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
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement |_| Confidential, for use of the
Commission only (as permitted
by Rule 14a-6 (e)(2)
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
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:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or Registration Statement no.:
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(3) Filing party:
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(4) Date filed:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
U.S. HOME & GARDEN INC.
655 Montgomery Street
San Francisco, CA 94111
May 18, 1998
Dear Fellow Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders
which will be held on June 22, 1998 at 9:00 A.M., local time, at the offices of
U.S. Home & Garden Inc., 655 Montgomery Street, Suite 500, 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.
Your vote is very important, and we will appreciate a prompt return of your
signed proxy card. We hope to see you at the meeting.
Cordially,
Robert Kassel
Chairman of the Board,
President and
Chief Executive Officer
U.S. HOME & GARDEN INC.
655 Montgomery Street
San Francisco, CA 94111
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22 1998
----------
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 22, 1998, at 9:00
A.M., local time, at the offices of the Company, 655 Montgomery Street, Suite
500, 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;
2. To consider and vote upon a proposal to approve an increase in the
number of authorized shares of the Company's common stock to 75,000,000 shares;
3. 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 11, 1998 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
- --------------------------------------------------------------------------------
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, President
and Chief Executive Officer
May 18, 1998
PROXY STATEMENT
U.S. HOME & GARDEN INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 1998
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 22, 1998, 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 19, 1998.
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 11, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were issued and outstanding 20,116,197 shares 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. Adoption of the amendment to the Certificate of Incorporation to
increase the authorized shares of Common Stock requires the affirmative vote of
the holders of a majority of the issued and outstanding Common Stock. 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. However, because of the
requirement for an absolute majority of the outstanding Common Stock to approve
the proposed amendment to the Certificate of Incorporation, broker non-votes
will also have the same effect as a vote "against" the proposed amendment to the
Certificate of Incorporation.
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 favor of a nominee for director. In the event any of the
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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 or she will be available to serve.
Name Age Position
---- --- --------
Robert Kassel(1) 57 Chairman of the Board, Chief
Executive Officer, President and
Treasurer
Richard Raleigh(2) 44 Chief Operating Officer and
Director
Maureen Kassel 50 Vice President of Public Relations
and Advertising, Secretary and
Director
Jon Schulberg(1)(2) 39 Director
Fred Heiden(1)(2) 57 Director
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(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. From 1985 to August 1991 he was a consultant to Comtel Communications,
Inc. ("Comtel"), 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 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.
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Maureen Kassel, the wife of Robert Kassel, co-founded the Company and has
been Vice President and a director of the Company since November 1990 and
Secretary of the Company since February 1992. For the last ten years, she has
assisted in the general administration and operation of real estate and other
businesses. Ms. Kassel is Chairman of the Board of Comtel.
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.
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.
During the fiscal year ended June 30, 1997, the Board of Directors held one
meeting. The Board also took various actions by unanimous written consent in
lieu of a meeting. The Company did not have standing nominating, compensation or
audit committees of the Board of Directors or committees performing similar
functions during the fiscal year ended June 30, 1997. In September 1997 the
Board established an Audit Committee consisting of Messrs. Heiden, Raleigh and
Schulberg and a Compensation Committee consisting of Messrs. Kassel, Heiden and
Schulberg.
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.
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 with the
Securities and Exchange Commission ("SEC"). Officers, directors, 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 that
no Forms 5 were required for those persons, the Company believes that, during
the year ended June 30, 1997, all filing requirements applicable to its
officers, directors, and greater than 10 percent beneficial stockholders were
complied with.
EXECUTIVE COMPENSATION
The following table discloses the compensation awarded by the Company, for
the three fiscal years ended June 30, 1997, 1996 and 1995, to Mr. Robert Kassel,
its Chief Executive Officer and Mr. Richard J. Raleigh, its Chief Operating
Officer (together, the "Named Executives"). During the fiscal year ended June
30, 1997, no other executive officer of the Company received a salary that
exceeded $100,000 during such fiscal year.
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Summary Compensation Table
Annual
Compensation
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Name and Long Term All Other
Principal Position Year Salary ($) Bonus ($) Compensation Compensation(1)
- ------------------ ---- ---------- --------- ------------- ---------------
Securities
Underlying
Options (#)
------------
Robert Kassel, 1997 350,000 250,000 1,200,000(2) $ 5,995
Chairman, Chief Executive 1996 250,000 100,000 200,000(3) --
Officer, President and 1995 150,000 100,000 687,653(4) --
Treasurer
Richard Raleigh, 1997 195,000 111,275 500,000(2) $ 8,390
Chief Operating Officer 1996 150,000 10,000 100,000(3) --
1995 120,000 10,000 50,000(4) --
- -------------
(1) Represents Company contributions to the Named Executives' 401(k) account.
(2) Includes options to purchase 200,000 shares previously granted to Mr.
Kassel and options to purchase 100,000 shares previously granted to Mr.
Raleigh whose exercise prices were repriced to reflect a reduction in the
market price of the Common Stock at the time of repricing. Does not include
50,000 options previously granted to Mr. Raleigh the expiration date of
which was extended during fiscal 1997.
(3) Includes five-year options to purchase 200,000 shares granted to Mr. Kassel
and five-year options to purchase 100,000 shares granted to Mr. Raleigh in
June 1995 under the Company's 1995 Stock Option Plan, which grants were
subject to stockholder approval of the plan obtained in February 1996.
(4) Does not include the options referenced in footnote (3) above.
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The following table discloses information concerning stock options granted
in the fiscal year ended June 30, 1997 to the Named Executives.
Option Grants in Fiscal Year Ended June 30, 1997
Individual Grants
----------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to
Options Employees in Potential Realizable Value
Granted Fiscal Year Exercise at Assumed Annual Rates of
---------- ----------- Price Expiration Stock Price Appreciation for
Name (#)(1) (%) ($/Sh) Date Option Term ($)(2)
- ---- ---------- --- -------- ---------- ----------------------------
5% 10%
----- -----
Robert Kassel 350,000 19.8 2.06 7/24/01 199,199 440,177
450,000 25.5 2.06 8/30/01 256,113 565,943
200,000 11.3 2.06 2/24/01 113,828 251,530
200,000 11.3 2.06 6/01/00 113,828 251,530
Richard 125,000 7.0 2.06 7/24/01 71,142 157,706
Raleigh
175,000 9.5 2.06 8/30/01 99,599 220,089
100,000 5.7 2.06 2/24/01 56,914 125,765
100,000 5.7 2.06 6/01/00 56,914 125,765
- ----------
(1) All of such options were exercisable in full from the date of grant.
(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 the Company's 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, future
performance of the Common Stock, there can be no assurance that the amounts
reflected in this table will be achieved.
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The following table sets forth information concerning the number of options
owned by the Named Executives and the value of any in-the-money unexercised
stock options as of June 30, 1997. No stock options were exercised by the Named
Executives during the fiscal year ended June 30, 1997:
Aggregated Option Exercises In Fiscal Year Ended
June 30, 1997 And Fiscal Year-End Option Values
------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
June 30, 1997 June 30, 1997*
------------------------- --------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Robert 2,067,653 -0- $3,214,598 $-0-
Kassel
Richard 637,500 -0- 887,938 $-0-
Raleigh
* 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, 1997 was $3.375 per share.
Repricing of Certain Options During Fiscal 1997
In December 1996, the Company repriced certain options to purchase shares
of Common Stock that had previously been granted including options to purchase
an aggregate of 1,000,000 and 400,000 shares of Common Stock, respectively, that
had originally been granted to Messrs. Kassel and Raleigh, the Chief Executive
Officer, President and Treasurer of the Company and the Chief Operating Officer
of the Company, respectively, between June 1995 and August 1996. Pursuant to
such repricing, the Company cancelled the outstanding options, having exercise
prices ranging from $2.28 to $2.44 per share, and granted a corresponding number
of new options, each with an exercise price of $2.0625 per share (representing
the fair market value of the Common Stock at the time of the repricing). The
Board of Directors decided to reprice the foregoing options as a result of a
long-term decline in the market price of the Company's Common Stock prior to the
repricing which the Board believed would make it unlikely that any holder would
exercise the options at the then existing exercise price. The Board also
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believed that the purpose behind its grant of such options -- i.e., to act as
additional motivation for the Company's officers -- would be undermined by the
decline in the price of the Common Stock to a level below the exercise price of
the options.
Employment Agreements
The Company has entered into employment agreements with Messrs. Kassel and
Raleigh, each dated as of April 1, 1996. Mr. Kassel currently serves as the
Company's Chief Executive Officer and President for a term expiring on March 31,
1999, 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
Company's Chief Operating Officer for a term expiring on March 31, 1999 subject
to automatic renewal unless terminated. Mr. Raleigh's current annual salary is
$195,000, 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.
Mr. Raleigh's 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
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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
In September 1997, the Company established an Audit Committee which is
comprised of Messrs. Raleigh, Heiden and Schulberg. The Audit Committee will,
among other things, make 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 to September 1997.
The Company established a Compensation Committee which is comprised of Messrs.
Kassel, Heiden and Schulberg. The Compensation Committee will, among other
things, make 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 Company did not have a Compensation Committee of its Board of Directors
during fiscal 1997. Decisions as to compensation during fiscal 1997 were made by
the Company's Board of Directors. Messrs. Kassel and Raleigh, in their capacity
as directors, each participated in the Board of Directors deliberations
concerning compensation of executive officers for fiscal 1997. During fiscal
1997, none of the executive officers of the Company served on the Board of
Directors or the
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compensation committee of any other entity, any of whose officers served on the
Board of Directors 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 years in the case of ISOs granted to persons
holding 10% or more of the voting stock of the Company). Options to acquire an
aggregate of approximately 522,000 shares of Common Stock are outstanding under
the 1991 Plan.
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
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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 compensation committee of any other entity,
any of whose officers served on the Board of Directors of the Company. An
aggregate of up to 100,000 shares of Common Stock are available for automatic
grants under the Director Plan. Options to acquire an aggregate of 10,000 shares
of Common Stock are outstanding 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. Options to acquire an
aggregate of approximately 1,460,000 shares of Common Stock are outstanding
under the 1995 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 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. Options to
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acquire an aggregate of 615,000 shares are outstanding under the 1997 Plan.
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, 1997 each of the Company's two
non-employee directors, Messrs. Heiden and Schulberg, received $5,000 for
serving as directors of the Company.
Report on Executive Compensation
As noted above, during the fiscal year ended June 30, 1997, there was no
Compensation Committee of the Board of Directors or other committee of the Board
performing equivalent functions. Compensation of the Company's executive
officers for the fiscal year ended June 30, 1997 was determined by the Board of
Directors pursuant to recommendations made by Robert Kassel, Chairman of the
Board. 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 stock options were granted to executive officers of the Company
during the fiscal year ended June 30, 1997 except for five-year non-qualified
options to purchase 1,200,000 and 500,000 shares, respectively, of the Company's
Common Stock granted to Messrs. Kassel and Raleigh. These options are currently
exercisable at $2.0625 per share.
-12-
For the fiscal year ended June 30, 1997, the Company earned approximately
$3,183,000 on net sales of approximately $52,046,000, compared to earnings of
approximately $2,524,000 on net sales of approximately $27,031,000 in the fiscal
year ended June 30, 1996.
Robert Kassel
Richard Raleigh
Maureen Kassel
Fred Heiden
Jon Schulberg
Stock Performance Graph
The following line graph compares, from July 1, 1992 through June 30, 1997,
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 July 1,
1992, 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:
General Host Corp., Lesco, Inc., Ringer Corp., the Scotts Company and Toro
Company. Historic stock price is not necessarily indicative of future stock
price performance.
===============================================================================================================================
7/1/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
- -------------------------------------------------------------------------------------------------------------------------------
The $100.00 $ 73.81 $ 71.13 $ 57.14 $ 60.71 $ 64.29
Company
- -------------------------------------------------------------------------------------------------------------------------------
Peer Group $100.00 $119.84 $123.13 $148.52 $139.82 $185.07
Index
- -------------------------------------------------------------------------------------------------------------------------------
NASDAQ $100.00 $122.76 $134.61 $157.88 $198.73 $239.40
Market
Index
===============================================================================================================================
-13-
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 Executive, 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
- ------------------------ --------------- --------
Maureen Kassel 680,650(3) 3.3
Robert Kassel 4,482,095(4)(5) 20.0
Richard Raleigh 621,731(6) 3.0
Fred Heiden 258 *
Jon Schulberg 258 *
Joseph Owens II 1,101,896(7) 5.4
Richard Grandy 1,101,896(7) 5.4
Warburg Pincus Asset
Management, Inc.(8) 1,310,500(8) 6.5
All executive officers
and directors as a
group (five persons) 5,429,342(3)(4)(5) 23.2
(6)
- ----------
*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 person (but not those held by any other person) and which are
exercisable within 60 days from the Record Date have been exercised.
-14-
(3) Includes exercisable options and warrants issued to Ms. Kassel to purchase
an aggregate of 325,000 shares of the Company's Common Stock.
(4) Of such shares, (i) 355,650 are owned of record by Maureen Kassel; however,
because Ms. Kassel has appointed her husband as her proxy and
attorney-in-fact to vote all 355,650 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 (the "Voting 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.
(5) Includes 2,297,653 shares of Common Stock issuable to Mr. Kassel upon
exercise of options and warrants.
(6) Represents shares of Common Stock issuable to Mr. Raleigh upon exercise of
options and warrants.
(7) Includes 162,500 shares of Common Stock issuable to each of Messrs. Grandy
and Owens upon exercise of options. The address of Mr. Grandy is c/o the
Company. The address of Mr. Owens is 8 Millendale, Waco, Texas 76710.
(8) According to a Schedule 13G filed with the Securities and Exchange
Commission, the shares are held by accounts for which Warburg Pincus Asset
Management, Inc. acts as investment advisor. The address of Warburg Pincus
Asset Management, Inc. is 466 Lexington Avenue, New York, New York 10017.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
To obtain a portion of the financing for the Company's acquisition of Easy
Gardener, Inc., Mr. Kassel provided for the benefit of the lender $500,000 cash
collateral and a personal guarantee of $333,000. In consideration of providing
such collateral and guarantee, the Company granted Mr. Kassel options to
purchase an aggregate of 526,300 shares of Common Stock for an aggregate
exercise price of approximately $822,000.
In connection with certain acquisitions, during fiscal 1997, the Company
granted five year non-plan options to Messrs. Kassel and Raleigh to purchase an
aggregate of 650,000 and 275,000 shares of Common Stock, respectively at an
exercise price of $2.0625 per share.
The Company will not issue further options, warrants or other securities
convertible into the Common Stock prior to December 10, 1998, except for (i)
options, warrants or
-15-
convertible securities issued in connection with mergers or acquisitions or in
connection with financings obtained from unaffiliated third parties and (ii)
options to purchase shares of Common Stock which are issued pursuant to the
Director Plan. In addition, pursuant to an agreement with the underwriters of
its December 1997 public offering, the Company has agreed not to issue any
options, warrants or any other securities convertible into Common Stock for the
remainder of fiscal 1999, other than options, warrants or any other securities
convertible into up to an aggregate of 750,000 shares of Common Stock.
From time to time Messrs. Kassel and Raleigh have borrowed monies from the
Company. During fiscal 1997, the highest amounts owed to the Company by Messrs.
Kassel and Raleigh were $607,474 and $225,294, respectively, and at December 31,
1997, the balance of such indebtedness was $589,560 and $239,802, respectively.
The loans bear interest at 7% per annum and mature on June 30, 2002. Company
loans to all officers of the Company are restricted to a maximum of $850,000 by
the terms of the Credit Agreement. Messrs. Kassel and Raleigh will make annual
payments of interest on the outstanding principal balance of their loans through
the maturity of the loans. In addition, payments of principal will be made as
follows: As to Mr. Kassel -- $50,000, $50,000, $100,000 and $150,000 during each
of the first four years, respectively, and the balance of approximately $240,000
on maturity. As to Mr. Raleigh -- $25,000, $25,000, $50,000 and $50,000 during
each of the first four years, respectively, and the balance of approximately
$90,000 on maturity.
The above transactions and loans were approved or ratified by the
independent directors of the Company who did not have an interest in such
transactions or loans. All future transactions or loans between the Company and
its officers, directors or 5% or greater stockholders will be made or entered
into on terms no less favorable to the Company than those that can be obtained
from unaffiliated third parties. Furthermore, the Company has adopted a policy
that any future material transactions and loans between the Company and its
officers, directors and 5% or greater stockholders, and any forgiveness of any
such loans, must be approved by a majority of the Company's independent
directors who do not have an interest in the transactions and who have access,
at the Company's expense, to the Company's or independent legal counsel.
Notwithstanding the foregoing, there can be no assurance that conflicts of
interest will not arise with respect to any such transaction, or that if
conflicts do arise, they will be resolved in a manner favorable to the Company.
-16-
PROPOSAL I
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT AN INCREASE IN
AUTHORIZED SHARES OF COMMON STOCK
At the Annual Meeting, the stockholders will be asked to vote upon an
amendment to the Certificate of Incorporation of the Company (the "Proposed
Amendment") to increase the number of authorized shares of Common Stock, $.001
par value per share, from 30,000,000 to 75,000,000 shares. Approval of this
amendment requires the affirmative vote of the holders of a majority of the
shares of Common Stock of the Company that are issued and outstanding as of the
Record Date. The Proposed Amendment would amend Article Fourth of the Company's
Certificate of Incorporation. The Proposed Amendment is set forth in full as
Exhibit A to this Proxy Statement.
As of the Record Date, May 11, 1998, the Company had 20,116,197 shares of
Common Stock outstanding. In addition, the Company has outstanding options to
acquire up to approximately 2,600,000 shares of Common Stock under the Company's
existing stock option plans and non-plan options and warrants to purchase
approximately 5,400,000 additional shares of Common Stock.
The Board of Directors believes that the proposed additional 45,000,000
shares of authorized Common Stock will provide the Company with needed
flexibility to issue Common Stock for proper corporate purposes which may be
identified in the future. The development of the Company to date has been
financed to a considerable extent through the issuance of its Common Stock or
securities convertible into Common Stock and the Board of Directors believes
that it would be beneficial to the Company to be in a position to make
additional issuances of such Common Stock or convertible securities if
circumstances warrant such issuances. Corporate purposes which could result in
the Board of Directors authorizing the issuance of additional shares of Common
Stock include, but are not limited to, effecting a split or stock dividend of
Common Stock, raising capital through the sale of equity securities, adopting
additional employee benefit plans or reserving additional shares for issuance
under such plans, and making acquisitions of companies or produects through the
issuance of Common Stock. Although the Company continually evaluates
alternatives for raising capital and acquisition opportunities and conducts
preliminary discussions, the Company has no present agreements, arrangements or
commitments with respect to any such financing or acquisition. The authorization
of the additional shares will enable the Company to continue to consider such
alternatives and opportunities and to act promptly if appropriate circumstances
arise which require the issuance of such shares.
-17-
Approval by the stockholders of the Proposed Amendment at the Annual
Meeting will avoid the expensive procedure of calling and holding a special
meeting for that purpose at a later date if so required. If the Proposed
Amendment is approved by the stockholders, the Board of Directors will be
empowered to authorize the issuance of the additional shares at such time or
times, to such persons and for such consideration as the Board deems
appropriate, without further stockholder action.
The authorization of additional shares of Common Stock of the Company will
not, by itself, have any effect on the rights of holders of existing Common
Stock. Depending on the circumstances, any issuance of additional shares of
Common Stock could affect the existing holders of shares of Common Stock by
diluting the per share earnings of the Common Stock and the voting power of the
outstanding shares. Under the Company's Certificate of Incorporation, the
Company's stockholders do not have preemptive rights to acquire capital stock
which may be issued by the Company.
Although the Board of Directors is not proposing the authorization of the
additional shares as an "anti-takeover" device, it is possible that such
additional shares could be used to discourage or impede a tender offer or other
attempt to gain control of the Company. For example, in the event of a hostile
attempt to take over control of the Company, it may be possible for the Company
to impede the attempt by issuing shares of the Common Stock, thereby diluting
the voting power of the other outstanding shares and increasing the potential
cost to acquire control of the Company. Such issuance of additional Common Stock
could be used along with certain provisions of the Company's Certificate
Incorporation and By-laws and Delaware General Corporation Law to discourage
certain transactions that could result in a change in control of the Company.
Recommendation
The Board of Directors believes that the Proposed Amendment is in the best
interest of the Company and recommends a vote "FOR" the Proposed Amendment.
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, 1997 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,
1998. A representative of BDO Seidman, LLP is expected to be present at the
Annual Meeting with the opportunity
-18-
to make a statement if he or she desires to do so and is expected to be
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING
FOR FISCAL YEAR ENDING JUNE 30, 1998
The Company currently anticipates that its Annual Meeting of Stockholders
with respect to the Company's fiscal year ended June 30, 1998 will be held
between the months of December 1998 and March 1999. 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 ended June 30,
1998 must submit the proposal in proper form to the Company at its address set
forth on the first page of this Proxy Statement not later than October 31, 1998
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.
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,
1997 IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE CLOSE
OF BUSINESS ON MAY 11, 1998. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM
10-KSB WILL BE PROVIDED TO EACH SUCH STOCKHOLDER WITHOUT CHARGE UPON WRITTEN
REQUEST TO:
U.S. HOME & GARDEN INC.
655 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
ATTENTION: Corporate Secretary
The Board of Directors is aware of no other matters, except for those
incid-ent 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
-19-
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,
President and
Chief Executive Officer
May 18, 1998
-20-
EXHIBIT A
FORM OF AMENDMENT OF ARTICLE
FOURTH OF CERTIFICATE OF INCORPORATION
FIRST: That the first paragraph of the Certificate of Incorporation of the
Corporation has been amended to read in its entirety as follows:
"FOURTH: The total number of share of capital stock which the
Corporation shall have authority to issue is seventy-six million
(76,000,000) shares, consisting of One Million (1,000,000) shares of
Preferred Stock, par value of $.001 per share and Seventy-Five Million
(75,000,000) shares of Common Stock, par value $.001 per share.
U.S. HOME & GARDEN INC.
655 Montgomery Street
San Francisco, California 94111
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 22, 1998
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 22, 1998, at 655
Montgomery Street, 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, Maureen Kassel,
Fred Heiden and Jon Schulberg
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.)
- --------------------------------------------------------------------------------
2. Increase in Authorized Common Stock to 75,000,000 shares.
|_| For |_| Against |_| Abstain
3. 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
AND THE PROPOSALS LISTED ABOVE.
DATED: ________________________________, 1998
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.