-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HAyQKsh9E3wTiibdVTu9pN0pRCLfqM4fibrBNf4cWnrFZB26DlSPYO4eXGMYlQSn H0y3AEavD30tpmj3lTJMmg== 0000927356-98-000484.txt : 19980331 0000927356-98-000484.hdr.sgml : 19980331 ACCESSION NUMBER: 0000927356-98-000484 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUTRACEUTICAL INTERNATIONAL CORP CENTRAL INDEX KEY: 0001050007 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 870515089 STATE OF INCORPORATION: DE FISCAL YEAR END: 0830 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23731 FILM NUMBER: 98579741 BUSINESS ADDRESS: STREET 1: 1400 KEARNS BOULEVARD STREET 2: 2ND FLOOR CITY: PARK CITY STATE: UT ZIP: 84060 BUSINESS PHONE: 8016566000 MAIL ADDRESS: STREET 1: 1400 KEARNS BOULEVARD STREET 2: 2ND FLOOR CITY: PARK CITY STATE: UT ZIP: 84060 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1997 Commission file number 000-23731 NUTRACEUTICAL INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 87-0515089 (State of incorporation) (IRS Employer Identification No.) 1400 Kearns Boulevard, 2nd Floor, Park City, Utah 84060 (Address of principal executive office) (Zip code) (435) 655-6000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES NO X --- --- At March 30, 1998 the registrant had 11,756,148 shares of common stock outstanding. NUTRACEUTICAL INTERNATIONAL CORPORATION INDEX Description Page No. Part I. Financial Information Item 1. Financial Statements 3 Condensed Consolidated Balance Sheets - 3 September 30, 1997 and December 31, 1997 Condensed Consolidated Statements of Operations - 4 Three Months Ended December 31, 1996 and 1997 Condensed Consolidated Statements of Cash Flows - 5 Three Months Ended December 31, 1996 and 1997 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 10 Condition and Results of Operations Part II. Other Information Item 2. Use of Proceeds 15 Item 4. Submission of Matters to a Vote of Security-Holders 15 Item 6. Exhibits and Reports on Form 8-K 16 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements NUTRACEUTICAL INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (dollars in thousands)
September 30, December 31, ----------------------------------- 1997 (1) 1997 ASSETS Current assets: Cash $ 4,415 $ 711 Accounts receivable, net 8,001 8,724 Inventories, net 20,753 25,255 Prepaid expenses and other assets 1,018 799 Deferred income taxes 897 896 ------------ ------------ Total current assets 35,084 36,385 Property, plant, and equipment, net 10,711 10,597 Goodwill, net 42,008 41,703 Other assets, net 2,307 2,135 ------------ ------------ $ 90,110 $ 90,820 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 7,085 $ 5,651 Current portion of capital lease obligations 181 151 Accounts payable 6,932 8,089 Accrued expenses 5,270 4,707 ------------ ------------ Total current liabilities 19,468 18,598 Long-term debt 52,860 52,796 Capital lease obligations 133 120 Deferred income taxes, net 1,295 1,500 ------------ ------------ Total liabilities 73,756 73,014 ------------ ------------ Commitments and contingencies Stockholders' equity: Common stock 93 93 Additional paid-in capital 9,609 9,609 Subscriptions receivable (55) (35) Retained earnings 6,707 8,139 ------------ ------------ Total stockholders' equity 16,354 17,806 ------------ ------------ $ 90,110 $ 90,820 ============ ============
(1) The condensed consolidated balance sheet as of September 30, 1997 has been taken from the audited financial statements at that date. The accompanying notes are an integral part of these condensed consolidated financial statements. 3 NUTRACEUTICAL INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (dollars in thousands, except per share data)
Three months ended December 31, ---------------------------------- 1996 1997 Net sales $ 22,365 $ 25,857 Cost of sales 11,803 13,857 ----------- ----------- Gross profit 10,562 12,000 ----------- ----------- Operating expenses: Selling, general and administrative 6,817 7,771 Amortization of intangibles 349 332 ----------- ----------- 7,166 8,103 ----------- ----------- Income from operations 3,396 3,897 Interest expense, net 1,705 1,568 ----------- ----------- Income before provision for income taxes 1,691 2,329 Provision for income taxes 668 897 ----------- ----------- Net income $ 1,023 $ 1,432 =========== =========== Net income per common share: Basic earnings per common share $ 0.11 $ 0.15 Diluted earnings per common share $ 0.10 $ 0.14 Weighted average common shares outstanding: Basic earnings per common share 9,308,583 9,308,583 Diluted earnings per common share 10,477,862 10,565,905
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 NUTRACEUTICAL INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands)
Three months ended December 31, ----------------------------------- 1996 1997 Cash flows from operating activities: Net income $ 1,023 $ 1,432 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 916 1,114 Amortization of debt issuance costs 201 211 Changes in assets and liabilities: Accounts receivable (1,952) (723) Inventories 1 (4,502) Prepaid expenses and other assets 327 219 Deferred income taxes 236 204 Other assets (3) -- Accounts payable 610 1,157 Accrued expenses (134) (563) ------- ------- Net cash provided by (used in) operating activities 1,225 (1,451) ------- ------- Cash flows from investing activities: Purchases of property and equipment (712) (668) ------- ------- Net cash used in investing activities (712) (668) ------- ------- Cash flows from financing activities: Proceeds from revolving credit facility -- 1,500 Payments on long-term debt (500) (3,062) Principal payments on capital lease obligations (47) (43) Receipts of subscriptions receivable -- 20 ------- ------- Net cash used in financing activities (547) (1,585) ------- ------- Net decrease in cash (34) (3,704) Cash at beginning of period 2,321 4,415 ------- ------- Cash at end of period $ 2,287 $ 711 ======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 NUTRACEUTICAL INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (dollars in thousands, except per share data) 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments (consisting of normal recurring accruals) to present fairly the financial position of Nutraceutical International Corporation (the Company) and its subsidiaries as of December 31, 1997, the results of its operations for the three months ended December 31, 1996 and 1997, and its cash flows for the three months ended December 31, 1996 and 1997, in conformity with generally accepted accounting principles for interim financial information applied on a consistent basis. The results for the three months ended December 31, 1997 are not necessarily indicative of the results to be expected for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. Accordingly, these financial statements should be read in conjunction with the Company's Registration Statement on Form S-1, as amended, which was filed with the Securities and Exchange Commission and became effective on February 11, 1998. 2. INVENTORIES, NET Inventories, net of reserves for obsolete and slow moving inventory, are comprised of the following: September 30, December 31, 1997 1997 ------------- ------------ Raw materials $ 10,090 $ 11,698 Work-in process 3,064 4,326 Finished goods 7,599 9,231 ------------- ------------ $ 20,753 $ 25,255 ============= ============ 6 NUTRACEUTICAL INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (dollars in thousands, except per share data) 3. NEW ACCOUNTING STANDARDS The Company has adopted SFAS No. 128, Earnings per Share. SFAS No. 128 is effective for financial periods ending after December 15, 1997 and requires restatement of all prior-period earnings per share (EPS) data presented. Under this statement, both "basic" EPS and "diluted" EPS are presented on the face of the income statement. As required under SFAS No. 128, both basic EPS and diluted EPS for the three months ended December 31, 1997 and 1996 have been calculated giving effect to the Company's stock reclassification and stock split which occurred subsequent to December 31, 1997 (Note 4). The following table provides a reconciliation of both net income and the number of common shares used in the computations of basic EPS, which utilizes the weighted average number of common shares outstanding without regard to potential common shares, and diluted EPS, which includes all such shares: For the Three Months Ended December 31, 1996 1997 ----------- ----------- Net income (Numerator) $ 1,023 $ 1,432 Weighted average common shares (Denominator): Basic weighted average common shares 9,308,583 9,308,583 Add: Dilutive effect of stock options and warrants 1,169,279 1,257,322 ----------- ----------- Diluted weighted average common shares 10,477,862 10,565,905 =========== =========== Net income per common share: Basic $ 0.11 $ 0.15 Diluted $ 0.10 $ 0.14 4. SUBSEQUENT EVENTS On December 10, 1997, the Company filed a Registration Statement on Form S-1 with the Securities and Exchange Commission to offer for sale 3,330,000 shares of common stock (Common Stock) at a par value of $0.01 per share (the Offering) which became effective on February 11, 1998. In connection with the consummation of the Offering, the Company reclassified all of its outstanding shares of capital stock (including entitled 7 NUTRACEUTICAL INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (dollars in thousands, except per share data) preferential amounts) into a single class of Common Stock and authorized a single class of undesignated preferred stock. Upon the reclassification and consummation of the Offering, the Company effected a 7.5291-for-one stock split of all of the outstanding shares of Common Stock and a corresponding adjustment to the number of shares issuable upon exercise of all outstanding warrants and options. After giving effect to the reclassification and stock split, the Company had a total of 9,308,583 shares of Common Stock outstanding. The reclassification and stock split have been retroactively reflected in the balance sheets as of September 30, 1997 and December 31, 1997. The Company sold an additional 2,144,618 shares of Common Stock in the Offering. Warrants were also exercised to purchase 302,947 shares of Common Stock. After consummation of the Offering, the Company had a total of 11,756,148 shares of Common Stock outstanding. The net proceeds to the Company from the sale of shares of Common Stock was approximately $33,396 which was primarily used to repay existing indebtedness. On February 25, 1998, the Company replaced its existing credit agreement, under which the Company had outstanding borrowings of $60,178 (before unamortized discount of $2,454), with a new credit agreement (the New Credit Agreement). The Company expects to realize an extraordinary loss on the early extinguishment of the existing credit agreement of approximately $3,126, net of tax, during the three months ended March 31, 1998. The New Credit Agreement makes $70,000 of revolving credit borrowings available to the Company. In connection with the Offering, the Company approved the Nutraceutical International Corporation 1998 Stock Incentive Plan (the 1998 Stock Plan). The 1998 Stock Plan provides for the issuance of the following types of incentive awards: stock options, stock appreciation rights, restricted stock, performance grants and other types of awards. Options granted under the 1998 Stock Plan may be subject to time vesting and certain other restrictions. An aggregate of 1,050,000 shares of Common Stock have been reserved for issuance under the 1998 Stock Plan, subject to certain adjustments reflecting changes in the Company's capitalization. At the consummation of the offering, options to purchase an aggregate of approximately 250,000 shares of Common Stock were granted to certain employees. 8 NUTRACEUTICAL INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (dollars in thousands, except per share data) In connection with the Offering, the Company also approved the Nutraceutical International Corporation Employee Stock Discount Purchase Plan (the Stock Purchase Plan). The Stock Purchase Plan is intended to give employees desiring to do so a convenient means of purchasing shares of Common Stock through payroll deductions. The Company has reserved 750,000 shares of Common Stock for issuance in connection with the Stock Purchase Plan. In connection with the Offering, the Company also approved the Nutraceutical International Corporation Non-Employee Director Stock Option Plan (the Director Option Plan). The Director Option Plan is intended to encourage stock ownership by certain Directors of the Company and to provide those individuals with an additional incentive to manage the Company in the shareholders' best interest and to provide a form of compensation that will attract and retain highly qualified individuals as members of the Board of Directors. Under the Director Option Plan, 150,000 shares of Common Stock have been reserved for issuance by the Company, subject to certain adjustments reflecting changes in the Company's capitalization. The Company has executed a lease for a new facility in the Ogden, Utah area in which it will consolidate certain distribution and other operations. The Company will initially lease approximately 252,000 square feet and has options (which are subject to certain contingencies) to lease an additional 63,000 square feet. The Company expects to expend $2,500 to $3,500 in upgrading the facilities and installing tenant improvements during calendar year 1998. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General The following discussion and analysis should be read in conjunction with the response to Part I, Item 1 of this report. The Company was formed in 1993 by key members of the current management team and Bain Capital, Inc. to effect a consolidation strategy in the highly fragmented vitamin, mineral, herbal and other nutritional supplements industry (the VMS Industry). The Company purchased Solaray, Inc. in October 1993 with a view toward using it as a platform for future acquisitions of businesses in the VMS Industry. In fiscal 1995, the Company completed three additional acquisitions with the purchases of Premier One Products, Inc. in October 1994, Makers of KAL, Inc. in January 1995 and Monarch Nutritional Laboratories, Inc. in September 1995. Results of Operations The following table sets forth certain consolidated statement of operations data as a percentage of net sales for the periods indicated: Three months ended December 31, ---------------------------------- 1996 1997 Net sales 100.0% 100.0% Cost of sales 52.8% 53.6% ----------- ------------ Gross profit 47.2% 46.4% Selling, general and administrative 30.5% 30.0% Amortization of intangibles 1.5% 1.3% ----------- ------------ Income from operations 15.2% 15.1% Interest expense, net 7.6% 6.1% ----------- ------------ Income before provision for income taxes 7.6% 9.0% Provision for income taxes 3.0% 3.5% ----------- ------------ Net income 4.6% 5.5% =========== ============ Adjusted EBITDA (1) 19.6% 19.7% =========== ============ (1)See "- Adjusted EBITDA." Comparison of the Three Months Ended December 31, 1997 to the Three Months Ended December 31, 1996 Net Sales. Net sales increased by $3.5 million, or 15.6%, to $25.9 million for the three months ended December 31, 1997 (first quarter of fiscal 1998) from $22.4 million for the three months ended December 31, 1996 (first quarter of fiscal 1997). The increase in net sales was primarily the result of increased sales volume and, to a lesser extent, minimal 10 increases in the prices of the Company's products. Such price increases did not contribute significantly to revenue growth. The Company believes that the increased volume was primarily attributable to industry growth as well as to the success of the Company's new product introductions. Gross Profit. Gross profit increased by $1.4 million, or 13.6%, to $12.0 million for the first quarter of fiscal 1998 from $10.6 million for the first quarter of fiscal 1997. This increase in gross profit was primarily attributable to growth in sales volume. As a percentage of net sales, gross profit decreased to 46.4% for the first quarter of fiscal 1998 from 47.2% for the first quarter of fiscal 1997. This decrease in gross profit as a percentage of net sales was primarily attributable to increased discounts associated with the timing of recurring seasonal promotions which were more significant during the current year. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $1.0 million, or 14.0%, to $7.8 million for the first quarter of fiscal 1998 from $6.8 million for the first quarter of fiscal 1997. As a percentage of net sales, selling, general and administrative expenses decreased to 30.0% for the first quarter of fiscal 1998 from 30.5% for the first quarter of fiscal 1997. This decrease in selling, general and administrative expenses as a percentage of net sales was primarily attributable to the Company's efforts to implement incentive and cost control programs during periods of sales increase. Amortization of Intangibles. Amortization of intangibles was $0.3 million for the first quarter of fiscal 1998 and $0.3 million for the first quarter of fiscal 1997. As a percentage of net sales, amortization of intangibles decreased to 1.3% for the first quarter of fiscal 1998 from 1.5% for the first quarter of fiscal 1997. This decrease in amortization of intangibles as a percentage of net sales was primarily attributable to the increase in net sales. Interest Expense, Net. Interest expense decreased by $0.1 million, or 8.0%, to $1.6 million for the first quarter of fiscal 1998 from $1.7 million for the first quarter of fiscal 1997. As a percentage of net sales, interest expense decreased to 6.1% for the first quarter of fiscal 1998 from 7.6% for the first quarter of fiscal 1997. This decrease in interest expense was primarily attributable to decreased indebtedness associated with the Company's revolving credit facility. Provision for Income Taxes. The Company's effective tax rate decreased to 38.5% for the first quarter of fiscal 1998 from 39.5% for the first quarter of fiscal 1997. In each fiscal quarter, the effective tax rate is higher than statutory rates primarily due to the non-deductibility for tax purposes of goodwill amortization arising from the Solaray acquisition. The impact of Solaray goodwill on the effective tax rate for the first quarter of fiscal 1998 decreased compared to the first quarter of fiscal 1997 as a result of the Company's higher income before provision for taxes. 11 Adjusted EBITDA Adjusted EBITDA (earnings before interest expense, taxes, depreciation and amortization) is a widely used and commonly reported standard measure utilized by analysts and investors in the VMS Industry. The following Adjusted EBITDA information can provide additional information for determining the ability of the Company to meet its debt service requirements and for other comparative analyses of the Company's operating performance relative to other nutritional supplement companies: Three months ended December 31, ---------------------------------- 1996 1997 Net income $ 1,023 $ 1,432 Provision for income taxes 668 897 Interest expense, net (1) 1,705 1,568 Depreciation and amortization 916 1,114 Certain non-recurring items (2) 75 75 ----------- ----------- Adjusted EBITDA $ 4,387 $ 5,086 =========== =========== (1) Includes amortization of capitalized debt issuance costs. (2) Represents management fees paid to Bain Capital, Inc. pursuant to the Restated Advisory Agreement which was terminated in connection with the Offering. The Company does not expect to incur such recurring management fees following the Offering. The Company's Adjusted EBITDA increased $0.7 million to $5.1 million for the first quarter of fiscal 1998 from $4.4 million for the first quarter of fiscal 1997. Adjusted EBITDA as a percentage of net sales increased to 19.7% from 19.6% for the same periods. The successful implementation of the Company's operating improvements contributed to this increase in EBITDA. Seasonality The Company believes that its business is characterized by minor seasonality. Historically, the Company has recorded higher sales volume during the second and third quarters due to increased interest in health-related products among consumers following the holiday season and in anticipation of the summer months. The Company does not believe the impact of seasonality on its results of operations is material. In addition, the Company's sales of premium bulk formulations are characterized by periodic shipments to certain customers and can vary from quarter to quarter. Liquidity and Capital Resources The Company had working capital of $17.8 million as of December 31, 1997, compared to $15.6 million as of September 30, 1997. This increase was primarily the result of increases in inventory and accounts receivable due to higher sales levels and decreases in 12 the current portion of long-term debt, related to debt repayments, and accrued expenses offset by a decrease in cash and an increase in accounts payable. Net cash provided by (used in) operating activities for the three months ended December 31, 1997 was ($1.5) million compared to $1.2 million for the comparable period in fiscal 1997. Net cash provided by operating activities decreased primarily due to increases in inventory and accounts receivable related to higher sales levels and a decrease in accrued expenses, partially offset by increases in accounts payable and net income. Net cash used in investing activities was $0.7 million for the three months ended December 31, 1997 compared to $0.7 million for the comparable period in fiscal 1997. Investing activities during these periods relate entirely to capital expenditures. Net cash used in financing activities was $1.6 million for the three months ended December 31, 1997 compared to $0.5 million for the comparable period in fiscal 1997. Net cash used in financing activities increased primarily due to principal payments on long term debt. The Company's credit agreement at December 31, 1997, consisted of three components: a Term A Loan in the amount of $34.4 million, a Term B Loan in the amount of $15.0 million (before unamortized discount of $2.4 million) and a Revolving Credit Facility in the amount of $10.7 million. In connection with the Offering, the Company negotiated the New Credit Agreement under which the indebtedness existing at December 31, 1997 was refinanced. The New Credit Agreement provides for revolving credit borrowings of $70.0 million with scheduled maturity in 2003. The Company's initial borrowings under the New Credit Agreement were $31.5 million. A key component of the Company's business strategy is to seek to make additional acquisitions, which will likely require that the Company obtain additional financing, which could include the incurrence of substantial additional indebtedness. The Company believes that based on current levels of operations and anticipated growth, borrowings under the New Credit Agreement, together with cash flows from operations, will be sufficient to make anticipated capital expenditures and fund working capital needs for fiscal 1998. Recent Financial Accounting Standards Board Statements SFAS No. 128 changes the method of calculating EPS. The statement requires the presentation of basic EPS and diluted EPS on the face of the statement of operations. SFAS No. 128 is effective for financial statements issued for periods ended after December 15, 1997 and requires restatement of all prior-period EPS data presented. 13 Inflation Inflation affects the cost of raw materials, goods and services used by the Company. In recent years, inflation has been modest. The competitive environment somewhat limits the ability of the Company to recover higher costs resulting from inflation by raising prices. Overall product prices have generally been stable and the Company seeks to mitigate the adverse effects of inflation primarily through improved productivity and cost containment programs. The Company does not believe that inflation has had a material impact on its results of operations for the periods presented. Forward Looking Statements This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act). Such forward-looking statements are based on the beliefs of the Company's management as well as on assumptions made by and information currently available to the Company at the time such statements were made. When used in this MD&A, the words "anticipate," "believe," "estimate," "expect," "intends" and similar expressions, as they relate to the Company are intended to identify forward-looking statements, which include statements relating to, among other things, (i) the ability of the Company to continue to successfully compete in the nutritional supplements market; (ii) the anticipated benefits from new product introductions; (iii) the continued effectiveness of the Company's sales and marketing strategy; and (iv) the ability of the Company to continue to successfully develop and launch new products. Actual results could differ materially from those projected in the forward-looking statements as a result of the matters discussed herein and certain economic and business factors, some of which may be beyond the control of the Company. 14 PART II - OTHER INFORMATION Item 2. Use of Proceeds On February 25, 1998, the Company completed the Offering. The net proceeds to the Company from the Offering were approximately $33.4 million. The Company also replaced its existing credit agreement in connection with the Offering. The Company used the net proceeds of the Offering, together with borrowings under the New Credit Agreement and all available cash resources of the Company at such date, to repay all indebtedness under the existing credit agreement (approximately $60.6 million including accrued interest) as well as fees totaling approximately $2.2 million in connection with (i) the termination of an advisory agreement with Bain Capital, Inc. and services rendered in connection with the Offering, (ii) prepayment penalties under the existing credit agreement resulting from replacing such agreement and (iii) origination fees arising from the establishment of the New Credit Agreement. Item 4. Submission of Matters to a Vote of Security-Holders. Pursuant to Section 228 of the General Corporation Law of the State of Delaware, on January 8, 1998, the stockholders of the Company, by written consent without a meeting, adopted resolutions approving the Restated Certificate of Incorporation and the Amended and Restated Bylaws of the Company. Votes (not reflecting reclassification, stock splits or the Offering) cast for the above matters: 997,777.78 against: 0 abstaining: 0. Pursuant to Section 228 of the General Corporation Law of the State of Delaware, on January 8, 1998, the stockholders of the Company, by written consent without a meeting, adopted resolutions: 1. Approving a form of Indemnification Agreement for directors and officers of the Company. 2. Appointing Price Waterhouse LLP as the Company's outside independent accounting firm. 3. Approving the adoption of the Nutraceutical International Corporation 1998 Stock Incentive Plan. 4. Approving the adoption of the Nutraceutical International Corporation Employee Stock Discount Purchase Plan. 15 5. Approving the adoption of the Nutraceutical International Corporation Non-Employee Director Stock Option Plan. 6. Electing as directors the following persons: (i) Matthew S. Levin and Bruce R. Hough to serve until the annual meeting of stockholders in 1998, (ii) Geoffrey S. Rehnert and Jeffrey A. Hinrichs to serve until the annual meeting of stockholders in 1999, and (iii) Robert C. Gay and Frank W. Gay II to serve until the annual meeting of stockholders in 2000. Votes (not reflecting reclassification, stock splits or the Offering) cast for the above matters: 997,777.78 against: 0 abstaining: 0. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Restated Certificate of Incorporation 3.2 Amended and Restated By-Laws 10.1 Transaction Services Agreement between the Company and Bain Capital, Inc. 10.2 Termination Agreement between the Company and Bain Capital, Inc. 10.3 Nutraceutical International Corporation 1998 Stock Incentive Plan 10.4 Nutraceutical International Corporation Employee Stock Discount Purchase Plan 10.5 Nutraceutical International Corporation Non-Employee Director Stock Option Plan 27.1 Financial Data Schedule (b) Reports on Form 8-K: None 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NUTRACEUTICAL INTERNATIONAL CORPORATION (Registrant) Dated: March 30, 1998 By: /s/ Leslie M. Brown, Jr. -------------- ------------------------- Leslie M. Brown, Jr. Senior Vice President, Finance and Chief Financial Officer 17 EX-3.1 2 EXHIBIT 3.1 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF NUTRACEUTICAL INTERNATIONAL CORPORATION ARTICLE I - Name ---------------- The name of the corporation is Nutraceutical International Corporation (hereinafter referred to as the "Corporation"). ARTICLE II - Registered Office ------------------------------ The address of the registered office of the Corporation in the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle 19805. The name of the registered agent of the Corporation at that address is The Prentice-Hall Corporation System, Inc. ARTICLE III - Purpose --------------------- The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the "Delaware General Corporation Law"). ARTICLE IV - Capital Stock -------------------------- Part A. General. The maximum number of shares of capital stock that the Corporation is authorized to have outstanding at any one time is 55,000,000 shares, consisting of: (i) 5,000,000 shares of Preferred Stock, par value $0.01 per share (the "Preferred Stock"); and (ii) 50,000,000 shares of Common Stock, par value $0.01 per share (the "Common Stock"). Part B. Preferred Stock. Authority is hereby expressly vested in the Board of Directors of the Corporation (each member thereof, a "Director," and collectively, the "Board of Directors" or the "Board"), without further action by the Corporation's stockholders, subject to the provisions of this ARTICLE IV and to the limitations prescribed by law, to authorize the issuance from time to time of one or more series of Preferred Stock. The authority of the Board of Directors with respect to each series shall include, but not be limited to, the determination or fixing of the following by resolution or resolutions adopted by the affirmative vote of a majority of the total number of the Directors then in office: (1) The designation of such series; (2) The dividend rate of such series, the conditions and dates upon which such dividends shall be payable, the relation which such dividends shall bear to the dividends payable on any other class or classes or series of the Corporation's capital stock and whether such dividends shall be cumulative or non-cumulative; (3) Whether the shares of such series shall be subject to redemption for cash, property or rights, including securities of any other corporation, by the Corporation or upon the happening of a specified event and, if made subject to any such redemption, the times or events, prices, rates, adjustments and other terms and conditions of such redemptions; (4) The terms and amount of any sinking fund provided for the purchase or redemption of the shares of such series; (5) Whether or not the shares of such series shall be convertible into, or exchangeable for, at the option of either the holder or the Corporation or upon the happening of a specified event, shares of any other class or classes or of any other series of the same class of the Corporation's capital stock and, if provision be made for conversion or exchange, the times or events, prices, rates, adjustments and other terms and conditions of such conversions or exchanges; (6) The restrictions, if any, on the issue or reissue of any additional Preferred Stock; (7) The rights of the holders of the shares of such series upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and (8) The provisions as to voting, optional and/or other special rights and preferences, if any, including, without limitation, the right to elect one or more Directors. Part C. Common Stock. Except as otherwise provided by the Delaware General Corporation Law or this Restated Certificate of Incorporation (the "Restated Certificate"), and subject to the rights of holders of any series of Preferred Stock, the holders of record of Common Stock shall share ratably in all dividends payable in cash, stock or otherwise and other distributions, whether in respect of liquidation or dissolution (voluntary or involuntary) or otherwise and, are subject to all the powers, rights, privileges, preferences and priorities of any series of Preferred Stock as provided herein or in any resolution or resolutions adopted by the Board of Directors pursuant to authority expressly vested in it by the provisions of Section B of this ARTICLE IV. (1) The Common Stock shall not be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same of the Corporation's capital stock. (2) No holder of Common Stock shall have any preemptive, subscription, redemption, conversion or sinking fund rights with respect to the Common Stock, or to any obligations convertible (directly or indirectly) into stock of the Corporation whether now or hereafter authorized. -2- (3) Except as otherwise provided by the Delaware General Corporation Law, or the Restated Certificate and subject to the rights of holders of any series of Preferred Stock, all of the voting power of the stockholders of the Corporation shall be vested in the holders of the Common Stock, and each holder of Common Stock shall have one vote for each share held by such holder on all matters voted upon by the stockholders of the Corporation. Part D. Reclassification and Stock Split. (1) Reclassification. Immediately upon the filing of this Restated Certificate with the Secretary of State of the State of Delaware (the "Effective Time"), (A) each share of Non-Voting Common Stock, par value $.01, of the Corporation outstanding immediately prior to the Effective Time shall be, without further action by the Corporation or any of the holders thereof, reclassified into one share of Common Stock and (B) each share of Class A Non- Voting Common Stock, par value $.01 per share, Class A Common Stock, par value $.01 per share, and Class P Common Stock, par value $.01 per share, of the Corporation (the "Accruing Common") outstanding immediately prior to the Effective Time shall be, without further action by the Corporation or any of the holders thereof, reclassified into one share of Common Stock plus an additional number of shares of Common Stock equal to the sum of the Unreturned Original Cost and Unpaid Yield (as such terms are defined in the Corporation's Certificate of Incorporation as in effect immediately prior to the Effective Time) on such outstanding share of Accruing Common as of the Effective Date divided by the Public Offering Price. The fraction resulting from dividing the sum of the Unreturned Original Cost and Unpaid Yield of each outstanding share of Accruing Common by the Public Offering Price is referred to herein as the "Conversion Factor". Each certificate representing outstanding shares of Accruing Common shall automatically represent from and after the Effective Time that number of shares of Common Stock equal to the number of shares shown on the face of the certificate plus such additional number of shares equal to the number of shares shown on the face of the certificate multiplied its respective Conversion Factor. For purpose of this Part D of this ARTICLE IV, "Public Offering Price" shall mean the initial public offering price per share of Common Stock set forth on the cover page of the Corporation's Prospectus included in the Registration Statement on Form S-1, as amended (Registration No. 333-41909) (the "Registration Statement"), relating to the initial public offering of the Corporation's Common Stock and in the form first used to confirm sales of the Common Stock, without deduction for any underwriting discounts or commissions or any expenses incurred by the Corporation in connection with the initial public offering and as adjusted so as to not give effect to the stock split described in the following paragraph. (2) Stock Split. At the Effective Time and immediately following the reclassification of the Accruing Common set forth above (the "Reclassification"), each share of Common Stock outstanding at the Effective Time (after giving effect to the Reclassification) shall be, without further action by the Corporation or any of the holders thereof, changed and converted into a number of shares of Common Stock equal to that number determined by multiplying each outstanding share of Common Stock by 7.5291 (the "Stock Split Factor"). Each certificate then outstanding representing shares of Common Stock (including those certificates that represent shares of Common Stock as a result of the Reclassification) shall automatically represent from and after the -3- Effective Time that number of shares of Common Stock equal to the number of shares shown on the face of the certificate multiplied by the Stock Split Factor. (3) Fractional Shares. Notwithstanding the foregoing, in the event that the conversion of the Common Stock described in (1) and (2) above would result in any holder of shares of Common Stock holding a share of Common Stock that is not an integral multiple of one, the effect of the conversion shall be such that the shares of Common Stock issued as a result of the Reclassification shall be the integral multiple of one closest to the product of the Stock Split Factor and the number of shares of Common Stock held by such holder, with fractions of 0.50 and greater being rounded up to the next higher integral multiple of one and fractions less than 0.50 being rounded down to the next lower integral multiple of one. No consideration will be paid in lieu of fractions that are rounded down and no consideration shall be due from holders of Common Stock in lieu of fractions that are rounded up. ARTICLE V - Existence --------------------- The Corporation is to have perpetual existence. ARTICLE VI - By-laws -------------------- In furtherance and not in limitation of the powers conferred by the Delaware General Corporation Law, the Board of Directors of the Corporation is expressly authorized to make, alter, amend, change, add to or repeal the By-laws of the Corporation by the affirmative vote of a majority of the total number of Directors then in office. Any alteration or repeal of the By-laws of the Corporation by the stockholders of the Corporation shall require the affirmative vote of at least a majority of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote on such alteration or repeal, subject to ARTICLE IX hereof and ARTICLE VII of the Corporation's By- laws. ARTICLE VII - Stockholders and Directors ---------------------------------------- Part A. Stockholder Action. Election of Directors need not be by written ballot unless the By-laws of the Corporation so provide. Subject to any rights of holders of any series of Preferred Stock, from and after the date on which the Common Stock of the Corporation is registered pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (i) any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected in lieu thereof by any consent in writing by such stockholders, (ii) special meetings of stockholders of the Corporation may be called only by either the Board of Directors pursuant to a resolution adopted by the affirmative vote of the majority of the total number of Directors then in office or by the chief executive officer of the Corporation and (iii) advance notice of stockholder nominations of persons for election to the Board of Directors of the Corporation and of business to be brought before any annual meeting of the stockholders by the stockholders of the Corporation shall be given in the manner provided in the By-laws of the Corporation. -4- Part B. Number of Directors and Term of Office. Subject to any rights of holders of any series of Preferred Stock to elect additional Directors under specified circumstances, the number of Directors which shall constitute the Board of Directors of the Corporation shall be fixed from time to time in the manner set forth in the By-laws of the Corporation. The Directors of the Corporation shall be divided into three classes: Class I, Class II and Class III. Membership in such class shall be as nearly equal in number as possible. The term of office of the initial Class I Directors shall expire at the annual election of Directors by the stockholders of the Corporation in 1998, the term of office of the initial Class II Directors shall expire at the annual election of Directors by the stockholders of the Corporation in 1999 and the term of office of the initial Class III Directors shall expire at the annual election of Directors by the stockholders of the Corporation in 2000, or thereafter when their respective successors in each case are elected by the stockholders and qualified, subject however, to prior death, resignation, retirement, disqualification or removal from office for cause. At each succeeding annual election of Directors by the stockholders of the Corporation beginning in 1998, the Directors chosen to succeed those whose terms then expire shall be identified as being of the same class as the Directors they succeed and shall be elected for a term expiring at the third succeeding annual election of Directors by the stockholders of the Corporation, or thereafter when their respective successors in each case are elected by the stockholders and qualified. If the number of Directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible, and any additional Director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of Directors shorten the term of any incumbent Director. Part C. Removal and Resignation. No Director may be removed from office without cause and without the affirmative vote of the holders of a majority of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors voting together as a single class; provided, however, that if the holders of any class or series of capital stock are entitled by the provisions of this Restated Certificate (it being understood that any references to this Restated Certificate shall include any duly authorized certificate of designation) to elect one or more Directors, such Director or Directors so elected may be removed without cause only by the vote of the holders of a majority of the outstanding shares of that class or series entitled to vote. Any Director may resign at any time upon written notice to the Corporation. Part D. Vacancies and Newly Created Directorships. Subject to any rights of holders of any series of Preferred Stock to fill such newly created Directorships or vacancies, any newly created Directorships resulting from any increase in the authorized number of Directors and any vacancies in the Board of Directors resulting from death, resignation, disqualification or removal from office for cause shall, unless otherwise provided by law or by resolution approved by the affirmative vote of a majority of the total number of Directors then in office, be filled only by resolution approved by the affirmative vote of a majority of the total number of Directors then in office. Any Director so chosen shall hold office until the next election of the class for which such Director shall have been chosen, and until his successor shall have been duly elected and qualified, unless he shall resign, die, become disqualified or be removed for cause. -5- Part E. Effectiveness. The provisions of this ARTICLE VII shall terminate and be of no further force and effect in the event that the initial public offering of the Corporation's Common Stock as contemplated by the Corporation's Prospectus included in the Registration Statement is not consummated within 30 days of the Effective Time. ARTICLE VIII - General Provisions --------------------------------- Part A. Dividends. The Board of Directors shall have authority from time to time to set apart out of any assets of the Corporation otherwise available for dividends a reserve or reserves as working capital or for any other purpose or purposes, and to abolish or add to any such reserve or reserves from time to time as said board may deem to be in the interest of the Corporation; and said Board shall likewise have power to determine in its discretion, except as herein otherwise provided, what part of the assets of the Corporation available for dividends in excess of such reserve or reserves shall be declared in dividends and paid to the stockholders of the Corporation. Part B. Issuance of Stock. The shares of all classes of stock of the Corporation may be issued by the Corporation from time to time for such consideration as from time to time may be fixed by the Board of Directors of the Corporation, provided that shares of stock having a par value shall not be issued for a consideration less than such par value, as determined by the Board. At any time, or from time to time, the Corporation may grant rights or options to purchase from the Corporation any shares of its stock of any class or classes to run for such period of time, for such consideration, upon such terms and conditions, and in such form as the Board of Directors may determine. The Board of Directors shall have authority, as provided by law, to determine that only a part of the consideration which shall be received by the Corporation for the shares of its stock which it shall issue from time to time, shall be capital; provided, however, that, if all the shares issued shall be shares having a par value, the amount of the part of such consideration so determined to be capital shall be equal to the aggregate par value of such shares. The excess, if any, at any time, of the total net assets of the Corporation over the amount so determined to be capital, as aforesaid, shall be surplus. All classes of stock of the Corporation shall be and remain at all times nonassessable. The Board of Directors is hereby expressly authorized, in its discretion, in connection with the issuance of any obligations or stock of the Corporation (but without intending hereby to limit its general power so to do in other cases), to grant rights or options to purchase stock of the Corporation of any class upon such terms and during such period as the Board of Directors shall determine, and to cause such rights to be evidenced by such warrants or other instruments as it may deem advisable. Part C. Inspection of Books and Records. The Board of Directors shall have power from time to time to determine to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. -6- Part D. Location of Meetings, Books and Records. Except as otherwise provided in the By-laws, the stockholders of the Corporation and the Board of Directors may hold their meetings and have an office or offices outside of the State of Delaware and, subject to the provisions of the laws of said State, may keep the books of the Corporation outside of said State at such places as may, from time to time, be designated by the Board of Directors. ARTICLE IX - Amendments ----------------------- The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate in the manner now or hereinafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation. Notwithstanding anything contained in this Restated Certificate to the contrary, Parts A, B and C of ARTICLE IV, ARTICLE VII, ARTICLE X, and this ARTICLE IX of this Restated Certificate shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of the holders of at least 66 2/3% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote on such alteration, amendment or repeal, voting together as a single class (other than any alteration or amendment to Part A of ARTICLE IV that increases the authorized number of shares of Preferred Stock or Common Stock). ARTICLE X - Liability --------------------- Part A. Limitation of Liability. (1) To the fullest extent permitted by the Delaware General Corporation Law as it now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), and except as otherwise provided in the Corporation's By-laws, no Director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages arising from a breach of fiduciary duty owed to the Corporation or its stockholders. (2) Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification. Part B. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved (including involvement as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he or she is or was a Director or officer of the Corporation or, while a Director or officer of the Corporation, is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a Director or officer or in any other capacity while serving as a Director or officer, shall be indemnified and held harmless -7- by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys' fees, judgments, fines, excise exercise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that, except as provided in Part C of this ARTICLE X with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Part B of this ARTICLE X shall be a contract right and shall include the obligation of the Corporation to pay the expenses incurred in defending any such proceeding in advance of its final disposition (an "advance of expenses"); provided, however, that, if and to the extent that the Delaware General Corporation Law requires, an advance of expenses incurred by an indemnitee in his or her capacity as a Director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Part B or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same or lesser scope and effect as the foregoing indemnification of Directors and officers. Part C. Procedure for Indemnification. Any indemnification of a Director or officer of the Corporation or advance of expenses under Part B of this ARTICLE X shall be made promptly, and in any event within forty-five days (or, in the case of an advance of expenses, twenty days), upon the written request of the Director or officer. If a determination by the Corporation that the Director or officer is entitled to indemnification pursuant to this ARTICLE X is required, and the Corporation fails to respond within sixty days to a written request for indemnity, the Corporation shall be deemed to have approved the request. If the Corporation denies a written request for indemnification or advance of expenses, in whole or in part, or if payment in full pursuant to such request is not made within forty-five days (or, in the case of an advance of expenses, twenty days), the right to indemnification or advances as granted by this ARTICLE X shall be enforceable by the Director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of expenses where the undertaking required pursuant to Part B of this ARTICLE X, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is -8- proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. The procedure for indemnification of other employees and agents for whom indemnification is provided pursuant to Part B of this ARTICLE X shall be the same procedure set forth in this Part C for Directors or officers, unless otherwise set forth in the action of the Board of Directors providing indemnification for such employee or agent. Part D. Insurance. The Corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a Director, officer, employee or agent of the Corporation or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss asserted against him or her and incurred by him or her in any such capacity, whether or not the Corporation would have the power to indemnify such person against such expenses, liability or loss under the Delaware General Corporation Law. Part E. Service for Subsidiaries. Any person serving as a Director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture or other enterprise, at least 50% of whose equity interests are owned by the Corporation (a "subsidiary" for this ARTICLE X) shall be conclusively presumed to be serving in such capacity at the request of the Corporation. Part F. Reliance. Persons who after the date of the adoption of this provision become or remain Directors or officers of the Corporation or who, while a Director or officer of the Corporation, become or remain a Director, officer, employee or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to indemnity, advance of expenses and other rights contained in this ARTICLE X in entering into or continuing such service. The rights to indemnification and to the advance of expenses conferred in this ARTICLE X shall apply to claims made against an indemnitee arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof. Part G. Non-Exclusivity of Rights. The rights to indemnification and to the advance of expenses conferred in this ARTICLE X shall not be exclusive of any other right which any person may have or hereafter acquire under this Restated Certificate or under any statute, by-law, agreement, vote of stockholders or disinterested Directors or otherwise. Part H. Merger or Consolidation. For purposes of this ARTICLE X, references to the "Corporation" shall include, in addition to the resulting Corporation, any constituent Corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its Directors, officers and employees or agents, so that any person who is or was a Director, officer, employee or agent of such constituent Corporation, or is or was serving at the request of such constituent Corporation as a Director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this ARTICLE X with -9- respect to the resulting or surviving Corporation as he or she would have with respect to such constituent Corporation if its separate existence had continued. ARTICLE XI - Business Combinations ---------------------------------- The Corporation expressly elects to be governed by Section 203 of the Delaware General Corporation Law. Notwithstanding the terms of Section 203 of the Delaware General Corporation Law, none of Bain Capital, Inc. and its affiliates (the "Bain Entities") and F.W. Gay and Sons and its partners (the "Gay Entities") shall be deemed at any time and without regard to the percentage of voting stock of the Corporation owned by the Bain Entities or the Gay Entities to be an "interested stockholder" as such term is defined in Section 203(c)(5) of the Delaware General Corporation Law. * * * * * -10- EX-3.2 3 EXHIBIT 3.2 EXHIBIT 3.2 AMENDED AND RESTATED BY-LAWS OF NUTRACEUTICAL INTERNATIONAL CORPORATION A Delaware Corporation ARTICLE I --------- OFFICES ------- Section 1. Registered Office. The registered office of Nutraceutical International Corporation (the "Corporation") in the State of Delaware shall be located at 1013 Centre Road, in the City of Wilmington, County of New Castle 19805. The name of the Corporation's registered agent at such address shall be The Prentice-Hall Corporation System, Inc. The registered office and/ or registered agent of the Corporation may be changed from time to time by action of the Board of Directors. Section 2. Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II ---------- MEETINGS OF STOCKHOLDERS ------------------------ Section 1. Annual Meeting. An annual meeting of the stockholders shall be held each year within 150 days after the close of the immediately preceding fiscal year of the Corporation or at such other time specified by the Board of Directors for the purpose of electing Directors and conducting such other proper business as may come before the annual meeting. At the annual meeting, stockholders shall elect Directors and transact such other business as properly may be brought before the annual meeting pursuant to ARTICLE II, Section 11 hereof. Section 2. Special Meetings. Special meetings of the stockholders may only be called in the manner provided in the Restated Certificate of Incorporation. Section 3. Place of Meetings. The Board of Directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the Corporation. If for any reason any annual meeting shall not be held during any year, the business thereof may be transacted at any special meeting of the stockholders. Section 4. Notice. Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the Board of Directors, the chairman of the board, the president or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her or its address as the same appears on the records of the Corporation. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Section 5. Stockholders List. The officer having charge of the stock ledger of the Corporation shall make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 6. Quorum. The holders of a majority of the outstanding shares of capital stock entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by the General Corporation Law of the State of Delaware or by the Restated Certificate of Incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. When a specified item of business requires a vote by a class or series (if the Corporation shall then have outstanding shares of more than one class or series) voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum (as to such class or series) for the transaction of such item of busi ness. Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. -2- Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless (i) by express provisions of an applicable law or of the Restated Certificate of Incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question, or (ii) the subject matter is the election of Directors, in which case Section 2 of ARTICLE III hereof shall govern and control the approval of such subject matter. Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Delaware, the Restated Certificate of Incorporation of the Corporation or any amendments thereto or these By-laws, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of common stock held by such stockholder. Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. Any proxy is suspended when the person executing the proxy is present at a meeting of stockholders and elects to vote, except that when such proxy is coupled with an interest and the fact of the interest appears on the face of the proxy, the agent named in the proxy shall have all voting and other rights referred to in the proxy, notwithstanding the presence of the person executing the proxy. At each meeting of the stockholders, and before any voting commences, all proxies filed at or before the meeting shall be submitted to and examined by the secretary or a person designated by the secretary, and no shares may be represented or voted under a proxy that has been found to be invalid or irregular. Section 11. Business Brought Before an Annual Meeting. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public announcement of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the date on which such notice of the date of the annual meeting was mailed or such public announcement was made. A stockholder's notice to the secretary shall set forth as to -3- each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting, (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this section. The presiding officer of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this section; if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. For purposes of this section, "public announcement" shall mean disclosure in a press release reported by Dow Jones News Service, Associated Press or a comparable national news service. Nothing in this section shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). ARTICLE III ----------- Directors --------- Section 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to such powers as are herein and in the Restated Certificate of Incorporation expressly conferred upon it, the Board of Directors shall have and may exercise all the powers of the Corporation, subject to the provisions of the laws of Delaware, the Restated Certificate of Incorporation and these By- laws. Section 2. Number, Election and Term of Office. Subject to any rights of the holders of any series of Preferred Stock to elect additional Directors under specified circumstances, the number of Directors which shall constitute the Board of Directors shall be fixed from time to time by resolution adopted by the affirmative vote of a majority of the total number of Directors then in office. The Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of Directors; provided that, whenever the holders of any class or series of capital stock of the Corporation are entitled to elect one or more Directors pursuant to the provisions of the Restated Certificate of Incorporation of the Corporation (including, but not limited to, for purposes of these By-laws, pursuant to any duly authorized certificate of designation), such Directors shall be elected by a plurality of the votes of such class or series present in person or represented by proxy at the meeting and entitled to vote in the election of such Directors. The Directors shall be elected and shall hold office only in the manner provided in the Restated Certificate of Incorporation. Section 3. Removal and Resignation. No Director may be removed from office without cause and without the affirmative vote of the holders of a majority of the voting power of the then outstanding shares of capital stock entitled to vote generally in the election of Directors voting -4- together as a single class; provided, however, that if the holders of any class or series of capital stock are entitled by the provisions of the Restated Certificate of Incorporation (it being understood that any references to the Restated Certificate of Incorporation shall include any duly authorized certificate of designation) to elect one or more Directors, such Director or Directors so elected may be removed without cause only by the vote of the holders of a majority of the outstanding shares of that class or series entitled to vote. Any Director may resign at any time upon written notice to the Corporation. Section 4. Vacancies. Vacancies and newly created directorships resulting from any increase in the total number of Directors may be filled only in the manner provided in the Restated Certificate of Incorporation. Section 5. Nominations. (a) Only persons who are nominated in accordance with the procedures set forth in these By-laws shall be eligible to serve as Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this By-law, who is entitled to vote generally in the election of Directors at the meeting and who shall have complied with the notice procedures set forth below in Section 5(b). (b) In order for a stockholder to nominate a person for election to the Board of Directors of the Corporation at a meeting of stockholders, such stockholder shall have delivered timely notice of such stockholder's intent to make such nomination in writing to the secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (i) in the case of an annual meeting, not less than 60 nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is changed by more than 30 days from such anniversary date, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure of the meeting was made, and (ii) in the case of a special meeting at which Directors are to be elected, not later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public announcement of the meeting was made. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election as a Director at such meeting all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); (ii) as to the stockholder giving the notice (A) the name and address, as they appear on the Corporation's books, of such stockholder and (B) the class and number of shares of the Corporation which are beneficially owned by such stockholder and also which are owned of record by such stockholder; and (iii) as to the beneficial owner, if any, on whose behalf the nomination is made, (A) the name and address of such person and (B) the class and -5- number of shares of the Corporation which are beneficially owned by such person. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. (c) No person shall be eligible to serve as a Director of the Corporation unless nominated in accordance with the procedures set forth in this section. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by this section, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. A stockholder seeking to nominate a person to serve as a Director must also comply with all applicable requirements of the Exchange Act, and the rules and regulations thereunder with respect to the matters set forth in this section. Section 6. Annual Meetings. The annual meeting of the Board of Directors shall be held without other notice than this By-law immediately after, and at the same place as, the annual meeting of stockholders. Section 7. Other Meetings and Notice. Regular meetings, other than the annual meeting, of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the Board of Directors may be called by the chairman of the board, the president (if the president is a Director) or, upon the written request of at least a majority of the Directors then in office, the secretary of the Corporation on at least 24 hours notice to each Director, either personally, by telephone, by mail or by telecopy. Section 8. Chairman of the Board, Quorum, Required Vote and Adjournment. The Board of Directors shall elect, by the affirmative vote of a majority of the total number of Directors then in office, a chairman of the board, who shall preside at all meetings of the stockholders and Board of Directors at which he or she is present and shall have such powers and perform such duties as the Board of Directors may from time to time prescribe. If the chairman of the board is not present at a meeting of the stockholders or the Board of Directors, the president (if the president is a Director and is not also the chairman of the board) shall preside at such meeting, and, if the president is not present at such meeting, a majority of the Directors present at such meeting shall elect one of their members to so preside. A majority of the total number of Directors then in office shall constitute a quorum for the transaction of business. Unless by express provision of an applicable law, the Restated Certificate of Incorporation or these By-laws a different vote is required, the vote of a majority of Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. -6- Section 9. Committees. The Board of Directors may, by resolution passed by a majority of the total number of Directors then in office, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation, which to the extent provided in such resolution or these By- laws shall have, and may exercise, the powers of the Board of Directors in the management and affairs of the Corporation, except as otherwise limited by law. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Section 10. Committee Rules. Each committee of the Board of Directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the Board of Directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. Unless otherwise provided in such a resolution, in the event that a member and that member's alternate, if alternates are designated by the Board of Directors, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Section 11. Communications Equipment. Members of the Board of Directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear and speak with each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting. Section 12. Waiver of Notice and Presumption of Assent. Any member of the Board of Directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. Section 13. Action by Written Consent. Unless otherwise restricted by the Restated Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. -7- ARTICLE IV ---------- OFFICERS -------- Section 1. Number. The officers of the Corporation shall be elected by the Board of Directors and shall consist of a chairman of the board, a chief executive officer, a president, one or more vice-presidents, a secretary, a chief financial officer and such other officers and assistant officers as may be deemed necessary or desirable by the Board of Directors. Any number of offices may be held by the same person. In its discretion, the Board of Directors may choose not to fill any office for any period as it may deem advisable, except that the offices of president and secretary shall be filled as expeditiously as possible. Section 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. Section 3. Removal. Any officer or agent elected by the Board of Directors may be removed by the Board of Directors at its discretion, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise may be filled by the Board of Directors. Section 5. Compensation. Compensation of all executive officers shall be approved by the Board of Directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a Director of the Corporation. Section 6. Chairman of the Board. The chairman of the board shall preside at all meetings of the stockholders and of the Board of Directors and shall have such other powers and perform such other duties as may be prescribed to him or her by the Board of Directors or provided in these By-laws. Section 7. Chief Executive Officer. The chief executive officer shall have the powers and perform the duties incident to that position. Subject to the powers of the Board of Directors and the chairman of the board, the chief executive officer shall be in the general and active charge of the entire business and affairs of the Corporation, and shall be its chief policy making officer. The chief executive officer shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or provided in these By-laws. The chief executive officer is authorized to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where -8- the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. Whenever the president is unable to serve, by reason of sickness, absence or otherwise, the chief executive officer shall perform all the duties and responsibilities and exercise all the powers of the president. Section 8. The President. The president of the Corporation shall, subject to the powers of the Board of Directors, the chairman of the board and the chief executive officer, have general charge of the business, affairs and property of the Corporation, and control over its officers, agents and employees. The president shall see that all orders and resolutions of the Board of Directors are carried into effect. The president is authorized to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The president shall have such other powers and perform such other duties as may be prescribed by the chairman of the board, the chief executive officer, the Board of Directors or as may be provided in these By-laws. Section 9. Vice-Presidents. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the Board of Directors or the chairman of the board, shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the Board of Directors, the chairman of the board, the chief executive officer, the president or these By-laws may, from time to time, prescribe. The vice-presidents may also be designated as executive vice- presidents or senior vice-presidents, as the Board of Directors may from time to time prescribe. Section 10. The Secretary and Assistant Secretaries. The secretary shall attend all meetings of the Board of Directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose or shall ensure that his or her designee attends each such meeting to act in such capacity. Under the chairman of the board's supervision, the secretary shall give, or cause to be given, all notices required to be given by these By-laws or by law; shall have such powers and perform such duties as the Board of Directors, the chairman of the board, the chief executive officer, the president or these By-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the Corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, any of the assistant secretaries, shall in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors, the chairman of the board, the chief executive officer, the president, or secretary may, from time to time, prescribe. -9- Section 11. The Chief Financial Officer. The chief financial officer shall have the custody of the corporate funds and securities; shall keep full and accurate all books and accounts of the Corporation as shall be necessary or desirable in accordance with applicable law or generally accepted accounting principles; shall deposit all monies and other valuable effects in the name and to the credit of the Corporation as may be ordered by the chairman of the board or the Board of Directors; shall cause the funds of the Corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the Board of Directors, at its regular meeting or when the Board of Directors so requires, an account of the Corporation; shall have such powers and perform such duties as the Board of Directors, the chairman of the board, the chief executive officer, the president or these By-laws may, from time to time, prescribe. If required by the Board of Directors, the chief financial officer shall give the Corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of chief financial officer and for the restoration to the Corporation, in case of death, resignation, retirement or removal from office of all books, papers, vouchers, money and other property of whatever kind in the possession or under the control of the chief financial officer belonging to the Corporation. Section 12. Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these By-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the Board of Directors. Section 13. Absence or Disability of Officers. In the case of the absence or disability of any officer of the Corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the Board of Directors may by resolution delegate the powers and duties of such officer to any other officer or to any Director, or to any other person selected by it. ARTICLE V --------- CERTIFICATES OF STOCK --------------------- Section 1. Form. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by the chairman of the board, the chief executive officer or the president and the secretary or an assistant secretary of the Corporation, certifying the number of shares owned by such holder in the Corporation. If such a certificate is countersigned (i) by a transfer agent or an assistant transfer agent other than the Corporation or its employee or (ii) by a registrar, other than the Corporation or its employee, the signature of any such chairman of the board, chief executive officer, president, secretary or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may neverthe- -10- less be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the Corporation. Shares of stock of the Corporation shall only be transferred on the books of the Corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates and record the transaction on its books. The Board of Directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the Corporation. Section 2. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 3. Fixing a Record Date for Stockholder Meetings. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is first given. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 4. Fixing a Record Date for Other Purposes. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days -11- prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. Section 5. Registered Stockholders. Prior to the surrender to the Corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the Corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner. The Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof. Section 6. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the Board of Directors. Any call made by the Board of Directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the Corporation may proceed to collect the amount due in the same manner as any debt due the Corporation. ARTICLE VI ---------- GENERAL PROVISIONS ------------------ Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the certificate of , if any, may be declared by the Board of Directors at any regular or special meeting, in accordance with applicable law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the Restated Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or any other purpose and the Directors may modify or abolish any such reserve in the manner in which it was created. Section 2. Checks, Drafts or Orders. All checks, drafts or other orders for the payment of money by or to the Corporation and all notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner, as shall be determined by resolution of the Board of Directors or a duly authorized committee thereof. -12- Section 3. Contracts. In addition to the powers otherwise granted to officers pursuant to ARTICLE IV hereof, the Board of Directors may authorize any officer or officers, or any agent or agents, of the Corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 4. Loans. The Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or of its subsidiaries, including any officer or employee who is a Director of the Corporation or its subsidiaries, whenever, in the judgment of the Directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute. Section 5. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 6. Corporate Seal. The Board of Directors may provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 7. Voting Securities Owned By Corporation. Voting securities in any other Corporation held by the Corporation shall be voted by the chief executive officer, the president or a vice-president, unless the Board of Directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. Section 8. Inspection of Books and Records. The Board of Directors shall have power from time to time to determine to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. Section 9. Section Headings. Section headings in these By-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. -13- Section 10. Inconsistent Provisions. In the event that any provision of these By-laws is or becomes inconsistent with any provision of the Restated Certificate of Incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these By-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. ARTICLE VII ----------- AMENDMENTS ---------- In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to make, alter, amend, change, add to or repeal these By-laws by the affirmative vote of a majority of the total number of Directors then in office. Any alteration or repeal of these By-laws by the stockholders of the Corporation shall require the affirmative vote of a majority of the outstanding shares of the Corporation entitled to vote on such alteration or repeal; provided, however, that Section 11 of ARTICLE II and Sections 2, 3, 4 and 5 of ARTICLE III and this ARTICLE VII of these By-laws shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of the holders of at least 66% of the outstanding shares of the Corporation entitled to vote on such alteration or repeal. -14- EX-10.1 4 EXHIBIT 10.1 EXHIBIT 10.1 TRANSACTION SERVICES AGREEMENT ------------------------------ This Transaction Services Agreement (this "Agreement") is made and entered into as of February 25, 1998, by and between Nutraceutical International Corporation, a Delaware corporation (the "Company"), and Bain Capital, Inc., a Delaware corporation ("Bain"). WHEREAS, the Company desires to retain Bain and Bain desires to perform for the Company and its subsidiaries and parent certain services; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties agree as follows: 1. Term. This Agreement shall be in effect for an initial term commencing on the date hereof and ending on the earlier to occur of (a) February 15, 2001 and (b) the first day on which Bain and its affiliates cease to own at least 5% of the Company's Common Stock (the "Term"). The Term shall be automatically extended thereafter on a year to year basis unless the Company or Bain provides written notice of its desire to terminate this Agreement to the other party 90 days prior to the expiration of the Term or any extension thereof. 2. Services. Bain shall perform or cause to be performed such services for the Company and its subsidiaries and parent as directed by the Company, which may include, without limitation, the following: (a) identification, support, negotiation and analysis of acquisitions and dispositions by the Company or its subsidiaries or parent; (b) support, negotiation and analysis of financing alternatives, including, without limitation, in connection with acquisitions, capital expenditures and refinancing of existing indebtedness; and (c) finance functions, including assistance in the preparation of financial projections, and monitoring of compliance with financing agreements. 4. Transaction Fees. (a) The Company hereby agrees to pay to Bain or its designees on the closing date of the consummation of the Company's initial public offering for services rendered in connection therewith and certain other management services. Such fees shall be payable by wire transfer in an amount equal to $375,000 to Bain or its designees plus reasonable and documented out-of- pocket expenses. (b) In addition, during the term of this Agreement, the Company shall pay to Bain or its designees a transaction fee in connection with the consummation of each acquisition, divestiture or financing (without duplication) by the Company or its subsidiaries or parent that is generated by Bain or for which the Company requests Bain to perform services pursuant hereto, in an amount equal to 1.0% of the aggregate value of such transaction, plus reasonable and documented out-of-pocket expenses incurred in connection with performing services for the Company, when and as incurred. 5. Personnel. Bain shall provide and devote to the performance of this Agreement such partners, employees and agents of Bain as Bain shall deem appropriate to the furnishing of the services required. 6. Liability. Neither Bain nor any of its affiliates, partners, employees or agents shall be liable to the Company or its subsidiaries or affiliates for any loss, liability, damage or expense arising out of or in connection with the performance of services contemplated by this Agreement, unless such loss, liability, damage or expense shall be proven to result directly from gross negligence, willful misconduct or bad faith on the part of Bain, its affiliates, partners, employees or agents acting within the scope of their employment or authority. 7. Indemnity. The Company and its subsidiaries and parent shall defend, indemnify and hold harmless each of Bain, its affiliates, partners, employees and agents from and against any and all loss, liability, damage or expenses arising from any claim by any person with respect to, or in any way related to, the performance of services contemplated by this Agreement (including attorneys' fees) (collectively, "Claims") resulting from any act or omission of Bain, its affiliates, partners, employees or agents, other than for Claims which shall be proven to be the direct result of gross negligence, bad faith or willful misconduct by Bain, its affiliates, partners, employees or agents. The Company and its subsidiaries and parent shall defend at its own cost and expense any and all suits or actions (just or unjust) which may be brought against the Company, its subsidiaries and parent and Bain, its officers, directors, affiliates, partners, employees or agents or in which Bain, its affiliates, partners, employees or agents may be impleaded with others upon any Claims, or upon any matter, directly or indirectly, related to or arising out of this Agreement or the performance hereof by Bain, its affiliates, partners, employees or agents, except that if such damage shall be proven to be the direct result of gross negligence, bad faith or willful misconduct by Bain, its affiliates, partners, employees or agents, then Bain shall reimburse the Company and its subsidiaries and parent for the costs of defense and other costs incurred by the Company and its subsidiaries and parent. 8. Notices. All notices hereunder shall be in writing and shall be delivered personally or mailed by United States mail, postage prepaid, addressed to the parties as follows: 2 To the Company: Nutraceutical International Corporation 1400 Kearns Boulevard, 2nd Floor Park City, Utah 84060 Attention: Chief Executive Officer To Bain: Bain Capital, Inc. Two Copley Place Boston, Massachusetts 02116 Attention: Robert C. Gay 9. Assignment. Neither party may assign any obligations hereunder to any other party without the prior written consent of the other party (which consent shall not be unreasonably withheld); provided that Bain may, without consent of the Company, assign its rights and obligations under this Agreement to any of its affiliates (but only if such affiliate is a person or entity (excluding any Bain portfolio companies) controlled by Bain, or in the case of an affiliate which is a partnership, Bain is the ultimate general partner of such partnership). The assignor shall remain liable for the performance of any assignee. 10. Successors. This Agreement and all the obligations and benefits hereunder shall inure to the successors and assigns of the parties. 11. Counterparts. This Agreement may be executed and delivered by each party hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original and all of which taken together shall constitute but one and the same agreement. 12. Entire Agreement; Modification; Governing Law. The terms and conditions hereof constitute the entire agreement between the parties hereto with respect to the subject matter of this Agreement and supersede all previous communications, either oral or written, representations or warranties of any kind whatsoever, except as expressly set forth herein. No modifications of this Agreement nor waiver of the terms or conditions thereof shall be binding upon either party unless approved in writing by an authorized representative of such party. All issues concerning this agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Illinois. * * * * * 3 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. NUTRACEUTICAL INTERNATIONAL CORPORATION By: /s/ Frank W. Gay ----------------------------------- Its: Chief Executive Officer ---------------------------------- BAIN CAPITAL, INC. By: /s/ Robert Gay ----------------------------------- Its: Managing Director ---------------------------------- 4 EX-10.2 5 EXHIBIT 10.2 Exhibit 10.2 TERMINATION AGREEMENT This Termination Agreement (this "Agreement") is made and entered into as of February 25, 1998, by and between Nutraceutical International Corporation, a Delaware corporation (the "Company"), and Bain Capital, Inc., a Delaware corporation ("Bain"), and terminates that certain Advisory Agreement dated as of January 31, 1995, by and between the Company and Bain (the "Advisory Agreement"). NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties agree as follows: 1. Termination. The Company and Bain hereby agree to terminate the Advisory Agreement and that no further consideration or services are to be tendered pursuant thereto, other than as set forth herein. 2. Termination Fee. The Company hereby agrees to pay to Bain or its designees on the date hereof a fee for agreeing to terminate the Advisory Agreement in consideration of foregone revenues to Bain thereunder. Such fees shall be payable by wire transfer in an amount equal to $625,000 to Bain or its designees. 3. Liability. Neither Bain nor any of its affiliates, partners, employees or agents shall be liable to the Company or its subsidiaries or affiliates for any loss, liability, damage or expense arising out of or in connection with the performance of services under the Advisory Agreement, unless such loss, liability, damage or expense shall be proven to result directly from gross negligence, willful misconduct or bad faith on the part of Bain, its affiliates, partners, employees or agents acting within the scope of their employment or authority. 4. Indemnity. The Company and its subsidiaries and parent shall defend, indemnify and hold harmless each of Bain, its affiliates, partners, employees and agents from and against any and all loss, liability, damage or expenses arising from any claim by any person with respect to, or in any way related to, the performance of services under the Advisory Agreement (including attorneys' fees) (collectively, "Claims") resulting from any act or omission of Bain, its affiliates, partners, employees or agents, other than for Claims which shall be proven to be the direct result of gross negligence, bad faith or willful misconduct by Bain, its affiliates, partners, employees or agents. The Company and its subsidiaries and parent shall defend at its own cost and expense any and all suits or actions (just or unjust) which may be brought against the Company, its subsidiaries and parent and Bain, its officers, directors, affiliates, partners, employees or agents or in which Bain, its affiliates, partners, employees or agents may be impleaded with others upon any Claims, or upon any matter, directly or indirectly, related to or arising out of the Advisory Agreement or the performance thereof by Bain, its affiliates, partners, employees or agents, except that if such damage shall be proven to be the direct result of gross negligence, bad faith or willful misconduct by Bain, its affiliates, partners, employees or agents, then Bain shall reimburse the Company and its subsidiaries and parent for the costs of defense and other costs incurred by the Company and its subsidiaries and parent. 5. Notices. All notices hereunder shall be in writing and shall be delivered personally or mailed by United States mail, postage prepaid, addressed to the parties as follows: To the Company: Nutraceutical International Corporation 1400 Kearns Boulevard, 2nd Floor Park City, Utah 84060 Attention: Chief Executive Officer To Bain: Bain Capital, Inc. Two Copley Place Boston, Massachusetts 02116 Attention: Robert C. Gay 6. Assignment. Neither party may assign any obligations hereunder to any other party without the prior written consent of the other party (which consent shall not be unreasonably withheld); provided that Bain may, without consent of the Company, assign its rights and obligations under this Agreement to any of its affiliates (but only if such affiliate is a person or entity (excluding any Bain portfolio companies) controlled by Bain, or in the case of an affiliate which is a partnership, Bain is the ultimate general partner of such partnership). The assignor shall remain liable for the performance of any assignee. 7. Successors. This Agreement and all the obligations and benefits hereunder shall inure to the successors and assigns of the parties. 8. Counterparts. This Agreement may be executed and delivered by each party hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original and all of which taken together shall constitute but one and the same agreement. 9. Entire Agreement; Modification; Governing Law. The terms and conditions hereof constitute the entire agreement between the parties hereto with respect to the subject matter of this Agreement and supersede all previous communications, either oral or written, representations or warranties of any kind whatsoever, except as expressly set forth herein. No modifications of this Agreement nor waiver of the terms or conditions thereof shall be binding upon either party unless approved in writing by an authorized representative of such party. All issues concerning this agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State 2 of Illinois or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Illinois. * * * * * 3 IN WITNESS WHEREOF, the parties have executed this Termination Agreement as of the date first written above. NUTRACEUTICAL INTERNATIONAL CORPORATION By: /s/ Frank W. Gay __________________________________ Its: Chief Executive Officer __________________________________ BAIN CAPITAL, INC. By: /s/ Robert Gay __________________________________ Its: Managing Director __________________________________ 4 EX-10.3 6 EXHIBIT 10.3 EXHIBIT 10.3 NUTRACEUTICAL INTERNATIONAL CORPORATION 1998 STOCK INCENTIVE PLAN ------------------------- ARTICLE 1 Identification of the Plan 1.1 Title. The plan described herein shall be known as the 1998 Stock Incentive Plan (the "Plan"). 1.2 Purpose. The purpose of this Plan is (i) to compensate certain officers and employees of Nutraceutical International Corporation (the "Company") and its Subsidiaries for services rendered by such persons after the date of adoption of this Plan to the Company or any Subsidiary; (ii) to provide certain officers and employees of the Company and its Subsidiaries with significant additional incentive to promote the financial success of the Company; and (iii) to provide an incentive which may be used to induce able persons to enter into or remain in the employment of the Company or any Subsidiary. 1.3 Effective Date. The Plan shall become effective upon its approval by the Board of Directors and the stockholders of the Company (the "Effective Date"). 1.4 Defined Terms. Certain capitalized terms used herein have the meanings as set forth in Section 10.1 of the Plan. ARTICLE 2 Administration of the Plan 2.1 Initial Administration. This Plan shall initially be administered by the Board of Directors. The Board of Directors shall delegate the administration of the Plan to a Compensation Committee (the "Committee") in the event that such a committee is established by the Board of Directors and is comprised of persons appointed by the Board of Directors of the Company in accordance with the provisions of Section 2.3. The Board shall exercise full power and authority regarding the administration of the Plan until such administration is delegated to the Committee. Unless the context otherwise requires, references herein to the Committee shall be deemed to refer to the Board of Directors until the administration of the Plan has been delegated to the Committee. 2.2 Committee's Powers. The Committee shall have full power and authority to prescribe, amend and rescind rules and procedures governing administration of this Plan. The Committee shall have full power and authority (i) to interpret the terms of this Plan, the terms of the Awards and the rules and procedures established by the Committee and (ii) to determine the meaning of or requirements imposed by or rights of any person under this Plan, any Award or any rule or procedure established by the Committee. Each action of the Committee which is within the scope of the authority delegated to the Committee by this Plan or by the Board shall be binding on all persons. 2.3 Committee Membership. The Committee shall be composed of two or more members of the Board, each of whom is an "outside director" as defined in Section 162(m) of the Code and a "Non-Employee Director," as defined in Securities and Exchange Commission Rule 16b-3, as amended ("Rule 16b-3"), or any successor rules or government pronouncements. The Board shall have the power to determine the number of members which the Committee shall have and to change the number of membership positions on the Committee from time to time. The Board shall appoint all members of the Committee. The Board may from time to time appoint members to the Committee in substitution for, or in addition to, members previously appointed and may fill vacancies, however caused, on the Committee. Any member of the Committee may be removed from the Committee by the Board at any time with or without cause. 2.4 Committee Procedures. The Committee shall hold its meetings at such times and places as it may determine. The Committee may make such rules and regulations for the conduct of its business as it shall deem advisable. Unless the Board or the Committee expressly decides to the contrary, a majority of the members of the Committee shall constitute a quorum and any action taken by a majority of the Committee members in attendance at a meeting at which a quorum of Committee members are present shall be deemed an act of the Committee. 2.5 Indemnification. No member of the Committee shall be liable, in the absence of bad faith, for any act or omission with respect to his or her service on the Committee under this Plan. Service on the Committee shall constitute service as a director of the Company so that the members of the Committee shall be entitled to indemnification and reimbursement as directors of the Company for any action or any failure to act in connection with service on the Committee to the full extent provided for at any time in the Company's Certificate of Incorporation and By-Laws, or in any insurance policy or other agreement intended for the benefit of the Company's directors. ARTICLE 3 Persons Eligible to Receive Awards A person shall be eligible to be granted an Award only if on the proposed Granting Date for such Award such person is an employee of the Company or any Subsidiary, excluding non-management directors of the Company, or has rendered or is expected to render advisory or consulting services to the Company or any Subsidiary within a twelve-month period of the Granting Date. A person eligible to be granted an Award is herein called a "Grantee." -2- ARTICLE 4 Grant of Awards 4.1 Power to Grant Awards. (a) The Committee is authorized under the Plan to enter into any type of arrangement with any Grantee that is consistent with the provisions of the Plan and that by its terms involves the issuance or potential issuance of (i) shares of Common Stock, par value $.01 per share, of the Company ("Common Stock") or (ii) a Derivative Security (as such term is defined in Rule 16a-1 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such Rule may be amended from time to time) with an exercise or conversion right at a price related to Common Stock or with a value derived from the value of the shares of Common Stock. The entering into of any such arrangement is referred to herein as the grant of an "Award." (b) Awards are not restricted to any specified form or structure and may include, without limitation, sales or bonuses of stock, restricted stock, restricted stock unit, stock options, reload stock options, stock purchase warrants, other rights to acquire stock, securities convertible into or redeemable for stock, stock appreciation rights, limited stock appreciation rights, phantom stock, dividend equivalents, performance units or performance shares, and an Award may consist of one or more such security or benefit. 4.2 Granting Date. An Award shall be deemed to have been granted under this Plan on the date (the "Granting Date") which the Committee designates as the Granting Date at the time it approves such Award, provided that the Committee may not designate a Granting Date with respect to any Award which is earlier than the date on which the granting of such Award is approved by the Committee. 4.3 Award Terms Which The Committee May Determine. The Committee shall have the power to determine the Grantee to whom Awards are granted, the number of Shares subject to each Award, the number of Awards granted to each Grantee and the time at which each Award is granted. Except as otherwise expressly provided in this Plan, the Committee shall also have the power to determine, at the time of the grant of each Award, all terms and conditions governing the rights and obligations of the holder with respect to such Award. With respect to any Award granted under this Plan that is an option to purchase Common Stock of the Company (an "Option"), the Committee shall have the power to determine: (a) the purchase price per Share or the method by which the purchase price per Share will be determined; (b) the length of the period during which the Option may be exercised and any limitations on the number of Shares purchasable with the Option at any given time during such period; (c) the times at which the Option may be exercised; (d) any conditions precedent to be satisfied before the Option may be exercised, such as vesting period; (e) any restrictions on resale of any Shares purchased upon exercise of the Option; (f) the extent to which the Option may be transferable; and (g) whether the Option will constitute an Incentive Stock Option. 4.4 Award Agreement. No person shall have any rights under any Award unless and until the Company and the person to whom such Award is granted have executed and delivered -3- an agreement expressly granting the Award to such person and containing provisions setting forth the terms of the Award (an "Award Agreement"). 4.5 Limitation on Shares Issuable to any Grantee. The aggregate number of Shares that may relate to Awards granted to a Grantee during any calendar year (including those already exercised by the Grantee) shall not exceed 100,000 shares, as adjusted pursuant to Article 8 of this Plan. ARTICLE 5 Award Terms 5.1 Plan Provisions Control Terms. The terms of this Plan shall govern all Awards. In the event any provision of any Award Agreement conflicts with any term in this Plan as constituted on the Granting Date of such Award, the term in this Plan as constituted on the Granting Date of the Award shall control. Except as provided in Article 8, the terms of any Award may not be changed after the Granting Date of such Award without the express approval of the Company and the Award Holder. 5.2 Term Limitation. No Incentive Stock Option may be granted under this Plan which is exercisable more than ten years after its Granting Date. This Section 5.2 shall not be deemed to limit the term which the Committee may specify for any Awards (including Options) granted under the Plan which are not intended to be Incentive Stock Options. 5.3 Transfer of Awards. An Award granted pursuant to this Plan may be transferable as provided in the Award Agreement. It shall be a condition precedent to any transfer of any Award that the transferee executes and delivers an agreement acknowledging such Award has been acquired for investment and not for distribution and is and shall remain subject to this Plan and the Award Agreement. The "Holder" of any Award shall mean (i) the initial grantee of such Award or (ii) any permitted transferee. 5.4 $100,000 Per Year Limit on Incentive Stock Options. No Grantee may be granted Incentive Stock Options if the value of the Shares subject to those options which first become exercisable in any given calendar year (and the value of the Shares subject to any other Incentive Stock Options issued to the Grantee under the Plan or any other plan of the Company or its Subsidiaries which first become exercisable in such year) exceeds $100,000. For this purpose, the value of Shares shall be determined on the Granting Date. Any Incentive Stock Options issued in excess of the $100,000 limit shall be treated as Options that are not Incentive Stock Options. Incentive Stock Options shall be taken into account in the order in which they were granted. 5.5 No Right to Employment Conferred. Nothing in this Plan or (in the absence of an express provision to the contrary) in any Award Agreement (i) confers any right or obligation on any person to continue in the employ of the Company or any Subsidiary or (ii) affects or shall affect in any way any person's right or the right of the Company or any Subsidiary to terminate such person's employment with the Company or any Subsidiary at any time, for any reason, with or without cause. -4- ARTICLE 6 Regulatory Compliance 6.1 Taxes. The Company or any Subsidiary shall be entitled, if the Committee deems it necessary or desirable, to withhold from an Award Holder's salary or other compensation (or to secure payment from the Award Holder in lieu of withholding) all or any portion of any withholding or other tax due from the Company or any Subsidiary with respect to any Shares deliverable under such Holder's Award or the Committee may (but need not) permit payment of such withholding by the Company's retention of Shares which would otherwise be transferred to the Award Holder upon exercise of the Option. In the event any Common Stock is retained by the Company to satisfy all or any part of the withholding, the part of the withholding deemed to have been satisfied by such Common Stock shall be equal to the product derived by multiplying the Per Share Market Value as of the date of exercise by the number of Shares retained by the Company. The number of Shares retained by the Company in satisfaction of withholding shall not be a number which when multiplied by the Per Share Market Value as of the date of exercise would result in a product greater than the withholding amount. No fractional Shares shall be retained by the Company in satisfaction of withholding. Notwithstanding Article 7, unless the Board shall otherwise determine, for each Share retained by the Company in satisfaction of all or any part of the withholding amount, the aggregate number of Shares subject to this Plan shall be increased by one Share. The Company may defer delivery under a Holder's Award until indemnified to its satisfaction with respect to such withholding or other taxes. 6.2 Securities Law Compliance. Each Award shall be subject to the condition that such Award may not be exercised if and to the extent the Committee determines that the sale of securities upon exercise of the Award may violate the Securities Act or any other law or requirement of any governmental authority. The Company shall not be deemed by any reason of the granting of any Award to have any obligation to register the Shares subject to such Option under the Securities Act or to maintain in effect any registration of such Shares which may be made at any time under the Securities Act. An Award shall not be exercisable if the Committee or the Board determines there is non-public information material to the decision of the Holder to exercise such Award which the Company cannot for any reason communicate to such Holder. ARTICLE 7 Shares Subject to the Plan -5- Except as provided in Section 6.1 and Article 8, an aggregate of 1,050,000 Shares of Common Stock shall be subject to this Plan. Except as provided in Section 6.1 and Article 8, the Awards shall be limited so that the sum of the following shall not as of any given time exceed 1,050,000 Shares: (i) all Shares subject to Awards outstanding under this Plan at the given time and (ii) all Shares which shall have been issued by the Company by reason of the exercise at or prior to the given time of any of the Options. The Common Stock issued under the Plan may be either authorized and unissued shares, shares reacquired and held in the treasury of the Company, or both, all as from time to time determined by the Board. In the event any Award shall expire or be terminated before it is fully exercised, then all Shares formerly subject to such Award as to which such Award was not exercised shall be available for any Award subsequently granted in accordance with the provisions of this Plan. No fractional Shares will be eligible to be issued under the Plan. In the event of a change in the Shares as presently constituted, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the Shares within the meaning of the Plan. ARTICLE 8 Adjustments to Reflect Organic Changes The Board shall appropriately and proportionately adjust the number and kind of Shares subject to outstanding Awards, the price for which Shares may be purchased upon the exercise of outstanding Awards, and the number and kind of Shares available for Awards subsequently granted under this Plan to reflect any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other change in the capitalization of the Company which the Board determines to be similar, in its substantive effect upon this Plan or the Awards, to any of the changes expressly indicated in this sentence. The Board may (but shall not be required to) make any appropriate adjustment to the number and kind of Shares subject to outstanding Awards, the price for which Shares may be purchased upon the exercise of outstanding Awards, and the number and kind of Shares available for Awards subsequently granted under this Plan to reflect any spin-off, spin-out or other distribution of assets to stockholders or any acquisition of the Company's stock or assets or other change which the Board determines to be similar, in its substantive effect upon this Plan or the Awards, to any of the changes expressly indicated in this sentence. The Committee shall have the power to determine the amount of the adjustment to be made in each case described in the preceding two sentences, but no adjustment approved by the Committee shall be effective until and unless it is approved by the Board. In the event of any reorganization, reclassification, consolidation, merger or sale of all or substantially all of the Company's assets which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, the Board may (but shall not be required to) substitute the per share amount of such stock, securities or assets for Shares upon any subsequent exercise of any Award. -6- ARTICLE 9 Amendment and Termination of the Plan 9.1 Amendment. Except as provided in the following two sentences, the Board shall have complete power and authority to amend this Plan at any time and no approval by the Company's stockholders or by any other person, committee or other entity of any kind shall be required to make any amendment approved by the Board effective. So long as the Common Stock is eligible for trading on the Nasdaq National Market, the Board shall obtain stockholder approval for those amendments of the Plan required to be so approved pursuant to the By-laws of the National Association of Securities Dealers. The Board shall not, without the affirmative approval of the Company's stockholders, amend the Plan in any manner which would cause any outstanding Incentive Stock Options to no longer qualify as Incentive Stock Options. No termination or amendment of this Plan may, without the consent of the Holder of any Award prior to termination or the adoption of such amendment, materially and adversely affect the rights of such Holder under such Award. 9.2 Termination. The Board shall have the right and the power to terminate this Plan at any time, provided that no Incentive Stock Options may be granted after the tenth anniversary of the adoption of this Plan. No Award shall be granted under this Plan after the termination of this Plan, but the termination of this Plan shall not have any other effect. Any Award outstanding at the time of the termination of this Plan may be exercised after termination of this Plan at any time prior to the Expiration Date of such Award to the same extent such Award would have been exercisable had this Plan not terminated. ARTICLE 10 Definitions and Other Provisions of the Plan 10.1 Definitions. Each term defined in this Section 10.1 has the meaning indicated in this Section 10.1 whenever such term is used in this Plan: "Award" has the meaning such term is given in Section 4.1 of this Plan. "Award Agreement" has the meaning such term is given in Section 4.4 of this Plan. "Board of Directors" and "Board" both mean the Board of Directors of the Company as constituted at the time the term is applied. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" has the meaning such term is given in Section 2.1 of this Plan. "Common Stock" means the issued or issuable Common Stock, par value $.01 per share, of the Company. -7- "Company" as applied as of any given time shall mean Nutraceutical International Corporation, a Delaware corporation, except that if prior to the given time any corporation or other entity has acquired all or a substantial part of the assets of the Company (as herein defined) and has agreed to assume the obligations of the Company under this Plan, or is the survivor in a merger or consolidation to which the Company was a party, such corporation or other entity shall be deemed to be the Company at the given time. "Expiration Date" as applied to any Award means the date specified in the Award Agreement between the Company and the Holder as the expiration date of such Award. If no expiration date is specified in the Award Agreement relating to any Award, then the Expiration Date of such Award shall be the day prior to the tenth anniversary of the Granting Date of such Award. Notwithstanding the preceding sentences, if the person to whom any Incentive Stock Option is granted owns, on the Granting Date of such Option, stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company (or of any parent or Subsidiary of the Company in existence on the Granting Date of such Option), and if no expiration date is specified in the Award Agreement relating to such Option, then the Expiration Date of such Option shall be the day prior to the fifth anniversary of the Granting Date of such Option. "Grantee" has the meaning such term is given in Article 3 of this Plan. "Granting Date" has the meaning such term is given in Section 4.2 of this Plan. "Holder" has the meaning such term is given in Section 5.3 of this Plan. "Incentive Stock Option" means an incentive stock option, as defined in Code Section 422, which is granted pursuant to this Plan. "Option" has the meaning such term is given in Section 4.3 of this Plan. "Plan" has the meaning such term is given in Section 1.1 of this Plan. "Securities Act" at any given time shall consist of: (i) the Securities Act of 1933 as constituted at the given time; (ii) any other law or laws promulgated prior to the given time by the United States Government which are in effect at the given time and which regulate or govern any matters at any time regulated or governed by the Securities Act of 1933; (iii) all regulations, rules, registration forms and other governmental pronouncements issued under the laws specified in clauses (i) and (ii) of this sentence which are in effect at the given time; and (iv) all interpretations by any governmental agency or authority of the things specified in clause (i), (ii) or (iii) of this sentence which are in effect at the given time. Whenever any provision of this Plan requires that any action be taken in compliance with any provision of the Securities Act, such provision shall be deemed to require compliance with the Securities Act as constituted at the time such action takes place. "Share" means a share of Common Stock. -8- "Subsidiary" means any corporation in which the Company owns, directly or indirectly, 50% or more of the total combined voting power of all classes of securities of such corporation. 10.2 Headings. Section headings used in this Plan are for convenience only, do not constitute a part of this Plan and shall not be deemed to limit, characterize or affect in any way any provisions of this Plan. All provisions in this Plan shall be construed as if no headings had been used in this Plan. 10.3 Severability. (a) General. Whenever possible, each provision in this Plan and in every Award at any time granted under this Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Plan or any Award at any time granted under this Plan is held to be prohibited by or invalid under applicable law, then (i) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (ii) all other provisions of this Plan and every Award at any time granted under this Plan shall remain in full force and effect. (b) Incentive Stock Options. Whenever possible, each provision in this Plan and in every Award at any time granted under this Plan which is evidenced by an Award Agreement which expressly states such Option is intended to constitute an Incentive Stock Option under Code Section 422 (an "intended ISO") shall be interpreted in such manner as to entitle such intended ISO to the tax treatment afforded by the Code to Options which do constitute Incentive Stock Options under Code Section 422, but if any provision of this Plan or any intended ISO at any time granted under this Plan is held to be contrary to the requirements necessary to entitle such intended ISO to the tax treatment afforded by the Code to Options which do constitute Incentive Stock Options under Code Section 422, then (i) such provision shall be deemed to have contained from the outset such language as shall be necessary to entitle such intended ISO to the tax treatment afforded by the Code to Options which do constitute Incentive Stock Options under Code Section 422, and (ii) all other provisions of this Plan and such intended ISO shall remain in full force and effect. If any Award Agreement covering an intended ISO granted under this Plan does not explicitly include any terms required to entitle such intended ISO to the tax treatment afforded by the Code to Options which do constitute Incentive Stock Options under Code Section 422, then all such terms shall be deemed implicit in the intention to afford such treatment to such Option and such Option shall be deemed to have been granted subject to all such terms. 10.4 No Strict Construction. No rule of strict construction shall be applied against the Company, the Committee or any other person in the interpretation of any of the terms of this Plan, any Award or any rule or procedure established by the Committee. 10.5 Choice of Law. This Plan and all documents contemplated hereby, and all remedies in connection therewith and all questions or transactions relating thereto, shall be construed in accordance with and governed by the internal laws of the State of Delaware. -9- 10.6 Tax Consequences. Tax consequences from the purchase and sale of Shares may differ among grantees under the Plan. Each grantee of an Award should discuss specific tax questions regarding participation in the Plan with his or her own tax advisor. -10- EX-10.4 7 EXHIBIT 10.4 EXHIBIT 10.4 NUTRACEUTICAL INTERNATIONAL CORPORATION EMPLOYEE STOCK DISCOUNT PURCHASE PLAN ------------------------------------- 1. Title. The plan described herein shall be known as the Nutraceutical International Corporation Employee Stock Discount Purchase Plan (the "Plan"). The Plan will be maintained by the Nutraceutical International Corporation (the "Company") and any of its subsidiaries that may adopt the Plan from time to time in accordance with the procedures set forth in Section 23 hereof (each such adopting subsidiary referred to herein as a "Covered Entity") with the Company's consent. 2. Purpose. The purpose of the Plan is to give employees wishing to do so a convenient means of purchasing at a discount shares of the Company's Common Stock, par value $.01 per share (the "Shares"), through payroll deductions. The Company believes that ownership of Shares by employees will foster greater employee interest in the Company's growth and development. The Plan is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). 3. Shares Reserved for the Plan. There shall be reserved for issuance and purchase by employees of the Company under this Plan an aggregate of 750,000 Shares, subject to adjustment as provided in Section 17 hereof. Shares subject to the Plan may be shares now or hereafter authorized and unissued or shares already authorized, issued and owned by the Company. The right to purchase shares pursuant to the Plan shall be made available by a series of quarterly offerings to employees eligible to participate in the Plan pursuant to Section 8 hereof. If and to the extent that any right to purchase reserved Shares shall not be exercised by any employee for any reason or if such right to purchase shall terminate as provided herein, Shares that have not been so purchased under the Plan shall again become available for the purposes of the Plan during the remaining term of the Plan. 4. Effective Date. The Plan shall become effective on the date of the consummation of the initial public offering of the Company's Common Stock (the "Effective Date"). 5. The Plan Year. The Plan shall operate on a fiscal year beginning on the first day of October in each year and ending on the 30th day of September. This fiscal year is referred to herein as the "Plan year." The initial Plan year shall begin on the Effective Date. 6. Plan Quarters. The Plan year shall be divided into four Plan quarters ending December 31, March 31, June 30 and September 30. Each such quarter is referred to herein as a "Plan quarter." 7. Plan Administration. The Plan shall initially be administered by the Board of Directors. The Board of Directors shall delegate the administration of the Plan to a Compensation Committee (the "Committee") in the event that such a committee is established by the Board of Directors. As Plan administrator, the Committee shall have complete control of the administration of the Plan, which includes the determination of employees, eligibility for participation in accordance -1- with the standards set forth in Section 8 hereof, the interpretation of provisions of the Plan, the adoption of any rules or regulations which may be necessary, advisable or desirable in the operation of the Plan including rules governing the participation of officers and directors in the Plan in order to exempt transactions under the Plan in accordance with Rule 16b of the Securities and Exchange Commission, and the delegation of certain of the duties of the Committee to an agent to facilitate the purchase and transfer of Shares and to otherwise assist in the administration of the Plan. The Committee shall control the general administration of the Plan with all powers necessary to enable it to carry out its duties in that respect, except that, if for any reason a Committee shall not have been appointed, all authority and duties of the Committee under this Plan shall be vested in and exercised by the Board of Directors of the Company. 8. Eligibility. Any employee of the Company who is a United States resident or who is a United States citizen temporarily on location at a facility outside of the United States and any Covered Entity (as defined in Section 23 hereof) shall be eligible to participate in the Plan on the day next following the twelve-month anniversary of such employee's employment provided such employee would not own, immediately after the exercise of any right granted hereunder, stock possessing five percent (5%) or more of the combined voting power or value of all classes of capital stock of the Company. The Committee shall determine which employees are eligible to participate in the Plan in accordance with the standards set forth in this Section. 9. Election to Participate; Payroll Deductions and Lump Sum Contributions. An eligible employee may elect to participate in the Plan on any day within the Plan quarter in which such employee becomes eligible to participate, and thereafter as of the first day of any Plan quarter, by correctly completing and returning to the Company an enrollment form authorizing a specified payroll deduction to be made from each subsequent paycheck for the purchase of Shares under this Plan (the "payroll deduction"). The minimum allowable payroll deduction is $25.00 per payroll period. All payroll deductions shall be made regularly and in equal amounts and shall be credited on the records of the Company in the name of the eligible employee. Such credit shall constitute only a bookkeeping entry by the Company and no interest will be paid or due on any money paid into this Plan or credited to such eligible employee. Employees who elect to participate in the Plan are referred to herein as "participating employees." A participating employee will be deemed to have authorized the same payroll deduction for each subsequent payroll period provided that he or she is eligible to participate during each subsequent payroll period. A participating employee may increase or decrease his or her payroll deduction as of the first day of the first full payroll period of any Plan quarter by filing the required form, in the time and manner prescribed by the Committee. Upon the request of any participating employee, the Company shall suspend making any payroll deduction with respect to such employee as soon as practicable after the employee notifies the Company of such request. In such event, the earliest date upon which payroll deductions may be resumed with respect to such employee shall be the first day of the Plan quarter occurring immediately after the first full Plan quarter that follows the suspension of the employee's payroll deductions. A participating employee may elect to make a lump sum contribution to the Plan, not more than once per plan quarter. Such election must be made no later than the 10th business day preceding the end of such plan quarter and payment must be made no later than 5 business days thereafter. In the event that an employee ceases to be a participating employee, or if for any reason the Company does not invest the aggregate amount of payroll deductions or contributions of a participating -2- employee, the amount of payroll deductions not theretofore invested shall be returned to such employee. 10. Limitation of Number of Shares That an Employee May Purchase. A participant shall be allocated the number of Shares which may be purchased with such participant's contributions; provided, that in any Plan quarter a participant may only contribute an amount less than or equal to 15% of such participant's gross pay from the Company (including salary and bonus) for the immediately prior Plan quarter, which amount may be paid through payroll deduction pursuant to Section 9 or by one or more lump sum contributions. Notwithstanding the foregoing, no right to purchase Shares under this Plan shall permit an employee to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company at a rate which in aggregate exceeds $25,000 of fair market value of such stock (determined at the time the right is granted) for each calendar year in which the right is outstanding at any time. In addition, the total number of Shares purchased under the Plan shall not exceed 750,000 and if, for any purchase date, the number of Shares to be purchased with participants' cash account balances, when aggregated with all prior purchases under the Plan, would exceed 750,000 Shares, allocations to participants for such purchase date shall be reduced pro rata in accordance with their respective cash account balances, so that the total allocations shall not cause the total Shares purchased under the Plan to exceed 750,000 Shares. 11. Accounting for Participant Contributions. The Committee will cause to be established a "cash account" and a "Share account" for each participant under the Plan for bookkeeping purposes. As soon as practicable on or after the last day of each Plan quarter, but in no case later than the fifteenth day of the month immediately following the end of the Plan quarter, the Committee will credit each participant's cash account with such participant's payroll deductions during the Plan quarter ("credited payroll deductions"). The date of crediting of such credited payroll deductions is referred to herein as the "deduction crediting date." The Company shall not be required to pay or accrue interest on the cash balances in participants' cash accounts or on the value of participants' Share accounts. 12. Share Purchases. The Committee will use the entire balance of funds in participants' cash accounts to purchase Shares to be allocated to participants' Share accounts within the first 15 working days following each deduction crediting date. The cost per Share to participants will be 90% of the lower of the closing price for the Shares on the Nasdaq National Market ("Nasdaq") on the first or the last day of the Plan quarter with respect to which such purchase relates; provided that if the first or last day of the Plan quarter is a day on which Nasdaq is closed, the price for such day shall be determined as of the last preceding day on which Nasdaq is open. 13. Allocation of Shares. As soon as practicable after all necessary Shares have been purchased by the Committee (or its agent) for the benefit of participants, the Committee will allocate such Shares to participants' Share accounts (the date of such allocation to be referred to as the "Share allocation date") in the following manner: (a) The Committee will allocate full Shares and fractional Shares to the Share accounts of the individual participants to the extent of the balances in their respective cash accounts, subject to the limitations set forth in Section 10. The cash accounts will be charged with the cost -3- to participants of all Shares so allocated. No cash balances will remain in the participants' cash accounts immediately after each Share allocation date; (b) Until certificates are issued, no person shall have any right to sell, assign, mortgage, pledge, hypothecate or otherwise encumber any of the Shares allocated to a participant's Share account. 14. Issuance of Share Certificates. Share certificates for the number of whole Shares in each participant's Share account may be issued to participants only upon the receipt by the Committee (or its agent) of a participant's written request indicating the number of Shares (to a maximum of the number of full Shares in the participant's Share account) for which the participant wishes to receive certificates. Such request shall be made on a form at the time prescribed by the Committee and filed with the Committee (or its agent). Share certificates shall be issued to the participant as soon as practicable after the end of a Plan quarter. 15. Restrictions on Transfer. Unless the Shares purchased hereunder are covered by an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"). (a) Restrictive Legend. The certificates representing the Shares shall bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER." (b) Opinion of Counsel. The participant may not sell, transfer or dispose of any Shares (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel reasonably acceptable in form and substance to the Company that registration under the Securities Act or any applicable state securities law is not required in connection with such transfer. 16. Expenses. The Company or the Covered Entity will bear the costs associated with administering the Plan and purchasing Shares. No expenses attributable to a participant's sale of Shares, however, will be borne by the Company or the Covered Entity. 17. Cash Dividends, Share Splits and Distributions. (a) Cash Dividends. Cash dividends attributable to Shares allocated to participants' Share accounts as of the record date for which such cash dividends are declared will be credited to participants' cash accounts as of the dividend payment date and applied to Share -4- purchases and allocations on the next Share allocation date in accordance with the methods set forth in Sections 12 and 13 hereof. (b) Share Distributions and Share Splits. Share distributions and Share splits attributable to Shares allocated to participants' Share accounts as of the Share distribution record date or the Share split effective date will be credited directly to participants' Share accounts as of the record date and the effective date, respectively, of such Share distributions and such Share splits. (c) Share Rights and Warrants. The Company may, from time to time, in the exercise of its sole discretion, declare Share rights or warrants with respect to Shares. Following and as of the record date for determining those shareholders of record entitled to receive Share rights or warrants with respect to their Shares, the Company shall issue, and the Committee shall allocate, such Share rights and/or warrants directly to the appropriate participants as though the Shares allocated to the account of each such participant were held of record by such participant. Certificates representing such Share rights or warrants, if any such certificates have been authorized by the Board of Directors of the Company, may be issued to participants pursuant to the procedures set forth in Section 14 of this Plan. (d) Change in Common Stock. In the event of a reorganization, recapitalization, stock split, merger, consolidation or other increase or change in the common stock of the Company, the Committee may make appropriate changes in the number and type of Shares that at the time of such event remain available for purchase under this Plan. 18. Voting Rights. Holders of Shares have the right to vote on matters affecting the Company. If one of these matters is submitted to the shareholders for a vote, then following the record date for any shareholder meeting at which such vote is to occur, the Committee shall advise the Company of the number of participants for whom Shares are held in Share accounts on such record date, and the Company shall furnish the Committee (or its agent) with sufficient sets of its proxy soliciting materials to deliver one set to each such participant. The Committee shall thereupon forward one set to each participant for whom allocated Shares are being held and request voting instructions. Upon receipt of voting instructions, the Committee shall vote the Shares (including any fractional Shares) as instructed. The Committee shall not vote any Share allocated to a participant's Share account unless voting instructions have been received from the participant. 19. Records and Reports to Participants. The Committee shall cause to be maintained true and accurate books of account, and a record of all transactions under the Plan, and such accounts, books and records relating thereto shall be open to inspection and audit by such person or persons designated by the Company. At least annually, but in all cases on or before March 31 of each year, the Committee shall file with the Chief Financial Officer of the Company a written report setting forth all receipts and disbursements and other transactions effected on behalf of the Plan during the last preceding Plan year, including a description of all Shares purchased together with the cost of all such Shares. Such report shall also disclose any liabilities of the Plan and shall show, as of the close of the Plan year, the value of each active cash account and Share account of each participant together with the record of Share certificates delivered to each of the participants during such Plan year. The Committee shall have the right to maintain one or more bank -5- accounts for funds contributed to the Plan, and to make deposits in and withdrawals therefrom in connection with its administration of the Plan. An annual report shall be rendered to each participant in the Plan annually within 90 days after the close of the Plan year, showing for the Plan year just ended: (a) the amounts of employee payroll deductions made for each participant; (b) the amounts of cash dividends credited to such participant's cash account; (c) the number of Shares acquired for such participant's Share account (including the amounts of Share distributions or Share splits so allocated or credited); (d) the cost to the participant per Share of Shares purchased for such participant; (e) the number of Shares, if any, for which certificates were delivered to such participant; and (f) the beginning and ending balances in the participant's Share and cash accounts. 20. Termination of Employment. Settlement of the accounts of participants whose employment has terminated shall be made as of the beginning of the Plan quarter following the Plan quarter in which termination of employment occurred. As promptly as practicable after the close of the Plan quarter in which termination of employment occurred, the Committee will deliver to such former participant a certificate for the number of full Shares allocated to such participant's account and not previously distributed, together with a check for (i) any remaining cash balance and (ii) the value of any fractional Shares allocated to such participant's account. In the event of a participant's death, settlement will be made to the participant's duly appointed legal representative after the satisfaction of any applicable legal requirements. 21. Amendment and Termination of the Plan. Subject to the provisions of Section 423 of the Code and Rule 16b-3 under the Securities Exchange Act of 1934, as amended ("Exchange Act"), the Board of Directors may amend this Plan in any respect; provided, that no amendment may affect any participant's right to the benefit of contributions made by such participant prior to the date of the amendment. The Board of Directors reserves the right to terminate or temporarily suspend this Plan at the end of any Plan quarter. In the event of termination or suspension of the Plan, the Committee will make an allocation of Shares to the Share accounts of the participants in the usual manner. As soon as practicable, the Committee will distribute to or on behalf of each participant all of the Shares held in such participant's Share account plus an amount of cash equal to the balance in such participant's cash account. -6- 22. Limitation on Sale of Shares. No Shares will be sold under the Plan to any employee residing or employed in any jurisdiction where the sale of such Shares is not permitted under the applicable laws. 23. Adopting Subsidiaries. Any subsidiary of the Company may adopt the Plan on behalf of its employees either unilaterally or by collective bargaining by filing with the Company a certified copy of a resolution of the Board of Directors (or other appropriate authorization satisfactory to the Secretary of the Company) of the subsidiary providing for such subsidiary's adoption of the Plan and a certified copy of a resolution of the Board of Directors of the Company consenting to such adoption. Each such adopting subsidiary is referred to herein as a "Covered Entity." -7- EX-10.5 8 EXHIBIT 10.5 EXHIBIT 10.5 NUTRACEUTICAL INTERNATIONAL CORPORATION NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN --------------------------------------- 1. Name and Purpose. This plan shall be called the Nutraceutical International Corporation Non-Employee Director Stock Option Plan (the "Plan"). The Plan is intended to encourage stock ownership by Non-Employee Directors (as defined below) of Nutraceutical International Corporation, a Delaware corporation (the "Company"), to provide such directors with an additional incentive to manage the Company effectively and to contribute to its success, and to provide a form of compensation which will attract and retain highly qualified individuals as members of the Board of Directors of the Company. 2. Effective Date and Term of the Plan. The Plan shall become effective on the date of the consummation of the initial public offering of the Company's Common Stock, par value $.01 per share (the "Effective Date"). Options may not be granted under the Plan after the tenth (10th) anniversary of the Effective Date (the "Term"); provided, however, that all options outstanding as of that date shall remain or become exercisable pursuant to their terms and the terms of the Plan. 3. Administration. The Plan shall initially be administered by the Board of Directors of the Company (the "Board"). The Board shall delegate the administration of the Plan to a committee of the Board (the "Committee") in the event such a committee is established by the Board for such purpose and that committee is composed solely of two or more "Non-Employee Directors" (as such term is defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Each member of the Committee shall be eligible to participate in the Plan; however, grants made to a member of the Committee must be approved by the full Board with such member abstaining. References herein to the Committee shall be deemed to refer to the Board in the event that the administration of the Plan has not been delegated to the Committee. The Committee may, from time to time, establish such regulations, provisions and procedures, within the terms of the Plan, as in the opinion of its members may be advisable in the administration of the Plan. A majority of the Committee shall constitute a quorum, and the acts of a majority of a quorum at any meeting, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. The interpretation and construction by the Committee of any provisions of the Plan or of any option granted pursuant to the Plan shall be final and binding upon the Company and any optionee. No member of the Board of Directors of the Company or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted pursuant thereto. 4. Stock Available for Options. Subject to the adjustments as provided in Subsection 7(f), the aggregate number of shares of Common Stock, par value $.01 per share, of the Company (the "Common Stock") reserved for purposes of the Plan shall be 150,000 shares of authorized and unissued shares or issued shares reacquired by the Company (the "Shares"). Determinations as to the number of Shares that remain available for issuance under the Plan shall be made in accordance with such rules and procedures as the Committee shall determine from time to time. If any outstanding option under the Plan expires or is terminated for any reason before the end of the Term of the Plan, the shares allocable to the unexercised portion of such option shall become available for the grant of other options under the Plan. No shares delivered to the Company in full or partial payment upon exercise of an option pursuant to Subsection 7(c) or in full or partial payment of any withholding tax liability permitted under Section 10 shall become available for the grant of other options under the Plan. 5. Participation. Subject to the limitations contained in this Section 5, any director of the Company who is not a contractual nor common law employee of the Company or any of its subsidiaries (a "Non-Employee Director") will be eligible to be granted options to purchase shares of the issued or issuable Common Stock in accordance and consistent with the terms and conditions of the Plan. An optionee may hold more than one option, but only on the terms and subject to the restrictions hereafter set forth. Except as provided herein, terms and conditions of options granted to a director at any given time need not be the same for any other grant of options. 6. Option Grants. (a) Discretionary Grants. The Committee shall be authorized to determine from time to time the directors (among the Non-Employee Directors) to be granted options, the number of shares of Common Stock subject to such options, and the terms and conditions of the options to be granted. All options granted under this Subsection (a) must be approved by either the Board or the Committee prior to such grant. (b) Non-Statutory Stock Options. All options granted under the Plan shall be non-statutory options not intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Each option granted under the Plan shall provide that such option will not be treated as an "incentive stock option," as that term is defined in Section 422(b) of the Code. 7. Terms and Conditions of Options of the Plan. Options granted under this Plan shall be evidenced by agreements in such form as the Committee shall from time to time approve, which agreements shall comply with and be subject to the following conditions: (a) Term of Options. The term of each option shall be for a period of not greater than ten (10) years from the date of grant of the option. (b) Option Price. The exercise price of each option shall be equal to one hundred percent (100%) of the Fair Market Value of the shares of Common Stock on the date of the grant of the option. If the shares are traded in the over-the-counter market, the Fair Market Value per share shall be the closing price on the national market list as quoted in the National Association of Securities Dealers Automated Quotation System ("Nasdaq") on the day the option is granted or if no sale of shares is reflected in Nasdaq on that day, on the next -2- preceding day on which there was a sale of shares reflected in Nasdaq. If the shares are not traded in the over-the-counter market but are listed upon an established stock exchange or exchanges, such Fair Market Value shall be deemed to be the closing price of the shares on such stock exchange or exchanges on the day the option is granted or if no sale of the shares shall have been made on any stock exchange on that day, on the next preceding day on which there was a sale of the shares. (c) Medium of Payment. The option price shall be payable to the Company either (i) in United States dollars in cash or by check, bank draft, or money order payable to the order of the Company or (ii) if permitted by the Board, through the delivery of shares of the Common Stock with a Fair Market Value on the date of the exercise equal to the option price, provided such shares are utilized as payment to acquire at least 100 shares of Common Stock, or (iii) by a combination of (i) and (ii) above. Fair Market Value will be determined in the manner specified in Subsection 7(b) except as to the date of determination. (d) Exercise of Options. Except as provided herein, the Committee shall have the authority to determine, at the time of grant of each option pursuant to Subsection 6(a), the times at which an option may be exercised and any conditions precedent to the exercise of an option. An option shall be exercisable upon written notice to the Chief Financial Officer of the Company, as to any or all shares covered by the option, until its termination or expiration in accordance with its terms or the provisions of the Plan. Notwithstanding the foregoing, an option shall not at any time be exercisable with respect to less than 100 shares unless the remaining shares covered by an option are less than 100 shares. The purchase price of the shares purchased pursuant to an option shall be paid in full upon delivery to the optionee of certificates for such shares. Exercise by an optionee's heir, personal representative or permitted transferee shall be accompanied by evidence of his or her authority to act, in a form reasonably satisfactory to the Company. (e) Termination of Service as Director. (i) Termination of Service for any Reason Other than Death or Permanent Disability. In the event an optionee shall cease to serve the Company as a director for any reason other than such optionee's death or Permanent Disability, each option held by such optionee shall, to the extent rights to purchase shares under the option have become vested at the time such optionee ceases to serve as a director, remain exercisable, in whole or in part, by the optionee, subject to prior expiration according to its terms and other limitations imposed by the Plan, for a period of one (1) year following the optionee's cessation of service as a director of the Company. If the optionee dies after such cessation of service, the optionee's options shall be exercisable in accordance with Subsection 7(e)(ii) hereof. (ii) Termination of Service for Death or Permanent Disability. If an optionee ceases to be a director by reason of death or Permanent Disability, each option held by such optionee shall immediately become exercisable and shall remain -3- exercisable, in whole or in part, by (in the case of Permanent Disability) the optionee or the optionee's guardian or attorney-in- fact or (in the case of death) the personal representative of the optionee's estate or by any person or persons who have acquired the option directly from the optionee during the shorter of the following periods: (i) the term of the option, or (ii) a period of two (2) years from the death or Permanent Disability of such optionee. If an optionee dies or a Permanent Disability occurs during the extended exercise period following cessation of service specified in Subsection 7(e)(i) above, such option may be exercised any time within the longer of such extended period or one (1) year after death or Permanent Disability, subject to the prior expiration of the term of the option. For purposes of this Subsection 7(e)(ii), "Permanent Disability" shall mean a determination by the Social Security Administration or any similar successor agency that an optionee is "permanently disabled," and the date on which a Permanent Disability is deemed to have occurred shall be the date on which such determination by such agency shall have been made. (f) Adjustment in Shares Covered by Option. The number of shares covered by each outstanding option, and the purchase price per share thereof, shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares resulting from a split in or combination of shares or the payment of a stock dividend on the shares or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company. If the Company shall be the surviving corporation in any merger or consolidation or if the Company is merged into a wholly-owned subsidiary solely for purposes of changing the Company's state of incorporation, each outstanding option shall pertain to and apply to the securities to which a holder of the number of shares subject to the option would have been entitled to receive in such transaction. In the event of a Change in Control, only if provided in the option agreement, any option awarded under this Plan to the extent not previously exercisable shall immediately become fully exercisable. The Committee in its sole discretion may direct the Company to cash out all outstanding options on the basis of the Change in Control Price as of the date a Change in Control occurs or such other date as the Committee may determine prior to the Change in Control. For purposes of this Plan, a "Change in Control" means the occurrence of any of the following: (i) when any "person" as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act but excluding the Company and any subsidiary, any of the Company's existing stockholders prior to the Effective Date and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), after the Effective Date, of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities; (ii) when, during any period of 24 consecutive months during the existence of the Plan, the individuals who, at the beginning -4- of such period, constitute the Board of Directors of the Company (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24 month period) or by prior operation of this provision; or (iii) the approval by the stockholders of the Company of a transaction involving the acquisition of the Company by an entity other than the Company or a subsidiary through purchase of assets, by merger, or otherwise. For purposes of this Plan, "Change in Control Price" means the highest price per share of Common Stock paid in any transaction reported on the Nasdaq National Market or paid or offered in any bona fide transaction related to a Change in Control at any time during the 60-day period immediately preceding the occurrence of the Change in Control, in each case as determined by the Committee. In the event of a change in the shares as presently constituted, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the shares within the meaning of the Plan. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Any such adjustment may provide for the elimination of any fractional share which might otherwise become subject to an option. Except as expressly provided in this Subsection 7(f), the optionee shall have no rights by reason of any split or combination of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger, or consolidation or spinoff of assets or stock of another corporation, and any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of stock subject to the option. The grant of an option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. (g) Rights of a Stockholder. An optionee shall have no rights as a stockholder with respect to any shares covered by his or her option until the date on which the optionee becomes the holder of record of such shares. No adjustment shall be made for dividends, distributions, or other rights for which the record date is prior to the date on which he or she shall have become the holder of record thereof, except as provided in Subsection 7(f). -5- (h) Postponement of Delivery of Shares and Representations. The Company, in its discretion, may postpone the issuance and/or delivery of shares upon any exercise of an option until completion of the registration or other qualification of such shares under any state and/or federal law, rule or regulation as the Company may consider appropriate, and may require any person exercising an option to make such representations, including a representation that it is the optionee's intention to acquire shares for investment and not with a view to distribution thereof, and furnish such information as it may consider appropriate in connection with the issuance or delivery of the shares in compliance with applicable laws, rules, and regulations. In such event no shares shall be issued to such holder unless and until the Company is satisfied with the accuracy of any such representations. (i) Transferability. If provided in the option agreement, the options granted pursuant to the Plan may be transferable by a Non-Employee Director. The Committee shall have the sole discretion to determine to what extent, if any, the options granted pursuant to the Plan are transferable by a Non-Employee Director. (j) Other Provisions. The option agreements authorized under the Plan shall contain such other provisions, including, without limitation, restrictions upon the exercise of the option, as the Committee shall deem advisable. 8. Adjustments in Shares Available for Options. The adjustments in number and kind of shares and the substitution of shares, affecting outstanding options in accordance with Subsection 7(f) hereof, shall also apply to the number and kind of shares issuable upon the exercise of options to be granted pursuant to Section 6 and the number and kind of shares reserved for issuance pursuant to the Plan, but not yet covered by options. 9. Amendment of the Plan. The Board, insofar as permitted by law, shall have the right from time to time, with respect to any shares at the time not subject to options, to suspend or discontinue the Plan or revise or amend it in any respect whatsoever. So long as the Common Stock is eligible for trading on the Nasdaq National Market, the Board shall obtain stockholder approval for those revisions or amendments of the Plan required to be so approved pursuant to the By-laws of the National Association of Securities Dealers. If the Plan is amended so that the exemption provided by Rule 16b-3 as a result of the Plan being approved by the stockholders of the Company is no longer available for options granted under Subsections 6(b) or 6(c) hereof, all options subsequently granted thereunder must be approved by either the Board or the Committee prior to such grant. 10. Withholding of Taxes. The Company shall have the right to deduct from any payment to be made pursuant to this Plan, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock, payment by the optionee of any federal, state, or local taxes required by law to be withheld. Unless otherwise prohibited by the Committee, an optionee may satisfy any such withholding tax obligation by any of the following means or by a combination of such means: -6- (a) tendering a cash payment; (b) authorizing the Company to withhold from the shares otherwise issuable to the optionee a number of shares having a Fair Market Value as of the "Tax Date," less than or equal to the amount of withholding tax obligation; or (c) delivering to the Company unencumbered shares owned by the optionee having a Fair Market Value, as of the Tax Date, less than or equal to the amount of the withholding tax obligation. The "Tax Date" shall be the date that the amount of tax to be withheld is determined. Fair Market Value shall be determined in the manner specified in Subsection 7(b), except as to the date of determination. An optionee's election to pay the withholding tax obligation by either of (b) or (c) above shall be irrevocable, may be disapproved by the Committee, and must be made either six (6) months prior to the Tax Date or during the period beginning on the third business day following the date of release of the Company's quarterly or annual summary statement of sales and earnings and ending on the twelfth business day following such date. 11. Right of Board of Directors or Stockholders to Terminate Director's Service. Nothing in this Plan or in the grant of any option hereunder shall in any way limit or affect the right of the Board of Directors or the stockholders of the Company to remove any director or otherwise terminate his or her service as a director, pursuant to the law, the Restated Certificate of Incorporation, or Amended and Restated By-laws of the Company. 12. Application of Funds. The proceeds received by the Company from the sale of stock pursuant to options will be used for general corporate purposes. 13. No Obligation to Exercise Option. The granting of an option shall impose no obligation on the optionee to exercise such option. 14. Construction. This Plan shall be construed under the laws of the State of Delaware. -7- EX-27 9 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NUTRACEUTICAL INTERNATIONAL CORPORATION'S FINANCIAL POSITION AS OF DECEMBER 31, 1996 AND DECEMBER 31, 1997 AND THE RESULTS OF ITS OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS 3-MOS SEP-30-1996 SEP-30-1997 OCT-01-1996 OCT-01-1997 DEC-31-1996 DEC-31-1997 2,287 711 0 0 9,995 9,565 835 841 17,422 25,255 30,483 36,385 12,783 16,374 (3,020) (5,777) 86,407 90,820 9,639 18,598 0 0 0 0 0 0 93 93 13,020 17,713 86,407 90,820 22,365 25,857 22,365 25,857 11,803 13,857 11,803 13,857 7,166 8,103 35 106 1,705 1,568 1,691 2,329 668 897 1,023 1,432 0 0 0 0 0 0 1,023 1,432 0.11 0.15 0.10 0.14
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