SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_} Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-12
Alberto-Culver Company
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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)
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[X] No Fee required
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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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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ALBERTO-CULVER COMPANY
Melrose Park, Illinois
December 14, 2001
TO THE STOCKHOLDERS:
The annual meeting of stockholders will be held at the principal office
of the Company in Melrose Park, Illinois, on Thursday, January 24, 2002, at
10:00 a.m.
You are cordially invited to attend this meeting in person. The
principal business at the meeting will be to (i) elect four directors, (ii)
re-approve the Alberto-Culver Company 1994 Stock Option Plan For Non-Employee
Directors, as amended, and (iii) re-approve the Alberto-Culver Company 1994
Shareholder Value Incentive Plan, as amended.
At your earliest convenience, please sign and return the enclosed proxy
card to assure that your shares will be represented at the meeting.
Sincerely,
/s/ Leonard H. Lavin
Leonard H. Lavin
Chairman
NOTICE OF MEETING
The annual meeting of stockholders of Alberto-Culver Company (the
"Company") will be held on Thursday, January 24, 2002, at 10:00 a.m. Chicago
time, at the principal office of the Company, 2525 Armitage Avenue, Melrose
Park, Illinois 60160 for the following purposes:
1. To elect four directors.
2. To re-approve the Alberto-Culver Company 1994 Stock Option Plan For
Non-Employee Directors, as amended.
3. To re-approve the Alberto-Culver Company 1994 Shareholder Value
Incentive Plan, as amended.
4. To transact such other business as may properly come before the
meeting.
The board of directors has fixed the close of business on November 30,
2001 as the record date for determination of the stockholders entitled to notice
of and to vote at the meeting.
/s/ Bernice E. Lavin
Bernice E. Lavin
Secretary
December 14, 2001
ALBERTO-CULVER COMPANY PROXY STATEMENT
2525 Armitage Avenue December 14, 2001
Melrose Park, Illinois 60160
Solicitation of Proxies
The board of directors of Alberto-Culver Company (the "Company") solicits
your proxy for use at the annual meeting of stockholders to be held on January
24, 2002 and at any adjournment thereof.
On November 30, 2001, the record date for the meeting, the Company had
outstanding shares of common stock consisting of 24,844,301 shares of Class A
and 32,525,619 shares of Class B. This Proxy Statement and form of proxy are
being mailed to stockholders on or about December 14, 2001.
Each holder of record at the close of business on the record date is
entitled to one vote for each Class B share and one-tenth of a vote for each
Class A share then held. Class A and Class B shares vote together as a single
class in all matters to be voted upon at this meeting. Any person submitting a
proxy has the right to revoke it at any time before it is voted, in person at
the meeting, by written notice to the Secretary of the Company or by delivery of
a later-dated proxy.
The election of directors is decided by a plurality of the votes cast by
holders of all shares entitled to vote in the election. Accordingly, withheld
votes and broker non-votes will not affect the outcome of the election. A
majority of the votes entitled to be cast thereon by holders of shares of stock
present in person or by proxy at the meeting is required to re-approve the
Alberto-Culver Company 1994 Stock Option Plan For Non-Employee Directors, as
amended ("Director Plan"), and the Alberto-Culver Company 1994 Shareholder Value
Incentive Plan, as amended ("SVIP"). Although abstentions and broker non-votes
will be treated as present at the meeting for purposes of determining a quorum,
abstentions will have the effect of a vote against the re-approval of the
Director Plan and the SVIP and broker non-votes will have no effect on the
re-approval of the Director Plan and the SVIP.
Election of Directors
Unless otherwise instructed, proxies will be voted for the election as
directors of the four persons listed as nominees for a term of three years. All
of the nominees are currently serving as directors. Should any of the nominees
become unable to accept nomination or election (which the Company has no reason
to expect), it is the intention of the persons named in the enclosed proxy to
vote for a substitute in each case or the board of directors may make an
appropriate reduction in the number of directors to be elected.
1
Nominees for Terms Expiring at the Annual Meeting in 2005 (Class II)
Howard B. Bernick, age 49, has served as a director of the Company since
1986, as President of the Company since 1988 and as Chief Executive Officer of
the Company since 1994. Mr. Bernick is also a director of AAR Corp. and the Wm.
Wrigley Jr. Company. Mr. Bernick is the husband of Carol L. Bernick and the
son-in-law of Leonard H. Lavin and Bernice E. Lavin.
Bernice E. Lavin, age 76, has served as a director and Secretary and
Treasurer of the Company since 1955 and as Vice Chairman since 1994. Mrs. Lavin
is the wife of Leonard H. Lavin, the mother of Carol L. Bernick and the
mother-in-law of Howard B. Bernick.
Allan B. Muchin, age 65, has served as a director of the Company since 1995
and as Chairman of Katten Muchin Zavis, a Chicago-based law firm, since 1995.
For more than five years prior to 1995, Mr. Muchin served as Co-Managing Partner
and a member of the Board of Directors and Executive Committee of Katten Muchin
Zavis.
Harold M. Visotsky, M.D., age 77, has served as a director of the Company
since 1989, as the Owen L. Coon Professor of Psychiatry and Behavioral Sciences
Emeritus at Northwestern University Medical School for more than the past five
years, and as a consultant for more than the past five years in the areas of
health planning and benefits management.
The board of directors recommends that the stockholders vote FOR the
election of each of the nominees for director.
Directors Whose Terms Expire at the Annual Meeting in 2003 (Class III)
A. Robert Abboud, age 72, has served as a director of the Company since
1994 and as President of A. Robert Abboud and Company, a private investment
firm, for more than the past five years. Mr. Abboud is also a director of AAR
Corp.
Carol L. Bernick, age 49, has served as a director of the Company since
1984, as Assistant Secretary of the Company since 1990, as Vice Chairman of the
Company and President of Alberto-Culver North America, a division of the
Company, since April 1998 and as President of Alberto-Culver USA, Inc., a
wholly-owned subsidiary of the Company, from 1994 to April 1998 and since
January 1999. From 1990 to April 1998, she served as Executive Vice President of
the Company. Mrs. Bernick is the wife of Howard B. Bernick and the daughter of
Leonard H. Lavin and Bernice E. Lavin.
Leonard H. Lavin, age 82, the founder of the Company, has served as a
director and Chairman of the Company since 1955. Mr. Lavin is the husband of
Bernice E. Lavin, the father of Carol L. Bernick and the father-in-law of Howard
B. Bernick.
Robert H. Rock, D.B.A., age 51, has served as a director of the Company
since 1995 and as the President of MLR Holdings, LLC, an investment company with
holdings in publishing and information
2
businesses, for more than the past five years. Mr. Rock has also served as
Chairman of Metroweek Corporation, a publisher of weekly newspapers and
specialty publications, for more than the past five years. Mr. Rock is also a
director of Hunt Corporation, Quaker Chemical Corporation, Advanta Corporation
and Penn Mutual Life Insurance Company.
Directors Whose Terms Expire at the Annual Meeting in 2004 (Class I)
A. G. Atwater, Jr., age 58, has served as a director of the Company since
1995 and as President and Chief Executive Officer of Amurol Confections Company,
a specialty confections manufacturer and a wholly-owned associated company of
the Wm. Wrigley, Jr. Company, for more than the past five years.
Sam J. Susser, age 62, has served as a director of the Company since
January 2001 and as Chairman of the Board of SSP Partners, an operator of
convenience stores under the brand name "Circle K," since 1995. From 1988 to
1995, Mr. Susser served as Chairman of the Board of Southguard Corporation. SSP
Partners is the successor of Southguard Corporation.
William W. Wirtz, age 72, has served as a director of the Company since
1978 and as President of Wirtz Corporation, a diversified operations and
investment company, for more than the past five years.
3
Share Ownership of Directors and Executive Officers
The table below contains information as of November 16, 2001, concerning
the number of shares of Class A common stock and Class B common stock
beneficially owned by each director, each person named in the Summary
Compensation Table ("named executive officers") and by all directors and
executive officers as a group.
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Title of Amount and Nature of Beneficial Percent
Name of Beneficial Owner Class Ownership (1)(2) of Class
=========================================================================================================
Class A 15,000 (3) (4)
A. Robert Abboud Class B 2,000 (4)
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Class A 17,000 (5)
A. G. Atwater, Jr. Class B 0 (4)
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Class A 519,368 (6) 2.07%
Carol L. Bernick Class B 4,546,754 (6) 13.98%
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Class A 879,200 (7) 3.54%
Howard B. Bernick Class B 219,518 (7) (4)
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Class A 407,912 (8) 1.64%
Bernice E. Lavin Class B 4,104,714 (8) 12.62%
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Class A 427,082 (9) 1.72%
Leonard H. Lavin Class B 4,755,304 (9) 14.62%
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Class A 17,000 (10)
Allan B. Muchin Class B 0 (4)
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Class A 15,700 (11)
Robert H. Rock Class B 0 (4)
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Class A 2,000
Sam J. Susser Class B 0 (4)
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Class A 15,000 (12) (4)
Harold M. Visotsky Class B 1,000 (12) (4)
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Class A 597,000 (13) 2.40%
William W. Wirtz Class B 1,754,000 (13) 5.39%
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Class A 595,866 (14) 2.35%
Michael H. Renzulli Class B 166,011 (14) (4)
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All Directors and Executive Officers as a Class A 3,595,145 (15) 14.01%
Group (15 persons, including the above) Class B 15,574,111 (15) 47.88%
=========================================================================================================
4
(1) All, but not less than all, of the Class A shares may at any time be
converted into Class B shares on a share-for-share basis at the option of
the Company. The Class B shares are convertible into Class A shares on a
share-for-share basis at the option of the holder.
(2) Such ownership is direct, with sole voting and investment power, except as
indicated in subsequent footnotes. Unless otherwise specifically provided,
each person disclaims beneficial ownership of any shares indicated as owned
indirectly (i.e., as trustee or co-trustee of a trust or as an officer of a
foundation).
(3) Includes 3,750 Class A shares subject to stock options exercisable
currently or within 60 days.
(4) Less than 1.0% of the outstanding shares.
(5) Includes 12,721 Class A shares subject to stock options exercisable
currently or within 60 days.
(6) Includes 263,844 Class A shares subject to employee stock options
exercisable currently or within 60 days. Also includes 1,928,817 Class B
shares held as trustee of a trust for the benefit of Mrs. Bernick's sister;
222,527 Class B shares held as trustee of a trust for the benefit of Mrs.
Bernick's nephew; 80,088 Class A shares and 87,528 Class B shares held as
trustee of trusts for the benefit of certain of Mr. and Mrs. Bernick's
family members; 1,942,404 Class B shares and 175,000 Class A shares held as
trustee or co-trustee of trusts for the benefit of Mrs. Bernick; 100,000
Class B shares held as trustee of an insurance trust for the benefit of Mr.
and Mrs. Lavin's children and grandchildren; and 8,330 Class B shares held
as a participant in the Alberto-Culver Company Employees' Profit Sharing
Plan (the "Profit Sharing Plan"). Does not include 35,000 Class A shares
and 71,400 Class B shares held by the Bernick Family Foundation of which
Mrs. Bernick is a director and the President; 100,200 Class A shares and
300,600 Class B shares held as co-trustee with Mrs. Lavin of a trust for
the benefit of Mrs. Bernick; 64 Class A shares and 823,549 Class B shares
held as co-trustee of a trust with Mr. and Mrs. Lavin for the benefit of
Mrs. Lavin; 5,704 Class A shares and 823,529 Class B shares held as
co-trustee of a trust with Mr. and Mrs. Lavin for the benefit of Mr. Lavin;
and 421,378 Class A shares and 520,000 Class B shares owned by the Lavin
Family Foundation of which Mrs. Bernick is a director and an officer. In
addition, does not include shares reported as owned by Mr. Bernick, Mr.
Lavin or Mrs. Lavin.
(7) Includes 11,526 Class B shares held as a participant in the Profit Sharing
Plan; 47,910 Class B shares and 5,100 Class A shares held as co-trustee of
a trust for the benefit of certain of Mr. and Mrs. Bernick's family
members, for which Mr. Bernick shares voting and investment power; and
35,000 Class A shares and 71,400 Class B shares held by the Bernick Family
Foundation of which Mr. Bernick is a director and an officer and shares
voting and investment power with Mrs. Bernick. Does not include shares
reported as owned by Mrs. Bernick, Mr. Lavin or Mrs. Lavin.
(8) Includes 307,648 Class A shares and 393,936 Class B shares held as trustee
of trusts for the benefit of Mr. and Mrs. Lavin's children and
grandchildren; 100,200 Class A shares and 300,600 Class B shares held as
co-trustee with Mrs. Bernick of a trust for the benefit of Mrs. Bernick,
for which Mrs. Lavin shares voting and investment power with Mrs. Bernick;
2,586,335 Class B shares held as co-trustee of a trust with Mr. Lavin for
the benefit of Mrs. Lavin, for which Mrs. Lavin shares voting and
investment power with Mr. Lavin; and 823,549 Class B shares and 64
5
Class A shares held as co-trustee of a trust with Mr. Lavin and Mrs.
Bernick for the benefit of Mrs. Lavin, for which Mrs. Lavin shares voting
and investment power with Mr. Lavin and Mrs. Bernick. Does not include
5,704 Class A shares and 823,529 Class B shares held as co-trustee of a
trust with Mr. Lavin and Mrs. Bernick for the benefit of Mr. Lavin;
3,410,853 Class B shares held as co-trustee of a trust with Mr. Lavin for
the benefit of Mr. Lavin; and 421,378 Class A shares and 520,000 Class B
shares owned by the Lavin Family Foundation of which Mrs. Lavin is a
director and an officer. In addition, does not include shares reported as
owned by Mr. Lavin, Mr. Bernick or Mrs. Bernick.
(9) Includes 421,378 Class A shares and 520,000 Class B shares owned by the
Lavin Family Foundation of which Mr. Lavin is a director and the President
and shares voting and investment power with Mrs. Lavin and Mrs. Bernick;
823,529 Class B shares and 5,704 Class A shares held as co-trustee of a
trust with Mrs. Lavin and Mrs. Bernick for the benefit of Mr. Lavin, for
which Mr. Lavin shares voting and investment power with Mrs. Lavin and Mrs.
Bernick; and 3,410,853 Class B shares held as co-trustee of a trust with
Mrs. Lavin for the benefit of Mr. Lavin, for which Mr. Lavin shares voting
and investment power with Mrs. Lavin. Does not include 64 Class A shares
and 823,549 Class B shares held as co-trustee of a trust with Mrs. Lavin
and Mrs. Bernick for the benefit of Mrs. Lavin and 2,586,335 Class B shares
held as co-trustee of a trust with Mrs. Lavin for the benefit of Mrs.
Lavin. In addition, does not include shares reported as owned by Mrs.
Lavin, Mr. Bernick or Mrs. Bernick.
(10) Includes 15,000 Class A shares subject to stock options exercisable
currently or within 60 days.
(11) Includes 15,000 Class A shares subject to stock options exercisable
currently or within 60 days and 700 Class A shares held jointly with Mr.
Rock's wife.
(12) Includes 7,500 Class A shares subject to stock options exercisable
currently or within 60 days; and 7,500 Class A shares held as trustee of a
trust for the benefit of Dr. Visotsky's wife. Does not include 400 Class A
shares held in a trust for the benefit of Dr. Visotsky, for which trust Dr.
Visotsky's wife has sole voting and investment power.
(13) Includes 15,000 Class A shares subject to stock options exercisable
currently or within 60 days. Also includes 582,000 Class A shares and
1,746,000 Class B shares owned by Wirtz Corporation, of which Mr. Wirtz is
President and a director; and 8,000 Class B shares owned by William Wirtz
Pension Trust, of which Mr. Wirtz is a trustee.
(14) Includes 488,300 Class A shares subject to employee stock options
exercisable currently or within 60 days and 22,895 Class B shares held as a
participant in the Profit Sharing Plan.
(15) Includes 828,865 Class A shares subject to stock options exercisable
currently or within 60 days; 58,783 Class B shares held as participants in
the Profit Sharing Plan; and 6,792 Class B shares held as participants in
the Alberto-Culver 401(k) Savings Plan. Such persons have shared voting and
investment power as to 574,956 Class A shares and 8,584,176 Class B shares.
In addition, includes 8,500 Class A shares issued under the Alberto-Culver
Company 1994 Restricted Stock Plan ("Restricted Stock"), none of which have
vested. Holders of Restricted Stock have sole voting rights and no
dispositive rights with respect to those shares that have not vested.
6
Meetings and Committees of the Board of Directors
The board of directors of the Company held five scheduled meetings during
fiscal year 2001. No director attended fewer than three-fourths of the aggregate
number of meetings of the board of directors and of the committees of the board
of directors described below on which he or she served during the fiscal year.
There are four standing committees of the board of directors.
The audit committee, which is composed of A. Robert Abboud, Chairman, A.
G. Atwater, Jr., Allan B. Muchin, and Sam J. Susser, all of whom are independent
as defined in Sections 303.01(B)(2)(a) and (3) of the New York Stock Exchange's
listing standards, held nine meetings during fiscal year 2001. The audit
committee assists the board of directors in fulfilling its oversight
responsibilities relating to accounting, reporting practices, and the quality
and integrity of the financial reports and other publicly disseminated financial
information of the Company.
The executive committee, which is composed of Leonard H. Lavin, Chairman,
A. G. Atwater, Jr., Carol L. Bernick, Howard B. Bernick, Bernice E. Lavin, and
William W. Wirtz, held no meetings during fiscal year 2001. The executive
committee has many of the powers of the board of directors and can act when the
board of directors is not in session.
The compensation committee, which is composed of Robert H. Rock,
Chairman, A. Robert Abboud, Sam J. Susser and Harold M. Visotsky, held five
meetings during fiscal year 2001. The compensation committee reviews executive
performance and compensation and administers benefit plans pursuant to which
executive officers receive stock options, incentive awards, retirement income
and other compensation awards.
The nominating committee, which is composed of Leonard H. Lavin,
Chairman, A. Robert Abboud, Carol L. Bernick, Howard B. Bernick, Bernice E.
Lavin and Harold M. Visotsky, held no meetings during fiscal year 2001. The
function of the nominating committee is to evaluate and recommend persons to
fill vacancies or newly created positions on the board of directors and to
submit the names of those persons so recommended to the full board of directors
for approval. Stockholders may submit recommendations for nominations for
election to the board of directors. Additional information regarding the
stockholder recommendation procedure will be provided upon written request to
the Secretary of the Company. Stockholder nominations of directors are subject
to the notice requirements described under "Other Business" below.
7
Executive Compensation
The table below summarizes certain information with respect to
compensation paid by the Company or its subsidiaries to the Chief Executive
Officer and the four other most highly compensated executive officers of the
Company for the past three fiscal years.
=========================================================================================================================
SUMMARY COMPENSATION TABLE
=========================================================================================================================
Annual Compensation Long-Term Compensation
------------------------------------------------------------
Awards Payouts
-------------------------------
Name Securities
and Underlying LTIP All Other
Principal Salary Bonus Options Payouts Compensation
Position Year ($) ($) (#) ($)(1) ($)
========================================================================================================================
Leonard H. Lavin, 2001 $ 1,218,756 $ 1,598,000 0 $ 1,741,200 $ 244,583 (2)
Chairman 2000 1,200,000 821,000 0 0 217,827
1999 1,200,000 556,000 0 0 206,791
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Bernice E. Lavin, 2001 $ 643,755 $ 718,000 0 $ 551,380 $ 244,583 (2)
Vice Chairman, 2000 625,008 346,000 0 0 217,827
Secretary and Treasurer 1999 625,008 262,000 0 0 206,791
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Howard B. Bernick, 2001 $ 1,450,000 $ 1,901,000 224,000 $ 1,958,850 $ 16,448 (3)
President and Chief 2000 1,425,000 975,000 224,000 0 16,249
Executive Officer 1999 1,350,000 625,000 208,000 0 15,664
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Carol L. Bernick, 2001 $ 837,500 $ 934,000 90,000 $ 609,420 $ 16,448 (3)
Vice Chairman, Assistant 2000 775,005 429,000 84,000 0 16,249
Secretary and President 1999 641,674 293,000 60,000 0 15,664
Alberto-Culver North
America
------------------------------------------------------------------------------------------------------------------------
Michael H. Renzulli, 2001 $ 862,500 $ 1,142,000 90,000 $ 609,420 $ 21,956 (4)
President, Sally Beauty 2000 806,250 1,000,000 90,000 0 21,523
Company, Inc. 1999 737,502 655,000 60,000 0 20,632
========================================================================================================================
(1) For the three-year performance period ended September 30, 2001, the total
shareholder return on the Company's Class A shares was 62.75%, placing it
in the 88.6th percentile of the Standard & Poor's 500 Index with a
corresponding payout per unit of $2,902 under the 1994 Shareholder Value
Incentive Plan ("SVIP"). For the three-year performance period ended
September 30, 2000, the total shareholder return on the Company's Class A
shares was -2%, placing it in the 49th percentile of the Standard &
Poor's 500 Index with no corresponding payout per SVIP unit. For the
three-year performance period ended September 30, 1999, the total
shareholder return on the Company's Class A shares was 16%, placing it in
the 35th percentile of the Standard & Poor's 500 Index with no
corresponding payout per SVIP unit.
(2) For Mr. and Mrs. Lavin, the amount for each includes $13,350 of imputed
income from life insurance; an annual contribution to the Profit Sharing
Plan of $11,428; $216,405 of imputed income from split-dollar life
insurance policies; and $3,400 of matching contributions to the
Alberto-Culver 401(k) Savings Plan.
8
(3) For Mr. and Mrs. Bernick, the amount for each includes $1,620 of imputed
income from life insurance; an annual contribution to the Profit Sharing
Plan of $11,428; and $3,400 of matching contributions to the Alberto-Culver
401(k) Savings Plan.
(4) The amount includes $7,128 of imputed income from life insurance; an annual
contribution to the Profit Sharing Plan of $11,428; and $3,400 of matching
contributions to the Alberto-Culver 401(k) Savings Plan.
Director Compensation
Effective as of October 1, 2001, each non-employee director's annual
retainer was increased from $25,000 to $35,000. Non-employee directors receive
$1,500 for (i) each meeting of the board of directors attended and (ii) each
meeting of the audit, executive and compensation committees attended and $750
for each conference call audit committee meeting attended. The chairman of the
audit committee and the chairman of the compensation committee receive an
additional annual retainer of $3,500. Employee directors receive no additional
compensation for serving on the board of directors or its committees.
In addition, each non-employee director participates in the 1994 Stock
Option Plan For Non-Employee Directors (the "Director Plan"). Under the Director
Plan, a non-qualified option to purchase 7,500 shares of Class A common stock is
automatically granted to each non-employee director upon his or her initial
election to the board of directors. The exercise price of options granted under
the Director Plan is the fair market value of a share of Class A common stock on
the date options are granted. Options are granted for a ten-year term and become
exercisable in four equal annual installments commencing one year after the date
of grant.
Subject to shareholder re-approval, the Director Plan will be amended so
that each non-employee director will automatically be granted a non-qualified
option to purchase 2,500 shares of Class A common stock as of the day of each
regularly scheduled annual meeting of the stockholders of the Company,
commencing at the annual meeting scheduled on January 24, 2002. The Director
Plan and the material amendments are described in greater detail under
"Re-Approval of the 1994 Stock Option Plan For Non-Employee Directors, As
Amended."
On July 26, 2001, the board of directors approved the Deferred Compensation
Plan for Non-Employee Directors (the "DCP"). Under the DCP, effective as of
January 1, 2002, each non-employee director may elect to defer his or her annual
retainer and meeting fees ("Director Fees") paid during each calendar year,
receive shares of Class B common stock on a quarterly basis equal to the
Director Fees payable during such period or receive cash payable under the
current payment system. With respect to deferrals, non-employee directors may
defer their Director Fees in cash or in common stock units where each unit is
equivalent to one share of Class B common stock. Dividends that a director would
have received as an owner of Class B common stock will be reinvested into units
equal to a commensurate number of additional Class B shares. Director Fees may
be deferred at the election of each non-employee director until (i) one month
after such director's service on the board of directors ends or (ii) any date
selected by such board member. The interest rate earned on money deferred under
the DCP is determined by the compensation committee and shall be equal to the
interest rate earned on money deferred under the Executive Deferred Compensation
Plan. See "Executive Deferred Compensation Plan" below.
9
Stock Option Grants
The table below sets forth certain information with respect to options
granted to the named executive officers during the fiscal year ended September
30, 2001. All of these options were granted on October 1, 2000.
============================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
============================================================================================================================
INDIVIDUAL GRANTS
==========================================================================================
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation for
Number of Option Term (2)
Securities Percent of Total
Underlying Options ----------------------------------
Options Granted Exercise
Granted (1) to Employees Price Expiration
Name (#) in Fiscal Year ($/sh) Date 5%($) 10%($)
============================================================================================================================
Leonard H. Lavin 0 0 - - 0 0
----------------------------------------------------------------------------------------------------------------------------
Bernice E. Lavin 0 0 - - 0 0
----------------------------------------------------------------------------------------------------------------------------
Howard B. Bernick 224,000 13.2% $24.9375 09/30/10 $3,513,005 $8,902,645
----------------------------------------------------------------------------------------------------------------------------
Carol L. Bernick 90,000 5.3% $24.9375 09/30/10 $1,411,475 $3,576,956
----------------------------------------------------------------------------------------------------------------------------
Michael H. Renzulli 90,000 5.3% $24.9375 09/30/10 $1,411,475 $3,576,956
============================================================================================================================
(1) Options are granted under the Alberto-Culver Company Employee Stock Option
Plan of 1988 (the "ACSOP") which permits the compensation committee to
grant non-qualified options to purchase shares of Class A common stock. All
options granted have a term of ten years from the date of grant and an
exercise price per share equal to the fair market value of a share of Class
A common stock on the date of grant. Options become exercisable on a
cumulative basis in annual increments of one-fourth of the optioned shares,
commencing one year after the date of grant. The compensation committee may
accelerate the exercisability of any options subject to such terms and
conditions as it deems necessary and appropriate. In the event of a change
in control, as defined in the ACSOP and summarized below under "Employment
Contracts, Termination of Employment and Change in Control Arrangements,"
all stock option awards will be immediately vested and all outstanding
stock option awards will, depending on the type of consideration given to
stockholders in connection with the change in control, either become
options to purchase shares of the acquiring corporation or be canceled and
option holders will receive a cash payment in lieu of the exercise of such
option awards.
(2) The dollar amounts in these columns assume that the market price per share
of Class A common stock appreciates in value from the date of grant to the
expiration date of the option at the annualized rates indicated. These
rates are set by the Securities and Exchange Commission and are not
intended to forecast possible future appreciation, if any, of the price of
Class A common stock.
10
Stock Option Exercises and Fiscal Year-End Option Values
The table below sets forth certain information with respect to the exercise
of options during the fiscal year ended September 30, 2001 by the named
executive officers and the fiscal year-end value of unexercised in-the-money
options held by such officers.
==========================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
==========================================================================================================
Number of Securities
Underlying Value of
Unexercised Unexercised
Options at In-The-Money
Fiscal Options at
Year-End Fiscal Year-End (2)
Shares Value (#) ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
==========================================================================================================
Leonard H. Lavin (1) 0 0 0/0 0/0
----------------------------------------------------------------------------------------------------------
Bernice E. Lavin (1) 0 0 0/0 0/0
----------------------------------------------------------------------------------------------------------
Howard B. Bernick 0 0 679,100/332,000 $8,099,293/$3,430,812
----------------------------------------------------------------------------------------------------------
Carol L. Bernick 0 0 263,844/124,500 $3,481,064/$1,270,523
----------------------------------------------------------------------------------------------------------
Michael H. Renzulli 20,000 $391,875 488,300/127,500 $8,277,343/$1,309,976
==========================================================================================================
(1) Mr. and Mrs. Lavin have elected not to receive stock option grants since
the inception of the ACSOP and under the stock option plans of the Company
that preceded it.
(2) Based on the average of the high and low trading price of Class A common
stock ($32.995 per share) on September 28, 2001, the last trading day of
the fiscal year.
11
Long-Term Incentive Awards
The table below sets forth certain information with respect to the grant
of performance units under the SVIP during the fiscal year ended September 30,
2001 to the named executive officers.
=========================================================================================================================
LONG-TERM INCENTIVE PLAN --
AWARDS IN LAST FISCAL YEAR
=========================================================================================================================
Estimated Future Payouts Under Non-Stock Price-Based Plans
Number of Performance or =========================================================
Shares, Units or Other Period
Other Rights Until
(#) (1) Maturation or Threshold Target Maximum
Name Payout ($) ($) ($)
=========================================================================================================================
Leonard H. Lavin 600 3 years $300,000 $600,000 $1,800,000
-------------------------------------------------------------------------------------------------------------------------
Bernice E. Lavin 250 3 years 125,000 250,000 750,000
-------------------------------------------------------------------------------------------------------------------------
Howard B. Bernick 725 3 years 362,500 725,000 2,175,000
-------------------------------------------------------------------------------------------------------------------------
Carol L. Bernick 320 3 years 160,000 320,000 960,000
-------------------------------------------------------------------------------------------------------------------------
Michael H. Renzulli 330 3 years 165,000 330,000 990,000
=========================================================================================================================
(1) Awards under the SVIP are made in the form of performance units, each unit
having a payout value of $500 if the threshold performance level is
attained, $1,000 if the target performance level is attained and $3,000 if
the maximum performance level is attained. Units will have no value if the
threshold performance level is not attained. In the event of a change in
control, payouts of awards may be reduced (but not below zero) under
certain circumstances, so as not to constitute "excess parachute payments"
within the meaning of the Internal Revenue Code (the "Code").
Performance units were granted at the beginning of fiscal year 2001 for the
three-year performance period ending September 30, 2003. At the time the
performance units were granted, the compensation committee established
objectives for such three-year performance period based on the percentile
ranking of the total shareholder return of the Class A common stock among
the total shareholder returns of the companies comprising the Standard &
Poor's 500 Index. Participants may elect to receive all or a portion of
their award, less applicable withholding taxes, in Class A common stock.
Participants owning shares of Class A and Class B common stock having a
dollar value below a level determined by the compensation committee will be
required to take at least 50% of their award, less applicable withholding
taxes, in Class A common stock. In the event of a change in control, as
defined in the SVIP and summarized below under "Employment Contracts,
Termination of Employment and Change in Control Arrangements," all or a
pro-rata portion of the outstanding performance units, based on the number
of fiscal years of each performance period that have elapsed and the
percentile ranking of the Company based on the total shareholder return of
the Class A common stock as of the date of the change in control compared
to the total shareholder return of the companies comprising the index
chosen for each such performance period
12
by the compensation committee from among those indexes specified in the
SVIP ("Applicable Index") as of the end of the last quarter for which such
information is available, will become payable in cash within 30 days
following such change in control, subject to any reduction of such payment
pursuant to the preceding paragraph. If at least six full calendar months
of any fiscal year have elapsed, the entire fiscal year shall be deemed to
have elapsed.
Subject to stockholder approval, effective for grants made on or after July
26, 2001, the SVIP will be amended to (i) decrease the maximum payout from
$3,000 per unit to $2,000 per unit, (ii) prohibit any payout if the
Company's total shareholder return compared to the total shareholder return
of companies comprising the Applicable Index would rank it at less than the
40th percentile (currently payouts are prohibited if the Company's total
shareholder return would rank it below the 50th percentile) and (iii)
permit the compensation committee to reduce or eliminate any award
otherwise payable if the Company's total shareholder return for the
applicable performance period is negative. The SVIP and the material
amendments are described in greater detail under "Re-Approval of the 1994
Shareholder Value Incentive Plan, As Amended."
Employment Contracts, Termination of Employment and Change in Control
Arrangements
Beginning in 1996, the board of directors approved severance agreements
with the Company's named executive officers which provide payments and benefits
if such officer's employment with the Company terminates under the circumstances
set forth in the severance agreement within two years after a change in control,
as defined in the agreement and summarized below. The severance agreement for
each named executive officer provides for a payment in the amount which, when
added to any other payments subject to the limitation set forth in Section 280G
of the Code, equals 2.99 times such officer's "base amount" as such term is
defined in Section 280G(b)(3) of the Code. Such payment shall be in lieu of any
other amount of severance relating to salary or bonus continuation to be
received by such officer upon termination of employment under any other
severance plan or arrangement of the Company. The severance agreements provide
for continuation of such officer's health, life, disability and similar
insurance benefits for up to a three-year period. These agreements also provide
for payment to the named executive officer of accrued salary and vacation pay,
and of all amounts which he or she would otherwise be eligible to receive under
the Company's incentive plans applicable to the fiscal year in which the
termination occurs. The amounts payable to such an officer under each severance
agreement may be reduced so as to not exceed the limitation on tax deductibility
of such payments set forth in Section 280G of the Code.
Stock options granted to named executive officers under the ACSOP will be
immediately vested upon the occurrence of a change in control, as defined in the
ACSOP and summarized below, and all outstanding stock options will, depending on
the type of consideration given to stockholders in connection with the change in
control, either become options to purchase shares of the acquiring corporation
or be canceled and option holders will receive a cash payment in lieu of the
exercise of such options. In addition, the payment of awards under the
Management Incentive Plan ("MIP") and the SVIP will be accelerated, and all or a
pro-rata portion of each such award will become payable as provided in such
plans, upon the occurrence of a change in control, as defined in such plans and
13
summarized below. Under certain circumstances, awards paid pursuant to grants
made under the SVIP may be reduced. See "Long-Term Incentive Awards" above.
The definition of a change in control is the same for each of the severance
agreements, ACSOP, SVIP, MIP and Director Plan. Generally, a change in control
is defined as the occurrence of any of the following: (i) the acquisition by any
individual, entity or group of both 20% or more of the combined voting power of
the outstanding voting securities of the Company and combined voting power in
excess of the combined voting power held by the Exempt Persons, as defined
below, (ii) the cessation of the individuals who comprise the Incumbent Board,
as defined below, to constitute a majority of the board of directors of the
Company, (iii) except as provided in the next sentence, the approval by the
stockholders of the Company of any merger, reorganization, consolidation or sale
or other disposition (other than a tax-free spin-off of a subsidiary or other
business unit of the Company) of all or substantially all of the assets of the
Company (collectively, a "Fundamental Change") or (iv) the approval by the
stockholders of the Company of the complete liquidation or dissolution of the
Company. A Fundamental Change will not be a change in control if (a) immediately
after such Fundamental Change more than 60% of the combined voting power of the
then outstanding voting securities of the resulting corporation or the Company,
as the case may be, is then owned by all or substantially all of the individuals
and entities who were the owners of the combined voting power of the outstanding
voting securities of the Company immediately prior to such Fundamental Change
and (b) a majority of the members of the board of directors of the resulting or
acquiring corporation, as the case may be, were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the board of
directors of the Company providing for such Fundamental Change.
A change in control will not be deemed to occur through the acquisition of
voting securities of the Company if they were acquired (i) by an Exempt Person,
an employee benefit plan or trust sponsored or maintained by the Company or any
corporation controlled by the Company or (ii) through an exercise, conversion or
exchange privilege acquired directly from the Company. In addition, a change in
control will not be deemed to occur if such change in control resulted from the
Company acquiring its own voting securities. Exempt Persons are defined as: (i)
Mr. and Mrs. Lavin, their descendants and spouses of their descendants, and (ii)
any estate of any such individuals or any trust or similar arrangement or
charitable organization established by or for the benefit of any such
individuals. Incumbent Board is defined as those individuals who comprised the
board of directors of the Company as of October 24, 1996 and any individual who
becomes a director subsequent to such date whose election or nomination was
approved by either a majority of the Incumbent Board or at least a majority of
the combined voting power held by the Exempt Persons.
Key Executive Deferred Compensation Agreements
Upon retiring on or after reaching a specified retirement age, each of the
named executive officers will be entitled to receive the amount of compensation
as set forth in his or her deferred compensation agreement payable in equal
monthly installments. Payments range up to a maximum of $400,000 per year and
are payable over a maximum of 15 years. If the named executive officer is
terminated for any reason prior to his or her specified retirement age, such
executive shall not be entitled to receive any
14
payments under his or her deferred compensation agreement. In the event the
executive dies (and was not terminated by the Company) prior to reaching his or
her retirement age, the individual(s) designated by such executive will be
entitled to 50% of the deceased executive's deferred benefit. Executives
retiring prior to their specified retirement age may, at the discretion of a
committee of the board of directors, receive all or a portion of those benefits
they would have been entitled to receive had they retired at their specified
retirement age.
Payments are conditioned upon the named executive officer rendering such
reasonable business consulting and advisory services to the Company or any
subsidiary as the Chief Executive Officer deems desirable. No executive will be
obligated to provide more than eight hours of consulting and advisory services a
month without additional compensation. If the executive commits an act of
disloyalty, as defined in the deferred compensation agreements, to the Company
or any of its subsidiaries, the executive shall have no right to receive any
payments under these agreements. The obligations of the Company under these
agreements are unfunded and unsecured promises to pay. The Company has
voluntarily elected to purchase insurance policies covering the life of each
named executive officer. The Company is the sole owner and beneficiary of these
policies which have a face value in excess of the present value of all of the
amounts payable under all deferred compensation agreements combined.
Executive Deferred Compensation Plan
Effective January 1, 1999, the board of directors approved the Executive
Deferred Compensation Plan for all "highly compensated employees" within the
meaning of Section 414(q) of the Code, which includes all of the named executive
officers. All eligible employees may elect to defer all or a portion of their
salary and commissions ("Compensation"). Compensation may be deferred for any
period of time, provided it is no less than three years, and can be paid out to
the employee in a lump sum payment or annually over any period not to exceed
five years. The compensation committee determines the rate of interest earned on
money deferred under the plan, and may change that rate as it deems appropriate.
Such rate is currently 7% per annum. Under certain circumstances, employees who
are unable to receive the maximum Company matching contribution they would have
otherwise received (the "Maximum Match") under the Alberto-Culver or Sally
Beauty 401(k) Savings Plans because of limitations under the Code, will be
credited in this plan with an amount equal to the difference between the Maximum
Match and the amount of the matching contribution such employee actually
received in such 401(k) plan. Such contribution will be (i) made by the Company,
(ii) immediately vested and (iii) required to be deferred in this plan until the
termination of such employee's employment with the Company.
15
Compensation Committee Report
The compensation committee is comprised of Robert H. Rock, Chairman, A.
Robert Abboud, Sam J. Susser, and Harold M. Visotsky. The compensation committee
is responsible for reviewing executive performance and compensation, approving
employment agreements with executive officers and administering benefit plans
pursuant to which executive officers receive stock options, incentive awards,
retirement income and other compensation awards.
The Company's objectives for its executive compensation program are:
. To attract, motivate and retain highly qualified individuals.
. To link the interests of executive officers closely with those of the
Company's stockholders.
. To increase the personal stake of the executive officers in the
continued success and growth of the Company by linking a significant
portion of executive officers' compensation to the performance of the
Company.
In order to achieve these objectives, executive compensation for the last
fiscal year was comprised principally of three components: base salary, annual
bonus and long-term incentive compensation.
Base Salary
Base salaries of executive officers are reviewed annually by the
compensation committee and may be adjusted appropriately effective the beginning
of each calendar year. The factors used in determining an executive officer's
base salary are the duties and level of responsibility of the executive officer,
the past performance of the executive officer, the performance of the executive
officer's principal business unit, if any, the performance of the Company and
the recommendations of management. The compensation committee exercises its
judgment in making a determination of the impact which each of these factors has
on setting the executive officers' salaries.
Annual Bonus
Annual bonuses are awarded pursuant to the MIP. The primary objective of
the MIP is to strongly link incentive awards to measurable performance and
provide higher rewards for exceptional performance.
An executive officer's bonus award opportunity is allocated among one or
more of the following criteria: (i) sales of the Company, a subsidiary or a
division; (ii) pre-tax earnings of the Company, a subsidiary or a division;
(iii) except for the named executive officers, any other measurements the
compensation committee may determine; and (iv) except for the named executive
officers, individual business objectives. The compensation committee may modify
the above criteria during the plan year
16
as deemed appropriate; but may not modify these criteria for the named executive
officers so as to increase the award payable to such persons.
Actual awards can range from 0% to 200% of an executive officer's base
salary depending on the level of performance achieved. The compensation
committee may increase or decrease an individual award to a participant, other
than the named executive officers, by up to 25% of such participant's base
salary based upon such factors and circumstances as the compensation committee
deems appropriate. The named executive officers' fiscal year 2001 annual
incentive awards under the MIP were formula based and reflected the tenth
consecutive year of record sales and record pre-tax earnings performance for the
Company.
Long-Term Incentive Compensation
The Company's long-term incentive compensation program consists of grants
of stock options and performance units.
Stock options were granted to executive officers under the ACSOP.
Non-qualified stock options were granted for a term of ten years with an option
exercise price equal to the fair market value of a share of the Class A common
stock on the date of grant. Stock options become exercisable in four equal
annual increments commencing one year after the date of grant.
Executive officers were also granted performance units pursuant to the
SVIP. Each performance unit has a payout value of $500 if the threshold
performance level is attained, $1,000 if the target performance level is
attained and $3,000 if the maximum performance level is attained. The threshold,
target and maximum performance levels are attained when the total shareholder
return on Class A shares meets or exceeds the total shareholder return of 50%,
60% and 90% of the companies in the Standard & Poor's 500 Index, respectively,
over a three-year performance period. Under certain circumstances, such awards
will be paid in Class A common stock. See "Long-Term Incentive Awards" above.
Units will have no value if the threshold performance level is not attained for
a given performance period.
At the time performance units were granted, the compensation committee,
based on the recommendations of management and in consultation with the
Company's outside compensation consultants, established objectives for the
three-year performance period, October 1, 2000 through September 30, 2003, based
on the percentile ranking of the Class A common stock measured by total
shareholder return among companies comprising the Standard & Poor's 500 Index.
For the three-year performance period ended September 30, 2001, the total
shareholder return on the Company's Class A common stock was 62.75%, placing it
in the 88.6th percentile of the Standard & Poor's 500 Index with a corresponding
payout per unit of $2,902.
Subject to shareholder re-approval, for grants made on or after July 26,
2001, the SVIP will be amended to (i) decrease the maximum payout from $3,000
per unit to $2,000 per unit, (ii) prohibit any payout if the Company's total
shareholder return compared to the total shareholder return of companies
17
comprising the Applicable Index would rank it at less than the 40th percentile
(currently payouts are prohibited if the Company's total shareholder return
would rank it below the 50th percentile) and (iii) permit the compensation
committee to reduce or eliminate any award otherwise payable if the Company's
total shareholder return for the applicable performance period is negative. The
SVIP and the material amendments are described in greater detail under
"Re-Approval of the 1994 Shareholder Value Incentive Plan, As Amended" below.
Decisions with respect to grants of stock options and performance units to
executive officers were made based on formulas proposed by the Company's outside
compensation consultants. Under these formulas, executive officers received
grants of stock options and performance units having a value equal to a
percentage of his or her base salary. The number of stock options and
performance units granted were then adjusted for certain executive officers
based on the same factors used for determining base salary.
In fiscal year 1997, the compensation committee established stock ownership
guidelines for all SVIP participants. Under these guidelines, the Chairman and
the Chief Executive Officer are required to have at least five times, and senior
officers, including the other named executive officers, are required to have at
least three times, the amount of their annual base salary invested in common
stock of the Company. Participants have until the year 2002 or within five years
of first becoming a participant in the SVIP, whichever is later, to achieve
these stock ownership guidelines. In addition, in fiscal year 1997 the
compensation committee established stock ownership guidelines for outside
directors. Under these guidelines, outside directors are required to have at
least $100,000 invested in the common stock of the Company by the year 2002 or
within five years of their initial election to the board of directors, whichever
is later.
Chief Executive Officer Compensation
Howard B. Bernick's fiscal year 2001 total compensation was established
considering competitive market comparisons, Company performance, which included
records in each of sales, pre-tax earnings, net earnings and earnings per share
for the tenth consecutive year, and the executive compensation philosophy
established by the compensation committee. This philosophy targets total
compensation at competitive levels and provides significant performance-based
variable compensation opportunities.
Mr. Bernick's fiscal year 2001 annual incentive award under the MIP was
formula based and reflected record sales and record pre-tax earnings
performance.
The number of stock options and performance units granted to Mr. Bernick
was based on formulas proposed by the Company's outside compensation consultants
and reviewed and approved by the compensation committee. Under these formulas,
Mr. Bernick's grants were equal to a percentage of his base salary.
18
Deductibility of Compensation
As part of the Omnibus Budget Reconciliation Act passed by Congress in
1993, the Code was amended to add Section 162(m) which limits the deductibility
for federal income tax purposes of compensation paid to the Chief Executive
Officer and the four other most highly compensated officers of the Company.
Under Section 162(m), compensation paid to each of these officers in excess of
$1.0 million per year is deductible by the Company only if it is
"performance-based."
It is the Company's policy to take into account the deductibility for
federal income tax purposes of the compensation paid to its executive officers.
The Company believes that all bonuses and awards paid to executive officers
under the MIP and SVIP, respectively, will be tax deductible and that any
compensation generated upon the exercise of non-qualified stock options granted
under the ACSOP will be tax deductible by the Company.
Compensation Committee Members
Robert H. Rock, Chairman
A. Robert Abboud
Sam J. Susser
Harold M. Visotsky
19
Audit Committee Report
The primary purpose of the audit committee is to assist the board of
directors in fulfilling its oversight responsibilities relating to accounting,
reporting practices and the quality and integrity of the financial reports and
other publicly disseminated financial information of the Company. In this
context, the audit committee has met with management (including the Chief
Executive Officer, Chief Financial Officer and Vice President of Corporate
Audit) and KPMG LLP, the Company's independent public accountants ("Independent
Auditors").
The audit committee held meetings with the Company's internal auditors
and Independent Auditors, both in the presence of management and privately, to
discuss the overall scope and plans for their respective audits, the results of
their examinations, the evaluations of the Company's internal controls, and the
overall quality of the Company's financial reports.
The audit committee has reviewed and discussed the audited consolidated
financial statements with management and the Independent Auditors. The audit
committee also discussed with the Independent Auditors the matters required by
Statement on Auditing Standards No. 61 ("Communication With Audit Committees").
With respect to independence, the audit committee has received the
written disclosures and the letter from the Independent Auditors required by the
Independence Standards Board Standard No. 1 ("Independence Discussions With
Audit Committees") and has discussed with the Independent Auditors their
independence.
Based upon the reviews and discussions referred to above, the audit
committee recommended to the board of directors, and the board has approved, (i)
the selection of the Independent Auditors for the 2002 fiscal year and (ii) that
the audited financial statements be included in the Company's Annual Report on
Form 10-K for the year ended September 30, 2001 for filing with the Securities
and Exchange Commission.
Audit Committee Members
A. Robert Abboud, Chairman
A.G. Atwater, Jr.
Sam J. Susser
Allan B. Muchin
20
Audit and Related Fees
Audit Fees
The aggregate fees billed for professional services rendered for the
audit of the Company's annual financial statements for the fiscal year ended
September 30, 2001 and for the reviews of the financial statements included in
the Company's Quarterly Reports on Form 10-Q for that fiscal year were $945,000.
Financial Information Systems Design and Implementation Fees
KPMG LLP did not render professional services relating to financial
information systems design and implementation for the fiscal year ended
September 30, 2001.
All Other Fees
The aggregate fees billed by KPMG LLP for services rendered to the
Company, other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees" for the fiscal
year ended September 30, 2001, were $965,000.
The Company's Audit Committee considered whether the non-audit services
rendered by KPMG LLP to the Company was compatible with maintaining KPMG LLP's
independence.
21
Performance Graph
The following graph compares the cumulative total shareholder return on
the Company's Class A common stock and Class B common stock, the Standard &
Poor's 500 Index, and a selected peer group of companies for the last five
fiscal years. During 2001, the Company changed its peer group by removing one
company and adding 11 companies. The Company changed the peer group to make it
more representative of the Company's operations.
The new peer group consists of four companies from the old peer group,
Church & Dwight Co., Inc., Claire's Stores, Inc., McCormick & Company,
Incorporated, and Regis Corporation, as well as the following new companies:
Avon Products, Inc., The Clorox Company, The Dial Corp., Dollar General
Corporation, Family Dollar Stores, Inc., The Estee Lauder Companies Inc., Linens
`N Things, Inc., Michaels Stores, Inc., Payless Shoesource, Inc., Playtex
Products, Inc. and Revlon, Inc. The old per group consists of Applica,
Incorporated, Carter-Wallace, Inc., Chattem, Inc., Church & Dwight Co., Inc.,
Claire's Stores, Inc., Del Laboratories, Inc., E Com Ventures, Inc., Helen of
Troy Limited, McCormick & Company, Incorporated, Radio Shack Corporation and
Regis Corporation. Block Drug Company, Inc. dropped out of the old peer group
during the year as a result of an acquisition.
For the purpose of calculating the peer group average, the cumulative
total shareholder returns of each company have been weighted according to its
stock market capitalization at the beginning of the fiscal year. The graph
assumes $100 was invested on September 30, 1996 and that all dividends were
reinvested.
[Performance Graph Appears Here]
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
Alberto-Culver Class A $142 119 110 143 190
Alberto-Culver Class B 141 109 109 138 187
S & P 500 Index 140 153 196 222 163
Peer Group - New 139 147 172 169 174
Peer Group - Old 138 168 250 280 186
22
Principal Stockholders
The table below contains information as of November 16, 2001, unless
otherwise specified in the footnotes, concerning stock ownership by each person
known to beneficially own 5% or more of either class of the Company's
outstanding shares of common stock, based upon information supplied to the
Company by such persons.
Name and Address Amount and Nature of
of Beneficial Owner Title of Class Beneficial Ownership (1)(2) Percent of Class
------------------- -------------- --------------------------- ----------------
Leonard H. Lavin Class A 427,082 (3) 1.72%
2525 Armitage Avenue Class B 4,755,304 (3) 14.62%
Melrose Park, IL 60160
Bernice E. Lavin Class A 407,912 (4) 1.64%
2525 Armitage Avenue Class B 4,104,714 (4) 12.62%
Melrose Park, IL 60160
Carol L. Bernick Class A 519,368 (5) 2.07%
2525 Armitage Avenue Class B 4,546,754 (5) 13.98%
Melrose Park, IL 60160
William W. Wirtz Class A 597,000 (6) 2.40%
680 North Lake Shore Drive Class B 1,754,000 (6) 5.39%
Chicago, IL 60611
Barclays Global Investors Class B 1,496,272 (7) 4.60%
46 Fremont Street, 17th Floor
San Francisco, CA 94105
FMR Corp. Class A 4,663,390 (8) 18.77%
82 Devonshire Street Class B 2,468,890 (8) 7.59%
Boston, MA 02109
Franklin Resources, Inc. Class A 1,354,350 (9) 5.45%
777 Mariners Island Blvd.
San Mateo, CA 94403
Neuberger Berman, LLC Class A 1,876,600 (10) 7.55%
605 Third Avenue
New York, NY 10158
State Street Global Advisors Class B 1,360,143 (11) 4.18%
One International Place
Boston, MA 02120
(1) All, but not less than all, of the Class A shares may at any time be
converted into Class B shares on a share-for-share basis at the option of
the Company. The Class B shares are convertible into Class A shares on a
share-for-share basis at the option of the holder.
(2) Such ownership is direct, with sole voting and investment power, except as
indicated in subsequent footnotes. Unless otherwise specifically provided,
each individual disclaims
23
beneficial ownership of any shares indicated as owned indirectly (i.e., as
trustee or co-trustee of a trust or as an officer of a foundation).
(3) Includes 421,378 Class A shares and 520,000 Class B shares owned by the
Lavin Family Foundation of which Mr. Lavin is a director and the President
and shares voting and investment power with Mrs. Lavin and Mrs. Bernick;
823,529 Class B shares and 5,704 Class A shares held as co-trustee of a
trust with Mrs. Lavin and Mrs. Bernick for the benefit of Mr. Lavin, for
which Mr. Lavin shares voting and investment power with Mrs. Lavin and Mrs.
Bernick; and 3,410,853 Class B shares held as co-trustee of a trust with
Mrs. Lavin for the benefit of Mr. Lavin, for which Mr. Lavin shares voting
and investment power with Mrs. Lavin. Does not include 64 Class A shares
and 823,549 Class B shares held as co-trustee of a trust with Mrs. Lavin
and Mrs. Bernick for the benefit of Mrs. Lavin and 2,586,335 Class B shares
held as co-trustee of a trust with Mrs. Lavin for the benefit of Mrs.
Lavin. In addition, does not include shares reported as owned by Mrs.
Lavin, Mr. Bernick or Mrs. Bernick.
(4) Includes 307,648 Class A shares and 393,936 Class B shares held as trustee
of trusts for the benefit of Mr. and Mrs. Lavin's children and
grandchildren; 100,200 Class A shares and 300,600 Class B shares held as
co-trustee with Mrs. Bernick of a trust for the benefit of Mrs. Bernick,
for which Mrs. Lavin shares voting and investment power with Mrs. Bernick;
2,586,335 Class B shares held as co-trustee of a trust with Mr. Lavin for
the benefit of Mrs. Lavin, for which Mrs. Lavin shares voting and
investment power with Mr. Lavin; and 823,549 Class B shares and 64 Class A
shares held as co-trustee of a trust with Mr. Lavin and Mrs. Bernick for
the benefit of Mrs. Lavin, for which Mrs. Lavin shares voting and
investment power with Mr. Lavin and Mrs. Bernick. Does not include 5,704
Class A shares and 823,529 Class B shares held as co-trustee of a trust
with Mr. Lavin and Mrs. Bernick for the benefit of Mr. Lavin; 3,410,853
Class B shares held as co-trustee of a trust with Mr. Lavin for the benefit
of Mr. Lavin; and 421,378 Class A shares and 520,000 Class B shares owned
by the Lavin Family Foundation of which Mrs. Lavin is a director and an
officer. In addition, does not include shares reported as owned by Mr.
Lavin, Mr. Bernick or Mrs. Bernick.
(5) Includes 263,844 Class A shares subject to employee stock options
exercisable currently or within 60 days. Also includes 1,928,817 Class B
shares held as trustee of a trust for the benefit of Mrs. Bernick's sister;
222,527 Class B shares held as trustee of a trust for the benefit of Mrs.
Bernick's nephew; 80,088 Class A shares and 87,528 Class B shares held as
trustee of trusts for the benefit of certain of Mr. and Mrs. Bernick's
family members; 1,942,404 Class B shares and 175,000 Class A shares held as
trustee or co-trustee of trusts for the benefit of Mrs. Bernick; 100,000
Class B shares held as trustee of an insurance trust for the benefit of Mr.
and Mrs. Lavin's children and grandchildren; and 8,330 Class B shares held
as a participant in the Profit Sharing Plan. Does not include 35,000 Class
A shares and 71,400 Class B shares held by the Bernick Family Foundation of
which Mrs. Bernick is a director and the President; 100,200 Class A shares
and 300,600 Class B shares held as co-trustee with Mrs. Lavin of a trust
for the benefit of Mrs. Bernick; 64 Class A shares and 823,549 Class B
shares held as co-trustee of a trust with Mr. and Mrs. Lavin for the
benefit of Mrs. Lavin; 5,704 Class A shares and 823,529 Class B shares held
as co-trustee of a trust with Mr. and Mrs. Lavin for the benefit of Mr.
Lavin; and 421,378 Class A shares and 520,000 Class B shares owned by the
Lavin Family Foundation of which Mrs. Bernick is a
24
director and an officer. In addition, does not include shares reported as
owned by Mr. Bernick, Mr. Lavin or Mrs. Lavin.
(6) Includes 15,000 Class A shares subject to stock options exercisable
currently or within 60 days. Also includes 582,000 Class A shares and
1,746,000 Class B shares owned by Wirtz Corporation, of which Mr. Wirtz is
President and a director; and 8,000 Class B shares owned by William Wirtz
Pension Trust, of which Mr. Wirtz is a trustee.
(7) This information is based on information provided to the Company by
Barclays Global Investors ("Barclays") on November 12, 2001 and reflects
Barclays' holdings as of October 31, 2001. Assuming that Barclays converted
all of its Class B shares into Class A shares, Barclays would beneficially
own 5.68% of the Class A shares outstanding.
(8) The beneficial ownership of the Company's shares arises in the context of
passive investment activities only by various investment accounts managed
by various Fidelity companies on a discretionary basis (the "Fidelity
Accounts"). The Fidelity Accounts are institutional investors engaged in
the investment business. This information is based on information provided
to the Company by FMR Corp. on November 7, 2001 and reflects FMR Corp.'s
holdings as of November 6, 2001.
(9) This information is based on information provided to the Company by
Franklin Resources, Inc. ("Franklin") on November 19, 2001 and reflects
Franklin's holdings as of September 30, 2001.
(10) Neuberger Berman, LLC ("NB") is a registered investment advisor. In its
capacity as investment advisor, NB may have discretionary authority to
dispose of or to vote shares that are under its management. As a result, NB
may be deemed to have beneficial ownership of such shares. NB does not,
however, have any economic interest in the shares. NB's clients are the
actual owners of the shares and have the sole right to receive and the
power to direct the receipt of dividends from or proceeds from the sale of
such shares. As of October 5, 2001, of the shares as set forth in the
table, NB had shared dispositive power with respect to 1,876,600 Class A
shares, sole voting power with respect to 614,000 Class A shares and shared
voting power with respect to 1,261,900 Class A shares. With regard to the
shared voting power, Neuberger Berman Management, Inc. and Neuberger Berman
Funds are deemed to be beneficial owners for purposes of Rule 13(d) since
they have shared power to make decisions whether to retain or dispose of
the securities. NB is the sub-advisor to the above referenced Funds. It
should be further noted that the above mentioned shares are also included
with the shared power to dispose calculation. This information is based on
the information provided to the Company by NB on October 19, 2001 and
reflects NB's holdings as of October 5, 2001.
(11) Includes 25,903 Class B shares for which State Street Global Advisors
("State Street") shares voting and dispositive power and 96,999 Class B
shares for which State Street has no voting power. This information is
based on information provided to the Company by State Street on November
13, 2001 and reflects State Steet's holdings as of September 30, 2001.
Assuming that State Street converted all of its Class B shares into Class A
shares, State Street would beneficially own 5.19% of the Class A shares
outstanding.
25
Certain Business Relationships
During the last fiscal year, the Company retained the law firm of Katten
Muchin Zavis, of which Allan B. Muchin is a senior partner. The Company has
retained the firm to perform legal services during the current fiscal year.
Re-Approval of the 1994 Stock Option Plan For Non-Employee Directors, As Amended
The 1994 Stock Option Plan For Non-Employee Directors, as Amended (the
"Director Plan"), is being presented to stockholders for their re-approval. The
stockholders initially approved the Director Plan on January 26, 1995 and
re-approved the Director Plan on January 22, 1998. The material amendments
proposed for the Director Plan are to (i) provide for the automatic grant to
each non-employee director of an option to purchase 2,500 shares of Class A
common stock as of the date of each regularly scheduled annual meeting of the
stockholders of the Company, commencing at the annual meeting scheduled on
January 24, 2002, (ii) eliminate the October 27, 2004 plan termination date and
(iii) permit the delivery of previously-owned shares of Class B common stock in
payment of the exercise price.
The Director Plan permits the granting of non-qualified options to
purchase shares of Class A common stock to eligible directors who are not
officers or employees of the Company or any of its subsidiaries. As of November
30, 2001, there were 86,250 Class A shares available to be granted and 76,471
Class A shares subject to options currently outstanding under the Director Plan.
Shares subject to options may be made available from unissued or treasury
shares. Shares subject to options which terminate, are surrendered or expire
unexercised, in whole or in part, may be subsequently used to grant additional
options under the Director Plan.
The Director Plan currently provides that an option to purchase 7,500
shares of Class A common stock will automatically be granted by the board of
directors, without further action, to each eligible director of the Company upon
his or her initial election or appointment as a director of the Company
("Initial Grant"), and has been amended to provide that an option to purchase
2,500 shares of Class A common stock will be granted by the board of directors,
without further action, to each eligible director of the Company as of the date
of each regularly scheduled annual meeting of the stockholders of the Company
("Subsequent Grants"), starting at the annual meeting scheduled on January 24,
2002. Currently, seven directors participate in the Director Plan. No director
who has received an Initial Grant shall be entitled to receive a Subsequent
Grant during the same fiscal year of the Company.
The exercise price of options granted under the Director Plan will be the
fair market value of the Class A common stock on the date of grant. Each option
and the number and kind of shares subject to future options may be adjusted, as
may be determined to be equitable in the sole and absolute discretion of the
board of directors, in the event there is any change in the outstanding Class A
common stock, or any event that could cause a change in the outstanding Class A
common stock, including, without limitation, by reason of a stock dividend,
recapitalization, reclassification, issuance of Class A common stock, issuance
of rights to purchase Class A common stock, issuance of securities
26
convertible into or exchangeable for Class A common stock, merger,
consolidation, stock split, reverse stock split, spin-off, combination, exchange
or conversion of shares, or any other similar type of event.
On November 30, 2001, the closing price of the Class A common stock, as
reported on the composite tape of the New York Stock Exchange, was $37.32 per
share.
Each option granted under the Director Plan will be for a ten-year term and
will become exercisable with respect to 25% of the total number of shares one
year after the date of grant and with respect to an additional 25% at the end of
each of the three years thereafter.
All outstanding stock option awards will be immediately vested upon the
occurrence of a change in control, as defined in the Director Plan and
summarized above under "Employment Contracts, Termination of Employment and
Change in Control Arrangements," and all outstanding stock option awards will,
depending on the type of consideration given to stockholders in connection with
the change in control, either become options to purchase shares of the acquiring
corporation or be canceled and option holders will receive a cash payment in
lieu of the exercise of such option awards.
Options are not transferable other than by will or the laws of descent and
distribution and an option may be exercised during the director's lifetime only
by the director. If the director dies without having fully exercised his or her
option, the executor or administrator or his or her estate or his or her
legatees or distributees may exercise the option during a one-year period
following the director's death (or at the expiration of the term of such option
if sooner) but only to the extent the director could have exercised the option
at the date of his or her death. If a director resigns from the board of
directors due to disability or retirement, the director's option shall terminate
three months after his or her resignation (or at the expiration of the term of
such option if sooner) and may be exercised only to the extent the director
could have exercised the option at the date of his or her resignation. If a
director resigns from the board of directors for any reason other than
disability or retirement, the director's option shall terminate upon said
resignation.
Options may be exercised by giving written notice to the Secretary of the
Company, specifying the number of shares to be purchased, accompanied by the
full purchase price for such number of shares, in cash, by check, in shares of
Class A common stock, in shares of Class B common stock, or a combination
thereof. Any Class A and/or Class B common stock delivered in payment of the
exercise price will be valued at its fair market value on the date of exercise.
The Company understands that under existing federal income tax law, there
will be no federal income tax consequences to either the director or the Company
on the grant of the option. Upon the exercise of an option, the director will
have taxable ordinary income equal to the difference between the option price
and the fair market value of the shares received on the exercise. The Company
will be entitled to a tax deduction in an amount equal to such difference,
provided the Company complies with applicable tax reporting rules. The director
will have a tax basis in the shares acquired equal to the fair market value of
the shares on the exercise date. Any additional gain or loss realized on the
sale or exchange of shares received upon exercise will be long-term or
short-term capital gain or loss, depending on how long the director held the
shares after the date of exercise.
27
Directors may deliver previously-owned shares of Class A common stock,
Class B common stock or a combination thereof in payment of the option price. In
such case, the Company understands that (i) with respect to the shares exchanged
to pay the option price, no gain or loss will be recognized by the director at
the time of exercise, and the basis and holding period of a portion of the
shares received in the exchange (to the extent such shares are equal to the fair
market value of the shares surrendered to pay the option price) will be the same
as the basis and the holding period of the surrendered shares, and (ii) with
respect to the additional shares received upon exercise (such additional shares
being the shares received in excess of the fair market value of the surrendered
shares), the director will be required to recognize as ordinary income in the
year of exercise an amount equal to the fair market value of the additional
shares received on the date of exercise less any cash paid upon exercise. The
tax basis of additional shares received will be equal to their fair market value
on the date of exercise.
The Director Plan may be amended or discontinued by the board of directors
at any time, provided, however, that no such amendment or discontinuance shall
(i) adversely affect or impair any option previously granted without the consent
of the director or (ii) except as otherwise provided in the plan, without
stockholder approval increase the total number of shares for which options may
be granted to eligible directors pursuant to the Director Plan or change the
purchase price.
Assuming that the Director Plan is re-approved, the non-employee directors
as a group will receive options to purchase 17,500 Class A shares as of January
24, 2002.
The board of directors recommends that the stockholders vote FOR the
re-approval of the Alberto-Culver Company 1994 Stock Option Plan For
Non-Employee Directors, As Amended.
Re-Approval of the 1994 Shareholder Value Incentive Plan, As Amended
The 1994 Shareholder Value Incentive Plan, as Amended (the "SVIP"), is
being presented to shareholders for their re-approval. The SVIP was originally
approved by the shareholders on January 26, 1995 and re-approved on January 27,
2000. The material amendments proposed for the SVIP are to (i) decrease the
maximum payout from $3,000 per unit to $2,000 per unit, (ii) prohibit any payout
if the Company's total shareholder return ("TSR"), as defined below, compared to
the TSR of companies comprising the Applicable Index, as defined below, would
rank it at less than the 40th percentile (currently payouts are prohibited if
the Company's TSR would rank it below the 50th percentile) and (iii) permit the
compensation committee to reduce or eliminate any award otherwise payable if the
Company's TSR for the applicable performance period is negative.
The SVIP is intended to provide key salaried employees of the Company and
its subsidiaries who have substantial responsibility for the Company's
management and growth with additional incentives through the grant of awards
based upon the Company's TSR, thereby (i) more closely linking the interests of
such employees with stockholders, (ii) increasing the personal stake of such
employees in the continued success and growth of the Company, and (iii)
encouraging them to remain in the employ of the Company. Approximately 80
employees currently participate in the SVIP. Below is a summary of the material
terms of the SVIP.
28
The SVIP is administered by the compensation committee of the board of
directors. Under the SVIP, eligible employees selected by the compensation
committee will receive performance units having a target value at the time of
grant of $1,000 per unit. At the time performance units are granted, the
compensation committee will establish objectives for the next three consecutive
fiscal years based on the percentile ranking of the performance of the Class A
common stock among the performance of the companies comprising the (i) Standard
& Poor's 500 Index, (ii) Standard & Poor's MidCap 400 Index, (iii) Standard &
Poor's SmallCap 600 Index, (iv) Standard & Poor's SuperComposite 1500 Index, (v)
Russell 3000 Index, or (vi) Russell 2000 Index. The index chosen by the
compensation committee for a particular performance period shall be referred to
as the "Applicable Index." The Class A common stock is not included in any of
these indexes. For the performance period ended September 30, 2004, the
Applicable Index is the Standard & Poor's 500 Index.
Performance of the Company and the Applicable Index companies will be
measured by the TSR. TSR is defined as the percentage by which the ending per
share price of common stock (determined by using the average closing price for
the ten trading days prior to and including the last day of the applicable
performance period), as adjusted for any stock split or other recapitalization,
plus reinvested dividends, exceeds the beginning per share price of the common
stock (determined by the average closing price for the ten days prior to and
including the first day of the applicable performance period). For purposes of
the Company's performance, TSR is computed using the Class A common stock. A
performance period is any three consecutive fiscal years of the Company, unless
accelerated pursuant to a change in control as described below.
Prior to or within 90 days following the beginning of a performance period,
the compensation committee will establish a matrix to determine the amount of
the awards payable upon the attainment of the objectives. As the Company's
percentile ranking among the Applicable Index companies improves, the
commensurate amount of the award will increase to a maximum of $2,000 (200% of
the target award) per unit. No award will be payable if the Company's TSR
compared to the TSR of the companies comprising the Applicable Index would rank
it at less than the 40/th/ percentile. The Compensation Committee may reduce or
eliminate an award if the Company's TSR for a performance period is negative.
At the end of the performance period, the compensation committee will
certify the Company's TSR percentile ranking among the companies comprising the
Applicable Index and to what extent the objectives established by the
compensation committee for the performance period have been attained. The
maximum award payable to a single SVIP participant in cash or in Class A common
stock for any performance period may not exceed the lesser of 200% of the target
award or $4.0 million. Awards will be distributed on or before the 15/th/ day of
the third month following the end of the applicable performance period.
Participants may elect to receive all or a portion of their award in Class
A common stock. Participants owning shares of Class A and Class B common stock
having a dollar value below a level determined by the compensation committee
will be required to take at least 50% of their awards, less applicable
withholding taxes, in Class A common stock.
29
If a participant's employment is terminated prior to the end of a
performance period for any reason other than death, retirement, disability, or a
change in control as defined in the SVIP and summarized above under "Employment
Contracts, Termination of Employment and Change in Control Arrangements," any
performance units held by the participant shall be immediately cancelled. If a
participant's employment terminates due to death, disability or retirement, the
participant, or in the case of death, his or her estate or named beneficiary,
will receive a prorated cash award based on the number of full calendar months
the participant was employed during the performance period.
In the event of a change in control of the Company, all or a pro-rata
portion of the outstanding performance units, based on the number of fiscal
years of each performance period that have elapsed and the TSR for the Company
as of the date of the change in control compared to the TSR for the Applicable
Index companies as of the end of the last quarter for which such information is
available, will become payable in cash within 30 days following such change in
control. If at least six full calendar months of any fiscal year have elapsed,
the entire fiscal year shall be deemed to have elapsed.
In event of a change in control of the Company, awards may be reduced (but
not below zero) so that the present value, as determined in accordance with
Section 280G(d)(4) of the Internal Revenue Code (the "Code"), of such payments
plus any other payments relating to a participant under Section
280G(b)(2)(A)(ii) of the Code shall not, in the aggregate, exceed 2.99 times
such participant's "base amount" as defined in Section 280G(b)(3) of the Code.
No such reduction, however, shall be applied to any payments which do not
constitute "excess parachute payments" within the meaning of the Code.
A participant's rights in, and performance units granted under, the SVIP
may not be assigned or transferred except by will or the laws of descent and
distribution. A participant's benefits under the SVIP are reflected on the
Company's books as general, unsecured and unfunded obligations of the Company,
and the SVIP does not give any person any right or security interest in any
asset of the Company, nor does it imply a trust or segregation of assets by the
Company. The compensation committee or the board of directors may terminate or
amend the SVIP at any time, provided no such amendment may adversely affect or
impair previously granted performance units and the termination of the SVIP
shall have no impact on previously granted performance units.
The board of directors recommends that the stockholders vote FOR the
re-approval of the Alberto-Culver Company 1994 Shareholder Value Incentive Plan,
as Amended.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission,
the New York Stock Exchange and the Company. Based solely on its review of such
reports received by it, the Company believes that during fiscal year 2001 its
executive officers, directors and greater than 10% beneficial owners complied
with all such filing requirements.
30
Independent Public Accountants
The board of directors of the Company has selected KPMG LLP as
independent public accountants for the Company for the fiscal year ending
September 30, 2002. KPMG LLP has served the Company in the capacity of
independent public accountants since 1955. Representatives of that firm are
expected to be present at the annual meeting of stockholders, with an
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions presented at the meeting by stockholders.
Other Business
Management knows of no other matters which will be brought before the
meeting. However, if other matters are properly brought before the meeting, the
persons named in the enclosed proxy will vote in accordance with their judgment
on such matters. For business to be properly brought before the meeting by a
stockholder, other than stockholder proposals covered by the following
paragraph, notice in proper written form must be given to the Secretary not more
than 120 days and not less than 90 days in advance of the anniversary date of
the immediately preceding annual meeting and otherwise be in compliance with the
Company's Bylaws.
Stockholder Proposals
Any stockholder proposals intended to be included in the Company's 2002
proxy materials must be received by August 16, 2002 and must otherwise comply
with the requirements of Rule 14a-8 of the Securities and Exchange Commission.
Cost and Method of Proxy Solicitation
The cost of soliciting proxies will be borne by the Company. In addition
to solicitation by mail, brokerage houses, nominees and other custodians and
fiduciaries will be requested to send the proxy materials to their principals
and the Company will reimburse them for their reasonable expenses.
By Order of the Board of Directors
/s/ Bernice E. Lavin
BERNICE E. LAVIN
Secretary
31
December 14, 2001
Dear Retirement Benefit Plan Participant:
The Annual Meeting of Stockholders of Alberto-Culver Company (the "Company")
will be held on January 24, 2002. The record date for determining stockholders
entitled to vote at the meeting was November 30, 2001. Through your
participation in the Alberto-Culver Company Employees' Profit Sharing Plan, the
Alberto-Culver 401(k) Savings Plan and/or the Sally Beauty 401(k) Savings Plan
(collectively, the "Plans"), you are the beneficial owner of the Company's Class
B Common Stock and may instruct CIGNA Bank & Trust Company, the trustee of each
of the Plans, how to vote your shares.
The number of Class B shares in your retirement benefit plan(s) appears at the
top of the enclosed proxy card and is identified by a suffix beginning with the
following letters: "PS" (Alberto-Culver Company Employees' Profit Sharing Plan),
"SB" (Sally Beauty 401(k) Savings Plan) or "AC" (Alberto-Culver 401(k) Savings
Plan). If you are the registered shareholder of either Class A or Class B Common
Stock outside of the Plans, these shares will be identified on your proxy card
by a suffix: "CLA" (Class A Common Stock) and "CLB" (Class B Common Stock).
Please read the enclosed Notice of Meeting and Proxy Statement carefully. Please
mark your choices, sign the enclosed proxy card and return the card in the
enclosed postage-paid envelope to the Company's transfer agent, EquiServe, Proxy
Department P.O. Box 9381, Boston, MA 02205-9381 so that the card is received
before January 21, 2002.
The trustee of the Plans will have the voting instructions of each participant
in the Plans tabulated and will vote the shares of the participants by
submitting a final proxy card for inclusion in the tally at the Annual Meeting.
Sincerely,
/s/ Kent E. Madlinger
Kent E. Madlinger
Sr. Manager, Compensation and Benefits
ALBERTO-CULVER COMPANY
1994 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
(as amended through January 24, 2002)
_____________________
1. Purpose. The principal purpose of the 1994 Stock Option Plan for
Non-Employee Directors (the "Director Plan") is to benefit Alberto-Culver
Company (the "Company") and its subsidiaries by offering its non-employee
directors an opportunity to become holders of the Company's Class A common
stock, par value $.22 per share, in order to enable them to represent the
viewpoint of other stockholders of the Company more effectively and to encourage
them to continue serving as directors of the Company.
2. Administration. The Director Plan shall be administered by the Board
of Directors, whose interpretation of the terms and provisions of the Director
Plan shall be final, conclusive and binding. No member of the Board of Directors
shall be liable for any action or determination made in good faith with respect
to the Director Plan or any option thereunder.
3. Eligibility. Options shall be granted under this Director Plan only to
members of the Board of Directors who are not officers or employees of the
Company or any of its subsidiaries.
4. Granting of Options.
(a) An option to purchase 7,500 shares of Class A common stock from
the Company shall be automatically granted by the Board of Directors, without
further action required, to each director of the Company upon his or her initial
election or appointment as a director of the Company and to each person who is
an incumbent director on October 27, 1994 ("Initial Grant"); provided such
director is eligible at that time under the terms of paragraph 3 of this
Director Plan. No person may be granted more than one option pursuant to this
paragraph 4(a) of this Director Plan.
(b) An option to purchase 2,500 shares of Class A common stock from
the Company shall be automatically granted by the Board of Directors, without
further action required, at every Annual Meeting of the Stockholders of the
Company commencing on the Annual Meeting of the Stockholders of the Company
scheduled to occur in January, 2002, to each director of the Company
("Subsequent Grant"); provided such director is eligible at that time under the
terms of paragraph 3 of this Director Plan. No director who has received an
Initial Grant shall be entitled to receive a Subsequent Grant during the same
fiscal year of the Company.
(c) An aggregate of 210,000 shares shall be available under this
Director Plan. Such number of shares, and the number of shares subject to
options outstanding under this Director Plan, shall be subject in all cases to
adjustment as provided in paragraph 10. Shares subject to options may be made
available from unissued or treasury shares of stock. If any option granted under
the Director Plan shall terminate or be surrendered or expire unexercised, in
whole or in part, the shares
so released from such option may be made the subject of additional options
granted under the Director Plan.
(d) Nothing contained in this Director Plan or in any option granted
pursuant hereto shall confer upon any optionee any right to continue serving as
a director of the Company or interfere in any way with any right of the Board of
Directors or stockholders of the Company to remove such director pursuant to the
certificate of incorporation or by-laws of the Company or applicable law.
5. Option Price. Subject to adjustment under paragraph 10, the option
price shall be the Fair Market Value (as defined below) of the Company's Class A
common stock on the date the option is granted. For purposes of the Director
Plan, "Fair Market Value" shall mean the average of the high and low transaction
prices of a share of Class A common stock or Class B common stock of the Company
(the "Class B common stock"), as the case may be, as reported in the New York
Stock Exchange Composite Transactions on the date as of which such value is
being determined or, if there shall be no reported transactions for such date,
on the next preceding date for which transactions were reported.
6. Duration of Options, Increments and Extensions. Subject to the
provisions of paragraph 8, each option shall be for a term of ten (10) years.
Subject to the provisions of paragraph 11, each option shall become exercisable
with respect to 25% of the total number of shares on the day preceding the one
(1) year anniversary of the date of grant and with respect to an additional 25%
at the end of each twelve-month period thereafter during the succeeding three
years.
7. Exercise of Option. An option may be exercised by giving written
notice to the Company, attention of the Secretary, specifying the number of
shares of Class A common stock to be purchased, accompanied by the full purchase
price for such number of shares, (i) in cash, (ii) by check, (iii) by delivery
of previously owned shares of Class A common stock, (iv) by delivery of
previously owned shares of Class B common stock or (v) by a combination of these
methods of payment. However, under no circumstances may any optionee deliver
previously owned shares of Class A common stock obtained from the exercise of
options hereunder during the six months immediately preceding the exercise date.
The per share value of the Class A common stock and/or Class B common stock
delivered in payment of the option price shall be the Fair Market Value of the
Class A common stock and/or Class B common stock on the date of exercise.
8. Termination - Exercise Thereafter.
(a) If an optionee dies without having fully exercised his or her
options, the executors or administrators of his or her estate or legatees or
distributees shall have the right during the one (1) year period following his
or her death (but not after the expiration of the term of any such options) to
exercise such options in whole or in part but only to the extent that the
optionee could have exercised each such option at the date of his or her death.
(b) If any optionee resigns from the Board of Directors due to
disability or retirement, the optionee's options shall terminate three (3)
months after his or her resignation (but not after the expiration of the term of
any such option) and may be exercised only to the extent that such optionee
could have exercised each such option at the date of his or her resignation.
2
(c) If the optionee's termination from service on the Board of
Directors is for any reason other than death, disability or retirement, the
optionee's options shall terminate upon said termination; provided, however,
that if such termination occurs following a Change in Control (as such term is
defined in paragraph 11(b) hereof), the optionee's options shall terminate three
(3) months after his or her termination (but not after the expiration of the
term of any such option) and may be exercised to the extent that such optionee
could have exercised each such option at the date of his or her termination.
9. Non-Transferability of Options. No option shall be transferable by the
optionee otherwise than by will or the laws of descent and distribution, and
each option shall be exercisable during an optionee's lifetime only by the
optionee.
10. Adjustment upon Change in Stock. Each option and the number and kind
of shares subject to future options under the Director Plan may be adjusted, as
may be determined to be equitable in the sole and absolute discretion of the
Board of Directors, in the event there is any change in the outstanding Class A
common stock, or any event that could cause a change in the outstanding Class A
common stock, including, without limitation, by reason of a stock dividend,
recapitalization, reclassification, issuance of Class A common stock, issuance
of rights to purchase Class A common stock, issuance of securities convertible
into or exchangeable for Class A common stock, merger, consolidation, stock
split, reverse stock split, spin-off, combination, exchange or conversion of
shares, or any other similar type of event. The Board of Director's
determination of any adjustment pursuant to this paragraph 10 shall be final,
conclusive and binding.
11. Change in Control
(a) (1) Notwithstanding any provision of the Director Plan, in the event
of a Change in Control, all outstanding options shall immediately be
exercisable in full and shall be subject to the provisions of paragraph
11(a)(2) or 11(a)(3), to the extent that either such paragraph is
applicable.
(2) Notwithstanding any provision of the Director Plan, in the event
of a Change in Control in connection with which the holders of shares of
the Company's Class A common stock receive shares of common stock that are
registered under Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act"), all outstanding options shall immediately be exercisable
in full and there shall be substituted for each share of the Company's
Class A common stock available under the Director Plan, whether or not then
subject to an outstanding option, the number and class of shares into which
each outstanding share of the Company's Class A common stock shall be
converted pursuant to such Change in Control. In the event of any such
substitution, the purchase price per share of each option shall be
appropriately adjusted by the Board of Directors, such adjustments to be
made without an increase in the aggregate purchase price.
(3) Notwithstanding any provision in the Director Plan, in the event
of a Change in Control in connection with which the holders of the
Company's Class A common stock receive consideration other than shares of
common stock that are
3
registered under Section 12 of the Exchange Act, each outstanding option
shall be surrendered to the Company by the holder thereof, and each such
option shall immediately be cancelled by the Company, and the holder shall
receive, within ten (10) days of the occurrence of such Change in Control,
a cash payment from the Company in an amount equal to the number of shares
of the Company's Class A common stock then subject to such option,
multiplied by the excess, if any, of (i) the greater of (A) the highest per
share price offered to stockholders of the Company in any transaction
whereby the Change in Control takes place or (B) the Fair Market Value of a
share of the Company's Class A common stock on the date of occurrence of
the Change in Control over (ii) the purchase price per share of the
Company's Class A common stock subject to the option. The Company may, but
is not required to, cooperate with any person who is subject to Section 16
of the Exchange Act to assure that any cash payment in accordance with the
foregoing to such person is made in compliance with Section 16 of the
Exchange Act and the rules and regulations thereunder.
(b) "Change in Control" means:
(1) The occurrence of any one or more of the following events:
(A) The acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act of
both (x) 20% or more of the combined voting power of the then
outstanding securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting
Securities") and (y) combined voting power of Outstanding Company
Voting Securities in excess of the combined voting power of the
Outstanding Company Voting Securities held by the Exempt Persons (as
such term is defined in paragraph 11(c)); provided, however, that a
Change in Control shall not result from an acquisition of Company
Voting Securities:
(i) directly from the Company, except as otherwise
provided in paragraph 11(b)(2)(A);
(ii) by the Company, except as otherwise provided in
paragraph 11(b)(2)(B);
(iii) by an Exempt Person;
(iv) by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company; or
(v) by any corporation pursuant to a reorganization,
merger or
4
consolidation involving the Company, if, immediately after such
reorganization, merger or consolidation, each of the conditions
described in clauses (i) and (ii) of paragraph 11(b)(1)(C) shall
be satisfied.
(B) The cessation for any reason of the members of the Incumbent
Board (as such term is defined in paragraph 11(d)) to constitute at
least a majority of the Board of Directors.
(C) Approval by the stockholders of the Company of a
reorganization, merger or consolidation unless, in any such case,
immediately after such reorganization, merger or consolidation:
(i) more than 60% of the combined voting power of the then
outstanding securities of the corporation resulting from such
reorganization, merger or consolidation entitled to vote
generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals or entities who were the beneficial owners of the
combined voting power of all of the Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation; and
(ii) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization,
merger or consolidation were members of the Incumbent Board at
the time of the execution of the initial agreement or action of
the Board of Directors providing for such reorganization, merger
or consolidation.
(D) Approval by the stockholders of the Company of the sale or
other disposition of all or substantially all of the assets of the
Company other than (x) pursuant to a tax-free spin-off of a subsidiary
or other business unit of the Company or (y) to a corporation with
respect to which, immediately after such sale or other disposition:
(i) more than 60% of the combined voting power of the then
outstanding securities thereof entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners of the combined voting
power of all of the Outstanding Company Voting Securities
immediately prior to such sale or other disposition; and
(ii) at least a majority of the members of the board of
5
directors thereof were members of the Incumbent Board at the
time of the execution of the initial agreement or action of
the Board of Directors providing for such sale or other
disposition.
(E) Approval by the stockholders of the Company of a plan of
complete liquidation or dissolution of the Company.
(2) Notwithstanding the provisions of paragraph 11(b)(1):
(A) no acquisition of Company Voting Securities shall be
subject to the exception from the definition of Change in Control
contained in clause (i) of paragraph 11(b)(1)(A) if such
acquisition results from the exercise of an exercise, conversion
or exchange privilege unless the security being so exercised,
converted or exchanged was acquired directly from the Company;
and
(B) for purposes of clause (ii) of paragraph 11(b)(1)(A), if
any Person (other than the Company, an Exempt Person or any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company)
shall, by reason of an acquisition of Company Voting Securities
by the Company, become the beneficial owner of (x) 20% or more of
the combined voting power of the Outstanding Company Voting
Securities and (y) combined voting power of Outstanding Company
Voting Securities in excess of the combined voting power of the
Outstanding Company Voting Securities held by the Exempt Persons,
and such Person shall, after such acquisition of Company Voting
Securities by the Company, become the beneficial owner of any
additional Outstanding Company Voting Securities and such
beneficial ownership is publicly announced, such additional
beneficial ownership shall constitute a Change in Control.
(c) "Exempt Person" (and collectively, the "Exempt Persons") means:
(1) Leonard H. Lavin or Bernice E. Lavin;
(2) any descendant of Leonard H. Lavin and Bernice E. Lavin or
the spouse of any such descendant;
(3) the estate of any of the persons described in paragraph
11(c)(1) or (2);
(4) any trust or similar arrangement for the benefit of any
person described in paragraph 11(c)(1) or (2); or
(5) the Lavin Family Foundation or any other charitable
organization
6
established by any person described in paragraph 11(c)(1) or (2).
(d) "Incumbent Board" means those individuals who, as of October 24, 1996,
constitute the Board of Directors, provided that:
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(1) any individual who becomes a director of the Company subsequent
to such date whose election, or nomination for election by the Company's
stockholders, was approved either by the vote of at least a majority of the
directors then comprising the Incumbent Board or by the vote of at least a
majority of the combined voting power of the Outstanding Company Voting
Securities held by the Exempt Persons shall be deemed to have been a member
of the Incumbent Board; and
(2) no individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act, or any other actual or threatened solicitation of proxies or
consents by or on behalf of any Person other than the Board of Directors or
the Exempt Persons shall be deemed to have been a member of the Incumbent
Board.
12. Amendment of Director Plan. The Board of Directors may amend or
discontinue this Director Plan at any time; provided, however, that no such
amendment or discontinuance shall, without the approval of the stockholders
except as provided in paragraph 10, (i) increase the total number of shares for
which options may be granted to eligible directors pursuant to this Director
Plan or (ii) change the purchase price. In addition, no amendment or
discontinuance of the Director Plan shall adversely affect or impair any option
previously granted, without the consent of the optionee.
13. Effective Date. The Director Plan, as amended through January 24, 2002,
shall be submitted to the stockholders of the Company for their re-approval at
the Annual Meeting of the Stockholders to be held on January 24, 2002, or any
adjournment thereof, and as so amended shall be subject to the re-approval of
the stockholders at such meeting.
7
ALBERTO-CULVER COMPANY
1994 SHAREHOLDER VALUE INCENTIVE PLAN
(as amended through July 26, 2001)
I. GENERAL
1.1 Purpose of the SVIP
The 1994 Shareholder Value Incentive Plan ("SVIP") of the Alberto-Culver
Company ("Company") is intended to advance the best interests of the Company by
providing key salaried employees who have substantial responsibility for the
Company's management and growth with additional incentives through the grant of
awards based upon Total Shareholder Return as defined in Section 1.2(o),
thereby: (1) more closely linking the interests of key salaried employees with
shareholders, (2) increasing the personal stake of such key salaried employees
in the continued success and growth of the Company, and (3) encouraging them to
remain in the employ of the Company.
1.2 Definitions
The following definitions apply with respect to the SVIP:
(a) "Change in Control" shall have the meaning assigned to such term in
Section 3.8(b).
(b) "Code" shall have the meaning assigned to it in Section 1.2(c).
(c) "Committee" shall mean the Compensation Committee of the Board of
Directors of the Company or, if any member of the Compensation
Committee is not (i) an "outside director" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986 and the rules and
regulations thereunder (the "Code") or (ii) a "non-employee director"
within the meaning of Section 16 of the Securities Exchange Act of
1934 and the rules and regulations thereunder ("Section 16"), the
Committee shall set up a subcommittee comprised solely of outside
directors and non-employee directors for purposes of all matters
arising under this SVIP involving "Executive Officers" within the
meaning of item 401(b) of Regulation S-K ("Executive Officer") and
Covered Employees as defined herein.
(d) "Common Stock" shall mean the Class A common stock of the Company,
$.22 par value.
(e) "Covered Employee" shall mean a Participant who is a "covered
employee" within the meaning of Section 162(m) of the Code during the
plan year at issue.
(f) "Disability" shall have the meaning provided in the Company's
applicable disability plan or, in the absence of such a definition,
when a Participant becomes totally disabled as determined by a
physician mutually acceptable to the Participant and the Committee
before attaining his or her 65th birthday and if such total
disability continues for more than three months. Disability does not
include any condition which is intentionally self-inflicted or caused
by illegal acts of the Participant.
(g) "Exempt Person" and "Exempt Persons" shall have the meaning
assigned to such terms in Section 3.8(c).
(h) "Incumbent Board" shall have the meaning assigned to such term in
Section 3.8(d).
(i) "Ownership Threshold" shall mean the required dollar value of
ownership of Common Stock and Class B common stock of the
Company, $.22 par value, by each Participant as set by the
Committee from time to time. In determining such ownership for
each Participant, the Committee may conclusively rely on the
books and records of the Company.
(j) "Participant" shall have the meaning assigned to it in Section
1.4.
(k) "Performance Period" shall mean any three consecutive fiscal
years as set forth in the Participant's Performance Unit
Agreement, unless accelerated pursuant to Section 3.8.
(l) "Performance Unit" shall have the meaning assigned to it in
Section 2.1(a).
(m) "Performance Unit Agreement" shall have the meaning assigned to
it in Section 2.1(b).
(n) "Retirement" shall have the meaning provided in the Company's
Employees' Profit Sharing Plan or, in the absence of such a
definition, the first day of the month following the month in
which the Participant attains his or her 65th birthday.
(o) "Total Shareholder Return" or "TSR" means the percentage by
which the ending per share price of common stock (determined as
the average closing price for the ten trading days prior to and
including the last date of the applicable Performance Period),
as adjusted for any stock split or other recapitalization, plus
reinvested dividends, exceeds the beginning per share price of
the common stock (determined as the average closing price for
the ten trading days prior to and including the first date of
the applicable Performance Period). For purposes of the
Company, TSR shall be computed using the Common Stock.
1.3 Administration of the SVIP
The SVIP shall be administered by the Committee. The Committee shall
have full and final authority in its discretion to interpret conclusively the
provisions of the SVIP, to adopt such rules and regulations for carrying out the
SVIP and to make all other determinations necessary or advisable for the
administration of the SVIP.
The Committee shall meet at least once each fiscal year, and at such
additional times as it may determine to designate the eligible employees, if
any, to be granted Performance Units under the SVIP, the amount of such
Performance Units and the time when Performance Units will be granted. All
Performance Units granted under the SVIP shall be on the terms and subject to
the conditions hereinafter provided.
2
1.4 Eligible Participants
Key salaried employees of the Company and its subsidiaries as determined
by the Committee shall be eligible to participate in the SVIP (any employee
receiving a Performance Unit under the SVIP hereinafter referred to as a
"Participant").
1.5 Limitation on Grants
The maximum amount payable under the SVIP to a single Participant may not
exceed $4.0 million per Performance Period.
II. PERFORMANCE UNITS
2.1 Terms and Conditions of Grants
(a) Performance Units may be granted to Participants prior to or within the
first ninety (90) days following the beginning of a Performance Period.
Each Performance Unit shall have a target value at the time of the grant
of $1,000. Except as provided in the following sentence, each Participant
shall be eligible, in his or her sole discretion, to receive such
Participant's award in cash or shares of Common Stock or a combination
thereof as set forth in Section 2.2, payable in each case following the
end of a Performance Period, if the Common Stock of the Company has met
the objectives established by the Committee, as set forth below (unless
the Committee, pursuant to Section 2.1(c), determines that no award will
be payable because the Company's TSR is negative for that Performance
Period). For Performance Periods which end on or after the year 2000,
Participants owning less than their Ownership Threshold shall be required
to receive at least 50% of their award in Common Stock ("Required
Election"). Notwithstanding anything to the contrary contained in this
Section 2.1(a), each Participant shall be eligible to receive an award
(payable only in cash) in the event of a Change in Control at such time
as set forth in Section 3.8, if the Common Stock has met the objectives
established by the Committee as set forth below.
(b) At the time Performance Units are granted to Participants, the Committee
shall establish objectives based on the percentile rank of the Common
Stock of the Company measured by Total Shareholder Return among the
companies comprising the (i) Standard & Poor's 500 Index, (ii) Standard &
Poor's MidCap 400 Index, (iii) Standard & Poor's Small Cap 600 Index,
(iv) Standard & Poor's Super Composite 1500 Index, (v) Russell 3000
Index, or (vi) Russell 2000 Index. The index chosen by the Committee for
a particular Performance Period shall be referred to as the "Applicable
Index." In addition, the Committee shall establish a matrix to determine
the awards payable to Participants upon attainment of these objectives.
Within 90 days following the beginning of a Performance Period, each
Participant shall receive an agreement which shall set forth the
Performance Period, the number of Performance Units granted and the
objectives and matrix established by the Committee (hereinafter referred
to as a "Performance Unit Agreement").
(c) For Performance Units granted before July 26, 2001, no award will be
payable if the Company's TSR as a percentile among the Applicable Index
companies is less than the 50/th/ percentile, and the maximum award
payable is 300% of the target value. Starting with Performance Units
3
granted to Participants on or after July 26, 2001, (i) no award will be
payable with respect to such Performance Units if the Company's TSR as a
percentile among the Applicable Index companies is less than the 40/th/
percentile, (ii) the maximum award payable with respect to such Performance
Units is 200% of the target value, and (iii) if the Company's TSR is
negative, the Committee may, in its discretion, not pay any award or reduce
an award otherwise payable with respect to such Performance Units,
notwithstanding the fact that the Company's TSR as a percentile among the
Applicable Index companies is equal to or greater than the 40/th/
percentile. If the Company's TSR as a percentile among the Applicable Index
companies is not specifically shown in the matrix established by the
Committee and set forth in the Performance Unit Agreement the amount of the
award shall be calculated by interpolating between the amounts shown.
(d) At the end of each Performance Period, or earlier pursuant to Section
3.8(a) in the event of a Change in Control, the Common Stock of the Company
will be ranked based on Total Shareholder Return among the companies
comprising the Applicable Index. The Committee shall certify the Company's
ranking and the attainment of the objectives established by the Committee
for each Performance Period or, in the event of a Change in Control, the
elapsed portion of the Performance Period in which such Change in Control
shall have occurred. No award may be paid to Covered Employees under this
SVIP until the Committee has made such certification.
2.2 Payment
Awards approved by the Committee will be distributed on or before the 15th
day of the third month following the end of the Performance Period or, in
the event of a Change in Control, within 30 days following such Change in
Control (but in the event of a Change in Control, such award shall be
payable only in cash). Awards payable, in whole or in part, in Common Stock
shall be the number of shares of Common Stock that a Participant could have
purchased at the ending per share price of the Common Stock as calculated
pursuant to Section 1.2(o) had such Participant used the relevant
percentage (pursuant to any election to receive Common Stock) of his or her
award, less applicable withholding taxes, to purchase Common Stock.
Elections to receive Common Stock in lieu of cash shall be submitted to the
Committee at such time as specified by the Committee, but in no case after
the end of the relevant Performance Period. Except for Required Elections,
failure to make a timely election shall be conclusively deemed to be an
election to receive all cash. Failure to make a timely election to receive
more than 50% of an award in Common Stock pursuant to a Required Election
shall be conclusively deemed to be an election to receive 50% of such award
in Common Stock. To the extent necessary to secure an exemption under
Section 16(b), voluntary elections by Executive Officers to receive Common
Stock shall be approved by the Committee following the end of the
Performance Period and prior to the distribution of such stock.
2.3 Termination of Employment
(a) If a Participant's employment is terminated prior to the end of a
Performance Period because of death, Retirement or Disability, the extent
to which a Performance Unit shall be deemed to have been earned and payable
(solely in cash and without regard to any elections to the contrary) shall
be determined by multiplying (a) the cash value of the Performance Unit as
calculated in
4
accordance with the matrix established by the Committee and set forth in
the Performance Unit Agreement by (b) a fraction, the numerator of which is
the number of full calendar months such Participant was employed during the
Performance Period and the denominator of which is the total number of full
calendar months in the Performance Period.
(b) If a Participant's employment terminates for any reason other than because
of death, Retirement or Disability, or a Change in Control (as defined in
Section 3.8), the Performance Unit and any and all rights to payment under
such Performance Unit shall be immediately canceled and the Performance
Unit Agreement with such terminated Participant shall be null and void.
III. ADDITIONAL PROVISIONS
3.1 Nature of Participant's Interests
A Participant's benefits under the SVIP shall at all times be reflected on
the Company's books and records as a general, unsecured and unfunded obligation
of the Company, and the SVIP shall not give any person any right or security
interest in any asset of the Company nor shall it imply a trust or segregation
of assets by the Company.
3.2 Amendments
The Committee or the Board of Directors of the Company may amend the SVIP
from time to time, as it deems advisable and in the best interests of the
Company, provided that no such amendment will adversely affect or impair
previously issued grants.
3.3 Withholding
The Company shall have the right to deduct from any distribution to any
Participant an amount equal to the federal, state and local income taxes and
other amounts as may be required by law to be withheld with respect to any grant
or distribution under the SVIP.
3.4 Nonassignability
(a) Except as expressly provided in the SVIP, the rights of a Participant
and any awards under the SVIP may not be assigned or transferred except by will
and the laws of descent and distribution.
(b) A Participant may from time to time name in writing any person or
persons to whom his or her benefit is to be paid if he or she dies before
complete payment of such benefit has occurred. Each such beneficiary designation
will revoke all prior designations by the Participant with respect to the SVIP,
shall not require the consent of any previously named beneficiary, shall be in a
form prescribed by the Committee, and will be effective only when filed with the
Committee in care of the Secretary of the Company during the Participant's
lifetime.
(c) If the Participant fails to designate a beneficiary before his or her
death, as provided above, or if the beneficiary designated by the Participant
dies before the date of the Participant's death or before complete payment of
the Participant's benefit has occurred, the Company may pay the
5
remaining unpaid portion of the Participant's benefit to the legal
representative or representatives of the estate of the Participant.
3.5 Nonuniform Determinations
Determinations by the Committee under the SVIP regarding determinations of
the persons to receive grants, the form, amount and timing of such grants, and
the terms and provisions of such grants and the agreements evidencing the same
need not be uniform and may be made by it selectively among persons who receive,
or are eligible to receive, grants under the SVIP, whether or not such persons
are similarly situated.
3.6 No Guarantee of Employment
Neither grants under the SVIP nor any action taken pursuant to the SVIP
shall constitute or be evidence of any agreement or understanding, express or
implied, that the Company or its subsidiaries shall retain the Participant for
any period of time or at any particular rate of compensation.
3.7 Effective Date; Duration
The SVIP, as amended, has been adopted and authorized by the Board of
Directors for submission to the stockholders of the Company. If the SVIP is
approved by the stockholders of the Company at the Annual Meeting of
stockholders to be held on January 24, 2002, or any adjournment thereof, it
shall be deemed to have become effective on July 26, 2001, the date of the most
recent amendments to the SVIP by the Board of Directors. Performance Units may
be granted under the SVIP prior, but subject, to the approval of the SVIP, as
amended, by stockholders of the Company and, in each such case, the date of
grant shall be determined without reference to the date of approval of the SVIP,
as amended, by the stockholders of the Company. The Committee will have the
authority to terminate the SVIP at any time. Termination of the SVIP will have
no impact on Performance Units granted prior to the SVIP termination date.
3.8 Change in Control
(a)(1) Notwithstanding anything herein to the contrary, in the event of a
Change in Control, all Performance Units awarded prior to October
24, 1996 shall become fully payable in cash at the TSR percentile
rank of the Company calculated using the TSR of the Company as of
the date of the Change in Control as compared to the TSR among the
Applicable Index companies as of the last quarterly period for which
such TSR information is available.
(2) Notwithstanding anything herein to the contrary but subject to the
dollar limitation payable per Performance Period as set forth in
Section 1.5, in the event of a Change in Control, all Performance
Units awarded after October 24, 1996 shall become payable in cash in
accordance with the following sentence of this Section 3.8(a)(2) at
the TSR percentile rank of the Company calculated using the TSR of
the Company as of the date of the Change in Control as compared to
the TSR among the Applicable Index companies as of the last
quarterly period for which such TSR information is available. A
Performance Unit shall be payable pursuant to this Section 3.8(a)(2)
in an amount equal
6
to the cash value of such Performance Unit calculated in accordance with
the preceding sentence, multiplied by a fraction, the numerator of which is
the number of full fiscal years of the Performance Period in which the
Change in Control shall have occurred which shall have elapsed prior to
such Change in Control, and the denominator of which is three. For purposes
of the preceding sentence of this Section 3.8(a)(2), if at least six full
calendar months of a fiscal year within a Performance Period shall have
elapsed, such entire fiscal year shall be deemed to have elapsed.
(3) If any amount to be paid to a Participant (or beneficiary thereof) pursuant
to this Section 3.8(a) is not paid in full within 30 days following the
Change in Control (the "Payment Date"), then the Company shall also pay to
that Participant (or beneficiary) interest on the unpaid amount for the
period beginning on the Payment Date and ending on the date that the amount
is paid in full. The amount of interest to be paid to a Participant (or
beneficiary thereof) pursuant to this Section 3.8(a)(3) shall be computed
using an annual rate equal to two percent above the prime rate from time to
time in effect, as published under "Money Rates" in The Wall Street
---------------
Journal, but in no event higher than the maximum legal rate permissible
-------
under applicable law. Payments received by a Participant (or beneficiary
thereof) pursuant to this Section 3.8(a)(3) shall be credited first against
accrued interest until all accrued interest is paid in full before any such
payment is credited against the amount payable pursuant to Section
3.8(a)(1) or (2).
(4) Solely for the purposes of the computation of payments under the SVIP and
notwithstanding any other provision of the SVIP, payments to any
Participant under the SVIP with respect to Performance Units granted after
September 22, 1998 shall be reduced (but not below zero) so that the
present value, as determined in accordance with Section 280G(d)(4) of the
Code, of such payments plus any other payments that must be taken into
account for purposes of any computation relating to the Participant under
Section 280G(b)(2)(A)(ii) of the Code, shall not, in the aggregate, exceed
2.99 times the Participant's "base amount," as such term is defined in
Section 280G(b)(3) of the Code. Notwithstanding any other provision of the
SVIP, no reduction in payments under the limitation contained in the
immediately preceding sentence shall be applied to payments under the SVIP
which do not constitute "excess parachute payments" within the meaning of
the Code. Any payments in excess of the limitation of this Section
3.8(a)(4) or otherwise determined to be "excess parachute payments" made to
any Participant under the SVIP with respect to Performance Units granted
after September 22, 1998 shall be deemed to be overpayments which shall
constitute an amount owing from the Participant to the Company with
interest from the date of receipt by the Participant to the date of
repayment (or offset) at the applicable federal rate under Section 1274(d)
of the Code, compounded semi-annually, which shall be payable to the
Company upon demand; provided, however, that no repayment shall be required
under this sentence if in the written opinion of tax counsel satisfactory
to the Participant and delivered to the Participant and the Company such
repayment does not allow such overpayment to be excluded for federal income
and excise tax purposes from the Participant's income for the year of
receipt or afford the Participant a compensating federal income tax
deduction for the year of the repayment.
(b) "Change in Control" means:
7
(1) the occurrence of any one or more of the following events:
(A) The acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of beneficial ownership within the meaning of
Rule 13d-3 promulgated under the Exchange Act of both (x) 20% or
more of the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities") and (y) combined voting power of Outstanding Company
Voting Securities in excess of the combined voting power of the
Outstanding Company Voting Securities held by the Exempt Persons
(as such term is defined in Section 3.8(c); provided, however,
-------- -------
that a Change in Control shall not result from an acquisition of
Company Voting Securities:
(i) directly from the Company, except as otherwise provided in
Section 3.8(b)(2)(A);
(ii) by the Company, except as otherwise provided in Section
3.8(b)(2)(B);
(iii) by an Exempt Person;
(iv) by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company; or
(v) by any corporation pursuant to a reorganization, merger or
consolidation involving the Company, if, immediately after
such reorganization, merger or consolidation, each of the
conditions described in clauses (i) and (ii) of Section
3.8(b)(1)(C) shall be satisfied.
(B) The cessation for any reason of the members of the Incumbent
Board (as such term is defined in Section 3.8(d)) to constitute
at least a majority of the Board of Directors.
(C) Approval by the stockholders of the Company of a reorganization,
merger or consolidation unless, in any such case, immediately
after such reorganization, merger or consolidation:
(i) more than 60% of the combined voting power of the then
outstanding securities of the corporation resulting from
such reorganization, merger or consolidation entitled to
vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals or entities
8
who were the beneficial owners of the combined voting power
of all of the Outstanding Company Voting Securities
immediately prior to such reorganization, merger or
consolidation; and
(ii) at least a majority of the members of the board of directors
of the corporation resulting from such reorganization,
merger or consolidation were members of the Incumbent Board
at the time of the execution of the initial agreement or
action of the Board of Directors providing for such
reorganization, merger or consolidation.
(D) Approval by the stockholders of the Company of the sale or other
disposition of all or substantially all of the assets of the
Company other than (x) pursuant to a tax-free spin-off of a
subsidiary or other business unit of the Company or (y) to a
corporation with respect to which, immediately after such sale or
other disposition:
(i) more than 60% of the combined voting power of the then
outstanding securities thereof entitled to vote generally in
the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of
the combined voting power of all of the Outstanding Company
Voting Securities immediately prior to such sale or other
disposition; and
(ii) at least a majority of the members of the board of directors
thereof were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board of Directors providing for such sale or other
disposition.
(E) Approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.
(2) Notwithstanding the provisions of Section 3.8(b)(1)(A):
(A) no acquisition of Company Voting Securities shall be subject to
the exception from the definition of Change in Control contained
in clause (i) of Section 3.8(b)(1)(A) if such acquisition results
from the exercise of an exercise, conversion or exchange
privilege unless the security being so exercised, converted or
exchanged was acquired directly from the Company; and
(B) for purposes of clause (ii) of Section 3.8(b)(1)(A), if any
Person (other than the Company, an Exempt Person or any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company) shall, by
reason of an acquisition of Company Voting Securities by the
Company, become the beneficial
9
owner of (x) 20% or more of the combined voting power of the
Outstanding Company Voting Securities and (y) combined
voting power of Outstanding Company Voting Securities in
excess of the combined voting power of the Outstanding
Company Voting Securities held by the Exempt Persons, and
such Person shall, after such acquisition of Company Voting
Securities by the Company, become the beneficial owner of
any additional Outstanding Company Voting Securities and
such beneficial ownership is publicly announced, such
additional beneficial ownership shall constitute a Change in
Control.
(c) "Exempt Person" (and collectively, the "Exempt Persons") means:
(1) Leonard H. Lavin or Bernice E. Lavin;
(2) any descendant of Leonard H. Lavin and Bernice E. Lavin or the
spouse of any such descendant;
(3) the estate of any of the persons described in Section 3.8(c)(1)
or (2);
(4) any trust or similar arrangement for the benefit of any person
described in Section 3.8(c)(1) or (2); or
(5) the Lavin Family Foundation or any other charitable organization
established by any person described in Section 3.8(c)(1) or (2).
(d) "Incumbent Board" means those individuals who, as of October 24, 1996,
constitute the Board of Directors, provided that:
--------
(1) any individual who becomes a director of the Company subsequent
to such date whose election, or nomination for election by the
Company's stockholders, was approved either by the vote of at
least a majority of the directors then comprising the Incumbent
Board or by the vote of at least a majority of the combined
voting power of the Outstanding Company Voting Securities held by
the Exempt Persons shall be deemed to have been a member of the
Incumbent Board; and
(2) no individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest,
as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of
any Person other than the Board of Directors or the Exempt
Persons shall be deemed to have been a member of the Incumbent
Board.
3.9 Stockholder Approval. Unless otherwise determined by the Board of
Directors, the SVIP shall be resubmitted to the stockholders for re-approval and
re-adoption no less often than every five years.
10
DETACH HERE
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PROXY
ALBERTO-CULVER COMPANY
Annual Meeting, January 24, 2002
Proxy Solicited by the Board of Directors
The undersigned hereby appoints CAROL L. BERNICK, WILLIAM J. CERNUGEL and
BERNICE E. LAVIN, each with power of substitution, to vote all shares which the
undersigned stockholder would be entitled to vote if personally present and, if
applicable, hereby directs the trustee of each of the Alberto-Culver Company
Employees' Profit-Sharing Plan, the Alberto-Culver 401(k) Savings Plan and the
Sally Beauty 401(k) Savings Plan to vote the shares of stock of Alberto-Culver
Company allocated to the account of the undersigned which the undersigned is
entitled to vote pursuant to such employee benefit plan at the Annual Meeting of
Stockholders of Alberto-Culver Company to be held on January 24, 2002, and at
any adjournment thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF THE FOUR NOMINEES FOR DIRECTOR SET FORTH ON THE
REVERSE SIDE, "FOR" THE RE-APPROVAL OF THE COMPANY'S 1994 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS, AS AMENDED, AND "FOR" THE RE-APPROVAL OF THE COMPANY'S
1994 SHAREHOLDER VALUE INCENTIVE PLAN, AS AMENDED.
------------------------- ------------------------
SEE REVERSE SIDE SEE REVERSE SIDE
------------------------- ------------------------
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
DETACH HERE
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[X] Please mark
votes as in
this sample
1. Election of directors
Nominees: Howard B. Bernick, Bernice E. Lavin, 2. Re-Approval of the Company's 1994 Stock FOR AGAINST ABSTAIN
Allan B. Muchin and Harold M. Visotsky, M.D. Option Plan For Non-Employee Directors, as [_] [_] [_]
Amended.
FOR WITHHELD 3. Re-Approval of the Company's 1994 FOR AGAINST ABSTAIN
[_] [_] Shareholder Value Incentive Plan, as [_] [_] [_]
Amended.
4. In the discretion of the board of directors, on any other matters
that may come before the meeting.
[_]____________________________________________
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE NEW ADDRESS AT LEFT [_]
The board of directors recommends a vote FOR the election of each of
the nominees for directors listed hereon, FOR the re-approval of the
Company's 1994 Stock Option Plan For Non-Employee Directors, as
Amended, and FOR the re-approval of the Company's 1994 Shareholder
Value Incentive Plan, as Amended.
Please sign here exactly as your name (or names) appear on this proxy.
Persons signing as executors, administrators, trustees, guardians or
attorneys should so indicate when signing. Where there is more than one
owner, each must sign.
Signature:______________________________ Date:___________ Signature:__________________________________ Date:___________