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 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:
(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:
(2) Form, schedule or Registration Statement no.:
(3) Filing party:
(4) Date filed:
- ----------
(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 14, 1999
Dear Fellow Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders
which will be held on June 14, 1999 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
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14 1999
--------------------
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 14, 1999, 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 approve the adoption of the Company's 1999 Stock Option Plan; and
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 6, 1999 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 14, 1999
PROXY STATEMENT
U.S. HOME & GARDEN INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 1999
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 14, 1999, 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 17, 1999.
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 6, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were 19,325,376 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 next the 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 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.
-2-
Name Age Position
---- --- --------
Robert Kassel(1) 59 Chairman of the Board, Chief
Executive Officer, President and
Treasurer
Richard Raleigh(2) 45 Chief Operating Officer and
Director
Maureen Kassel 51 Vice President of Public Relations
and Advertising, Secretary and
Director
Fred Heiden(1)(2) 58 Director
Jon Schulberg(1)(2) 41 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. 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.
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
-3-
general administration and operation of real estate and other businesses. Ms.
Kassel is Chairman of the Board of Comtel.
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.
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, 1998, 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 standing nominating committee of the
Board of Directors or committees performing similar functions during the fiscal
year ended June 30, 1998. During the fiscal year ended June 30, 1998 the Board
established an Audit Committee consisting of Messrs. Heiden, Raleigh and
Schulberg and a Compensation Committee consisting of Messrs. Kassel, Heiden and
Schulberg. The Compensation and Audit Committees did not hold any meeting during
the fiscal year ended June 30, 1998.
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 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 year ended June 30, 1998 all filing
requirements applicable to
-4-
its officers, directors, and greater than 10 percent beneficial stockholders
were complied with except that Robert and Maureen Kassel failed to timely file a
Form 5 with respect to the extension of the expiration date of certain options
previously granted to Ms. Kassel that occurred in March 1998 and the disposition
to the Company of certain shares of Common Stock owned of record by Maureen
Kassel in repayment of certain expenses. In addition, Ms. Gustafson failed to
timely file a Form 5 to report the grant to her of certain stock options in
February 1998.
EXECUTIVE COMPENSATION
The following table discloses the compensation awarded by the Company, for
the three fiscal years ended June 30, 1998, 1997 and 1996, to Mr. Robert Kassel,
its Chief Executive Officer, President and Treasurer, Mr. Richard J. Raleigh,
its Chief Operating Officer and Ms. Lynda Gustafson, the Company's Vice
President of Finance (together, the "Named Officers"). During the fiscal year
ended June 30, 1998, no other officer of U.S. Home & Garden, Inc. received a
total salary and bonus that exceeded $100,000 during such fiscal year.
Summary Compensation Table
Annual Compensation Long-Term Debt
------------------- --------------
Securities Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options (#) Compensation(1)
- --------------------------- ---- ---------- --------- --------------------- ---------------
Robert Kassel, 1998 450,000 281,667 468,000 (2) $7,523
Chairman, Chief Executive Officer, 1997 350,000 250,000 1,200,000 (3) $5,995
President and Treasurer 1996 250,000 100,000 200,000 (4) --
Richard Raleigh, Chief Operating Officer 1998 225,000 115,000 132,500 (5) $9,203
1997 195,000 111,275 600,000 (3)(6) $8,390
1996 150,000 10,000 100,000 (4) --
Lynda Gustafson, Vice President of Finance 1998 125,000 45,000 50,000 $11,273
1997 101,040 20,000 30,000 $ 7,451
1996 67,500 11,000 10,000 $ 2,790
- ------------
(1) Represents Company contributions to the Named Officers 401(k) account.
(2) Includes 80,000 options that were originally granted to Mr. Kassel in 1993
and which expiration dates were extended during fiscal 1998.
(3) Includes as to Mr. Kassel 200,000 options previously granted to Mr. Kassel
and as to Mr. Raleigh 100,000 options 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.
-5-
(4) Includes, as to Mr. Kassel, five-year options to purchase 200,000 shares
granted to Mr. Kassel and as to Mr. Raleigh, 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.
(5) Includes 12,500 options that were originally granted to Mr. Raleigh in
1992, the expiration date of which was extended during fiscal 1998.
(6) Includes 50,000 options previously granted to Mr. Raleigh the expiration
date of which was extended during fiscal 1997.
The following table discloses information concerning options granted in
fiscal 1998 to the Named Officers.
Option Grants in Fiscal Year Ended June 30, 1998
Individual Grants
-------------------------------------------------------------
Number of Percent of
Securities Total Options Potential Realizable Value
Underlying Granted to at Assumed Annual Rates of
Options Employees in Exercise Stock Price Appreciation
Granted Fiscal Year Price Expiration for Option Term ($)(2)
Name (#)(1) (%) ($/Sh) Date --------------------------
- ---- ---------- ------------- -------- ----------
5% 10%
----- -----
Robert Kassel 310,000 34.6 3.25 8/4/02 278,354 615,089
78,000 8.7 3.25 8/4/02 70,037 154,764
80,000(3) 8.9 1.69 12/31/02 40,804 91,251
Richard Raleigh 100,000 11.2 3.25 8/4/02 89,792 198,416
20,000 2.2 3.25 8/4/02 17,958 39,683
12,500(3) 1.4 1.69 12/31/02 6,376 14,258
Lynda Gustafson 50,000 5.6 4.375 2/5/03 60,437 133,549
- --------------------
(1) Unless otherwise noted, all of such options were initially exercisable in
full from the date of grant.
-6-
(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.
(3) Reflects extension of expiration date of options that were originally
granted on September 15, 1992. All of such options vest in three equal
annual installments commencing August 5, 1998.
-7-
The following table sets forth information concerning options exercised by the
Named Officers during the fiscal year ended June 30, 1998, and the number of
options owned by the Named Officers and the value of any in-the-money
unexercised options as of June 30, 1998:
Aggregated Option Exercises
And Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired on Value Options at Options at
Exercise(#) Realized ($) June 30, 1998 June 30, 1998(1)
----------- ------------ ------------- ----------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Robert -- -- 2,297,653 158,000 $10,045,760 $ 1,128,504
Kassel
Richard 104,598 249,007 620,411 32,500 $2,603,461 $123,110
Raleigh ---------- -----------
Lynda 34,000 69,168 26,000 40,000 $90,638 $82,520
Gustafson ---------- -----------
- ----------
(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, 1998 was $6.438 per share.
-8-
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 the
Company's Chief Executive Officer and President for a term expiring on March 31,
2000, 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, 2000 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.
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
-9-
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
During the fiscal year ended June 30, 1998, the Company established an
Audit Committee which is comprised of Messrs. Raleigh, Heiden and Schulberg. 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. During the fiscal year ended June 30, 1998, the Company 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 Company's Compensation Committee of its Board of Directors, consisting
of Messrs. Kassel, Schulberg and Heiden, was established during the fiscal year
ended June 30, 1998. Prior thereto, decisions as to compensation were made by
the Company's Board of Directors. Prior to the establishment of the compensation
committee, Messrs. Kassel and Raleigh, in their capacity as directors, each
participated in the Board of Directors deliberations concerning compensation of
executive officers for fiscal 1998. During fiscal 1998, none of the executive
officers of the Company served on the Board of Directors or the 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 ("Incentive Stock Options" or "ISOs")
under the Internal Revenue Code
-10-
of 1986, as amended (the "Code") or (ii) non-qualified options ("Non-Qualified
Stock Options" or "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).
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,
-11-
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 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 which is described
below under Proposal I.
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, 1998 each of the Company's two
non-employee directors, Messrs. Heiden and
-12-
Schulberg, received $5,000 for serving as directors of the Company.
Report on Executive Compensation
Although during the fiscal year ended June 30, 1998, the Company
established a Compensation Committee of the Board of Directors the compensation
of the Company's executive officers for the fiscal year ended June 30, 1998 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 or other officers
of the Company during the fiscal year ended June 30, 1998 except for
non-qualified options to purchase 388,000, 120,000, 50,000 shares, respectively,
of the Company's Common Stock granted to Messrs. Kassel and Raleigh and Ms.
Gustafson. These options are currently exercisable at $3.25, $3.25 and $4.375
per share.
-13-
For the fiscal year ended June 30, 1998, the Company earned approximately
$5,526,000 on net sales of approximately $67,149,000, compared to earnings of
approximately $3,183,000 on net sales of approximately $52,046,000 in the fiscal
year ended June 30, 1997.
Robert Kassel
Richard Raleigh
Maureen Kassel
Fred Heiden
Jon Schulberg
Stock Performance Graph
The following line graph compares, from July 1, 1993 through June 30, 1998,
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,
1993, 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:
Lesco, Inc., the Scotts Company, the Toro Company and Verdant Brands Inc.
Historic stock price is not necessarily indicative of future stock price
performance.
========================================================================================
6/30/93 6/30/94 6/30/95 6/30/96 6/30/97 6/30/98
- ----------------------------------------------------------------------------------------
The $100.00 $96.77 $77.42 $82.26 $87.10 $166.13
Company
- ----------------------------------------------------------------------------------------
Peer $100.00 $110.81 $133.62 $136.03 $178.04 $196.84
Group
Index
- ----------------------------------------------------------------------------------------
NASDAQ $100.00 $109.66 $128.61 $161.89 $195.02 $258.52
Market
Index
========================================================================================
-14-
PROPOSAL I
APPROVAL OF 1999 STOCK OPTION PLAN
At the Annual Meeting, the Company's stockholders will be asked to approve
the adoption of the Company's 1999 Stock Option Plan (the "1999 Plan").
The Board of Directors adopted the 1999 Plan on May 10, 1999. The Board
believes that, to enable the Company to continue to attract and retain personnel
of the highest caliber, provide incentive for officers, directors, employees and
other key persons and to promote the well-being of the Company, it is in the
best interest of the Company and its stockholders to provide to officers,
directors, employees, consultants and other independent contractors who perform
services for the Company, through the granting of stock options the opportunity
to participate in the value and/or appreciation in value of the Company's Common
Stock. The Board has found that the grant of options under the existing stock
option plans has proven to be a valuable tool in attracting and retaining key
employees. Accordingly, the Board believes that the 1999 Plan (a) will provide
the Company with significant means to attract and retain talented personnel, (b)
will result in saving cash, which otherwise would be required to maintain
current employees and adequately attract and reward personnel and others who
perform services for the Company, and (c) consequently, will prove beneficial to
the Company's ability to be competitive. There are approximately 150,000 options
available for future grant under the Company's existing stock option plans. The
last sale price of the Common Stock on May 13, 1999 was $5.3125.
To date, no options have been granted under the 1999 Plan although the
Board currently anticipates that options to purchase approximately 364,000
shares of Common Stock will be granted under the 1999 Plan to certain employees
of its subsidiary, Easy Gardener Inc. Moreover additional options may be granted
under the 1999 Plan, the timing, amounts and specific terms of which cannot be
determined at this time.
The following summary of the 1999 Plan does not purport to be complete, and
is subject to and qualified in its entirety by reference to the full text of the
1999 Plan, set forth as Exhibit "A" hereto.
Summary of the 1999 Plan
The 1999 Plan provides for the grant of stock options. A total of 900,000
shares of Common Stock, subject to anti-dilution
-15-
adjustment as provided in the 1999 Plan, have been reserved for distribution
pursuant to the 1999 Plan. The maximum number of shares of Common Stock that may
be issued upon the grant of an Award to any one participant cannot exceed
500,000 shares during the term of the 1999 Plan.
The 1999 Plan can be administered by the Board of Directors (the "Board")
or a committee consisting of two or more non-employee members of the Board who
are appointed by the Board. The Board or the committee will determine, among
other things, the persons to whom options will be granted, whether the options
will be "incentive stock options" ("Incentive Stock Options"), as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
for options not qualifying as Incentive Stock Options ("Non-Qualified Stock
Options"), the number of shares subject to each option, the vesting terms and
exercise price. The Board or the committee will also determine the term of each
option, the restrictions or limitations thereon, and the manner in which each
such option may be exercised. Unless sooner terminated, the 1999 Plan will
expire at the close of business on May 9, 2009.
Incentive Stock Options granted pursuant to the 1999 Plan are
nontransferable by the optionee during his lifetime. NonQualified Stock Options
are also nontransferable by the optionee during his lifetime unless the Board or
committee decides otherwise. Options granted pursuant to the 1999 Plan will
expire if not exercised within 10 years of the grant (five years in the case of
Incentive Stock Options granted to an eligible employee owning stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or a parent or subsidiary of the Company immediately before the grant
("10% Stockholder")), and under certain circumstances set forth in the 1999
Plan, may be exercised within thirty (30) days following termination of
employment (one year in the event of death). Options may be granted to optionees
in such amounts and at such prices as may be determined, from time to time, by
the Board or the committee. The exercise price of an Incentive or Non-Qualified
Stock Option will not be less than the fair market value of the shares
underlying the option on the date the option is granted, provided, however, that
the exercise price of an Incentive Stock Option granted to a 10% Stockholder may
not be less than 110% of such fair market value.
Under the 1999 Plan, the Company may not, in the aggregate, grant Incentive
Stock Options that are first exercisable by any optionee during any calendar
year (under all such plans of the optionee's employer corporation and its
"parent" and "subsidiary" corporations, as those terms are defined in Section
424 of the Code) to the extent that the aggregate fair market value of the
-16-
underlying stock (determined at the time the option is granted) exceeds
$100,000.
The 1999 Plan contains anti-dilution provisions authorizing appropriate
adjustments in certain circumstances. Shares of Common Stock subject to options
which expire without being exercised or which are cancelled as a result of the
cessation of employment are available for further grants. No shares of Common
Stock of the Company may be issued upon the exercise of any option granted under
the 1999 Plan until the full option price has been paid by the optionee. The
Board of Directors or the committee may grant individual options under the 1999
Plan with more stringent provisions than those specified in the 1999 Plan.
Options become exercisable in such amounts, at such intervals and upon such
terms and conditions as the Board or the committee provide. Stock options
granted under the 1999 Plan are exercisable until the earlier of (i) a date set
by the Board of Directors or committee at the time of grant or (ii) the close of
business on the day before the tenth anniversary of the stock option's date of
grant (the day before the fifth anniversary in the case of an Incentive Stock
Option granted to a 10% Stockholder). The 1999 Plan will remain in effect until
all stock options are exercised or terminated. Notwithstanding the foregoing, no
options may be granted after May 9, 2009.
Certain Federal Income Tax Consequences of the 1999 Plan
The following is a brief summary of the Federal income tax aspects of
options granted under the 1999 Plan based upon statutes, regulations and
interpretations in effect on the date hereof. This summary is not intended to be
exhaustive, and does not describe state or local tax consequences.
1. Incentive Stock Options. The optionee will recognize no taxable income
upon the grant or exercise of an Incentive Stock Option. Upon a disposition of
the shares after the later of two years from the date of grant and one year
after the transfer of the shares to the optionee, (i) the optionee will
recognize the difference, if any, between the amount realized and the exercise
price as long-term capital gain or long-term capital loss (as the case may be)
if the shares are capital assets in his or her hands; and (ii) the Company will
not qualify for any deduction in connection with the grant or exercise of the
options. The excess, if any, of the fair market value of the shares on the date
of exercise of an Incentive Stock Option over the exercise price will be treated
as an item of adjustment for his or her taxable year in which the exercise
occurs and may result in an alternative minimum tax liability for the optionee.
In the case of a disposition of shares in the same taxable year as the exercise
where the amount realized on the disposition is less
-17-
than the fair market value of the shares on the date of exercise, there will be
no adjustment since the amount treated as an item of adjustment, for alternative
minimum tax purposes, is limited to the excess of the amount realized on such
disposition over the exercise price which is the same amount included in regular
taxable income.
If Common Stock acquired upon the exercise of an Incentive Stock Option is
disposed of prior to the expiration of the holding periods described above, (i)
the optionee will recognize ordinary compensation income in the taxable year of
disposition in an amount equal to the excess, if any, of the lesser of the fair
market value of the shares on the date of exercise or the amount realized on the
disposition of the shares, over the exercise price paid for such shares; and
(ii) the Company will qualify for a deduction equal to any such amount
recognized, subject to the requirements that the compensation be reasonable and
not limited under Section 162(m) of the Code. The optionee will recognize the
excess, if any, of the amount realized over the fair market value of the shares
on the date of exercise, if the shares are capital assets in his or her hands,
as short-term or long-term capital gain, depending on the length of time that
the optionee held the shares, and the Company will not qualify for a deduction
with respect to such excess.
Subject to certain exceptions for disability or death, if an Incentive
Stock Option is exercised more than three months following the termination of
the optionee's employment, the option will generally be taxed as a Non-Qualified
Stock Option. See "Non-Qualified Stock Options."
2. Non-Qualified Stock Options. With respect to Non-Qualified Stock
Options, (i) upon grant of the option, the optionee will recognize no income;
(ii) upon exercise of the option (if the shares are not subject to a substantial
risk of forfeiture), the optionee will recognize ordinary compensation income in
an amount equal to the excess, if any, of the fair market value of the shares on
the date of exercise over the exercise price, and the Company will qualify for a
deduction in the same amount, subject to the requirements that the compensation
be reasonable and not limited under Section 162(m) of the Code; (iii) the
Company will be required to comply with applicable Federal income tax
withholding requirements with respect to the amount of ordinary compensation
income recognized by the optionee; and (iv) on a sale of the shares, the
optionee will recognize gain or loss equal to the difference, if any, between
the amount realized and the sum of the exercise price and the ordinary
compensation income recognized. Such gain or loss will be treated as short-term
or long-term capital gain or loss if the shares are capital assets in the
optionee's hands
-18-
depending upon the length of time that the optionee held the shares.
Recommendation
The Board of Directors recommends a vote "FOR" the approval of the adoption
of the 1999 Stock Option Plan.
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
- ------------------------ --------------- --------
Maureen Kassel 509,550(3) 2.6
Robert Kassel 4,491,995(4)(5) 20.7
Richard Raleigh 761,911(6) 3.8
Lynda Gustafson 26,000(7) *
Fred Heiden 5,258(8) *
Jon Schulberg 5,258(8) *
Joseph Owens II 1,151,896(9) 5.8
Richard Grandy 1,151,896(9) 5.8
All executive officers
and directors as a
group (five persons) 5,462,422(3)(4)(5) 24.1
(6)(8)(10)
- ----------
*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
-19-
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.
(3) Includes exercisable options and warrants issued to Ms. Kassel to purchase
an aggregate of 198,000 shares of the Company's Common Stock.
(4) Of such shares, (i) 311,550 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 311,550 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.
(5) Includes 2,351,653 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.
(7) Represents shares of Common Stock issuable upon exercise of options granted
to Ms. Gustafson who is a Named Officer but not an executive officer of the
Company.
(8) Includes 5,000 shares issuable upon exercise of options.
(9) Includes 212,500 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 Hillendale, Waco, Texas 76710.
(10) Excludes shares beneficially owned by Lynda Gustafson, the Company's Vice
President of Finance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time Messrs. Kassel and Raleigh have borrowed monies from the
Company. During fiscal 1998, the highest amount owed to the Company by Messrs.
Kassel and Raleigh were $605,764 and $244,038, respectively, which amounts were
outstanding on September 21, 1998. The loans bear interest at 7% per annum and
mature on June 30, 2002. Messrs. Kassel and Raleigh will make
-20-
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 each of the first four years and on maturity of the loans as follows: As
to Mr. Kassel -- $50,000, $50,000, $50,000, $100,000, $150,000 and the balance
of approximately $205,919, respectively. As to Mr. Raleigh, $25,000, $25,000,
$50,000, $50,000 and the balance of approximately $85,608, respectively.
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, 1998 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,
1999. A representative of BDO Seidman, LLP is expected to be present at the
Annual Meeting with the opportunity 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, 1999
The Company currently anticipates that its Annual Meeting of Stockholders
with respect to the Company's fiscal year ended June 30, 1999 will be held
between the months of February 2000 and May 2000. 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,
1999 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 November 30, 1999 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,
1998 IS BEING FURNISHED HEREWITH TO EACH
-21-
STOCKHOLDER OF RECORD AS OF THE CLOSE OF BUSINESS ON MAY 6, 1999. 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
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,
President and
Chief Executive Officer
May 14, 1999
-22-
EXHIBIT A
1999 STOCK OPTION PLAN
OF
U.S. HOME & GARDEN INC.
1. Purpose
U.S. Home & Garden Inc. (the "Company") desires to attract and retain the
best available talent and encourage the highest level of performance in order to
continue to serve the best interests of the Company, and its stockholder(s). By
affording employees and other persons the opportunity to acquire proprietary
interests in the Company and by providing them incentives to put forth maximum
efforts for the success of the business, the 1999 Stock Option Plan of U.S. Home
& Garden Inc. (the "1999 Plan") is expected to contribute to the attainment of
those objectives.
The word "Subsidiary" or "Subsidiaries" as used herein, shall mean any
corporation, fifty percent or more of the voting stock of which is owned by the
Company.
2. Scope and Duration
Options under the 1999 Plan may be granted in the form of incentive stock
options ("Incentive Options") as provided in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or in the form of nonqualified stock
options ("Non-Qualified Options"). (Unless otherwise indicated, references in
the 1999 Plan to "options" include Incentive Options and Non-Qualified Options.)
The maximum aggregate number of shares as to which options may be granted from
time to time under the 1999 Plan is 900,000 shares of the common stock of the
Company ("Common Stock"), which shares may be, in whole or in part, authorized
but unissued shares or shares reacquired by the Company. The maximum number of
shares with respect to which options may be granted to any employee during the
term of the 1999 Plan is 500,000. If an option shall expire, terminate or be
surrendered for cancellation for any reason without having been exercised in
full, the shares represented by the option or portion thereof not so exercised
shall (unless the 1999 Plan shall have been terminated) become available for
subsequent option grants under the 1999 Plan. As provided in paragraph 13, the
1999 Plan shall become effective on May 10, 1999, and unless terminated sooner
pursuant to paragraph 14, the 1999 Plan shall terminate on May 9, 2009, and no
option shall be granted hereunder after that date.
3. Administration
The 1999 Plan shall be administered by the Board of Directors of the
Company, or, at their discretion, by a committee which is appointed by the Board
of Directors to perform such function (the "Committee"). The Committee shall
consist of not less than two members of the Board of Directors, each of whom
shall serve at the pleasure of the Board of Directors and shall be a
"Non-Employee Director" as defined in Rule l6b-3 pursuant to the Securities
Exchange Act of 1934 (the "Act"). Vacancies occurring in the membership of the
Committee shall be filled by appointment by the Board of Directors.
The Board of Directors or the Committee, as the case may be, shall have
plenary authority in its discretion, subject to and not inconsistent with the
express provisions of the 1999 Plan, to grant options, to determine the purchase
price of the Common Stock covered by each option, the term of each option, the
persons to whom, and the time or times at which, options shall be granted and
the number of shares to be covered by each option; to designate options as
Incentive Options or Non-Qualified Options; to interpret the 1999 Plan; to
prescribe, amend and rescind rules and regulations relating to the 1999 Plan; to
determine the terms and provisions of the option agreements (which need not be
identical) entered into in connection with options under the 1999 Plan; and to
make all other determinations deemed necessary or advisable for the
administration of the 1999 Plan. The Board of Directors or the Committee, as the
case may be, may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Board of Directors
or the Committee, as the case may be, or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with respect
to any responsibility the Board of Directors or the Committee, as the case may
be, or such person may have under the 1999 Plan.
4. Eligibility; Factors to be Considered in Granting Options
Incentive Options shall be limited to persons who are employees of the
Company or its present and future Subsidiaries and at the date of grant of any
option are in the employ of the Company or its present and future Subsidiaries.
In determining the employees to whom Incentive Options shall be granted and the
number of shares to be covered by each Incentive Option, the Board of Directors
or the Committee, as the case may be, shall take into account the nature of
employees' duties, their present and potential contributions to the success of
the Company and such other factors as it shall deem relevant in connection with
accomplishing the purposes of the 1999 Plan.
2
An employee who has been granted an option or options under the 1999 Plan may be
granted an additional option or options, subject, in the case of Incentive
Options, to such limitations as may be imposed by the Code on such options.
Except as provided below, a Non-Qualified Option may be granted to any person,
including, but not limited to, employees, independent agents, consultants and
attorneys, who the Board of Directors or the Committee, as the case may be,
believes has contributed, or will contribute, to the success of the Company.
5. Option Price
The purchase price of the Common Stock covered by each option shall be
determined by the Board of Directors or the Committee, as the case may be, shall
not be less than 100% of the Fair Market Value (as defined in paragraph 15
below) of a share of the Common Stock on the date on which the option is
granted. Such price shall be subject to adjustment as provided in paragraph 12
below. The Board of Directors or the Committee, as the case may be, shall
determine the date on which an option is granted; in the absence of such a
determination, the date on which the Board of Directors or the Committee, as the
case may be, adopts a resolution granting an option shall be considered the date
on which such option is granted.
6. Term of Options
The term of each option shall be not more then 10 years from the date of
grant, as the Board of Directors or the Committee, as the case may be, shall
determine, subject to earlier termination as provided in paragraphs 10 and 11
below.
7. Exercise of Options
(a) Subject to the provisions of the 1999 Plan and unless otherwise
provided in the option agreement, options granted under the 1999 Plan shall
become exercisable as determined by the Board of Directors or Committee. In its
discretion, the Board of Directors or the Committee, as the case may be, may, in
any case or cases, prescribe that options granted under the 1999 Plan become
exercisable in installments or provide that an option may be exercisable in full
immediately upon the date of its grant. The Board of Directors or the Committee,
as the case may be, may, in its sole discretion, also provide that an option
granted pursuant to the 1999 Plan shall immediately become exercisable in full
upon the happening of any of the following events: (i) a "change in control" of
the Company as hereafter defined; (ii) with respect to an employee, on his 65th
birthday; or (iii) with respect to an employee, on the employee's involuntary
termination from employment, except as provided in
3
Section 10 hereof. In the event of a question or controversy as to whether or
not any of the events hereinabove described has taken place, a determination by
the Board of Directors or the Committee, as the case may be, that such event has
or has not occurred shall be conclusive and binding upon the Company and
participants in the 1999 Plan.
(b) For purposes of the 1999 Plan, a "change in control of the Company"
shall be deemed to occur, unless previously consented to in writing by the
optionee or any person entitled to act under paragraph 11 hereof, upon (a) the
actual acquisition or the execution of an agreement to acquire 12% or more of
the voting securities of the Company by any person or entity not affiliated with
the optionee, or any person entitled to act under paragraph 11 hereof (other
than pursuant to a bona fide underwriting agreement relating to a public
distribution of securities of the Company), (b) the commencement of a tender or
exchange offer for more than 12% of the voting securities of the Company by any
person or entity not affiliated with the grantee, or any persons entitled to act
under paragraph 11 hereof, (c) the commencement of a proxy contest against the
management for the election of a majority of the Board of Directors of the
Company if the group conducting the proxy contest owns, has or gains the power
to vote at least 12% of the voting securities of the Company, (d) a vote by the
Board of Directors to merge, consolidate, sell all or substantially all of the
assets of the Company to any person or entity not affiliated with the grantee,
or any persons entitled to act under paragraph 11 hereof, or (e) the election of
directors constituting a majority of the Board of Directors who have not been
nominated or approved by the Company; provided, however, for purposes of the
1999 Plan, it shall not be deemed a change in control of the Company if such
person or entity acquires 12% or more of the voting securities of the Company
(I) as a result of a combination of the Company or a wholly-owned subsidiary of
Company with another entity owned or controlled by such persons or entity
(whether effected by a merger, sale of assets or exchange of stock or otherwise)
(the "Combination") and (II) after completion of the Combination and for a
continuous period of not less than twelve (12) months thereafter (i) executive
officers of the Company (as designated in the Company's most recent Annual
Report on Form 10-K or its most recent Proxy Statement filed with the Securities
and Exchange Commission with respect to its Annual Meeting of Stockholders)
immediately prior to the Combination constitute not less than 50% of the
executive officers of the Company after the Combination or (ii) the members of
the Board of Directors of Company immediately prior to the Combination
constitute not less than 50% of the membership of the Board of Directors of the
Company after the Combination. For purposes of calculating the executive
officers of the Company after the Combination, those
4
executive officers who are terminated by the Company for cause or who terminate
their employment without good reason, as determined by the Board of Directors or
Committee shall be excluded from the calculation entirely.
(c) Any option at any time granted under the 1999 Plan may contain a
provision to the effect that the optionee (or any persons entitled to act under
paragraph 11 hereof) may, at any time at which Fair Market Value is in excess of
the exercise price and prior to exercising the option, in whole or in part,
request that the Company settle all or any portion of the option as shall then
be exercisable at a price equal to the difference between (i) an amount equal to
the option price multiplied by the number of shares subject to that portion of
the option in respect of which such request shall be made and (ii) an amount
equal to such number of shares multiplied by the fair market value of the
Company's Common Stock (within the meaning of Section 422 of the Code and the
treasury regulations promulgated thereunder) on the date of purchase. The
Company shall have no obligation to make any settlement pursuant to such
request, but if it elects to do so, such portion of the option as to which the
request is made shall be surrendered to the Company. The settlement price for
the portion of the option to be so surrendered shall be paid by the Company,
less any applicable withholding tax obligations imposed upon the Company by
reason of the purchase, at the election of the Board of Directors or the
Committee, as the case may be, either in cash or in shares of Common Stock
(valued as of the date and in the manner provided in clause (ii) above), or in
any combination of cash and Common Stock, which may consist, in whole or in
part, of shares of authorized but unissued Common Stock or shares of Common
Stock held in the Company's treasury. No fractional share of Common Stock shall
be issued or transferred and any fractional share shall be disregarded. Shares
covered by that portion of any option purchased by the Company pursuant hereto
and surrendered to the Company shall not be available for the granting of
further options under the 1999 Plan. All determinations to be made by the
Company hereunder shall be made by the Board of Directors or the Committee, as
the case may be.
Any option at any time granted under the 1999 Plan may also contain a
provision to the effect that the payment of the exercise price may be made by
delivery to the Company by the optionee of an executed exercise form together
with irrevocable instructions to a broker-dealer to sell or margin a sufficient
portion of the shares sold or margined and deliver the sale or margin loan
proceeds directly to the Company to pay for the exercise price.
5
(d) An option may be exercised, at any time or from time to time (subject,
in the case of Incentive Options, to such restrictions as may be imposed by the
Code), as to any or all full shares as to which the option has become
exercisable until the expiration of the period set forth in paragraph 6 hereof,
by the delivery to the Company, at its principal place of business, of (i)
written notice of exercise in the form specified by the Board of Directors or
the Committee, as the case may be, specifying the number of shares of Common
Stock with respect to which the option is being exercised and signed by the
person exercising the option as provided herein, (ii) payment of the purchase
price; and (iii) in the case of Non-Qualified Options, payment in cash of all
withholding tax obligations imposed on the Company by reason of the exercise of
the option. Upon acceptance of such notice, receipt of payment in full, and
receipt of payment of all withholding tax obligations, the Company shall cause
to be issued a certificate representing the shares of Common Stock purchased. In
the event the person exercising the option delivers the items specified in (i)
and (ii) of this subparagraph (d), but not the item specified in (iii) hereof,
if applicable, the option shall still be considered exercised upon acceptance by
the Company for the full number of shares of Common Stock specified in the
notice of exercise but the actual number of shares issued shall be reduced by
the smallest number of whole shares of Common Stock which, when multiplied by
the Fair Market Value of the Common Stock as of the date the option is
exercised, is sufficient to satisfy the required amount of withholding tax.
(e) The purchase price of the shares as to which an option is exercised
shall be paid in full at the time of exercise. Except with respect to an option
exercise settled on a non-cash basis pursuant subparagraph 7 (c) above, payment
shall be made in cash, which may be paid by check or other instrument acceptable
to the Company; in addition, subject to compliance with applicable laws and
regulations and such conditions as the Board of Directors or the Committee, as
the case may be, may impose, the Board of Directors or the Committee, as the
case may be, in its sole discretion, may on a case-by-case basis elect to accept
payment in shares of Common Stock of the Company which are already owned by the
option holder, valued at the Fair Market Value thereof (as defined in paragraph
15 below) on the date of exercise; provided, however, that with respect to
Incentive Options, no such discretion may be exercised unless the option
agreement permits the payment of the purchase price in that manner.
(f) Except as provided in paragraphs 10 and 11 below, no option granted to
an employee may be exercised at any time by such employee unless such employee
is then an employee of the Company or a Subsidiary.
6
8. Incentive Options
(a) With respect to Incentive Options granted, the aggregate Fair Market
Value (determined in accordance with the provisions of paragraph 15 at the time
the Incentive Option is granted) of the Common Stock or any other stock of the
Company or its current or future Subsidiaries with respect to which incentive
stock options, as defined in Section 422 of the Code, are exercisable for the
first time by any employee during any calendar year (under all incentive stock
option plans of the Company and its parent and subsidiary corporation's, as
those terms are defined in Section 424 of the Code) shall not exceed $100,000.
(b) No Incentive Option may be awarded to any employee who immediately
prior to the date of the granting of such Incentive Option owns more than 10% of
the combined voting power of all classes of stock of the Company or any of its
Subsidiaries unless the exercise price under the Incentive Option is at least
110% of the Fair Market Value and the option expires within 5 years from the
date of grant.
(c) In the event of amendments to the Code or applicable regulations
relating to Incentive Options subsequent to the date hereof, the Company may
amend the provisions of the 1999 Plan, and the Company and the employees holding
options may agree to amend outstanding option agreements, to conform to such
amendments.
9. Non-Transferability of Options
Except as may be otherwise provided in the option agreements with respect
to a Non-Qualified Option, options granted under the 1999 Plan shall not be
transferable otherwise than by will or the laws of descent and distribution, and
options may be exercised during the lifetime of the optionee only by the
optionee. No transfer of an option by the optionee by will or by the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and a copy of the
will and such other evidence as the Company may deem necessary to establish the
validity of the transfer and the acceptance by the transferor or transferees of
the terms and conditions of such option.
10. Termination of Employment
In the event that the employment of an employee to whom an option has been
granted under the 1999 Plan shall be terminated (except as set forth in
paragraph 11 below), such option may be, subject to the provisions of the 1999
Plan, exercised (to the extent that the employee was entitled to do so
7
at the termination of his employment) at any time within thirty (30) days after
such termination, but not later than the date on which the option terminates;
provided, however, that any option which is held by an employee whose employment
is terminated for cause or voluntarily without the consent of the Company shall,
to the extent not theretofore exercised, automatically terminate as of the date
of termination of employment. As used herein, "cause" shall mean conduct
amounting to fraud, dishonesty, negligence, or engaging in competition or
solicitations in competition with the Company and breaches of any applicable
employment agreement between the Company and the optionee. Options granted to
employees under the 1999 Plan shall not be affected by any change of duties or
position so long as the holder continues to be a regular employee of the Company
or any of its current or future Subsidiaries. Any option agreement or any rules
and regulations relating to the 1999 Plan may contain such provisions as the
Board of Directors or the Committee, as the case may be, shall approve with
reference to the determination of the date employment terminates and the effect
of leaves of absence. Nothing in the 1999 Plan or in any option granted pursuant
to the 1999 Plan shall confer upon any employee any right to continue in the
employ of the Company or any of its Subsidiaries or parent or affiliated
companies or interfere in any way with the right of the Company or any such
Subsidiary or parent or affiliated companies to terminate such employment at any
time.
11. Death or Disability of Employee
If an employee to whom an option has been granted under the 1999 Plan shall
die while employed by the Company or a Subsidiary or within thirty (30) days
after the termination of such employment (other than termination for cause or
voluntary termination without the consent of the Company), such option may be
exercised, to the extent exercisable by the employee on the date of death, by a
legatee or legatees of the employee under the employee's last will, or by the
employee's personal representative or distributees, at any time within one year
after the date of the employee's death, but not later than the date on which the
option terminates. In the event that the employment of an employee to whom an
option has been granted under the 1999 Plan shall be terminated as the result of
a disability, such option may be exercised, to the extent exercisable by the
employee on the date of such termination, at any time within thirty (30) days
after the date of such termination, but not later than the date on which the
option terminates.
8
12. Adjustments Upon Changes in Capitalization, Etc.
Notwithstanding any other provision of the 1999 Plan, the Board of
Directors or the Committee, as the case may be, may, at any time, make or
provide for such adjustments to the 1999 Plan, to the number and class of shares
issuable thereunder or to any outstanding options as it shall deem appropriate
to prevent dilution or enlargement of rights, including adjustments in the event
of changes in the outstanding Common Stock by reason of stock dividends,
split-ups, recapitalizations, mergers, consolidations, combinations or exchanges
of shares, separations, reorganizations, liquidations and the like. In the event
of any offer to holders of Common Stock generally relating to the acquisition of
their shares, the Board of Directors or the Committee, as the case may be, may
make such adjustment as it deems equitable in respect of outstanding options and
rights, including in its discretion revision of outstanding options and rights
so that they may be exercisable for the consideration payable in the acquisition
transaction. Any such determination by the Board of Directors or the Committee,
as the case may be, shall be conclusive. Any fractional shares resulting from
such adjustments shall be eliminated.
13. Effective Date
The 1999 Plan shall become effective on May 10, 1999, the date of adoption
by the Board of Directors of the Company; provided, however, that no Incentive
Option may be granted under the 1999 Plan unless approval by the stockholders of
the Company of the 1999 Plan is obtained on or before May 9, 2000.
14. Termination and Amendment
The Board of Directors of the Company may suspend, terminate, modify or
amend the 1999 Plan, provided that any amendment that would adversely affect the
compliance of the 1999 Plan with the requirements of Rule 16b-3 of the Act or
any successor rule or other applicable material law, rule or regulation, shall
be subject to the approval of the Company's stockholder(s), except that any such
increase or modification that may result from adjustments authorized by
paragraph 12 does not require such approval. No suspension, termination,
modification or amendment of the 1999 Plan may, without the consent of the
participant to whom an option shall theretofore have been granted, adversely
effect the rights of such participant under such option.
9
15. Miscellaneous
As said term is used in the 1999 Plan, the "Fair Market Value" of a share
of Common Stock on any day means: (a) if the principal market for the Common
Stock is a national securities exchange or the National Association of
Securities Dealers Automated Quotations System ("NASDAQ), the closing sales
price of the Common Stock on such day as reported by such exchange or market
system, or on a consolidated tape reflecting transactions on such exchange or
market system, or (b) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is not quoted on NASDAQ, the
mean between the highest bid and lowest asked prices for the Common Stock on
such day as reported by the National Quotation Bureau, Inc.; provided that if
clauses (a) and (b) of this paragraph are both inapplicable, or if no trades
have been made or no quotes are available for such day, the Fair Market Value of
the Common Stock shall be determined by the Board of Directors or the Committee,
as the case may be, and shall be conclusive as to the Fair Market Value of the
Common Stock.
The Board of Directors or the Committee, as the case may be, may require,
as a condition to the exercise of any options granted under the 1999 Plan, that
to the extent required at the time of exercise, (i) the shares of Common Stock
reserved for purposes of the 1999 Plan shall be duly listed, upon official
notice of issuance, upon stock exchange(s) on which the Common Stock is listed,
(ii) a Registration Statement under the Securities Act of 1933, as amended, with
respect to such shares shall be effective, and/or (iii) the person exercising
such option deliver to the Company such documents, agreements and investment and
other representations as the Board of Directors or the Committee, as the case
may be, shall determine to be in the best interests of the Company.
During the term of the 1999 Plan, the Board of Directors or the Committee,
as the case may be, in its discretion, may offer one or more option holders the
opportunity to surrender any or all unexpired options for cancellation or
replacement. If any options are so surrendered, the Board of Directors or the
Committee, as the case may be, may then grant new Non-Qualified or Incentive
Options to such holders for the same or different numbers of shares at higher or
lower exercise prices than the surrendered options. Such new options may have a
different term and shall be subject to the provisions of the 1999 Plan the same
as any other option.
Anything herein to the contrary notwithstanding, the Board of Directors or
the Committee, as the case may be, may, in their sole discretion, impose more
restrictive conditions on the
10
exercise of an option granted pursuant to the 1999 Plan; however, any and all
such conditions shall be specified in the option agreement limiting and defining
such option.
16. Compliance with SEC Regulations.
It is the Company's intent that the 1999 Plan comply in all respects with
Rule 16b-3 of the Act and any regulations promulgated thereunder. If any
provision of the 1999 Plan is later found not to be in compliance with said
Rule, the provisions shall be deemed null and void.
11
U.S. HOME & GARDEN INC.
655 Montgomery Street
San Francisco, California 94111
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 14, 1999
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 14, 1999, at 655
Montgomery Street, Suite 500, 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. Approval of the Adoption of 1999 Stock Option Plan
|_| 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: ___________________, 1999
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.