating to
such ISO, if an ISO Optionee ceases to be employed by the Company by reason
of his or her death, any ISO owned by such Optionee may be exercised, to
the extent otherwise exercisable on the date of his or her death, by his or
her estate, personal representative or beneficiary who has acquired the ISO
by will or by the laws of descent and distribution, until the earlier of
(i) the specified expiration date of the ISO or (ii) twelve (12) months
from the date of the Optionee's death.
11.2 If an ISO Optionee ceases to be employed by the Company by
reason of his or her disability, such Optionee shall have the right to
exercise any ISO held by him or her on the date of termination of
employment, for the number of shares for which he or she could have
exercised on that date, until the earlier of the specified expiration date
of the ISO or twelve (12) months from the date of the termination of the
Optionee's employment. For the purposes of the Plan, the term "disability"
shall mean "permanent and total disability" as defined in Section 22(e) (3)
of the Code or any successor statute. Notwithstanding the immediately
preceding sentence, if an Optionee has entered into an employment agreement
with the Company or any of its subsidiaries which contains a definition for
the term "disability," then such term shall be used herein as therein
defined.
11.3 The Board (or its Committee), in its sole discretion, shall
determine the extent, if any, to which the grantee of a Non-Qualified
Option may exercise said Option upon his or her termination of employment
with the Company by reason of his or her disability or to which a legal
representative of a deceased holder of a Non-Qualified Option may exercise
said Option after the death of the Optionee. If not otherwise specified in
an Option Agreement, a Non-Qualified Option must be exercised no later than
ninety (90) days after the Optionee's termination of employment with the
Company by reason of disability or death.
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Section 12
Means of Exercising Options
12.1. An Option (or any part or installment thereof) shall be
exercised by giving written notice to the Company at its principal office
address, or to such transfer agent as the Company shall designate. Such
notice shall identify the Option being exercised and specify the number of
shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefore either (a) in United States dollars
in cash or by check, (b) subject to the Board's (or its Committee's) sole
discretion at the time of exercise, by payment through a broker-dealer sale
and remittance procedure pursuant to which the Optionee (A) shall provide
written instructions to a Company designated brokerage firm to effect the
immediate sale of some or all of the shares of Common Stock that may be
acquired upon exercise of an Option (the "Option Shares") and remit to the
Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregated exercise price payable for the
purchased Option Shares and (B) shall provide written directives to the
Company to deliver the certificates for the purchased Option Shares
directly to such brokerage firm in order to complete the sale transaction,
or (c) at the sole discretion of the Board (or its Committee), by any
combination of (a) and (b).
12.2 As soon as practicable following the exercise of an Option in
the manner set forth above, the Company shall issue or cause its transfer
agent to issue stock certificates representing the shares of Common Stock
purchased. Until the issuance of such stock certificates (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the shares of
Common Stock. Except as expressly provided in Section 14 with respect to
changes in capitalization, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
Section 13
Transferability of Options
13.1 Except as otherwise provided in an Option Agreement pertaining
to Non-Qualified Options, (i) no Option shall be assignable or transferable
by the grantee except by will or by the laws of descent and distribution
nor shall an Option be subject to attachment, execution or similar process.
Except as set forth in the previous sentence and, except as otherwise
provided in an Option Agreement pertaining to Non-Qualified Options, during
the lifetime of a grantee each Option shall be exercisable only by such
grantee.
13.2 In the event of (a) any attempt by the Optionee to alienate,
assign, pledge, hypothecate or otherwise dispose of the Option, except as
provided in this Plan, or (b) the levy of any attachment, execution or
similar process upon the rights or interest hereby conferred, the Company
may terminate the Option by notice to the Optionee and it shall thereupon
become null and void.
13.3 If deemed necessary or appropriate by the Board (or its
Committee), each Option Agreement may contain such provisions consistent
with this Plan as the Board (or its Committee), in its sole discretion, may
determine to be appropriate for restriction on the transfer and redemption
by the Company or other disposition of all shares pursuant to the Option
received by the Optionee (or his or her legal representatives),
notwithstanding any tax consequences to the Optionee of such redemption or
other disposition, including, without limitation, restrictions on transfers
pursuant to any buy-sell agreement or stockholder agreement to which the
Optionee is a party, under the Securities Act of 1933, as amended (the
"Securities Act"), and under any blue sky or securities law applicable to
such Common Stock. The
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Company may cause a restrictive legend to be placed on any certificate
issued with respect to the Common Stock acquired upon exercise of an Option
in such form as may be prescribed from time to time by applicable laws and
regulations or as may be advised by legal counsel.
Section 14
Adjustments Upon Changes in Capitalization and "Terminating Transaction"
Events
14.1 Upon the occurrence of any of the following events, an
Optionee's rights with respect to Options granted to such Optionee
hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the Option Agreement:
A. Stock Dividends and Stock Splits. If the shares of Common
Stock of the Company shall be subdivided or combined into a greater
or smaller number of shares or if the Company shall issue any shares
of its Common Stock as a stock dividend on its outstanding Common
Stock, the number of shares of Common Stock deliverable upon the
exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or
stock dividend.
B. Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than in
connection with a transaction described in subparagraph C below)
pursuant to which securities of the Company or of another corporation
are issued with respect to the outstanding shares of Common Stock, an
Optionee upon exercising an Option shall be entitled to receive for
the purchase price paid upon such exercise the securities he or she
would have received if he or she had exercised his or her Option
prior to such recapitalization or reorganization.
C. "Terminating Transaction" Events. Except as otherwise
provided herein or in an Option Agreement, upon the consummation of a
Terminating Transaction (as defined below), the Board (or its
Committee) may, in its sole discretion, take any one or more of the
following actions, as to outstanding Options: (i) provide that such
Options (or portions thereof) shall be assumed or equivalent options
shall be substituted, by the acquiring or succeeding corporation (or
an affiliate thereof), with appropriate adjustments as to the number
and kinds of shares or units and exercise prices; (ii) upon written
notice to the Optionees, provide that the Plan and all unexercised
Options (or portions thereof) will terminate immediately prior to the
consummation of the sale of the Company unless exercised by the
Optionee within a specified period of time; (iii) in the event that
the Company is involved in a merger or other transaction under the
terms of which holders of Common Stock of the Company will receive
upon the consummation thereof a cash payment for each share
surrendered in the merger or other transaction (the "Transaction
Price"), make or provide for a cash payment to the Optionees equal to
the difference between (A) the Transaction Price times the number of
shares of Common Stock subject to such outstanding Options (to the
extent then exercisable at prices not in excess of the Transaction
Price) and (B) the aggregate exercise price of all such outstanding
Options that shall become exercisable in full immediately prior to
such event.
For purposes of this Plan, "Terminating Transaction" means a
single transaction or series of related transactions, pursuant to
which any Person or Persons (acting as a group) who do not own a
majority of the issued and outstanding shares of Common Stock of the
Company (i) acquire(s) capital stock of the Company possessing the
voting power to elect a majority of the Board, (ii) consummates a
merger, amalgamation, consolidation, stock acquisition or any other
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transaction with the Company or its stockholders, as the case may be,
a result of which such Person or Persons own, directly or indirectly,
more than fifty percent (50%) of the Common Stock of the Company or the
voting securities of the surviving entity, as the case may be or (iii)
acquire(s) all or substantially all of the assets of the Company.
For purposes of this Plan, "Person" shall mean an individual,
corporation, limited liability company, association, trust, joint
venture, unincorporated organization and any government, governmental
department or agency or political subdivision thereof.
14.2 Notwithstanding the foregoing, any adjustments made pursuant
to Section 14.1(A), (B), or (C) above with respect to ISOs shall be made
only after the Board (or its Committee), after consulting with counsel for
the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of the
Code) or would cause any adverse tax consequences for the holders of such
ISOs. If the Board (or its Committee) determines that such adjustments made
with respect to ISOs would constitute a modification of such ISOs or would
cause adverse tax consequences to the holders, it may refrain from making
such adjustments.
14.3 The Company may grant Options under the Plan in substitution
for options held by employees of another corporation who become employees
of the Company, or a subsidiary of the Company, as result of a merger or
consolidation of the employing corporation with the Company or a subsidiary
of the Company, or as a result of the acquisition by the Company, or one of
its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board (or its Committee) considers appropriate in the
circumstances.
14.4 In the event of the proposed dissolution or liquidation of the
Company, each Option will terminate immediately prior to the consummation
of such proposed action or at such other time and subject to such other
conditions as shall be determined by the Board (or its Committee).
14.5 Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash
or in property other than securities of the Company.
14.6 No fractional shares shall be issued under the Plan and the
Optionee shall receive cash in lieu of such fractional shares.
14.7 Upon the happening of any of the events described in Section
14.1 above, the class and aggregate number of shares set forth in Section 5
hereof that are subject to Options which previously have been or
subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described in such subparagraphs. The Board
or its Committee (or the successor Board or its Committee) shall determine
the specific adjustments to be made under this Section 14 and, subject to
Section 3, its determination shall be final and conclusive.
Section 15
Conversion of ISOs into Non-Qualified Options
15.1 The Board (or its Committee), at the written request or with
the written consent of any Optionee, may in its sole discretion take such
actions as may be necessary to convert such Optionee's
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ISOs (or any installments or portions of installments thereof) that have
not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
Optionee is an employee of the Company at the time of such conversion. Such
actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of the appropriate installments of
such ISOs.
15.2 At the time of such conversion, the Board (or its Committee)
(with the consent of the Optionee) may impose such conditions on the
exercise of the resulting Non-Qualified Options as the Board (or its
Committee) in its sole discretion may determine, provided that such
conditions shall not be inconsistent with this Plan.
15.3 Nothing in the Plan shall be deemed to give any Optionee the
right to have such Optionee's ISOs converted into Non-Qualified Options,
and no such conversion shall occur until and unless the Board (or its
Committee) takes appropriate action.
Section 16
Cancellation of Options
Except as otherwise expressly provided in the Option Agreement
pursuant to which an Option is issued, the Board (or its Committee) may, in
its sole discretion, in cases involving a serious breach of conduct by an
employee or former employee, or activity of a former employee in
competition with the business of the Company, cancel any Option, whether
vested or not, in whole or in part. Such cancellation shall be effective as
of the date specified by the Board (or its Committee) but may not be
retroactive. Activities which shall constitute a serious breach of conduct
include, for example only: (i) the disclosure or misuse of confidential
information or trade secrets; (ii) activities in violation of the policies
of the Company, including, without limitation, the Company's insider
trading policy; (iii) the violation or breach of any material provision in
any employment contract or agreement among the Optionee and the Company;
and (iv) engaging in conduct relating to the Optionee's employment with the
Company for which either criminal or civil penalties may be sought. The
determination of whether an employee or former employee has engaged in a
serious breach of conduct or activity in competition with the business of
the Company shall be determined by the Board (or its Committee) in good
faith and in its sole discretion.
Section 17
Termination and Amendment of Plan
17.1 Unless terminated earlier by the Board, the Plan shall
terminate on the tenth anniversary of the date on which the Company's
stockholders approved this Plan.
17.2 The Board may terminate or amend the Plan in any respect at
any time, except that the approval of the Company's stockholders must be
obtained within 12 months before or after the Board adopts a resolution
authorizing any of the following actions: (a) the total number of shares
that may be issued under the Plan may not be increased (except by
adjustment pursuant to Section 14); (b) the benefits accruing to
participants under the Plan may not be materially increased; (c) the
requirements as to eligibility for grants of ISOs may not be modified; (d)
the provisions of Section 7 regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to Section 14); or (e) the expiration date of the Plan may not be
extended.
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17.3 Except as otherwise provided in this Section 17, in no event
may action of the Board (or its Committee) or the Company's stockholders
alter or impair the rights of a grantee, without such grantee' s consent,
under any Option previously granted to such grantee.
Section 18
Notice to Company of Disqualifying Disposition
By accepting an ISO granted under the Plan, each Optionee agrees to
notify the Company in writing immediately after such Optionee makes a
Disqualifying Disposition (as described in Sections 421, 422 and 424 of the
Code and regulations thereunder) of any stock acquired pursuant to the
exercise of ISOs granted under the Plan. A Disqualifying Disposition is
generally any disposition occurring on or before the later of (a) the date
two years following the date the ISO was granted or (b) the date one year
following the date the ISO was exercised.
Section 19
Withholding of Additional Income Taxes
19.1 Upon the exercise of a Non-Qualified Option, the making of a
Disqualifying Disposition (as defined in Section 18), the vesting or
transfer of securities acquired on the exercise of an Option hereunder, or
the making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that
constitute compensation includible in gross income, which amount shall not
exceed the Company's minimum statutory withholding amount. The Board (or
its Committee) in its sole discretion may condition the exercise of an
Option, the vesting or transferability of restricted stock or securities
acquired by exercising an Option, on the Optionee's making satisfactory
arrangement for such withholding. Such arrangement may include payment by
the Optionee in cash or by check of the amount of the withholding taxes or,
at the sole discretion of the Board (or its Committee), by the Optionee's
delivery of previously held shares of Common Stock having an aggregate fair
market value equal to the minimum amount required to be withheld; provided,
however that the value of any shares of Common Stock withheld may not
exceed the statutory minimum withholding amount required by law.
19.2 Any adverse consequences incurred by the Optionee with respect
to the use of the shares of Common Stock to pay any part of the exercise
price or any tax in connection with the exercise of an Option, including,
without limitation, any adverse tax consequences as a result of a
Disqualifying Disposition within the meaning of Section 422 of the Code,
shall be the sole responsibility of the Optionee.
Section 20
Governing Law
The validity and construction of the Plan and the instruments
evidencing Options shall be governed by the laws of the State of Delaware,
or the laws of any jurisdiction in which the Company or its successors in
interest may be organized.
B-10
NBTY, INC.
90 Orville Drive
Bohemia, New York 11716
Annual Meeting of Stockholders to be held on
April 29, 2002 at 10:00 A.M., Local Time
The undersigned hereby appoints Harvey Kamil and Michael C. Slade as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them, to represent and vote, as designated on the reverse side, all shares of
Common Stock of NBTY, INC. (the "Company") held of record by the undersigned
on March 11, 2002, at the Annual Meeting of Stockholders to be held at the
Wyndham Windwatch Hotel, 1717 Motor Parkway, Hauppauge, New York 11788, on
April 29, 2002 at 10:00 AM, local time, for the purpose of considering and
taking action on the proposals set forth on the reverse side:
(To be Signed on Reverse Side.)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
NBTY, INC.
April 29, 2002
Please Detach and Mail in the Envelope Provided
A [X] Please mark your
votes as in this
example.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NBTY, INC.
DIRECTORS RECOMMEND: A VOTE FOR ELECTION OF DIRECTORS
AND A VOTE FOR PROPOSALS 2 AND 3.
FOR WITHHOLD
ALL NOMINEES ALL NOMINEES
1. ELECTION OF [ ] [ ] Nominees: Scott Rudolph
DIRECTORS: Murray Daly
Nathan Rosenblatt
Peter White
To withhold authority to vote for any
individual nominee, write the name of such
nominee below.
If authority to vote for a nominee is not
withheld, then the stockholder is deemed to
grant authority to vote for the election
of such nominee.
- --------------------------------------------
Name of Nomineee(s)
FOR AGAINST ABSTAIN
2. TO APPROVE THE ADOPTION OF THE [ ] [ ] [ ]
NBTY, INC. YEAR 2002 STOCK OPTION
PLAN
3. RATIFICATION OF PRICEWATERHOUSE- [ ] [ ] [ ]
COOPERS LLP AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS.
PLEASE PROMPTLY DATE, SIGN AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
"NOTE" THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
- ------------------------- --------- -------------------------- ---------
SIGNATURE DATE SIGNATURE IF HELD JOINTLY DATE
(NOTE: Please sign exactly as your name appears hereon. Executors,
administrators, trustees, etc. should so indicate when signing, giving full
title as such. If signer is an entity, execute in entity's name by
authorized officer. If owned by two or more persons or entities, all should
sign.)
Annual Meeting of Stockholders of
NBTY, INC.
April 29, 2002
Co. # Acct. #
--------------- ---------------
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
- ---------------
Please date, sign and mail your proxy card in the envelope provided as soon
as possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
- -------------------
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
YOUR CONTROL NUMBER IS ------> ____________________
Please Detach and Mail in the Envelope Provided
A [X] Please mark your
votes as in this
example.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NBTY, INC.
DIRECTORS RECOMMEND: A VOTE FOR ELECTION OF DIRECTORS
AND A VOTE FOR PROPOSALS 2 AND 3.
FOR WITHHOLD
ALL NOMINEES ALL NOMINEES
1. ELECTION OF [ ] [ ] Nominees: Scott Rudolph
DIRECTORS: Murray Daly
Nathan Rosenblatt
Peter White
To withhold authority to vote for any
individual nominee, write the name of such
nominee below.
If authority to vote for a nominee is not
withheld, then the stockholder is deemed to
grant authority to vote for the election
of such nominee.
- --------------------------------------------
Name of Nomineee(s)
FOR AGAINST ABSTAIN
2. TO APPROVE THE ADOPTION OF THE [ ] [ ] [ ]
NBTY, INC. YEAR 2002 STOCK OPTION
PLAN
3. RATIFICATION OF PRICEWATERHOUSE- [ ] [ ] [ ]
COOPERS LLP AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS.
PLEASE PROMPTLY DATE, SIGN AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
"NOTE" THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
- ------------------------- --------- -------------------------- ---------
SIGNATURE DATE SIGNATURE IF HELD JOINTLY DATE
(NOTE: Please sign exactly as your name appears hereon. Executors,
administrators, trustees, etc. should so indicate when signing, giving full
title as such. If signer is an entity, execute in entity's name by
authorized officer. If owned by two or more persons or entities, all should
sign.)