UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
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The Hain Celestial Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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THE HAIN CELESTIAL GROUP, INC.
58 South Service Road
Melville, New York 11747
October 14, 2002
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
The Hain Celestial Group, Inc., scheduled to be held on Tuesday, November 12,
2002 at the conference center, located in the lower lobby, at 58 South Service
Road, Melville, New York 11747, commencing at 11:30 A.M., Eastern Standard
Time. Your board of directors and management look forward to greeting
personally those stockholders able to attend.
Details of business to be conducted at the Annual Meeting of Stockholders
are provided in the enclosed Notice of Annual Meeting of Stockholders and
Proxy Statement. Also enclosed for your information is a copy of our Annual
Report for 2002.
It is important that your shares are represented at the meeting whether or
not you plan to attend. Accordingly, we request your cooperation by promptly
signing, dating and mailing the enclosed proxy in the envelope provided for
your convenience.
Sincerely,
/s/ Irwin D. Simon
Irwin D. Simon
President, Chief Executive
Officer and Chairman of the Board
THE HAIN CELESTIAL GROUP, INC.
58 South Service Road
Melville, New York 11747
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
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To the Stockholders of THE HAIN CELESTIAL GROUP, INC.:
The Annual Meeting of Stockholders of The Hain Celestial Group, Inc. will be
held on Tuesday, November 12, 2002 at 11:30 A.M., Eastern Standard Time, at
the conference center, located in the lower lobby, at 58 South Service Road,
Melville, New York 11747, for the following purposes:
1. To elect a board of directors to serve until the next Annual Meeting
of Stockholders and until their successors are duly elected and
qualified;
2. To approve our 2002 Long Term Incentive and Stock Award Plan;
3. To ratify the appointment of Ernst & Young LLP as our independent
auditors for fiscal 2003; and
4. To transact such other business as may properly come before the
meeting.
Your vote is important. If you do not expect to be present at the meeting
and wish your stock to be voted, please sign and date the enclosed Proxy and
mail it promptly in the enclosed reply envelope addressed to Continental Stock
Transfer & Trust Company, 2 Broadway,
New York, New York 10004.
SOLICITATION AND REVOCATION OF PROXIES
Proxies are being solicited on behalf of our board of directors, and we will
bear the cost of such solicitation. We expect that the solicitation of proxies
will be primarily by mail. Proxies may also be solicited by our officers and
employees at no additional cost to us, in person or by telephone, telegram or
other means of communication. We may reimburse custodians, nominees and
fiduciaries holding our common stock for their reasonable expenses in sending
proxy material to principals and obtaining their proxy. Any stockholder giving
a proxy may revoke it at any time before it is exercised by written notice to
our secretary or by voting in person at the meeting.
It is expected that this Notice of Annual Meeting of Stockholders and Proxy
Statement will first be mailed to stockholders on or about October 14, 2002.
STOCKHOLDERS ENTITLED TO VOTE AND SHARES OUTSTANDING
Only stockholders of record at the close of business on September 30, 2002
will be entitled to vote at the Annual Meeting of Stockholders. On that date,
there were 33,583,202 shares of our common stock outstanding and entitled to
be voted at the Annual Meeting of Stockholders. Each such share is entitled to
one vote. The holders of a majority of the shares entitled to vote on the
record date, represented in person or by proxy, shall constitute a quorum for
the purpose of transacting business at the Annual Meeting of Stockholders.
Proxies marked as abstaining (including proxies containing broker non-votes)
on any matter to be acted upon by stockholders will be treated as present at
the meeting for purposes of determining a quorum.
Directors will be elected by a plurality of the votes cast. Abstentions,
broker non-votes and instructions on a proxy to withhold authority to vote for
one or more of such nominees will result in the respective nominees receiving
fewer votes.
Abstentions may be specified as to all proposals to be brought before the
Annual Meeting of Stockholders, other than the election of directors. Approval
of each of the proposals to be brought before the Annual Meeting of
Stockholders (not including the election of directors) will require the
affirmative vote of at least a majority in voting interest of the stockholders
represented in person or by proxy at the Annual Meeting of Stockholders and
entitled to vote thereon. As to the proposals, if a stockholder abstains from
voting on a proposal it will have the effect of a negative vote on that
proposal, but if a broker indicates that it does not have authority to vote
certain shares (i.e., a broker non-vote), those votes will not be considered
as shares present and entitled to vote at the Annual Meeting of Stockholders
with respect to that proposal and, therefore, will have no effect on the
outcome of the vote.
Proxies that are executed, but do not contain any specific instructions,
will be voted FOR the election of all the nominees for directors specified
herein, FOR the approval of the adoption of our 2002 Long Term Incentive and
Stock Award Plan and FOR the ratification of the appointment of Ernst & Young
LLP as our independent auditors. The persons appointed as proxies will vote in
their discretion on any other matter that may properly come before the Annual
Meeting of Stockholders or any postponement, adjournment or adjournments
thereof, including any vote to postpone or adjourn the Annual Meeting of
Stockholders.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of September 30, 2002 for (1) each
of our directors and nominees for director and each of our executive officers,
(2) each person who is known by us to beneficially own more than five percent
of the outstanding shares of our common stock and (3) all of our directors and
executive officers as a group. Beneficial ownership has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934 and does
not necessarily bear on the economic incidents of ownership or the right to
transfer the shares described below.
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Number of Percentage of
Shares Common Stock
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Irwin D. Simon (1) ................................ 2,766,215 7.6%
Andrew R. Heyer (2) (3) ........................... 345,111 1.0%
Beth L. Bronner (3) (4) ........................... 143,667 *
Jack Futterman (3) (5) ............................ 96,500 *
James S. Gold (3) (6) ............................. 84,000 *
Joseph Jimenez (3) (7) (8) ........................ 70,500 *
Marina Hahn (3) (9) ............................... 84,908 *
Roger Meltzer (3)(10) ............................. 65,000 *
Michael J. Bertasso (3) (8) (11) .................. 30,000 *
Daniel R. Glickman (3) (12) ....................... 15,000 *
Larry Zilavy (13) ................................ 0 *
Gary M. Jacobs (14) ............................... 213,515 *
Ira J. Lamel (14) ................................. 163,500 *
HJH One, L.L.C. (8) ............................... 6,090,351 18.1%
H.J. Heinz Company (8) ............................ 6,090,351 18.1%
Wellington Management Company, LLP (15) ........... 1,811,000 5.4%
John Hancock Advisors, LLC (16) ................... 1,868,140 5.6%
All directors and executive officers as a
group (thirteen persons)(17) ..................... 4,077,916 10.9%
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* Indicates less than 1%.
(1) Includes 535,000 shares of common stock issuable upon the exercise of
options granted under our 1993 Executive Stock Option Plan and 2,035,000
shares of common stock issuable upon the exercise of options granted
under our 1994 Long Term Incentive and Stock Award Plan (the "1994
Plan"). Mr. Simon is our President, Chief Executive Officer and Chairman
of the Board of Directors.
(2) Includes 63,000 shares of common stock issuable upon the exercise of
options granted under our 1996 Directors Stock Option Plan (the "1996
Directors Plan"), 30,000 shares of common stock issuable upon the
exercise of options granted under our 2000 Directors Stock Option Plan
(the "2000 Directors Plan" and, together with the l996 Directors Plan,
the "Directors Plans") and 168,499 shares issuable upon the exercise of
warrants.
(3) Director of Hain.
(4) Includes 103,000 shares of common stock issuable upon the exercise of
options granted under our Directors Plans.
(5) Includes 95,500 shares of common stock issuable upon the exercise of
options granted under our Directors Plans.
(6) Includes 78,000 shares of common stock issuable upon the exercise of
options granted under our Directors Plans.
(7) Consists of 70,500 shares of common stock issuable upon the exercise of
options granted under our Directors Plans.
2
(8) HJH One, L.L.C., an affiliate of H.J. Heinz Company, holds 6,090,351
shares of common stock. Mr. Jimenez is President and Chief Executive
Officer of Heinz Europe, a division of H.J. Heinz Company and Mr.
Bertasso is Senior Vice President, and President--Asia Pacific for H.J.
Heinz Company. Share amounts presented for Mr. Jimenez and Mr. Bertasso
do not include the shares of common stock held by HJH One, L.L.C..
(9) Includes 60,000 shares of common stock issuable upon exercise of options
granted under our Directors Plans and 22,770 shares of common stock
issuable upon the exercise of options assumed upon consummation of our
merger (the "Merger") with Celestial Seasonings, Inc. ("Celestial") in
May 2000.
(10) Consists of 65,000 shares of common stock issuable upon exercise of
options granted under our Directors Plans.
(11) Consists of 30,000 shares of common stock issuable upon the exercise of
options granted under our Directors Plans.
(12) Consists of 15,000 shares of common stock issuable upon the exercise of
options granted under our Directors Plan.
(13) Mr. Zilavy is nominated for election to our board of directors for the
first time.
(14) Includes 212,500 shares for Mr. Jacobs and 162,500 shares for Mr. Lamel
of common stock issuable upon exercise of options granted under the 1994
Plan. In the case of Mr. Jacobs, includes 15 shares held by his son. Mr.
Jacobs and Mr. Lamel are executive officers.
(15) According to a Schedule 13G dated February 14, 2002, Wellington
Management Company, LLP, in its capacity of investment advisor, may be
deemed to beneficially own 1,811,000 shares held of record by clients of
Wellington.
(16) According to a Schedule 13G dated February 14, 2002, John Hancock
Advisors, LLC has direct beneficial ownership of 1,868,140 shares.
Through their parent-subsidiary relationship to John Hancock Advisors,
LLC, John Hancock Financial Services, Inc., John Hancock Life Insurance
Company, John Hancock Subsidiaries, LLC and The Berkeley Financial Group,
LLC have indirect beneficial ownership of these shares.
(17) Includes 535,000 shares issuable upon the exercise of options granted
under the 1993 Plan, 2,410,000 shares issuable upon the exercise of
options granted under the 1994 Plan, 22,770 shares issuable upon the
exercise of options granted under Celestial plans assumed in connection
with the Merger, 610,000 shares issuable upon the exercise of options
granted under our Directors Plans and 168,499 shares issuable upon the
exercise of warrants. See notes 1 through 14.
3
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our board of directors is currently comprised of eleven members, ten of whom
are standing for reelection at the Annual Meeting of Stockholders and one of
whom will be standing for election for the first time.
Each director will hold office until the next Annual Meeting of Stockholders
and until his or her successor is elected and qualified. The persons named as
proxies in the accompanying proxy, who have been designated by the board of
directors, intend to vote, unless otherwise instructed in such proxy, FOR the
election of all of the nominees listed below.
The following information describes the backgrounds and business experience
of the nominees for director:
Irwin D. Simon, President, Chief Executive Officer and Chairman of the Board,
Age 44
Irwin D. Simon has been our President and Chief Executive Officer and a
director since our inception and is our founder. Mr. Simon was appointed
Chairman of the Board of Directors in April 2000. From December 1990 through
December 1992, Mr. Simon was employed in various marketing capacities with
Slim-Fast Foods Company ("Slim Fast"), a national marketer of meal replacement
and weight loss food supplements with annual revenues in excess of $500
million. His duties initially involved sales and marketing for the frozen and
dairy divisions of Slim Fast, which included establishing and implementing
marketing strategies and establishing a distribution system throughout the
United States. In March 1992, Mr. Simon became Vice President of Marketing for
Slim Fast. From 1986 through 1990, Mr. Simon was employed by The Haagen-Dazs
Company, a division of Grand Metropolitan, plc. Haagen-Dazs is a manufacturer
and distributor of premium ice cream and related products. Mr. Simon held a
number of sales and marketing positions, including Eastern Regional Director
of Haagen-Dazs Shops, the entity managing a majority of the franchisee system
and all company-owned retail shops. Mr. Simon serves as a director of
Technology Flavors & Fragrances, Inc., Jarden Corporation and other privately
held companies and is the past chapter chairman of YPO--Gotham Chapter, New
York City.
Andrew R. Heyer(1), Age 45
Andrew R. Heyer has been a director since November 1993. Mr. Heyer is a
founder of Trimaran Capital Partners, a private asset management firm with
over $4 billion under management. Trimaran Capital Partners manages its second
private equity fund, Trimaran Fund II, a $1.043 billion fund that concentrates
on investments in the equity of private companies in the United States and
Western Europe. In addition to its private equity funds, Trimaran Capital
Partners also manages, through Trimaran Advisors, a portfolio of structured
investment funds. Mr. Heyer is also a vice-chairman of CIBC World Markets
Corp., co-head of CIBC Argosy Merchant Banking Funds and a member of CIBC's
U.S. Management Committee. Prior to joining CIBC in 1995, Mr. Heyer was a
founder and managing director of The Argosy Group L.P. Mr. Heyer serves as a
director of eLink Communications, Inc., Niagara Corporation, Fairfield
Manufacturing Company, Inc., Lancer Industries, Inc., Millennium Digital Media
Holdings, L.L.C., and Village Voice Media, LLC.
Beth L. Bronner(1), Age 51
Beth L. Bronner has been a director since November 1993 and is the
chairperson of our compensation committee. Ms. Bronner, who is currently a
private consultant and president of a private realty company, served as
President and Chief Operating Officer of Advo Inc. from August 2000 until May
2001. Prior to that, Ms. Bronner was at Sunbeam Inc. from November 1998 as
President--Health Division. Prior to that, she was with Citibank, N.A. from
September 1996 as Senior Vice President and Director of Marketing for the
United States and Europe. From July 1994 to August 1996, Ms. Bronner was Vice
President--Emerging Markets of American Telephone & Telegraph Company Consumer
Communications Services business. Ms. Bronner was President of the
Professional Products Division of
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Revlon, Inc. from May 1993 until June 1994. From February 1992 to May 1993 she
was Executive Vice President of the Beauty Care and Professional Products
Division of Revlon, Inc. Ms. Bronner also serves as a director of Fortis, Inc.
Jack Futterman(2)(3), Age 69
Jack Futterman has been a director since December 1996. Mr. Futterman served
as Chairman and Chief Executive Officer of Party City Stores, Inc. from June
1999 through December 1999. Mr. Futterman retired as Chairman and Chief
Executive Officer of the Pathmark Supermarket chain in March 1996. He joined
Pathmark in 1973 as Vice President of its drugstore and general merchandise
divisions and occupied a number of positions before becoming Chairman and
Chief Executive Officer. Mr. Futterman is a registered pharmacist and former
Chairman of the National Association of Chain Drugstores. He is a director of
Party City, Inc., as well as several not-for-profit organizations.
James S. Gold(2), Age 51
James S. Gold has been a director since March 1998 and is the chairperson of
our audit committee. Mr. Gold is a Managing Director in the Banking Group of
Lazard Freres & Co LLC. Since joining Lazard Freres & Co LLC in 1977, Mr. Gold
has been involved in a broad range of investment banking activities,
particularly relating to the consumer products and food industries. Mr. Gold
is also a director of Smart & Final Inc.
Joseph Jimenez(3), Age 42
Joseph Jimenez has been a director since September 1999. Mr. Jimenez has
served as Executive Vice President, H.J. Heinz Company and President and CEO,
Heinz Europe since July 2002. Mr. Jimenez was President and Chief Executive
Officer of Heinz North America from November 1998 through June 2002. Prior to
that, Mr. Jimenez served as president of Wesson/Peter Pan Food Co. and Orville
Redenbacher/Swiss Miss Food Co. from March 1997 to November 1998. Mr. Jimenez
serves on our board of directors as a designee of HJH One, L.L.C..
Marina Hahn(1), Age 43
Marina Hahn has been a director since May 2000. Prior to that, she had
served as a director of Celestial since 1994. Currently, Ms. Hahn is Executive
Vice President of J. Walter Thompson Company, an advertising agency. From 1996
to 1998, Ms. Hahn was Head of the Corporate Advisory Group for the William
Morris Agency, Inc. From 1993 to 1995, Ms. Hahn was Vice President,
Advertising for Sony Electronics, Inc., a consumer electronics manufacturer.
From 1989 until joining Sony, she was the Director of Advertising for the
Pepsi-Cola Company, a beverage company. From 1979 to 1989, she was employed by
DDB Needham Worldwide, Inc., an advertising agency.
Roger Meltzer(1)(3), Age 51
Roger Meltzer has been a director since December 2000. Mr. Meltzer is a
partner and a member of the executive committee of the law firm Cahill Gordon
& Reindel, New York, New York, where he practices corporate law. Cahill Gordon
& Reindel has represented us in various matters since 1994.
Michael J. Bertasso, Age 52
Mr. Bertasso has been a director since December 2001. Mr. Bertasso is
currently Senior Vice President, and President-Asia Pacific for the H.J. Heinz
Company. From May 1998 through August 2002, Mr. Bertasso was Senior Vice
President, Strategy, Process and Business Development for Heinz. Prior to
that, Mr. Bertasso served as Chief Cost Officer and Executive Vice President
of Heinz's Star-Kist Foods, Inc. from March 1995. Prior to that, Mr. Bertasso
served as Vice President-Purchasing and Logistics, Heinz Pet Products, from
1988 to 1992, with responsibilities for Star-Kist Seafood Purchasing and
Logistics since 1993. Mr. Bertasso began his career at Heinz by joining Star-
Kist foods in 1987 as
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General Manager of Business Planning and Production Control. Mr. Bertasso
serves on our board of directors as our joint designee with HJH One, L.L.C..
Daniel R. Glickman(3), Age 57
Daniel R. Glickman, who served as U.S. Secretary of Agriculture from March
1995 until January 2001, has been a director since July 2002. Secretary
Glickman currently serves as the Director of the Institute of Politics at the
John F. Kennedy School of Government at Harvard University. From January 2001
to August 2002, Secretary Glickman was a partner in the public law and policy
practice group of Akin, Gump, Strauss, Hauer & Feld, L.L.P. and continues to
be a consultant and advisor to the law firm. Prior to his appointment as
Secretary of Agriculture, Secretary Glickman served for 18 years in the U.S.
House of Representatives, where he served as a member of the House Agriculture
Committee. Secretary Glickman serves as chairman of the Fair Labor Association
and as a director of the Chicago Mercantile Exchange; Communities in Schools;
America's Second Harvest; Food Research and Action Center; RFK Memorial
Foundation; and the Farm Foundation.
Larry Zilavy(2), Age 51
Larry Zilavy is nominated to serve on our board of directors for the first
time. Mr. Zilavy has served as chief financial officer of Barnes & Noble, Inc.
since June 2002, where he is responsible for financial management, including
financial reporting, tax, risk management, investor relations, legal, and
human resources. Prior to that, he was executive vice president of IBJ
Whitehall Bank and Trust Company, where he worked since 1992. Mr. Zilavy is a
director of Edrich Vascular Devices, a medical device company, and a member of
the Council of Regents for St. Francis College in New York City.
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(1) Compensation committee member.
(2) Audit committee member. Mr. Zilavy has agreed to serve as a member of our
audit committee upon his election to our board of directors.
(3) Corporate governance and nominating committee member.
Directors' Compensation, Committees and Meeting Attendance
During the last fiscal year, the board of directors held seven meetings.
During the last fiscal year, we did not pay any direct compensation to
directors, other than reimbursement of out-of-pocket expenses incurred in
connection with attendance at meetings of the board of directors. Under our
director stock option plans, during fiscal 2002 we granted each of our
independent directors who stood for election at our 2001 annual meeting of
stockholders options to purchase 30,000 shares of our common stock for his or
her services as director at exercise prices equal to the fair market value of
the common stock at the time of grant.
The board of directors has three standing committees: the audit committee,
the compensation committee and the corporate governance and nominating
committee.
Audit Committee. Our audit committee is comprised of three independent
directors (one position is currently vacant due to the resignation of Mr.
Ostrander from our board and which we expect will be filled by Mr. Zilavy upon
his election to our board), currently Messrs. Gold and Futterman, with Mr.
Gold acting as chairperson. The audit committee's principal duties include
recommending to our board of directors the selection, retention and
termination of our independent auditors, evaluating the independence of the
auditors, including whether the auditors provide any consulting services to
us, reviewing with the independent auditors their report as well as making any
recommendations with respect to our financial statements, accounting policies,
procedures and internal controls. In addition, the audit committee is charged
with determining whether there are any conflicts of interest in financial or
business matters between us and any of our officers or employees. During
fiscal 2002, our audit committee held five meetings. See "Report of the Audit
Committee."
6
Compensation Committee. Our compensation committee is currently comprised
of Ms. Bronner, Mr. Heyer, Ms. Hahn and Mr. Meltzer, with Ms. Bronner acting
as chairperson. The compensation committee administers our employee stock
option plans, determines the compensation policies for our officers and
recommends to the entire board of directors the salaries of our executive
officers. During fiscal 2002, the compensation committee held one meeting. See
"Report of the Compensation Committee on Executive Compensation."
Corporate Governance and Nominating Committee. Our newly formed corporate
governance and nominating committee is comprised of Mr. Futterman, Mr.
Jimenez, Mr. Meltzer and Mr. Glickman, with Mr. Futterman serving as chairman.
We anticipate our corporate governance and nominating committee will begin
holding meetings in fiscal 2003.
During fiscal 2002, each of our incumbent directors (except for Mr. Heyer,
who attended five of eight meetings, and Mr. Jimenez, who attended four of
seven meetings) attended at least 75% of the aggregate of the meetings of the
board of directors and committees on which they served.
Executive Officers
The following information describes the backgrounds and business experience
of our current executive officers who are not also directors.
Gary M. Jacobs, Executive Vice President and Secretary, Age 45
Mr. Jacobs was appointed Executive Vice President-Operations and Secretary
on October 1, 2001. Prior to that time, Mr. Jacobs served as Executive Vice
President--Finance since July 2000, Secretary since December 1998 and
Treasurer and Chief Financial Officer since September 1998. Prior to his
appointment as Executive Vice President--Finance, Mr. Jacobs served as Senior
Vice President--Finance since September 1998. Prior to his employment with us,
Mr. Jacobs was the Chief Financial Officer of Graham Field Health Products,
Inc., a manufacturing and distribution company. In December 1999, Graham Field
filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code. Mr.
Jacobs is a certified public accountant and served as Senior Manager at Ernst
& Young LLP for 13 years.
Ira J. Lamel, Executive Vice President, Chief Financial Officer and Treasurer,
Age 55
Mr. Lamel was appointed Executive Vice President and Chief Financial Officer
and Treasurer on October 1, 2001. Prior to his appointment, Mr. Lamel, a
certified public accountant, was a partner at Ernst & Young LLP where he
served in various capacities from June 1973 to September 2001. Ernst & Young
LLP serves as our independent auditors, and Mr. Lamel directed all services to
us, including the audits of our financial statements, during the fiscal 1994
through fiscal 2000 periods.
7
PROPOSAL NO. 2
ADOPTION OF THE 2002 LONG TERM INCENTIVE AND STOCK AWARD PLAN
Our board of directors has adopted, subject to shareholder approval, our
2002 Long Term Incentive and Stock Award Plan (the "2002 Plan"). The 2002 Plan
is qualified in its entirety by express reference to the 2002 Plan, which is
attached as Annex A to this Proxy Statement.
General
The 2002 Plan is intended to provide incentives to attract, retain and
motivate employees, consultants and directors in order to achieve our long-
term growth and profitability objectives. The 2002 Plan will provide for the
grant to eligible employees and directors of stock options, share appreciation
rights ("SARs"), restricted shares, restricted share units, performance
shares, performance units, dividend equivalents and other share-based awards
(the "Awards"). An aggregate of 1,600,000 shares of common stock has been
reserved for issuance under the 2002 Plan (of which during a calendar year:
(i) the maximum number of shares with respect to which options and SARs may be
granted to an eligible participant under the 2002 Plan will be 1,000,000
shares, and (ii) the performance shares, performance units, restricted shares
and restricted units intended to qualify as performance-based compensation
shall be not more than the equivalent of 800,000 shares), subject to anti-
dilution adjustments in the event of certain changes in our capital structure,
as described below. Shares issued pursuant to the 2002 Plan will be either
authorized but unissued shares or treasury shares.
Eligibility and Administration
Officers and other employees of Hain and its subsidiaries and affiliates,
consultants and directors of Hain who are responsible for or contribute to the
management and profitability of our business will be eligible to be granted
Awards under the 2002 Plan. The 2002 Plan will be administered by the
compensation committee or such other committee (or the entire board of
directors) as may be designated by the board of directors (the "Committee").
Unless otherwise determined by the board of directors, the Committee will
consist of two or more non-employee directors with the meaning of Rule 16b-3
of the Securities Exchange Act of 1934 (the "Exchange Act"), each of whom is
an outside director within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Committee will determine
which eligible employees and directors receive Awards, the types of Awards to
be received and the terms and conditions thereof. The Committee will have
authority to waive conditions relating to an Award or accelerate vesting of
Awards.
The Committee will be permitted to delegate to officers or other directors
of Hain the authority to perform administrative functions for the 2002 Plan
and, with respect to Awards granted to persons not subject to Section 16 of
the Exchange Act, to perform such other functions as the Committee may
determine to the extent permitted under Rule 16b-3 of the Exchange Act and
applicable law. If an Award is intended to be qualified performance-based
compensation under Section 162(m) of the Code, the Committee may not increase
the amount of compensation payable if it would disqualify the Award under
Section 162(m) of the Code.
Awards
Incentive stock options ("ISOs") intended to qualify for special tax
treatment in accordance with the Code and nonqualified stock options not
intended to qualify for special tax treatment under the Code may be granted
for such number of shares of common stock as the Committee determines. The
Committee will be authorized to set the terms relating to an option, including
exercise price and the time and method of exercise. The terms of ISOs will
comply with the provisions of Section 422 of the Code. ISOs may only be
granted to employees. Awards may be granted alone, in tandem with or in
exchange for any other Award.
A SAR will entitle the holder thereof to receive with respect to each share
subject thereto, an amount equal to the excess of the fair market value of one
share of common stock on the date of exercise (or, if the Committee so
determines, at any time during a specified period before or after the date of
exercise) over the exercise price of the SAR set by the Committee as of the
date of grant.
8
Payment with respect to SARs may be made in cash or shares of common stock as
determined by the Committee.
Awards of restricted shares will be subject to such restrictions on
transferability and other restrictions, if any, as the Committee may impose.
Such restrictions will lapse under circumstances as the Committee may
determine, including upon the achievement of performance criteria referred to
below. Except as otherwise determined by the Committee, eligible employees
granted restricted shares will have all of the rights of a stockholder,
including the right to vote restricted shares and receive dividends thereon,
and unvested restricted shares will be forfeited upon termination of
employment during the applicable restriction period.
A restricted share unit will entitle the holder thereof to receive shares of
common stock or cash at the end of a specified deferral period. Restricted
share units will also be subject to such restrictions as the Committee may
impose. Such restrictions will lapse under circumstances as the Committee may
determine, including upon the achievement of performance criteria referred to
below. Except as otherwise determined by the Committee, restricted share units
subject to deferral or restriction will be forfeited upon termination of
employment during any applicable deferral or restriction period.
Performance shares and performance units will provide for future issuance of
shares or payment of cash, respectively, to the recipient upon the attainment
of corporate performance goals established by the Committee over specified
performance periods. Except as otherwise determined by the Committee,
performance shares and performance units will be forfeited upon termination of
employment during any applicable performance period. Prior to payment of
performance shares or performance units, the Committee will certify that the
performance objectives were satisfied. Performance objectives may vary from
person to person and will be based upon one or more of the following
performance criteria as the Committee may deem appropriate: appreciation in
value of the shares; total stockholder return; earnings per share; operating
income; net income; pretax earnings; pretax earnings before interest,
depreciation and amortization; pro forma net income; return on equity; return
on designated assets; return on capital; economic value added; earnings;
revenues; expenses; operating profit margin; operating cash flow; free cash
flow; cash flow return on investment; operating margin; net profit margin. The
Committee may revise performance objectives if significant events occur during
the performance period which the Committee expects to have a substantial
effect on such objectives.
Dividend equivalents granted under the 2002 Plan will entitle the holder
thereof to receive cash, shares of common stock or other property equal in
value to dividends paid with respect to a specified number of shares of common
stock. Dividend equivalents may be awarded on a free-standing basis or in
connection with another Award, and may be paid currently or on a deferred
basis. The Committee is also authorized, subject to limitations under
applicable law, to grant such other Awards that may be denominated in, valued
in, or otherwise based on, shares of common stock, as deemed by the Committee
to be consistent with the purposes of the 2002 Plan.
Nontransferability
Unless otherwise set forth by the Committee in an award agreement, Awards
(except for vested shares) will generally not be transferable by the
participant other than by will or the laws of descent and distribution and
will be exercisable during the lifetime of the participant only by such
participant or his or her guardian or legal representative.
Capital Structure Changes
If the Committee determines that any dividend, recapitalization, share
split, reorganization, merger, consolidation, spin-off, repurchase, or other
similar corporate transaction or event affects the common stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of eligible participants under the 2002 Plan, then the Committee is
authorized to make such equitable changes or adjustments as it deems
appropriate, including adjustments to (i) the number and kind of shares which
may thereafter be issued under the 2002 Plan, (ii) the number and kind of
shares, other securities or other consideration issued or issuable in respect
of outstanding Awards and (iii) the exercise price, grant price or purchase
price relating to any Award.
9
Amendment and Termination
The 2002 Plan may be amended, suspended or terminated by our board of
directors at any time, in whole or in part. However, any amendment for which
stockholder approval is required by Section 422 of the Code will not be
effective until such approval has been attained. In addition, no amendment,
suspension, or termination of the 2002 Plan may materially and adversely
affect the rights of a participant under any Award theretofore granted to him
or her without the consent of the affected participant. The Committee may
waive any conditions or rights, amend any terms, or amend, suspend or
terminate, any Award granted, provided that, without participant consent, such
amendment, suspension or termination may not materially and adversely affect
the rights of such participant under any Award previously granted to him or
her.
Effective Date and Term
The 2002 Plan will become effective as of November 12, 2002, assuming the
adoption of the 2002 Plan is approved by our stockholders at our Annual
Meeting of Stockholders. Unless earlier terminated, the Plan will expire on
November 12, 2012, and no further awards may be granted thereunder after that
date.
Federal Income Tax Consequences
The following is a summary of the federal income tax consequences of the
2002 Plan, based upon current provisions of the Code, the Treasury regulations
promulgated thereunder and administrative and judicial interpretation thereof,
and does not address the consequences under any state, local or foreign tax
laws.
Stock Options
In general, the grant of an option will not be a taxable event to the
recipient and it will not result in a deduction to us. The tax consequences
associated with the exercise of an option and the subsequent disposition of
shares of common stock acquired on the exercise of such option depend on
whether the option is a nonqualified stock option or an ISO.
Upon the exercise of a nonqualified stock option, the participant will
recognize ordinary taxable income equal to the excess of the fair market value
of the shares of common stock received upon exercise over the exercise price.
We will generally be able to claim a deduction in an equivalent amount. Any
gain or loss upon a subsequent sale or exchange of the shares of common stock
will be capital gain or loss, long-term or short-term, depending on the
holding period for the shares of common stock.
Generally, a participant will not recognize ordinary taxable income at the
time of exercise of an ISO and no deduction will be available to us, provided
the option is exercised while the participant is an employee or within three
months following termination of employment (longer, in the case of disability
or death). If an ISO granted under the 2002 Plan is exercised after these
periods, the exercise will be treated for federal income tax purposes as the
exercise of a nonqualified stock option. Also, an ISO granted under the 2002
Plan will be treated as a nonqualified stock option to the extent it (together
with other ISOs granted to the participant by us) first becomes exercisable in
any calendar year for shares of common stock having a fair market value,
determined as of the date of grant, in excess of $100,000.
If shares of common stock acquired upon exercise of an ISO are sold or
exchanged more than one year after the date of exercise and more than two
years after the date of grant of the option, any gain or loss will be long-
term capital gain or loss. If shares of common stock acquired upon exercise of
an ISO are disposed of prior to the expiration of these one-year or two-year
holding periods (a "Disqualifying Disposition"), the participant will
recognize ordinary income at the time of disposition, and we will generally be
able to claim a deduction, in an amount equal to the excess of the fair market
value of the shares of common stock at the date of exercise over the exercise
price. Any additional gain will be treated as capital gain, long-term or
short-term, depending on how long the shares of common stock have been held.
Where shares of common stock are sold or exchanged in a Disqualifying
Disposition (other than certain related party transactions) for an amount less
than their fair market value at the date
10
of exercise, any ordinary income recognized in connection with the
Disqualifying Disposition will be limited to the amount of gain, if any,
recognized in the sale or exchange, and any loss will be a long-term or short-
term capital loss, depending on how long the shares of common stock have been
held.
If an option is exercised through the use of shares of common stock
previously owned by the participant, such exercise generally will not be
considered a taxable disposition of the previously owned shares and, thus, no
gain or loss will be recognized with respect to such previously owned shares
upon such exercise. The amount of any built-in gain on the previously owned
shares generally will not be recognized until the new shares acquired on the
option exercise are disposed of in a sale or other taxable transaction.
Although the exercise of an ISO as described above would not produce
ordinary taxable income to the participant, it would result in an increase in
the participant's alternative minimum taxable income and may result in an
alternative minimum tax liability.
Restricted Stock
A participant who receives shares of restricted stock will generally
recognize ordinary income at the time that they "vest", i.e., either when they
are not subject to a substantial risk of forfeiture or when they are freely
transferable. The amount of ordinary income so recognized will be the fair
market value of the common stock at the time the income is recognized
(determined without regard to any restrictions other than restrictions which
by their terms will never lapse), less the amount, if any, paid for the stock.
This amount is generally deductible for federal income tax purposes by us.
Dividends paid with respect to common stock that is nonvested will be ordinary
compensation income to the participant (and generally deductible by us). Any
gain or loss upon a subsequent sale or exchange of the shares of common stock,
measured by the difference between the sale price and the fair market value on
the date restrictions lapse, will be capital gain or loss, long-term or short-
term, depending on the holding period for the shares of common stock. The
holding period for this purpose will begin on the date following the date
restrictions lapse.
In lieu of the treatment described above, a participant may elect immediate
recognition of income under Section 83(b) of the Code. In such event, the
participant will recognize as income the fair market value of the restricted
stock at the time of grant (determined without regard to any restrictions
other than restrictions which by their terms will never lapse), and we will
generally be entitled to a corresponding deduction. Dividends paid with
respect to shares as to which a proper Section 83(b) election has been made
will not be deductible to us. If a Section 83(b) election is made and the
restricted stock is subsequently forfeited, the participant will not be
entitled to any offsetting tax deduction.
SARs and Other Awards
With respect to SARs, restricted share units, performance shares,
performance units dividend equivalents and other Awards under the 2002 Plan
not described above, generally, when a participant receives payment with
respect to any such Award granted to him or her under the 2002 Plan, the
amount of cash and the fair market value of any other property received will
be ordinary income to such participant and will be allowed as a deduction for
federal income tax purposes to us.
Payment of Withholding Taxes
We may withhold, or require a participant to remit to us, an amount
sufficient to satisfy any federal, state or local withholding tax requirements
associated with Awards under the 2002 Plan.
Deductibility Limit on Compensation in Excess of $1 Million
Section 162(m) of the Code generally limits the deductible amount of annual
compensation paid (including, unless an exception applies, compensation
otherwise deductible in connection with Awards granted under the 2002 Plan) by
a public company to a "covered employee" (i.e., the chief executive officer
and our four other most highly compensated executive officers) to no more than
$1 million. We currently intend to structure stock options granted and other
Awards made under the Plan to comply
11
with an exception to nondeductibility under Section 162(m) of the Code. See
"Executive Compensation--Report of the Compensation Committee of the Board of
Directors."
New Plan Benefits
No benefits have been received or allocated to any employee or non-employee
director under the 2002 Plan, and therefore a "New Plan Benefits" table has
not been included.
Recommendation of the Board of Directors
The Board of Directors, which unanimously approved the adoption of our 2002
Long Term Incentive and Stock Award Plan, recommends a vote FOR approval of
the adoption of our 2002 Long Term Incentive and Stock Award Plan.
12
PROPOSAL NO. 3
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
It is the practice of the board of directors to designate the accounting
firm that will serve as our independent auditors. The audit committee has
recommended that Ernst & Young LLP be selected to audit our financial
statements for the fiscal year ending June 30, 2003 and the board of directors
has approved the selection of Ernst & Young LLP. Ernst & Young LLP has audited
our financial statements since 1994.
The audit committee reviews and approves the audit and non-audit services to
be provided by our independent auditors during the year, considers the effect
that performing those services might have on auditor independence and approves
management's engagement of our independent auditors to perform those services.
Ernst & Young LLP expects to have a representative at our Annual Meeting of
Stockholders who will have the opportunity to make a statement and will be
available to respond to appropriate questions.
Recommendation of the Board of Directors
The board of directors recommends a vote FOR ratification of Ernst & Young
LLP as our independent auditors for our fiscal year ending June 30, 2003.
13
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth the compensation paid by Hain for services
rendered during the three fiscal years ended June 30, 2002 to or for the
accounts of our Chief Executive Officer and our other most highly compensated
executive officers, who we refer to as the named executive officers.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
-------------------------------------------- ------------
Awards
------------
Securities
Fiscal Other Annual Underlying
Name and Principal Position Year Salary Bonus Compensation Options
------------------------------------------------------------ ------ -------- -------- ------------ ------------
Irwin D. Simon .............................................. 2002 $520,000 $ 12,000 $12,300 300,000
President, Chief Executive Officer and 2001 $460,000 $161,000 $ 5,400 600,000
Chairman of the Board 2000 $375,000 $625,000(1) $ 5,400 0
Gary M. Jacobs .............................................. 2002 $270,000 $ 48,000(2) $ 7,800 0
Executive Vice President - Operations 2001 $261,000 $ 40,000 $ 5,400 50,000
2000 $216,000 $225,000(1) $ 5,400 0
Ira J. Lamel (3) ............................................ 2002 $225,000 $ 42,000(2) $ 6,450 125,000
Executive Vice President and Chief
Financial Officer
- ----------
(1) Includes a one-time bonus in connection with past acquisitions (including
Celestial) of $250,000 for Mr. Simon and $125,000 for Mr. Jacobs.
(2) Includes a one time award of $30,000 to each of Mr. Jacobs and Mr. Lamel
which was used to purchase Hain common stock in the public market.
(3) Mr. Lamel commenced employment on October 1, 2001.
Employment Agreements
Irwin D. Simon
We have entered into an employment agreement with Mr. Simon. The term of the
agreement is for three years and can be extended for one additional year by
mutual consent. Mr. Simon's employment agreement provides for a minimum annual
base salary of $460,000 for the fiscal year ended June 30, 2001, $520,000 for
the fiscal year ended June 30, 2002 and $600,000 for the fiscal year ending
June 30, 2003. Mr. Simon's employment agreement also provides for an annual
bonus ranging from 0% to 200% of his annual compensation upon the achievement
of sales and profitability objectives to be determined by our compensation
committee. Under the agreement, Mr. Simon receives an annual grant during each
year of the term of his agreement of options under our 1994 Plan (or under the
2002 Plan, if adopted) exercisable for 300,000 shares of our common stock at
an exercise price equal to the market price on the date of the grant, and also
received one-time grant of options to purchase an additional 300,000 shares of
our common stock which were provided for in his previous employment
arrangement but were not granted as of June 30, 2000. In the event that Mr.
Simon is terminated without cause or he resigns for good reason, which will
include resignation upon a change of control, he will be entitled to, among
other things, two years annual salary and two years average annual bonus plus
compensation in lieu of his granted and ungranted options (based on a black-
scholes value) as of the date of his termination, together with options to
purchase an additional 300,000 shares of our common stock. Mr. Simon has also
agreed not to compete with us during his employment term or for a period of
two years thereafter and has agreed to customary provisions regarding
confidentiality and proprietary rights.
14
Ira J. Lamel
We have entered into an employment agreement with Mr. Lamel. The agreement
commences October 1, 2001 and ends June 30, 2002 and provides for automatic
renewals in one year increments effective July 1 of each fiscal year unless
notice not to renew is delivered by Hain or Mr. Lamel 90 days prior to the
next renewal date. Under the agreement, Mr. Lamel is entitled to receive an
annual base salary for fiscal 2002 of $300,000 (pro rated from employment
commencement date), and thereafter his annual base salary will be reviewed
annually and will be subject to upward adjustment based on performance and
market factors. Mr. Lamel's annual bonus shall be determined in accordance
with Hain's current policies for executive officer compensation and will be
based on performance and market factors but will be at least 25% of his annual
base salary during the first two years of his employment (pro rated for fiscal
2002). If Mr. Lamel is terminated without cause, he will be entitled to
receive one year annual salary, one year minimum annual bonus, his accrued
bonus through termination plus vacation, one year of continued benefits and
the vesting of all outstanding stock options. The agreement also provides for
a grant to Mr. Lamel upon the commencement of his employment of options
exercisable for 125,000 shares of Hain common stock at an exercise price of
the market price at the date of grant, 50% of which vest immediately and 50%
which vest on the first anniversary of his employment, and an additional grant
of options exercisable for 75,000 shares of common stock at an exercise price
of the market price at the date of grant if Hain and Mr. Lamel have met
certain pre-established performance criteria. The agreement further provides
that Mr. Lamel will enter into the standard change of control agreement for
Hain senior executives as described below, and that in the event of a change
of control, Mr. Lamel will receive an additional 75,000 stock options.
Change of Control Agreements
We have entered into change of control agreements with Messrs. Jacobs and
Lamel that provide that, in the event that, following a change of control of
Hain, the surviving corporation takes certain actions, including a termination
without cause, diminution in duties or forced relocation, such executive
officer will be entitled to terminate his employment and receive two times
annual base salary and annual bonus, two years benefits continuation and
immediate vesting of all outstanding options.
Changes in Internal Controls
During fiscal 2002, there were no significant changes in our internal
controls or other factors that could significantly affect these controls
subsequent to their date of evaluation.
15
Stock Option Grants and Exercises
The tables below set forth information with respect to grants of options to,
and exercise of options by, our Chief Executive Officer and our other named
executive officers during our fiscal year ended June 30, 2002.
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
-------------------------------------------------------------------------------
% of Total
Options Number of
Granted to Securities Exercise
Employees Underlying or Base
in Fiscal Options Price Expiration
Name Year Granted ($/Sh)(1) Date 5% 10%
- ---- ---------- ---------- --------- ------------ ---------- -----------
Irwin D. Simon ................................. 300,000 18.1% $21.40 Jul. 7, 2011 $4,037,504 $10,231,827
Ira J. Lamel ................................... 125,000 7.6% $18.06 Oct. 1, 2011 $1,419,730 $ 3,597,874
- ----------
(1) Options were granted at exercise prices which were not less than the fair
market value of the common stock at the time of grant.
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares Held at June 30, 2002 at June 30, 2002(1)
Acquired Value --------------------------- ---------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
Irwin D. Simon ........................... 0 $0 2,270,000 0 $10,178,325 $ 0
Gary M. Jacobs ............................ 0 $0 200,000 0 $ 365,625 $ 0
Ira J. Lamel .............................. 0 $0 62,500 62,500 $ 27,500 $27,500
- ----------
(1) Based on a price of $18.50 per share, the closing bid price for our
common stock on The Nasdaq National Market on June 30, 2002.
1993 Executive Stock Option Plan
In July 1993, we adopted the 1993 Executive Stock Option Plan, which we
refer to in this notice of annual meeting as the 1993 Plan, under which we
granted to Irwin D. Simon, our founder, president and chief executive officer,
options to purchase 600,000 shares of our common stock, 535,000 of which were
outstanding at June 30, 2002. The exercise price of options designed to
qualify as incentive options is $3.58 per share and the exercise price of non-
qualified options is $3.25 per share. The options expire in 2003.
1994 Long Term Incentive and Stock Award Plan
In December 1994, we adopted the 1994 Long Term Incentive and Stock Award
Plan, which we refer to in this notice of annual meeting as the 1994 Plan. The
1994 Plan, as amended, provides for the granting of incentive stock options
and other stock-based awards to employees and directors to purchase up to an
aggregate of 6,400,000 shares of our common stock. The 1994 Plan is
administered by the compensation committee of the board of directors, or a
subcommittee thereof. All of the awards granted to date under the 1994 Plan
have been incentive or non-qualified stock options providing for exercise
prices not less than the fair market price at the date of grant, and expire 10
years after date of grant. At the discretion of the compensation committee,
options are exercisable upon grant or over an extended
16
vesting period. During fiscal 2002, options to purchase 1,688,900 shares were
granted at prices ranging from $15.42 to $22.72 per share, options to purchase
48,133 shares were exercised and options to purchase 64,387 shares were
canceled. At June 30, 2002, options to purchase 638,025 shares were available
for grant under the 1994 Plan.
2002 Long Term Incentive and Stock Award Plan
Our board of directors has adopted, subject to stockholder approval, our
2002 Long Term Incentive and Stock Award Plan, which we refer to in this
notice of annual meeting as the 2002 Plan. See "Proposal No. 2 - Adoption of
the 2002 Long Term Incentive and Stock Award Plan" for a description of the
2002 Plan. At June 30, 2002, no awards had been granted under the 2002 Plan.
1996 Directors Stock Option Plan
In December 1995, we adopted the 1996 Directors Stock Option Plan, which we
refer to in this notice of annual meeting as the 1996 Directors Plan. The 1996
Directors Plan provides for the granting of stock options to non-employee
directors to purchase up to an aggregate of 750,000 shares of our common
stock. No options may be granted under the Directors Plan after December 2000
and, as of June 30, 2002 options to purchase 380,000 shares were outstanding
under the 1996 Directors Plan.
2000 Directors Stock Option Plan
In May 2000, we adopted a new 2000 Directors Stock Option Plan, which we
refer to in this notice of annual meeting as the 2000 Directors Plan. The 2000
Directors Plan provides for granting of stock options to non-employee
directors to purchase up to an aggregate of 750,000 shares of our common
stock. During fiscal 2002, 255,000 options were granted at prices ranging from
$20.01 to $26.44 and no options where exercised or canceled. At June 30, 2002,
495,000 options were available for grant under the 2000 Directors Plan.
Celestial Plans
In connection with the merger of Celestial Seasonings, Inc. with and into
our wholly owned subsidiary on May 30, 2000 (the "Merger"), we assumed
Celestial's 1993 Long-Term Incentive Plan and 1994 Non-Employee Director
Compensation Plan, which we refer to in this notice of annual meeting
collectively as the Celestial Plans. Following the consummation of the Merger,
no options to purchase shares of common stock will be granted under the
Celestial Plans. During fiscal 2002, options to purchase 46,208 shares were
exercised and options to purchase 2,530 shares were cancelled. As of June 30,
2002, options to purchase 414,720 shares of common stock were outstanding
under the Celestial Plans.
Equity Compensation Plan Information
The table below sets forth information with respect to our compensation
plans as of June 30, 2002. The table does not reflect the adoption of the 2002
Plan described under "Proposal No. 2--Adoption of the 2002 Long Term Incentive
and Stock Award Plan."
Number of Securities
Number of Securities Remaining Available for
to be Issued Upon Weighted-Average Future Issuance Under
Exercise of Outstanding Exercise Price of Equity Compensation
Plan Category Options, Warrants Outstanding Options, Plans (excluding securities
- ------------- and Rights Warrants and Rights reflected in column (a))
----------------------- -------------------- ---------------------------
(a) (b) (c)
Equity compensation plans approved by security
holders......................................... 6,023,383 $18.72 1,133,025
Equity compensation plans not approved by security
holders......................................... N/A N/A N/A
Total.......................................... 6,023,383 $18.72 1,133,025
17
REPORT OF THE AUDIT COMMITTEE
Our audit committee is comprised of three independent directors (one
position is currently vacant due to the resignation of Mr. Ostrander from our
board and which we expect will be filled by Mr. Zilavy upon his election to
our board) and operates under a written charter. The audit committee, in its
oversight role over (1) our financial accounting and reporting process, (2)
our system of internal controls established by management and (3) the external
audit process, has met with management and our independent auditors.
Discussions about our audited financial statements included our independent
auditor's judgments about the quality, not just the acceptability, of our
accounting principles and underlying estimates used in our financial
statements, as well as other matters, as required by Statement on Auditing
Standards No. 61, Communication with Audit Committees ("SAS 61"), as amended
by Statement on Auditing Standards No. 90, Audit Committee Communications
("SAS 90") and by our Audit Committee Charter. In conjunction with the
specific activities performed by the audit committee in its oversight role, it
issued the following report as of September 30, 2002:
1. The audit committee has reviewed and discussed the audited financial
statements as of and for the year ended June 30, 2002 with our
management.
2. The audit committee has discussed with the independent auditors the
matters required to be discussed by SAS 61 and SAS 90.
3. The audit committee has received from the independent accountants,
as required by Independence Standards Board Standard No.1,
Independence Discussions with Audit Committee, (i) a written
disclosure, indicating all relationships, if any, between the
independent auditor and its related entities and the company and its
related entities which, in the auditor's professional judgment,
reasonably may be thought to bear on the auditor's independence, and
(ii) a letter from the independent auditor confirming that, in its
professional judgment, it is independent of the company; and the
audit committee has discussed with the auditor the auditor's
independence from the company.
Based on the review and discussions referred to in paragraphs (1) through
(3) above, the audit committee recommended to the board of directors, and the
board has approved, that the audited financial statements should be included
in our Annual Report on Form 10-K for the fiscal year ended June 30, 2002 for
filing with the Securities and Exchange Commission.
James S. Gold, Chairperson
Jack Futterman
Audit Fees, Financial Information Design and Implementation Fees and All Other
Fees Paid to Ernst & Young LLP during Fiscal 2002 and Fiscal 2001
For its fiscal 2002 and 2001 services, we paid Ernst & Young LLP total fees
of $912,000 and $1,324,000, respectively, comprised of:
o Audit Fees: $420,000 and $250,000 for services rendered for audit
services for fiscal 2002 and 2001, respectively.
o Financial Information Systems Design and Implementation Fees: There were
no services rendered related to information systems in fiscal 2002 or
2001.
o All Other Fees: $492,000 and $1,074,000 in fiscal 2002 and 2001,
respectively, for all other matters.
The audit committee has considered whether the provision of audit-related
and other non-audit services by Ernst & Young LLP is compatible with
maintaining Ernst & Young LLP's independence.
18
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation Committee. Our compensation committee is responsible for
determining the compensation of our executive officers. The compensation
committee, or a sub-committee thereof, also administers the 1994 Plan and
discretionary grants under our 2000 Directors Plan and will administer the
2002 Plan.
The compensation committee is currently comprised of Ms. Bronner, Mr. Heyer,
Ms. Hahn and Mr. Meltzer, with Ms. Bronner acting as chairperson. Decisions
and recommendations by the compensation committee are made on the basis of an
assessment of corporate performance and a review of supporting data, including
historical compensation data of other companies within the industry. Although
actions with respect to various programs are taken at different times,
consideration of each is made in the context of our overall compensation
package.
Section 162(m) of the Internal Revenue Code generally limits the deductible
amount of annual compensation paid to certain individual executive officers
(i.e., the chief executive officer and our other most highly compensated
executive officers) to no more than $1 million. Considering the current
structure of executive officer compensation, the compensation committee
believes that we will not be denied any significant tax deductions for fiscal
2002. The compensation committee will continue to review tax consequences as
well as other relevant considerations in connection with compensation
decisions.
Compensation Philosophy. Our executive compensation program is designed to
provide competitive levels of remuneration and assist us in attracting and
retaining qualified executives. The compensation committee is committed to the
objectives of linking executive compensation to corporate performance and
providing incentives which align the interests of our executives with the
interests of our stockholders. This philosophy underlies executive
compensation policies designed to integrate rewards with the attainment of
annual and long-term performance goals, reward significant corporate
performance and recognize individual initiatives and achievements. It is
performance which most significantly influences an individual executive's
compensation level. As a result, actual compensation levels in any particular
year may be above or below those of our competitors, depending upon our
performance. The executive compensation program is comprised of salary, annual
cash incentives and long-term, stock-based incentives. The following is a
discussion of each of the elements of the executive compensation program along
with a description of the decisions and actions taken by the compensation
committee with regard to fiscal 2002 compensation:
Base Salary. We establish salary ranges for each of our executive
positions based on appropriate external comparisons, internal
responsibilities and relationships to other corporate positions. Existing
base salaries and annual escalations for the named executives were
established based on the foregoing factors and in negotiation with each of
the executives in connection with their employment by us.
Annual Incentive. We may pay annual cash bonuses in any year to reward
significant corporate accomplishments and individual initiatives which
contributed to the attainment of targeted goals relating to product sales,
product margins, return on capital employed, earnings per share and
stockholder return. If the compensation committee determines that corporate
results are such that a bonus program is warranted, then each executive's
accomplishments are assessed as to their impact on corporate results. The
chief executive officer consults with compensation committee members to
review corporate results, the individual executive's contributions and his
recommendations as to annual incentive payments.
Long-Term Incentives. The 1994 Plan and the 1993 Plan were approved by
stockholders for the purpose of promoting the interests of our stockholders
by: (1) attracting and retaining executives and other key employees of
outstanding ability; (2) strengthening our capability to develop, maintain
and direct a competent management team; (3) motivating executives and other
key employees, by means of performance-related incentives, to achieve
longer-range performance goals;
19
(4) providing incentive compensation opportunities which are competitive
with those of other comparably situated corporations; and (5) enabling such
employees to participate in our long-term growth and financial success.
Chief Executive Officer Compensation. The compensation committee is
responsible for determining the appropriate compensation for our chief
executive officer based on a variety of criteria, including our performance
and the chief executive officer's performance, the compensation of the chief
executive officers of comparable companies and other market factors. In
fiscal 2000, the compensation committee worked with Mr. Simon in the
preparation of his employment agreement described above, then recommended
the adoption of the employment agreement to our board of directors, which
adopted it unanimously.
Compensation Committee: Beth L. Bronner, Chairperson
Andrew R. Heyer
Marina Hahn
Roger Meltzer
20
PERFORMANCE GRAPH
The following graph compares the performance of our common stock to the S&P
500 Index and to the Standard & Poor's Food Products Index for the period from
June 30, 1997 through June 30, 2002. The comparison assumes $100 invested on
June 30, 1997.
[graphic]
(U.S. Dollars)
Hain S&P 500 S&P Food Products
---- ------- -----------------
6/30/97 100.0 100.0 100.0
6/30/98 537.7 128.1 122.0
6/30/99 428.6 155.1 108.1
6/30/00 762.3 164.3 91.9
6/30/01 457.1 138.3 105.4
6/30/02 384.4 111.8 117.6
CERTAIN RELATIONSHIPS
On September 27, 1999, we announced an agreement with H.J. Heinz Company to
form a strategic alliance for the global production and marketing of natural
and organic foods and soy-based beverages. In connection with the alliance, we
issued 2,837,343 investment shares of our common stock to Boulder, Inc.
(formerly known as Earth's Best), a wholly owned subsidiary of Heinz, for an
aggregate purchase price of $82,383,843. In addition, in a separate
transaction, we announced on September 27, 1999 that we had purchased the
Earth's Best trademarks. In consideration for the trademarks, we paid
$4,620,000 in cash and issued 670,234 shares of our common stock to Boulder,
valued at $17,380,000. These shares were subsequently transferred to HJH One,
L.L.C., an affiliate of Heinz. In connection with the issuance of these
shares, Hain and Boulder (currently HJH One, L.L.C.) entered into an
investor's agreement that provides for the appointment to our board of
directors of one member nominated by HJH One, L.L.C., currently Mr. Jimenez,
and one member jointly nominated by HJH One, L.L.C. and Hain, currently
Mr. Bertasso. Mr. Jimenez is President and Chief Executive Officer of Heinz
Europe, a division of Heinz. Mr. Bertasso is currently Senior Vice President
and President-Asia Pacific for Heinz.
In accordance with the provisions of the investor's agreement relating to
HJH One, L.L.C.'s right to maintain its ownership percentage following certain
issuances by us of our common stock, on June 19, 2000, we issued an additional
2,582,774 shares of common stock to HJH One, L.L.C. at an aggregate purchase
price of $79,743,147 in connection with the Merger. Under the investor's
agreement described above, HJH One, L.L.C. has agreed to vote its shares in
favor of nominees for directors listed in Proposal No. 1.
In fiscal 2002, we paid to H.J. Heinz Company approximately $3,456,000 in
purchases, royalties and profit sharing fees.
Gregg Ostrander, who served as a director during part of fiscal 2002, is the
Chairman, President and Chief Executive Officer of Michael Food, Inc. Kohler
Mix Specialties, a subsidiary of Michael, produces half gallon cartons of
Westsoy refrigerated milk for Hain under a co-packing agreement. In fiscal
2002, Hain paid Kohler approximately $2,941,000 under the co-packing
agreement.
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Mr. Gold, who is nominated for re-election as a director, is a managing
director of Lazard Freres & Co LLC, which provides financial advisory and
other investment banking services to us from time to time. Mr. Meltzer, who is
nominated for re-election as a director, is a partner at the law firm Cahill
Gordon & Reindel. Cahill Gordon & Reindel provides legal services to us from
time to time.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors and persons who own more than 10% of a registered class
of our equity securities to file initial reports of beneficial ownership and
changes in such with the SEC. Such officers, directors and stockholders are
required by SEC regulations to furnish us with copies of all Section 16(a)
forms they file. Based solely on a review of the copies of such forms
furnished to us and written representations from our executive officers and
directors, all persons subject to the reporting requirements of Section 16(a)
filed the required reports on a timely basis.
OTHER MATTERS
Management does not know of any other matters that will come before the
meeting, but should any other matters requiring a vote of stockholders arise,
including any question as to an adjournment of the meeting, the persons named
on the enclosed proxy will vote thereon according to their best judgment in
our interests.
STOCKHOLDER PROPOSALS
We will not consider including a stockholder's proposal for action at our
2003 annual meeting of stockholders in the proxy material to be mailed to our
stockholders in connection with such meeting unless such proposal is received
at our principal office no later than July 16, 2003.
HOUSEHOLDING
During fiscal 2002, we adopted a new procedure approved by the Securities
and Exchange Commission called "householding." Under this procedure, multiple
stockholders who share the same last name and address will receive only one
copy of the annual proxy materials, unless they notify us that they wish to
continue receiving multiple copies. We have undertaken householding to reduce
our printing costs and postage fees.
If you wish to opt-out or householding and continue to receive multiple
copies of the proxy materials at the same address, you may do so at any time
prior to thirty days before the mailing of proxy materials, which typically
are mailed in October of each year, by notifying us in writing at: 58 South
Service Road, Melville, New York 11747, Attention: Corporate Secretary. You
also may request additional copies of the proxy materials by notifying us in
writing at the same address.
22
If you share an address with another stockholder and currently are receiving
multiple copies of the proxy materials, you may request householding by
notifying us at the above-referenced address.
By order of the board of directors,
/S/ Gary M. Jacobs
- ------------------
Gary M. Jacobs
Corporate Secretary
Dated: October 14, 2002
Your vote is important. Stockholders who do not expect to be present at the
Annual Meeting of Stockholders and who wish to have their stock voted are
requested to sign and date the enclosed proxy and return it in the enclosed
envelope. No postage is required if mailed in the United States.
23
Annex A
THE HAIN CELESTIAL GROUP, INC.
2002 LONG TERM INCENTIVE AND STOCK AWARD PLAN
1. Purposes.
The purposes of the 2002 Long Term Incentive and Stock Award Plan are to
advance the interests of The Hain Celestial Group, Inc. and its stockholders
by providing a means to attract, retain, and motivate employees, consultants
and directors of the Company upon whose judgment, initiative and efforts the
continued success, growth and development of the Company is dependent.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board or the Committee as a
participating employer under the Plan; provided, however, that the Company
directly or indirectly owns at least 20% of the combined voting power of all
classes of stock of such entity or at least 20% of the ownership interests
in such entity.
(b) "Award" means any Option, SAR, Restricted Share, Restricted Share
Unit, Performance Share, Performance Unit, Dividend Equivalent, or Other
Share-Based Award granted to an Eligible Person under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which have
been designated by an Eligible Person in his or her most recent written
beneficiary designation filed with the Company to receive the benefits
specified under this Plan upon the death of the Eligible Person, or, if
there is no designated Beneficiary or surviving designated Beneficiary, then
the person, persons, trust or trusts entitled by will or the laws of descent
and distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(g) "Committee" means the Compensation Committee of the Board, or such
other Board committee (which may include the entire Board) as may be
designated by the Board to administer the Plan; provided, however, that,
unless otherwise determined by the Board, the Committee shall consist of two
or more directors of the Company, each of whom is a "non-employee director"
within the meaning of Rule 16b-3 under the Exchange Act, to the extent
applicable, and each of whom is an "outside director" within the meaning of
Section 162(m) of the Code, to the extent applicable; provided, further,
that the mere fact that the Committee shall fail to qualify under either of
the foregoing requirements shall not invalidate any Award made by the
Committee which Award is otherwise validly made under the Plan.
(h) "Company" means The Hain Celestial Group, Inc., a corporation
organized under the laws of Delaware, or any successor corporation.
(i) "Director" means a member of the Board who is not an employee of the
Company, a Subsidiary or an Affiliate.
(j) "Dividend Equivalent" means a right, granted under Section 5(g), to
receive cash, Shares, or other property equal in value to dividends paid
with respect to a specified number of Shares. Dividend Equivalents may be
awarded on a free-standing basis or in connection with another Award, and
may be paid currently or on a deferred basis.
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(k) "Eligible Person" means (i) an employee of the Company, a Subsidiary
or an Affiliate, including any director who is an employee, (ii) a
consultant to the Company or (iii) a Director.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act shall be
deemed to include successor provisions thereto and regulations thereunder.
(m) "Fair Market Value" means, with respect to Shares or other property,
the fair market value of such Shares or other property determined by such
methods or procedures as shall be established from time to time by the
Committee. If the Shares are listed on any established stock exchange or a
national market system, unless otherwise determined by the Committee in good
faith, the Fair Market Value of Shares shall mean the mean between the high
and low selling prices per Share on the immediately preceding date (or, if
the Shares were not traded on that day, the next preceding day that the
Shares were traded) on the principal exchange or market system on which the
Shares are traded, as such prices are officially quoted on such exchange.
(n) "ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.
(o) "NQSO" means any Option that is not an ISO.
(p) "Option" means a right, granted under Section 5(b), to purchase
Shares.
(q) "Other Share-Based Award" means a right, granted under Section 5(h),
that relates to or is valued by reference to Shares.
(r) "Participant" means an Eligible Person who has been granted an Award
under the Plan.
(s) "Performance Share" means a performance share granted under Section
5(f).
(t) "Performance Unit" means a performance unit granted under Section
5(f).
(u) "Plan" means this 2002 Long Term Incentive and Stock Award Plan.
(v) "Restricted Shares" means an Award of Shares under Section 5(d) that
may be subject to certain restrictions and to a risk of forfeiture.
(w) "Restricted Share Unit" means a right, granted under Section 5(e), to
receive Shares or cash at the end of a specified deferral period.
(x) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(y) "SAR" or "Share Appreciation Right" means the right, granted under
Section 5(c), to be paid an amount measured by the difference between the
exercise price of the right and the Fair Market Value of Shares on the date
of exercise of the right, with payment to be made in cash, Shares, or
property as specified in the Award or determined by the Committee.
(z) "Shares" means common stock, $.01 par value per share, of the
Company.
(aa) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
shares possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, and the Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the
provisions of the Plan:
(i) to select Eligible Persons to whom Awards may be granted;
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(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be granted to each
Eligible Person;
(iv) to determine the type and number of Awards to be granted, the
number of Shares to which an Award may relate, the terms and conditions
of any Award granted under the Plan (including, but not limited to, any
exercise price, grant price, or purchase price, any restriction or
condition, any schedule for lapse of restrictions or conditions relating
to transferability or forfeiture, exercisability, or settlement of an
Award, and waiver or accelerations thereof, and waivers of performance
conditions relating to an Award, based in each case on such
considerations as the Committee shall determine), and all other matters
to be determined in connection with an Award;
(v) to determine whether, to what extent, and under what circumstances
an Award may be settled, or the exercise price of an Award may be paid,
in cash, Shares, other Awards, or other property, or an Award may be
canceled, forfeited, exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what
circumstances cash, Shares, other Awards, or other property payable with
respect to an Award will be deferred either automatically, at the
election of the Committee, or at the election of the Eligible Person;
(vii) to prescribe the form of each Award Agreement, which need not be
identical for each Eligible Person;
(viii) to adopt, amend, suspend, waive, and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary
or advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any
Award, rules and regulations, Award Agreement, or other instrument
hereunder;
(x) to accelerate the exercisability or vesting of all or any portion
of any Award or to extend the period during which an Award is
exercisable;
(xi) to determine whether uncertificated Shares may be used in
satisfying Awards and otherwise in connection with the Plan; and
(xii) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. The Committee shall have
sole discretion in exercising its authority under the Plan. Any action of
the Committee with respect to the Plan shall be final, conclusive, and
binding on all persons, including the Company, Subsidiaries, Affiliates,
Eligible Persons, any person claiming any rights under the Plan from or
through any Eligible Person, and stockholders. The express grant of any
specific power to the Committee, and the taking of any action by the
Committee, shall not be construed as limiting any power or authority of the
Committee. The Committee may delegate to other members of the Board or
officers or managers of the Company or any Subsidiary or Affiliate the
authority, subject to such terms as the Committee shall determine, to
perform administrative functions and, with respect to Awards granted to
persons not subject to Section 16 of the Exchange Act, to perform such other
functions as the Committee may determine, to the extent permitted under Rule
16b-3 (if applicable) and applicable law.
(c) Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him or her by any officer or other employee of the Company or
any Subsidiary or Affiliate, the Company's independent certified public
accountants, or other professional retained by the Company to assist in the
administration of the Plan. No member of the Committee, and no officer or
employee of the Company acting on behalf of the Committee, shall be
personally liable for any action, determination, or interpretation taken or
made in good faith with respect to the Plan, and all members of the
Committee and any
A-3
officer or employee of the Company acting on their behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company
with respect to any such action, determination, or interpretation.
(d) Limitation on Committee's Discretion. Anything in this Plan to the
contrary notwithstanding, in the case of any Award which is intended to
qualify as "performance-based compensation" within the meaning of Section
162(m)(4)(C) of the Code, if the Award Agreement so provides, the Committee
shall have no discretion to increase the amount of compensation payable
under the Award to the extent such an increase would cause the Award to lose
its qualification as such performance-based compensation.
4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 4(c) hereof, the total
number of Shares reserved for issuance in connection with Awards under the
Plan shall be 1,600,000. No Award may be granted if the number of Shares to
which such Award relates, when added to the number of Shares previously
issued under the Plan, exceeds the number of Shares reserved under the
preceding sentence. If any Awards are forfeited, canceled, terminated,
exchanged or surrendered or such Award is settled in cash or otherwise
terminates without a distribution of Shares to the Participant, any Shares
counted against the number of Shares reserved and available under the Plan
with respect to such Award shall, to the extent of any such forfeiture,
settlement, termination, cancellation, exchange or surrender, again be
available for Awards under the Plan. Upon the exercise of any Award granted
in tandem with any other Awards, such related Awards shall be canceled to
the extent of the number of Shares as to which the Award is exercised.
(b) Subject to adjustment as provided in Section 4(c) hereof, the maximum
number of Shares (i) with respect to which Options or SARs may be granted
during a calendar year to any Eligible Person under this Plan shall be
1,000,000 Shares, and (ii) with respect to Performance Shares, Performance
Units, Restricted Shares or Restricted Share Units intended to qualify as
performance-based compensation within the meaning of Section 162(m)(4)(C) of
the Code shall be the equivalent of 800,000 Shares during a calendar year to
any Eligible Person under this Plan.
(c) In the event that the Committee shall determine that any dividend in
Shares, recapitalization, Share split, reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or share exchange,
or other similar corporate transaction or event, affects the Shares such
that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Eligible Persons under the Plan, then the
Committee shall make such equitable changes or adjustments as it deems
appropriate and, in such manner as it may deem equitable, adjust any or all
of (i) the number and kind of shares which may thereafter be issued under
the Plan, (ii) the number and kind of shares, other securities or other
consideration issued or issuable in respect of outstanding Awards, and (iii)
the exercise price, grant price, or purchase price relating to any Award;
provided, however, in each case that, with respect to ISOs, such adjustment
shall be made in accordance with Section 424(a) of the Code, unless the
Committee determines otherwise. In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria and
performance objectives, if any, included in, Awards in recognition of
unusual or non-recurring events (including, without limitation, events
described in the preceding sentence) affecting the Company or any Subsidiary
or Affiliate or the financial statements of the Company or any Subsidiary or
Affiliate, or in response to changes in applicable laws, regulations, or
accounting principles; provided, however, that, if an Award Agreement
specifically so provides, the Committee shall not have discretion to
increase the amount of compensation payable under the Award to the extent
such an increase would cause the Award to lose its qualification as
performance-based compensation for purposes of Section 162(m)(4)(C) of the
Code and the regulations thereunder.
(d) Any Shares distributed pursuant to an Award may consist, in whole or
in part, of authorized and unissued Shares or treasury Shares including
Shares acquired by purchase in the open market or in private transactions.
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5. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set forth
in this Section 5. In addition, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter (subject to Section
8(d)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
regarding forfeiture of Awards or continued exercisability of Awards in the
event of termination of service by the Eligible Person.
(b) Options. The Committee is authorized to grant Options, which may be
NQSOs or ISOs, to Eligible Persons on the following terms and conditions:
(i)Exercise Price. The exercise price per Share purchasable under an
Option shall be determined by the Committee. The Committee may, without
limitation, set an exercise price that is based upon achievement of
performance criteria if deemed appropriate by the Committee.
(ii)Option Term. The term of each Option shall be determined by the
Committee.
(iii)Time and Method of Exercise. The Committee shall determine at
the date of grant or thereafter the time or times at which an Option may
be exercised in whole or in part (including, without limitation, upon
achievement of performance criteria if deemed appropriate by the
Committee), the methods by which such exercise price may be paid or
deemed to be paid (including, without limitation, broker-assisted
exercise arrangements), the form of such payment (including, without
limitation, cash, Shares, notes or other property), and the methods by
which Shares will be delivered or deemed to be delivered to Eligible
Persons.
(iv)ISOs. The terms of any ISO granted under the Plan shall comply in
all respects with the provisions of Section 422 of the Code, including
but not limited to the requirement that the ISO shall be granted within
ten years from the earlier of the date of adoption or stockholder
approval of the Plan. ISOs may only be granted to employees of the
Company or a Subsidiary.
(c) SARs. The Committee is authorized to grant SARs (Share Appreciation
Rights) to Eligible Persons on the following terms and conditions:
(i)Right to Payment. A SAR shall confer on the Eligible Person to
whom it is granted a right to receive with respect to each Share subject
thereto, upon exercise thereof, the excess of (1) the Fair Market Value
of one Share on the date of exercise (or, if the Committee shall so
determine in the case of any such right, the Fair Market Value of one
Share at any time during a specified period before or after the date of
exercise) over (2) the exercise price per Share of the SAR as determined
by the Committee as of the date of grant of the SAR (which in the case of
a SAR granted in tandem with an Option, shall be equal to the exercise
price of the underlying Option).
(ii)Other Terms. The Committee shall determine, at the time of grant
or thereafter, the time or times at which a SAR may be exercised in whole
or in part, the method of exercise, method of settlement, form of
consideration payable in settlement, method by which Shares will be
delivered or deemed to be delivered to Eligible Persons, whether or not a
SAR shall be in tandem with any other Award, and any other terms and
conditions of any SAR. Unless the Committee determines otherwise, a SAR
(1) granted in tandem with an NQSO may be granted at the time of grant of
the related NQSO or at any time thereafter and (2) granted in tandem with
an ISO may only be granted at the time of grant of the related ISO.
(d) Restricted Shares. The Committee is authorized to grant Restricted
Shares to Eligible Persons on the following terms and conditions:
(i)Issuance and Restrictions. Restricted Shares shall be subject to
such restrictions on transferability and other restrictions, if any, as
the Committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times, under
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such circumstances (including, without limitation, upon achievement of
performance criteria if deemed appropriate by the Committee), in such
installments, or otherwise, as the Committee may determine. Except to the
extent restricted under the Award Agreement relating to the Restricted
Shares, an Eligible Person granted Restricted Shares shall have all of
the rights of a stockholder including, without limitation, the right to
vote Restricted Shares and the right to receive dividends thereon. If the
lapse of restrictions is conditioned on the achievement of performance
criteria, the Committee shall select the criterion or criteria from the
list of criteria set forth in Section 5(f)(i). The Committee must certify
in writing prior to the lapse of restrictions conditioned on achievement
of performance criteria that such performance criteria were in fact
satisfied.
(ii)Forfeiture. Except as otherwise determined by the Committee, at
the date of grant or thereafter, upon termination of service during the
applicable restriction period, Restricted Shares and any accrued but
unpaid dividends or Dividend Equivalents that are at that time subject to
restrictions shall be forfeited; provided, however, that the Committee
may provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Shares will be waived in whole or in
part in the event of terminations resulting from specified causes, and
the Committee may in other cases waive in whole or in part the forfeiture
of Restricted Shares.
(iii)Certificates for Shares. Restricted Shares granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Shares are registered in the name of
the Eligible Person, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Shares, and the Company shall retain physical possession of
the certificate.
(iv)Dividends. Dividends paid on Restricted Shares shall be either
paid at the dividend payment date, or deferred for payment to such date
as determined by the Committee, in cash or in unrestricted Shares having
a Fair Market Value equal to the amount of such dividends. Shares
distributed in connection with a Share split or dividend in Shares, and
other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
Restricted Shares with respect to which such Shares or other property has
been distributed.
(e) Restricted Share Units. The Committee is authorized to grant
Restricted Share Units to Eligible Persons, subject to the following terms
and conditions:
(i)Award and Restrictions. Delivery of Shares or cash, as the case
may be, will occur upon expiration of the deferral period specified for
Restricted Share Units by the Committee (or, if permitted by the
Committee, as elected by the Eligible Person). In addition, Restricted
Share Units shall be subject to such restrictions as the Committee may
impose, if any (including, without limitation, the achievement of
performance criteria if deemed appropriate by the Committee), at the date
of grant or thereafter, which restrictions may lapse at the expiration of
the deferral period or at earlier or later specified times, separately or
in combination, in installments or otherwise, as the Committee may
determine. If the lapse of restrictions is conditioned on the achievement
of performance criteria, the Committee shall select the criterion or
criteria from the list of criteria set forth in Section 5(f)(i). The
Committee must certify in writing prior to the lapse of restrictions
conditioned on the achievement of performance criteria that such
performance criteria were in fact satisfied.
(ii)Forfeiture. Except as otherwise determined by the Committee at
date of grant or thereafter, upon termination of service (as determined
under criteria established by the Committee) during the applicable
deferral period or portion thereof to which forfeiture conditions apply
(as provided in the Award Agreement evidencing the Restricted Share
Units), or upon failure to satisfy any other conditions precedent to the
delivery of Shares or cash to which such Restricted Share Units relate,
all Restricted Share Units that are at that time subject to deferral or
restriction shall be forfeited; provided, however, that the Committee may
provide,
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by rule or regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Restricted Share Units will be waived in whole or in part in the event of
termination resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Restricted Share
Units.
(f) Performance Shares and Performance Units. The Committee is authorized
to grant Performance Shares or Performance Units or both to Eligible Persons
on the following terms and conditions:
(i)Performance Period. The Committee shall determine a performance
period (the "Performance Period") of one or more years and shall
determine the performance objectives for grants of Performance Shares and
Performance Units. Performance objectives may vary from Eligible Person
to Eligible Person and shall be based upon one or more of the following
performance criteria as the Committee may deem appropriate: appreciation
in value of the Shares; total stockholder return; earnings per share;
operating income; net income; pretax earnings; pretax earnings before
interest, depreciation and amortization; pro forma net income; return on
equity; return on designated assets; return on capital; economic value
added; earnings; revenues; expenses; operating profit margin; operating
cash flow; free cash flow; cash flow return on investment; operating
margin; net profit margin. The performance objectives may be determined
by reference to the performance of the Company, or of a Subsidiary or
Affiliate, or of a division or unit of any of the foregoing. Performance
Periods may overlap and Eligible Persons may participate simultaneously
with respect to Performance Shares and Performance Units for which
different Performance Periods are prescribed.
(ii)Award Value. At the beginning of a Performance Period, the
Committee shall determine for each Eligible Person or group of Eligible
Persons with respect to that Performance Period the range of number of
Shares, if any, in the case of Performance Shares, and the range of
dollar values, if any, in the case of Performance Units, which may be
fixed or may vary in accordance with such performance or other criteria
specified by the Committee, which shall be paid to an Eligible Person as
an Award if the relevant measure of Company performance for the
Performance Period is met. The Committee must certify in writing that the
applicable performance criteria were satisfied prior to payment under any
Performance Shares or Performance Units.
(iii)Significant Events. If during the course of a Performance Period
there shall occur significant events as determined by the Committee which
the Committee expects to have a substantial effect on a performance
objective during such period, the Committee may revise such objective;
provided, however, that, if an Award Agreement so provides, the Committee
shall not have any discretion to increase the amount of compensation
payable under the Award to the extent such an increase would cause the
Award to lose its qualification as performance-based compensation for
purposes of Section 162(m)(4)(C) of the Code and the regulations
thereunder.
(iv)Forfeiture. Except as otherwise determined by the Committee, at
the date of grant or thereafter, upon termination of service during the
applicable Performance Period, Performance Shares and Performance Units
for which the Performance Period was prescribed shall be forfeited;
provided, however, that the Committee may provide, by rule or regulation
or in any Award Agreement, or may determine in an individual case, that
restrictions or forfeiture conditions relating to Performance Shares and
Performance Units will be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Performance
Shares and Performance Units.
(v)Payment. Each Performance Share or Performance Unit may be paid in
whole Shares, or cash, or a combination of Shares and cash either as a
lump sum payment or in installments, all as the Committee shall
determine, at the time of grant of the Performance Share or Performance
Unit or otherwise, commencing as soon as practicable after the end of
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the relevant Performance Period. The Committee must certify in writing
prior to the payment of any Performance Share or Performance Unit that
the performance objectives and any other material terms were in fact
satisfied.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to Eligible Persons. The Committee may provide, at the date of
grant or thereafter, that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional
Shares, or other investment vehicles as the Committee may specify; provided,
however, that Dividend Equivalents (other than freestanding Dividend
Equivalents) shall be subject to all conditions and restrictions of the
underlying Awards to which they relate.
(h) Other Share-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Eligible Persons such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Shares, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, unrestricted shares awarded purely as a "bonus" and not subject
to any restrictions or conditions, other rights convertible or exchangeable
into Shares, purchase rights for Shares, Awards with value and payment
contingent upon performance of the Company or any other factors designated
by the Committee, and Awards valued by reference to the performance of
specified Subsidiaries or Affiliates. The Committee shall determine the
terms and conditions of such Awards at date of grant or thereafter. Shares
delivered pursuant to an Award in the nature of a purchase right granted
under this Section 5(h) shall be purchased for such consideration, paid for
at such times, by such methods, and in such forms, including, without
limitation, cash, Shares, notes or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other Award
under the Plan, shall also be authorized pursuant to this Section 5(h).
6. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted to
Eligible Persons either alone or in addition to, in tandem with, or in
exchange or substitution for, any other Award granted under the Plan or any
award granted under any other plan or agreement of the Company, any
Subsidiary or Affiliate, or any business entity to be acquired by the
Company or a Subsidiary or Affiliate, or any other right of an Eligible
Person to receive payment from the Company or any Subsidiary or Affiliate.
Awards may be granted in addition to or in tandem with such other Awards or
awards, and may be granted either as of the same time as or a different time
from the grant of such other Awards or awards. The per Share exercise price
of any Option, grant price of any SAR, or purchase price of any other Award
conferring a right to purchase Shares which is granted, in connection with
the substitution of awards granted under any other plan or agreement of the
Company or any Subsidiary or Affiliate or any business entity to be acquired
by the Company or any Subsidiary or Affiliate, shall be determined by the
Committee, in its discretion.
(b) Term of Awards. The term of each Award granted to an Eligible Person
shall be for such period as may be determined by the Committee; provided,
however, that in no event shall the term of any ISO or a SAR granted in
tandem therewith exceed a period of ten years from the date of its grant (or
such shorter period as may be applicable under Section 422 of the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award
may be made in such forms as the Committee shall determine at the date of
grant or thereafter, including, without limitation, cash, Shares, notes or
other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The Committee may make rules relating
to installment or deferred payments with respect to Awards, including the
rate of interest to be credited with respect to such payments.
(d) Nontransferability. Unless otherwise set forth by the Committee in an
Award Agreement, Awards shall not be transferable by an Eligible Person
except by will or the laws of descent and
A-8
distribution (except pursuant to a Beneficiary designation) and shall be
exercisable during the lifetime of an Eligible Person only by such Eligible
Person or his guardian or legal representative. An Eligible Person's rights
under the Plan may not be pledged, mortgaged, hypothecated, or otherwise
encumbered, and shall not be subject to claims of the Eligible Person's
creditors.
(e) Noncompetition. The Committee may, by way of the Award Agreements or
otherwise, establish such other terms, conditions, restrictions and/or
limitations, if any, of any Award, provided they are not inconsistent with
the Plan, including, without limitation, the requirement that the
Participant not engage in competition with the Company.
7. General Provisions.
(a) Compliance with Legal and Trading Requirements. The Plan, the
granting and exercising of Awards thereunder, and the other obligations of
the Company under the Plan and any Award Agreement, shall be subject to all
applicable federal, state and foreign laws, rules and regulations, and to
such approvals by any regulatory or governmental agency as may be required.
The Company, in its discretion, may postpone the issuance or delivery of
Shares under any Award until completion of such stock exchange or market
system listing or registration or qualification of such Shares or other
required action under any state or federal law, rule or regulation as the
Company may consider appropriate, and may require any Participant to make
such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of Shares in
compliance with applicable laws, rules and regulations. No provisions of the
Plan shall be interpreted or construed to obligate the Company to register
any Shares under federal, state or foreign law. The Shares issued under the
Plan may be subject to such other restrictions on transfer as determined by
the Committee.
(b) No Right to Continued Employment or Service. Neither the Plan nor any
action taken thereunder shall be construed as giving any employee,
consultant's, or director the right to be retained in the employ or service
of the Company or any of its Subsidiaries or Affiliates, nor shall it
interfere in any way with the right of the Company or any of its
Subsidiaries or Affiliates to terminate any employee's, consultant's or
director's employment or service at any time.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Shares, or any payroll or other
payment to an Eligible Person, amounts of withholding and other taxes due in
connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Eligible Persons to satisfy obligations for the payment of withholding taxes
and other tax obligations relating to any Award. This authority shall
include authority to withhold or receive Shares or other property and to
make cash payments in respect thereof in satisfaction of an Eligible
Person's tax obligations; provided, however, that the amount of tax
withholding to be satisfied by withholding Shares shall be limited to the
minimum amount of taxes, including employment taxes, required to be withheld
under applicable Federal, state and local law.
(d) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or the Committee's authority to grant
Awards under the Plan without the consent of stockholders of the Company or
Participants, except that any such amendment or alteration as it applies to
ISOs shall be subject to the approval of the Company's stockholders to the
extent such stockholder approval is required under Section 422 of the Code;
provided, however, that, without the consent of an affected Participant, no
amendment, alteration, suspension, discontinuation, or termination of the
Plan may materially and adversely affect the rights of such Participant
under any Award theretofore granted to him or her. The Committee may waive
any conditions or rights under, amend any terms of, or amend, alter,
suspend, discontinue or terminate, any Award theretofore granted,
prospectively or retrospectively; provided, however, that, without the
consent of a Participant, no amendment, alteration, suspension,
discontinuation or termination of any Award may materially and adversely
affect the rights of such Participant under any Award theretofore granted to
him or her.
A-9
(e) No Rights to Awards; No Stockholder Rights. No Eligible Person or
employee shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Eligible Persons and
employees. No Award shall confer on any Eligible Person any of the rights of
a stockholder of the Company unless and until Shares are duly issued or
transferred to the Eligible Person in accordance with the terms of the
Award.
(f) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the
Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided, however,
that the Committee may authorize the creation of trusts or make other
arrangements to meet the Company's obligations under the Plan to deliver
cash, Shares, other Awards, or other property pursuant to any Award, which
trusts or other arrangements shall be consistent with the "unfunded" status
of the Plan unless the Committee otherwise determines with the consent of
each affected Participant.
(g) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of options and other awards otherwise than
under the Plan, and such arrangements may be either applicable generally or
only in specific cases.
(h) Not Compensation for Benefit Plans. No Award payable under this Plan
shall be deemed salary or compensation for the purpose of computing benefits
under any benefit plan or other arrangement of the Company for the benefit
of its employees, consultants or directors unless the Company shall
determine otherwise.
(i) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in
lieu of such fractional Shares or whether such fractional Shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction, and effect of the Plan,
any rules and regulations relating to the Plan, and any Award Agreement
shall be determined in accordance with the laws of New York without giving
effect to principles of conflict of laws thereof.
(k) Effective Date; Plan Termination. The Plan shall become effective as
of November 12, 2002 (the "Effective Date") subject to approval by the
stockholders of the Company. The Plan shall terminate as to future awards on
the date which is ten (10) years after the Effective Date.
(l) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only. In the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
A-10
THE HAIN CELESTIAL GROUP, INC.
This Proxy is solicited on Behalf of the Board of Directors of The Hain
Celestial Group, Inc. (the "Company"). The undersigned hereby appoints Irwin
D. Simon, Gary M. Jacobs and Ira J. Lamel, or any of them, proxies, each with
full power of substitution, to vote the shares of the undersigned at the
Annual Meeting of Stockholders of the Company on November 12, 2002, and any
adjournments thereof, upon all matters as may properly come before the
meeting. Without otherwise limiting the foregoing general authorization, the
proxies are instructed to vote as indicated herein. If no instruction is given
the shares will be voted "FOR" items 1, 2 and 3 below, each of said items
being more fully described in accompanying the Notice of Annual Meeting and
Proxy Statement, receipt of which are hereby acknowledged.
The Board of Directors Recommends You Vote "FOR" items 1, 2 and 3 below
1. Election of Directors
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed
below) below
(Instructions: to withhold authority to vote for an individual nominee,
strike a line through the nominee's name listed below.)
Irwin D. Simon, Andrew R. Heyer, Beth L. Bronner, Jack Futterman, James S.
Gold, Joseph Jimenez, Marina Hahn,
Roger Meltzer, Michael J. Bertasso, Daniel R. Glickman, Larry Zilavy
2. To approve the 2002 Long Term Incentive and Stock Award Plan
FOR|_| AGAINST |_| ABSTAIN|_|
(Continue and sign on other side)
(Continued from other side)
3. To ratify the appointment of Ernst & Young LLP, to act as independent
auditors of the Company for the fiscal year ending June 30, 2003.
FOR|_| AGAINST |_| ABSTAIN|_|
In their discretion, the proxies named above are authorized to vote upon
such other business as may properly come before the meeting.
Please Complete All Information Below
Signature: ----------------------------
Signature: ----------------------------
Dated: --------------------------, 2002
Please sign exactly as names appear
hereon, indicating official position or
representative capacity, if any. If
shares are held jointly, both owners
should sign.