SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
HENRY SCHEIN, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 5, 2002
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Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Henry Schein, Inc. (the "Company"), to be held at 11:00 a.m., on Wednesday,
June 5, 2002 at the Huntington Hilton, 598 Broadhollow Road, Melville, New York.
The Annual Meeting will be held for the following purposes:
1. To elect 13 directors of the Company for terms expiring in 2003.
2. To amend the Company's 1996 Non-Employee Director Stock Option Plan.
3. To ratify the selection of BDO Seidman, LLP as the Company's independent
certified public accountants for the fiscal year ending December 28,
2002.
4. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only stockholders of record at the close of business on April 10, 2002 are
entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
Whether or not you expect to attend the meeting in person, your vote is very
important. Please cast your vote regardless of the number of shares you hold by
signing and dating the enclosed proxy exactly as your name appears thereon and
promptly returning it in the envelope provided, which requires no postage if
mailed in the United States. I believe that you can be proud, excited and
confident to be a shareholder of Henry Schein. I look forward to discussing our
plans for Henry Schein's future at the Annual Meeting, and I hope to see you
there.
STANLEY M. BERGMAN
Chairman, Chief Executive Officer
and President
Melville, New York
April 29, 2002
HENRY SCHEIN, INC.
135 DURYEA ROAD
MELVILLE, NEW YORK 11747
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PROXY STATEMENT
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The Board of Directors of Henry Schein, Inc. (the "Company") has fixed the
close of business on April 10, 2002 as the record date for determining the
holders of the Company's common stock, par value $0.01 (the "Common Stock"),
entitled to notice of, and to vote at, the 2002 Annual Meeting of Stockholders
(the "Annual Meeting"). As of that date, 42,272,838 shares of Common Stock were
outstanding, each of which entitles the holder of record to one vote. The Notice
of Annual Meeting, this Proxy Statement and the enclosed form of proxy are first
being mailed to stockholders of record of the Company on or about May 1, 2002. A
copy of the Company's 2001 Annual Report to Stockholders is being mailed with
this Proxy Statement, but is not incorporated herein by reference.
At the Annual Meeting, abstentions will be counted as votes cast on
proposals presented to stockholders, but broker non-votes will not be considered
votes cast and the shares represented by broker non-votes with respect to any
proposal will be considered present but not eligible to vote on such proposal.
Abstentions and broker non-votes will have no effect on the election of
directors (Proposal 1), which is by plurality vote, but abstentions will, in
effect, be votes against the amendment of the Company's 1996 Non-Employee
Director Stock Option Plan (Proposal 2) and against the ratification of the
selection of independent public accountants (Proposal 3), as these items require
the affirmative vote of a majority of the shares present and eligible to vote on
such items.
The expense of this proxy solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone or other means by directors or employees of the Company or its
subsidiaries without additional compensation. The Company will reimburse
brokerage firms and other nominees, custodians and fiduciaries for costs
incurred by them in mailing proxy materials to the beneficial owners of shares
held of record by such persons.
The enclosed proxy is solicited by the Board of Directors of the Company. It
may be revoked at any time prior to its exercise by giving written notice of
revocation to the Secretary of the Company at Henry Schein, Inc., 135 Duryea
Road, Melville, New York 11747, by executing a subsequent proxy and delivering
it to the Secretary of the Company or by attending the Annual Meeting and voting
in person. Attendance at the Annual Meeting will not in and of itself constitute
revocation of a proxy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information regarding beneficial
ownership of the Company's Common Stock as of April 10, 2002 by (i) each person
known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company,
(iii) each nominee for director of the Company, (iv) each executive officer of
the Company and (v) all directors and executive officers as a group. Unless
otherwise indicated, each person in the table has sole voting and dispositive
power as to the shares shown as being beneficially owned by such person.
SHARES
BENEFICIALLY OWNED
--------------------
PERCENT
NAMES AND ADDRESSES(1) NUMBER OF CLASS
- ---------------------- --------- --------
Stanley M. Bergman(2)(21)................................... 767,068 1.8%
Marvin H. Schein(3)......................................... 50,000 *
Pamela Schein(4)(21)........................................ 893,969 2.1%
Irving Shafran and Judith Shafran, as Trustees(4)........... 893,969 2.1%
Marion Bergman, as Trustee(5)............................... 731,139 1.7%
Lawrence O. Sneag, as Trustee(6)............................ 719,239 1.7%
Barry J. Alperin(7)......................................... 16,333 *
Gerald A. Benjamin(8)....................................... 102,293 *
James P. Breslawski(9)(21).................................. 162,102 *
Leonard A. David(10)........................................ 53,396 *
Larry M. Gibson(11)......................................... 332,083 *
Pamela Joseph(12)(21)....................................... 207,570 *
Donald J. Kabat(13)......................................... 15,333 *
Mark E. Mlotek(14).......................................... 66,747 *
Steven Paladino(15)(21)..................................... 128,393 *
Michael Racioppi(16)........................................ 45,837 *
Michael Zack(17)............................................ 55,196 *
Philip A. Laskawy........................................... 0 *
Norman S. Matthews.......................................... 1,000 *
T. Rowe Price Associates, Inc.(18).......................... 3,161,400 7.5%
T. Rowe Price New Horizons Fund, Inc.(19)................... 2,350,000 5.6%
Directors and Executive Officers as a Group
(16 persons)(20).......................................... 2,897,320 6.9%
- ------------------------
* Represents less than 1%
(1) Unless otherwise indicated, the address for each person is c/o Henry
Schein, Inc., 135 Duryea Road, Melville, New York 11747.
(2) Represents 28,629 shares that Mr. Bergman owns directly and over which he
has sole voting and dispositive power, 733,639 shares over which Marion
Bergman, Mr. Bergman's wife, Lawrence O. Sneag and/or Mr. Bergman's sons
have sole or shared voting and dispositive power as trustee or co-trustee
under certain trusts established by Mr. Bergman for his benefit, the benefit
of his family members or the benefit of certain other persons, 4,800 shares
held by Mark E. Mlotek as custodian for certain family members of
Mr. Bergman.
(3) Represents 50,000 shares owned by Mr. Schein over which Mr. Schein has sole
voting and dispositive power.
(4) Represents shares owned by a revocable trust established by Ms. Schein, of
which Mr. Shafran and Ms. Shafran are co-trustees. Mr. Shafran and
Ms. Shafran, as trustees, have the power to vote and
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dispose of such shares. Ms. Schein has the power to vote and dispose of such
shares upon her revocation of the trust.
(5) Ms. Bergman, Stanley M. Bergman's wife, holds such shares as the trustee or
co-trustee of trusts established by Mr. Bergman for the benefit of
Mr. Bergman and/or his family members. Ms. Bergman has the sole or shared
power to vote and dispose of such shares.
(6) Mr. Sneag holds such shares as the trustee or co-trustee of trusts
established by Stanley M. Bergman for the benefit of Mr. Bergman and/or his
family members. Mr. Sneag has the sole or shared power to vote and dispose
of such shares.
(7) Represents 2,000 shares owned directly and options to purchase 14,333 shares
that either are exercisable or will become exercisable within 60 days.
(8) Represents 5,660 shares owned directly and options to purchase 96,633 shares
that either are exercisable or will become exercisable within 60 days.
(9) Includes 99,602 shares that Mr. Breslawski owns directly and options to
purchase 62,500 shares that either are exercisable or will become
exercisable within 60 days.
(10) Represents 2,500 shares owned directly and options to purchase 50,896
shares that either are exercisable or will become exercisable within
60 days.
(11) Represents 264,350 shares owned directly or indirectly and options to
purchase 67,733 shares that either are exercisable or will become
exercisable within 60 days.
(12) Ms. Joseph has the sole power to vote and dispose of such shares.
(13) Represents 1,000 shares owned directly and options to purchase 14,333
shares that either are exercisable or will become exercisable within
60 days.
(14) Represents 2,012 shares owned directly, or by family members and options to
purchase 59,934 shares that either are exercisable or will become
exercisable within 60 days and 4,800 shares held as custodian for certain
family members of Mr. Bergman.
(15) Includes 6,360 shares owned directly and options to purchase 122,033 shares
that either are exercisable or will become exercisable within 60 days.
(16) Represents options to purchase shares that either are exercisable or will
become exercisable in 60 days.
(17) Represents 4,200 shares owned directly, or by family members, and options
to purchase 50,996 shares that either are exercisable or will become
exercisable in 60 days.
(18) The principal office of T. Rowe Price Associates, Inc. ("Price Associates")
is 100 East Pratt Street, Baltimore, Maryland 21202. These securities are
owned by various individual and institutional investors for which Price
Associates serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934 (the "Exchange Act"),
Price Associates is deemed to be a beneficial owner of such securities;
however, Price Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities. The foregoing information regarding the
stock holdings of Price Associates and its affiliates is based on an amended
Schedule 13G filed by Price Associates with the Securities and Exchange
Commission (the "SEC") on February 14, 2002.
(19) The principal office of T. Rowe Price New Horizons Fund, Inc. ("Price New
Horizons") is 100 East Pratt Street, Baltimore, Maryland 21202. These
securities are owned by various individual and institutional investors for
which Price New Horizons serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes of the
reporting
3
requirements of the Exchange Act, Price New Horizons is deemed to be a
beneficial owner of such securities; however, Price New Horizons expressly
disclaims that it is, in fact, the beneficial owner of such securities. The
foregoing information regarding the stock holdings of Price New Horizons and
its affiliates is based on an amended Schedule 13G filed by Price New
Horizons with the SEC on February 14, 2002.
(20) Includes (i) all shares described in the preceding notes (2) through (17),
and (ii) and options to purchase 585,229 shares that either are exercisable
or will become exercisable within 60 days.
(21) The stockholder has dispositive power with respect to the shares, subject
to the right of participation held by certain stockholders for sales of
Common Stock by the stockholders. This right of participation is contained
in the Amended and Restated HSI Agreement, dated as of February 16, 1994, as
amended, among certain stockholders of the Company.
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PROPOSAL 1
ELECTION OF DIRECTORS
Thirteen directors are to be elected at the Annual Meeting to serve until
the 2003 Annual Meeting of Stockholders and until their successors are elected
and qualified. Directors will be elected by plurality vote. The Board of
Directors has approved the persons named below as nominees and the enclosed
proxy, if executed and returned, will be voted for the election of all of such
persons except to the extent the proxy is specifically marked to withhold such
authority with respect to one or more of such persons as provided in the proxy.
The first eleven of the nominees currently serve as directors and were elected
by the stockholders at the 2001 Annual Meeting. The last two nominees were
appointed to the Company's Board of Directors in February 2002. All of the
nominees have consented to be named and, if elected, to serve. In the event that
any of the nominees is unable or declines to serve as a director at the time of
the Annual Meeting, the proxies may be voted in the discretion of the persons
acting pursuant to the proxy for the election of other nominees. Set forth below
is certain information concerning the nominees:
NAME AGE POSITION
- ---- -------- -----------------------------------------------------
Stanley M. Bergman..................... 52 Chairman, Chief Executive Officer, President and
Director
Gerald A. Benjamin..................... 49 Executive Vice President, Chief Administrative
Officer and Director
James P. Breslawski.................... 48 Executive Vice President, President -- US Dental and
Director
Leonard A. David....................... 53 Vice President -- Human Resources and Special Counsel
and Director
Mark E. Mlotek......................... 46 Senior Vice President -- Corporate Business
Development Group and Director
Steven Paladino........................ 45 Executive Vice President, Chief Financial Officer and
Director
Barry J. Alperin....................... 61 Director
Pamela Joseph.......................... 59 Director
Donald J. Kabat........................ 66 Director
Marvin H. Schein....................... 60 Director
Irving Shafran......................... 58 Director
Philip A. Laskawy...................... 61 Director
Norman S. Matthews..................... 69 Director
STANLEY M. BERGMAN has been Chairman, Chief Executive Officer and President
of the Company since 1989 and a director of the Company since 1982. Mr. Bergman
held the position of Executive Vice President of the Company and Schein
Pharmaceutical, Inc. from 1985 to 1989, and Vice President of Finance and
Administration of the Company from 1980 to 1985. Mr. Bergman is a certified
public accountant.
GERALD A. BENJAMIN has been Executive Vice President and Chief
Administrative Officer of the Company since 2000 and a director of the Company
since September 1994. Prior to that time, Mr. Benjamin had been serving as
Senior Vice President of Administration and Customer Satisfaction since 1993.
Mr. Benjamin was Vice President of Administration and Customer Satisfaction from
1992 to 1993, Vice President of Distribution Operations of the Company from 1990
to 1992, and Director of Materials Management from 1988 to 1990. Before joining
the Company in 1988, Mr. Benjamin was employed for 13 years in various
management positions at Estee Lauder, where his last position was Director of
Materials Planning and Control.
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JAMES P. BRESLAWSKI has been Executive Vice President of the Company and
President of U.S. Dental since 1990, with primary responsibility for the U.S.
Dental Group, and a director of the Company since 1990. Between 1980 and 1990,
Mr. Breslawski held various positions with the Company, including Chief
Financial Officer, Vice President of Finance and Administration and Controller.
Mr. Breslawski is a certified public accountant.
LEONARD A. DAVID has been Vice President of Human Resources and Special
Counsel of the Company since January 1995. Mr. David held the office of Vice
President, General Counsel and Secretary from January 1993 to January 1995 and
General Counsel from June 1990 to January 1993. Prior to joining the Company,
Mr. David practiced corporate and business law for eight years. Mr. David has
been a director of the Company since September 1994.
MARK E. MLOTEK has been Senior Vice President of the Corporate Business
Development Group of the Company since February 2000. Prior to holding his
current position, Mr. Mlotek was Vice President, General Counsel and Secretary
from 1994 to 2000, and became a director of the Company in September 1995. Prior
to joining the Company, Mr. Mlotek was a partner in the law firm of Proskauer
Rose LLP, specializing in mergers and acquisitions, corporate reorganizations
and tax law from 1989 to 1994.
STEVEN PALADINO has been Executive Vice President of the Company since
February 2000 and a director of the Company since December 1992. Prior to
holding his current position, Mr. Paladino served as Senior Vice President and
Chief Financial Officer of the Company from April 1993 to February 2000. From
1990 to 1992. Mr. Paladino served as Vice President and Treasurer, and from 1987
to 1990 he served as Corporate Controller of the Company. Before joining the
Company in 1987, Mr. Paladino was employed as a public accountant for seven
years, most recently with the international accounting firm of BDO Seidman, LLP.
Mr. Paladino is a certified public accountant.
BARRY J. ALPERIN has been a director of the Company since May 1996.
Mr. Alperin, a private consultant since August 1995, served as Vice Chairman of
Hasbro, Inc. from 1990 through July 1995, as Co-Chief Operating Officer of
Hasbro, Inc. from 1989 through 1990 and as Senior Vice President or Executive
Vice President of Hasbro, Inc. from 1985 through 1989. Mr. Alperin served as a
director of Seaman Furniture Company, Inc., a furniture retailing company, from
1992 to February 2001. He currently serves as a director of K'nex
Industries, Inc., a wholesale toy company.
PAMELA JOSEPH has been a director of the Company since September 1994. For
the past five years, Ms. Joseph has been a self-employed artist and is Director
of MaNose Studios. Ms. Joseph is also a trustee of Alfred University.
DONALD J. KABAT has been a director of the Company since May 1996.
Mr. Kabat is the President of D.J.K. Consulting Services, Inc., and served as
Chief Financial Officer of Central Park Skaters, Inc. from September 1992 to
September 1995. From 1970 to 1992, Mr. Kabat was a partner in Andersen
Consulting (now known as Accenture).
MARVIN H. SCHEIN has been a director of the Company since September 1994 and
has provided consulting services to the Company since 1982. Mr. Schein founded
Schein Dental Equipment Corp., a subsidiary of the Company. Prior to founding
Schein Dental Equipment Corp., Mr. Schein held various management and executive
positions with the Company.
IRVING SHAFRAN has been a director of the Company since September 1994.
Mr. Shafran has been an attorney in private practice for the past 25 years. From
1991 through December 1995, Mr. Shafran was a partner in the law firm of
Anderson Kill Olick and Oshinsky, PC.
PHILIP A. LASKAWY has been a director of the Company since February 2002.
Mr. Laskawy joined the accounting firm of Ernst & Young in 1961 and served as a
partner in the firm from 1971 to
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September 2001, when he retired. Mr. Laskawy served in various senior management
positions at Ernst & Young including Chairman and Chief Executive Officer which
he was appointed to in 1994. Mr. Laskawy currently serves on the Board of
Directors of Goodyear Tire & Rubber Company and The Progressive Corporation.
NORMAN S. MATTHEWS has been a director of the Company since February 2002.
Since 1989, Mr. Matthews has worked as an independent consultant and venture
capitalist. From 1978 to 1988, Mr. Matthews served in various senior management
positions for Federated Department Stores, including President from 1987 to
1988. Mr. Matthews currently serves on the Board of Directors of The Progressive
Corporation, Toys"R"Us, Finlay Jewelry, Gaylan's Trading Co., and Sunoco.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A PLURALITY OF THE OUTSTANDING SHARES
OF COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AND ENTITLED TO VOTE
ON THIS MATTER AT THE ANNUAL MEETING IS REQUIRED TO APPROVE THE PROPOSED
NOMINEES FOR DIRECTORS. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
PROPOSED NOMINEES FOR DIRECTORS.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 29, 2001 ("fiscal 2001"), the Board of
Directors held six meetings.
The Company has an Executive Committee, which currently consists of
Messrs. Bergman, Benjamin, Breslawski, Paladino and Schein. The Executive
Committee may exercise all of the powers and authority of the Board of
Directors, except that it does not have the power or authority to adopt, approve
or recommend to stockholders any action or matter that is required by Delaware
law to be submitted to the Company's stockholders for approval, or to adopt,
amend or repeal any bylaw of the Company. The Executive Committee did not meet
in fiscal 2001.
The Board of Directors has an Audit Committee, which currently consists of
Messrs. Alperin, Kabat and Shafran. The Board of Directors has determined that
each of the members of the Audit Committee is an "independent director," as
defined in Rule 4200(a)(15) of the National Association of Securities
Dealers, Inc.'s listing standards. The Audit Committee, which held four meetings
in fiscal 2001, oversees the Company's financial reporting process and internal
audit functions on behalf of the Board of Directors. In fulfilling its
responsibility, the Audit Committee recommends to the Board of Directors,
subject to stockholder approval, the selection of the Company's independent
certified public accountants. The Audit Committee also reviews the Company's
consolidated financial statements and the adequacy of the Company's internal
controls. The Audit Committee meets with the independent certified public
accountants to discuss the results of their audit of the Company's consolidated
financial statements, their evaluation of the Company's internal controls and
the overall quality of the Company's financial reporting.
The Board of Directors has a Compensation Committee, which currently
consists of Messrs. Alperin and Kabat. The Compensation Committee makes
recommendations regarding the compensation and benefit policies and procedures
of the Company. The Compensation Committee held four meetings during fiscal
2001.
The Board of Directors has a Stock Option Committee, which currently
consists of Messrs. Alperin and Kabat. The Stock Option Committee determines
grants under the Company's 1994 Stock Option Plan, as amended. The Stock Option
Committee held four meetings during fiscal 2001.
Each director attended more than 75% of the aggregate number of meetings
held in fiscal 2001 by the Board of Directors and the Committees of which he or
she was a member.
7
COMPENSATION OF DIRECTORS
In fiscal 2001, Messrs. Alperin and Kabat each received a $30,000 annual
retainer and an additional $1,500 for each Board meeting attended and $850 for
each Committee meeting attended (or $1,100 if such Committee meeting was held on
a day other than a day on which a Board meeting was held).
PROPOSAL 2
AMENDMENT OF 1996 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN
The Company maintains the Henry Schein, Inc. 1996 Non-Employee Director
Stock Option Plan, as approved on March 22, 1996 by the Board of Directors of
the Company and approved by the stockholders on May 8, 1996 (the "1996 Director
Plan"), for the benefit of all directors of the Company who are not employees of
the Company or its subsidiaries (the "Non-Employee Directors"). The proposed
amendment to the 1996 Director Plan, which was unanimously adopted by the Board
of Directors on March 4, 2002, subject to stockholder approval at the Annual
Meeting, would increase the number of shares of Common Stock issuable upon the
exercise of options granted under the 1996 Director Plan by 50,000 shares, or
approximately .12% of the currently outstanding shares of Common Stock. The
Company also maintains the 2001 Non-Employee Director Stock Option Plan, as
adopted on July 12, 2001 by the Board of Directors (the "2001 Director Plan"),
for the benefit of all directors of the Company who are not employees of the
Company or its subsidiaries. There are a total of 25,000 shares available under
the 2001 Director Plan for option grants, all of which have been granted.
The following description of the 1996 Director Plan is a summary of its
principal provisions and is qualified in its entirety by reference to the 1996
Director Plan, as amended, a copy of which is attached hereto as Appendix A.
The purposes of the 1996 Director Plan are to enable the Company to attract,
motivate and retain Non-Employee Directors who are important to the success of
the Company, and to create a mutuality of interest between the Non-Employee
Directors and the stockholders by granting options to purchase Common Stock to
the Non-Employee Directors. Under the 1996 Director Plan, each director who is
not also an employee of the Company or its subsidiaries is eligible to receive
options to purchase shares of Common Stock. Under the 1996 Director Plan as
currently in effect, a maximum of 50,000 shares of Common Stock are authorized
for issuance pursuant to the exercise of options granted under the 1996 Director
Plan, subject to antidilution adjustments. As of April 10, 2002, options to
purchase an aggregate of 50,000 shares of Common Stock at an average exercise
price of $27.86 per share were outstanding and no shares remain available for
future option grants under the 1996 Director Plan. If any option is canceled, or
expires or terminates unexercised, the shares of Common Stock covered by such
option shall again be available for the grant of options under the 1996 Director
Plan.
The 1996 Director Plan is administered by a committee (the "Director Stock
Option Committee") comprised of three directors appointed by the Board of
Directors. Currently, the committee is comprised of Mr. Bergman, Mr. Benjamin
and Mr. Paladino. The Director Stock Option Committee has the full authority and
discretion, subject to the terms of the 1996 Director Plan, to determine those
individuals who are eligible to be granted options and the amount and type of
options. The terms and conditions of specific option grants are set forth in
written option agreements between the Company and each participant. No options
shall be granted under the 1996 Director Plan on or after the tenth anniversary
of the effective date of the 1996 Director Plan (the date of its approval by the
Board of Directors, March 22, 1996), but options granted prior to such date may
extend beyond such date.
The Board of Directors or the Director Stock Option Committee may terminate
the 1996 Director Plan at any time, subject to the continued effectiveness of
outstanding options. The Board of Directors
8
or the Director Stock Option Committee may also amend the 1996 Director Plan,
except that no amendment may, without the approval of the stockholders,
(i) increase the total number of shares of Common Stock that may be acquired
upon exercise of options granted under the 1996 Director Plan, (ii) change the
eligibility requirements for participation in the 1996 Director Plan or
(iii) effect any change that would require stockholder approval under
Rule 16b-3 (or any successor provision) promulgated under the Exchange Act.
The term of each option will be specified by the Director Stock Option
Committee upon grant, but may not exceed ten years from the date of grant. The
exercise price of each option granted under the 1996 Director Plan and the terms
upon which each such option granted under the 1996 Director Plan will be
exercisable will be determined by the Director Stock Option Committee. Under the
1996 Director Plan, the exercisability of options may be accelerated in certain
events, including upon a Change of Control (as defined in the 1996 Director
Plan). Subject to certain rights to exercise after the death, disability,
retirement or termination of services (other than for cause) of the option
holder or after a Change of Control, options granted under the 1996 Director
Plan may be exercised only if the option holder is eligible to participate in
the 1996 Director Plan on the date of exercise.
Directors who receive an option under the 1996 Director Plan will not
realize taxable income for federal income tax purposes at the time of grant, but
such directors will realize ordinary income, generally six months after the date
of exercise of the option, in an amount equal to the excess, if any, of the fair
market value of the shares acquired on the date income is realized over the
exercise price. However, an option holder may elect pursuant to Section 83(b) of
the Internal Revenue Code of 1986, as amended (the "Code"), to be taxed as of
the time of exercise based upon the fair market value of the acquired shares at
that time. If at the time of exercise the option holder is not subject to the
restrictions on purchases and sales of a corporation's securities provided by
Section 16(b) of the Exchange Act, the option holder will realize ordinary
income immediately upon exercise of the option on the excess of the fair market
value of the securities acquired on the date of exercise over the exercise
price. The Company will be entitled to a tax deduction equal to the ordinary
income realized by an option holder at the time the option holder recognizes
such income.
Upon the exercise of an option, the option holder must make payment of the
full exercise price, either (i) in cash, or, if permitted by the Director Stock
Option Committee, (ii) in shares of Common Stock, (iii) by delivery of a
promissory note from the option holder, (iv) in a combination of cash, shares of
Common Stock and/or a promissory note from the option holder or (v) on such
other terms and conditions as may be acceptable to the Director Stock Option
Committee.
Each of Messrs. Alperin and Kabat were granted options in 2001 pursuant to
the 1996 Director Plan to purchase 6,000 shares of Common Stock at an exercise
price of $28.63 per share, the fair market value on the date of grant.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES
OF COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AND ENTITLED TO VOTE
ON THE PROPOSED AMENDMENT TO THE 1996 DIRECTOR PLAN AT THE ANNUAL MEETING IS
REQUIRED TO APPROVE THE PROPOSED AMENDMENT TO THE 1996 DIRECTOR PLAN. THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT OF THE 1996 DIRECTOR
PLAN.
9
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning annual and long-term
compensation for the fiscal years ended December 29, 2001, December 30, 2000 and
December 25, 1999 of the Company's Chief Executive Officer, the other four most
highly paid executive officers (based on salary and bonus for fiscal 2001)
serving as of December 29, 2001 (the "Named Executive Officers").
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ----------------------------------
OTHER RESTRICTED SECURITIES
ADDITIONAL STOCK UNDERLYING LTIP OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(1)
- ------------------ -------- -------- --------- ------------ ---------- ---------- -------- ------------
Stanley M. Bergman.......... 2001 609,000 1,087,430 24,140 -- -- -- 44,135
Chairman, Chief Executive 2000 585,000 1,099,712 19,300 -- -- -- 42,112
Officer and President 1999 559,050 87,048 19,300 -- -- -- 39,661
James P. Breslawski......... 2001 351,000 210,000 16,800 -- 20,000 -- 22,009
Executive Vice President and 2000 337,500 136,606 15,000 -- -- -- 21,148
President -- US Dental 1999 324,500 45,000 15,000 -- 28,500 -- 20,078
Steven Paladino............. 2001 328,000 235,000 16,800 -- 25,000 -- 23,592
Executive Vice President and 2000 315,000 215,000 15,000 -- -- -- 22,648
Chief Financial Officer 1999 263,000 75,000 15,000 -- 46,500 -- 18,781
Gerald A. Benjamin.......... 2001 325,500 220,000 16,800 -- 22,000 -- 23,703
Executive Vice President 2000 313,000 190,000 15,000 -- -- -- 22,807
and Chief Administrative 1999 261,000 67,000 15,000 -- 38,500 -- 18,878
Officer
Michael Racioppi............ 2001 250,000 275,000 16,800 -- 67,500 -- 18,292
President -- Medical 2000 230,000 225,000 15,000 -- -- -- 16,790
Group 1999 220,000 75,000 15,000 -- 25,000 -- 13,766
- --------------------------
(1) The 1999 amounts shown in this column represent (i) matching contributions
under the Company's 401(k) plan of $10,000 for Mr. Bergman, $5,800 for
Mr. Breslawski, $4,957 for Mr. Paladino, $4,919 for Mr. Benjamin and $3,769
for Mr. Racioppi, and (ii) excess life insurance premiums and SERP
contributions of $528 and $29,133 for Mr. Bergman, $608 and $13,670 for
Mr. Breslawski, $371 and $13,453 for Mr. Paladino, $608 and $13,351 for
Mr. Benjamin and $608 and $9,389 for Mr. Racioppi. The 2000 amounts shown in
this column represent (i) matching contributions under the Company's 401(k)
plan of $9,450 for Mr. Bergman, $7,500 for Mr. Breslawski, $5,088 for
Mr. Paladino, $5,547 for Mr. Benjamin and $4,906 for Mr. Racioppi and
(ii) excess life insurance premiums and SERP contributions of $1,162 and
$31,500 for Mr. Bergman, $898 and $12,750 for Mr. Breslawski, $599 and
$16,961 for Mr. Paladino, $898 and $16,362 for Mr. Benjamin and $691 and
$11,193 for Mr. Racioppi. The 2001 amounts shown in this column represent
(i) matching contributions under the Company's 401(k) plan of $7,875 for
Mr. Bergman, $3,894 for Mr. Breslawski, $4,240 for Mr. Paladino, $4,213 for
Mr. Benjamin and $3,096 for Mr. Racioppi and (ii) excess life insurance
premiums and SERP contributions of $898 and $31,500 for Mr. Bergman, $898
and $12,750 for Mr. Breslawski, $599 and $16,961 for Mr. Paladino, $898 and
$16,362 for Mr. Benjamin and $691 and $11,193 for Mr. Racioppi. The
Company's ESOP was merged into the 401(k) plan during the 1998 fiscal year.
Forty percent of the Company's matching contributions under the 401(k) plan
must be invested in the plan's Common Stock fund.
10
OPTION GRANTS IN FISCAL 2001
The following table sets forth information with respect to the options
granted during fiscal 2001 to each of the Named Executive Officers and their
potential realizable value at the end of the option terms assuming certain
levels of appreciation of the Common Stock.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR(%) ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- -------------- ----------- ---------- ---------- ----------
Stanley M. Bergman................ -- -- -- -- -- --
James P. Breslawski............... 20,000 2.25 $28.63 3/01/11 360,042 912,417
Steven Paladino................... 25,000 2.81 $28.63 3/01/11 450,052 1,140,521
Gerald A. Benjamin................ 22,000 2.48 $28.63 3/01/11 396,046 1,003,659
Michael Racioppi.................. 67,500 7.60 $28.63 3/01/11 1,215,142 3,079,409
- ------------------------
(1) Each of these options was granted on March 1, 2001 and becomes exercisable
as to one-third of the shares subject to such options on each of the first,
second and third anniversaries of the date of grant, subject to acceleration
under certain circumstances.
(2) The dollar amounts under these columns are the result of calculations at the
hypothetical rates of 5% and 10% set by the Securities and Exchange
Commission and are not intended to forecast possible future appreciation, if
any, of the Company's Common Stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL 2001 YEAR-END OPTION
VALUES
The following table summarizes the options exercised by the Named Executive
Officers in fiscal 2001 and the number of all shares subject to options held by
the Named Executive Officers at the end of fiscal 2001, and their value at that
date if they were "in-the-money".
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
SHARES ACQUIRED VALUE REALIZED YEAR-END YEAR-END ($)(1)
NAME ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- -------------- ------------------------- -------------------------
Stanley M. Bergman........... -- -- --/-- --/--
James P. Breslawski.......... -- -- 51,500/29,500 582,220/365,690
Steven Paladino.............. -- -- 116,200/40,500 2,311,514/528,340
Gerald A. Benjamin........... -- -- 100,367/34,833 1,946,702/452,034
Michael Racioppi............. 4,881 110,035 26,666/75,834 438,311/761,351
- ------------------------
(1) Represents the difference between the aggregate exercise prices of such
options and the aggregate fair market value of the shares issuable upon
exercise.
EMPLOYMENT AND OTHER AGREEMENTS
The Company and Stanley M. Bergman entered into an employment agreement,
dated as of January 1, 2000 (the "Employment Agreement"), providing for his
continued employment as Chairman of the Board, President and Chief Executive
Officer until December 31, 2002. Mr. Bergman's salary of $609,000 was set in
accordance with the terms of his Employment Agreement. In addition, the
Employment Agreement provides for incentive compensation to be determined by the
Compensation Committee of the Board of Directors (or, if there is no
Compensation Committee, the Board of Directors). The Compensation Committee
awarded incentive compensation of $1,087,430 to Mr. Bergman for 2001. The
Employment Agreement also provides that Mr. Bergman will continue to
11
participate in all benefit, welfare and perquisite plans, policies and programs
generally available to either the Company's employees or the Company's senior
executive officers. The Company provides Mr. Bergman with the use of an
automobile and expenses related thereto and other miscellaneous benefits in
accordance with the Employment Agreement. If Mr. Bergman's employment with the
Company is terminated by the Company without cause, or is terminated by
Mr. Bergman following a material breach of the Employment Agreement by the
Company that is not timely cured, Mr. Bergman will receive all amounts then owed
to him as salary and deferred compensation and all benefits accrued and owed to
him or his beneficiaries under the then applicable benefit plans, programs and
policies of the Company. In addition, Mr. Bergman will receive, as severance
pay, 200% of his then annual base salary plus 200% of Mr. Bergman's average
annual incentive compensation paid or payable with respect to the immediately
preceding three fiscal years, and a payment equal to the account balance or
accrued benefit Mr. Bergman would have been credited with under each pension
plan maintained by the Company if the Company had continued contributions
thereunder until the expiration of the full term of the Employment Agreement,
less Mr. Bergman's vested account balance or accrued benefits under each pension
plan. If Mr. Bergman resigns within one year following a change in control of
the Company, Mr. Bergman will receive, as severance pay, 300% of his then annual
base salary plus 300% of Mr. Bergman's maximum incentive compensation
opportunity for the year in which such termination occurs, and a payment equal
to the account balance or accrued benefit Mr. Bergman would have been credited
with under each pension plan maintained by the Company if the Company had
continued contributions thereunder until the expiration of the full term of the
Employment Agreement, less Mr. Bergman's vested account balance or accrued
benefits under each pension plan. If the payments described in the preceding
sentence are subject to the excise tax imposed by Section 4999 of the Code, the
Company will pay Mr. Bergman an additional amount such that the amount retained
by him, after reduction for such excise tax, equals the amounts described in the
preceding sentence prior to imposition of the excise tax. Unless the Employment
Agreement is terminated for cause or pursuant to Mr. Bergman's voluntary
resignation, the Company will continue the participation of Mr. Bergman and his
family in the health and medical plans, policies and programs in effect with
respect to senior executive officers of the Company and their families after the
termination or expiration of the Employment Agreement, with coverage for
Mr. Bergman and his spouse continuing until their respective deaths, and
coverage for his children continuing until they reach the age of 21.
In September 1994, the Company and Marvin Schein, a director and principal
stockholder of the Company, amended and restated the terms of a consulting
agreement (the "Consulting Agreement"), providing for Mr. Schein's consulting
services to the Company from time to time with respect to the marketing of
dental supplies and equipment. The Consulting Agreement initially provided for
compensation of $283,200 per year, increasing $25,000 every fifth year beginning
in 2003. The Consulting Agreement also provides that Mr. Schein will participate
in all benefit, compensation, welfare and perquisite plans, policies and
programs generally available to either the Company's employees or the Company's
senior executive officers, excluding the Company's 1994 Stock Option Plan, as
amended, that Mr. Schein's spouse and his children (until they reach the age of
21) will be covered by the Company's health plan and that the Company will
provide Mr. Schein with the use of an automobile and expenses related thereto.
The original Consulting Agreement was entered into as part of a recapitalization
of the Company's predecessor in 1982 among Mr. Schein and its other stockholders
and secured for the Company the consulting services of Mr. Schein, who had
served the Company in various executive capacities for more than 20 years.
The Company is also party to various other employment, consulting and
noncompete agreements expiring at various times through 2006. These agreements
provide for varying base aggregate annual payments of approximately $4,946,000
per year, which decrease periodically to approximately $867,000 per year. In
addition, some agreements have provisions for incentive and additional
compensation.
12
The Company has entered into agreements with the Named Executive Officers,
other than Mr. Bergman, that provide that upon a change in control of the
Company, the Company will pay the executive an amount equal to (i) the amount
paid per share for Common Stock in any transaction triggering the change in
control (not to exceed $40) multiplied by (ii) a factor (ranging from 45,000 to
100,000). Effective July 1, 2001, the foregoing provisions were modified to
provide that the amount referred to in clause (i) would be the amount paid per
share for Common Stock in any transaction triggering the change in control (not
to exceed $60) less $15. The Company's obligation to provide the foregoing
benefit expires on December 31, 2002. The agreements also provide that if the
executive's employment is terminated by the Company without cause or by the
executive for good reason following a change in control of the Company, the
Company will pay to the executive severance pay equal to 300% of the sum of the
executive's then base salary and target bonus. In the event any payments to the
executive become subject to the excise tax imposed by Section 4999 of the Code,
the Company will pay the executive an additional amount such that the amount
retained by the executive after reduction for such excise tax equals the amount
to be paid to the executive prior to imposition of the excise tax.
On November 30, 1998, the Company's Board of Directors adopted a Stockholder
Rights Plan (the "Rights Plan"), and declared a dividend under the Rights Plan
of one common stock purchase right (a "Right") on each outstanding share of the
Company's Common Stock. Until the occurrence of certain events, each share of
Common Stock that is issued will also have a Right attached to it. The Rights
provide, in substance, that should any person or group acquire 15% or more of
the outstanding common stock of the Company after the date of adoption of the
Rights Plan, each Right, other than Rights held by the acquiring person or
group, would entitle its holder to purchase a certain number of shares of Common
Stock for 50% of the then-current market value of the Common Stock. Unless a 15%
acquisition has occurred, the Company may redeem the Rights at any time prior to
the termination date of the Rights Plan. This Right to purchase the Common Stock
at a discount will not be triggered by a person's or group's acquisition of 15%
or more of the Common Stock pursuant to a tender or exchange offer which is for
all outstanding shares at a price and on terms that the Board of Directors
determines (prior to acquisition) to be adequate and in the stockholders' best
interests.
Certain business combinations with an acquiring person or its affiliates
will trigger an additional feature of the Rights. Each Right (other than Rights
held by the acquiring person or group) will entitle its holder to purchase a
certain number of shares of the common stock of the acquiring person at a price
equal to 50% of the market value of such shares at the time of exercise.
Initially, the Rights will be attached to, and trade with, the certificates
representing the Company's outstanding shares of Common Stock and no separate
certificates representing the Rights will be distributed. The Rights will become
exercisable only if a person or group acquires (or commences a tender or
exchange offer for) 15% or more of the Common Stock.
The Board of Directors may, at its option redeem all but not less than all
of the then outstanding Rights at a redemption price of $0.01 per Right at any
time prior to the earlier of (i) a time when any person or group acquires 15% or
more of the Common Stock or (ii) the final expiration date of November 30, 2008.
13
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee, the members of which also serve as the Stock
Option Committee under the Company's 1994 Stock Option Plan, has responsibility
for the philosophy, competitive strategy, design and administration of the
Company's compensation program for its executive officers (including the Named
Executive Officers). The Compensation Committee seeks to ensure that the
executive officer compensation program is competitive in level and structure
with the programs of comparably sized businesses, is supportive of the Company's
financial and operating objectives and is aligned with the financial interests
of the stockholders. The Company and the Compensation Committee have retained
the services of an independent executive compensation consulting firm for advice
regarding the competitive structure and administration of its executive officer
compensation program.
PHILOSOPHY AND PROGRAM COMPONENTS
The Company's executive officer compensation program is designed to enable
the Company to attract and retain the caliber of officers needed to ensure the
Company's continued growth and profitability, and to compensate them based on
their and the Company's performance and on the longer term value they create for
the stockholders in a manner consistent with competitive practices. The
components of the executive officer compensation program consist of base salary,
annual bonuses paid under the Company's annual Performance Incentive Plan
("PIP"), and periodic grants of stock options.
The Company measures the competitiveness of its compensation program
relative to the practices of other companies with annual revenues comparable to
those of the Company. The Committee generally seeks to set salaries within the
25th to 75th percentile range of salaries at such comparable companies. The
Committee also seeks to structure annual PIP award opportunities so that an
officer's salary plus annual bonus will fall within the 25th to 75th percentile
range of competitive practices, depending on both the Company's achievement of
annual financial performance targets established by the Committee, in
consultation with the Company's senior management, at the start of the year and
the individual achievements of the officer, as evaluated against pre-established
goals and objectives. Similarly, stock option grants are made with reference to
option granting practices for companies with comparable annual revenues.
BASE SALARY
The Company annually reviews officer salaries and makes adjustments as
warranted based on competitive practices and the individual's performance.
Salary increases are generally approved during the first quarter of the calendar
year and made retroactive to January 1st. The 2001 annual salaries of the Named
Executive Officers, excluding Mr. Bergman, the Company's Chief Executive
Officer, were increased by an average of 5% over annualized 2000 levels. The
Committee was advised by its compensation consultant that such officers' average
2001 salaries approximated the 45th percentile of competitive practices.
Mr. Bergman's 2001 salary was increased pursuant to the terms of his prior
employment agreement and approximated the 20th percentile of competitive
practices.
ANNUAL INCENTIVE COMPENSATION
Annual incentive compensation for each of the Company's executive officers
other than Mr. Bergman for each year is paid under the PIP for such year, each
of which is designed to reward the achievement of pre-established corporate,
business unit and individual performance goals so as to compensate the Company's
senior officers for both their individual performance and business unit
financial results. At the beginning of each year, the Chief Executive Officer
determines which officers will participate in the PIP for that year and such
officers are notified of their participation. The Chief Executive Officer
determines the PIP's performance goals for those officers who report directly to
him,
14
and determines goals for other participants in consultation with their
supervisors. These performance goals are reviewed at mid-year to ensure their
continued relevance.
During the first quarter of the subsequent year, the Chief Executive Officer
reviews the relevant financial, operating and personal performance achievements
of the Company, its business units and the participating officers against the
PIP performance goals that had been established, and submits proposed PIP awards
for the participating officers to the Compensation Committee for its approval.
PIP awards for 2001 performance for the Named Executive Officers other than
Mr. Bergman were based on (i) the Company's 2001 earnings per share measured
against pre-established standards, (ii) achievement of financial goals in their
respective areas of responsibility and (iii) achievement of individual
objectives.
PIP payments for 2001 for the four Named Executive Officers other than
Mr. Bergman ranged from 60% to 110% of salary and averaged 75%. The Committee's
compensation consultant has advised that the average 2001 salary plus 2001 bonus
for these four executive officers approximated the 60th percentile of annual
cash compensation at companies with comparable annual revenues. PIP awards for
these individuals appear in the Summary Compensation Table in the column
captioned "Bonus."
STOCK OPTIONS
The Company and the Compensation Committee believe that stock options are a
factor in aligning the long-term financial interest of the officers and
stockholders and intend to make grants on an annual basis. The Committee's
compensation consultant provides the Committee with competitive option granting
guidelines that reflect option granting practices at companies with comparable
annual revenues and that are taken into account in determining the size of the
Company's stock option grants. Options granted in March 2001 are shown above
under the caption "Option Grants in Fiscal 2001."
THE CHIEF EXECUTIVE OFFICER
Mr. Bergman's salary of $609,000 was set in accordance with the terms of his
prior employment agreement and was 4.1% higher than his 2000 salary. The
employment agreement also provides that Mr. Bergman's bonus be within a
specified range based on the Company's performance, as determined by the
Committee. The Committee awarded Mr. Bergman an annual bonus of $1,087,430 with
respect to 2001 performance. In making its bonus determination, the Committee
evaluated the Company's 2001 earnings per share measured in relation to
pre-established performance standards and the average bonuses earned by the
Company's executive officers (including the Named Executive Officers) in
relation to their target bonus opportunities.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code prohibits the Company from deducting annual
compensation in excess of $1 million paid to any of the Named Executive
Officers, unless such compensation is performance-based and paid pursuant to
criteria approved by the stockholders. The Committee's general policy is to
preserve the federal income tax deductibility of compensation by qualifying such
compensation for the performance based compensation exception to the limitation
on deductibility under Section 162(m). The Committee may, however, approve
compensation that may not be deductible if the Committee determines that such
compensation is in the best interests of the Company, and did so with the
respect to the Chief Executive Officer's aggregate compensation in fiscal 2001.
The Committee recommended to the Executive Committee of the Board of Directors
the adoption of the Henry Schein, Inc, 2001 Section 162(m) Cash Bonus Plan,
which was approved by the stockholders at the 2001 Annual Meeting.
THE COMPENSATION COMMITTEE
Barry J. Alperin, Chairman
Donald J. Kabat
15
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors, including the Company's internal controls, the
quality of its financial reporting and the independence and performance of the
Company's independent certified public accountants.
Management has primary responsibility for the Company's financial statements
and the overall reporting process, including the Company's system of internal
controls. The independent certified public accountants audit the annual
financial statements prepared by management, express an opinion as to whether
those financial statements fairly present the consolidated financial position,
results of operations and cash flows of the Company and its subsidiaries in
conformity with accounting principles generally accepted in the United States
and discuss with management any issues that they believe should be raised with
management.
The Audit Committee reviewed the Company's audited financial statements for
fiscal 2001 and met with both management and BDO Seidman, LLP ("BDO Seidman"),
the Company's independent certified public accountants, to discuss those
financial statements. Management has represented to us that the financial
statements were prepared in accordance with accounting principles generally
accepted in the United States.
We have received from BDO Seidman the written disclosures and the letter
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and discussed with BDO Seidman their
independence from the Company and its management. The Audit Committee also
discussed with BDO Seidman any matters required to be discussed by Statement on
Auditing Standards No. 61, Communication with Audit Committees.
Based on these reviews and discussions, the Audit Committee recommended to
the Board of Directors that the Company's audited financial statements be
included in the Company's Annual Report on Form 10-K for fiscal 2001.
THE AUDIT COMMITTEE
Donald J. Kabat, Chairman
Barry J. Alperin
Irving Shafran
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers and directors are required under the
Exchange Act to file reports of ownership of Common Stock of the Company with
the SEC. Copies of those reports must also be furnished to the Company. Based
solely on a review of the copies of reports furnished to the Company and written
representations that no other reports were required, the Company believes that
during fiscal 2001 the executive officers and directors of the Company timely
complied with all applicable filing requirements.
16
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on $100
invested on December 28, 1996, the last trading day before the beginning of the
Company's 1997 fiscal year, through the end of fiscal 2001 with the cumulative
total return on $100 invested for the same period in the Nasdaq Stock Market
(U.S. Companies) Composite Index and a group of five distribution companies
selected by the Company as appropriate for this purpose after discussions with a
number of investment analysts who follow the Common Stock and are familiar with
the Company's business (the "Old Peer Group Index"). The companies in the Old
Peer Group Index are Owens & Minor, Inc., Patterson Dental Company, PSS World
Medical Inc., Systemax, Inc. and U.S. Office Products, Co. After some
consideration, the Company has decided to increase the number and update the
list of companies in the peer group to provide a more accurate comparison (the
"New Peer Group"). The companies in the New Peer Group are Granger (W.W.) Inc.,
Caremark RX Incorporated, Patterson Dental Company, Omnicare Inc., Priority
Healthcare CP, MSC Industrial Direct, Accredo Health Inc., Owens & Minor, Inc.,
PSS World Medical Inc. and D&K Healthcare Resources, Inc. Set forth below are
comparisons for both the Old Peer Group and the New Peer Group.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
12/28/96 12/27/97 12/26/98 12/25/99 12/29/00 12/29/01
HENRY SCHEIN INC. 100.00 97.46 116.30 31.34 100.36 108.35
OLD PEER GROUP INDEX 100.00 90.74 117.70 76.59 100.20 121.26
NASDAQ MARKET INDEX 100.00 122.32 172.52 304.29 191.25 152.46
NEW PEER GROUP INDEX 100.00 113.28 94.02 80.03 107.06 129.90
DECEMBER 28, DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 30, DECEMBER 29,
1996 1997 1998 1999 2000 2001
------------ ------------ ------------ ------------ ------------ ------------
Henry Schein, Inc.... 100 97.46 116.30 31.34 100.36 108.35
Old Peer Group
Index.............. 100 90.74 117.70 76.59 100.20 121.26
NASDAQ Market
Index.............. 100 122.32 172.52 304.28 191.25 152.46
New Peer Group
Index.............. 100 113.28 94.02 80.03 107.06 129.90
17
PROPOSAL 3
RATIFICATION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
selected BDO Seidman as independent certified public accountants for the Company
for the fiscal year ending December 28, 2002, subject to ratification of such
selection by the stockholders at the Annual Meeting. If the stockholders do not
ratify the selection of BDO Seidman, another firm of independent certified
public accountants will be selected by the Board of Directors. Representatives
of BDO Seidman will be present at the Annual Meeting, will have an opportunity
to make a statement if they desire to do so, and will be available to respond to
appropriate questions from stockholders in attendance. The Audit Committee of
the Board of Directors has considered whether the provision of the services
referred to below under the captions "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" by BDO Seidman is compatible with
maintaining BDO Seidman's independence.
AUDIT FEES
BDO Seidman billed the Company $969,000 for professional services and
out-of-pocket expenses rendered in connection with the quarterly reviews and the
audit of the Company's annual consolidated financial statements for fiscal 2001.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees owed to BDO Seidman for professional services and
out-of-pocket expenses in connection with information technology consulting
services for fiscal 2001.
ALL OTHER FEES
BDO Seidman billed the Company $1,362,000 for professional services and
out-of-pocket expenses other than those described above for fiscal 2001.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES
OF COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AND ENTITLED TO VOTE
ON THIS MATTER AT THE ANNUAL MEETING IS REQUIRED TO RATIFY THE SELECTION OF BDO
SEIDMAN AS INDEPENDENT AUDITORS FOR THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 28, 2002. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED
SELECTION OF BDO SEIDMAN AS INDEPENDENT AUDITORS FOR THE COMPANY FOR THE FISCAL
YEAR ENDING DECEMBER 28, 2002.
VOTING OF PROXIES AND OTHER MATTERS
The Board of Directors recommends that an affirmative vote be cast in favor
of each of the proposals listed on the proxy card.
The Board of Directors knows of no other matter that may be brought before
the meeting that requires submission to a vote of the stockholders. If any other
matters are properly brought before the meeting, however, the persons named in
the enclosed proxy or their substitutes will vote in accordance with their best
judgment on such matters.
A complete list of stockholders entitled to vote at the Annual Meeting will
be available for inspection beginning May 10, 2002 at the Company's headquarters
located at 135 Duryea Road, Melville, New York 11747.
18
STOCKHOLDER PROPOSALS
Eligible stockholders wishing to have a proposal for action by the
stockholders at the 2003 Annual Meeting included in the Company's proxy
statement must submit such proposal at the principal offices of the Company not
later than December 31, 2002. It is suggested that any such proposals be
submitted by certified mail, return receipt requested.
Under the Company's Amended and Restated Certificate of Incorporation, as
amended, a stockholder who intends to bring a proposal before the 2003 Annual
Meeting without submitting such proposal for inclusion in the Company's proxy
statement cannot do so unless notice and a full description of such proposal
(including all information that would be required in connection with such
proposal under the SEC's proxy rules if such proposal were the subject of a
proxy solicitation and the written consent of each nominee for election to the
Board of Directors named therein (if any) to serve if elected) and the name,
address and number of shares of Common Stock held of record or beneficially as
of the record date for such meeting by the person proposing to bring such
proposal before the 2003 Annual Meeting is delivered in person or mailed to the
Company and received by it not later than April 15, 2003; provided, however,
that such notice need not be received more than 75 days prior to the date of the
2003 Annual Meeting.
Under the SEC's proxy rules, proxies solicited by the Board of Directors for
the 2003 Annual Meeting may be voted at the discretion of the persons named in
such proxies (or their substitutes) with respect to any stockholder proposal not
included in the Company's proxy statement if the Company does not receive notice
of such proposal on or before the deadline set forth in the preceding paragraph.
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APPENDIX A
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
HENRY SCHEIN, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of this Henry Schein, Inc. 1996 Non-Employee Director Stock
Option Plan are to enable Henry Schein, Inc. (the "Company") to attract, retain
and motivate directors of the Company who are not employees of the Company or
its subsidiaries ("Non-Employee Directors") and who are important to the success
of the Company and to create a mutuality of interest between the Non-Employee
Directors and the stockholders of the Company by granting such directors options
to purchase Common Stock (as defined herein) of the Company.
2. DEFINITIONS
(a) "Acquisition Event" means a merger or consolidation in which the Company
is not the surviving entity, or any transaction that results in the acquisition
of all or substantially all of the Company's outstanding Common Stock by a
single person or entity or by a group of persons and/or entities in concert, or
the sale or transfer of all or substantially all of the Company's assets.
(b) "Act" means the Securities Exchange Act of 1934, as amended and the
rules and regulations promulgated thereunder.
(c) "Board" means the board of directors of the Company.
(d) "Cause" has the meaning set forth in Section 7(b).
(e) "Change of Control" has the meaning set for in Section 6(e).
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means such committee, if any, appointed by the Board of
administer the Plan consisting of two or more directors as may be appointed from
time to time by the Board, each of whom shall qualify as a "disinterested
person" within the meaning of Rule 16b-3 promulgated under the Act. If the Board
does not appoint a committee for this purpose, "Committee" means the Board.
(h) "Common Stock" means the voting common stock of the Company, par value
$.01, any common stock into which the common stock may be converted and any
common stock resulting from any reclassification of the common stock.
(i) "Company" means Henry Schein, Inc., a Delaware corporation.
(j) "Corporate Transaction" has the meaning set forth in Section 6(e)(i).
(k) "Disability" means a permanent and total disability, as determined by
the Committee in its sole discretion, provided that in no event shall any
disability that is not permanent and total disability within the meaning of
Section 22(e)(3) of the Code be treated as a Disability. A Disability shall be
deemed to occur at the time of the determination by the Committee of the
Disability.
(l) "Effective Date' has the meaning set forth in Section 3.
(m) "Fair Market Value" means the value of a Share (as defined herein) on a
particular date, determined as follows:
(i) If the Common Stock is listed or admitted to trading on such date on
a national securities exchange or quoted through the National Association of
Securities Dealers' Automated Quotation ("NASDAQ") National Market System,
the closing sales price of a Share as reported on the relevant composite
transaction tape, if applicable, or on the principal such exchange
(determined
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by trading value in the Common Stock) or through the National Market System,
as the case may be, on such date, or in the absence of reported sales on
such day, the mean between the reported bid and asked prices reported on
such composite transaction tape or exchange or through the National Market
System, as the case may be, on such date; or
(ii) If the Common Stock is not listed or quoted as described in the
preceding clause, but bid and asked prices are quoted through NASDAQ, the
mean between the bid and asked prices as quoted by the National Association
of Securities Dealers through NASDAQ on such date; or
(iii) If the Common Stock is not listed or quoted on a national
securities exchange or through NASDAQ or, if pursuant to (i) and (ii) above
the Fair Market Value is to be determined based upon the mean of the bid and
asked prices and the Committee determines that such mean does not properly
reflect the Fair Market Value, by such other method as the Committee
determines to be reasonable and consistent with applicable law; or
(iv) If the Common Stock is not publicly traded, such amount as is set
by the Committee in good faith.
(n) "HSI Agreement" means the Amended and Restated HSI Agreement dated as of
February 16, 1994 among the Company and certain other parties.
(o) "Incumbent Board" has the moaning set forth in Section 6(e)(ii).
(p) "Non-Employee Directors" means directors of the Company who are not
employees of the Company or its subsidiaries.
(q) "Option" means the right to purchase one Share at a prescribed purchase
price on the terms specified in the Plan.
(r) "Outstanding HSI Voting Securities" has the meaning set forth in
Section 6(e)(i).
(s) "Participant" means a Non-Employee Director who is granted Options under
the Plan.
(t) "Person" means an individual, entity or group within the meaning of
Section 13d-3 or 14d-1 of the Act.
(u) "Plan" means the Henry Schein, Inc. 1996 Non-Employee Director Stock
Option Plan.
(v) "Purchase Price" means purchase price per Share.
(w) "Securities Act" means the Securities Act of 1933, as amended.
(x) "Share" means a share of Common Stock.
(y) "Substantial Stockholder" means any Participant who at the time of grant
owns directly or is deemed to own by reason of the attribution rules set forth
in Section 424(d) of the Code, Shares possessing more than 10% of the total
combined voting power of all classes of stock of the Company.
(z) "Termination of Services" means termination of the relationship with the
Company so that an individual is no longer a director of the Company.
3. EFFECTIVE DATE/EXPIRATION OF PLAN
This Plan shall became effective as of March 22, 1996 (the "Effective
Date"), and was amended on March 4, 2002, subject to its approval not later than
the date of the Company's 2002 Annual Meeting of Stockholders by the holders of
a majority of the outstanding shares of Common Stock entitled to vote thereon.
Grants of Options under the Plan may be made on and after the Effective Date,
provided that, if this Plan is not approved in accordance with the preceding
sentence on or before such
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annual meeting, all Options granted pursuant to the Plan shall be null and void.
Options may not be exercised prior to such approval.
4. ADMINISTRATION
(a) DUTIES OF THE COMMITTEE. The Plan shall be administered by the
Committee. The Committee shall have full authority to interpret the Plan and to
decide any questions and settle all controversies and disputes that may arise in
connection with the Plan; to establish, amend, and rescind rules for carrying
out the Plan, to administer the Plan, subject to its provisions: to select
Participants in, and grant Options under, the Plan; to determine the terms,
exercise price and form of exercise payment for each Option granted under the
Plan; to prescribe the form or forms of instruments evidencing Options and any
other instruments required under the Plan (which need not be uniform) and to
change such forms from time to time; and to make all other determinations and to
take all such steps in connection with the Plan and the Options as the
Committee, in its sole discretion, deems necessary or desirable. provided, that
all such determinations shall be in accordance with the express provisions, if
any, contained in the HSI Agreement or the Plan. The Committee shall not be
bound to any standards of uniformity or similarity of action, interpretation or
conduct in the discharge of its duties hereunder, regardless of the apparent
similarity of the matters coming before it. The determination, action or
conclusion of the Committee in connection with the foregoing shall be final,
binding and conclusive.
(b) ADVISORS. The Committee may designate the Secretary of the Company,
other employees of the Company or competent professional advisors to assist the
Committee in the administration of the Plan, and may grant authority to such
persons to execute option agreements or other documents on behalf of the
Committee. The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan, and may rely upon
any opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company.
(c) INDEMNIFICATION. To the maximum extent permitted by law, no officer,
member or former officer or member of the Committee or the Board shall be liable
for any action or determination made in good faith with respect to the Plan or
any Option granted under it. To the maximum extent permitted by applicable law
or the Certificate of Incorporation or By-Laws of the Company and to the extent
not covered by insurance, each officer, member or former officer or member of
the Committee or of the Board shall be indemnified and held harmless by the
Company against any cost or expense (including reasonable fees of counsel
reasonably acceptable to the Company) or liability (including any sum paid in
settlement of a claim with the approval of the Company), and advanced amounts
necessary to pay the foregoing at the earliest time and to the fullest extent
permitted, arising out of any act or omission to act in connection with the
Plan, except to the extent arising out of such officees, member's or officer's
or member's own fraud or bad faith. Such indemnification shall be in addition to
any rights of indemnification the officers, members or former officers or
members may have as directors under applicable law or under the Certificate of
Incorporation or By-Laws of the Company or otherwise.
(d) MEETINGS OF THE COMMITTEE. The Committee shall select one of its
members as a Chairman and shall adopt such rules and regulations as it shall
deem appropriate concerning the holding of its meetings and the transaction of
its business. Any member of the Committee may be removed at any time either with
or without cause by resolution adopted by the Board, and any vacancy on the
Committee may at any time be filled by resolution adopted by the Board. All
determinations by the Committee shall be made by the affirmative vote of a
majority of its members. Any such determination may be made at a meeting duly
called and held at which a majority of the members of the Committee were in
attendance in person or through telephonic communication. Any determination set
forth in writing and signed by all of the members of the Committee shall be as
fully effective as if it had been made by a vote of such members at a meeting
duly called and held.
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5. SHARES; ADJUSTMENT UPON CERTAIN EVENTS
(a) SHARES TO BE DELIVERED; FRACTIONAL SHARES. Shares to be issued under
the Plan shall be made available at the discretion of the Board either from
authorized but unissued Shares or from issued Shares reacquired by the Company
and held in treasury. No fractional Shares will be issued or transferred upon
the exercise of any Option. In lieu thereof, the Company shall pay a cash
adjustment equal to the same fraction of the Fair Market Value of one Share on
the date of exercise.
(b) NUMBER OF SHARES. Subject to adjustment as provided in this
Section 5, the maximum aggregate number of Shares that may be issued under the
Plan shall be 100,000 shares of Common Stock. If Options are for any reason
canceled, or expire or terminate unexercised, the Shares covered by such Options
shall again be available for the grant of Options, subject to the foregoing
limit.
(c) ADJUSTMENTS; RECAPITALIZATION, ETC. The existence of the Plan and the
Options granted hereunder shall not affect in any way the right or power of the
Board or the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
Common Stock the dissolution or liquidation of the Company or any sale or
transfer of all or part of its assets or business or any other corporate act or
proceeding. If and whenever the Company takes any such action, however, the
following provisions, to the extent applicable, shall govern:
(i) If and whenever the Company shall effect a stock split, stock
dividend, subdivision, recapitalization or combination of Shares or other
changes in the Company's Common Stock, (x) the Purchase Price (as defined
herein) per Share and the number and class of Shares and/or other securities
with respect to which outstanding Options thereafter may be exercised, and
(y) the total number and class of Shares and/or other securities that may be
issued under this Plan, shall be proportionately adjusted by the Committee.
The Committee may also make such other adjustments as it deems necessary to
take into consideration any other event (including, without limitation,
accounting changes) if the Committee determines that such adjustment is
appropriate to avoid distortion in the operation of the Plan.
(ii) Subject to Section 5(c)(iii), if the Company merges or consolidates
with one or more corporations, then from and after the effective date of
such merger or consolidation, upon exercise of Options theretofore granted,
the Participant shall be entitled to purchase under such Options, in lieu of
the number of Shares as to which such Options shall then be exercisable but
on the same terms and conditions of exercise set forth in such Options, the
number and class of Shares and/or other securities or property (including
cash) to which the Participant would have been entitled pursuant to the
terms of the agreement of merger or consolidation if, immediately prior to
such merger or consolidation, the Participant had been the holder of record
of the total number of Shares receivable upon exercise of such Options
(whether or not then exercisable).
(iii) In the event of an Acquisition Event, the Committee may, in its
discretion, and without any liability to any Participant, terminate all
outstanding Options as of the consummation of the Acquisition Event by
delivering notice of termination to each Participant at least 20 days prior
to the date of consummation of the Acquisition Event; provided that, during
the period from the date an which such notice of termination is delivered to
the consummation of the Acquisition Event, each Participant shall have the
right to exercise in full all of the Options that are then outstanding
(without regard to limitations on exercise otherwise. contained in the
Options). If an Acquisition Event occurs and the Committee does not
terminate the outstanding Options pursuant to the preceding sentence, then
the provisions of Section 5(c)(ii) shall apply.
(iv) If, as a result of any adjustment made pursuant to the preceding
paragraphs of this Section 5, any Participant shall become entitled upon
exercise of an Option to receive any
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securities other than Common Stock, then the number and class of securities
so receivable thereafter shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock set forth in this Section 5, as determined
by the Committee in its discretion.
(v) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash, property, labor or services, upon
direct sale, upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or other securities, and in any case whether or
not for fair value, shall not affect, and no adjustment by reason thereof
shall be made with respect to the number and class of Shares and/or other
securities or property subject to Options theretofore granted of the
Purchase Price per Share.
6. AWARDS AND TERMS OF OPTIONS
(a) GRANT. The Committee may grant Options to Non-Employee Directors.
(b) EXERCISE PRICE. The Purchase Price deliverable upon the exercise of an
Option shall be determined by the Committee, in its sole discretion, but shall
not be less than the par value of a Share.
(c) NUMBER OF SHARES. The option agreement shall specify the number of
Options granted to the Participant, as determined by the Committee in its sole
discretion.
(d) EXERCISABILITY. At the time of grant, the Committee shall specify when
and on what terms the options granted shall be exercisable. In the case of
Options not immediately exercisable in full, the Committee may at any time
accelerate the time at which all or any part of the Options may be exercised and
may waive any other conditions to exercise, subject to the terms of the option
agreement and the Plan. No Option shall be exercisable after the expiration of
ten (10) year from the date of grant. Each Option shall be subject to earlier
termination as provided in Section 7 below.
(e) ACCELERATION OF EXERCISABILITY ON CHANGE OF CONTROL. All Options
granted and not previously exercisable shall become exercisable immediately upon
the later of a Change of Control (as defined herein) or approval of this Plan in
accordance with Section 3. For this purpose, a "Change of control shall be
deemed to have occurred upon:
(i) an acquisition by any Person or beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Act) of 20% or more of either
(A) the then outstanding Shares or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding HSI Voting Securities");
excluding, however, the following: (w) any acquisition directly from the
Company, other than an acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself acquired
directly from the Company, (x) any acquisition by the Company, (y) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or (z) any acquisition by any corporation pursuant
to a reorganization, merger, consolidation or similar corporate transaction
(in each case, a "Corporate Transaction"), if, pursuant to such Corporate
Transaction, the conditions described in clauses (A), (B) and (C) of
paragraph (iii) of this Section 6 are satisfied; or
(ii) a change in the composition of the Board such that the individuals
who, as of the Effective Date hereof, constitute the Board (the Board as of
the date hereof shall be hereinafter referred to as the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board;
provided that for purposes of this Subsection any individual who becomes a
member of the Board subsequent the date hereof whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at
least a majority of those individuals who are members of this proviso) shall
be considered as though such individual were a member of the Incumbent
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Board; but, provided further, that any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board shall
not be so considered as a member of the Incumbent Board; or
(iii) the approval by the stockholders of the Company of a Corporate
Transaction or, if consummation of such Corporate Transaction is subject, at
the time of such approval by stockholders, to the consent of any government
or governmental agency, the obtaining of such consent (either explicitly or
implicitly by consummation), excluding, however, such a Corporate
Transaction pursuant to which (A) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
outstanding Shares and Outstanding HSI Voting Securities immediately prior
to such Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock of
the corporation resulting from such Corporate Transaction and the combined
voting power of the outstanding voting securities of such corporation
entitled to vote generally in the election of directors, in substantially
the same proportions as their ownership immediately prior to such Corporate
Transaction, of the outstanding Shares and Outstanding HSI Voting
Securities, as the case may be, (B) no Person (other than the Company, any
employee benefit plan (or related trust) of the Company or the corporation
resulting from such Corporate Transaction and any Person beneficially
owning, immediately prior to such Corporate Transaction, directly or
indirectly, 20% or more of the outstanding Shares or Outstanding HSI Voting
Securities, as the case may be) will beneficially own, directly or
indirectly, 20% or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the then outstanding securities of such corporation
entitled to vote generally in the election of directors and (C) individuals
who were members of the incumbent Board will constitute at least a majority
of the members of the board of directors of the corporation resulting from
such Corporate Transaction, notwithstanding the foregoing, no Change of
Control will occur if 3, of the Incumbent Board approves the Corporate
Transaction; or
(iv) the approval of the stockholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Company;
excluding, however, such a sale or other disposition to a corporation with
respect: to which, following such sale or other disposition, (x) more than
60% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors will be then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding Shares and Outstanding HSI Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to
such sale or other disposition, of the outstanding Shares and Outstanding
HSI Voting Securities, as the case may be, (y) no Person (other than the
Company and any employee benefit plan (or related trust) of the Company or
such corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of the
outstanding Shares or Outstanding HSI Voting Securities, as the case may be)
will beneficially own, directly or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and
(z) individuals who were members of the incumbent Board will constitute at
least a majority of the members of the board of directors of such
corporation.
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(f) EXERCISE OF OPTIONS.
(i) A Participant may elect to exercise one or more Options by giving
written notice to the Committee of such election and of the number of
Options such Participant has elected to exercise, accompanied by payment in
full of the aggregate Purchase Price for the number of shares for which the
Options are being exercised.
(ii) Shares purchased pursuant to the exercise of Options shall be paid
for at the time of exercise as follows:
(A) in cash or by check, bank draft or money order payable to the
order of the Company;
(B) if so permitted by the Committee: (x) through the delivery of
unencumbered Shares (including Shares being acquired pursuant to the
Options then being exercised), provided such Shares (or such Options)
have been owned by the Participant for such period as may be required by
applicable accounting standards to avoid a charge to earnings,
(y) through a combination of Shares and cash as provided above, (z) by
delivery of a promissory note of the Participant to the Company, such
promissory note to be payable on such terms as are specified in the
option agreement (except that, in lieu of a stated rate of interest, the
option agreement may provide that the rate of interest on the promissory
note will be such rate as is sufficient, at the time the note is given,
to avoid the imputation of interest under the applicable provisions of
the Code), or by a combination of cash (or cash and Shares) and the
Participant's promissory note; provided, that, if the Shares delivered
upon exercise of the Option is an original issue of authorized. Shares,
at least so much of the exercise price as represents the par value of
such Shares shall be paid in cash or by a combination of cash and Shares;
or
(C) on such other terms and conditions as may be acceptable to the
Committee and in accordance with applicable law. Upon receipt of payment,
the Company shall deliver to the Participant as soon as practicable a
certificate or certificates for the Shares then purchased.
7. EFFECT OF TERMINATION OF SERVICES
(a) DEATH, DISABILITY, RETIREMENT, ETC. Except as otherwise provided in
the Participant's option agreement or in this Plan, upon Termination of
Services, all outstanding Options then exercisable and not exercised by the
Participant prior to such Termination of Services (and any Options not
previously exercisable but made exercisable by the Committee at or after the
Termination of Services) shall remain exercisable by the Participant to the
extent not theretofore exercised for the following time periods (subject to
Section 6(d)):
(i) In the event of the Participant's death, such Options shall remain
exercisable (by the Participant's estate or by the person given authority to
exercise such Options by the Participant's will or by operation of law) for
a period of one (1) year from the date of the Participant's death, provided
that the Committee. In its discretion, may at any time extend such time
period to up to three (3) years from the date of the Participant's death.
(ii) In the event the Participant retires at or after age 65 (or, with
the consent of the Committee, before age 65), or if the Participant's
services terminate due to Disability such Options shall remain exercisable
for one (1) year from the date of the Participant's Termination of Services,
provided that the Committee, in its discretion, may at any time extend such
time period to up to three (3) years from the date of the Participant's
Termination of Services.
(b) CAUSE OR VOLUNTARY TERMINATION. Upon the Termination of Services of a
Participant for cause (as defined herein) or if it is discovered after such
Termination of Services that such Participant had engaged in conduct that would
have justified a Termination of Services for Cause, all outstanding
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Options shall immediately be canceled. Termination of Services shall be deemed
to be for "Cause" for purposes of this Section 7(b) if the Participant shall
have committed fraud or any felony in connection with the Participant's duties
as a director of the Company or willful misconduct or any act of disloyalty,
dishonesty, fraud or breach of trust, confidentiality or fiduciary duties as to
the Company or the commission of any other act which causes or may reasonably be
expected. to cause economic or reputational injury to the Company.
(c) OTHER TERMINATION. In the event of Termination of Services for any
reason other than as provided in Section 7(a) and 7(b), all outstanding Options
then exercisable and not exercised by the Participant prior to such Termination
of Services shall remain exercisable (to the extent exercisable by such
Participant immediately before such termination) for a period of three (3)
months after such termination, provided that the Committee in its discretion may
extend such time period to up to one (1) year from the date of the Participant's
Termination of Services.
8. NONTRANSFERABILITY OF OPTIONS
No Option shall be transferable by the Participant otherwise than by will or
under applicable laws of descent and distribution, and during the lifetime of
the holder may be exercised only by the holder or his or her guardian or legal
representative. In addition, no Option shall be assigned, negotiated, pledged or
hypothecated in any way (whether by operation of law or otherwise), and no
Option shall be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, negotiate, pledge or hypothecate any Option, or in
the event of any levy upon any Option by reason of any execution, attachment or
similar process contrary to the provisions hereof, such Option shall immediately
be cancelled.
9. RIGHTS AS A STOCKHOLDER
A holder of an Option shall have no rights as a stockholder with respect to
any Shares covered by such holder's Option until such holder shall have become
the holder of record of such Shares, and no adjustments shall be made for
dividends in cash or other property or distributions or other rights in respect
to any such Shares, except as otherwise specifically provided for in this Plan.
10. DETERMINATIONS
Each determination, interpretation or other action made or taken pursuant to
the provisions of this Plan by the Committee shall be final, conclusive and
binding for all purposes and upon all persons, including, without limitation,
the holders of any Options and Non-Employee Directors and their respective
heirs, executors, administrators, personal representatives and other successors
in interest.
11. TERMINATION, AMENDMENT AND MODIFICATION
The Plan shall terminate at the close of business on the tenth anniversary
of the Effective Date, unless terminated sooner as hereinafter provided, and no
Option shall be granted under the Plan on or after that date. The termination of
the Plan shall not terminate any outstanding Options which by their terms
continue beyond the termination date of the Plan. At any time prior to the tenth
anniversary of the Effective Date, the Board or the Committee may amend or
terminate the Plan or suspend the Plan in whole or in part. Notwithstanding the
foregoing, however, no such amendment may, without the, approval of the
stockholders of the Company, (i) increase the total number of Shares which may
be acquired upon exercise of Options granted under the Plan; (ii) change the
requirements for eligibility for participation in the Plan; or (iii) effect any
change that would require stockholder approval under Rule 16b-3 (or any
successor provision) promulgated under the Act.
Nothing contained in this Section 11 shall be deemed to prevent the Board or
the Committee from authorizing amendments of outstanding Options of
Participants, including, without limitation, the
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reduction of the Purchase Price specified therein (or the granting or issuance
of new Options at a lower Purchase Price upon cancellation of outstanding
Options), so long as all Options outstanding at any one time shall not call for
issuance of more Shares than the remaining number provided for under the Plan
and so long as the provisions of any amended Options would have boon permissible
under the Plan if such Option had been originally granted or issued as of the
date of such amendment with such amended terms.
Notwithstanding anything to the contrary contained in this Section 11,
(i) no termination, amendment or modification of the Plan may, without the
consent of the Participant or the transferee of such Participant's Option, alter
or impair the rights and obligations arising under any then outstanding Option,
and (ii) neither the Board nor the Committee may make any determination or
interpretation or take any other action which would cause any member of the
Committee to cease to be a "disinterested person" with regard to the Plan for
purposes of Rule 16b-3 under the Act.
12. NON-EXCLUSIVITY
Subject to the express provisions contained in the HSI Agreement, neither
the adoption of the Plan by the Board nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting or
issuance of stock options, Shares and/or other incentives otherwise than under
the Plan, and such arrangements may be either generally applicable or limited in
application.
13. USE OF PROCEEDS
The proceeds of the sale of Shares subject to Options under the Plan are to
be added to the general funds of the Company and used for its general corporate
purposes as the Board shall determine.
14. GENERAL PROVISIONS
(d) RIGHT TO TERMINATE SERVICES. Neither the adoption of the Plan nor the
grant of Options shall impose any obligations on the Company to retain any
Participant as a director nor shall it impose any obligation on the part of any
Participant to remain a director.
(e) PURCHASE FOR INVESTMENT. If the Board determines that the law so
requires, the holder of an Option granted hereunder shall, upon any exercise or
conversion thereof, execute and deliver to the Company a written statement, in
form satisfactory to the Company, representing and warranting that such
Participant is purchasing or accepting the Shares then acquired for such
Participant's own account and not with a view to the resale or distribution
thereof, that any subsequent offer for sale or sale of any such Shares shall be
made either pursuant to (i) a registration statement on in appropriate form
under the Securities Act, which registration statement shall have become
effective and shall be current with respect to the Shares being offered and
sold, or (ii) a specific exemption from the registration requirements of the
Securities Act, and that in claiming such exemption the holder will, prior to
any offer for sale or sale of such Shares, obtain a favorable written opinion,
satisfactory in form and substance to the Company, from counsel approved by the
Company as to the availability of such exception.
(f) TRUSTS, ETC. Nothing contained in the Plan and no action taken
pursuant to the Plan (including, without limitation, the grant of any Option
thereunder) shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between the Company and any Participant or the executor,
administrator or other personal representative or designated beneficiary of such
Participant, or any other persons. Any reserves that may be established by the
Company in connection with the Plan shall continue to be part of the general
funds of the Company, and no individual or entity other
A-9
than the Company shall have any interest in such funds until paid to a
Participant. If and to the extent that any Participant or such Participant's
executor, administrator, or other personal representative as the case may be,
acquires a right to receive any payment from the Company pursuant to the Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company.
(g) NOTICES. Each Participant shall be responsible for furnishing the
Committee with the current and proper address for the mailing to such
Participant of notices and the delivery to such Participant of agreements,
Shares and payments. Any notices required or permitted to be given shall be
deemed given if directed to the person to whom addressed at such address and
mailed by regular United States mail, first class and prepaid. If any item
mailed to such address is returned as undeliverable to the addressee, mailing
will be suspended until the Participant furnishes the proper address.
(h) SEVERABILITY OF PROVISIONS. If any provisions of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions of the Plan, and the Plan shall be construed and
enforced as if such provisions had not been included.
(i) PAYMENT TO MINORS, ETC. Any benefit payable to or for the benefit of a
minor, an incompetent person or other person incapable of receipting therefor
shall be deemed paid when paid to such person's guardian or to the party
providing or reasonably appearing to provide for the care of such person, and
such payment shall fully discharge the Committee, the Company and their
employees, agents and representatives with respect thereto.
(j) READINGS AND CAPTIONS. The headings and captions herein are provided
for reference and convenience only. They shall not be considered part of the
Plan and shall not be employed in the construction of the Plan.
15. ISSUANCE OF STOCK CERTIFICATES; LEGENDS AND PAYMENT OF EXPENSES
(a) STOCK CERTIFICATES. Upon any exercise of an Option and payment of the
exercise price as provided in such Option, a certificate or certificates for the
Shams as to which such Option has been exercised shall be issued by the Company
in the name of the person or persons exercising such Option and shall be
delivered to or upon the order of such person or persons.
(b) LEGENDS. Certificates for Shares issued upon exorcise of an Option
shall bear such legend or legends as the Committee, in its discretion,
determines to be necessary or appropriate to prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act,
or to implement the provisions of any agreements between the Company and the
Participant with respect to such Shares.
(c) PAYMENT OF EXPENSES. The Company shall pay all issue or transfer taxes
with respect to the issuance or transfer of Shares, as well as all fees and
expenses necessarily incurred by the Company in connection with such issuance or
transfer and with the administration of the Plan.
16. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board shall determine in its sole discretion that the
listing, registration or qualification of the Shares covered by the, Plan upon
any national securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the award or sale of Shares
under the Plan, no Shares will be delivered unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained, or otherwise provided for, free of any conditions not acceptable to
the Board.
A-10
17. WITHHOLDING TAXES
Where a Participant or other person is entitled to receive Shares pursuant
to the exercise of an Option, the Company shall have the right to require the
Participant or such other person to pay to the Company the amount of any taxes
which the Company may be required to withhold before delivery to such
Participant or other person of cash or a certificate or certificates
representing such Shares.
Unless otherwise prohibited by the Committee or by applicable law, a
Participant may satisfy any such withholding tax obligation by any of the
following methods, or by a combination of such methods: (a) securing payment in
cash or property in lieu of withholding, (b) authorizing the Company to withhold
from the Shares otherwise payable to such Participant (1) one or more of such
Shares having an aggregate Fair Market Value, determined as of the date the
withholding tax obligation arises, less than or equal to the amount of the total
withholding tax obligation or (2) cash in an amount less than or equal to the
amount of the total withholding tax obligation; or (c) delivering to the Company
previously acquired Shares (none of which Shares may be subject to any claim,
lien, security interest, community property right or other right of spouses or
present or former family members, pledge, option, voting agreement or other
restriction or encumbrance of any nature whatsoever) having an aggregate Fair
Market Value, determined as of the date the withholding obligation arises, less
than or equal to the amount of the total withholding tax obligation. A
Participant's election to pay his or her withholding tax obligation (in whole or
in part) by the method described in (b)(1) above is irrevocable once it is made,
may be disapproved by the Committee and, if made by any director, officer or
other person who is subject to Section 16(b) of the Act, must be made (x) only
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 the date of such
release; (y) not less than six months prior to the date such Participant's
withholding tax obligation arises or (z) during any other period in which a
withholding election may be made under the provisions of Rule 16b-3.
A-11
PROXY
HENRY SCHEIN, INC.
135 Duryea Road, Melville, New York 11747
This Proxy is solicited on behalf of the Board of Directors.
The undersigned, having duly received the Notice of Annual Meeting of
Stockholders and the Proxy Statement, dated April 29, 2002, hereby appoints
Stanley M. Bergman and Michael S. Ettinger as proxies (together, the "Proxies"),
each with the power to act alone and with the power of substitution and
revocation, to represent the undersigned and to vote, as designated below, all
shares of Common Stock of Henry Schein, Inc. (the "Company") held of record by
the undersigned on April 10, 2002, at the Annual Meeting of Stockholders to be
held at 11:00 a.m. on Wednesday, June 5, 2002 at the Huntington Hilton, 598
Broadhollow Road, Melville, New York and at any adjournments or postponements
thereof. The undersigned hereby revokes any previous proxies with respect to the
matters covered by this Proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
1. PROPOSAL TO ELECT THIRTEEN DIRECTORS FOR TERMS EXPIRING IN 2003.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees listed below
Stanley M. Bergman, Gerald A. Benjamin, James P. Breslawski, Leonard A. David,
Mark E. Mlotek, Steven Paladino, Barry J. Alperin, Pamela Joseph, Donald J.
Kabat, Marvin H. Schein, Irving Shafran, Philip A. Laskawy and Norman S.
Matthews.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW:
2. PROPOSAL TO AMEND THE COMPANY'S 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION
PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF BDO SEIDMAN, LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER
28, 2002.
/ / FOR / / AGAINST / / ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS
OR POSTPONEMENTS THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THIS
PROXY BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ELECTION OF ALL NOMINEES FOR DIRECTORS LISTED IN PROPOSAL 1, FOR
PROPOSAL 2 AND FOR PROPOSAL 3.
Please sign below exactly as your
name appears on this Proxy. Where
shares are held by joint tenants,
both should sign. If signing as an
attorney, executor, administrator,
trustee or guardian, please give
full title as such. If signing as a
corporation, an authorized person
should sign in the full corporate
name. If signing as a partnership,
an authorized person should sign in
the full partnership name.
Signature: ________________________
Date: _____________________________
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
