SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement |_| Confidential, for use of the
Commission only
(as permitted by Rule 14a-6 (e)(2)
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material under Rule 14a-12
U.S. HOME & GARDEN INC.
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| 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:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Filing party:
- --------------------------------------------------------------------------------
Date filed:
U.S. HOME & GARDEN INC.
655 Montgomery Street
San Francisco, CA 94111
May 23, 2001
Dear Fellow Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders
which will be held on June 25, 2001 at 9:00 A.M., local time, at the offices of
U.S. Home & Garden Inc., 655 Montgomery Street, Suite 830, San Francisco,
California 94111.
The Notice of Annual Meeting and Proxy Statement which follow describe the
business to be conducted at the meeting.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed Notice of
Annual Meeting and Proxy Statement, may I urge you to complete, sign, date and
return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent,
Continental Stock Transfer & Trust Company, in writing, at 2 Broadway, New York,
New York 10004.
The Annual Meeting will be held solely to tabulate the votes cast and
report on the results of the voting on those matters listed in the accompanying
proxy statement. No presentations or other business matters are planned for the
meeting.
Your vote is very important, and we will appreciate a prompt return of your
signed proxy card.
Cordially,
Robert Kassel
Chairman of the Board,
Chief Executive Officer,
President and Secretary
U.S. HOME & GARDEN INC.
655 Montgomery Street
San Francisco, CA 94111
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 25, 2001
--------------------
To the Stockholders of U.S. HOME & GARDEN INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of U.S. Home
& Garden Inc. (the "Company") will be held on Monday, June 25, 2001, at 9:00
A.M., local time, at the offices of the Company, 655 Montgomery Street, Suite
830, San Francisco, California 94111, for the following purposes:
1. To elect five (5) directors to hold office until the next Annual Meeting
of Stockholders and until their respective successors have been duly elected and
qualified; and
2. To transact such other business as may properly come before the Annual
Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on May 10, 2001 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
The Annual Meeting will be held solely to tabulate the votes cast and
report on the results of the voting on those matters listed in the accompanying
proxy statement. No presentations or other business matters are planned for the
meeting.
- --------------------------------------------------------------------------------
IF YOU DO NOT EXPECT TO BE PRESENT AT THE ANNUAL MEETING:
------
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
- --------------------------------------------------------------------------------
By Order of the Board of
Directors,
Robert Kassel
Chairman of the Board,
Chief Executive Officer,
President and Secretary
May 23, 2001
PROXY STATEMENT
U.S. HOME & GARDEN INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 25, 2001
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of U.S. HOME & GARDEN INC. (the "Company") for
use at the Annual Meeting of Stockholders to be held on June 25, 2001, including
any adjournment or adjournments thereof (the "Annual Meeting"), for the purposes
set forth in the accompanying Notice of Meeting.
Management intends to mail this proxy statement and the accompanying form
of proxy to stockholders on or about May 29, 2001.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the Annual Meeting and voting in person.
The address and telephone number of the principal executive offices of the
Company are:
655 Montgomery Street
San Francisco, California 94111
Telephone No.: (415) 616-8111
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on May 10, 2001 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were 17,628,379 shares issued and outstanding of the
Company's common stock, $.001 par value per share (the "Common Stock"), the
Company's only class of voting securities. Each share entitles the holder to one
vote on each matter submitted to a vote at the Annual Meeting.
VOTING PROCEDURES
The directors will be elected by the affirmative vote of a plurality of the
shares of Common Stock, present in person or represented by proxy at the Annual
Meeting, provided a quorum exists. A quorum is present if, as of the Record
Date, at least a majority of the outstanding shares of Common Stock are present
in person or by proxy at the Annual Meeting. All other matters at the meeting
will be decided by the affirmative vote of the holders of a majority of the
shares of Common Stock cast with respect thereto, provided a quorum exists.
Votes will be counted and certified by one or more Inspectors of Election who
are expected to be employees of the Company. In accordance with Delaware law,
abstentions and "broker non-votes" (i.e. proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares as to a matter with respect to
which the brokers or nominees do not have discretionary power to vote) will be
treated as present for purposes of determining the presence of a quorum. For
purposes of determining approval of a matter presented at the meeting,
abstentions will be deemed present and entitled to vote and will, therefore,
have the same legal effect as a vote "against" a matter presented at the
meeting. Broker non-votes will be deemed not entitled to vote on the subject
matter as to which the non-vote is indicated and will, therefore, have no legal
effect on the vote on that particular matter.
The enclosed proxies will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies may be revoked as noted above.
ELECTION OF DIRECTORS
At this year's Annual Meeting of Stockholders, five (5) directors will be
elected to hold office for a term expiring at the next Annual Meeting of
Stockholders. Each director will be elected to serve until a successor is
elected and qualified or until the director's earlier resignation or removal.
At this year's Annual Meeting of Stockholders, the proxies granted by
stockholders will be voted individually for the election, as directors of the
Company, of the persons listed below, unless a Proxy specifies that it is not to
be voted in
-2-
favor of a nominee for director. In the event any of the nominees listed below
shall be unable to serve, it is intended that the Proxy will be voted for such
other nominees as are designated by the Board of Directors. Each of the persons
named below has indicated to the Board of Directors of the Company that he will
be available to serve.
Name Age Position
---- --- --------
Robert Kassel(1) 61 Chairman of the Board, Chief
Executive Officer, President,
Secretary and Treasurer
Richard Raleigh 47 Chief Operating Officer and
Director
Fred Heiden(1)(2) 59 Director
Brad Holsworth(2) 40 Director
Jon Schulberg(1)(2) 42 Director
- ------------------
(1) Member, Compensation Committee
(2) Member, Audit Committee
Robert Kassel co-founded the Company and has been Chairman of the Board,
Chief Executive Officer, President and Treasurer of the Company since October
1990. He has also served as Secretary of the Company since May 2001. From 1985
to August 1991 he was a consultant to Comtel Communications, Inc., a company
specializing in the installation and operation of telephone systems in hotels.
From 1985 to 1990, Mr. Kassel was also a real estate developer in Long Island,
New York and Santa Barbara, California. From 1965 to 1985, he was a practicing
attorney in New York City, specializing in corporate and securities laws.
Richard Raleigh has been a Director of the Company since March 1993, Chief
Operating Officer of the Company since June 1992 and served as the Company's
Executive Vice President-Operations from December 1991 to June 1992. Prior to
joining the Company, Mr. Raleigh was a free-lance marketing consultant to the
lawn and garden industry from January 1991 to December 1991. From April 1988 to
January 1991 he was employed by Monsanto Agricultural Co. as its Director of
Marketing, Lawn and Garden. From December 1986 to April 1988 he was Vice
President
-3-
of Sales and Marketing of The Andersons, a company engaged in the sale of
consumer and professional lawn and garden products. From November 1978 to
December 1986 he held a variety of positions at The Andersons, including
Operations Manager and New Products Development Manager.
Fred Heiden, a director of the Company since March 1993, has been a private
investor since November 1989. From April 1984 to November 1989 Mr. Heiden was
the president and principal owner of Bonair Construction, a Florida based home
improvement construction company.
Brad Holsworth, has been a director of the Company since July 2000. Since
April 2000 he has been employed by Prescient Capital LLC, a money manager and
venture capital firm, as its Chief Financial Officer. From April 1999 to April
2000 he was employed by Banc of America Securities, as a Principal, Accounting
and Finance. He was employed by the accounting firm, BDO Seidman, LLP from July
1982 to April 1999 and had been a partner of BDO Seidman, LLP since July 1995.
Jon Schulberg, a director of the Company since March 1993, has been
employed as president of Schulberg MediaWorks, a company engaged in the
independent production of television programs and television advertising, since
January 1992. From January 1989 to January 1992 he was a producer for
Guthy-Renker Corporation, a television production company. From September 1987
to January 1989 he was the director of development for Eric Jones Productions.
During the fiscal year ended June 30, 2000, the Board of Directors held one
meeting. The Board also took various action by unanimous written consent in lieu
of a meeting. The Company did not have a standing nominating committee of the
Board of Directors or other committee performing similar functions during the
fiscal year ended June 30, 2000. During the fiscal year ended June 30, 2000 the
Board had an Audit Committee which is responsible for supervising the audit and
financial procedures of the Company. The Audit Committee currently consists of
Messrs. Heiden, Holsworth, and Schulberg. Prior to May 2001 Mr. Raleigh also
served as a member of the Audit Committee. The Company has a Compensation
Committee consisting of Messrs. Kassel, Heiden and Schulberg. The Audit
Committee held one meeting during the fiscal year ended June 30, 2000. The
Compensation Committee did not meet during the fiscal year ended June 30, 2000.
-4-
All directors of the Company hold office until the next annual meeting of
the stockholders and the election and qualification of their successors.
Officers of the Company are elected annually by the Board of Directors and serve
at the discretion of the Board.
EXECUTIVE OFFICERS
In addition to Mr. Kassel and Mr. Raleigh, the Company's executive officers
include Donald Rutishauser.
Donald Rutishauser, 44, has been Chief Financial Officer since his
employment with the Company in November 1999. From 1997 to 1999, he was Vice
President, Corporate Development of Miller Energy, Inc., a private oil and gas
exploration and production company. From 1992 to 1997, Mr. Rutishauser was Vice
President and Treasurer of Belden and Blake Corporation, a public oil and gas
exploration and production company. From 1980 to 1992, he held a variety of
financial management positions at Belden and Blake, W.R. Grace and Company, and
Texas Instruments, Inc.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10 percent 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 ("SEC").
Officers, directors, and greater than 10 percent stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on the Company's review of the copies of such forms received
by the Company, or representations obtained from certain reporting persons, the
Company believes that during the fiscal year ended June 30, 2000 all filing
requirements applicable to its officers, directors, and greater than 10 percent
beneficial stockholders were complied with except that Robert Kassel and Maureen
Kassel (who was an officer and director during fiscal 2000) did not timely file
a Form 4 with respect to the exercise by Robert Kassel in July 1999 of certain
unit purchase options previously granted to Mr. Kassel that had been placed in
the Company's Non-Qualified Deferred Compensation Plan for Select Employees.
-5-
EXECUTIVE COMPENSATION
The following table discloses the compensation awarded by the Company, for
the three fiscal years ended June 30, 2000, 1999, and 1998, to Mr. Robert
Kassel, its Chief Executive Officer, President, Treasurer and Secretary, Mr.
Richard J. Raleigh, its Chief Operating Officer and Ms. Lynda Gustafson, the
Company's former Vice President of Finance (together, the "Named Officers").
During the fiscal year ended June 30, 2000, no other executive officer of U.S.
Home & Garden Inc. received a total salary and bonus that exceeded $100,000
during such fiscal year.
Summary Compensation Table
Annual Compensation Long-Term
------------------- Compensation
Name and Principal Position Securities
- --------------------------- Underlying All Other
Year Salary ($) Bonus ($) Options (#) Compensation(1)
---- ---------- --------- --------------- ---------------
Robert Kassel, 2000 477,000(2) 320,000(2) 500,000(3) $6,383
Chairman, Chief Executive Officer, 1999 450,000 114,000 641,333(4) $6,169
President, Treasurer and Secretary 1998 450,000 281,667 468,000(5) $7,523
Richard Raleigh, Chief Operating Officer 2000 250,000 125,000 225,000 (6) $12,623
1999 250,000 96,000 137,500 (7)(8) $12,169
1998 225,000 115,000 132,500 (7) $9,203
Lynda Gustafson, Vice President of Finance* 2000 147,000 60,000 50,000 $4,763
1999 148,000 60,000 -- $12,169
1998 125,000 45,000 50,000 (9) $11,273
- ------------
* Ms. Gustafson's employment with the Company ceased in August 2000.
(1) Represents Company contributions to the Named Officers 401(k) account.
Excludes certain perquisites that did not exceed the lesser of $50,000 or
10% of their combined bonus and salary.
(2) Included in Mr. Kassel's salary is $46,800 of non-cash compensation
attributable to his receipt of shares of common stock of Egarden Inc. Mr.
Kassel's bonus of $320,000 primarily reflects work performed by him in
connection with Egarden Inc. and its initial
-6-
capitalization, securing E-commerce agreements with certain of the nations
largest hardware cooperatives and obtaining vendor arrangements.
(3) Includes 200,000 options that were originally granted to Mr. Kassel in prior
fiscal years, the expiration dates of which were extended in fiscal 2000.
(4) Includes 341,333 options that were originally granted to Mr. Kassel in prior
fiscal years, the expiration dates of which were extended in fiscal 1999.
Also includes options to purchase 300,000 shares that were granted to Mr.
Kassel in December 1998, and voluntarily forfeited by him during the fiscal
year ended June 30, 1999.
(5) Includes 80,000 options that were originally granted to Mr. Kassel in 1993,
the expiration dates of which were extended during fiscal 1998.
(6) Includes 100,000 options that were originally granted to Mr. Raleigh in
prior fiscal years, the expiration dates of which were extended in fiscal
2000.
(7) Includes 12,500 options that were originally granted to Mr. Raleigh in 1992,
the expiration date of which was extended during fiscal 1998 and further
extended during fiscal 1999.
(8) Includes options to purchase 125,000 shares granted to Mr. Raleigh in
December 1998 and voluntarily forfeited by him during the fiscal year ended
June 30, 1999.
(9) Ms. Gustafson's fiscal 1998 option grant covering 50,000 shares has been
voluntarily forfeited by her during fiscal 2000.
-7-
The following table discloses information concerning options granted in
fiscal 2000 to the Named Officers.
Option Grants in Fiscal Year Ended June 30, 2000
Individual Grants
Number of
Securities Percent of Total Potential Realizable Value at
Underlying Options Granted to Assumed Annual Rates of Stock
Options Granted Employees in Fiscal Exercise Price Expiration Price Appreciation for Option
Name (#)(1) Year (%) ($/Sh) Date Term ($)(2)
- --------------- --------------- ------------------- --------------- -------------- -----------------------------
5% 10%
-- ---
Robert Kassel 300,000 23.6 2.125 11/29/09 400,920 1,016,011
200,000(3) 15.7 2.0625 6/1/05 113,966 251,835
Richard Raleigh 125,000 9.8 2.125 11/29/09 167,050 423,338
100,000(3) 7.9 2.0625 6/1/05 56,914 125,918
Lynda Gustafson 50,000 3.9 2.5625 1/4/05 35,399 78,222
- --------------------
(1) All of such options were initially exercisable in full from the date of
grant except for the options granted to Ms. Gustafson which vested 40% on
the grant date and the balance on June 1, 2000.
(2) The potential realizable value columns of the table illustrate values that
might be realized upon exercise of the options immediately prior to their
expiration, assuming our common stock appreciates at the compounded rates
specified over the term of the options. These numbers do not take into
account provisions of options providing for termination of the option
following termination of employment or nontransferability of the options and
do not make any provision for taxes associated with exercise. Because actual
gains will depend upon, among other things,
-8-
future performance of the common stock, there can be no assurance that the
amounts reflected in this table will be achieved.
(3) Reflects extension of expiration date of options that were originally
granted on June 1, 1995. The potential realizable value for these options
has been calculated using the five-year extended term.
The following table sets forth information concerning options exercised by
the Named Officers during the fiscal year ended June 30, 2000, and the number of
options owned by the Named Officers and the value of any in-the-money
unexercised options as of June 30, 2000:
Aggregated Option Exercises
And Fiscal Year-End Option Values
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money Options
Exercise(#) Realized ($) Options at June 30, 2000 at _June 30, 2000(1)
------------ ------------ ----------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------- ----------- ------------- ----------- -------------
Robert Kassel 54,772(2) (2) 1,930,133 299,200 $1,829,727 $ 466,752
Richard Raleigh -- -- 751,911 10,000 $ 745,781 $ 15,600
Lynda Gustafson -- -- 66,000 -- $ 53,540 --
- -------
(1) Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year end
market value of the common stock. An Option is "in-the-money" if the fiscal
year end fair market value of the common stock exceeds the option exercise
price. The last sale price (the fair market value) of the common stock on
June 30, 2000 was $3.25 per share.
(2) In July 1999 unit purchase options to acquire 263,160 shares of common stock
and 263,160 common stock purchase warrants were exercised by Mr. Kassel
pursuant to the terms of the Company's Non-Qualified Deferred Compensation
Plan for Select Employees. A total of 54,772 shares of common stock owned by
Mr. Kassel were surrendered to the Company in payment of the exercise price
of the options exercised and in return 54,772 of the shares underlying the
options were issued to Mr. Kassel. No value was realized on the issuance of
the new 54,772 shares as for tax purposes these
-9-
shares assume the same basis as the shares surrendered by Mr. Kassel. The
issuance to Mr. Kassel of the remaining 208,388 shares and 263,160 common
stock warrants underlying the unit purchase option have been deferred
pursuant to an election made by Mr. Kassel under the Company's Non-Qualified
Deferred Compensation Plan for Select Employees.
Employment Agreements of Executive Officers
The Company has entered into employment agreements with Messrs. Kassel and
Raleigh, each dated as of April 1, 1996. Mr. Kassel currently serves as Chief
Executive Officer and President of the Company for a term expiring on March 31,
2002, subject to automatic renewal unless terminated. His current annual salary
is $450,000, and is subject to such bonuses and increases as are approved at the
discretion of the Board of Directors. Mr. Raleigh currently serves as the Chief
Operating Officer of the Company for a term expiring on March 31, 2002 subject
to automatic renewal unless terminated. Mr. Raleigh's current annual salary is
$250,000, and is subject to such bonuses and increases as are approved at the
discretion of the Board of Directors. Each of the employment agreements requires
that substantially all of the employee's business time be devoted to the Company
and that the employee not compete, or engage in a business competitive with, the
Company's current or anticipated business for the term of the agreement and for
two years thereafter (although they each may own not more than 5% of the
securities of any publicly traded competitive company). Each of Mr. Kassel and
Mr. Raleigh is, in addition to salary, entitled to certain fringe benefits,
including the use of an automobile and payment of related expenses.
Mr. Kassel's agreement also provides that if his employment is terminated
under certain circumstances, including termination of Mr. Kassel's employment
upon a change of control of the Company, (as defined in the agreement) a failure
by the Company to comply with its obligations under the agreement, the failure
of the Company to obtain the assumption of the agreement by any successor
corporation, or a change in Mr. Kassel's duties and obligations from those
contemplated by the agreement, and termination by the Company of Mr. Kassel's
employment other than for disability or cause, he will be entitled to receive
severance pay equal to the greater of (i) $350,000 ($3,500,000 in the event of a
change of control) or (ii) the total compensation earned by Mr. Kassel from the
Company during the one-year period (multiplied by ten in the event of a change
of control) prior to the date of his termination.
-10-
Mr. Raleigh's employment agreement also provides that if his employment is
terminated under certain circumstances, including termination of Mr. Raleigh's
employment upon a change of control of the Company, (as defined in the
agreement) a failure by the Company to comply with its obligations under the
agreement, the failure of the Company to obtain the assumption of the agreement
by any successor corporation, or a change in Mr. Raleigh's duties and
obligations from those contemplated by the agreement, and termination by the
Company of Mr. Raleigh's employment other than for disability or cause, he will
be entitled to receive severance pay equal to the greater of (i) $162,500
($812,500 in the event of a change of control) or (ii) the total compensation
earned by Mr. Raleigh from the Company during the one-year period (multiplied by
five in the event of a change of control) prior to the date of his termination.
Committees of the Board of Directors
The Company has established an Audit Committee which is comprised of
Messrs. Heiden, Holsworth and Schulberg each of whom is an "independent
director" under the rules of the national Association of Securities Dealers,
Inc. The Audit Committee, among other things, makes recommendations to the Board
of Directors with respect to the engagement of the Company's independent
certified public accountants and the review of the scope and effect of the audit
engagement. The Audit Committee has adopted a written charter, a copy of which
is attached hereto as Appendix A. The Company has also established a
Compensation Committee which is comprised of Messrs. Kassel, Heiden and
Schulberg, The Compensation Committee, among other things, makes recommendations
to the Board of Directors with respect to the compensation of the executive
officers of the Company. The Company maintains a Stock Option Committee
comprised of Messrs. Schulberg and Heiden, which determines the persons to whom
options should be granted under the Company's 1995 and 1997 Stock Option Plans
and the number and other terms of options to be granted to each person under
such plans.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Compensation Committee of the Company's Board of Directors consists of
Messrs. Kassel, Heiden and Schulberg. During the fiscal year ended June 30,
2000, none of the Company's executive officers served on the Board of Directors
or
-11-
the compensation committee of any other entity, any of whose officers served on
the Board of Directors or Compensation Committee of the Company.
Stock Option Plans
In September 1991, the Company adopted a stock option plan (the "1991
Plan") pursuant to which 700,000 shares of Common Stock have been reserved for
issuance upon the exercise of options designated as either (i) options intended
to constitute incentive stock options ("ISOs") under the Internal Revenue Code
of 1986, as amended (the "Code") or (ii) non-qualified options ("NQO's"). ISOs
may be granted under the 1991 Plan to employees and officers of the Company.
NQO's may be granted to consultants, directors (whether or not they are
employees), employees or officers of the Company.
The purpose of the 1991 Plan is to encourage stock ownership by certain
directors, officers and employees of the Company and certain other persons
instrumental to the success of the Company and give them a greater personal
interest in the success of the Company. The 1991 Plan is administered by the
Board of Directors. The Board, within the limitations of the 1991 Plan,
determines the persons to whom options will be granted, the number of shares to
be covered by each option, whether the options granted are intended to be ISOs,
the duration and rate of exercise of each option, the option purchase price per
share and the manner of exercise, the time, manner and form of payment upon
exercise of an option, and whether restrictions such as repurchase rights in the
Company are to be imposed on shares subject to options.
ISOs granted under the 1991 Plan may not be granted at a price less than
the fair market value of the Common Stock on the date of grant (or 110% of fair
market value in the case of persons holding 10% or more of the voting stock of
the Company). The aggregate fair market value of shares for which ISOs granted
to any employee are exercisable for the first time by such employee during any
calendar year (under all stock option plans of the Company and any related
corporation) may not exceed $100,000. NQO's granted under the 1991 Plan may not
be granted at a price less than the fair market value of the Common Stock on the
date of grant. Options granted under the 1991 Plan will expire not more than ten
years from the date of grant (five
-12-
years in the case of ISOs granted to persons holding 10% or more of the voting
stock of the Company).
The Company has adopted, a Non-Employee Director Stock Option Plan (the
"Director Plan"). Only non-employee directors of the Company are eligible to
receive grants under the Director Plan. The Director Plan provides that eligible
directors automatically receive a grant of options to purchase 5,000 shares of
Common stock at fair market value upon first becoming a director and,
thereafter, an annual grant, in January of each year, of 5,000 options at fair
market value. Options to purchase an aggregate of up to 100,000 shares of Common
Stock are available for automatic grants under the Director Plan.
The Company has adopted a 1995 Stock Option Plan ("1995 Plan") which
provides for grants of options to purchase up to 1,500,000 shares of Common
Stock. The Board of Directors or the Stock Option Committee (the "Committee"),
as the case may be, will have discretion to determine the number of shares
subject to each NQO (subject to the number of shares available for grant under
the 1995 Plan and other limitations on grant set forth in the 1995 Plan), the
exercise price thereof (provided such price is not less than the par value of
the underlying shares of Common Stock), the term thereof (but not in excess of
10 years from the date of grant, subject to earlier termination in certain
circumstances), and the manner in which the option becomes exercisable (amounts,
intervals and other conditions). Directors who are employees of the Company will
be eligible to be granted ISOs or NQOs under such plan. The Board or Committee,
as the case may be, also has discretion to determine the number of shares
subject to each ISO, the exercise price and other terms and conditions thereof,
but their discretion as to the exercise price, the term of each ISO and the
number of ISOs that may vest in any calendar year is limited by the same Code
provisions applicable to ISOs granted under the 1991 Plan.
The Company has adopted a 1997 Stock Option Plan ("1997 Plan") which
provides for grants of options to purchase up to 1,500,000 shares of Common
Stock. The Board of Directors or the Committee of the 1997 Plan, as the case may
be, will have discretion to determine the number of shares subject to each NQO
(subject to the number of shares available for grant under the 1997 Plan and
other limitations on grant set forth in the 1997 Plan), the exercise price
thereof (provided such price is not less than the par value of the underlying
shares of Common Stock), the term thereof (but not in excess of 10 years from
the
-13-
date of grant, subject to earlier termination in certain circumstances), and the
manner in which the option becomes exercisable (amounts, intervals and other
conditions). Directors who are employees of the Company will be eligible to be
granted ISOs or NQOs under such plan. The Board or Committee, as the case may
be, also has discretion to determine the number of shares subject to each ISO,
the exercise price and other terms and conditions thereof, but their discretion
as to the exercise price, the term of each ISO and the number of ISOs that may
vest in any calendar year is limited by the same Code provisions applicable to
ISOs granted under the 1991 Plan.
The Company has also adopted a 1999 Stock Option Plan ("1999 Plan") which
provides for grants of options to purchase up to 900,000 shares of Common Stock.
The Board of Directors or the Committee of the 1999 Plan, as the case may be,
will have discretion to determine the number of shares subject to each NQO
(subject to the number of shares available for grant under the 1999 Plan and
other limitations on grant set forth in the 1999 Plan), the exercise price
thereof (provided such price is not less than the fair market value of the
underlying shares of Common Stock), the term thereof (but not in excess of 10
years from the date of grant, subject to earlier termination in certain
circumstances), and the manner in which the option becomes exercisable (amounts,
intervals and other conditions). Directors who are employees of the Company will
be eligible to be granted ISOs or NQOs under such plan. The Board or Committee,
as the case may be, also has discretion to determine the number of shares
subject to each ISO, the exercise price and other terms and conditions thereof,
but their discretion as to the exercise price, the term of each ISO and the
number of ISOs that may vest in any calendar year is limited by the same Code
provisions applicable to ISOs granted under the 1991 Plan.
The Company has adopted the Non-Qualified Deferred Compensation Plan for
Select Employees of U.S. Home & Garden Inc. ("Deferred Plan") and has amended
its stock option plans, as well as certain option agreements which it has had
with Robert Kassel. Under the Deferred Plan and such amended stock option plans
and agreements, the Board of Directors or its committee which administers the
relevant stock option may grant permission to optionees to exercise their
options with shares of the Company's common stock in which they have a holding
period, for income tax purposes, of at least six months and defer the receipt of
a portion of the shares subject to the option so exercised. The optionee has the
right to designate the time or
-14-
times of receipt of those shares pursuant to the Deferred Plan. The Deferred
Plan does contain provisions for earlier issuance of those deferred shares on
death, disability and other termination of employment (e.g., on a change of
control of the Company).
The Company from time to time has also granted non-plan options to certain
officers, employees and consultants.
Director Compensation
During the fiscal year ended June 30, 2000 each of the Company's two
non-employee directors during such fiscal year, Messrs. Heiden and Schulberg,
received $5,000 for serving as directors of the Company and received grants
under the Director Plan of options to purchase 5,000 shares of the Company's
common stock.
Audit Committee Report
In September 2000, the Audit Committee met with management to review and
discuss the audited financial statements. The Audit Committee also conducted
discussions with the Company's independent auditors, BDO Seidman, LLP, regarding
the matters required by the Statement on Auditing Standards No. 61. As required
by Independence Standards Board Standard No. 1, "Independence Discussion with
Audit Committees," the Audit Committee has discussed with and received the
required written disclosures and confirming letter from BDO Seidman, LLP
regarding its independence and has discussed with BDO Seidman, LLP its
independence. Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended June 30, 2000.
Fred Heiden, Brad Holsworth, Richard Raleigh*, Jon Schulberg
- -----------
* Mr. Raleigh's membership on the Audit Committee ceased in May 2001.
-15-
Report on Executive Compensation
Although the Company has established a Compensation Committee of the Board
of Directors, the compensation of the Company's executive officers for the
fiscal year ended June 30, 2000 was determined by the Board of Directors. There
is no formal compensation policy for the Company's executive officers.
The Board of Directors has appointed a Stock Option Committee, currently
comprised of Messrs. Heiden and Schulberg, for each of the 1995 Plan and the
1997 Plan, which has made grants under, and has administered, such plans.
Total compensation for executive officers consists of a combination of
salaries and stock option awards. The salaries of Robert Kassel and Richard
Raleigh, are fixed annually by the Board of Directors pursuant to the terms of
their respective employment agreements with the Company. Base salary of other
executive officers is based on the Company's financial performance and the
executive's individual performance and level of responsibility. Bonus
compensation, if any, to executive officers is based generally upon the
Company's financial performance and the availability of resources as well as the
executive officer's individual performance and level of responsibility. Stock
option awards under the Company's Stock Option Plans are intended to attract,
motivate and retain senior management personnel by affording them an opportunity
to receive additional compensation based upon the performance of the Company's
Common Stock. No new stock options were granted to executive officers of the
Company during the fiscal year ended June 30, 2000 except for non-qualified
options to purchase 300,000, 125,000 and 50,000 shares, respectively, of the
Company's Common Stock granted to Messrs. Kassel and Raleigh and Ms. Gustafson,
respectively. During the fiscal year ended June 30, 2000 the Board also extended
the expiration date of certain options previously granted to certain of its
executive officers, including Messrs. Kassel and Raleigh.
-16-
For the fiscal year ended June 30, 2000, the Company had a net loss of
$345,000 (after an extraordinary gain of $1,224,000) on net sales of
$89,665,000, compared to earnings of $2,049,000 on net sales of $89,346,000 in
the fiscal year ended June 30, 1999.
Robert Kassel Fred Heiden
Richard Raleigh Brad Holsworth*
Jon Schulberg
- ------------
* Mr. Holsworth joined the Board in July 2000 and did not participate in the
Board's determination of executive compensation for the fiscal year ended June
30, 2000.
Stock Performance Graph
The following line graph compares, from July 1, 1995 through June 30, 2000,
the cumulative total return among the Company, companies comprising the NASDAQ
Market Index and a Peer Group Index, based on an investment of $100 on June 30,
1995, in the Company's Common Stock and each index, and assuming reinvestment of
all dividends, if any, paid on such securities. The Company has not paid any
cash dividends and, therefore, the cumulative total return calculation for the
Company is based solely upon stock price appreciation and not upon reinvestment
of cash dividends. The Peer Group Index consists of the following companies:
Acorn Products Inc., Lesco, Inc., the Scotts Company and the Toro Company.
Historic stock price is not necessarily indicative of future stock price
performance.
[GRAPH OMITTED]
6/30/95 6/30/96 6/30/97 6/30/98 6/30/99 6/30/00
------- ------- ------- ------- ------- -------
The Company $100.00 $106.25 $112.50 $214.58 $125.00 $108.33
Peer Group Index $100.00 $101.10 $133.50 $140.78 $168.22 $132.25
NASDAQ Market Index $100.00 $125.88 $151.64 $201.01 $281.68 $423.84
-17-
VOTING SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information at the Record Date, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by the
Company to be the owner of more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each Named Officer, and (iv) all executive
officers and directors of the Company as a group.
Amount and
Nature of
Beneficial Percentage
Name of Beneficial Owner Ownership(1)(2) of Class
- ------------------------ --------------- ----------
Robert Kassel 4,539,524(3)(4) 22.7
Richard Raleigh 751,911(5) 4.1
Lynda Gustafson 0 0
Fred Heiden 15,258(6) *
Brad Holsworth 6,000(7) *
Jon Schulberg 15,258(6) *
Richard Grandy 1,089,396(8) 6.1
Joseph Owens, II 914,396(9) 5.2
Wellington Management
Company, LLP 1,510,000(10) 8.6
All executive officers
and directors as a
group (six persons) 5,337,951(3)(4)(5) 25.6
(6)(7)
- ---------------
*less than 1%
- --------------------------------------------------------------------------------
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the Record Date upon the
exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such
-18-
person (but not those held by any other person) and which are exercisable
within 60 days from the Record Date have been exercised.
(3) Of such shares, (i) 224,050 are owned of record by Mr. Kassel's wife;
however, because Ms. Kassel has appointed her husband as her proxy and
attorney-in-fact to vote all 224,050 of the shares owned of record by her,
Robert Kassel may also be deemed to have beneficial ownership of such
shares; (ii) an aggregate of 914,396 shares are owned of record by each of
Messrs. Joseph Owens and Richard Grandy, who have entered into a voting
trust agreement providing Mr. Kassel with the right to vote the shares
until September 1, 2001. The address of Mr. Kassel is c/o the Company.
(4) Includes 2,203,294 shares of Common Stock issuable to Mr. Kassel upon
exercise of options and warrants and 208,388 shares whose issuance to Mr.
Kassel has been deferred pursuant to the terms of the Company's
Non-Qualified Deferred Compensation Plan.
(5) Represents shares of Common Stock issuable to Mr. Raleigh upon exercise of
options.
(6) Includes 15,000 shares issuable upon exercise of options.
(7) Includes 5,000 shares issuable upon exercise of options.
(8) Includes 150,000 shares of Common Stock issuable upon exercise of options.
The address of Mr. Grandy is c/o the Company.
(9) The address of Mr. Owens is 8 Hillandale Road, Waco, Texas.
(10) According to a Schedule 13G filed by Wellington Management Company, LLP
("Wellington") with the SEC, these shares are beneficially owned by
Wellington in its capacity as an investment advisor and are clients of
Wellington. The address of Wellington is 75 State Street, Boston, MA 02109.
-19-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time Messrs. Kassel and Raleigh have borrowed monies from the
Company. During fiscal 2000, the highest amount owed to the Company by Messrs.
Kassel and Raleigh were $603,264 and $207,225, respectively. After deducting
principal payments made to date, the principal balance of such loans at April
30, 2001 were approximately $533,373 and $151,382, respectively. The loans bear
interest at 7% per annum and mature on June 30, 2002. Messrs. Kassel and Raleigh
will make annual payments of interest on the outstanding principal balance of
their loans through the maturity date. In addition, payments of principal will
be made during next year and on maturity of the loans as follows: As to Mr.
Kassel -- $150,000 and the balance of approximately $383,373, respectively. As
to Mr. Raleigh, $50,000 and the balance of approximately $101,382, respectively.
During fiscal 2000 the Company purchased from Mr. Kassel and Mr. Raleigh,
at market, an aggregate of $289,250 and $105,750 respectively of Trust Preferred
Securities of the Company's subsidiary U.S. Home & Garden Trust I.
In connection with services rendered to it during fiscal 2000 the Company's
Egarden Inc. subsidiary issued to certain of the Company's officers shares of
its common stock as follows: 450,000 shares to Robert Kassel and 35,000 shares
to Richard Raleigh.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BDO Seidman, LLP has audited and reported upon the financial statements of
the Company for the fiscal year ended June 30, 2000 and the Board of Directors
currently anticipates that it will select BDO Seidman, LLP to examine and report
upon the financial statements of the Company for the fiscal year ending June 30,
2001. A representative of BDO Seidman, LLP is not expected to be present at the
Annual Meeting.
Audit Fees. The aggregate fees billed by BDO Seidman, LLP for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended June 30, 2000 (the "2000 fiscal year") and the reviews of
-20-
the financial statements included in the Company's Form 10-Q's for the 2000
fiscal year totaled $107,000.
Financial Information Systems Design and Implementation Fees. There were no
fees billed to the Company by BDO Seidman, LLP for professional services related
to financial information systems design and implementation by BDO Seidman, LLP
for the 2000 fiscal year.
All Other Fees. The aggregate fees billed for services rendered by BDO
Seidman, LLP, other than for audit and information technology services,
described in the preceding two paragraphs, totaled $119,000 for the 2000 fiscal
year, of which $26,000 related to tax services and $93,000 related to all other
services which primarily related to acquisitions.
The Audit Committee has considered whether the provision of services
covered in the preceding two paragraphs is compatible with maintaining BDO
Seidman, LLP's independence.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING
FOR FISCAL YEAR ENDING JUNE 30, 2001
The Company currently anticipates that its Annual Meeting of Stockholders
with respect to the Company's fiscal year ending June 30, 2001 will be held
between the months of November 2001 and January 2002. Therefore, stockholders
who wish to present proposals appropriate for consideration at the Company's
Annual Meeting of Stockholders with respect to the Company's fiscal year ending
June 30, 2001 must submit the proposal in proper form and in satisfaction of the
conditions established by the Securities and Exchange Commission, to the Company
at its address set forth on the first page of this Proxy Statement not later
than September 1, 2002 in order for the proposition to be considered for
inclusion in the Company's proxy statement and form of proxy relating to such
annual meeting. Any such proposals, as well as any questions related thereto,
should be directed to the Secretary of the Company.
After the September 1, 2002 deadline, a stockholder may present a proposal
at the Company's next Annual Meeting if it is submitted to the Company's
Secretary at the address set forth above no later than October 15, 2002. If
timely submitted, the stockholder may present the proposal at the next Annual
Meeting but the Company is not obligated to present the matter in its proxy
statement.
-21-
OTHER INFORMATION
Proxies for the Annual Meeting will be solicited by mail and through
brokerage institutions and all expenses involved, including printing and
postage, will be paid by the Company.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30,
2000 IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE CLOSE
OF BUSINESS ON MAY 10, 2001. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
WILL BE PROVIDED TO EACH SUCH STOCKHOLDER WITHOUT CHARGE UPON WRITTEN REQUEST
TO:
U.S. HOME & GARDEN INC.
655 MONTGOMERY STREET, SUITE 830
SAN FRANCISCO, CALIFORNIA 94111
ATTENTION: CORPORATE SECRETARY
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board of Directors,
Robert Kassel
Chairman of the Board,
Chief Executive Officer,
President and Secretary
May 23, 2001
-22-
Appendix A
U.S. HOME & GARDEN INC.
AUDIT COMMITTEE CHARTER
Composition
There shall be a committee of the board of directors (the "Board") of U.S. Home
& Garden Inc. (the "Company") to be known as the audit committee which shall
have at least three (3) members, comprised solely of independent directors, as
such term is defined in Marketplace Rule 4200 of the National Association of
Securities Dealer's, Inc. ("NASD") or successor rule, subject to the exception
in NASD Marketplace Rule 4350(d)(2)(B), or successor rule.
Each member of the audit committee shall be able to read and understand
fundamental financial statements, including the Company's balance sheet, income
statement and cash flow statement or will become able to do so within a
reasonable period of time after his or her appointment to the audit committee.
In addition, at least one member of the audit committee shall have past
employment experience in finance or accounting, requisite professional
certification in accounting or any other comparable experience or background
which results in the individual's financial sophistication, including, but not
limited to, being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities.
The Board shall elect or appoint a chairperson of the audit committee who will
have authority to act on behalf of the audit committee between meetings.
Responsibilities
The responsibilities of the audit committee are as follows:
o Ensure its receipt from the outside auditor of a formal written
statement, delineating all relationships between the outside auditor
and the Company consistent with the Independence Standards Board
Standard 1.
o Actively engage in a dialogue with the outside auditor with respect to
any disclosed relationships or services that may impact the
objectivity and independence of the outside auditor and be responsible
for taking, or recommending that the board of directors take,
appropriate action to oversee the independence of the outside auditor.
o In view of the outside auditor's ultimate accountability to the Board
and the audit committee, as representatives of the stockholders, the
audit committee, acting together with the Board, has the ultimate
authority and responsibility to select, evaluate, and, where
appropriate, replace the outside auditor (or, if applicable, nominate
an outside auditor for stockholder approval in any Company proxy
statement).
o Review with the outside auditor, the company's internal auditor (if
any), and financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the company,
and elicit any recommendations for the improvement of such internal
control procedures or particular areas where new or more detailed
controls or procedures are desirable.
o Consider, in consultation with the outside auditor and management of
the company, the audit scope and procedures.
o Review the financial statements contained in the annual report to
stockholders with management and the outside auditor to determine that
the outside auditor is satisfied with the disclosure and content of
the financial statements to be presented to the stockholders.
o Meet with the internal auditor (if any), outside auditor or the
management privately to discuss any matters that the audit committee,
the internal auditor (if any), the outside auditor or the management
believe should be discussed privately with the audit committee.
-2-
o Review and reassess the adequacy of the audit committee's charter
annually.
o Prepare a report of the audit committee to be included in the
Company's proxy statement in accordance with applicable Securities and
Exchange Commission regulations.
o Make such other recommendations to the Board on such matters, within
the scope of its functions, as may come to its attention and which in
its discretion warrant consideration by the Board.
Limitations
The audit committee is responsible for the duties set forth in this charter but
is not responsible for either the preparation of the financial statements or the
auditing of the financial statements. Management has the responsibility for
preparing the financial statements and implementing internal controls and the
independent accountants have the responsibility for auditing the financial
statements and monitoring the effectiveness of the internal controls. The review
of the financial statements by the audit committee is not an audit nor is it of
the same quality as an audit. The audit is performed by the independent outside
auditors. In carrying out its responsibilities, the audit committee believes its
policies and procedures should remain flexible in order to best react to a
changing environment.
-3-
U.S. HOME & GARDEN INC.
655 Montgomery Street
San Francisco, California 94111
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 25, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT KASSEL and RICHARD RALEIGH, and each
of them, Proxies, with full power of substitution in each of them, in the name,
place and stead of the undersigned, to vote at the Annual Meeting of
Stockholders of U.S. Home & Garden Inc. on Monday, June 25, 2001, at 655
Montgomery Street, Suite 830, San Francisco, California 94111, or at any
adjournment or adjournments thereof, according to the number of votes that the
undersigned would be entitled to vote if personally present, upon the following
matters:
1. Election of Directors:
|_| FOR all nominees listed below
(except as marked to the contrary below).
|_| WITHHOLD AUTHORITY
to vote for all nominees listed below.
Robert Kassel, Richard Raleigh,
Fred Heiden, Brad Holsworth and Jon Schulberg
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.)
- --------------------------------------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(continued and to be signed on reverse side)
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THOSE NOMINEES LISTED
ABOVE.
DATED: ____________________________, 2001
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
------------------------------------
Signature
------------------------------------
Signature if held jointly
Please mark, sign, date and return this proxy card promptly using the
enclosed envelope.