EXHIBIT 10.4
NUTRACEUTICAL INTERNATIONAL CORPORATION
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
-------------------------------------
1. Title. The plan described herein shall be known as the Nutraceutical
International Corporation Employee Stock Discount Purchase Plan (the "Plan").
The Plan will be maintained by the Nutraceutical International Corporation (the
"Company") and any of its subsidiaries that may adopt the Plan from time to time
in accordance with the procedures set forth in Section 23 hereof (each such
adopting subsidiary referred to herein as a "Covered Entity") with the Company's
consent.
2. Purpose. The purpose of the Plan is to give employees wishing to do so a
convenient means of purchasing at a discount shares of the Company's Common
Stock, par value $.01 per share (the "Shares"), through payroll deductions. The
Company believes that ownership of Shares by employees will foster greater
employee interest in the Company's growth and development. The Plan is intended
to qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code").
3. Shares Reserved for the Plan. There shall be reserved for issuance and
purchase by employees of the Company under this Plan an aggregate of 750,000
Shares, subject to adjustment as provided in Section 17 hereof. Shares subject
to the Plan may be shares now or hereafter authorized and unissued or shares
already authorized, issued and owned by the Company. The right to purchase
shares pursuant to the Plan shall be made available by a series of quarterly
offerings to employees eligible to participate in the Plan pursuant to Section 8
hereof. If and to the extent that any right to purchase reserved Shares shall
not be exercised by any employee for any reason or if such right to purchase
shall terminate as provided herein, Shares that have not been so purchased under
the Plan shall again become available for the purposes of the Plan during the
remaining term of the Plan.
4. Effective Date. The Plan shall become effective on the date of the
consummation of the initial public offering of the Company's Common Stock (the
"Effective Date").
5. The Plan Year. The Plan shall operate on a fiscal year beginning on the
first day of October in each year and ending on the 30th day of September. This
fiscal year is referred to herein as the "Plan year." The initial Plan year
shall begin on the Effective Date.
6. Plan Quarters. The Plan year shall be divided into four Plan quarters
ending December 31, March 31, June 30 and September 30. Each such quarter is
referred to herein as a "Plan quarter."
7. Plan Administration. The Plan shall initially be administered by the
Board of Directors. The Board of Directors shall delegate the administration of
the Plan to a Compensation Committee (the "Committee") in the event that such a
committee is established by the Board of Directors. As Plan administrator, the
Committee shall have complete control of the administration of the Plan, which
includes the determination of employees, eligibility for participation in
accordance
-1-
with the standards set forth in Section 8 hereof, the interpretation of
provisions of the Plan, the adoption of any rules or regulations which may be
necessary, advisable or desirable in the operation of the Plan including rules
governing the participation of officers and directors in the Plan in order to
exempt transactions under the Plan in accordance with Rule 16b of the Securities
and Exchange Commission, and the delegation of certain of the duties of the
Committee to an agent to facilitate the purchase and transfer of Shares and to
otherwise assist in the administration of the Plan. The Committee shall control
the general administration of the Plan with all powers necessary to enable it to
carry out its duties in that respect, except that, if for any reason a Committee
shall not have been appointed, all authority and duties of the Committee under
this Plan shall be vested in and exercised by the Board of Directors of the
Company.
8. Eligibility. Any employee of the Company who is a United States resident
or who is a United States citizen temporarily on location at a facility outside
of the United States and any Covered Entity (as defined in Section 23 hereof)
shall be eligible to participate in the Plan on the day next following the
twelve-month anniversary of such employee's employment provided such employee
would not own, immediately after the exercise of any right granted hereunder,
stock possessing five percent (5%) or more of the combined voting power or value
of all classes of capital stock of the Company. The Committee shall determine
which employees are eligible to participate in the Plan in accordance with the
standards set forth in this Section.
9. Election to Participate; Payroll Deductions and Lump Sum Contributions.
An eligible employee may elect to participate in the Plan on any day within the
Plan quarter in which such employee becomes eligible to participate, and
thereafter as of the first day of any Plan quarter, by correctly completing and
returning to the Company an enrollment form authorizing a specified payroll
deduction to be made from each subsequent paycheck for the purchase of Shares
under this Plan (the "payroll deduction"). The minimum allowable payroll
deduction is $25.00 per payroll period. All payroll deductions shall be made
regularly and in equal amounts and shall be credited on the records of the
Company in the name of the eligible employee. Such credit shall constitute only
a bookkeeping entry by the Company and no interest will be paid or due on any
money paid into this Plan or credited to such eligible employee. Employees who
elect to participate in the Plan are referred to herein as "participating
employees."
A participating employee will be deemed to have authorized the same payroll
deduction for each subsequent payroll period provided that he or she is eligible
to participate during each subsequent payroll period. A participating employee
may increase or decrease his or her payroll deduction as of the first day of the
first full payroll period of any Plan quarter by filing the required form, in
the time and manner prescribed by the Committee.
Upon the request of any participating employee, the Company shall suspend
making any payroll deduction with respect to such employee as soon as
practicable after the employee notifies the Company of such request. In such
event, the earliest date upon which payroll deductions may be resumed with
respect to such employee shall be the first day of the Plan quarter occurring
immediately after the first full Plan quarter that follows the suspension of the
employee's payroll deductions.
A participating employee may elect to make a lump sum contribution to the
Plan, not more than once per plan quarter. Such election must be made no later
than the 10th business day preceding the end of such plan quarter and payment
must be made no later than 5 business days thereafter.
In the event that an employee ceases to be a participating employee, or if
for any reason the Company does not invest the aggregate amount of payroll
deductions or contributions of a participating
-2-
employee, the amount of payroll deductions not theretofore invested shall be
returned to such employee.
10. Limitation of Number of Shares That an Employee May Purchase. A
participant shall be allocated the number of Shares which may be purchased with
such participant's contributions; provided, that in any Plan quarter a
participant may only contribute an amount less than or equal to 15% of such
participant's gross pay from the Company (including salary and bonus) for the
immediately prior Plan quarter, which amount may be paid through payroll
deduction pursuant to Section 9 or by one or more lump sum contributions.
Notwithstanding the foregoing, no right to purchase Shares under this Plan shall
permit an employee to purchase stock under all employee stock purchase plans (as
defined in Section 423 of the Code) of the Company at a rate which in aggregate
exceeds $25,000 of fair market value of such stock (determined at the time the
right is granted) for each calendar year in which the right is outstanding at
any time. In addition, the total number of Shares purchased under the Plan shall
not exceed 750,000 and if, for any purchase date, the number of Shares to be
purchased with participants' cash account balances, when aggregated with all
prior purchases under the Plan, would exceed 750,000 Shares, allocations to
participants for such purchase date shall be reduced pro rata in accordance with
their respective cash account balances, so that the total allocations shall not
cause the total Shares purchased under the Plan to exceed 750,000 Shares.
11. Accounting for Participant Contributions. The Committee will cause to
be established a "cash account" and a "Share account" for each participant under
the Plan for bookkeeping purposes. As soon as practicable on or after the last
day of each Plan quarter, but in no case later than the fifteenth day of the
month immediately following the end of the Plan quarter, the Committee will
credit each participant's cash account with such participant's payroll
deductions during the Plan quarter ("credited payroll deductions"). The date of
crediting of such credited payroll deductions is referred to herein as the
"deduction crediting date." The Company shall not be required to pay or accrue
interest on the cash balances in participants' cash accounts or on the value of
participants' Share accounts.
12. Share Purchases. The Committee will use the entire balance of funds in
participants' cash accounts to purchase Shares to be allocated to participants'
Share accounts within the first 15 working days following each deduction
crediting date. The cost per Share to participants will be 90% of the lower of
the closing price for the Shares on the Nasdaq National Market ("Nasdaq") on the
first or the last day of the Plan quarter with respect to which such purchase
relates; provided that if the first or last day of the Plan quarter is a day on
which Nasdaq is closed, the price for such day shall be determined as of the
last preceding day on which Nasdaq is open.
13. Allocation of Shares. As soon as practicable after all necessary Shares
have been purchased by the Committee (or its agent) for the benefit of
participants, the Committee will allocate such Shares to participants' Share
accounts (the date of such allocation to be referred to as the "Share allocation
date") in the following manner:
(a) The Committee will allocate full Shares and fractional Shares to the
Share accounts of the individual participants to the extent of the balances in
their respective cash accounts, subject to the limitations set forth in Section
10. The cash accounts will be charged with the cost
-3-
to participants of all Shares so allocated. No cash balances will remain in the
participants' cash accounts immediately after each Share allocation date;
(b) Until certificates are issued, no person shall have any right to sell,
assign, mortgage, pledge, hypothecate or otherwise encumber any of the Shares
allocated to a participant's Share account.
14. Issuance of Share Certificates. Share certificates for the number of
whole Shares in each participant's Share account may be issued to participants
only upon the receipt by the Committee (or its agent) of a participant's written
request indicating the number of Shares (to a maximum of the number of full
Shares in the participant's Share account) for which the participant wishes to
receive certificates. Such request shall be made on a form at the time
prescribed by the Committee and filed with the Committee (or its agent). Share
certificates shall be issued to the participant as soon as practicable after the
end of a Plan quarter.
15. Restrictions on Transfer. Unless the Shares purchased hereunder are
covered by an effective registration statement under the Securities Act of 1933,
as amended (the "Securities Act").
(a) Restrictive Legend. The certificates representing the Shares shall bear
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER."
(b) Opinion of Counsel. The participant may not sell, transfer or
dispose of any Shares (except pursuant to an effective registration statement
under the Securities Act) without first delivering to the Company an opinion of
counsel reasonably acceptable in form and substance to the Company that
registration under the Securities Act or any applicable state securities law is
not required in connection with such transfer.
16. Expenses. The Company or the Covered Entity will bear the costs
associated with administering the Plan and purchasing Shares. No expenses
attributable to a participant's sale of Shares, however, will be borne by the
Company or the Covered Entity.
17. Cash Dividends, Share Splits and Distributions.
(a) Cash Dividends. Cash dividends attributable to Shares allocated
to participants' Share accounts as of the record date for which such cash
dividends are declared will be credited to participants' cash accounts as of the
dividend payment date and applied to Share
-4-
purchases and allocations on the next Share allocation date in accordance with
the methods set forth in Sections 12 and 13 hereof.
(b) Share Distributions and Share Splits. Share distributions and Share
splits attributable to Shares allocated to participants' Share accounts as of
the Share distribution record date or the Share split effective date will be
credited directly to participants' Share accounts as of the record date and the
effective date, respectively, of such Share distributions and such Share splits.
(c) Share Rights and Warrants. The Company may, from time to time, in the
exercise of its sole discretion, declare Share rights or warrants with respect
to Shares. Following and as of the record date for determining those
shareholders of record entitled to receive Share rights or warrants with respect
to their Shares, the Company shall issue, and the Committee shall allocate, such
Share rights and/or warrants directly to the appropriate participants as though
the Shares allocated to the account of each such participant were held of record
by such participant. Certificates representing such Share rights or warrants, if
any such certificates have been authorized by the Board of Directors of the
Company, may be issued to participants pursuant to the procedures set forth in
Section 14 of this Plan.
(d) Change in Common Stock. In the event of a reorganization,
recapitalization, stock split, merger, consolidation or other increase or change
in the common stock of the Company, the Committee may make appropriate changes
in the number and type of Shares that at the time of such event remain available
for purchase under this Plan.
18. Voting Rights. Holders of Shares have the right to vote on matters
affecting the Company. If one of these matters is submitted to the shareholders
for a vote, then following the record date for any shareholder meeting at which
such vote is to occur, the Committee shall advise the Company of the number of
participants for whom Shares are held in Share accounts on such record date, and
the Company shall furnish the Committee (or its agent) with sufficient sets of
its proxy soliciting materials to deliver one set to each such participant. The
Committee shall thereupon forward one set to each participant for whom allocated
Shares are being held and request voting instructions. Upon receipt of voting
instructions, the Committee shall vote the Shares (including any fractional
Shares) as instructed. The Committee shall not vote any Share allocated to a
participant's Share account unless voting instructions have been received from
the participant.
19. Records and Reports to Participants. The Committee shall cause to be
maintained true and accurate books of account, and a record of all transactions
under the Plan, and such accounts, books and records relating thereto shall be
open to inspection and audit by such person or persons designated by the
Company. At least annually, but in all cases on or before March 31 of each year,
the Committee shall file with the Chief Financial Officer of the Company a
written report setting forth all receipts and disbursements and other
transactions effected on behalf of the Plan during the last preceding Plan year,
including a description of all Shares purchased together with the cost of all
such Shares. Such report shall also disclose any liabilities of the Plan and
shall show, as of the close of the Plan year, the value of each active cash
account and Share account of each participant together with the record of Share
certificates delivered to each of the participants during such Plan year. The
Committee shall have the right to maintain one or more bank
-5-
accounts for funds contributed to the Plan, and to make deposits in and
withdrawals therefrom in connection with its administration of the Plan.
An annual report shall be rendered to each participant in the Plan annually
within 90 days after the close of the Plan year, showing for the Plan year just
ended:
(a) the amounts of employee payroll deductions made for each participant;
(b) the amounts of cash dividends credited to such participant's cash
account;
(c) the number of Shares acquired for such participant's Share account
(including the amounts of Share distributions or Share splits so allocated or
credited);
(d) the cost to the participant per Share of Shares purchased for such
participant;
(e) the number of Shares, if any, for which certificates were delivered to
such participant; and
(f) the beginning and ending balances in the participant's Share and cash
accounts.
20. Termination of Employment. Settlement of the accounts of participants
whose employment has terminated shall be made as of the beginning of the Plan
quarter following the Plan quarter in which termination of employment occurred.
As promptly as practicable after the close of the Plan quarter in which
termination of employment occurred, the Committee will deliver to such former
participant a certificate for the number of full Shares allocated to such
participant's account and not previously distributed, together with a check for
(i) any remaining cash balance and (ii) the value of any fractional Shares
allocated to such participant's account.
In the event of a participant's death, settlement will be made to the
participant's duly appointed legal representative after the satisfaction of any
applicable legal requirements.
21. Amendment and Termination of the Plan. Subject to the provisions of
Section 423 of the Code and Rule 16b-3 under the Securities Exchange Act of
1934, as amended ("Exchange Act"), the Board of Directors may amend this Plan in
any respect; provided, that no amendment may affect any participant's right to
the benefit of contributions made by such participant prior to the date of the
amendment.
The Board of Directors reserves the right to terminate or temporarily
suspend this Plan at the end of any Plan quarter. In the event of termination or
suspension of the Plan, the Committee will make an allocation of Shares to the
Share accounts of the participants in the usual manner. As soon as practicable,
the Committee will distribute to or on behalf of each participant all of the
Shares held in such participant's Share account plus an amount of cash equal to
the balance in such participant's cash account.
-6-
22. Limitation on Sale of Shares. No Shares will be sold under the Plan to
any employee residing or employed in any jurisdiction where the sale of such
Shares is not permitted under the applicable laws.
23. Adopting Subsidiaries. Any subsidiary of the Company may adopt the Plan
on behalf of its employees either unilaterally or by collective bargaining by
filing with the Company a certified copy of a resolution of the Board of
Directors (or other appropriate authorization satisfactory to the Secretary of
the Company) of the subsidiary providing for such subsidiary's adoption of the
Plan and a certified copy of a resolution of the Board of Directors of the
Company consenting to such adoption. Each such adopting subsidiary is referred
to herein as a "Covered Entity."
-7-